Superior Group of Companies Inc. Q1 2023 Earnings Call
Good afternoon, everyone welcome to the superior group of companies first quarter 2023 conference call with US today are Michael Benstock, The company's Chief Executive Officer, and Mike Labelle, Chief Financial Officer as a reminder, this conference.
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<unk>.
Except as required by law and now I would like to turn the call over to Mr. Michael Benstock.
Thank you operator for the introduction and I'd like to welcome everyone to our call today.
I'll start by reviewing our first quarter highlights, including the performance for each of our three business segments during the discussion.
I'll also provide updated thoughts on the evolving macro environment and our strategy more profitably grow the business I'll, then turn the call over to Mike who will take us through the first quarter results in more detail and discuss our 2023 outlook. We will then open it up for Q&A.
Consolidated revenues were $131 million relative to $144 million, a year ago, and our consolidated EBITDA was $7 million down from $10 million in the prior year quarter.
We view this overall performance is consistent with both our expectations and best on our last call.
With respect to the softness we anticipated still anticipate in the first half of this year.
It is also reflective of the continued strategic investments we're making.
Into the attractive addressable markets across all three of our business segments, starting with health care apparel.
Which includes the brands under CIB resources in fashion seal healthcare first quarter revenues of $28 million compared to $31 million in the prior year first quarter as conditions across the healthcare market remains subdued.
EBITDA came in at $1 6 million, which was down from $2.9 billion a year earlier.
Primarily due to a combination of the lower revenues and gross margin rate pressure as mentioned in March we are focused on achieving better inventory equilibrium by the end of this year through already significantly reduced purchasing and a more disciplined inventory approach or strategy for health care apparel senders Rev capture.
Market share well beyond the 2 million caregivers, who already where our brands everyday health.
Health care apparel is a large and growing addressable market and we are increasing our focus on digital growth on that point, we soft launched our own direct to consumer website, featuring a week product line few weeks ago, which is more than met our initial expectations over time, our direct to consumer strategy will nicely complement our omnichannel approach.
Driving higher consumer awareness and engagement with our brands in the coming weeks, we expect to launch a new <unk> website to our wholesale accounts to make their engagement with us even more efficient we're confident in the attractive long term prospects for health care apparel with stronger year over year results anticipated in the second half.
Turning to branded products, our largest segment revenues of $82 million during the first quarter compared with $97 million a year ago. Again. This is in line with the outlook. We described last quarter with the cloudy economic environment suppressing demand <unk>.
EBITDA decreased during the quarter to $7 $5 million from $8 million in the prior year period due to the sales decline notwithstanding near term economic challenges. Our plan is to continue expanding our less than 2% market share in this $26 billion marketplace.
Contact centers, our highest margin segment continues to generate robust topline growth revenues of $22 million were up 23% over the prior year first quarter slightly above the fourth quarter growth rate the pipeline for new customers remains strong as the contact center segment onboard at the same number of new customers during the <unk>.
First quarter of this year as we did for all of last year, while revenues remain strong first quarter EBITDA of $2 $8 million was down from $4 $8 million in the prior year period due to a combination of higher labor costs negatively impacting gross margins and our continued investment in talent technology and infrastructure.
Going forward during the year, a combination of price increases some of which were already implemented in March and cost reductions of which most have already been implemented as well are expected to improve profitability toward achieving a normalized annual EBITDA margin approaching 19% to 20% strategically we continue to see the office gurus as having significant.
Difficult growth potential with high margins and a large addressable market with that I'm going to turn it over to Mike for additional detail on our financial results and our 2023 outlook Mike.
Thank you Michael and we appreciate everyone being on the call today overall, the first quarter was as expected consolidated revenues of $131 million compares to a $144 million in the prior year first quarter and our gross margin improved to 36%, which was up from 34, 7%.
On the.
The expansion of our overall gross margin was driven by favorable pricing and customer mix shifts within branded products, our largest segment as well as the contact center segment, our highest margin segment, becoming a larger portion of your overall revenue mix.
The overall gross margin rate was up the contact centers gross margin rate declined during the first quarter due to increased labor costs that were only partially offset by price increases implemented later in the first quarter as Michael mentioned.
Our first quarter SG&A expense of $43 million or 33, 2% of sales was up from $42 million or 29, 4% of sales in the prior year first quarter.
SG&A expenses were down year over year for both the health care apparel and branded products segments. Due in part to successful cost reduction actions. The SG&A rate was up due to deleveraging on the sales declines in both segments.
