Redishred Capital Corp (Pre-Merger)
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Redishred Capital Corp (Pre-Merger)
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Thank you for standing by. This is the conference operator. Welcome to the RediShred Capital Corp. Second Quarter 2022 Financial Results and Business Update Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Jeffrey Hasham, Chief Executive Officer. Please go ahead.
Great. Thank you very much. Good morning, everyone. I want to welcome everybody to the Second Quarter 2022 Analyst Call and the Shareholder Call. I really appreciate you joining us this morning. First and foremost, before I jump into the discussion of the results and what drove those results. I think everyone can see, we had a pretty good quarter. And that doesn't happen by accident. So first and foremost, I want to thank the team, our employees, our franchisees, our Board members, our partners and our shareholders, the team effort we do it together.
And without all of that participation in this, we would not have had a good quarter as we did. And so thank you to them. We appreciate all their efforts. As you can imagine, this was an interesting quarter and for us to have a good quarter, the way we did is quite something. We were able to thrive in a very tough economic environment. As everyone is very aware from the news, where we -- there's strong inflation, supply chain issues. These things impacted us, too. We had strong -- we had higher input costs, namely fuel, also driver wages.
We also had truck supply challenges, getting new trucks. We seem to be getting some new trucks now, which is great, but the trucks that were supposed to be delivered in the second quarter, very few of them were delivered. But now we're getting some movement there. So I think there's some grease going into the system, which is great and repairs on older trucks that was tough too because trying to get parts for those that also got cut off on a lot of the supply chain issues. Thankfully, our strategy of having good depth and density in the Eastern Seaboard in particular, where we have many corporate locations and particularly in the Northeast.
We're allowed to be able to share assets and one location available to help the other location. That helped mitigate. And so the long-term strategy of what we're doing in terms of driving route density, driving density in regions driving -- that drives the ability to pull share fleets. And -- we certainly had to do that. We didn't trade in older trucks, but those trucks came in to help us achieve a good quarter. So -- in spite of all of these challenges and why do I start with the challenges because I think they're well known. They're well documented. However, we had strong results, and we're very pleased about that.
So we sort of look at the second quarter here, same location EBITDA was up 47%; consolidated EBITDA, 73% when compared to 2021. These are great numbers. And we'll talk about why -- how we achieve them. From a top line perspective, we had record revenue of $14.6 million in the second quarter and were $27.1 million year-to-date. Many of you who were on the very first analyst calls probably remember when our numbers weren't even that for the year. And here we are in just the first half of the year, putting up these types of revenue numbers and EBITDA numbers.
How have we gotten there? Acquisitions, no doubt about it. We've been quite -- we've been acquiring a lot. We go back to even last year. We acquired some franchisees retired American. And going into this year, we've done some tuck-ins, some small ones and some big ones or medium-sized ones as STV we did on June 1. So that one really hasn't impacted the results fully, but it will.
Organic growth from shredding, we've had great organic growth on the shredding side, PROSCAN and higher revenue from a cycle paper. Let's not ignore that.
Paper prices are significantly higher, this year to last. No doubt about it. However, there's a bit of a difference in terms of this increase in paper prices for us. And that's -- when we go back to 2018 and 2018, we didn't have any billing facilities. 2019, where we only have one. Here we are in 2022, we have 4 in there in our biggest markets. We already have 1 in Chicago, 1 in Kansas and through the American acquisition, New York and New Jersey. And the increased tonnage is now from our facilities in New York and New Jersey are being diverted into those American, a part of the purchased baling facilities, and that helps us increase our paper revenue in our paper prices because when you bail paper, you get a paper price premium. And so that American acquisition we knew that was one of the opportunities, and that opportunity came at the right time as paper prices were going up and the premiums were there.
And so that is, of course, one of the reasons why we wanted to buy American. Not the only we wanted to densify our routes and solidify our market presence in the region. And we've done that, and we continue to do that. So it was a big acquisition, and we continue to do that. So that's having a positive impact. And so we're thrilled about that. What's happening is what we thought would happen. And so we're pleased about that. So again, [indiscernible] macroeconomic environment, what can we do? All we can do is control what we can control and the team really did do that.
We mentioned Safeguard document destruction ended the second quarter. Again, good bids of customers in New Jersey and Florida. We're integrating that as we speak, so far so good.
