Kingsway Financial Services Inc

Good day and welcome to the Kingsway third quarter 2024 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. Please note this conference is being recorded. With me on the call are JT Fitzgerald, Chief Executive Officer and Kent Hanson, Chief Financial Officer. Before we begin, I want to remind everybody that today's conference may contain forward looking statements. Forward looking statements include statements regarding the future, including expected revenue, operating margins, expenses and future business outlook. Actual results or trends could materially differ from those contemplated by those forward looking statements. For discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward looking statements, please see the risk factors detailed in the company's annual report on form 10K and subsequent form 10Q and form 8K filed with the Securities and Exchange Commission. Please note also that today's call may include the use of non-GAAP metrics that management utilizes to analyze the company's performance. A reconciliation of such non-GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well in our periodic filings with the SEC. Now, I would like to turn the call over to JT Fitzgerald, CEO of Kingsway. JT, please proceed.

Thank you, John. Good afternoon, everybody and welcome to the Kingsway earnings call for the third quarter of 2024. Let me start by saying that we had another very solid quarter that was largely in line with our expectations. We saw improving performance in our extended warranty segment. Which showed strong cash sales and the continuing moderation of claims experience and exited the quarter with nice momentum heading into the fourth quarter. Our KSX segment also performed to our expectations with adjusted EBITDA improving sequentially and year over year. The third quarter was highlighted by our acquisition of image solutions at the end of September marking our sixth acquisition in our accelerator portfolio. Image Solutions is one of the largest IT managed service providers in western North Carolina with approximately 85% contractual recurring revenue with low churn, strong margins and impressive historical organic growth. Required the company for $19.5 million, roughly 6.3 times TTM EBITDA plus some transaction expenses and a small working capital adjustment. And an all cash transaction. As a service business operating in an industry with attractive long term growth opportunities, established customer relationships and a high margin asset light business model with 12 month adjusted EBITDA of 3.1 million for the 12 months ended June 30th, 2024. Image Solutions met all of our clearly defined investment criteria. Davide Zanke led the deal and has since transitioned from his role as an OIR to the CEO of the company. Davide and his team will be focusing on scaling the business by further penetration of their existing market, expanding its service area geographically and eventually expanding its offerings to include services such as cyber security and cloud storage. As you may know, Image Solutions is in the middle of the area that was devastated by Hurricane Helene. Fortunately, our team members and their families were all safe and the region continues to recover. Image Solutions was one of the first IT providers to get back up and running and has been working tirelessly to help its customers and prospects get back to business. We believe any short term impacts from the storm are delayed revenue rather than lost revenue as hardware installations are being rescheduled to later this year. Operationally, the third quarter was again largely in line with our expectations. Consolidated revenue was $27.1 million, a solid increase of nearly 10% compared to the prior year quarter. Our consolidated adjusted EBITDA was $2.9 million, a 28% improvement over the 2.3 million in the year ago quarter. For the extended warranty segment and the KSX segment, combined adjusted EBITDA was $3.4 million in the third quarter, an increase of 5% compared to 3.2 million in the third quarter of last year. Digging into our extended warranty segment, a slight increase in the sale of warranty contracts and higher cash sales drove a .4% increase in revenue. Claims expense rose by .5% over the third quarter of last year, which is lower than the 12% increase that we experienced in the year ago period. Year to date claims expenses up .3% over prior year compared to an 11% increase in the year ago period. Adjusted EBITDA, $2.1 million, was essentially flat to prior year as an increase in claims offset gains from increased revenue and ongoing cost savings initiatives. While the impact from claims inflation have not abated quite as quickly as anticipated, they are improving. We also see opportunity for accelerating growth in our credit union and mechanical businesses. IWS's opportunity pipeline has returned to pre-pandemic levels and is currently onboarding two new significant credit union partners. While Trinity, our commercial HVAC and refrigeration warranty business, continues to grow and hit record levels of revenue and profitability. We also believe that any future interest rate cuts from the Fed could have a positive impact on our extended warranty business. As lower interest rates make auto financing more affordable for the end customer. In our search accelerator or KSX segment, revenues increased 23% compared to the year ago quarter. Primarily as the result of a favorable comparison due to the acquisition of SPI late in the third quarter of last year and the acquisition of DDI in the fourth quarter of last year. Q3 2024 results exclude those of image solutions as we only own that business for a few days during the quarter. Within KSX, talk about each one of those businesses, at Ravix the team focuses on increasing utilization rates