Q1 2023 GEE Group Inc Earnings Call
Fixed.
Hello, and welcome to the G Group fiscal 'twenty twenty-three first quarter ended December 31, 2022 earnings.
A webcast conference call.
I'm, Derek Dewan, the chairman and CEO of G Group.
That will be hosting today's call and joining me is it co presenter.
As Kim our senior Vice President and Chief Financial Officer.
Thank you for joining us today.
It's our pleasure to share with you.
G group's results for the 2023 fiscal first quarter ended December 31, 2022 and <unk>.
Provide you with our outlook for the remainder of the 2023 fiscal year.
In the foreseeable future.
Some comments, Kim and I will make today.
May be considered forward looking including predictions estimates expectations and other statements about our future performance.
These represent our current judgment of what the future holds.
Subject to risks and uncertainties that actual results may differ materially from our forward looking statements. These risks and uncertainties are described below under the caption forward looking statements Safe Harbor and in Tuesday's earnings press release, and our most recent Form 10-Q10-K and other SEC.
Filings under the captions.
Cautionary statement regarding forward looking statements and forward looking statements, we assume no obligation to update statements made on today's call.
During this presentation. We also will talk about some non-GAAP financial measures reconciliations and explanations of the non-GAAP measures.
We will address today are included in.
In the earnings press release.
Our presentation of financial amounts and related items, including growth rates margins and trend metrics around it or based upon rounded amounts for purposes of this call and all amounts or percentages and related items presented are approximations accordingly.
Your convenience our prepared remarks for today's call are available in the Investor Center of our website.
Www Dot GE group Dot com.
We once again achieved very good results in fiscal 2023 first quarter, beginning with consolidated revenues of $41 1 million.
Our consolidated gross profit and.
Gross margin were $14 4 million.
And 35% respectively for the first fiscal quarter ended December 31, 2022, our consolidated non-GAAP adjusted EBITDA for the 2023 first quarter was $2 million.
We achieved consolidated net income of 700000 or <unk> <unk> per diluted share for our fiscal 2023 first quarter.
As Ken will explain further the prior year.
First quarter results were above average due to peak demand for direct hire.
And a significant amount of current COVID-19 related project work.
Our current fiscal first quarter still compares favorably taking into account the unique opportunities present in last year's first quarter and particularly in terms of growth.
Our professional IP contract businesses.
Before I turn it over to Kim I want to say, thank you to our wonderful dedicated employees and associates.
They work extremely hard every day to ensure that our clients get the very best service.
This was a key factor in the stellar performance in GE group in fiscal 2022.
So far in fiscal 2023 and will continue to be the most important underpinning of our company's future success.
At this time I'll turn over the call to our CFO , Jim Thorpe, who will further elaborate.
On our fiscal 2023 first quarter results.
Kim.
Thank you Derek and good morning.
Again revenue for the fiscal 2023 first quarter was $41 1 million.
Which is one $7 million or 4% lower compared with the fiscal 2022 first quarter revenue.
$42 8 million as Derek alluded to revenue for the prior fiscal 2022 first quarter included above average performance in our direct hire revenue.
As well as professional contract revenue of $2 $3 million generated from the discreet projects for clients, serving as co COVID-19 responders.
COVID-19 related projects successfully concluded during December 2021.
In January 2022, and are nonrecurring in nature.
<unk> the effects of them alone our remaining total revenue increased $600000 or approximately 2% quarter over quarter.
Professional and industrial contract staffing services revenues for fiscal 2023 first quarter were $35 $4 million, which again is $1 3 million or 3% lower as compared to fiscal 2020, twos first quarter contract staffing services revenue.
Professional contract staffing.
Services revenue, which represents 90% of all contract services revenue and 77% of total revenue increased $1 5 million or 5% quarter over quarter, excluding the effects of the nonrecurring COVID-19.
Related projects revenue professor.
Professional contract services revenue grew 15% quarter over quarter.
Contract services represented 60% of.
Of all professional contract revenue.
And 45% of total revenue and is our highest priority growth specialty.