So we're glad about that. The other big thing that we did and it just happened as many of you know, we did a 5:1 reverse split or consolidation. And -- just so you know, the MD&A and the financial statements for the second quarter are all stated with the new share basis, so on a proposed consolidation basis. So overall, and I'm going to turn it over to Harjit in a moment. He will provide more color and detail on the financial results.
I think the team did very well to respond to the challenges. We've also just raised our prices here in the third quarter in July, August. And -- so that will have a positive impact. So our scheduled recurring clients have seen a price increase due to these input costs. Other companies are doing that. And of course, we have followed suit. We have good relationships with our customers.
And so far, we're happy to report that we haven't seen significant churn to date, and that's a good sign. And so I think that talks to the client service that we provide. It talks to how we go about doing it. We don't do fuel surcharges. We don't do delivery charges. We don't do any other charges. We keep it clean, but we do the price increase. And I think our clients appreciate that transparency in how we do it.
So I'm going to turn it over to Harjit. Harjit, you get the fun part. So go ahead.
Thank you, Jeff. So hi, everyone. As Jeff noted, we had a very strong period of financial performance for the 3 and 6 months ended 2022. If we look at Q2 2022, we generated revenue of $14.6 million. Our EBITDA was $4.5 million and operating income was $3.2 million. And even with the input cost increases that Jeff spoke about, our margins, they remain strong. Recycled paper, of course, had a contribution to that, and that helped. But even without that very strong results for the quarter. And then if we look at the year-to-date results through June, again, Jeff spoke to it $27.1 million in revenue, record highs there. EBITDA $8.6 million, operating income of $5.9 million.
And we sort of translate that on a per share basis. If we look at our operating income on a per share fully diluted basis. Year-to-date, we're at $0.324, that's up almost 100% compared to the comparative period in 2021. And of course, these figures are on a post-share consolidation basis. So quite impressive because we're looking at apples-to-apples here. And -- how does that translate to the cash flow?
Well, we generated $3.3 million in cash flow from operations for Q2, year-to-date, $5.4 million. And again, the strong EBITDA results translating to our cash kind of relate to strong cash flows as well. Looking at our balance sheet, our liquidity position is pretty solid. We have $5.8 million in working capital. We do have $9.5 million in cash -- and that's going to put us on -- put us in a position to execute on our plans, our strategic objectives, and we do highlight those in the MD&A.
So all in all, very good results. We are all pleased to report, and I will now turn it over to Jeff just for some final comments before we open it up to the Q&A.
Thanks, Harjit. I appreciate it. So as Harjit noted, we're in a very good position to execute on our plans and to remind everyone our strategic initiatives. Number one, whatever we own, we want to build by growing our organic revenue, same location sales that's important. We -- as you know, we have some new services relatively new to us, such as PROSCAN and we continue to see a good quarter on the PROSCAN side, which was excellent. Our e-waste business also continue to grow. So growing organically is important. And we've been able to do that despite some of the prenoted challenges. So that's a great outcome.
Of course, we have 2 pools of M&A targets. The first pool of M&A targets is our franchisees, when they wish to retire or exit whichever comes first, we have that opportunity. There's also 750 independents in the marketplace. And many of them are fatigued in this environment. If you think about it, they've gone through the ups and downs of paper. They've gone through COVID, now that went through inflation, trucks are costing more for them.
The reality is we get in front of the line on the truck supply, and that's why we're seeing some movement there. And so there's a lot of challenges there, and that creates the opportunity for us to buy these. So we have a strong pipeline. So we want to speak to that.
We got a good pipeline. And the nice thing is we have the financial capacity, capability and willingness to deploy the capital to execute on that part of it. And of course, we know when we execute on those parts of it. We can bring things to the table back-office savings route density opportunities in the case of American enhanced baling on pre-existing tonnage, all those things are great. As noted, we had to respond to cost increases. They are real. They are there, and we have raised prices in line with that, and that's very important. And again, I can't emphasize enough that having a good relationship with our truck suppliers is paying dividends now in third quarter because we're able to -- we're starting to see the flow of trucks again.
Yes, we're delayed in getting them. However, we're getting them. And so we're very pleased about that. And again, 1 of our strategies that we've mentioned is we want to make sure we have a moderate truck fleet. And now that is even more important and why is that more important because procuring truck parts for older trucks is very much more difficult due to the supply chain. And so having a newer fleet allows the trucks to be under warranty.
