Q3 2019 Earnings Call
My name is to me, Jason I'll be your conference moderator for today.
This time, all participants listen only mode. We will conduct a question answer session towards the end of this conference call.
We expect this cost teach included in about an hour.
A reminder, this call is being recorded for replay purposes. The replay of the call will be archived made available on the IR section of Gentex website.
I'd now like to turn the call Overachieve, Roger Sachs head of Investor Relations at Genpact. Please proceed sir.
Thank you can be true yes.
Afternoon, everybody and welcome to Gentex third quarter earnings call.
Our results for the quarter ended September Thirtyth 2019, we hope you had a chance to review our earnings release, which was closer to the IR section of our website Genpact dotcom.
Joining me in New York today or Tiger Tyagarajan.
President and Chief Executive Officer.
It's Patrick our Chief Financial Officer.
The agenda for today will be as follows.
Try to get will provide a high level overview of our second quarter results third quarter results and update you want to strategy and will then discuss our financial performance in greater detail and provide an update on our outlook for the year.
Tiger will then come back for some closing comments, we'll take your questions and ask Dimitrios just noted we expect the call the collapsed roughly an hour.
Some of them out as we will discuss in today's call or the one looking.
Forward looking statements involve a number of risks uncertainties and other factors that could cause actual results could differ materially that was in such forward looking statements such risks and uncertainties are set forth in our press release.
In addition, during our call today.
Refer to certain non-GAAP financial measures. We believe these non-GAAP measures and provide additional information to enhance the understanding of the weight management, because the operating performance of our business.
And find a reconciliation of these measures to gap in today's earnings release.
The IR section of our website.
That let me turn the call over to target.
Thank you Roger good afternoon, everyone and thank you for joining us today for 2019 current quarter earnings calls.
I'm very pleased with our third quarter results as we continued to see broad momentum across all business.
Demand for our transformation services that feeds on your T. intelligent operations remains the primary driver of robust global client growth.
Strong operating performance led to a healthy dr. Libya on Olberding gas flows during the quarter.
We have embraced the experience economy using design thinking oh, the level to create value across blinds operations.
I'm a key factor in our winning many new knowledge medallion relationships.
We believe that pending acquisition no right point I'm very digital consulting team dramatically enhances our already strong capabilities and experience on further strengthens our prediction.
You don't anticipate.
Specifically during the third quarter on a constant currency basis.
Total revenue increased 19% gober bonds revenue increased 13% nobody keep your revenue increased 14%.
Older delivered adjusted operating income margin of 16%.
Referred you'd be at 56 cents up 17% year over year.
Our children verticals and service lines continued to be underpin a greater.
Our being transformed by digital technologies as well as insights derived from data analytics.
Let me share a few you ought to do on third quarter highlights that showed a continued success of our strategy and execution.
Gone growth was driven by strong performance in our consumer goods retail banking capital markets on high Tech vertical.
We saw continued growth in Gi driven by the new large deals signed late last year I Gotta transmissions. All this is book.
Got it looked like girls Britain's oldest revenue was up over 25% you all wheel drive.
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Having more definitely a neighborhood audio de beers intelligent operations.
Approximately 40% of total revenue now consists of commercial models that are not based on 50 pricing up from the mid 30% range. A couple of years back about solutions increasingly leverage advanced technologies on analytics to deliver outcomes.
Beyond lower cost and productivity.
Our pipeline remains healthy driven by strong year to date inflows with a consistent contribution from log view on the recent Boston.
Yeah acquisitions of bergamini on risk gondolas expanded our capabilities and supply chain services on financial Grinds. Russell. This is in banking leading to more than a five four degrees in our pipeline football do so this is what I guess, who left the nuisance create the impetus for transformation.
Our strong when Rick highlighted our differentiation and competitive situations and finally sole source deals remain at approximately 50% of our bookings.
We believe a key factor in recent large deal wins it all representation of the confirmation talk to you, though with the ability to deliver end to end domain and process like solutions that leverage consulting on digital technologies.
