Q2 2023 HireQuest Inc Earnings Call
Greetings and welcome to the higher question incorporated second quarter 2023 earnings Conference call.
At this time, all participants have been placed in a listen only mode.
And answer session will follow the presentation, if anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded I will now turn the conference over to your host Mr. John Nesbitt Investor Relations John you may begin.
Thank you.
I'd like to welcome everyone to the call hosting the call today are high request Chief Executive Officer.
And Chief Financial Officer, David Burnett.
Take a moment to read the safe Harbor statement.
This conference call contains forward looking statements as defined within section 27 of the Securities Act of 1933 as amended and section 21 E.
And the Securities Exchange Act 1934 as amended these forward looking statements are terms such as anticipate expect intend may will should or other comparable terms involve risks uncertainties, because they relate to events and depend on circumstances that will occur in the future. These statements include statements regarding the intent belief.
The current expectations of higher class I members of its management as well as the assumptions on which such statements are based prospective investors are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in <unk> periodic reports filed with the Securities Exchange Commission.
Actual results may differ materially from those contemplated by such forward looking statements, except as required by federal Securities Law <unk> undertakes no obligation to update or revise forward looking statements to reflect changed conditions.
I would now like to turn the call over to the Chief Executive Officer of Markwest requirements go ahead Rick.
Thank you everyone for joining today's call I'll begin by providing an overview of our financial and strategic highlights from the second quarter and year to date, and then I'll turn the call over to David who will.
Share more details around our second quarter results our performance in the second quarter reflects our ability to deliver solid results. Despite what I can what I think can accurately be described as a difficult economic environment. As I have frequently said, we have a unique model for the staffing industry and our results this quarter reflect the strength of the <unk>.
Franchise model, our franchisees are entrepreneurial and incentivize to run a successful office no matter, what the market environment and we are seeing solid exactly solid execution across the franchise base. This quarter also includes MRI network and the over 200 franchise offices, we on boarded.
As part of that acquisition at the end of last year MRI as a top permanent placement in executive search and professional staffing network based in the United States and one of the largest executive recruiting networks in the world.
The addition of MRI allowed us to immediately scale our presence in the executive search segment and is further enhanced and strengthened our broader franchise model in.
In the quarter, our total revenue grew 12, 4% to $9 million.
Franchise royalties increased 25% to $8 7 million compared to $7 2 million in the prior year period system wide sales for the quarter increased to $157 million compared to $120 million for the second quarter of 2022.
While the majority of the growth in system wide sales came from the addition of MRI some of our smaller ray offerings, such as driver question higher Quest House also contributed.
Also like to point out that our that both are higher quest direct and snelling franchisees held their own despite the soft macro environment with year over year declines of 4.4% and nine 2% respectively.
For the six months ended June 32023, total revenue was $18 8 million, an increase of 25, 3% compared to $15 million in the prior year period and franchise royalties increased 37% to $18 million compared to $13 8 million for the <unk>.
Six months ended June 30th 2022 S.
SG&A was $5 6 million in the second quarter of 2023, an increase of $74 five per cent compared to the second quarter of 'twenty to the.
The increase was primarily related to ongoing costs related to the MRI acquisition and increased workers compensation costs in the second quarter MRI.
MRI was a large acquisition for us as we continue to integrate MRI and drive synergies across our business, we expect to bring expenses down over the balance of the year in the second quarter, we continued to make progress and excluding the effect of workers' compensation insurance Q2, SG&A was approximately $4 9 million.
As compared to $5 7 million in Q1, we just wanted to make sure that we drive synergies thoughtfully and in a sustained fashion.
Our positioning continues to improve with an increasingly diverse mix of staffing options and a strong presence across key the key geographic areas as we continue to drive organic growth integrate acquisitions into our business and drive synergies, we're confident that we'll be able to drive growth and improved performance for the long term.
With that I'll pass it along to our CFO , David Burnett, who will provide a closer look at our second quarter results David.