and managing costs to improve profitability. Gross margins improved slightly for both the third quarter and year to date compared to prior year periods despite a slight decline in revenue. Adjusted EBITDA was down in the third quarter compared to the third quarter of last year. Overall, the venture market remains slow in the quarter with field volume depressed as fewer new companies are being funded and in need of our services. However, the market is showing signs of recovery. October was a favorable month from a new opportunity perspective as the team's marketing efforts are starting to generate solid leads and the trend of closed deals over prior year turned positive for the first time this year in October. Similarly, at C-suite persistent challenging market conditions were again an overhang for the business in the third quarter. The team has a solid pipeline of staffing requests. However, with a slower private equity deal market and macro uncertainty, the team is experiencing placement deferrals. Importantly, the placements are being deferred and not canceled and we continue to believe the business has a healthy outlook and is headed in the right direction strategically. For the third quarter, revenue was lower than the prior year period yet the impact of operating income and adjusted EBITDA was diminished by a lower cost of sales and lower GNA expenses. At SNS, our nurse staffing company, we made great progress on the rebuild of our travel business in the quarter. The number of total shifts increased 5% year over year while travel shifts increased 73% year over year and the number of travel nurses on assignment has more than doubled since the beginning of the year. In spite of higher shift counts, competitive pressure on pricing caused revenue to decline roughly 1% in the current quarter versus last year. Adjusted EBITDA was also slightly down compared to prior year but the magnitude of decline is much less than we saw in the first half of 2024. We're beginning to see a positive change in the industry and Charles continues to focus on margins, working capital management, technology upgrades and building a bench of top notch recruiters. We remain optimistic about the outlook for the nurse staffing market and the prospects for this business. At SPI, our global software solutions provider for the management of share owned properties, revenue increased and in fact, year to date revenue through the first nine months of 2024 is on par with the full year revenue number that we used to base our investment decision just a year ago. Since acquisition, SPI has grown its ARR annual recurring revenue by 16%, expanded its capabilities through discipline recruiting and development of its team, added new clients and expanded with existing customers. Operational metrics are also up across the board with solid ARR growth and excellent growth and net retention dynamics. Drew and the team are building a solid pipeline of qualified leads for continued ARR growth. At DDI, our provider of fully managed outsourced cardiac monitoring services, investments that have been made in infrastructure and talent are beginning to pay off. Team opened its second operation center in Salt Lake City in the third quarter which provides not only the capacity needed to grow but also reduces the business risk associated with having only a single operation center. Revenue continues to grow over prior year pre-acquisition periods with revenue in the quarter up 20% year over year and up 19% year to date. Adjusted EBITDA was down modestly in the quarter and from prior year periods due to the aforementioned investments in growth. DDI has a robust backlog of new customers that will be onboarded over the next couple of quarters and the near to midterm pipeline of opportunities also remain strong. We expect profitability to improve as the business scales. Based on the performance of our operating businesses, the 12-month run rate adjusted EBITDA improved to 18.5 million to 19.5 million. Those numbers include image solutions. As a reminder, run rate is intended to capture the last 12 months of adjusted EBITDA for the businesses we currently own including those we have recently acquired. Of note, run rate adjusted EBITDA was negatively impacted in the quarter by roughly 100 basis point reduction in the reinvestment market yield on our warranty float at quarter end. Last week we announced that Rob Casper has joined Kingsway as our newest operator in residence. Rob previously led private equity back consolidations in the veterinary services and HVAC and plumbing industries and has developed a solid investment thesis targeting a couple of attractive service industries. Rob is a graduate of the United States Naval Academy and served three deployments as an officer in the Marine Corps. He holds a Bachelor of Science degree in systems engineering from the Naval Academy and an MBA from Harvard Business School. Rob brings really terrific leadership and operational execution experience to the team and has hit the ground running. With the addition of Rob and Davide transitioning to CEO of Image Solutions, we currently have four OIRs who are actively searching for acquisition opportunities. We have a great current cohort of entrepreneurs and a solid deal flow pipeline to support our strategy of acquisitive growth within our accelerator segment. To summarize, solid operational execution and discipline management drove improved consolidated financial results for the third quarter and we're seeing promising signs of further improving market conditions. We're excited about the opportunities with the addition of Image Solutions to our KSX portfolio and remain committed to our corporate strategy of growth through acquisitions. I'll now turn the call over to Kent for some additional commentary related to the financials.

