Q2 2020 Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the resources connection incorporated conference call.
This time, all participants Arnie listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time.
If anyone should require assistance during the conference call. Please press the star King followed by the zero button on your Touchtone phone and you will be connected to an operator, who will assist you.
As a reminder, this conference call is being recorded.
At this time I would like to turn the call over to your hosts for todays call me as Alex Washington General Counsel, our resources connection as Washington, You May now begin.
Hi.
Good afternoon, everyone and thank you for participating on this call joining me here today, Okay, and sharing our Chief Executive Officer, Kim Brown, our Chief operating officer, and Jennifer Hudson.
<unk> Chief Financial Officer.
Hey, Colby commenting on our results for the second quarter ended November 20, Threerd 2019.
You should have a copy of todays press release.
We need a copy and unable to accept it on our website.
Paul Shannon HM.
Won awards for nearly 63.
During this call may make forward looking statements regarding future looking out for future financial performance of the company.
Such statements are predictions and actual dr. results could differ materially.
Reports on Form 10-K sitting here if it makes them feel when lunch.
For discussion of real <unk>.
Certainty and other factors that you know when economic conditions.
Such factors may cause our business results of operations and financial condition.
Materially some results of operation and financial condition.
Or implied forward looking statements made during this call.
I'll now turn the call over to Mark Yes, Okay.
Thanks, Salli good afternoon, and welcome to argue P 2022nd quarter Conference call Happy New year, everyone. I will start with a brief overview bar operating results for the second quarter second I will I think one our progress could become a more digital business. Both in how we fear of our client base and how we.
Operator.
Third I will discuss certain macro trends, we believe will be beneficial to our business in the second half of the pick a year and beyond and sports I will pre deal project. We are initiating in Q3 to optimize our cooperation and create more business agility.
Our total revenues for the second quarter fiscal 2020, 184.5 million, which represents a slight decrease of about 2% over the second quarter a year ago.
The sequential increase in revenue was 7.1%.
The increase in revenue came from North America and Europe .
And he did by the addition of veracity the digital transformation for 'em, we acquired in late July .
Our Asia Pacific revenue was down slightly which is unusual in the second quarter, but mainly because of two different weeklong holiday periods during the quarter in our largest market.
One holiday week within China to celebrate Seventyth anniversary of the People's Republic, and never holiday week, According to Penn one or the new Lindbergh drain.
Without those significant holiday there Asia Pacific would have grown into too.
You do all complete by the improvement in gross margin, 40.3% in the quarter. This increase was light in North America by higher bill rates and higher value mix of business.
Finally after your name was below plan as we've been working to trim Clos to deliver more cropping.
We achieved 22.7 million in adjusted EBITDA, or 12.3% up revenue compared to 20 million or 10.6% of revenue in the year ago quarter.
Like revenues declined slightly in the second quarter, we were able to deliver improved profit.
As stated previously being tempted, but little more profit to the bottom line over the long term through a combination of head count efficiency.
Real estate spend reduction expense management improved pricing and expanding our mix of business higher value services.
Over the past three years, we've been focused on building capabilities beyond staff augmentation and into program and project management and solutions. The corner, we will continue to make progress with our mix of business at clients continue to value work as a disruptor in professional services and an attractive alternative to the big.
Sure.
Another important strategic initiative. This fiscal year is the development of our digital capability driven principally through our digital innovation function. During Q2, we kicked off and they go to market plan look our newly acquired Braskem consulting group.
Veracity of just mentioned, there's an advisory and consulting business based in Richmond, Virginia with approximately 110 employees focused on helping companies with digital transformation.
Graphic capabilities include strategy in road map designing brand and client an employee experience.
They also bring deep technical expertise and best in class technology partnership.
Including service now site core I couldn't Madonna and won't talk.
We are encouraged quite a quick ramp up pipeline opportunities within the first three month.
These opportunities will take additional time to close as Braskem sales cycle is longer than for traditional staff augmentation and project work.
As I have stated in the last earnings call. The digital innovation group is also focused on building products to be delivered another finance transformation crank It management American complaint services.
<unk> currently have multiple products in various stages of development.
The two parter close it can market, including internal audit automation tool and it gives you the light end to end project management framework.
We expect where we see you kind of limited basis in Q3.