Thank you Rick and good afternoon, everyone. Thank you for joining us today.
Expanding on some of the numbers Rick mentioned, let's start with total revenue, which for the second quarter of 2023 was $9 million compared to $8 million for the same quarter last year.
An increase of 12, 4%.
Our total revenue was made up of two components franchise royalties, which is our primary source of revenue, making up approximately 95% of total revenue.
And service revenue, which is generated from certain services and interest charge to our franchisees.
Other miscellaneous revenue was classified with service revenue.
We did not report any revenue from company owned operations, although at June 30.
2023, we earned one location classified as held for sale and reported below the line as discontinued operations.
For continuing operations franchise royalties for the second quarter were $8 7 million compared to $7 2 million for the same quarter last year, an increase of 25%.
MRI network accounted for $1 9 million of the increase in royalties for the second quarter as royalties from preexisting locations decreased by approximately $430000.
Underlying the growth in royalties our system wide sales, which are not part of our revenue, but can serve as a key performance indicator.
System wide sales reflect sales at all offices, including those classified as discontinued it serves as a basis for most of our royalty revenue.
Systemwide sales for the second quarter were $157 million compared to $120 million for the same period in 2022, an increase of 38%.
Similar to the growth in royalties growth in system wide sales was driven by the addition of MRI network, which accounted for $43 5 million of the increase in system wide sales for the second quarter sales from pre existing locations decreased by approximately $6 6 million.
Service revenue, which is generated from certain interest charge to our franchisees service fees and other miscellaneous revenues such as license fees was 286000 for the second quarter compared to 779000 for the same quarter a year ago.
Service revenue will fluctuate from quarter to quarter based on a number of factors, including changes in the volume and mix of system wide sales changes in accounts receivable insurance renewals and similar dynamics.
Selling general.
General and administrative expenses for the second quarter were $5 6 million compared to $3 2 million in the prior year period that is an increase of 74, 5%.
As Rick referenced earlier, the increase was primarily driven by a few large items.
The predominant item driving the increase in SG&A as compensation and benefits compensation related expenses have always been the largest components of SG&A.
Comp and benefits for the second quarter was $3 2 million versus $2 3 million in the prior year period.
Since the acquisition, we have absorbed significant personnel costs as we integrate MRI network into our preexisting operations.
We are handling the integration in a disciplined manner and hopes of creating an annuity like payback from cost savings over the foreseeable future.
Second we had an $878000 swing in workers compensation expense for the second quarter in 2023 Workers' compensation expense was approximately 690000 compared to a $188000.
Benefit and workers' compensation in the second quarter of 2022.
The increase primarily relates to changes in rates that we are unable to immediately pass along to our franchisees.
Generally workers' compensation expense will fluctuate quarter to quarter based on the mix of worker classifications, the level of payroll and claims resolution both recent and historical.
In the past we have benefited from the run off of older claims that were acquired in the Snelling acquisition from 2021, but does have now largely been realized.
In addition to increased salaries and benefits. We have also absorbed other MRI network SG&A expenses, including marketing and.
Insurance.
Personal fees and alike. These.
These increases are evident in our SG&A cost for the second quarter and more so in the year to date year to date results.
As we communicated in our last earnings call, we expect to carry certain transition items and associated expenses well into 2023 to support our expanded operations.
The increase in SG&A can be felt and income from operations, which is total revenue less SG&A depreciation and amortization.
Income from operations was $2 7 million in the second quarter versus $4 3 million in the prior year period, a decrease of 37, 4%.
Net income includes income from operations adjusted for miscellaneous items interest income taxes and discontinued operations.
All in net income for the quarter was 2.0 million or 15 cents per diluted share.
Compared to net income of $4 9 million or <unk> 36 per diluted share in the second quarter last year net.
Net income for the second quarter of 2022 includes $1 3 million of gains from the conversion of acquired operations into franchises.
Adjusted EBITDA in the second quarter of 2023 was $3 9 million compared to $5 8 million in the second quarter of last year.
