Q3 2023 HireQuest Inc Earnings Call
Greetings and welcome to the higher Quest incorporated third quarter 2023 earnings call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Note. This conference is being recorded.
And I would turn the conference over to your host Mr. John Nesbit of IMS Relations, Sir you may begin.
Thank you and good afternoon, everyone I'd like to welcome everybody to the call hosting the call today are higher Quest, Chief Executive Officer, Rick Hermanns, and Chief Financial Officer, David Burnett.
To take a moment to read the safe Harbor statement.
This conference call contains forward looking statements as defined within secured section 27, a of the Securities Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1934 as amended these forward looking statements in terms such as anticipate expect intend may will should and other comps.
Terms involve risks and uncertainties, because they relate to events and depend on circumstances that will occur in the future. These statements include statements regarding the intent belief in current expectations of higher class members of its management as well as the assumptions on which such statements are best.
Investors are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties.
Including those described in higher quest periodic reports filed with the SEC.
SEC and that actual results may differ materially from those contemplated by such forward looking statements except as required.
Choir by Federal Securities Law, higher Quest 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, Matt.
Thank you everyone for joining today's call I'll begin by providing an overview of our financial and strategic highlights from the third quarter and then I'll turn the call over to David who will share more details around our third quarter results.
The third quarter of 2023 was highlighted by increased revenue growth and healthy profitability, primarily related to our acquisition of MRI network, which has driven increases in franchise royalties and underlying system wide sales. Our total revenue in the third quarter grew 18, 1% to $9.3 million.
Franchise royalties increased 19, 9% to $8 $9 million compared to $7 $4 million in the prior year period systemwide sales for the quarter increased to 50 $151.2 million compared to $123 $2 million in the third quarter of <unk>.
22.
As mentioned the majority of system wide sales growth continues to be driven by our acquisition of MRI network with additional increased contributions from our drive request and trade core offerings compared to the prior period. Prior year period. This growth was offset by quite high request directs relatively moderate year over year decline of just five four.
Per cent and Snellings decline of 17.2%.
SG&A expenses in the third quarter were $6 $4 million compared to $2 $1 million in the prior year period. The increase was primarily related to increased costs associated with workers compensation insurance as well as expenses to support increased system wide sales from acquisitions and organic growth, particularly.
The MRI network, excluding workers' compensation and impairment of notes receivable SG&A expenses in the quarter grew 34, 1% year over year and represented 49, 5% of total revenue compared to 43, 6% of total revenue in the third quarter of 2022.
SG&A, excluding workers' compensation and impairment of notes receivable has decreased for two consecutive quarters as a percentage of total revenue from 57, 4% in Q1 of 2023 and 54.9% in Q2 as well as in absolute dollars.
Workers compensation has negatively impacted our results for the last few quarters and in this third quarter and in the third quarter. We recorded a $1 5 million dollar expense, which is a $2.8 million net increase from the $1 3 million dollar benefits. We recorded in Q3 of 2022.
Prior periods also benefited benefited for all workers compensation reserve that we assumed from a 2021 acquisition, but the remaining liability.
There has remained relatively stable in 2023 moving forward, we don't expect that liability to impact year over year comparisons as meaningfully as in recent quarters.
Like we mentioned in the press release, there are a number of factors that have contributed to the increase in our workers' compensation expense. Some in our control some outside of it on a more macro level, while medical costs have been rising in recent years workers' compensation insurance rates have actually been declining when combined with general wage inflation.
It seems unlikely that the current relationship between workers compensation benefits and premiums can be sustained.
Also as we've grown in recent years and added franchisees, specifically to our snelling offering the composition of our franchisees clients and job types it's shifted.
We are working with our partners in this area to adjust our plans to better reflect our current business mix as well as the overall market in order to reduce the impact in the future. However, no meaningful improvement can be expected until the second quarter of next year.
SG&A expenses have also grown to support the increase system wide sales during Q4 of 2022 we increased our operational footprint with the acquisition of the MRI network and additions to certain areas that support growth in our higher quest direct snelling and other temporary staffing offerings when.
