I'm Jeff Garro, Healthcare IT Analyst here at Stephens. Pleased to have Simulations Plus joining us here today, and Shawn O'Connor, the CEO. So thank you for joining us, Shawn.
Thanks for having us, Jeff.
We'll just jump right into the questions. I want to start with the state of the end market, and then our recent initiation report, we tried to present data showing demand trends, but wanted to ask what macro indicators you're tracking most closely, and maybe more importantly, what your sales team on the ground are hearing in their regular interactions with the purchasers and end users of your biosimulation solutions.
Yeah, no, not a question I've gotten of late or really the last few years. You listed a number of good metrics in your report. Our solutions cover the full range from discovery through regulatory approval and beyond commercialization. So there's no single metric that really ties to our top-line growth rate directly, but clinical trials, overall pharma spend, biotech funding.
These are all metrics that are indicative of opportunity out there. But in the end, our relationship, our discussions directly with clients are probably my best metric in terms of outlook. And in that regard, we're at critical points in the calendar every year. This September, probably start running through December, is budgetary time for our clients. And discussions of two types really are indicators for us. One is that, can you give me a proposal? I want to put this in the budget for next year.
That budget preparation activity is a good litmus test as to appetite of our clients for expanding and investment into the next year. Those discussions have been, I'd say, very positive over the last few months. I say that with the asterisks associated with that. They were very positive a year ago, and then we came into the new calendar year, and you saw on a monthly basis, two or three large pharma accounts announce cost-constraining, budget-cutting activities in the year, so no guarantee as to the correlation here, but I think certainly there's some expectation that there was a right-sizing of budgets to top-line growth that took place during this last calendar year, that as we enter into 2025, hopefully they've been a little bit more saner in terms of their budgetary activity. They've rationalized their ROI.
Many of these large pharma public companies hopefully have gotten their cost structure calibrated to their near-term revenue expectations. And we don't see a series of announcements like we did last year post-budget implementation. The other aspect of discussions today is our industry has that budget flush activity that takes place at the end of every year. We've got, despite all the constraints, we've got $200,000 left in the budget that I lose if I don't spend it by the end of the calendar year. I'm amazed that the pharma CFOs don't constrain that, but it's an annual phenomenon that takes place. And again, in that regard, last week was one of the bigger conferences in our cycle with clients' interactions. Last week with those clients surfaced numerous opportunities that we'll see how they play out.
The metric there in terms of seeing how successful that process is would be bookings. Our fiscal first quarter ends in November. That budget flush doesn't flush to the extent that it's contract signed and revenue delivered, but bookings at the end of the first quarter would be a fair metric to look for in terms of our results to gauge budget flush activity there. It'll happen in the last two weeks here of November. It'll bleed into second quarter bookings as well in December for us. So I get a little repetitive in terms of using that cautious optimistic phrase. I'm optimistic, but cautious enough that I'll always say cautiously optimistic until things break. And our guidance, which we delivered a month or so ago for our fiscal year 2025, was based upon business as usual, current state of affairs, cost-constrained environment.
Obviously, position ourselves to take advantage if market upticks in terms of our clients' demand for our capabilities. We can certainly grow beyond that, but our guidance is based upon a status quo sort of perspective.
Makes sense. Helpful context to kick off the conversation. You answered the macro question that you've gotten for the last two years, and now I'll ask the macro question that you'll get for the next two to three months or so. And I don't think the timing was quite perfect to get a real-time reaction from the Pharmacometrics conference that a lot of your staff was at, but we welcome any perspective that you could relay from clients or that you from representing SLP have on how we can think about potential leadership changes at the FDA with the new administration. And maybe a more helpful way to frame that is, do you have any detail that you could give on how far removed Pharmacometrics and similar work is from the policies that might be influenced by a political appointee?
The million-dollar question of the day, right? Everyone's looking for what will the aftermath be. And I think it is a little early to tell. I would say that somewhat shocking and surprising in terms of the aftermath with some of the appointees that have been announced. I sit back from it, and we're in the business of providing productivity and efficiency to the drug development process. And to the extent that that is the banner head for some of these efforts to cut costs, get drugs to market, the right drugs to the market more efficiently, that can only bode well. The devil's in the details, and we'll have to see how that plays out. I think there's cautiousness. Certainly, the market and pharma company valuations took a little bit of a hit upfront at that perspective. It's early.