We believe adjusted EBITDA is a relevant metric for us due to the size of certain noncash operating expenses running through our P&L.
Detailed reconciliations of adjusted EBITDA to net income is provided in our 10-Q, which was filed this afternoon.
Moving on now to the balance sheet. Our current assets at June 32023 were $57 9 million compared to $51 9 million at December 31, 2022.
Current assets as of June 30 included $2 million of cash and $51 million of accounts receivable.
While current assets at December 31, 2022 included $3 million of cash and $45 3 million of accounts receivable.
Current assets exceeded current liabilities by $17 3 million at June 30 versus year end when working capital was $15 2 million.
The increase in working capital is driven by the increase in accounts receivable offset partially by a corresponding increase in the credit line.
At June 30, we had $16 5 million drawn on our credit facility and another $23 2 million and availability assuming continued covenant compliance.
We believe our credit facility provides us with flexibility and room for short term working capital needs as well as the capacity to capitalize on potential acquisitions.
We have paid a regular quarterly dividend since the third quarter of 2020, continuing that pattern, we paid a <unk> <unk> per common share dividend on June 15th 2023 to shareholders of record on June 1st.
We expect to continue to pay our shareholders a dividend each quarter subject to the board's discretion.
With that I will turn the call back over to Rick for some closing comments.
Thanks, David to conclude we are very pleased with our performance this quarter, especially in the face of a more challenging economic environment. Our results are a testament to the innovative franchise or model and the strength of our business initiatives that include synergistic mix of strong organic growth and accretive M&A activity.
As always I would like to thank our employees for their hard work and dedication this quarter and a C. E O higher quest I look forward to continuing to drive operational success and value for our shareholders with that we can now open the line to questions. Thank you.
Thank you very much Rick we are now opening the floor for questions. If you would like to ask a question. Please press star one on your phone keypad now confirmation tone will indicate your line is in the question you May Press Star two if you would like to remove your question from Nicky to any participants using speaker equipment. It may be that.
So you can pick up your handset before you press the keys piece Bulls Amendment Lusby poll for questions.
Thank you. Your first question is coming from Mike Baker of D. A Davidson Mike Your line is live.
Okay, Hey, thanks, guys I'm. So it sounds like you saw a little bit of a organic growth slowdown Ah I presume that's a function of the slowing our employment growth that we've seen over the last couple of months, but it you know is that the right way to think about it or is there something else going on in and I guess, if you could help us sort of frame.
Up how we should think about revenues for the third and fourth quarter.
Thanks, Mike So.
Realistically.
Our results are somewhat in line with all the other companies that have been reported thus far so for example.
People ready was down I think 16% and if you look at from a pump placement standpoint, most of them are running down 25% to 30%. So that gives you an idea of what the sort of the staffing in the recruiting industry is experiencing.
Our instance, particularly on the staffing side, we exceeded at least what's been reported thus far by our peers.
On the recruiting and Perm placement side, we're probably right in the middle of what everybody else is reporting that said as I said earlier, let's say last quarter.
The.
Our geographic mix is working in our favor as far as on the staffing side I think that if you look at the overall.
Economy, and you know clearly there are places where.
Jobs are.
Are you know as you know unemployment is softening and therefore, you know temporary staffing definitely gets definitely gets hit with that like I said, we're seeing a bit less of an impact because of our heavy exposure in Texas and Florida.
I would expect you know I haven't seen anything in this quarter or and really don't see anything coming from the fed that would get me to believe that we're gonna get relief anytime before the end of the year and so I think that you know I don't I.
Don't see that at least from internal growth I don't know I don't see that recovering until the economy are.
<unk> begins to recover and you know even I remember sitting probably in a call at the end of the year.
Kind of like look you can't forecast, what you know what the economy is going to do and we are definitely susceptible to it but all that being said is you know I don't expect our.
Same store sales to improve.
You know any time before the end of the year I'm not seeing but if something happens where the economy does turn we'll be right with it but I do again want to point out that the.
