Quest Resource Holding Corporation

Q4 2022 Earnings Conference Call


spk_0: thank you for bannon by this is the conference operator welcome to the class resource holding corp fourth quarter twenty twenty two earnings conference call as a reminder about this offense or in listen only mode and as conference is being recorded after the presentation don't be an opportunity to us question to joined a question que you may press car than one on your telephone keypad she didn't need assistance during the conference call you may signal an operator by pressing star and zero i would now like to turn the conference over two days most berg investor relations representative please go
spk_1: head barbecue brenda and thank you everyone for joining us on a call before we began i'd like to remind everyone that this conference call may contain predictions estimates and other forward looking statements regarding future events or future performance of quest use of yours like anticipate project estimate expect and turn believe and other similar expression are intended to identify those for looking statements such forward looking statements are based on quest current expectations estimates projections beliefs and assumptions and in both significant risks and uncertainties actual events or quests results could differ materially from those discuss to the forward looking statements as a result of various factors which are discussed in greater detail in class families with the securities and exchange commission you are cautioned not to place undue reliance on chest states such statements and to consult are as you see follies for additional risks and uncertainties quests forward looking statements are presented as of the day made and we disclaim any duty to update such statements unless required to do so by law in addition in this car we may include industry and more get data in other states could statistical information as well as quest observations induce about and strict conditions and developments the data and information or based on quest estimates independent publications government publications and reports by market research firms and other sources other quest believes the sources are reliable and the data and other information or accurate we caution that quest as not independently verify the reliability of a sources or the accuracy of information certain on caffeinated financial metrics or measures will also be discussed during this call these non gaap measures are used by man's with to make strategic decisions forecast future results in of a way because company's current performance management beliefs the presentation of these non gaap financial measures as useful to investors on a saying the assessment of the companies ongoing core upper patients and prospects for the future unless it is otherwise stated it should be assume that any financials discussed in his car will be on a non gap basis for reconciliation of non gap to gap financial measures are included in today's earnings release
spk_2: but all that said on now turn the call word or a hatch president and chief executive officer thank you day and thanks everyone for your interest in class overall we have strong year and twenty twenty two was seventy percent growth and gross profit dollars we managed thirty minutes growth during the year expanding relationships with existing customers and a significant ramp from new customers current also came from integrating for acquisitions turned twenty twenty two three of these acquisitions have gone according to plan at the fourth or debbie as cause challenges for us during this past year it is a good business with a strong customer base of process this is hampered the performance the good news is that we've addressed aren't as it debbie as issues and we've already begun to see substantial improvements from that acquisition thus far in the first quarter and expected fully realize the plan contribution three twenty twenty three outside of art of us are prevent it has performed well we're executing well on all of our strategies we continue to move new opportunities to a pipeline we continue to build our operating platform investing a capabilities which will enable us to drive operating efficiencies integrate acquisitions more quickly and continually enhance our customer service importantly are outlet for profit growth and twenty twenty three am beyond remains unchanged because our to of us had such a large impact on the fourth quarter and the year before i turn to call over to breath to review financials i'm gonna give you an update on what's going on there and an overview via to corrective actions we've taken to give you a little background we made the art of yet acquisition and handed twenty twenty one this is the largest acquisition they were made today and we decided to integrate the business over a longer time period the plan was to pursue processing opportunities and implement quest business processes that art of yes the white him to fully integrate into we have more time to operate the business the thinking was that this would allow us to achieve the highest contribution from the acquisition why the same time to avoid disrupting the business in retrospect waiting to fully integrate are debbie as quickly was a mistake which made at which costs two major issues first because of the information gap sort of yes it was challenging of and or optimization process is there which entails working with vendors in areas such as by uprising right sizing and route optimization second are normal