Earnings Call Transcript - CXDO Q3 2020

Operator, Operator

Good day, ladies and gentlemen, and welcome to the Crexendo Third Quarter 2020 Earnings Conference Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host for today, Mr. Steve Mihaylo. Sir, the floor is yours.

Steve Mihaylo, Chairman and CEO

Thank you, Jess. Good afternoon, everyone. I'm Steve Mihaylo, the Chairman and CEO of Crexendo. I want to welcome all of you to the Crexendo third quarter 2020 conference call. On the call with me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; and Jeff Korn, our General Counsel. I am going to ask Jeff to read our Safe Harbor statement. After that, I will give some brief general comments about the quarter. Ron will provide more detail on the numbers. Doug will provide a business and sales update, and then we will open the call up to questions. Jeff, would you please give the Safe Harbor statement?

Jeff Korn, General Counsel

Yes, thank you, Steve. I want to take this opportunity to remind listeners that this call will contain forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. All statements made in this conference call, other than statements of historical fact, are forward-looking statements. Forward-looking statements include, but are not limited to words such as believe, expect, anticipate, estimate, will, and other similar statements of expectation identifying forward-looking statements. Investors should be aware that any forward-looking statements are based on assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10-K for the fiscal year ended December 31, 2019 and the Form 10-Qs as filed. Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, further events, or otherwise. I'd now like to turn the call back to Steve.

Steve Mihaylo, Chairman and CEO

Thank you, Jeff. We again come to you with the country and the world in the throes of the COVID-19 pandemic. We hope that we find all of you and yours healthy and that you are continuing to adapt to what has become the new normal. COVID is a trying time for everyone. But we believe that we, as a company, are on the cutting edge of technology that helps our customers adapt and operate in an uncertain time. We build our award-winning phone systems to allow our customers to work from anywhere seamlessly and to make it as easy as unplugging your phone from one internet connection to another, the new normal. We believe that our systems are exactly what is needed now and what will be needed in the post-COVID world. It is clear that how and where we work will continue to change and adapt, as will our systems. It was a good quarter and a good year-to-date for our company. I previously discussed that our systems are award-winning and this quarter was again confirmed by our receiving the prestigious 15th Annual Internet Telephony Excellence Award. Our Ride the Cloud systems are regularly recognized by outside organizations, and it confirms what we have always said: that there is no better solution you can get than the Crexendo solution. Not only do we have award-winning cutting-edge technology when you join us and Ride the Cloud, but in most instances, you will save a considerable amount of money by switching to Crexendo. I am pleased with the results for the year-to-date. UCaaS service revenue increased 15% compared to year-to-date of 2020 versus year-to-date of 2019. This is the metric I primarily use to judge the company, and these results are very promising. The results are even better when you consider that we believe we have some attrition of customers that did not remain operating or otherwise decreased their service level due to COVID. This quarter, we also had a substantial increase in expenses, both in regards to investing in the business and initial listing fees with our uplisting to the NASDAQ capital markets in July. We are hopeful we will start to see less COVID-related attrition, but the investments we made are necessary and important for our future growth. With that said, we watch every penny carefully and will invest where it makes sense for the future growth of the company and to increase shareholder value. This quarter, we were able to close and have a fully subscribed public offering. The proceeds had many benefits for the company. We were able to raise necessary money and have been able to speak to many new investors about the Crexendo story. We have substantially increased our footprint with investors while increasing our investor base and our stock float. All of these are significant benefits for the company. Our streak of continuing profitability, together with our ability to raise additional capital, puts us in a very strategic position to aggressively work on making accretive acquisitions and also to increase organic growth. While we work on acquisitions, we are not turning our backs on organic growth. We are investing in sales and marketing as part of the plan. I am more excited about the future of Crexendo than I have ever been. There will be a focus on growth, growth, growth, and more growth. With that, I’ll turn the call over to Ron.

