Q1 2023 HireRight Holdings Corp Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to higher Reits first quarter 2023 conference call.
Joining today's call as the company's President and Chief Executive Officer, Diorama, Chief Financial Officer, Tom straight and Andrew Hey, VP of Treasury and Investor Relations.
At this time all participants are in a listen only mode.
I remind everyone that management will refer to certain non-GAAP financial measures an explanation and a reconciliation of these measures to the most comparable GAAP financial measures is included in the press release issued today, which is available on the Investor Relations section of higher rates website.
Also during this call managements remarks will include forward looking statements, including related to macroeconomic conditions demand for the company's services and the company's technology improvement and cost reduction initiatives.
Statements are predictions and actual results may differ materially.
All information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in <unk> Form 10-K filed with the Securities and Exchange Commission and there are sections of that document entitled risk factors forward looking statements and management's discussion and analysis of financial condition and results of operation.
Now, it's my pleasure to turn the call over to Guy a problem.
Thank you operator, and good afternoon I appreciate everyone, taking the time with us as we share our first quarter 2023 results. We are very pleased to announce that despite continued macroeconomic headwinds our first quarter 2023 revenue was $175 million, which although down 12% versus previous year.
<unk> is tracking to our full year plan.
We continue to see hiring patterns during the first quarter, which were consistent with our previous commentary.
Deferment of essential but noncritical roles continues across many industries. However, let me reiterate there's still strong demand for talent and hiring continues just not at the pace we saw during the pandemic recovery.
Hesitation appears to be driven primarily by a general nervousness on the economic outlook and the impact of Federal reserve actions.
As was the case last quarter the headwinds continue to be strongest in the technology sector, where we saw demand declined 42% year over year, despite essentially 100% retention within that customer base.
We expect this year over year comparison challenge to continue in the second quarter and begin to alleviate in the second half of the year.
Although we have seen a significant decline in the number of screens in the technology vertical. This result is aligned with the public announcements of staff right sizing that has dominated the headlines and is already reflected in our guidance.
For our account management teams, we continue to exceed our upsell targets with our existing customers the.
The exceptional service our account managers in customer service teams provide is also driven are strong gross retention rate of 99 per cent.
This indicates the market continues to value the quality and thoroughness in our investigations.
Turning to expenses and profitability for the quarter, we continued to improve our cost of service delivery driving gross margins, excluding depreciation and amortization up 50 basis points versus Q1 of 22 to 44 per cent.
This improvement has been driven by the geographical optimization of our labor mix and implementation of data cost cutting initiatives Q.
Q1 is historically are seasonally lowest quarter and we fully expect to grow these margins the remainder of the year similar to 2022.
Adjusted EBITDA of 33 million compares to 42 million a year earlier, reflecting a combination of lower revenues and negative operating leverage.
And the first quarter, we announced and began executing a restructuring plan focused on reducing and right sizing, our global expense space, including direct and indirect costs.
We anticipate these changes will continue over the remainder of the year and will begin to favorably flow through our results as soon as the current quarter.
Tom will provide additional details on that shortly.
A higher rate, we understand the significance of local expertise would conducting employment background screens and believed that our local presence and global platform continues to set us apart from other screening providers.
As such this capability is opening the door for new business in our international regions.
Subsequent to the quarter, we continued our international expansion in Latin America, where their acquisition of <unk> in Argentina, enabling us to extend our in country background screening services to small and medium businesses <unk>.
Hi, right customers and employees in Argentina will benefit from faster identity checks local fulfillment of verification through direct connections to local data sources and commercial vendor the vendor screening services.
Turning to our technology initiatives, we continue to make measured progress in line with the broader macroeconomic environment.
We are expanding our development team in India as we continue to further our automation efforts, while leveraging leading cloud based technologies. Our focus remains on precision first and foremost while simultaneously improving speed and innovation.
In closing we are pleased with our results given the backdrop of the broader macroeconomic environment.
