Q4 2019 Earnings Call
Please standby.
Good day, everyone and thank you for participating in today's conference call to discuss.
Financial results for the fourth quarter and full year ended December 31st 2019.
Joining us today Rpss wed CEO, Mike Willoughby, the Companys CFO Tom Madden.
General manager of PFS, Zack Selman, the general manager of life area, Jim Subtler, and the company's outside Investor Relations adviser, Sean Mansuri with keenly Investor Relations.
Following their remarks, well open the call for your question.
I'd now like to turn the call over to Mr. me I'm, sorry for some introductory comments.
Thank you before we go further I want to make the following remarks concerning forward looking statements.
All statements in this conference call other than historical facts or forward looking statements.
Words anticipates believes estimates expects intends will guidance competence target projects and other similar expressions typically are you to identify forward looking statements.
Disclaimer relating to forward looking statements as long as certain non-GAAP metrics, you get our filings and in his presentation can be found at the Investor section of the P. It that's what website under Safe Harbor statement.
I'd like to remind everyone that this call will be available for replay through March 26, starting at eight P.M. Eastern this evening.
A webcast replay will also be available via the link provided in today's press release.
But they want a company website got PFS, what dot com.
Any redistribution retransmission or rebroadcast of this call in any way without the expressed written consent to p.. If that's what is strictly prohibited.
Now, let's turn to go over to Chief Executive Officer, PFS, one, which Michael will be like.
Thank you, Sean and good afternoon, everyone.
I realize that everyone has a lot on their place so thinking we're taking some time in joining us this afternoon.
We are going to present, our results have been differently. This quarter. We're pleased to welcome to the conference call. The leaders of each of our business segments exact someone for PFS and Jim Butler for Liberia.
To review key operational highlights and results for the businesses that they oversee.
Our prepared remarks, well follow Toms.
Overview of the financials and we'll continue to follow this format for future calls as appropriate.
Before turning over to Tom looking at a PFS at a high level.
Close down 29 team with a strong level of execution for our clients.
And also had another great quarter of generating new client bookings for both business units.
All despite a disappointing transition year in 2019, as we dealt with two unexpected client bankruptcies in PFS and lower bookings activity in Liberia into first half a year.
Our struggles in Liberia, followed an underperforming period of new client sales for this units as we exited 2018.
In the face of be setbacks, we executed several key initiatives last year.
Created momentum in the second half from 2019 and positioned us for a return to growth in 2020.
First in PFS, we renewed our focus on targeting prospects within our core industry expertise.
And expanded our service offerings to include small and medium sized businesses.
This strategic shifts led to a record level of PFS bookings were 29 team.
In addition to our vertical focus we continued our core services focus on brands and branded manufacturers, while disengaging from general merchandise retailers.
This multiyear effort to focus on high potential brands, along with the unexpected bankruptcy exits and Charlotte Rusin charming Charlie in 2019.
Has eliminated general merchandise retailers from the PFS fulfillment services client portfolio.
We believe this reduces our risk to client business failures that result from retail disruption by big box multi channel and online retailers.
Second in Liberia, we brought in new executive leadership.
Sales and marketing leadership.
Revamped our go to market strategy and rapidly rebuilt our undersized sales pipeline.
This multi pronged approach, which has focused on simultaneous improvements to marketing.
New client engagement.
Field sales.
Inside sales focused on regeneration.
And strategic alliances that generate a high percentage of sales leads.
All led to material improvements in the back half of the year.
For new Liberia bookings.
Jim Butler and as high impact sales team has brought a new high level of energy and optimism to Liberia.
It has been immediately apparent within the company as well as with client prospects competitors and strategic partners in our industry.
Jim and his team or now focused on recruiting.
Talent management and service delivery enhancements designed to capture the rapid increase in demand for our services and of course, delivering high quality work product to our clients on time and on budget as we build on this momentum and return library to growth in.
In 2020.