There's more availability of parts. There's still sometimes challenges there, but there's much more availability of parts. And so having a modern truck fleet not only enhances client service, creates uptime, reduces repair maintenance, more fuel efficient and of course, the ease of the repair and maintenance from a parts perspective that's critical. So we're -- and the last piece, and I think important is we've seen fuel prices go up, we've seen paper prices go up and fuel is still at record highs and paper continues to follow that.
I think the paper market is just to comment on that. Look, it went up again slightly in the first month of the third quarter. The way market that I spoke about many times, is still demanding the tissue paper. And of course, the primary component of that is our supply of paper. And so that's a good news for us is that we continue to provide that supply. We're also providing that supply in a baled format. And so those are very positive things for us is that the economy and the way economy continues to grow in the United States.
Anyone who's been to Toronto Pearson Airport knows that fairly heavily at the moment. Sorry, I've been caught in that as well. So I'm going to pause there. Again, I want to thank everyone. I want to thank everyone for joining this call. want to thank everyone for their support, and I open this up to questions.
[Operator Instructions]
Our first question comes from Amr Ezzat of Echelon Partners.
Jeff, Harjit, congrats on another strong quarter. My first one is on your organic growths for shredding services. 20% year-on-year. Can you quantify how much of that is price increases versus just increased activity? I know there's a new price increase now, but I believe you had one earlier this year as well.
Yes. So we increased prices at the very tail end of 2021. It was a smaller price increase 2% to 3% at that point in time. So the good news here is the vast majority of our increase has been the new client acquisition. One of the things that we've spoken about for many years, I would say now, and now that we've known each other for a couple of years, there's 2 components to our business in terms of driving revenue.
Number one is, of course, the digital advertising that brings in the leads. Most of the leads are for onetime service. However, the idea, and we're executing on this well in outside sales team in particular, is how do you convert those onetime event-based shredding into other services or recurring shredding service? And so this database that we have, the past clients, new clients that we can convert and then buying lists and looking for route densification opportunities, that's really been the driver of our growth so far year-to-date, our organic same location growth.
That's been the driver -- and so kudos to marketing and sales and to the service team as well for converting that during some tough times in terms of truck challenges and all that. I mean they did a great job, everybody working together to make sure our clients and those new clients get a good experience. So I know it's a long answer. But yes, going forward, we're going to see obviously more of a price increased uptick because we put through a more significant price increase just recently.
I'm just perplexed in a good way of this revived growth, I think you had like a period of strong same location service revenues in 2015 or '16, then you're just like wedding at 10% or 5%, 10% for a pretty long period. And now we're back at that sort of 20-ish percent level, which is good to see.
Yes. No, it is. And I think one thing, just maybe to comment Amr, I like good -- I like it when we're perplexed in a good way because it's a nice outcome. And look, the reality in the marketplace is we start to, again, get more [indiscernible] we will get -- as we get larger in the marketplace, you have more trucks running around the digital presence is there, the sales presence is there, the brand presence is there, the service reliability is there, what's starting to happen is, of course, we've got competitors and we've got some large competitors that do struggle in the on-site model.
They struggle with the small, medium-sized enterprise client, where they are to take away that revenue from them, right? We're also now starting to see larger opportunities. And again, from a risk management perspective, we are seeing a little bit more purchasing agents going with time out. There's a difference in on-site and off-site. And look, our competitors can do a good job protecting the information from an off-site perspective. we do some off-site as well, a very small amount. We do some off-site and we follow the made procedures and it's secure, but on-site is very secure, and our research has showed that small medium-sized enterprise is more sensitive to that than large companies. So I think maybe that helps just -- maybe give you a little bit of explanation on some of how we're getting there and why we're getting there.
That's helpful. And can you refresh my memory, what is the magnitude of the new price increase?
It will be on the scheduled clients, so just on our scheduled clients, exclude American at the moment just because -- or any acquired stuff over the last year because we typically like to get our arms wrapped around them and then do a price increase. So American is excluded from that, we're looking at about 8% to 10% pretty much every single market that we operate in.
Right. Switching gears to the cost structure, there are a few moving parts that you guys spoke about, wage, fuel and flow, let's call it input cost inflation. Then you guys are also investing in the business and technology. I'm just trying to get a sense of how much of the cost increases we're seeing is really input cost inflation versus you guys proactively investing in the business.
Yes. And the G&A is more where you will see the investments being made. There's some investments made more direct at the face of it. But the G&A is where you have your IT folks and your developers and those types of folks working on the technology. We're right now in the middle of a complete workflow software rollout. And we went from something that was good for us really 5 years ago to something that's now the industry standard, it's called total recall, the big guys use that software. And so it's a much more robust software. So why do we need that? That's the center of everything, right?