You know lets say, 6% blended decline we've seen in our existing staffing of offices is actually.
Really good comparison to our to our peers. So I don't know if that answers your question, but.
Hopefully I did yeah, no that definitely helps.
And you know I guess, if I could ask one more moving down the P&L, we understand I think the you know the sticky costs, an MRI, which should come down over time, but but my take awhile you know any way to how should we sort of think about the expense rate in the coming quarters.
Excluding workers' comp, which I understand is volatile.
So the good news is during <unk>.
The second quarter we.
It's mostly through attrition, but basically we were able to reduce our perm staffing costs by close to $900000 on an annualized basis.
Sitting within that pattern of again rationalizing our staff size too.
You know to the revenues that we have.
And.
Even during you know as I pointed out in my reading there were some other you know in my presentation, there, whereas the number of.
Other costs that went away in the second quarter, and so we're not getting that far off.
Of.
You know the Q2 still contained obviously a lot of those costs came off during the quarter and so I would say Q3 might still have a little bit of extra expense from the MRI acquisition, but I would say that the costs from.
Let's say a legacy standpoint will pretty much be.
We'll have flown through by the end of the quarter, So Q3 should be up.
They are the reasonable number Q4, we really should be at where we are now.
That can change based on you know fed keeps raising rates revenues keep softening we may have to make other unanticipated cuts, but I guess, what I'm, saying is we are.
We have made a lot of the cuts that we.
Had planned on making there are still another.
You know, there's still a fair bit of ones that we can make but they're more in the lines of.
What I would consider to be investments.
Meaning you know and Ive brought this example up in the last earnings call and I bring it up again, let's just say that franchise sales as an example, well.
As long as we have new units being sold we'll keep doing that you know, we'll keep we'll keep devoting those resources, but.
If we get to a point, where we start thinking where we're fighting the fed.
You know that that's an area, where there is still opportunities to reduce costs, but.
What I'm, saying then is.
You know, it's gonna be situational I wish I could tell you. Yeah. You know SG&A is going to drop. Another you know is going to drop another $2 million a year annualized, but it's really going to be based off of what we see in demand.
And again there are still a few cuts to be made but most of them have been made they just werent fully reflected in Q2.
Okay Yep makes sense understood. Thanks, I'll turn it over to someone else.
Yeah.
Thank you very much. Your next question is coming from Kevin Steinke of Barrington Research, Kevin Your line is life.
Thank you good afternoon.
You know with regard to the.
Our revenue outlook again, I know it's a.
We were the environment here.
Third quarter.
Historically, there's been a a.
A stronger quarter sequentially versus the second quarter, and I think you've talked about that.
Effect might be viewed as a bit as well by MRI, but.
Is there any reason to believe that that historical trend can continue or would maybe be disrupted due to the economy or.
Hum.
No.
Do you have any visibility into that at this point.
So that's a great question, Kevin the reality is that <unk>.
Q3 is generally our best quarter, you're absolutely right.
The state of the economy is going to affect whether let's say Q3 is better than Q2, it'll probably be but will it be let's say as good as it's supposed to be.
Hard to completely say because even back in April our comparisons were let's say a year over year comparisons will probably stronger in early April than what they were let's say in late June .
And so.
Q3 may be let's say not as pronounced of an increase is what we would normally expect to see.
If that answers your question.
Yes, no that that's helpful.
A good insight.
And you mentioned there are some of the.
I guess you could call them growth related cost that you brought on with MRI, you mentioned franchise sales.
And I think you've talked about training.
Costs in the past.
You know if you have you seen it.
It's still early on but have you seen some of the benefits of retaining those costs thus far.
And you know could the economy.
Impact maybe the returns that you.
Get from those are expenses.
Expenses in the near term.
Yeah, I don't know if that because of that maybe you'd be willing to hang onto them a little bit longer to see how they benefit you on the economy strengthens or yeah.
Yeah, Hi, how are you kind of think about.
That that dynamic.
So.
They're they're three to me there's three types of.
