Good day and welcome to the Quest Resource Holding Corp. Second Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time I'd like to turn the conference over to Dave Mossberg Investor Relations representative. Please go ahead sir..

Thank you Cody and thank you everyone for joining us on the call. Before we begin I'd like to remind everyone that this conference call may contain predictions, estimates and other forward-looking statements regarding future events and -- or future performance requests.

Use of the words like anticipate, project, estimate, expect, intend, believe, and other similar expressions are intended to identify those forward-looking statements. Such forward-looking statements are based on Quest's current expectations, estimates, projections, beliefs and assumptions and involve significant risks and uncertainties.

Actual events or Quest's results could differ materially from those discussed in the forward-looking statements as a result of various factors which are discussed in greater detail in Quest's filings with the Securities and Exchange Commission.

You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties. Such forward-looking statements are presented as of the date made and we disclaim any duty to update such statements unless required by law to do so.

In addition, in this call we may include industry and market data and other statistical information as well as Quest's observations and views about industry, conditions and developments. The data and information are based on Quest's estimates independent publications government publications and reports by market research firms and other sources.

Although Quest believes these sources are reliable and the data and other information are accurate, we caution that Quest has not independently verified the reliability of the sources of the accuracy of the information. Certain non-GAAP financial measures will be discussed during this call.

These non-GAAP measures are used by management to make strategic decisions forecast future results and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures is useful for investors' understanding and assessment of the company's ongoing core operations and prospects for the future.

Unless it is otherwise stated, it should be assumed that any financials discussed in this call will be non-GAAP basis. Full reconciliations of non-GAAP to GAAP financial measures are included in today's earnings release. And with that said, I'll now turn the call over to; Ray Hatch, President and Chief Executive Officer..

Thank you, Dave. Thanks to everyone for your interest in Quest. We hope that you and your families are healthy and safe. And we appreciate that you've taken the time to join us to discuss our second quarter results.

Regarding our results, while we're not fully recovered by any stretch results were ahead of where we thought they would be and the trend was positive through June. Within our end markets most effective in April recovery began sooner than expected and has continued steadily since the law.

And in certain markets such as grocery and specialty retail, we saw stable volumes which helped offset the decreases in other areas. We were able to demonstrate the flexibility of our cost structure and show an increase in adjusted EBITDA year-over-year post positive operating cash flow and maintain a strong balance sheet.

We were able to replace our asset-based credit facility which was due to expire in 2021. I'm happy to say, we're able to achieve this objective ahead of schedule and with more favorable terms.

Importantly through the hard work of our management and staff we were able to adapt quickly to a work-from-home environment without disruption in our service business. It has not been easy and I want to thank our folks for all of their efforts to manage through this uncertainty.

I'm going to turn the call over to; Laurie Latham, our Chief Financial Officer to review financials and then I'll get back to review the trends that we see in our major end markets and discuss some of our strategic initiatives.

Laurie?.

first, we have flexibility in our cost structure and we've aligned cost to meet the current level of demand; second, we have continuously worked to optimize services on behalf of our clients; and the third factor relates to service mix, which can fluctuate from quarter-to-quarter.

In the second quarter this year our mix had less revenue related to lower margin commodity waste disposal services. SG&A expenses were $4 million during the second quarter compared to $4.2 million during the same period last year.

We took action to lower our SG&A expenses and preserve cash including discretionary spending cuts and a labor force reduction.

The biggest contributors to the decrease in SG&A was a decrease in labor costs professional fees and travel, which was partially offset by employee recalls under the Paycheck Protection Program, severance costs, increased stock compensation expenses and third-party legal accounting and professional fees related to our corporate development efforts.

At the end of the first quarter, we temporarily reduced our workforce through separations attrition and furloughs.

Thankfully, we were able to secure a Paycheck Protection loan under the CARES Act, which allowed us to bring back many of the furloughed employees, maintaining the continuity of our workforce in support of the essential services provided by our customers.

The $1.3 million use of proceeds utilized from the PPP loan shows up in other income line and funded eligible payroll, rent and utility expenses.

During the balance of the year, while certain SG&A expenses such as travel will remain low, we expect SG&A costs will increase from Q2 levels due to increased staffing in relationships to business recovery and corporate development activities.

Net income per basic and diluted share was $0.08 for the second quarter of 2020 compared with breakeven for the second quarter of 2019. Our adjusted EBITDA for the second quarter was $1.1 million compared to $825,000 during the same period last year.