I haven't heard that much conversations with our clients as yet in the aftermath in the two weeks since the election, but I think we will bode well in this environment of putting emphasis on cost constraint and being efficient in the drug industry here.
Excellent. Excellent. That helps, and yeah, we haven't heard any names floated yet with any specificity on leading the FDA, so that's kind of the next name to drop, which will be an important one, so we'll wait and see there, but I want to get a little more.
But I'll jump in and I'll say that FDA leadership has changed multiple times over the years, over the extended lifetime of Simulations Plus, 25-plus years of existence. And each of the leadership has come in with their own set of priorities and emphasis through that simulation, the use of simulation by the FDA, their support of it in the industry has never been stepped back from and has only grown over the years. So I wouldn't anticipate that specific to modeling and simulation that there would be any turnaround in terms of emphasis, in terms of the benefits that we bring to the table.
I appreciate that, and I think a helpful segue to the next question. Maybe we've been kind of talking top-down and maybe a little bit more bottoms-up, just how you see the competitive environment for your solutions, what you see as SLP's strongest differentiators, and how that competitive environment has evolved the last couple of years where there's been headwinds to fundraising for your end market, more guarded budgets that you've alluded to, and the Inflation Reduction Act has caused your clients and prospects to take even a harder look than usual at their various priorities?
Yeah, from a competitive landscape, I don't think that there's been too dramatic of shifts there. From a competitive perspective, our emphasis has been several pillars I'll point to. One, a focus on software versus service. We focus in terms of providing the tools to allow our clients to do modeling and simulation internally and support them with our service organization, our consultants, but focus on software. Within that, our focus is in terms of being the most efficient, easy to use on a high-caliber science foundation in terms of our products. The value of the product, if it's difficult to use, impedes the proliferation and adoption of modeling and simulation. We've looked for ways to extend in an environment where the scientist community in this space has always been a supply less than demand environment.
How can we make the scientists on the margin capable of doing this type of work, the scientists that may not be fully trained in all of the disciplines of biology and physics and statistics and computer science and pharmacology, all of these components of the recipe of a good modeler? How can we present software tools that guide them from wo rkflow perspective, step a through z, from an ease-of-use sort of perspective, make our products the easier-to-use products in the marketplace? I think we achieve that, and we continue to achieve it by maintaining a focus in that regard on a go-forward basis to distinguish ourselves from our competition there.
Excellent. I appreciate that. Maybe we'll transition to a few questions on the somewhat recent Pro-ficiency acquisition. So we can start with maybe giving an overview of the strategy for the deal and your evaluation of how that's played out roughly five months post-deal close.
Sure. Pro-ficiency really was the output of an M&A strategy that has always had three lenses: a lens that looked and said, "Where do we fill gaps in our biosimulation portfolio of products and services?" Our acquisition of Lixoft five years ago, an example of that in acquiring the Monolix product, a PKPD analysis tool added to an already existing consulting practice in that space, gave us the ability to sell our clients both our capability of doing the work for them as well as a software application to license to them.
Second lens of M&A strategy has been, "How do we supplement an existing biosimulation focus area for ourselves?" Acquisition of Immunetrics 16 months ago example of that type of acquisition where we supplemented our existing quantitative systems pharmacology business with the acquisition of Immunetrics, which brought a team of an additional dozen scientists and therapeutic areas of focus at Immunetrics that complemented ours. Third lens of the M&A activity has always been looking at the adjacencies to biosimulation.
Where can we find opportunity to expand our TAM into an area that has the same sort of foundation in science and technology as the SLP legacy business? Pro-ficiency fit that bill and is a combination of adaptive learning techniques that are dependent upon an investment in science and technology in comparison to their competitors and medical communications that supports drug sponsors both pre-approval and in the commercialization process.
Pro-ficiency doubled our market opportunity, which is aligned to since I've been on board very focused in terms of how do we get to $100 million in revenue. Our guidance is a little bit less than that, but let me round up and say we're about $100 million now. Now the question is, how do we get from $100 million to $200 million to $300 million most quickly? While opportunity abounds in biosimulation, both from an organic growth perspective as well as further acquisitions in that space, the doubling of our market opportunity is all designed to allow us to grow and get to the next objectives more quickly. Pro-ficiency is really focused in terms of using science and technology like that, which we do in biosimulation.