I'll say investments right you have you have some that are like truly.
I don't say frivolous, we don't do anything that's frivolous, but are ones that you only do in a really good economy and you know when when things arent very good you get rid of all of those weeks, we've gotten rid of.
There are other ones that the economy can absolutely kill and you can easily spin them back up once the economy is good.
<unk> sales probably fits that one perfectly right. It's it's something that is if if we were to go into a full on recession.
We're not going to sell a lot of franchises and therefore, it's something that's harder to justify spending a lot of money on.
But then you get to a third group of investments, let's say I T.
So the things that really.
Hey off in the long term they don't pay off in the short run and frankly, unless the economy gets to be.
You know so bad to the extent that our cash flow is like truly impacted we're gonna probably keep spending that money, even if it impacts our earnings in a negative way in the shorter run because frankly, that's the that's the that's that innovation that will keep us sort.
The head of the game and that's what our strong balance sheet allows us to continue to do and so we're just really going to be judicious with the cuts we with the cuts we make I mean, it's not as you know, it's not an easy environment out there and yet we're still performing reasonably well, but I wish we'd be doing better of course I do.
And you know, but there are certain segments of the economy that are really that are really struggling I was reading about maybe six weeks ago, where like one third of all of the jobs that had been lost in the last like six months in the United States are in.
The I T sector.
You know our and I brought this up at our last earnings call is how much our MRI I T related.
Franchisees are struggling and.
When I read that after that it's like well that makes sense of it if there's a third of all of the job losses or in one segment. It certainly makes sense why they're struggling all that being said.
It was literally just speaking with somebody before the call and they are starting to see it improve a little bit. My point is is I'm not going to cut you know unless we were starting has really struggled from a cash flow standpoint, I'm not going to cut things that we're investing that will have a long term impact on the profitability of the company.
I certainly will cut things that can either be easily we spun up or that are you know really should only be being done in a good economy I don't know if that answers. Your question really but you know the where were very.
You know, where we're careful in so far as you know, we're not going to we're not going to spend crazy money in a down economy.
But we're also not going to kill our future just to keep the next couple of quarters looking good.
Yeah, I would say absolutely, yes that the answer to the question. That's that's great insight.
Lastly, I wanted to.
Ask about how you're thinking about.
Acquisitions in the current environment.
If this environment might present more opportunities as well.
Other.
Competitors struggle, maybe more than you are in this environment.
You know, what you're seeing on deal flow and.
Hum.
Pricing and those sorts of dynamics.
So first I'll just repeat one thing that I've said numerous times, which is the one advantage.
Of a recession.
Is that it tends to create.
More opportunities for us and better pricing and so I will still stick by that in that there are.
You know more opportunities right now than what let's say there were six months ago, now I'm, not sitting there and saying where.
Feeding people off with a stick who are trying to you know throw their businesses at us that's not true, but there are definitely.
More serious opportunities for us as far as our attitude towards buying them in.
Is that we are you know we are very much in the market to buy for two reasons really beyond beyond let's say just normal strategically we've been doing it for five years now and we intend to keep doing it because so beyond the fact that it just hits are normal.
Business process.
In specific now obviously with our current HQ D and snelling business down.
Layering on an acquisition.
We'll be easier, we have probably a bit of slack in our Perm staff right now and so we'd be able to take on an acquisition without adding.
As much staff as maybe we would have to in the in the past.
We're probably running.
30 to 50 million Bucks on an annualized basis behind what we would have been.
You know what I would've expected.
Prior to the prior to the economy slowing down here.
And so obviously, if we did a 30 or $40 million and we haven't really cut it really cut perm payroll as it relates to H D D and higher cost direct and snelling yet.
And so again, we could easily layer on at $25 million to $30 million acquisition without adding much staff and so from that perspective, it would be a bit more lucrative than normal. So we're you know very.
Desirous of finding an acquisition that way.
But the other but that's got to be tempered with the economy is down a bit.
And so.
