Mattr Corp. (MATR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by and welcome to the Shawcor Q4 and Year-End 2019 Results Webcast Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the call over to Paul Pierroz. Please go ahead.

Thank you and good morning. Before we begin this morning's conference call, I would like to take a moment to remind all listeners that today's conference call includes forward-looking statements that involve estimates, judgements and uncertainties that may cause actual results to differ materially from those projected. The complete text of Shawcor's statement on forward looking information is included in Section 4 of the fourth quarter 2019 earnings press release that is available on SEDAR and on the company's website at shawcor.com. I will now turn it over to Shawcor's CEO, Steve Orr.

Good morning and thank you for joining us on this morning's conference call. As we start the call, I'd like to highlight the extreme challenge of triangulating the industry and the company with a backdrop of ever-changing macroeconomics and factors that influence the risks of the company. Our approach is to be conservative and anticipate the possible impacts to the company and its performance. Yesterday evening we released our Q4 and Full-Year 2019 results, with new segment reporting. This new segment reporting will without question provide enhanced granularity into the company's performance, but it will also challenge the historical and, in many ways, outdated set of assumptions about the company's portfolio, markets and competitors that result in the company's valuations. Additionally, the change in segment reporting will bring enhanced clarity to the reasoning why the company has moved with great urgency to diversify beyond pipe coating and, furthermore, the future potential that pipe coating brings. Now turning to Q4 2019, adjusted EBITDA was $30 million, a decrease of 30% over the third quarter of 2019 and an increase of 22% over the same quarter 1 year ago. Revenue for the quarter was $334 million, a 15% decrease over the previous quarter and a 6% less than Q4 2018. The current quarter's revenue was negatively impacted by the annual seasonal slowdown, low demand for product and services related to North American drilling and completions and a revenue push related to a service quality event, partially offset by the addition of the ZCL acquisition. Although Q4 revenue was lower than expected, as the North American E&P operators pull-back in spending was even greater than we had anticipated -- and we certainly did not forecast a service quality event -- EBIT was delivered as expected for the quarter. Without the direct service quality cost of $7 million provision taken to recoat pipe and the indirect cost, a $10-million-plus revenue push out of the quarter, the results would have much better than we expected. Looking at the segments for the quarter, the Pipeline and Pipe Services segment saw the completion of coating work for the Barzan project in EMAR, the absence of demand for girth weld inspection in December in both gathering lines and large diameter, and the impact of pipe coating of the service quality event. The Composite Systems segment had a very good quarter for tank deliveries, but it did not fully offset the reduction in demand for pipe in the U.S. land market. Automotive and Industrial segment was as expected, with a typical year-end slowdown. Looking forward to Q1 and the full year, we are forecasting that there will be a return in demand for our products and services in North America in both the upstream and midstream, with strengthening through the first quarter, with January being very slow. We expect demand for our composite tank products and retail fuel market will remain strong, within historical profile sales, where Q1 is the lowest point of the year. Demand drivers for products and services within Automotive and Industrial segment should remain solid for the full year, although we are expecting there will be some volatility due to the coronavirus in Q1. But at this time, and I emphasize at this time, we do not expect it to impact the full year results. Pipe coating in offshore and international markets, where we are now forecasting there will be a step change in activity, based on projects that are already booked and are expected to be booked, Q1 will be slow, with a progressive build for each quarter through the year, with Q3 and Q4, where we expect to see the visible step change in performance. I'll speak in much more detail in a moment, but in summary, based on a very conservative view, we expect that Q1 could be significantly lower than we had just delivered in Q4 2019. However, on the assumption we'll see continued strengthening in North American upstream and midstream to near 2019 levels, our oil and gas nonrelated businesses will perform at levels similar to 2019 and pipe coating projects that we have secured, or have high certainty of securing and executing in 2020, are not halted or suspended, the company will deliver results in 2020 that are an improvement over 2019. Additionally, with line of sights on projects, many bids outstanding and the success we are having in securing work with EPC's pending FID, the step-up that we are forecasting for the second half of 2020 we expect will continue in 2021. I will now ask Gaston Tano, our CFO, to provide some details on the fourth quarter financial results.

