Ignacio Bernaldez: That’s really helpful. Thank you so much for your time today.
Jeff Eberwein : Absolutely.
Operator: Our next question comes from Mark Bishop a Private Investor.
A – Jeff Eberwein: Good morning!
Unidentified Participant: Hi! Thanks for taking my call. I have a couple of things here. First, in your €“ you said you cut about $1 million plus in SG&A. How much of that flowed through to Q4 and how much has not benefited earnings yet?
Jeff Eberwein : Yes, I would say we have a very flexible €“ just at a high level, we have a very flexible cost structure and so we can adjust fairly quickly to changes in activity levels. And the second half of last year was one of those odd times where certain clients, certain countries, certain sectors were ramping, while others were decreasing, and there can be some inefficiencies in the short term as we move people around and we had situations where we’re hiring in one area and reducing in another area. That usually takes a quarter or two to kind of work itself out and a very good rule of thumb is that our SG&A costs should run around 70% of adjusted net revenue. So just like if you were building a model or kind of looking at a long term forecast, that’s a pretty good way to look at the business we think.
So if we get another $1 of revenue in general, we have to add $0.70 of SG&A and that other $0.30 should drop down to the EBITDA line, because we already have all the costs of being global and the overhead and different things like that. So we were just pointing out that our SG&A costs in absolute dollars declined by, I think it was a little over $1 million dollars in Q4 versus Q3 and we can make further adjustments up or down as required by our clients. And we just wanted to highlight that just to show we do have a flexible business model, we can make adjustments pretty quickly. Sometimes it takes a quarter or two, but over time we do think that 70% number is a good one to use in terms of SG&A as a percent of net revenue.
Unidentified Participant: Okay, just looking at your numbers here from your presentation, you have adjusted net revenue for the year. I see for the quarter you’ve had it at about almost $20 million on adjusted net revenue of €˜22. 70% would be more like $15 million or $16 million I think or something like that. Does that mean that going forward, like in the next couple of quarters we could expect that SG&A number to get back to you know in the neighborhood of 70% of adjusted net revenue or am I looking at the numbers wrong?
Jeff Eberwein : No, I think you’re looking at the numbers, right. You now it’s hard to give precise guidance by quarter on something like that, but that definitely is the trend and that is where it will normalize to over time. And for example, coming out of COVID, hiring volumes in a lot of sectors, in a lot of geographies increased so quickly that I think our SG&A divided by net revenue was below 70% for a while, which is kind of an unsustainable level. Said another way, our team was stretched incredibly thin and was working way more than kind of normal work hours. I think one other thing, if you look at the SG&A numbers is that you have to strip out the non-recurring items. Sometimes there’s some non-recurring items in the SG&A number.
And then when I look at €“ I mean we stopped giving guidance during COVID and not giving guidance for the year. But when I look out for this year, Q1 is always the slowest quarter of the year. That is largely due to our significant presence in Asia PAC. Most of Australia is at the beach in January, and you have a Chinese New Year and China, Hong Kong was ended €“ ended the year on a very weak note and started the year on a weak note. So Q1 is almost always the weakest quarter of the year for us, and I think 2023 is going to be no exception. And then I think each quarter will show an improvement versus the prior quarter. So if things go the way we think, and there’s no massive disruption in the economy or hiring trends or anything like that, probably the highest quarter of the year will be Q3 or Q4.
And then just the way the annualization works, you know we entered 2022 on a really, really strong note. So we had a very strong Q1, very strong q2 and then we started seeing weakness in Q3 and further weakness in to Q4. And so the comps get much easier when you get out to like Q3 and so I think we’ll be having positive year-over-year comps when you get out to Q3 and Q4. So to answer your direct question, you know we are very confident we’ll be at that number sometime around the middle of the year, Q2 or Q3 in terms of 70% of net revenue, SG&A being 70% of net revenue. Probably it’ll be worse than that in Q1.
