DLH Holdings Corp (DLHC) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2011 TeamStaff, Inc. earnings conference call. My name is Lacey and I'll be your coordinator for today. At this time all participants are in listen-only mode. Later we will facilitate a question-and-answer session towards the end of the presentation. (Operator Instructions). As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Adam Lowensteiner of Wolfe Axelrod Weinberger Associates.

Thank you, Lacey. Good morning; thank you for joining us on today's conference call. I am Adam Lowensteiner, Senior Account Executive at Wolfe Axelrod Weinberger Associates, Investor Relations Council on behalf of TeamStaff. On the call with me today is Mr. Zach Parker, President and Chief Executive Officer of TeamStaff, and Mr. John Kahn, Chief Financial Officer.

Before I turn the call over to our hosts, let me take a moment to read the forward-looking statement. This conference call may contain forward-looking statements as defined by the federal securities laws. Statements in this conference call regarding TeamStaff, Inc.'s business which are not historical facts are forward-looking statements that involve risks and uncertainties.

TeamStaff's actual results could differ materially from those described in such forward-looking statements as a result of certain risk factors and uncertainties including, but not limited to -- our ability to continue to recruit and retain qualified temporary and permanent healthcare professionals and administrative staff on acceptable terms; our ability to enter into contracts with government agencies and other customers on terms attractive to us; and to secure orders related to those contracts; changes in the timing of customer orders for placement of temporary and permanent healthcare professionals and administrative staff; the overall level of demand for our services; our ability to successfully implement our strategic growth, acquisition and integration strategies; the effect of existing or future government legislation regulation; the loss of key officers and management personnel that could adversely affect our ability to remain competitive; other regulatory and tax developments and the effect of other events and important factors disclosed previously from time to time in TeamStaff's filings with the US Securities Exchange Commission.

For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, key risk factors in the Company's periodic reports filed with the SEC, the information in this conference call should be considered accurate only as of the date of the call. TeamStaff expressly disclaims any current intention to update any forecasts, estimates or other forward-looking statements contained in this call.

With that out of the way, let me turn the discussion over to Zach Parker, President and CEO of TeamStaff. Zach, please proceed.

Thank you, Adam. Good morning, everyone, and thank you for joining us today for our mid-year report. My plan is to first summarize the highlights of the second quarter fiscal year 2011 and then hand the call over to John Kahn for a brief discussion of our financial results for the quarter. I will then close with an overview of our progress on key strategic initiatives and the significance of our most recent win with the Department of Veteran Affairs, one of which I'm very excited.

I'm very pleased with our mid-year progress which can be characterized as a period where we are turning the corner. We're demonstrating top-line and bottom-line improvement, excellence in customer satisfaction and continued execution of our strategy. We have hit the mid-year point with $21 million in revenue, a 2% increase over the prior comparable quarter of 2010; gross profit has increased 22% to $2.8 million for the first half of the year.

Our work with the Department of Veterans Affairs continues to be exemplary. We continue to rely heavily on our relationship with the DVA where, of course, we derive the majority of our revenues. It is here with our relationship with the DVA where we have delivered top notch service and have been recognized by the DVA and others, like the JD Powers & Associates award, about how we've done a high-quality job in supporting our clients.

Our impeccable record has enabled us to secure additional work with the Department of Veteran Affairs and should also prove valuable when we build our practice for the Department of Defense. Our core strengths and capabilities are already opening up new opportunities with our targeted market areas of healthcare delivery and logistics. We're aggressively leveraging these capabilities which are opening the doors to new prospects in business for both near- and long-term objectives.

New business bookings totaled $1.6 million during the quarter; most of this growth was in our Logistics & Technical Services line of business where we began engineering support to the Department of Energy at their Savannah River site.

While we are pleased with these wins, we were disappointed with a number of government contract awards that were delayed or continued to slip to the right. However, we are encouraged by the momentum we have seen in the recent government procurement activity including our recent award with the Department of Veterans Affairs which represents a gross booking of an estimated $140 million over five years. I'll talk about this a little bit more in my remarks a little bit later.

