Q1 2021 ServiceSource International Inc Earnings Call
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Good day, ladies and gentlemen, and thank you for standing by welcome for the Servicers first quarter of 2021 earnings Conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation, there may be a question and answer session. The ask a question during the session you'll need the press Star then one on your telephone keypad as it for them.
Mind you. This conference call is being recorded if you require any further assistance. Please press Star then zero at this time I would like to turn the conference over to MS. At least partially the head of corporate communications.
Thank you operator.
Great everyone, joining us today and welcome to serve as sources of earnings call to discuss the result for the first quarter ended March 31 2021 on.
On the call today on Gary Moore, the Resources', Chairman and CEO and Chad Lyne our CFO.
As a reminder, our SEC filings in the earnings release, we issued yesterday after market closed are available on our web site at Www Dot IR The service force Dot com.
In addition, we have posted earnings slides to accompany our comments today.
Shortly after this call we will post an audio replay and a copy of the prepared remarks to our website.
Before we begin I would like to remind you that during the call we will make projections or forward looking statements that involve risks related to future events.
All statements made during the call reflect our views as of today April 29, 2021 and are based upon the information currently available to us.
All projections and forward looking statements should be considered in conjunction with the cautionary statements in the earnings press release and the risk factors included in our SEC filings, including our report on form 10-Q.
These documents contain and identify important factors that could cause actual events and results to materially differ from those contained in our projections and forward looking statements and we disclaim any duty to revise or update any forward looking statements.
In addition, during the call. We will also be discussing certain non-GAAP financial measures, which we believe provide additional information to enhance the understanding of how management assesses the operating performance of the business.
The reconciliation of the GAAP and non-GAAP measures can be found in the earnings release that accompany this call.
And with that I'll turn the call over to Gary.
Thank you Lee and welcome everyone to our earnings conference call for the first quarter of 2021.
I'm happy to join you today to discuss our first quarter results in our last call. We shared on the expectations that our path to growth and improved profitability would become more apparent later in the year based on anticipated improvement in our go to market and operational execution.
Day I'm pleased to share that we continue to make progress on our objectives, and we are gaining greater confidence to reach the future.
We envision.
While there are certainly still elevated levels on.
Certainty globally.
We are encouraged by early signs of strengthening in the markets we serve.
Market research firm Gartner this month right the global forecast for 2021 from six 2% year over year growth to eight 4%.
And we share of this optimism that conditions will continue to recover as the year progresses for her.
Part of this belief is due to the technology the ability to connect all of that.
It's worth noting that the events of the last year had reminding everyone of the value of personal connections and relationships social on business networks have gotten smaller and more focused on those that add value to our daily lives.
Our clients too are focused on getting closer to their customers and fortifying the value of the existing relationships as a company that enhances and preserves the relationships service towards the same underlying momentum from this alignment of market need with our business.
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We have focused on solid execution across the business to start the year and also on our ability to successfully deliver the deeper stronger connections that our clients need well beyond the pandemic.
And our first quarter business highlights you can see the evidence of our relentless focus on creating quality relationship between our clients and their customers overall for Q1, we performed broadly in line with the cadence we shared with you in February.
We also had some areas of the outperformance compared to our internal expectations.
From a financial snapshot perspective.
The adjusted quickly to be responsive to the revenue headwind. We told you we would face in the first half of the year on non-GAAP expense reductions offset about 98% of our year over year revenue contraction and we accreted cash in the quarter cash.
<unk> will give you a closer look at these factors in the financial section of our call.
Turning to our client centric result, I am pleased to see that the work we're doing to instill a client for life mentality.
Everything we do is taking hold.
While clients for life is not a new concept. It's an important one that we are bringing front and center in our culture, We often council our clients on the value of nurturing installed base of accounts and we also practices. The advisers Bell our top 10 clients have been with us for approximately 11 years.
And over the trailing 12 months through Q1, we of drug revenue with half of that.
In the quarter, we've secured new expansion wins with six of our top 10 and expect the take on more work for them throughout the year.
