Q3 2019 Earnings Call
Good day and welcome to the Sykes Enterprises incorporated third quarter 2019 financial results Conference call.
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Management has asked me to relate to you that certain statements made during the course of the school as they relate to the company's future business and financial performance are forward looking such statements contain information debts are based on the beliefs of management as well as assumptions made by and information currently available to me.
Each month phrases such as our goal, we anticipate we expect and similar expressions as they relate to the company are incented to identify forward looking statements. It is important to note that the company's actual results could differ materially from those projected bid in such forward looking statements.
Factors that could cause actual results to differ materially from those into forward looking statements were identifying and yesterdays press release, and the company's Form 10-K , and other filings in the S. E. C from time to time I wouldn't my life to turn to coal over to Mr. truck cycle.
President and Chief accept Chief Executive Officer. Please go ahead Sir.
Thank you Julie and good morning, everyone and thank you for joining US today, let's go Sykes enterprises.
Gordon <unk> financial results.
Joining me on the call today, or John job, and or Chief Financial Officer, It and suppose Kumar our head of Investor Relations I'm, a brief remarks about the quarter on todays call and then talk about ourselves opportunities.
John will take you through the numbers and then we'll turn the call over figure with Oh, We did you guys will be able to understand because I'm speaking with my voice. So it's still having some Joe does your it'll go when it out sometimes it will work well go dogs that we felt like it is right [laughter]. So long as you're going to understand me that'd be good so.
Let's start with the third quarter results a woman operation standpoint, we continue to make nice underlying progress.
The range of actions it and composition capacity rationalization price increases and program reassuring starting in late 2017 paid off nicely again in the quarter.
Gross margins in the third quarter reached levels not seen for similar periods since 2010.
Operating margins in the third quarter getting better than expected both relative to the year prior and to projections.
As a complement to that we revised our operating margin projections upward for a four year of 29 team, which is further testament of our operational strength.
Increased our capacity rationalization or capacity utilization to 73% from 70% in a year ago quarter.
While maintaining a diversified client base and which no one client is greater than 10% of our overall business.
Also in the quarter, we sustained our strong balance sheet net cash position. This has enabled us to not only reinvest in our business, but it is also allowed us to return cash back to our shareholders through our share repurchase program. So overall, we continued to be pleased with the progress we're making.
Let me now talking about the revenue dynamics in our business. We continue to feel positive about ourselves momentum and we're comfortable with the current 2020 couldn't since it was revenue growth projections, what's giving us confidence about revenue trajectory is first.
There is deeper integration among our fall customer lifecycle offerings around digital transformation engagement services and digital marketing a second with the actions we have taken around capacity rationalization and operational simplification, we have closer alignment in our cell.
It was model.
And third the a continued message refinements about our full customer lifecycle value proposition I don't go to market approach is resonating nicely in the marketplace.
While these improvements are yielding results.
They are being masked by the noise from our once largest client for instance over the last four years, our revenue growth on an organic constant currency basis is average roughly 1%, but after stripping out the impact of our once largest client which peaked at 17% of total revenues in 2000.
15.
Revenue growth on an organic constant currency basis jumps to an average at roughly 4%.
Over the same time frame.
Under that methodology, the pace of growth into third quarter of 2019 was trending at similarly strong levels and is expected to even accelerated in the fourth quarter of 2018.
And now that the ones largest client will be just a third of his former size any further reduction in this business should increasingly have diminished impact. Another factor that is slightly masking a revenue growth on a couple of elongated client ramps.
Last quarter, we stated we are ramping new clients and programs some of which are significant and scope and just to highlight the scale and some of these programs. We are on boarding more than 1000 agents.
Now the good news is ever most clients the implementations or right on track, but a couple of clients one who is new to outsourcing in another who is changed the agent in hiring profiles.
It is creating a short term impact on our revenues because we've had to modified our recruitment and training approach for this client which is stretch it out the training duration and the speed to competency trajectory.
But the good news is that with the adjustments. We've made our agents are performing in line with clients targets as they go live.
The client. Moreover has validated this by actually awarding us additional business for several hundred more agents.
So at all we continue to feel confident about the opportunities ahead.
Strategic differentiation around full customer lifecycle offerings is being validated in the marketplace. As a result, we're seeing strong activity across our mix of vertical markets.
