Q4 2019 Earnings Call

Good day welcome to the center, just tech fourth quarter and full year 2019 earnings call. Today's conference is being recorded not just trying not to turn the conference over to Brian surface Tech Investor Relations. Please go ahead Sir.

Thank you operator, I want to welcome everyone to synergistic slipped colder and full year 2019 earnings call joining us today from the company includes Mr. King a borrower president and Chief Executive Officer.

<unk> Chief Financial Officer.

Before we begin formal presentation I'd like to remind everyone that some statements made on the call and web cast, including those regarding future financial results and industry prospects among others. All forward looking maybe subject to a number of risks and uncertainties that could cause actual results to differ materially most describing the conference call.

Certainly those risks and uncertainties are will be described in greater detail in the company's FCC volumes synergistic is under no obligation and expressly disclaims any obligation to update alter its forward looking statement, whether there is all the new information feature that your otherwise at this time I'd like to turn the call that you actually scalable.

Thank you Brian Good morning, everyone before I start my remarks today I appreciate it want to thank all of our investors employees customers and partners for their support I've received over the last eight months would that help us synergistic we continue to transform our business you know comprehensive security and privacy services company, let me start by discussing.

Krona virus pandemic, how we are responding to its impact.

First thing to understand is that our clients are very much on the front want to this crisis that from a business perspective that means they are still at work, we're interacting with them Gailey I personally made it a point to call nearly all of our customers over the past few days check in and discuss the impact of this crisis under operator.

Patients and their security and privacy posture.

You know synergistic has been supporting the health care market, that's a trusted advisors for security and privacy services for almost two decades, our team is fully operational, albeit remotely during this difficult comps.

Although the primary concern right now and our client base is access to personal protective equipment ventilators kinda flattening of the curve.

Security professionals, including myself are increasingly concerned about the likelihood of a destructive attack on hospitals in the middle of this crisis.

After all we saw 118% increasing rents for last year and in most cases, what a hospitals hit was ransomware, yeah, no choice, but to divert patience.

He is our job working with our clients to do everything we can to keep our clinicians at work and seeing patients with full access to their systems and infrastructure. This is the responsibility we take incredibly seriously.

Dialogue, we're having with our chief information Security offers and right now is really want a round not all my watch as we help them shore up their defenses and prevent privacy breaches during this crisis.

Well operationally, 86% of our workforce was actually remote part of the Crane Democrat outbreak and with rare exception, where now fully remodeled our teams are traveling only one absolutely required as critical infrastructure walkers as outlined in the guidance from the less department of Homeland Security Cyber security and infrastructure Security Agency.

We're continuing to monitor and close contracts as you recently saw with the announcement of a million dollar managed security and professional services contract. We also just announces second notable six figure deal, which is an expansion of a leading public research University system into additional managed services.

The second contract includes our newer medical device assessment offering.

Since I started this job many of you been asking me when would we see a change or event occur which is health care market will start to take security seriously I.

I believe that moment may just have arrived in a similar environment to post not 11, we're recognizing that this is now a new normal. It's disruption has accelerated tele medicine will not work temporary facilities and increased spend or access to systems things would have happened over the next number of years have dalbec celebrated over the last few days and weeks.

Like any disrupted activity. This comes with increased security and privacy concerns with industry, it's only beginning to grapple with.

The threat landscape has completely changed any attack surface has grown exponentially and just the last two weeks.

Our clients are already reaching out for help a great example of which is a large patient privacy monitor deal, we close last year, where our clients.

I heard about medical records snooping related to Cobot night team has asked us to celebrate their deployment.

Like everyone else, we're monitoring the situation daily at long term I believe we may see benefits to the business.

Ever short term, we may see a temporary impact to our sales and marketing.

Our sales team is not able to meet with clients face to face.

The sales approach is changed it even though we're not able to physically need it requires communication Lontra made open as everyone is after home office and willing to take a phone call as most of the nation is indeed clouded from travel.

I would 19 will impact our business. However, I believe weren't as strong position as we continued to see demand for our services, while our clients come back this virus.

We're very active on social media, including a regular said a video cafs well I've been conducting for our customers health and prepare for covered died team and any cyber adversary that might look to take advantage of the crisis or increased threat landscape with more Americans working from home.

