Q3 2020 Forterra Inc Earnings Call
[music].
Today's call is over I was hit by a car Watson Juniors, the company's Chief Executive Officer, Charlie Brown, the company's Chief Financial Officer, and Simon Johnson, Vice President of the Treasury and Investor Relations with that I will now turn the call over to you Mr. Chen.
Thank you Angela and good morning to everyone welcome to <unk> third quarter Twentytwenty earnings Conference call.
I like to point out that four terawatt intends to take advantage of the safe Harbor provisions of the private Securities Litigation Reform Act I'm not going to do five as noted in the earnings release were filed last night.
Please remember that our comments today may include forward looking statements, which are subject to risks and uncertainties and actual results may differ materially from those who the kw implied by such statements.
Some of the most important with all disrupting the detail in the company's FCC filings, including our annual report on form 10-K, and our quarterly report on form 10-Q that was filed last night.
The company does not undertake any duty to update such forward looking statements.
Additionally, we will refer to certain non-GAAP financial measures during the call, including EBITDA EBITDA margin adjusted EBITDA, adjusted EBITDA margin and bad debt.
I can find a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures and other related information, including a discussion of why we consider these mergers. He was 14 restaurants in our earnings release.
Now I will turn the call over to Carl.
Thanks, Aaron and good morning, everyone.
We appreciate you being on the call with us today.
Protecting the health and welfare about team members is are the highest priority followed closely by meeting our customers expectations.
I have to think each of my teammates for their continued diligence towards keeping their fellow team members safe and their commitment to meeting our customers expectations.
With respect to COVID-19, we remain vigilant.
In the macro environment of increasing cases, we're becoming more efficient managing through positive test results. Among our team members, while continuing to meet the needs of our customers.
Through the state business practice.
During the third quarter.
We continued the execution of our five improvement pillars.
Health and safety level operational discipline and.
Enhance commercial capabilities.
Working capital efficiency in GNS effectiveness.
This progressive execution led to further expanded gross profit margins in both of our operating segments and record quarterly EBITDA and adjusted EBITDA we.
We achieved these record outcomes. Despite the decline in our shipment volumes, particularly when our drainage business, which I like to expand on further.
Our dreams shipment volumes declined 16% during the quarter compared to last year.
Contributing to this decline is a combination of two things less favorable weather year over year and the effect of the early stage of our margin enhancing value before volume commercial strategy.
Weather wise last year, when we reported our third quarter results, we noted favorable weather within the quarter, which created a difficult comp for this year across.
Across our footprint parted across our footprint.
Precipitation increased by approximately 11% and during the third quarter compared to last year and in some areas. The increases were higher this is Texas, and Florida, where it was 43% and 56% respectively.
With respect to commercial strategy when implementing lean valuable for volume strategy. The first stage in the process can lead to some short term relative market share declines, although not ideal this was not unexpected and it's typical of the many times I've been involved with implementing this strategy.
Did jump to the next stage and we change and what we train two is.
Just to achieve a fair return on the products, we produce and the capital we have deployed without and he bring important without sacrificing our long term market positions.
We have made the proper adjustments as we moved into this next stage and as a result, our current plan is backlog tonnage and prices are both higher than last year's levels.
For the quarter, we achieved an 8% year over year increase in our average selling price.
Similar to last quarter, the 8% year over year increase is a combination of both crude pricing improvement and the effect of product in geographic sales mix.
In our water business volumes for the quarter were largely flat down just 2%.
And average selling price was up 17%.
This price increase is the result of the compounding effect of our two increase last year.
On August 1st we announced a 5% increase that became effective October 1st.
Due to the support of our distribution partners. We anticipate this increase to be as successful as the ones last year.
That being said we.
We won't see much of its financial impact until the second quarter of 2021.
As we have previously discussed our goal is to increase our prices to a point, where we earn a fair return the capital we have deployed when scrap our largest and most vulnerable cost input is at its historical top cortile levels.