Unlike previous downturns, which have had an identifiable catalyst. This cycle continues to be unique with as many positive negative signals, while always maintaining financial discipline. We're focused on our key initiatives that include growing gross margins up selling and expanding packages to existing clients, adding new global logos.
Enhancing our technology stacked with the objective of delivering thorough and accurate searches to help our customers reduced risk.
The underlying demand for talent remains very strong and the underlying drivers have increased hiring velocity are here for the long term.
Howard talented and dedicated teams focus on these principles gives us confidence in the longterm outlook and our ability to create significant shareholder value over time.
With that I'll turn the call over to Tom for a closer look at our first quarter financial performance and our outlook for the remainder of the year Tom.
Thank you guys. Good afternoon, everyone and thank you for joining our call today is Guy mentioned, our first quarter revenue was $175 million down 12% versus the prior year.
The demand environment has been consistent with our view is going into the year as well as those underlying our annual guidance.
First quarter revenue also includes a 1.1 million dollar negative impact some foreign currency.
As Guy noted our technology vertical saw the steepest decline at 42 per cent in our services vertical declined 22 per cent.
Some of our leading services customers are large technology Orange B P o's or professional service firms that have significant exposure to the same underlying labor dynamics as our technology customers.
Four other verticals health care and transportation were up slightly year over year and the remaining verticals were down a combined 5% year over year.
A core for verticals of health care technology transportation and financial services now represent approximately 54% of total revenue and we're down slightly from prior year.
Revenue from new customers added over the past year contributed nearly $10 million to the quarter and revenue from existing customers, excluding new and lost customers was down 12%.
Looking at our geographic split International revenue based on African location was approximately 14% of total revenue.
Mia after adjusting for the 1 million dollar currency impact, what's down approximately 8% versus the prior year.
In fact in India continued to be impacted by the softness in technology and we're down a combined 24 per cent from the prior year.
Gross margins defined as revenue less cost of service and excluding depreciation and amortization improved 50 basis points versus Q1 2022 to.
44%.
When further adjusting for restructuring charges the year over year improvement was more than 120 basis points.
Although down when compared to queue for this is consistent with our historical seasonality and our expectations.
We expect to grow these margins in a similar to directory is 2022 and are confident that our team's attention to right sizing or domestic and off shore labor mix flexing.
Flexing variable labor, increasing automation than vendor cost management is in line with our plan.
First quarter adjusted EBITDA margin declined to 18.8% primarily attributable to lower operating leverage from declining revenue.
To address the operating leverage issue, we have embarked on a restructuring plan targeted reducing operating expenses, which includes a reduction in global SG&A positions.
Offshoring and outsourcing certain nonstrategic functions.
Further streamlining our real estate footprint, you're pulling back in certain discretionary cost.
These targeted actions will begin to show benefit and her overall 2023 result, beginning in the current quarter.
Taking these actions like other organizations are doing allows us to drive better bottom line margins, resulting from our improvements and gross margin.
In addition to these actions we continue to flex and rebalance our direct labor increase our focus on data cost reductions and continue to see incremental benefits from our automation initiatives.
Overall focus on continued cost optimization inefficiency is in support of achieving a longterm EBITDA margin goals of 30 per cent.
Digging deeper into SG&A expenses and quarter, excluding stock based compensation and restructuring charges employee cough increased 5% a $1.3 million driven in part by hiring in technology and go to market positions as well as higher health care costs.
Other non restructured related operating expenses were up $1.4 million driven primarily by third party technology costs.
Justin net income for the quarter was $13.5 million compared to $29.8 million in Q1 2022.
The reduction of $16.3 million was driven by lower operating profits and a 4.8 million dollar increase in interest expense.
Finally, adjusted diluted EPS for the quarter was 18 cents compared to 37 cents a year prior.
Interest expense increased from $7.6 million to $12.4 million driven by higher interest rates on our floating rate that.
Free cash flow for the quarter was down $3.1 million compared to the prior year period, largely driven by higher interest payments.
