Chart Industries, Inc. (GTLS) Earnings Call Transcript & Summary

Good afternoon, and thank you all for holding. [Operator Instructions] And I would like to remind all parties, the call is now being recorded. If you have any objections, please disconnect at this time. And I will now turn the call over to Steve Tusa. Thank you. You may begin.

Great. Thanks, everyone, for joining me. Last one of the day, I think, for us here. Very happy to have Chart and their COO, John Bishop, with us. John, thanks for the flexibility of dealing with us in these dial-ins and all the madness that goes along with organizing this. We really appreciate you under the circumstances.

No problem.

Maybe if we could just start, I know people are going a little bit COVID crazy here, but I wanted to just check in with every company, and you guys, of course, ask at a high level, what is the context around which we should think about the impacts for you. I don't think anybody is giving real hard annual guidance. There are some giving a little bit of color around the quarter, but perfectly understandable if this thing is highly fluid. Just want to understand kind of the context of how we should be thinking about it in a -- from an exposure perspective for you guys?

Sure, sure. Well, the way that we think about our exposure there is what are we -- what are the critical functions that in a situation like this that we need to make sure continue to happen to run the company and generate revenue. And I think this is probably the right way -- or this would be the way I would break it out is there's really 3 critical functions that we need to happen to generate revenue: a, we've got to be able to get the supply to our manufacturing facilities; b, we've got to get our people, our employees, to our manufacturing facilities and give them a safe environment in which they can turn those supplies into our finished product; and then three, is we need to be able to ship those finished products to our customers. And at that point, we generate revenue. And thus far, we are able to do that all across the world. We are -- have operations in China. For a while, those were shut down about 3 weeks, and now those have been turned back on. We're 100% back to work. We've got operations in the U.S. and across Europe. That may or may not be impacted by areas of the virus as it continues to spread, but even -- our understanding is that even in the lockdown areas, you're able to -- that doesn't restrict any supplies going in and product coming out and so we're still feeling very good about our ability to execute. So thus far, we don't really have a way of -- our end demand markets have not seen much impact thus far. It's early. But thus far, we've been able to still execute, and we're just continually watching on what the end of market demand may be. We -- critical supplies to us is an important element, and we formed a lot of SWAT teams internally that are speaking with our local facilities on a daily basis. I'm on several of them that is making sure that we're getting the supplies we need to our manufacturing facilities and that there are people there to put product together. So thus far, we can't really give a fully annual impact of what that might mean. We do have an $800 million backlog that actually continues to grow that we're going to continue to execute as long as 1, 2 and 3 critical functions can happen. So we're actually feeling pretty good about where we are relative to some of the end markets that are out there.

And when you think about, I guess, the incremental wrinkle -- I guess, wrinkle is probably a term that doesn't do the magnitude justice. But the incremental wrinkle of the recent OPEC move on oil, how do you see that kind of rippling through your markets that are not exactly related but certainly tied to some degree to what's going on in oil price at a high level?

Yes, sure. I mean I think what wrinkle is -- you're right, that probably doesn't do justice to what I would call almost a shock through the system.

Right, right.

But I think what -- and we absolutely have -- half of our products that is leveraged to the energy markets, Steve, in one way or another, most of that's natural gas, and a lot of that is LNG, and so not -- you're right, not directly impacted by it. But I think end customers are impacted, and all of those things tend to be -- and some markets are directly impacted. Here's what I would say is we -- half of our portfolio is leveraged to the industrial gas markets, which the end markets of those customers, Air Products and Air Liquide, et cetera, are actually quite diversified and not something that we're seeing as any kind of an impact, given the oil price drop, although we are still in constant contact with them because I think that can happen down the line. And ultimately, I think there is linkage between all of these elements of the economy, but the other thing I....

Sure. As it was in the past here.