So now with look back at 2019, we made the first transformative move by divesting the managed print services business and therefore, eliminating the majority of our debt, which a lot of operations and sales teams to streamline their focus on security and privacy services.

We continue to expand or managed services revenue and strengthen our offerings.

We saw approximately 90% renewal rate from our recurring revenue service customers and continue to expand services within our existing client base with approximately 24% or managed service clients, having two or more managed services.

Our investments in new managed services and started to pay off the most notable which being a multimillion dollar offering with one of the nations largest health systems.

It is rollout across their entire enterprise after completing a successful pilot at five hospitals.

Contract pending associated rollout as I noted earlier could be accelerated as our clients deal would kill the Nike and associated concerns on insider snooping.

As part of the service synergistic will proactively identify apparent behavior and activity within the medical record leveraging artificial intelligence user behavior analytics, a team of highly skilled investigators.

Overall, we saw 10% year over year growth in our managed services offerings at 29 team.

Let's now constitute 56% of our overall revenue for the year.

This is an important point as we entered this period of uncertainty again, 56% of our revenue is tied up in long term multiyear contracts many of which are required by regulators and all of which can absolutely be deliver remotely.

Finally, we made a successful acquisition of backbone consultants, which brought a team of 18 security professionals into the company as well as additional services to our portfolio such as electronic prescription of controlled substance and I T audits.

We're excited about the acquisition and look to continue to support their team as we work together to expand their business.

I joined synergistic in the second half of 2019 and after my hundred day strategy call in November we anticipated that while we had some challenges. Since then we've made substantial progress on improving the fundamental to the business by focusing on the five strategic imperatives that I had outlined.

First challenge was the companies go to market strategy, our focus was to rebuild the citadel scene with individuals who not only have the experience in the security industry, but also the contacts network reputation and most importantly speak the language of health care.

Thank you may recall in November we were down to four.

Yes, well I'm happy to report today that we now we're able to recruit and onboard hiring covering all seven regions of the country. We're now operating with the team with 10 sales professionals with decades of experience in healthcare information technology and security.

These additions have made in immediate impact as we've seen a 10% growth in our pipeline. So level, we would expect to see as we drive this turnaround.

How many of these people are brand it and it will indeed be sometime like like the second half the 2020 before they're fully productive as it can any board and enable our day sales team.

Our staffing challenge focused on strengthening of the skills of our team over the last few months recruit individuals the one Dave lots to scale, our current offerings and deliver higher value services, such as Red team East consoles can provide much more comprehensive security analysis zoster penetration testing Catholics didn't minute.

Real world attack scenarios as we improve our skills, we approve of the quality of our work product with a deeper casegoods controls integration of run books in the back end of risk assessments and the favorable reactions I've received from our clients.

Ultimately should be able to also increase our pricing.

We've also strengthened the board, adding three new members with extensive background to the health care and security markets as well as experience, leading both public and private companies. These new members will be invaluable supporting me in my role as the CEO and opening the doors for client expansion.

Santa Sellers has an impressive track record, leading and growing health care REIT T. firms and she is an experienced operator, Mike Lauria is well known security professionals with extensive knowledge of the key players products and services and cyber security market.

The bottom occassion well he brings decades of experience as a public company CEO and board member, which will be critical to our ability to manage cities tumultuous times.

Next we needed to focus on the operations of the business make process improvements and reductions within our delivery teams and eliminate the backlog of work across the board. This is a crucial stuff for the business as it ties directly to client satisfaction and our ability to deliver our services.

What was taking of three to four months now takes us two to three weeks by reducing the backlog, we can maintain client satisfaction and focus the security and privacy teams on delivering our new services. Additionally, it allows us to maintain a more efficient and fully utilize workforce, particularly now during this crisis.

Finally, we had to reduce our operational headcount, which when combined with the efficiencies should start to show improved gross margins. It is always difficult to let employees go, especially in this kind of environment.

As we move forward in his time of uncertainty no that Paul and I will remain focused on becoming cash flow positive as rapidly as possible in the current environment.