The touchpoint for us is really a lot of our work is headed towards a development of a protocol for a clinical trial. We then step back and that protocol is rolled out and a clinical trial performed. More often than not, the problem at the end of the day of the clinical trial is protocol adherence. Over 50% of the citations issued by the FDA at the end of the clinical trial, errors that they identify, if you will, are related to lack of adherence to the protocol.
In the world in which we live of statistics, that clinical trial designed at 2,000 patients, the FDA nods and says, "Hey, 2,000 is enough for us with our key factor and statistics jargon to extrapolate that a successful clinical trial is efficacious and safe for the target population as a whole." If the adherence takes out 300-500 of those patients because the protocol isn't adhered to, then that the clinical trial is successful as it may have been will not be approved by the FDA at the end of the day. We live in a world in biosimulation of delivering to drug sponsors the ability to be predictive and proactive in making drug programs more efficient.
Pro-ficiency comes in and allows the drug sponsor to now be more proactive in their training of the sites and investigators with the protocol and more predictive of the success of that clinical trial based upon adherence to the protocol document and proactive in visibility to that so that they can, before the failure occurs, address the problem either by more training, either by reallocating and patient recruitment in sites that are adhering to the clinical trial, whatever that might be.
So we see a lot of opportunity in terms of both the technology in-house to leverage their software platform, which distinguishes themselves from their competitors, the use of science, which again is a distinguishing factor on their part internally in terms of technology. From a business development perspective, I think our success over the last two years in biosimulation has been driven in a cost-constrained environment.
We typically are funded out of a discovery budget and/or a modeling and simulation budget. In a cost-constrained environment, that outside service component of the modeling and simulation budget is the one that gets constrained. They haven't been letting modeling and simulation people go and decreasing their staff and impacting software licensing.
The constraint is on the service side. During the same time frame, we extended from a business development perspective our touchpoints and our clients from the discovery budget and the modeling and simulation budget to developing direct relationships with the clinical management team budget, the drug program management team, and by doing so, we are often in our service engagements being funded not by the modeling and simulation budget, but by that clinical management team budget as well. Pro-ficiency brings us two more budgets that we can access: the clinical ops budget and the medical affairs budgets.
And so we've increased substantially the budget opportunity that we can run after with our clients as well. So Pro-ficiency coming back, A, doubles our market opportunity, allows us to see fewer columns in the spreadsheet of getting from $100 million- $200 million. It increases our leverage of science and technology in-house and finally increases our budget opportunity access with our clients in the long run here.
Excellent. That helps. Some follow-up from the audience.
On the go-to-market, will they, in terms of these additional touchpoints with the customer, is there going to be a separate Pro-ficiency sales team versus the core Simulations Plus? Or I guess could you talk about how the go-to-market might integrate the two products?
Yeah, integration and full-run mode right now. We've, from past acquisitions, gone through a transition of, with each acquisition that took place, a new sales force, and for probably too long of a time, we let them run independently. Prior to Pro-ficiency, we have consolidated into one business development organization from a sales and marketing perspective so that we have one face to our clients. Obviously, within that sales force, each salesperson doesn't carry quota for every product, but there's some focus there, but no one has a quota that's just one product, and there are some specialization in there. Pro-ficiency sales and marketing team has already been integrated into that organization, and we're including them in all of our sales programs to provide more visibility and cross-pollinate those budgets that are out there, separate budgets, but medical affairs.
There are biosimulation techniques that I think have not necessarily become visible to medical affairs that they will fund in the long run in the future, so that sort of cross-selling opportunity is being focused on now. Our presentation to clients is full product and service suite of Simulations Plus, including Pro-ficiency. Our Concierge meetings, which are meetings that we make on a quarterly basis with our largest accounts where we trade. We share with them what our development efforts are. They share with us what their challenges and their directions of modeling and simulation are. Those meetings are now being expanded to include these other groups, medical affairs and clinical ops, and so, yeah, one face forward here. One metric is we've got 18, 19 of the top 20 large pharma are our clients.
Pro-ficiency comes to us with only six of the top 20 as their accounts in that space. Pro-ficiency is a relatively small vendor. Much easier for a large pharma to say, "Well, I'll just let the CRO do that training bit as well. I only have to deal with one vendor." Pro-ficiency, we're not as large as some of the CROs they're doing business with, but Pro-ficiency, we anticipate benefit from already existing relationships. MSAs, master service agreements that are already in place with large pharma with Simulations Plus takes that negotiation process off the table. I think large pharma will be quicker to engage with the toolset from Simulations Plus as opposed to the small private company Pro-ficiency.