Absolutely. The other thing I'd say is we have an $800 million backlog that doesn't get impacted by commodity prices, and we're continuing to execute on that. And so generally, we're feeling pretty good. If you look at our share price, that probably isn't a view that is shared by the shareholders at this point, but we're feeling pretty good about how we're continuing to progress the business. We're staying focused on what we can be focused on and can control, cutting costs and making sure that people are -- have a safe environment to work, and we're going to take it one day at a time. But thus far, we're actually feeling fairly good about how the order book is progressing this year. Our backlog is building. So it's hard to say what the future is going to bring. But thus far, like I said, we're feeling fairly good.

Is there -- you guys had talked about the potential for $700 million to kind of $1 billion in pipeline for LNG. And even just outside of the higher level macro, there's been news around Tellurian, and there were some cautious comments from Cheniere on their fourth quarter call. Is there anything that's kind of more of a direct news flow that you've seen in the last month or 2 that would temper that kind of the confidence in that order pipeline? Or would this be merely just kind of a bit of a push to the right on these things?

Yes. No, good question. And obviously, big LNG is an element of our portfolio that we certainly spend a lot of time thinking about. Three big projects that are in the portfolio, you listed most of them off. There's Cheniere's Corpus Christi Stage 3. There's Tellurian's Driftwood project and then Venture Global's Plaquemines Parish in Louisiana. Those 3 are not actually in our revenue guide. So -- but we would love for them to move forward. But I think in this environment, while we haven't heard anything definitive out of any of those very good customers, that is different than what people have heard publicly, and we also have a hard time, we don't really like to get in front of them from what they've said. We haven't heard anything different, but it would make sense in an environment like this to probably see those shift to the right. I think that's the speculation that is out there probably makes a lot of sense to us. And ultimately, that probably is what may happen as they slide towards the end of the year or the following year. I guess one of the things that we feel really good about them is these are the projects that are at the 10-yard line right now. And whether it's these companies or other companies progressing them forward, we think if there is incremental LNG capacity to be built in the United States, it's with these projects because they're nearly done. They're all very efficient from a cost perspective. And like I said, usually, when you get this far and have this much money and effort invested, they do move forward. But sliding a quarter or 2 wouldn't be inconceivable in an environment like this. Although we have -- we'll see what time brings. Now the one project that we do have, Venture Global's Calcasieu Pass project in Louisiana also, we are manufacturing right now. That has not stopped. The environment doesn't stop that. They've got all of their financing put together. And so we are in execution mode right now in our La Crosse and New Iberia facilities, and that will generate $100 million of revenue this year. So feeling good about that.

And then is there -- do you feel like there's heightened risk of now -- I know we're talking about kind of the order pipeline and perhaps they're shifting. Is there heightened risk around project cancellations that you see out there at this stage of the game? Or really too early to talk about that at this stage?

Yes, I think it's too early. And I know you know this, but these companies are building 20-plus-year assets with execution time frames of 4-plus years. So I think they tend to be conservative in their estimates, and they tend to not change their mind very quickly when shocks to the system happen like this. But anything is possible. Contractually, we're well protected from a lot of that because we are -- and what I have found usually is once they make that financial investment decision to move forward, they do, do that because the developers want to spend the money and move them and go forward. But either way, we're relatively covered in our contractual arrangements. As long as we produce our products, we're okay.

And when you think about kind of that revenue coverage in your backlog, can you just remind us on the big LNG stuff? Is that -- are you pretty -- given the visibility on these projects, assuming no cancellations, you're pretty well covered for '20. Really, the issue would be kind of getting orders to kind of fill that growth pipeline in big LNG for '21 and '22. Is that the way to think about it?

