Q3 2023 Consensus Cloud Solutions Inc Earnings Call

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Speaker 4: Good day ladies and gentlemen and welcome to the consensus Q3 2023 earnings call.

Good day, ladies and gentlemen, and welcome to the consensus.

Q3, 2023 earnings call.

Speaker 4: My name is Paul and I will be the operator assisting you today.

My name is Paul and I will be the operator, assisting you today.

Speaker 4: At this time, all participants are in a listen-only mode. A question and after session will follow the former presentation.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

Speaker 4: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. On this call from consensus will be Scott Tarekki, CEO , John Nebergo, COO, Jim Malone, CFO , and Adam Varan, Senior Vice President of Finance.

Should require operator assistance during the conference. Please press star zero on your telephone keypad on.

On this call from consensus will be Scott to Rekey CEO, John neighbor Golf C O O Jim Malone CFO.

Senior Vice President of finance.

Speaker 4: I will now turn the call over to Adam Varan, Senior Vice President of Finance at Consensus. Thank you. You may be...

I will now turn the call over to Adam <unk> Senior Vice President of Finance at consensus. Thank you you may begin.

Speaker 5: Good afternoon and welcome to the consensus investor call to discuss our Q3 2023 financial result.

Good afternoon, and welcome to the consensus Investor call to discuss our Q3 2023 financial results.

Speaker 5: Other key information in 2023 guide.

Other key information in 2023 guidance.

Speaker 5: Joining me today are Scott Tareeke, CEO , John Nevergall, COO, and Jim Malone's CFO .

Joining me today are Scott <unk>, CEO, John <unk>, CFO and Jim Malone CFO.

The earnings call will begin with Scott providing opening remarks.

Speaker 5: The Ernie's call will begin with Scott providing opening remarks.

Speaker 5: John will give you an update on our operational progress since our Q2 Investor call. And then Jim will discuss the Q3 2023 financial results and 23 guidance.

John will give you an update.

On our operational progress since our Q2 Investor call and then Jim will discuss the Q3 2023 financial results and 'twenty three guidance.

Speaker 5: After we finish our prepared remarks, we will conduct a Q&A session.

After we finish our prepared remarks.

We will conduct a Q&A session.

Speaker 5: At that time, the operator will instruct you on the procedures for asking your questions.

At that time, the operator will instruct you on the procedures for asking a question.

Speaker 5: Before we get our preferred remarks, allow me to direct you to the safe harbor language on slide two.

Before we begin our prepared remarks allow me to direct you to the Safe Harbor language on slide two.

Speaker 5: As you know, this call and the webcast will include forward-looking statements.

As you know this call and the webcast will include forward looking statements such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results.

Speaker 5: Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results.

Speaker 5: Some of those risks and uncertainties include, but are not limited to the risk factors outlined on slide three that we have disclosed in our 10K SEC filing, as well as the summary of those risk factors that we have included as part of the slide show for the web.

Some of those risks and uncertainties include but are not limited to the risk factors outlined on slide three that we have disclosed in our 10-K SEC filings.

As well as a summary of those risk factors that we have included as part of the slideshow for the webcast. We refer you to discussions in those documents regarding safe Harbor language as well as forward looking statements.

Speaker 5: We refer you to discussions and those documents regarding safe harbor language, as well as forward looking statements. Now, let me turn.

Now, let me turn the call over to Scott.

Thank you Ed.

Speaker 6: Thank you, Adam. There's now been two years since our spin. I would like to make some brief comments and we've looked back over these past two years. As you know, we spun with the go-to-market focus and product roadmap aimed at the healthcare sector. We've made substantial investments in strides in this space with more than half of our corporate revenue now coming from the healthcare sector.

It has now been two years since our spin I would like to make some brief comments and look back over these past two years as you know we spun with the go to market focus and product roadmap aimed at the health care sector.

We've made substantial investments in strides in this space with more than half of our corporate revenue now coming from the health care sector. However, we have also seen inflation in a tight labor market impact revenue growth in this piece of our business.

Speaker 6: However, we've also seen inflation in a tight labor market impact revenue growth in this piece of our business.

Speaker 6: In fact, in the past two quarters, we have seen overall corporate revenue growth of approximately 3% down from approximately 13% in Q3 of 2022.