Direct hire revenue for fiscal 2023 first quarter was $5 7 million down $500000 or 8% compared with the fiscal 2022 first quarter direct hire revenue of $6 2 million considering.
Considering its inherent sensitivity to macroeconomic conditions.
We are pleased with this level of direct higher production and remain cautiously optimistic about the overall direct hire revenue potential for fiscal 2023 direct hire revenue for Q1 2023 annualized still exceeds fiscal 2019 2020.
And 2021 results.
The increases in our quarter over quarter professional contract staffing services revenue and total revenues asset fiscal 2022. These nonrecurring COVID-19 projects and in our professional contract staffing services sector. In particular are the result of increased.
<unk> demand and our strategic and tactical initiatives to meet this demand and the new post COVID-19, U S economy and workforce.
Recent indicators the outstanding December jobs report and in contrast, recent significant layoffs of it professionals by larger employers also are positive indicators for the remainder of fiscal 2023.
Recent lower unemployment trends suggest increasing demand for our services, while recent corporate downsizing actions being more.
Candidates available to fill demand.
Industrial staffing services revenues were $3 6 million and represented 9% of total revenue for fiscal 2023 first quarter ended December 31 2022, we.
We continue to experience growth challenges.
Our industrial markets associated with economic and lingering post COVID-19 conditions.
<unk> inflation also has led to significant increases in hourly wages in our industrial business, while at the same time certain state and local COVID-19, and unemployment relief programs.
<unk> active in Ohio.
We are finding that the combination of higher wages and benefits tends to cause many of the companies temporary laborers to seek to moderate or reduce their hours in order to balance income streams and preserve their welfare another governmental benefits and subsidies. This in turn has the effect of incur.
<unk> competition.
Among the staffing firms in Ohio to fill temporary labor labor orders, we are actively introducing new sales and recruiting programs and price increases to restore growth enhanced profitability in our industrial business.
Gross profit for fiscal 2023 first quarter was $14 4 million down $1 2 million or 8% compared with fiscal 2020 twos first quarter gross profit of $15 6 million. Our overall gross margins were 35% and 36, 4% for <unk>.
Fiscal 2023, and 2020 twos first quarters, respectively.
Decrease in gross profit and gross margin is mainly attributable to lower to the lower direct hire business, which has 100% gross margin and.
And increases in contractor pay associated with recent the recent rise in inflation.
Resulting in some spread compression in our professional services businesses. The company has recently stepped up counter inflationary increases in bill rates and spreads.
In order to increase gross margin.
Despite slightly lower quarter over quarter gross margin trend.
<unk> relatively high as compared with those of our competitors.
Selling general and administrative expenses SG&A for fiscal 2023 first quarter ended December 31, 2022 increased $400000 or 4% compared with fiscal 2022. This first quarter.
G&A expenses were 31% of revenues for fiscal 2023 first quarter compared with 29% for the first quarter of fiscal 2022.
Inflationary increases and costs incurred.
Including some strategic investments in sales and recruiting and management resources.
Take advantage of future growth opportunities accounted for the significant portion of the quarter over quarter increase we expect these strategic investments to begin contributing to top line growth. This fiscal year. In addition, we expect the implementation.
The bill rate increases and spread I spoke.
Another targeted cost reductions to help improve our expense ratio and operating margin.
We achieved net income for fiscal 2020, Three's fiscal first quarter of $700000 or <unk> per diluted share as compared with net income of $16 $7 million or 14% per diluted share for fiscal 2020 twos first quarter adjusted.
<unk> net income, which is a non-GAAP financial measure for the fiscal 2023 first quarter was $1 1 million or <unk> <unk> per diluted share down one $6 million or <unk> 50 950.
<unk> 59 per se.
As compared with $2 7 million or <unk> per diluted share for fiscal 2020, twos first quarter fiscal 2022 first quarter net income included gains on the forgiveness of former PPP loans of $16 8 million and a nine.
Cash goodwill impairment charge of $2 $5 million adjusted.