Thanks, Steve. As Steve mentioned earlier, the fourth quarter results were in line with our expectations despite some challenges in certain areas. Before I start, I'd like to remind all listeners that we have revised our segment reporting. We now have three segments -- Pipeline and Pipe Services, Composite Systems and the renamed Automotive and Industrial, formerly Petrochemical and Industrial. Starting off with revenue, consolidated revenue in the fourth quarter was $334 million, 6% lower than the fourth quarter of 2018. The Pipeline and Pipe Services segment revenues decreased by 14% compared to the prior year, primarily due to lower demand for pipe coating and girth weld inspection services in the North America, as a direct result of the capital-disciplined focus of E&P operators and delays in land transmission line projects, partially offset by higher pipe coating project activity in the EMAR region. The current quarter was also negatively impacted by delay of revenue related to the quality issue experienced in the quarter. The Composite Systems segment revenues increased by 10% compared to the fourth quarter of 2018, primarily due to the ZCL acquisition, which was completed in the second quarter of 2019. This was partially offset by lower demand for compositive pipe products related to the capital-discipline focus of E&P operators and the continued market softness in Western Canada. In the Automotive and Industrial segment revenues were higher by 1%, primarily due to higher demand for our wire and cable products in North America, partially offset by lower revenue for our automotive heat shrink products. On an annual basis, consolidated revenue for 2019 was $1.49 billion, an increase of 6% over 2018. The Pipeline and Pipe Services segment revenues increased slightly over the prior year primarily due to improved pipe coating activity in the EMAR region, partially offset by lower revenues in the Asia-Pacific region. The Composite System segment revenues increased by 20% compared to the prior year, reflecting the benefit from the ZCL acquisition in the current year, partially offset by lower demand for composite pipe and tubular management services related to the capital-discipline focus of E&P operators and a continued market softness in Western Canada. The Automotive and Industrial segment revenues increased by 4% compared to the prior year, primarily due to higher demand for our wire and cable products in North America, partially offset by a slight decrease in revenues for our automotive heat shrink products. Consolidated results for the fourth quarter of the year were negatively impacted by nonrecurring items outside of the company's normal course of business. The current quarter includes $104 million impairment charge on intangible assets and goodwill for our Shawcor Inspection Services business and assets at 2 pipe-coating facilities, also a loss of $1 million related to the hyperinflationary accounting for Argentina. This was partially by a $5 million gain on an investment in associates and a $1 million gain on sale of land in the quarter. The annual results reflect a negative impact of $104 million impairment charge, the ZCL acquisition and related items of $17 million, a loss of $5 million related to the hyperinflationary accounting for Argentina, partially offset by gains of $39 million on the sale of lands in Western Canada and a $5 million gain on an investment in associates. On an adjusted basis, consolidated adjusted operating income margin for the fourth quarter was 1% compared to 2% for the prior year fourth quarter. The current year's adjusted operating margins reflect positive adjusted margins for the Composite and Automotive segments, both at 14.1%. These positive margins were offset by a negative adjusted operating margin of 13% in the Pipeline and Pipe Services segment, which reflect the negative impact of a $7 million cost for the quality issue in the quarter, lower demand for girth weld inspection services and underutilization of our pipe coating facilities in the EMAR and Asia-Pacific regions. On an annual basis, consolidated adjusted operating margin was 3%, with Composite Systems and Automotive and Industrial segments having positive adjusted margins of 14.3% and 15.7% respectively, partially offset by the Pipeline and Pipe segment being negative 5.2% due to the reasons mentioned earlier for the quarter. Adjusted EBITDA for the quarter was $30 million, 22% higher than $24 million reported in the fourth quarter of 