Contact centers drove the overall increase in SG&A expenses, reflecting the investments in talent technology and infrastructure to enhance future growth I should note that while contact centre SG&A expense was up year over year the level of spending was fairly consistent with recent quarters.
Interest expense for the quarter was $2 $6 million up from approximately $300000 a year earlier, primarily due to higher interest rates and to a lesser extent higher average debt outstanding.
Net income for the quarter was approximately $900000 or <unk> <unk> per diluted share as compared to net income of $5 $2 million or <unk> 32 per diluted share in the prior year quarter.
Let's turn to the balance sheet and an update on our covenant compliance.
We ended the first quarter with cash and cash equivalents of approximately $27 million up from $18 million at the end of 2022.
The increase in cash was driven by our focus on driving significant free cash flow lowering working capital and reducing capital expenditures.
As a result, our first quarter net leverage ratio was 383 times, our trailing 12 month Covenant EBITDA, which is within our required covenant ratio of less than four times.
While we are currently in compliance as I mentioned on our last call. It is more likely than not that we will exceed our maximum leverage covenant ratio during 2023.
As a result, we executed an amendment to our credit agreement, which temporarily increases our maximum net leverage ratio to four eight times and four five times covenant EBITDA for the second and third quarters, respectively.
We'll continue to focus on cash flow enhancement by improving our working capital position, particularly about optimizing our inventory levels within our health care apparel segment as well as scrutinizing, our operating expenses and capital expenditures.
I'll wrap up with a reiteration of the outlook, we provided for full year 2023 on our last call on a consolidated basis. We continue to look for full year sales of 585 million to $595 million.
Up from $579 million last year and earnings per diluted share of 92 to 97 cents up from adjusted earnings per diluted share up 62 cents last year.
More specifically for health care apparel, we continue to expect low single digit sales growth gradually improves throughout the year as inventory levels I think customer demand returned to normalized levels for.
For branded products, we now expect a flat to mid single digit sales decline again with meaningful improvement during the second half of the year.
And for contact centers, we continue to expect strong double digit sales growth with the strong profitability of this segment enhancing our overall margins as referenced last quarter. The segment by segment expectations for improvement should result in consolidated financial performance for this year that is backend loaded and our.
<unk> plans to capitalize on our large addressable markets for each of our three business segments should drive significant shareholder value creation over time.
With that operator, Michael and I will be happy to take questions.
Yeah.
We will now begin the question and answer session to ask a question you May Press Star then one on a touchtone you.
Withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Mitra <unk>.
Ram Gopal with.
Jody. Please go ahead.
Yes, hi, good afternoon, thanks for taking the questions Al Mike I, just wanted to start regarding the.
Covenant compliance and the relief are you received after two Q3 Q.
Is it reasonable to expect that the two Q would probably mark the peak or in terms of or the highest.
The ratio.
That's correct Mitra when you as I mentioned in the last year and a year end earnings call.
We really felt like we'll start to feel the pressure you know more in the short term and as we get into the second quarter are actually through the first quarter of this year. We had we had some favorable add backs in our covenant calculation, which expired at the end of the first quarter. So the exploration of some of those add backs combined with the caliber of.
Nation up our forecast really create some peak pressure in the second quarter and then obviously, we see that improving as we as we move forward, which ties into how we set up the amendment with our bank syndicate.
Okay. That's great. Thanks, and then on the quarter I'm just a couple of questions I wanted to zero in on first on the inventory issue is that pretty much behind you when you speak to your customers now.
Well I think you know as we said before Mitra, especially from a healthcare perspective, it will take us.
The full year to really work through inventory.
And get it to the targeted levels that are that were really focused on achieving by the end of the year I think that where we're making progress but it's early.
I think still as we talked about even the guidance in health care, we expect the first half to still be somewhat soft.
The market somewhat soft and to accelerate.
As we move throughout the year.
I think at this point from an inventory standpoint, where we're making the progress that we expected recognizing we have more to go.
Again still focused on really driving it.
Turns in reductions through yearend to achieve our target.
Okay. Thanks, and then I.
I believe a year ago a P. P. E revenue was north of 4 million just curious a how.
How much that was and <unk> this year.
Mitch or P. P sales or were really fairly immaterial. This.
This year, so last the first quarter of last year really probably the last year, where it was a meaningful number for the business.
Okay. Thanks.
And I know on the Banff <unk> segment, clearly you continue to see some softness there, but when we look at the guidance. It's obviously, assuming a meaningful pick up in the second half of the year and when we look at Banco for example are you expecting.