Potential client pilot followed by wider sales in Q4.
We also are applying this methodology as modernize our internal platform starting with the redesign of our knowledge management system.
It further products in consideration for research and development within our portfolio through the next 12 months, we remain committed to enhancing our services delivery and pricing through digital innovation to drive better outcomes in our client projects could speed and value.
Third area focus guard digital innovation team is to build of our digital engagement platform or human cloud product.
Since we reported last quarter, we have really more powerful version of our matching algorithm across North America, and we'll continue to enhance it as we progress toward completion and boldly because our platform to the market.
As part of this progress. We've also completed the first iteration of our digital consultant profiled pool.
It will empower and incentivize our consultants to directly manage their profile information can contribute in valuable input such as video introduction second enhanced market ability and likelihood of rapid selection.
As a reminder, amazing differentiator for this product is our focus on going not independent contractor.
We are working through the commercial aspects of the platform and anticipate launch to a select group of market by end of Q4.
Turning to the macro environment, there to regulatory developments occurring that we believe will favorably impact opportunities in the new calendar year.
The FERC is a renewed regulatory scrutiny on independent contractor in the professional services arena.
But the passage of baby five in California, and other pending legislation around the world. He believes client will turn to our model more frequently.
Especially in the staff augmentation arena, we compete against individual contractors and small beating that one contractor model.
Given that the legislation now until just heightened financial risk the company to engage talent.
And independent contractor structure, we believe our model will benefit from these regulatory shift and is well positioned to gain market share.
Leads or whatever agile talent to our client base between victory also referred to as our form a big.
But we do so with the complexion and benefits of traditional endpoint.
Yes, we believe is the best to both worlds and <unk> in the global professional services space.
Given our commitment to mitigate client risk and invest in consulting professional development.
Second we're seeing an increasing client request for support with the IRS 17 compliance in both Europe and Asia Pacific.
I first 17 is in standard that impacts the accounting treatment for insurance contracts.
Issued by the International Accounting standards Board that compliance date is currently January 2021.
We're hearing from clients at the resulting workload is substantial it involves many work stream and most impacted firms have not become a serious work.
We expect this regulatory that will provide us with increased market opportunity in Europe and Asia Pac at the started the calendar here and continue throughout 2020.
We're also developing a partnership with one of the big pork from people assist with its compliance effort.
We expect there to be a meaningful talent shortage in the big four and be impacted client base, which we can address with our core finance and accounting and technology consultant.
We're also actively increasing our count pipeline is region to align supply and demand.
Before I turn the call over the 10, and then Jan I want to close my remarks by pre dealing a project, we're initiating in Q3 to optimize our core operations and improve our cost structure.
This project also aligned with our continued digital transformation and impact of automation in how we operate.
Also with news about potential recession means over the economy, we want to ensure that our infrastructure is well prepared together a downturn.
We're conducting a thorough review of the business to turn cost and head of any negative trending client buying patterns.
I have an update on this project in advance of the next earnings call.
I'll now turn the call over to Tim for a more detailed review of operation in the second quarter educate them happy new year, everyone. I will highlight shrunken initiative that directly impacted our results of operations sort of second quarter.
Who bought an update on off difficult 20 operational priorities.
Got it only trends in the third quarter.
Tom cruise Milwaukee and pipeline throughout the second quarter ended the first <unk> third quarter. Despite some clients don't be possible lack of clarity in the global economic environment. We have worked very hard to control our own performance diligently increasing activity level building pipeline and converting anything else.
As I mentioned last quarter. When you build continued opportunity profitable met them as many clients and targets are engaging in crucial projects and transformational.
Not traditional activities and then economic environment, Cleveland agile Fujian value combined with a clear market shift towards Gigawatts of employment model the ideal environment for business abroad.
We continue to make positive strides optimizing our core business talk on the key focus on field productivity cost containment delivery effectiveness and efficient matching supply and demand.
I will briefly touch on key operational objectives.
While global revenue decreased approximately people stuff in the prior year quarter due to declines in North America in Europe , offset by an increase in Asia Pac and revenue from BRAF and.
Nice productivity gains in terms without him to meeting and a significant increase in total pipeline when compared to the part of your core.