Although the buying pattern spans the spectrum. It gave me broadly category to into four groups in the first group. We have legacy clients that are starting out with large 1000 plus seat awards.
In the second group our legacy clients that are just starting with pilot programs.
However, these programs have considerable potential growth given the significance of their customer engagement operations and the third group our opportunities with the emerging brands that have had significant success in the marketplace, but they are having to play catch up with their customer engagement strategies.
These companies are awarding large contracts right at the gate and finally in the fourth root some emerging brands are creating opportunities that are initially small but had nice growth potential as spinal market demand for their services and or products materializes.
Meanwhile, operationally, we believe the actions we have taken position us well to absorb this demand across our embedded infrastructure and to continue increasing our capacity utilization, which will enhance our operating margins.
So in short as the year comes to a close the noise from a revenue growth will fade as the 2020 underlying demand picture continues to come into play and the with Abbott light vehicle loop. The John Chairman John Thank you Chuck and let me turn to our quarterly financial results, particularly key PNM cash flow and balance sheet highlights.
After which I'll turn to the business I would for the fourth quarter on through year, let's start with revenues in the quarter. We reported revenues of 397.5 million vest as a third continent outlook of 400 405 million. This is 5 million balloon midpoint of our business I would also 5 million Delta roughly 3.5 mill.
Ian was due mostly to lower revenues from our once largest client with remained at a function of foreign exchange fluctuations looking at revenues on a year over year comparable basis, we would die not 0.4% on reported basis, but up 9.7% on a constant currency basis by medical market and on a constant currency basis healthcare it was up around.
17% transportation lighten up 12 financial services up 9% technology up 8% all of which was partially offset by the communications vertical down 17 half percent on the other ventricle down 2% and the other vertical we had a couple of programs in the education and energy space that one time third.
Wanted to end to 19 income from operations increased 71% 24.7 million for the open.
Operating margin the increased to 6.2% from 3.6% for the comparable period last year on the non-GAAP basis, which excludes the impact of acquisition related intangibles and fixed asset write.
The Americas restructuring as well as manager instigation call third quarter operating margin was 7.9% versus 7.4% and CP last year. The increase in the comparable operating margins is primarily due to benefits from the capacity rationalization actions.
Which tailed off towards the first half 2019 and improved operational performance.
We delivered strong comparable operating margin performance in the quarter despite costs as outlined in the prior quarters earnings release related to longer than expected ramp because of wins with clients, who are new doctors to outsourcing and doses programs have a higher level of compact complexity on speed to competency.
Third quarter 2019 diluted earnings per share were 44 cents versus 33 in the same period last year.
Due to aforementioned reason, coupled with lower share count, which provided a one cents benefit on a non-GAAP basis third quarter 219 diluted earnings per share were 56 cents versus 59 cents impossible basis. The decrease in a diluted earnings per share on a comparable basis was a function of a higher effective tax rate of five cents per.
Last year, coupled with higher other expenses of roughly two cents per share for the same period last year, partially offset by one cents of lower share count relative to the business outlook range of fortified four to eight cents per diluted earnings per share. The nine cents per diluted share outperformance relative that midpoint was mostly driven by operations.
Turning to client mix for a moment on a consolidated basis, our top 10 clients represented approximately 43% to revenues down from 44% needs of a period due principally to decline in one of our large clients. We had no 10% client in the quarter versus one at 11% in Utica period, driven mostly by load them.
Mine by clients and communications vertical now, let's turn to select cash on balance sheet items during the quarter capital expenses were down 2% of revenues.
Down to 2% of revenues from 2.7% in the year ago period. The reduction capital intensity is largely timing really coupled with a focus on driving utilization of existing capacity in assets treat dsos and consolidated basis for the third quarter was 77 up to these comparatively unchanged sequentially the dsos.
Split between 76 days for the Americas, and 81 days for EMEA, we collected roughly five these want them dsos within the progress within a few days from quarter end.
Our balance sheet as it tends to September 2019 remained strong with cash and cash equivalent of 142.6 million of which approximately 88.9% or 126.8 million was held in international operations and the majority of which would not be subject additional taxes and repatriated to the U.S.
During the quarter, we repurchased approximately 306 9000 shares at an average price of $27 up before.
Per share for a total of roughly $10.1 million, we have roughly 3.6 million shares remaining under a 10 million repurchase authorized in August 2011, an amazing March 2016.