New sales reps that have a meaningful contribution towards that goal.
Sure.
Well, Thanks, Mitra, obviously, our guidance assumes.
The debt that we have an improvement in the market as we move forward and we're seeing some of the tech companies, who are reporting more favorable earnings this quarter, which which are our important customers to the branded product space and so we're anticipating that there'll be some opening of the budgets if you will.
They've moved forward, but then just in terms of again focusing on the things we can control, we're really where we're happy with with our rep recruiting at this point. We're ahead of last year and it does yeah. It does take a little bit of time for new reps to to begin adding incremental sales.
So as we're adding those reps at a faster pace. This year it'll drive additional sales force as we get to the back half of the year.
Okay. Thanks, then.
Contact center is another really nice quarter I'm, just curious how the new centre in the Dominican Republic is coming along.
Yes, the Dominican Republic.
Still in the beta stage, we actually have some new customers who will.
We will be making use of that and give us a little bit more eyesight.
What the future of that is so far it's going well.
Uh huh.
It's early and I think we as I said on the last call, we have probably 18 months.
Until where we're certain about that being.
A place that we want to invest more money.
And but we should know in the next in the next six to eight months have a fair degree of certainty with respect to that meantime, we're moving ahead as though it is going to be important to our future as I said on the last call.
It's a little bit less important than when we first opened it or when we first conceived of it because we still have a fair amount of our agents working from home and that seems to be a dynamic that our customers are very happy with to have a percentage of their.
Their workforce working from home in the event of any kind of.
Future disaster.
Okay. Thanks, and how should we think of interest expense and tax rate for the remainder of the year.
Interest expense.
If you look at the first quarter interest expense was just just about $2.6 million.
I'd say, that's a fairly good proxy as we move forward, obviously, we're focused on bringing that down over throughout the year.
Offset somewhat by interest rates continuing to tick up so I think the first quarter is pretty good proxy and from a tax rate perspective Metro I would say if you look at.
Our effective tax rate over the last couple of years in our 10-K, you know given that Oh.
The majority of our earnings have been.
With our contact center, which is offshore I think the last couple of years would represent a pretty good proxy of how we think about the interest or I'm, sorry, a tax expense as we move forward.
Okay. Thanks for taking the questions.
Thank you.
Okay.
Our next question comes from Kevin Spanky Barrington.
Barrington Research. Please go ahead.
Good afternoon.
One of them actually start off first.
But you're asking about.
Health care apparel, you mentioned you expect.
First half in aggregate.
Fairly soft and then.
They'll pick up in the second half.
Can you just talk about the expectations that.
Do you believe will.
Drive that pick up is it you know more about it.
Inventory clearing out of the market or you know how much do your own internal efforts factoring that in terms of you mentioned the soft launch of the <unk>.
To consumer.
Yeah just.
Comments on <unk>.
How the ramp plays out and how health care apparel. This year as you expect.
That's a that's a good multipart question Hi, Kevin Thank you I'll take that.
As we said we continue to see some economic headwinds in downward pricing pressure and we certainly will even see it into the second half of the year.
Yeah, what it really comes down to it it's manifesting through a really smaller basket size.
Consumer seems to be taking advantage of very.
Notional marketplace.
Their comparison shopping.
Really to find the best deals.
The market will work its way through all of this excess inventory.
We expect to see increased demand for newness in product.
In full price products.
During the latter half of the second half of the year.
We're focused on controlling what we can control the relaunch of the week scrub Brent.
On our D to C website launched very very successfully.
Exceeded our expectations and.
Certainly elevated our spirits with respect to this marketplace.
And there.
There was a great elevation of our team in.
In accomplishing this in a great elevation in our technology to accomplish this.
We pulled it off pretty seamlessly.
We as we've said in the past week, we have new executive leadership in place.
They they all got swaps to hedge when I call them the dream team.
On the last call, but they are focused on transforming the business and executing against a strategic plan that we believe is achievable.
That we released in early 2023.
We were going to continue investing in the scene in the technologies.
To drive our brand and.
In digital efficiencies as well as our product.
Innovation.
Going to the potential of this marketplace is huge and so.
That's.
That's in a nutshell I think I answered all parts of your question is that if I didn't please come back.
Yeah.
Oh, that's that's yeah, that's good thanks.
So yeah, you touched on it there and you mentioned in the prepared comments that the first quarter results.
Reflect investments you're making.
Can you just walk us through some of those various investments are we talking you know about salesforce and branded products in.
