Q3 2020 Earnings Call
At this time, all participants are in listen only mode.
After managements prepared remarks, we will conduct a question and answer session and instructions for how to ask a question will follow at that time.
As a reminder, this call is being recorded for replay purposes.
No I would like to turn the call over to David Mackie W and assist executive Vice President Finance and head of Investor Relations David.
Thank you and welcome to our fiscal 2023rd quarter earnings call.
With me today on the call I have w. not the CEO Keshav Murugesh W and that's the CFO Sungy Korea, and our COO golf in bright.
Yes release detailing our financial results was issued earlier today.
This release is also available on the Investor Relations section of our website at Www Dot WMS dotcom.
Today's remarks, we'll focus on the results for the fiscal third quarter ended December 31st 2019.
Some of the matters that will be discussed on todays call are forward looking.
Please keep in mind that these forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such stake.
Such risks and uncertainties include but are not limited to those factors set forth in the company's form 20-F.
This document is also available on the company website.
During this call management will reference certain non-GAAP financial measures, which we believe provide useful information for investors.
Conciliations of these non-GAAP financial measures to GAAP results can be found in the press release issued earlier today.
Some of the non-GAAP financial measures management will discuss our defined as follows.
Net revenue is defined as revenue less repair payments.
Adjusted operating margin is defined as operating margin, excluding amortization of intangible assets share based compensation and goodwill impairment.
Adjusted net income for an ice is defined as profit excluding amortization of intangible assets share based compensation goodwill impairment and all associated taxes.
These terms will be used throughout the call.
I would now like to turn the call over to W. enough the CEO Keshav Murugesh catch up.
[laughter].
Thank you David and good morning, everyone.
Doubling its continued to deliver solid financial results.
In the fiscal third quarter.
Net revenue for the quarter came in at $228.2 million, which represents a year over year increase all 16% on Bulldog reporter and constant currency basis.
In the third quarter.
I'm doing this added six new clients expanded 11 existing relationships.
And the good news protein contracts.
Revenue growth continues to be driven by healthy broad based business momentum across all key verticals and service offerings.
Third quarter adjusted operating margin came in at 22.8%.
And our adjusted diluted EPS.
Uhhuh age and <unk> percent.
Since the third quarter of last year.
Coming in at 80 cents Bushehr.
Some do but it's got the details of our third quarter financial performance in his remarks.
I would like to spend a few moments today discussing the evolution and progress of our sales organization.
The overall of the sales force was one of my first initiatives.
Joined W and is back in 2010, along with what localizing the company.
Since then we've been successful in dramatically improving to size capability and the pro fine doubling this w. NSS sales organization.
Obviously, the most visible sign of change has been the increase in the size of our global sales team, which has grown from 41 resources in 2000 and Dan.
To 109 at the end up this quarter.
Why this expansion has been significant.
Believed the biggest change to our sales organization has been the upgrade off the quality and capabilities all fog sales professionals.
First we have successfully separated the team into hunters responsible for new logo generation and farm was soft with expanding existing relationships and aligned these two different skill sets without a book to bill organization structure.
Second.
We have changed the fighting for fine OFAC team members to do all sales resources. Each average more than 20 years of experience I know joining WMS from a broad range all sources, including.
Direct from industry.
Global consulting firms systems integrators, I do service firms analytics companies and technology firms.
Most have deep industry and domain backgrounds, and proven track record selling solution based services.
Todd.
W. And this has added nice, especially since skills in high in fact areas such as analytics and technology.
And to support on acquisitions of unique assets, including Denali and headcount.
As a result to fund investments the caught him since the team looks.
Dramatically different than the 2010 version has enabled Dublin is to not only drive industry, leading growth over the past few years, but to also grew a healthy pipeline for the future.
Over the past four years on existing sales team has helped doubling its deliver superior revenue grew a healthy margins.
The company has.
Has now added 100 and for New York lives expanded 172 existing relationships.
And renewed or extended 248 contracts.
We also announced the average HCV and DCB off signed Deans continues to improve.
As a result in the past three fiscal years WSS posted organic constant currency growth.
Bridging 12.7%.
And we have just updated our constant currency guidance for fiscal 2020 to 13% to 14%.
With one quarter remaining in the year.
Why do we are pleased with our Boston revenue performance.
But equally excited about our opportunities moving forward.
Our new logo hunting five line continues to grow I.
We are seeing a steady increase in the volume of large deals.
These opportunities are increasingly domain specific transformational in nature technology enabled and outcome based.
Many of these deals are advisor led and improving our positioning with these key influencers over the past few years has been a focus area for our sales and marketing organizations.
Good day.
Blueness consistently received high marks from the sourcing advisors and the industry analysts for our domain led solutions flexible and innovative approach and the ability to help clients driver market differentiation.
As a result, we have seen a steady increase in Odyssey invitations from this China.
Our reputation for developing innovative solutions.
He was also enabling W and that's to participate in an increasing number of sole source gone positions, which do not follow traditional honestly processes.