Building on our proven track record of providing innovative solutions were growing Rostov iconic brands in the industry as of August . We recently won a new strategic relationship with Cardinal health.
A major pockets of burned in the broader healthcare life Sciences industry, where we will help transform weaponize operating model.
God knows how it was saw that Bianca blind hard on new data analytics on F. B anyhow in central Ohio to drive industry, leading innovation.
Never didn't get box deep expertise in digital technologies analytics finance and operations excellence, the Hopper drive industry, leading transformation into highly under penetrated on critical did on mix it up the other functions.
More accurate real time, good on that except allows bet on more insight for decision, making for our clients.
This new center was zone as an integral part of our growing network, albeit away from hubs, where do you work with lunch to Reimagine business model.
We are seeing our market rapidly change would experience moving front on central and many other services redesign and run for our clients.
Market forces have elevated experience from primarily a front end customer briefing need do a key strategic level that companies see other differentiating factor to create value across their front middle and back office operations.
What's the digital transformation moving beyond the CIO.
He was being created by driving two weeks Breeden's, let Johnny that re imagined so I don't organizations, a seamless end to end enterprises.
We believe the fusion no process innovation and experience in a wish him well how blinds change the way they walk on getting a competitive advantage in the markets there's no.
A few years dock weirder depart use on customer experience as one of the curator kind of technologies that what's critical do automation to AI based platforms going backwards.
We have bought done them seven to provide a solid stake in the ground and experience undergoing thinking capabilities.
Over the last two years, but down from 70 him a broken could be a critical differentiator in dry docks ability to win and drive lots skill underwent transformation Brock lines and a few source of value creation and many of the large deals we have one.
The market has validated our strategy as we have one significant deals during the last 18 months.
I would never have been possible without her experience capabilities, leading to outcomes beyond cost savings.
Together with our clients, we are building and driving enough people solutions around experienced led transformation.
Just a few weeks box, we announced the pending acquisition, a REIT point, a leading experience digital consultancy to deepen our capabilities and disappeared and accelerate our ability to drive transformative outcomes for clients.
With this acquisition, we believe jump up you're gonna unique position to bring prosper onyx be rems together in an unprecedented way.
Blinds drive true end to end digital transformation and when in the growing experienced economy.
We believe our ability to connect fronts to middle and back offices will make a huge difference dropped lines.
We have orchestra that digital transformation journey.
I also want to update you on our partnership program that for a large new routes to market.
Expands on new commercial motor deployment and accelerate solution development by leveraging our target its oh, because it's simpler.
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Collaborating with colonus to combine their leading edge profit mining technology dragged into part inefficiencies in customer buses.
Got married with our digital and operations expertise, we are able to provide detailed strategic roadmap for process improvements to help accelerate digital transformation.
Next boxspring with Dillard on one source watches we launched a novel and flexible financing of the service solution called Genconn boot using Wap games, the scale admonished lines finance operations in the close.
The solution automates, various transactions announced offices freeing up time for employees to engage in high value walk.
Given our strong year to date performance our bookings pipeline on inflows. We are confident we will achieve our double digit to low teen medium term global bond revenue growth target.
We shared during our recent Investor day.
Dot, let me turn to follow with right.
Thank you Tiger and good afternoon, everyone.
Today I'll review, our third quarter results and provide an update on our full year financial outlook for 2019.
During the quarter, we generated total revenue of 889 million, an increase of 90% year over year, both on an as reported and constant at constant currency basis overall business process outsourcing revenues, which represent 84% of our total revenue increased 20% year over year total IP services revenue grew 12%.
Global clients revenue was 768 million, representing 86% of total revenue increased 12% year over year or 13% on a constant currency basis.
Within global clients VPO revenue grew 14% those on an as reported and constant currency basis, largely driven by the impact of large deals and the growth in transmission services. It was up over 25% in the quarter and contributed more than 25% of total global client revenue.
Global client IP services revenue was up 4% year over year.