We announced the MRI network acquisition, we said, we would be carrying additional costs as we integrated its operation and that integration was largely completed at the end of the third quarter and we believe expenses for MRI network are now in line with its current revenues SG&A, excluding workers' compensation and impairment of <unk>.
Note receivable was $4 $6 million in this past quarter, a roughly $1 million reduction compared to Q1 of this year, which was the first full quarter after the acquisition.
Professional recruiting and staffing has some different has different support needs to our traditional temporary labor staffing, but we expect to be able to leverage what we have today to support future growth.
I've said in previous quarters M&A continues to be a key part of our growth strategy and opportunities such as our pending acquisition of Tech staffing services that we announced last month, our part of why we have maintained operating levels operating staff levels over the past couple of quarters tax 10 offices through.
Out north West and Central Arkansas provide light industrial clerical tactical and professional staffing services and generated over $34 million in revenue for the trailing 12 month period ended September 32023.
<unk> operations aligned well with our Snelling franchise offering and it is a good example of our core strategy core acquisition strategy to acquire businesses and convert them to franchise operations. So in contrast, the MRI network, we have the resources in place and the capacity to support the additional system wide sales.
With little to no incremental expenses, thus restoring some of the operating leverage that the company has lost as a result of the current economic environment with that I'll pass it along to our CFO, David Burnett, who will provide a closer look at our third quarter results David.
Thank you Rick and good afternoon, everyone. Thank you for joining us today.
Expanding on some of the numbers, Rick just mentioned, let's start with total revenue, which for the third quarter of 2023 was $9 3 million compared to $9 million in the second quarter of 2023, and $7 8 million for the third quarter of 2022.
The year over year increase of 18, 1% is primarily due to the addition of MRI network.
Our total revenue is made up of two components franchise royalties, which is our primary source of revenue.
And service revenue, which is generated from certain services and interest charge to our franchisees.
We did not report any revenue from company owned operations.
September 32023, we owned one location and classified as held for sale and reported below the line as discontinued operations.
For continuing operations franchise royalties for the third quarter were $8 9 million compared to $7 4 million for the same quarter last year.
An increase of 19, 9%.
The MRI network accounted for $1 6 million of the increase in royalties for the third quarter as royalties from preexisting locations had a net decrease of approximately 119000.
Underlying the growth in royalties our system wide sales, which are not part of our revenue, but it can serve as a key contextual performance indicator.
System wide sales reflect sales at all offices, including the locations currently classified as discontinued.
System wide sales for the third quarter of 2023 were $151 2 million compared to $123 2 million for the same period in 2022.
An increase of 22, 7%.
Similar to the growth in royalties growth in system wide sales was driven by the addition of the MRI network, which accounted for $39 3 million of the year over year increase for the third quarter.
As combined sales from other locations decreased on a net basis by approximately $11 3 million.
Service revenue, which is generated from interest charge to our franchisees on overdue accounts receivable service fees and other miscellaneous revenue.
377000 for the third quarter compared to 429000 for the same quarter a year ago.
Service revenue can fluctuate from quarter to quarter based on a number of factors, including changes in system wide sales accounts receivable insurance renewals and similar dynamics.
While there are many things in the quarter that we felt good about including a 22, 7% growth in our active customer system wide sales in the 19, 9% growth in our franchise royalty revenues. We also saw growth in our cost structure selling.
Selling general and administrative expenses for the third quarter of 2023 were $6 4 million compared to $2 1 million in the third quarter of 2022, and $5 6 million in the second quarter of 2023.
As Rick referenced earlier, the increase was primarily driven by workers' compensation insurance.
We had a $2 8 million dollar swing in workers compensation expense.
For the third quarter in 2023 Workers' compensation expense was approximately $1 5 million compared to a $1 $3 million benefit and networkers compensation expense in the third quarter of 2022.
I will just echo Rick's remarks that the workers compensation carriers has struggled with interest rates in a challenging labor market all while medical costs are rising.
We have identified key components of the rate disparity as it relates to our business and we are addressing them.
From past experience, we expect it will take a few more quarters until we see meaningful improvements.