I would note that the adjusted EBITDA excludes the use of proceeds from the PPP loan as well as expenses related to COVID-19 labor recall severance and third-party legal accounting and professional fees related to our corporate development efforts. Moving onto a review of the balance sheet and cash flow.

During the second quarter, we generated $1.5 million in cash flow from operations. Excluding the $1.3 million for use of PPP loan proceeds, we still generated positive cash flow which speaks to the flexibility of our model as well as our actions to optimize services on behalf of our clients.

With positive operating cash flow, our cash balance increased by $600,000 to $4 million at the end of the second quarter. We also used cash to reduce debt levels. We had $3.8 million drawn on our credit facility which was a decrease of $800,000 from the end of the first quarter. Last week, we entered into a new loan agreement with a new lender.

This new loan provides access to an asset-based revolving credit facility of $15 million with an accordion feature permitting the facility to be increased up to $25 million. There is also an equipment loan facility of $2 million.

We elected to secure the new agreement now because our existing credit facility was set to mature in 2021 and we were able to capture better terms. The credit facility's primary use will be for working capital needs. We maintained strong working capital discipline and continued to carefully monitor the status of our accounts receivable.

DSOs remain within the normal range and through our efforts we have been able to keep receivables in order. As previously announced, we closed a common stock placement on August seven with net proceeds of more than $3 million. The capital raised in the offering is intended to support the company's acquisition strategy.

In summary, with the actions taken, to increase our financial flexibility, we are well positioned to continue the pursuit of enhancing shareholder value, while providing uninterrupted service to our customers. At this time, I'll turn the call back to Ray..

Thank you, Laurie. During this pandemic, we've remained focused on protecting the health and safety of our employees and taking care of our customers. More than 90% of our staff is working remotely. There's a skeleton crew that continues to work from the office.

We implemented safety measures to protect the health and safety of our workers, and are grateful to our employees' willingness to do what it takes, to deliver uninterrupted service to our clients. The change in our operation has been seamless and is facilitated by investments we made last year to move our technology infrastructure to the cloud.

I want to point out that, we're now able to -- we were able to show an improvement in adjusted EBITDA and generate positive cash flow during one of the most challenging economic periods in our lifetime. This demonstrates the resiliency of our business and the power of our asset-light model.

Clearly, this is also visible to our new lender and was a factor in the willingness to replace and extend our credit facility with stable returns. Before I go into more detail about the end markets and strategies, I'd like to review some of the reasons that we are well positioned to continue to weather the pandemic.

First, we are very fortunate that we along with most of our customers are considered an essential business and have remained operational throughout the period. Second, while certain customers have lower volumes of waste, they still have the same waste streams and the need for our services. Third, we have diverse end markets.

Finally, our asset-light business model gives us the ability to align our costs, with the current level of business. Next, I'll review what we've seen in terms of economic activity in the major end market. In the grocery end market, volumes have stayed strong throughout the entire period and in some cases have experienced modest growth.

We continue to work with our grocery customers to divert more waste from landfill, and grow the food waste programs that we have in place. With a few exceptions, most of our retail customers are specialty retailers that are classified as essential and have remained open.

In certain cases, some of those customers saw modest volume gains, during the early stages of the pandemic. In the automotive end market, we saw a significant decrease in automotive repair and maintenance at the beginning of the quarter. Consumer-focused automotive maintenance tends to correlate to miles driven. And in April, U.S.

miles driven declined an unprecedented 40% year-over-year. Industry data suggests that, the rate of the year-over-year decrease has steadily improved since then, but it's still below historic levels. Consumer demand has had less of an impact on the industrial end market.

However, during the quarter, certain industrial customers curtailed production and temporarily closed some of their plants, due to the breakout of the virus. Most of our industrial customers are considered essential and have indicated they expect to recover the majority of their business that was delayed due to the disruptions.

The restaurant end market relatively new for us is worth mentioning, because it's one of our fastest-growing effort -- it was one of our fastest-growing areas prior to the pandemic. While full-service restaurant customers have been significantly impacted, quick service customers have done well in terms of volumes.

Overall, restaurant market has recovered somewhat from the April lows, but it's still significantly lower year-over-year. Next, I'll talk about our growth initiatives. Most of our growth in gross profit dollars over the past few years has been from the existing customers.

And while volumes are down in certain end markets, we continue to see interest and are having success adding programs with current customers. We continue to pursue and have a strong pipeline of new customer opportunities.

