Q2 2020 Quest Resource Holding Corp Earnings Call

Please standby.

Good day and welcome to the Quest resource holding Corp. second quarter 2020 earnings Conference call Today's conference is being recorded.

Just like to try to cope with Dave Mossberg Investor Relations represented please go ahead Sir.

Thank you Tony and thank you everyone for joining us on the call before we begin I'd like to remind everyone that this conference call may contain predictions estimates and other forward looking statements regarding future events or future performance request.

You're sort of words like anticipate project estimate expecting trend, believing publish a little expressions on spending.

Hi goes forward looking statements.

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Certain non-GAAP financial measures will be discussed during this call.

These non-GAAP measures are used by management to make strategic decisions forecast future results evaluated the company's calling performance management believes the presentation of these non-GAAP financial measures is useful for investors understanding.

Assessment of the company's onboard cooperations on prospects for future.

Most of the goal I stated should we assume that any financials discussed in this call will be non-GAAP basis.

Full reconciliations of non-GAAP to GAAP financial measures are included in todays earnings release.

I'll now turn the call it really helps president and Chief Executive Officer.

Thank you Dave Thanks, everyone for your interest request, we hope that she was a families are healthy insect and.

We appreciate that you've taken the time to join us to discuss our second quarter results.

Regarding our results will not fully recovered by any stretch.

That's for ahead of where we thought there would be.

And the trend was positive through too.

Within our end markets most affected in April.

Recovery began sooner than expected it was constrained continues steadily since the war.

And in certain markets, such as grocery, especially retail we saw stable volumes, which helped offset the decreases in other areas.

We were able to demonstrate the flexibility of our cost structure.

And show an increase in adjusted EBITDA year over year.

Most positive operating cash flow.

And maintaining a strong balance sheet.

We are able to replace our asset base credit facility, which was getting expired 2021.

I'm happy to say, we're able to achieve this objective ahead of schedule and what not affected their trips.

Importantly through the hard work about management and staff.

Able to adapt quickly to a work from home environment.

Without disruption there are certain service.

It's not been easy I want to thank our folks for all of their efforts to manage through this uncertainty.

I'm not sure the call over to worry lights of our Chief Financial Officer to if you financials, and then I'll get back to review the trends have you seen or major end markets and discuss some of our strategic initiatives Ward.

Thank you Randy good afternoon to everyone on the call.

Second quarter revenues was 22 million.

<unk>, 13.7% decrease compared to 25 point Fourmillion give a second quarter last year.

The decrease was primarily due to lower levels of services due to cope with 19 related shut downs and reduced operations at some of our customers gross profit was 4.4 million <unk> decreased 7.9% when compared with second quarter last year.

Gross margin for the second quarter was 19.9%.

820 basis point improvement compared with last year.

It relatively smaller decrease in gross profit was primarily related to three factors.

First we got flexibility in our cost structure and we've aligned Clos to meet the current level of domain.

Second we have continuously work to optimize services on behalf of our clients.

Third factor relates to service snacks, which can fluctuate from quarter to quarter.

Second quarter. This year, our mix had less revenues related to lower margin commodity waste disposal services.

Yes, you're gonna expenses for 4 million during the second quarter compared to 4.2 million during that same period last year.

We took action to what were asked you're getting expenses and preserve cash including discretionary spending cuts in a labor force reduction.

The biggest contributors to the decrease yesterday was the decrease in like the Clos professional fees and travel which was partially offset by employee recalls under the Paychex protection program.

Severance costs.

Free stock compensation expenses.

Third party legal accounting and professional fees related to our corporate development efforts.

At the end of the first quarter, we can't correct, we're already reduced our workforce through separations attrition in Florida wise.

Thankfully, we were able to secure a paycheck protection under the Cures Act.

So while it is to bring back many of the for one of employees maintaining the continuity airport workforce in support of biggest central services provided by our customers.

The 1.3 million to use of proceeds utilized for the P.P. low shows up in other income line and funded eligible payroll rents and utility expenses.

During the balance for the year, while certain SGX juicy and expenses such as travel well remain low.

We expect passenger unit costs will increase from Q2 levels due to increased staffing in relationship to business recovery at corporate development activities.

Net income per basic and diluted share was eight cents for the second quarter of 2020.

Compared to breakeven for the second quarter of 29 team.

Our adjusted EBITDA for the second quarter was 1.1 million.

Compared to 825000 during that same period last year.

I would note that's the adjusted EBITDA excludes the use of proceeds from the P.P.P. Love.