Is there something about getting into this part of the process with the Pro-ficiency product that I guess, is there a benefit to the customer of buying kind of the full solution, if you will? Or are they incentivized to just kind of pick the points, [audio distortion]?
Yeah, I'd say on the front end, clearly the driver will be their protocol adherence metric, which is sort of specific to the proficiency application, not necessarily the integrated platform of Simulations Plus solutions. I think over time, we will find some touchpoints that will provide efficiencies if they're using both. That protocol being the touchpoint where biosimulation is input, protocol training is developed from there. Enhancing that connection will prove valuable in the long run here as well. I mean, it's indicative of our biosimulation tools as well. They have historically been used by, they may all be in the modeling and simulation department, but these people in that department use GastroPlus. Those use Monolix, the discovery organization uses ADMET Predictor.
And again, an example of the regulated environment that we're in. The FDA over the last number of months, I think it's maybe now nine months since they announced an initiative internally to step back and look at the FDA and all the various departments and uses of modeling and simulation throughout the organization. And the FDA today is going through a process of how can we integrate and be more efficient in our use of modeling and simulation across the board. I'm seeing more of our clients step back and look at it from that perspective as well. And the value of integration, I think, is on the horizon as being a more important element in modeling and simulations uptake in the industry.
We're integrated today, not perfectly in all regards, and we'll improve that internally, but integrated platform becomes more and more from a cost efficiency perspective important down the road.
So we hit on the kind of strategic effect for Pro-ficiency, and you talked some about the operational aspects and integration. Maybe you could also hit on financial performance and product advancement. How is the Pro-ficiency deal performing post-close on those two fronts?
Yeah, no, going to plan in the sense of as anticipated and expected. I know in the fourth quarter, we had kind of guided to a $3 million contribution at the revenue line. It came in at $2.3 million, part of which was the mechanical process of the bean counters allocating revenue to the part of the quarter pre-acquisition and the part that was after. And naturally, I mean, acquiring an entity of 20, 30 people, pretty distracting event and whatnot. Fourth quarter performance, no indication in terms of the flow of business at either of the two. As we've organized internally, Pro-ficiency is in our world now, two different business units, the adaptive learning, the clinical simulations part, and the medical communications part. They both have similar, but a little different seasonality cycles, clinical simulations, very much tied to when clinical trials are performed.
It's in part tied to our simulation work, but its impact is it's a little bit closer to the initiation of a clinical trial that revenue is driven. Medical communications is more of a budgetary cycle right now. Budgets are being determined, and while it might not go to revenue, they actually have tremendous visibility based upon budgets to performance of revenue over time. All of those metrics indicate just as we anticipated, we had said at acquisition, $15 million-$18 million in revenue in fiscal year 25. That's the guidance we gave after the end of the fourth quarter, and their growth at that $15 million-$18 million level is an implied 15%-20% growth, so faster growth than our biosimulation legacy business into 25, so things are coming on board: sales, integration, business development, integration.
I've spoken to internally the allocation and consolidation and back office operations and other areas, financially, HR, and all those things pretty well complete at this point in time. So it's execution time.
Excellent. I want to follow up on product advancement. In prior conversations, you've talked about Pro-ficiency having an advantage versus the status quo in the industry. And you've also talked about kind of next steps they can take to increase adherence, but also potentially decrease the COGS and make it a better gross margin business.
Yeah, they come to us a little askew to our profitability model, historical profitability model there. Software services mix is 50/50, maybe a little bit higher, above 50% on the service versus software side. Our profile has always been 60/40 in favor of software. That I think is headed in the right direction and will get to a point that approximates our profile. Their software business, the clinical simulations of the business is growing faster than medical communications. From a gross margin perspective, their software margins are 80%, where our software margins are 90%. They're making improvements in that regard. It'll always be a little slightly below ours. The training modules that they license require some tailoring and development specific to a clinical trial, but they're becoming incredibly efficient in that regard, and that's the use of technology.
They are not complete in the process of moving from a studio with live actors filming activity and replacing that with entirely digital preparation simulation using avatars that is obviously much more cost efficient. They've been implementing those programs for a year now and continue to contribute there, so we'll see that 80% margin improve towards our 90%, probably always be a little bit below. On the service side, the medical communication business is not that far off in terms of our service margins, but they often take on the logistics. What I mean by that is their agency effort often brings together meetings of KOLs, and they pick up the logistics. They buy the plane tickets. They buy the hotel rooms at a very low margin component of their project.
