Q1 2021 Bioanalytical Systems Inc Earnings Call
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Greetings and welcome to the Bioanalytical systems, Inc. First quarter fiscal 'twenty 'twenty, one financial results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note this conference.
Is being recorded I would now like to turn the conference over to your host Kelly all of the equity group. Thank you you may begin.
Thank you Devin and good afternoon, everyone Bioanalytical systems, Inc. First quarter fiscal 2021 financial results were released today. After the market closed a copy of the earnings release can be found in the investors section of the Companys website at Www and note of co dot com.
As a matter of formality I need to remind you that some of the statements that management will make on this call are Scott.
You are considered forward looking statements, including statements about the company's future operating and financial results and plans.
Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected.
Any such statements represent management's expectations as of today's date you.
You should not place undue reliance on these forward looking statements and the company does not undertake any obligation to update or revise forward looking statements, whether as a result of new information future events or otherwise.
Please refer to the company's SEC filings for further guidance on this matter.
Management will also discuss certain non-GAAP financial measures in an effort to provide additional information for investors of debt.
<unk> of these non-GAAP measures and reconciliation of the most comparable GAAP measures is included in the company's financial results press release and corresponding form 8-K.
Joining us from the company. This afternoon are Bob Leisure, President and Chief Executive Officer, Beth Taylor, Chief Financial Officer, and John <unk> Chief Strategy Officer.
Bob will begin with some opening remarks, after which Beth will present, a summary of the Companys financial results then we'll open the call for questions.
Now, it's my pleasure to turn the call over to Bob.
Thank you Kelly and good afternoon, everyone and thank you for taking time out of your day to listen to our story.
Since this is our management team's first earnings call conference call I would like to spend a few minutes discussing where the company has come from where we stand today and where we're headed.
We were founded 1970 for Bioanalytical systems, Inc. Originally focused on manufacturing and marketing marketing the analytical products.
As liquid liquid chromatography electrochemical systems for universities and pharmaceutical companies.
By the time of the company's IPO in November of $19 97.
Contract research services have become an increasingly important part of the revenue mix representing approximately a third of the total revenue with the remainder of coming from products.
The Companys contract research services continued to expand in the following two decades, reflecting strong core competencies and bio analysis pharmaceutical testing and toxicology consistent and consistent sustained revenue growth and profitability. However remained elusive throughout the years.
After a period of management changes asset write offs declining product sales.
Uneven service growth.
The intermittent profitability bioanalytical space systems face liquidity constraints.
And default under the credit arrangements in the second half of 2016.
At that juncture I was hired as the management consultant to evaluate the situation, it's alternatives and help change the course of direction of the business.
At that time, we put an action of strategic turnaround plan to remedy what I considered to be a underachieving contract research organization with the significant potential.
Our immediate emphasis involve reducing cost managing cash flow securing a new credit arrangement, which we accomplished with the new lending partner of June of 2017.
So in this regard I would like to say we were founded in 1974 and reinvented in 2017.
Having success successfully made it through the early phases of the restructuring we shifted our attention to investing for future growth and creating what I call of contemporary organization.
In the category of investing for future growth, we thoughtfully evaluated strategic acquisition opportunities to build a more complete comprehensive solution set.
For our clients and greater scalability for our organization.
At that time, we had operations in West Lafayette, and Evansville, Indiana.
The acquisition of Missouri based seventh ways laboratories in July 2018 was one of the first important building blocks, bringing us.
Complementary expertise and histopathology pharmacokinetics investigative toxicology.
And pharmacology model development.
Importantly, we gained impressive talent from seventh wave, including our current Chief strategy Officer, John Cigar Who's on the call with us today.
The acquisition of the toxicology services business unit of Gaithersburg, Maryland based Smithers Ivanka in May of 2019 brought us additional capacity capabilities and the scientific debt and general toxicology vaccine safety and development and reproductive toxicology studies.