As well as expenses related to cope ignite team labor recall severance and third party legal accounting and professional fees related to our corporate development efforts.

Moving onto a review of the balance sheet and cash flow.

During the second quarter, we generated 1.5 million and cash flow from operations.

Excluding the 1.3 million for use a P.P. loan proceeds we still generated positive cash flow.

Which speaks to the flexibility of our model as well as our actions to optimize services on behalf of our clients.

The positive operating cash flow.

Our cash balance increased by 600000 to 4 million at the end of second quarter.

We also used cash to reduce debt levels.

He had 3.8 million drawn on our credit facility, which was a decrease of 800000 firmly into the first quarter.

Last week, we entered into a new one agreement the good news lender.

This new provides access to an asset base revolving credit facility, a 15 million.

He's an accordion feature for bidding that facilities to be increased up to 25 million.

There's also been equipment Wanning facility of 2 million.

We elected to secure the new agreement now because our exists existing credit facility, let's set to mature in 2021.

And we were able to capture better terms.

The credit facilities primary use will be for working capital needs.

We maintained strong working capital discipline.

And continued to carefully monitor the status of our accounts receivable.

Dsos remain within the normal range.

Through our efforts, we've been able to keep receivables in order.

As previously announced we closed a common stock placement on August seven.

Net proceeds of more than 3 million.

The capital raised in the offering is intended to support the Companys acquisition strategy.

In summary, with the actions taken to increase our financial flexibility.

We are well positioned to continue the pursuit of enhancing shareholder value.

While providing uninterrupted service to our customers.

At this time I'll turn call back drain.

Thank you Laurie during this pending that Weve remained focused on protecting the health and safety is our employees and taking care of our customers.

More than 90% of our staff is working remotely there's the scope and true crew. There continues to work from the office and then safety measures to protect the health and set you know workers and are grateful to our employees willingness to do it takes to deliver uninterrupted service to our clients.

Changing our operation has been saying that's what's facilitated by investments we made last year to move our technology, that's a structure to the client.

I want to point out that we're now able to who are able to show an improvement in adjusted EBITDA.

Generate positive cash flow during the war one of the most challenging economic periods in our lifetime.

This demonstrates the resiliency of our business and the power of our asset light model.

Sure. This is also visible to warm weather and that's a factor and their willingness to a place and extend.

Got it facilities at favorable terms.

For go into more detail back end markets and strategies I'd like to do some of the reasons that we are well positioned to continue to that independent.

First we are very fortunate that we along with most forecasters are considered and central business and that remains operational throughout the period.

Second while certain customers have lower volumes of ways. They still have the same waste streams and the need for our services.

Third we have diverse end markets.

Finally, our asset life business small gives us the ability to align our costs.

With the current level of business.

Next our view of what we've seen in terms of economic activity in the major end markets.

And the grocery market volumes have stayed strong throughout the entire period and in some cases have experienced modest growth.

We continue to work with our grocery pressures to devote more waste from landfills.

And grow the crude was programs that we haven't choice.

But a few exceptions most of all retail customers or specialty retailers that are classified as essential and have remained up.

In certain cases, some of those customers saw modest volume gains during the early stages it depends dinner.

So the automotive markets, we saw significant decrease in automotive repair and maintenance at the beginning of the corner.

Consumer focused automotive nine that's tends to correlate to miles driven.

And in April U.S. miles driven decline in unprecedented 40% year over year.

Industry data suggests that the greater the year over year decreases steadily improved since then.

But it's still below her circles.

Consumer demand has had less of an impact on industrial end market. However, during the quarter certain industrial customers tail production.

Temporary close some of their plans due to the breakout the virus.

Most of our industrial customers are considered essential.

You have indicated they expect to recover the majority of their business I was delayed due to the disruptions.

The restaurant end market relatively new for us.

It's worth mentioning because it's one of our fastest growing effort. It was one of our fastest growing areas partially pandemic.

Multiple service restaurant customers have been significantly impacted.

Quick service customers have done well in terms of volumes.

Overall this in market interest coverage somewhat from rifle loans.

It is still significantly lower year over year.

Next I'll talk about gross to their growth initiatives most of our growth in gross profit dollars or the past few years, he's got from existing customers.

While volumes are down in certain end markets, we continue to see entries sooner having success, adding programs with current customers.

We continue to pursue and have a strong pipeline of new customer opportunities as you might expect many prospects have slowed down their valuations have delayed large enterprise decisions in the current anymore.