Between PFS in Liberia, we are continuing to promote the value of our full end to end solutions across our entire client base.
PFS and library marketing teams are currently implementing a joint go to market strategy.
And our sales processes now include more efficient communication and transparency to enable our teams to collaborate on prospects and leads.
We currently have 44 programs across 34 brands that are taking advantage of both our PFS and libraries services and we believe our team's efforts will continue driving improvements in the coming quarters.
Before commenting further I'd like to turn the call over to Tom to provide more details on our financials and outlook for 2020.
Tom.
Thank you, Mike and good afternoon, everyone.
For the fourth quarter, our consolidated service fee equivalent for SMB revenue was 63.4 million compared to 68.3 million in the prior year period.
The decrease was primarily driven by the two clients bankruptcies referenced earlier.
And the transition of certain transportation management related activity.
While we also had a slight year over year decrease in service fee revenue for our library of segment. Our fourth quarter 2019 was the highest quarterly service fee revenue performance that we had for Liberia during the year, reflecting some of the positive momentum we're seeing in that business.
Service fee gross margin was 32.5 million compared to 34.7% sorry was 32.5 per cent compared to 34.7% in the prior year quarter.
The decrease was primarily due to lower gross margins a quick for the PFS fulfillment and library of technology services.
It is important to note that gross margins for both segments continued to be within the guidance range of 25% to 30% for PFS.
And 40% to 50% for librarian.
SDMA costs were 18 million in the December 2019 quarter.
A decrease of 1.4 million compared to the prior year.
With decreases are occurring across PFS, Liberia, and sure shared services or our corporate function.
We were able to offset increases in sales and marketing related spend with cost focus and savings in other areas.
We generated 6.3 million of adjusted EBITDA for the quarter compared to 9.1 billion in Q4 2018.
The decrease was primarily due to the expected lower SFP revenue and lower gross margins, which I just discussed.
Turning to the balance sheet at December 31, 2019, cash and cash equivalents totaled $12.4 million and total debt excluding operating leases was 37.8 million.
This results in a net debt position of approximately $25.4 million.
An improvement from our net debt position of 26.5 million hours at December 31, 2018.
As we've stated in the past a portion of our cash balance includes the benefits from the timing of certain cash collections received from our clients customers that are then later remitted to our clients.
So there's always some variability on a quarter by quarter basis that is outside our control.
We do currently expect that the benefit of this cash flow.
Will decrease during.
Calendar year 2020, due to the transition of one of our clients away from utilizing this component of our service offerings.
Our capital expenditures in the December quarter for approximately zero point $9 million.
Resulting in a total 2019 level of $6.9 million, which includes capital expenditures finance through cash and debt.
We expect our capital expenditure spend in 2020 to be between 7 million and $10 million, sorry, 7 million and $9 million. The majority of which is expected to be roof related to new client activity.
Quickly reviewing our annual 2019 results.
Consolidated fee revenue for 2019 came in at 215.8 million hours compared to $232.1 billion last year.
Service fee gross margin was 33.9%.
Compared to 36.3% in 2018.
Adjusted EBITDA was $16.2 million compared to 24.4 million hours in 2018.
Net loss for calendar year, 2019 was $2.2 million compared to net income of $1.2 million last year.
And free cash flow.
The way to this cash flow from operations less capital expenditures was approximately 6.9 million in 2019.
Which was relatively similar to the 2018 levels, even with the reduced level of profitability in the current year.
Moving onto our 2020 outlook.
As Mike indicated earlier, we are excited about where we stand as we look ahead into 2020, and we believe we are poised for growth in both business segments.
Based on the success of our sales and marketing efforts in the back half of 2019.
We are reiterating our previously announced 2020 guidance and currently expect to generate consolidated SFP revenue growth of mid to high single digits compared to the prior year.
Coupled with an ongoing focus on costs. We also expect to improve our adjusted EBITDA margin performance.