We continue to win more business also with the USDA and other customers where we're providing a range of technical services including engineering and program management support. The investments that we made in 2010 and continue to make in 2011 to date continue to build our business development and they're starting to pay off and have positioned us very well for a successful year and beyond.

With that I'll turn the call over to John Kahn for a more detailed discussion of our financial results for the second quarter of fiscal year 2011. John.

Thank you, Zach. Revenues for the three months ended March 31, 2011 and 2010 were $10.4 million and $9.8 million respectively, which represents an increase of $0.6 million or 6% over the prior fiscal year period. The increase in revenues is due primarily to the impact of increased demand of TeamStaff's services and new business resulting in increased overtime and increased headcount at certain government facilities related to federal government outsourcing certain positions.

Gross profit for the three months ended March 31, 2011 and 2010 was $1.5 million and $1 million respectively, which represents an increase of $0.5 million or 50% over the prior fiscal year period. Gross profit as a percentage of revenue was 14.4% compared to 9.9% looking at the three months ended March 31, 2011 and 2010 respectively.

The key drivers for the period-over-period increase in gross profit as a percentage of revenue are greater overtime at certain government facilities which earn a higher gross profit margin and a reduction in direct expenses.

Selling, general and administrative expenses for the three months ended March 31, 2011 and 2010 were $1.6 million and $1.8 million respectively which represents a decrease of $0.2 million or 11.1%. The decrease is primarily due to cost reduction initiatives which we include in headcount reductions, a temporary furlough program and negotiating significant cost reductions with vendors.

Loss from operations for the three months ended March 31, 2011 was $0.1 million as compared to loss from operations for the three months ended March 31, 2010 of $0.9 million. This represents an improvement of $0.8 million or 89% in results from operations for the prior fiscal year period. The improvement is due to the above-mentioned increase in gross profits and reduction in selling, general and administrative expenses for the three months ended March 31, 2011.

Net loss for the three months ended March 31, 2011 was $0.2 million or $0.04 per basic and diluted share -- so $0.04 per basic and diluted share as compared to a net loss of $1 million or $0.20 per basic and diluted share for the three months in March 31, 2010.

I would now like to briefly discuss our capital structure. As of March 31, 2011 the Company had approximately $1.3 million in cash and approximately $323,000 in availability under its credit facility. During the quarter the Company and its lender further increased the maximum availability under the loan agreement by an additional $500,000 to $3 million subject to eligible receivables.

The Company believes that it will have adequate liquidity resources to fund operations over the next 12 months in view of cash and cash equivalents, expected operating cash flow, the existing additional funding committed by the Company's lender, the capital that was provided through the equity investments by members of our Board and management team at the quarter's end, and other assurances for future financings provided the Company in February 2011 as well as the contesting of certain liabilities recorded on the Company's balance sheet.

That concludes my discussion of the financial statements. I will now turn it back over to Zach for the remainder of his comments.

During the past 18 months we have taken numerous steps in an effort to enhance the value of TeamStaff and have fully focused our efforts on the Government services market where we, of course, have a proven track record of excellent performance. We continue to believe that we can leverage this track record and our core competencies in developing growth markets within the federal and DoD space. Early indications are excellent.

In that vein, we have in the interim months been working on three key strategic initiatives to make us a stronger and more viable company and a better platform from which to grow.

This first initiative we embarked upon was securing our financial stability, as John just described. This has of course involved the extension of our line of credit with Presidential Financial and the cash infusion made by the members of the Board of Directors and the executive management team. In addition, we continue to have a commitment for additional capital from our largest shareholder.

Our second key initiative was to make sure that the funds we secured don't go wasted and we have implemented tight expense controls which continue to be in place.

Last and most importantly, we have worked hard and diligently on maintaining our core business with the Department of Veteran Affairs and, subsequent to the quarter's end, we've secured that core business and then some -- with our recent awards with the DVA related to the pharmaceutical services for its consolidated mail outpatient pharmacy program, this is also known as the CMOP program. This award, which was made again post -- after the second quarter, will do a significant amount of business for us not only in our current sites but in new sites as well.