In fact in the past two quarters, we have seen overall corporate revenue growth of approximately 3% down from approximately 13% in Q3 of 2022.

Speaker 6: This is driven by a slowdown in revenue generation from our health care customers due to stable usage.

This was driven by a slowdown in revenue generation from our health care customers due to stable usage slower sign ups and a slow ramp of our larger customers.

Speaker 6: slower signups and a slow ramp of our larger custom.

Speaker 6: Until there is a substantial relief in the labor markets, we expect these trends to continue. As we look to next year with continuing uncertainty in both the economy as well as the labor markets, we will be focusing our attention on EBIDA and free cash flow generation. As a result, we will reduce our capitalized investments from the level of the past two years while still investing in the business at a rate higher than prior to the spin.

Well there is a substantial relief in the labor markets. We expect these trends to continue.

As we look to next year with continuing uncertainty in both the economy as well as the labor markets, we will be focusing our attention on EBITDA and free cash flow generation.

As a result, we will reduce our capitalize investments from the level of the past two years, while still investing in the business at a rate higher than prior to the spin.

Speaker 6: The record cash balances of $156 million in future free cash flow will be dedicated to repurchasing our equity and debt security.

The record cash balances of $156 million in future free cash flow will be dedicated to repurchasing our equity and debt securities now that we've cleared the two year Mark from the spin we are able to repurchase debt and as a result, the board has authorized a $300 million repurchase program over the next three years.

Speaker 6: Now that we have cleared the two year mark from the spin, we are able to repurchase debt and as a result the board has authorized a $300 million dollar repurchase program over the next three years.

Speaker 6: This program covers both the 6% notes that mature in October of 2026 as well as the 6.5% notes due in October of 2028. These repurchases can take a variety of forms and will be opportunistic, similar in manner to our existing stock repurchase program.

This program covers both the 6% notes that mature in October of 2026, as well as the six 5% notes due in October of 2028.

These repurchases can take a variety of forms and we'll be opportunistic similar manner to our existing stock repurchase program.

Speaker 6: While we are early in the budgeting process, I would expect negligible overall revenue growth in 2024, with continuing decline in SOHO revenues offset by mid-single-digit growth in our corporate channel. I would also expect greater growth in our EBITDA than in our revenue.

While we are early in the budgeting process I would expect negligible overall revenue growth in 2024 with continuing decline in Soho revenues offset by mid single digit growth in our corporate channel.

I would also expect greater growth in our EBITDA than in our revenue.

Speaker 6: We will be providing full year 2024 guidance on our Q4 earnings call to be held in February .

We will be providing full year 2020 for guidance on our Q4 earnings call to be held in February.

Speaker 6: While our revenues were disappointing in the quarter, there were several factors that affected the results. Within the Soho Channel, we cut a meaningful amount of marketing spend on questionable profitability channels.

While our revenues were disappointing in the quarter. There were several factors that affected the results within the Soho channel, we cut a meaningful amount of marketing spend are questionable profitability channels.

Speaker 6: I would also note that as we discussed last quarter, the price change to that base is complete.

I would also note that as we discussed last quarter the price change to that base is complete.

Speaker 6: On the corporate side, in addition to the headwinds experienced in the healthcare sector, we also completed the migration of our fax box customer base, but did incur customer attrition in the process.

On the corporate side in addition to the headwinds experienced in the health care sector. We also completed the migration of our facts box customer base, but did incur customer attrition in the process. This.

Speaker 6: This was a legacy system that needed to be retired, notwithstanding the customer and revenue loss.

This was a legacy system that needs to be retired notwithstanding the customer and revenue loss.

Speaker 6: On the bright side, our EBITDA margin remains strong at 52.5%, the midpoint of our range, and coupled with interest income on our cash balances and a lower share count, produce year-over-year growth in EPS.

On the bright side, our EBITDA margin remained strong at 52, 5% the midpoint of our range and coupled with interest income on our cash balances and a lower share count produced year over year growth in EPS.

Speaker 6: In addition, we generated a record $50 million of free cash flow for a full fiscal quarter post-spin and, more importantly, $83 million for the nine months. As usual, there are timing differences in payment of estimated taxes and cash collections of receivables.

