Bohn Crain: I always want to choose my words carefully because I, never say never, right? But certainly, we’ll continue to look with a great deal of scrutiny around the multiples that we pay and the relative trade-offs relative to the stock buyback. We really look at that in and around every transaction. So certainly, that’s the, what you described is definitely the baseline case and kind of what we would generally expect to happen. But I don’t want to paint myself into a corner where if a transaction came along that we really felt was compelling, we would look at it. And so I don’t want to say anything on the call that would leave us at another conclusion than that.
Operator: Our next question comes from Jeff Kauffman from Vertical Research.
Q – Jeff Kauffman: So a lot of my questions have been answered. So let me go in a different direction. The last 2 years, from third quarter to fourth quarter, we’ve been dealing with this inventory destocking and what ended up being almost negative seasonality in a quarter that should be displaying more positive seasonality. Do you feel like that’s going to be a little different this year? Like do you think we’re past the worst of the storm and we’re going to see more normal 3Q to 4Q seasonality? And then if you could just remind us because I don’t think we’ve seen it in 3 years, what does normal 3Q to 4Q seasonality look like?
Todd Macomber: Yes. I mean, I, personally, I mean, it’s too early to tell, right? But I do think it’s going to be much more normal. I mean we’re seeing increases, tracking, through tracking each month versus each quarter. And as we mentioned earlier, I mean, April has been stronger than March, et cetera. So, and typically, our Q3 is our weakest quarter. So we are fully expecting Q4 is going to be certainly much stronger than our existing Q3. So it’s, so yes, I think it’s, I think we’re, what we saw in the past, I think that is, in my opinion, not going to, I mean, we’re going to be back to more of a normal Q4 increase over historical Q3.
Jeff Kauffman: All right. And I know there’s not a cash flow statement in the release. But if I was looking for the first 9 months of the year at an unaudited cash flow statement, what would be my year-to-date use of cash on acquisitions and share repurchase?
Bohn Crain: So obviously, that is in the Q that should also be filed by now, but Todd is looking here to give you that number.
Jeff Kauffman: Yes. I mean, we can always collect offline.
Todd Macomber: Yes. So share repurchases, Jeff, for the 9 months was a little bit $3.1 million. That’s what we purchased through for the 9 months ended March 31, 2024.
Jeff Kauffman: Okay. So all the shares really this quarter?
Todd Macomber: Yes. And then as you also asked about acquisitions and payments to acquire businesses for the 9 months was just under $2 million. .
Jeff Kauffman: All right. So is there a certain, I know you’re being opportunistic, and you’re sitting on a powder keg of liquidity here for opportunities. But is there a certain cash level that you just don’t want to go below, given the environment?
Todd Macomber: Not necessarily. I mean, I would answer, I’ll come at that slightly differently, which is we would target probably plus or minus 2.5x funded debt to EBITDA in terms of leverage while leaving kind of cushion within our capacity. So we would be comfortable up to 2.5x. So that’s kind of an answer. But we would, only with the kind of benefit of the cash we generated through COVID are we sitting in a net cash positive position. Almost always to the history of the company, we’ve been a net borrower and had amounts outstanding under our credit facility. So it’s not that we’re not prepared to, we’re not seeking or intentionally targeting some targeted level of cash. At the end of the day, we’re looking more at what are we comfortably carrying as kind of a net debt position relative to our financial covenants and all that kind of stuff.
Jeff Kauffman: One last question, Todd, if I can. So shares outstanding started the year around 49 million, and I’m talking fiscal year. And currently, they’re right around 47 million. So they’re down about 2 million shares, but you’ve only repurchased 0.5 million shares. I think I know the answer. But can you help me understand what that other 1.5 million share difference is? And is it a situation where if you return to profit and the stock goes up $1 or $2, are we looking at 48 million to 49 million in shares as opposed to 46 million to 47 million? I’m just trying to model here.
Todd Macomber: So I’m sorry, let’s see, so we’ve, yes, we start, well, the treasury shares were 4.3 million at the beginning of the year June 30, 2023. And so we have, yes, we purchased 500,000 shares. So our treasury shares are now 4.8 million.
Jeff Kauffman: Right. But the fully diluted shares finished the fiscal year at 49.1 million, and they’re currently 47 million-ish. So that’s a 2 million share difference in reported shares outstanding on 0.5 million shares repurchased. I’m just wondering…
Todd Macomber: Yes. I think that dilution has to do with the fact there was a net loss in the quarter.
Bohn Crain: Well, I think it has more to do that there’s out-of-the-money security that wouldn’t be counted in that share outstanding basis. Let me get to the point you’re getting at.
Jeff Kauffman: Yes. Right. So I guess my question is in terms of modeling, if you swing to a profit, will that drive it back to 48.5 million shares? Or is it something more to do with stock price?
Todd Macomber: Well, yes, it’ll drive it back. Obviously, we’ll recast calculations. And as those numbers change, it’s going to obviously impact the overall fully diluted shares of the calculation. So the answer is yes.
Jeff Kauffman: Okay. Congratulations. Hopefully, this environment gets better soon.
Todd Macomber: Thank you, Jeff. We appreciate your support.
Operator: And we do have one last question from Mike Vermut from Newland Capital.
Mike Vermut: A couple of quick ones for you. Obviously, a lot of your competitors are, we’ve seen a lot of reports, are hurting pretty bad right now. And I believe some of your direct competitors do have a lot of leverage on that. They’ve been, I think the private equity zone. ] Have you seen any concern from their customers coming to you? Are you winning any new business? I guess what I’m getting here, is this, are we going to come out of this stronger than we went into this, forgetting about acquisitions, but just on the pure organic win basis?
Bohn Crain: Well, so I don’t want to take advantage of the softball you’re throwing out there, talk negatively about our competitors. So I’m going to stay…
Mike Vermut: I’m talking more positively about the balance…