While I do want to emphasize the importance of this award to shareholders please note that my comments on this award will be brief due to the competitive sensitivity of this current contract.

Recently TeamStaff GS was awarded a single source blanket purchase agreement by the Department of Veterans Affairs for the procurement of pharmaceutical services at seven of the DVA's consolidated pharmacy distribution centers. This is expected to result in an increase in the annual run rate of the pharmaceutical services provided by the Company over that period during the expiration of -- as we expire the existing contracts. The maximum total value under this award is expected to be $140 million. Work is expected to begin on July 1 of 2011 and continue for five years.

In summary, fiscal 2011 has been a pivotal year thus far for TeamStaff. Our transition of top- and bottom-line performance combined with the stellar operations and superior delivery across the organizations are expected to yield sustainable and increase in our value to our shareholders and are indicative of our proven management team's commitment. That concludes my formal remarks. I would now like to open the call for questions or comments. Operator, please proceed.

(Operator Instructions). Mark Beard (sic), Hodges Capital.

Yes, looks like a really good quarter. This new order you're working on, the $140 million, would that be at a normal profit margin compared to your current business?

Yes, good question, Mark. This is Zach. Yes, it's actually going to be comparable to our existing profit margin. In some areas there may be some slight variation, but we're again -- while it's still very competition sensitive, it's going to be a great shot in the arm for us.

Okay, thank you.

Benj Gallander, President of Contra Investments (sic).

Hi, it's actually Contra the Heard Investment Letter. Anyhow, congratulations on the turnaround you guys are doing; it sounds great. Question is -- the stock price now has to stay above $1 for 10 days otherwise there's a possibility of delisting?

That's correct.

And that is by -- is it May 31?

Yes.

And can you reapply again or is that the final time that you can possibly do it?

I believe that basically we have an appeal process that we could exploit if by the 31st we had not sustained that dollar rate. And while we've got that as a back-up position we're optimistic that we will be able to meet the requirement outright.

Otherwise then you reapply or you go before the Board and if it is not accepted, and I think it will be -- I think it's a good chance it will stay above $1, then you'd be looking at over-the-counter or the pink sheets?

That's correct, that would be one of our options. That's correct.

And would you be looking again at a stock consolidation? It's already happened once and there aren't many shares left.

Well, we actually haven't taken -- we've looked at -- we've got several options. We really haven't taken any options off of the table and that certainly would be one of the options. But again, we're looking very optimistically and pragmatically, we think, with meeting the requirement and being able to work with the NASDAQ folks to continue.

Okay. Well again, congratulations. You've done a tremendous job and this new contract is a huge shot in the arm.

Well, it is. I appreciate that comment. And I'll tell you that when we talked about unfolding our strategy, our strategy has a lot to do with not only retaining our existing business but expanding our business base both in the VA and with the new clients that John Armstrong is bringing to the fold for us.

And we're making great progress in both. This contract does a couple of those key steps. It, first of all, retains all of our business with the pharmaceutical side of the VA. In addition, it adds a couple of additional sites; it's going to of course add new work for us and greater revenue for this year. So we've been very, very, very pleased with this award.

Well, keep up the good work, sir.

(Operator Instructions). Martin Faltzman, AFM Investments.

How you doing in there, Zach and John? Great job, it's a great job. I just want to compliment you on that for a fairly what looks to be swift turnaround. So my compliments to you. And seeing the stock at $1.20 versus $0.40 is wonderful.

I appreciate that.

Keep up the good work. Zach, I have a question pertaining to this contract and this contract is -- it is a big contract. And I guess it's somewhat of a concern, but not understanding everything I'd just like to understand -- do you have the personnel to be able to handle a contract of this size?

Very, very good question, Martin. Because obviously with us being able to keep our rates competitive we've got fairly small bandwidth in certain areas and that certainly was a concern. But of course over the last couple of months when they were continuing to give us extensions rather than awarding the new contract, Kevin Wilson has put together our team to make sure we are prepared to phase in this new work.