Later in the second quarter were able to convert one large opportunity that especially retail and that's about 1000 stores.

We started service in the specialty retailer into war.

We also had another small wins during the cold.

Regarding our M&A occurs.

As we previously discussed we've been actively pursuing M&A strategy.

Our industry as highly fragmented with 18000 local regional players, which provides plenty of opportunity for growth through consolidation.

So we kept our strategy is to acquire regional local players.

That offer differentiated service with longstanding customer relationships, because you are reluctant or unable to gradually lack of infrastructure.

The Delta scalable platform, which includes a national given that work backed off its capabilities.

Systems to support the acquired company growth.

We believe the integration of these businesses will be similar to a process of seamlessly on board.

Yes.

This we repeatedly demonstrated international sphere.

Over the past here, we had been selected we're building a pipeline of companies that potentially fit our criteria.

So make sure there's targets have disaster the other life stage.

Well, we won't be able to give any specifics at this time well have more to say if and when we're able to come to a definitive agreement.

It's full or M&A strategy, we did around the finance your last week as just lower described earlier.

In summary, there's still a great deal of uncertainty about how this pembina will affect the economy in the second half of the or and maybe into 2021.

However at this point, we feel we've turned the corner, while we expect to see another did decrease year over year financial comparisons.

Cautiously optimistic I won't see sequential improvement in gross profit dollars turned the corner and continue to expect positive cash flow from here.

Longer term, we believe the trend towards sustainability will continue.

And the company's will continue to play programs in other devote more wise from wanting to us and reducing environmental footprint.

In addition, we believe quest is well positioned to benefit in some cases take a leadership role.

Affecting the sex is no true.

I look forward to keeping you updated our progress.

Now I'll ask the operator to provide instructions on how listeners can cure for questions. Okay.

Thank you Sir we'd like to ask a question, we're pressing star one of the telephone keypad, if you're using a speakerphone. Please make sure that your mute function is turned off to a like your signal to reach I quickly.

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

And we'll pick her first question from Jerry Sweeney with Roth Capital. Please go ahead Sir.

Good afternoon, everybody. Thanks for taking my call.

Sure Hey, Gerry.

One person on the M&A fun I know you can't talk that much bothered threats.

Touched upon it.

Each bicultural opportunities in the pipeline, but okay. It's sad to say maybe they bring geographic.

Or you know additional wavestream opportunities you could either.

So some of your existing other streams that they may not have into different areas. It's I don't recall song opportunity I'm, just curious as to a little bit more.

Sure pull through of opportunities.

Yeah, I'll speak in general to our acquisition strategy as far as what the targets deployed.

And.

There's three or so sure there's a there's opportunities geographic or geographic expansion and there's also definitely opportunities to sell additional western services under the existing client base.

One of times existing client base and I tried to may only be original while we have a national platform. As you know I gives us a chance to use our network to expand geographically.

Also do that breadth of the service offerings, we have each other's lot opportunities to sell that into the into preposition Mark.

But.

Obviously.

I think we're booking strength, it's I think there's a big opportunity the sustainability and all the services you're going to companies.

But growth is going a little slower than anticipated. It may be just getting somebody's larger company. She just to outsourcing. This your work that you could you put up it's a way of almost maybe speeding up some of the girls process just short circuit on some of that.

Over the hump type of like Oh process, I'm, just getting more people on the platform faster.

Because I will also way of looking at it.

Yeah, Theres a great again, there's two types of broadly is focused on desktop evolves I know when you know we've talked about we continue to grow that that's our measure.

Gross but there's no question that all the pipeline is strong and they will need to we'd love to accelerate that im definitely making every effort there and looking for that short circuit method, you're talking about and as I mentioned more I will tell you its.

She said, which has been a slowdown period as far as decision, making the distractions and the type of thing that's going on.

I will try to companies that were trying to sell too so.

It's it's been a little stagnant because of that but at the we are continuing to add which is encouraging.

All they moved their accounts to the.

The pipeline even in the slow time.

Challenge is moving those things through to fruition and we did have a as we mentioned a lot of success actually in Q2 and doing that.

I hope that's a single walls to be able to continue to push that existing pipeline through that close.

Yes.

Got it then just wanted to talk a little bit about flexibility and maybe some of the communications you may or may not that that's where clients. Obviously, we're going to fall do some concerns or maybe reemergence of cope with 2.0, how much flexibility to have and how much communication have you had with your clients.

Maybe understanding what they're looking at what they're anticipating.

To staff up stuff out there just is that flexibility you have just for to manage volumes in service, what's your clients or so.

