Chuck Piluso: Sure. I’ll go in reverse direction. Our close rates are around 25%. What happens is, when we take a look at each company, which is very separate, you take a look at Flagship. These are large customers that are being covered by folks that have dealt with them for a while and the close rate on it is typically very high. I’m going to say, probably higher than 50% on it. Their sales funnel is not in the sense of the same way that CloudFirst is. So you will see in the case of Flagship, you will see equipment and you will see some recurring. On the other side with CloudFirst, you will see probably an excess of a $13 million total contract value. And what happens sometimes is it’s not that necessarily, you are losing an account.
It’s just that they are putting off their decisions on it. So most of the time, you will get a delay in decision making and put off for another period. But the close rate is around 25% or so on CloudFirst, it’s actually a little bit higher and we move those out to our channel partners, some of those leads. And what happens is that, through our sales force, the system is automated when a lead comes through because they have downloaded a white paper. And based on how many pages they came through, the lead is actually rated. And if it’s a highly rated lead, the close rate is higher than 25%. We know what pages they’ve been at. They’re very interested. We see they might have downloaded the page, migrating your IBM systems, power systems to the cloud.
And it’s a much higher rate. The exact number on it, I’d have to ask Hal Schwartz to get that. So, if you want to know the exact rates, I know that Hal tracks all of that. But I also know that, we had usually around 6,000 visitors to our site to the CloudFirst site typically each month. I understand that that’s more than doubled over the last month because we’ve added in our marketing programs AIX on that, so to run on our systems. So, we get an inflow of leads when they comes in the higher closing rate versus, no one’s cold calling anymore frankly. We’re working through channel partners and the other trusted advisors. If their client wants to move to the cloud and they happen to be a partner of us that close rate is, let’s call it 90%.
Adam Waldo: No, that’s tremendously helpful. And Chuck, you talked about the 13 million value, annualized value of the current sort of pipeline at CloudFirst. How does that dollar value compare with let’s say six months to 12 months ago? If you go back six months, what would that have looked like? If you go back a year ago, what would that have looked like?
Chuck Piluso: Sure, just to clarify, it’s the total contract value typically.
Adam Waldo: Okay. Sorry. Sorry.
Chuck Piluso: No, it’s okay. I just want to make sure. So that typically we signed a 36-month agreement, but I believe that you average everything out and pull out the ones that have 60-month agreements. We have one very large client that’s a 60-month, that we service is 60-month agreement. It’s on average. Hal tells me of around 30 months on average. Usually, it ranges from $13 million to $15million typically, and has been consistent with that over the last couple of years.
Adam Waldo: Okay, that’s very helpful. And then turning to you’ve given guidance sort of qualitatively that your ambition is to be profitable and cash generative in 2023 and beyond. You’ve right-sized the organization late last year to be able to do that and resources as well within the organization. So how comfortable are you at this juncture that you should be able to be profitable cash generative for all of 2023 although there may be because of lumpiness in the business a quarter here or there where, it might be a little bit tight?
Chuck Piluso: It’s a tough to answer that question and to not put myself in a corner on it. We — all of our business plans that were approved by the board this year for 2023, our aim is to be an objective is to have net income profitability. Now, we’re not one to wildly spell spend the cash, but we are searching for experienced sales representatives that requires recruiters to do that. And we are planning on hiring. And so, take Nexxis for example. Nexxis, as you’ll see in the filings, is a small telecom voice data company in the board. And the offices have approved John Camello, the President of that unit, to hire and recruit sales reps. A lot of times you might lose money in that Nexxis subsidiary, while you’re growing that sales force and while they’re selling and the benefit for that is in 2024.
But overall, that’s small. So when we take a look at Flagship, when we take a look at CloudFirst, we’re expecting a positive net income. And also, when you add Nexxis in, the overall company can absorb in our plans, can absorb that loss, that short term loss, that they’ll have. So we’re highly focused on net income after our headquarters and corporate overhead absorption that we assigned to each subsidiary. So, we’re highly focused on it. We’re trying to size the actual business. Well, in the case of Flagship, we’re trying to size it up for the recurring revenue, but giving Tom enough run way to be able to get those recurring revenues going on it. But we are sizing everything up for recurring revenue. And then what we’re planning is that as in the case of Flagship with cybersecurity and some other services, the plan is to add to that so that we know on the baseline recurring revenue, it’s profitable and now we’re investing in the growth in new services.
So, we could see some — we could see on a segment based reporting, we could see a loss there. But overall, when we consolidate everything, we believe it’ll be a positive net income.
Adam Waldo: And then the final topic is capital returns and deployment, right? Your stock trades at basically net cash. You look to be pretty comfortable that you can be at least somewhat profitable cash generative this year and beyond. Hopefully, it’s scaling beyond. So what opportunities are there to try to close the gap in value between the stock price valuation and the sort of private market value in the business, which is much higher? What thoughts do you have currently around stock buybacks, dividends and so forth?