process of patents or contracted cost increases and fuel surcharges was happy and down with a subset of the art of us customers we estimate these factors combined to reduce gross profit dollars by price i one and a half million for twenty twenty two we've implemented quest best practice across our dbs business and realign management reporting structure for each department are accounting operation sales are marking groups are now fully integrated as of the end of year and we expect systems integration to be completed during the third quarter we've corrected the process to pass through cost and fuel surcharges that are part of the contractual agreements have heard of yes while we can't build catch up for past few years we started see benefits of implementing passer cost and fuel surcharges start abs customer starting in january we've addressed information gaps in implemented been or management improvements where sandy benefits and the first quarter and expect to see improvements in gross profit throughout the year along with it continued strength of our core business a corrective actions we have taken have already begun to result in incremental improvement during the first quarter as you said the press release the trajectory is positive preliminary results for january february so gross profits averaging approximately four point two five million per month
spk_1: and revenue averaging twenty four million per month
spk_2: but further improve unexpected across remainder the year by expected contribution from our dbs was delayed i want to reiterate that our view of the potential the business and original financial expectations remain intact
spk_1: it's important and out the customer relationships remain strong and if that we've been able to successfully cross sell our dbs services to existing quest clients
spk_2: equally important we've also maintain or improve relationships with our dbs vendors
spk_1: on alter the color with our cfl brad johnson for our final over the financial you and i'll bring be back to discuss strategies brett thanks rain and good afternoon everyone we had mixed results during the fourth quarter with solid performance and our core business being offset by integration challenges that art of us a quick note about the sequential decrease in revenue it was primarily related to commodity price fluctuations and normal fourth quarter seasonality as discussed on previous calls commodity price fluctuations of not historically had material effects on gross profit dollars
spk_3: our customer agreements produce consistent gross profit dollars based on volumes and are not tied to commodity price fluctuations
spk_4: the value of the commodities we recycle on behalf of our clients simply passes through far piano
spk_3: during the fourth quarter gross profit dollars increased twenty five percent year over year to ten point eight million and for the year two thousand and twenty two gross profit dollars increase seventy percent to forty eight point nine million for the quarter we estimate that approximately one third of the increase in gross profit dollars came from acquisitions and the remains two thirds from organic growth of the organic growth for the quarter the bulk was driven by new customer growth for the year we estimate that approximately two thirds of the increase in gross profit dollars came from acquisitions and the remaining third from organic growth of the organic growth for the year the bulk was also drip combine new customer growth
spk_1: as we have previously stated due to the ongoing integration work and resulting accounting adjustments it was difficult to make sequential comparison and gross profit dollars from quarter to quarter during twenty twenty two however as right mentioned earlier we fill significant progress has been made with the acquisition of art of us and the
spk_3: accounting adjustments were finalized during twenty twenty two
spk_1: as rice said earlier we estimate that the issues with our ws reduce gross profit dollars during twenty twenty two by approximately one an app millions as a reminder this was related to slower than expected implementation of contract optimization processes and missing price adjustments with certain part of your customers that we
spk_3: normally take as part of our contract at agreements
spk_1: outside of art of us are want to know that sequential gross profit dollar comparisons were not affected by inflationary cost pressures
spk_3: we were able to offset inflationary costs pressure with flexible pricing and cost recovery these we have implemented changes that art of us and expect these changes will be in full effect by the end of the second quarter looking for our outlook for gross profit dollars for the year is robust and we remain confident in our ability to deliver double digit growth and gross profit dollars during twenty twenty three gross profit dollar should benefit from continued momentum and organic growth and continued improvement from our integration efforts
spk_1: moving on to es una expenses which were nine point eight million during the fourth quarter compared to seven point one million during the same period last year the increase in the comparison was mostly related to overhead from acquired businesses for the quarter as dna was a little higher than our expectations of nine point one to nine point five million which was mostly related to additional bad that reserved and increased integration costs during the first quarter of twenty twenty three we expect estuarine a costs will be about nine and a half to ten million which reflects the ongoing run rate of our business along with the ongoing acquisition integration costs and increased investment and systems processes and people to continuously improve our efficiency in scale ability of our platform
