Chit Chat Stocks - Hirequest (Ticker: HQI) with Aaron Edelheit

Episode Date: May 18, 2023

HireQuest, Inc. (HQI) is a staffing company that provides temporary and permanent staffing solutions in the light industrial and skilled trades sectors, with a focus on blue-collar jobs. Listen as Brett and Ryan ask questions about the company, its business model, and valuation. Enjoy the show! ***************************** Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney  Subscribe to our Substack to receive free show notes and charts that go along with every episode: https://chitchatmoney.substack.com/ Interested to see more of Aaron's work? Check out their Twitter here: https://twitter.com/aaronvalue?s=20 Contact us: [e-mail] Timestamps Hirequest | (2:30) Costs & Prospects | (15:44) Infrastucture Bill | (33:04) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. My name is Ryan Henderson, and I'm joined by my co-host, Brett Schaefer, as always. Today, we've got our Thursday deep dive episode where we interview an analyst to discuss a single stock or industry. Today, we have on the show Aaron Edelheit. Aaron is the CEO of Mindset Capital. He's also the author at the Mindset Value Substack. We love reading his work, and he's honestly been the inspiration for a couple of holdings that we today own in the Arch Capital Fund. I think we kind of fish in the same pond or try to fish in the same pond that he does as an investor. And HireQuest was certainly another intriguing company to look into. Other things on Aaron, I think you'll be able to tell that he has a

really infectious personality. He's super excited when talking about investments and it makes it really fun to listen to him and discuss ideas. So hope you enjoy this episode. Here's our interview with Aaron Edelheit. Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guests

is not formal advice or recommendation. Now, please enjoy this episode. All right, welcome in. Today we are joined by Aaron Edelheit, now third time on the show, I think. Is it the third time or the other two? I know one of them was Nelnet, right? I know we talked to Nelnet. For some reason, I thought there was another one before that. I think there may have been, but it also may have been a call that wasn't a podcast. So it might have been a Zoom call, but my brain says there's three, but maybe only one of them was a public corner. And either way, the Nelnet one is, yeah, listen to the Nelnet one. It was a fun one.

Okay. And I guess for a little bit of context for listeners, Aaron is the CEO of Mindset Capital. He runs a wonderful sub stack, which I highly recommend. And he does it at the incredible price of free. So go ahead and check it out. Mindset Capital sub stack, I believe is. It's mindsetvalue.substack.com. Perfect.

My company is called Mindset Capital. I have a fund called Mindset Value, so not to confuse you. And then we're talking about HireQuest today, which you have written about in the past, but it's kind of, I mean, it's probably not a name brand, maybe not a stock a lot of people know of. So I guess I always am curious on the origins of how you come across companies. So how'd you find HireQuest to begin with? So before I say that, I just want to warn people, a couple of things.

one, sometimes I am wrong. And so do your own due diligence. And also a warning I like to give when stocks are small, like higher quest, it's about a $300 million market cap is this is a illiquid micro cap stock. And if you are not comfortable with volatility, and if the stock suddenly falls for some reason, or the market declines, and this has an outsized decline, and that would freak you out, do not invest in this. This is not the investment for you. So I'll just give that as like a cautionary. But the reason I wanted to talk about HireQuest today is because I think they're doing something rather remarkable, kind of like Nelnet. We were talking before this started about it. I found it from another friend who invested in micro-cap and small-cap companies.

And he was like, hey, you got to take a look at this company. They went public in this super weird way and uh it looks pretty interesting and so i was like it was a person that i trust and um and so i looked into it and then i was just there was something about it i love trying to find undervalued or companies that are doing something unique that people haven't discovered before and that's my favorite part i love researching it i love finding the story and then telling the story to others and watching them unfold. My favorite part of investing, if you told me as an investor that I could only invest in Apple or Microsoft or the S&P 500, I probably would not be an investor. That's not what my motivation is. I like fishing in waters where there's less

competition and there's much less efficiency and what i what i my own personal philosophy is kind of to trade uh liquidity but i don't mind the liquidity um for much much uh better i think opportunities and so i think higher quest fits that bill um and and what's happened since it's gone public is just super fascinating to me. And I continue to kind of watch and study the company and kind of slowly more and more now tell its story as it gets larger. So when it went public, I mean, I think at one point it was, you know, sub $100 million market cap. Now it's over, now it's around 300. And I think it's going much higher. And I think it's worth studying what the company and specifically management are doing.