Finally, our latest acquisition of Fort Collins, Colorado based preclinical research services in December of 2019 expanded our toxicology business and surgical services for pharmaceutical and medical device clients.
Together these three combinations increased our capacity broadened our services enhance our talent.
Enabled us to serve additional clients and improved our scalability.
We believe that we are not simply integrated these acquisitions, but we've also improved operations in order to achieve subsequent organic growth at each.
During the same timeframe. We also made internal investments for future growth highlighted by the completion in March of 2020 of it.
The new building expansion of improvement project at our GOP toxicology facility your Evansville, Indiana.
We estimate that this project alone added approximately 6 million of an annual revenue capacity.
Furthermore, we upgraded our accounting systems implemented in the ERP software platform and investing in new technology automation and equipment that can support a much larger organization.
We made approximately $15 million of such growth related capital expenditures between fiscal 2017, and fiscal 2020 and expect to reap a return of those investments going forward.
Perhaps more importantly, we made investments to upgrade our leadership team and employee base.
For example, 10 of the top of 11 members of our senior leadership team joined the company within the last for years.
We have also improved the areas that were previously not prioritize such as our client experience team marketing group human resources.
Department.
Yeah.
We are not only focused on the employee talent, but also on the employee culture cultural fit as we build the company into a contemporary organization and our new brand name entities, which.
Which we unveiled for the.
CRO business in November 2019.
At our annual shareholder meeting this March we will be requesting shareholder approval to adopt and at the bank as our formal corporate legal name.
Beyond the new name logo color schemes, Taglines, which unify all of our businesses under one umbrella we are establishing a new culture mission and vision.
First and foremost we are a client service oriented organization and encourage a culture of respect open communication collaboration and excellence in everything we do.
Rather than trying to avoid the loss we've played to win.
We are getting employee buy in.
As evidenced by our significantly lower voluntary turnover and we are hiring new personnel that have customer service in their DNA.
With the business transformation and important growth investments of the last few years behind us.
We believe that we have emerged as the best in class contract research organization with the scalable growth platform and unparalleled dedication.
The personalized customer service.
Today, our contract research services segment represents approximately 95% of our total revenue in contrast.
Two the Companys product orientation, when we were founded of $19 74.
We have top notch GOP, GMP, GCB and <unk> compliant contract laboratories at our five locations, which referred to of centers of excellence across the drug discovery and development continuum.
We provide a full spectrum of services ranging from small to large molecule therapies of medical devices.
We have been off the streets radar for you for a while but starting with this conference call. We intend to communicate engage more proactively with investors and analysts in the quarters and years to come.
As a relatively small publicly traded CRO participating in a faster growing clients and the faster growing client segments, such as small biotech single molecule drug development individualized medicine gene and cell therapy, we have an exciting long term growth opportunity.
We have clients reduce the time and cost to bring drugs to market through outsource discovery and development services, which otherwise would require significant client overhead.
We strive to outperform our large larger and smaller CRO peers with service flexibility innovation and attention to details, creating a unique opportunity for us to grow in this space.
We believe we are growing faster than the global industry average, which frost and Sullivan pegs, 8% per year and.
And we have diversified customer mix.
Without any single client contributing more than 8% of our revenue.
Our strategy for future growth involves much of what we've been doing the last few years.
Focus on flexible superior customer service to our clients.
Pursue selective strategic acquisitions, the dovetail well with our current assets and suite of services.
Integrate our acquisitions, and then add services people equipment and capacity to drive subsequent organic growth.
Continue to invest in internal growth initiatives and capacity.
Drive ongoing operational efficiencies.
Scale, our business to realize operating leverage in order to drive improved profitability and cash flow.
Yes.
We believe that the first quarter fiscal 2021 financial results. We reported this afternoon demonstrate that our strategy is working.
And that we can extract extract operating leverage as revenue grows.
On a year over year basis. This quarter of revenue grew 38, 5% to $17 9 million.
Gross profit increased 69% to $5 9 million.