It would be -- I mean, actually, right now, our big LNG projects, which would be that we're manufacturing that are in the backlog, there are some small ones that we're finishing off. But Calcasieu Pass and -- is in our backlog and that we're under -- in execution mode right now. And then 50% of our -- we booked 50% of the Magnolia project, which hasn't moved forward but -- which is in our public disclosure, $40 million. So you add those 2, you've got kind of about $150 million in our backlog. That's it. It's in there for big LNG. So the rest of our backlog is actually filled with projects that are anywhere from $20 million petrochemical facility orders to fuel downstream LNG fueling station orders to an industrial gas customer who may have ordered 20 cryogenic tanks at a time. And so it's a lot of diversified stuffed that's in there. So -- and like I said, it doesn't cover our revenue for 2020, it's ultimately $800 million that most of which will be executed this year, but that doesn't cover the guide of $1.65 billion. So -- but it -- we feel good that, that's giving us a lot of tailwind. We do have quite a bit of kind of book and ship that we do as well that doesn't ultimately usually sit in the backlog that long. And we haven't seen those markets dry up yet or even be terribly impacted by what's going on, but there's always the chance of that happening. So no, I think the big LNG projects would be more about adding to the backlog for '21 and '22, absolutely. And we do feel like the 6% to 8% LNG demand growth that the world has shown up until yesterday probably will continue. So...

Right, right, right. When you think -- just remind me, when you talk about these supplying the industrial gas guys, what -- how geographically dispersed is that globally?

I mean we are selling products in over 50 countries across the world, so very diversified is the way that I would say that. We -- the biggest portion of that, half of it probably is in the United States and then a very big portion in Europe, an increasing portion across Asia, some of which is in China, but also India and various other Southeast Asian countries. So quite diversified to their end markets, which can be anywhere from industrial metal cutters to hospitals to meat packaging companies to you name it. They're quite diversified, beverage distributors, et cetera, et cetera. And geographically, the Air Products, the Air Liquide, the Linde, all those great customers of ours, they're operating all over the world and we're there with them.

And how big are you in China with that business? How big is that?

Overall, our China business is -- well, we'll see where it is in 2020, but we had projected that it would be $90 million a year, and it's been consistent with that for the last several years since we've done the expansion there in '13 and '14. The first quarter, we had projected that it would be about $18.5 million that we would do in the first quarter of revenues, and this is sales revenues that I'm talking about. I think the 3-plus-week slowdown that happened there, which I think happened to everybody when people had to stay home and not go back to their plants, we don't make the kind of things that can be done at home. And we lost some time there that we are trying to make up with over time and resetting shifts, et cetera, but I think we'll probably lose several million dollars of revenue in the first quarter. We hope we can recover a lot of that in the second quarter, provided China doesn't have another challenge. But that's the magnitude sort of $90 million on an overall $1.6 billion revenue business.

Right, right, right. When you talk about some of the small-scale LNG opportunities. Maybe just in the near term, any opportunities for those to increase with the backdrop of low gas prices? How do we think about maybe the influence on that business in the near term?

Yes. Well, we -- we'll see what happens ultimately with the oil price, but a low gas price only typically improves the arbitrage of against liquids, diesel or whatever liquids that they're using, coal, et cetera. So we actually had seen an uptick, and we'll see where the market goes now, but we have seen an uptick in the amount of discussions that we're having around that pipeline. And so those projects do take about 12 to 18 months to sort of come together, if you will, and then they take about 12 to 18 months to execute. So it's not -- no time frame. They're great projects for us because they tend to be 20 -- on average, about $20 million revenue generator. It can be $10 million. It can be $40 million. But they keep us busy for a while. They leverage all of our end-to-end product portfolio, which is, again, there's nobody in the world can match what we've got on an end-to-end product portfolio across the LNG value chain. And they leverage a lot of our engineering expertise. So this turnkey solution provider that we do, which can't really be matched, it's almost a perfect fit for that. And we've seen the number of -- with low gas prices and especially low LNG prices, but low gas prices, we're seeing a lot of people say, "It might be the time to consider natural gas as a bridge fuel for my industrial business, for my port, for marine bunkering, et cetera." With all the challenges that new gas pipelines are having in the U.S. and elsewhere, but even in the Northeast U.S., we're building peak shavers where we're supplementing the -- we're using -- we're liquefying gas off the pipeline, if you will, during downtimes and then feeding it back to the power plant, so they can maximize their power output during peak electrical demand without actually needing to build a larger pipeline. So we're seeing a number of opportunities pop up all over the place, and all of it has to do with confident low natural gas. So while I think some of our businesses swooned a little bit with the low gas prices, I've been pretty amazed at the balance that this portfolio provides because of the -- those that are gas consumers and LNG consumers have actually seen a pretty big uptick. And small-scale is definitely one of those businesses. We've announced 2 or 3 projects already this year. We've got about $50 million in our guide around it, which given the math I just gave you, is anywhere between 3 and 5 projects. And we've got 30 or 40 still in the pipeline. And so we'll see. Provided the world continues to move forward with what's happened in the last 3 days or 2 weeks, we should see more activity around that.