Yeah, I'll say right now, Aaron has a write-up or it's a transcript of an interview that he did with the CEO. So we'll link to that as well. And then my original report that I wrote up, I wrote a deep dive report, I think back in 2020, just when the stock was below $7, talking about what I liked about it. Yeah, both those tell a really good kind of story of what HireQuest is and who the CEO is, but we'll save that for a later question. I guess on HireQuest, like I said, probably a company a lot of people aren't familiar with. So can you explain what they do and who the customers are that they're trying to serve? Yeah. So it's a staffing company, specifically a franchise staffing company. And so what they started out with like day laborers and then went to a broader category of commercial factory type workers and now have branched into drivers and have branched also now into executive search and others. So some of the companies that they compete with for their kind of day labor, it's a company called True Blue.

They also compete somewhat with Manpower and Korn Ferry. Just to tell you in terms of the size of the company system, and remember, it's going to be important, and I'll explain why the franchise part is important. is but like as of last year and these numbers are going to go up a lot because they just acquired a company at the end of december which is super fascinating to look into but they did nearly 500 million dollars of system-wide revenue that's what their franchise kind of earned they get a percentage of whatever their french franchise gets and so there's their own revenue on that 472 million was $31 million. But it's important to understand the size is while the company looks small at $31 million in annualized revenue, that is high margin franchise income that comes

at like a 60%, six zero, 60% operating margin, all free cash flow. So they have over 81,000 employees through their system, reach over 10,000 customers. It's become a much larger business. What HireQuest really does, and this is the magic, is HireQuest used to be a private company run by, I think, one of the best CEOs I've ever invested alongside of, Rick Hermans. And what he had is this private company where he's spent over 30 years, he and his partners and management team, of developing a more efficient staffing model. So if you think about staffing companies, there are franchise models out there, but you'll mainly have vertically integrated companies where you'll have management, then you'll have a middle later of management, and then you'll have the branch kind of managers who are kind of running. And the bridge managers are the ones who are connecting the employees, the temp employees, with the companies or people that need to them on a temp basis. And so what HireQuest has done is figured out a better system of incentives that's a lot more lean and a lot more efficient about tying the incentives so that you eliminate kind of this need for this whole swath of management in the middle.

so that the branch manager can be the franchise owner and go from earning $50,000 or $60,000 a year to $125,000, $150,000 and be a business owner. And all they have to do is get employees and connect them with the employers. And what HireQuest does is say, hey, if you have hustle or you're good at this, we will handle all your accounts receivable.

You don't have to worry about collecting any of the bills. We're going to do it for you. Workers' comp, we got it. Not only that, we're going to take your little business and we're going to all the employees. So instead of you, let's say, you know, Brett, you had 500 employees. Well, the workers' comp at 500 employees per employee is going to be very different versus 10,000 in higher request system. So I can immediately save you money. And then I'm going to provide you national accounts because now we have over 10,000 customers.

And not only that, you want to go, you're in business or you see an opportunity to enter one part of the market. And you want to open a new location like 20 miles away? Well, as long as it fits within our map, we'll even fund upfront, give you upfront costs to open. Because what we want to do is we're a fund hustle. So it's not like a brand in terms of what you think about like a Chick-fil-A or something like that. But this is more of like, how do you find the people that want to run branches that have hustle and drive and that are good at connecting temp employees with customers? And then HireQuest wraps you with all the support behind so that you can go, you can open multiple branches, you can do things and earn much more than you would have. and then what higher quest can do is because they've eliminated all these branches then