Margins expanded operating income turn positive and we achieved $1 3 million of adjusted EBITDA and $1 7 million of cash flow from operations.
We believe that our organizations unification under the <unk> brand name.
Along with our client service oriented culture.
Underpinning our performance.
Furthermore, our quarter end backlog in the first quarter book to Bill ratio remained $45 3 million and $1 one respectively.
Despite the quarter strong revenue growth.
While we've accomplished much since of joined the company for years ago as the management consultant and then as the CEO in 2019.
I believe the best is yet to come.
Now I will turn the call over to Beth Taylor, our Chief Financial Officer to recap our fiscal 2021 first quarter financial results in some more detail.
Please go ahead.
Thanks, Bob and good afternoon in the.
First quarter of fiscal 'twenty 'twenty, one of our revenue increased 38, 5% to $17 $9 million from <unk>.
$1 $9 million in the comparable prior year period.
The majority of the increase in revenue was due to internal service revenue growth augmented by approximately $1 $5 million of incremental revenue from our operations in Fort Collins, Colorado, which we acquired in December of 2019.
Our revenue growth during the first quarter of fiscal 2021 was 13% compared to the fourth quarter of fiscal 'twenty from.
Service segment revenue in the first quarter of fiscal 2021 increased 43% to seven.
The $17 million from $12 $1 million in the comparable prior year period.
Service gross margin increased to 31, 9% in the first quarter of fiscal 2021 from 26, 6% in the comparable prior year period, reflecting operating leverage and the greater utilization of recently expanded capacity.
Product segment revenue increased nine 9%.
$853000 in the first quarter of fiscal 2021 from.
$776000 in the comparable prior year period.
Electing an increase and collect in vivo sampling systems and analytical instruments, partially offset by a decrease in other instruments.
Product gross margin increased to 51, 8% in the first quarter of fiscal 2021 from 31, 7% in the comparable prior year period, driven by expense reductions implemented in the last half of fiscal year 2020, and improved margins from existing sales.
Income from the first quarter of fiscal 2021 turn of power.
Revenue at $14000 compared to an operating loss of approximately $1 million in the prior year period, reflecting higher gross profit and lower operating expenses as a percentage of revenue.
Net loss in the first quarter of fiscal 2021 totaled $366000 or a negative <unk> <unk> per diluted share an improvement of $1 $1 million.
<unk> to a net loss of $1 4 million or negative <unk> 13 cents per diluted share in the comparable prior year period.
Adjusted EBITDA increased 169, 4% to $1 3 million in the first quarter of fiscal 2021 from.
$481000 in the comparable prior year period.
The book to Bill ratio for the first quarter of fiscal 2021 was $1 one six times.
Continue to build our infrastructure for growth, which included additional head count and investments in research and development technology and systems.
Our backlog at the end of the first quarter of fiscal 2021 was $45 $3 million of.
From $35 7 million on December 31, 2019 and up for.
The $43 8 million on September 32020.
Now, let's turn to the cash flow statement and balance sheet.
Cash flow from operations totaled $1 $7 million, which reflects the add back of depreciation and amortization of $1 $1 million, an increase in customer advances of $2 $2 million, partially offset by a decrease in accrued expenses of $1 $1 million.
Capex for the first quarter of fiscal 2021 totaled $1 $5 million and we expect the level of capital investment to be similar in fiscal 2021 to the to prior fiscal years, not including any major facility expansion.
Our balance sheet at December 31, 2020 included cash and cash equivalents of $1 $2 million and long term debt of $17 $2 million.
Total debt was $27 1 million, which included a $5 $1 million balance of our PPP loan.
We believe the benefit of the PPP loan has allowed us to continue to retain our employees and safely maintain business operations do recent period.
We have submitted our application for forgiveness of of.
$4 9 million of the loan to the SBA for their review.
Overall, we are pleased with the direction of of.
And we felt confident in continuing to invest in our future.
