Sunworks Inc (SUNW) 2015 Q1 法說會逐字稿

Greetings and welcome to Solar3D's first-quarter 2015 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce Andrew Haag, Managing Director and partner at IRTH Communications. Mr. Haag, you may begin.

Good afternoon. Thank you, everyone. I'd like to welcome all of you to Solar3D's first financial results conference call covering the first quarter of 2015. With us today are Solar3D's CEO, Jim Nelson, and the Company's CFO, Tracy Welch.

Before I turn the call over to Jim, I'd like to remind you that in this call, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session of this call. Therefore, the Company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors not limited to general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel, changes in legal and regulatory requirements. In addition, any projections as to the Company's future performance, represent management's estimates as of today, May 18, 2015. Solar3D assumes no obligation to update these projections in the future, as market conditions may change.

Last Friday, the Company filed its 10-Q with the SEC and issued a press release announcing its financial results. So participants in this call who may not have already done so, may wish to look at those documents as we provide a summary of those results on this call.

I would like to now turn the call over to Solar3D's CEO, Jim Nelson, who will give an overview of the Company's business activities and developments for the first-quarter 2015. Jim will then turn the call over to Tracy Welch, CFO of Solar3D, who will provide an overview of the Company's key financial performance metrics. And we will then open up the call for Q&A.

Jim?

Thanks very much, Andrew. Actually, after Tracy speaks, I'm going to speak again and I'll have a few more wrapping up comments. Then I'll look forward to fielding your questions. Thanks so much for your interest in Solar3D and for tuning into our call. And we'll look forward to answering your questions and chatting at another time as well as this call.

So, for our operational highlights for quarter-one, we were very busy. The big news of our first quarter is that we uplifted to the NASDAQ during March of 2015, and we raised $12.5 million, which netted to $11.2 million, thanks to the great efforts of Cowen and Company, for whom we have the deepest respect, and our attorney, Sichenzia. And we are so thankful for their help.

We completed the acquisition of MD Energy also in early March. Grateful to have Danny Mitchell as part of our management team, and feel great about the direction that MD Energy is going.

A couple of important metrics that I would like to share with you. We booked new sales -- not new revenue but new sales -- of $17.3 million during Q1 of 2015 versus $3.3 million of Q1 of 2014, which was over a 400% increase. Our ending backlog during the quarter, which I think is one of the key metrics that you'll want to consider as these quarters go by, was $14.7 million at the end of quarter-one 2015 versus $2.3 million at the end of quarter-one 2014.

We secured a $2.4 million contract to install complex solar system designed to protect against rising utility costs. We are starting to look at many, many of these much larger contracts as well, and have an opportunity to announce some of those as we sign contracts going forward.

Expanded operations into Nevada at the beginning of January, and have a very fine management team there and have had success beyond what we had hoped for so far. We also reported growing market opportunity created by widespread adoption of solar energy in the farming market, which was cited by Renewable Energy World. We launched a proprietary referral program, with which we are having great success in expanding our residential solar market. We call that referral program our Power Pay Plan.

And finally, we appointed Tracy Welch as the CFO to strengthen our corporate management team and provide leadership for future acquisitions. I am personally really grateful to have Tracy with us. And I'm going to turn the time over to Tracy to talk about some of our financial highlights.

Thanks, Jim. I'm glad to be on the call here today. Glad to be part of the Company. As our first quarter of this year, we reported revenue of $5.7 million, which was an increase of 440% over our first quarter last year. Now just for comparison purposes, last year, SUNworks was a subsidiary for only two months of the quarter. So it's not exactly apples-to-apples. But the January, and before we acquired them, was not a huge month for them, so it's not materially different from that.

Late in the first quarter this year, we did do the acquisition of MD Energy in the beginning of March. Their revenue for this quarter of this year was inconsequential to our results. So, we are looking for big results going forward.

Our gross profits was $1,941,461. And this was primarily the result of the increased sales growth that we had. The good news is our gross margin grew from 26% last year to 34% this year. And we are really excited about that. We've got better efficiency as we get bigger, and we had a good mix of jobs in the quarter.

Our selling and marketing expenses were $1.1 million, which was about 20% of our revenue. And this was up from $185,000 last year and an 18%. So on a percentage basis, we are pretty much in line. And most of these costs are involved with building our residential business going forward.

As a -- for the Company, we -- one of the metrics we are looking and tracking is how much we spend to acquire customers. In this quarter, we spent just under $1,500 per customer to do that, versus about $2,000 a year ago, which we think is still much lower than what the industry is incurring.