We continue to expect expand relationships with our global clients across a range of our targeted industry verticals for the 12 month period ending September 32019, we grew the number of global client relationships with annual revenues over 15 million to 52 from 45, including client relationship with wouldn't 25 million and annual revenue increasing to 25 from two.
22.
Revenues were 121 million up 88% year over year, driven by the new large deals signed late last year as well as transformation services work.
Adjusted income from operations for the quarter grew 15% to 142 million and our adjusted operating margin was 16% compared to 60.6% in the prior year period that included export subsidy income of $5 million.
Adjusted operating income margin expanded sequentially by 60 basis points, driven by higher gross margins at ESG operating leverage.
Gross margin for the quarter was 35.5% compared to 35.6% during the same period last year.
The positive impact from the improvement in transmission services.
Utilization.
I was offset by lower gross margins from the new large deals that are in the early stages of the ramp as well as higher stock based compensation.
Total operating expenses were 195 million compared $168 million in the same quarter last year.
As a percentage of revenue asked you to expenses declined year over year by 60 basis points, primarily driven by operating leverage.
Adjusted EPS for the quarter was 56 cents compared to 48 cents last year.
The eight cents increase was driven by higher operating income of seven cents, a lower effective tax rate of two cents, partially offset by one said related to lower foreign exchange balance sheet remeasurement gains at higher net interest expense.
Active tax rate was 20.5% compared to 24.7% last year. It was elevated due to the impact from the U.S. tax reform in 2018.
Third quarter 2019 tax rate was a bit lower than we expected due to certain discrete benefits recorded during the quarter.
Now, let me turn to our cash flows and balance sheet.
During the quarter, we generated 220 million of cash from operations compared to 153 million last year.
The incremental cash flows were driven primarily by higher operating income and the expected collection the export subsidy from prior periods.
Dsos 87 days were in line with the second quarter, we continue to expect our dsos to improve in the fourth quarter to the low to mid 80 day range.
Our cash and cash equivalents reported 57 million compared to 401 million at the end of the third quarter of 2018, our net debt to EBITDA ratio for the last four rolling quarters was 1.4.
With Undrawn debt capacity of 253 million an existing cash balances, we continued to have sufficient liquidity to pursue growth opportunities and execute on our capital allocation strategy.
During the quarter, we returned 40 million of capital to shareholders. This included approximately 60 million in the form of a regular dividend of 8.5 cents per share.
We also repurchased approximately 600000 shares totaling 24 million at a weighted average price of $39.29 per share during the quarter.
Since we initiated our share buyback program in 2015, we've reduced our net outstanding shares by 17% over this period, we repurchased 37 million shares at an average price of approximately 26.
Dollars per share for a total of not having 70 million.
We currently have approximately 280 million of authorized capacity available under our share repurchase program.
Capital expenditures as a percentage of revenue was 4.1% in the third quarter compared to 5.2%. During the same period last year for the full year, we continue to expect capital expenditures to be in the range of 3% to 3.5%.
Revenues.
Let me update your full year 2019 outlook.
This outlook does not include any impact from our planned acquisition of likely which we expected to close in mid November .
We continue to expect total revenue to be between 3.46, and 3.5 billion representing year over year growth of 15% to 17% or 16% to 18% on a constant currency basis.
The global clients expected full year revenue growth remains in the range of tenant ahead to 12% on a constant currency basis.
Continue expect adjusted operating margin to be approximately 16% for the full year, we continued margin improvement during the fourth quarter.
We are increasing our full year adjusted earnings per share expectation to be in the range of $2 in two cents to $2 a four cents up from our prior outlook of $2 to $2 a two cents due to the favorable impact from balance sheet FX remeasurement gains with that let me turn the call back over to Tiger for his closing comments. Thank you at all.
Our results for the third quarter, our continued reflection of our focus long term strategic journey playing out in the marketplace.
We expect to end the your strong setting the stage for 2020 and beyond.
We're continuing to deepen and grow many of our strategic relationships and all verticals and we expect more of them to eclipsed 100 million dollar annual revenue level going forward.
Our targeted capability acquisitions have been a fundamental driver of our growth and accelerated our boss to become a crew transformation partner for our clients.