As you might expect many prospects have slowed down their evaluations and have delayed large enterprise decisions in the current environment. Later in the second quarter, we were able to convert one large opportunity with a specialty retailer that has about 1,000 stores. We've started servicing this specialty retailer in July.

We also had a number of smaller wins during the quarter. Regarding our M&A efforts. As we previously discussed, we've been actively pursuing an M&A strategy. Our industry is highly fragmented with 18,000 local or regional players which provides plenty of opportunity for growth and consolidation.

To recap, our strategy is to acquire regional local players that offer differentiated service with long-standing customer relationships, but who are reluctant or unable to grow due to lack of infrastructure.

We've built a scalable platform which includes the national vendor network, back-office capabilities and systems to support the acquired company growth. We believe the integration of these businesses will be similar to our process of seamlessly onboarding new customers, which we repeatedly demonstrated on a national scale.

Over the past year, we have been selectively building a pipeline of companies that potentially fit our criteria. Recently two of those targets have advanced to the LOI stage. Although, we won't be able to give any specifics at this time, we'll have more to say, if and when we're able to come to a definitive agreement.

This pulled our M&A strategy, we did around the financing last week, as we described earlier. In summary, there's still a great deal of uncertainty about how this pandemic will affect the economy, in the second half of the year and maybe into 2021.

However, at this point, we feel we've turned that corner, while we expect to see another decrease in year-over-year financial comparisons. But we're cautiously optimistic that we'll see a sequential improvement, in gross profit dollars, during the third quarter. And continue to expect positive cash flow for the year.

Longer term we believe, the trend towards sustainability will continue and the companies will continue to deploy programs, in order to divert more waste from landfill. And reduce their environmental footprint. In addition, we believe Quest is well positioned to benefit. And in some cases take a leadership role, in affecting this secular growth trend.

I look forward to keeping you updated on our progress.

We would now like the operator to provide instructions on, how listeners can queue up for questions, Operator?.

Thank you. [Operator Instructions] We'll take our first question from Gerry Sweeney with Roth Capital. Please go ahead, Sir..

Hi. Good afternoon, Ray and Laurie. Thanks for taking my call..

Sure..

Hi, Gerry..

I wanted to start on the M&A front. I know you can't talk that much about it. But you touched upon it.

These potential opportunities in the pipeline that you look at, is it fair to say, maybe they bring geographic and/or additional waste stream opportunities, that you could either sell, some of your other streams that they may not have into different areas et cetera or cross-selling opportunity? I'm just curious, as to a little bit more push or pull-through of opportunities..

Yes. I'll speak in general to our acquisition strategy as far as what the targets look like. And there's both, there's opportunities for geographic expansion. And there are also definitely opportunities to sell additional waste stream services into the existing client base.

A lot of times the existing client base in a target may only be regional, while we have a national platform as you know. That gives us the chance to use our network to expand geographically. And also due to the breadth of the service offerings we have, we feel there's a lot of an opportunity to sell that into acquisition market..

Got it. And we've obviously -- I think, we're both in the same pace. I think there's a big opportunity to sustainability. And all the services you bring to companies. But growth has been a little slower than we anticipated. It may be just getting some of these larger companies used to outsourcing this -- your work that you can do for them.

Is this a way of almost maybe speeding up, some of the growth process just short circuiting some of that over the hump type of a thought process of just getting more people, on the platform faster? Is that also a way of looking at it?.

Yes. There's -- and again, there's two types of growth. A focus on gross profit dollars, I know in e-mail we talked about it. We continue to grow that, as our measure of growth. But there's no question that the pipeline has grown. And we really need to -- we'd love to accelerate that and definitely making every effort there.

And looking for that, short-circuit method you're talking about. And as I mentioned, though I will tell you, it's -- this has been a slowdown period, as far as decision-making, with the distractions and the type of thing that's going on, in our target companies that we're trying to sell through. So it's been a little stagnant because of that.

But we are continuing to add, which is encouraging new accounts to the pipeline even in this slow time. The challenge is moving those things through to fruition.

And we did have as we mentioned a little success actually in Q2 in doing that and we hope that this thing will allow us to be able to continue to push that existing pipeline through to close territories..

Got it. And then just wanted to talk a little bit about flexibility and maybe some of the communications you may or may not have had with some your clients. Obviously, we're going to the fall. There are some concerns of maybe the reemergence of COVID 2.0.