Have to be careful as far as sellers expectations, because obviously theyre going to look back to 2022 and say that's what the price should be based off of and we're gonna be looking more yeah, well. We're in mid 'twenty three things are different now price is a bit different and so that kind of puts a damper on getting a deal.
<unk> done, but again I would argue the good point about it too is now we know what the run rate is in an economy that isn't.
Amped up by post Covid.
Demand and things like that so I think it gives us a fair representation of.
What we're buying and it gives us more upside if we if we.
You know because were buying it in the midst of an uncertain economy. So we're bullish on that.
And again, our VP of corporate development is working diligently lining up perspective acquisitions.
Okay, Yeah, yeah, great insight.
Thanks for taking the questions al I'll turn it over.
Thank you Kevin.
Thank you very much. Your next question is coming from Aaron Edelheit of mindset capital.
Your line is nice.
Hi, Rick I wanted to ask you a last quarter when we talk.
On the earnings conference call, you kind of alluded to the fact that this was going to be a messy quarter.
And when I see the workers comp.
Kind of increasing and I see the SG&A that you're kind of working through very thoughtfully.
And I look out to next quarter based on what I'm hearing and I I don't want to get a false expectation about what I'm hearing from here, which we should see a sequential increase assuming nothing crazy happens just from seasonal strength in terms of revenue you have bad you're working off of it.
Expenses.
And so.
We should see I mean, it just even higher revenue and lower expenses, the third quarter should be.
A much better like EPS quarter am I hearing that.
Right or is that the right way I should be thinking about and then maybe this is being the messy trough and plus some of the slowing of the economy.
So.
I mean, the elephant in the room is the economy itself. So I.
I'm always golf shoes, and what I say simply because I don't know what the fed is going to do and how that's going to impact business.
And or for that matter, you know downgrades of regional banks or are they going to start you know really cutting back on lending on commercial projects and things like that there's a lot of things that good.
[noise] affect what I'm, saying right now so realizing.
Everything that I say it can be totally different a week from now.
That said third quarter is our strongest quarter typically and sequentially it should be better as I said in the answering one of the questions was.
You know if though that it continues to weaken.
We would've gained by a better quarter, we might lose because of a weaker economy and so I want to leave that open it certainly shouldn't be from a sales standpoint, it certainly shouldn't be worse in the second quarter worst case, it shouldn't be and as some of the costs that we dropped in the second quarter.
You know in the midst of it we should have the benefit in the third quarter of them being completely out and so I definitely believe that SG&A will be.
Less.
With the exception of workers' comp, which is somewhat unpredictable one of the.
Parts of the workers comp.
That has made the comparisons bad we had.
Benefited from the run off of some old Snelling claims which weren't in our.
You know, which was in our presentations in the past and so you know part of it we had some unfavorable.
Comparisons, but those.
Should start going away as well we've had three quarters in a row now where workers' comp has been a drag on earnings and not a positive well sooner.
Sooner or later that should.
So that should level off again as the benefit that we had from Sterling falls away and we should benefit from that.
There are other expenses beyond personnel that again, we dropped in the second quarter that should be fully reflected in the third quarter. So yes, I mean from my perspective things should be better now whether you know but.
I'm not suggesting it's time to break open the champagne either there are still a lot of clouds out there from the economy and you know where we are hanging in there really I think it's really well, especially again as you said to look at the comparisons to our peers.
And we're holding out very well.
But I don't want that's very healthy I don't I don't I don't want I don't want to be you know I don't want to be just two celebratory right now either because you know things outside of our control can happen.
Gotcha. So you know the way that I have been thinking about it and I think it's just kind of confirming it as you took on a big acquisition, you've been really thoughtful about the expense base about how it can help you grow in the long term, we are having a short term hit shareholders from that SG&A is.
Going to slowly start running off workers' comp has been elevated more than normal.
Then on top you have kind of a slowing economy, but on the positive side I guess, if I just switch into my next question and I just wanted to make sure that I'm as a long term shareholder that I am viewing things the right way and I know that youre going to caution me, but I think of higher.