In addition, we focused heavily on renewals in the quarter with more than $50 million of contract value up for renewal I'm pleased to say that we renewed or extended more than 95% of this total value.
Within that the effort we brought it home to important win at different ends of the size spectrum.
But I want to highlight.
First one of the top three accounts in the software and cloud vertical.
He's been with us for about 12 years, we set a goal of not only to renew the relationship but the secure a multi year renewal in Q1.
Our team completed a complex multi quarter of negotiation that successfully ended with the renewal of our book of business for a three year term and the expansion to support recent acquisitions and there are ongoing push into the cloud.
Really proud of the team for bringing this and especially during the time when tech when the technology industry is generally seen shorter term commitment.
At the other end of the spectrum of global medical device clients that provide diagnostic imaging and other mission critical medical equipment result of up for renewal. The client relationship has been in place since 2017 centered around the high margin service contract renewal.
And warranty conversion.
Our team worked for several quarters with this client to ultimately security renewal with new commercial terms that expands the scope of our work by more than 30%.
There was a comment driving force behind both of these client renewals and that is we have proven ourselves to be a valuable asset to our clients in times of business growth and change as our clients grow through acquisition or charter of course to build market share of new sectors. They need partners that understand the go to market with the pay.
Asian for their business and can ramp quickly to attack new opportunity our top clients have stayed with us as long as they have in part because of our proven ability to flex and scale to support new opportunities and be a true strategic partner on their training for them.
Patient journey.
By loving this client for life mentality. It creates a valuable feedback loop for our sales organization as well with our clients demonstrating the increased willingness to the advocate and positive references for prospects in our pipeline, our new bookings had strong improvement.
Compared to the last year, and it's clear that our performance and execution here continues to accelerate.
On a trailing 12 month basis for Q1 on.
Our bookings were up approximately 30% net year over year.
Our sales team also added a very attractive new logos to our client roster and the first quarter, the client, which is a high growth data and analytics market leader.
Into our cloud and software of vertical and as a recently acquired business of a marquee client who has a strong reference for us throughout the sales cycle.
We announced last week that we are now live and in production for this client win renewal of management services.
The goals of the relationship fit well with our strength will be working to modernize the renewals process by moving our clients customers from perpetual license contracts to subscription based model.
The shift from perpetual to subscription relationships requires the level of sales expertise and proactive engagement that many companies simply can't manage alone.
We have the expertise and scale to execute this properly which are the key reasons why we wanted the opportunity to help this client created a new path for success.
I am encouraged by our solid performance with our clients in the quarter and also by the perspective, new logos. We have in the late stage pipeline that we expect to close in Q2 and Q3.
We will continue to tune and refinement of.
Of our go to market execution engine, the and I'm pleased to see our enhanced focus on disciplined bearing fruit.
The invested in building a new account based marketing strategy fully staffed our marketing team enhance our martech stack and brought greater rigor to our lead generation and qualification process with these changes and investments we are optimistic that our go to market Foundation is.
On a solid position to help us growth.
In addition to these market facing the investments we have also devoted meaningful resources to enhance our capability and pioneer new innovation that we expect will continue to differentiate our business.
From a digital transformation perspective.
We've begun to see early success from deploying advanced the efficiency technologies, such as robotic process automation and click to renew.
The technology to replace manual repetitive the production task.
And empower our valuable selling resources to focus on higher leverage activities for our clients.
And one client example of since August of 2020, we have processed more than 20000 quote true.
True RPX system. This is significant because quoting themes like in simple path, but in reality can involve thousands of skus and pricing and discount information scattered across dozens of clients systems, we're starting to see success with our RPM of efforts reducing manual.
The intervention by 30% for our pilot client.
While the <unk> enabled for a faster time to quote click to renew operating faster time to buy for one of our early click to renew client hundreds of thousands of their customers are now receiving the automated self service online quote each quarter and we are growing the fish.
<unk> no touch revenue stream for our clients by nearly 40% year over year.