At the Thats in September we had seven 7 million in borrowings outstanding down 50 million sequentially under a 500 million credit agreement. We can we continue to hedge some of the foreign exchange exposure for the fourth quarter, we've hedged approximately 60% weighted average day rate of 52.81 Filipino piece.
To the dollar in addition, considering the cone exposure for the fourth quarter is hedged approximately 57% on a weighted average rate of roughly 603.2 see call onto the dollar.
Now lets turn some seat count and capacity utilization metrics on a consolidated basis. We ended the third quarter with approximately 47500 seats down approximately 2100 seats comparably almost all of the compatible reduction related to the capacity rationalization actions the third quarter seat count can be broken.
Dan to 39700 in the Americas and 7800 in EMEA.
Utilization rates at the end of the third quarter of 2000 and team are 73% for the Americas region, 75% for EMEA versus 69% for the Americas and 76%, let me in Utica quarter. They increased in the Americas utilization was driven by capacity rationalization well reduction in EMEA was due to expansion and utilization of our.
Okay platform as a complement to our brick and mortar facilities.
The capacity utilization ran a combined basis was 73% versus 70% Unico period with the increased mainly due to a combination of previously stated factor.
Now, let's turn to the business slightly we delivered healthy operating performance in the third quarter underlying demand remain consistent with strong trends highlighted in second quarter. In fact based on the opportunities we see across our vertical mix. We are increasingly confident with the current consensus revenue projections for 2020 . This.
Despite the revenue revision of revenues for the remainder of 2019.
Moreover.
Even with the updated revenue revision for 2019, an implied income from operations and operating margin is projected to be higher than what was implied in the previous outlook in July due to strong operational performance.
Second the downward revision in revenue and diluted earnings per share for the balance of 2019.
Relative to the mid point in the prior outlook provides in July at approximately 22 million and approximately three cents net respectively. The drivers revenue changes split roughly equally among foreign exchange volatility lower revenues from our once largest telecommunications client and elongated run.
While the approximate four cents diluted earnings per share impact is primarily a function of higher effective tax rate at previous than previously forecast as partially offset by one cents benefit for more interest expenses relative to the platform.
Our revenues and earnings per share assumptions for the fourth quarter until year 2019 based on their foreign exchange rates as of October 2018.
Further volatility in foreign exchange rates in US dollar functional comes with markets. We serve deliver a further impact positive or negative on revenues, both GAAP and non-GAAP earnings per share.
Relative to the business I will for fourth quarter and through year.
Fourth we anticipate to other interest income expense net of approximately $1 million dollars for the fourth quarter and $3.8 million for the full year. The full year 2019 amount is lower than previously guided due to lower average debt balance and lower interest rate the amount in the other interest income expense net however.
Excludes the potential impact if any foreign exchange gains and losses and finally, our full year 2018 effective tax rate is expected to be slightly higher than previously forecast due largely to a shift in mix of earnings higher tax rate jurisdictions.
Considering the both factors, we anticipate the falling financial results would see month ending December 31, 2019 revenues in the range of 450 420 million an effective tax rate of approximately 27%, both GAAP and non-GAAP fully diluted share kind of 41.3 million diluted earnings per share but.
Constantly 50, 40 to 58 cents non-GAAP diluted earnings per share in the range of 64 to six to eight cents and capex in the range of $30 million to $60 million.
For the 12 months ending debt first December 2018, we anticipate the falling financial results revenues in the range of 1.6 to one 1.6 or 4 billion to 1.6 or 9 billion, an effective tax rate, both GAAP and non-GAAP , 25% filly diluted share kind of approximately 41.8 million.
Diluted earnings per share of approximately $1.52 to $1.86 non-GAAP diluted earnings per share in the range of two seven to 11 on capital expenditures in range of $37 million to $14 million with that I'd like to open the call up for questions Jude It.
We will now begin the question and answer session to ask a question you May Press Star then one on New York Touchtone phone, if you're using the speakerphone. Please pick up your handset before pressing to Keith if at any time. Your question has been addressed and he would like to it probably question. Please press star Dynetek.
Yeah.
At this time, they will pause momentarily to assemble roster.
[noise].
The first question is from Josh Vogel with Sidoti. Please go ahead.
Thank you good morning, Chuck and John .
Yes.
Got it a couple of questions first round, a you know revenue trends and and.
Guidance and.