How much flexibility do you have? And how much communication have you had with your clients? Maybe understanding what they're looking at what they're anticipating maybe so you could staff up staff down just use that flexibility you have just for -- to manage volumes and service with what your clients are seeing?.

Yes, Gerry that's a great question. And it really actually just boils down to communication effective communication. Luckily, we talk with good partners or integral partners with all of our clients. So we're able to communicate quite regularly.

And I would say that our intelligence relative to what's going on with their businesses is in many cases as good as theirs, however good that is, because it's hard to anticipate some of these ups and downs.

But staying as close as we can to the ups and downs in foot traffic and volume allows us to work with them to make sure our services are meeting those needs consistently and placing with that. But communication is very, very important. And I will tell you I believe that the company has gotten much better with that through this COVID crisis..

I’ll jump back in queue. And I appreciate it. Thank you..

Thanks, Gerry..

[Operator Instructions] We'll take our next question from Amit Dayal with H.C. Wainright..

Good morning, Dave. Hi, Ray, hi, Laurie..

Hi, there..

With respect to sort of your customer base I know you've added one large customer in the second quarter.

Did you lose any customers?.

No, we didn't have any churn. Yes. I guess obviously this crisis we're in has changed a lot of things. But along with the slowness in adding those there's actually been no churn on the other side. That's very positive.

And you know that, I think one of the key reasons why we continue to retain these clients is our ability to understand their needs, communicate with them and help them meet it. So we actually feel like we've been a big service to a lot of our existing clients and haven't had any kind of issues like that..

And is this like your cash flow in those aspects of the business also continue to hold up pretty well? I was just wondering if you faced any challenges on the collection side or the account receivable side..

No. Amit we have put in place even before the COVID-19 crisis hit good practices to keep up with our receivables and we've seen the DSOs stay right in our expected range and our receivables have stayed and balances have stayed in very good shape..

Understood. And then your second quarter revenues came in ahead of our expectations. So it looks like the revenues have recovered at a faster pace.

Should we anticipate sequential improvements for the rest of the year as well? And any color on how much sequential improvements you are just anticipating with the visibility you have?.

The one thing we tell first of all obviously, we're hesitant like everybody would be in this uncertain environment of giving -- like I know you faced that with everybody you talk to but we did say and we expect our gross profit dollars to continue to improve sequentially and we do.

Obviously, there's a lot of caveats to that based on what's going on out there but we feel good about that. As far as through the balance of the year, we'd like to see it continue to improve as it has.

And I think we mentioned this quarter -- that this quarter was -- we accelerated better than expectations to your point and it basically means our clients did. But we're still going to be below last year.

But the real question is the speed of the recovery and it's hard to say but we do expect Q3 to have a growth in gross profit dollars as well sequentially not year-over-year..

Understood, understood. And maybe just last one. I don't know if you touched on this, with respect to the commentary on your M&A efforts.

But in terms of time line, are these expected to potentially translate into a deal or a transaction before the end of the year? Or is that a little too early to kind of what the environment right now is?.

Yes. Amit, as we mentioned, we do have two LOIs in place. And obviously that leads to that succession of activities, and we definitely expect those activities to get us there by the end of the year. Of course nothing is done, but we're hopeful. So, yes, the time line should be within that frame..

Okay, great. With that, I’ll get back in queue and take my other questions offline. Thank you so much..

Thank you, Amit..

Thank you. We'll now take our next question from Greg Kitt with Pinnacle Family Office Investments. Please go ahead..

Hi, Ray and Laurie.

How are you?.

Hi, Greg.

How are you doing?.

Hi, Greg..

Thanks for taking my question. First just a comment. Congratulations on a great quarter. I'm shocked that you were able to generate $1.5 billion of cash from ops in this quarter, in this market environment, and then additionally, be able to grow EBITDA sequentially in Q2.

I think this quarter proved the durability of your operating model and that your COGS and operating expenses are truly variable. So I'm very excited by this quarter..

Thanks..

You’re welcome. I'm encouraged to hear about the spec retailer win.

Can you give us any color why this customer chose to work with you? And how big the opportunity is with that customer?.

It's a certain bigger opportunity as we roll out through all the locations. So, it's a nice one. It is, and we expect to get more healthy.

But the reason we were able to get this is the customer service is really -- this is my feeling on it, customer service is really something that this industry, sometimes I want to repeat related to it, Quest really focuses on customer service and it seems to be a novelty at times. And that really is one of the primary reasons.