These deals are highly strategic in nature and involve doubling its working closely with declined to create unique and disruptive.
In addition to our strong new logo and large deal pipeline.
All are farming opportunity to cross sell services to existing clients continues to improve.
Over the past 240 years, we have increased the number of clients generating over $1 million of revenue with W. units from 80 to 128.
Today 95 of these clients are under $5 million in annual revenue.
This provides us with the significant growth opportunity over the next few years as these clients Mitt jobs and evolve.
When we combine our hunting and farming opportunities.
Unisys overall, probably probability adjusted since pipeline.
Is approximately 50% larger two days then it was one year ago.
This gives us confidence in our future growth opportunities I know continued investments in sales and solutions.
Year to date, we have added eight new sales resources and apply no current plans gone for the team size to expand over the next few quarters.
Recent hiding has focused on strategic offerings and more consultative skills, including transformation.
Did you do technology enablement.
And new operating models.
We're also adding vertically focused practice leaders in key geographies, bringing senior level domain and market focus.
Especially for large deals and strategic client relationships.
These client facing investments are expected to enable dot WMS to further drive innovation and procreation.
In conclusion, our business momentum remains strong as evidenced by our revenue growth and expanding sales pipeline.
W. this remains well positioned to capitalize on the healthy and rapidly evolving BPM demand environment.
We also understand that we must continue to invest in our business doing short on the ability to meet the needs of pipelines for the next 10 years.
Speed it all this decade.
The quad increased deployment of both Brightree and third party technology in all our solutions and the re skilling off our global employee base.
We'll also necessitate ongoing investments in consulting and transformation.
Watson analytics, and even deeper domain expertise to ensure we are able to work closely with our clients to create a customized differentiated business models.
The W. This focus remains on the long term BPM opportunity and our superior execution, which will enable.
Value creation for all our key stakeholders I would now like to turn the call or to Sanjay Puria, our CFO to further discuss our results and the guidance Sanjay.
Thank you catch up.
In the fiscal third quarter, Dublin, <unk> net revenue came in at $228.2 million.
16.5 person from hundred $95.9 million bolstered in the same quarter off last year and up 16.1 person on a constant currency basis.
By vertical revenue growth was broad based we travel.
Consulting and professional services utility and help good each growing more than 15% Yodle what are your.
With respect to our service offerings revenue growth versus the prior year was driven by strength in finance and accounting customer interaction services and industry specific BPM, which all grew 16% Ardmore.
Sequentially net revenue increased by 3.4% on reported basis and people sitting on a constant currency basis.
Got it what quarter revenue performance was marked by healthy growth with both new and existing client fine by favorable currency movements net of hedging.
In the third quarter, Dublin is regarded approximately $4 million off shop, some nonrecurring revenue, which was booked at margins above company average.
The majority of this revenue is related to volume spikes with line in our travel and Insurance Award Nichols.
Adjusted operating margin in quarter, three was 22.8 person as compared to 23% reported in the same blogger all fiscal 2019 and 23.5% last quarter.
Adjusted operating margin decreased as a result of the impact awful what I'm a little bit increases.
And unfavorable currency movements natural hedging.
This headwind more than offset.
Ability from the IR part of 16 lease accounting change.
He brings utilization and operating leverage on higher volumes.
Sequentially adjusted operating margin decreased as a result of reduced productivity, including quarter to short term revenue with minimal cost, which more than offset improved utilization.
Based on our margin performance year to date and cotton visibility into quarter. Four we now expect full year adjusted operating margin to be in the range. All 22.5 took many people isn't.
The company's net other income expense was $1.8 million net expense in the third quarter as compared to $2.8 million off net income reported in quality, all fiscal 2019 and $1.1 million off net expense last quarter.
[noise] Yodle your dividend is actively table, two or 3.6 million dollar increase in interest expense, resulting from the I fought a 16 lease accounting change.
Sequentially the reduction in the net expense is due to increased interest income driven by higher average cash balances and lower interest expense.
I think from scheduled debt repayments.
Dublin is effective tax rate for quarter, three gaming Tonight, So any person down from 30.7% last year and down from 50.2 boats and last quarter.
Changes in the quarterly tax rate are primarily due to the mix of was delivered from tax incentive facilities.
The mix of profits between geographies.
For fiscal 2020, we now expect our effective caught Britt actually doing that Angel 20 to 21 person.
The Companys adjusted net income for quarter, three was $40.9 million.
Fair bit $38 million in the same quarter of fiscal 2019.
And $40.6 million last quarter.
Adjusted diluted earnings were 80 cents bullshit in quarter three what's is 73 cents in the third quarter off last year and 79 cents last quarter.
As of December 31, 2019, doubling its balances in cash and investments.
$280.1 million.
The company had $47.5 million object.
Dublin is generating $62.5 million off cash from operating activities this quarter ending good $4.8 million in capital expenditures.