Great. Pat -- I'm going to pass it over to my associate Pat here to click away at a couple of these questions he had some interest in. Pat, go ahead.

Hey, John. How's it going?

Good. How are you?

I'm doing good. Maybe just stepping back kind of zoom out a little bit kind of higher level, I'm just -- with the stock down 50% since you last reported, I mean, the market seems to implying that -- seems to be implying that your EBITDA is going to be like $200 million or less in 2021 versus current consensus of close to $400 million. And I just wanted to kind of get a sense from you, like, is that a reasonable expectation, given the big decline we've seen in oil? Or maybe that's like an unfair question. But if you could provide some color around maybe the resiliency of your EBITDA today versus what you saw back in 2014 to 2016, that might be helpful for people, differences in the portfolio that might make it more immune to such a move in oil, I think that would be helpful for people, given what's happened to the stock.

Yes. No, absolutely. I guess -- and I think you're right, depending on how you look at valuation, if you assume valuation multiples that are consistent with other industrial companies, even others that -- whose manufacturing process work like ours, you're right, the market is implying at that share price a lower EPS number. We spend less time thinking about EBITDA, but a lower EPS number and earnings generating power that we think we've got, especially when you look at where we finished the year, which is, although we would thought -- we would love to -- a higher earnings number than where we hit $2.52 of earnings with really no big LNG in the portfolio, there was $20 million of revenue or $25 million last year. We feel like we're in a very different spot than we were in 2014 when we hit our other earnings height, which was about in the mid-$2.60s. We had a lot of LNG, big LNG projects flowing through the portfolio. They, by their nature, start and stop over time. And as we rolled into '16, a lot of those big projects finished off that had started in '13 and '14 and weren't announced again. And that was a large part of our backlog if you go back and look at it. Now yes, we'd love to see more big LNG projects happen. But our backlog is, for the most part, as Steve indicated or mentioned earlier, is filled with a lot of diversified industrial gas and downstream, chemical, petrochemical projects that we don't think are in jeopardy of moving forward. In fact, we think we can actually continue to win those projects in this environment. And it's still early, but most of our customers in the last 48 hours have indicated they are going to continue to buy at the path in which they've already told us this year they will. So we feel like that perhaps -- I hate to say that to criticize the market because I think that's a lot of different voices at the same time. But we're scratching our heads a little bit ultimately with the confidence that we've got in our earnings forecast and the resilience that we think we've got in our EBITDA forecast in our revenue stream relative to what's being implied by the market. And that's -- I think I can give you more detail on that, but I think it's a very -- it's a different company today. It's much more diversified today. So yes, I would say we feel better about where we were back then and the resilience of our earnings power.

It's so diversified in the sense that you have less big LNG in there and also from kind of M&A and divestitures perspective that you've done over the last several years. Is that what you mean by that?