higher quest gets all of this kind of high income stream coming in and so what they've been doing is and this is part of the important story is they've been now acquiring and this is the fascinating part of the story is they've been acquiring poorly run companies or subscale companies that are either family operated or lifestyle businesses or were just undersized or vertically integrated and then taking them in and putting them into uh the putting them into higher quests superior franchise model and they when i first invested the question was could they could they could they repeat what they first did and i'll i'll explain that in a second because it's it's really important but like and they've just repeatedly

done this. If I just take a step back, FireQuest is only public because there's an opportunity to grow in a very fragmented market. There was a company called Command Center that was a poorly run, vertically integrated staffing company that I want to say I had something like a hundred million dollars in system-wide revenue and like a million dollars of income. HireQuest was private. And I want to say on like 12 or $13 million in revenue. And I have this in my original report, so you can look it back up, but they were generating $6 to $7 million in income. And the reason that I got so excited initially into HireQuest, and it's only grown since then, is when you reverse engineer how HireQuest bought Command

Center. HireQuest got paid to go public. I'm pretty sure it's the only time that's happened. Maybe there are other times that that's happened. But as an investor, when you find a private company and the owners of that private company essentially are getting paid or creating value by going public, your eyes should open and say, hey, how did this happen? And so what you find is what they did is they acquired Command Center and they took this vertically operated business. And then what they did is they transformed all of them into franchises. and sold them off and so when you reverse engineer what they paid and it was a negative value and so i was like oh my gosh this is a company with you know good earnings power clearly very savvy management and what's happened is since they've

done that they have repeated not to that extent but they're you reverse engineer what they're doing. And you can find it all in the filings. And is there buying companies for when all is said and done, sometimes for two or three times earnings? Yeah, no, it's quite fascinating. And we'll talk about maybe the, I guess, here's my next question is, I had two things on my mind, because you didn't answer a lot of our follow-ups there. So it's okay. No, it's perfect. Great. There's a lot to talk about here. So we can keep going. Yeah. Yeah. So I think the two things I want to kind of pique my interest is one, what are their costs? Is it all just the G&A expense? And two, how large is the pipeline for potential new franchisees or acquisitions? so yeah their costs are all just the sg and well they remember they're financing the ar right so

you have like a whole ar function accounts receivable function where they're collecting all the bills they do provide some technology um but the management of all the franchises making sure all the franchisees are operating correctly and you know obviously you have some that either don't do well or do well you have new franchises now they're actively trying to grow from an organic basis of like existing franchises do you want to open new offices or now they have different kind of verticals that you can go after uh so they're actively trying to grow that uh and in terms of the pipeline it's actually you know the franchise the the staffing market's a huge market and if you just look at that occasionally this is posted of the number of temp workers

in this country it's just it's like a consistent line going up um and that's because at the margin there are companies that are worried about you know that either have more project-based work um or worried about taking on more full-time employees because of the economy or what have you but the uses for temp workers continues to grow. This is a very fragmented market. There's a lot of mom-and-pop operators. There's a lot of companies in different niches. You just think about they started with day laborers. Now it's like factory, executive search. They got into driving. uh you talk to the company they're on they're looking for let's think about security guards their higher quest isn't in that vertical uh they got in they acquired a company called dental power

for you know temp workers for your dentists um for you know hygienists and stuff like that and so there's all these little niches that they can go and attack and um and that's what's really exciting. You have this fragmented market and you have a lot of mom and pop operators. You have some people who've been running it for a lifestyle business. What happens when the people get older and they're looking for an exit? There aren't many buyers for these kinds of businesses. That's one. When you talk to the company, and they've said this publicly on their conference calls. They have a full pipeline. And what I love is Rick Herman's, the CEO, it's like he has a price that he will pay. And if you ask for more, he's not going to pay it.