Historically Q1 results in a use of cash as we prepare for stronger Q2 and Q3.
At the end of the quarter, we had no draws against the revolver and had $697 million outstanding on our first lien loan.
Our leverage ratio ended the quarter at 3.2 times and we also ended the quarter with $127 million unrestricted cash on the balance sheet compared to $162 million as of December 31st 2022.
The primary use of cash during the quarter stems from our previously announced share repurchase program.
For the quarter ended March 31st 2023, the company repurchased over 2.3 million shares of common stock for approximately $26 million.
We will continue to evaluate our cash allocation options and monitor market conditions respect with respect to the repurchase program.
We remain confident in our business prospects and our ability generate ongoing positive cash flow and we believe we have sufficient liquidity to operate and grow the business, while maximizing shareholder value.
Looking ahead, we continue to see steady volume across almost every vertical however, lower than the same period a year ago.
In the near term, we anticipate some of our customers may continue to defer some hiring decisions, primarily driven by uncertainty regarding the sustained direction of the macro environment.
As we've noted on previous calls Q4, and Q1 has historically been our seasonally lower quarters with two two and Q3 being stronger and in line with each other.
R Q1 results <unk> exceeded our expectations and support our annual guidance.
With this in mind, we are reiterating our full year guidance for 2023 of <unk>.
Revenue in the range of $728 million to $745 million adjust.
Suggested EBITDA and a range of $165 million to $175 million.
Justin net income and a range of $100 million to $110 million.
Adjusted diluted earnings per share and a range of one dollar and 30 cents to one dollar and 43 cents based on a fully diluted share count of $77 million we.
We will continue to monitor the macro environment actions by the Federal reserve Pyres quit some job openings and actively engage with our customers to monitor demand manage vendor relationships and costs and adjust our operating practices to reflect market conditions maximize margins and create long term shareholder value.
With that operator, we can open the call for questions.
Thank you we will not be conducting a question and answer session. It.
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Alright first questions come from the line of Georgetown with Goldman Sachs. Please proceed with your questions.
Hi, Thanks, good afternoon.
You mentioned that hiring patterns are consistent with your last commentary can you discuss how base revenues performed over the course of the quarter, including exit raped and talk about how you expect revenue growth come in and <unk> four Q relative to one <unk>.
Yeah, sure George Hi, Tom So.
I sit on the call we think the the patterns that we saw in Q1 with order consistent with what we had expected to see we talked about the seasonality that we typically experience into foreign Q1.
Obviously, we saw a little bit.
Better, but not much in Q1, however, we typically see a kind of a seasonal peak in Q2 and two three we expect that to be no different this year than in any other year except for.
A little bit lower volumes and what what we might have seen in 2022.
And what we've seen so far is consistent with that so we're not giving specifically quarterly guidance for for Q2 and Q3, we're gonna stick with the annual guidance and outlook, but generally speaking we expect to see improvements in Q2 over Q1.
Just like we've always done historically, so we wouldn't expect any change there there's nothing we've seen year to date that would.
Cause us to change that guidance.
Got it that's helpful and then on the automation initiatives, you've made progress in the quarter with fulfillment automation leveraging technology can you discuss what additional steps your plan to take to drive further efficiencies over the remainder of this year and into next year.
Yeah sure George This guy it's we have a you know a whole slew of initiatives and ongoing the one that we always talk about is the large project that we have ongoing to automate the.
The removal of labor in our fulfillment on our fulfillment systems, we've talked openly about the new verification module, that's been rolled out as in production.
But we but we don't just focus on automation on the fulfillment side. We've also got initiatives that will continue to automate our data entry processes. The the acquisition of data for the uses of cram the acquisition of data on Verifications.
You know with like everybody else can continue on the development using robotic process automation to manage different processes and ensure that we can automate as much as as much as possible. So that that will be a never ending uhm set set of work all targeted on either eliminating processed taking out.
Taking out labour reducing demands on labor improving efficiency. All you know again with the objective of us launching towards a 30 per cent.