Yes. We -- absolutely. We have done 3 acquisitions since that time period that have really expanded our exposure to not only the energy value chain. So spreading us across the energy value chain, both downstream and upstream, midstream, petrochemical, all that. But also globally, is what I would add to that as the VRV acquisition stretched us into India. We had already built out in China, but we are diversified across Europe and especially a strong leg into India, which we think has a lot of staying power, in fact, there's a lot of growth potential in that market right now. Being on the ground in manufacturing in Chennai and doing our engineering center in Hyderabad gives us a great leg on that market, which we think is going to grow, both on the industrial gas side but especially on the transition to gas side, which Prime Minister Modi has made a priority. So not only is it diversified on the energy side through the acquisitions we've done, and again, diversified on the end markets but also geographically, which I think is something that you don't always get an opportunity to see.

Yes, makes sense. Maybe diving a little bit into the -- one of the recent deals you did, the Harsco deal. As you talked at the fourth quarter call, I think you said something about January orders being pretty good in that business. I guess, maybe you're not going to comment on recent trends. If you can, that would be helpful. But if not, I'm just thinking about the 2014 to '16 period in that business. If you look at the data that Harsco provided, they went from like $225 million in revenue to $94 million in revenue.

$95 million. Right, yes. Yes, at the bottom.

So is that like a reasonable expectation this time around? Or is there something different about that business? Like I just don't know enough about the history there.

Yes. I mean, it's a business that does have its exposure to the gathering and processing and midstream markets, absolutely. And those can be somewhat up and down. I think Harsco did a number of things to expand that business in the last downturn that they had hoped would insulate them from a dip like that. On average over the last 10 years, it's done about $170 million of revenue if you take the average across the cycles. All of that is public disclosure back when Harsco owned it, and now we do. And of course, it was -- when we bought it, it was on a pace to do $240 million, $250 million. And we've said it's probably going to be something more like $180 million, $200 million this year. And you may say, "Why do you have that comfort that it isn't going to fall back to that $95 million, $100 million level that Harsco saw in 2016 or 2015 when that was?" We've taken our businesses, we put them in there. And so the business is much -- overall, they're manufacturing our brands as well, so I think they've got more diversity to them right now. We've got a different sales channel that still attacks the same markets, but we've been able to leverage ours. I mean that does attack the same markets but also is more connected to the business is what I would say, and it is selling into different markets, which is where we've seen some of the strength in the first month of the year that Jill mentioned on the last call. And we're taking it to India, and that's something that they haven't done before. So we looked at -- maybe that doesn't impact us much from a revenue standpoint this year. We think next year, it will. So we're going to make that business global, and so -- and we think that's going to be another element that will provide some upward pressure to reaching the downward parts of that cycle. So for that reason, we don't see revenue getting down to that point. In fact, the last time that we've talked about guidance, Pat, we said we felt like the conservative case we gave at $180 million was probably now the case, but we weren't moving down further than that. I think that does require some recovery towards the end of the year to hit that number. But I think the perspective you've got to have is that's -- that business is $180 million, as we've been talking about it, that we bought on an overall $1.65 billion to $1.7 billion revenue guide. Overall, Fin-Fans might -- because of that, have some weakness in it, but I think that we're more than making it up in the rest of our businesses right now. So we feel pretty good about the overall diversity of the portfolio. That's just one element of it.

Yes, it makes sense. Maybe we could talk about one of the growth areas that you guys have talked about for the last couple of years, the specialty market opportunities. If you could flesh out kind of the size of the aggregate of those revenues today and where you think you could be in a few years, I mean, I think -- and the key growth kind of markets within that, that you want to highlight, I mean, I think that would be helpful for people. And I think that's all in the D&S segments, right, east and west, where you would report those? Or is that across the...