In the meantime, workers' compensation expense will likely remain elevated but fluctuate quarter to quarter based on the mix of worker classifications, the level of payroll and claims resolution.
Beyond workers' compensation, the largest component of SG&A as employee compensation and benefits.
Compensation and benefits for the third quarter of 2023 was $2 9 million versus $2 3 million in the prior year period, but below the $3 4 million in the second quarter of 2023.
We initially absorb significant personnel cost as we integrated MRI network into our operations. However, we are handling the integration in a disciplined manner and have made progress in controlling the impact of these costs.
Yeah.
In addition to increased salaries and benefits. We have also incurred other MRI network, SG&A expenses, including marketing insurance professional fees and similar costs.
These are evident in our SG&A for the third quarter of 2023 and more so in the year to date results.
These costs were substantially higher than the first and second quarters of 2023.
The acquisition of MRI network came with sticky costs that reflect a slow and deliberate process by the end of the third quarter the incremental costs related to the MRI network have reached what would be unexpected level based upon the current revenue volumes for executive recruiting services.
The increased SG&A, particularly workers compensation can be felt and income from operations, which is total revenue less SG&A depreciation and amortization.
Income from operations was $2 2 million in the third quarter of 2023 versus $5 2 million in the prior year period.
Net income includes income from operations adjusted for miscellaneous items interest income taxes and discontinued operations.
All in net income for the quarter was $1 5 million or <unk> 11 per diluted share compared to net income of $4 2 million or <unk> 31 per diluted share in the third quarter last year.
Adjusted EBITDA in the third quarter of 2023 was $3 7 million compared to $6 5 million in the third quarter last year.
We believe adjusted EBITDA is irrelevant non-GAAP metric for us due to the size of noncash operating expenses running through our P&L.
Detailed reconciliations of adjusted EBITDA to net income is provided in our 10-Q.
Which we filed this afternoon.
Moving on now to the balance sheet.
Our current assets at September 32023 were $56 2 million compared to $51 9 million at December 31, 2022.
Current assets as of September 32023 included $1 1 million of cash and $50 2 million of net accounts receivable.
Current assets at December 31, 2022 included $3 million of cash and $45 3 million of net accounts receivable.
Current assets exceeding current liabilities by $19 1 million at September 32023 versus year end 2022, when working capital was $15 2 million and.
The increase in working capital was driven by the increase in accounts receivable following the acquisition of the MRI network.
Offset partially by a corresponding increase on the credit line.
Current liabilities were 66% of current assets at September 32023 versus 78% of current assets at December 31 2022.
At September 30, we had $14 $4 million drawn on our credit facility and another $25 9 million in 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.
Including the pending transaction that Rick mentioned earlier.
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 September 15th 2023 to shareholders of record as of September one.
We expect to continue to pay a dividend each quarter subject to the board's discretion.
With that I'll turn the call back over to Rick for some closing comments.
Thank you. Thank you David despite a challenging economic environment for our industry and I'm proud of our franchisees' performance and higher quest ability to generate continued profitability.
We have a long term view of our business and look looking out beyond the current economic environment and near term increases in expenses. We believe that we're well positioned to continue our record of strong performance is a leading provider of temporary workforce hiring.
And professional recruiting solutions as always I'd like to thank our employees for their hard work and dedication this quarter and as CEO of 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.
Okay.
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One moment, please while we poll for questions.
Okay.
Thank you.
Our first question is coming from Mike Baker with D. A Davidson your line is life.
Okay.
So a good job on the <unk>.
Top line and controlling what you can control.
I guess, maybe to me at least the obvious question is is the work with coffee you gave some color on expecting that to continue.
But I guess when you say continue to be elevated and I know, it's hard to estimate but do we think continues to be elevated at the same level I $1 5 million a quarter and that I guess the second part of that question is how do we think about the other costs of $4 6 million, excluding workmen's comp worker's comp.
And in the impairment is that sort of a reasonable run rate going forward now that you've worked through the MRI integration ER or does that come down in other words how much.
Of the MRI integration is in that still in that $4 6 million for this quarter.
Hey, Mike so thanks, Thanks for that question.