So getting the -- and I'll quote Ron Gable, our -- senior VP of ours, we're getting trucks and people to our clients. That's the heart of what we do. And So we're in the middle of the rollout. The Southeast has been completed, which is good. And so then what happens, we're also now starting migration to Salesforce. Again, the CRM and marketing automation platform was, again, for a smaller company. The nice thing with Salesforce is that it's SaaS-based, it's pay-as-you-go and there's a million integrators for it.
So the key there is now integrating that in with the routing software, Sonia, 1 point of entry. We've got the data going into the different platforms. We're getting more robust real-time dashboards. We do get dashboards now, but more real-time dashboards. So now the decision-making will be more robust. And again, the ability to squeeze more into a route or understand our route dynamics will only be better. And so that G&A technology investment is very critical because it will allow us to scale, it will allow us to build that business better.
And as you know, Amr, we don't want to ever sit. We keep -- we stand still for a second, someone also catch up to us. So for a company of our size, we want to be nimble and agile, and this is the time to make those investments while paper prices are good. These are the time to make the investments while we're still agile and nimble because these are technology platforms, and we're also moving to Azure as well. That's the backbone of it. These are time to make the investments that allow us to scale for a long time because Salesforce is the ultimate total recalls. These are the ultimate finishing softwares. So again, long answer, but I think it's important for all of us to know and all of our shareholders and partners and -- to know that these investments we're making in technology, while we have a good opportunity to do it, these will pay dividends for many, many years. So it's a good time to do it.
That's great color and I fully agree. Can we go back to your comments on your M&A pipeline. How are discussions with targets evolving in light of the high paper prices. Is that sort of hindering discussions? Or do you feel there's a good appetite to sell in what is a tough operational environment?
Yes. I mean, obviously, there's some folks out there that they go, well, paper prices are high. This is a great time to sell, my evaluation is going to be super high, all that. I think those that know myself and Harjit and us generally at RediShred, we recognize that you've got to sort of normalize that out. You got to sort of say, okay, what is sort of that 10-year average of paper and use that as part of the valuation methodology. Now some -- you lose folks because of that, right? Because there's folks that go, wow, papers is paper, and I'm getting it now.
And that's fine. Someone else might buy you and give you credit for that. That's fine. That's not the way we do it. That's not the way we approach it. And I think it's logical. The good news is there's lots of independents that do understand that. And so -- and franchisees understand that for sure. And so we do that piece of it, which is good. Of course, look, I mentioned earlier, there is fatigue out there. It's been a tough 3 years. If you're an independent, it's -- boy, it's been tough.
And I feel for those small business owners, they've worked hard. They've done everything they can hopefully. When they're looking to sell and they knock on our door, they get a good outcome, and we get a good outcome. And that's been our approach. And -- but yes, we have to be -- we have to run the numbers. We sought to be have a methodology to this, which we do. And the good news is the pipeline is good. We've been -- we've been working this industry for now in an M&A view for the last 5, 7 years. And there's so many people that now come to us and go, "Yes, I spoke this 4 years ago, I'm ready. Great." And of course, we have a methodology to keep in touch with them throughout all along as well, including subcontracting accounts to them. So again, long answer Amr, you're asking all the loaded questions here.
Our next question comes from David Ocampo of Cormark Securities.
I just had 1 question and 1 follow-up. Just on the rate increases that you guys implemented for July and August. Do we expect that rate increase to fall directly down to the bottom line since you guys have been beating those inflationary pressures over the last 1 or 2 quarters?
Yes, some -- a good chunk of it. I mean, the only one downside there is we do our wage increases July -- we do a July to June sort of performance evaluation timetable. So there was waging -- some wage increases that went through in July. On the driver side, we've been a little more agile if we weren't waiting for that period of time and for a good reason that we did wait, we wouldn't have drivers. So look, we should see a good chunk of that flow to the bottom line. I can't say all of it because, of course, we did do wage increases in the -- to start the third quarter.
And Jeff, I know you talked about this in the past, but any thoughts on implementing fuel surcharges just given the volatility that we're seeing with fuel.