Through these automation strategies, we are quoting and clothing, the long tail lower dollar renewals faster and more efficiently than ever before improving client service, while increasing job satisfaction for our teams.
It's the strength and resilience of our team that enables us to build up on the position as the strategic partner of leading brands across the world.
I reflect on our accomplishments.
Know that behind every success smaller large dedicated sources from the leadership perspective, we are doing our part to care for our team in the workplace and in their lives.
On may workplace standpoint, our teams are working virtually worldwide as the pandemic clears, we will continue to be a virtual first company.
And our annual employee survey nearly 80% of our team members.
The they enjoy the work from home model.
2021, if we were able to safely open our office locations, we will do so, but we will keep our home office the as our primary on work location of our intent is to transform and reconfigure our office spaces as collaboration and innovation hub for art.
Teams and clients.
As the general rule day to day production work and the individual activities will be delivered remotely while we use on our site for specific activities, such as employee and client on boarding executive briefings and business reviews team building and collaboration this.
This combination of virtual offices and in person collaboration spaces offers a hybrid model that we see many of our clients moving toward.
To make sure the virtual first model continues to work for our employees, we are taking steps to enhance and build our culture. In February we held our annual service source cares week dedicated to showing gratitude towards each other and supporting the communities, where we live and work during the week.
<unk> worldwide gave their time and resources to support many important causes and nonprofit throughout the world. Additionally.
Additionally, we launched a b well initiative to support not only the physical health of our employees, but also of Holistically provide resources to the care for the entire person from that.
That'll help the finances and relationships we undertake these initiatives because they speak to the heart of our culture of caring for each other and the communities around us and also of the cultivate a thriving virtual environment for our diverse and inclusive workforce to wrap up.
I'd like to say I'm as convinced as ever that our strategy priorities and team are on the right path to building a future that will all be proud of we executed well in the quarter. So areas of accelerated momentum in the business and believe the market backdrop.
Continue to improve.
I remain optimistic that the areas of the stronger execution in recent quarters will begin to translate into enhanced financial results as we progressed throughout the year.
With that I'll turn the Chad to cover the financials.
Thank you Gary it's good to be back with everyone today and thank you for joining us.
I will echo Gary's comments that we executed well in the quarter and in many areas of paced ahead of our internal expectations.
There is still plenty of the ear in front of us and heightened levels of uncertainty continued to persist globally, but we are increasingly encouraged by some of the early market indicators. We are tracking in the green shoots of activity, we are seeing in the business.
Before I turn to Q1 numbers, let me touch on a few things so you understand where attention priorities and investments are being directed.
As a team we continue to focus on the four pillars that underpin our multiyear transformation strategy inspire success impact scale ignite sales and innovate solutions.
Throughout the company, we are pleased with the level of back to the and urgency we're seeing on these pillars and the overall progress we are tracking on the respective internal kpis.
The holistic focus and investments we have made and the employee experience encompassing compensation benefits training culture diversity, and inclusion career development and tools and technologies. Among other areas are allowing us to recognize tangible benefits from the more loyal tenured and productive team.
In Q1, our employee tenure of reached the highest level on record and is up approximately 85% from where it was two years ago.
That's incredibly important as we primarily support complex BW sales motions for very technical products and solutions.
While there are multiple components to our value proposition the <unk>.
Quality of our talent, coupled with the processing technology, as a key differentiator and competitive situations and to partner versus build scenarios.
Having a more highly skilled technically proficient and on the job of experienced workforce is allowing us to deliver improved productivity and higher and more consistent outcomes for our clients.
Through these enhanced outcomes, we start to benefit from the flywheel of sorts.
For your clients are more inclined to renew their contracts and expand their level of investment with us.
They are more willing to take calls from our prospects and share the success stories, which helps accelerate our sales cycle.
And the Windows executives move on to the next opportunity there are more willing to bring us into their new companies, which helps improve our new logo win rates.
We are seeing early signs of these types of the second order effects.
Performance metrics on moving higher our contract renewal rates are improving our bookings activity is up our pipeline is expanding and churn is coming down.