2018. This increase was primarily due to the addition of the ZCL acquisition and lower adjusted SG&A expenses, partially due to lower incentive compensation expense offset by $7 million of warranty costs and lower foreign exchange gains in the current quarter. Adjusted EBITDA for the current year was $136 million, slightly higher than the prior year. This increase is primarily due to higher revenues discussed earlier, which include the acquired ZCL business, the positive impacts from the adoption of the IFRS 16 in the current year and lower SG&A expenses, also reflecting lower incentive compensation expense offset by higher warranty costs and lower foreign exchange gains. Let's now discuss cash flows for the quarter. Cash provided from operating activities for the fourth quarter of 2019 was $49 million, slightly lower compared to the $51 million in the fourth quarter of 2018. This decrease reflects lower net income and higher changes in noncash items in the current quarter. The change in noncash working capital in the fourth quarter was a net cash inflow of $33 million compared with an inflow of $27 million in the prior year period. The $33 million cash inflow from working capital in the current quarter is primarily due to a lower accounts receivable and contract assets, partially offset by lower accounts payable. On an annual basis cash provided from operating activities in 2019 was $54 million compared to $31 million in 2018. This increase lower investment in working capital, partially offset by lower adjusted net earnings. Cash used in investment activities in the fourth quarter were $7 million, reflecting $10 million of purchases of property, plant and equipment, partially offset by $3 million of proceeds generated from the sale of land during the quarter. On an annual basis, cash used in investing activities in 2019 was $252 million, reflecting $291 million related to the ZCL acquisition and $45 million of capital expenditures, partially offset by $79 million of proceeds from the sale of land and investment in associates. During the fourth quarter cash used in finance activities was $26 million, reflecting a debt repayment of $10 million made in the quarter, the payment of lease obligations and our regular quarterly dividend. On an annual basis, cash provided in financed activities was $82 million, reflecting a net increase of debt of $148 million related to the ZCL acquisition, partially offset by $42 million of dividends paid and $25 million of lease payments. Net cash flow for the fourth quarter [indiscernible] was a positive $16 million compared to a positive $27 million in the fourth quarter of 2018. 2019 annual cash flow was negative $119 million, primarily related to the [indiscernible] acquisition, compared to negative $72 million for 2018. In terms of the balance sheet, the company's cash and short-term investments increased to $98 million compared to $82 million at the end of the third quarter. Noncash working capital at the end of the fourth quarter was $204 million, down from the $249 million at the end of the third quarter, primarily related to a typical seasonal inflow from working capital in the business. Property, plant and equipment, good will and intangible assets are down compared to the third quarter of 2019, primarily due to impairment charges booked in the current quarter. With respect to debt, the company is in full compliance with debt covenants and has long-term debt of $438 million and $37 million of standard letters of credit as of December 31, 2019. As announced in our press release, subsequent to year-end the company negotiated an amendment on its credit facility with its syndicate of lenders. This amendment amends the maximum net debt leverage covenant in 2020 to 4.24x for March 31 and June 30 and to 4.0x for September 30. The net debt leverage covenant returns to 3.5x for December 31. The company obtained this amendment to address the potential risk that it might experience volatility in its short-term results due to the dynamic nature of a demand in North America land market, the potential delay of pipe coating projects and the general overall global uncertainty at this time. The company believes this level of relief provided in the amendment is conservative and will not be fully utilized. This debt amendment will allow the company to focus its resources in 2020 on delivering on its long-term growth strategy. I'll now turn it back to Steve for some additional commentary on the company's performance and outlook.