On the G&A side, we had cost-out expenses of $1.8 million. This compares to just under $1 million last year. The number includes a lot of one-time costs associated with our stock offering and with the uplifting to NASDAQ. That totaled approximately $1.3 million, resulting in an operating loss of approximately $1 million for this quarter compared to a loss -- an operating loss in 2014 first-quarter of $900,000.

Our other expense items totaled for the quarter $0.4 million, which is made up of a gain on exchange of fair value of our derivative liability of about $68,000. This was offset by almost $0.5 million of non-cash interest expense recorded on our convertible notes. This compares to last year's, where we had a $3.1 million expense, which consisted of $1.8 million non-cash loss on the fair value of loss of derivatives, and a $1.3 million in non-cash interest expense.

Our net loss for the quarter of $1.4 million was $0.10 a share compared to our loss last year in 2014, the first quarter, of $4 million or $0.43 a share. Our adjusted EBITDA, which was a number that we like to show, even though it's not a GAAP measure, but we think it gives us a better idea of what we've done as a Company. So we presented that in our press release. Basically, we're looking at our net loss of $1.4 million.

We add back the gain that we took, and we deduct the amortization of debt discount, which was a non-cash item. That gives us an adjusted net loss of just over $1 million. We add back the one-time costs and non-cash items, we had -- we spent about $30,000 on the acquisition of MD Energy, and the costs associated with listing -- uplisting and legal fees.

That gets us to an adjusted EBITDA of just about $6,000. So, on a cash basis, we were -- we're pretty flat for the year. That compares to, on a same -- similar calculation basis, of an almost $700,000 loss in 2014 for the first quarter.

Now I'd like to talk just a little bit about the balance sheet. One of the things that make this quarter with our stock offering that we did in early March, our cash has grown significantly. As Jim mentioned, we did -- we raised $12.5 million in new equity. After we take out the expenses and fees associated with that, we netted about $11.2 million, which is what our cash is currently.

This compares to, at the end of the year, we had about $400,000 worth of cash. And last year at the end of the third quarter, about $300,000. We did do -- on the balance sheet, we've added some goodwill not associated with the acquisition we made of MD Energy. We spent $3.5 million on that. And after deducting out the tangible assets, we had some goodwill of about $2.8 million.

And then finally, our shareholders equity has grown to about $16.2 million, which, at the end of the year, end of 12/31, we were just under $2 million.

With that, that's kind of the financial highlights. I'll turn the call back over to Jim.

Great. Thanks. So just a couple of things to wrap up our discussion here. First of all, I just want you to know that we are in a great business. All of you who are on the phone know that solar business is booming right now. And we're coming down the superhighway toward the end of next year, when there's going to be a change in the IT -- the investment tax credit that people get right now for installing solar systems.

Of course, we don't know what that change is going to be. We do know from contacts that there's great bipartisan support in Washington, DC for doing something. We don't know exactly what that something will be.

But one of the things that we know too is that when you look at Wall Street's forecast and the Department of Energy forecast, it shows that if there is a pullback in the solar market at the end of next year or in 2017, most of that, according to the forecast, will be in the utility grade solar, at least according to the Department of Energy forecast done in conjunction with the SEIA and Goldman Sachs.

And they also say that the residential and commercial business will remain flat and even growing a little bit. We believe that. And as a result, we think that we are going to do really well. Since we are gaining share rapidly, we think we'll continue to grow, even in an environment where the ITC changes. So we are excited about being in this business.

Both of our brands are doing really well at this point. And both SUNworks and MD Energy have a great foothold in their respective locations.

I will mention -- I know that many of you have had questions about our solar cell, or the development of our technology, which is ongoing. We have chosen not to speak a whole lot about that, because clearly, the next step for our technology is to get a manufacturing partner. We are working on that. We haven't yet concluded it. We had hoped to be commercial by now, but we are still in the process of seeking a manufacturing partner.

As soon as there is news to give you, we will definitely give it to you. That said, the solar market, particularly in our trading area in California and Nevada, is very fragmented. And there are a lot of very strong and good companies, particularly in the range that we are interested in making acquisitions -- that is $10 million to $30 million or $10 million to $50 million in revenue.

We have met with many companies, and we will continue to meet with more companies. We have a number of companies that we are very excited about and we continue discussions with them. As soon as we have announcements to make, we will definitely keep you in the loop. That is our major objective right now, is to identify some companies that we would like to acquire and make those acquisitions.