Note that we do expect growth in the PFS segment to be concentrated in the second half of 2020.
As we anniversary the prior results from the two bankruptcy clients and PFS.
Generate full value from our new clients.
The end year within Q4 that is traditionally our seasonally high quarter for PFS service fee revenues.
We expect our 2022 what activity in service fee equivalent revenue and adjusted EBITDA profitability to be lower than Q1 2019.
And then ramp up as we go through the year.
A few other items to add regarding calendar year 2020 guidance.
While we continue to target overall service fee gross margins in the 30% to 35% range.
We expect to be toward the high end of this range in 2020.
As always this will be impacted by the relative proportion of our infrastructure related services versus the higher margin professional services activity.
PFS project work.
And our Fas and technology product offerings.
We expect our product revenue will continue to decline from the 26 million that we generated in 2019.
To a level of $18 million to $22 million in 2020.
Our expected gross margin on this product revenue.
Is expected to be in the 4% to 5% range.
We do expect an increase in cash based operating expenses in 2020.
Primarily related to incremental sales and marketing spend in both segments.
We expect our total DNA expense, including amortization of intangibles.
To range between $8.5 million to $9.5 million.
Decrease compared to our actual DNA expense in 2019 of $10.4 million.
We expect an increase in stock compensation expense on a year over year basis.
But it is currently difficult to predict the expected level due to ongoing fluctuations in our market share price.
We are seeing fluctuations in currency rates between our U.S. and international operations.
These rates are fluctuating more than what we have seen historically due to the recent macroeconomic events.
We continue to monitor those closely to the us to assess the impact on our financial results.
For our interest expense, we currently expect to maintain a relatively stable level of average debt borrowings as compared to 2019.
Depending on interest rate fluctuations, we would expect our interest expense to be reduced slightly in 2020 compared to our 2019 expense of $1.9 billion.
With our anticipated improvement in profitability, we do expect an increase in tax expense compared to the 2019 expense level of 1.2 million.
Likely in the 1.5 million to $2.5 million range.
This concludes my prepared remarks, I'll turn the call over to Zack to walk through operational highlights and PFS.
Correct.
Thanks, Tom.
Those who I haven't had a chance to meet yet I've been leading the PFS segment for roughly four years and I've been with the company in various roles for about 17 years.
As Mike mentioned, we directly responded to the challenges of 2019, my investing in multiple avenues to drive growth offset the unexpected client losses.
We also aggressively manage their costs as we dealt with the resulting temporary excess capacity in our fulfillment centers.
Although unexpected in untimely these client losses have helped us execute our strategic decision to refocus our fulfillment efforts with the highest potential core verticals that we have specialized and for many years the ones, where I believe we are well known as the leading authority for E Commerce fulfillment.
Health and beauty.
Luxury fashion, and apparel jewelry, and collectibles and consumer package goods or CPG.
Our experience indicates that brands within these verticals often require a unique and differentiated fulfillment experience for their customers not simple Brown box experience for example, if youre selling luxury beauty products at a relatively expensive price point your customers expect a certain type of.
Experienced when receiving their goods and we ensure that experiences maximize and his authentic brands identity.
I strongly believe our proven ability to provide high touch and scalable fulfillment gives us the edge against our competition.
Further our ability to provide branded high touch customer experiences for all of our clients across all of the physical customer touch points in the differentiator for each of our core services, including customer care in order to cash management, which includes order execution payments fraud management.
And omni channel enablement.
It's worth noting that we have more flexibility in our vergnano vertical targeting for these non fulfillment services as client churn MB their service areas does not always that result in excess capacity that impacts our overhead.
And Tony Tony increasing our addressable market for vertical market expansion with non fulfillment services as one of our top sales priorities.
On the topic of addressable markets and 29 team began to expand our addressable market to include high potential small and medium sized businesses.
These smbs are early enough and their lifecycle, but they are often more willing to engage in a broader set of services that may not already be handled in house.