The us increased confidence that we are making progress and on the right path.
With that context, let's jump to the Q1 results.
As I shared with you on our February call, we anticipated the first half of the year, we'd have the more challenging year over year comparison due to typical installed base seasonality the.
Ongoing impact of the pandemic on our clients Midmarket and SMB customer tiers, and the overhang caused by the one larger client who in source the various scopes of work last year.
These factors largely played through as we expected.
Revenue of $45 million was down $5 1 million or 10, 2% year over year.
The new logos. We won last year are in production and are in various stages of ramping to our run rate expectations.
Bind the accounted for approximately 3% of our revenue in the quarter. However.
However, this new logo revenue contribution was more than offset by legacy churn and the single play of headwind I referenced the second ago.
Our first quarter non-GAAP cost of revenue was $32 $1 million of favorable reduction of $2 $2 million for $6, 3% year over year as we have I know of resources to our revenue.
Non-GAAP gross profit was $12 9 million for a margin of 28, 7% of revenue.
The $2 9 million for approximately 300 basis points year over year.
Although we are seeing some nice contribution from our virtual first operating model by way of loan facility and travel expenses.
We expect our non-GAAP gross profit margins to be under pressure in the near term, particularly as we continued to carry meaningful fixed costs relative to our current scale.
Also as we are investing in front of revenue for some larger program ramps that are underway.
Non-GAAP operating expenses were $14 $6 million in the quarter and represented 32, 4% of revenue.
Compared to Q1 of last year, we have lowered our operating expense base here by $2 $8 million or a 16, 2% favorable year over year reduction.
You have heard me say this in the past, but I feel it's important to reiterate that these are net savings as we've been intentional about capturing and realizing some savings while also redeploying some of the gains into areas that align to our strategic growth priorities and the further in two of our four strategic pillars.
Turning to the bottom line first quarter adjusted EBITDA was negative $200000 roughly in line with last year's Q1 of positive $100000.
I'm really pleased with the financial stewardship. The team has demonstrated and the rigor and discipline that has underpinned our decision making process to drive this result.
Shifting to the balance sheet and cash flow highlights, we maintained a healthy cash and liquidity position that affords us the flexibility to continue to invest in our digital transformation initiatives, including the robotic process automation and click to renew capabilities take care of you highlighted.
In the first quarter, we accreted approximately $100000 of cash cash equivalents and restricted cash primarily driven by our working capital.
Dsos were 69 days of very strong nine day improvement year over year.
Seasonal patterns and the mix of off quarter clients, usually call the pronounced increase in dsos sequentially from Q4 to Q1.
So we are really pleased with how our client delivery account management and billing teams worked together to whole DSO flat with the fourth quarter of 2020.
Cash flow from operations was approximately $500000 and included approximately $900000 of restructuring expense for align with our virtual first operating model and to improve our go forward the cost structure.
Capex inclusive of capitalized internally developed software was $1 million <unk>.
Approximately $500000 year over year.
Free cash flow in the first quarter was negative $500000 compared with negative $7 2 million in the prior year period.
We ended Q1 with $36 5 million of cash cash equivalents and restricted cash.
We maintain $15 million outstanding on our revolving line of credit with an effective interest rate of two 1% with an additional $14 $7 million available for borrowing on the line.
Total liquidity consisting of cash on hand, and availability under our revolver was $48 $9 million as of quarter end.
From the capital allocation standpoint, we continue the target our investments at internal organic initiatives that support our ongoing transformation.
Although these investments and expenses can be dilutive to our near term financial results. We undertake them, believing the will further enhance our value proposition and accelerate our progression to our long term target model objectives.
We will continue to be disciplined about where and how we invest our resources.
And we will also continue to be mindful of any potentially accretive acquisition opportunities for other uses of capital that could benefit our stockholders.
Before I open the call for questions allow me to summarize our year to date results. Although we had a tougher year over year comparison on the P&L. It was not unforeseen and in several respects paced ahead of our internal assumptions we.
