Q4 2019 Earnings Call

Good morning, welcome to GP strategies Corporation fourth quarter 2019 earnings conference call. All participants will be in listen-only milk. Should you need assistance, please sing know the conference specialist by pressing star key followed by zero after today's presentation. They'll be an opportunity to ask questions to ask a question. You may press * then one on your telephone keypad to withdraw your question, please press * then two, please note that this event is being recorded. I would now like to turn the conference over to an blank vice president of investor relations, please go ahead.

Thank you.

Good morning, everyone and welcome to GP strategies fourth quarter 2019 earnings call on the call today are Scott Greenberg chief executive officer. Adam said own residence. And why did you win Chief Financial Officer? Before we begin I would like to remind you that today's comments will include forward-looking statements which are subject to certain risks and uncertainties that could cause our actual results to be materially different from expectation for a complete discussion of these ratings. We encourage you to read our documents on file with the SEC with your posted on the investors section of our website at GP strategies. A replay of this webcast will be available on our website for 90 days following today's calls. The slides that are represented today are also available on the quarterly earnings releases page of the investors section of our website at this time. I'd like to turn the call over to our CEO Scott Greenberg.

Thank you and good morning and Welcome to our fourth quarter 2019 earnings conference call today. We will continue to use our regular quality of life which will include a WebEx presentation. Hopefully you'll find this informative and useful in your analysis of GP strategies to initiate the call. I will provide a brief overview page for the 1/4 then Adam out president will give key updates on our Global initiatives with a focus on organic Revenue growth opportunities and also an update on potential impacts of the coronavirus and have to add this presentation lcfo my Google preserve the summary financial analysis, then our provide a summary concluding with Acura extension.

Due to the coronavirus that company has taken actions protecting our employees while at the same time servicing our customers. We have implemented policies and procedures to reduce the impact while maintaining and promoting safety in the workplace in the fourth quarter of 2019 the company achieved the revenue growth of 15% of which 12% was organic growth this compared to the fourth quarter of 2018 in addition our adjusted even. Increased by 26% for the fourth quarter of 2019 compared to the corresponding period of 2018 the progress that we made in our business development efforts have translates to positive results to the corner. We continue to improve our balance sheet and generate approximately 8.8 million of operating cash flow for the coil. We were able

And that's that position after subtracting cash the seventy four point seven million at December 31st, 2019 compared to a hundred thousand million as of December 31st, 2018 the improvement in our balance sheet gives us increased flexibility going following a positive attribute of our company fax that over 60% of our revenue is considered recurring on an annual basis. We currently have approximately $125 of the global 500 companies as clients with that being said, we are making strong positive inroads in both increasing wild share and winning new customers by leveraging our Global footprint. I'll now turn the call over to them.

Thank you, Scott.

In 2019, we focused on the implementation of a new sales strategy designed to reignite are managed learning Services growth and expand our opportunities in the automotive industry. I'm pleased with the progress we've made and the significant traction we've seen with our client-focused sales strategy that contributed to the company's organic juice with the 5.4% for 2019 the combination of our sales strategy and automotive industry Focus drove Revenue growth during 2019 off within TTI and the historical GP automotive services that exceeded the company's overall organic growth rate. We're more confident than ever about the long-term growth opportunities for GP strategies within the global automotive industry in addition during Q4 are previously announced managed Services wins help drive off.

So in the quarter, this sales momentum has continued into 2020 with higher than normal RFP activity for managed Services. Now before I discuss the details of our strong Q4 and overall 2019. I'd like to address to recent developments in the marketplace and provide some perspective on how these events relate to them business first or second largest client that operates in the financial services sector recently announced a strategy that shifts their Geographic and Market focus in an effort to drive cost savings over the next few years based upon our insight and experience with the client. We do not believe there's any correlation between the shift in strategy and their expected investment and learning and talent management historically, the client's learning spend has been influenced by other business strategies besides.

Incremental Staffing reductions and as a result it be inaccurate to predict that these changes automatically increase or decrease the client's investment in learning client initiatives and involved changing staff allocations geographically corporate processes, or the implementation of new technologies are associated with automation typically involve additional training requirements.