You say there are two very very important questions in there and I guess I'll really just to back it out even further.
As you know clearly the quarter was impacted by three main factors, one obviously being the workers' comp and so part of the reason why we are saying for example, no meaningful improvement will occur until the you know basically Q2 of <unk>.
'twenty 'twenty four it is because our renewal.
Our renewal is march 1st for our.
For our workers comp.
Our workers comp program. So some of the things that we've identified that we need to change.
I said, we're locked into our policy, we're locked into our policy until March 1st.
The but the other things are as far as you know.
From an elevated standpoint our.
Some of them are a little bit.
Some of them.
How can I put this we're not.
The reality is and it's maybe was put in a little bit.
Put in subtly, but basically obviously you have medical inflation that is taking place you have wage inflation and yet you have workers' comp rates have dropped.
Now part of it we suspect and we think that workers' comp rates can't keep going down at a time when the cost of workers' comp generally the components, obviously being indemnity benefits, which are tied to higher wages and medical costs, which of course are.
Subject to a lot of medical inflation.
So you know it's hard for frankly, it's hard for me to imagine that rates won't go back up and to the extent that rates go back up it is it assists us in that but I have you know we literally.
In that area, we have literally no control one of the other factors that are.
It has happened to us over time is as we drifted.
From more let's say a far more heavy concentration in construction to one that's more industrial and warehouse and professional clerical.
And you know and this is one of the areas, where we will definitely be working with our carrier is.
You know, we're not comfortable that you know that we've been given credit on our fixed cost sufficient for the fact that our claims or that are that are payroll has moved more towards basically less risky work and are and so.
Yeah, we're gonna definitely work with them on bringing that fixed cost component down as well just based on our sort of general risk.
You know risk profile, that's had the last year, our actual losses.
Has.
It has not been.
Has.
Really has it been relatively speaking worse than than let's say the last 30 years.
Not massively I'm not suggesting that that that's part of it but it was a relatively bad year of course that hurts us and our argument with the carrier that they need to reduce their base fee, but the net result is as we have had.
A bit more of a trend towards.
Higher overall claims and I would add that for example in because they become up there a pretty good comparison towards for US is true Blue for example, I know booked a big reserve adjustment as well for their workers comp, which which would just simply say that they're experiencing what were experience.
Saying, which then I go back to the first point of it's hard to imagine workers' comp rates generally continuing to go down at a time when claims are going up.
Now that said so year to date, where something like $4 $4 million behind the prior year comparison.
How much did that when do we start recovering in 2024.
I'm not I don't think we'll recover all of it so I'm not so I want to make sure everybody understands I'm not just trying to paint a happy face a happy face on something that said I do think though we will make meaningful progress on.
On bringing that back to a more normal level. So your question as far as like do I expect it to be a million and a half a quarter no I don't expect it to be a million and a half a quarter of cost.
But whereas for the prior three years it had been a benefit I'm not expecting that I'm not expecting that either as.
As far as the other.
SG&A expenses.
The you know as was stated in the sort of you know in the presentation.
The the.
By the end of September we have you know we have pretty much.
Eliminated <unk>.
Most.
I'll say extraneous expenses that were sort of planned as we integrated MRI network and so there will still be a bit of an improvement on that in Q4 simply because there were certain expenses that did in fact linger into Q.
Q3, but Q3 did not keep contained nearly as much as let's say Q1 and Q2, so it's not going to be it'll be a relatively you know it'll be a relatively minor improvement.
But I want to be really clear on and sometimes it becomes a really difficult.
Concept sort of two weeks.
To explain or to at least see directly.
Is you know obviously we.
We added.
You know a fairly significant amount of employees.
<unk> expenses for the MRI network.
Acquisition.
And professional recruiting support is dish.
Different than not completely different but is but is.
Is somewhat distinct from let's say the services that we provide to our smelling and higher quest direct franchises and so it's not like you can just sort of integrate them all together and say, okay. Our system wide sales are.
You know are just X plus Y and we just can run at the same rates its not that way we have separate individuals that obviously support each division.
So here's where that's important and this is where it bears into the future in it and it and it you know it.
Bears.
