Q1 2024 urban-gro Inc Earnings Call

Participants

Christian Monson; Executive Vice President and General Counsel; urban-gro Inc

Bradley Nattrass; Chairman of the Board, Chief Executive Officer; urban-gro Inc

Richard Akright; Chief Financial Officer; urban-gro Inc

Eric Des Lauriers; Analyst; Craig-Hallum

Scott Fortune; Analyst; ROTH MKM

Anthony Vendetti; Analyst; Maxim Group

Eric Beder; Analyst; Small Cap Consumer Research

Presentation

Operator

Hello, and welcome to the urban-gro first-quarter 2024 earnings conference call. (Operator Instructions)
Please note that this conference call is being recorded today, April 30, 2024, and a replay will be made available on the company's website following the end of the call.
At this time, I'd like to turn the conference call over to Christian Monson, urban-gro's Executive Vice President and General Counsel. Sir, please go ahead.

Christian Monson

Good afternoon, and thank you for joining us. Today's call will be led by Brad Nattrass, Chairman and Chief Executive Officer, and Dick Akright, Chief Financial Officer.
I'd like to remind our listeners that remarks made during this call will include a discussion of non-GAAP metrics, including adjusted EBITDA and backlog. These items should not be utilized as a substitute for urban-gro's financial results prepared in accordance with GAAP.
Reconciliations of our GAAP net loss to adjusted EBITDA are available in our press release and in our Form 10-Q filed with the Securities and Exchange Commission. It can be accessed from the Investor Relations section of our website at ir.urban-gro.com.
On this call, we may state management's intentions, beliefs, expectations, or future projections. These are forward-looking statements, and involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws, and are based on urban-gro's current expectations. Actual results could differ materially.
As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from such forward-looking statements are discussed in the periodic reports urban-gro files with the Securities and Exchange Commission. These documents are available in the Investors section of the company's website, and on the Securities and Exchange Commission's website. We do encourage you to review these documents carefully.
Lastly, a copy of our earnings press release and website for replay for today's call may be found on the Investor Relations section of our website, which again is ir.urban-gro.com. With that, I will now turn the call over to Brad.