Dsos in the third quarter came in at 30 days as compared to 32 days last year and 29 days last quarter.
With respect to other key operating metrics total headcount at the end of the quarter was 44011.
Sequins should increase of more than 1400 people.
Well, what at least shouldn't read in the third quarter was 26%.
Down from 88% reported in quarter, three off last year and gone from 32% in the previous quarter.
Global built seat capacity at the end of the third quarter was 34211.
Average seat utilization improved to 1.27.
The infrastructure build out plan for quarter three is now expected to impact our profit in laws beginning in quarter four of this fiscal year.
You know what press release issued earlier today.
During this provided updated guidance for fiscal 2020.
Based on the company's Goddard visibility levels, we expect net revenue to win that Angel 892, $900 million, representing yours or what are your revenue growth of 12% to 13%.
Our guidance includes $6.5 million off shock them nonrecurring revenue in quarter four.
This amount has been included we call it is visible and committed adds up to date.
Revenue guidance assumes an average British pound to U.S dollar exchange rate of 1.31 for the remainder of fiscal 2020.
Excluding exchange rate impact revenue guidance at the present constant currency growth of 13% to 14, plus and all of which is organic.
We currently have or 99% visibility to the midpoint of the revenue range consistent mid January guidance in prior years.
I just didnt net income is expected to be in the range. All hundred 58 $262 million based on a 71 rupee to U.S dollar exchange rate for the remainder of fiscal 2020.
This implies adjusted EPS of $3.05 to $2 and well since assuming a diluted share tone of approximately 51.9 million shares.
Full year adjusted EPS guidance includes like yours or your.
Negative impact of approximately six cents for share.
So you did with their adoption of I thought it 16.
With respect to capital expenditures doubling this continues to expect Oh, what requirements for fiscal 2020 to be up to $25 million.
We'll now open the call for questions operator.
Thank you.
Ladies and gentlemen, if you have a question at this time.
Please press the star followed by the number one key on your Touchtone telephone. If your question has been answered it what do you wish her move yourself from the Q He's [laughter] town key.
The interest of time into enable everyone on the call to participate please limit your clearance to one question and one follow up.
And we'll take our first question from Moshe Katri from Wedbush Securities. Your line is open.
Hey, Thanks, and congrats on very very strong results.
We've seen a pretty impressive the virgins hearing growth between your top wondering a client versus the rest of the business. Maybe you can talk a bit about that.
Where are we seeing that growth coming in from the non top 20, and obviously that bodes well for no growth down the road and then on top of data. We've also seen very strong performance in Continental Europe . This quarter, a strong performance and travel leisure any color there will be helpful. Thanks a lot.
Sure. So let me take that Moshe I think you know as an organization, we're pretty happy with the the Brett and the depth of the the improvement that we've seen you know when you look at our customer concentration levels, despite putting up.
Really healthy growth not only in the quarter, but on a year to date basis, we have not seen up for a significant change in and the client concentration. If you mentioned as a matter of fact, our top three top 10 clients year to date, our 43% of revenue compared to 45% of revenue a year ago. So what we're actually starting to see it.
As the maturation of some of the relationships that we've been able to put in place over the last couple of years and this is obviously, but we hope to continue to see in the future and you know in case of in his prepared remarks talked about farming opportunity here at WMS, and having 128 clients generating now north of a million dollars yeah.
I guess, that's up a bigger called efficient and you know all about relationships, obviously are gonna be $20 million plus types of relationships, but we're excited about the opportunities with the logos and types of clients and the objectives of those clients that we've been able to add a specific to your question about the travel vertical.
We were pretty happy again, I think with the Q3 performance sequentially travel was flat and typically this is a down quarter for us and the travel vertical that was really a combination of a couple of things wanted but being the short term volume spikes that we discussed that were $3.7 million in the quarter. Some of that was associated with the.
But we also had a few new logos that were added and some good expansion and growth within our existing clients. So you know really healthy healthy quarter overall for the travel vertical.
And then just as a follow up given the pipelines ranks.
And the visibility do you think this time for you know maybe an inflection point in terms of your long term growth objectives down the road.
HM.
Yes, let me take that most oh.
Good day.
No I was just gonna stay in you can certainly add in your case I think when we look at the long term objectives. Obviously, we look at these relationships the things that are going to mature over several years.
And the pace at which these relationships mature it's not something we have a lot of control over but what we have seen over the last 10 years in our business. The kind of go back to <unk> comments about the growth in the Salesforce and the growth in our business is a nice slow steady improvement in the organic constant currency rate.
Avenue that we've been able to deliver so you know certainly given the type of business that we have in the fact that is long term and layers, having a true inflection point might be difficult, but to see an opportunity if things continue to progress well for us to continue to grow at an accelerated rate.
Certainly certainly there and that's I think what we're most excited about.
Thanks.
Thank you. Our next question comes from Mayank Tandon from Needham and company. Your line is open.
Hey, good morning, guys, it's actually a cow Peterson out from my own thanks for taking the questions.