It's building up a stream of cash flows.
And you acquired MRI, you kind of use that line of credit you can now see you paying off that line of credit every quarter.
And you have your a or it's going to peak.
In Q3.
So.
After it peaks because of just the seasonality right you should pay down even more of that line of credit outside of any acquisitions.
And at the same time, so it's kind of like your reloaded for.
Hopefully a very full pipeline and I just wanted to ask more it sounds like with the slowing of the economy, what I've always thought of higher Acquest Ystad, Yeah short term results, maybe hit a little but it increases the odds of you getting an acquisition.
And because and that you should be able to you're now in a much much stronger place because you're just reducing cash flow to basically go out and reload and I wanted to ask specifically about kind of the bid ask.
Of acquisitions is that.
In terms of what sellers are asking and what you may want to acquire or do you feel it's closer now than it was in the past and I just a little more details about.
Do you how do you feel about another kind of acquisition before year end.
So there was a lot in that there was a lot in that yeah, no I'm sorry, there's a lot of need go back let me go back to the first part of it as far as your long term.
Summation is.
Very close to how I would view it as well.
We're out there.
Trying to grow as much as we can organically, but in the meantime, we're also being aggressive in making accretive acquisitions.
And.
Good times Bad times.
We're still ultimately building.
That revenue stream right. So we're gonna be lumpy as all get out because we keep doing acquisitions in.
You know, it's not like we're sitting there and letting everything sink in for a year and a half and then.
Before we move onto the next one and so.
That absolutely is and it is existing the other part I want to make sure because I don't know if.
It's not properly convey this.
The MRI you know as much as we talk about the MRI expenses I don't want you to think that the MRI MRI deal is done.
Quarterly for Us in spite of the fact that it has been more negatively impacted by the.
Recession or at least recessionary factors than higher quest direct and snelling.
Frankly, it's still been a profitable.
Acquisition for us despite even carrying some of the extra cost that we are now we are at it has been an accretive.
Acquisitions, so I just want to make sure that anybody who's listening understands that it has been a.
It has worked obviously to the extent that its sales and revenues are down.
Limits the upside that we would otherwise have been experiencing.
Experiencing but frankly.
It has.
Panned out the way you know the way maybe not the way it's supposed to because of the economy, but it is actually panned out well for for shareholders reasonably well given given what the economy is and that's obviously one of those things at once.
Once the economy straightens back out.
That should increase even more now as far as the second part of your question.
One of the as far as like bid ask and things like that there are there are kind of several ways that we can that we can.
Benefit as a as a buyer from this well.
One thing is is a.
And I keep saying recession, but we're really.
You know we're we're in recessions in certain places in other places we're not in a recession at least is in my way of looking at it and I brought this up in the last quarter for example, Florida, Texas, There's there's no way to look at it as being in a recession there there.
Performing very well.
At least on the higher quest direct in the Snelling side and so.
It's hard for me to sit there and say recession, because it doesn't really.
It doesn't really apply in a lot of the markets that we're that we're in.
But.
To the extent that it.
Does in other markets it creates distress in some of the companies and it will absolutely bring the price down.
So and obviously one of the biggest ways that we can ultimately benefit we don't we only hit these in one out of you know maybe one out of five acquisitions, but I look at something like the Snelling acquisition.
We had a book of $5.6 million bargain purchase agreement and we probably made another few million bucks on running off their workers' comp So I mean.
That little that deal literally we almost got it for free when push comes to shove and so we're obviously.
Hopefully going to be the beneficiary of somebody who overextended themselves and we're gonna be able to sort of find them right at the right time that being said, we don't have to do that either.
We just find a good company at a fair price that works out okay for us as well the.
Tricky part for US is simply it has to fit our geography, it has to fit sort of where our network is.
And the seller you know a lot of times.
And we have a whole laundry list of things that we look for and so we are pretty choosy, but an uncertain economy makes it so that.
A lot of people are more willing to sell because they want to they want to grab what they have and maybe for the last.