Bradley Nattrass

Thank you, Christian, and good afternoon, everyone, and thank you for joining us today.
What a phenomenal day for the cannabis industry, as I'm sure most of you are now aware, a few hours ago, there were credible reports in the media indicating that the US Drug Enforcement Agency is supporting the Department of Health recommendation to reclassify cannabis from the most stringent Schedule I to the less stringent Schedule III.
In turn, providing a long awaited catalyst for the cannabis industry. While there still is a review period to complete with the expected removal of the two ADE. related tax burden from the DOJ addressing state run programs through a guidance memo, we believe many cannabis operators will realize significant increases to their working capital that in turn could be reinvested in their business infrastructure to refresh existing facilities and build out new ones for the last two years.
I'm proud to sit on the board of the National Cannabis Roundtable alongside [CELs] from some of the leading multistate operators in this space. The tireless dedication of MSL leaders like these and the lobbying efforts from organizations like NCR that has paved the way for our industry and the exciting wins along the way as it relates to what this news and the subsequent final approval of rescheduling means for urban-gro's future.
It's significant with over 1,000 projects completed in the cannabis market over the last eight years with 120 employees, which include architects, engineers, construction managers and horticulture. As urban-gro, the leading professional services firm in the cannabis industry that refreshes existing operations designs and or build new dispensary and cultivation facilities and further procures and integrates cultivation equipment solutions as well.
The successful rescheduling of cannabis is a long-awaited catalyst that we've anticipated to reinvigorate an industry. It has been facing strong headwinds for the last couple of years.
With that said and moving on, I'm excited to report that in the first quarter, we had positive cash flow from operations and in turn delivered our strongest quarterly and adjusted EBITDA results in two years. This improved performance is attributed to both the diversified revenue streams that we've been seeking and building out as well as our focused efforts throughout 2023 to reduce operating expenses on a go-forward basis.
Today, our multi-sector focused professional services and design build firm operates out of offices in three states and Europe and our targeted markets extend from the cannabis and vertical farming sectors to also include light industrial, commercial, hospitality, recreation, education and healthcare sector.
Looking at the highlights from our first quarter performance, both revenue of $15.5 million and a slight adjusted EBITDA loss of $0.3 million beat our quarterly guidance. The $3.1 million year-over-year. Improvement in adjusted EBITDA was driven by a combination of reduced operating expenses and strengthening margins.
It relates to the reduced expenses as a result of the optimization efforts made in '23, we began to benefit from the previously communicated $8 million reduction in general and administrative expenses. In fact, we realized the $2.8 million improvement from the first quarter versus Q1 of 2023.
The margin growth in the first quarter was tied to both increased productivity from our professional services providers as well as the strengthening of our returns delivered by our construction business and further backlog remained strong at $99 million as a result relating to full year 2024.
We are maintaining our guidance to recognize more than $84 million in revenue and to generate positive adjusted EBITDA. I'll further note that this does not take into consideration today's rescheduling related developments as there are still unknowns, including timing that need to be clarified.
Looking at market trends, diversification has most definitely assisted in insulating our business from the previously discussed headwinds that we've been facing within the cannabis and vertical farming sectors for the last couple of years, consistent with the sector breakout in '23 in the first quarter, approximately 72% of our revenues came from the commercial sectors that we serve and 28% from Controlled Environment.
In the commercial sector, our client base continues to be comprised of top tier companies that include Fortune 50 and 500 firms and revenues recognized in the quarter were from a combination of ongoing and new projects in the cannabis sector. While the market sentiment has been stronger than it has been in more than a year, especially after today.
We're actively engaged with clients on multiple fronts. However, cautious optimism has been the status quo for operators. So far this year. In the interim, while we wait for the rescheduling narrative to play out in the months ahead, we're expecting to see steady activity and to continue signing both services and construction contracts and legal markets across the US as operators work through persistent state-level, regulatory and legal delays.
This being said, and in addition, today's announcement through a couple of key additional catalysts, which could also result in a significant and sustained positive change in momentum for our business.
First, on the federal level, there's prospects of successfully passing a banking related bill by year end continues to be discussed of particular importance. This would potentially include a Capital Markets clause that allows plant-touching businesses to list on the larger public market exchanges, providing a more efficient path for them to access capital and create greater liquidity as would attract institutional investors that can participate via these exchanges or provide capital directly to the issuers.
Second, at the state level progress continues to be made on legalization in multiple states. We maintain our position, but the most impactful change would be in Florida, the nation's third, most populous state and one of the fastest growing in the country.
Now that it's confirmed to be on the ballot in November, a successful vote to allow adult use recreational sales would have a profound and sustained impact for Florida operators. And we anticipate for urban growth as well in closing and supported by our $99 million backlog. Our qualified pipeline for recognition of last year's $8 million, our general and administrative expense reduction and today's positive regulatory developments, we believe that we are well positioned to continue building momentum through the end of the year and beyond.
Thank you. And with that, I will now turn the call over to Dick.

Richard Akright

Thanks, Brad. In the first quarter of 2024, we generated revenue of $15.5 million, which represents a sequential improvement of $0.5 million or 4% over the $15.0 million of revenue generated in the fourth quarter of 2023 and a $1.2 million or 7% decrease over the 16.8 million of revenue generated in the prior year period.
The decrease in revenue over the prior year period was driven by a $0.4 million decrease in construction design-build revenue, which reflected a decrease in the number of projects and average size of projects during those periods. Equipment Systems revenue decreased by $0.4 million and services revenue decreased by $0.3 million, which corresponds to the historical downturn in the cannabis industry.
Gross profit was $3.1 million or 20% of revenue in the first quarter of 2024 compared to 1.7 million or 11% of revenue in the fourth quarter of 2023 and 2.1 million or 17% of revenue in the prior year period. The increase in gross profit dollars and margin percentage from both of these comparable periods was driven by the impact of improved margins in Services and Construction design-build revenues as we experienced improvements in delivery of services projects and started work on higher-margin construction design-build projects during the current quarter.
Operating expenses were $5.2 million in the first quarter of 2020, for which on a sequential basis, it's a decrease of $1.2 million and on a year-over-year basis is $2.7 million less.
Then operating expenses of $7.9 million in the first quarter of 2023. Both of these decreases are associated with the Company's expense optimization and resource reallocation initiative. Net loss was $2.1 million or a negative $0.18 per diluted share in the current quarter compared to a net loss of $5.1 million or a negative $0.48 per diluted share in the prior year period.
Adjusted EBITDA improved by $2.7 million sequentially to negative $0.3 million in the first quarter of 2024. This is an improvement in adjusted EBITDA of $3.1 million compared to the prior year period. The improvement in our adjusted EBITDA for both periods was driven by lower operating expenses as previously discussed.
Turning to our balance sheet, we ended the quarter with $0.7 million of cash and a balance on our line of credit of $2.0 million with the support of the working capital line of credit that we put in place in December, we currently do not see the need to bring new dilutive capital into the company.
Our total backlog as of March 31, 2024 was approximately $99 million, reflecting a decrease of $11 million or 10% on a sequential basis. This backlog is comprised of $93 million in construction design-build, $5 million of professional services and $1 million of equipment systems contracts.
Breaking backlog out by sector, 76% is with clients in the CYA sector and 24% is with clients in the commercial, supported by our backlog and pipeline. We remain confident that our cash position, combined with our $10 million line of credit will provide us the necessary flexibility to manage through various macroeconomic scenarios. We continue to remain focused on our execution and returning to positive adjusted EBITDA on an ongoing basis.
That concludes our prepared remarks. Operator, please open the call for questions.