Just wanted to touch a little bit I'm on the UK actually the pound moved a lot in the quarter, but the year over year gross I'm still very nice how much of that was currency impact to first are you guys seeing anything now the there seems to be a little less uncertainty around Brexit or you guys seeing any change.
Change either qualitatively or quantitatively.
Behavior Weiss with some UK clients.
Well I'll take that you know I think in terms of just the pipeline in terms of customer behavior as we've been saying for sometime now I think our unique value proposition has ensured that we actually haven't seen any negative impact.
Around the uncertainty that people were talking about around Brexit. In fact, we had always said that this would be an opportunity and we continue to see clients taking decisions moving ahead and being very excited with our value for both proposition. So.
We don't expect or the current situation to significantly change, but if at all it could help some of the bystanders to start accelerating decisions. That's all and maybe just to add on your first wind from in a fix perspective, I know a the fully or.
The revenue, which went up a you know of FX wandered off 6 million dollar Ah you spoke about nonrecurring revenue, which was in this quarter as well as due to the visibility we have for the quarter for what put together is $10 million and the balances from the girls.
Yeah, and let me just let me just had one thing relative to the UK in the third quarter, obviously pretty pleased with a 12% growth on a year over year basis Interestingly enough. When you when you decompress. That's when you look at the average dollar to pound rate for this quarter. It was just under 1.29 well.
Which is actually almost identical to where it was a year ago. So the growth that we delivered this quarter in our UK was entirely on a constant currency basis.
Okay. That's a that's helpful color and then just one follow up on kind of attrition hadn't nice tick down in the summer or at this quarter I'm guessing at least a portion of.
That is seasonal but just want to see if there was any update or change you guys are seeing on kind of the poor for attracting retaining talent.
Yeah. This is going and what you're seeing in Q3, the attrition rates it's up.
Historical Gen. Two bits, we have seen over the past two years that you see the attrition rates on amongst the lowest meaning more towards the United et cetera, but you're also seeing our ability to attract talent and.
Areas to actually get more increased and been able to attract a lot more.
All right that's helpful color, Thanks, guys nice quarter.
Thanks, Scott here.
Thank you. Our next question comes from Justin Janani from Wells Fargo. Your line is open.
Hi, Thanks for taking my question.
And your prepared remarks, you talked about.
On the need for continuing to get that sorry investments for the future. So can you kind of talked about.
How you plan to kind of balance that with the strong margin performance here this year and how sustainable that is moving forward.
Sure Let me, let me take a little bit of that Justin and then we can kind of have application sanjay contribute a little bit but.
If you look at what we've been able to do over the last four or five years, we've always been investing in our business and we've been able to largely fund that from.
Improvements in our operating margins from from efficiencies from from volumes, so on and so forth. Obviously, we have to kind of look and see what.
The FX rates look like for next year, but you know we do know that for example, this year, we had roughly 100 basis points of nonrecurring merchant in terms of having short term revenue at much higher margins than having seat utilization delays throughout the year, but you know I think when we look at what next year means for US the plan for W. enough.
It is really to continue to invest aggressively Anastasia mentioned in things like.
Information Consultative services advanced analytics sale.
But largely fund those investments with improving operations. So you know the plan is I think longer term as we look forward to kind of keep the margins in this.
20% to 22% kind of range.
Obviously going to depend on where we sit at the end of the year, what our investment needs are for that specific year and what the FX numbers are but you know that's kind of where we're shooting for right now as an organization.
So I think that's very accurate again.
From a big picture point of view, you know what I'd like to say is that the reason we want to continue to make these investments and potentially in some of these new areas is because we see the market opportunities continuing to be very strong for WMS and we believe that this momentum there for <unk>.
And the continued and knock on the cost stuff margin.
HM.
Got it thank you for that color and they can you just talked about what drove the step up and revenue per employee this quarter and and how WMS is moving up the value chain with clients.
Yeah. This is got them and the three reasons that up the.
Revenue for F. T. He has started going up and in terms of the deal size is the first one has been as Steve alluded earlier, that's been the increase in volumes across some of our drop clients looking to travel and insurance vertical and a lot of that revenue came in addition to expand additional money shouldnt. Okay. The second one is.
Fuel for existing Ashwin less new clients. Then we have launched transformation from jumps underway, which are linked to milestone based gainshare outcome based pricing executing ahead of schedule.
And.
Earlier than planned cool new clients.
Earlier in the.
Just to increase our share of Williams deftly managed from them, but what I saw you did what you're seeing is an increasing amount of clients, but the transformation that automation needs.
Bob outweigh the traditional outsourcing model.
Yeah, and it's just one word of caution as well Justin I think when you look at revenue per employee look looking at a quarter is not always going to give you a healthy picture of our business.
That being said, we have been expanding revenue per employee on average a little bit over 2%. The last three four years. So you know we do continue to expect more and more technology to double what it would be deployed in the services that we provide it's got the mentioned, we do expect more outcome and efficiency based revenues overtime.