Ron Vincent, CFO

Thanks, Steve. Consolidated revenue for the third quarter increased 15% to $4.1 million compared to $3.6 million for the third quarter of the prior year. Service revenue for the third quarter increased 12% to $3.7 million compared to $3.3 million reported for the third quarter of the prior year. Our Cloud Telecommunications segment service revenue for the quarter increased 14%, or $425,000, to $3.5 million compared to $3.1 million reported for the third quarter of the prior year. Offset by a 19% or $30,000 decrease in our Web Service segment service revenue for the quarter. Our product revenue for the third quarter increased 43%, or $146,000, to $489,000, as compared to $343,000 for the third quarter of the prior year. Gross margin for the third quarter decreased 2% to 70% as compared to 72% for the third quarter of the prior year. Our consolidated operating expenses for the third quarter increased 22% to $4 million, compared to $3.3 million for the third quarter of the prior year. Net income for the third quarter was $131,000 or $0.01 for basic and diluted common share, compared to $334,000 or $0.02 per basic and diluted common share for the third quarter of the prior year. Non-GAAP net income for the third quarter was $290,000 or $0.02 per basic and diluted common share, compared to $454,000 or $0.03 per basic and diluted common share for the same period of the prior year. EBITDA for the third quarter was $211,000 compared to $361,000 for the same period of the prior year. Adjusted EBITDA for the third quarter was $347,000 compared to $460,000 for the same period of the prior year. For the nine-month period, consolidated revenue increased 13% to $12.1 million compared to $10.7 million for the same period of the prior year. Service revenue for that nine-month period increased 14% to $10.7 million compared to $9.4 million reported for the same period of the prior year. Our Cloud Telecommunications segment service revenue for the nine months period increased 16% to $1.4 million – by $1.4 million, and $10.3 million compared to $8.9 million reported for the same period of the prior year, offset by a 16% decrease or $81,000 decrease in Web Services segment service revenue for that nine-month period. Our product revenue for the nine-month period increased 2% to $1,320,000 compared to $1,290,000 for the same period of the prior year. Gross margin for the nine-month period ended September 30, 2020, and 2019 was 70% for both periods. Consolidated operating expenses for the nine-month period increased 14% to $11.2 million compared to $9.8 million for the same period of the prior year. Net income for the nine-month period was $779,000 or $0.05 per basic and diluted common share compared to $911,000 or $0.06 per basic and diluted common share for the same period of the prior year. While it was $1.23 million or $0.08 per basic common share, or $0.07 per diluted common share compared to $1.24 million or $0.09 per basic common share and $0.08 per diluted common share for the same period of the prior year. EBITDA for the nine-month period was $1.1 million compared to $986,000 for the same period of the prior year. Adjusted EBITDA for the nine-month period was $1.4 million as compared to $1.3 million for the same period of the prior year. Our cash, cash equivalents, and restricted cash balance at September 30 was $15.5 million compared to $4.3 million at December 31, 2019. Operating activities provided $423,000 of cash, cash equivalents; investing activities utilized $921,000 of our cash, cash equivalents, and restricted cash for the purchase of property and equipment. Financing activities provided $11.7 million of cash, cash equivalents, and restricted cash. We received $8.8 million in proceeds from the issuance of common stock in an offering that Steve spoke about, which closed on September 28. $2 million was proceeds from stock option exercises, and $1 million in proceeds from those payables, offset by repayments made on finance leases and those payables and asset acquisition continued consideration payment. With that, I'm going to turn it over to Doug Gaylor, our President and COO, for additional comments on sales and operations.