Over the last six months I focused on the challenges we faced in the business. Our team was able to make considerable improvements on the imperatives, we made adjustments and we're going to continue the balance infrastructure overhead requirements.

We've begun to strengthen our team both internally and all the board we've reduced 100% of the backlog.

Finally, we started to rebuild our go to market strategy by building a sales organization that is ready to execute.

Now, we still need to reboot, our digital presence and our brand and continued to execute on the sales and operational improvements however by addressing the above challenges and focusing on improving the fundamentals of the business. We're positioned to either returned to growth or if we see a temporary pull back in the market we are fully prepared.

Well positioned right out of store.

So what does this mean for 2020.

At the moment with Cobot 19 were flat out busy and we have the team and structure in place to adapt and pivot quickly.

Our sales team is eager to engage and elevate the conversation with our clients of the C suite as they work to expand or managed services offering an area of success and 29 team with the backbone acquisition, we will focus on adjacent markets such as with medical device manufacturers at some of the top each our companies who are already clients dish.

Finally, with the strengthening of the delivery team had the ability to conduct more of a bus ticketing services, we see an opportunity to increase pricing across our suite of services I get more ammunition to our sales team to compete and focus on large scale enterprise clients.

Fixing the imperatives was absolutely essential for the business at a recent commitment to and a half million from a current investor gives us the capital support we need to pursue opportunities from a position of strength, we will continue to.

Our ties capital efficiency in these uncertain times, while balancing investments prudently.

Other areas, where we see opportunity I will not only on the call over to Paul Anthony.

To give a summary of Q4 and a full year financials. Paul go ahead.

Thank you can't look the financial information about providers for the continuing security business only.

Security revenue for the full year increased point 1 million to 21.4 million.

Breaking down the revenue for 2019 versus 18 managed services revenue was 11.9 billion an increase of 10%.

Professional and consulting services decreased 10% to 9.5 million.

This decrease in consulting and professional services consistent with what we've discussed over the last couple of quarters.

Grocer revenue was down due to the decreased from one of our largest customers.

Pleaded a number of the remediation efforts, which required our sport.

It's reduced the number of resources.

Going into 2020 with the recent cope with 19, we're still evaluating what impact we might see.

We do expect some revenue growth due to the benefit from our recent acquisition a backbone and growth from our new managed services offerings.

Gross margin was 39% for the full year 19 compared to 48% mate.

As we mentioned in prior quarters reduction in gross margin is reflective of our investment in attracting talented cyber security employees.

Cost associated with ramping up the new managed services offerings and the lower than expected consulting and professional services revenue from new and existing customers.

Over the next few quarters, we expect gross margins to improve towards the back half of 2020, if we look to grow our revenue target cost reductions and better utilize our workforce.

Sales and marketing expense increased slightly to 5.3 million for the full year 19, compared to 5.2 million for the same period and 18.

This was in line with her expectations as a result of additional marketing expenses incurred in an effort to increase sales, including trade show in program related marketing expenses.

DNA expense increased 5.5 million to 6.9 million for the full year 19, compared to 6.4 million for the same period in 18.

The increase is attributable to a net increase of 400000, a nonrecurring expenses related to the Onboarding, you're not 14 of our CEO.

Severance related costs transaction fees associated with the backbone acquisition.

Along with approximately 300000 in software subscriptions and support cost for streamlining operations and business tracking.

Non-GAAP adjusted EBITDA loss was 1.4 million or 6% of revenues for the full year 19 compared to breakeven for 18.

Actual results for Q4 2019 compared to Q4 2018 were impacted for the same reasons noted for the annual results, but we do want to lay out some of the quarterly specific numbers.

Revenue was 5.8 million for Q4, 19, compared to 7 million in 18 and.

Fair enough services revenue was 3.1 million compared to 3.2 for the same period of 18.

This drop was directly tied to the issues we were experiencing on the sale side.

We've already started to make progress from growing. This line again, you have seen from some of our recent announcements.

Professional consulting services revenues were 2.7 million compared to 3.8 for the same period of 18.

Gross margin was 41% of revenue for Q4 1952 for the same period and 18.

Sales and marketing expenses were 1.4 million for Q4 19 compared to 1.3 for the same period in 80.