spk_3: during the fourth quarter depreciation and amortization increased to two point four million versus one point two million a year ago
spk_1: the increase was primarily related to amortization of acquisition intangibles
spk_3: we expect depreciation and amortization to be approximately ten million for twenty twenty three
spk_1: moving on to her of view of the cash flow in balance sheet we are in good shape liquidity lies are cash balance was nine point six million which increased from eight point four million at the beginning of the year in december we enhanced are liquidity by increasing the size of the operating borrowing line from fifteen to twenty five million
spk_3: we generated approximately one point one million and operating cash flow during the fourth quarter for the year we use two point three million and operating cash flow the use of cash was primarily related to investment and working capital to support nearly doubling the size of our company year over year during twenty twenty two cap ex was one point seven million and we utilized approximately two point six million in cash to purchase a smaller acquisition during the first quarter we expect a slight increase in cap back to approximately two million during twenty twenty three which includes increased investment in our operating platform at the end of the quarter we had seventy four point nine million and notes payable versus sixty seven point nine million at the beginning of the year that increase reflect the investments and growth we made during twenty twenty two
spk_5: at this time altar and the call back to right
spk_2: thank you brat while we're not happy with the integration process of art of yes i want to reiterate that this one quarter does not affect our overall like to the company and it is not reflect on a tremendous growth progress that the company spain during the last several years and or opportunity for continued down with as you grow i'm very proud of the track record our team is produced nearly doubling the size of the company and twenty twenty two but this past year mark and six contempt second of years of double digit growth and even down i want to reiterate that the issues we have a our mps were very specific in nature and i've been addressed and are beginning to and we're beginning to realize the strategic benefit of this acquisition at a time we announced the acquisition of art of us and and stream in december of twenty one expected data combined adjusted ebitda of a proxy five point five million annually part of us was behind our expectations and twenty two is still deliver positive economic the died during the year and and stream is performing in line with our expectations our business is strong and were well positioned to continue to whether challenging economic and
spk_1: and execute are gross fancies in a market that contains a see inflationary pressure and significant follow community values in certain recycled materials a business model held up well
spk_2: as bread mentioned earlier we structure agreements of the gross profit dollars are not affected by swings in commodity prices that despite the significant decrease in prices for scrap metal and other commodities during the second half of twenty two first proper dollars generated were not technically affected by the swings an inflationary of armor were able to offset cost pressures for flexible contract to allow us to pass three employ increasing cost of fuel surcharges bodies costs for not being passed through passed on our during twenty twenty two and art of yes and the core business we continue successfully passer cost for our contracts and offset inflationary pressures again going forward with corrected this issue and are of yes regarding the economic environment in general we continue to stay stable activity levels across all of our in markets and have a proposition is resonating with that existing and with new customers moving onto a discussion about grow i feel very good about your organic growth we have in front of us where within our install base of customers we continue to use the land and expand strategy to deliver grow the strategy has consistently delivered a base of organic growth for the last five years we really made a slight wait to our recently made a slight tweet to our compensation structure of our clients service measures
spk_1: offering them a chance to earn his senate pay based on growing the contribution from existing customers we made a change in the first quarter twenty three and been rewarding to see all the excitement level where the entire team the smaller that's an incentive compensation will go a long way to increase growth in addition we expect is changes to help us retain and attract the best talent and a further linus for their clients growth else diverting more our waste from the landfill
spk_2: another key eat organic growth from existing customers is adding new services
spk_1: we added several news service capabilities the recent acquisitions and were actively introducing these new services to existing clients by adding these services and geography we feel confident that existing customers will continue to provide a major contribution to organic growth for years to come
spk_3: on top abroad for existing customers to and last couple years with improve new client targeting