Question and Answer Session

Operator

(Operator Instructions)
Eric Des Lauriers, Craig-Hallum.

Eric Des Lauriers

Great. Thanks for taking my questions. So first one on the here. Less than CCA agreeing to We scheduled payments, usually 30 to 80 factories, not applying to the cannabis operators --

Operator

Apologies. Apologies, Eric, your line is really bad quality. We will and we'll reconnect you will dial out to you so that we can get a better connection, if that's okay with you.

Eric Des Lauriers

It's okay.

Operator

I'll move on to the next question, and we'll reconnect Eric as soon as possible for those people.

Bradley Nattrass

Thank you.

Operator

Scott Fortune, ROTH MKM.

Scott Fortune

Thank you for the question. Hopefully you can hear me better. I will leave the hey question for Eric. But just curious on Florida, Brad, if you're obviously that's up for rental use a ballot vote now. It's still a big hurdle to get 60% of the vote.
But are you seeing now that it's up for vote are you seeing operators come in engaging more in your services as it looked a build-out of a potential vote in Florida? Or is still kind of muted interest from that standpoint?
To wait to see if this does pass in Florida from $1 side of things. Just curious on kind of the the operators kind of emphasis for moving forward now and building out potential ahead of some of these states.

Bradley Nattrass

Thanks, Scott. Thanks. Thanks for the question. You have Florida, it is a hurdle at the 60% and there's a lot of confidence that that will be that will be beat. But the heavy work starts now and the grade for people too to donate and to give to the path that Trulieve has created in the state with a lot of the other multistate leaders and so they can get the word out and keep pushing hard.
The polls are trending higher than 60% at this time from what I've heard. But again, it's a it's early stage and it's important to give so we can we can fight that fight in terms of uptick.
Yes, for sure. In terms of the the uptake and the excitement and the planning moving forward to hard large orders, that's not quite here and the conversations on many fronts that we've been having are preparing to be in a good place from an equipment standpoint. Some equipment needs to be ordered four to six months in advance and others is entering the design stage for new facilities and then at some point in the future proceeding to the build. But absolutely a very positive uptick in the state so far.

Scott Fortune

I appreciate color that. Thank you. And then just focus on guidance. You guys are giving guidance of more than $84 million in revenue for 2024 on the projects and the backlog and focus. Can you can you provide a little more cadence to kind of the remaining of the 24 year? Obviously, you had some delays from 4Q and I assume those projects are recognized here in 1Q, but just kind of step us through the year as you see your backlog move second half kind of loaded from the cadence standpoint to meet your revenue guidance?

Bradley Nattrass

Yes. First, addressing the three projects that we discussed on the on the 2023 or Q4 23 call, all three projects that are active, two of them are recognizing revenue in Q1 and third has has began recognizing for us in the second quarter. So those are those are all on track. We remain right now. We're cautiously optimistic we believe that we've turned the corner and I'm excited about where we're moving, and that's before today is a development. So it came to light. We are trying to under-promise and over-deliver in terms of our setting expectations, we're off to a good start in Q1. Backlog remains strong. Of course, we'd like to see it start to appreciate and increase again. But we're in a very good place. We feel good, especially with the rightsizing of the Company.
In terms of an SG&A standpoint, we've we've lowered the breakeven breakeven level for the Company Scott. So that's actually as good as we're going forward and we we can keep growing the business as the demand increases.