So we are focusing that business to hand that off to a third party, and that will improve their margins to our profile. So we guided this next year in terms of margins. We historically have been at 35% the last couple of years. We've seen that closer to 30% EBITDA margins, really driven by 2022. Fiscal year 2022 saw tremendous job hopping post-COVID by our scientific staff. That led to about a 25%-30% compensation increase for that profile. That impacted us in 2023, carried over into 2024 a little bit. 2024, market slows down, compensation settles out. We got to help admittedly a little ahead of ourselves in terms of capacity. 2024, we saw 2% attrition of our scientists in an environment where we typically see 10+% attrition. So a little bit capacity overload in the back half of 2024.
That ship can be righted pretty quickly. Compensation is pretty settled in. Quite frankly, our 31%-33% guidance for next year. The underlying SLP business does get back to 35%, but the Pro-ficiency layered in as they make their improvements kept our guidance at the 31%-33% range. So I think when we get to fiscal year 2026, we'll be able to overall get back to 35% plus.
Excellent. I appreciate that. And maybe to hit the FY25 revenue guidance, you just gave a kind of a good overview of the mechanics on the margin front, but I was hoping you could walk through your key assumptions around end market conditions and internal performance relative to how you exited FY24 to achieve your FY25 guidance and maybe highlight any potential areas of variance that will determine whether you ultimately land around the low end or closer or above the high end of your guidance.
Yeah, yeah. As I said before, underlying assumption, market conditions as in 2024. So continued cost constraint environment. The $90-$93 million revenue guide, if I split it into SLP legacy and Pro-ficiency, the SLP component of it is the same boring 10%-15% growth that we've guided to the last two years. In 2023, we came in at lower end of that 10%-15%. In 2024, we came in at 14% organic growth. And I think we'll continue to execute in that 10%-15% range. If we perform as we did in 2024, it'll be at the high end of that range. If the market picks up, the potential exists to overperform to that guidance, that component of the guidance. The Pro-ficiency $15-$18 million in revenue is part of that $90-$93 million in revenue.
That represents 15%-20% growth on their revenue lines versus the prior year. So if market picks up, hey, that's great. If we get near-term wins in terms of cross-selling opportunities that didn't exist in their expectation, their growth expectations, then those could be two drivers for overperformance to the plan. On the downside, continued cost constraints. I think in the long run, the one underlying trend, I mean, over the years, biosimulation has grown 12%-14%. We live in the world of statistics. What that means is it's never 12%-14%. It's 15% or above, or it's 10% or below. It just averages to 12%-14%. And I think the growth in that side of the business at 15% is what we shoot to hit or exceed on a go-forward basis.
In the end, the opportunity to grow that number is impacted in some measure, not just by cost constraint, but by program reallocation. That's something that we need to be adept at on a go-forward basis forever. One of the transitions and what we sell to our clients is fail fast. Don't be afraid to kill programs. Reallocate resources to opportunities that are more predictive quality opportunities.
While this past two years, we've seen cost constraints and program reallocation, cost constraint may change over time, but program reallocation will always be there. The clients need to be able to fail fast, move more efficiently, don't be dependent upon big blockbuster drug approvals to pay for dry holes. In an environment where we've moved from 20 years ago when I first started, cardiac was modeling and simulations sandbox to cut its teeth at.
Lipitor gets approved, and it pays for a lot of dry holes. In today's world, oncology is the top of the stack, but oncology is a bunch of small market cancer types, and successes there are not going to be Lipitor-like in terms of paying for a lot of failures, so our clients need to be more adept, more efficient at smaller wins and same objectives in terms of ROI. We as a company need to be able to move with drug program reallocations and shifting our work effort, our support of our clients more quickly. That process will continue, and how that sorts out also has an impact in terms of top-line growth going into fiscal year 2025.
Excellent. Really interesting topic around the ROI around fail fast. It's a little different topic than here's an arm of a clinical study that you don't have to do because of simulation where you can more discreetly discuss the ROI, but both are certainly important. I want to transition a little bit to a more internal question and ask about the finance function at SLP as you become a bigger company. You've overseen corporate divisions evolving over the last year or so. You've delivered more precise cost allocation between SG&A and COGS specifically. I was hoping you could speak to how the changes and rigor behind the financial team's process, and Will's been in the CFO seat for about four years now, are giving you better insights on how to run the business and deliver the revenue growth and margin expansion targets you've outlined.