<unk> expenses were 2.1 million for Q4 19 as compared to 1.5 for the same period in 18.

This increase in June today is attributable to the point 4 million a nonrecurring expenses we discussed previously.

The full financials and reconciliation of GAAP to non-GAAP can be found in the earnings release it came out today.

The company at 5.3 million of cash cash equivalents just received the commitment from existing investor to provide up to 2.5 million an equity financing.

Kelvin I continue to work together daily, albeit by video conference now to manage and monitor the daily operational expenses for the business. We're excited to continue working towards reestablishing predictable growth.

However, our operational focus while not limited will be on four key drivers that impact cash flow.

One monitored any negative trends in collections to controlling costs by constantly reviewing ways to reduce or rightsize, our overhead and support organization.

Three improving margins through we're laser focused on utilization.

And for ensuring that our investment in sales is generating the results. We expect both in terms of bookings and revenue.

We've already taken steps to address each one of these areas are currently enacting additional measures and have contingency plans developed at the need arises.

Returning to our efforts around monitoring to covert 19 situation. We're also looking at all the options I will be available to us from the recent signing by President Trump of the Corona virus aid relief in economic Security Act.

This concludes the financials in the prepared remarks for Q4 and the full year 19, operator, please open the floor for questions.

Thank you.

Thank you if you'd like to ask a question. Please press star one on your telephone keypad.

Do you think the speakerphone. Please make sure you read function is turned off to layer signal to meet your equipment again for star one to ask the question pause for just a moment allow everyone an opportunity to suit for questions.

Alright, well now take or first question from that she was Heartbreak Hill in capital Group. Please go ahead Sir.

Thank you could take an acquirer.

Uh huh.

So.

[noise] waypoint, while we will hold at.

Awful a lot like Oh.

Oh, you Ben its self.

Path you know.

I think you'd be able to call get an answer to work with them more as a public or.

Okay covert.

The little bit more.

Hello, ladies equation.

Well first of all thanks to the question Matt.

The short answer your question is yes, and no and it's been interesting I mean, one of the things that I've noticed is I guess is something everybody has got a ground themselves in.

You know as you go around you talk with friends and family and you know other people in industry I mean, theres just a lot of industry right now that shut down.

All of our customers her work in it's a it's a very different kind of farm at than what we're seeing everywhere else.

And they're also kind of amped up a little bit in that most of these hospitals have executed their emergency plans, but also you got to remember our primary addresses the chief information Security Officer, and generally speaking they are not clinicians are occasionally they are so they're often working from home there.

Really working hard right now to do everything they can to make sure that they've properly enabled and secured telework and they're getting ready. So you know that actually presents an opportunity for us where they're at home, they're interacting with us they are not traveling there actually gathering the phone. So so far so good on that I think the.

Yeah, it's always challenging not being able to see and eat face to face, but I think the reality is this probably regardless of whatever industry. You read is we're all going to have to get used to dealing sales and working really I personally have done a lot of social media work in the past.

I hadn't done a lot here at synergistic just because that was kinda busy with other things, but I'll tell you what our dusted off those muscles and we're out there every day or two because it's a great way to engage with people.

Keep the process moving but requires a slightly different set of tools.

Yeah, Okay, let's call them.

We're able to add though.

Sales people are going to called <unk> and you mentioned that there was something happens, but have you ever get privately held that was what the challenges.

For the company historically fighting Carla.

At all levels of young please go to the crew.

Hi, good that can be tobacco.

Ooh, maybe people that have been.

Laid off at other or Oh, well looking for work in south.

Opportunity for you and how quickly.

Well I saw that.

Well you know there. This is so you think that you're in your inside my brain right now that I need the.

Do you have to understand security talent, there was a 2 million person gap right now and this only gets exacerbated when I'm talking about let's say a small regional hospital. They they can't get the people to come work that there even if they're willing to pay them now historically, we've really benefited from the facts.

At higher talented people and we operate in a remote structured it day. So a lot of times if somebody live outside of a major metropolitan area, We had a better chance of recruiting them, then, let's say I'll get a larger security company.

I'm very curious to see what happens as people end up on the streets here over and you know, it's a terrible things have happened, but he's going to happen over the next couple of months.