In addition, we generated a record $50 million of free cash flow for a full fiscal quarter post spin and more importantly, $83 million for the nine months as usual there are timing differences in payment of estimated taxes and cash collections of receivables also as we've noted before due to our debt structure and interest payments, we generate most of our fleet.

Speaker 6: Also, as we've noted before, due to our debt structure and interest payments, we generate most of our free cash flow in quarters one and three.

Cash flow in quarters, one and three.

Speaker 6: I will now turn the call over to John for more detail on the quarter.

I will now turn the call over to John for more detail on the quarter.

Yes.

Speaker 7: Hey, thank you, Scott. As we mentioned on the last call, we held a meeting with the ECFACS partners to discuss tactics for accelerating the rollout. The talks were substantive and all partners agreed that an acceleration of the overall program in 2024 would be a mutual goal.

Hey, Thank you Scott as we mentioned on the last call. We held a meeting with the EC facts partners to discuss tactics for accelerating the rollout of.

The talks were substantive and all partners agreed that an acceleration of the overall program in 2024 would be a mutual goal.

Speaker 7: In that context, we are actively working on acceleration options and are making progress on the overall plan.

In that context, we are actively working on acceleration of options and are making progress on the overall plan.

Speaker 7: While not final, we are encouraged by the direction and anticipate a favorable schedule for next year.

While not final we are encouraged by the direction and anticipate a favorable schedule for next year.

Speaker 7: Now that said, we have seen the hurdles that can be encountered in a project of this scope and are going to be cautious in forecasting any revenue expected from the program next

Now that said, we have seen the hurdles that can be encountered in a project of this scope and go.

Going to be cautious in forecasting any revenue expected from the program next year.

As for the current state of the implementation, we have increased the numbers of facilities using EC facts and while the pure number of facilities is an improvement the level of usage per facility varies and not every location has been fully implemented.

As we have discussed there are nearly 30 other government agencies in the pipeline and while progress is being made the threat of a government shutdown earlier this quarter and the upcoming holiday season have slowed the speed discussions we do not expect any measurable progress on this front until <unk>.

Sometime in 2024.

On the clarity front, we are in the process of implementing our first clarity P. A client who signed last July.

<unk> P. A is a specifically engineered version of clarity aimed at the problem of prior authorization workflow.

Speaker 7: As Scott has mentioned, the slow progress in both closing the deal and implementing the customers are fully on display.

As Scott has mentioned the slow progress in both closing the deal and implementing the customers are fully on display here.

Speaker 7: The deal took 15 months to close and will likely require an additional 12 months to implement.

The deal took 15 months to close and will likely require an additional 12 months to implement.

Speaker 7: in the AI market, this is a typical time frame and is what we can anticipate with each subsequent prospect engagement.

In the AI market. This is a typical timeframe and is what we can anticipate with each subsequent.

Respect engagement.

Speaker 7: Separately, we have launched the Clarity CD product, tuned for clinical documentation administration, and built a pipeline of interest. Our sales team is progressing through those opportunities, and serious discussions are underway.

Separately, we have launched the clarity CD product tuned for clinical documentation administration and built a pipeline of interest our sales team is progressing through those opportunities and serious discussions are underway.

On the sales front for the quarter Q3 bookings came in at $6 $4 million, which was a welcome improvement from both Q1 and Q2 results.

Speaker 7: On the sales front for the quarter, Q3 bookings came in at $6.4 million, which was a welcome improvement from both Q1 and Q2 results.

Speaker 7: Historically, Q3 has been the best month seasonally for sales, and it appears to be holding true this year.

Historically Q3 has been the best month seasonally for sales and it appears to be holding true this year.

Speaker 7: While this result is a welcome improvement sequentially, it is still under last year's Q3 result and year-to-date overall 2023 bookings are still lagging 20% behind our 2022 page.

While this result is a welcome improvement sequentially and is still under last years Q3 results and year to date overall 2023 bookings are still lagging 20% behind our 2022 pace.

Speaker 7: Our advanced product sales came in just short of a million dollars, and while that was an improvement over Q2, that also still lags behind the 2022 pace.