And the fact that it actually doesn't start until July 1st, we've got the team in place now with a plan; we call it a phase-in plan to be able to ramp up without having any negative impact on either our performance or our financial -- or to create any kind of financial risks.

As such we also, in addition to ramping up the people, we've needed to make sure that we have the relationship in place with our bank and we're fortunate. We've had the discussions with Presidential to make sure that we're prepared to succeed. And John Kahn has done a great job in building that relationship to make sure that these kinds of successes won't be a drain on us.

So yes, we've just got a great team in place with our contract folks and Bob Coffman in making sure we're squared away to implement this work, and then Kevin and getting the team in place to make sure we can phase it in quickly.

There are always some headwinds in that arena. As you well know, the President signed into Act a provision to make sure that we gave first right of refusal to the incumbent personnel, and then subsequently we would have to then backfill. So the fact that we have a legacy business base in staffing and contingency augmentation is a major, major plus for us to mitigate that risk, Martin.

Excellent. Can you just speak briefly on exactly what the program does? I mean, I can think it through a bit myself where you're saying consolidated mail outpatient pharmacy program. Can you just walk me through what I'm assuming a veteran would do in the event they needed some product?

Yes, I'll do the best I can.

Yes, I mean give me a Reader's Digest.

This is where I usually call in Kevin or John Armstrong who is a veteran. But I can tell you, first of all, let me start, if you don't mind, with an anecdotal statement that I got from John Armstrong recently. Many of you know John is our retired army colonel who's leading our growth business.

He ran into someone in his neighborhood mowing their lawn and they got to talking a little bit about business and he asked what do you do and he described he worked for TeamStaff, Inc. and we had a large contract with the veterans administration that involved the CMOP program.

Or he actually indicated it involves mailing out pharmaceuticals for our veterans. And this troop happened to be a veteran. He said, I know it, you must be referring to the CMOP program, you guys are absolutely fantastic. I have gotten my meds timely and accurately for years. Thank you, thank you, thank you.

So I'll tell you, those are why we get excited about the dollar values and things of that nature in our contract. It's always great and gratifying for us to hear that we really are taking care of those who have served us so admirably in uniform.

A bit of overview of -- and this is the Zach Parker version of the CMOPs program. It essentially -- the Department of Veterans Affairs has sites, regional sites where they identify various medications that are going to be required for veterans throughout the country. And each of these regional sites has both operations associated with logistics and operations associated with pharmacy services.

This contract deals primarily with the pharmacy services. So we will have pharmacists, licensed pharmacists and pharmacy technicians primarily under this contract. And it's what they call a performance-based contract because we really have to meet certain standards associated with both the quality and the quantity of delivery. We deliver in the neighborhood of over 1 million transactions under this contract annually. So it's a really, really high pace contract.

The nature of the work, of course, includes us working in what you might call more of a production environment where we have folks that work with a variety of technologies including RFID that tracks each individual item with regards to the pharmaceuticals. We have a variety of workforce that works on different types of commodities. And the end result is we will validate that the right type of pharmaceutical gets to the right individual on a timely basis every day.

So it's -- think of it as an inventory management type warehouse operation where we have the subject matter experts and the pharmacists and the pharmacy folks to make sure that the product quality is correct and that we meet the high standards -- we call them Six Sigma standards -- of quality metrics.

So it's really a team, a workforce that has come together well over the recent years. In the last couple of years we've done a great job of increasing the productivity that has resulted in net cost savings for the VA. And we clearly believe it's that value as a value partner that has led to our ability to not only retain our existing work but to have them give us even greater work with this new contract.

And at this time I show that we have no questions in queue. (Operator Instructions). Martin Faltzman.

Zach, my apologies. Our system went down and our phone lines went down, so I didn't get to hear the full Reader's Digest [theme]. But I can get that from you another time. My follow-up question, Zach, is -- going forward -- and I know you've worked out a nice arrangement with Presidential. Do you feel contracts like these or any future ones that you're working on, that you'll have ample capital for them?

Do you foresee -- and I don't mean to not give you a chance to answer the question. But do you foresee, just based on your capital structure -- you only have 5.1 million shares outstanding let alone the float is only, what, $2.2 million. Can you foresee doing a secondary offering down the road?