No I guess first is the communications program that you ramped down is that complete and then just kind of curious what would that impact was in you built into your Q4 guidance.
Yes, as yes, it's simply a complete in July and dive.
Claims gone.
And it really doesn't have any I.
We have is projected to be gone by Q4 and as going by Q4, There's no change there John .
Okay, Great and I know you talked about underlying organic trends X 18, T. and you have the commentary around being increasingly confident in that consensus number out there for 2020, which does imply about 5% organic growth I'm, just curious what would the implied growth rate be.
Actually that terminated program as well as what are your thoughts about the ongoing declines at your largest client when you think about 2020.
And well as you've seen I mean, obviously 18 tea is no significantly under the to the 10% and you could see this quarter, we where we're at 6.4 and we we do see we do see the 18 T. continue to drop in Q4.
They've got a distinct strategy to the lines of business that we mainly support a lot of dies moving offshore and so we'll see some head headwind and next year from now.
But we do see by second half the year, we do see dot client and really.
We should see it which is significantly stabilize as we've said because we won.
Are there new telco business, we will start to see telco grow and I will probably be at the.
Before the fully in T. stabilizes will start to see the telecom vertical grow because of the.
So yes, so as you keep saying we talk about underlying growth in the business and 18 T has been a real drive for us and we do disclose 18, t. numbers and I'm really just wanted to point out to people hired.
The first half of this year, excluding 18 T. A growth we was really from a constant currency organic excluding 18, TV setting and not 0.3, and if you actually kit for Q3, we were actually up 3.6%. So there's been a change in that that the growth and the volumes from the client to be.
We can you guys that we've been winning is starting to offset on more of that decline and that was a growth of 3.6, excluding 18 tea.
In Q3, and if I actually if you exclude decline you mentioned that the win and delight nicely with just about 5% in Q3, so as not as the information that really where we see continuing into Q4 nicely slightly accelerating and if it's not that gave us the confidence to really mansion 2020.
Guidance, because and we know the numbers are rightly attached we've figured out that underlying growth excluding 18 p. as in our target range of 46%. So really just want to make that clear that us we saw the business trending for for 2020.
Okay. That's very helpful. Thank you and when we think about client mix you said your top 10 or 42% of revenue. So ex 18 T.. We're looking at couple of clients that are you know in and around three and 4% I was just curious when we look at that base or any of those client contracts coming up for renewal that your or you're in negotiations with where you.
I think they may not meet your objectives their targets in May result in similar actions to data Communications program, we saw in Q2.
No I mean, we've we're going to have very little telco telecommunications client.
Delivered.
From the U.S. and that was really the issue. We hired we had not mix combined with some clients clients that maybe were not doing as well in the market that has given us issues. If we think about underperform. The kinds. We've got we've got 300 clients, Josh mean, it must be a thousand lines of business and any portfolio.
You'll know you've got under then over performers, but as we stand here today and we look at this material clients in behalf, we don't see any as always being distressed in the way that we spoke about our largest client was on we spoke about the other telco was and so yes. We've got accounts that we are constantly working on to improve.
We were somewhat tests are doing better than where we need them to be as you'd expect in any portfolio, but is this luca top 10, I don't see angela's clients in the and the basket the you're describing their as being.
Up for renewal and accounts that were willing to walk away from.
Okay. Thank you and I, just shifting gears a little bit you appear to be seeing nice traction with some of your digital offerings I guess first I'm curious as to what your definition of digital is and then with regard to this business you know how big is it today what is your growth expectations, that's built into that 46% number.
For 2020, and also skews remind us what the margin profile looks like versus the legacy operations.
Oh.
Yeah, it's kind of jobs, just kind of hard to add to think about how do you find a digital transformation, but for most part if you think about digital.
You typically always think about the RPH tools, the artificial intelligence tools, you'll hear a lot about block chain.
Terminology and things that's out there so.
Bob knowledge, Bob So for so long. So in essence is basically companies that are trying to applied is new technologies to I'll find new ways to modernize the or other operating model for really the sole purpose of taken their operational performance to win new threshold, but they'd number down.
Before and at the same time, just trying to increase the customer experience and it is hard thing we have this conversation and side as well all I can tell you is when you show up today in the marketplace.
Don't have the ability to to talk to clients about how to create a more seamless customer experience for their customers help them optimized some modernize their operations using these new technologies that we all read about a year just viewed as basically a light you'll see a call center outsourcer.