Yes, yes, great question and then it it really is let's just walked out of communication effective communication.

Definitely world, we talk a pretty good.

Good partner, Joan Chemical partners with all of that clients. So we're able to.

Can you take part regularly and and I would say data our intelligence relative to what's going on with their businesses.

Okay. So as good as this [laughter] targeted that is because it's hard to anticipate some of these ups and downs, but staying as close as we can kill the ups and downs in foot traffic and volumes. It allows us to work for them to make sure our services.

Our meeting those needs consistently and types of what that but communication is very very important then I will tell you I believe its capital we've gotten much better that.

Through the second classes.

Got it.

I'll jump back in queue and I appreciate it thank you.

Thanks Jerry.

Thank you and what's Gonna Star one if he'd like to ask a question.

The next question from Palmetto with H.C. Wainwright.

Well, you're hiring Lori will go well, yeah, Oh there.

Right.

Well with respect to so we are cost store base I know you've added one what are the logical or something.

Second quarter.

I'll give you lose any customers.

Oh, the there was no all but didn't have any churn.

I guess, it's obviously this this crisis when its itself has changed at all the things but.

Well all of the slowness and exiting there's there's actually been upside on the other side, that's very positive and you know a father that they kind of their key reasons why we continue to retain these clients as does our ability to.

Understand of AIDS can you give them and help it made it so we've actually feel like we've done a big service or a lot of of system policy. This and haven't had any kind of issues like that.

I mean, you know it looks like your cash flow.

No those aspects of the business also continued to hold up pretty well I'm just wondering.

If you will see studies challenges on the collection say, though.

Accounts receivable side.

No. There we've we have put in place even before the Kogan 19 crisis. He had a good practices to keep up with our receivables than we've seen the dsos stayed right our expected range and our receivables have stayed in a balances have stayed at very good shape.

[music].

And.

Then you don't feel good.

Second quarter revenues came in ahead of already do shouldn't it looks like.

The news how growing at a faster abuse.

Should we anticipate sequential improvements for the rest of the year as well and you know any color on you know how much.

Sequential improvement so you are anticipating that the visibility.

Well.

He doesn't get the one thing we killed first of all this together he doesn't like everybody would be certain involvement of giving like I know you faced area that you talk to you, but we did say and we expect our gross profit dollars to continue to improve sequentially all.

And we do.

Obviously, there's a lot of that caveat to that based on what's going on out there but.

Definitely we feel good about that as falls to the balance of the year.

I can see continued to improve as it has now taken this and Oh this quarter.

This quarter was.

Are we accelerated.

Better than expectations to your point and that basically means our clients did.

But we're still going to be below last year, but it's the real question, it's a speaker to recovery.

And it's hard to gets harder it's hard to say to the Dol. So we do we do expect Q3 to have a built in gross profit dollars is flat sequentially not that year over year.

Understood.

Maybe just last one I don't if it doesn't this.

Straight to the quarter on Germany airports, but in terms of timeline.

I'll be expected to potentially translate into a dealer drug production before the end of the goal or.

It's like alluded to it if you wouldn't.

Yes.

Yeah, I mean, it isn't as we mentioned, which we do have to otherwise.

In place and obviously that that leads to that succession of activities and we definitely expect those activities to get us here by the end of year course, nothing nothing to death, but we're hopeful.

So yeah, the timeline should be within that so.

Okay.

That's all.

Good.

Oh back in queue and taking all the questions offline. Thanks, so much.

Thank you.

Okay, well they'll pick our next question from Greg care with kind of go Yaki said Scott.

Hi, rain Morry, how are you.

Hi, Greg.

Yes.

Thanks for taking my question first shift to comment congratulations on him a great quarter, I'm shocks that you're able to generate a million dollars.

Cash from ops I in this quarter and that's market environment, and then additionally be able to grow EBITDA sequentially in Q2.

I think this quarter for a bit durability of your operating model.

You know that your.

Cogs in operating expenses are truly variable.

Very excited.

By this quarter on X. I'm encouraged Oh, you're welcome I'm encouraged to hear.

About the spec retailer when can you give us any color why this customer chose to work with you and how big they opportunity is with that customer.

It's it's a seven figure the opportunity how it actually as we rollout through all the locations.

So it's it's a nice one it is and we expect to get more hopefully that they're looking at the reason we were able to get this is a.

Clock customer service is really how could this is my feeling on it customer service is really something that this industry, sometimes I wonder to what it is.

<unk> costs really focuses on customer service and it seems to be a novelty at times.