Let me start on it and I'm going to turn it over to John Kahn because I think John touched on it a little bit earlier. But we -- first of all, let me mention that as you know with John Armstrong coming on, we implemented what we call an accelerated growth program as well. As such the normal contract sales cycle for the business that we're transitioning for is 18 to 24 months.

But when John came on board we have got a number of opportunities now that we're still awaiting decisions, some as soon as the end of this week. And it is very important that we are prepared to succeed and our capital positions have been -- I've seen other companies crumble because they have not been able to achieve the kind of capital requirements that are required to succeed with the kind of growth we have there.

So we certainly do believe that there will be a need and we're laying the groundwork, John is laying the groundwork for that in the future. And let me pass it over to John Kahn, our CFO, for further (multiple speakers). John?

Thank you.

Thank you, Zach. Yes good question, Martin. We've been working closely with Presidential and we get approached from others from time to time. We do believe that we will have what we need to be able to succeed. We've got commitments from our largest existing shareholder for additional funding if we need it. We don't have any active plans at the moment beyond that.

And do you feel that the structure you have right now, it's a fairly small amount of shares outstanding due to obviously years ago the 1 for 4, but 5.1 million does make for an interesting situation when things are bad and good. So you might have a lot of volatility in your stock trading for a while here.

That's the challenge of being where we are.

Okay, okay. Well, look, the main thing is I just wanted to make sure that you folks were satisfied with the type of cash position you have or will have that going forward you can answer the bell with these nice contract wins, you know?

You bet.

Okay. That's all I have. Thanks and great job and good luck, guys.

Thank you, Martin; I appreciate the (inaudible) positive kind of comments.

No problem.

Richard Greulich, REG Capital.

Good morning. Just a follow-on question to the question regarding profitability of this contract going forward. And you mentioned roughly the same as what it's been I guess. When you talk about that are you talking about the gross profit and not the SG&A of the Company itself?

Yes, we are -- I'll tell you that the numbers -- the actual numbers with this new contract obviously are going to be a function of the task orders when they're funded, this is the broad blanket that we have in place that's $140 million. But we're seeing significant value in terms of the gross margins for this year. I can tell you that notionally if all the task orders are funded we're seeing in excess of 3 million over the next year with this contract. So it will be a great shot in the arm for us in terms of profitability as well.

We did not -- and I'll tell you, you have those bids where you have to get very, very aggressive on price. And we really felt that the relationship that we had been building on the excellence of our performance had yielded value that allows us not to have to trade off profitability to compete in this space and this was just a great endorsement by the VA that that strategy was appropriate.

When you say this year you're talking fiscal 2011?

I'm talking about really over a calendar year or when the contract goes into place. And the contract, if you didn't hear the first part, it actually does not begin until July 1st, so we're only going to really see a quarter's worth during this fiscal year.

Okay. So you're talking like gross profit -- when you say $3 million you mean overall gross profit or incremental? I'm not sure I --.

Gross, gross, that's correct.

Okay. You're talking like the gross profit margin like 8% or something like that?

It would be inappropriate if I said -- while it's still competition sensitive right now to get into the specifics on the profit margin. But suffice it to say, we expect it to have a positive effect on our profitability going forward.

Okay. Is your SG&A expense at the corporate level fixed or is that very variable?

It's not highly variable. Probably the most variable component we have outside of our total control is the worker's comp. But the kind of reductions we have got in place now we see as sustainable and that's really in part to your question. And we are in control of most of those things. John kind of described them fairly swiftly there and I think in our 10-Q we may describe some of the measures we've implemented.

It gets our SG&A as a percentage of revenue less than 20%. I think we're around 18%, or something of that nature, of revenue. Which for folks that are competing in the government services space, if you're below 22%, 23% or so you're doing very well. So it means we're still lean and mean from that perspective and we expect to continue that.

Thank you very much.

You bet you.

Mark (sic) Breard, Hodges Capital.