Adjusted EBITDA, which is a non-GAAP financial measure for fiscal 2023 first quarter ended December 31, 2022 was $2 million down $1 9 million or 49% compared with $3 $9 million for fiscal 2020 twos first quarter.
The overall declines in our net income non adjust non-GAAP adjusted net income and non-GAAP adjusted EBIT EBITDA quarter over quarter are mainly due to the increases in compensation and certain other operating expenses since fiscal 2022 first quarter as I indicated a moment ago, we expect.
Strategic investments in personnel and price increases to begin contributing to top line growth and in combination with targeted cost reductions begin to have positive effects on our margins and profitability during the remainder of fiscal 2023.
Our current working capital ratio at December 31, 2022 was three 6% was up 90 basis points from two seven to one at September 32022.
We reported a small negative cash flow from operating activities of $300000 for the 2023 fiscal first quarter ended December 31, 2022, due to extraordinary payments operating cash flow for the 2023 fiscal first quarter was reduced by payment.
Of the second and final installment of deferred FICA taxes.
<unk>.
$1 $8 million that were deferred under the cares Act.
The $1 1 million in aggregate annual cash bonuses, we commented on last quarter.
<unk> the effects of these nonrecurring deferred FICA payments.
The aggregate cash progress payments non-GAAP adjusted free cash flow would have been $2 5 million or.
Liquidity position is strong we have no outstanding debt, our net book value per share was 89.
At December 31, 2022, and our net tangible book value was 26 cents per share.
To conclude we remain positive.
Optimistic in our outlook for the remainder of fiscal 2023 with appropriate consideration regarding lingering.
Macro economic uncertainties as they are.
Before I turn it over back over to Derek. Please note that reconciliations of <unk> non-GAAP financial measures discussed today with their GAAP counterparts can be found in supplemental schedules included in our earnings press release.
Now I'll turn it back over to Derek.
Thank you Kim.
The fiscal 2023 first quarter marked our sixth consecutive quarter.
Strong operating performance, having consistently achieved solid margins and free cash flow.
The last six quarters, we continue to build.
Our positive track record as well as strong momentum for the future.
At December 31, 2022.
The company had over $18 5 million in cash.
The $13 million available under its bank ABL credit facility.
Key gross prospects today for future profitable growth continue to expand and improve.
And despite macro economic challenges are unforeseen events. We believe we can continue to produce solid results in this fiscal year and beyond.
Four we pause to take your questions I want against it.
Say a special thank you to all of our wonderful people for their professionalism hard work and dedication.
Without them, we could not have accomplished all the good things we have shared with you today.
Now, Ken and I would be happy to answer your questions.
Please ask just one question.
And rejoin the queue with a follow up as needed. If there's time, we'll come back to you for additional questions.
We will now enter the question and answer session.
One of the first questions that we have.
And its repeated a few times is.
Regarding the potential for the company.
To initiate a stock buyback.
We've had discussions in the past regarding the buyback.
We brought it to the attention of our board of directors.
Had in depth analysis.
And.
A very lengthy discussions regarding a stock buyback.
The consensus of the board and senior management at this time.
Is that a strategic tuck in acquisition.
Would help our growth prospects much better by adding additional revenue.
And EBITDA to our company.
And actually have a better impact on our stock price performance and market capitalization going forward.
And we have targeted.
Various tuck in acquisitions.
I should note also with regard to acquisitions are.
Doing a very large acquisition.
That would have more potential risk.
Would not likely be in the cards at this point.
Because we've been successful with the smaller tuck in acquisitions easier to integrate.
And also easier.
Easier to manage with less risk.
Going forward.
And a fairly uncertain economy.
And I'll talk a little bit more about macroeconomic trends as well we have a few questions regarding what we're seeing.
And what we think we're going to face going forward.
Another question that came up is.
How many offices do you have do you look at consolidating offices and reducing costs.
We have reduced bricks and mortar costs, we have renegotiated leases in many cases, we've gone virtual in some of our markets.
And with remote and hybrid working.
The need for office space is somewhat reduced so as leases expire.
We will.