Thanks, JT. As a reminder, during the fourth quarter of 2022, we began executing a plan to sell one of our subsidiaries, VA Lafayette, which owns a medical clinic whose sole tenant is the US Veterans Administration. In August, we completed the sale of the VA clinic. The final adjustment between the net carrying value of the assets and the selling price, as well as the WASN disposal are recorded below the operating line in discontinued operations. As JT discussed, we acquired Image Solutions during the third quarter for 19.5 million plus transaction expenses and a working capital adjustment. The transaction was funded by 11.4 million in cash and 7.75 million in debt financing. The 11.4 million came primarily from the proceeds of the issuance of 330,000 shares of newly created Class B convertible preferred stock and proceeds from drawing on our existing KWH loan and cash on hand. The 7.75 million of debt financing was provided by AVID Bank in the form of a six-year term loan with a graduated amortization schedule that is now recourse to Kingsway. Also during the third quarter, we completed in a creative purchase of the 10% interest in IWS that we did not previously own. And as such, IWS is now a wholly owned subsidiary of the company. As of September 30th, we had cash and cash equivalents of 6.5 million compared to 9.1 million at the end of 2023 and total debt outstanding of 58.5 million compared to 44.4 million at the end of 2023. Our debt balance is comprised of 44.8 million of bank loans and 13.7 million of subordinated debt. Net debt increased to 52 million as of September 30th, 2024 compared to 35.3 million at the end of 2023, primarily due to the 7.75 million of acquisition financing for IWS solutions and a $1 million draw on the KWH revolver as well as a $6.5 million draw on the KWH delayed draw term loan. In March of this year, our securities repurchase program was extended for one year through March of 2025. Year to date, we have repurchased 312,850 shares of common stock for an aggregate purchase price of approximately 2.5 million. I'll now turn the call back over to John to open the line for any questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Once again, please press star

1 if you have a question or comment. Our first question comes from Joshua Horowitz with POM. Please proceed. Thank you. Hi, JT.

Hey, Josh. How are you? Good. A couple of questions. I guess, what are you seeing out there? What industries are the most attractive as you look for new acquisitions and multiple years into this KSX model? Like, is the talent recruitment getting easier? Are you getting to some flywheel?

Yeah, maybe I'll take those in reverse order. In terms of talent acquisition, you know, we sort of approach that several different ways. We try to maintain a fairly active presence on the campuses of the sort of elite business schools that have ETA programs. So, engage with their ETA clubs and do lunch and learns and post on their internal job boards. We attend ETA conferences as well. And, but our best source of talent is, as you might suspect, from referrals from our existing OIRs. And so, as the number of OIRs that become CEOs continues to grow, we get more and higher quality referrals from their personal networks. So, yes, I think that there is a real flywheel element to that. And I think, as a result, we're able to get really, really talented folks interested in the KSX program. In terms of industries, each one of our OIRs, we encourage them to develop a handful of industry theses. I think that we have done sort of white papers on about 45 different industries to date. And they're sort of across the spectrum, but as you might suspect, given our focus on recurring revenue business models, high margin, low capital intensity, they end up being in kind of asset life, business services, vertical market software, things like that. So, I think, you know, we probably won't buy a manufacturing business, for instance. So, but they're, you know, to say industry, it's really sub industries within sub industries. We're really focused in trying to identify opportunities in the niches. That's where smaller businesses, like what we're targeting, have the ability to have a competitive advantage is in a specific niche. What is the appropriate time frame to measure your success? That's a great question. I think that we acknowledge that there will always be a bit of a J-curve when you transition a new CEO into a business that you just acquired from an exiting founder. It starts with sort of assessing and building the team, and then making investments in growth. And so, you know, you got to kind of get through that first 18 months once that high attribute, maybe low experience CEO learns and develops in the industry, then you start to see things really start to happen. So, I would say that you would then really start assessing how it's going kind of at the three-year mark, right? You know, so Timmy's right at the three-year mark in his acquisition of Ravix. You know, when we bought that business, TTM EBITDA was around 1.7 million. And then he, you know, got in, learned the business, assessed the team, built the team, optimized pricing, leaned into business development, and, you know, has now almost doubled EBITDA at Ravix since we acquired it. And so, and really starting to get some momentum after kind of a tough first nine months of this year given the private equity M&A environment. Great. Thank you so much. Keep up the good work.