We had a comparatively strong quarter from a new bookings in terms of standpoint, and we are encouraged by the momentum we're seeing on these two fronts.
We added our first new logo of the year and so curious some great expansion wins across our installed base.
We had impressive performance renewing in the extending contracts that were expiring in the quarter, including the large multiyear that Gary shared with you.
So all things considered we are really pleased with how the team performed through the first three months of the the year.
We are increasingly encouraged by the tone of commentary we are hearing from our clients as well as the more favorable market outlook more broadly.
But we also recognize the road in front of Us and the work we still have to do we.
We have not changed our expectation for the cadence through the year that we shared with you on our February call.
We remain focused on our objective to return to growth later in the second half of the year, while also keeping our sight set on our target model and the value. We believe we can create for our stockholders over time.
With that operator, please open the call for any questions.
Ladies and gentlemen, if you have a question of comment at this time. Please press Star then one on the telephone keypad.
As for your question has been answered or you wish to remove yourself from the queue simply press the pound key.
Again, if you have a question of our comment at this time. Please press Star then one on the telephone keypad.
Our first question of kind of it comes from the line of Josh Vogel from Sidoti <unk> Company. Your line is open.
Thank you good morning, Gary and Chad will you guys are doing well.
Well a couple of questions here.
Thank you.
Other questions.
Last quarter you had it.
They missed the name of prepared remarks, you mentioned.
How much revenue per employee was up and I think it was of around 7% and that was with full year head count down about 13% from from a year. Prior so I'm just curious how much additional.
The capacity of productivity gains can you drive from the existing base before you start to reinvest and head count additions in or maybe another way to ask is what do you necessarily need to see in the marketplace to get comfortable bringing additional heads on board.
Yeah. Thanks, Josh.
And Chad you're welcome to jump in here, if I, Miss something but clearly quarter to quarter, we see in the.
The head count was about flat so not a lot of change there and given the ramp of the new business. The efficiency was about the same in terms of on revenue per head.
From that point of view, we didn't we didn't have any material change that we felt we should call out and that's why it wasn't part.
Part of our remarks that said as we look at all of the things we're investing in and we talk about click to renew we talk about the.
The RP.
And the value of that and it's early days for that stuff and we've been we've been pushing on on those things for quite some time and we're seeing good progress I think also the efficiency of the team in terms of the teamwork the.
Communications that we have the tools that we're using now.
The.
There is just the number of things that we're automating.
And so there is additional leverage I don't think I can.
Could or should put a number on it but we do expect to continue to expand on our our productivity.
I appreciate those insights.
Shifting gears, a little bit of really good contract renewal rate.
The nice tick up from the around <unk> I think it was 81% in Q4 is that is this.
Back to pre pandemic levels, or perhaps even a little higher than your historical rate.
It's <unk>.
Higher than our historical rate as a matter of fact.
You have to go back several years.
On to.
To get the kind of rate Q1 of last year.
And was also around 95% the <unk>.
Difference is a large portion of this year's renewals was in Q1, so it's more weighted.
No.
We feel really good about what we're able to get done in Q1.
Really focused on it as we as we closed out last year and really pleased with it my hope would be that we can continue to drive.
Very high renewal rate and we're seeing that and the way we are delivering for our clients in terms of the performance targets that we mutually agreed to as well as how quickly we're ramping to the changing the environment. So I think you know churns.
Churns in everyone of go away or go on the way the zero, but I think our plans for 'twenty one.
And we set this plan last year have us closer to the middle of that more parts of the 515% targets that I've talked about.
Of our time and our global account management and the structure of that that Mike not to put in place for the global service delivery team.
<unk>.
We have a number of client for life of initiatives and they're paying dividends. It's.
Not just talk it's real people and technology investments that are delivering and executing to the metrics. We agreed to with our clients. So Josh we're really pleased with the.
With Q1, and it has high hopes and execution to continue that.
Yes, Josh.
Yes, sorry.