Well that product pricing is not at that point yet.
We feel with the successful implementation of these increases.
The size and teacher.
Increases is likely be more moderate.
We also expect to see continued margin expansion in our water business through the improvements in our operational performance.
The fourth of our five improvement polices working capital efficiency.
With continued focus on better managing inventory and collections.
We have reduced our net working capital as a percentage of rolling 12 months sales by about 450 basis points on a year over year basis.
These improvements coupled with higher earnings and less cash interest payments have increased our year to date operating cash flow by 97 million.
Year over year.
As a result, we had a volume we had voluntarily repaid $144 million of our term loan by the end of the third quarter.
I will now turn the call over to trading who will go through our financials and then I'll wrap it up to the look ahead Charlie.
Thanks, Carl and good morning, everyone.
I'll provide some additional comments and financial details on our business segments for the quarter.
Starting with drainage as Carl mentioned earlier, our drainage volume decreased by 16% year over year, largely due to less favorable weather conditions compared to last year as well as the early stage impact of our value before volume commercial strategy.
Drainage gross profit margin improved 150 basis points year over year that it benefiting from higher average selling prices.
Similar to last quarter, well the average selling prices were up 8% approximately 50% of this price impact as a result of product and geographic mix.
The increase in price more than offset increases in costs, which is mostly labor costs, resulting in higher gross profit margin and EBITDA margin.
Most importantly, our current dredging backlog tonnage and prices are both higher than last year's levels.
Switching over to the water segment that business continues to demonstrate significant growth in revenue gross margin and adjusted EBITDA as compared to last year volume for the quarter.
Were decreased slightly compared.
Compared to last year down about 2% however, our backlog at the end of the quarter was much higher than last year.
Oh already discussed the water pricing, so I won't repeat here other than to note the future price increases are unlikely to compound at such a high low rates.
On the cost side scrap costs during the quarter was comparable to last year and higher labor cost was offset by improvements in manufacturing efficiency, resulting in a slight decrease in unit cost compared to last year.
The higher labor cost is mostly attributable to higher bonus accrual.
As a result of these factors water gross margin for the quarter nearly doubled compared to prior year.
I would also note that our water segment DNA expense had an increased during the quarter driven by a nonrecurring legal accrual.
Our corporate adjusted EBITDA loss was higher than prior year results, primarily due to higher incentive expenses.
As I've mentioned before we switched our incentive compensation system. This year from EBITDA focused to economic profit focused a system that is more aligned with shareholder value.
Our team members are incentivized to maximize the return of investments and continuously create value higher.
Higher operating profit.
Capital spending and reduced investment in working capital all contributed to improvements in economic profit best resulting in higher incentive rewards.
In addition, corporate costs were impacted by an 11 and a half million <unk> million.
<unk> million loss on the extinguishment of debt or.
A noncash charge, which was excluded from adjusted EBITDA.
This was the result of paying down more than $600 million of our term loan in the third quarter that required us to write off the prorated portion of deferred debt issuance costs.
Carl mentioned earlier about our significant cash generation and debt pay down during the quarter, which further reduced our net leverage ratio at the end of the quarter to 4.2 times.
With a favorable earn out arbitration ruling we now believe that we can achieve our stated leverage target of three to three and a half times in the near term.
Because of the continuous improvements we have demonstrated.
As well as the rapid reduction in our leverage ratio, we received double upgrade in our credit rating from Moodys in a single upgrade from S&P.
[noise] lastly, I want to make a comment about on our capex.
We disclosed in our earnings release, and 10-Q that our year to date Capex was 16 million much lower than our normal pace, primarily due to temporary delays in projects during the second quarter as a precautionary measure in response to could alter to conserve cash.
We resumed our capital spending at the end of the second quarter.
And are appropriately ramping up projects, but now expect our full year capex to be between 30 and $35 million.
This is 15 to 20 million below our targeted annual capex expenditure of $45 million to $55 million.