Doug Gaylor, President and COO

Thanks, Ron. Q3 was a very exciting quarter for Crexendo. We were pleased that we were able to successfully uplist from the OTC to the NASDAQ exchange in July; we then followed that up with the accomplishment in September with the successful completion of our S1. In addition, we had a strong bookings quarter that helped propel us to our seventh straight quarter posting positive GAAP income. I’ll provide a quick recap on the quarter from the sales perspective and what impact we continue to see from COVID, but we'll also provide an update on our marketing efforts, as well as our R&D efforts and finish with an overall assessment of our current environment. We saw a nice increase in sales bookings from Q2 to Q3 as customers continued to adapt to the new digital transformation that has accelerated with the COVID pandemic. Our award-winning technology allows businesses to work from anywhere, anytime, and on any device, which is what businesses are looking for as they adjust to today's new normal. We've continued to offer incentives for our customers to make their migration to the cloud easier by waiving activation fees and offering a free month of service. Our partner channel continues to grow, and we continue to see increases in the sales contribution from that channel. We are encouraged by the larger transactions that our partners are selling, as they accounted for numerous six-figure total contract value sales during the quarter. Despite the economic headwinds from the pandemic, our sales bookings increase allowed us to post a 14% increase in our unified communications as a service revenue year-over-year, and that resulted in GAAP net income of $131,000 or $0.01 per share for the quarter. Our telecom backlog also grew by $1 million to $28.3 million, further supporting that the migration to the cloud is picking up steam. Our telecom service gross margin for the quarter was strong at 73%, and we are able to consistently sustain these healthy gross margins, since we have a very stable cost structure, we're diligent about managing our costs, and the fact that we own the technology that is the foundation of our offering. Our profitable results for the quarter, combined with our successful capital raise, helped increase our cash position to $15.3 million at the end of the quarter. As we have discussed on our previous calls, we continue to reinvest into the business, including marketing, lead generation, new hires, new incentives to generate more sales, and additional R&D to further enhance our offerings. On the marketing side of the business, we successfully launched our new Crexendo website during the quarter and have started new paid search SEO and social media campaigns to further drive additional lead generation. Our in-house engineering team is constantly enhancing the Crexendo platform with new features and capabilities, and those efforts earned us another prestigious award during the quarter, as we were awarded the 2020 Internet Telephony Excellence Award that Steve mentioned earlier, recognizing our remote work from anywhere capabilities in the business texting applications with this highly coveted award. As we have previously mentioned, the migration to cloud communications from older legacy premise-based solutions was already occurring at a rapid pace prior to the pandemic. With the rapid changes the business world has encountered post-pandemic, the need for businesses to utilize our solutions has never been greater. We are confident that our products and marketing strategies are well positioned to take advantage of this continued migration to the cloud. Our recent capital raise has provided us with a strong balance sheet that will allow us to accelerate our organic growth, as well as allow us to focus on acquisition opportunities that will further accelerate our growth. As one of the leaders in the UCaaS industry, and one of the few profitable UCaaS providers, we are positioned well to help businesses migrate to the cloud. We are confident that our solutions and strategies will continue to gain traction, as businesses look for better ways to communicate in the post-pandemic world. I am excited about the opportunities ahead and I look forward to executing our plans for revenue and income growth, and we have never been in a stronger position to deliver. I will now turn the call back over to Steve.

Steve Mihaylo, Chairman and CEO

Thank you, Doug and Ron. And thank you, Josh, I think we'll start taking questions now.

Operator, Operator

We'll take our first question from Josh Nichols at B. Riley.

Josh Nichols, Analyst

Yes. Thanks for taking my questions.

Steve Mihaylo, Chairman and CEO

Hi Josh, how are you?

Josh Nichols, Analyst

Things are going great. Working from home like most people are at this point. Good to see the continued UCaaS service performance despite some of the pandemic headwinds. Could you elaborate a little bit on how many companies you ended the quarter with? And how much do you plan to ramp up hiring over the next 12 months to invest in growth organically?

Steve Mihaylo, Chairman and CEO

I'd be happy to answer that, and I could, but I'm going to let Doug answer it.

Doug Gaylor, President and COO

So hiring is obviously a key critical component at the moment, Josh. We are looking to add additional channel managers and salespeople. We've also recently added additional engineering staff. As we look at our growth, we obviously have to keep up with that growth by adding new employees to maintain and help that top line growth. Sales has been a constant focus for new channel managers and direct sales reps. We have continued to enhance those efforts by adding back office staff on the engineering and support side. From a customer perspective, we did increase the number of customers; I don't have that number off the top of my head, but I can follow up with you and give you the exact numbers.

Josh Nichols, Analyst

No problem. And can you talk a little bit more about some of the actions the company is looking to take on the bar business? I know that's where most of the sales are coming from today and how long until you think those actions are going to be materialized in terms of accelerating top line revenue growth?

Doug Gaylor, President and COO

We still see approximately 70% of the businesses out there that haven't migrated to the cloud. So we're still seeing a lot of interest. The bars that we're bringing on board, I think we brought 10 bars on board during the quarter. Those value-added resellers are obviously coming on board to promote Crexendo to their customer base. The demand for work-at-home and work-from-anywhere type solutions has never been greater, as I mentioned in my statement. So we do see a lot of need out there; I think the new partners that we're bringing on board recognize that as well. Of the 10 partners that we brought on board, I don't have the exact numbers, but quite a few of them don't have a telecom offering in their portfolio. So adding telecom into their offering, whether they were data bars or business-to-business opportunities, they're looking at telecom being a key component to meet the needs of potential and existing customers out there. Our partner channel continues to grow and flourish, and we're giving them a lot of incentives to continue selling and leading with Crexendo.