Scott Fortune

Perfect.
I appreciate the detail, and I'll jump back in the queue. Congrats on what is still the FDA moving forward today. So thanks for that.
Thanks.

Operator

Eric Des Lauriers, Craig-Hallum.

Eric Des Lauriers

Thank you.

Bradley Nattrass

The little bit you have to do well.
Okay.

Eric Des Lauriers

I tried at the center mark. We'll just take the questions offline. So I think you have to think because of the Day 2015 provide sort of an overview on the typical timing, one of your projects upfront with cannabis operators what sort of timing for a project to go from a discussion phase two pipeline to backlog and what you are looking into? I kind of understand how quickly you will be able to have visibility into your potential bonus calculations, capital expenditures to the cannabis industry permit?

Bradley Nattrass

I guess most of that permit, first of all, depends on the size, right and zoning and where we are, where we're located, state city and county and those requirements around the country. But typically they could take as long as without any delays as long as two years, depending on the size, probably as short as nine months on average a year and a half from initial discussions, we move into the design stage architecture and engineering and the cultivation design, civil and structural are all part of the engineering side there to hub. Once we have a whole set of CD.s that is put out to bid clients usually will look at multiple bids in which we're participating. And if awarded We immediately move forward, we can be we can cut weeks in terms of months, assets were proactively involved at certain stages. But overall, I'd say nine months to two years is a good average risk without delays.

Eric Des Lauriers

And how long would you take to see them that there is an increase in CapEx coming sort of industry-wide. I understand that some of these projects from discussion to completion can take up to two years, but how long will it take you to notice if there's a bona fide capital expenditure increase in the cannabis industry resulting from the TGA, would you have is it a few weeks of lead time of discussions picking up and leading to pipeline and deposits. Like is that? Is that a few weeks? Or is that because these discussion phases last, it's several months that it's hard to see if there's a true pickup or not?

Bradley Nattrass

I think on the on the Q2 earnings call and looking at backlog at that point from a services standpoint and new contracts that we've signed, that will be a really good indicator. And then also from an equipment standpoint, equipment in a strong cannabis market was a tremendous source of revenue for urban grow. And you look at 21, it was $56 million, decreased in 22 to $33 million as we reported last month and 23, it was down to $13 million and so the backlog that we reported at the end of Q1 for equipment was 1 million. So watch the backlog at the end of Q2 as well, that should be strengthening. I think the early indicators will be on services and on equipment. But I can tell you as a result of today's announcement, I already know it's stronger. We know stronger, good, strong discussions with clients and some signatures today already.

Eric Des Lauriers

That's very good to hear.
And I just have one more question. Given by a poor connection here of the gross margin expansion, you called out increased productivity from architects, engineers and an increase in construction margins. Because I guess just wondering if you could expand on Medicaid and these projects in Q1 and medical went themselves to higher productivity or higher construction margins. And ultimately, what I'm wondering is we expect productivity levels to remain somewhat steady going forward because there's something we feature fluctuate quarter to quarter and we got a little lucky this quarter, and I'm just wondering how to think about that going forward.

Bradley Nattrass

Dick, I'll let you take that one, please.

Richard Akright

We are I think spreads, Eric?

Bradley Nattrass

Yes.

Richard Akright

With regard to, we expect kind of that same type margin. It certainly was a very high margin for us in the in the first quarter of 2024. I don't necessarily expect that it's going to be exactly that high on a go forward basis. It was very low in the fourth quarter of 2023 as we I've talked about from a construction project that we had that incurred. Some additional costs went over budget and we weren't able to pass all those on to our customer because of a couple of the construction projects that did get started in Q1.
They are at very nice margins for us above kind of what we typically see for construction projects and so even though we might not expect that the Q1 margin we experienced just going to continue at that level going forward, we wouldn't expect it to fall off very much.
And as always, and we've talked about before, from the standpoint of our total gross profit and margin, it depends on that revenue mix that we have. So you still have to pay close attention to what happens as the equipment or services total revenue number changes over time and that impact on the gross margin.