No the only thing I'd add on to that Josh the other the other point of pride that we have with respect to the Q1 performance in comparing to last year of previous years is the amount of multiyear renewals that we did have as well Gary touched on the one large one with one of our top three clients being a three year renewal. So again I think really just does point to the the level of comfort confidence that our.
Our clients have in us and our ability to execute and the structure something over the longer term that aligns with the with their business priorities and strategy. So pleased with that and obviously that.
Does ease the burden we have to execute every day, but that does beats the burden in terms of having these renewals come back in every 12 months to have some of the multi years and continued performance there.
Yes that actually leads into my next question. When we think about let's just take Q1 is the snapshot of that 95%.
How much of that was renewed at multi year versus 12 months.
Yes, but you may not have that I guess fingertips, but I'm just curious.
Yeah, a little more of that two thirds of that Josh was renewed out for more than a year.
Oh great.
One of what about the price on as read.
<unk>, yes, sorry.
No I was just going to add.
Chad made a great point there I think if you think about the also not just the multi year, but the the on.
Our ability to upsell and extend some of the renewals two of higher revenue number basically we retained the 100% of of the revenue.
In general there so I feel really good about the performance and the execution of the team.
Great.
And just thinking about the pricing on renewals.
The stable better or are you, giving any concessions.
Yeah.
There is always pressure, but if you're if you were able to demonstrate a higher level of value and expand.
<unk>.
Ah contract, we feel better about a multi year and giving up some on some price on that because we know we can get it back over time. So it depends on the deal, but yes, we've seen some pressure, but you have to also remember that for the last two years, we've been renegotiating a lot of contracts too.
Prove the financials and we've been able to do that not just with price, but the way that we perform the work and where we perform the work.
Understood I got a couple more here. So I just wanted to shift gears a little bit.
Thinking about the new capabilities, you're providing for clients today, you've highlighted our click to renew.
I'm curious what the average ramp time on.
Of that type of work versus your historical programs in the take longer is it shorter can you just give some insights on that.
Yeah well.
My my it depends.
Which is not a very good answer, but it does depend on the complexity of it.
As I mentioned, the the click to renew is no touch and you've got a number of different data points and clients you've got a number of different skus.
And that kind of thing so I think I mentioned that the pilot that I referenced in my comments.
We've been delivering on that from August of last year.
So it ramped slower than what I think we will be able to ramp things in the future because we are learning right and so it's hard to give you on the answer but that's certainly something we're going to track and something that we'll continue to make improvements on some of it we can ramp much more quickly.
I Gotcha and to use your words, Gary you mentioned pioneering new innovation does that mean, you plan to build out the platform of capabilities internally or would M&A potentially be on the table.
Everything's on the payable Josh.
Got it.
I mean, there's a lot of great technology I mean, we're using you iPad for.
For our ph from we've been early user of their technology, we have an internal team that is really really skilled and net.
On the area, we have clients that are working jointly with us and in some cases funding the <unk>.
Work, so I feel really good that we will have a combination of both.
I've said for the last two years on my preferences. The partner make sure that we can predict things out and then if the.
For the coming together in a more formal way makes.
Makes sense, then we will do that.
I got you and just last one.
I understand it's a fluid situation and it's not necessarily an easy <unk>.
The answer here, but.
What kind of cost savings.
When you want to think about the long term cost structure of the business and the leverage in the model what kind of cost savings do you think you can see long term by moving to this permanent hybrid model with home offices being the primary location for many of your employees and thus less reliance on our real estate footprint.
Yes, I'm going to let I'm going to let Chad hit that one but.
We have seen some sort of pretty positive.
There and we think we've got a fair amount more to go Chad.
Yes. Good question, Josh I think if you look over the the longer term horizon, we have been very active in terms of rationalizing the the physical footprint. If you will so while we still have.
11 offices in eight different countries around the around the globe and that's a critical component of the value proposition for our clients to have that global coverage to be able to sell into 170 plus countries. The.