Additionally, we bought at 840 basis point increase in gross margin for Q2 fiscal 19 due to a better bill pay rate show with lots of ongoing pricing initiatives in government as well as a problem in quality look because of what the way on margin being bored by nearly 2% increase in average day rate.
Real people getting definitely discipline around lead generation is being felt notion of your pricing, but we know that we will have more upside and are committed to putting into buckets. It looked to obtain it.
Got some general provide more detail about revenue gross margin of Delray.
Really caused by the productivity strides getting lucky doesn't logistics recruits, let me result, and Bobby Baldwin lifted the largest markets the goods as a whole about once a desired level.
Got the mutual personnel and focus including recently hired a movement across it and are starting to see positive momentum from these changes.
These markets, we will continue to augment existing teams of investments and strategic hires that can take rapid into.
Todays lifting did result in certain parts of North America, Dallas, Atlanta, Detroit, Carolinas, and Seattle to name a few market and also on our calcium and executive search business.
Cost for continued its strong performance along with Asia clock as a whole <unk>.
Punchy like spots the continued to be laser focused on button replacement performance consistency and a lot about global fills up or.
Ultimately probably become a world class sales organization.
Yep.
Let's discuss cost containment, what we've made positive gains again this quarter.
As an enterprise the increase operating margin never do stuff you may have North America, Europe will sequentially compared to prior year quarter.
As I noted above any previous quarter, you continue to play strong emphasis on managing controllable excessive and leveraging existing assets and be more centralized operating model to be DLP productivity.
To that end, we will continue to evaluate our core operations and geographic presence to ensure that we are back Muslim returns relative to Dicks golf.
Yep.
Believe everything games of the velocity with the footprint that is more concentrated in the markets. It up a high focus of opportunity while leveraging our ABL platform to two of our client bases headquarters in operations outside of though.
Now onto what progress around delivery excellence last quarter. We noted the only success for our advisory project services organization or ATM.
Mission of different subject matter expertise support the sale process on complex world and deliver excellent. Once engaged if you have continues to demonstrate strong positive impact on our objective in the second half of this fiscal year to know the focus of our sales team and federal wanted to keep it. If you asked about our consulting employees to increase our win rate and Im sure if there should deliver.
Well this is not the Viking incidents were targeted stuck in Hatfield campaign localized shale plays and allow for and push around high opportunity offering quickly to celebrate the top.
If you up we'll continue to provide both operational and pricing leverage hasn't yet altitude abrupt selling into clients and prospects.
Now, let me provide an update on two other operational cloudy, but we've still got acquired globally and improving alignment of our supply and demand curve or strategic why program or STP continued support the top of the company has improved serving our largest clos on a global basis. The program grew approximately 12% overall and we put them internationally as opposed to acquire here.
That's and P. the different broke directory, coupled with the appropriate allotment of priorities and incentive articulated in the client centric global enterprise on support plan will help that you don't want to be more clot experience and provide more lead generation for all international operation.
He lives in Asia Pac in Europe that would direct result was strongly along cross border policies. We know this is an opportunity which are in the for us and when combined with a flexible platform significantly distinguishes us from our competition.
Well I mean, let me discuss the laminate supply demand, which is the fulcrum about business you become export is attracting and retaining talent talk platform on unemployed good basis, we've achieved by allowing our consultants to make control over to you can control of their career and portfolio of experience, while offering access to learning professional community market wages and benefits under which quiet.
Okay.
Oh Im a busy as they would like to be.
This is looking to dig into professional arena has a lot of gpus to maintain an average consultant tenure nearing three years.
While we certainly the bulk of small competitive advantage in the space, we know that directly aligning quiet media Department does have an agile talent they require strong core processing and data transparency.
We're working on optimizing its important that that's about business and I'm, making solid strides.
This quarter when compared both sequentially in the prior year quarter, we saw improvements in consulting retention ponds bill win rate and overall yield statistic.
This is committed to continuous improvement in this area, we know that better supply chain management stronger sales and operations planning and enhanced communication and decision, making will create optimize performance.
Before I conclude my remarks, I want to provide some insight about early third quarter dry.
Recognizing a third quarter results to be adversely impacted by both the timing and number of holidays.
The last we were pleased with operational trends today.
Both the long holiday weeks of the quarter trailing average into place lumber till the highest within this fiscal year on the highest in several months.