We think that, over the course of this year, we'll have another record year for revenue. With the portfolio of companies that we have now, we reiterate the guidance that we gave you a while ago of $40 million to $45 million in revenue, which is more than doubling from last year. We hope that, with additional acquisitions, our revenues will be much stronger than that.

That's where we are now after quarter-one. And we'll turn the time back over to Andrew.

Operator, would you like to queue everyone up for questions and answers?

Thank you. (Operator Instructions) Nigel Chadwick, a private investor.

(technical difficulty) -- and my question is just are you able to elaborate anything about the patent on the 3D cell? Thank you.

Hi, Nigel, how are you doing?

Very good, thank you.

Good. We can't elaborate right now. We've chosen not to talk a lot about it until we have a manufacturing partner nailed down. That's our next step.

Thank you.

Michael Baldwin, Eastern Dental.

Are you there Jim?

Michael?

Yes. My question is, are you working on a multi-junction panel? And have you ever heard of the material graphene that could enhance the solar panels?

Yes -- no and yes. We are working on a multi-junction panel, but we are aware of graphene. That isn't part of what we're doing right now, though.

Okay, thank you very much.

You bet. Thanks for asking.

Operator, do you want to pull for questions again?

(Operator Instructions) Jeff Osborne, Cowen.

Yes, Jim, thanks for taking the question. I was wondering if you could just touch on the additional synergies that you are getting with the acquisitions driving out costs?

Oh, yes. Thanks, Jeff. Appreciate that. Hope you are doing well. A couple of things that we are finding right now is that most of the synergy that we are experiencing immediately is on the marketing side. We are finding that the two companies are able to collaborate on bids and things that they do strongly together. We are able to bid on companies and contracts that we weren't able to bid on before.

We have yet to really experience costs synergies simply because we haven't yet gotten our financial package, our financial platform together. We have a lot of -- we have a list of things that we are going to be able to get that we haven't gotten yet, primarily the collaboration between management teams and the administration area. We'll find that we will be able to streamline the administration of both companies and central services into an enterprise management system that we can use well. But --.

Excellent, that's helpful. I was wondering, though, I had a question --

Oh, sorry, Jeff, one more thing -- that Tracy just rolled me a note and reminded me that we're able -- we are also finding purchasing synergies already, and able to do a better job, bidding jobs in getting certain types of panels, and also getting better pricing on panels. So purchasing is already an area that we are experiencing some synergies.

That's great to hear. Second question I had was if you could touch on what the residential versus commercial mix was in the first quarter? And then once MD Energy is falling through for the full quarter, how should we think about that for the second quarter? -- would be helpful. Thank you.

Sure. Yes, Jeff, this is Tracy. So for the first quarter, we actually had a little bit higher mix on the commercial side. We were about two-thirds commercial in the first quarter. We expect over the course of the year that will even up to about 50/50 for the year.

Yes, that's our standard line. I think that, based on some of the jobs that we are looking at right now, we actually might be a little bit more commercial. But residential is growing strong. If $40 million to $45 million, which is our guidance, is what we get, it will be about 50/50. If we are much bigger than that, it will be because we were able to secure some bigger commercial jobs.

Understand. Thanks for the detail. Appreciate it.

Mark Stutman, Trimark.

Thank you for taking my calls. Could you talk a little about -- going back to the customer acquisition cost, is that the average cost for commercial residential? And what is also the average residential size in terms of installation?

Sure. No, it's just residential cost, Mark. So we didn't talk about the cost of acquiring a commercial customer, because it varies so widely, depending on whether it's a $300,000 job versus a $2 million job. But for residential customers, like we said, about $1,400. And the average cost of a residential system is about $30,000.

Okay. And how large a system is that approximately? You said --?

5 kilowatts.

Okay. And also discuss a little about the backlog. Is -- what percentage of the backlog actually converts? And what is the average time to install?

Backlog is contracted deals. So 100% converts.

100%? okay. (multiple speakers) Go ahead.

And all of that -- all of the backlog now is in the calendar year. So, I can't tell you off the top of my head how much of it is in Q2, but it will be mostly in Q2.

All right, all right. Thank you very much.

(Operator Instructions) J.R. Miller, a private investor.

Hey, Jim, good job on the uplisting, and great job on the backlog and margins. I have a couple of questions. I follow different solar companies, and Canadian Solar and JA Solar's CEO sees a pickup in demand in the second half for the United States. Do you also see this demand increasing?