Okay, that's Mike instead of Mark. But this new contract, I believe you said you cover seven regional sites. How many sites do they have? And what I'm getting at is if you do a good job here could you get substantially more work doing similar type work elsewhere over the next couple of years?

That's what we're most excited about. The answer is yes. I really appreciate that question, Mike. First of all, we have now for their pharmaceutical sites, with this award starting in July we will be performing the CMOP's work for each one of their pharmacy sites. We'll be taking over enterprise-wide for them going from our existing five sites where we have pharmaceutical work. So a significant growth there.

Now the VA is, as you may have seen in our strategy discussion before, we expect to expand our footprint with the VA not only with the retention of this work and the add-ons, but in several other areas that are adjacent market here. And we've gotten a lot of traction of late with the client leveraging that we've had over the recent several weeks.

John Armstrong and I this week were up in DC and meeting with several of the principals as well as Kevin Wilson. So we're looking over the near-term of a year or so to add new business within VA that transcends beyond just the CMOPs. So yes, we're looking for additional growth even though this now gives us 100% of their pharmaceutical business for them in terms of the contractual coverage, we're expecting some additional awards with the VA to be coming out in the near future for you to hear about.

Okay, and these will be of fairly significant size?

Yes, there's a range. We've got -- it's very important for us to -- our strategy involved putting -- creating [seed] tasks and seed projects where we are doing some small things real well for our folks that set us up with the kinds of resources and positioning for the larger deals. And to the extent that -- and probably our subsequent next review we're going to have John Armstrong give an overview of our pipeline.

You'll get a sense of the clients we're targeting and the kind of volumes of the contracts that we have in our pipeline for growth. But it's very substantial, we're looking in the neighborhood of $1 billion of operations, new contracts over the course of the next 24 months. So a very healthy backlog and with a 30% to 35% win rate, as you can see, it could create the type of strategic and profitable growth that we've chartered to do.

With $1 billion a 10% win rate's not bad.

Yes. And you've got to remember, the one thing that, even with $1 billion, the other change in our strategy is to get more sustainable contracts. Historically before I came on board just about all of our contracts, the largest one would be about three months. That's the nature of the legacy of the staffing model that you've seen before, a lot of this 13.5 week temporary staffing type contracts and that was primarily what we were chasing.

So backlog, whether it be gross bookings or funded, was a metric that's got to be a critical one as I evaluate the health of this Company. And this contract of course gives us a major shot in that backlog with five-year contracts. So those values, when you hear us talking about in excess of $900 million today that John is going to be briefing our Board on later this week, those are generally contracts now that will carry out five years.

And we can start to now have the kind of heft that Martin was asking about earlier to ensure that we had the right kind of capital structure to succeed in that environment. So it's a major shift that we're doing in our business base now and these kinds of metrics are going to be the metrics that we're going to be reporting out in the future.

Okay. That makes it a lot easier to plan that way.

You bet you, exactly.

Thank you.

(Multiple speakers) for a second, it's important to remember that we don't give guidance and that we don't give any assurances that we're going to actually achieve any of these backlog, etc., numbers. So people just need to bear that in mind.

Benj Gallander, Head of Contra Investment Letter.

Yes, I was thinking the total valuation of the Company is probably around $6 million right now and revenues are call it in the $40 million range. What about the possibility of somebody coming in and scooping the Company? I mean, if they came in at $1.50 a share that would look pretty good right now.

I just caught -- I'm sorry, could you give your name again, I just caught the second half of your comment.

Benj Gallander of Contra the Heard Investment Letter.

Ben, the part I heard was I think you indicated that we're currently a Company with about $40 million in revenue. And if we were to postulate being in the neighborhood of above $1.50 per share what are the prospects -- if I understood your question, what are the prospects of someone being interested in acquiring us?

That's right. Yes, and if anybody is kicking the tires given that this Company now seems highly undervalued.

That's not really a question I think we can really comment on.

Yes, I was going to say it's something that of course we always have to take to our Board of Directors which we'll be meeting as there are inquiries over time. And obviously we can't comment specifically about what we would do in a hypothetical on $1.50. But certainly in this environment we are clearly a Company that is on the rise and we're in it to continue to grow the value for the shareholders we have today.