Additionally, we are seeing all of them nothing with some of working North American markets, including Tri State, Northern California, Los Angeles Dallas in Detroit.
Some of them, if we see a seasonal but we also began some pipeline growth and pull through.
What is only trends in stressing of our overall pipe one, but we know that must remain hyper focused because velocities is all the effect in the third quarter and drill pipe one for Q4 Q1 fiscal 2001.
Ill now turn the call over to Jim for more detailed review of our fourth quarter results.
Thank you Tim and good afternoon, everyone else talks I didn't detail on our second fiscal quarter financial results and will then discuss the trends we've seen in the third quarter fiscal 2020.
Starting with an overview of our second quarter results total revenue for the second quarter fiscal 20 was 184.5 million a 2.3% decrease from the comparable quarter, a year ago, and a 7.1% increase sequentially.
On a constant currency basis revenue decreased 1.9% year over year and into 7.8% sequentially.
Excluding the impact to the acquisition and divestiture, but took place in fiscal 2000 total revenues for the second quarter was 178.4 million compared to one in 4.8 million a year ago, representing a 3.4% decrease or 3.1% decrease on a constant currency basis.
Our second quarter gross margin was 40.3% up 140 basis points from the second quarter fiscal 19, and up 110 basis points sequentially.
Cheating expenses for the quarter, well 53.8 million or 29.1% of revenue compared to 55 million also 29.1% of revenue last year.
Despite lower year over year revenue, our net income for the second quarter was 12.2 million or 38 cents per diluted share from 10.6 million or 33 cents per diluted share in the prior year quarter <unk>.
In Q2, adjusted EBITDA, which we defined as EBITDA before stock compensation and contingent consideration adjustment was 22.7 million or 12.3% of revenue up from 20 million or 10.6% revenue in the prior year quarter.
Now, let me provide some color around our second quarter revenue geographically.
Our North America revenue, excluding veracity decreased 4.7% year over year and increased 5.5% sequentially.
Rhapsody contributed 5.8 million of revenue in the second quarter comparing to the prior year. The decline in North America organic revenue reflects the impact of lease accounting project revenue being at its peak in Q2 fiscal 19.
When should we compare to Q1 is just go 20, the rebound in organic revenue looks like active pipeline management and business development efforts.
Couple of could be impacted fewer holidays in the U.S. as long as capable seasonal impact.
Second quarter fiscal 20 included only labor day, while the first quarter included Memorial Day, and July 4th holiday as well as summer holiday break to embark and vote.
Well, rather than Wilmington improved in the second quarter.
We're still experiencing a lies in our tristate, northern and southern California markets compared to the prior year.
Nonetheless, we are seeing significant improvement in markets such as the Carolinas Dallas.
Total until adelphia and notable gains in our accounting business.
Your second quarter revenue decreased 16.4% year over year and increased 3.2% sequentially.
Our exit from the noise and Belgium resulted in a 3.7 million decreasing revenue compared to Q2 fiscal 19, excluding this impact your second quarter revenue showed a modest decline <unk>, 0.4% compared to year, though an increase of 3.4% on a constant currency basis.
Top fourth continued to show strong performance over the last year.
It's hard to second quarter revenue increased 7.6% year over year, but due to 2.8% sequentially.
On a constant currency basis easy tax revenue increased 7.1% year over year end decreased 1.9% sequentially.
The growth over last years, primarily led by Japan, and India as our international operations continue to benefit from our global Sep program.
The sequential decrease from the first quarter as Keith mentioned earlier due to weak long holiday during the second quarter in both Japan and China.
Our largest markets in Asia Pac.
Absent these extensive holiday period Asia Pac would have seen growth this quarter.
Turning to early revenue trends for the third quarter fiscal Twain.
Based on early revenue trends and assuming they persist.
Sparked revenue for the third quarter fiscal 20 to fall in the range of 164 to 169 million compared to 179.5 million in Q3 fiscal 19.
There are a number of stock is significant impacting the revenue forecast for Q3 compared to the previous fiscal year.
First piece, we pickle 20 include two additional holidays due to the timing of Thanksgiving when compared to the previous year, we estimate the impact to be in the $4 million to $5 million range again. Please be mindful that these estimates are based on early revenue trends in Q3.