So this is a company that will only acquire on their terms. And then you ask, well, why are they this disciplined? Why are they this focused? Well, management owns over 60% of the company. And in fact, when the stock fell in December, or inexplicably, it had a really bad December, which is super annoying as an investor, insiders just started buying. And it's like, this is a company when they were private, they used to take all their income and dividend it out to each other. And so they're public because they see an opportunity to grow this. And then eventually, as this grows, maybe they'll use some amount of shares, but they see what they're growing. And they're growing this phenomenal franchise recurring revenue business. That's

all free cashflow. And I think there's an opportunity to grow this, you know, to be much larger. Yeah. I have a bunch of follow-ups, but to kind of, you mentioned earlier the, the difference between the two companies when they went public, I'm looking at your write-up right now. And it, it is the, it looks like the fish that swallowed the whale when you look just at the revenue because it's a $13 million revenue company acquiring $97 million, but it's such a higher quality revenue stream. That's exactly right. I want you to imagine that when you reverse engineer that, they took

that $97 million and then resold that entire business as franchises. Was it to people at Command Center? It was to branch managers at Command Center, existing HireQuest franchise owners, and others. And so you're just like, oh, my God. And it's like, so this is an important point. The investment banker who Command Center hired to try to sell or figure out, one, if my understanding is right, Rick Herman's found Command Center. It was a domestic command center.

They hire an investment banker and try to search. Eventually, HigherQuest is like, oh, we heard you or whatever. And they're like, are you interested? The investment banker on the command center side is now the head of business development at HigherQuest. So he left me after HigherQuest bought command center. The investment banker, the command center hired, saw what HireQuest did and what they wanted to do. It was like, I'm not going to be an investment banker anymore. I'm going to go work for Rick Hermans.

Think about that. It is kind of a funny. And that's what you're like, as an investor, I looked at it and I was like, this is ridiculous. They can't do this again. Like they can't get deals like this again. And then they've gotten them over and over, not to that extent as command center, but just, and what you see is their latest deal. This is worth talking about.

So in December, you imagine my surprise, like they are now, every time they announce a deal, it's like Christmas as, and it was around, it was like December 13th. I think they closed it, but they announced it. They announced this MRI transaction. actually. And so it's this big company. And I'm like, great. Cause I know that Rick Herman's and his team, they only buy certain companies and they're very accretive. Okay. But I just don't know how much, you know, and then a lot of times these companies are a mess. You got to fix them. So the 10 K rolls around now, now you have to understand because of how they're building and

the company takes charges and does some things that mute the level of earnings because they're not trying to manage quarterly earnings, which is right, exactly like Nelnet, right? Like they just don't manage earnings. They just, but anyway, so the company announced 91 cents a share in annual earnings for 2022. Okay. And the 10K rolls around in March. I knew this deal was going to be good, right? And so in my mind, while they announced 91 cents in earnings, I was thinking the company's like $1.25, $1.30 in kind of earnings power, right? That's how I'm thinking about when I just model it out. I encourage everyone to do their own work. But they announce in the 10K and you can go find it. They say, well, what would have happened if instead of closing MRI on December

13th, if they had closed it on January 1st, what would our earnings have been? And they have a table in there and it says a dollar 30 and i'm like wait a dollar 30 that's almost 40 cents a share before rick and his team have fixed the company which was run as a lifestyle business this is what's so exciting as a higher quest investor and that was this december this december Yes. Yes. How many times do you see something like that? Hey, we acquired a company. We just added almost 50% of earnings per share to our company. No one's covering it. No one's writing it. I found it. I put a tweet out. I was like, hey, everybody, look at this. There's a couple of people that follow it and they're interested. Get your two likes and no one pays attention. Yeah. And it's like, oh, that's great. You know, good job. Here's my follow-up with that is, is this the classic situation for a, I don't want to call

them a roll-up, but maybe, you know, I have some qualities. Yeah, no, it's definitely a roll-up. Yeah. Where they have these, you know, individual small businesses that might be run by a single person who's run it over the years and that person can run it at a certain rate. It might be profitable, but pretty, you know, they're not going to be as efficient as you can be as a large company. And when they sell it, typically with these smaller transactions, that end of the market, when you kind of get closer to a small mom and pop business, you're going to have multiples that are very, very low in an earnings perspective. So you kind of have that combination of low earnings multiple on the acquisition, plus a very easy playbook to