Three years, they've been making a lot of extra money and they see it starting to decline and theyre more anxious to sell and then we have an easier time getting to the you know getting to the right.
Getting to the right price, but.
All of that being said.
You know the deals have been there for the last available for the last four years and so I'm not trying to say either that we have five times as many deals available to us now than what we did a year ago.
But we do but there is there are more I will say that.
And we are.
We had the exact same attitude in it and I wanted to say one last point you brought up the point as far as our borrowings and stuff like that and it's absolutely.
Accurate as well that you know for.
Most of the year, our borrowings have been heavier than what they have historically been.
Those borrowings keep coming down and.
A year ago, we were borrowing at something like 3.25% or something like that and so in a much smaller borrowings, but now we're borrowing at.
Six and a half 7% whatever it is on a much higher amount and so that has impacted our earnings as well, even if no decent acquisitions come about that money keeps you know that money keeps rolling in and we will benefit from some can feel.
I think our interest expense for the quarter was up.
You know $700000 or something like that which you know, which makes a difference too and if we do nothing at the rate. We're going you know it'll be you know pay.
Pay off in three or four quarters and that will go away and that'll be added income that way.
Of course, I would expect I would expect an acquisition before then I'm not saying, there's one now, but I'm, saying that I would you know I would certainly expect one because we've done most of the work that we've needed to do on MRI and so we're in a position where operationally we can.
Totally do an acquisition, it's just a question of coming to the right buyer and the right price.
Alright seller, I'm, sorry, and the right price.
Well, great well, thank you, Rick and happy hunting.
Thank you.
Thank you very much just as a reminder, if anyone has any remaining questions. Please press star one on your phone keypad now.
Your next question is coming from my companies of E. N E F Hutton Mike Your line is live.
Yeah, Hi, Eric Thanks for taking my question here.
A lot of great insight on the call as usual I just got a quick one for you.
On a kind of returning back to the macro I guess, obviously demand is softening a bit can you just tell tell me what you're seeing.
Generally speaking regarding wages.
Yeah.
So wages have.
Continued to go up part.
Part of it is in many of the states that we operate in.
Have brought you know have minimum wage escalators.
And while we don't typically pay minimum wage.
It definitely impacts, particularly in the higher quest direct in the Snelling divisions it impacts.
Even people, who are making more than minimum wage and so there has definitely been a fair bit of pressure on wages again, just simply because literally the minimum wage keeps going up.
Got it and would you say I mean, just relative are comparing to.
The growth you're seeing in wages over the previous quarters is it slow is decelerating is it accelerating or just kind of the same trend continuing.
I would say there's still a lot.
A pressure upwards.
Sure.
Okay.
That's correct, but maybe not and now that that said, it's certainly not.
The second quarter of 2021 in particular I'm you know there was a lot of upward pressure that I'm not suggesting that its like that either but again there is just a.
Constant.
There really is a constant shortage look I was on a I was flying through Minneapolis, the other day and the.
You've got a restaurant in the middle of the airport. It was closed until two o'clock.
Because they didn't have enough people.
Yeah.
Okay. Thank you.
Sure thing.
Yeah.
Thank you very much we have now reached the end of our question answer session and I will now turn the call back over to the management for closing comments.
Well. Thank you everybody for joining us on the call. We obviously wish the economy was a bit stronger than we would have had a bit better results that said I think again when you look at our results compared to our peers and.
When you factor in the workers' comp obstacles we've had.
I think you'd agree that we.
Have performed.
Pretty well given the circumstances and.
As we try to convey every time as well.
We're focused on the long term and our results will be lumpy throughout.
But that's why we retain a conservative balance sheet. So that we have opportunities that we're able to jump on opportunities and so again I. Thank you for your time and your interest and we look forward to the future. Thank you and have a good night.
Yeah.
Thank you very much. This does conclude today's conference and you may disconnect. Your phone lines at this time, thank you feel participation.
Okay.
Yeah.
Okay.