You mentioned health care, what what other investments should we think be thinking about.
Do those taper off as the year goes on and you know I assume you start to get some leverage of those investments in the back half of the year.
As the investments perhaps start to drive some growth is that the right way to think about it.
Yeah, that's that's somewhat the right way I mean, we will continue to make the investments even beyond the end of the year.
For further growth understand.
We did a soft launch of the D to C. So you can understand all that goes on around that.
A big investment in brand a big invest in an analysis and digital site direct to consumer sites consumer studies that we did and everything else.
Obviously, a lot of that is an upfront investment.
So that is also an ongoing investment and it'll be ongoing.
As we as we see how the digital marketplace grows for us.
Well continue to make investments in marketing and the talent and then analysis and so on to be able to take full advantage of the marketplace.
As we're growing it.
Do I expect that to.
To be more accretive to the bottom line as time goes on yes of course.
We wouldn't do it.
So we should get some leverage from that as time goes on.
Okay.
And then on the contact centers gross margin you mentioned in the higher labor costs there.
It sounded like you are.
<unk> implemented some price increases to help offset that maybe later in the year.
Is that.
Something where you can think you can fully recouped the higher cost or should we think about you know me.
Maybe gross margin in that segment being a bit lower than it was historically.
I'll jump in and then I'll, let Mike finished for me, but yes, we feel very confident that we lagged in price increases and a number of reasons for that one as you know we had some.
Contractual obligations with customers that we couldn't raise their prices until the time was right within the context of the contract.
I have to tell you too we we had never seen a cost increase.
As.
Drastic I would say as our costs went up.
In a very short period of time.
And probably not anticipating that not having experienced that before we lagged a little bit in notifying our customers of a price increase and that was a requirement that we notify them and give them time off.
With the implementation of that so we weren't able to implement those until March have we taken all the actions that we could have and should have a few months earlier.
We might have we might have been able to recoup much of.
What we what we were not able to garner in the first quarter.
As a result of that work so.
It's a learning experience for us quite frankly, where we're in some very unusual times and I'm just trying to be.
Transparent as possible that it won't happen again.
Will lag that greatly we will we will begin.
To begin our budgeting process, which really is what triggered the price increases to begin with we will begin it earlier.
With respect to the office gurus to ensure that we know what kind of price increases, we shouldnt be giving and we give them early enough so that it doesn't impact our financials.
And in Canada.
Like Oh.
I would just add you know it really ties back to.
Michaels prepared comments, where we we obviously we looked at it from from two sides, one was where price increases which Michael does just described then and the team is well we looked at where could we garner.
Garner some efficiencies in how we're organized providing the service.
Maybe certain benefits that we had built into some of the cost structure that that perhaps we felt were no longer needed. So we really looked really across the P&L and so I'd say, it's a combination of of implementing price increases as well as driving some efficiency in the cost structure.
I'm trying to recruit.
What we had seen the decline in the first quarter.
Okay. Thank you and could you just touch on the market dynamics that.
I guess drove that.
It sounds like rapid and somewhat unexpected increase in labor costs and is just that.
Labor market or more competition and contact centers for labor.
What was what was going on there.
If you look at the jobs numbers and the unemployment in the United States and the shortage.
Alrighty between 13 million open jobs, and only 5 million people.
To fill those jobs you start to understand that you know people looking for entry level employees, which are typically the agent level that we hire arent able to find them in the United States and I think there's an awakening to that going into an inflationary period, where being an inflationary or to go perhaps going into recession that people are going to get there.
Act together.
I think near shore has become a very viable a more viable than ever solution.
It's been viable for a lot of people, but I think a lot of people who were not open minded to that possibility of even outsourcing before or outsourcing to a foreign country.
I realize they don't have much choice.
The demand for workers and each of the countries that we're in.
It's been right and as demand has been raised.
There's only.
It's not a I would say an unlimited supply of people, who knows a large supply of people who want those jobs.
We demand a very high level of proficiency in English.
And so it is more limited and we'd have to pay.
To make sure that we recruit the best of those four.
For our clients and how theres been signing bonuses and referral bonuses.
And higher levels of pay.
That we've had to institute.
In order to do that that's not a bad thing I mean inflation always isn't a worst isn't the worst thing can happen you'll be able to raise our prices, we will be able to improve our margins over time because of that.
But it is the driving force behind what's happening and it's not we're not alone in this and in the regions, where we operate I don't think we're alone in this in the call Center World period I think.