Bradley Nattrass

And I'll add all that in on the back there a little bit. It has been almost two years, Eric, since we completed the acquisition of the construction company. And so there were some legacy projects that we came with the acquisition and that ended up not being what we would have hoped, right? So we call them legacy projects and they're pretty much finished.
Now the project that Dick alluded to in the fourth quarter and some surprise costs come in was tied to one of those projects. So that's behind us. That's great positive. Second, in the middle of 23, we had all of the acquired companies on the same ERP. We've talked about that before. And as a result, our COO and his team were able to put some stronger internal controls in place and now we're seeing the results of those move. So definitely trending in the right direction and we don't we weren't lucky in the quarter.
I guess to answer that last question for you.
Yes, that all makes sense to me, and I'm certainly glad to hear that some of these initiatives like getting everyone on the same ERP system has led to some some structural changes in margins, but understand that.

Richard Akright

Yes, there will be some degree of fluctuation going forward.

Eric Des Lauriers

I'm sorry, helpful. Thank you for taking my questions.

Bradley Nattrass

Thank you particular.

Operator

Anthony Vendetti, Maxim Group.

Anthony Vendetti

You had just a couple of questions on on the backlog of 99 million at the end of March.

Bradley Nattrass

I know today, obviously big data talk about cannabis and what this impact could mean in terms of future business. But in terms of the backlog, how what percent of that is cannabis related and what percent?
Obviously not non cannabis?
The 72% was commercial or non cannabis segment sorry, deck 76.
Go ahead, sorry.

Richard Akright

Yes, 76% of it was CEA. related and 24% was commercial. That's pretty consistent with what we reported at the end of December in terms of the split by the factors that we have. So even though our recent revenue performance has been a shift of that where we have had substantially more commercial than CEA., the backlog still continues to be a more higher percentage on CEA. than it is on commercial, partly due just to the size of some of the CA. projects that we have in backlog.

Eric Des Lauriers

Okay.

Bradley Nattrass

That's helpful.

Anthony Vendetti

And then what this could mean, obviously less stringent less stringent rules should open up investments, the tax benefit as well on what what I know it's just happened a couple of hours ago, but have you heard from any potential customers eager to come maybe speed up investment if indeed this gets this gets passed and maybe elaborate a little bit on what you think the timing is and for a final like consent decree to come down say okay, boom, this is going to move and from a Schedule I to Schedule III, potentially, it's neither the two 80 E. and the removal of two, eight years is most definitely the largest benefit to a successful rescheduling.

Bradley Nattrass

Some of the large multistate operators have publicly stated that the annual savings from the removal of two 80 E. and range from the 130 million to 180 million plus. So it's significant funds that we believe as some of them have also stated publicly that they're looking to reinvest those funds into the company with refreshing existing facilities and building out new ones. And so that's definitely the largest benefit there.
Yes, the period that it will be open for anywhere from three to five months before the final approval would take place. But it has been stated publicly that if the FDA supported the Department of Health, it will all all indicators are it will absolutely be approved in the long run, then that my opinion, but just opinions that that I've read so transformational for the industry as for clients.
Yes, just as we have had increased discussions and interest and excitement from clients in Florida would be on the ballot addition for November. We're having the same today and I just I'm not sure if you'd heard on an earlier answer, but we've had good, strong interest, even had some signatures today as well.
So it'll take time, right, like there's a lot of excitement today. We're buying that pool. We didn't want to increase our guidance or anything at this point. There's so many unknowns, and we just want to we want to under-promise and over-deliver with exciting time for the industry and for urban growth?
Well today, Brian.
Right. Okay.
So that will you will be upside? And if it goes from Schedule one to Schedule three, do you think that expedites changes in the banking regulations as well. I don't believe they're related. I think any momentum in the industry is fantastic.
And from a banking standpoint, you've seen that because the FHA bill, they thought they could tie safer banking to that as of late. They've said that it won't be connected now that it looks like it would go to the lame duck section later or session later in the year, and that would be the best avenue to have it passed. But I think positive overall cannabis industry sentiment, it helps go a long way. The people are speaking. And I believe from a banking standpoint, politicians, they have no option, but delicious. So I do see overall working together for a better industry for sure.
Okay. But let's separate on the banking thing.
Okay. And then just in terms of and productivity improvements, cost cutting, how obviously you decreased expenses, but where are you sort of in that process with halfway through completed. Maybe just give us a sense and understanding where you're at from a productivity standpoint, it tied into some of the reductions in general and administrative expenses last year when we had line of sight in the middle of last year when they all run the same ERP, we realized that that we were we had too many service providers on the team. And that's when we started to adjust and we've got to a size now where we're capturing a large amount of those salaries in COGS.
That's the key on the last call, we had stated that in 2023, we moved over $1.3 million down into salaries just because of the fact that we weren't as productive as we wanted to be. So so our results in Q1 were very strong there in terms of optimization, we don't anticipate at this time making any further reductions were rightsized right now a year over year from the efforts and the moves we made in 2023, we're expecting to recognize $8 million in '24 of savings from a G&A standpoint. And in Q1, we've already recognized the 2.8 million versus Q1 of '23. So we feel like we're in a great place and we've lowered the breakeven level for the Company, which is which is key, and we do not anticipate making additional cuts at this at this time.
Now that being said, we're always looking at expenses overall expenses and shrink trimming where we can predict. Is there anything you'd add to that?