Now I'd like to shift to the global business environment specifically as it pertains to the coronavirus at this time. Although the potential impact of the buyer is unquantifiable. We believe it will be temporary and not extend beyond some cancellations of learning activities during the time organizations. Take actions to limit the spread of the virus. Currently the most significant impact to GP has been in China. It's important to note that in 2019. Only four percent of GP strategies Raku was generated in China including Hong Kong at this time. We've had several cancellations of previously both learning activities in q1 and the first part of June and it's hard for us to determine how many will be rescheduled but with that said a meaningful part of our training delivery business is compliance-related with specific complain.

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And as a result, they need to be completed prior to the end of the compliance window. Now as a Counterpoint, it companies canceling face-to-face training activities the companies actively reviewing training options with a focus on me learning and virtual instructor-led training We Believe with that. We are the largest and most capable custom eLearning development provider in the world over the last few years as part of our offshore expansion strategy. We've increased our eLearning development capabilities significantly, given our expertise and Leadership position. We're well positioned to benefit from an increase in demand from companies looking for ways to develop learning strategies that are less susceptible to damage options due to events like the Coronavirus

No a second, risk mitigation strategy companies can leverage to minimize business disruptions during Times Like These is to enter into Outsourcing relationships with providers that have business continuity and Recovery plans built into their Outsourcing models. We're the largest learning Focus Outsourcing company and history has shown know when the marketplace Embraces training Outsourcing that is very positive for GP strategies our expertise and capabilities position the company to benefit package as new opportunities developed. We anticipate that the current events will reinforce and expand the trend of increased Outsourcing request for proposals, which we will receive overtime. We believe the events over the last few months have highlighted the value proposition of GP strategies and our ability to deliver long-term birth.

Looking forward we expect to deliver stable Revenue in the first half of 2020 excluding divestitures in the timing of shipments for automotive Publications during the second half of 2020. We expect to deliver mid-single-digit organic growth as compared to the second half of 2019 overall. We've executed on our growth strategies driving improved results and we believe the current events are only a temporary disruption now, I'd like to move on and and update on the overall sales activities off on our last call. I discussed are multi-million-dollar plus contract opportunities with the combined potential to drive twenty million per year in Revenue since then with one contracts valued at over half of this amount while bidding on additional opportunities.

The net result of the contracts that are still active since the last call minus those that were one or laws plus the new contract opportunities is still over twelve million and annualized opportunities that are active in our pipeline. We're pleased with our success rate of closing deals and adding new deals to the pipeline.

No.

Do you our clients annual budget Cycles? We've historically had the greatest number of requests for proposals at the end of the third quarter and into the beginning of the fourth quarter of this year despite the current market environment. We're encouraged by the fire proposal activity. We're experiencing in the first quarter compared to previous years.

Now to summarize the status of our sales efforts and 2019 quickly share our year end sales metrics for 2019 Jeep at one point two billion a new sales opportunities, which is a 31% increase from 2018. Our year end sales pipeline was $739 Million which is up 37% compared to 2018 are new bookings were $361 million, which is 25% over 2018 as a result our backlog at the end of 2019 was up 16.7% versus the end of 2018 after excluding the backlog associated with the two divestitures wage based upon our sales strategy success in 2019 were expanding the sales initiative in 2020 and we anticipate similar Returns on this investment.

Now at this point I'd like to move on to provide some key updates within our operating segments and then light will cover detailed revenue and profit drivers during this report during his report turning to the workforce. Excellent segment-first the manage learning Services practice delivered year-over-year Revenue growth of 14% in Q4 driven primarily by Outsourcing contracts. Traditionally Outsourcing contracts take about a year to fully ramped during 2019 several manage learning Services contract wins from the end of 2018 followed this life cycle, and we're fully ramped bike you for driving strong Revenue growth with the new contract wins and managed learning Services. We expect the same Cadence for the business throughout 2020 with Revenue waited to the second half of the year as I mentioned earlier. Yep.

We caveat would be any unforeseeable impact from fact from factors that are outside of everyone's control another contributor to the growth within manage learning Services was job skills training which delivered strong organic Revenue growth in Q4 2019 compared to the same period the previous year. We anticipate both of Revenue and gross profit in q1 of 2020 and Beyond will exceed the prior year same quarter comparisons.