expand earnings once you acquire them. That's exactly right. And one of my favorite things is when you talk to the team at HireQuest is the way they structure the transaction is they don't wait for the transaction to close and then they start fixing and if you study the mri acquisition they only acquired what they wanted to acquire so they only acquired the offices and locations that they wanted to acquire and they're running at full speed the minute that it's acquired like there's integration there's almost they've already done a tremendous amount of work and so you know some of these companies that either have debt they've been run as a lifestyle business they have a bunch of branches some of the branches are just unprofitable

they just don't have the systems and the lean structure that like a higher quest has and there's just a ton of low hanging fruit, just a ton of it. And so, you know, when I look at what they acquired with MRI, and I see higher quest is I now believe the company has about $1.75, $1.80 or so of earning annual earnings power, you know, stocks at 22. You know, it's just kind of fun to think that like, I was acquiring this company for $6 or $7. And now, I think they're approaching $2 a year. And I think they're going to like $3 or who knows in the long run of earnings power where they just keep acquiring, keep growing, grow organically. And there's a couple of really interesting points that I would also say is that you look at this and now that they've been able

to execute on so many transactions, I don't know when these transactions will happen because the price dependent. It's got to be the right opportunity. Rick is not just going to pay whatever the market. And so I can't predict when these are going to happen, but it's just a free cashflow machine. And the other great part is one of the things that you worry about as an investor is like, oh, it's a staffing company. What happens is the economy weakens. I know we're hearing the economy is weakening and we might enter a recession, et cetera. This is the magic of higher quest. And this is why when I first wrote it up, I said, hey, there's something really special here. And that is, in the second quarter of 2020, the entire world shut down, right?

It shut down because of COVID. Higher quest was profitable in that quarter. if i can create a nightmare scenario for a staffing company and you are profitable in that quarter you have a pretty resilient business model but what's even better is if you think about what they're doing they finance ar right so that you when you study their balance sheet i only encourage you everyone who's listening to study it if you're financing ar and things weekend, the account receivable of what people owe you, that account receivable goes down. What happens when account receivable goes down? Cash comes into your company.

So imagine at the exact point that, no, it's not like this amazing thing, right? Because your earnings and your revenue go down. But at the exact point when things get harder, your cash goes up. And for a company like HireQuest, and they just took on a modest amount of debt to acquire this company, they're acquiring it on a credit line, but if they don't acquire anyone by year-end, that will be completely paid off, and it's all free cash flow, right? This is a service business. There's no CapEx, or almost no CapEx. But if you imagine the economy weakening, but your goal is to keep rolling up mom and pops or other companies, your ability to buy at the moment that when other companies are

struggling dramatically improves. I just think it's a phenomenal business model. And that's why they don't rely on debt, really. That's why it's not a highly indebted company. It's because if things go south, that's when the company is going to get really aggressive. And that's what they did during COVID. Do you think being public gives them any advantage in acquiring companies? Yes, I think down the road, it will.

Well, one, I think everyone can study their finances. They can see they have the cash and ability to close. they've now shown they can do really quick closings for people um and i think down the road depending on the size you could use some amount of shares for the right business so there could be whales down the road that we just don't know about where for you know again rick and his team is going to be very conservative on price and everything else but like for the right deal, you could issue some shares. And that obviously dramatically improves their ability to keep growing the business. You touched on a lot, which was the acquisitions

they've already made. Do they expand their franchise locations organically much at all, or is it mostly all kind of through acquisitions? A little bit. They're trying to put more of a focus on that now, because they have a lot of offerings where they used to just be in one segment of the market. And I think this is a renewed focus for them. The other great thing is if you just think about organic revenue growth, we have inflation right now, right? And there's a shortage of workers, and there is labor inflation. Well, if you think about how higher quest gets paid they get a percentage of what their franchise owners get and their franchise owners get a percentage of the hourly labor rate that their employees are being paid