Thank you, Gaston. I'll first start with providing some additional color on Q4. We had expected, and in the Q3 conference call communicated, that the impact of North America E&P operators' capital discipline would result in a reduction in spending in the fourth quarter. This reduction was forecasted to impact the demand for our products and services that are tied to drilling completions in both our Pipeline and Pipe Services and Composite Systems segments. In the first 2 months of the fourth quarter we experienced a slowdown that was in line with what was planned. However, in December many field operators' -- field operations were fully halted, our crew utilizations fell below breakeven and product installations stalled, resulting in North American negative impact on Q4 being greater than we expected. Furthering the pressure on the fourth quarter operational results was the service quality event that occurred at 1 of our sites in our Pipeline and Pipe Services segments. The event was limited to 1 site, a specific product and application and 1 customer. Shawcor's decision to rework the product was driven primarily to ensure that the long-term credibility of our commitment to stand behind our products and services remained intact. In other words, a key customer was not satisfied with what we had delivered and we had to ensure our reputation for technology and execution continues to command a premium in the future. The impact on the quarter was seen directly in the $7 million provision we had taken and indirectly on revenue as other booked work at the facility was also pushed out of the quarter. It is estimated that revenue impact was in excess of $10 million and that it will take several quarters to reschedule the pushed work. The root cause of the incident has been addressed. The facility is back to production and the customer is now satisfied with what is being delivered and has awarded us work since. Within the Composite Systems segment, tank sales from retail fuel remain strong and actual results were better than expected due to favorable weather that increased the number of installs in the quarter. Other positives for the tank business were the record full year for sales and margins in water and waste water and we completed the last actions that will result in us achieving $8 million of annualized cost synergies as of the 12-month anniversary of the ZCL acquisition. Automotive and Industrial results were as expected in the quarter. There was the usual end of the year slowdown in demand for heat and cold shrink products that was partially offset by solid demand of specialty wire and cable solutions. Although at quarter end the backlog remained relatively flat at $513 million compared to $509 million reported at the end of Q3, I am very happy with the success we are having in winning work to maintain this level. Additionally, with over $1 billion of outstanding bids, of which $240 million is awarded conditional FID, it was a good quarter for project positioning to ensure Shawcor is the pipe [quoter] of choice. Of note, the recent press release on Payara and Sangomar are examples of projects secured pending FID, and the Baltic Pipe press release is one that followed the normal award process. In Q1 we are forecasting a slow return in North America E&P spending. We also expect project restarts in North America midstream, after the seasonal break and several regulatory suspensions, will push into late February or early March. Project startups in our Channelview, Texas; Kabil, Indonesia; and Orkanger, Norway facilities are wrapping up, but are end-of-the-quarter loaded. And we will be taking costs to prepare our Scotland and Brazil plants for [ girth weld ] production that will start in Q2. In our normal seasonal cycle Q1 is the lowest for composite tank sales due to low installs because of weather constraints. And the Automotive and Industrial segment should see an improvement in Q1 over Q4. However, there may be some impact in Q1 from the coronavirus. But we've been actively managing it and, although there is uncertainty, at this time we're not forecasting a negative impact on the full year. The net result of a very conservative view that has a slow return of activity in North America late in the quarter pipe coating project starts and costs and seasonally low quarter demand is that Q1 2020 could be significantly lower than we have just delivered in Q4 2019. For the full year 2020 we are expecting volatility quarter-to-quarter in North American upstream and midstream and customer spending on a par with 2019. Q1 will be the lowest point for pipe coating activity, with strong build in the second half of the year due to planned execution of projects that are already booked. The non-oil-and-gas businesses in our Composite Systems and Automotive and Industrial segments will follow their usual annual profile and are expected to remain solid, at similar levels to 2019. Overall, we are forecasting we will have earnings improvements over 2019 and that the improvement will be very visible as we exit the second quarter, as our international and offshore pipe coating business starts to execute. Since 2014 we've been building a portfolio that is diversified both in offering and markets, that leverages the core strengths of the company that can deliver both sustainability and [ torque ] benefits of the large capital projects. I believe with our new segment reporting it will make clear why a diversification strategy was pursued and the potential that is available in the very near term. Our Automotive and Industrial and Composite Systems segments are performing well as a result of the decisions we've made to add capacity, 25% increase in capacity over the last 3 years for Automotive and Industrial segment and new offerings, tanks in the case of Composite Systems segment, during a very rough, long-duration downturn for our oil and gas CapEx-spending-dependent Pipeline and Pipe Services segment. Supported by the demand for global LNG as a transition energy source, the reduction in offshore development costs, subsea tree orders and projects that Shawcor has booked or is positioned to win, there is confident that the Pipeline and Pipe Services segment is on the verge of returning to contributing meaningfully for Shawcor. We expect an inflection point that is quarters, not years, away and that the benefit will extend beyond 2020. The success of the company will be determined by our near-term success in managing three elements. The first is the dynamic management of our base book and term businesses; the second is securing and executing pipe coating projects; and the third is the reduction of our debt leverage. Before I open it up for questions, I'd like to highlight several points. The energy sector continues to be challenged due to uncertainties in trade, geopolitics and variables on both the supply and demand side of the equation. With this as a backdrop, investors should consider owning Shawcor for the following reasons. Shawcor's diversified portfolio is underpinned by supportive long-term fundamentals that it is positioned to deliver sustainable returns throughout the cycle. Shawcor legacy core business of pipe coating is poised to strengthen, with multiple projects set to be executed and secured in the upcoming quarters, and there is a growing list of future projects. Management is executing on clear priorities and they are focused on delivering shareholder value in the long term. I'll now turn the call over to the operator and open it up for any questions that you may have for Gaston and I.