And this should enable us to continue to drive growth rate that exceed the need for head count.
Thanks for the color.
Thank you. Our next question comes from Bryan Bergin from Cowen.
Hey, guys. Thank you Keshav I wanted to dig into that on that sole source commentary you had in the prepared remarks can you give us a sense on how much of the revenue base, where the pipeline is sole sourced and how does that compare to let's say three years ago, and then what type of uplift may that give you any operating margin line.
Yeah. So I'll just give you a high level to comment on you know the comfort that we are having that on the fact that.
Our people now thanks to the you know very unique positioning that we have are able to actually build a lot of comfort with new prospects.
I don't actually crafting and entire deal as it has got a rich we are different and those are in terms of.
Entering that deal is actually one by us.
In terms of where that was maybe three or four years ago I think there's a significant improvement a friend historically.
Then in terms of overall long term margins actually that we'd be salutary for Dublin is because you know wouldn't be cross these kind of deals it means that our ability to actually control.
All the new ideas that traditionally the client would've been investing in is very high so it means.
First of all the allows us to take an end to end or kind of position readiness is concerned we're able to actually planned milestones much better because you know we haven't control of the whole deal and the third thing is the the investments in terms of some of the new areas that quite often you know.
Our create a little bit of uncertainty that are multiple players involved I'd also not controlled so.
Loves declined to really focus on the kind of outcomes that we need to Denver to them as opposed to the imports that we're providing.
Because of which are you know we off actually interacting with them.
Our pricing mechanisms are completely different than I think overall it can be salutary as you've already seen in the you know and results that we've been delivering over the past few quarters.
Okay makes sense.
And then just looking here that the spike in the repair paying amount this quarter, we didn't see the inflection on the auto claim side, but I was curious if this has any indication that may suggest just broader end to end deals and insurance or what might be driving that.
Yeah, I don't I don't think there's anything I'm sorry go ahead got them.
Yeah I wouldn't predominantly said this is more about the into it in terms processing deals that you're seeing in that market speed and that's the call reason.
Yeah, but but you're going to see volatility on a quarter to quarter basis, and that's auto claims business. We've seen it for two or three years now where we're at spikes up we've got some additional activities and then the next quarter Appeals back. So you know guns right. The long term future for us and auto claims is having the service as part of an end to end offering but.
There's gonna be quarter to quarter volatility in the segment based on the one off type the clients in the one off types of claims management that we're doing in this space.
All right. Thanks.
Thank you are saying thank you. Our next question comes from Ashwin Shirvaikar from Citi. Your line is open.
Thank you.
Good morning, everyone a hand, congratulations on the strong quarter.
I appreciate the initial comments on how the BPM industries evolving and WMS has taken steps to change with it.
Okay. So let me start could you discuss this before this notion of increasingly co creating solutions with clients.
Could you talk a little bit more with regards to you know are there specific industries, where that's more prevalent and as you tap into some of these kind of non traditional demand.
Yeah, how does the margin profile you bought.
Okay. So I think the.
The intent usher in really is to.
Position ourselves with every one of our cold water grows as a strategic bachner that really operates as an extension of our clients enterprise as a partner that can be trusted because we understand.
Business domains, as well if not better than them.
As a partner that has true global experience and as investors very solidly in analytics technology, great people, new practices things like that and also.
The leading edge all going after some of the new operating areas, it's quite often clients would find very expensive or disruptor propriety invest in all but themselves. So I just step back and look at the situation here is a box not coming in offering all of this and therefore as the interaction moves.
Towards one which is much more strategic grid interacting directly with the C suite with their CEO on US here for you know a very empower people or the ability for us to actually understand that business come up with unique solutions, which are created together as opposed to WMS alone.
On forcing a solution creates far better outcomes and impacts and I'm sure.
Over the quarters, we have spoken about a number of these examples I mean, just look at the example of what we created with that large insurance company. Very recently you know the startup company would be you know large or kind of investment out of the UK. If you just look at how that was created a b the kind of impact that has already been cleared.
Jointly again, I won't say that it's off or decline yourself jointly and the client openly goes out to recognize it one is in terms of the milestones that you took out to achieve their you know what achieved already and as far as Dublin is you don't being at Boston up to them. We are all the operating at significantly.
Hi, I kind of achievement percentages and walk we had set out for ourselves and our plan is read between.
You know, it's highly salutary and with the mature kicking off a verticals insurance travel.
Logistic shipping all of these did his ability to introduce these kind of offerings and then there are some verticals, which are probably less mature in the sense out there.
Two following some of the older models on the catching up.
The ability to introduce these models there would probably take a little longer and I would say, it's an opportunity for longer term growth.
But having said that there were we introduced these models and benefit decline. We are also benefiting because not only are being far better control all the outcomes of operations, but we are also a much more and control in terms of helping the client focus.
Based on what they want done in their marketplace I'm not wanting about how we're doubling it which means the I just would benefit is.