and you should see you know as long as we have persistent labor uh hourly growth rates that's a positive for higher quest so they're inflation they're inflation resistant yeah uh yes yeah as long as the inflation doesn't completely destroy the economy yes yeah and as long as the inflation isn't as long as there isn't high inflation but wages aren't running at zero percent which seems highly unlikely to be over to happen that's great and that is not the situation we are currently in yeah and i guess any other or ryan you have something because i was trying to think of any other follows yeah i guess one of the catalysts you called out in your article was the infrastructure bill aaron it what do you think

of that now do you think that can be a big boost to demand for higher quest i mean yeah i think i think that any time if you just think about any types of construction factory work uh you know you you're going to need some amount of temp employees with full-time employees and you're going to need you're going to need higher quest and so this is all uh it should all be you know when i first wrote that report we were in a very dark economic time um and there was a question you know what was going to happen with employment what was going to happen i think we're in a very different time now. And while things are weakening, the unemployment rate is still very low. And there's still a shortage of workers out there. So it's kind of like a weird place

where a hire quest where you may have slackening of demand. But remember, they have to fill two sides of the equation. You have the corporate demand, or it could be organization, it could be government whatever and then you have the employees while there is a shortage of employees like you can't fill you know the past year 18 months they haven't been able to fill all the demand um from their corporate uh needs and so there's like uh it's interesting to watch the still report strong growth and numbers uh even those things are starting to weaken it's partly because there's still not enough employees to fill the demand. How do they attract those employees?

Is it just like they just go out and kind of market in their local town? Like, hey, if you're looking for gigs, you're looking for jobs, come to HireQuest? That's exactly right. I mean, that's what the franchise owners do. That's their main function is not only that, but to match them with their local employers. Okay. Sometimes get into the jobs and things like that. Who are their big competitors then?

Is there any big national player or is it usually regional? Yeah. So in some segments, it'll be Manpower, Korn Ferry, and others. There's a company called True Blue. It just depends on what segment of the market. I mean, there's some real big companies in staffing. Staffing is a very large industry. And so HireQuest is just a consolidator of these smaller companies in what I believe is a superior kind of franchise model for almost everyone involved.

Okay. Sorry, Ryan. I was on mute. You talked about management a bit. You interviewed the management team. And what were, I guess, high-level takeaways from talking with, I believe it was the CEO, correct? Yes, that's right. Rick Hermans. Yeah. What were your thoughts? Any...

I mean, my thoughts is I think he's one of the best CEOs I've ever invested alongside of. I think that he has a very clear strategy of kind of rolling up his industry and converting it to his superior kind of franchise model. um and that he is very very thoughtful about capital allocation um and you can kind of see how he executes and he will kind of tell it like it like he thief it and i i it has been remarkable watching the company create value and i don't i think it's starting but i don't think people have fully appreciated the kind of earnings and cash flow that the company is building, mainly because no one's researching or really analyzing the company. And there's not a lot of great coverage on the company.

But if you go out and you say, hey, this company is going to earn $2.50 to $3 a share in earnings, you have a great management team, high insider ownership that are going to be very respectful. And if you look at the share count, it doesn't really move. There's no dilution. You really have to worry about everyone's aligned. You have a 60% operating margin business. You study the history and you say, hey, recurring business, that cash goes up if things really go south.