spk_2: and are closing on the right new targets
spk_1: during the fourth quarter we continue dad new prospects and several large up and is across multiple and markets are working their way through our pipeline
spk_2: last quarter we spoke about to new seven figure wins one in industrial market one of the automotive service market when the early stages one boring these cancers and expect him to ramp over the course of the next twelve eighteen months our data platform of it's ability to provide uniform and supported datasets across multiple ways streams continues to play a key role in securing new ends and growing within our existing customer base
spk_1: a good illustration of value propositions how quickly wherever the ramp and provide value for a large new industry summer during twenty two the for synthetic asteroids fully on board by the and and forth
spk_2: and became out a figure revenue customer during twenty two when our delivering a thousands of lot lines of service to discuss her across all locations in the u s we have a direct feed from our portal to their systems and are providing him not only with important operation data but also data for sustainability portion of their yes to reports today we have helped them divert more than a hundred and thirty five thousand times from landfill and we brought him cost savings i'm so impressed with the capabilities of our platform and appreciative and proud of the dedication our team had that with able to wrap this were so quickly and provide such a strong value proposition moving on to a discussion about him and i we continue to evaluate opportunities and them and a will continue to be an important part of our grow plants going forward i want to reiterate that will continue to maintain discipline of making acquisitions will only as good those that did our criteria we made six acquisitions says twenty twenty other than our dbs all i performed at or above our expectations and i'll reiterate that we expect our debbie as to be back on track during twenty three movie doctor writing efficiencies the grown rapidly over the last three years with the size of business nearly tripling says twenty twenty
spk_1: we've achieved the scale through growth and existing customers organic growth and by completing six acquisitions
spk_2: we've grown in a new ice streams in a new and markets diversifying our customer base and improving our financial strength growth has not been linear that we fed move in driven to continually improve our ability to drive scale and operating efficiencies more rapidly integrate acquisitions and dr efficiencies throughout the organization converting gross profit to castle in earnings
spk_6: will continue to invest in the organization and bill capabilities to do so
spk_2: regarding our outlook overall are positive outlook for profit growth is not chase with address the issues with our give yes and we expect to see continued improvement in the months and quarters to come and expect to achieve our original plan for contribution from our dbs during twenty twenty three
spk_1: we expect acquisition integration to provide incremental contribution from both increased efficiencies am from cross selling
spk_2: we expect continue positive momentum and the core of our business during twenty twenty three pressure to improve sustainability increasing regulation increasing costs landfills are lowering the bar for the adaptation of recycling services the contribution from new client ones will continue to provide incremental gross profit as we on board these programs and we will continue to drive operating efficiencies investing capabilities and driving growth and gross profit cashflow and earnings we're optimistic will continue with positive momentum for twenty three and the next several years i like for to keeping you updated on a progress
spk_7: we now like the operator fight instructions on how listeners can queue up or questions operator
spk_0: thank you well now become the question and answer session he joined the question can you may press start than one hundred dollar phone keypad you hear a tone acknowledging your request if you're using a speaker phone please pick up your handset before crossing any case to withdraw your question please press die then you will pause for a moment as collars join the queue
spk_8: the first question comes from arrow is shower from crag harlem please go ahead
spk_2: i re hybrid thanks for taking the questions eric hi you know first maybe and on just kind of the sales funnel cell cycle t to talk about how the feels like have been trending you're given the macro and and just your value proposition resonating in the market and then on on boarding can you talk a little bit about how that's gone with with some of the recent wins and what are some of the key drivers that your focus on their to to shorten their process yeah short in the process is keep fraser a document a question at our our pipeline it represents a bit of a dichotomy to me at the on of one had a very impressed with a cloudy a prospect and the moving along the pipeline on the other hand i will tell you that i don't know if the macros the cars you're not era
spk_9: but it's been slow to get them pushed across
spk_2: i want to reiterate will got good customers prospects in their the type are looking for and the we don't have prospects falling out with just my frustration are our scuse me our frustration is there's not move as quickly as we were like but the good news is we know they will is just taken or longer to do it as far as onboard and goes