EBITDA margins down down the road.
Very helpful. Thank you.
Mmm.
Thank you. Our next question is coming through the line and your Nicholas with William Blair. Please proceed with your questions.
Hi, good afternoon. Thanks for taking my questions. The first one I just wanted to ask is is just maybe a bigger picture question on kind of the nature of your client conversations over the past couple of months I know you said that that hiring patterns are relatively consistent with with Q1, but whatever the nature of your conversations with clients.
And they changed a lot I think he talked about you know.
Macro uncertainty being the the primary driver of of weakness, but just curious if you hear anything from your clients that that's different from what you heard earlier in the year.
Yeah, it's pretty pretty consistent Andrew in fact, what I've said before is this.
There's more uncertainty and nervousness than explicit you know.
We expect hiring patterns to decline or increase.
It's it's a strange time and that the just the level of uncertainty that we're hearing from clients is pretty much across the board. There's not a lot of pay we you know we think you know from Q2 Q3 will change our hiring patterns from extra why there's there's none of that it's it just continued nervousness about what's going on in the macro.
<unk> environment, but I would tell you for the most part the ZIP is a general sense that the second half of this year.
Will improve over the first half and again, that's just me reading the tea leaves from the tone from our clients, but you know I wouldn't I wouldn't cast that in stone for sure.
It makes sense. Thank you that's helpful and then.
Following up to some of the the weakness that you saw last quarter on the government front is that any of those pressures eased relative to the first or relative to the fourth quarter. Rather I think you called out just a lack of of applicants for a bunch of open rolls at a at a larger client is that has that changed at all.
So that hasn't that has improved you know the first quarter's actually seasonally or low quarter for them, but it. It. It definitely has improved they were they're still down year over year, but not not a substantial as it was in the fourth quarter.
That's helpful. Thank you.
Mmm.
Okay. Thank you. Our next question is coming from the line of Carl Pettersson, which Needham. Please proceed with your question.
Alright, good afternoon, guys. Thanks for taking questions wanted to touch on gross margins you know nice to see in in one to the 50 basis points of your on your expansion I guess, just kind of thinking for the balance of the year I get there some sort of seasonality there, but it is that.
A reasonable expectation for the rest of the year on on the gross margin front at least when kind of looking at a year over year comparison here.
Yeah, Hi, how are you. This is Tom so what we're trying to point out to folks is that two things one that year over year in other words to one over to one improvement that we saw when you're normalised for some of the restructuring activities, it's actually about 120 basis points better than last year's too.
<unk>. So after a really good starting like we said ahead of our plan, what we were targeting and when I tried to indicate and it sounds like I didn't do a great job, so I need to be a little bit more specific.
In terms of the progression that we're gonna make throughout the year. If you go back and look at the gross margin progression that we made last year, we expect to make similar progression this year as well quarter to quarter, but starting at a better better starting part better base level, where we started Q1. This year. So if you go back without getting you.
Specific numbers, what I would point people do is to take a look at the progress we've made last year and I would expect to do something similar to this year, but starting at a higher base, where we started Q1. So look at how we did Q2 last year versus Q1 last year.
And so forth and so on does that make sense.
<unk> Yeah, just a follow up on you know new logos and contribution from new logos and you'll get to see the disclosure I think you guys set about 10 million revenue from from new logos in the quarter.
Just wanted to see in in your guide you know how that's tracking relative to initial expectations and you know what you know what's the pipeline for for more logos, you know to add kind of in in the balance of the year of her first what's in the guide today.
Yeah, a good <unk>. Good question Clouseau, it's it's in terms of new business, we're right on right on the plan that we expected based on the pipeline that we had coming into the year and we are very pleased with the size of the new business pipeline that were sitting in front of now we also mentioned that we have.
$24 million of of contract you have to be implemented revenue you know getting ready to launch and then there will be more after that right. So I know it may be hard for you to model.
But I would tell you. We're we're bullish about are the existing performance of new business and given what's in the pipeline, we we remain <unk>.