Yeah. Yeah, Will's been my partner in crime for three companies now. Will and I have worked together at Pharsight Ente los and now Simulations Plus. So we make a good team. And quite frankly, when I came on board at Simulations Plus, it was a great company, but relatively immature in terms of its professional profile and consolidation of acquisitions, QuickBooks, no CRM system, on down the line. And so brought Will in to do his magic from a financial perspective, an HR perspective, systems in general. And we're starting to bear that fruit tremendously now. The sales organization and our ability to manage the pipeline and identify opportunities and focus on our efforts, programs, be it the concierge program or specific product programs, has been enhanced tremendously.
Our operational changes from new ERP system are allowing us to manage operations, the consulting groups across the divisions in a more unified, consistent way. That is finding all kinds of opportunities, whether that is being swifter at identifying that, hey, we're approaching the limits of our budget for this project, or whether it's, hey, we're doing work for the client that's out of scope. We need to send a change order to the client. Or managing people, the identification of underutilized staff that, say, someone in our QSP consulting group. Don't have enough projects right now for them, but they can do work in the PBPK consulting segment. Let's assign them to a project in another division. All of these things which bear efficiency gains within the organization are coming to bear fruit today.
And it's what gives us the confidence in terms of getting back on the margin, EBITDA improvement focus going forward. I think it's on the revenue side, our use of the CRM system that didn't exist three years ago is having tremendous payoff today.
Excellent. I think the natural follow-up there is around culture, and you have $100 million in revenue in sight. You've deployed some more rigor in the infrastructure. You're seeking out efficiencies, but how do you do that and also retain the science and customer-focused culture that's made you successful as you try to scale and deliver consistently across a broader set of solutions and clients?
Yeah. I smile and chuckle a little bit because I find myself the flood of adherence to science as a key component of our culture comes at me more than it is me reinforcing that with the organization. We've got 250 people now with 200 PhD scientists that are first and foremost science-oriented. So don't need to encourage that side. Customer as the number one focal point of what we do. That's a key distinguishing characteristic of Simulations Plus in the marketplace and one which we hold dearly. And we continue to evolve that. We thought we were good at it. Then we acquired Lixoft. And their whole reason for being is providing a more customer-oriented solution than NONMEM, the sort of market share leader in the marketplace.
And we learned from Lixoft in terms of workflow orientation of the front end of that product and our release of the latest version of GastroPlus this past year. So customer ease of use and importance, a leading banner-head in terms of our culture. And within that, hey, let's embrace new ways of doing it, new tools internally to make our life easier and more productive. Scientists achieve that. Oftentimes, the vernacular of herding the cats is the case in terms of managing scientific people. And we do herd cats a little bit in keeping them on track with things. But the cats are always gravitating to science. So that's a strong cultural aspect of our organization.
Excellent. One last quick one to submit. I want to make sure we hit capital deployment. Is there a necessary pause in M&A to integrate Pro-ficiency, or would SLP consider taking on debt to fund future acquisitions?
Yeah, you know, the acquisition process, this was the biggest apple that we took a bite out of in terms of the largest acquisition. But it's managing very well through the integration process. It's an important one to us. It's a step outside of our biosimulation focus. So I want to keep the eye on the ball on it. Also aware, though, that M&A activity is not a you can time it and forecast it and plan it meticulously. So our effort on the M&A side continues. It's a larger landscape now in the sense that biosimulation opportunities, there are opportunities that surround the clinical simulations, clinical ops side that might be attractive. Our effort in terms of maintaining visibility, networking, interaction in that landscape continues forth unabated. We were on a cadence of acquisitions once every three years.
We now have done one in each of the last two years. Will we do another one this year? If the opportunity is there and it's right and it comes to fruition, we aren't looking at prohibiting an acquisition in the next year. And we don't see the cash on hand as being a barrier. Most of our acquisitions in the past have been in that $20 million plus or minus. We have great free cash flow, and our ability to do something at that level may not require financing of any sort. If we found one that was larger, and we do see the benefits of being larger in our acquisitions as opposed to smaller, it wouldn't preclude.
It would be a variable in terms of the valuation and creative nature of the acquisition that would go into that evaluation as an input, but we wouldn't be shy from doing that if we thought it was the right opportunity.
Makes sense. Sounds like a good place to end.
Very good.
Appreciate it. Thank you, Shawn.
Thank you, Jeff. Take care.