And they want they want a company that they can grow with because the average relationship last 10 years and they may not purchase those capabilities on day, one, but they want to make sure that you can help them figure out how to apply these new technologies, you know to modernize what it is that they do.
That's.
General Atlas explanation that I can really provide oh and enjoy that Chuck talking about how people use needs that you did you all techniques to improve the agent performance Im not sure. If you would also asking how much of our transactions that we do today, our digital I'd non voice.
So if you're talking about the way, we deliver services to for clients to consumers how much is non voice and thats, what we kind of individual we're still 80% voice and that's still the killer up.
As we've always keep we keeps seeing.
Businesses. It those voice transactions are becoming more complex thing referred to that in some of the ramps in terms of the complexities around the time. It takes an agent about come completely confident that's increasing that then makes these tools that talk just talking about a simplified these transactions for agents and allow them.
To be focused on the customer experience to allow the agents to be efficient and highly deliver the service. So the two are slightly different but our connect can access. So just wanted to make sure. We both potential questions you add there yeah.
Great. That's helpful I'll jump back into queue. Thanks, guys. Okay. Thanks.
The next question asked from below born in Canada with Wells Fargo Securities. Please go ahead.
And to ask.
And Bill Justin just a second for the next question.
[noise] [noise].
Let me start worrying about wanting to your line is open.
Yes can you hear me, yes, we've done a weekend Oh perfect, Okay, sorry about that.
I wanted to start off Oh. This is bill Johnson on for Bill Warmington, Oh, Okay. All right, Yeah, I'm, sorry, if I Miss this but was the contribution from Cincinnati This corner.
Yeah.
We don't really disclose symphony and separate.
It's a small it yet.
Less than 5% [noise].
Okay perfect.
And I want to ask or just kind of stepping back over the past two to three years.
We've seen a pretty big change in vertical mix, partly because of 18 tea and its impact on communications.
But I was wondering what do you think the optimal vertical next is for sites or where do you think the next will be in say five years.
And the optimal vertical next summer we would.
We have looked at the market in the available market and we would like to be have a balanced portfolio versus the people that I've source in our business I.
And if you look at not.
We were over index in telecom and if you look at in terms of where we delivered not telecom from we were over index and delivering telecom from a domestic delivery.
We don't really look at beyond that we want to make sure that we've got a balanced portfolio. We want to make sure that we don't have any one cline dominant whether that be in a specific vertical.
Company as a whole and we do think we'd like to be bigger in house. If you look.
Look at our percentage of revenues versus the available market, that's where we still are behind and we didn't do a press release on Cigna, we see ourselves as we simplified and focus our sales team that we would get traction there, but as we stand today.
Telcos come down, but that's fine I think we still want it to be a significant piece of our business, we want and delivered from the appropriate Geo.
And we like if we look at proportion is a business, we like definitely for health to be more and we don't really want any claim to be above 10% of a revenues and that's the against the benefit of where we are today and it's not great that we've had these significant reductions in our largest client bar and we want and make sure that we don't can it get ourselves like.
Again, and that's what we're focused on not so much the specific vertical mix.
Okay that makes sense and then a one last question for me I was curious on the new Capex guidance it looks like it's being reduced by.
20%.
Which I think would put at the lowest level since 2012.
Which we read into from this is the timing yet.
As.
Well I would say do not read into it as if we're growing at 46% the capex as a percentage of revenues changed I mean, we've always said, we want to really focus on existing capacity really be diligent and our capex spend makes you that we grew and the kept the sites that we hot.
And I think you really just seeing the impact of law and the Capex number this year.
Next year I'm still hopeful we can be under the seen our percent of revenues, even wed see a 5% growth because we still got all existing capacity grew into the Walgreens says I wouldn't model that all of a sudden we're significantly less capital intensive and although we always want to try and be around.
The study and a half versus above that I think this years being at home to the Hopper sand is our projection and 2% year to date.
Thats in the low end, but yeah. We are just watching what we do in terms of trying to make sure that we utilize capacity will be hobby grew into it because we know in terms of all pre margin dots, how we're going to improve the operating margin overall percentage as getting not utilization number back up into that 80.
Something percent.
Yeah. Thank you so much.
Okay. Thanks.
[laughter].
The next question is from a day's cunningly Baird. Please go ahead.
Yeah, Hey, guys. Thanks nice job.
And David Thanks.