Thanks, Josh. Once again, if you have a question or a comment, please indicate so by pressing star 1. The next question comes from Adam Patinkin with David Capital. Please proceed.

Hey, guys. Congrats on the nice quarter and the continued business progress.

Thanks,

Adam. All right. I got a couple questions for you. So first, I saw the release about the new OIR who you brought on board. Can you maybe share a little bit more color about him? What do you like about him? What are the categories that you're looking at and what do you like about those categories?

Yeah. So, we've talked in the past at length about our five Hs, right? The attributes that we think are indicative of someone being a successful operator in a small business. And Rob demonstrates those at a very, very high level. A little bit later in career than some of our other folks. I don't know exactly how old Rob is, but, you know, after HBS, he spent 10 or 11 years in two different private equity backed roll up strategies. The first one was in veterinary care, rolled up, you know, 300 or so vet hospitals. And then more recently at Alpine, a large West Coast private equity firm. Interestingly, with its origins in search, doing a roll up in HVAC and plumbing. And so, you know, Rob's based on those experiences. Rob has developed some theses around some very interesting service related industries that are maybe in the very early innings, you know, first inning of consolidation. And the goal there would be to buy a platform, run it, and then use that as a basis to do, you know, follow on acquisitions out in front of, you know, what he expects would be private equity backed consolidation.

Got it. That's great. And that's really helpful to kind of shift to, you know, thank you for the updates on. I know you did a little tour de force running through a bunch of the different businesses that you have on the KSX platform. But one of them that stood out a little bit was DDI and about how, you know, the growth seems really meaningful, but maybe it hasn't been showing up in the financial statements yet in terms of EBITDA. In fact, I think you said that the EBITDA was slightly down year on year. I know that that business has been adding people and expanding very quickly. So maybe that was just building out some costs ahead of that growth. But maybe could you fill in a little bit more color there about what what that business has been up to? And where kind of like when you think the EBITDA is actually going to start showing up in the financials from that business?

Yeah, great question and great insight that, you know, I would say that that's sort of exactly what's been going on. They've been first of all, all of the growth is entirely inbound. They don't have a sales force yet. That will be, you know, a project we'll be working on. But given the high level of inbound interest to add this service, you know, we're dealing with monitoring patients. And so there's a real focus and emphasis on safety and quality. And so we want to make sure that we aren't adding volume that we can't handle in a perfectly reliable way. And so the goal was to both bring on EKG techs in advance of onboarding those customers and get them trained so that we have sort of a perfect monitoring experience and then also to, you know, air quote, de-risk the business by opening a second operations facility. We looked at a lot of different geographies up and down the sort of kind of inland west and settled on Salt Lake City for a variety of factors, probably most importantly, the availability of really good talent. And so, you know, the investment in new people, bringing them on board so that we had the capacity to add these new customers that were in our pipeline and then the operations facility for redundancy and access to more talent so that we could continue to scale given the visibility we have into kind of the mid stage of our funnel and the inbound interest we're having. So you ought to see our bottom line profitability start to scale now that we can bring on these customers.

Got it. So it sounds like, you know, a lot of that investment. I mean, obviously, you got to build out a biz dev team eventually and do those things. But a lot of the big investment is kind of behind you and you feel like it's not going to be super long before you start seeing at least a little bit of that operating leverage.

Yeah, I think we ought to start seeing the operating leverage even, you know, in this quarter, fourth quarter.

Okay, great. And then last question is just on your pipeline. So I know Josh asked a little bit about it, but, you know, how are the KPIs tracking? What are you seeing? You've got four OIRs looking. You know, how does it feel? I know that there was just a presidential election. So maybe that I don't know, I assume that there was some hesitancy ahead of that. But maybe that would go away now. But I'm just curious what you're what you're seeing in the pipeline and with your KPIs and key metrics there in terms of new deals.

Yeah, no, we're very active, right? I think we were just going through our monthly KPIs yesterday with the team and, you know, incredible activity. We kind of focus on lead measures, you know, kind of the things that we can do, kind of activity based lead measures that we think are both sort of influenceable and predictive of lag metrics. Our lag metrics are obviously letter letters of intent with the ultimate goal of doing acquisitions. And so in terms of top of the funnel, proprietary outreach, NDA signed conversation with business owners. We are knocking out of the park relative to our internal goals. And so there's a lot of activity and, you know, just sort of working things through the pipeline. We did experience some costs in the quarter that show up in SG&A, some broken deal related fees. So, you know, we're working on stuff. The reason we do due diligence that, you know, we end up finding things and not closing things. So we're definitely very active and, you know, I would anticipate that we would continue to hold with 40ARs. We ought to expect to, you know, be able to do two to three acquisitions in any 12-month period. Obviously, subject to the sort of serendipitous nature of lower middle market buyouts.