[Operator Instructions] Our first question comes from Aaron MacNeil of TD Securities.

Steve, when you say that Q1 results could be significantly lower than Q4, can you help us understand the magnitude by maybe diving into some of the variables that might contribute to this performance? And I guess I'm wondering specifically, will U.S. land be any different Q1 versus Q4? What will be the Q1 impact of the Channelview facility? And how much do you expect to incur in additional costs to prepare for contracted work?

Okay. So I think it's a very fair question. But I'd like to highlight management's commentary on Q1 is with the understanding of all -- and I want to make sure I phrase it correctly -- all the headwinds and uncertainties as we go into Q1. The comment of significant is based on a factor in U.S. land that we may not see an improvement from Q4. So we now have 1 month and it has not recovered to the first 2 months' run rate in North America and upstream that we saw in the fourth quarter. So that's my first comment. We have, and we monitor incoming tickets, because it really is a book-and-turn type business for girth weld inspection gathering lines and pipe sales. So assume if it's flat and shows no improvement so it becomes a 2-month quarter, then you could expect similar performance to Q4, so no uplift. The other comment I would make in non-oil-and-gas, and you can look at the historical performance of ZCL, Q1 will be low for ZCL. It is the profile of the business. So if you compare Q4 to Q1 you will see an absence of contribution, a much lower contribution of ZCL into Q1. The comment then on pipe coatings, the facility -- and you identified it as Channelview -- there will be some impact. We took the cost to strip and recoat. But of course we had to push work out of the schedule. So there's going to be work that we would have assumed we would have done in Q1 that is still going to be pushed into further quarters in the year. So they'll be some pressure from the service quality on the top line to continue into Q1. The other comment I'll make, and we really don't know, is will -- the Automotive and Industrial segment is a very solid segment for us. We should see an improvement from Q4 to Q1, and I use the word "should." However, and you're probably familiar, our Chinese facilities and our automotive customer supply chain is engrained and touches many points of being impacted by the current pullback, extended shutdowns in automotive. And so the messaging on the significant pullback is kind of at an arm's length of the projects for pipe coating, and that's the one thing I think we're most comfortable with because we have the work that we have secured and we're forecasting will be a step up. It is work that is already secured. So that one is probably the most confidence that we have. The next confidence that we would have of course is we know that [indiscernible] will be low. And then the rest relies on really what is the uptick that will happen in North America reference to Q4, and what will happen on the automotive as we see things play out over the remainder of the quarter for demand of automotive products and our facilities [ left ] in China. So I hope that puts it in proportion. Look at Q4. I think you can pull out the ZCL. I think that's fair. You can expect if things don't improve from the Q4 run rate in North America upstream, it could be a pretty rough quarter for us.