Richard Akright

Yes.
I think the only thing I would potentially add, Anthony, is just during the first quarter that continued to be some reductions. But generally, when we hit the end of the first quarter, that was the but that was where we got the head count levels. We were looking to get to. So I'm the ways you're thinking about things go on, go on further out.
Yes, there the first quarter contains a little bit high on the G&A side that would there would be further reductions expected for Q2. But by the time we got to the end of the quarter, we were kind of at exactly at levels where perfect.
Okay.

Anthony Vendetti

Great. That's good color. Thanks, guys. I'll hop back in the queue. Appreciate it.

Operator

Eric Beder, SCC Research.

Eric Beder

Good afternoon. Let's talk a little bit about something the size of phases on commercial. What are you seeing in terms of demand for the commercial business? Has it continued to be as robust and have you been able to continue to expand the services you can offer for that division?

Bradley Nattrass

We haven't expanded the services at all at this point. Any further demand is remained strong. So the one area where we're watching closely is the length of time. I talked about it in Q4 as well. But the length of time that passes in between where we're being verbally awarded contracts and we're actually getting signatures. And so far in Q1, that hasn't gotten worse, but it hasn't gotten better either.
So that's that's one area that we're watching closely, but where the licenses were not losing. So it'd be one thing if we're losing clients or opportunities, but we're not losing. So it's just a timing issue. Our pipeline remains strong and we don't publicly speak about the quantity of pipeline, but it remains strong and very qualified for sure.

Eric Beder

And are you seeing when you look at kind of your top accounts here. Are you seeing them give you larger contracts going forward? I'm saying as they kind of like because I know the commercial is a little bit it's not as much a one off and managed sometimes as the cannabis business can be. So are you seeing that trend continue?

Bradley Nattrass

We have seen that trend continue over or progress over the last year, not in Q1. You know, the we did we hit a lot of solid singles in Q1, but with no triples or home runs and hence the backlog backed off a little bit, 10% right sequentially, but hitting a lot a lot of add-on contracts to existing projects where they increase the scope and some new smaller projects. But on the larger ones. So we do have some that are close and out. We believe that we will secure them. But we don't have the signatures yet, but no, no real material increase in size in Q. one to report you can update on Europe.

Eric Beder

What are you seeing in terms of trends there? I know there's been talk about Germany. What are you seeing in terms of the European business on forward.

Bradley Nattrass

But overall in Germany is slow and steady, right? If they're just coming into themselves, they made that announcement a couple of months ago, social licenses to start. So there's no requirement for the design and or build a significant sized facilities overall in Europe for us, the demand is remains weak. We talked on the last call about rightsizing the organization in Europe, aligning the expense structure with the size of the opportunity right now that all being said, we believe we've right-sized that there's definitely business. It can be had in Europe.
We want to be a part of the European cannabis and also in the future vertical farming market, it's going to grow a lot from a Canada standpoint, a lot of the CTOs of multistate operators who are expanding into the European market have have significant forecasts for where that market's going to grow over the next decade.
So we know we want to be there. That being said in Q1, there was no additional new contract signed in Europe. However, we did have a nice services contracts signed in Q2 so far. So we expect to continue signing contracts, but we don't expect any robust material improvement in the business throughout the remainder of the year.

Eric Beder

Okay. All right.
Thank you, Dick. Thank you Bradley.

Operator

There were no other questions at this time. And that does conclude today's conference. You may disconnect your lines at this time. Have a wonderful day. Thank you for your participation.