This concludes our prepared remarks and with that Kevin. Please open the call for questions.
At this time, we'll be conducting a question and answer session. If you'd like to ask the question. Please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You May press star two of people will look for will be a question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one one please as well.
Poll for questions.
Our first question comes from the line of Calabaza.
With colors Securities. Please proceed with your question.
Hi, everyone. Thank you for all of the updates and excellent results here.
Maybe my first one.
Our channel checks, we found very overwhelming support for its white glove service as a result of your 2017 reinvention that you highlighted in your prepared remarks.
What are some of the ways you've been able to deliver this high quality client experience just some of the changes that you've made.
Hi, Kyle this is Bob first.
Yes.
Went out to the conferences in the poll would make a difference to our clients and our consultants one of the first things that I was told US. If you would just if you're scientist would return of phone call timely that we would separate ourselves. So first and foremost of and we want to make sure that were timely returning phone calls.
And second of all we wanted to divide of very high touch service. So we want to not rather than taking orders, we want to be very consultative in our nature. So our scientist and study of directors. All of this can be very involved in the study and offering advice early on.
And the client relationship.
I think we've done a good job of bringing in some very experienced people that have.
So the drug discovery and development experience and that has helped us quite a bit.
I think the then finally.
We have taken time to really focus on project management, and making the making sure that we can follow up with the client where the project is and if it's of multiple multi site project.
Make sure that we're following up but they don't have to chase it but we can proactively tell them other project is going and where it stands.
So it's something we work on every day, it's something we're going to continue to work on we're developing systems of recruiting for it constantly and it's something we're going to remain vigilant about.
I appreciate that.
And I think.
<unk>.
Business development team members, that's kind of a new thing over the past three years.
How many are there in that role and do you anticipate and adding to the AD count here.
Yes.
Good question right now in strictly as in terms of business development people, we have five what we call business development people, but they are supported by <unk>.
The strong client service team.
Of the of about a dozen people that supports them.
And.
And then a lot of scientists that are involved.
With the business development also and very engaged with the client. So it's just not five business development people by themselves.
We're currently looking how we can make those five people more efficient so with the analyst support or with additional resources from sales and marketing.
We have some people in our sales margin group they've been very supportive of identifying additional clients and then we're also looking at potentially supporting them with some additional specialty service support.
And experts in this field. So right now we have five we're looking daily to make them more efficient and then we will probably look to potentially add also.
Got it got it and.
So a nice tick up in the financials I think are the EBITDA margin is approaching 10%.
Well I'm, just kind of curious whats kind of the long term goal here for for EBITDA margins I think that.
Comp group is for more established zero is maybe plus for the 20%, but just trying to get a sense of of how youre thinking about that.
Yeah.
Good question Covid, we've really never talked about that before but I.
I will tell you that I.
The view of the best in class.
The range is 19% to 21%.
Is what the EBITDA that should be achieved.
We as the company Youre not going to back away from the goal of being best in class.
I think there's a path to the 19% to 21% not with are not with how we stand today, but the path for going in the debt.
Being best in class is what we're going to be about and so that that will go will remain there.
Great.
Great and one more if I may I.
We started providing the the book to Bill ratio, which is great and it's been very strong.
And it has changed quite a bit over the past few years can you just talk about how it's changed and and also how you define it I guess is it does it using like the last quarter for the last 12 months.
The there thank you for a book to Bill.
Last quarter I think the one once one of one six was just the last quarter.
And the.
The quarter before that we reported I think one for which was the last quarter also.
We defined it as orders divided by the revenue recognized.
So our orders are growing faster than the revenue that we're recognizing.
So.
Right now.
It has been positive when we first acquired these companies.
Most of the revenue the book to Bill I would say it was probably.
Flat or negative.
CSI, particularly was negative it had declining sales.
Smithers of Vonda was flat to negative.
So we.
We bought companies that were.
We use leveraged the return of rounds.
So that is what we.
They didn't have a lot of momentum at the time.