spk_8: that process is something we always pushed to accelerate it's usually driven by the customers ability to digest yeah for a new locations on
spk_2: i will say that i think we mentioned in the prepared remarks that last large industrial casually we had took a year related to ramp and and and i think in the past it might have taken the i two months so i think our ability to to digest to move forward as accelerated the question is how fast can the casters move on
spk_10: are getting the location sad that are getting nigga cases up to date on the transfers
spk_2: or he thinks and then you know maybe and unjust food waste you know we seen numerous states regulating food waste and and can a corporate initiatives around that can give an update their and and kind of what that opportunity might look like for for you over time yeah thanks for that and that's a that's a good observation food waste is getting a lot of than i guess attention and and rightfully so why the largest if not the largest group of of that type of materials are going in laptop is organic waste so it's a major culprit and in those things up so luckily that's that that or is got a lot of growth were excited about it regulation is one of the things is feeding into your point the and so it's making our i guess our it maybe it helps said somebody answer recall sometimes that they may not have taken before from our sales group so we've really got some exciting leads and some nice brand names in there that are have a lot of active conversations going with this ah and be part of that is educating them as to what the possibilities are
spk_8: yeah for diverting
spk_9: but it's it's it's it's helping us out of the awesome i really think the regulation and the press is is helping him there for is without a lot of new prospects are moving down the path
spk_0: and i'm really excited for this year i think we're going to see an accelerated growth and and to waste adaptation or cutaways program adaptation
spk_11: good good was that will stay tuned for that damn that's it for me i'll i'll turn over thanks for the questions thanks and
spk_1: the next question comes from jerry seen a from rod capital please go ahead a good afternoon re read that critic michael eight years as or ah
spk_3: could you on it on fourth quarter you describe the some seasonality of also commodity pricing impacting i guess the regular line up would you be on a break out how much with seasonality and how much was commodity price by chance hey the spread of i'll take that question so i think the first thing we'd like to talk about the you notice related to the cube or revenues there's there's no loss customers their such
spk_11: base customer core customers very solid arm again most of it was related if you get to protect the commodity ah value decreases and the seasonality you get mostly there if you want to split that in half that's fine but armed or get you most of the way there
spk_12: gotcha and i am i partisan five said last customers at a minute i'm at seasonality snow no ice debris farming i think it's garden with yeah i'm so sorry either was no on my back on by up got a perfect so fair to say fifty fifty eight or commodity parties an alley
spk_3: yes the that got it got it okay and then on the rw outside that one and a hat nine that you sort of broke out maybe impact the gross margin
spk_11: was that spread out across the course of the year or did that sort of become more second half load or even loaded in the fourth quarter because with us and price pressures inflation or or lack of passed through out
spk_13: it may be became what's your mother blade or near how do we look at that
spk_11: now you think it about a right i i definitely think out as more back half of the year related
spk_14: got it so have any sort of gave our guidance by january february this year your run an ad
spk_11: i i think four point two five million gross profit
spk_1: that equates to twelve point seven five nine gross profits are things are bouncing back
spk_9: but also on that front
spk_2: february better than january or where they sort of even on on that metrics but
spk_15: so mostly even you know that every certainly has your your business day so there's there's different factors that go into the but yeah i'd i'd take it as an average
spk_11: okay duquette but maybe material a get or is ray i agree with bread and it's nothing i just want them a reiterates not the right word but clarify we differ january february out there are least some some key numbers around that and india
spk_2: we started implementing sadly just in january but we started implementing fixing this thing we gotta take to january but there's a there's a cycle through tie expectation is that the months go by will get more more benefit from that that's what we're trying to
spk_12: kind of certainly put in there
spk_3: okay i gotta i mean i was kind of looking at it there's probably some seasonality and fourth quarter that exiting january february look good and then when you say cycled through i imagine you know this price increases it takes a little bit of time to get through the system as yeah just been priced appealing fact we are now theory yeah just billing cycle itself has a a bit of a lack of so yeah i guess what i'm trying to raiders is that that's the beginning we expect continued improvement
spk_11: got it perfect and then one final question i jump in line up just cash flow from operations obviously them