What do you think it's worth? What multiple would you pay for this in a much larger company where it's all free cash flow? So I can come up with some pretty high multiples and a very different stock price than $21 or $22 a share. But I think management is exceptional. I've got a quote here from your interview with them. Rick says, we're not interested in top line. I mean, we're interested in top line growth, but we're only interested in top line growth to the extent that it creates bottom line growth and that we retain our margins.

and we continue to grow. I think that tells you kind of where his incentives are and kind of illustrative of someone with a problem. It sounds like someone with higher incentive ownership. I guess maybe last questions. We kind of touched on valuation, but any other thoughts there? What do you think they can earn? I guess growth-wise, it sounds like it's kind of hard to estimate

mate, because the acquisitions are so lumpy. Do you think there's a lot of runway to keep kind of gobbling up these smaller shops? Yes. I was concerned at first now that I've seen what they're doing now that they have this, like they literally have this former investment banker who used to be on the other side now running. And they're now, I think the other benefit is when you close multiple deals in an industry, then everybody in that industry now knows hey this is a buyer and they do what they say and they close with cash like that's very very valuable and with speed and with cash um and i just think the company is uh i think they have a long runway to go i think there's a lot of verticals they haven't

touched yet you know hit yet i mentioned security guards you know there's also like janitors and And there's all different kinds of ways they could go. And my own kind of sense when I first started, I was like, oh, they could get the $2 to $3. I kind of raised it to $2.50 or $3. But to be honest, I don't know that there's an upper limit per se. but you know what i think about franchise companies that have a proven history of growth high free cash flow 60 operating margins resilient business models run by great management normally that's you're getting 20 or 30 times that number and if i'm right that you know you're

gonna get 250 to three dollars and i think they're right now around a dollar 75 a dollar 80 of kind of earnings power is what I would call it once they digest this business and get it fully. And there'll be some messiness because of this acquisition just in the numbers. I see a stock that's $50 to $90, maybe more. Robert Leonard Yeah. It seems like there's a ton of potential here. Now, you're optimistic. I think when we close things out with our last question here to temper everyone's expectations, what could go wrong what risk do you see uh and what have you looked at as you studied the company over the last few years well obviously i mean you could have like a big economic recession right um and like

mass unemployment and the earnings could go down um and you know maybe it's not a dollar 75 of earning maybe it's like a dollar or something like that um i think in that scenario you'd have cash store, and I would hope they would go and acquire other companies, but maybe they don't find acquisitions. And maybe growth kind of peters out or something like that. I mean, you can have scenarios where things kind of go wrong. I think you are protected by the fact that cash would go up if things significantly slow down, and that you have highly incentivized uh management aligned with other investors that would you know you know they wouldn't just throw the cash out the window um but i think that you could have some scenarios where

you know the growth isn't there maybe they don't aren't able to execute on acquisitions and you know you know the earnings are much lower because we're in a dramatically different economic setting. But to be honest, I don't know how this stock would be much different than any other stock if that were to happen. Maybe I'm thinking about this the wrong way, but isn't higher unemployment rate potentially a good thing for them since they're helping those people find jobs? It could be. Again, it just depends on what kind of unemployment, How quickly does that happen? What does the corporate side do? I mean, there's some uncertainty there. And that's why I think you kind of have to kind of look through and see, I can't predict what the economy is going to do. But I'm pretty confident that you're going to have companies using temp employees at a strong rate for a long time, that this team is going to find future acquisition opportunities that are very accretive to investors,

and that they're going to manage through these economic cycles and just build this wonderful recurring cash flow business that I don't think sells for the right multiple. Yeah, I think that's all the questions we have. Brett, do you have any more? He's shaking his head, so that is going to do it. I guess for listeners that maybe don't know you, don't know where to find you,

what are some good resources or places to kind of follow your thoughts? Well, you can come to, you know, subscribe to my sub stack. It's free. It's a mindset value.substack.com. I'm also on Twitter. My handle is at Aaron value, A-A-R-O-N and then value. And those are two great ways that you can follow or, you know, get in touch with me. And we will, we will have the original write-up and the interview. linked in the show notes for anyone that wants to read those as well. But I guess we've got to do a

disclosure here for all our listeners. Brett and I are not financial advisors. Anything we say or discuss here on Chit Chat Money is not formal advice or recommendation. Thank you all for listening. We are, however, general partners at Arch Capital, so clients may have positions in the securities discussed in this podcast. Thanks again. Thanks, Aaron, for coming on the show, and we'll see you all next time. Thank you.