Many of these delayed projects have already been engineered and they will be slotted into our schedules when feasible.
As a result, the delays in capital spending this year will get caught up in subsequent years.
During last quarter's call. We stated that we would focus on the things we can control, which is the execution of our five improvement pillars health and safety.
That level operational discipline.
Enhanced commercial capabilities working capital efficiency and DNA effectiveness.
Our third quarter success was another demonstration of that focus.
With that I will turn the call back to Carl who will discuss our full year 2020 guidance.
Thanks, Charlie looking ahead, we still face uncertainties in the near future, we remain cautious on the potential impact from a pandemic.
Although 2021, you is still uncertain with only two months left we feel we can share our view of the full year 2020 results we.
Its bumped up pricing momentum in both businesses to continue into the fourth quarter.
Higgins was really impressive there.
First question just.
I appreciate you guys think.
Think that scrap prices are gonna be higher next year. Just also curious on what you think about aggregate into men input costs going into 2021.
<unk> I mean stuff did you did you say that we expect short possibly hold of next year.
Yeah, I thought I thought you said that in your apartment.
In the fourth quarter, we're we're still uncertain about here, but that that was the fourth quarter as far as arrogant submit prices.
Oh.
If if it's the.
The past is is the future. It does appear that I'll get prices. We just put her on your prices this year.
And slightly higher submit prices. This year, we will not know what an extra spoon to look like into our negotiations start in January through April there's.
There's different time frame for different markets, but I would expect them, both arrogance and suppliers would.
Certainly tend to get increases and we would certainly attempt to negotiate those increases.
Okay. Thanks, and then.
With leverage coming down a four point too I'm looking more likely that you're gonna hit that near term target of three to three and a half.
Times.
How do you guys like look at capital allocation going forward, maybe once you hit those targets.
Well I think we have a range of all of them I was.
[laughter] and.
The options are to can you to pay down debt or at that point in time look to grow inorganically through acquisitions, we're discussing that with the board now.
And where the million of our planning process. We think once we get to those levels will have a much clearer view.
Of what we are intending to do it will be able to communicate that.
More specifically and more broadly.
Thank you.
Your next class.
Okay I'm on the phone I would.
Bank of America, Please call at.
Hey, guys. Thank you for taking my questions as well the first one on the 16% decline in treating it should can call you and I appreciate the color on the weather. The question is is.
Is the component that is weather related directly correlated with that 11% increase in rain that you saw cross your portfolio meeting that the value strategy was attributable to your <unk> about five per cent of that decline was attributable to that.
Yes, I mean, the the rain definitely affected us and our valued before volume strategy affected us there's no doubt that we lost a little bit of a chair and like I said in my remarks, if that's that is to be expected.
I think in our water business, we executed absolutely perfectly and so the same strategy and what are the same strategy and and drainage.
But it's a little bit easier and water international market, three competitors, whereas vintage businesses and many local markets with different competitive intensities and many more people who have to understand it will be able to.
Execute it properly.
We I would say that.
Yeah, we give ourselves an a for effort or we can give ourselves for a for execution.
And that that first stage, but once again, that's not to be expected of such a distributor market.
We have made the carpet judgments and like I said in my remarks, our backlog currently.
We have both volumes and prices that are higher.
And where we were at last year. So.
I would say it's it it it didn't do it perfectly that we did it successfully.
Okay and about yeah. If it was a tie to 11% precipitation increase doesn't necessarily tie out with you know the remainder being a valued before volume it's very hard as you can imagine to make whether work that perfectly we're not that good at.
Does go across a number of different regions. I mean, that's the component curl talked about you know, Texas coming up 43% increase in precipitation, Florida, having 56% increase in precipitation from last year. Unfortunately, it just doesn't doesn't work perfectly, but I can say a significant component of that decrease.
Some volume is tied together.
What did you say more of it is whether dripping then then the.
Growth strategy.
I'd say 50 50, just for Okay cause I don't have a better number.