Yeah, and I guess first of all that we think about next year and you talked about kind of that mid single digit growth. When we think of this year first EMEA is growing really well because the symphony and a good core gross two in Americas. Obviously is is declining a little bit just because of the.
You know ATM t. and stuff, but next year as 18 T headwinds kind of subside Symphony anniversaries and stuff should we see both of those divisions, both growing kind of in that mid single digits Wow, you want us to gain by saying.
[laughter].
I don't I, Yeah, I mean, I'd suspect, you're probably right David as I really given guidance I think we want all of our business units to be growing it up 5% and you're right and EMEA looks like it did significantly bad, but I've symphony and we'd expect that the average back down.
Great margins in EMEA be doing well and against some of the eyes Symphony in some of its just the core business.
But yeah, I mean, I suspect you're right, but we'll get to that when we get to the next quarter [laughter] [laughter], yeah, not it's fair.
And I guess the other question is is a little bit like that to margin expansion. This year has been so good you know between probably symphony between.
Some of just the core utilization.
Is that pace sustainable or as you as you start to grow do wage rates start to pick up investment rates start to pick up a little it just it just becomes harder to expand by as much as your growth picks up.
Where there's a little bit of wage inflation and some of the geography as it were ramping in but no no like crazy stuff that we saw under you asked that can it be emailed us in the value proposition offshore in near shore. There's no big deal then I think it's ever been in terms of the despite a.
I forgot where you asked me David.
Yeah, Yeah, just really just after the ramp so margin yeah.
A big part where the margins up David to its just the it really shows you just how challenging these domestic programs were written and communication sector add a you know we don't get it did I Miss detail, what we're guiding but but I think everyone seem that now because our capacity utilization.
Then jump up by a tremendous amount, but our margins have you know.
So those domestic based communication programs were struggling quite a bit no yeah, and we're still we're still is we know me targa, it's 10%, David we're still trying to get and not range and we know the biggest.
The biggest lever we've gotten ivas utilization, if we can fill the capacity will be available that's going to be the best thing. We can do but you're also right that as you ramp these programs, especially in these ramps so going into Q1 next year.
I'm not that we'll have a little above a headwind on margins and we're not guidance and we don't want to get up because of so many factors we need to build into our operating margin guidance.
But I think as was talking about how is that well hall and a lot will drag until it it let's call. It normalized and it is referred in Q4 now continue in Q1.
Yep.
All right well thanks for all that.
Thanks, David.
[noise] again, if you have a question. Please press Star then one.
This concludes our question and answer session I would like to turn the conference back over to Mr. Sykes for any closing remarks.
Sorry, excuse me Oh, Tennessee, there is that from Allergan, yes, okay. Okay excuse me in the last month I'm curious as Vincent Colicchio Barrington Research was just a registered for question. Please go ahead.
Yeah, I have a couple of questions truck, but important question is I hope you're elements not contagious to John [laughter] No I don't think it is the job, but I think the boss is a struggle adobe or little bit [laughter], that's not good either.
[laughter].
So I I apologies, if I missed it I don't think I did the size of the along any ramps and what's verticals there in it and when will they be fully ramped.
Well, we spoke about romps being bought them insurance in one being the and telco and the largest one is the telco ramp I mean, we've got a significant telco ramping to.
1200, kinda seat size, it's a very significant and now continue into Q1 next year then.
Yeah, Yeah, that's the majority of the well. That's this is the most significant one there yeah.
And then Chuck.
John talk little about the portfolio, a you know mix, how you like it to play out.
Financial services become pretty substantial I'm comfortable are you with it at that level.
Right now.
Yeah, No, where we're comfortable with defense I mean, typically if you look at the industry reports.
Communications, just total industry across the world is the largest sector I think it's around 30, 40% of the total industry communications is about right around 30 to 33, so we kind of like to see our business.
Map.
Industry concentration, if you will and as John said, the bigger issue was really client concentration, but the one thing I would add about the portfolio. That's a little different now than it was in the past is that we're also looking at each industry, we're asking ourselves.
How's the mix coming from what we consider or traditional or my words I was using the word legacy but more the traditional companies and the reason why that's important it's because the growth in a lot of the traditional businesses just as their or their business themselves, they're not growing rapidly and many of them.
We're just now beginning to outsource and candidly through automation or many of them are able to reduce the contact rates per customer.