spk_16: big increase year over year window said sort of get digest it may be in a working capital decrease a little bit casual tolerates
spk_2: how do we think about that
spk_0: yeah overall were very positive on on operating cash flow for going into twenty twenty three
spk_17: there's some momentum but of course where at we also expect growth so the timing of that growth were all down in the year of you know that that can tamper tamp things down a bit from that but we're certainly optimistic
spk_18: time will take worse and them as for sector okay yeah breivik got it i they've got it's out jump back and like a thanks jerry preset the next question comes from cheap more from he ah them
spk_2: please go ahead
spk_18: hey good the ray bradbury predicting the question to roger likely hey like the and got all have another one on on the actions and away and our to us
spk_19: through that feeling lag you think you get to that fully in
spk_18: feels that the right way i think about that
spk_2: yeah i think it is chip know that cycle that have run out during the quarter the second quarter me yeah okay perfect and then on on your hit broadside some blankets you know that the pipeline by scrawny feel feel good dunham and he mentioned big change to construct your video every now and really be back in which seen attraction there
spk_18: yeah i'm i'm glad you brought that up to i want it gives me a chance to him
spk_20: speak about their little more what we did was we added to the com structure on the clients or says side and those guys are the ones that work on with existing customers
spk_18: in on their job is is to take care of those customers and and retain their customers and grow with them so what we've added is a bit of an incentive package as they spam locations sell news services lines and you know i message ship them your we've added new lines through acquisition and otherwise and these are the folks that that i use their skill set some relationships to sell up up sell i guess maybe the term you'd want to use to add these lines and to existing customers and existing casters has been such a huge and wonderful source of growth rush for many years and continue to be and we just wanna we want to make sure keep that momentum going and get these folks and goes to shoot for so that's really what that's focused on show berkman
spk_2: david the last one i get on the emanate i don't like you still think things opportunity to merge
spk_21: you know with
spk_2: the the deal give integrated and and what you learned you know maybe more subtle and art of us it's to talk about that you know eight ability now you know that my later in the money that and on the data time find some other places
spk_22: you don't i feel that teacher integration
spk_2: yeah a couple things are i'm really excited that i'm i'm really excited about where we are frankly as i look ahead and that the progress we're making internally i think on our own internal systems here a class with the investors with the making would do nothing but enable us to be the more effective and quicker in the integrations as we go
spk_23: for work
spk_18: so i'm very optimistic and are and plus we i see had some learnings obviously i'm really excited about our ability
spk_2: to integrate when we do make out acquisitions and we continue to be i guess we used the word opportunistic a lot of bad think it's the right one
spk_0: the market goes up and down up and we we keep our eyes open all the time for really complimentary immediately a creative good strategic businesses and i know that as we move forward and we do make of acquisitions i am really excited about our improved ability to be able to onboard and and keep in mind we only had really one with an issue there
spk_17: to perform quite well
spk_24: so i really think it's gonna be a nice part of our our business going forward but we don't have a definitive target relative what would you have my positions and that's happening right now
spk_25: understood understood that fair
spk_24: appreciate it thank for it thanks jeff for off i phone come from george nice from i'm caught and management fees go out
spk_2: thing to play hybrid so you good your tower year a good and
spk_26: just when it didn't a little bit deeper if we can own or w as i believe that it was sort of to businesses you bought it from a private equity firm that had me to be some acquisition and those two didn't lose weight totally different a marine integrated is almost as if you bought two separate businesses when they bowed problematic only get just one of them
spk_27: he i am china to our best as any personal your as much as extremely accurate they they operate their different that had it before us with operate on telly separately
spk_2: we've we've moved with we we've combined the salesforce the accounting we combine allow those aspects of they didn't do we've already done that in fact i think we have from both sides of that business have everybody aligned with the departments here at the core from a management standpoint are processed and point but i would say that the at the side of
spk_26: the business add that wasn't really commodity related it's decided as lottery it's retail that's probably where that's where most of the issues came from
spk_2: okay
spk_28: okay and and i'm
spk_3: and then i think you you mentioned way that are wh with the be the candidate in for the full year
spk_24: but when it's the afternoon and or the flight lies in the second half i know now i was sad if it was it it did it we we had a camera explains that we def laminated our pies and i don't think it was negative enough now i'm half brother quarter now
