Nelson Obus: So it seems like you’re approaching 300 compactors, I mean, at what point will it be a differentiator in terms of the P&L?
Ray Hatch: Well, that’s a good question. We just acquired — it’s actually closer to 400, I think, at this point. And this most recent acquisition really doesn’t take, doesn’t really start impacting until, well, middle of Q2, middle of Q2. So as a differentiator, you should start seeing it. And mostly, you’ll see it in the back half of the year Q3 and Q4 based on when we implemented it.
Nelson Obus: No, you don’t have a lot of bad debt expense, but it was up meaningfully in the quarter. I’m just — what are your thoughts about that? And how — I know you build people a month in advance, but the DSOs go beyond that. But are there flags that you look forward to make sure that people come across with what they owe?
Brett Johnston: Nelson, this is Brett. I’ll take that one. Yes, bad debt was up, mostly related to just the fact that AR was up year-over-year. We do have a couple of things we’re reserving a little bit more for, but nothing significant. Most of it is just formulaic. In terms of just DSOs in general, as we mentioned on the call or in the prepared portion, we didn’t finish the quarter as strongly as we would have liked. We’ve done a lot early in the year. And unfortunately, it didn’t quite materialize. I’m excited about where we’re at already a month into Q2. But we’ve made some organizational changes to realign focus there. We’ve enhanced some reporting, increased visibility driving some more accountability there. So I’m really excited about the progress we’ve made. It didn’t quite show up in the Q1 numbers. But I think I’m excited about what we’re going to be able to produce in Q2.
Nelson Obus: Fine. Last question. In the past, you’ve quantified some of the SG&A savings that would flow from IT enhancement. I’m just curious, I mean SG&A is moving up a little bit, not a lot. But do you — I mean, how much of this is capitalized and how much of it is expense as we move forward?
Brett Johnston: In terms of the IT spend?
Nelson Obus: Yes.
Brett Johnston: Yes. As we go forward, we’ll have less and less capitalized. It will just be kind of ongoing maintenance. So we’ve talked — we’re pretty close to having a lot of this stuff fully ramped up. So those expenses will be coming down. And as you mentioned, yes, Q2, we’re expecting a little bit of increased SG&A as we’ve got to build some additional expenses to support the growth, the new wins. But when we get into Q3 and Q4, we’ll be in a better position to talk about the savings that we’re expecting. We’re certainly excited about that portion.
Nelson Obus: And I would assume by fiscal ’25, the rate of change will be lower, if any, depending on how you grow. Is that fair?
Brett Johnston: In terms of flow through rate, absolutely our flow through rates will continue to improve, especially into next year as we’ve got a full year of all of these initiatives and savings.
Operator: And there are no further questions on the line at this time. I will turn the call to Ray Hatch for any closing comments.
Ray Hatch: Thank you, operator. Most importantly, thanks to all you out there and your interest in Quest and taking the time to be on the call, hear our story. I — as always, I make a note to remind myself, I want to thank the Quest team. I know a number of you are on the call. All of these folks have continued to work diligently and help us execute in our plan to be a much better supplier to our customers. And it’s just tremendous to watch them do that, and I’m greatly appreciative. The initiatives that we’ve been in place some of these initiatives over the course of years are starting to really show the traction. And I think we’re at, I guess, the operative word is inflection point. I’m really excited at the progress we’ve shown now, but mostly and more importantly, it’s what we have in front of us.
It’s tremendous the scalable leverage piece that we’re building along with the ability to grow new clients, along with the ability that the team is putting together with new service lines to grow with existing clients, it’s all pointing forward and the momentum is great. So I just look forward to keeping all of you up to date on the quarters to come. And again, thank you for your faith and interest in Quest.
Operator: This does conclude today’s program. Thank you for your participation, and you may now disconnect.
