Theodore O’Neill: Oh, yes, absolutely. Understand. I was wondering if you can just give us some qualitative discussion about the backlog. And of the business that you mentioned here in the prepared remarks moving from Q4 into 2024, is that still being pushed out? Just give us some color on that.
Jeff Eberwein: Yes, this is Jeff. What I would say is, credit conditions have gotten tighter. That’s pretty well known in the marketplace. And the developers that we work with, a lot of times, they’ll want to get financing in place or need to get financing in place. And by financing, I’m talking about construction loan, that’s typically refinanced when the when the construction project is over, and they have a finished product, and it’s making rent income. And what we’re seeing is that it’s just taking longer, and it’s more difficult for them to get the financing in place. So what used to take, say, 3 months, a couple years ago, is taking 6 months or 9 months. And so there’s been several instances that we saw in 2023, where everything is on track, projects approved, they give us the order, but we don’t start on it until we get those first payments.
And it’s just taking them longer to get the financing in place. And so it just shifts production in the future. So I think the shortest way to say it is that it’s kind of a one-time shift to the right. And some of the things we thought would be produced in Q4 have moved into Q1. Things that we thought would be produced in Q1 has gotten shifted to Q2 and Q3. And so it’s something that we’ve adjusted to, and we think will get better over time. But in general, the tone in the marketplace is better than it was 6 months ago, projects are going forward. And it’s just a very different situation than if projects were getting cancelled. Because of weak economy or because demand wasn’t there, we’re not seeing that. It’s an odd thing to say, but our sales pipeline, our backlog hasn’t declined at all, it’s remained really strong.
And if anything is stronger than it was 6 months ago, it’s just that the timing of when some of the — we would be starting some of these projects has gotten shifted out a quarter or two.
Theodore O’Neill: Is that because there’s an expectation that the rates will come down so that things are getting pushed out a bit?
Jeff Eberwein: No, it’s not that so much as credits tighter, so it’s just taking longer to get the financing in place.
Theodore O’Neill: Okay. And my last question here. In the non-GAAP reconciliation, there’s a reference to approximately $1.2 million bargain purchase gain related to the acquisition of Big Lake Lumber. Maybe I’m the only one who doesn’t know what that is. Would you mind enlightening me?
Dave Noble: Yes. I mean it took us a bit to get our head around it. We purchased Big Lake Lumber for a really good price from our standpoint. And from an accounting standpoint, we needed to do a third-party valuation, and that valuation confirmed what we thought was a great deal. So essentially, that’s like a negative goodwill. So we had to run that through the P&L as a gain because we essentially paid less than that company was worth. As you well know, you often pay more than the assets of a company, and that gets reflected in goodwill. I would look at this as a negative goodwill that runs through our balance — oh, sorry, run through our P&L and causes a noncash gain.
Jeff Eberwein: Yes. So the accounting, it is what it is, but we — under the accounting rules, we are forced to put it on our balance sheet at “market value,” which is determined by this third-party valuation firm. And given that the market value they came up with was greater than what we paid, there’s a gain there. And under the accounting rules, we had to run that gain through our P&L in the fourth quarter.
Theodore O’Neill: Okay. Well, just one of those a quarter would be great.
Jeff Eberwein: Well, I would emphasize it was noncash. No one wrote us a check.
Theodore O’Neill: Yes.
Dave Noble: Look, the important thing is we feel like we’ve got a good value for that — we paid a good price for that acquisition. So that’s the good news.
Theodore O’Neill: Yes, I understood. Okay. That’s it for me. Thanks very much.
Operator: The next question comes from John Oberholzer with — who’s a Private Investor. Please go ahead.
John Oberholzer: Good day everybody. My questions are about Firsthand Tech and [indiscernible], how do you pronounce it. Why — what is the value in buying those equities?
Jeff Eberwein: Yes. This is Jeff. I will handle that. So we are a multi-industry holding company. So we have our construction business, which is wholly owned and is one division. We used to have a Health care division, and there are a lot of public micro caps out there that we think are cheap. They’re below NAV. And in many cases, we think they just shouldn’t be public companies. So over time, we would like more size and scale as a company, not just to be bigger, but it costs quite a bit to be public. And so if we can spread those public company costs and those corporate overhead costs over a bigger base, we think that will create a tremendous amount of shareholder value. So our strategy with those companies is to make an investment, encourage them to sell themselves in most cases.