Absolutely.
Reduce the amount of space and lower costs.
For rent and so forth.
It was a good question.
Can management talk a little bit more about the discrete projects you had last year with Covid.
Those were special projects that created huge volumes of contract workers for us.
And we're very very well.
Good on pricing to the demand was very very strong and.
And we have pricing power.
On those contracts those contracts pretty much expired in the first quarter of last year.
And a little bit in the second quarter. So.
They're hard to make up that kind of volume on the contract side for that business noteworthy, though is our IP contract business, which has very good spreads.
And higher bill rates, and so forth and margin.
Are on the rise.
And that's that should be expected, particularly going from an economy that was more focused on permanent hires to an economy now with uncertainty.
Moving towards more contract hires.
I've been through this before several times and it's.
It's happening similarly to what we've seen in the past.
Other questions.
Bonus payments are you accruing bonus payments Kim.
I don't yes.
That.
Yes.
I think on the call for last quarter. There was some consternation about that so let me be clear.
The company and the board with the assistance of an independent compensation consultant created a performance space.
Center program for the senior managers of the company, including Derek deny this.
This program is based strictly on.
Both the cash and the.
<unk> <unk>.
Equity compensation is strictly based on performance and hitting our financial targets for both revenue and profit.
Which the board sets and negotiates annually.
So.
Yes, we did accrue some during the first quarter.
<unk> with the Berry.
Strict formulas and performance measures that are in that plan.
And let me add that.
Bonuses for the C suite level executives will.
We will not be paid.
If performance targets are met and they tend to be set.
For example, this year, they're set fairly high relative to.
Where we've been in the past so.
It's possible that there won't be any performance bonuses, if the targets for EBITDA and other metrics aren't hit.
I think what happened in the quarter.
Hum.
That.
September 30 quarter.
They are cool, we accrued them all because the plant was newly implemented.
And it was a catch up so I think came up with.
The question is are you accruing bonuses quarterly.
Yes.
Versus bunching them up in a quarter and the answer is yes to that so.
That's.
Good questions and those are the answers to that.
Another question what are you doing about SG&A, selling general and administrative costs.
Kevin can we address that as well, yes, yes.
We are <unk>.
First of all number one we do actively manage expenses on a routine basis.
However, given the recent inflation, we've had we've doubled down on renegotiating contracts, including principally with.
Lessors of our operating locations on one hand, where we renewed leases.
And in some cases, we want going forward and then primarily with what we call our job board.
R R.
Candidate tracking system providers, the linked into the worlds the job Devos.
Alive Bullhorn, all the tools, we use we negotiated hard with them.
Last but not least we're making certain.
We are reviewing.
The productivity of our folks.
That they are producing a reasonable what we.
Call, a PPA or a per desk average.
And when people fall behind.
Counsel them too to try to help them pick back up and get where they need to be but if but if it's not in the cards.
We will manage our workforce accordingly so.
The goal will always be.
And keep in mind.
People drive our business and our growth.
There are two fundamental things that do that one is.
You hire the best sales and recruit recruiters that you can and then the second thing is as you make sure that they are achieving the productivity they need both by managing a motivating them with incentive compensation appropriately and then also by giving them tools that would be.
So were very actively managing all of those things now for example.
I want to get more granular.
When we look at commission plans in various plans and milestones.
Targets that we set we're graduating those upward.
Two two again to incentivize people to move their own payout by producing her business.
And if they don't produce then we achieve the cost savings if they only produce what they did in the prior year. So.
And then in our corporate support staff.
We continue to trim away, we're very lean in the back office.
Promise my staff on reuse that worry.
I've done it.
But we're very lean in our corporate staff.
And we integrate and use technology wherever we can our goal.
I realize that our SG&A percent ticked up to 31% and actually.
It came down from the fourth quarter, but our goal is to be below 30%.
So that's where we're targeting our cost reductions and get our SG&A down below 30%.
Thank you Kim.
Here's a really great question.
That on.
I'm happy to address.
Unemployment is at an all time low.
Hiring is happening in the pool of applicants is growing.