Got it Okay, and then turning to scrap for a second and for 219 and you guys touched on this briefly but unfortunate I teach scratch all sequentially pretty sharply. So it's four 220, a scrap remains even similar levels to three 220, it would be up call at 10% year over year. So I'm just trying.
Gage the magnitude of increase in scrap that you guys are are you contemplating in your four Q outlook.
We don't we even that would not actually talked about what we're actually buying scratchboard, but or with the the the trend. So I want to be careful not to start to say something we have to get in the past.
But it it's very similar to what.
The the.
I think it's called number two bushels scrap prices are for Monday at the American battles, what they're showing and trends is what we expect to pay insurance is not the prices that will be paid but the the change of are very similar.
Okay, and how did I lastly, how quickly does it flow through the P&L when when you buy scrap it spot.
We.
Probably flows through within 45 days.
Which is the reason why that we had to go decoupler pricing strategy to our our our our input costs.
They just don't match up we have them by cycle that Bayou cycle, There's probably 45 days on average when we have a cell cycle that can make a stretch out six to nine months, which is why we say that our price increases won't show up until.
The second half of of next year.
Got it thank you guys.
Mhm.
And your next question is from the line of sounding Clark with what you think please go ahead.
And good morning, Thanks, just getting back to your comment on M&A in your 3933, and a half times leverage target could could you just clarify whether you're implying that you know things drift meaningfully below that level, you're you're willing to leather back up for the right deal or is the goal to sort of get to that bogey.
And then and then revisit M&A and if that's the plan where would you be comfortable and bringing leverage in in that scenario.
I think in the ideal situation and is this ideal and nothing ever works out exactly as you planned it we would drift down a bit below and then we would buy stuff too.
To be back up I mean, we don't want to we don't want to ever be where we are where we were.
Quite frankly, and where we are today for any extended period of time.
So we would like to to to be in that.
And at three to four range Uhm, if we were to buy something and never back down, but that's the ideal situation.
We don't ever know what's going on.
Come to fruition, what's gonna be available and.
The improvements we think we can bring to a business. We may go above that for a short amount of time, but it is our intention to stay.
Is a cyclical business and a lower level physician when we have been over the last couple of years.
Okay that sounds cool and then you gave EBITDA guidance for the year and and you know increase your expected debt repayment is could.
Could you help us to think about the Braves. The free cash flow then is that $170 million sort of maybe the right way to to think about it just based on.
Your your strategy right now do you have a business.
Yeah. So then so you know all of our free cash flow at this point is being driven to repayment. So that 170 to 185 is it appropriate couple of caveat. So there as I mentioned are capex spend this year is muscle is lower by 15 to 20 million.
And what it would typically be.
I would also say I'm working capital curl is set it.
In the past, where actually exceeding our expectations for the year. So it will be over $30 million of benefit from working capital. So those are two big items that we've not necessarily quantified in.
Release before so I just wanted to make sure that you've captured that in your model.
Okay. That's really helpful. And then just one more if I can squeeze it in Ah Ah was there there's a lot of moving parts here, but when you take a step back and look at the relationship between volume in pricing in your drainage business.
Who just sort of assume a natural.
You know a gradual shaped recovery and the macro from here kind of mine with how how consensus is is thinking about it under that scenario do you have a sense of what do you think volumes could turn positive or or maybe you know when you would stop seeing you sort of more meaningful double digit decline that leased or.
Some sort of sense on on how the the shape of the recovery will look there you know as as pricing increases I imagine kind of slow from this high single digit level.
Okay.
So it's a couple of things clearly they remain system tremendous amount of uncertainty and the macro environment. So I just want to step back a little bit to tell you. How we're thinking about this and as it relates to the volumes, but also the other things that we're looking at.
We're going to continue to you know.
Focus on becoming a safer workplace, our backlog suggest stabled demand in total.
The backlogs in both of our businesses are at a higher level than they were last year at this time.