And then I just wanted to clarify on your 2020 comment. In order for 2020 to be higher than 2019, do you need to see activity levels flat to 2019? And I guess I'm wondering because based on capital budgets announced in the U.S. so far, U.S. land, upstream spending would broadly be expected to be lower year-over-year.

Yes. In my prepared comments -- and I'll address it by segment. So what do we need to have an improvement over 2020? The first thing that we need to do is we need to ensure that the revenue that we generate in North American upstream is equal to what we did in 2019. That doesn't necessarily mean that we need the same level of activity, because we have more products that are now going into the market. And I think a critical one I would identify is the success that we're having in pushing our 5-inch-and-larger diameter spoolable into the marketplace. So it was commercialized at the end of last year. And we are expecting and we have line of sight of an increase demand in international that will help our composite pipe business. So we don't need the same level of spending, but we need to be able to [ accept ] the [indiscernible] [ hedges ] to a decline in spending. So I think that's my comment there. We need the same that I mentioned before in our Automotive and Industrial business, we need on par of 2019. So the biggest impact on year-on-year performance is really the execution of work that's already secured. And I think you only have to go back to the press releases that we've made throughout '19 and recently in 2020 and look at the timeline of when they're going to be executed. They all start, and you'll see them in the project plans that I mentioned, which is the plants that are in Kabil -- Indonesia is going to see a substantial and we mentioned that in the press release. Norway is going to pick up. We're going to see Channelview, once we can clear up the service quality issue, start to generate bottom-line performance. And in the later part of the year you're going to see Norway. And the one that is probably the biggest one is now Leith, which was a site we had targeted to consider. It adds a footprint. How does it address the market? It has been awarded the Baltic Pipe. So all this has been secured in the second half. So you will see an uplift and that's probably the most confidence we have.

And you had mentioned on the last call that you wouldn't look to a substantial reduction in head count in Q4 for the girth weld business, kind of giving an expectation that activity would rebound in Q1. And I guess has the continued weakness in U.S. activity changed your view at all? Or are you still committed to running . . .

If you'll allow me to correct you, we said it the other way. We actually reduced facilities in the fourth quarter and reduced head count in girth weld inspection. So we have moved out of 3 different geographies in girth weld inspection in the fourth quarter. Yes, so to be clear, we've actually done that, so the revenue on girth weld -- the profitability as a percentage for girth weld inspection, for gathering lines for this [indiscernible] type work, we've pulled out of several bases, all those service bases from adjacent locations. So we're down 4 in the 1 quarter.

And obviously I assume you think that that's a good fixed-cost structure going forward?

The big head count in that business is the variable head count, which are the technicians that run the trucks. The technicians' compensation are tied directly to activity, so it's kind of self- [ regulating ].

Our next question comes from Anthony Linton of National Bank.

Just a question to clarify on the backlog. So conditional awards at the end of Q4 '19 were $240 million, which was flat to Q3. Is that because the letter of intent on the Liza project was backfilled? Was it -- did you all consider it to be a part of the conditional awards?

Payara, Liza III remains in this bucket of $240 million, so it [indiscernible]. And so is another large project, by the way. But the $240 million and, and just off the top of my head, probably 4 projects that moved into backlog and that were backfilled by other projects. So we did have a movement of projects from this $240 million bid number that moved into backlog that was replaced by other ones over the quarter.

And then I guess on a similar note just trying to understand the timing for Baltic Pipe and then Sangomar, were those reflected in that 500 -- in the backlog number on the conditional award? Or should we be thinking about those over and above the release number?