Profitably products could be significantly higher.
Yeah, and I think at the time today Ashwin. It's happened at the end of the dates Acacia is point. This is a mindset in the culture issue I mean, the fact that we're going in and actually trying to work with the client to create a solution that helps them specifically address their need I think it's somewhat unique in the industry I think.
Thank the tendency tends to be too to wants to sell a standard process or a standard off the shelf solution and.
Honestly that doesn't tend to work for a lot of clients. So what we're seeing is that having the domain expertise, having the flexibility having the innovation is allowing us to separate ourselves in the marketplace.
Got it so just got it [laughter].
Well, it's just the under Signups servicing did still companies and understand digital nor does it go creation from but it's still companies and additional due to the Cline Ultra ultra adds a lot of color.
Understood understood and then on the quarter.
Think about it one of them spikes in FX aside there's also a outperformance.
Worse this year set expectations. In addition to that if you could comment on what led to that and would it be safe assumption to say that that's let's say faster that perhaps up oh.
Deals already signed that's going to also benefit you as you head into.
Yes, good 21 would that be afraid assumption.
Yeah. So if you don't see a you know a treaty or a you know it's a fair assumption to me definitely other than the volume Spike a it's a notice of bombing as well as a new logos, what we have I do and accordingly, a you know some of that quicker ramp you know even keel alluded the large insurance Oh look like.
What we added and you don't but some of the.
Welcome what because we are able to oh per life, it's dusted off helping into the or all of them differently or you know the growth from the new logo, there's going to the existing that he's going to help us from a.
Next to you perspective, no fine, but we'll have to just wait and watch that do not even the quarter for is that how it does shapes up but do you know we are very we expect a really good year.
These are the pipeline what we have today.
Okay. Thank you.
Okay.
Thank you.
Our next question comes from Nike Nolan from William Blair. Your line is open.
Thank you.
Keshav you mentioned the pipeline is 50% larger today versus a year ago. So can you give us a little more detail on how that pipeline may have changed the nature of these deals versus several years ago.
Yeah, Yeah, Maggie so yes, absolutely I think I think what I would say is not at this point in time vs. Very excited about first and foremost our performance art positioning as a company based on how we have invested in executed as well as the pipeline itself.
And if you.
Forward from three years ago, I will say that first and foremost most of this change in terms of the pipeline is being driven now by transformation is gonna be is not the traditional.
Kind of deals that you have you know.
We've been doing to participate in the bus so much more transformational in nature much more into and.
Well the entire gamma drop.
I mean, a vertical offerings and stitching together that along with digital services and analytics.
You know being see the second is you know a in a number of these cases. These are completely new kind of deals red while we come in and has declined with the goal creating a solution.
The outcome.
That is being proposed and planned for that's traditionally not been or the kind of models that W. And this has actually done you know.
Maybe a few years ago, but we've got so used to doing it now.
Got it is a.
For the course at this point in time, and again I would say that the a focus and the delivery has been the m. Good execution has ensured a despite blend is very bad business across all our core to what it goes.
Very broad based across all geographies and is also in many cases being driven by some effect Gore.
Horizontal offerings, but again that Missy.
At this point in time, they're getting far more comfortable out on the fact that did deals are being driven by doubling its are not around just simple efficiency gains on cost reduction themes, which were the traditional BPM kind of models to date is much more about our ability to transform our clients ecosystem.
Environments and help them with that kind of strategic outcomes and that is actually driving a completely different held in the centsfive Mike.
Thank you and I enjoyed the commentary on the sales force I'm curious how to specialty sales force it integrated within the existing sales teams and how they are participating and pitches.
On every client team at every pitch just given that you know many of these specialty areas like analytics that you're just talking about are now embedded in the majority of your engagement.
Yes, that's an interesting question I think one of the most exciting things that is happening to the company today.
Is something that we called WMS education.
I think it's what we're doing around the whole, killing programs and the integration of new talent. So one is how logging first of all making sure that the new people coming in are you know our first of all big becoming very relevant in each one of the new age kind of deals a year ago them spoke about.
The internet areas, you need a very different greed of salesperson to attack those deals upfront. What are the same time, we have very smart people, who are who are you know available across the globe and who have done extremely well for us and what we need to do wants to keep risk.
Killing of upscaling them in terms of did <unk> ability to integrate into some of the new areas around technology domain analytics and things like that or maybe the new technology areas and that's where W. W. Education comes into being sort of it constantly doing programs to upskill agrees skilled at existing people.
We are constantly making sure that the you know the new talent, that's coming in but they're completely new capability are interacting closely with this buttons and hunting together in order to make sure that see overall impact from Dublin as is the highest and I think a true test is you know when we actually interact.
With our prospects that applies including our existing clients. The feedback are consistently now received is that the quality of interactions that could be of having a review our teams is completely different because today, we are having europeans coming in and talking to us like advisor strategic advisors.