Right, no, not right now. We did the price increase, and that price increase is more than enough to cover that fuel increase. And -- and the reality is that fuel does go up and down. And when fuel goes down, I still want to -- I don't want to -- fuel surcharge has to come down with a fuel. It does. And we've seen many of our competitors' invoices and it goes up and down. The price increase, we do not get back -- and the reality is that there could be other costs that go up over time. And so we have to protect our margins, and so we view that price increases a more permanent protection program, if you will.
And I think that's the best approach. And you know what, from a client perspective, remember, we're targeting small medium-size enterprise and small medium-size enterprise they think more consumer like. And I don't know about you, but I hate seeing any type of fuel surcharge or things on my cell phone bill, cable bill, all those wonderful things. So the psychology of that client is a little bit different than, say, a Royal Bank of Canada that might be more understanding of fuel surcharge. So it's a great question. I get asked that all the time. And you know what, we -- I think the approach we're taking is a good one. It's a transparent one and knock on wood, the churn so far has been very, very -- almost nothing.
Our next question comes from Nick Corcoran of Acumen Capital.
Congratulations on the strong quarter. A few of my questions were already asked, but maybe just to start on the cost side, have you seen any improvement in fuel?
Slight, Yes. Slight improvement, which is good. And look, it's still way higher than we've ever seen, but it is -- it has come down a little bit. We'll see if this continues that way. I guess the only good news here right now is paper continued to go up and fuel came down a little bit. Just the last month, 1 month doesn't make a trend, but that's good news.
And then I think about your drivers have you seen losing in that market? Or does it still remain really tight?
Say that one more time, Nick. Sorry, I didn't read that.
Yes, yes. I'm just trying to think of the market for drivers. Has that loosened up at all? Or does that still remain really tight? I know you've done some wage increases as well.
Yes, there is some regionality to that. And -- but overall, we've seen a little bit of loosening up in some markets but not all. And -- but we're -- I would say it's gotten a little bit better. And I think, again, that's a sign of what might be to come as a couple of things happen there, right? So again, a lot of folks came out of the market during COVID and now they're coming back in. And -- our goal, though, frankly, is to hire the best drivers, the best drivers weren't sitting at home during COVID. And by hiring the best drivers, they take care of your trucks, they take care of your clients. So that's been our approach. And yes, there's been a little bit of loosening up to find those good drivers, which we're really happy about.
Good. And then a housekeeping item. Just looking at your MD&A, it looks like the tonnage process was -- and maybe just the wording but these revised from 13,700 to about 16,000 in the comparable period last year. Can you help me understand what the reason for that was?
The uptick -- total uptick?
Well, no, it's the comparable period last year was revised up.
Yes, I'll have to back to you on that. I don't have -- Harjit, are you online. Have you got that number if you want to give it to Nick.
Sure. I think on that one, there was a bit of a mathematical issue in the comparative period last year. So we just adjusted it to reflect the updated tonnage because we had access to some additional information subsequent to when we released in the comparative subsequent to when we released in the prior year. So we did update that number to reflect the correct number.
Good. And then I think about the tonnage 16,500 this quarter. Is that a sustainable level? Or did you have a pure revenue, your kind of onetime tonnage but might have boosted that up?
Sure. So I think -- Sure. In terms of the tonnage, so that's more sort of tied to our sort of shredding business, right? More so. So if you look at our shred business, so as that generally grows the tonnage will generally increase as well in line. Well, it won't exactly match, but that's the general trend. And so if you look at those tonnage levels, those will be more sustainable than some of the other metrics, which are more based sort of or dependent on things like commodity pricing and such. But the core tonnage is tied to the shredding, so that should be a more sustainable measure going forward as well.
That's good color. And then you mentioned in your prepared remarks that the truck deliveries have been delayed, but you start to see them in Q3. Can you give any indication of what you expect for deliveries in the back half of the year?
Yes, we should catch up. We should catch up. That's what our vendors are telling us. And again, the proof always in the pudding, but we are -- I've been signing a few more documents recently, so that's a good thing. So -- and trucks are getting into markets and are being deployed. So that makes our operations team happy. It makes our sales team happy too, they have more capacity to sell into. So far, so good. So we're hoping to make up the backlog here in the third quarter and into the fourth quarter, positions ourselves well for early 2023 for sure.
We also have been proactive. We've been planning out our truck buys for next year and working with our truck manufacturers. They have dedicated slots for us. Now we did have dedicated slots this year and look, they didn't control part supply in their production. But I think I saw some recent reports manufacturing inventory reports, and there seems to be a bit of a better news on the inventory side. And I think we're seeing that ourselves through the delivery of these new trucks.