So we think that is going to flow through in the near future. It won't be in the next quarter as this releases, but if our backlogs or higher today than they were last year at this time it suggests that in.
Likely.
In the near future these double digit increases <unk>.
Moderate to disappear.
We see pricing momentum will carry into next year.
But not at the same pace, especially in the water business.
We have tremendous opportunities to improve our conversion costs in both businesses alright to help drive unit margin improvement.
And where we continue to focus on our G&A productivity.
And I believe that we can make significant improvements in that overtime.
B S of our business will continue to to make the investments in our sales force because that is so key to our our value of volume.
<unk> and we're gonna be investing quite a significant amount in our technical engineering resources to promote both are but to learn product and enter concrete park as a company I would say as an industry. We've underinvested in this in the <unk>.
Past.
But that's sort of schematically, what we're thinking about going into next year.
And I know, it's more than just the volume question, but I think it's important that.
It's it's it's a bit more than just volume as we execute on these five pillars.
Understood. That's helpful. I appreciate your time thank goodness.
And your next question is from the line I might call with our V. C capital markets. Please go ahead.
Alright, Thanks for taking my questions nice job on the continued progress on margin from Carl I I just wanted to follow up on on the backlog comments could you elaborate on just order of magnitude in terms of the increases uhm.
Maybe overall, but also on on a tonnage basis and remind us kind of the differences in.
Between the two businesses of how how much that backlog typically represents for Ya.
Well I.
We've never really given the detail and look at a backlog tonnages are so I'm gonna sort of glossed over that but I can get you have a very good question about the backlog as a percentage of a bar.
Total disk.
Cause it just.
Pretty good view in our water business about a quarter out.
Maybe a little bit more and are packed logging unfinished business gives us a pretty good view maybe.
Maybe almost six months out.
That's just sort of the the nature of it is as far as the percentage of it being up uhm, it's in single digits.
On both that's not double digits.
But I don't want to shy away from the exact 10 inches and what that means.
Okay. That's that's still helpful. Thanks, and then the second question just.
On the drainage side this yeah no it's still.
You praise it for phase one.
Uhm and drainage and you expect some of these.
<unk> dynamics, but.
You know I think it's.
It may still be a quarter or a couple of quarters into this and there's still appears like the results in three Q deviated a little bit from.
Expectation. So I'm curious if there's any specific area customer issue anything specific that you can kind of call out as he this changed from a competitive or a customer dynamic.
And and here's here's what's different about four cure or 21 that gives us that confidence in N D.
And the decline teasing.
Okay that that that's actually a great question, we haven't seen already any changes in a competitive dynamics other than than our our actions or behaviors.
And.
We have begun to regain our position there'll be Kimberly gave up but we're beginning it at a higher prices, we're not seeing a big negative effect on the market.
Yeah, a little bit more color on on aware of that happened.
It.
It was Florida for us.
It was in certain markets in Texas, specifically, South, Texas in Central Texas, not North Texas.
And.
Some in California.
Important.
Bring important canceled in the comics we we.
Anybody in my opinion can raise prices and is Margaret Cho anybody can lower prices and gained market share that doesn't take any commercial slow.
Skill is is being able to be a market leader and retain you're sure. While also we're putting a unit marches at least that part of an emergency.
So like I said, we give ourselves a for effort not really a per execution, but and that's enough to be expected.
When changing commercial cake.
Capabilities are are on the table when it comes to this guy before volume, but your could be.
Regaining or does it will be temporary gave up.
In <unk>.
Yeah, and this won't happen again.
Okay, great. Thank you.
And as a reminder, do they like to ask a question. Please past have one on your telephone keypad again that star one to ask any audio question.
Okay.
And your next question, it's kind of like Jerry revenge with Goldman Sachs. Please go ahead.
Hi, good morning, everyone.
Good morning, Jerry.
Ah Ah Ah Ah Carl I'm wondering if you look at the the pillars that you outlined on on your first conference call can you talk about and what any of the.
Progress offers you are a cross.
