James Carbonara: Thank you, Operator. Yes. A number of questions did come in on email. I’ll start with the first one. It says, you have talked about how you think the business conditions at many of the company divisions look to improve over the next six months to 12 months. Can you give two or three anecdotes or signs of improvement in these businesses?
JT Fitzgerald: Yeah. Thanks, James. Yeah. So just to kind of break it apart, start with the Warranty businesses. I think we mentioned it in the prepared remarks, but I’d point out that, cash revenue in the quarter was actually up year-over-year, about 1.5% and our operating expenses were down 4%. And so we’re seeing that pricing that we pushed through at the end of last year starting to come through and that will come through earned revenue over time. And then sort of anecdotally, Trinity, we didn’t talk about equipment backlogs. I think those are clearing up and that business is starting to pick back up, which is great. And then, IWS, which is our vehicle service contract company that distributes to credit unions, they recently signed a very large new credit union customer.
I mean, they’ve onboarded several new credit union customers this year and last year, but they recently signed a deal with a very large one, which is slated to launch late second quarter or early third quarter this year, which could be a really nice needle mover. So we’re super excited about that. And then in KSX, I mean, I think that the big drag on performance there for several quarters has been SNS, our nurse staffing business. We think that the industry has sort of found a bottom. The travel nurse demand has stopped going down. And at the same time, over the last many months, Charles has first built kind of the tech stack internally and then recruited three new recruiters to bring more nurses onto our platform. And in the first quarter, the number of travel nurses on assignment, we call TOAs, was up sort of 40% from the same, from year end, right?
So at the end of March, there were 40% more TOAs than there were at the end of December and most of that happened in March and that ramp continues in April as these recruiters get up to speed. And so the trajectory of TOAs at SNS was going down last year and going up this year and we think that those two lines will cross very soon and we’ll have a much better back half of the year. And then DDI, which we mentioned is significant growth with no corresponding sort of improvement in EBITDA. They’re onboarding new hospital customers one every week and a half, I think. And there’s pretty significant upfront expense to bring a new hospital into their system, like, technology expenses, and in some cases, they’re purchasing monitors. And many, many of those onboarding costs get expensed, but they have a very quick payback period and so we would, that business is ramping very significantly and we’re just trying to kind of keep up with the growth while maintaining the very high level of patient care and qualities of our services.
So, we’re pretty excited about what’s going on.
James Carbonara: Great. And I think you answered a few of the other questions here, but there are some additional ones that came in. It says, yeah, can you talk about how the first quarter or two of results might look at new businesses we buy? Do you experience some economic drag and early financial results, even if the businesses are doing well and meeting or exceeding expectations?
JT Fitzgerald: Yeah. I think that’s a great question, right? I mean, I — first of all, we have a very long-term view, right? And so, one or two quarters is not sort of make or break our thesis and we would absolutely expect some, I think the word you use is drag here in the first couple of quarters. If you think about when we buy a small business, they’re generally small and relatively unsophisticated. And more often than not, well, I think we can say have never been part of a public company reporting.
James Carbonara: On the KSX side, that’s correct. Yeah.
JT Fitzgerald: Yeah. And so there’s a lot of work we have to do, right? And so we add incremental overhead out of the gate, audit, both external and internal. We put them on new accounting systems, new HR and benefits that are maybe enhancements to what was there in the past. Professionalization of these small businesses and creating a foundation that will support their growth. And so, yeah, there’s a J-curve is probably not the right term, but a couple quarter drag and then they get going. And let’s be honest. These are young managers, first time Presidents, and they and we and I make mistakes and got to work through that too and learn from that and get better. So, yeah, I think that would be expected for sure.
James Carbonara: Great. And then continuing along and feel free to say, nothing additional to add if you feel like you’ve already answered it. But the next one says, it sounds like the software and cardiac monitoring businesses are doing well, but the financials don’t yet reflect their upward trajectory. Can you speak to this and tell us when the financials will start to show positive momentum in these two businesses? Yeah. I mean, I think I spoke to it. I’ll just sort of underscore it. SPI mentioned in the prepared remarks, we added eight new enterprise customers and once those customers get onboarded, there’s a little bit of customization of the software. And once they come on, well, that will see a nice uplift in ARR.
And Drew’s very focused on continued penetration in his markets and got a great strategy and a great team. And yeah, so, I’m very happy about that. And software business is really, in his case, about growing ARR. We talk about the Rule of 40, right? ARR growth plus EBITDA margin greater than 40 and that’s he wants to be there. And so right now he’s leaning into ARR growth. As he, more fully penetrates his market, the focus may shift towards improving EBITDA margins. But for now, he wants to make it a much larger business. And DDI, as I said…
James Carbonara: Great.
JT Fitzgerald: … there’s a lot of upfront investment to onboard these new hospitals, tech installations. Those are upfront costs, but they have an extremely fast payback and he’s growing very quickly, in terms of new hospital adds.
James Carbonara: Excellent. Okay. And one of the questions is, can you talk about the float at the insurance companies and the size of the portfolio? What is the yield today and how long will it take to get closer to a market rate at 5% plus?
JT Fitzgerald: Yeah. I assume they mean Warranty, not insurance. Important distinction, but yes. So the float, we have roughly $40 million bond portfolio and another $8 million or so in restricted cash.
Kent Hansen: Yeah.