spk_1: going to be decoded it every quarter
spk_24: i don't i don't know to are specifically
spk_2: oh yeah we wouldn't put would break that down to that level but
spk_0: get lucky and we're going to get back to where we originally thought that business would be by the end of this year i think that's the the main take away as were very positive on the acquisition overall with what we've been able to accomplish over the last quarter so
spk_26: okay
spk_18: and then maybe just one final well i think that maybe are you guys had said that
spk_29: you know the first half of the year committee be the perspective was suitable one way to expect or something similar in the second house
spk_30: but they've been photographed and does or ws explain all that to op or whether some other factors that came in that you know that sort of slightly lower the for the the forecasted say
spk_1: yeah and the art of us get you most of the way they're certainly the the seasonality that that came in with queue for makes up the a large force of the rest of the business
spk_31: okay
spk_3: okay great thank you
spk_29: that like you for said the question comes from grad get from of found things go wrong hi thank you for taking my question and can you i was a little bit unclear about art of you as you talked about that one and half million dollar impact over the course of the year but there was that positive benefit thank you to and the negative impacting and cute three and and the net net enough i just take you to tune que three hours and and you know net positive surprise and so when i think about the one and half million dollar negative impact for the year was out a lot of back in into for
spk_3: like maybe two two million dollars plus
spk_29: no i would i would characterize back to the million and a half those those items and que to and que three were really just adjustments
spk_3: reconciling the might i'm from from previous border so on the million and a half is is largely just the upside the that we missed out on in the business and and certainly would look at that as as being more related to the second half of the year
spk_18: okay
spk_32: okay thank you very much and then and on the commentary for january and february and and i heard on
spk_0: it did you expect things to get a little bit better as you cycle through some of the adjustments that you made to a fuel surcharges being able to pass those aren't you know a absent any additional improvements it sounded like what i heard was twelve seven fives of gross profit
spk_24: on a run rate basis and and nine seven five as as as dna in a urban on gap our taxes like three million dollars plus plus whatever additional stock based compton and adjustments it gets you can have to like the for ishmael dollars of and either dot for that first quarter is my kind of like reading those pieces correctly
spk_26: i think that's a fair assessment yeah certainly january and february we wouldn't is is it's not meant to be guided for the quarter but religious the point out that the businesses is really stabilize coming out a few for okay thank you very much and on my last question was ah around that free cash flow you at it again cash flow quarter and on you guys got it that and so i was excited to see you generate new positive free cashflows we look forward to this year is there is some reason that you wouldn't be generating positive free cash flow as she did you know kind of high teens to twenty million of the the this year
spk_1: yeah we're certainly optimistic about where we're at and building on the operating cost of operating cash flow from queue for arm will have some integration catholic tell off as well so certainly there's a lot of optimism that that's going to continue and and increase thank you very much
spk_3: thank you thank you correct
spk_9: denmark's question come from charge miles from am come out it's pronouncement can i hope
spk_33: did you try him back so quickly sorry about that
spk_1: i just want to follow up on greg's question on his dna
spk_26: this discord or it was nine eight but if you take out stop based comp
spk_34: the transaction related expenses and some other adjustment
spk_29: it was roughly eight point five
spk_35: is that eight point five on are of normalized his teenage is that a good number to use or there some investments that will that you bump set up during twenty twenty three
spk_24: a chore spread of i'll take that again yet so they integrate acquisition
spk_5: or i should say atari the integration expenses are going to continue as we integrate through and we we mentioned earlier
spk_0: and the call that we expect us to be completed by que through two three so i would i would expect there to be some continued integration expenses there that would that would taper off
spk_2: okay by me that another reminder prevented partly are sorry go ahead donald you go ahead i'm sorry guys was going to say is uk i think you're thinking about a ride the other pieces he called out would be related deaths dna that backs okay showing a way we get have a ready made on sort of like that normalized a is it would be could be a point five they'll be some transaction related expenses or integration related expenses in the first pass or maybe all the way to the third quarter arm but don't but then i guess they stopped yeah that's that's fair
spk_36: okay
spk_0: okay great thank you

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