The second practice within the workforce excellent segment is engineering and Technical Services, the multimillion-dollar Aerospace project. We previously announced is wrap up nicely and we anticipate this project to contribute significantly during Q2 and Q3 on twenty-twenty the sales efforts of our energy products and services did not meet our expectations in Q4 and 2019 as a result. We reorganized our sales sales efforts in this area. Although we're beginning to think positive Trends in the business. We do not expect to see significant contribution within this particular part of the business until the second half of 2020. Now if we move on to the business transformation segment revenue for the segment increased 24.5% in Q4 with 9.6% Organic growth compared to the same period last year's

the growth was

I'm primarily by the sales enablement practice the derives the majority of its revenue from the automotive industry looking forward one of the multi-year contracts that we just one since our last earnings call is in the automotive industry and we expected to contribute to our organic growth within business transformation and Q2 of 2026 and then fully ramped in Q3 of twenty-twenty. In addition. We're pleased with the t t i

Component of sales enablement and expected to deliver Revenue growth in 2020. Our organizational development practice within this segment wage was basically flat in Q4 2019 versus Q4 2018 on our last call. We announce that we're Shifting the sales strategy for our human capital organization within this practice in 2019. The human capital business did not deliver growth over 2018 since the shift of our struggles sales strategy. That's the human capital team has already won two significant new projects that will span twenty-twenty and twenty Twenty-One. In addition there in late sales stages for another significant project. We're very encouraged by the increase in opportunities in the space and the ability of our team to win these new sales contracts quickly.

Looking forward to 20 20. We're very pleased with the momentum of our business the organizational and strategic changes. We've made over the past few years are showing results. We will continue to monitor the global landscape, but we continue to believe any impact to the business from the coronavirus will be temporary. We are well positioned to benefit from Trans in the market that we serve and we believe our ability to deliver long-term growth and drive shareholder value is strong now, I'll turn the call over to Mike and he'll provide some details financial review. Thanks Adam and good morning everyone starting with revenue and gross profit on slide eight. We reported Q4 revenue of 155.4 million, which is up twenty two point five million or 17% from the hundred thirty two point nine million of Revenue reported in Q4 of 2018. Organic Revenue growth in dog.

Or in constant currency was 11.9% breaking the revenue out by segment their Workforce. Excellent segment reported Q4 revenue of 86.8 million, which is about 9 million or 11.6% from the revenue reported in Q4 of 2018 within this segment the MLS practice contributed a net increase of 8.7 million primarily due to a 6.9 million net increase for MLS training and content development services do to recently announced Outsourcing contract wins and new content development contracts and a 1.9 million increase in UK vocational skills Training Services, the 80s practice experienced a point five million increase in Revenue primarily due to increases in chemical demilitarization Training Services for the u.s. Government and Disaster Recovery Services organic Revenue growth in this segment for Q4 was 13.5%

Transformation service is second report a Q4 revenue of 68.6 million which is up 13.5 million or 24.5% from the revenue requiring Q4 of 18 within a segment. The sales enablement practice contributed net increase in revenue of 13.4 million primarily due to an eight point eight million increase related to the TTI Global and TTI Europe Acquisitions, which were completely in 2018 a 3.5 million increase in Automotive Sales Training Services largely due to an increase in new vehicle launch events and Technical Training Services. And at one point 1 million increase in Publications, Revenue due to the timing of shipment of the 2019 fall publication McCurdy occurring in Q4 of 2019 versus a portion of the 2018 fall off shift in Q3, the organizational development practice Revenue in Q4 2019 was consistent with key for 2018 organic Revenue growth in this segment was dead.

Okay, 6% Automotive publication Revenue in the sales enablement practice in Q4. Nineteen was $10, which was one point 1 million more than the public Revenue a quarter in Q4 of 15. This increases mentioned before was due to the entire 2019 fall publication being shipped in q 4 19 verses the portion of it shipped in Q3 of 2018 RAV4 2020. The publication revenues forecasted to be approximately $24 million, which is materially consistent with the 24.2 million of 2019 Pub Revenue. However long to ship a five million above Revenue out of Q2 of twenty-twenty and in the Q3 of twenty-twenty based on the scheduled shipment of one of the twenty twenty pumps falling in early July month vs in 2019 the same Pub shipped in late June for a breakout of the projected 20/20 Revenue by quarter. It's as follows Q one five million dead.