Our advanced product sales came in just short of $1 million and while that was an improvement over Q2 that also still lags behind the 2022 pace.

Speaker 7: We've also continued our aggressive pursuit of harvesting health care accounts from the Soho base into a more expensive corporate product.

We've also continued our aggressive pursuit of harvesting healthcare accounts from the Soho base into a more expensive corporate product.

Speaker 7: For the past several quarters, we have been successfully upgrading more than a thousand SoHo accounts per quarter into a corporate product, and this quarter is no exception with about 1,300 customers upgraded from SoHo.

For the past several quarters, we have been successfully upgrading more than a thousand Soho accounts per quarter into our corporate product and this quarter is no exception with about 1300 customers upgraded from Soho.

While each upgrade is a positive increase in revenue it does come with a negative impact in a couple of key metrics that are important to note first these customers tend to be on the extreme low end of our corporate average revenue per account or ARPA range impacting our overall corporate <unk>.

With downward pressure.

Second the process for changing an account from Soho to corporate include cancellation of the Soho account. This process then create an unfavorable impact on Soho churn as our system calculates to cancellation as it churned accounts. So as you assess our operating metrics.

Be aware that our upgrade program has those impacts.

In the quarter, we were able to close two large hospital system deals with a combined 60, plus hospitals over 400 clinics and more than 100 skilled nursing facilities.

Due to their level of complexity, we anticipate that inflammation will implementation will take most if not all of 2024.

As you will recall from our discussion about the go to market realignment earlier. This year, we established the E Commerce group for all web based self service sales.

This group includes our traditional Soho revenue stream and has been expanded to encompass up market sales to the SMB market.

This quarter the Soho market saw further moderation of the churn that we saw last year due to our price increase rollout.

Churn for the quarter came in just under three 5% a nice improvement from last year's Q3 result.

Now as mentioned earlier that number includes the 1300 accounts that we upgraded to corporate.

As we discussed last call, we continue to see the pace of new ads fall under pre pandemic levels.

As we've also said on our last call. The expectation is that this trend will be the new normal in Soho as we have made the decision to pull back spending in areas of Soho that we found to have questionable profitability.

And we will continue to scrutinize, our marketing spend to ensure high returns for the business.

This quarter, we launched an e-commerce product targeting SMB customers traditionally we had used our inside sales team to sell inbound web opportunities and these form fill customers would be assisted by our lives sales rep. The release of this E frac protect.

<unk> marks our first entry into the self service sales approach for corporate.

Finally on the product front as mentioned earlier, we successfully released clarity CD and we have also successfully completed the J sign High Trust audit.

Now, let me pass the presentation to Jim Malone, our CFO.

Jim.

Thank you John and good afternoon, everyone.

Let's start with our corporate.

Business results.

Q3, 'twenty three revenue was $50 4 million.

An increase of $1.5 million.

Four 3% over the prior year comparable period.

<unk> growth of 13%.

From Q3, 'twenty, one Q3 22.

The corporate revenue growth slowed to 3% from 13% in Q3 22.

Due to an increased number of customers at lower Arps as our Lord as our larger clients remains slow and bolter decision cycles.

And implementation.

Corporate Aqua $312.

<unk> was down $36 or 10, 5%.

From the prior year attributable to the mix of paid ads at a lower oil.

Including Soho accounts moving to corporate.

However, it was similar to the offer as we experienced in Q2.

Monthly churn improved 20 basis points to one 5% over the prior year delivering a trailing 12 month revenue retention over 100%.

Yes.

Moving to Soho result.

Q3, 23 revenue of $40 1 million, a decrease of $2 7 million or six 2% over.

Over the prior comparable period.

This decrease was driven by an anticipated decline.

Our base offset by the impact of price increases in the period.

This was the hardest comparable as the price increase had substantial effect in Q3 22.

But there had not yet been a meaningful increase in churn.

In addition, as Scott noted.

We cut marketing spend with a lifetime value to customer acquisition cost was marginally profitable.

The offer of $15 31 increased by 89 cents.

Or approximately 6% year over year benefiting from the price increase.

Churn declined 10 basis points to three 5% compared to the prior year period and pre price increase levels.

