Superior Drilling Products, Inc. (NYSEMKT:SDPI)
Q3 2016 Earnings Conference Call
November 15, 2016 2:00 PM ET
Deborah Pawlowski – Investor Relations
Troy Meier – Chairman and Chief Executive Officer
Chris Cashion – Chief Financial Officer
Jason Wangler – Wunderlich Securities
Jeff Eberwein – Lone Star Value
Joseph Reagor – ROTH Capital Partners
John Stoltzfus – Oppenheimer & Company
Greetings and welcome to Superior Drilling Products Inc. Third Quarter 2016 Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Ms. Deborah Pawlowski, Investor Relations for Superior Drilling Products. Thank you. You may begin.
Thank you, Andre, and good afternoon everyone. I am going to thank you for taking the time to join us today and for your interest in Superior Drilling Products. Here with me for our conference call are Troy Meier, our Chairman and CEO; and Chris Cashion, our Chief Financial Officer. Troy and Chris are going to review the results of the quarter as well as provide an update on the Company's strategic process.
You should have a copy of the financial results that were released before the market – or actually after the market closed yesterday as well as the slides that will accompany our conversation. You can access both on our website at www.sdpi.com.
If you turn to Slide 2 in the deck, you will see the Safe Harbor statement. As you are aware, we may make some forward-looking statements during the formal discussion as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as with documents filed by the Company with the Securities and Exchange Commission. You can find the documents on our website or at sec.gov.
I also want to point out that during the call today, we will discuss some non-GAAP measures, which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying today's earnings release as well as on the slide deck.
So with that, let me turn it over to Troy to begin. Troy?
Thanks, Deb, and thanks everybody for joining us. What we'll be talking about today is, let’s start with the revenue turning point. When you turn to Slide 4 in the slide deck, what we’d like to demonstrate is this, turning point in our revenue and how it’s taking place. So when we look at this, what you’ll notice is a lot of this, most of this is due to the fact of our DTI agreement and how that is taking hold and this turning point revenue is driven by that agreement. Keep in mind that this agreement is in its early stages. And I'm sure most of you have modeled out this agreement going forward and we're excited to watch this agreement develop.
You'll notice that the – we’ll be talking about the rig count activity increasing by 40% from the historic lows in May of 404. Our contracted services, you're all familiar with that being the – our relationship with Baker Hughes and mostly the refurbishment of drill bits. And that directly relates to that rig count. And you'll see that in next slide as we – as that’s doubled from what it was in Q2 and that reflects that rig count. Now, it’s coming off of that 404 and moving up into that, getting closer to that 580 range. So that’s what that is showing you there.
So let's turn to the next page and let’s talk about the Drill-N-Ream. This is a tool that we’ve been telling you about for a couple of years and how we really believe that this a step change in technology. What we're finding out is the acceptance of this tool. Once DTI got out there and got in front of customers with this tool and was able to prove the performance of this tool. This is truly a game changer. This tool is – develop – giving the E&P companies a quality wellbore, which is really becoming a buzzword now in the industry. It's doing so much for them that it's hard to not notice this tool.
When you look at the Rotary Steerable Systems, an industry going to these Rotary Steerable Systems, we thought that that would be a tool that that really hampered the cells of our drilling because of the quality wellbore that Rotary Steerable Systems, a better quality wellbore, Rotary Steerable Systems delivered. What we found out just the opposite. We found out that our tools found a wonderful home in the Rotary Steerable System market due to the fact that the Rotary Steerable Systems is continuously making corrections. So instead of having big corrections as you’re steering your bottom hole assembly, they have constant correction, so there is a lot of smaller sub lagging [ph] going on, but even though they're less severe, there's a lot more of them.
So we're excited about what this is doing for the Rotary Steerable market and allowing operators to get these advanced Rotary Steerable Systems around the curve and down into the wellbores. We’ll tell you a little bit more about some of the exciting stuff that's been happening with some fantastic runs with this tool. But we also want to notice is the average tool size and how it's increasing. Before Superior, it signs this agreement, our average tool size was about six and three quarter. DTI and their customer base, what we're finding is the average tool size is closer to eight and three eighth now.