Deals understanding or you know it bears to understand it in order to understand our Q3 results and sort of what's sort of going forward.
So you know I don't want anybody to go away thinking well.
MRI network acquisition was a disaster and that's not the case, it's it's Ben.
It is it's been profitable for us and given elevated interest rates, even if you allocate all of our interest expense to the acquisition.
It is still you know.
Cash flow positive and how we generally buy companies are the multiple of EBITDA that we look to buy companies that it's still squarely in the middle of it now it's not quite the home run we had hoped to hit because.
Obviously, it has been a challenging economic.
Economic environment, but I, just don't want people to go away thinking yes. Your you know your SG&A is up in an absolute sense, which it is the.
MRI network is comfortably profitable.
Now the reality is is that if you recall in Q1, our system wide sales and our revenues were.
Excluding MRI were roughly flat with the prior year.
And it was basically at the end of March that we started seeing a.
I would just call it a noticeable.
A noticeable decline in our system wide sales in.
In the higher quest direct but more specifically or more noticeably in the selling on the selling side and that continued into Q2, Q3, Q3, probably even deteriorated a little bit more than Q2, but its fairly I would say that it's fairly stable.
Fairly stable, but obviously at lower levels. So VX to the extent that our SG&A expenses are higher on a relative basis.
It's because of the operating leverage that we lost in the you know.
Basically on the Sterling and higher quest direct side.
And obviously that goes to part of what is important about the.
The Tech acquisition.
Is that in reality, we will be able to add that $34 million of system wide sales on well.
Well, we we didn't.
We we have basically the same.
Perm staff.
<unk>.
You know right now than what we had let's say in April of this year, because we spent two years hanging on for Dear life trying to keep our good staff and we knew already in May you know, we'd probably engaged with Tak already back in May along with a few other.
Along with a few other prospective acquisitions. So you know, we we were expecting to be able to.
Recover our operating leverage and so anyway going forward.
To the extent that we're tracking you know back to sort of.
Whereas our SG&A relative to what it was in the past.
We you know we absolutely expect by Q1.
Assuming no major changes in no no major changes in the.
No major changes in the economy or no other major acquisitions is that we should.
B.
Sort of back at a level.
SG&A relative to our revenue.
Excluding workers' comp.
So keeping that thrown out but by Q1 that will be at normal we will be at normal levels. In Q1, I hope that answers. Your question I know there was a really really really long answer, but yeah no. It absolutely. It absolutely did one really quick follow up that last name you said by <unk> 24, excluding <unk>.
With comp SG&A back to normal levels, but what what what's a normal levels out that Ah I think what you'd said 50 round, 54% of royalties or just ball no. One queued for less look where we shoot for less than that I mean, I I would I would I mean I would.
Certainly target less than 50% that's really more what were you know that's more what we're targeting now again obviously.
When we just.
Kind of an interesting thing when when we bought MRI at the end of 2022.
And they had done around.
260, $270 million worth of system wide sales and of course, we had done it we were on target to do for 50 something like that.
So you know, obviously and we knew due to some franchise terminations in the MRI network. We weren't we were never going to hit that 270 figure, but we knew you know, but but obviously you know.
Professional recruiting has been hit heavier than staffing.
You know, but no.
Net you'd sit there and say well gosh, we should we should.
It would have been fair to think that we would have been pushing 700 million of system wide sales. Obviously, you just have to look at the numbers, we're not even close to that and so we have lost.
A good amount.
As you know operating leverage and you know really the relative.
Declines in MRI have been worse, but I go back to we are still thinking we are still hitting our targets.
Our our at least our original assumptions.
For EBITDA within.
MRI network and so to.
We do expect to get back to where we are.
Sort of excluding the workers' comp part, that's that's a bit more of a wildcard and and again I'm not going to sugarcoat. It. It. It is something that will it will it is something that will dog us for at least six months.
And it may well be you know a year and a half to two years before it.
It goes back to what I would call normal.
And then maybe a new normal because I don't.
I'm not the CEO of Chubb I'm not the CEO of AIG, So I don't control I don't control workers' comp rates.