Second the mid week timing of both could 15 years day further cycles revenue momentum the estimated impact is in southern $8 million range.
Third the loss of revenue from the Nordics in Belgium is expected to be approximately 2.4 million compared to the third quarter fiscal 19.
Offsetting the adverse factors I just mentioned Voracity is expected to add approximately 5 million to our revenue in Q3.
Thus far the U.S. the revenue run rate and choose who have been trending ahead of the first half of fiscal 20. However, a content she'd be run rate of Q2 fiscal 19, we're still seeing a slight gap principally due to the lift on lease accounting project revenue in the prior year.
We believe our efforts into place new revenue streams on lease accounting projects with other opportunities are starting to pay off Tc pipelines knows and pull through we are narrowing the year over year revenue gap.
Turning to gross margin gross margin for the second quarter was 40.2% introducing 140 basis points from the prior year equivalent period and into 210 basis points sequentially.
Year over year increase as we made it continues to improve bills to pay ratio as well as a decrease in holiday table consultants in the U.S. due to the timing of the Thanksgiving holiday.
The sequential increase is primarily due to a decrease in holiday pay for consultants in the U.S. did you feel holidays as well as lower payroll taxes.
Bill pay ratio remained relatively flat between the two period.
For the second quarter, a gross margin the U.S. with 41.7% compared to 39.7% last year and our international gross margins of 34.2% compared to 35.9% a year, though.
The average hourly delay for the quarter with approximately $123 compared to 124 in the prior year quarter of 122 sequentially.
The U.S. average bill rate increased by 2.8% compared to prior year quarter. However, the consolidated average bill they showed a slight decrease as a result of mix.
They tried to hide delays experienced a decline in revenue, whereas asiapac. They tried to move to build it showed increased revenue.
The average pay rate for the second quarter fiscal 20 was $61 compared to 62 in the second quarter fiscal 19, and 61 in the first quarter fiscal 20.
For the third quarter, we expect gross margin to be adversely impacted by the additional holidays, Ruth Thanksgiving and the middle East finding that both Christmas day in new years day, we estimate gross margin to be in the 36.7% to 37% range compared to 37.8% year, though.
Even longer these Alan they do like based on prevailing exchange me, killing each given period.
Now looking at other components of our second quarter financial results actually expenses were 52.8 million or 29.1% of revenue. This compares to actually any 55 million were 29.1% of revenue in the second quarter fiscal 19, and 57 million or 33.1% or revenue in the first.
Quarter fiscal 20.
The only your dollar decrease is primarily attributable to a beetroot incentive compensation as a result of lower revenue in the second quarter lower cost associated with business expenses as we continue to closely manage discretionary spend and lowest severance expense, partially offset by an increase in appeal and benefit costs.
Due to additional headcount related to project delivery and digital transformation efforts, including veracity.
Sequentially. That's you may as a percentage of revenue decreased by 400 basis points from the first quarter fiscal 20.
Actually improved significantly primarily due to tighter management, it's been lower payroll taxes as well as a number of onetime cost incurred in the first quarter, including acquisition costs related to veracity severance and other costs related to the exit activities in Europe .
Looking ahead to a third quarter fiscal pointing we expect a teenage mutant Ninja 54 to 54.5, yeah actually makes sense in Q3 is impacted by higher payroll taxes at the beginning of the calendar year.
Turning to other components of our financial system deliberate pretax income was 17.7 million in the second quarter up from 15.7 million in a prior year quarter.
Our income tax provision for the second quarter with 5.2 million, representing an effective tax rate of 30%.
Our effective tax rate is primarily impacted by valuation allowances on our foreign analog on a cash basis, a tax rate was approximately 21%.
Our GAAP tax rate at each of the upcoming quarters is difficult to predict and could be volatile as a week will be dependent upon several factors, including the operating results of our U.S. and foreign locations each of which attack or benefited at different statutory that.
The offset if the tax benefit of foreign losses on certain locations, a valuation allowances and potentially U.S. tax deductions related to be as good activity in Europe .
Now, let me turn to our balance sheet cash and cash equivalents at the end of the second quarter were 42 loan receivables at quarter end, well hundred 37.1 million compared to 133.2 million at the end to the fourth quarter fiscal 19.