With the macro uncertainty, we see all around us, we like the durability and resiliency of our business model through economic cycles.
Our business is primarily made up all annuity like revenue streams derived from design in transforming on running mission critical operations for a set of strategic lines in the industry verticals of our choice.
We take tremendous pride in our ability to help our clients navigate the many different challenges associated with the ups and downs of an economic cycle.
The more we become a trusted advisor on Bognor. The more we can to about lines drive change so they can better compete in their markets.
Well, it reducing fraud optimizing inventory levels, creating overall operational efficiency to increase profitability on improved working capital, while providing better experience front to back to help drive market share gains through growing revenues. We are there to help clients to any changes in the broader economy.
At the same time, we're also constantly on proactively looking inside our own operations to be sure. We are in line with the best in class metrics.
Different jobs, we remain a job nimble and relevant to sell about lines in the best way possible through innovation.
Lastly, you would've seen our announcement Aarding Stacy contract or the newest member of our board of Directors safety has an impressive track record of leading on transforming numerous companies I'm going to be a grid offered to jump up.
With that let me turn the call back although Roger.
Thank you Tiger, we'd now like to open up our call for your questions. Demetrius can you. Please provide instructions.
[noise] as a reminder to ask a question you need to press star one on your telephone to withdraw your question.
The pound key please standby, while the compared to Q and a roster.
And our first question comes from Dave Koning with Baird You May proceed.
Yeah, Hey, guys great job again.
Thanks, Dave. Thank you yeah in I guess I was I was wondering you know as we look kind of forward and you talked about in the global client business growing kind of low double to low teens.
Is it this year was so good does that create a little bit of a comp issue in 2020 or is your pipeline. In then plus obviously the acquisition I would imagine is on top of that is that enough to sustain that type of growth.
Next year.
So David if you look at our global client growth.
It's not been that's different as we you know showed you in the during Investor day actually over the last five years ever since we finished our Oh, it's pretty good exercise five years back on narrow down does hurdles vertical. So this is a geography, so I wouldn't necessarily say that global client.
Growth off 2019 creates a challenge for 2020, obviously, we are as we all know in slightly on certain economic times was the all that plays out but barring any of that our pipeline inflows are strategic value proposition for offline, we don't even thought about all of that.
Great. Thanks, and then just I guess my follow up gross margin has got a long ways. This year just to stabilize which is great to see and that's despite all the kind of ramp costs. So some of the big deals are we to a point now we're.
Pretty soon in the future now you know you probably get the benefit of of even a leverage on some of those the ramps and stuff that we can actually stabilized even improve on the gross margin.
Yeah, I'll just kick it off and then Ed will jump in I.
I think you're absolutely right, Dave you actually pretty much has been able to hurt we feel very good about the stability and gross margins.
Obviously, there are puts and takes him that purely the big deal or when we went up big deal. Its docs typically are lower gross margins now going into the future where typical portfolio should work is that new big deals come in.
They will have pressure on gross margins, but the old big deal. So you know one way to think about this is this is we believe this is a good stable gross margin environment.
I think I think tiger covered it I think we had this year the improvement in the transmission services particular consulting margins given given the channels. We had the for sale last year. So that feels really good place their large deals are ramping that just mathematics. So that's that's a stability so to the extent that we have more large deals tiger and I are kind of happy that we had them. So we'll deal with it.
We'll have improved in the existing or just the accounting as we get new deals we'll deal with the initially lower margins on the new deal. So we feel good about where we are in the path for as we get into 2020.
Sounds great. Thanks, guys.
Good.
And our next question comes from Joseph Foresi with Cantor Fitzgerald you May proceed.
Hi, I just wanted to get a sense of and I know, it's a little bit early to be asking for it but.
Any goal posts around how we should think about the model for 2020 I think in the past we've talked about Gee, maybe moderating to more normal plus or minus two or 3%.
It sounds like the pipelines good enough to support that double digit.
Global client growth, we've always talked about margin sort of slightly going up but I wanted to see if you are willing to and ready to put out some goalposts out there.