Closer more large mature so we can help them with that and there was a lot of growth there for us, but we also want to make sure that we're going after the so called new economy companies. So in financial services. Its Fintech you know if you're looking in communications media. It's 11, new content providers in people want you know we want to go after.
In technology that continues to do this grow wind and general overall.
But that's important because the.
Wages are good there are they're willing to pay and support pricing domestically that will support the wages funnel and as companies themselves still growing very very rapidly. So what else, we really want to have a a more hoping base there because some of the new business from new economy, guys won't be replacing.
Some of the traditional business there may be a declining through automation and that type of stuff, but in general when you look at the total market with both legacy companies entered a new economy companies. The total industry that were in it's still growing.
So you've got to be smart in the way that your placed in that market.
So that's what's on our minds today, but still to John's comment when you responded to the previous question number one is client concentration.
It just isn't good I hope you know get up to 17% of your business like we were and put us in a tough spot.
And I I biggest clearlink today, and how fast is a growing in may and any comments you might have on sort of inflation in your portfolio.
Yeah, you keep us nothing [laughter] College trial.
[laughter] and yeah. We went we mean, we kept talking about how Cleveland was growing substantially above and we've spoken about this year, it's kinda and not the same this year because we've got we spoke about the PNC insurance that we kind of got nice growth in terms of revenue last year, but we pulled back on not because we really.
I didn't see a route to the canal trade margins that we expect from not businesses. So that gives us. Some some had headwinds. This year. We also had a and if you listen if you see my script, we talked about energy clients that was really a clearlink energy clients, where we can unwind that relationship is really a let's call a struggling clients.
The issue is there so I'm not the same as it was and long term projections for the business is no different and just this year, where can adjust and the portfolio and some some kind of losses that we didn't project, which is the energy one so and we don't we don't we don't we're.
No in Atlanta, more positive than when the business, but definitely the trajectory license it had been in prior years.
[laughter] that's it for me Thanks, guys, hi, thanks, everyone.
Yeah.
The next question as a follow up from Josh Raskin with Sidoti. Please go ahead.
Okay. Thank you I'd, just just one more heroes and I'm curious when you do sit with prospects and have those discussions around.
Modernization and optimization do you find that there are any gaps in your digital transformation business and with that in mind, what does the landscape look like today out there in what's your appetite for deals to maybe expand your portfolio on that front. Thank you.
Yes, Josh I I wouldn't say I mean, we do have some some small gaps in areas that we wanted to plug N, but in general the capabilities that we've assembled now with a with clear link it marketing within investment we do what the XL with artificial intelligence and some partnerships yeah, but now with the robotic.
Nation, Oh, we have we have capabilities that really makes us competitive we have we can really get but very compelling story with those capabilities that we have the challenge it yet, but it's not just want to see capabilities is that these businesses are so different from our core traditional a call center operator.
Issue, which is very human capital intensive it was that we've got to continue showing up in the market what the more integrated suite, which is one of the reasons why we don't really want to start breaking out how big Clearlink isn't symphony is because what we want to show up as in the marketplace. Once we're beginning to do better now is a true end to end.
And customer engagement and provider and then when we say customer engagement. It isn't just doing full end to end customer service or for customer end itself, it's truly marketing settles in service and I.
I think way or maybe a tad ahead of the market to some extent when we first started talking about that but more and more clients today.
I think it that way so they're not just trying to optimize the way. They currently operate which may just be going offshore they're not just trying to modernize using the latest tools and technologies to find new levels of performance threshold and improve the experience. They also want to create an integrated seamless experience across marketing so.
It wasn't service.
So I think our capabilities are great place, what's our challenge right now it's just the way we show up in the market and making sure that we deliver in an integrated fashion that that's what is really the biggest challenge right now.
And that's what I'd say the last six months yeah. The last six months, Josh I think part of the reason that's given us a lot of excitement.
You can sit around the table all day long and talking about stuff, but until you get into market place. A you really don't know and in the last six months. We've just had really good affirmation that marketplace that our story and at our capability is resonating. So so that's a good place to be.
Yes, well, thanks again guys.
Alright, Thanks, Josh and I'm sure.
This concludes our question and answer session I would like to try to all friends back over to Mr. sites for any closing remarks, okay, well. Thanks, Jude I know no closing remarks. This a as always thanks for your participation in the call and we look forward to speak with you next quarter have a good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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