Two to three point five million two hundred five point five million and Q4 ten million in terms of gross profit. We report a Q4 or profit of 23.3 million, which is up five million or 27.4% from the 18.3 million of gross profit reported in Q4 18, their Workforce wage in segments report a Q4 gross profit of 14.8 million or 17% of Revenue, which is an increase of 3.6 million or 31.9% compared to gross profit of 11.2 million or 14.4% of revenue for Q4 2018 primary driver of the increase in gross profit in the workforce. Excellent segments are the revenue increases previously owned noted and in addition within the 80s practice in Q4 of 2018. There were contract overruns in our alternative fuels division that totaled eight point seven million dollars off.

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Pete and in fact, we're replaced with profitable projects in Q4 of 2019 the business transformation Services segment reported Q4 gross profit of 8.5 million months or 12.5% of Revenue, which is an increase of one point four million or 24.4% compared to gross profit of 7.1 million or 12.9% our revenue for Q4 of 2018 gross profit increases in this segment. We're primarily due to the gross profit contributed by the TDI acquisition and the other increases in Revenue in the sales enablement practice moving objects, like 9 to touch upon some you today highlights for the company. The internet revenue is up 68.1 million or 13.2% organic revenue is up 5.4% in constant currency. Looking ahead to 2020 given the potential impact of the coronavirus on our Revenue in the early part of 2020 that Adam previously mentioned and due to age

Shift of five million dollars and publication Revenue out of Q2 and into Q3. We expect our 2020 Revenue profile to be more heavily weighted to the second half of the Year. Rose margins excluding Severance for both periods are improving and running at 15.7% Unit A 2019 versus a comparable 15.2% in a 2018 for 2020. The emphasis will be to continue to deliver Improvement in Gross margins included in the you today 2019 results is revenue and gross profit for two businesses that we recently announced being divested the tuition business, which was sold effective 10:00 1 of 2019 had revenue of 5 million dollars during the first nine months of 2019, the alternative fuels division, which was sold effective one one 2020 had revenue of $11 in 2019.

The gross margins these two businesses were in line with the gross margins of the workforce. Excellent segment where they resided moving on to sg&a expenses on slide ten General administrative expenses for Q4 up 3.1 million dollars or 21.1% from the 14.6 million in Q4 of 2018. Primary drivers are a two point 1 million dollar increase in bad debt expense primarily due to a 2.2 million-dollar bad debt write-off upon final settlement of an AR with a foreign or an oil and gas client, which was in dispute since June of 2017. There was also a point five million dollar increase in G&A including amortization related to the acquired TTI Global business in Q4 of 2096. And there was a point three million increase due to internal labor cost at that in Q4 of 2018 were capitalized in connection with our financial system implementation butter including

GNA expense in 2019 sales and marketing expense for Q4 is up point five million quarter-over-quarter primarily due to the investment Business Development projects now inside sales and the centralization of our account management team some of who were previously reported in cost of Revenue in 2018 as a dimension based on the success of the sales initiative. We are in fact only expanding our investment in the sales force in twenty-twenty and expect similar Returns on this investment moving on to other p&l items on slide 11:00 and to touch upon just a few months with a gain on sale of business while the proceeds from the sale of the tuition business were twenty million dollars the accounting for the transaction included the allocation of Goodwill and the book value of certain age. It's related to the business which resulted in the pre-tax Game recorded of 12.1 million interest expense in the quarter is down 1 million dollars from Q4 of last year wage.

And it down point five million.

Dollars from the Year Day 2019 quarterly average do to lower borrowings under the credit facility.

The income tax rate for 2019 was 32.1% compared to 33.4% 2018 as we looked at twenty-twenty. The projected tax rate is approximately 30%

Moving on to the earnings summary on slide twelve after adjusting for special items including the gain of divestiture of the tuition business. We reported adjusted EPS for Q4 of $0.23 vs $0.11 for Q4 last year and adjusted ebitda for Q4 was $11, which is a 46% increase over the seven point five million of adjusted ebitda reported in Q4 last year off for details on adjusted EPs and adjusted ebitda. You can refer to the appendices at the end of this presentation moving on to some balancing drivers on slide thirteen dead operating cash flow for Q4 was 8.1 and 8.8 million. And for the year was thirteen point four million unbilled Revenue was down twenty three point five million and accounts receivable was out twenty four point two million from December of 2018 as the disruption in Billings related to the financial system has now finally cleared through the system.

