And I think that discipline and that focus is 100% here today, and it’s been here for a while. And I don’t think that if you look out over the next three or four years, that you’re going to see the kind of fluctuations that you’ve seen five years ago. But we do have a couple of areas that we need to work on right now, and that’s what we’re focused on.
Ben Andrews : Okay. Well, that’s good to hear. Hopefully, we’ll see that going forward, kind of an ongoing lower DSO.
Kevin Miller: Yes. And we will absolutely get them down. The only thing I would add to that also is, we’re very, very focused on obviously cash flow, return on equity. So if we have a client that we know is going to be 90 days or 120, and a lot of these big companies, it’s 90, 120, or there’s eight companies behind us that will take the business. We’re pretty careful about how we select those companies. And we also need to make sure that if we’re going to have high DSOs of the client that the juice is worth the squeeze, right? We’re going to make sure that we get a good margin from that client to make sure that that capital allocation is worthwhile. So we spent a lot of time looking at this, and we spent a lot of time thinking about it very, very carefully.
Brad Vizi: Right. And that’s why I’m asking this, because it clearly looks like it is, well, I know it’s happened before, and I’m just trying to understand your customer base more. Yes, but I’d also pair that and just to begin to put a fine point on what Kevin said, we look at DSOs in the context of overall returns on capital, right? So again, if a client’s going to pay 50% gross margin, right, but they want to pay 90 days, and we feel it’s absolutely good credit, great. And so, we try to be pretty holistic in the way we look at our client base. But also kind of a subtle thing here is, we’re scaling a services platform, right? I mean, naturally that mix is, as you scale any business, especially one that has a diverse set of project activity like ours, it starts to normalize.
So you can get some gyrations from even just a couple of flare-ups or maybe one flare-up and one missed cutoff, and furthermore on the administrative front, when we talk about administrative issues, right, they can be pretty fundamental, say, we have a school client that ends up being a great client, but actually onboarding them is pretty, I would say, waiver and intellectually intensive. And when you have that in place on that rhythm, right, and then all of a sudden you might have some turnover on their side. So the next person that comes in, right, you know, there’s a little bit of a learning curve on that side, on their side again, right, in terms of picking up their own system. So that could slow things down a little bit. So there’s just some natural things that just happen, and as a whole, we view this long-term as opportunity, because anytime you have a, you know, a pinch point with a client or a challenge in terms of getting to do a point in a steady state where they’re a great client, right, that ultimately is an opportunity to help them resolve a pinch point, so now instead of just being a vendor, you’re a partner, right, and you become a little bit more sticky with respect to that partnership.
Ben Andrews : Thank you, Brad. If I look at earnings in the quarter, I was impressed. I mean, when you back out the gain on sale, like, for 400,000 from last year, clearly your EBIT went up more than I thought it was going to go up, and definitely more than the street analysts thought. And you did it with the health care engine not really running this quarter or being masked by stuff falling off. So how should I look at that type of margin looking out over a few quarters, when these schools and possibly aerospace, clients are coming on. Should you maintain relatively the same margin, or could we see nice growth like we did year-over-year in Q1 or even better?
Kevin Miller: Well, on a sequential basis, Ben, I expected to improve on a sequential basis. I’m not going to sit here and tell you that we’re going to see a catapult and gross margin from Q1, but we should see improvement as we move through the quarters. I mean, when we start running through 100% of unemployment expenses for a lot of our employees that alone will bring up the margins 50 basis points. So, we should see some improvement as we go through. We had really good margins last year, so, I don’t know how we’re going to compare year-over-year, but I would also stress that Brad and I — while gross margin is incredibly important and something we really focus on, we focus on growing gross profit dollars and getting a return on those gross profit dollars.
So, if it makes sense to sort of do a large deal for a 22% margin or a 20% margin, that’s not going to have a lot of SG&A — a lot of direct SG&A, we’ll do that. But as we look at the business today, I do expect to see some sequential improvements in gross margin for all three of the businesses.
Ben Andrews: Well, excellent, well, hopefully the world realizes the work you’ve done and you’ve turned RCM back into a growth company again. And I don’t know, I guess buying it, you can kind of get a double whammy, you can get that growth, and the stock is clearly trading at a market multiple, or well below a market multiple now on valuation-wise. So, let’s see, so thank you for everything. I appreciate it.
Brad Vizi: Thank you, Ben.
Kevin Miller: We appreciate it, Ben. Thank you.
Operator: All right, gentlemen, at this time, there are no further questions in queue. [Operator Instructions]. All right. At this time I’m seeing no further questions in queue.
Brad Vizi: Thank you for attending RCM’s first quarter conference call. We look forward to our next update in August.
Operator: And with that, ladies and gentlemen, this does conclude your call. You may now disconnect your lines, and thank you again for joining us today.
