The tricky thing is that you have got three different categories of SG&A. So, we have the mobile health SG&A, which is pretty variable. So, that should come down along with when the revenues come out for the migrant piece. The transport revenues are also – well, transport SG&A is generally connected on a variable basis. The issue for us is going to be whether the work that we have to do that has really started and certainly underway is making sure that we right-size our corporate expenses. So, how do we manage our corporate expenses in such a way that we scale it for a company that’s, let’s say, $400 million or so in revenue or a little bit more than that as opposed to $600 million or $700 million. But that is going to be the work that has to get done as we scale and right-size the rest of the business.
But that’s kind of how we get there. 35% gross margin on a blended basis, right about where we are now, and then about 23 points on the SG&A side, getting you to an adjusted EBITDA margin of about 12%, 12.5%. So, the margin characteristics will be – yes, they look very similar actually to what we have here in Q1.
Kieran Ryan: Right. So, that would imply there is probably not much change to your expectation that quarterly gross margins this year stay relatively consistent with 4Q ‘23?
Norman Rosenberg: Yes. I mean we are very encouraged because not only do we have a continued improvement in gross margin on the sequential, and of course, year-over-year basis, but I can say, I mean that number is pretty neat and clean. There wasn’t a lot of adjustments of expenses or anything like that. There wasn’t any reversal of accruals or the typical accounting stuff that you could have in a quarter that take your margins up or down. It was very, very little that was non-recurring in nature. That was pretty much, pure clean margin that we saw this quarter. Now, obviously, there are always factors that will put some pressure on margins from time-to-time, but at the same time, there are factors that move in the other direction.
So, we think we ought to be in this general area for quite some time. As I pointed out during the call, things like overtime continue to trend in a positive direction, even better than they were in Q1. Things like the subcontracted labor as a percentage of hours or cost or however you want to look at it are also trending in a positive direction. So, when we look at those KPIs, the signal is flashing green, so that’s good.
Kieran Ryan: Thanks.
Operator: Thank you. So, the next question we have comes from Sarah James of Cantor Fitzgerald. Please go ahead.
Sarah James: Thank you. So, just to clarify on that last question, it sounds like as you step out of the HPD revenue that we shouldn’t expect any mix shift in expenses between the buckets of cost of revenue and G&A, that you guys have a similar enough mix on that business to your core that those ratios would stay pretty consistent. Is that right?
Norman Rosenberg: Sarah, on an overall basis, that’s correct. Realistically, in terms of timing, it happens to be that the first projects or the first sites that are going to be transitioned happen to be the ones that have the lower gross margin. So, you would see a little bit of an improvement technically. But again, we didn’t choose – it wasn’t like we cherry-picked those sites or anything like that. It just happens to be that way and that certain regions and certain sites tend to be a little bit less profitable. But on an overall basis, when you look at sort of the blended projects, they don’t have a dramatically different margin profile from the rest of the business.
Sarah James: Okay. Great. And is there anything that you can offer us to help on seasonality this year kind of as that contract winds down, but you are contrasting it with growth in some of your other units, how should we think about the contribution of first half versus second half?
Norman Rosenberg: So, I would look at – I mean there will be a seasonality or at least a fluctuation. Not really seasonality per se, but a fluctuation on a sequential basis. And essentially, what I would look at is that overall revenue is going to – blended revenue would trend lower because while the core revenue is going to grow sequentially, I feel pretty good about that. And then if you line up what we did in Q1 with what our full year projections are that we have shared for the core business, they would pick up sequentially as we go throughout the year and that’s based on certain projects that we have that are about to launch, both on the transport side and on the non-migrant mobile health side. But that’s not going to outweigh – or that will be outweighed by the decline in HPD revenue.
So, we are looking at HPD revenue coming down by a pretty significant amount in Q2 and then maybe dropping by half again in Q3. And then by Q4, there is almost immaterial contribution from – in our guidance, in our projection from that particular contract. So, that’s going to be a big enough delta that it will outweigh the increase in the core revenue. So, if I was just looking at our overall revenue number sequentially, the way it lines up at the moment is that you would have – Q1 will end up serving as a high watermark for revenues for us on a quarterly basis in 2024 and it will drop into Q2, drop further into Q3, probably dropping further into Q4 depending on the timing of when some of that other revenue picks up.
Sarah James: Great. Last question, could you give us any details on the payable build in the quarter, accounts payable?
Norman Rosenberg: The accounts payable? Sure. So, an interesting thing that we look at is we have mentioned that we collected – actually collected quite a bit of money during the quarter. Yet, obviously, what you have seen is continued pressure on the working capital side. But if you look at the balance sheet, which was included both in the release and in our 10-Q, which was filed today as well right after the close, so you will notice that, obviously, not only did the AR go up, but certain payable levels went down, i.e., the prepaid expenses and things of that nature. So, I would estimate – just to walk everybody through it, I would estimate to be collected from the various migrant and related programs, we probably collected about $120 million during the quarter.
