Right now, there’s a phenomenal opportunity in the US cannabis market as it relates to rebates, energy rebates. And we’re really focusing on that area to help go to our clients and provide a value to them where they could refresh or relight, for example, their facilities with more energy efficient LED lighting, as one example, with relatively low amounts of working capital out of their pocket. So when times get tough and it’s been tough in equipment, you find a way to — for everyone to win. And so that’s what we’ve definitely been doing. Moreover, we have successfully been able to integrate equipment systems into our first large mechanical retrofit by adding mechanical systems or air conditioning to a super large distribution center, and we were able to integrate that equipment in.
Now important to note, when we — that equipment’s part of a larger project. So equipment to the commercial side will not show up on our financials as a separate — as part of the equipment line that is really equipment to the controlled environment and ag marketplace. Our equipment is built into the construction so that gives us the confidence, as Dick mentioned earlier, that we can increase our margins in the construction side in 2024. Now unfortunately, we had an fourth quarter one project that went the other way. So it looks like we’re underperforming on that initiative to increase margins in Q3, but things are in Q4. But as Dick explained, that just was a point in time, 90 days. Now we go to the project that was decreased and we work to get a change order to get it back into place for ourselves.
So we are really focused on increasing our margins in all categories this year, Eric.
Operator: The next question comes from Ellis Acklin with First Berlin.
Ellis Acklin: Thanks for the insights into Q4. I just got one topic to discuss with you guys. If we can circle back to your initial 2024 guide, the last time on the Q3 call, I believe we were talking about needing a — the magic number for you guys to reach adjusted EBITDA breakeven was around $30 million in revenues. So I’m just trying to square those comments with your new guide of $8 million in revenue and a positive EBITDA. Maybe you can help me out there.
Brad Nattrass: So it all depends, first of all, on the revenue mix, right? So if it’s high in the lower margin construction, you would need that $30 million. But we’ve already sort of looked at $24 million to $26 million. Now a couple of things have happened. A, it goes back to what I just talked. We did not show what we’re — the progress we’re really making on increasing margins in construction, we didn’t show that in Q4 because of that one project that took us down to low single digits. But also in the professional services side. In professional services, when we got everyone on the same ERP at the beginning of third quarter, we realized that we weren’t as productive as we thought we were. We were around, when you look at billable hours, we were in the mid around 55% productivity.
So in 2023, we actually had to put $1.2 million of COGS down into salaries. And our goal is to have all of our professional service providers, all of their salary, what we pay them should be up in COGS because we’re billing adequately. In Q1, we’re tracking above 90%. So that’s one of the areas when we talk about the SG&A, I’m going to have Dick chime in here shortly, but that’s one of the areas where we’re doing a lot better. But Dick, will you tag on to the back then apart from increasing the margins, maybe focus on the SG&A side?
Dick Akright: And Ellis, to your point, I mean, you’re right, when we talked before with that larger revenue number on the initial guidance for Q4, certainly looked like it was going to take a lot of revenue for us to be breakeven on a go forward basis. With the G&A reductions that we’ve made that are taking place right now in Q1 2024 and will be there for all of 2024, we are significantly reducing that breakeven point. And again, it goes back to — depends a little bit on mix but breakeven for us now is looking more like it’s around the $16 million to $19 million of revenue, even with still having a decent amount, high percentage of our revenues being construction. But because of those G&A cuts, we have been able to really reduce that breakeven point for us.
And you’re just going to see that going forward into 2024. It’s going to show up immediately when we do report our Q1 numbers. When you see a year-over-year basis, it’s going to be rather dramatic from the standpoint of the reductions and how they’re flowing through the income statement.