Just for modeling perspective.
I, we haven't changed the model Joe at the Investor Day, we talked about growth Tiger just talked about kind of our comfort level and consistency of global client growth being in that double digit to low teen range. So we haven't changed medium term expectation and we haven't said, we haven't come off of the expectation to deliberately improve margins while at the same time investing to ensure we drive.
That profitable growth going forward. So no real change of the model will guide you to 2020, but you are what you said was not all at all from what we've said previously that's correct.
Got it Okay, and then on demand for 2020, How's your visibility there and given the strong performance. This year have you made your way through a decent amount of a pipeline for large deals does that need to be replenished.
Replenishment draw up large deals has been we has been oh, it had been but how do we have been going well and.
You know that's driven by the inflows which are being strong.
So obviously, while we burn through.
The pipeline through New news day inflows helps keep the pipeline I've got to level. So I wonder visibility is a similar to the visibility weve hogs and the last few years.
More importantly, what what's clear in the last three or four yards is dot visibility is specific to our choices and that makes a big difference because then you.
You know then you have real differentiation when you go into the marketplace and are convinced declines to dwindle a relationship.
Got it last one from me what was your organic growth in the quarter.
It was largely aligned Joe we will talk about quarter, but for the year about appointed impact from M&A.
Got it perfect. Thank you.
Thanks, Joe.
Okay.
And our next question comes from.
Im seeing Hong with JP Morgan you May proceed.
Thank you good afternoon I was curious.
Just on the right point acquisition why why is that a good fit for.
For for Genpact unknown controls business, obviously can be tricky sometime soon what can you tell us but that asset that appeals to you.
No 100, our you know there was other was explaining in my prepared remarks.
We have been over the last two years.
Specifically in the last two years offer the tandem from an acquisition, which was a very deliberate strategic charge that we made and having such turnaround.
Finally acquired condom seven dot team working with each of all verticals or realization that both from a customer perspective as well from from a user perspective, both in the BDC environment out in the beat would be environment.
Almost every one of our operations for our clients and operation that outlines run for themselves.
The importance of experience has just skyrocketed.
We've seen that in our deals we've seen that in the weight on them. Seven has got included in so many of our big deals are not being one of the reasons. We are one so we believe that the right burned acquisition.
It's coming in at a time when.
All of our clients.
Hi demand around this topic, we believed that we can bring them into a number of the deals in the verticals of our charters and there's obviously a lot choice.
Same time.
They continue to have a great engine of their own.
A reasonable scale business, it's not a small business and it has a it has good traction in the marketplace with.
Client overlap I know vertical overlap that's very strong so we really feel good about extra about the de that's coming in.
Okay. Good there's just one quick follow up on the margin side it looks like.
Year to date margins, you're running at 16 and a half I think your guidance is for what 16 for the year or so.
Bump up in the fourth quarter I just wanted to make sure. We're letting this this up correctly.
And any color on the fourth quarter, you're right because if you were kind of along the lines of where we were last year last year. We were 15 three year to date through Q3. This year were 15, five so kind of on track, but with a hurdle to get to the ended a 17% range in Q4, so lot of that will come from as you typically expect can.
As we typically do through leverage topline leverage looking to drive a little bit better gross profits also get SGN a leverage.
But at the end today, we've also had some expectation in the past the of the export subsidy earlier. This year, we kind of reaffirmed all throughout the year that we still are expecting it the likelihood of that continue to drop a bit as you as you get into the year now our expectation is that that will likely will not come through so we've we've been.
Weighing we didnt weighing what to do throughout the year anything kind of putting action plans in place kind of on a step function. If you will as that as the likelihood of that export subsidy became lesser and lesser throughout the year. So discretionary spend as you as you know.
As always been.
[noise] looked at pretty tightly we're looking at that we've looked at even more closely in Q3 and considering other actions and as we look into 20 into 2020 as we typically do looking at actions that we might look to do to dial up and dial down.