Yes, I think our feeling here is that it will substantially increase over the next 18 months as people get -- there is an emotional component to the change in the ITC as far as we believe. And if the ITC changes, people will be -- continue to be nervous about it. And so we see a real increase in sales generally in the industry over the next 18 months.

Excellent. It seems the ASP for panels has been ticking downward. Do you see this cost reduction while you've been ordering your panels for your inventory?

We know that we're taking full advantage of every opportunity to get cheap -- to get panels at a lower cost. And yes, we've experienced some real positive benefit from lower-cost panels.

Okay. Is there any way you can give us any info on how the search for the next acquisition is going?

It's going really well.

Okay.

(laughter) Sorry, there's no more detail than that. But we feel real good about our process.

Right. I appreciate that. The last thing is just a general comment. I've been investing and trading professionally for the last eight years, and yourself and your new IR department is by far the most retail-friendly I've come across. You've answered every single email, you've answered calls, your IR department also has. And I just wanted to say thank you for that. Because it goes a long way for us small guys.

Yes. Well, thanks, J.R. I really appreciate that feedback. Means a lot.

All right, thanks a lot. Looking forward to the next --.

Yes, thank you.

Lou Rotondo, private investor.

Good afternoon, Jim. Thank you for hosting this phone call.

Hey, Lou. How you doing?

I'm doing fine, my friend. Thank you. Question -- regarding acquisitions. You have given guidance that you are expecting to do one to two more acquisitions this year, and well into 2016, continuing the process.

The question is, what is your choice of funding these acquisitions? I know cash is a premium right now -- or is not a premium. So, are you looking more debt, more equity? A combination of both? How do you plan on funding these acquisitions that we are talking about here? Obviously, we are looking $10 million to $50 million. That's a lot different than the last two acquisitions you've done. So what is your funding preference?

No, it's a great question. And I don't mean to be cagey in my response, Lou, but also I ought to make clear that when I mentioned that we'd like to do one or two acquisitions this year and more next year, not really giving guidance. I'm talking about our objectives. And so, that's a key difference.

Fair enough.

But in the acquisitions, I think we'll continue to want to do less than half the deal in cash. But then it will really depend on the company and how important the company is to our future. So each individual acquisition could be different. And so, I'm really reluctant to say anything different, again, because we are talking to a lot of different people. And we'll just keep you posted on it.

Okay. Thank you very much, Jim. I appreciate your reply.

Take care.

Henry Lamb, private investor.

Hi Jim, how are you?

Hello, Henry, thanks for calling.

Yes, I just (technical difficulty) --

We lost Henry.

Our next question comes from Joseph Bellano, a private investor. Please proceed with your question.

I understand you can't elaborate on the patent for the three-dimensional panel, but I understand that Panasonic also has a similar three-dimensional panel. And I'm wondering if that conflicts with ours? Or does that hurt us in any way?

You know, I asked somebody about this some time ago, and I can't tell you the specific differences. It is true that Panasonic has some kind of three-dimensional cell. It is different than ours. And it's expensive -- it's more expensive to make, to make it very difficult to commercialize.

Our intention, of course, is along to make ours -- to design ours with current technology and current capacity in mind, so that we can make it cheaper to be commercialized. So, in the end, if ours is commercialized and is widely adopted, it will be because we are more efficient in manufacturing design and manufacturing output. So, we don't see the Panasonic as preventing us from being able to commercialize our solar cell.

Thomas Cassidy, a private investor.

Yes, Mr. Nelson and Mr. Welch. Thanks for taking my question. I just kind of wondered about if there were any tie-ins between Jackson Family warrants and the Tesla batteries? I know you are high on storage.

We are. We know Jackson Family Wines has spoken with Tesla about it, right? And they have Tesla batteries. We didn't arrange for them, but they have -- they do have Tesla batteries. And they're -- we love Jackson Family Wineries. They think ahead and they are thinking in terms of storage. And yes, they are doing a great job.

Ted Bowersox, private investor.

Thank you for taking my call. My question is this, is that -- if we were to buy one of the residential units and place it on our home, and then the new three-dimension finally gets developed whenever it comes to marketplace, will there be some accommodation to be able to put that new 3-D into our older units that we've purchased now? In other words why would we buy it now? I know the ITC incentive, but I'm just wondering, are people holding off because they think that they are not going to be able to get the most efficient cell at a later date?