Jetnet of cash at the end of Q4 was 74.7 Million which is down twenty eight point four million from the 12-31-18 balance. The company's leverage ratio as defined under our credit facility as of Q4 2019 was 2.3 times ebitda up compared to two point nine times at Q4 of 2018 and is down a full turn when compared to the 3.5 average ratio in Q3 of 2019 before I move on from the financial statement discussion. I want to point out that in our 2019 10K disclosure. We will be reporting material Witnesses in the area of our internal controls over financial reporting. It is important to note. However that we expect an unmodified opinion on our 2019 financial statements audit we seem to have all material weaknesses remediated in 2020. Finally turning the backlog on page. Fourteen backlog as a Q4 2019 was 349.8 Million.

Which is up Thirty one point eight million or 10% compared to the $380 million and backlog reported for Q4 2018 after removing from backlog wage 2018 backlog related to the divested tuition business and LNG alternative fuels business. The increase in backlog is approximately fifty million or 17%

This concludes our financial update on out there in the call back to Scott.

Thank you, Mike and Adam. We concluded 2019 with success on three major strategic initiatives one organic Revenue growth to strengthening our balance sheet 3 implementing a new Erp system. We looking forward to 2020 with that. I'll turn them into the Q&A session. Thank you very much.

We will know.

Begin, the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys off to withdraw your question, please press star then to our first question comes from Chris. How from Berrington research go ahead. Good morning. Everyone congrats on a great quarter. Thank you, Chris.

First question, perhaps the more color commentary on your previous comments just in regard to the variance that you saw that led to the outperformance off within TTI and Automotive over the course of the year or specifically in the fourth quarter. However, you may choose to answer.

So so basically what you're looking at is and you said a performance. I mean we expected it to perform. Well, I mean all along we thought the automotive would perform. Well, it did perform strongly. What we're realizing is there's a couple of Trends you have our acquisition that happened in the office services space. You also have other Acquisitions that have happened in the space. So the consolidation within the space has provided an overall macroscopic environment to where all of the players have more opportunities, there's less competition in and we've experienced benefits from that. We've also experienced benefits from cross-selling services that the two organizations have and our existing clients if we've been able to introduce TTI products and services page.

And likewise and then thirdly you had the geographic component. We've been able to expand some work, um in different geographies where we had strengthened tti's been a big fan some work in different geographies, um the that we had strength vice versa. So those three things have contributed to the overall, um, Pleasant growth that we've experienced automotive. If I could just answer that, you know, when we announced the acquisition of t t i, we basically set it when we put the companies together, we have a company that and now all kind of the largest manufacturers are customers of GP strategies. And in addition. We now have the ability to live in our service all over the world and we're able a brand recognition all over the world. And I think that that has occurred with the transaction that we completed last year.

Hey, that's great. Very helpful. And one follow-up question. You mentioned some comments surrounding the coronavirus. And as we all know it's had a large impact on the job Market's. How should we look at this as it relates to your Capital allocation priorities in this next fiscal year in regard to share repurchases off or whether it has any influence on how you assess the overall outlook for how you allocate Capital this fiscal year. Well, you know, I I did put up a quote, uh, um, the strengthening of balance. She is a financial flexibility with the with ongoing even. So, I don't think I have any impact at all on how we allocate capital in 2020.

Okay, that's all I have for now. I'll hop back in the queue. Thank you.

Our next question is from Jeff Martin from Roth Capital Partners. Go ahead good morning. Wanted to clarify your commentary around the 1st of June 2020 versus the second half the stable revenue and first-half imply flat or are you in are you anticipate or are you factoring in the divested businesses within that you would look at it on a pro-forma basis?