Josh Nichols, Analyst

Thanks for that. I know the space has been dealing with a little bit of elevated churn as expected with the pandemic, but it seems that you've navigated that pretty well. Has that kind of leveled off, or what are you seeing? How are your customers doing in the current economic backdrop? Any vertical or regional concentration that you could comment on?

Doug Gaylor, President and COO

Yes, I'm going to have Ron add some color on that, because he's been tracking the churn. We actually saw a little bit of a decline in churn for the quarter, which is a positive, so I'll have Ron add some color to that.

Ron Vincent, CFO

That's right. We saw our average monthly churn rate come down back to pre-COVID levels. So I think we were at 0.66% per month average customer churn in the third quarter; that's in line with the 0.67% that we had for the average in Q1, and in Q2, we spiked up above 1% of month churn. I think it was 1.07% average for each month during Q2. So the churn has receded back down to pre-COVID levels, and that's very promising. I think we will maintain those levels and hopefully get into further decline back to 2019 levels as we move forward.

Josh Nichols, Analyst

Thanks for the additional color on that. And last question for me, then I'll hop back to the queue and pass the baton. How would you describe the current M&A environment? I know that's a relatively new strategy that you were able to pursue now with the uplifting and additional firepower as far as liquid capital. Is it an M&A-rich environment? Do you think that could happen over the next few months, or do you think it may take a few quarters to find something that's a good fit?

Doug Gaylor, President and COO

Yes. I think that the M&A discussions we've had are more prevalent now than they've ever been. I think we've got more discussions going, and I think there are more opportunities. I don't know if it's necessarily related to COVID, but there are more businesses looking for opportunities to either have an exit strategy or look to partner with someone larger that can take them to the next level. I'm really excited about some of the discussions we've got going. Obviously, I can't announce anything; we don't have anything concrete, but there are some good discussions going on, and we do hope that within the next six months we could announce some acquisition opportunities.

Steve Mihaylo, Chairman and CEO

And Josh, I'd like to add a little color to that. One of the things that uplifting has done for us is that it has given us more credibility and more investors are looking at the company. In addition to that, it's opened up some good opportunities, as Doug just mentioned, and we intend to pursue every one of them going forward. 2021 is going to be concentrated on growth, and we feel secure in both the organic area and the acquisition front.

Josh Nichols, Analyst

Thanks for that. I’ll hop back in the queue.

Operator, Operator

We’ll go next to Andrew King at Colliers Securities.

Steve Mihaylo, Chairman and CEO

Good afternoon, Andrew.

Andrew King, Analyst

Thanks for taking my question. So first off, I just wanted to look at the gross margins a little bit. I noticed that the product gross margin has come down to 35% about the first time in a while. Just wanted to get a little bit more of an idea on the trends that you see going through gross margins currently and going forward?

Doug Gaylor, President and COO

Yes. As a result of COVID, we offered some very good promotions for customers, so we offered no payments until 2021. The allocation of that revenue through the guidance of spreading that over the total contract period resulted in a lower gross margin on our product revenue for the customers that were installed during Q3. We anticipate that going back up into the 42% range from the 36% we ended with in the near term, because the promo was through Q3 and we ended that promotion at this point.

Andrew King, Analyst

Okay, great. And then can you talk a little bit more about the linearity of the revenue through the quarter? Just wanted to see if there was any sort of meaningful pick up that you guys started to notice towards the end, as people may start to be getting prepared for another wave of COVID or might start even coming back with COVID precautions in place?

Steve Mihaylo, Chairman and CEO

Yes. We haven't seen a dip from a sales perspective, which is a positive. We saw fairly consistent sales throughout the quarter, and that has continued on. I think that businesses, even if there is a second wave, are prepared for that or are preparing for that by implementing the right solutions out there. When we talk to businesses, many are telling us that they got caught off guard during the first round and made do with cell phones or forwarding to home phones or whatever they might have had to do with their existing platforms. Now they've had a chance to breathe and plan ahead and are implementing our type solutions. Going forward, I think that's going to be the norm; businesses are realizing that we are in a new norm today, and they must adapt. I don’t think they are going to wait for a second wave to make decisions; I think they will continue making decisions as we’ve seen over the last three or four months. If you’d asked me the same question back in April or May, that was a different scenario where people were not prepared, and today after six or seven months of dealing with the waves coming and going, I think businesses have learned to adapt, and we’re seeing that in our sales processes.