Yes, that's right. That's right. Actually, largely, it's been in the D&S West thus far. One of the big things that we're doing is stretching that into the East this year, and we've got a new sales team that's engaged in it. So it is an element of the market that we are -- or an element of our business that we're very excited about. And you're right, it's been momentum that's been building for a couple of years. We, last year, had said that, that was about $160 million, $165 million business overall, all of the specialty markets. That includes our food and beverage, our hydrogen customers, our industrial laser customers, water treatment, space, cannabis, you name it, a lot of very interesting and diversified customers around that as well as that $165 million includes our HLNG vehicle tank business. And so from a size perspective, I think investors need to understand that, that was about $65 million of revenue. Last year, we guided to $75 million this year. That's the tanks that we make that go on the side of the semi trucks that are using LNG as a fuel. Same as where you'd see a diesel tank, we replaced that with our 2 LNG tanks. If you -- that business likely will end up going into D&S as not a specialty market anymore. It's big enough that it's not specialty-wise. And so the segment becomes -- or excuse me, the business then is about $100 million overall revenue. And I think what we indicated is we still felt very strong about the growth this year. We think that, as we said in our first quarter call, we think 20% growth, at least up until the last 48 hours, we thought very much was possible. We put 14, 15 new sales and engineering people to carve them out specifically to go after those markets. They're different markets. It's a little bit more diversified, and the end sale is a smaller sale. It's a $200,000, $300,000 sale as opposed to multiple millions elsewhere in our business. So you need to incentivize people in a different way, but they're doing very well. They're hustling, which is a lot of understanding those markets. And I think that's one of the areas that, when we talk about where we're investing for the future growth, that's an area that you'll see us put probably more people and more dollars. But I think that gives a relative context of the size. I think one of the things that we don't probably always tell people is why are we so excited about it, and there are a lot of things going on individually in those markets. Each of those markets has breakout potential in the beverage market with our nitrogen dosers. We are working with several beverage companies, which could be much large contracts, ultimately, if they decide that they're going to move towards this nitrogen dosing for their products, which we're seeing in the water treatment space. We've seen a lot of the concern around municipalities have with making their equipment more efficient because they can't build out new water treatment facilities. People don't want those in their backyard, and they've been retrofitting their -- a lot of their facilities across the country with new equipment, and we provide that. So a lot of different opportunities within each of those segments. But for us, it's interesting because this is the portion of our industrial gas business where we're going directly to the end customer. And we've got an opportunity to say to that end customer, "We have an engineered solution that is going to make you work better. It's going to make you consume more liquid oxygen or liquid nitrogen or whatever it is that you're consuming, so our large industrial gas customers like that, too. And it's going to make you more efficient and get a better return on your assets than you ever have. And there's nobody in the market that can actually provide that business proposition right now." So that's why I think people have heard us be so excited about it. I'm excited about it. We all are, and we continue to invest into it.

Okay. I'm going to turn it back over to Steve for a few more questions.

Yes. Thanks, Pat. So just on the services, you guys have talked about it getting to be over 20% of sales. When is that -- what do you think the timing is of that target? And what are the biggest drivers? And then where was that kind of the peak of the last cycle, that services number? Could that be a differentiator relative to what you saw then and what you could see now in this oil and gas downturn?

Yes. Absolutely. We -- so last year, we finished at about mid-13% of our revenue was what we call our -- I think people call it aftermarket. It's our parts repair and services business. We have that in each one of our segments. We don't break that out separately. But it was about 13% of our revenue. As you mentioned, our target is to get that to 21%, by the end of 2021 is our target. That's a pretty big leap. We know that. We're working on it very hard. We have a few things that we have been working on, which we've highlighted on some previous calls, around taking more of the -- as our industrial gas customers have gotten more sensitive to their own CapEx and ROIC pressures, if you will, they've been thinking about reworking a lot of their portfolio of our tanks and equipment as opposed to buying new ones. And we think that's going to be a real opportunity for us. We actually aren't seeing an impact to our new sales because we're diversified around that. But we think that some -- so there will be some big opportunities in the U.S. largely, but perhaps also in Europe where that's going to provide us with a step change around our aftermarket revenues. And so I think we have some organic building to do within our portfolio, and that's what we're going to do through -- within our Fin-Fans portfolio. We've got opportunities on the aftermarket side within our E&C Cryogenics portfolio. We've got opportunities on the aftermarket and really, the retrofitting opportunities where we're going back into LNG facilities and saying, "Hey, we can make you more efficient by replacing some of your old equipment with ours." But these step changes are going to come from, hopefully, some of these new opportunities with some of our industrial gas guys.