We're very pleased with the momentum with the we've built today.
And hopefully we can continue that internal growth.
Okay, Great. That's it for me thanks for all of the updates today.
Thank you.
Our next question comes from the line of David Windley with Jefferies. Please proceed with your question.
Hi, Thanks for taking my questions Good afternoon, Hi, Bob.
Wanted to ask you a few on <unk>.
A variety of things first demand environment can you tell if if any.
<unk> is benefiting from.
A lack of capacity across the industry is that something that you can take advantage of.
Hi, David.
Good question, where he is a very small piece of the very big industry currently.
So.
And we have very good momentum with our with our clients.
And adding more service to existing clients, where we add new clients.
I'm sure we must be benefiting from some of the.
Lacking lacking capacity and an example would be in the non human primate area.
Where inventories the shortened.
About a year ago made the decision to buy ahead of buy inventory. So at some point and I know that we had we had capacity when we had the resources that maybe others did not have so I believe we probably picked up some.
Some benefit.
In certain areas, but I think that is the overall, we're a small enough piece of the big enough by that I think there are other reasons why we're also seeing the uptick.
Got it in and of.
Are you as you mentioned services are you finding that the clients are engaging you and kind of growing bundles of services I E. They'll hire you for the Tox as well as the bioanalytical or they'll hi, how are you for the toxin, perhaps the pathology along with it.
Or are you are you able to kind of cross sell into the same contracts for same mandate multiple services at this point.
Yes, and that's been that's been critical to our to our internal growth. So as we completed these acquisitions. Each time, we've picked up several hundred clients and those clients for used to maybe.
Buying one service from one entity and now as we've developed a relationship with those clients.
Dale.
Now start to look at multiple services to multiple entities. So it's up to us to make sure that we can provide the seamless service to them.
And there were an easy place for them to work with but we're definitely seeing increasing amount of sales from clients that came maybe from smithers our bonds are or the seventh way of acquisition that may be the only looked at them for one or two services in the past.
Got it on my NAV the.
The good segue into my next question, which is around your rebranding.
I noticed that debt you referenced the acquisition still buy there by the required name will everything folded under the <unk> brand now or will will smithers and seventh wave retain those identities.
No we have now folded everything and rebranded everything under the <unk> the name so invoices and pose.
R&D throughout Chuck.
Check everything goes into the interest of name I think we mainly refer to those now internally is just by gaithersburg or St Louis or for Collins.
I think for just for today's call that we actually referred to the amount of the names that we acquired got it. That's helpful. Thanks, and then maybe lastly for me.
From the capital standpoint.
How do you think about.
You've got the opportunity to grow margin still but how do you think about the amount of of available cash you need to run the business and then I apologize. If you went through this but how how much capital you have available to you through borrowing or otherwise to continue your acquisition strategy.
Well that's it that's a good question.
Capital I guess, the two two keys of capital too to me one is human capital and the other is monetary capital.
I'm guessing you're asking about the monetary more monetary, yes, but I'll I'll take either.
Okay.
Let's say I'm trying to the the human capital is obviously critical.
Spent a lot of time recruiting relocating and bringing people on board and.
That's debt.
A large expense for us in today's market and I think as long as we are.
It can continue to afford to do that we will do that and I think we should be able to continue to for to do that.
As far as access to the capital markets.
I believe that.
And talking to the capital markets I think we have access to the capital.
I'm not.
Not concerned about it at the moment.
I think we have rather aggressive plans here and so we have kept in touch with the capital markets are well aware of what's out there of the leveraged its capable I know, where we are right now.
I think with the five or six we're not afraid of debt.
Ultimately I think we'd like to get to to three are under as far as the leverage.
But depending on the cost of capital I think that.
We will consider that and then we look at when we look at growth opportunities of really look at the <unk>.
The cash flow from where we can grow and we have a lot of leverage on our model so growing internally.
<unk>.
Is one opportunity and growing externally is another and.