The demand is going to get greater and greater if we don't figure out a way to take care of those 8 million jobs in between that we can't seem to fill in this country for many reasons.
Yeah.
Okay, Yes, it makes sense, but yeah as you mentioned it on the other side of that.
This environment is very strong I think.
I think you said you on boarded as many.
New customers in the first quarter and contact centers.
You did all of last year is that correct.
Does that.
Yeah, Yeah, Okay, and then does that that kind of change the growth trajectory or whats how should we think about the.
<unk> growth trajectory.
Yeah over the next several years I guess.
We're we're on a steady path to grow the business by 20 plus percent just as we said in the last quarter, we need to do it diligently we need to be careful about how we do with the right customers.
The customers to make sure that we can.
It makes similar kinds of margins that we've made previously.
With new customers and then ultimately the right customers for us So we're not changing our guidance with respect to our growth. We feel very good that that 20 plus percent is something we can hit and.
Should we be able in the future that we can beat it we will certainly give guidance to that.
Yeah.
Okay. Thanks for taking the questions I'll turn it over.
Thanks, Kevin.
Okay.
Yeah.
Waiting for the operator.
Hello.
I turn the call the question over to Tim Moore with E S. Hudson.
Thanks.
The gross margin was good in the quarter and it was nice to hear about the Covenant amendment in place.
Few of my questions have already been asked but let me just start out maybe with the.
Two part question about health care.
How should we think about maybe your your history of possibly being able to monitor the institutional side is possibly.
A leading indicator.
In our retail side pick up you know if you.
Think of our punishments.
The institutional side tend to kind of start picking up three to four months, maybe how does the retail side.
It's a really good question Nobody's asked that in a long time.
Typically.
Health care.
On the wholesale side the institutional side.
Which is to the laundries, who are servicing the hospitals.
Is that the buying tends to be reduced later.
In a period it anywhere from three to six months later than other buying retail buying is reduced.
And it tends to come out of recession sooner.
And the explanation that we've gotten to that over the years is that it.
When when Theres a looming risk.
A recession that.
People tend to make sure they see their doctors.
Make sure they they avail themselves of.
Health care under their insurance, because theyre concerned that in a in a bad recession that there'd be a lot of layoffs at the job sort of health care.
And so.
That is what we've experienced in the past now.
I understand we've never been.
In a recession, where we had the affordable care Act in place. So we don't know if that was still follow suit we believe it will.
Because there's still plenty of people who were they to lose their jobs would lose a lot of their better access to health care, even though they could certainly go into one of the different plants that's out there.
And you know their co pays to be higher and everything else. So the way we're looking at it is that.
When we start seeing.
On the institutional side coming out of it we would expect within six months to see.
The retail wholesale side as well as the consumer side coming out of it and we're seeing the light of day on the wholesale side the wholesale side.
For us is.
It is not as pressured as the.
The consumer retail side.
<unk>.
And we're hoping that the past models.
Three to six months work out this time as well.
Well Michael Thank you for that that's really helpful color and the other part of my Health care apparel question is.
Yeah as you look at maybe the discounting more so obviously on the retail side and an industry wide.
Have you seen it come down a bit in the past month or two and how well do you feel youre positioned or Katherine feels you're positioned with.
Youre attractive pricing relative to peers for some of the new launches and items coming out.
You add some more.
Items and features to the apparel offerings later this year.
We haven't seen a slowdown in discounting discounting is still pretty heavy a lot of the the.
Discount buyers.
Our full of merchandise right now so it's slowed down a little bit.
And quite frankly.
Often times for certain products, there's there's no price that anybody would want to buy them at this point I mean, you've got to see a diminishing of some of those inventories at the retail.
Before you.
We will see a big impact, but we expect at the end of the year to be where are we planning to be.
Some big write downs last year, which is supporting giving us a little bit of breathing room.
But we.
It's not stopping us from from developing.
New products.
We've got it, especially with our direct to consumer we've got to engage.
Customers with it with a fair amount of newness now.
We're being conservative and how much newness, we bring out I mean, a lot of it we're just trying to align our brand strategy.
So that where we're able to handle every single matter and with somebody who might buy from us and at every single demographic that might want to buy scrubbers as well.
We're able to handle that as well. So we're just trying to be as omnichannel as we can be spend marketing dollars wisely.
You spend money on technology wisely.
And get the quickest return on the investments, we're making that we can.
Great. Thanks for that color and just switching gears to Bam co and its related to the city areas.
Well you know how you are there any things that they're doing to stay engaged specifically maybe with the.