Painting, a picture of how we should actually go go after new areas within all companies and then at the back and there is other bunch of people who are also talking about all the wins that when it seems like the business for them in the past some how some of that can then be integrated into some other new offering it yet so I think a combination of all of this.
And the investment made in you know skimming and educating our.
Oh really is transformational for the company.
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Great. Thank you congrats.
Thank you. Thank you.
Thank you. Our next question comes from Dave Koning from Baird. Your line is open.
Oh, Yeah, Hey, guys. Thanks, great job.
Thank you.
Yeah, Yeah, and I guess my first question just what's been interesting you ask T E base revenue growth. It was over 20% this quarter in it seems like that's just keeps accelerating in the five years or we might have said oh, we'd rather see the transaction based or not if you base grow but what's actually seem like it's happening is that's accelerating its the same time margin.
Our lifting in revenue growth is as strong as ever so maybe you could talk a little bit about that dynamic because it. It all seems just very positive.
Yeah, I think I think it is Dave I mean, it as we've talked about on the last last couple of calls and certainly over the last couple of years what are the things. We still continue to see is that most new clients want to start their relationships and NFC based model. So you know from from our perspective, if we don't have a mix Oh.
Headcount based models of transaction based models of outcome based model.
We may have a bottleneck to growth down the road certainly we believe overtime, you're going to see this industry shift heavily towards transaction and outcome clients are going to want to pay to put bodies on processes are only going to want to pay for results and for outcomes. So you know this is the certainly the future, but we all.
So I understand as Keshav mentioned the clients are in various stages of their journey and forever existing client that we have that comfortable giving up control of their process and moving to a transaction or outcome based model, where w. went out held accountable for result, we have a new set of clients coming in on an f. the base.
Who are still making sure that we're capable of delivering on the promises that we we presented to them. During the sales process. So you know I think having that balance having this healthy distribution across is extremely important to the business. When we look at the long term growth opportunity.
Great great. Okay. Thank you and I guess my follow up just you talked a little bit about hut travel was really strong and in some wins it a little bit a onetime revenue, but is the backdrop of travel volumes just in general good too because I know the last quarter to just the travel industry. I think there was a little pressure a little on a little uncertainty you know with Expedia et cetera.
But has that kind of rebounded a little bit cross the travel just industry.
Yes.
Yes, the tests. So besides declines that you named then we're seeing an increasing volumes. What is also be prevalent in the travel vertical has been addition of new clients, which had been broad based across 40 Airlines and other lines of business that has also started increasing the volume of that particular vertical.
Yeah Okay.
Got them said, Dave you were pretty happy with the fact that you know this wasn't just no increased volume with some existing clients are a short term spike. This is there's also some good speed that have been plant that here for longer term growth and and it's not just the quarter. If you look at the travel vertical on a year to date basis, it's up over 20% so.
You know, what we're certainly going to see volatility and we certainly cannot in any given quarter be a little bit more exposed to the volume volatilities with some of our larger clients. The backdrop in some of the challenges in some of the pressures in the travel in the airline industry are the kinds of things that tend to push clients towards process management process outsourcing.
Services, so little bit of a double edged sword there.
All right, great well great job. Thanks.
Thank you.
Thank you. Our next question comes from Korean Marcello from Deutsche Bank. Your line is open.
Hey, guys. Thanks for taking my question has had a couple of clarifications the pipeline comment being 50% larger than last year is that directly comparable to that come out I believe you guys made this time last year about average JCB HCV being up 35% year over year is that directly comparable because it pretty.
Nice acceleration there I guess.
No. That's that's really it's a slightly different view of the pipeline I'm certainly the fact that there are larger deals in their helps contribute to an overall larger pipeline, but you know this this metric that we provided your this statistic that we provided you. This quarter was just to give you a sense of what the overall pipeline in total look.
Like so that encompasses not only larger TCV ACB, but also encompasses a larger number of deals as well.
Got it make but what are you having said that you know our comfort and confidence in our performance positioning and our pipeline is very strong.
Got it makes sense.
Just as a follow up another clarification on the short term revenue I think you said that was mainly booked in travel and then where do you expect to record the sure short term revenue for fourth quarter, and then I guess just as the last one any update on the M&A pipeline, we haven't heard anything there in a while thanks guys.
Yeah for the show up for the fourth quarter. The short term revenue, what's already baked into the guidance.
Again.
It's a primarily is coming from insurance.
Travel and some of the other work because because you know it's a combination of the better the budget flush specifically from analytics, a you know the value edge and you know some of the shock them projects around that also includes some of the efficiency in the properties that doesn't mean.
You know, but is going to be primarily.
You know a in the insurance into you know traveling and some other verticals.
Also from an M&A pipeline perspective, as we have Oh, the spoken about from a capital allocation, it's all of us towards the capability acquisition.
It's a matter of the right that they'd like time and the like valuation, but you know are continuously progress is that a and b a pretty much satisfied with the pipe and what we have.
Good day.