So when you look at the increasing tool size and the opportunities we have as a matter of fact as those of you can see the picture there, you can see the smaller what we call a spin hole tool in the upper picture. And now you see one of these larger, I believe that's probably the 13-inch or 12.5-inch tool in this bottom picture. So customer adoption is really starting to take hold. We've got new customers coming on every, every, every month. I mean we've got nine new customers since July. And one of the things that we're really finding out is the service companies are really liking what this tool does for them.
So when you look at the operator, being the E&P Company, while the service company is the ones that are bringing their tools out and their MWDs and their down-hole motors and their Rotary Steerable Systems. What they're finding out is Drill-N-Ream really enhances the performance of their products. And so that's really neat and exciting to see how these large service companies now are identifying the benefit of the Drill-N-Ream tool.
Let’s go ahead and turn to Page 6 in our slide deck. So as we look at this environment, we look at the rig count and one of the things that we've been saying is look the footage drilled, keep your eye on the footage drilled because the efficiency today are so impressive. Again you look at a rig just three years ago that was spending 30 days to drill down 9,000 feet now 4,000 feet, that same rig today is, like I said in the last call, it’s going out 9,000 or down 9,000 or now 10,000 on four wells in 45 days. So the efficiencies are incredible.
But what we're finding out is tools like the DNR, the Drill-N-Ream, they need to have a quality wellbore, so that they can keep gaining these efficiencies and keep reducing the drill time. Some of the neat things what we’re seeing happening in different basins around North America is the penetration rate, what we call the P rate, using this tool has increased a bunch and sometimes we’ve seen it increased 100%.
So I was on the phone Saturday, I got a call from a representative of one of the major service companies that was telling me all the benefits they get when their customer, who is E&P company, uses the Drill-N-Ream, the benefits that not just the E&P company gets, but the benefits that this service company gets because their tools are lasting, they're not tripping, coming out of the hole with broken down MWDs or that their motors seem to be lasting much better. In his comments to me on Saturday were he doesn’t know like every wellbore being drilled is not using a Drill-N-Ream tool. So it's really exciting for us to see how this tool is finally getting that recognition it deserves. And so, we're excited about what's been due for us.
Anyway with that being said, I'm going to turn it over to Chris and talk about the financings.
Thank you, Troy, and let’s continue our review by looking at Slide Number 8. We titled it lower cost structure. And you just heard just how exciting Q2 was for us from a revenue perspective, roughly doubling our revenue from Q2 to Q3. And on the cost side, we also saw some very encouraging trends, operating expenses coming down. So with revenue roughly doubling quarter-to-quarter, we saw roughly a 20% reduction in operating expenses. Now just to remind everyone, we did have an unusual non-recurring charge in Q2 related to an asset impairment that we took, but even after factoring that out, we had real cash decreased from Q2 2016 to Q3 2016.
A lot of that was driven by the transfer of our field sales in two distribution personnel to DTI that's our distributor now for the Drill-N-Ream that Troy was alluding to. And so we were able to accomplish that in the quarter. And so, we're able to see some of those cost savings came through the quarter as well as the depreciation expense on the ream tools as we sell those tools to DTI then those that’s not a part of our depreciation base any longer. So the benefits, the many benefits that we see from the DTI agreement are showing up in the Q3 numbers. Not only in the revenue side, but the operating expense side as well as selling the used tools to DTI.
Now, one thing I do want to caution everyone with regard to is that when we sell those used tools, we have a very low basis in those tools. And so, we did get a nice a little increase in gross profit margins in Q3 from the sale of those tools. As we've progressed, we will eventually not be selling those tools any longer, so we did get some benefit from selling used tools in the quarter, so just kind of keep that in mind.
Resetting productivity metrics, this agreement as we've told everyone as far as the basis we’re doing this agreement was allow us to focus on what we think we’re good at. That's developing new tools and that’s manufacturing tools and focusing on efficiencies and just continuing to get the cost of manufacturing the tool, cost of developing a tool and get those costs down. So it allows us to take a harder look and really boring down on cost controls.
Now let's go to Page 9 and continue looking at this business model. We look at the graph on the left. We’re really pleased with the way the net loss contracted. We lost $3 million at the net line last quarter, Q2, and we lost $1.2 million. We still have a ways to go. We've got to get to a profit position. We’ve made a lot of good strong movement in that direction during the quarter. And then from a cash perspective, EBITDA turned around nicely. We have a couple hundred thousand dollars of positive EBITDA coming off of a very rough Q2, negative EBITDA of $1.2 million. CapEx, we had zero CapEx in Q3. And then we've got roughly $50,000 of CapEx in Q4, so we're seeing that benefit to the model, less CapEx and that’s starting to show up on the balance sheet.
