Greg Kitt: Okay. And so, if SG&A goes up by $600,000 sequentially should gross profit go up by $1.2 million sequentially, so that you’re seeing 50% of that incremental gross profit fall through to EBITDA or are there investments in the first quarter that are kind of outside of that 50% flow through?
Brett Johnston: That’s why it’s hard to talk, because there is some other stuff, some investments going on, but I think it’s fair to assume that we’ll see we expect the 50% operating leverage going forward.
Greg Kitt: Yes. Okay. Thank you very much. I’ll hop back in the queue if I have anything else.
Ray Hatch: Thanks, Greg.
Brett Johnston: Thanks, Greg.
Operator: The next question comes from George Melas of MKH Management. Please go ahead.
George Melas-Kyriazi: Hey, thank you. Good morning, guys.
Ray Hatch: Hey, George.
George Melas-Kyriazi: Thanks for taking my questions, and congratulations. Quick question on the sales operation where you mentioned that you hired the director of sales operation with the sales force previously how do you responsible for wiping up the customer and now they are freed up and they can focus more on selling and closing, is that kind of what you said?
Ray Hatch: Yeah, it’s kind of a bridge, George. First of all, the sales people had a lot more to do then, now they can focus on sales and closing. But it also helps our operations team with implementation be much smoother. I mean, the plans are laid out. He does a great job. There’s a full matrix with everybody’s responsibility, the timing on every little thing. Implementing a large customer is really hard. And there’s so many things that can go wrong, George, when you’re rolling out a customer of 1,000 or 2,000 locations. And we’re so much, we’re infinitely better prepared to do that, execute on that better than before, and also freeing up both sides of that equation, sales and operations, to focus more on their core strength. So it’s kind of a bridge type role that takes away from both sides. So it’s very beneficial.
George Melas-Kyriazi: Great. That’s interesting. Thanks. Brett, the $1.7 million in savings related to RWS, what is that and where does it flow through? What’s the components of that? Is it technology or is it also some people that were at RWS?
Ray Hatch: Yeah, it’s just purely the moment for all people, George. And there’s additional – I think, we mentioned in the comments, we expect the technology to continue to give us additional yield. But we were being clear about the $1.7 million, that’s a hard cost savings that’s purely, well, payroll.
Brett Johnston: Yeah, and most of that was baked in already in Q4 as it was partially in place for Q3.
Ray Hatch: Yeah.
George Melas-Kyriazi: Okay. So almost like a quarter of the $1.7 million is baked into the December quarter?
Brett Johnston: Yeah, exactly.
George Melas-Kyriazi: Yeah. Okay. Great. And then, way on the large new clients on the food distribution side, how is that related to Proganics? Because Proganics is really, really mixed food waste, whereas that food distributor, I’m not exactly sure what they do, but they mostly bring the goods to the store. So how could that lead to a Proganics deal and maybe also talk, take that opportunity to talk a bit about the pipelines of Proganics and what does that look like?
Ray Hatch: Yeah. And actually food distributors do generate quite a bit of organic waste, George, surprisingly. You get into, especially – I don’t want to speak like a food distributor, but the cooler stuff, which is dairy and produce and things like that. So there’s quite a bit of shrink at the distributor DC level as well. But in addition, this company also has retail stores on top of that. So they’re a bit of a hybrid. So you’ve also got retail stores involved. So it’s really a great fit for Proganics in the future. We’re excited about that. And the pipeline for Proganics has almost mispronounced, I’m going through it in my head as I’m talking. There’s a couple of really nice grocery store chains that are in that pipeline that are in active conversations with right now.
I think I’ve mentioned before, Proganics is not an easy sale. It’s a good product. But it involves, it’s intrusive in a way. It involves operational changes in the client. And anytime you’re looking at large stabilized clients and you’re asking to change their operation, regardless of how valuable the outcome would be, it slows the process down as you can imagine. So, we always should have moved faster, but definitely the product, Proganics itself, is compelling. It’s more about how do we get this implemented kind of thing for the clients. So, we have an active pipeline, and also within our existing clients like the one we mentioned earlier, we hope for that.
George Melas-Kyriazi: Okay. Great. Okay, thank you very much.
Ray Hatch: Thank you, George.
Brett Johnston: Thanks, George.
Operator: The next question comes from Nelson Obus of Wynnefield Capital. Please go ahead.
Nelson Obus: Yeah, I just had an accounting minutia. I mean, obviously, RWS was a difficult integration. I appreciate you being clear here as to what the problem was, and that it antedated the current fiscal year. Just you have an adjusted number of $3.5 million, just from an accounting perspective. Is there a problem with that $1.2 million? The way it reads here is an adjustment to an adjustment. I guess the question for Brett, why wouldn’t you immediately make it $4.6 million, and just point out that there was an RWS issue, or is there something in the accounting realm that makes it difficult to do that?
Brett Johnston: Yeah, Nelson, I mean, it was missed expense in prior periods. So, when I think about add-backs, one is kind of non-cash, but then it can be a piece of that, but because it was missed expense in prior periods, we just didn’t feel like it was appropriate to fully add it back.
Nelson Obus: Okay. But anyway, it’s behind us now. That’s for sure, right? And my other question, simply, I mean, obviously, you look at the – as you pointed out very clearly, if you look at the debt, it’s gone up exactly as much as accounts receivable, and that’s because your DOS [ph] with slow pay and all that other issue. My question is, do you think you’ll have that cleared up in Q1 and get the DOS back down into the low-60s as opposed to 75 where we are now?