You know, it's an ideal opportunity recruit on the other had one of the things Paul and I are very consciously monitoring is we want to make sure we don't get over our skis and then a capital pull back we may see so it said if you think about it we've got a couple of variables in the equation War on is the now pipeline.

Alan right and you know always staying close to that.

Second variable is kind of a short term tactical variable, where any number of can help get any industry, including hospitals and health care, you're going to see a short term you know kind of knee jerk reaction to pull battle expenditures, especially as they're going through kind of code that 19, you know they never bought those cost SAR and of course.

You know they've also lets say deferred elective procedures.

But.

Longer term outlook is what gets really interesting because honestly this probably would have taken five or more years to see the telemedicine and remote work in more access to vendors to the HR role while at the speed I mean, we've basically got.

Two three weeks, what would have taken four or five years and my gut tells me that you're never need back on the bottom right now that there's more remote access to health care data now that more clinicians who had been so from home I can't imagine how that genie ever goes back in the bottle, but we're going to the need to figure.

How to secure it and it opens up a whole new realm of challenges from a privacy perspective.

Understood. Okay. That's really helpful. And then maybe two more first off.

I can tell him at its in a few times.

There's a couple of different model for telemedicine one.

Good luck for example, the doctors are working for them through them worsened somewhere it's more of a white label the hospital themselves on the platform.

Are you currently working with any of these telemedicine providers and if so.

How did that model how is that model a little bit.

Different from working with a hospital per se.

Our primary clients today or the actual provider so the hospitals and we've started to diversify that through the acquisition a backbone into the each ours, a as well as you know one of the nations largest medical device manufacturers, what you're hitting on is clearly an opportunity area.

Matt If you had asked me three or four weeks ago I would've said at the outcome. The outlook on that is yeah actually it's interesting we're going to watch it closely but you know we've really got to wait for something to happen at 94 or five well test for two or three weeks and its here. So I think there's a absolutely an opportunity there.

I think we like you were asking the same question of.

All I think the other question we're looking at with all of this is how did the economics change who's on first to deliver these types of services right does it comp from.

The physicians practice, where you had the skills and the talent does it come up from the the hospital in the hospital system, where she's where are usually where the HR sits and where they had the bigger I teams or does it potentially come from a third party. That's contracted just to do that so you know I I guess to answer your.

Question. Another way, we have the same questions and I think it is a new unforeseen market opportunity that's emerge out of nowhere and we're going to start looking at a very closely.

Got it and then last one for me.

You also mentioned the maybe the opportunity to increase pricing or prices for some of your services.

How should we be thinking about that over the course of the euro and maybe I guess, that's twofold, one and.

How or when would you implement that and what types or you know what magnitude of price increases I would imagine this environment, maybe it's a little bit more challenging, but as we kind of get through.

So on a virus push your over that hopefully near term that like me may.

Be more simple to implement something like that but maybe just the timing and magnitude be helpful. Thank you.

Yeah, I think that's a that's a great point here and look no no. One is looking to do anything here in the short term that's going to send anybody sideways that being said.

And this is something we did not have the opportunity to discuss in my hundred gay a webcast because honestly I hadn't really gotten underneath it yet, but one of the things that I found after really be digging in deeply to our pricing. Our resourcing model. We found a couple of things first of all we found that there were new opportunities for efficiency in how we deliver.

Our services and you know that was simply just a byproduct is the fact that no one had gone back in and refresh some of the approaches some of the reporting methods of how we delivered our what product to our client. So we found some real opportunities for efficiency. There. We've got a couple of rock stars on the team that are just really good it.

Right and that kind of service efficiency. The second thing I looked at was when when's. The last time have we updated pricing and remember we're a labor base business in a market, where you know and this is a rough quote don't put this in your financial models, but you know you're talking about a cyber security market, where if you're going to go out and get new.

Tell it tomorrow, it's probably going to cost you, 5% to 7% more than what it cost to the year before right. So when we've got multiyear contracts, it's absolutely realistic that when you get to the end of that contract your pricing might be go up by 20 or 30% just because of the increase in labor rates.