They're all, of course, properly incentivized. If you look at our incentives, we're probably incentivized to stay the course, continue implementing this strategy, we're real pleased with the turning of the corner. But again, it's turning and we have yet to turn that complete corner. We've still got a ways to go, but I really like the progress that the team is pulling together and delivering on.

Martin Faltzman, AFM Investments.

Zach, I had gone back to my notes to the webcast from February 17 and I just wanted to look back at some of the goals and kind of the streamlining that you had in mind with I guess your three areas, the logistics and technical, healthcare and then contingency op staff augmentation -- I went back to those notes.

Do you feel -- this is a little different than talking about the contract for a moment. But do you feel that your name -- I know we talked about this when you had come on early -- do you feel like your name is suited for now the new direction of this Company? I know that you are sensitive about not being perceived as say a pure staffing company.

Right.

Has there been any further discussions with the Board on that?

Yes. Good comment and clarification again, because we have implemented as part of our strategic plan a plan to transition our name as well. And so the answer is we still have that same sentiment. We have retained, just recently retained the resources of an outside firm that manages and works with companies in our space to help facilitate that transition, just recently had our first kickoff meeting. So it is still part of our strategic plan to evolve the Company from a branding perspective and we think -- we're convinced that that will continue to help us with exponential presence in the market space.

Hard to do when you're bidding on contracts though, right?

It is, but it's also important to note that we are not walking away from the staffing business. I mean, it is clearly a third component of our business, it's just not the one that I'm strategically investing in today.

Which is why I asked the question, exactly, yes.

It can be confusing to some folks because when they hear that we're looking at transitioning, I don't want them to think we're walking away. I mean, our ability to succeed in staffing up this new program for a company of our size is largely dependent upon the great work and the team that Kevin had put in place for the staff augmentation business. So it's going to continue to be an important cog of our business and a valuable one.

Okay and last question for you would be, I obviously see that you still keep the executive offices in New Jersey. And back when we talked about the notion of relocating those executive offices to somewhere in the region of Virginia, Georgia, that area, --

Right.

-- is that still a plan?

Well, there are two pieces of that. The Virginia area and the DC, we still believe very much that it's important for us to have a presence in the Virginia DC area. It's just that right now when you look at our books we're just not prepared to cost wise to absorb that kind of cost. So today we utilize some facilities that are in actually Washington DC through a club membership that allows us to conduct operations and conduct meetings that John and Kevin and I are regularly doing in that workplace.

So it's working well for us in the interim; we're not quite vagabonds when we're up here. But it's worked for us in the interim. And then of course we have been standing up our headquarters operation more and more in the Atlanta area, not only with myself but, as you know, John Kahn is also based in Atlanta. John Armstrong is also based in Atlanta and our corporate compliance officer and director of contracts is also now based in Atlanta. So we are in the process of standing up more and more of the operations in (multiple speakers).

Kevin Wilson also --?

Yes, he is. Kevin is also -- he heads his operation out of Loganville which is about 20 minutes to half an hour south of the airport southwest of the -- southeast of the airport.

Okay, very good. And thank you again for allowing me to follow-up and, again, wish you all the best.

No, great insight, Martin. And again, we will continue to address the strategic initiative. This great win and, like I said, is a key component of not only retaining our business but, as we said, we wanted to expand our business with the VA. It's just an important very cost effective means of growing with the same customer and similar type of work.

And that model and that quadrant of the business development matrix is very near and dear to John Armstrong. So that will continue to be a critical part of our growth and we're looking forward to executing successfully on this new win.

And at this time I show we have no further questions in queue. I would like to turn the call back over to President and CEO, Zach Parker, for closing remarks.

Well, thank you, Operator. And thank you all, both the East and West Coast, for participating in today's conference call. As always, should you have any questions, please feel free to contact myself or John Kahn at the Company, or Don Weinberger or Adam Lowensteiner of Wolfe Axelrod Weinberger Associates. We thank you for your interest and support and look forward to speaking with all of you again in the coming months. Bye for now.

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day, everyone.