Good customer service, responsive to needs, listening when they have issues. Those are things that we do very well and these large multi-unit customers have an appreciation for it. So I would definitely lean it as customer service growth..

Thank you.

And can you give any color on the types of services that you're offering?.

It's waste and recycle, and hopefully helping them find even more opportunities to recycle more materials, and they were dealing with their previous provider. So that's the deal.

You get better customer service, and you get more opportunities to leverage our more sustainable program by finding better homes for a number of materials that will go into the landfill with you..

Thank you. And my last question is you talked about COVID slowing down the decision process for some customers in your pipeline.

Do you feel that COVID might have also created some disruption opportunities that open some doors for you to have a conversation with potential customers where the customer maybe previously wasn't necessarily as motivated to look at changing vendors?.

Yes, I think that's a great point Greg. I think every -- normally the crisis does create opportunity where you can find it. It has -- it's created a bit of a shock wave to the system and a lot of people are trying to trip water, and turn out what their next steps are, and consequently that slows down a lot of decision-making processes.

But there's also situations where customers' needs change due to this, and the current provider isn't providing it. And we feel that that could yield some opportunities to us as well. And we're definitely on the lookout for those..

Great. Thank you very much and congratulations on a great quarter..

Thanks again, Greg. Appreciate it..

Thank you..

Thank you. We'll hear next from George Karutz [ph] with Karutz Capital [ph]..

Good afternoon.

Right?.

Hey, George..

Hey. So I've got a couple of questions for you. One is before the COVID for the last couple of years you'll have struggled with your salesforce. And you hired a pretty high-profile guy ahead of sales.

And what I'd like to ask you is how is that working out and then not being able to see people face-to-face? The other question is as far as your offering that you did it's dilutive at this point unless you make the deals and you did it at a pretty cheap price $1.15.

So, obviously, your deals must be priced comparable to the low equity price that you got. And so what I'm asking you is this. If those two deals that you have LOIs " will they be accretive after that dilution?".

I'll answer the second one first George. I really can't speak to that right now on the accretive aspect and everything. I think you understand or -- yes, unfortunately, I can't speak to that. But I would ask and hope that you would -- I know you trust us. We're doing our best. I think we think it's going to work..

Well, you're not going to do something stupid. You're not going to raise money at $1.15 and then go make a deal that's twice as expensive as you should because that would be a foolish thing to do. And I think you're going to have to work out of it for two years or something..

Yes, we try to do it..

And you did the deal really quick. So, these deals must be pretty close to -- you must be pretty sure they're going to be done or you wouldn't go raise money when you did at $1.15. And you say something about the end of the year.

My guess is that you probably will have them closed by the end of September but can you say anything about that or not?.

The question I got was really I thought if we close before the end of the year and I said yes. But I really can to be honest I didn't say that. I answered the question, yes. But I really can't give -- I'm sorry George I wish I could do more..

Okay. No problems. Okay. So, how about your Head of Sales? How is that working out? And because you've struggled for a couple of years with the whole salesforce and that was something that you weren't happy with the way it went and everything. And you hired a guy who pretty high-profile maybe came from waste management or whatever.

Is he still there?.

Yes, he's still there. And your question was about how the sales pipeline is working in acceptance that. And I do feel good about our sales pipeline. It was actually pretty encouraging. We've actually moved some stuff across the goal line during some very difficult times.

I'm disappointed as is everybody else in the lack of progress because of what we talked about getting stagnant George. And it is all you mentioned not being able to see people face-to-face. That's one reason. People want making decisions are distracted and we're still trying to do calls with folks. And it's just not conducive to really accelerate it.

But we have a nice pipeline George, I really feel good about the fact as we move through this as we grow back on the right track..

So, let me ask you this. So, you've got a fast food chain with 600 stores. And before they did I don't know 60% of their business indoors and they did 40% through the drive-thru. It is -- and now maybe they're doing they might even be closed indoors some are doing 20%, but they're doing 80% of their business through the drive-in.

Is how much does that hit you all as far as waste?.

It's -- it moves the waste away from the restaurant as you can imagine when you drive up and pick it up and go home run it you're not throwing it away there. There's still the waste from the preparation in the kitchen. And it's -- the net effect is it doesn't create more waste. It moves it to a different place which is typically their home.

But the fast food places of volume it seems like has really increased overall. So, we've been working pretty good with those guys, in general, especially in light of events. It's the poll service guys that as you can tell the dine outs have been hit hard it's really been difficult for them..