Our experience indicates the smbs are typically looking for more product types and packaged offerings, which lead to quick in cost of fish effective launches.
It's also worth noting that many of these smbs aren't a rapid growth stage, which increases their motivation to elevate the ecommerce operations to handle scale, while maintaining a great customer experience.
As we help enable their growth we grow with them.
Between these two important initiatives, we generated another strong quarter of bookings in Q4 as anybody three new engagements with a combined estimated $6.4 million and annual contract value or a TV, which compares to 1 million of HCV in a year ago quarter.
This brings our total 2019 bookings for PFS to $34.5 million in HCV, which compares to $11.8 million in 2018 and has the highest level of bookings for PFS in company history.
The pipeline for PFS continues to be strong several deals signed in Q1 that we plan to announce on our next update call.
We're also seeing good momentum in Europe in particular, you the UK as the ramifications from Brexit have become more defined.
We brought on new personnel in the region during the fourth quarter to execute to refine sales strategy and take advantage other growth opportunities Brexit may present.
We currently expect to see the sales benefits from these UK and European investments later in the year.
As a reminder, PFS bookings can be a useful indicator for the expected annual revenue we plan to generate from a client engagement.
However, the timing to get to a full annual run rate can vary with some engagements thinking about six months to ramp up and others, taking a full year or more if there are multiple brands in play for that engagement.
As always one of the primary benefits of the PFS business. It's a long term sticky nature of our typical client engagement and the way annual contract value can translate in total contract value despite year to year variances.
But we're very pleased to have another solid quarter of bookings in Q4.
We were even more proud of a successful successfully executing another important holiday season for our clients, which is obviously a very important time for PFS client given the verticals we serve.
To give some perspective on the timing of volume we experience, we shipped more than 10 million units over the holidays generated about $330 million in client shift revenue. We also made 873000 customer contacts and averted 132000 fraud transactions that saves our customers.
Estimated $18 million.
Wrapping up my prepared comments on the last wrapping up my prepared comments on the last call like mentioned several client engagements, which pushed from planned launches in 2019 into 2020.
I'm pleased to report these delayed engagements have now launched four are substantially in progress, helping us returned to growth in 2020 and already setting us up for a strong 2021.
Ill pass the call over to Jim for an overview of librarians operations, Jim Great. Thanks, and good afternoon, everyone.
It's a pleasure to during this call for the first time as the new Liberia leader.
As Mike mentioned earlier I joined the company in June of 2019, falling over 20 years of various leadership roles for organizations.
Digital space, including global service providers with very similar capabilities from Iberia.
Most recent direct relevant experience was leading actually bar U.S., a full service global digital agency and its predecessor round arch, which is equipped me with the knowledge and experience of how to grow and scale High performance Commerce service company like Liberia into a global strategic digital services company.
Additionally, my experiences intersection Smart City consulting practice provided me with direct insight into digital transformation efforts.
That brought together digital and physical environments, which is so critical for libraries focus on elevating omni channel commerce.
When Mike initially approach me this opportunity I saw services business within mens untapped potential.
Through strategic acquisitions and organic client growth.
I can as leadership team has assembled a business with great phones, but the business, which really missing the spark in sales marketing and alliances required to grow a business like this.
With a focus on exceptional digital experiences and especially in combination with the capabilities of PSS that create a unique and value proposition, Mike and I believe laggard library of what's the best kept secret in the digital professional services industry.
I was excited to join Mike's team into turn that best kept secret into a clear leader in our space as a preferred provider partner and employer as we execute our mission to create inspired interactions and elevated commerce.
Okay. I started we began to calculate it program to re architect the sales and marketing team with high performance leaders for my extensive network, including several proven executive leaders that have had worked with in the past.
Most critical mission was to reverse the downward revenue trajectory and create positive upward momentum in the business in the back half from 2019.
Setting the stage for returning to growth in 2020.