Including looking at customer relationships and service line investments that we may need to be to be dialing up are dialing down throughout the year. So some of the things that we're looking to do and also as we would typically do looking at our asset portfolio.
Identify any undervalued assets that we may be able to monetize during the quarter as we've done before as well so looking at all believers discretionary spend dial up dial down and whatever else. We can do to make sure that we that we deliver.
I would say is we feel good about our ability to drive the 60% margins for 19, but we still have work to do during the fourth quarter to make it happen for the long term again, no change in our and our trajectory or derived to deliver really improve operating margins. While the same time reinvesting business to drive that long term profitable growth.
Makes sense. Thank you.
Got it.
Thanks.
And our next question comes from my Onec tandem with Needham and company you May proceed.
Oh, Thank you Tiger at the recent Investor Day, you called out some of the newer service areas, specifically supply chain management services and financial crimes, maybe just talk about the contribution to growth. How you see that playing out and is that going to actually inflict the topline or do you think that's more about offsetting some of the maturity in sum up the core areas.
Such as M&A and claims processing as an example.
I think all growth for the yard.
Particularly in inflows pipeline bookings and then revenues. So it's in Dot auto clearly has been driven by some of these newer services and we called out two of them or supply chain services in the manufacturing consumer goods, we get life sciences space and financial crimes and risk in the banking capital markets.
Yeah.
Since its starting off at a low bids it's absolutely contribution to growth we'll start off small.
Meaningful, but small and then over time would ramp up because as we explained on the Investor Day Dol total addressable market inboard. These services is massive is it offsetting a finance and accounting as an example, no. We we continue to see finance and accounting as.
Underpenetrated and you know dog relationship with cognizant houses is just one example of why we believe that.
Makes sense and then if I could just talk on another question around the gating factors to growth or would you are basically call out sourcing talent I was the main factor or are there other factors that might limit the growth overtime I just wanted to get your of sort of high level thoughts on that.
What might limit the growth potential overtime.
I would fit the growth that we are.
You have been experiencing in a very consistent manner that said for four or five years not the global client level.
One of growth rate that we would expect to continue which is why we're talking about.
Double digit to low teens global client growth in the medium term.
Gating factor on that I would say it I mean, obviously talent is very important not business I wouldn't definitely called that out as the only gating factor I mean, there is delivering excellence for our clients I would say is they'll most important getting factor we are incredibly careful about the excellence, we deliver for our clients that caused that sets up the base.
This is for doing more with our clients as well as busy reputation doing other plans and not to be announced already for a ever since we came out of begin 2005. So that's how changed at all.
We are big believers in dark so I would say, that's probably a bigger getting factor than just short on it.
Got it a great job in the quarter. Thanks, Thanks Mark.
And our next question.
Comes from Mackie Nolan with William Blair You May proceed.
Hi.
So I wanted to follow.
Hi on a REIT point can you give any financial metrics of bad or maybe a comparison to genpact in terms of the growth rate or the margin profile refer had.
Yes, so the the profile.
Give any the terms yet because the transaction hasn't yet closed but in general the margin profile largely consistent with ours. So that's a good thing as we go through a Tiger said, it's as meaningful levels of revenue so they're not in the at this isn't adjust the capability addition, with X with expertise. It's also come with a reasonable level of a volume and pre.
The good margins, so happy with the profile and as we go forward would expect it to be an accretive transaction.
In Twoq in 2020, it will be somewhat minimal for 2019, but accretive in 2012.
Understood and then can we get a little more information on net finance has a service tool that you spoke of Tiger that you co develop is that like proprietary automation software and just bundled in engagements or would it be priced out separately.
Yeah. It is it is a finance other service. So it's obviously leveraging off love this platform.
In the cloud.
And then on Fernand obviously, when they went loved it gets implemented for finance. It has more deals on a child that that typically go together with it because theyre kind of interact with each other and our solution really is a bundling all workday along with aborting.
The finance operations onto that which is rather do like partnership becomes incredibly important including a though on source.
