Unidentified Analyst : Hi, good morning. You have Tazi on for Brian, thank you for taking my question. So my first question has to do with margins in both segments, right? You had housekeeping at 8.7%, dining at 5.5%. So as we think about your pivot into growth mode for the second half of the year, just curious what particularly needs to happen in order for you to see alleviation margins, especially throughout the year in both segments, and for you to see that translation to the bottom line.
Ted Wahl : Yes, Tazi, it’s a great question. I think specifically, from a segment perspective, there’s always going to be some movement, whether it be month-to-month or quarter-to-quarter, largely due to execution. And you alluded to it new business ads, and there’s other considerations that are happening each and every day in our field based operations. And they’re just as an add on to that there’s, we don’t talk about it because it’s not really material, but around the edges. There’s even some seasonality whether it’s the number of holidays in a quarter, sometimes the timing of supplemental billings, we had union buyouts at different times during the year. I would say, just for some additional context from a margin perspective, if you look back pre-COVID, our segment margins were in that 9% to 10% range for EVS and 5% to 6% range for dining, we would expect to track and trend in and around those levels for 2023.
Even with the expectations we have around growth and the margin compression that could create, again with a degree of quarter-to-quarter variability.
Unidentified Analyst : Thanks. That’s really helpful. And then just last question for me. Just curious as we think about CECL AR reserves and other adjustments. Can you maybe talk about sustainability at these adjustments? I think you had talked about how like CECL is pretty formulaic, and at times volatile, but any thoughts around where this could settle out when you expect to, I guess, see the adjustments kind of taper out in your P&L?
Ted Wahl : Yes, and I know, we’ve discussed it at previous times on this call, just to maybe take a step back to your question, Tazi, but the industry is still recovering and has not yet recovered. And that’s the primary reason why coming into the year, even on the heels of a very strong Q4 cash collections quarter, we expected some fits and starts on the collections front, especially in the first half of the year. That’s why we provided coming into the year more modest cash flow estimates. And that’s why we highlighted our expectation for volatility around CECL. We don’t expect that to be the new norm in the quarters and years ahead. But in this current environment, it was expected that we would see some CECL volatility. I think that said, and specifically to this quarter as it was a difficult environment, we expected that, especially with the May 11, expiration of the public health emergency, we saw clients really looking to maximize their own liquidity and flexibility.
And that impacted our April efforts. But overall, any negative impact on our customer base specific to the public health emergency was really less than feared. And we were successful in executing on our strategies in May and June, which is why we highlighted that strong momentum heading into the back half of the year. So getting back to your question around CECL, specifically, as we’re consistently collecting what we built, we would absolutely expect CECL to moderate and to become more normalized. We’ll continue to make the adjustment in the adjusted EBITDA table irrespective of whether it’s an upward adjustment or a downward adjustment, because we do believe longer term write-offs, actual write-offs is a more effective way and probably a more indicative of what would actually be a P&L charge for HCSG.
But, again, in terms of the actual business side of it as cash flow and cash collections improve, which we expect them to do the back half of the year, we would expect to see sort of moderate.