On the actual physical plant. If you will is less less necessary and I think COVID-19 has really shown of light on that and opened up People's eyes to understand that you can access great talent anywhere and we've been able to prove out over the past year that we can actually keep them productive drive greater productivity and as you think about the entire human capital value chain from recruiting sourcing true.
Training on boarding putting the limited production being able to do that at the very high level of.
Of the effectiveness. So the model has shifted and I think it's not just us we're hearing the SMC and thats from our clients and other tech leaders at the law that they will have a more of a hybrid approach going forward, but in terms of your question about what is that on the lock in terms of the cost structure.
Take our physical.
Square footage down about a third over the past couple of years, probably of another room to run over another third of the coming years as well for the number that I kind of soft circle, Josh on the facility side itself potentially $5 to $7 million of expense that we can get out overtime and then again that last part over times, probably the critical work. Some of these are longer term leases the.
The corporate real estate market is soft in many of the areas that were based on its will be smart about either sublease the nose renegotiating isn't can or as those come up for exploration stepping away of downsizing. So a lot of work going on on that front and pleased with the progress so far but more to go here in the years to come and obviously a key lever for.
For the target model that we've put out there.
Well, great Gary Chad, Thanks for taking my questions and Im looking forward of watching the business progress this year.
Josh Thank you Josh.
Thank you. Our next question the comment comes from the line of Jim Kennedy from Marathon capital. Your line is open.
Good morning, guys.
Hey, Jim how are you.
Doing well doing well listen very quickly first of all congratulations on the continued progress.
Chad I guess just the question for you I just had a quick question on <unk> could you remind us of what the outstanding Nols are at this point.
Yes. Good question, Jim on the on the federal side, it's north of 350 million don't have the pinpoint number on me, but I can follow up with you.
The $350 million in aggregate on the federal Nols on then.
The similar figure of north of $300 million on the state and local Nols as well.
The substantial figure and Thats the question on M&A debt of.
One of the things that we look at as well as are there ways to unlock the value associated with those Nols that are hanging on the balance sheet.
Great. Okay. Thanks, guys keep up the good work.
Thanks, Jim.
Thank you again, ladies and gentlemen, if you have a question the comment at this time. Please press Star then one on the telephone keypad.
I'm showing no additional questions in the queue at this time I would like to turn the conference back over to Mr. Moore for any closing comments.
Thank you very much Howard.
I'll be I'll be quick here, but I do want to.
Reemphasize the few things that the Chad close with in his comments.
We continue to be encouraged by the tone in the commentary that we're seeing from our clients.
As well as the the outlook that we're seeing from more broadly from Gartner and others.
Where the market's headed but I want to remind everyone. We have a road in front of US it's early in the year.
And the key thing for for myself and the team is we have not changed our expectation.
For the cadence that we will see throughout the year that we talked about in February but we remain we remain very very focused on returning to growth in the second half of the year as well as focusing in on the things that we can control and improve on.
No.
I also want to thank our employees for for delivering the way that they did in Q1.
The perseverance drive performance really allowed us to deliver on our brand promise on the commitments, we head to our clients.
I'm also incredibly proud of how the team has showed up.
Relative to generating the results that we've shared.
Also on extend my appreciation to our client partners and.
We continued to deepen those relationships in place and place a lot of emphasis on our ability to use our clients as references and have them help us grow this business and then finally.
Certainly one of the thank our.
Stockholders, who share the conviction that we have about the future of this company and what we're building towards.
I really appreciate it as does the team there with that.
All of what they call ahead, and thank you all very much.
And Gary really quickly actually before we do that just so I can clean up on the answer that I gave there too the Jim I. Appreciate the question and didn't have it at my fingertips, but want to make sure I get the right number out there for everybody.
The net operating losses on the federal side as of the end of FY 'twenty of about $317 million, Jim and then on the state side, we're just shy of $250 million. So apologize for for misstating that earlier, but did want to clean that up net net.
Gary is that thank you everyone for the support and look forward to talking with the with many of you here on the days and weeks to come.
Okay.
Ladies and gentlemen, thank you for participating on today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
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