You know, you are talking about the age-old technology conundrum, which is, do we buy a computer now or do we buy next year's better version? The fact is that we see these as two different businesses as well. We are busy installing and integrating systems for our commercial and residential people that are great systems right now.

If our -- if and when we commercialize our solar cell, it will be something we want to make available to the world, not just captive to ourselves. So, I guess the simple answer is, no, we will make accommodations, but we think it will be great if everything works the way we plan.

Brian Boito, WESCO Distribution.

Good afternoon, guys, and congratulations on a very good Q1. Just a very simple question. You mentioned earlier in the call that you've got a major footprint in California and Nevada. Is that maybe going to extend into the East Coast? Because I know there is some very nice growth engines in the East Coast. Thank you.

Thank you. Yes, you know, we address this all the time because we know that there are some great markets in the East Coast. But when you're doing a consolidation of quality companies, the only truly scarce resource that you have is management time. And if we bought companies on the East Coast while we're busy buying them here, it's much more difficult to manage.

60% of the solar installations in America, or at least in the last half of last year, occurred in California and Nevada. And we are still just a little company that's growing really fast and doing really well. But we can grow a lot in just California and Nevada. When we achieve critical mass in California and Nevada, then we will start looking at other places. But for now, we think we can grow really well just in our current markets.

Very good. Thank you for the explanation.

All right. All the best.

Douglas Brown, Sopris Investments.

Jim, thank you for taking my call. Just a question regarding your acquisitions and your current companies. I'm wondering -- a cost comparison between the two, as far as, let's say, expanding SUNworks into Nevada, into other cities in California, other states, what is a cost comparison between doing that and the acquisition?

No, that's a great question. And we can do that. I mean, obviously, that's what we did -- we moved SUNworks into Nevada, and it's going really well. We just are looking to become a bigger company faster. And that's the way we see it. And we are exploring all our alternatives, including organic expansion and acquisitions.

So it's a one-off analysis. So, I can't give you specific numbers, but believe me, we are considering every option.

Okay. Thank you very much, Jim.

You bet. Take care.

Shakir Lee, a private investor.

I have a question in regards to acquisitions. Generally acquiring good companies in an expanding market is really expensive, and acquiring bad companies is also expensive. Furthermore, it's not entirely indicative of company fundamentals. Can you explain how you are exerting some control over the market or over your suppliers?

Did you get cut off, Shakir? Because I didn't quite get the end of the question.

Can you explain how you are exerting some control over the market and over your suppliers in comparison to larger, more established solar installation companies?

I'm not sure we really do exert control over suppliers of the market. We know that we are very strong. Let me address our competitiveness.

We go up against every competitor that you know of, you know, every large competitor, including the biggest of the competitors. And we are very successful in competing. We tend to be great competing head-to-head. Other companies that we know of are really great if they don't have competition, but they are very good at talking people into making decisions without having other competitors come and bid.

So, when we start talking about how we control the market, I think that's how we do it. In the end, the low-cost competitor is going to win. The people who can design and develop the best systems for the lowest cost that are effective and well-designed for specific customers. We do a really great job of that, both at MD Energy and in SUNworks. And if there is a way to control the market, it's by being competitive. And we are.

James Gallant, a private investor.

Yes, not too long ago, I came across some information about solar powered shingles, maybe a project with Redwood Renewables. I was just wondering whatever happened with that?

It never went anywhere really. But I have -- I like Redwood Renewables, and I think highly of them and what they are trying to do. What we were hoping to be able to do was collaborate with them to put our solar cell into their roof -- roofing material. And our development didn't go fast enough for them. They are doing some other things.

If our development comes through, we will circle back around and talk with them. But I honestly think that the solar integrated buildings are a thing of the future. And I think it's going to be great. I think the footwork and the ditch-digging that they are doing to break the ground for the future is a really good thing.

Derek Tolonic, private investor.

Yes, Jim, thanks a lot for all the hard work you've been doing out there. I know you are probably putting in a lot of hours. My question is regarding the backlog. There's a lot of speculation going around about a job in Fresno for about $10 million. Is that included in the backlog or no?

Only contracted deals are in that backlog. And there's nothing from the city of Fresno in the backlog.

Okay. And then how is -- can you -- we've seen a little bit of information on Facebook regarding the Reno, Nevada operation for SUNworks. How is that going? Is that mostly residential? Or are you getting into commercial up there as well?

Yes, we are doing residential and marketing commercial. And we are starting to get commercial jobs. So it's looking really good up there for us right now.