Very confident and continuing to win new business and take care.
Oh, thanks, guys.
Thank you. Our next question comes from the line of Mark <unk> with Bear to please proceed with your questions.
Good afternoon with regards to the restructuring you know a charge that was taken during the quarter.
Is that the is that the extent of the stress restructuring charges that we should expect over the balance of the year, how should we think about restructuring charges over the course of the year and what are the expected savings you know for this year and potentially what may end up spilling over into next year.
And how quickly we could end up seeing those.
Yeah, Great question markets Tom.
We didn't have that in the script, but it is in the queue that got file. This afternoon. So in the queue I believe partially flip between the restructuring footnote in MBNA, we talk about the further charges will be taking the rest of the year I think in the order of eight.
Mean to $20 million roughly incremental cause the the plan is ongoing we've executed some of it at the end of Q1, but it's still ongoing for probably another six months or so here and the estimated benefits, resulting from this or in the neighborhood of $50 million. So it is very significant.
Part of which we haven't guided in terms of how much is built into this year, but clearly you know our our focus is on delivering that EBIT margin and and the guidance, we provided and that will certainly go a long way towards helping us achieve that obviously, we're not going to achieve all $50 million of that this year, but we.
We do believe in circuit half that.
So roughly around half might be delivered this year and half next year.
<unk>, 20th I'd say 20 to 25 is here yep.
Okay, Great and then you mentioned that the you know that the the hiring trends are steady.
Do you mean like could you just give us a flavor for like how things have trended since December like was December the low point on an absolute basis, obviously to seasonal low point, but I'm wondering you.
Did you see where things relatively steady January through.
Through March and how are they looking in April .
And how should we think you know you mentioned you know Q2 and two three are are seasonally high points <unk>.
Should we look back to you know past years, maybe 21 is not a good year, but.
Other than that kind of to look at what the seasonal pattern might be or.
Are the impacts on tech and professional services such that those normal patterns are gonna be different.
Yeah, I think so you got a couple of questions are the the first part of the question about how things started out you know definitely December January we would say, we're kind of low point January always gets off to a slow start people with a little bit slow coming back from holidays, and resetting budget, but we definitely saw the relatively normal ramp we would expect.
February March and and into the current quarter. So again, our point about seasonality and how we feel about our seasonality curved still holds so there's nothing we've seen that changes are you on that the only thing I was saying in terms of looking at you know annual Luyster comparisons. It's it's been a couple of years since we've had a normal <unk>.
Oh right you know we have the the.
Pandemic affected year and then we had this huge surge of growth coming out of the pandemic. So it's not necessarily a normalized view four 2022, but it's not it's not far off from what we would expect.
Yeah. It was like something like that to be the same level of ramp that we saw last year. When tech was going gangbusters in the first half of the year, but we're certainly seeing the the normal seasonal strength, we would expect.
Yeah, Mark I think just to add to what times were saying their tech tech is a little bit of the one exception I mean that to have.
The tech sector down 42% year over year, there's clearly you know.
A different set of of of hiring plans that we're seeing from all of our major Tech lights, and you know who we have we have all the largest.
The largest check logos that are there so.
But the other I would tell you with other vertical uhm that or not is impacted by tech com pointed out you know the services sector. That's heavily reliant on on that economy. It's also been impacted but everything else.
Is is still hiring it very what I would say very robust levels, albeit just not the you know the the accelerated patterns, we saw coming out of the pandemic, but it's still healthy.
Alright, and then what sort of you gave us the bedaub, how should we think about free cash flow.
And and and capital allocation and and how comfortable are you with the the level of interest payments that you have.
Yeah sure we felt really good about the the cash out look for the business Q1 is historically Ah usage of cash for us I believe even if I go back to last year cash flow from operations with slightly slightly negative even last year and that strength of the year we are.
Tend to generate cash in 2223, and generally queue for as well. So we don't expect that to be any different this year than it has been in previous years. So we feel really good about our ability generate cash obviously with moderate a little bit on our.