Great,

that's

helpful. I really appreciate the color, guys. I'll check off here. Thanks, Adam. No further. We have

no further questions from the phone lines. I'd like to turn the floor back to James Carbonara for any questions he may have via email.

Sure. Thank you, operator. And yes, we do have a number that came in on email. First one's on claims. You know, why is claims moderating? And then there's a second part to the question, which states current warranty claims expense growth has moderated to 70% from 11% last year. What's a normal percentage and when do you estimate it returning to that level?

So why is claims moderating, I think, was the first one. We track this at a very macro level. If you look at the sort of monthly CPI report deep in the tables, they break it out and there's one line item CPI for vehicle repair, not service and maintenance, but the repair. And we've just sort of been tracking that every month for a long time, but especially over the last year. Like in September, the September over September change was 6%. I think at its peak about a year ago, it was, you know, in the 14, 15% range. So it is continuing to step down. It claims severity. You know, the cost per claim is not going down. It is just not going up as fast. You know, claims expense is a function of parts and labor and I think labor was the driving factor over the last several years. Largely absent of qualified technicians to work on cars and then also just sort of what we've all seen in the labor market. Up until recently, so I would think that normal. Historically, we would always see that parts and labor inflation kind of closely mirroring CPI. And so I would expect that to moderate over time as increases in labor rates moderate, but that's just speculating.

Great and and the next comes in on image solutions. It says image solutions does 3.1Million in EBITDA annually and simplifying. That's 775 K, sorry, 775 K, 775,000 quarterly. What is the expected EBITDA impact in Q4 in 2025 from Hurricane Helene delaying the hardware installations?

Yeah, I mean, I might probably want to kind of try to sidestep providing any guidance. I think we spoke in the in the prepared remarks about the fact that. The portion of their revenue that comes from equipment installs. Is just delayed, not gone. And so as businesses come back online in the region and can focus on. Replacement of their existing technology, we will be able to get back in those facilities and install the hardware. A big portion of that business is monthly contractual recurring service and IT help desk revenue. So. Which was not impacted at all, so. I don't want to give guidance, but just, you know, I think that. We believe that the hardware sales and install is really just pushed out of two months kind of thing as opposed to.

Gone.

Got it understood. And then the next one was on Ravix and C suite, our business volumes likely to always be tied to the venture market for Ravix or DC opportunities to diversify into new verticals. And the same on C suite are there opportunities to diversify away from private equity or are they likely always to be tied to that market?

Yeah, I mean, I think in terms of the original part of the original thesis on the C suite acquisition is that there would be opportunities to cross sell complimentary services into those. So different verticals. Ravix was historically. Kind of venture exposed and C suite was historically private equity exposed and so both of those businesses are sort of cross selling into those. Each other's verticals. In terms of diversifying away from private equity venture capital, you know, one it's. There's like always an acute need on a on a sort of new investment by a PE or VC fund to have like more sophisticated accounting, but maybe not the necessity for a full time resource. So we think it's a really good fit for fractional accounting and and obviously interim and the placement business at C suite. And so, but then like stepping back when we think about strategy, like, you know, we use this this framework called the ANSOFT matrix. And so where we focus is kind of the penetration quadrant of that matrix. Start with pricing optimization, right? Timmy did a great job of that. Then move to upsell and cross sell. And we've been doing that with the C suite acquisition, the ability to cross sell those two different verticals. And then and then penetrate those existing markets and add new customers. Right. And so I think that there's still just a lot of room to go in penetrating those verticals before you would move to the next harder thing to do, which is to take on a new vertical. And so I think we would want to fully exhaust that quadrant of of the ANSOFT matrix before we move to something that is harder to execute.

Got it. Okay. The next one here is on SNS and it says, glad to hear you are optimistic about the outlook for the market and prospects for the business. Can you reiterate those attractive dynamics of the SNS market and business?