And with -- so it's really the E&C segment? Or are you thinking it's kind of across both segments?

Actually, across all, yes. And I think it's probably going to -- the charge is probably going to be led, Steve, by our D&S segment so -- because that's where the industrial gas is. But I think it's going to be across all of them. We historically had separated out what we called our Lifecycle business and made it a little bit more visible for people to see. And that was where we had -- that was what we had in the last cycle. People could see our Lifecycle segment, I think. And now we've actually embedded those within the businesses, so that there is a better communication loop, not only with the R&D and the innovation that comes out maintaining the aftermarket business, but also a better communication loop between tying the aftermarket services to new CapEx decisions that our companies are making, which actually is, I mean, can be a real revenue generator for us. And we've seen that on both sides of the house, so that's one of the ways. There are a few ways that we're operating those businesses differently relative to last cycle. We've got those in the businesses, so they're much more integrated. And we think that's ultimately going to be -- enable us to grow those a lot faster than were -- the way we had them structured before.

And anything moving around when it comes to raw materials for you guys as markets pull back and as asset values deflate a bit? Any opportunities there on the kind of the purchased raw material side?

Sure, to go along with some of the materials. We don't actually keep that much. I mean we usually target project-specific needs around that. And so...

Right, right. You lock that in at that stage?

At that stage, exactly. And then usually, we've got ways of moving cost back and forth to our customer, but we don't tend to go long several months on aluminum or a long several months on carbon steel or stainless steel because we philosophically, we just -- we haven't done that kind of thing. And a lot of that is dependent on what's ordered specifically by our customers. So there are opportunities, I would say, unless we were to actually run the business differently. But there's also not an opportunity to lose money too much there, right in there.

Right, right, right. Operator, let's open it up for questions, if you don't mind.

[Operator Instructions]

While we're waiting kind of for that to queue up, one more question for you, John. The contingency plans in case things don't go well, what does Chart do from a restructuring perspective? Or is there -- are there certain levels you can pull if the markets don't cooperate with what you're thinking at a high level?

Well, do you mean with respect to...

Just protecting EBITDA -- protecting EBITDA and earnings in the event that the revenue picture doesn't play out that, hey, we really do go into a recession or a mild recession or whatever comes our way that's not on the downside.

Yes. I mean, there's -- there's still -- we tend to have a very people-intensive business, so we can always cut more costs. And that's something that I've been razor-focused on since I came here and continue to be razor-focused on is taking more cost out of the business. We're rolling through $38 million in cost savings from last year. I think there's the opportunity to take another, I've said $7.5 million to $15 million out this year through sourcing savings, through people savings, through footprint consolidation, which we're underway doing right now on some facilities that we have in the portfolio that are less profitable. So I think that's one way that we could kind of protect the EBITDA. The contracted nature of the backlog tends to also offer some protection around there. Ultimately, if people stop ordering products, that's a problem for them. But a lot of their revenue generation is using our products to get there. So we feel like there's some insurance there, some protection there that we've got ultimately around that. And like I said, there's still a lot of cost that can be pulled out of the business, and we're thinking about those every day.

Great. Operator, any questions on the line or just nothing?

I'm showing no questions at this time.

All right. Everybody's -- we haven't had a question yet from the line the whole day. So they just get...

Well, you did such a good job of asking them.

Did you think that you'd get the virus over the phone? Not going to happen, guys. So over the next couple of days, we need more questions from people. Anyway, on that front, on that note, John, thanks for being flexible and dialing in. We appreciate it. Best of luck managing through whatever comes our way, and stay healthy, and we'll speak to you when you report earnings here in the first quarter.

Excellent. Steve and Pat, thank you very much a lot. I appreciate it. And yes, stay safe, everybody.

Yes. Okay. Bye-bye.

Thank you. This does conclude today's conference. You may disconnect at this time.