I mentioned operating efficiencies as a focus. We've got royalty revenue that as we continue – as DTI continues to grow the business and penetrate the marketplace and our royalty rate, which is 8% of their revenue, will continue to grow. And then we manage to bring the cash burn down to roughly $0.5 million per quarter, our revenue breakeven is just under $1 million per month, $3 million per quarter and so we're not quite there yet at $2.2 million in Q3, but we’re moving in the right direction. And we believe that we will achieve – as we said before, we believe we will achieve positive net cash flow by the second half of 2017, so we're still on track to do that. So, basically, this report is pretty much were on track to do the things that we felt like we would do when we were on the road a couple months ago.
If you flip the page now thinking of cash and some of the things we did from a debt perspective in the quarter, Page 10, we take a look at cash and equivalents. And you can see that we got down to $300,000 of cash at the end of the third quarter and then we did our secondary equity offering. We closed that offering, October 5th. We raised $5.75 million gross in proceeds, $1 a share. And then we paid off three indebtedness as we highlighted here: bridge financing, FNCC indebtedness and the Hard Rock Note payment. That left us about $2 million roughly of cash, which as of last week that's about our cash balance, on November 10th, a couple million dollars.
And then of course I think as most everyone knows we did restructure the Hard Rock Note again and Hard Rock the holders of that note are now owners of shares, 700,000 shares were issued to them. And we did filed a reseller registration statement in order to get those shares registered and that is in process of being reviewed by the SEC. And the thing we’d like to point out here is extending the term of this note to 2020. And debt service, principal and interest 2017, $2 million.
So with that I'll turn it back over to Troy to wrap this up.
Thanks, Chris. Chris had mentioned something there when he talked about bringing costs down and I want to give special thanks there to our team, The Team Superior, they've done a tremendous job, rolling up their sleeves and identifying where we can be much more efficient. When you guys get the opportunity, come visit our facility, I think you'd be very impressed with what you see going on there. But when we look at opportunities going forward, one of the things that of course that we will stay very focused on is the relationships we have with our channel partners. We really enjoyed the opportunities right now that we have with DTI. They’re very quality organization, very well managed. These guys have been great to work with. They understand the win-win concept.
And so, we're going to really strengthen that relationship with them as we continue to provide them great tools with giving them great performance. The other thing we've got to work on is we have another channel partner as well. We look at our contract and service. We've got to nourish and strengthen that relationship with Baker and we think there’s some great opportunity there for us. We look at the opportunity with the Striders giving us. That tool, we’ve been introducing this tool much different than we did the original Strider. We wining with Strider and we ran that original Strider in one basin with one – essentially one operator under one much system and thought we had it nailed and when we went to expand, we found out different much systems react differently with our tool.
We've been very careful with this one. As we've introduced this tool and then testing this tool, we’ve been into – we've now run this tool and had it run very well in four basins with six different operators working with five different service companies. So we've been putting this tool to the test and making sure there's no surprises that that we're overlooking. So we're excited to move this tool forward throughout 2017 and we’re looking for some experts. We've been interviewing some consultants that understand this coiled tubing market and understand how to bring new tools into this marketplace. And we are excited to listen to their advice on how this is going to develop.
We look at the relationship, I told you that we have with our channel partners and we really, really are not going to lose sight of that. We enjoy what we have with them. So we're looking forward to finishing the year on a high note. And going into 2017 and taking some good firm forward steps. We believe that there is some wonderful opportunity ahead for this company and we're excited to that you're all part of that.
I’d like to open it up to any questions or comments.
Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jason Wangler with Wunderlich Securities. Please proceed with your question.
Good afternoon, everybody.
Hi, Jason. How are you doing?
Troy, thanks for all the color on Drill-N-Ream. I was curious as you talked about obviously more rigs – or excuse me a fewer rigs drilling more feet. Does change anything from your aspect as far as how you're seeing the tools whether it's putting more tools out or getting tools back to refurbish. Should we look at that just as simply a one rig is going to be utilizing more tools so to speak? Or is there something different we should look at that as that kind of changes?