Oh, the partnership around HR operations, and then go all the commercial motor wouldn't be other covered commercial models. So all of that makes it unique and different I'm ran well get finance is beginning to get implemented in the effect of flags.
Okay. That's helpful. Thank you.
Thanks.
And our next question comes from Bryan Bergin with Cowen and company you May proceed.
Hi, Thanks wanted to start a margin obviously strong SJ leverage here to offset the stable gross margin.
And how much more room do you think you have within senior leverage and I thought I heard a stable environment for gross margin going forward is operating leverage really the model that we should expect here going forward to 2020 beyond.
I think that nothing's changed in that I think Brian . It is as we grow can we grow the support functions a bit less than that topline growth and given the growth has been robust, particularly with the GE.
Revenue coming through were coming back.
It's easy to leverage when you have topline growth it's at the levels, where we are today.
And just to add just to add to what I'm ecstatic.
One of the things back has changed in our business over the last couple years also is because after all value of the what we do the complexity of the work we do.
Dog interconnectedness between the front middle and back office in digital transformation.
Got his o'clock could be down a lot more onshore work on a lot more onshore operations across the globe not just with the U.S. and got does change.
The gross margin profile, our Dod and all of that has already incorporated because that's what that's the change we've undertaken in the company or the last four years and therefore, we feel good about now being stable to be gross margin.
Okay, that's helpful and.
And then I want to ask about content moderation business right to clients. So im shush I'm sure you know our competitor is going to be stepping away from this work how are you viewing that as an opportunity and then broadly your views on that business.
Brian We Oh, we do that kind of look for a range of Cline.
We're very proud of that work that we do Oh, you can imagine it makes a your office I'd say it makes people say so actually we are we're only product backlog that we do.
Like all the work that we do we focus really strongly on operational delivery excellence and so on and therefore, we feel very good about the position that we haven't done business relationship with our clients in that business. So all good.
Okay. Thank you.
Thanks, Mike.
And our next question comes from Bryan Keane with Deutsche Bank You May proceed.
Hi, guys I just wanted to follow up on on the margins on a quarter I think the street had it a little bit higher at 16 aid, but do you guys came in at 16 I was just trying to figure out.
Is that is that where you thought it was gonna coming in and or was there a couple extra costs are the ramp up a large deals that might have been a little higher in the quarter than than you guys. Originally planned.
No I think it was largely largely aligned with where we were.
Ryan in as you know the toggle with the expert subsidy when that was Gonna command really was was dependent but we didn't think it would come in in Q3. So part of that Q4 is the is the uptick that would have expected from from the expert subsea, which as I said, we now expect not to happen. So we got started dialing up the other other items to try to offset that shortfall the export subsidy and that's what.
We are getting after right now so it is aligned I don't remember what the outside what was expecting but I know it was as high a 60 I think it was a little higher than where we came in but it was it was a bit higher but we expected it to be having to be over 17% very early in the year not trajectory, Brian all for our margins through the all has actually been broadly in the direction, we've been going but.
Just one item of exports subsidy being.
Depending on when it comes.
Okay, Great and then just one for Tiger just just thinking about the pipeline of deals are you seeing some of the you know some of the larger competitors are obviously.
Not doing as well as as you guys are so where are you seeing that in the sales pipeline that some of the larger players that you've typically competed with aren't as.
You know a aren't as many pitches are not winning as much as they used to.
I wouldn't say that Brian it is very competitive market.
There's no question that competitive landscape high intensity has introduced.
That's a barrel.
The competitors are very credible respected competitors. So I wouldn't say that are are been great stable.
Our in competitive situation and as I said about 50% of our brought all a wins a sole sourced and that typically happens. When you are inside you've delivered you'll get a reputation which is why it's so important for us to do that so I wouldn't necessarily say that there's been any reduction in competitive intensity.
Got it okay. Thanks, guys.
Uh huh.
Ladies and gentlemen, this concludes.
Your next question on today's conference I'd now like to turn the call over to Roger Sachs for any closing remarks.
Thanks, everybody for joining us on our call today, and we look forward to speaking with you again next quarter.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.