Across the key areas obviously.
Covid slowed down some of the targets I'm sure that you've had but.
Take a step back if you don't mind it.
Give us an update on where the organization stanza like.
Like areas that you're outlining and first of all.
Sure.
With nine innings it it it creates a lot of a lot of subtle do something to reduce it down to a scale of one to five with five being complete an incomplete and you're being first starting on safety I would say and Jerry were about it too we're making progress we have two different businesses or advantage businesses much further along.
The journey and then our water business and so I'm not sure what her business was about a one in a change businesses about it for so I guess, if you're averaging that was a little bit more than two but somewhere in that area.
When it comes to operations.
And again, our our water business has probably has the most opportunity.
I'm very excited about our our our water business operationally and what what is in front of us to be able to significantly.
Reduce.
Or conversion Castor interchange business, there's opportunity to but we're just a bit more advanced and what we're doing and triggers but they're still opportunities.
From enhanced commercial I would say our water business.
Is.
Four to 4.5, maybe touching cause I mean, they they.
It it it it's actually quite stunning what they had done in the transformation they have made and help.
<unk>.
Textbook they they did apply the process and our drainage business, we still have a lot of work to do but it's it's understandable that many it seemed like any separate markets that'd be a separate people that'd be separate competitive steps of competitive dynamics. So it's taking a bit more time.
And we're working capital standpoint, we've done a fantastic job here, we we have.
Zero to five but we're probably at about about it for there's still and commits to be made but they're they're going to be.
Less and less over time, because there's only so much working capital you can take out of business, we still do still have more to do.
But we've made break good progress.
And I would say it aren't G&A effectiveness, probably Jewish I mean, we still have a ways to go we still.
Three E PS well, we have a friend in system when our change business, which is our our highest 40 right now that is.
<unk> Spaghetti Bowl the processes.
And we have a lot of work to do there.
And.
So I would say, it's like collectively put all of that and into place I would say that as a company we're probably in that.
At two and a half range five you still have a ways to go which actually it's quite exciting quite exciting there's a lot of stuff to do and a lot of stuff.
Self help.
That is still.
In front of us.
[laughter] and call them that note, obviously 20 twenties, the big margin enhancement year from commercial excellence.
As we think about the margin opportunity and 21 are you expecting significant progress on [noise] dropping down to the marching line from manufacturing efficiency games and GMA efficiency gains you or are those.
Longer longer tail benefits that we should be thinking about.
Yeah.
It's it's it's.
I I will say this under some to macro assumptions that.
<unk>.
Keeps things relatively stable or or doesn't cost things and then not to be relatively stable. We would expect margin improvement in 2021 to the extent of that like I said, we're just going through a planning process.
We have.
We definitely have.
Almost in hopes not hopes we haven't had plans for.
Or operational.
Improvements to enhance unit margins and we do thank the passing more minimal carryover into 2021, although clearly not at the same level since we're getting 2020.
Okay. Thank you.
Okay and your name is [laughter] and it's on the line is Matthew bowling with Barclays. Please glatt.
Maggie there.
Okay.
And that the airline is out there.
Yeah.
Okay can you hear me now.
Yes, yes, Sir.
Okay, that's all sorry about that.
So I I wanted to ask about the the revenue God I thought you gave closet apologies if you talk about it all that much but but it seemed like there was a notification of a bit of a wide range the fourth quarter and presumably whether it's a natural factor one was looking about fighting for <unk>.
But I was curious if you could just walk us a wrong assumption.
Assumptions, how's the higher or lower up with I guess, if you count once you've seen so far of October.
Yeah, it's not it's not high math.
Basically took the EBITDA range back into with the associated volume a big you know you're absolutely right, whether it's a big factor for US we owe is plan for the worst and hope for the best and right now Yep October it's raining outside of my window here in Dallas.
Not my favorite, but no I think it's safe to say you know if that's.
Yep reasonable range, given the 15 million dollar range and have it though that we put out there so I'm not trying to say too much more than that.