Well, as we said before, the Drill-N-Ream is finding more homes than just in the horizontal or the lateral section of the hole. So as operators are using this, essentially the entire well needs to be a quality wellbore and there are benefits for having that that tools throughout that wellbore. And as you know the different hole – the hole sizes change from the surface in intermediate and lateral. So, there's opportunities there for multiple tools per well. And the fact that they’re drilling so quick, also really brings up the tool utilization. So there’s opportunities there for total D-N-Ream and get turnaround as it needs to be repaired, we have some metrics that we workout with DTI that we try to make sure that they get X amount of repairs before runs – runs before repair. But, yeah, I mean, look at the efficiencies and those efficiencies are driving more tool usage.
Okay, thank you. And then look at drill bit remanufacturing, you guys kind of talked about how – obviously you saw a doubling in the revenue there. It is kind of specific to kind of more the Bakken and Rockies area. Is it still fair to kind of look at the entire rig count? Or should we specifically focus on kind of that market because it did look a lot better than I had expected?
It’s the entire rig count. One of the things that you'll see is when the markets really, really got tied, when you're not manufacturing bits, you've got to find something to fill that up. And so within the Hughes organization, they would pool repairs into their facility to keep those people there and to keep those machines going. As they are now getting busy in those facilities, we're now starting to see them allowing that work outside of our contracted area to start to funnel back into our facility.
We believe there's more we can do there to help them out. We're excited about the fact that there's only within the Hughes organization they have one facility that does what we do where they used to have four, five. So there is now one facility that does what we do and us. So they lean on us, they need us and we respect that. And we look to enhance that relationship.
That's great guys. I’ll turn it back. Thank you.
Our next question comes from the line of Jeff Eberwein with Lone Star Value. Please proceed with your question.
Hey, guys. Thanks for doing a presentation as usual. That’s always helpful and congrats on the improved results versus second quarter. I was noticed on one of the slides, I think on one of the Drill-N-Ream slides that you mentioned new basins being Eagle Ford in Canada. I was hoping you could talk more about the Permian. I've just seen a lot of forecasters say that's where majority of rigs are being added and will be added in the future. And it seems like by far the single most important basin to have a good presence in. Thanks.
Thank you, Jeff. And you’re right, it is. And that is the basis that drives a lot of what we're talking about. The acceptance of this tool in all of these basins has been great, but you obviously know where most of the rigs are concentrated. And we're happy to say that this tool and the performance of this tool have been very well accepted there. So as we look at the Permian Basin, we don't lose focus on basins like the SCOOP and the Eagle Ford, the Haynesville. There's opportunity there throughout these basins. But, yeah, I mean, we're very pleased with what we're seeing in the Permian, our tools found really good on there.
And could you say Troy that like word of mouth is actually helping to?
Yeah, it comes down to – just I talked about the phone call I had on Saturday, it’s not every day that somebody that you don't know calls you from a major service company and compliment you on what your tool does for them, not just – not just their customer, but what is doing for them. And it is word of mouth. And it’s pretty hard to not notice when you have a customer that’s doubled their P rate. It’s pretty incredible. One of the comments that this gentlemen made is within their company, they have essentially their tools and services on sixty rigs.
And they have definitely seen what Drill-N-Ream does because they have the exact same BHA on the rig across the street with the exception on this rig, they have the Drill-N-Ream and the performance levels are not even close. So it is word of mouth. And you cannot deny what this tool is doing. So it’s fun to watch that happen. So, we're very excited about this tool really being accepted. But other things that that we've noticed is the Drill-N-Ream when you talk people identify that reamer tool, this is a lot more than a reamer tool, this is why we call it a wellbore conditioning system.
Because there have been reamer tools in the business forever, so when you go to make a seller presentation, a lot of times people will deal with problems that they have, if they don't understand what the solution is. And so what we've got to do and what DTI is doing very well and we support them with our engineering staff is making sure that they understand what it is Drill-N-Ream is doing. And we've got to get out there and we've got to be more aggressive on writing some papers about the tool and getting them co-authored by some of these industry experts that have been using this technology and seeing the savings that it creates.
Our next question comes from the line of Joseph Reagor with ROTH Capital Partners. Please proceed with your question.
Good morning, guys, and thanks for taking the questions.