So the Sangomar is in the $240 million at the end of the quarter. We had pipe delivery confirmation for Baltic Pipe, so some of Baltic Pipe is in the backlog and some of Baltic Pipe is beyond the 12 months.

And then just thinking about the Channelview facility, I think you said $10 million. Is that how we should be thinking about what's getting pushed into Q1, or is that somehow going to carry over into Q2?

It will take the whole -- some of the work is already pushed into Q3, Q4. So it won't be fixed in -- the back-up work won't all come in Q2.

And then if we just, on the margins side, if we add back that $7 million rework charge it implies adjusted EBITDA of $36 million with an 11% EBITDA margin. Is that kind of the profile of backlog we should be thinking about in the first half of 2020?

There should be some improvement to that. As you know, we get further utilization in our coating facilities in the pipe coating side as we execute the secured work that we have and the work that we expect to secure. So there is improvement and that's what we've talked about in our earlier remarks, that we do expect an improvement of results in 2020 over 2019.

Our next question comes from Elias Foscolos of Industrial Securities.

I want to hit on some sort of general overall items. Given the current share price, have you considered, and the board, an issuer bid? Or is that something that's maybe off the table for awhile, given the amendments to the credit facility?

Yes. I think we should temper the priorities. So I think the near-term priority is to manage the [ dynamics ]. And certainly as we have line of sight of the debt leverage coming down, a share buyback program certainly is more and more attractive as the share price goes down. But as we mentioned, there's kind of 3 priorities and the third one is we really have to get the confidence in the balance sheet back that I would say is lacking. And then as we generate more cash -- and we expect to generate the cash from the pipe coating in the second half. And I think the board and management is aligned that there is opportunity to use excess cash, including returning to shareholders in the form of a share buyback. But we have to get there, right? We have to get the second half running and we really need to see what's going to happen in the other pending markets. And I think at this time with the uncertainty from many different headwinds that I never thought I would see in my career in oil and gas. We need to see these headwinds, to find out what really is going to happen. The concern now is on -- and Elias, you're probably reading as much as I am, on the long-term impact on demand and does this switch the whole supply chain. So I think -- and certainly right now is high and the focus needs to be securing the balance sheet.

I appreciate that color. And it's not surprising, but I did want to ask you. Are there any asset sales that you might have that you're working on? No specifics, but I kind of think there must be a few things that are possible.

The board and management is spending considerable amounts of time evaluating the value of assets that's in the portfolio and the long-term strategy of the company. So it's important that I don't get granular on particular businesses, but certainly that is a topic of focus right now.

That high-level color is appreciated. Finally, focusing on Sangomar, given that the work is supposed to start in 2021, that is not in backlog and we can start to see that come in over the next few quarters. Correct?

Yes, correct. So we actually will generate a little bit of revenue in the tail end of 2020. And the way we generate revenue in pipe coating is a small percentage of the overall revenue that we'll generate we'll [ cull ] from loading in the pipe. The lion's share is done by [ joining ] the pipe that you coat and as they accept it. And then there's a small percentage as you load it out. Included in the load-in is some cash that we receive, revenue we receive, to run trials of the pipe in our facility. We're going to see some of that in Q4 and then as production starts in Q1. So as we release the end of Q1 results, you'll start seeing Sangomar in the backlog, is how it will work. And then as we do Q2, you'll start to see now 2 quarters of the total production come in. So you're right. So it's not captured in today's backlog, but you'll start seeing it coming in next quarter.

Maybe one last question. And I don't want to beat this to death, but I just want to understand it. You had rework in Q4 that pushed revenue out. You said it's pushing revenue out from Q1 into Q2. But you presumably have revenue in Q4 that would have been pushed into Q1, unless you were planning to do some retooling. Is that correct? In other words, when you're doing the rework everything slides back. But it used to be a bit of a gap. Is that because some retooling of a facility?