This should be very favorable for GE group.
Why are we not seeing the results of this.
So.
It's a complex employment environment.
And you have to stratify.
The population.
Of workers.
You also have something called the workforce participation rate.
And other things that influence hiring.
So the unemployment rate itself as a standalone metric is not always indicative.
Of each segment of employment or vertical for example, let's look at information technology.
So you had an information technology and blue and light up a tight on them or very low unemployment rate you have had layoffs at Google Facebook Amazon Dell.
And more sales force and more are coming.
Now.
We have on it vertical so how has our vertical reacted to that shift.
In labor.
What it's done for us the pool of candidates have increased.
And.
That has made recruiting better for us in terms of being able to get candidates because that's always been an issue in the past year or two.
Phil job orders, how are open job orders open job orders are steady.
Our fill rate takes a bit longer for the hiring manager at companies to make the decision.
But we are seeing good momentum at this point in our contract I T.
Staffing segment.
It also these layoffs.
Have presented us with a pool of recruiting.
Talent.
That was very hard to get in the past because people were going to the googles and Facebooks and.
Amazons and taking.
Permanent jobs at high salaries and they have been laid off the first group to be laid off.
Would be recruiters, particularly since those entities are not hiring.
Full time.
And I think Theres, a huge distinction now between contract labor.
And what we call direct hire a permanent placements.
Last calendar year or fiscal year.
Was a banner year.
For permanent hires.
And I call it the post COVID-19 bounce because people.
Laid off a lot.
Of talent.
And scrambled to assemble workers and workers could call.
The shots in terms of wages and schedules and so forth, even remote versus hybrid versus permanent office work.
What we're seeing today is somewhat of a shift.
Toward the employer.
And also the use of flexible talent.
Because of potential uncertainty in the macroeconomic environment.
We're seeing noise somewhat.
In the economy.
And.
By definition, we've had two successive quarters of negative GDP.
Like it or not that was indicative of some type of downturn or recession.
The labor statistics haven't borne that out if you take them singularly, but if you take it segmented than youll see pockets.
Higher unemployment and pockets of even possibly a little bit lower than the average rate that's been published.
Hospitality for example, it's hard to get hospitality workers were not big in that segment, it's tends to be a low low.
Spread segment with high Workman's comp risk.
So you.
You may see some hiring in that area.
And that is influencing somewhat the unemployment stats or the hiring stats, but again, we're focused on the higher end.
We've taken a bit of a beating on the labor force in our Ohio segment, which is industrial.
And that's because of subsidies as Kim had said by the government that continue.
It keeps people from working it.
At certain hours, a week, meaning they're limiting their hours to possibly 25 to 30, instead of 40, plus because they don't want to.
Disqualify themselves from these wells.
Welfare and other government subsidies flash benefits.
That will probably run itself out at some point, we are cutting costs.
In that division.
In order to respond appropriately.
To get to the profitability level that we want we also were cutting costs across the board to respond to the decrease in direct hire business, which is expected.
Versus last year.
Cause of economic challenges and because of the Covid bounce for example, permanent placements last year in the aggregate last fiscal year were approximately $27 million 500000 in that range.
And they are anticipated.
To be in the <unk>.
$19 million to $20 million range this year.
Which is historically.
High number in comparison to all years, except for the last fiscal year, which was somewhat of an aberration and that's been found in almost all of our competition.
Similar results.
So.
Again, while labor statistics by itself is not always indicative of what's happening to different.
Different companies in our sector. For example, if you took true blue.
That's entirely labor low end driven business.
And they've taken it a lot harder than some of the professional staffing firms.
Including us in terms of the performance now.
Other question.
The.
SG&A, we address that and we're taking aggressive action there.
To reduce our SG&A percent below 30.
And we've historically had it as low as 27 and a half.
And thats very very possible as revenue increases as well.
The question is can you do buybacks and acquisitions.
The answer to that is yes.
We have enough resources to do both.
And that's under the assumption that the acquisitions.
Are not of a large size.
But that are tuck in level that can add profitability.