Notwithstanding the above $6 two revenue decline.

In the quarter to full year Soho revenue decline is benefiting from the first half performance.

Of a negative 3% and expect it to improve ending the year within our 2% to 4% guidance range.

Okay.

Moving to Q3 consolidated results revenue of $90 6 million is a decrease of $1 2 million or one 3% over Q3 2022.

Adjusted EBITDA of $47 $5 million was a decrease of $1 6 million over Q3, 2002, or three 2% delivering a 52, 5% margin.

The main drivers of the revenue flow through mentioned above the play and employee costs.

Timing of bad debt expenses, while managing cost to keep the EBITDA margins within the 50% to 55% guide.

<unk> expectations.

The Q3, 2023, non-GAAP tax rate and share count was 19, 1%.

And $19.

7 million shares respectfully.

Note, we repurchased 152000 shares in the quarter and approximately 500000 shares year to date.

Adjusted non-GAAP net income.

$9 7 million increased $1 1 million or three 7% driven by the benefits of interest income of $1 5 million noncash revaluation of intercompany accounts of <unk> 7 million and a lower effective tax rate.

non-GAAP EPS of $1 51.

Was better than the prior your prior comparable year by five 6% or <unk>.

We continue to build our cash position ending the quarter with a record $156 million in cash and cash equivalents.

She is sufficient to fund our operations and debt.

Q3 was a record post spin full full fiscal quarter free cash flow.

$49 $9 million.

Turning to the guidance Q4, 'twenty three guidance range.

The range is as follows.

Revenues between 87, five and 95 million with.

With $89 million at midpoint.

Adjusted non-GAAP EBITDA.

<unk> 46, 3% and $48 2 million with $47 4 million at midpoint.

Adjusted non-GAAP EPS at $1 15 to $1 19.

The $1 17 at midpoint.

For the full year.

Guidance is revenues between 362.

And 365 with $364 million at midpoint.

Adjusted non-GAAP EBITDA between $186 million and $188 million with a $187 million at the midpoint.

Adjusted non-GAAP EPS.

At $5 13.

To $5 17, with $5 and 15 at the <unk>.

Midpoint.

We're planning to file our Q3, two three 10-Q at market close today November November 9th.

That concludes my formal comments.

I'd like to turn the call back to Scott for some final remarks before we move to the Q&A section. Thank.

Thank you.

Thank you Jim before we begin our Q&A session I would like to take the opportunity to talk about our management transition noted in our press release, John <unk>, Our Chief operating officer will step down from this position effective December 31, John.

John will continue as a strategic advisor in 2024 as he Relocates and travels the world I want to thank John for his more than five years of service to the business. He was hired in mid 2018 to grow the business focus the opportunity on the health care sector and build out our management team.

As part of that build out he higher Johnny Hecker, who will become our chief revenue Officer effective January one 2024, as well as the EVP of operations.

I'd ask Johnny to join US now for Q&A and I'll turn it over to the operator to instruct you how to queue for questions.

Thank you we will now be conducting a question and answer session in the interest of time, we ask that you. Please limit yourself to one question.

If you would like to ask a question. Please press star one on your telephone keypad a.

A confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove yourself from the queue.

For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Once again.

Star One if you wish to ask a question at this time.

And one moment, please while we begin.

And once again it is star one if you wish to ask a question today.

Our question comes from Jon <unk> from CJS Securities John Your line is live.

Hi, Good afternoon, it's Pete Lucas for Jon.

I guess start.

Just in terms of the VA rollout how much do you think you can gain from that plan next year on a growth revenue basis, or however, you wanted to find out how should we think about that.

Yes.

That's something we'd like to be able to know as well as I mentioned in my opening remarks, although I gave some directional guidance for next year is clearly not a formal guidance nor is it a budget.

John noted in his comments, we had a very substantive meeting back in late August with not only cognizant.

And there are various representatives.

Shall we sit at almost mid November and there still is a plans being worked through in terms of exactly how the rollout we will proceed.

And if I had to put it into two buckets. The initial phase that we discussed last quarter, then conclude with some 40 sites was done on a site basis and the philosophy was that you could take each individual unit.

Call. It a clinic hospital et cetera, and you would convert everything within that facility.