Yeah, so the you know as we look at the first half of the year in the the stable on a comparative basis would be after taking out the divested businesses that we know. I know what the amounts were for those two businesses. So that would be after taking it out of 2019 on a comparable basis, you know, in terms of you know, what what the stable song we talked about. It's it's difficult to quantify the impact of an ongoing situation. We do think it's a short-term impact and that are along um, you know structure in the business and and and Pipeline and opportunities that we see out there are are just as we've you know said, you know, you know the the strength that we've seen out there so I can't give anymore or you gotta know Adam if you want to provide any more other than you know, what does stable mean, you know, relatively stable compared to that, uh, prior-year first half after those the best of businesses are accounted for

No, I I think that's exactly right. So if you look at the the simple reality is we're looking at our current forecast and and and we look at at the all of the things that drove us to make the statements Upon Our Last Call about our confidence for twenty twenty and all those things are still there. But there's also a lot of unknowns that exists in the current immediate environment. So it's difficult for us to predict what that might what may occur the first half of the year off because of that but all of the conditions all of the Winds everything that existed during our last earnings call which provide us the optimism that we had at that point in time still exists. You just have this counterbalance situation that is a little bit unquantifiable right now and have two two other quick questions on the exam.

Increased activity in the rfps. Are you seeing that more on the U Learning side or are there is it just a broader broader book business? So it includes a dog but it's a broader book a business those the rfps. I'm referring our the multi-year managed Services contract and frequently, those most frequently those are comprehensive relationships that involve multiple modalities of learning. So eLearning instructor-led learning training Administration several different components put together in a strategic Foundation ship but in addition Jeff Adam commented that we're seeing increased activity in the human capital side, and that's one area as well. And then as you go through you can see increased activity on the automotive side as well. So I think those are really the combination

Okay, and then final question was?

Regards to the financial services client and the shift in strategy there. What are you looking for in terms of getting additional Clarity? What what should we look for in over what timeline the game game on whether that's going to change, you know, the the degree of of business that you do for that client?

So I don't think that I don't think you should look for anything. I think that if if something ships, obviously we will bring it up. As I said, we currently offer anticipating anything to do with that. I mean that particular client views us as a cost-saving mechanism. So the facts are undertaking cost-saving strategies is not necessarily a bad thing, right? So as of right now, I I don't think you should look for anything there. We would obviously keep everyone updated a more of a driving factor in the very short-term for that client as well as all of our other clients is how are they managing the short-term disruptions potentially do to the coronavirus, right? Okay. Thank you. Next question is from Zach.

Coming from B Riley FBR. Go ahead. Yeah. Hi. Good morning. Thanks for taking my questions Adam you're missing around. You've seen some customers delaying projects here in Georgia. And then in the start of Q2, um, especially in China, but you said this also does provide an opportunity for you to see maybe some more eLearning or a virtual learning opportunities. Have you had clients reach out to you to potentially schedule that type of learning or how are you expecting that to Trend or the coming quarters? Absolutely. We've had clients reach out to us, We'll also actively converted some live instructor-led training to Virtual instructor-led training that we're delivering programs in a virtual instructor-led Training Method of those programs have never been delivered that way historically. So that's happening that there was just a yesterday there was a big, there was a conference call with an industry expert in our space at Birth.

Non-affiliated industry expert in our space and he had a lot of learning leaders on there and it was interesting on that call a couple of these. Um Chief learning officers. They were talking about how long one hand there's definitely a short-term challenge associated with bringing people together in a face-to-face learning environment, but on the other hand if they are seeing the conversation about learning and the conversation about how do we equip our Workforce with the skills the ability and the knowledge required to be to work in an environment like this and the highest level it's ever been. So they're having conversations about training and learning at the highest levels of their organization in the highest levels are requesting it instead of them going to them. So we're seeing it all over the marketplace. We're seeing it everyone else is seeing it now. It's just a matter of of watching to see how it actually materializes.

Got it.

That that's helpful. And then you also mentioned expanding your sales initiatives here in 2020. I mean, can you do a little more of a deep dive into what exactly that means in terms of Investments and headcount or make investments in additional processes?