Good morning, Joe.
Good morning, Joe.
Just have a few things. I guess first on the DTI contract. Just can you give us any color as to what you’re seeing in Q4 as far as additional market share gains versus the rig count increase? Do you think that there’s still showing the market share increasing or you’re only seeing because rig count is going up? What can you give us as far as color there? Then also if the rig count starts to get the same approach – the 900 range I've seen out there from some macro shops. Do you think that would impact their ability to reach their minimums to maintain exclusivity? I believe the first one comes up in June of next year?
Okay. If I can say something right here just briefly and then Chris you can. Keep in mind Joe that the operators this tool is new. This is the new tool. So, it's not. There’s so much opportunity at the rig count even if it wasn't increasing. So as we introduced is into these basins is essentially tools unheard of. And so when you look at as the level of shelves ramping up because the rig count ramping up that helping far out the marketplace where everybody – people are now willing to listen and want to talk to you, but as far as when you look at different operators and see maybe they’ve always had five or six rigs drilling in this basin, but we never had any of that word. And they didn’t even drill that from five rigs to ten, that’s still five rigs that we never had. And so, there's a lot of opportunity there whether the rig count continues to climb or not. This tool is undeniable with the performances that these operators are seeing with this tool.
And Joe as far as DTI’s penetration of the market, this is rolling out, this whole model is rolling out, really we’re pleased to say just the way we’d hoped it would. DTI is continuing to pick up share and I might just take a just a minute to kind of remind everyone what – contractually how we contemplate that number. It's on horizontal rigs. And so, how many horizontal rigs is Drill-N-Ream on relative to the number of horizontal rigs in the marketplace.
And so as I think most people know the first measurement date, but that that share calculation is June 30, 2017. And so what we're saying is DTI is getting the tool into the marketplace. They're purchasing tools in order to build a fleet to service that market in order to meet that 10% market share hurdle. So really I mean we're just excited about how – just how well this agreements coming together. And not that we thought it wouldn’t and but it's always nice to see it and verified that hey it's just really working the way we thought. And I think as you may have seen, we reported in a press release a few weeks ago that actually DTI is a little bit ahead of purchasing tools and fulfilling their tool purchase commitment to us.
Okay. So, I guess, in summary they're still gaining market share and they're benefiting from the rig count. So we should see benefit from both the fourth quarter even though it's too early to quantify it. Is that a fair way to put it?
Okay. Moving on to Strider is you know I mean given that the remodel of it, there was originally a deal with Baker Hughes for them to use it. You've given up your sales staffs actually for the Drill-N-Ream. Can you give us just an explanation of how it is that you're bringing that tool to market today from a sales perspective? And you know like what that revenue stream could book like? Or is the expectation prove it out and then go for a DTI like contract with somebody for exclusively? Or is it to market it yourself or to market it through Baker Hughes or whatever you can I guess add us color on Strider there?
Okay. So let me first explain, when we talk about Strider, we have there's two sides to this business. You have the, what we the open hole, which is typically where we've been, okay, that’s where Drill-N-Ream, is that’s where drill bits that we do with Baker Hughes. That’s all in the open home. Then there's a completion side of the business. Once they drill the well and run the casing and putting their truck loads, the whole another side of the company that comes in their drill bit up and brings these wells under production that’s probably called as Strider coiled tubing Strider.
So when we went into the Strider process as you well know we were in the open hole and we were developing the tool and we knew the mechanics and how this tool function was very sound. We were very excited about it, but when we did our testing in one basin with essentially one operator, we really had our [indiscernible] when we went and started introduce this on our basin. And so as the market created and we went into a survival mode, we knew we had to find the quickest way to revenue. And we knew we had a good solid tool, a sound tool, but it would be more expensive to finish the development of the open hole Strider. So we went into the coiled tubing Strider with the same mechanics as the open hole Strider, a little bit different change on the design just because of the size of the tool. But this is the tool that’s going to give us the quickest path to revenue.
So keep that in mind this is a coiled tubing Strider. It’s for the completion side of the business. And we don't know what that market. We think it's a very appealing market, but like I was mentioning, we're bringing in some experts in this industry that has brought innovation and technology to this industry before develop the market, identify the size of the market. And then make the right decisions on how that tool is going to be marketed. There could be a channel partner in there. There could be multiple channel partners. So, we're going to learn a lot about this tool as we go into 2017.