The technology downturn in some other end markets that they pulled back from layoffs, but it seems like some of those layoffs.
Started leveling out you know the last few weeks or months or.
Are they doing anything to kind of go get in touch with the customers who might have had kind of a buying moratorium or at least the budget cut you know.
At the end of the year last year.
Sure they are they're on their customers.
Like white on Rice I mean.
They've been in touch with their customers all throughout the last.
Six months is buying habits have changed and even through the layoffs and obviously you know some of the people that we're dealing with got laid off so they've got to make new connections with new people as well.
And in.
And as I said on the last call, we're not losing customers. We just have customers who are buying less.
As you know, we we can't necessarily create the demand for them to buy more.
Don't have the marketing or HR dollar spend well, we can stay in front of them and in some ways.
What we're looking for what are the other paths are what are the areas. We're not feeling wasn't that comes down to you know oftentimes there I mean, we have customers who might have 20 different departments buying.
<unk> branded merchandize and branded uniforms.
And we might only be dealing with three or four of them. So this is a time for us to get really aggressive and try to pick up a couple more of those departments.
Through the connections that we have so we haven't slowed down one bit and.
Our our recruiting whereas last year I made the statement that was a little disappointed in our recruiting.
I'm not at all disappointed this year, we're right on track to where we were we budget and we plan to be.
And it will make a difference.
Later half of the year in particular and certainly into next year.
Great. That's helpful to hear my last question is just on the about the contact centers and the office gurus.
When you think about kind of maybe.
You know, it's just a phenomenal business kind of where you feel like investors are under appreciating I always worried about that my reports, but do you think about maybe the two.
Headwinds to two EBITDA margin this year, one being the cost inflation and it's great that you've got the pricing and margin.
Come through soon.
And the other just being sensible.
It grew.
Growth spending for infrastructure and hiring as you rollout the Dominican Republic and expand some of the other areas do.
Do you think that you know when you I know you're not giving guidance for next year, but it would seem like there's two to 300 basis points EBITDA drag this year and when you kind of look out to next year. When you start lapping that and maybe the Dominican Republic investments come down a little bit.
Do you think you can recover.
A lot of that margin.
Next year.
Yep.
Some.
On this I'm going to let Mike jump in after the split.
Investment was pretty small.
You know, it's no more than <unk>.
And then a few hundred thousand dollars quite frankly in a lot of that was capitalized.
Over the course of our leases so.
As we said we didn't go in full bore we went in.
Doing it as it is.
Ada opportunity and so we spent very little getting there.
I wouldn't blame the Dominican or any of our infrastructure moves.
Move.
On why we're at where we're at right now.
Really where we're at right now is cost got ahead of us and they went up very very quickly and and.
And we couldn't respond quickly enough.
It's not completely our fault, but that's on us.
And now that we've.
We are we have readjusted.
Mike described earlier I described.
We're on the right track at this point I think there is.
As we grow the opportunity to leverage what we've already done.
And Leverages, the fact that I think.
A certain percentage of our workforce is going to continue to work from home.
For many years.
And that should help us from an.
These das standpoint, as well Mike.
I think you said it well Michael Yeah, I would just say Tim obviously.
We talked.
On this call about some cost pressure that we're seeing from a labor standpoint difficult to predict what it might look like next year will be.
Certainly feel like we have a level of pricing power.
At the same time, we also recognize we need to remain competitive. So we'll obviously keep an eye on that going forward.
And that'll be obviously, a key determining factor as we get past 2023, I do think that as the business continues to grow.
We'll obviously get library on the operating expense side. If you go back to last year, you see a steady growth and an operating expense dollars in that segment for obvious reasons last year growing certain quarters in excess of 30%. There's just certain things we need to do to build out infrastructure, where we're we're doing.
Those investments that you've seen quarter to quarter end and as the business continues to grow at a double digit.
We would expect to begin getting more leverage out of those investments as we move forward.
Well, thanks for clarifying the contact centers on net pricing realization and the readjustment there over cost inflation. So that's it for my questions I'll turn it back over.
Yes.
A question answer session and I would like to turn the call back over to Michael Benstock for closing remarks.
Alright. Thank you again, operator, as we progressed, while navigating some pretty uncertain times.
What you need to know is that our team is extremely energized I hope you're feeling that on the call about the opportunities ahead, and the investment, we're making to drive growth and future profitability.
Thank you everyone for joining us look forward to updating you again on our next call. Please don't hesitate to reach out with any questions. Thanks again.
Yeah.