Andrew King, Analyst

Great. And just one last one for me. You’ve touched on this a bit, but can you give us more color into any marketing initiatives you’ve placed as the promotions or increased digital marketing just to offset some pandemic headwinds?

Doug Gaylor, President and COO

Yes, obviously we started with building a new website that was just launched last month, so we’re excited about that. We've started some paid search campaigns, some social media campaigns to get our message out there. We've also put some additional incentives out there for customers and our partners. Our partners have some nice new incentives to lead with our platform and have some extra incentive to get our opportunities sold and installed before the end of the year. We've really tried to focus our marketing efforts on what’s going to move the needle quickly; obviously paid search has a little bit quicker return, SEO has a long-tail return, but we’re investing for the long-term and for the short-term. We’re seeing good lead generation happening through our paid search campaigns and are seeing good response from our social media campaigns, and obviously with our incentives for our partners and customers, we’re seeing good adoption as well.

Andrew King, Analyst

Great. Appreciate it.

Steve Mihaylo, Chairman and CEO

We're ready for the next one, Jess.

Operator, Operator

Certainly. We'll go next to Arham Khan with Eden.

Arham Khan, Analyst

Hi everyone. How are you guys doing?

Steve Mihaylo, Chairman and CEO

We're doing well. How are you?

Arham Khan, Analyst

Doing great. Just had two really quick questions for you. One, just wanted to follow up on something I always ask. How is the backlog looking, where has that come to now in this quarter? And then finally just want to get an idea of the acquisition kind of the criteria for what you're looking at? You guys are obviously a little better positioned than most other companies, generating cash flow where many failed to do. When you're looking – obviously when a company is not generating cash flow, you can probably negotiate better prices for it. But the flip side of that is you're acquiring something that's not cash flowing. So I wanted to look at what exactly you're looking for apart from accretion in revenues.

Doug Gaylor, President and COO

Sure. Yes, so the backlog had a nice increase quarter-over-quarter, so we increased backlog by right at $1 million to $28.3 million. That's our sales backlog of sold opportunities. Just to reiterate, backlog is contracted revenue that hasn't been recognized yet, so increasing that by $1 million quarter-over-quarter was a nice increase. Looking at that increase year-over-year is also another nice positive. I think we've increased that by about 12% to 14% year-over-year. Regarding acquisition strategies, what we're looking for out there is accretive acquisitions that are critical for us. We're looking for a revenue stream that we can convert over to our platform. We want opportunities where we can grow the business and grow it with cost synergies. So as we look at the opportunities that we're talking to, there are many opportunities and a lot that are a nice fit. We want customers that are under long-term agreements and that we can easily migrate over to our platform. We want that relationship that the end users have with potential acquirers to have good relationships, as we want that long-term connection. Our low churn is something we consider in acquisition opportunities, ensuring that there is very little churn, so we want to buy a business with a solid footprint moving forward.

Arham Khan, Analyst

Okay. Well understood. Thank you, guys so much. Take good care.

Steve Mihaylo, Chairman and CEO

You’re welcome.

Ron Vincent, CFO

Thanks, Arham.

Operator, Operator

We’ll go next to Ronald Shaw, Investor.

Unidentified Analyst, Analyst

Yes. Thank you. My question is about the general and administrative expense and R&D; those were the biggest expense increases in the quarter. Steve, you mentioned some listing fees, but I thought the general and administrative was up a little more than I thought it would happen.

Steve Mihaylo, Chairman and CEO

I'm going to let Ron handle this one, but we had a lot of CapEx and some of the costs spilled over into the third quarter. But Ron, would you go through that, please?

Ron Vincent, CFO

Sure, Steve. From an R&D perspective, we added some FTEs during the quarter to backfill positions that were lost as well as add additional resources for development of our UI and product offering. On the G&A, we had approximately $100,000 in costs associated with the uplisting to the NASDAQ. We had some general and administrative cost increases over the quarter. So there weren't PP&E purchases that we had that are below the capitalizable threshold that were expensed during the quarter. The majority of those increases were due to adding a new accounting staff, which was an additional FTE or replacement for someone we lost in 2019. Those were the main drivers for the increase in G&A.