Prefer not to talk about whether I think we've had that conversation before but it is a it is a factor, especially this time of year as to how things go across are many regions.
Okay understood.
Hi, Thank you for that and.
<unk>.
Oh sure.
[noise] I'm wondering if there's a way to think about kind of what happens after the Big result, you know once you're clearly successful another clicking so Carl I guess.
The idea that at a certain point in the future you know as you get passed though so.
Angela.
<unk> high price increase or is it always going to be opportunistic like the just kind of what happens when when do you think you've you know appropriately reset.
Your product Kreifels like it.
Alright, I think both business you've left a little bit differently I think the changed your business will probably I should say be a bit more optimistic on top of a yearly.
Executions.
I think the water business ends up being a bit like when I was a business I mean, just study compounding prices year after year after year.
It's it's it's a well structured it was a lot of similarities.
I wanted to someone who is also got a lot of similarities I haven't wanted somebody so it was just would that environment.
Will provide for.
Compounding price increases.
What are the important things to me and that is the fact that we still have his curl indicators and the last question a lot of room for self improvement on the cost side and other activities. So yeah.
Pricing is an important component, but actual margin expansion.
Is certainly the bottom bottom line view that we take and I'm excited to see you know even if we weren't successful in getting pricing, which we won't get the same type of compound growth that we've seen this year in water, they're going forward. We have other places that we can fix that continue to expand that merger.
Okay I appreciate the Blue Cross perfect.
And your final question comes to them on a furniture to add any time tomorrow that their capital please flat.
<unk> production as you so.
<unk>.
[noise] sorry, you just.
Sort of your your question.
Hi, I was just wondering if you could give some guidance around sort of long term.
Cost opportunity on the G and I saw it you know if you fast for several years and you're in a world where you've got one L. P system.
And everything is working how much cost you think you can take out about G&A line. If you wouldn't you'll sort of optimal setup I guess secondly, what's the cadence of getting the.
Sure tough question, but I will give you my best shot at it.
First off G N as a as a simple number for me because girls told me you can't go any higher than this it'll be it'll be on a percentage basis less as we grow the business.
As far as removing cost you can imagine multiple erp's that we pay a lot of money on an I T staff that supports it E. R. Audit staff are audits external auditors, who cover so there's there's a pretty sizable number there.
And it's.
It it would be hard for me to quantify that on this cough, but I would say it is.
Several you know maybe $5 million to $10 million, let's say as we continue to grow the business.
As we turn that around and we talked about kittens the ability to remove systems.
It cost money if you rush. It. So we are trying to do that very thoughtfully curled socked earlier about our front end system, we're trying to fix the pieces to create the most challenges right now.
And at the most G&A.
I see lots of opportunities I wouldn't want to quantify beyond what you know broad general terms, Jessica b as much as $10 million right now I hope, we can do better than that but I also hope that we'll be growing the business and supporting that that growth business with better information faster and at a loss expense. So.
Something we're certainly focused on and will continue to show improvement in these reports.
Okay, great, but I mean, it's sort of a two or three processed to Mcdonald's it for like a five five fluffy I process.
Properly.
[laughter].
I don't think Karl has more patients within two to three and then I'll push them on that but yeah.
In that short a rich.
Okay, great. Thank you.
Thank you I'm, sorry, Nowadays you know questions in queue. At this time I would like to turn the conference back off Ecomanagement for clothing, Vermont.
Thank you operator, we're pleased with the results we announced today. However, we realize there's still so much more to do on our five appointment colors.
And shortly and I would be remiss, if we do have in the call as we began it by taking all of our fellow team members continued belief in the company and what it can achieve as a spring to us both so thank you.
It's a pleasure to be with you all we look forward to our next call in 2021.
Have a good day and most importantly stay six.
Take care.
Ladies and gentlemen, and thank you for participating in today's conference. This concludes the program you may now disconnect everyone and have a wonderful day.
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