Good. And can you give any ballpark what number you expect?
On the number of trucks?
Yes, exactly.
Good question. Yes, you know what, I'll get back to you on that. I just want to confirm, there's got a couple of vendors we're buying from. But I do -- I mean it's double digits, for sure. I mean I think we've got another 10 coming in, or around 10, but I'll confirm that Nick with you.
Yes, that sounds about right, though.
Our next question comes from Ben [indiscernible] a private investor.
Congrats on another great quarter. I was wondering if you could please comment on the status of your new franchisee development pipeline. I think it's been some years since we've seen new activity there. Curious what kind of white space you're seeing in that market and any challenges or opportunities you're seeing in that initiative?
Yes, you're right. We haven't developed many new franchise territories over the last little while. Our growth and footprint is -- could be franchisees. It could also be M&A. And I think that's really -- I want to really bring it to that as that footprint growth, there's more probability that being M&A than it is franchising. And I'll tell you the reason why. And by the way, we have great franchisees. We have wonderful franchisees. They do a great job. We want them to build a great business.
And one of the things I didn't mention early on is one of our strategic objectives to support our franchisees and help their unit economics to be the very best that they can be. But having said that, launching and initiating a franchise is heavy lifting on the front end. And it's also tough on the franchisee, too.
They got to go through 18 to 24 months of negative cash flow before they get to cash flow positive. And then, of course, there's a couple more lean years. And then it gets really good, by the way. I mean, the last 5 years of our franchise agreements, we signed 10-year franchise we mentored, were very good. So franchisees need to have the financial capability and capacity to do this. So one of the challenges we've run into in the last 5 years is the type of franchisee, the profile of our franchisee are typically high net worth individuals from corporate America.
They've had very good positions in corporate America to typically VP or higher. They're earning a lot of money in corporate America. And so it's difficult for them to make the decision to say, I want to burn gas for a few years and give up this very lucrative highly successful 6-figure job. And then we also look at the demographic, typically the -- our franchisees by time they're in that position at late 40s and early 50s and then they got kids in college and all that, where when we typically win on the franchising side is during recessions because corporate America has released some very great talent.
And that's a lot of our great franchisees -- all of our franchisees and all of them are great. It's where they've come from, for the most part. And so that's been the challenge that we've had. So why not refocus our energies and efforts to something we also do very well, which is acquisitions and acquire franchisees in open new -- sorry, not franchisees, independents and open in new markets. A good example of that was in 2018, we bought Safe Shred. We weren't in that market in New Jersey. We wanted to be in that market. We bought it, and we continue to buy in New Jersey, which is great.
There's lots of independents there. And we're targeting a number of locations along the East Coast that we're not in. and in the Midwest that we're not in. We don't have a presence. We're targeting them. In those cases, we are to buy -- we look to buy larger independent so we can have the right base of opportunity -- a right base of operations because what we don't want to do is go cash flow negative on those either. So then great question. I hope that answers it. If it doesn't, keep coming for me.
No, really helpful context. And maybe a nice segue into my next question, which is as we think about the current M&A pipeline, could you give us any color on how you're thinking about financing for acquisition targets just given the rate environment?
Yes. Look, I guess, the position we're in right now is we've got the cash resources. We've got the financing with our bank and our banking relationships are strong. Our balance sheet is strong. yes, rates are going up. And so we have to be mindful of that. That plays a role in how we look at these and how we value these, of course. And -- having said that, in the historical context, I mean, even if you go back 5 or 6 years, we were financing acquisitions at 6%, 7%, 8% debt and we're not quite there yet. We're not 7%, 8%, 9%. I mean, way back when we were at 10%, we were still making money. So if you look at the context of this historically we're in a very good position. And as Harjit mentioned, we're also producing cash flow. So if you think about the smaller deals, we do the smaller deals out of cash flow, it doesn't -- we're able to do it and win at that.
And then, of course, the bigger deals, larger franchisees, larger independents, we're going to have to come in with debt and equity. And the good news is the financing is there and continue to work with those partners. So -- and we have to assess, we have to look at where rates are and if rates go back way, way high, well, we're going to be agile and think of the right way to go about it. Now the good news is, I guess, as rates go higher, valuations come down, and so the equation typically works out.
Our next question comes from Devin Schilling of PI Financial.