Yep Yep, Okay understood. So.
Yep got the message there I guess, what I'm really asking one another one and in the sort of the offset is the tech.
Acquisition.
Where are you in terms of I think so those are company owned offices I think the plan is to re franchise those in and in some respects that helps pay for you know not maybe not all of the acquisition, but a lot of it where are you in terms of the refranchising process for those 10 I'm glad I'm glad you asked that I'm glad you asked that question. So we've had staff out in art.
And sorry, the last couple of weeks now I myself was out there.
And then like I said, it's a large senior management has been out there.
And so I would I would just say that we are in very very advanced.
You know at a very advanced stage to have all of them converted where we're trying absolutely as hard as we can that when we are you know we have an anticipated close of November 27th.
And it is our goal and I think it's a reasonable goal.
I cannot make a promise, but but as you know.
But we are we are well on our way too.
You know, we're hitting our goal of having them all re franchised all franchised.
November 27th.
I mean, if they're not it's we're still far enough along that you know what I'm, saying it's.
No.
It it wouldn't be long thereafter.
It makes sense.
Okay I appreciate that yeah, it sounds like a great acquisition.
Alright, Thanks, a lot.
Gotcha.
Thank you once again, ladies and gentlemen, if you have any questions. Please press star one on your telephone keypad.
Our next question is coming from Kevin Spanky with.
Barrington research.
Okay.
Good afternoon, Rick and David.
Hey, I wanted to start off by asking about just you know the overall market.
Tony.
Demand environment and the economy as you see it do you think it's.
They've been kind of stable since you know you reported second quarter three months ago is it.
Worsened a bit I think you mentioned may be snowing.
Decelerated a bit more in the third quarter, but just kind of maybe your general overall read on where the demand environment stands today relative to a few months ago.
Yeah, Kevin Thanks for the question I think that.
You know from an let's say an aggregate standpoint.
We you know probably by June <unk>.
Hit.
From a comparative standpoint.
We've leveled off right. So they so you would just have to say well okay.
No what I'm, saying, we've found our level so to speak in demand, which is certainly off from the prior year.
It is still absolutely true what I said really the last couple of quarters is it.
It is very.
Where it is weakest is definitely.
It it's not uniform at all and I think in fact, maybe the best way of looking at is construction has held up significantly better than <unk>.
<unk> and warehousing, there's no question about that and so.
While you know.
While I'm sure there are a lot more factors at play than let's say than what we might see.
I would probably argue that the sort of the the weakness you see in e-commerce.
He is probably what is affecting let's say snelling more.
Whereas again, our construction remains.
Significantly.
Significantly stronger than you know relatively speaking than.
Our logistics.
Our officers that are more focused on logistics.
<unk>.
And that tends to be geographical as well and that's why so for example, higher close to direct has remained stronger while it's also more heavily centered in Texas, Tennessee, Georgia, and Florida, which you know well.
Now the question is is it just because of the economies are better in those states or is it because we're more heavily towards construction, it's probably a bit of both whereas.
Illinois, Washington, a couple of other states.
Probably more tied to distribution and logistics have been definitely more of a more of a challenge and I would go back to probably ties back to sort of you know.
People ready and true Blue again was down I think they reported they were down like 19% or something well they tend to be more heavily concentrated west coast more heavily concentrated warehouse and logistics than where we are and that probably explains explains a lot of the <unk>.
What are the relative difference between let's say our relative performances in the in the third quarter as we're just geographically where we're in a better spot and.
Our business mix is in an area. That's more is more stronger now.
Now the and I've said this in the last quarterly call and I'll say the same thing is as you know you know interest rates are of great concern to us.
Because of what we pay particularly not that I like to pay any more interest than we need to but more importantly, because of how it impacts real estate projects going forward.
To the extent that we have a lot of business going on with you know in.
In the construction industry clearly, it's important to us that those projects new projects continue to be approved and funded to solve the projects that are being worked on now.
Now and.
No. The I will say, one thing and I'd really kind of meant to say this earlier.
We've also.
I'm sort of happy to say that our trade core division historically higher quest has really never done much as far as targeting skilled construction labor and then the very last days of 2022, we've spun up a division called trade core and we are.