Okay. Okay. Well, thank you. Good job. I mean things are kind of coming along now and pretty optimistic..

Thanks George. And George one more thing on the restaurant space, we're talking about it quite a bit. We were going into -- I just want to make sure you remember as we've been in this COVID, it's really a pretty small segment for us. So, I'm really kind of thankful for that at this point just based on near-term events..

So, basically, you could be doing more now with the COVID than you did before because you've got some business that you never had before. So, even if there's less waste, you had zero before out of those new clients..

Yes, we were really smaller penetrated. So, -- but the ups and downs in that space really hasn't moved out our needle a whole lot based on the mix at least at this point..

And let me ask you one last thing.

So in the deals you're going to do and try to do, so how do you want to structure them? I mean how much cash, how much debt, how much equity and how much earn out? What's your goal to do there?.

Well I think each deal is going to be different George. And that's again a hard one to say. But I think typically don't have element to all those all the above and are not so nice because we've got a real engagement on a go-forward basis. But we'll do what we can as far as equity and debt goes. It's going to depend on the deal.

Again, we're so young in this process we've got a couple out there, but we hope to have a couple more down the line. And I really would hate to be specific as to the kind of structure. But I would say that all three of the elements are there for sure..

When you gave the end of the quarter July 30 -- I mean June 30, you said $4 million in cash and $3.8 million in debt. So that's the first time in a long time we do have a net cash position. Is that correct? And that's before the offering.

Is on the debt cost position?.

That's right George..

Yes, that's correct..

Okay. Yes. Okay. And that's the first time in a long time. It used to be like $5 million in debt and $2.5 million in cash a year ago.

Something like that Laurie wasn't it like that?.

Well yes. And remember we received $1.4 million in -- from a PPP loan in May also..

But you're right on the ratio George where it typically had been for sure..

Okay. Well, thank you very much..

You bet. Thank you, George. We appreciate it..

We'll hear next from George Melas with MKH Management. Please go ahead..

Thank you.

Hi Ray, hi Laurie, how are you?.

Good..

Great. Laurie this is a question I think mostly for you. I'm just trying to get to a bigger number. So, I think there's roughly $300,000 of onetime expenses that probably are in SG&A that we take out.

Is that about right? And can you maybe give some more?.

Yes. Remember that we did put the use which was about $1.3 million in PPP loan use that we took out of it's an adjustment out of EBITDA. And then the remainder of the other adjustment line items are expenses that we adjusted out of SG&A related to severance, COVID-19 recall and also to third-party expenses related to acquisitions such as legal..

Okay. So if we look at your SG&A going forward, if we exclude also the third-party expenses regarding acquisitions, it's probably going to be a bit lower in the year.

Is that right?.

You say -- I couldn't quite hear you George..

I'm sorry. I'm just trying to get a sense of your SG&A in the second half.

Does it stay roughly at the same level or does it come down a little bit?.

Well actually I think George if you look at it, we'll start to see some of our labor costs coming back up in line with the increased services that we're having with the recovery with our customers while some of our expenses will remain low such as travel and trade shows, things that are clearly not happening because of COVID-19.

So, we do expect that SG&A expenses will come up a little bit from what we had in the second quarter. And in addition, we'll have some corporate acquisition-type expenses running through there also..

Okay. Great. Thank you, Laurie And then Ray a quick question for you, just trying to understand the timing of the acquisition. Is it that you sort of work to develop the platform and have the systems in place right now that maybe you didn't have a year ago? And now that you have that in place you feel like going the acquisition route is a real ability.

So have you -- is this kind of a nature of the business?.

Yes. That's a great question. First I thought you're going to ask me when the acquisition was....

No. I was not going to do that..

Okay. But the timing is relative to the evolution of business is a great, great observation. I think George you've been following the company for a number of years we've evolved pretty steadily into I think a much more disciplined organization knows how to generate gross profit manage costs and develop our platform.

And it's a great platform for growth and with the scalability I think that's been developed here we feel it's the right time to do - to start down this path. And we're excited about it. I think the evolution of the company this is exactly where we should be doing based on where we are as we've evolved..

Okay. Thanks a lot. Okay. Thank you, very much folks. Thank you..

Thank you, George. Appreciate it..

Thank you..

Thank you. And that does conclude today's question-and-answer session. It does also conclude our conference call today. We thank you all for your participation. You may now disconnect..