All right. Thanks, guys. Congrats on solid result.
Thank you thanks Corey.
Thank you Sir our next question comes from Joseph Foresi from Cantor Fitzgerald. Your line is open.
Hi, This is Daniel Regan on for Joe having more macro question. So as we begin the calendar year 2020, I was hoping you could provide more color on what you're seeing from clients in times of spend expectations in the BPL space as a whole.
Well, you know only or early for us because you know in terms of overall guidance, we give guidance in April but let me just give you a sense of you know why we are excited about the market generally we actually believe that you know the focus now is much more on.
Transformation. This is the age of transformation clients on getting much more excited with working with partners, who can help them ripped a new thinking rich helping transform their business models and I think based on the investments we've made as well as some of the.
You know new areas, where we have led the market now I think there's a lot of excitement in terms of clients wanting to work with us.
So I will say that there's a significant shift in terms of clients not just wanting cost reduction anymore or not just looking at efficiency gains anymore, but really looking at exciting new models do said wives sustained and manage the disruption that's out there and in that game I think.
Doubling this has come out as one of the most critical players that can help them read that transition. So transformation is the key and that's where I think we will continue to lead and create more excitement going forward.
Perfect. Thank you.
And then I just.
Wanted to ask so that over the years the structural level of margins have increased.
I'm wondering for the fiscal year 20, what would what factors would put you at the high end.
Of your margin guidance.
Thank you I think yeah I think at this point, Dan, it's really going to be a function of if FX I mean, the guidance that subject provided for this fiscal year is.
2022, and a half the 23% so we're in a pretty narrow range. At this point you know really for us to go outside of that band given where we are today given the only one quarter left in the fiscal year <unk>, probably not much can do that if there's one item that could could make that number move it would probably be the FX.
Perfect. Thank you guys.
Thank you.
Thank you. Our next question comes from Sam England from Berenberg. Your line is open.
Hi, guys just a couple from me and the first one I just wondered how much bigger do you think the sales team needs to get into future and are there any geographies all markets, while you're still underway in terms of salespeople.
Oh, well actually a that's an interesting question I don't think we calibrate. These on the numbers I think for US it's more a case off you know constantly looking at the productivity of the salespeople.
You know one also focusing a lot on the new age skills that are required for sales.
Again, it's more a function of how under penetrated the market is the nature of how the demand is you know being seen out there. The fact that clients are.
Facing huge amounts of disruption out there in the marketplace and therefore their need for a very critical strategic partner that can help them manage this transition so as long as that demand continues to be there and we are at the forefront all for being the company that can help them. We continue investing in many areas.
Including sales, but at this point in time to say you know to actually put a number for salespeople.
It is not something that we have planned for but we'll continue to invest red or would it make sense and including answers.
Yeah, and I think important to understand where we are investing ahead of the curve. We know it takes a year to in some cases two years to make a salesperson productive. So a lot of what we're doing here is laying the groundwork for continued revenue growth in the coming years, but that being said I think that vacations point when we're looking at where we're hiring.
You know geographically, it's broad based but if he mentioned in his prepared remarks.
Certainly the focus from a hiring perspective is on having additional capabilities across the organization, specifically and consultative skills transformation skills advanced analytic skills. So you know automation and technology as well. These are the areas that we need to continue to augment the teams with and continued.
To add the right types of people to drive.
Long term growth over the next five to 10 years.
Great. Thank for the next one was just around the wage increases and wage inflation I, just wondered whether that was being driven by general market wage inflation or whether it's a reflection is slightly different hiring makes it more promotions and and you'd expected that will fit fed into not wage inflation.
All right I'll be expected to be a you know do we don't have rich a general market, everyone, if you're not expecting anything unusual.
Including the promotional stuff.
Okay, great. Thanks.
Thank you.
Thank you. Our next question comes from Vincent Colicchio from Barrington Research. Your line is open.
Yeah, Acacia I'd be curious what are the top one or two things you say that you'd say you hear from clients and prospects on on how your Salesforce differs from your largest competitor.
I think the first is you know that understanding off you know their traditional business domains the business that our clients belong to and the conflicts nuances that those businesses are going through I think that's the biggest a precision that.
You know our prospects in our clients have for our you know salespeople. The second is the fact that they understand listen and solve their problems as opposed to just giving them you know a longwinded lectures on walkers the offer the possible they import.
One thing is they really get down to solving a problem and giving them you know that what are what outcomes. Other quiet fairly quickly and I can tell you in this ido disruption red timing matters. So much having people who can understand domain, who can understand that business problem, who can saw.
But.
Who can also integrate all the new technologies.
Required and future brings them on on in a significant demand and their premium and I think we have a lot of those people essentially because we invested in those kinds of people and we continuously them to go on incremental education programs.
Thanks for that it's all have nice quarter.
Thank you very much.
At this time, we have no further questions in the Q.
This will conclude today's conference call. Thank you for your participation and you may now disconnect everyone have a wonderful day.