Prove our verticals for example, and we're very focused.
And.
Add to revenue and profitability and we are generating good cash flow.
So we're able to do both and at some time.
That possibility.
We'll come back to the table, but initially we believe an acquisition.
Would be the most likely scenario before a buyback at this point.
And thats been the consensus of our board.
And also senior management.
One of the questions was are you able to get more key workers because of the recent layoffs of IC companies. The answer is yes.
Uh huh.
We talked about bonuses, let's see.
Many of the questions are very similar.
Obviously, the interest in acquisitions and buybacks.
<unk> is a key question that that repeats itself.
And rest assured.
We take that very very seriously and we will take action as I just discussed can you discuss the current acquisition pipeline.
Good and prices will moderate some in this environment.
We will not buy a company by the way that had excessive permanent placement or direct hire business last year and is trying to sell off of that number.
In that situation, we will go back historically and look at what the trend line is.
Adjust the purchase price accordingly.
Very bad something on the SG&A I'm seeing a number of craft a little bit about the bonuses I just want to reassure everybody that last year, our last call.
The September 30 quarter, the fourth quarter.
Of our prior fiscal year.
Had an outsized SG&A ratio because of the catch up.
For our newly implemented program. So I just want to assure everybody that we are we are going to have a process in place to monitor that quarterly across the year. So you shouldnt expect to see another bump like that or another.
Outsize accrual.
Accrual like that at the end of this year or any future year now that the program is in place and operating as intended.
Thank you Tim for that.
Somebody said you care about the long term stock price.
And the answer to that is I.
Care about the stock price.
In the morning.
In the afternoon.
What I'm dreaming at night.
When I wake up in the next morning, and so forth.
What do I care about I care about shareholders getting the return that they deserve.
<unk> me.
And others that have invested in our company and the long term value is what we're focused on when we build talent to generate revenue and profitability in the future.
Fortunately I do have a lot of experience in this area.
And I think that if you are a shareholder you will get your just rewards.
And what do they say that.
Most shareholders say I'm, a long term shareholder with a short term focus so I understand the frustration in the short term and.
And we share that same frustration at times, but we're very confident in the long term performance of delivering on the equity value and I say that with all sincerity I'm not doing this for my salary.
And neither is camera or any of our other.
<unk>, we're looking to long term shareholder value and building a company to last and continue to succeed in the way you do that if you focus on the operating aspects of the company.
And what I call blocking and tackling.
As a football analogy.
And you can't throw the bomb.
As I say.
Every day.
We take advantage of it when it's there but right now the key for US is to streamline our cost structure.
Execute appropriately.
Get our spreads and operating margin up.
And then the rest should take care of itself.
Another question came back saying, Okay. If your stock price drops will you reconsider a buyback.
In conjunction with an acquisition and the answer to that is yes.
We will bring it back to the table at the appropriate time.
And.
Our cash flow accordingly.
If it continues the way it is which is very good.
Then.
We'll be very keen on something of that nature of that plan.
Let's see most of the questions were answered so far.
Have you had somebody offered by your company.
Just say that we get those.
From time to time.
And to the extent that there's one that's phenomenal of course, we have fiduciary obligations to bring it.
Further, but you know at.
At this depressed stock price.
You know its not conducive to can really consider that unless someone made an offer that you couldn't refuse but at this point, we're focused on execution and building value.
And.
Delivering that value to our shareholders and if at some point that becomes appropriate.
To consider the share hurdles the shareholders will make that decision with our board recommendation on top of it.
And I ran a company for 17 years, and then we sold it.
At a really good.
Level at the appropriate time, you always want to sell a lot of strength not out of weakness if that's if that's your exit.
I don't want an exit personally.
At this point I want to deliver the value to shareholders and let the shareholders decided the appropriate time, what's best for them.
Which would be best for all of us quite frankly.
So at this point.
Let's see.
There's one other thing there is a couple of questions here on the small new item in there for interest income and why is it so low yes, yes, yes, I wanted to answer that that's been that's one of the consistent questions, we get but go ahead.