I'm happy to say that in nine months.
You know, it's it's making significant the significant I shouldn't say significantly I guess, it's significant it's not 10% of our sales or anything but I mean it is it is doing nicely, it's it's setting up to be.
Hopefully meaningful in the future and.
It's one of the ways.
For anybody who's even sort of investors and say look we're not a one trick pony we're not out there just let's just go bye bye bye bye bye, it's not it's not what we're trying to to also we still want to grow organically and skilled trades is one of those.
Areas that we perceive first of all due to demographic reasons, it's Trey.
Trades.
Trades people are going to be harder and harder to find it. So we're trying to position ourselves you know gobs smack in the center of that.
Of that field and like I said, we're very happy with our progress, but I want again investors to understand as well.
We don't just.
We're not just.
Looking to buy people. We're also looking to grow internally as well and trade core is a good example of that.
Okay.
That's very helpful.
Yeah just.
Talking again about the pending acquisition of Tech.
Wondering if you could provide any background or color on all that.
Deal came about and is that a business that maybe was a little more financially stressed.
With the you know.
The downturn in the economy or how healthy where they are they I'm just trying to get a sense as to.
You know how all that plays into the pipeline and.
Yeah, Yeah. So it was not no.
<unk> Tec Tech was not a distressed company at all the.
The owner a seller.
Is but if somebody who you know he's been in the business for 40, some odd years and so.
You know it is.
And then just clearly a retirement strategy and so so he has a pretty advanced age. So it was completely related to that that's sad.
You know we're buying it going in.
The $34 million that we put out there is what the TTM sales are zacks.
Probably 15% to 18% off what it was.
You know what the T. T M would've been let's just say in January of 'twenty. Three so you know the good news is the you know sort of the decline in sales has been.
You know sort of already absorbed within that.
So that's a good thing and from from my perspective. It is a you know as far as it how it was came about it. It's just basically our VP of corporate development, David Hartley just out there sourcing deals were always out there.
Sourcing deals and so it was one of <unk>.
You know.
And different ones that we were looking at let's say in April may.
And Fortunately.
We were able to come to a you know come to a deal. It's it's a very nice deal for us and so far as it's.
Barry.
Typical of the types of.
People that we place historically, so there's no it's right down the fairway and maybe.
For us what I like about the deal as well as geographically it strengthens our presence in the state of Arkansas.
We've had a presence there, but it really flashes it it really flashes it out.
And.
And you know where we're hopeful that.
Some of the national accounts that we have we're going to be able to be really able to access those in Arkansas, where tech hadn't in the past and so we're we're very we're very bullish on it.
You know, we're very bullish on it.
Okay. That's all great color appreciate that and thanks for taking the questions I'll turn it back over.
Thank you.
We have no further questions in the queue at this time, so I will hand, it back over to management for their closing remarks.
I want to thank everybody, who has joined us I realize that the sort of the top line at least to be count earnings is kind of the top line.
Are less than what we would have we would've hoped I hopefully if you listen carefully to what's being said.
Number one it comports with what really what I've said for the last few years, which is.
You know an expansion even if it means that you know.
We leave one out of three open positions unfilled is better than a recession or better than a.
Stressed economy, and so what you're seeing.
Really what started in Q1, but it is especially become apparent in Q2 and Q3 is we are absolutely subject to.
You know the cyclicality of the economy and.
Uh huh.
The fundamentals of what we do haven't.
Haven't necessarily changed outside of the workers' comp, which wish like I said, we we believe that we will be able to rectify.
Significant portion of that again, not promising that that's some of that may not be a little bit of a an impairment, but it's not.
We certainly do not expect.
Any more quarters like we did this past quarter, we think that we will be definitely.
We're we're we're making progress towards sort of rectifying.
At least the bulk of those negative comparisons so again I want to thank our franchisees and want to thank our employees and I want to thank our investors and look forward to a great fourth quarter. Thank you.
Thank you ladies and gentlemen. This concludes today's conference and you may disconnect. Your lines at this time and we thank you for your participation.
Okay.