Do you have any numbers at all for that area?

Well, we do. We just haven't made them public.

Okay.

Yes, currently we are not breaking those out separately. At some point, we may do that. But for now, they're combined with our residential SUNworks business.

Our last question comes from William Brown, a private investor.

Thank you for taking my call, gentlemen. A couple of questions. In terms of where you would go beyond California and Nevada, where do you see the solar field spreading to other than nationally? What would be your next state to look at?

Primarily Hawaii, because I need to go and do some more surfing over there. (laughter) I am just joking, of course. But honestly, Hawaii is the logical place to go.

But you know one of the things -- I like to follow the Marriott idea. When Marriott first came out as a hotel company, they concentrated in Washington, DC. And once they filled out Washington, DC, they moved on to a new market and developed that market.

As long as that market is a market that you can kind of put your arms around and build solid, I could see doing it almost anywhere. Obviously, the Western states would be logical. You know, Arizona is a tough one; Utah is a good one. But other local states that are next to us. But also I could see going to the East Coast and doing something concentrated there. But we definitely won't spread out all over the place immediately after we have critical mass here. We'll go very systematically and in a concentrated way.

Okay. My second question -- and you may not be able to answer this -- is, I know you said that you are waiting to tie into a manufacturer for the 3D cell. Can you discuss at all what's holding that up or what you're looking for? Or what the impediments are?

I can't discuss it. But when I can, we'll let you know for sure.

Okay, last question. I saw something about a transparent glass solar cell just recently. I thought to myself, well, that's very clever, because with all the skyscrapers and all the glass in a skyscraper, that would be really nice. Would that conceivably, if that ever comes to fruition, would that actually work with what you guys are doing?

Well, with our -- obviously, our integrator can work with any kind of solar cell, but it wouldn't work with our three-dimensional cell. But it's pretty exciting if something like that is actually happening.

Well, they haven't said it's there yet, so we'll wait and see, I think.

Okay.

Thank you very much.

Thank you, William

Thank you. We have a follow-up question from Jeff Osborne with Cowen. Please proceed with your question.

Hey, Jim, thanks for taking the follow-up question. I just had a two-parter -- one on the customer acquisition cost of $1,400 is certainly impressive. Can you just touch on the resi side, how you are accomplishing that? How much is coming through on the referral program that must be the driver, but maybe there's something else I'm overlooking?

And then that was the first question. The second question is, how should we think about the multiples out there on the M&A front, as you are having these conversations? Would it be consistent with the prior multiples that you've seen? Or given this kind of boom cycle that we are having ahead of the ITC expiration, are multiples creeping up?

Yes, I'll -- let's answer the first one first. We have -- as you know, we've got the referral program that is going great guns. In fact, better than we had hoped. And that has done a lot to reduce the cost of acquisition.

The other thing we do is just that we are getting so much better known because of our broadcast media here. And that's not advertising. It's actually an education program that we have that I've discussed with you before. And we just continue to get lots and lots of referrals through that method.

And, of course, we do all the things everybody else does at the higher cost, but these two things really bring our costs down much lower. So, I suspect those are the things that has brought that cost down, Jeff.

Second -- second point that you are making is, no, we are probably going to be paying higher multiples for some of the companies that we buy going forward for two reasons. One is, as you say, it's in a boom cycle. And because everybody -- it's kind of a seller's market for quality companies at this point; whereas a couple of years ago, it really wasn't.

So -- and then the second part of that is that as we look at $30 million and $40 million companies to buy, they just -- they command higher multiples. So, the kind of multiples we've had in the past are probably in the past unless we go back to buying smaller companies, like we did before. But we think the appropriate approach is to pay the higher multiples and get the bigger, more sustained companies.

Understand. Appreciate it. Thank you.

And I'll talk to you more about that at some other point, so you can give me some guidance on that.

All right, good stuff. Looking forward to seeing you at our conference on the 28th.

Yes, same here. Take care.

Thank you. At this time, I would like to turn the call back over to management for closing comments.

Well, we are really grateful to all of you who have been on the call. And I really think we are looking forward to great things happening in the future. We had a great day today following our first Q1 -- our Q1 report, our 10-Q. And we'll see how the next ones go.

We have great hopes, high hopes. And we'll reiterate our guidance with our current portfolio of $40 million to $45 million in revenue. And please feel free any time to email us or call us with questions. And we'll look forward to talking to you on the next quarter call.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and have a great day.