What I found was two things one our ability to deliver our services was not as efficient as it could event and we've made those changes and then the second thing was that the actual pricing increases we generally speaking had not been increasing prices when we would renew those multiyear contract.

That is obviously a delicate process of working with our clients because we've got to make sure they got things and budget, but generally speaking we've been having those conversations I think they've been well received and I think in many cases, we should be able to you know update our prices a in a pretty significant way and you know I would say.

Asked me that question again next quarter, and I know you well and I'll tell you how successfully been out and maybe what kind of range, we've been able to get into.

Understood. Thank you very much.

Once again that is star one if you like to ask a question.

Well now take or next question from Jeff Gosh Accenture. Please go ahead.

Okay I remember you.

Hey, Jeff how are you doing.

Okay, a couple of quite a few questions mostly for pool or on the cyber security business.

Well one of the I think persisting changes regency is a teleworking.

Remote working is gonna be something that persist forever.

This is never going to go boxes thing and I guess I Suezmax. So my question number one does not make everybody's computer on their desk in their home now a vulnerable security point that.

Massively expands the amount of was everywhere in the system notches health care and therefore.

It's a huge amount of additional opportunity for you.

Oh, you're you're absolutely right, Yeah, and you know the thing you have to keep in mind is.

[laughter] and some of this historical but you know if you look at most industries, what you really thought about securing was everything from the firewall in.

So the best analog I could use here and I always hate it when security guys use you know medieval castles, but I'm going to here.

If you think about what you historically did was you had your big Castle ball, yet everybody inside the castle. The jewels are locked up in a safe and that's how you secured your environment and what you really paid attention to is what's coming across the drawbridge.

The difference now as we've told everybody to get out of the Castle go live out in the forest.

And whatever you need you know what we're just going to drop down the castle wall, let everybody coming in and out and what this means from a security perspective. These two key things have happened. One is the attack surface has grown exponentially because now the attack surface is as big as everybody working from home on the same network is their kids.

Playing x. box the wife Who's working in another company and whatever else is going on in that whole network because that home network is largely and secure in addition, a lot of our clients did not have robust D. P ends in place or the types of encryption and multifactor authentication. They needed there now scrambling to get those types of things in place I think.

That's the case and most companies button metaphorically. This is also really key because what it means is not just in health care, but an IP in general everyone is operating outside the castle wall and it needs the way in which we think about security has totally changed and I think you're spot on Jeff.

Never going to get the Genie back on the bottle. So this presents an opportunity for piece of this what you didnt ask about but goes equally well Oh. This is our bad guys looking at this and one of the things we've been watching on the intelligent perspective is how various ransomware gangs malware authors and it's just state after.

Now looking at this new attack surface and their peak pivoting back to forms of attack that they normally care less about right. They're looking at how they penetrate Hawaii Fi routers, how you know a massive increases in fishing to get people to try to click on things that allows them to get a beach head on companies then we'll.

See those attacks unfold. The next few weeks to months, but you know this is something we're every industry is concerned about but I'm, particularly worried about health care as well as state local governments because those are the two industries that just really got beat up last year with ransomware and that is the last thing we need to happen right now in the middle described.

Yes.

Uh Huh and ancillary question would be that in the past you've talked about health care and I've asked about expanding outside of health care and you've talked about a highly regulated industries as possibly.

No something you're going to spend to.

Wood.

The fact that the nature of the attack surface is totally change change your perspective on that that if you saw an opportunity.

Back to you you can provide these kinds of services in more needs than ever increase your interesting no general security rather than just the heavy were heavily regulated aspect of it few and getting that.

Yeah, I do and and I think it's a really good question and you your inside my brain here, Jeff kind of looking at different opportunities and one of the things that.

You know what are the things I'm really wondering about is how does this play out in health care. If we play this four to six months. So let's say we're past the point at which you know covert 19 infections that started to decrease that you know emergency rooms of calling back down.

Things are getting more back to normal how does this change how people want to one fast and.

In some ways it may actually bolster new opportunities in health care in that we're gonna have to secure telework. There are undoubtedly going to be breaches and issues that occur because of this increase in the attack surface, they're probably happening right now we just don't realize it and then the third thing is and this is kind of a big.