And all that really is when the timing of loosens all did customer service responsive can needs are listening when they have issues. Those are things that we do very well and these these large multi that customers have appreciation to resolve it I would definitely LNR has customer service.

Thank you and you can you give any color.

On the types of services that you're offering.

It's it's a it's waste and recycling, hi Inn, and hopefully helping them find even more opportunities to recycle more materials and they were dealing with their well I know there.

Previous provided.

So that's the do you get better customer service and you get more opportunities to leverage at more sustainable told all by tons of better homes for a number of material said, we're going to do all until the tool.

Thank you and my last question is you talked about coal bed.

Slowing down the decision process heard some customers in your pipeline do you feel that co bid might have also created some disruption opportunities that I bet open some doors for you to have a conversation with potential customers, where the customer maybe previously wasn't on.

You know.

Necessarily as motivated to look at changing vendors.

Yeah, I think that's good point I think every nominally or crises tall dusted opportunity, where you can find it.

It has its created a bit of a shop lives through the system and a lot of people trying to tread water, which is that what enough steps on consequently that slows down a lot of decision making process its but.

There's also situations where customers needs change.

Due to this and their current divide it wasn't providing.

And and we feel that that could yield some opportunities to us as well we're definitely on the local schools.

Great. Thank you very much and congratulations on great quarter.

Thanks again, guys I appreciate it thank you.

Thank you will hear next from George groups with groups capital.

More good afternoon right.

Hey, George.

Hey, So I've got a couple of questions for you want as the before to co bad for the last couple of years Yolanda struggle with your sales force.

And you hired a pretty high profile guar head of sales.

And what I'd like to ask is how is that work it out and then not being able to see people face to face.

The other question is.

As far as you're you're offering that you did you know it's it's dilutive at this point unless you make the deals and you did it at a.

Pretty cheap price a buck 15, so obviously your deals might be but you know price.

Parable to the low equity bikes that you got and so what I'm asking you is this those two deals that you have a large on close will they be accretive after that dilution.

I'll answer the second one floor space enjoys a really can't speak to that right now on the on the accretive aspect and everything I think you understand all below.

Unfortunately, I can't I can't speak to that but I look I would ask and hope that you would.

Well I'm not warmly choices for doing it just came out of their tickets, we think it's going to what where you're not going to do something you're not going to raise money $1.15. Then go make a deal that's.

Expenses, you should because that would be foolish thing to do you think you're going have to work out of it for two years or something so.

Yeah, we try to doing and you did a deal really quick. So these deals must be pretty close to you know you must be pretty sure they're going to be done or you wouldn't go raise money when you did at $1.15.

Are you, saying something about the ended the year My guess is it.

Probably all having close by the end of September, but can you say anything about that or not.

Well the question I got was what I thought it would close before reviewing the said yes.

But I really can't.

To be honest I didn't say that I answered the question yes.

Well I know.

[laughter] eat I really can't get I'm, sorry, George I wish I could be more Oh no was okay.

So so how about your kind of files how's that working out and and you know because you have struggled for a couple of years with this whole salesforce and all that was something that you weren't happy the way it went and everything and you hired a guy who are pretty pod profile, maybe came from waste management or whatever if he still there.

Yes, you still and your question was about how the sales pathological alternative sectors Savannah, and I do feel good about all our sales pipeline is actually pretty encouraging we've actually made.

Himself across the <unk> cost to go long.

More difficult times.

Disappointed as is everybody else and the lack of progress because of what we talked like I've, just got slabs intrusion and it is hard you mentioned not being able to see people face to face that's one reason.

People are making decisions are distracted and I will stop trying to do is impossible for casino and.

It's just not conducive to really accelerated the we have you have a nice pipeline George I really feel good about the attack as we move through this.

Back in the lateral.

So let me ask you there so you got to fast food chain, you know, what's the Carter's stores.

And.

You know before they did a you know I don't know 60% of their business indoors and they did 40% derived through is right now maybe either do when there might even be closed indoors someone doing 20%, but they're doing 80% of their businesses are driving is how much does that get you all as far as waste.

It's it moves to waste away from the restaurant because you can imagine when you drive up and pick it up and go home right. If you're not only at away. There is still the waste from the preparation in the kitchen and.

But the net effect is it it doesn't it doesn't create more lives to it it moves into a different place which is different from there.

But the fast replaces a volume it seems like it's really increased overall so.

Yes, Im looking pretty good with those guys in general, especially in light of because that's just a full service guys like that as he says you can tell the dining room stands just hold is it's really been difficult to them.