David revenue outstanding were approximately 68 days compared to 71 days in prior year and 67 days in the first quarter fiscal 2000.
We paid 4.5 million dividends during the quarter.
Capital expenditures were 1.2 million to the first half of fiscal 20, we expect capex email one to 2 million names in Q3.
He did not repurchase stock during the quarter, our stock buyback program has 19.1 million the moon. During the first half of fiscal 20, we borrowed 35 million to finance the acquisition of veracity and will be paid 24 million under our revolving credit facility. We will continue to return cash to shareholders through a quarterly dividend while balancing.
And payment in capital required them to grow more business, both organically and strategically I shared outstanding at the end in the second quarter were approximately 32.1 million.
Now I'd like to turn the call back to take for some closing comments. Thanks Jen.
They have the second half the fiscal year is strengthening while Q3 will be impacted by the holiday season, both number of holidays and the timing during mid week, we like the trend we're seeing in non holiday week during the first month of the quarter.
The strong interest coming from our Gpus client base for veracity services and our pipeline overall is much improved year over year.
Before turning to any question I will review our claim continuity statistics for Q2 and physical 20.
Quite continuity remained strong during our second quarter, we secured 49 of our Cup 50 clients from fiscal 2019 and 48 at the top 50 from 2018.
In the quarter, we have 294 clients for whom they provide services at a run rate exceeding 500000 fees and that's up from 281 in fiscal 2019.
In addition, our top 50 clients for the quarter represented 39% of total revenues, while 50% of our revenues came from 90 requiring it.
Our largest client for the quarter with approximately 3.4% of revenue.
At the ended the second quarter, 86% of our top 50 clients have used more than one type of solution categories. This penetration reflects the diversity of relationships, we have within our client organizations and reinforces the opportunity for growth. If we continue to execute improved account planning.
And penetration.
That concludes our prepared remarks, and we're now happy to answer any questions.
[noise]. Thank you to ask the question you're willing to press star one on your telephone to withdraw your question press the pound Ji. Please standby, while we compile the culinary roster.
Our first question comes from a line of Andrew Steinerman of JP Morgan.
Your line is open.
Hi team this might be a kind of a bold question here, but you know I you know I'm listening to the various digital and strategic initiatives going on at resources and I surely understand the puts and takes and the revenue currently I just wanted to know what level of organic revenue growth resources is targeting.
Kind of over the medium term.
Hi, Andrew that is a bold question as you know because our revenue is.
Cyclical we have ups and downs you know as I look at our revenue year over year. In particular, you can definitely sees the ending of the lease accounting work that we delivered and with that compliance date of last year, you know we're targeting the mid singles.
Just I think is the reality of it but keep in mind you know we've we've had some exit activities in Europe , we're going to continue to work actively and our geographic footprint. So at the end of the day, we can deliver better profitability in the business.
And when you take actions like that they are a bit disruptive.
That's fair and could you didn't mention just how significant the lease accounting in the U.S. is I would definitely realize you've anniversaried it and it's a tougher comp, but just could you give us a magnitude of how much success you had a in doing that type of work I'm going to past year.
Yeah, I mean, it I mean at hand to give you the detail yes are on the revenue from lease accounting project peaked last year in Q3 fiscal 19 at close to about 9 million and anxious to me. She three of last year as well and we enjoyed a pretty good lift from the these accounting revenue. So in the range of about 8 million.
$1.
Understood. Thank you again.
Thanks, Andrew.
[noise]. Thank your next question comes from alive, Marc Mcconnell of Baird. Your question. Please.
Good afternoon, I was wondering if you could just give us a little bit more feedback with regards to 85, you mentioned that as you know potentially positive, but just what are you hearing from clients at this early stage, where it seems like there's a little bit of confusion out there in terms of how to react to it.
Yeah.
You know we already know when it was reported today by S&P a that step two organizations have already filed suit they filed suit in Monday against this this law. So we are going to see active litigation you know the challenge here is that especially in the staff dog Arena I think clients are going to be more has.
The chance to engage independent contractors because of.
Heightened liability risk that and that comes in the form of wage and hour.
Complain and penalties, which he says.
Financial but also from a tax obligations. So you know the a more careful approach and we're starting to see clients you know our largest client the company has already actively moving toward it.
Using vendors that operate within employed model and afford us.