One and all this is how does this two trillion dollars and stimulus roll out what hits health care and what are they able to invested with that you know depending on how that rolls out.

There could be a really interesting opportunity here back in core health care.

Because of this additional funding and where that goes in of course, no. One knows the answer to that yet, but we want to pay a lot of attached to that as well as what's happening in the rest of the market and be ready to pivot and job and the great thing about this is you know we're a company is a 130 some people so for us to be opportunistic into pivoting to John.

Well, we think those short term opportunities will be is pretty easy for us.

Good night some courses for pool.

I've looked at the.

No stimulus bill quite closely in connection or other.

Yes.

And Oh.

Yes, I can see is that you seem to get to amendments and payroll plus occupancy cost and care supposed some other benefits such as deferred payment of.

Social security taxes payroll taxes.

And my my suspicion is as I might be with perhaps.

Buxom care supercontinent close the deferral bonuses.

If I'm right or in the ballpark that leads to see this is possibly reducing the need for equity financing the poor prices.

We do that's exactly we're doing the same analysis that you're doing Jeff for pulling all the information together that we need.

Working with our existing banking partner to be prepared as soon as they finalize what's necessary to to put in absolutely. If we think that the timing associated with the receipts.

Such that that it allows us to to ensure.

That we have to the cash we need to support the business them. Then absolutely. We would look at that are speed and offsetting any potential equity financing that we might have to do.

Terrific next.

My understanding the GAAP accounting requires review of goodwill.

If you have either a large sustained or a large sudden drop it will start players who have you tried both.

30% I'm sorry.

There's no last year.

And you have taken a impairment charge of they're familiar got sometimes relapses from 2019, but apparently nothing against a goodwill and I'm just curious how you see the situations like the goodwill now.

I mean, we definitely are gonna have to revisit it if we don't see a rebound. We obviously are taken into consideration when it did our analysis of what was going on on the macro.

Environment and have been so that obviously played into two our analysis on so once we get out of or at least see some stability of coming out of the Corona virus situation will obviously re evaluate them based on where the stock goes from there, but at least at the time in which we did our analysis.

We felt that any adjustment to share price below really the $3 range.

It was where we felt we need to revisit the the analysis, we felt that it was so subject.

True the Corona virus issue and therefore, we didn't feel is necessary to make an adjustment.

A year, but like to revisit it again.

It was another way of looking at this ER houses you made that.

Oh, because you didnt make an adjustment last year [noise].

Whether you might have to make one now because of a depressed stock price.

There is an inference that you felt that the goodwill was worth whether it was carried for on the balance sheet absence, any adjustment because of a depressed stock price.

We did and that was the initial got most of the adjustment that we made in this period with specifically related to what we saw XLIF projections associated with the core synergistic business and that was the primary reason for the adjustment.

Down back those.

Estimates from the original earn out and projections.

And my last question has to do with the tax carry back of losses, if we can season of.

<unk> taxable income losses for awhile.

Does that create any opportunity to get kicked back.

From the government in taxes at present, we played with respect to acquisition, where we've already achieved all those benefits that were possible.

Right now we believe we've achieved goes if you remember if you recall from our last conference call last couple of conference calls, we had anticipated a large tax liability as a result of these recent losses was or.

Finalizing the.

Current your provision in the apportionment schedules, we were able to allocate deanna wells some such worry that.

Allowed us the ability to.

Avoid paying them in the first place, Jeff so, but but definitely go go back and look at whether or not there's an opportunity to two actually claim a refund and we've already started that process and has at least initially indications are that there maybe some opportunity.

Good. Thank you that's it.

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All right when I will take our next question from Jerome well address phones. Please. Please go ahead sir.

My question was answered thank you.

All right well now and once again that is star one if you'd like to ask a question, we'll just wait a moment.

Perfect. It doesn't seem there appears to be no further questions I'll turn it back to kill it. Please go ahead.

All right. Thank you very much operator, and again I want to thank all of our investors employees customers and partners for their support for our 20 Nike.

Forwarded talking with all of you live in coming months and most importantly, they say thank you.

This concludes todays call. Thank you for your participation you may now disconnect.

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