What they were currently doing.

<unk>.

That's not the way we would generally.

Okay rollout.

A large scale corporate enterprise.

B.

What has occurred is the sort of next phase.

We have been rolling out is John noted. This is we are rolling out more facilities, but not necessarily taking all the pieces.

And in time.

This is an important distinction.

There are layers of.

Methods by which facts can be sent and received within an organization to give you. Some idea there individual numbers point to point communications.

<unk> that travels inbound versus outbound so maybe on servers. So may be associated with multi function devices of which there can be a variety. Thank HP ricoh cannon, lexmark brother et cetera.

There are applications, where you can factually application or it can be received it.

Its a non trivial exercise to think about taking an organization or an office and converting everything they do because likely they use all of these formats. Thank you.

Converting the volume.

Typically what we would do.

We would go in order.

The order would be generally.

How you can get the most users on our platform quickly and also where there's the most concentration of traffic.

And I think as John noted in his remarks, there is an alignment here between the Va's objectives cognizant objectives at our objectives, which is more usage more users even if it's not necessarily a complete facility that transitions over at a moment in time, having said that.

We're still working through with Congress on either.

Exactly what a rollout going forward it looks like.

It's a lengthy answer to let you know that it's very much a work in progress.

What we can say is that there is very little revenue.

In 2023, what we booked to date are more likely to book and the remaining 50 60 days of the year.

So we do believe there will be a substantial uptick although very small base in 2023, even amongst ourselves or some range of what that number could be.

My own my own belief in view is it should be seven digits.

Where it is in the seven digit range is very much a question I think yet to be answered and obviously, we will refine that number and when we release, our 2024 guidance in conjunction with the Q4 call.

We'll have a more explicit I think do you want that.

Yeah.

Very helpful. Thanks, I'll jump back in the queue.

Thank you and once again its star one if you wish to ask a question today and the next question is coming from Fatima <unk> from Citi.

Your line is now.

Hey, Good afternoon, guys. This is mark on for Tim Thanks for taking our questions maybe.

Maybe one for Johnny I understand it's still early days.

Earlier in the process before you get into the CRE overall, but when you take on the CFO role.

Any sort of early points you can share of your clients there should.

Can you maybe expect changes in sales incentives or go to market initiatives.

And then any further color around areas of upside or downside risk as you're going into 2024 aside from the obvious macro headwinds. Thanks.

Yes, hi, Thank you yes, good question.

I think we've started that process earlier this year with the go to market realignment and I had the opportunity on the last earnings call to take everybody through our continuum of customers and how we are.

Migrating our sales motion to be our customers on their on their buying motion.

To be more flexible in the market and I think we're going to continue on that road.

As John mentioned in the remarks.

We have started the.

The e-commerce.

Channel for the corporate space.

That's proven to be successful program. So we can continue down that road.

So the.

The one thing we will definitely be.

In alignment with our customers' buying motion.

<unk>.

Continuing that realignment of our go to <unk>.

Sales and marketing teams.

And the other team will be obviously continuing to analyze our existing customer base.

And that will be down on the.

Vertical.

The most successful for us today, primarily.

Our space, we're seeing a lot of growth in that area.

Scott talked about it in his opening remarks opening remarks.

More than 50% of our corporate revenue by now.

So we're going to continue down that road.

That's correct.

Yeah.

Great. Thank you.

Just one for Scott.

Alright.

Do you guys think going into 2024.

Any sort of guidance on capital allocation strategy or changes there good to see the optionality on the debt side.

That's where our priority here given the macro headwinds.

Yes, we have a related question that came by email, but I'll answer. Your question first and then there is a derivative of that question that came by email, which I'll also address.

<unk>.

We were just to bring everybody up to speed wasn't bulk company spin.

Noted in the opening remarks, but we were limited in our capital allocation strategies to this point and only being able to obviously invest in the company repurchased our equity securities or do M&A, we do.

It's a little bit of M&A very early on in acquiring summit, but thats not really been the focus of the company as you know so most of our capital allocation has been allocated to repurchasing stock, which we've done fairly consistently and of course banking cash.