Internally, we've been able to fund a lot of our cash flow with our current lender and our cash flow and externally I think we'll have to look for additional sources of capital to do acquisitions.
Got it thanks, a lot I appreciate I appreciate the answers and good luck with the strategy.
Thank you Dave.
And once again as a reminder, if you would like to ask the question. Please press star one on your telephone keypad once again as of Monday, if you'd like to ask the question. Please press star one on your telephone keypad. Our next question comes from the line of from Hamburg with Carl M. Hennig. Please for with your question.
Yeah. Thank you well our Bob congratulations on the great job, but quite a turnaround it is taking place here.
Thank you Tom.
Couple of questions here on the PPP loan you've applied for forgiveness is there any thought to applying for additional P. P loans the P P loans.
We do not qualify for additional PPP, you'll need at this time.
Okay.
And in and as long as the mine Covid, Let me ask you a question plus or minus net net what affect his COVID-19 had on.
The company would you say.
One from us.
The negative standpoint, with the employees and and and how they've handled it and I shouldn't say negative they've handled it very well, but there's certainly been some costs involved there.
Other hand, the increased business that you have.
Gotten the from a working on on the Covid vaccine.
Well I think I alluded to do a little bit earlier, Tom the.
It probably changed how we did some purchasing and.
Supplies and resources that we had the.
We anticipate.
The second of all of it.
Decreased our business development travel.
And inner side of operations at the time, we were doing integrations and just introduced our new ended the brand name.
So we had to pivot a little bit and how we how we introduce that of the market and some of the plans. We had we had to make some amendments to.
We had to learn how to do virtual auditing.
And a lot more virtual meetings.
We had a lot of people working from home.
And we became a much more virtual company still working on that today.
And then.
And then we had.
Our operations, Don and our labs don't work on their own so people do have to be.
At the lab at the operation I'm very proud of the how are how are people will handle the and the safety and the precautions and we've not really had any instances of people.
Getting the getting kidney COVID-19 from being at work.
I personally tried to.
Non travel for and I think that lasted for about eight to 10 weeks.
And I realize it's a very tough way to run the company and do integration and do what we wanted to do so I will say that.
I have personally been very active in traveling over the last six months and I think it has helped it helped in the communication, but we've had the changes some of the ways, we communicate and like everybody else and I think we're adapting and getting better daily.
Okay. Okay, and then can you can you break down each of the five locations of showing what revenue growth you've had with each one of those in the end the profitability or expected profitability from each of those five locations.
I don't have.
I can do it off top my head, but I got people here getting very nervous when I'm talking off the top of my head.
And so I'm going to I will.
We'll try to be very general just right. Although they are all shaking their head of getting very nervous.
Let's see.
I believe that.
Sure.
West Lafayette as it were up 50% to 100% from where we started Evansville is probably.
Over 100% of 150% of where it was four years ago in terms of the growth.
The Gaithersburg this last quarter, it's probably.
At least double what it was when we bought it.
For Collins.
When we bought last December is probably up 75% this quarter from where it was a year ago.
Of that one has really been.
Growing nicely and we invested heavily in that and I think we've.
At least $1 million here in the last six months.
To support that growth and I believe St. Louis is probably at a run rate is probably.
Not quite double I'd say of probably 70% to 75% from when we.
Wired it.
And.
So I think we've been able to bring value to each one of those.
So theyre all of different stages of the growth cycle.
And I don't think.
I wouldn't say than any of them.
Yeah.
R R.
<unk> tapped out and where we expect to go.
I think we have we have opportunities and we have a lot of leverage in our model. So.
I think youll see last quarter that are for.
For Q4 and Q1.
That almost 70 cents of our sales dollar showed up in our operating income.
I don't know that the so somewhere between 50% to 70% is the kind of leverage we have when we can increment keep increasing sales of those existing sites.
And as we do that I think that the sites have targeted EBITDA targets, the which I think that they can all achieve.
So.