Yeah, I mean, I think at a very high level, long term, big picture macro, you know, the attractive dynamics are a function of supply and demand. Right. On the supply side, there is an acute and persistent shortage of nurses in the US. And that doesn't get resolved anytime soon, as far as I can tell. Like, if you look at the number of people in nursing school, the number of nursing schools, they're just not going to churn out enough nurses to to even kind of refill the aging demographic in that workforce, let alone. Meet the expanding demand for health care services because of demographic trends. So that's sort of the attractive dynamic of that. Now, obviously. More recently, sort of we had, you know, we had a big pandemic boom that a lot of demand for nurses. And so the hospitals rushed into the travel market to get contingent labor. And I put a lot of pressure on those hospital systems from the on the cost side. And and you also had a lot of new kind of upstart staffing businesses enter the market during those boom times. And so for the last 12 to 15 months or so, 12 to 18 months, there's been kind of a large sorting out in the industry hospitals, sort of pushing back and trying to minimize or limit the amount of contingent labor they're using, pressing, pressing the boundary on staffing levels, being tough negotiators on price. And you've also seen some sorting out of those sort of new entrants into the into the travel market. And ultimately, some of them will probably go away. So I think the business is really well positioned to take advantage of those long term secular trends around supply and demand. And we're just kind of going through this sorting out period. And I feel like in the quarter, we finally sort of turn the turn the corner. You know, we travel travel shifts were up 73 percent year over year and a quarter. Our per diem business was down a little bit, but some of that is kind of hospital census driven and we're seeing that come back in cold and flu season. So I think Charles has done a good job professionalizing that business. It was a pen and paper business when we bought it. He put in a whole new tech stack. He's hired some great recruiters and I think well poised to to to take advantage of the opportunity once things sort of settle out.

Excellent. The next one comes in on SBI and it says, Congrats on SBI. What steps do you take in a business when it's growing so well? Do you continue to focus on the organic growth or possibly tuck in acquisitions or more sales hires?

Yeah, go back to that. You know, we had a no reason why anyone on the call would remember, but we when we did the acquisition, we had a investor call to announce the acquisition. And as part of Drew's strategy, it was kind of a not exactly either or but a yes and type strategy. And the first was to really focus on organic growth. We felt like the market in which this company provides its software is growing faster than GDP. There is some white space there, opportunity to to add customers and get adoption. And so he's really right for now really focused on growing organically. And, you know, in lesson and tell, we sort of exhaust that thesis. He's very focused on growing the business that he has. But the kind of and part of the yes and strategy was always that we created vertical market solutions, the holding company, and that once Drew got his sort of muscle built developed on running a small vertical market software business, he could use those practices to explore doing, you know, more acquisitions of vertical market software businesses. But we're really happy with we're really happy with the with what he's done. You know, he's grown ARR 16 percent gross retention in the mid 90s, net retention, you know, well over 100 percent and just getting started, really just getting started.

Terrific. And the next one comes in on DDI and it says, would you possibly use debt in the future for expansion or always self fund your expansion?

We used acquisition debt, so we're focused on paying down debt, right? That's one of the value creation levers that we have, right? And, you know, as is the case with most of these businesses are generally fairly capital light and so don't require a lot of incremental cash to grow. You know, in the case of DDI, we got to lean into headcount and open a new facility in anticipation of that volume coming online. But, you know, I think that the plan here would be to use cash flow to delever and fund fund the growth, which would mostly be in the form of like working capital, right? If your cash conversion cycle is 30 days, right? Your customers are taking longer to pay you than you're paying your suppliers and they're with growth. There will be a natural investment in working capital. And so I think that that would be the only sort of source of rather use of cash to grow.

Great. And last couple here first is aside from Rob Casper, who is brand new. How long have your other been with the firm now?

Yeah, so Peter Hearn joined us in May of last year. So that was about 17, 18 months. Miles joined us in September of last year, so 14 months or so. And then Paul Vidal joined us at the beginning of this year. So we kind of got a nice sequence here of OIRs and where they are in their gestation period, if you will. And so just kind of continue to bring these guys on board, you know, kind of one a quarter kind of thing and and and hopefully match that cadence with new acquisitions. At least that's the goal.

Great. And the last one was just on the DA. Can you share or reiterate what was the financial impact with respect to the VAs?

Ken, you want to take that one?

Yeah, we we got about a million dollars of cash out of that sale.

No P&L impact.

P&L will be shown in discontinued operations.

Great. That concludes the questions from email. I'll pass it back over to you, operator.

Thank you. We have no further questions from the phone lines. This does conclude today's conference call and you may disconnect your lines at this time. Thank you. Thanks, everyone.