Steve Mihaylo, Chairman and CEO

This company, even though you may only look at three or four different metrics, we look at about 15 or 20. As a growing company, we're going to grow SG&A; we have to, in order to keep up with the growth. But the trick will be to grow it at a slightly slower pace in the future. Ron, do you have one other comment you wanted to make?

Ron Vincent, CFO

No, Doug mentioned R&D, but we talked about that first. We added two or three FTEs during the quarter.

Steve Mihaylo, Chairman and CEO

Does that answer your question?

Unidentified Analyst, Analyst

Yes, that's very good. Thank you.

Steve Mihaylo, Chairman and CEO

You bet.

Operator, Operator

We’ll go next to Michael Kaufman at MK Investments.

Steve Mihaylo, Chairman and CEO

Hi, Michael. How is it going?

Michael Kaufman, Analyst

How are you doing, Steve? I want to thank you and Doug and the whole team for really threading the needle and producing profitable growth in light of the pandemic and uplisting and doing a public offering. I think it was certainly a very impressive performance. I'm sure under your joint leadership, it will continue to evolve.

Steve Mihaylo, Chairman and CEO

Just remember that Doug, Jeff, Ron, and the entire team, including Joe Seeler and all the rest of the team, Nishith, you name it, everybody is very, very focused on our growth and our profitability in the future.

Michael Kaufman, Analyst

Understand that. I really compliment everybody for doing a great job of balancing all these various forces.

Steve Mihaylo, Chairman and CEO

Thank you.

Michael Kaufman, Analyst

I'm just wondering, what is the current headcount? I didn't see it from any of the material. And what do you think you would be at the end of the year? What's your projection?

Doug Gaylor, President and COO

Yes. Current headcount, Michael, is 60 at the end of the quarter, and I anticipate potentially adding maybe two or three more bodies before the end of the year. It's all about productivity. We are constantly looking for the right fits while realizing that the productivity per employee is a key metric that we measure. As we continue to grow, we look for individuals that help us in that growth. If there are acquisitions, we will look at how that helps augment our organization.

Steve Mihaylo, Chairman and CEO

More importantly, Michael, is where our headcount is at the end of 2021. I would expect that if you look at where our headcount is going to be at the end of 2021, the productivity will have increased. I don't know by exactly how much, but it’s going to increase over the coming year.

Michael Kaufman, Analyst

I guess, the other thing, if you are picking up other teams potentially, you got to make sure that you have the right bandwidth, and you'll have to do some massaging of everybody. The last thing you want to do is overhire to the point where you get confusion as you’re trying to build a company faster and bigger.

Steve Mihaylo, Chairman and CEO

We're well aware of that. Any redundancies will have to be considered when it comes to additional people where they're going to be necessary. As a larger organization, you're going to have to have more people to run it. We take all of that into consideration.

Doug Gaylor, President and COO

We are extremely well-versed at multitasking, as you can tell just from the quarter. We did an uplist, we did an S-1. We did a lot of things, and at the same time still maintained our sales growth and profitability. We are extremely focused on what we need to do, but we also are extremely well-versed at being a multitasking organization; we wear a lot of hats, and we know we have to continue to grow this and add where necessary.

Michael Kaufman, Analyst

I think it’s a remarkable balancing act. Having been involved in starting a few hundred companies myself, I just wish you guys the best of luck.

Doug Gaylor, President and COO

Thank you.

Operator, Operator

With no other questions holding, I will now turn the conference back to management for any additional or closing comments.

Steve Mihaylo, Chairman and CEO

Okay. Thank you, Jess. With that having been said, just keep in mind that our focus will be on growth and profitability. We do expect, as we add growth, the organic growth will take the number of people that we currently have, but the acquisition growth will take more people. It's also going to allow for some goodwill and intangibles. On the intangible side, we will write that off over the course of two, three, four, five years, which will impact GAAP earnings but not EBITDA earnings. That’s going to become a more meaningful metric as we go forward. Our goal is to maintain a GAAP income every single quarter moving forward. Accretive acquisitions, as Doug pointed out, is going to be the name of the game. With that, I want to thank everyone for being on this call, and we look forward to talking to you in the new year. I wish you all happy holidays. Good day and goodbye.

Doug Gaylor, President and COO

Thank you, everybody.

Operator, Operator

Thank you, Mr. Mihaylo. Ladies and gentlemen, that will conclude today's call. We appreciate your participation. You may disconnect at this time and have a great day.