So.
The rates for suitable cash investments for us meaning.
It's something that's relatively low risk, but that can earn a decent rate and we're not locked in with penalties and all that.
Has really just optimize in the last quarter. So we do have a sizable amount most of the $18 8 million.
I'm, sorry, 18, 5 million in cash or a large chunk of it invested.
So you can expect investment income to grow and they are more sizable.
Then than the 38000 and that's in the P&L today.
Thank you Tim one other question that I want to address is someone asked the question.
When.
Will you increase your prices and influence your spread or your gross profit dollar per hour.
We are doing that as we speak.
And when will that take effect and when will we see it.
In the financial results.
I'd say in the next two quarters.
The latter part of the quarter, we're in and then.
The next quarter after that so.
We are conscientiously, increasing the spread and it's not contingent on CPI or inflation statistics or anything else.
Again.
The supply and demand for labor in particular segments and even within a vertical for specific skills.
Gives you pricing power.
So we will take advantage of that.
And influence our spreads and ultimately the gross margin percent.
Permanent placements.
Are not going to be at the same level as we've said before as the prior fiscal year.
But we're on track to exceed.
The years before that which are more normalized years, so we feel pretty good about where we're going.
And again this is a transition year economically it appears.
Are recovering from Covid.
High inflation and so forth the good thing is.
We don't have 6% unemployment in the aggregate, which would have an influence on virtually everyone.
In our space. So we think the macroeconomic challenges or changes can be dealt with appropriately.
And we're going to continue to execute.
Kim do you see any other questions that we have been addressed.
No not really.
I think we've addressed I don't mean to be I think we've addressed most everything at this point.
Here's one somebody said what are the multiples on acquisitions. Each one is structured a bit differently, but you know you you're going to probably somewhere between six and eight times EBITDA, but when you do earn outs and things like that you can bring down your multiple and then the next question would be what.
If you are trading at four times EBITDA, how can you do an acquisition at eight well, we're not going to give away equity cheap that's for sure and we believe that the acquisitions will add.
To the bottom line and top line and it'll be reflected in the market value of the stock at some point. So we're not giving away our stock cheaply is the short answer to that question.
And Derek let me add that the company is in a position now where we can reliably generate free cash flow.
Which means that gives us the luxury of of <unk>.
Patients.
In terms of picking and choosing good accretive targets, which.
Which in the long run grows the company either.
I understand peoples.
Wanting to see us put our capital to work right away and aggressively buy stock back.
Because it is cheap right now.
But on the other hand, keeping our cash and growing it gives us more dry powder to go pull these acquisitions and without using stock and therefore growing the value of.
Our stock through accretive acquisitions.
And importantly, growing the enterprise value and the scale of the company, which only adds to the intangible value of the company.
Great.
I think that let's see if there's only one other question was our bonus payments based on the overall company's EBITDA.
The answer is that metric absolutely plays a huge part.
And bonus payments.
And of course, as well as top line growth.
And top line growth the combination yes.
Uh huh.
When can you get to $1 billion in revenues.
Ask the question. So the answer to that is as we start to make strategic acquisitions.
And grow internally.
That target becomes very real.
And we're.
We're not going to just go for a large acquisition for the sake of revenue growth. So we have to make sure that our internal growth is where it needs to be.
And then take less risk and augment it.
With tuck in acquisitions that can integrate easily.
And contribute very quickly to the profitability and we will deploy capital appropriately.
And.
Also reconsider capital allocation.
In the aggregate.
Four.
Acquisitions and.
Potential buybacks at the appropriate time, that's not off the table.
It's more of what's more appropriate and win.
And I already articulated what the consensus was at this time.
So that pretty much concludes.
Our call for today, and we can say very much. So that we are optimistic about our future as a company.
We also are very thankful for our employees and their dedication and hard work.
And we also wanted to say thank you to those of you that are shareholders or are considering an investment in our company.
We work hard for you every day.
And we care very much about <unk>.
Stock price performance and delivering shareholder value. Thank you.
That concludes our call.