Theyre, making great progress we've had to make some changes with some people and we've added some people.
And again, we're still investing in training, but I'm really pleased with the progress that we demonstrated last last quarter.
Good day, how do you think the shareholders are very pleased as well.
And in the Cook bio lease that you have or that they have with you. How long has it got to goal, we and about the what seventh eighth year on that.
You're talking about the two lease of the West Lafayette square footage, yeah, mhm and for those who aren't on the phone as you're doing the Wii.
At least the half of our building here in West Lafayette to Cook and I believe that that lease growth.
Is it 25.
I believe on top of my head and somebody shaking their head, yes here because of me.
I think 2025 is where that goes right now and of 24 and the 24, okay. Thank you.
Okay.
And the last question Oh, I did not see it but I understand last night on T V.
Kennedy on Fox business, Brett fire was on there and there was some comments about a pharmaceutical company <unk> and the Doctor Jacob Van land in Ham and I believe that's the Doctor G and you've had some activities with the.
Can you discuss that at all in.
Were you referring to present to the switch in 2014.
Right.
The Si wrote off I think of five or $600000 receivable right.
Yes, we did in 2014, which about eight or 10 years ago, which you have a history of much longer than I do evidently with this company to remember a write off from 2014.
But I have not I've not heard or talk to product is sits about two o'clock. This afternoon. So.
Okay.
But we do stay in touch with them.
Okay, Oh, maybe someday, maybe someday that will come to life, but it's nothing we're counting on and have counted on okay, well it looks like that's just the dream.
It says here that the the the recently or of equated by Odyssey Group, which is a publicly traded company and you know I just I just was curious as to if there's any hope on collecting on that number one and number two I believe you still have the data on that and and.
For those on the call that aren't familiar with it it has to do with a concussion issues with the.
The NFL in particular, and and you know whether there is an opportunity to.
To get that money and and give them the data and do additional work with them.
Tom.
I think.
I think I know, what you're referring to and I had the same curious thought.
Okay.
Well, maybe we can address it on the next call.
Okay.
And our final question comes from the line of Lenny Dunn with mutual Trust company of them correctly.
The question.
The first congratulations.
Moving to slide into the black.
Kind of all of the expansion for.
This has been on building the infrastructure up.
And.
It would appear to me that.
For the back of the envelope that kind of a one.
100 million dollar run rate.
The U can be highly profitable because a lot of the.
The additional salaries.
We've taken on the other expenses.
Worked very well with the run rate.
Is it realistic.
Expect us to reach that run rate of sometime in the next.
Three of four quarters.
Well I don't think I can.
Give that kind of go forward data of learning on on when we will reach that kind of run rate.
But I.
I think you bring up a very good point.
Debt, our unallocated corporate G&A.
Is about 12% to 14% of our overall sales dollar.
And if we were able to see of 50% increase in our.
And our revenue.
With the with a with the with the.
Profitable entities.
For the 30% EBITDA range.
And we're able to keep the G&A flat I think is what youre, referring to the unallocated corporate G&A it would come down to the seven or 867% to 8% range and that would be a huge milestone of moving us towards the.
The 14% to 15% EBITDA range closer to the 19th of 'twenty with which I would refer to as best in class. So I think you pointed out of where there is where there is opportunity and where there is leverage opportunity but.
But I don't think of them in a position of where it should be giving comments when I think we will reach that point.
Well listen the ask of you to.
Give me a definitive answer but what are the right.
I guess.
Being realistic with the back of the envelope calculation.
I think your back of the envelope calculation is.
Hess has has some merit of of something that would that would move towards 15% not the best in COVID-19 or 20%.
So if that's what your question is.
Okay, well thank you.
Kind of my question and I appreciate the hard work you put in and everybody's put in and it.
It looks like we're certainly ahead of the right way.
Thank you Lenny.
With that we've reached the end of our question and answer session and I would like to turn the call back over to Bob Lee for any closing remarks.
Yes.
Alright.
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