Okay. Okay, well. Thank you good job I mean, it you know things are kinda coming along now and I'm pretty optimistic so.

Thank you.

Well I, just one more thing or a restaurant space, we're talking about a quite a bit.

We were going into Ashland actually will never as I've gone into its covenant, which was pretty small segments lost.

Some of.

I'm really kind of a thankful for that at this point just based on some near term events.

So basically you could be doing more now.

With the colder than you did before because you've got some business that you never had before so even if there's less waste.

You had zero before out of those Nicholas.

Yeah, we were really small we penetrated so but yes, you have come down in that space really hasn't moved on our needle a whole lot based on the mix.

At least at this point.

And then let me ask you one last thing so and the deals you're gonna do and try to do so how do you want to structure I mean, how much cash how much debt.

How much equity and how much earn out.

What's your go to do there.

Well I think your each deal is gonna be different choice and that's again a hard when the sensitivity I typically don't have almost all that's about all the above and are now tomorrow, because you've got as you've got a real engagement on a go forward basis, but well do we'll do what we can't as far as equity and debt goes.

It's it's kind of depends on the deal again, but we're still young in this process. We've got a couple out there, but we'll see how do you have a couple of walk down the line and I really would hate to be specific as to their kind of structure, but I would say that they'd all three of them elements. So that's for sure.

When you gave the ended the quarter July 30, I'm in June 30, Ah you said 4 million in cash and 3.8 million and bad. So that's the first time in a long time when do you had a net cash position is that correct and that's before the offering.

Mobile social <unk> cash position, that's right George Yes, that's correct.

Okay. Yeah. Okay, then I first time in a long time it used to be like five minutes doesn't do it I'm not going in cash a year ago, something like that Lori would wonder like that.

Well, yes, and we make it will be received 1.4 million again from a P.T. long in may.

So, but you're right on the ratio George when we typically have been insertion yes.

Okay, well listen thank you very much.

Yeah actually Georgia Krishna.

Thank you will hear next from the Georgia be lost with Encaje management. Please go ahead.

Thank you.

Hi, Laurie or were you.

Right.

Great.

This is a question that Cmos and so I'm just trying to get too.

You didn't number.

I think it's books.

Yeah, good scholars and all those onetime expenses.

Our news to me.

No.

That's about right thinking maybe with some.

Yes, remember that we did put to use this is not 1.3 million.

And PD <unk> lone use that we took out instead of just out of capital.

And then the remainder of the other adjustment line item.

<unk> expenses that we adjusted out of X gene and I.

Related to severance.

Huh coated 19, we call.

And also to third party expenses related to acquisitions, such as legal audit fees.

Okay.

George we look at your age.

Going forward.

Excluding also bolstered expenses.

Regarding acquisitions.

It's probably going to be a bit.

Yes.

Right.

Okay.

Quite hear you George.

Oh I'm sorry.

Just trying to get a sense of yours you mean.

Huh.

In the second halves.

Does it stay roughly at the same level or does it come down.

Well actually I think.

George If you look at it will start to see some about on labor cost coming back.

In line with these increased services that we're having with a recovery with our customers without some of our expenses will remain low such as travel and trade show things that are clearly not happening because it took about <unk>.

So we didn't expect the debt X gene expenses will talk a little bit.

What we have in the second quarter and in addition, we'll have some corporate.

<unk> expenses wanting to there also.

Okay great.

Thank you Larry and then really good question for you.

Just trying to understand the training that's the.

The acquisition.

I see that you sort of work get developed lots going on in both systems in place right now, but maybe.

No.

Now that you have.

Do you feel like.

Globally acquisition boat.

Yes.

So how does that.

Kind of any acquisition of the business yeah.

Yeah. That's a great question first unless you're going to ask or with their position those but obviously you actually do that.

Oh, okay.

Okay, but the timing.

It's a is it relative to devilishly business is a good observation you know I think George you've been following the company for a number of years, we've evolved pretty steadily until I take a much more disciplined organization knows how to generate gross profit manage costs and develop our platform and its a great platform for growth into the scalability that.

It's been developed here.

I actually feel it sits right time.

To do to start down this path.

And we're excited about it I think evolution of the company. This is exactly where we really should be do on base, where we are actually have evolved.

It's another six okay. Thank you very much goes into.

Thank you George appreciate thank you.

Thank you and that does conclude today's question and answer session. Does also could include our conference call. Today. We think you off your participation you may now disconnect.

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