Sure, what I can say is within within our budget this year. We plan to incrementally increase our clients service leaders are Club service leaders are are in Key component of the sales strategy. They don't exist inside of any service line they exist at a company level and they're looking to introduce all job is all services and really have a deep intimate relationship with that client. So we're increasing the number of those we're increasing that number by about 25%. Um inside in 2020. Um, so that that's what we planned on doing. So that will add a few incremental headcount from there. So I'm not a tremendous investment by any stretch but it is some it is an incremental investment that we feel confident. We'll give us returns. Got it. That's helpful. And then just yep.

Question for me. It looks like you had some lower margins, especially within kind of the automotive services portion. Can you talk about kind of the drivers there? And what are the expectations for the margin profile that back in 2020? Yeah. So a lot of all lowering in the larger profile had to do with the integration of TGI and it you know, when we we believe it was taken a little longer than originally anticipated. We believe that we do have potential wage increase on margins, which is one of the things that we said earlier. So again, we believe that the acquisition is is is very successful and we look forward to increased margin in that group in 2020.

Right. That's that's helpful. Well, thanks again for taking my questions and best of luck as we go forward in 2020.

Thanks. Our next question is from Chris Howell from Berrington research. Go ahead. Yes, just checking back in time to seek further Clarity. If there's anything more color here on the human capital projects that you briefly announced that could contribute significantly to 20 20 20 21 any idea at this point is to how material they could contribute the in these forward-looking years. I agree question and when when we should contribute significantly where you're saying contribute significantly at the business-unit level not necessarily contribute significantly at the whole company level, um, that that organization thumb shrink it last year compared to the previous year. Um, as we said they did not grow as of right now we're looking is that organization, um dead

With with a strong feeling of confidence around there.

Organic growth in 2020 and the key about our human capital crack organization. They're a very large contributor to the overall organizational development practice. It's hard for the organizational development practice to experience to achieve organic growth without that major drive or within human capital growing so long. So I think the way to look at it is it reinforces our confidence that our human capital business unit will be able to have organic growth in 2020 as opposed to what they experienced in 2019.

Yeah, and and Chris. I mean when we looked it back room that was actually a group that we would have expected to grow in 2019. And that was one of our disappointments in the air but now going into 2020, you know, we expect it to you know, exceed our overall growth rate for the year compared to on the business office cuz that's great. Always appreciate it.

Again, if you have a question, please press * then 1 our next question is from Jeff Martin Roth Capital Partners. Go ahead. Thanks again. Wanted to just ask if if you could frame the you know, the business in terms of how much of it is is face-to-face interacting at this point. How much is you know, you learning or online capable and you know also cover you know of those clients that are still in conducting face-to-face meeting. What do you what what are you hearing from them? What do they what are they saying?

So the biggest, you know, when you when you look at our business, you know, the biggest face-to-face we have all the revenue we generate at the automobile dealerships and that business has not at this stage had any type of significant impact damage to the due to the virus. Uh, when you look at other business units, we do have a lot of Blended Solutions, right? So we do both face-to-face and he learning so many customers including our large financial services. So it would be hard to give an exact percentage on that a separate app will say in our sales of Naval meant business. There is a substantial amount in that business what in a lot of the others of face-to-face and then yep.

The learning service says on there is you know significant amount with live on some of our largest financial service customers. So I think those are the two businesses that probably have both face-to-face, but it'll be difficult to me right now just apply percentage on okay, and then final thing I had was on the UK job skills suck they're driven more by the Strategic changes you've made over the last couple of years there or is some of the traditional business coming back there with with the changing the government policy.

No, I would say.

Right now the big generation and that business is are pivoting in our model and entering into the large companies and in effect suggesting some of the large companies to use the that Levy Levy money. For those of you on the calls before the government instituted a payroll tax and companies get out orders. Um, and he said a large companies in the small providers have to match with and reset but ah growth has been more on the large companies and the pivot that wage the then the smaller companies coming back.

Hey, thanks very much. Again. If you have a question, please press * then 1.

At this time, we have no more questions. This concludes the question-and-answer session. I would now like to turn the conference back to Scott Greenberg CEO for any closing remarks.

Thank you. I'll be brief of the closing remarks. Hopefully today is saying the significant progress that we've made in 2019 and not a long-term positive outlook we have in 2020 government phone with and we looked at update you at the end of the first quarter. So thank you very much.

The conference has now concluded thank you for attending today's presentation. You may now disconnect.