Congrats on the strong quarter here again, Jeff. Just looking at your scanning and your e-waste business, it's obviously another really strong quarter of growth here. Maybe you can share just some maybe internal targets on where you see this growing as a percentage of overall revenue in kind of the years to come?
Yes. If I think about the scanning, I will start there long term. And the scanning business is one that's actually more agile. And -- so the idea here is we've got a great hub and base of operations in Massachusetts, that we bought that from a franchisee almost 2 years ago now, 18 months ago, more than 18 months ago. And then the nice thing is now the team -- we've got a good team leading that.
Our VP of Marketing, Francesco is now leading that on the PROSCAN side, which is great. And so he's replicating. He's creating the playbooks to replicate this the right way. And here's the good news. We land a big contract in Chicago, as an example. We can deploy people and scanners typically within 6 weeks to start executing on the contract. And why do I make this statement because then that sort of leads to, okay, well, we just sort of do the simple math, right? If we can get -- and again, the overheads in this, we're using existing space typically, we're using the existing space unless you get very large -- once you get past $1 million, you might need more space to house more people and more paper, but you can use the existing space which is great.
So you can use that base of operations. So we're not burdening a ton of overhead here. In fact, we're getting better return on invested capital. So now let's do some math, right? $250,000 times 10 locations, there's another -- that's $2.5 million on top of the trend right now, we're going to be cranking over $2 million this year on the scanning side of all things go as planned.
So now you're at a $4.5 million business, right? Get to $0.5 million, right now, we're at a $9 million business. The key here for us is creating the playbooks. We have a dedicated PROSCAN salesperson. They're based out of mass, but they're not just selling into mass. And that's the other beauty of this. We can leverage that person. We've enabled all of our salespeople and our shredding salespeople are landing scanning jobs now. Why they're going to our existing database of clients, those clients trust us and we're getting share of wallet and we're getting those clients. So we're starting to land that way. And again, the team is agile to go out and get that. So kudos to Dave Knowles, who's our VP of Sales, working with the sales team to enable them on something new, Kudos to Francesco for replicating and creating the playbooks here, and kudos to our local management to identify these opportunities as well and be ready to take them on.
So does that give you a little color where this can go?
Yes. That's very helpful on the scanning side. Maybe you can just touch on the e-waste side as well.
Yes. e-waste is -- so e-waste, the one challenge of e-waste and it's the reality is you need warehouse space, right? And so that return on invested capital is not as good because -- initially. So where does the e-waste make sense? So why is it in Kansas. Kansas makes a lot of sense. We've got -- we are baling paper there. We have the warehouse space. It's a hub in the Midwest. We can go from there and go and get e-waste from Chicago, Oklahoma, all over the place, we can get the e-waste, which is great, but you need to -- there's a bit of a fixed cost component because of the warehouse, right?
So right now, what we're trying to do is just expand in the Midwest sort of going north and going down. That's the idea. And the e-waste business is responding well. There are a lot of buyers for the refurbed items. Of course, hard drives and everything like that is destroyed securely. So that's positive. I think with e-waste, we will look at other centers. And the nice thing is all of our proshred locations do a bit of e-waste. We collect e-waste in every location, smaller volumes, we typically will work with a partner.
But if we start to sense demand in an area and we can obtain real estate in a lower-cost manner, and then add baling at the same time, then it sort of makes sense for us. So I think with the e-waste, that one may not grow as fast out of the gate as scanning. But I think over time, as we get larger on the proshred side and need warehouse space for baling paper, then this will make a lot of sense because why not just add another 5,000 square feet of warehouse space and now you've got -- and now we can deploy an e-waste business. So I think that will be slower. But in the long run, it will catch up as we grow our shred business.
Yes. No, that's great color. I guess last one for me, just a bit of a housekeeping item as well. Maybe if you could just refresh what your 10-year average paper price is sitting at now?
Probably a little higher. It used to be $135. I think it's around $140-ish. $135 to $140 is sort of where we're sitting.
This concludes the question-and-answer session. I would like to turn the conference back over to Jeffrey Hasham for any closing remarks.
Yes. First of all, thank you to all those that ask questions, great questions. And of course, we appreciate those. And again, thank you to everybody on the call. Thank you to the team, all of our employees, all of our franchisees, all of our board members, all of our shareholders can't do it without you all. And look we're around if there's any follow-up questions. Otherwise, everyone, have a great end of summer. Have a great Labor Day weekend, and we'll talk soon. Bye-bye.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.