Not only to de risk their own position, but also because they believe in professional development and commitment to talent and I think that client in particular recognizes that they want to work with vendors that attracts the best talent and in order to attract the best talent you have to care for your people broadly.
And that means providing a full suite of benefits and professional development that comes with it.
So we are starting to have more active dialogue with several large clients in California.
And looking at their needs and hopefully concentrating some of that need with us going forward.
Great and then do what's the lease accounting for the third quarter of last year.
How much would you anticipate that it would that it would.
It will drop off too by the time, we get out to shoot a fourth quarter.
Well I can tell you that the delta for Q for this quarter and this year compared to last years about a $3 million to $4 million.
Uh huh.
Right and then.
<unk> as you're thinking about you know do when we there's lots of different puts and takes when it comes to the revenue guns for this current quarter <unk>. When we think about it on a non holiday affected shushing doing deep basis.
Stripping out for rest of the wood, what's the organic revenue growth rate coming out to when you when you.
People through the Union.
Hey markets, it's Tim Bracketing happy New year up in New York I don't know that will give you that is that that exact growth rate. What I can tell you is that when we look at the mom holiday, we look at the not holiday daily revenue run rate. It's it's it's the highest it's been Miss this fiscal year and it's higher than it was last fiscal year.
Sure So I think that.
Order of magnitude is tough because we have there's so many different factors, including the timing of holidays and when they pop out but I can tell you when I look at the inputs into what goes into our revenue velocity, which is what is our pipeline growth look like what do AARP literal what does a win rate look like.
What is our activity rate look like all those are well north of where we will both sequentially and prior year.
Got it or just trying to figure out ways. If we just took the midpoint of the range and then stripped out exported drags from the holidays.
No John is going through that or not.
Yeah, I think she tried to take you through that Mark with our disclosure and if you Wanna get talk with her more out that and walk through it again and just give a recall offline okay.
Yeah. It did this quarter, while we're you know as I said more optimistic about the pipeline and the opportunities we see and certainly about the sentiment you know I was reading more about that the economy. Today for example, and preparing and you know the mood today versus a year ago is quite different and you know one of the things.
We saw coming out of the holiday last year with a more depressed nude now we're seeing more optimistic mood in our client base and I think it does impact the pipeline, we're seeing the willingness and readiness of clients to sale engaging a transformation projects and other initiatives that obviously are our.
Food for our business.
Great and then just with regards to Detroit suits.
It was a little confused.
Or things getting better and the choices or are they still anticipated too.
You could have a drug.
There are getting better I mean, I would say I'd definitely say, they're getting better like I said, we hired a new leader we have when I look at the when I look at them sequentially and when I look at them from a velocity perspective, we are moving into right direction. Just this really being in that market is kit was saying, there's a lot of optimism still about market in terms of.
Well the usage of our services and so whatever uncertainty there is around the economy.
We believe there's still upside for US there so were Bob we're cautiously optimistic about Tri state.
Great and then I know, it's early but as it relates to Europe , specifically, London and Brexit, what do you see <unk>.
I'm sorry, what are we seeing.
With that question, yes, So I think we're all.
Relieved I think we'd say to for for that Brexit discussion to be resolving.
It is early days, though and I'm not sure that we've seen any real positive or negative fallout from the result.
That decision in England.
And as you know, we have new leadership and a Europe overall, and so we're still transitioning and getting that mean leader up to speed on our business. We have a new leader as you know in the Netherlands business. So while I think the trends there are strengthening as I said in my early.
Your remarks and.
These are early days for us and so we need to keep that moving into right direction. You know, we're starting to see a lot more.
Program Management and project management work, we're starting to see change management work with some high profile clients that.
Give us reason for optimism in that business, but again. These are early days and and with new leadership you have to see how that all plays out.
I appreciate the response I'll follow up offline. Thank you.
Thank you Mark.
Thank you again to ask your question. Please press star one and you touched on telephone at this time, but again that's star one on your touched on telephone to ask a question.
And if there are no questions in queue I'd like to turn the call back over to Chief Executive Officer take to shape for closing remarks, Matt.
Yes. Thank you operator and again, thank you everyone for attending this call and your interest in our GP, we'll look forward to talking to you again on our next earnings call. Following the third quarter fiscal 20, thanks again.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.