We know we have a tool that works very well and some very high profile operators and service companies have run it and been very pleased with it. And we know that there are some opportunities that we're excited to explore. And when we talk about the Strider for the open hole, we're going to get back to it as we start being getting into a productive mode now. You bet. We know what that tool – we’ve got to do with that tool. And we're going to get that tool out into the marketplace like just like we said we would. And so, we'll keep you all updated on how that tool progresses as well.
Okay. That sounds good and then one final one if I could just for Chris. Is there any update on the February Auto Body loan – you’re working on trying to refinance that maybe your degree of confidence that you could still get that done.
Yes. We are very confident. Kind of step number one is looking at a kind of resurrecting, divesting those assets, paying off that debt. So that's initiative number one. And we’re working with a lender, who is considering financing the transaction on the other side. And so that's what we're going on right now. We're in that process. If we do not get a transaction, where we sell the assets and pay off the loan, then yes we feel very confident well we'll refinance that debt on our balance sheet. But, yeah that's March 2017 is win that that terms – that $1.6 million roughly.
Okay, thank you.
[Operator Instructions] Your next question comes from the line of John Stoltzfus with Oppenheimer & Company. Please proceed with your question.
Thank you. Well done gentlemen from a difficult period in the marketplace. I’m curious, so what I see is that the horizontal rigs being put in place are growing at a pace that would get you to 600 horizontal rigs by June. Do you have the financial wherewithal and the nameplate capacity to meet the need should we actually hit 600 horizontal in June of 2017.
Yes this Chris, yes we do. We’ve got one shift in our manufacturing plant working. We have some additional capacity that we could utilize, so we’re not at full capacity utilization. But one shift and of course should the market start to look like what you’re describing, then we could add a second third shift. So we feel very confident that we’ve got the roof line and the machines, the CNC machines to meet that demand should it materialize.
And I think it’s important too John that you understand that one of the things that we’ve been doing in this over the last six months to eight months is identifying some out sourcing opportunities. We know that we’ve got some machines that do this work and do it very well. But in case something was ever happened, a major power outage or something that happened in our facility. We have now teamed up with some – and out sourced the machine of this tool to have some very high qualified facilities. Our team has gone down and worked with them and they are now able to build the tool at a level of quality that our customers demand. And so we are making sure that we have that kind of ability as well.
One more thing we would like to highlight is we anticipate after the first of the year that we’ll be looking for working capital financing. And we’ll start take a hard look at that again. And so that’s a part of our agenda.
And then another thing I might add is from just an inventory perspective we don’t build tools to finished goods inventory. We build tools to purchase orders. And so that allows us to keep inventory levels at modest levels. And so in working capital financial we’re really looking for is they’re just receivables for the most part, maybe a little bit of inventory. But there’ll be also something else we’re looking at the moment to put it in perspective and we’ll be taking a hard look at that after we get through this year and early into 2017.
Okay. And the other question I had has to do with, the rigs are being used far more intensively than they use to be. And so there could be a need to have a more rapid turnaround in terms of having the tool being refurbished. I’m just curious if you could give any thought for in field service units which could possibly be a boost to ROI?
Yes what we’re looking at right now John is we know that there’s a level of repairs that come to our facility. Our team is very good at turning these tools very rapidly. Matter of fact one of the e-mails I have seen yesterday in regards to the correspondence from the cutter company, as we do cutter development on these tools, they want to come and analyze their cutters and how they’re holding up in our tools and want to know when they can come see these tools, when they come back to the field to do essentially their [indiscernible] is cutter, we can never give them the time because when the tool gets in and we get it out, we turn it around right now.
So there will become a point in time that has been looking into 2017. But yes I mean there’s going to be a need for maybe an additional facility to rapidly turn these tools around to better support DTI and their efforts. But that’s going to be down the road. I mean that’s going to take a level of tools coming into our facility to justify that.
All right, okay. Thank you very much.
That does conclude our question-and-answer session. At this time I’ll turn it back to Mr. Meier for closing remarks.
And again, thanks for everybody for joining us and thanks for your support. And we look forward to our next conference call and we will keep on doing all the right things.
This concludes today’s conference. Thank you for participation you may disconnect you lines at this time.
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