Cashing investing in particular some of our Capex you know, we're still focused on our automation project, but styled it back a little bit from from a <unk> perspective.
Just to make sure that we're keeping up with you know kind of thing overall macro environment.
We did make a few acquisitions relatively small that we've announced the guy talked about.
Martin in the press release as well, we will still be moderately active in the M&A side of things, but as you know from our historical track record. These will be relatively small bite sized transactions that won't have a material impact on the balance sheet. The single biggest impact we saw on the balance sheet obviously.
It was a share repurchase program over the first quarter and will continue to monitor that and the market conditions and decide how we want to proceed but.
Whether we want a fun further share repurchases or the type of M&A. That's on our radar we felt really good about our cash position.
Okay, great. Thank you.
Thank you. Our next question has come from the line is Andrew Jeffrey That's true of Securities. Please proceed with your questions.
Hi, guys Uhm, it's got stepping on for Andrew. My first question is did you guys talk a little bit about the competitive environment amongst with all three have we seen a shift by clients the single sourcing the background screaming vendors.
And can you also talk about pricing in the industry proxy pregnant goats or anything.
Hey guess uhm.
Three big questions all rolled into that so first I'll, let you know in terms of the competitive environment I would tell you that the current environment is really no. Different then then it's been other than you know I think the three of US continue to take share from smaller players I will tell you that you know we're out there competing hard against.
You know against the other two but.
If you're asking me as the sort of irrational behavior out there because of the current environment I would I would tell you not I think what you're seeing is clients are are are moving to quality and are trying to reduce their risk and make sure that they're using background screening companies that can invest in the requisite technology needed to service their needs, especially at the enterprise.
The the trend toward single sore thing is is no different than it's been in the past like you know we continue to see large global multinational companies looking to consolidate tabak.
Background screen is particularly if they're undergoing a large change and and applicant tracking system.
And they wanted they wanted to be able to do that especially those that are more risk averse and Wanna you know Wanna hire someone like higher right, who who does a superior job in terms of thoroughness an investigation. So we've seen that as an advantage which is reflected in our numbers is swollen the pricing environment I would say is a steady.
As it's been in terms of <unk>.
It doesn't really take the lowest price to win an enterprise deal. It takes the best solution to winter enterprise deal there.
I think pricing comes into play more when your own clients are going to RFP and they're trying to get you know a little bit better deal you know a little bit better deal for you, but our focus with our existing clients has always been growing average revenue per order by up showing and cross selling so we feel pretty good about that as well.
Do I touch on all three there.
Yeah and have a great idea more pointed out pricing.
Always looking to take Pride February can right. So we go through an annual review every year part of my product market by market, you know vertical geography, whatever it may be and we tried to take price where we can in this there'll be no different than any other year.
Great I appreciate the color. My second question is could you talk a little bit on the variation maybe on economics or package density will on the background screens, maybe come up in those the core for vertical versus that other 46% of revenue.
<unk>.
Well in general we we talked about this before the core for verticals what are the things that we like about those industries is there either compliance driven or they are heavily regulated so their packages tend to be more comprehensive meeting, there's more elements and and those packages. So the average revenue per <unk>.
Order for those vertical is generally higher than it is for for other verticals. The reason why we like those that those those challenges.
Thorough background screener in the industry and people in those core for vertical.
<unk> the most interested in the most complete solution available, which is why we're so successful there and <unk> exactly you know.
To your point like it because of the larger package density the larger average revenue per order compared to the rest of of.
Of our client base.
Great I appreciate all the apologize.
You'd like us.
Thank you our next questions come from the line of Jason Selena with Keybanc capital markets. Please proceed with your questions.
Tom Thanks for taking my questions here I guess my first one sounds like the new business pipeline is holding in relatively well all things considered great, but any changes that close race or or any of that type of activity given the macro.
Hey, Jason No I mean in fact that you know I I think we're seeing success you know not only in deploying new business, but we you know, we're seeing an increased activity and and the number of Rfps.