Now our attention shifts somewhat in that we do have a maturity coming up in a little under three years those will be the 6% notes due October 15% to 26% and then two years later, the 500 willingness perhaps given that we've crossed the two year threshold spin we now have flexibility of buying the secure so in.

In the case of the six of the haves Theyre non coal in the case of the <unk>. They are callable at 103 price because of the movement in interest rates both securities trade below par.

A little unclear exactly the spot price the bonds are not quite as liquid as the stock.

I think it's safe to say the six fives are in the mid eighties and the sixes.

Do you have the nearer term maturity closer to the mid <unk>.

We will be looking.

Board authorized a $200 million repurchase program over the next three years.

Note that it is opportunistic so don't be looking for a tender tomorrow.

Some spot price.

Likely we will spend some time looking at what can be done in the open market not dissimilar to what we do with our equity buyback program.

Clearly as we look at both our cash balances and prospective free cash flow, we will be at least over time allocating.

Hey.

A meaningful amount of that to debt retirement, what I can't tell you at the pace at which it will come.

Or whether it will come in dribs and drabs of chops.

Because the.

State maturities three years away, we want to be we want to get.

The best deal we can on both securities.

We will be looking to buy each tranche.

Well, we'll have to be I'm sure will be asking the question Youll see it in our Qs and our case, how much we purchased.

Each quarter.

And.

I think if you look out over.

Two to three year timeframe.

Will be a significant amount of.

What I'll call the cumulative cash balances if you take what we have today you just accumulate cash over the next two to three years, obviously, we don't have to retire.

The 6% notes at maturity, we can't refinance, but we're also cognizant that it's likely to be a higher interest rate environment.

When we issued the notes back in the summer late summer of 2021 so.

You'll see it the derivative question.

Rich.

Hard to answer.

Is.

Yeah.

Specific question is on free cash flow for 2024, so let's start by where we are in 2023.

So we're at $83 million for the nine months, but Q4 is generally not a cash generative quarter. We've just paid $25 $5 million of interest on the two types of notes also quarter, we pay estimated tax payments.

And then of course, there is the normal capex et cetera that will occur in the quarter. So it is likely to be finished the year below the $83 million number somewhere probably in the mid 70 range.

In terms of the baseline as I look forward.

I don't know based on the last answer how much of that will be purchase of how much of an arbitrage there will be big.

Because recognize we are earning $5 40 on our cash.

So eliminating.

Eliminating the coupon of six six and a half gives us a little bit of Delta.

But I don't know how much will be able to buyback the timing and for that matter. The price. So the way we look at sort of the cash flow in the next year. Once again. These are very rough numbers is budgeting is far from complete.

But we would look at just building cash through the year.

Any interest on it paying the taxes associated with it and then we should do better than that if in fact, we are buying debt in eliminating either a higher coupon and we're getting a discount which I expect for both.

What I think is the most linear.

<unk> sure.

23 to 24 is the reduction in capitalized.

Capex for capitalized lately, we expect that to come down at least $7 million year over year that would flow through directly to free cash flow. So when you get all that together. It means we should be somewhere in the low <unk> next year, hopefully that is a conservative number and we can do better based on what we do.

Believe it will be some EBITDA growth as well as some repurchases of the that the open market, which would give us some incremental leverage it gets just.

$35 40 on cash.

Great. Thanks, Scott next question please.

Thanks.

Thank you and there were no other questions in queue. At this time I would now like to hand, the call back to Scott <unk> for closing remarks.

Thank you Paul and thank you all for joining us today on our Q3 call.

We'll have.

The next earnings call, which of course will be the Q4 call and as I mentioned at the beginning we will have a more robust discussion about 24 guidance that.

That will be sometime in probably the latter part of February 1st week of February of 2024.

Well, we do have an upcoming high yield bond conference.

At the end of this month.

Courtesy of Bank of America Merrill Lynch.

Be there there will be a another conference from <unk> that will be at on the 20th of November that's for the equity holders and then stay tuned for additional press releases for additional conferences, probably more likely at the beginning of next year versus the balance of this year.

And of course, if you have further questions you can contact any one of us and we'd be happy to get back to you. Thank.

Thank you.

Thank you. This does conclude today's conference you may disconnect at this time and have a wonderful day. Thank you for your participation.