Both an inbound request for new business as well as our sales teams you know generating.
Does this on a on a phone it's been you know.
Pretty strong.
Uhm and continues to be that it's something that I would tell you that we've seen.
Since the pandemic I've talked about this before even during the pandemic when when base revenue was down.
So significantly we still saw a lot of activity for new business and we continue to see that hasn't that hasn't stopped we continue to see it during this period of economic uncertainty as well.
Teams are busy.
Okay, Great and then in Clare of <unk> I think that's a state prior question you mentioned.
Wanting to be moderately active and.
<unk> I think this is the.
First acquisition, you've made since gone public.
You know is this a subtle change that it's just a reflection of arc evaluations and macro just curious on on that thanks.
No. So Jason it was part of our strategy right. The the general strategy on M&A is to look for either companies that have a product capability that we would prefer to to buy versus build which.
Led to the investment that we made in the <unk> nine business you know does it.
Talked about it the the last quarter.
Griffin H R and then the investment in their acquisition of inquiry <unk>.
<unk> is to strengthen our position in Argentina, and and a few other markets in South America for for two purposes, one as we already there, but we wanted a presence there to better serve the existing clients we have.
And this was just the best way for us to to solve that to solve that problem.
Great Awesome. Thank you.
You bet Jason.
Thank you. Our next question comes from the line, it's Stephanie more with Jeffries. Please proceed with your questions.
Hi, Good afternoon. Thank you I think that's for one point of clarification I. Thank you when kind of outlining the adjusted EBITDA margin performance with a quote. Thank you outlined that suddenly the restructuring charges the outsourcing nonstrategic function reduction in SG&A real estate Apple.
<unk> <unk> or any of those changes and could you look at there were any of those accelerants since the start of the year, you know whether the restructuring plan or anything else that maybe might be different from the guidance that would kind of give and you have to start the year. Thank you.
Yeah. So we we just started contemplating a lot of these changes going into the year.
And certainly a lot of this was formulated.
In our guidance when we guided that with just whatever 45 60, not even 60 days ago right. So a lot of that was built into that I would say there there's gonna be a little bit more than we would even factored in probably going back then certainly when we talk about 50 million dollar number you'll see us reference in the queue.
Not all that was certainly factored infected and for the year. So we certainly think there there's upside longer term, but I would push you know a.
<unk> 2024.
Okay understood. That's helpful. And then maybe switching gears to have you say talk a little bit about what you're thinking from your S. M. B customers can you tell me call about Pakistan is very weak, but if you could kinda bifurcate, what you're saying between your larger for national accounts, and then S. N b. Thanks.
Since <unk> continues its recovery from the pandemic there were certainly one of them hardest hit sectors, we saw.
Started to see some.
Some positive signs from S. M b in the fourth quarter that continued into the into the first quarter, but it's but it's mix. It that the problem with lumping S. M. B is certain small business is doing well and certain ones are just not or just not recovering so it's a little bit of of all over the place Stephanie <unk> to be honest with you.
Alright, and you said thank you so much.
Thank you there are no further questions at this time I would now like to have the call back over to Gaia Bravo for any closing remarks.
Alright, Thanks, operator appreciate it and thank you everyone for joining the call today as you as you gathered from the call and and in fact, the current earnings season, the macro environment continues to dominate and impact our investment decisions, including hiring those of our clients are management team continues to be focused on managing up and cross cells in turtle data cause.
And of course customer retention all activities that we can influence through great execution, and while we're making good progress on our automation and other margin expansion initiatives and while we were confident in our ability to deliver results will continue to monitor the greater macro economic environment and customer activity and respond accordingly to to focus on dry.
Irving profitability. So we look forward to keeping you posted as we move through the next few quarters and as always please don't hesitate to reach out to us with any questions. Thanks, again and enjoy your evening.
Thank you. This does conclude today's teleconference. We appreciate your participation may disconnect. Your lines at this time enjoy the rest of your day.