The recent elsewhere almost immediately evident as we generated strong as sales bookings quarter library history. During the third quarter of 2019 and carries that sales momentum into Q4, producing yet another record quarter for total library sales bookings despite what is.
Typically a slow selling quarter for Liberia.
Moving onto results.
We should remember we report two different types of bookings for library.
First we have project bookings, which can vary enlink are tied to specific scope of work and consist of expected revenues related one time projects for new anchor clients.
We also have engagement bookings, which consist of expected revenues related to new contracts to provide services on a recurring basis renewing current clients.
For library as these recurring revenue contracts, but at least one your initial contract term and can sometimes have an initial contract terms that is three years or more in line.
Agents have generally predictable and consistent revenue and gross margin characteristics and regardless of initial contract term often having have contractual terms, allowing the client easily extend the contract.
I believe both types of bookings or helpful helpful, leading indicators of future service fee revenue streams.
For Q4, we booked 56 projects.
The combined estimate at 11.5 million and project value.
This compares to 53 projects a year ago quarter, where they combined for then estimated 6 million and project timing.
He also book 16 engagements.
Library Award in combined estimated 9.1 million in annual contract value for HCV.
This compares to 24 engagements worth the combined than estimated 4.3 million in HCV in the year ago quarter.
The combined Q4 bookings performance of 20.6 million in HCV.
By far the best performance in Library history.
Blowing away 15.8 million, which was a record set for Q3 2019, which was discussed on the last earnings call.
So let's start with projects.
Here as a company built 194 projects worth an estimated 38.9 million.
Compares to 181 bookings than estimated $32.9 million project value in 2018.
Turning to engagements library engagement bookings in 2019 totaled 62 for an estimated 22.9 million in HCV compared to 59 engagements and then estimated 19.2 million of HCV in 2018.
This brings our total 2019 bookings projects plus engagements for library to 61.8 million in HCV, which compares to then estimated 52.1 million in 2018, and then estimated 50 million in 2017.
Now I was a lot of numbers.
For the long and short is that this quarter capsules and how were strongest year library of bookings since the company began tracking library OS and PFS bookings separately back in 2017.
Our record results buoyed by the sales momentum we generated in Q3 and four.
Reflective work and investments we've put into revamping our go to market approach and the early success of our new sales and marketing teams.
I'm happy to report we had a very strong we've had very strong pipeline carrying over into 2020.
We are determined to build on the strong foundation and momentum we developed during the last six months of 2019.
Wrapping up my prepared comments my goal for 2020 is pretty simple.
Build on the momentum we created during the last six months of 2019.
And return library to growth in 2020.
With shell soaring over the past couple of quarters as discussed previously.
New sales leadership driving pipeline and bookings I.
I'm extending my focus to a few core objectives to ensure our team is prepared for the inflow of new business.
Let's start with hiring.
Libraries, a people business.
Must remain our top retain our top talent, while adding new members to the team to support our growing sales pipeline.
Over the past six months I'm happy to report that we've made great progress in reversing attrition and have been growing headcount consistently throughout all regions in the second half of the year.
We have continued to add key resources to our sales sales operations marketing and service delivery teams and are excited about being the employer of choice for so many great new hires.
Thoroughly evaluate our recruiting tools, including retention programs to ensure we eliminate any roadblocks to growing her team to capture all the demand for our services.
In addition to my focus on hiring.
Keenly focused on making sure we continue to look for ways to improve how we scope and deliver projects.
As part of this effort, we're exploring changes to our project management office and the way in which we managed projects engagements to ensure we continued to deliver services on time and on budget as we grow.
Lastly in this area.
It's a great progress, we've made and revamping, our legal contracting processes and templates, making it easier for our clients, who do business with us well at the same time, ensuring that we too that we better protect the company from risk.
Last but not least something I call elevated conversations.
There's a big opportunity for library to continue to differentiate from the market.
Elevating our client relationships through strategic thinking any insights.
Our clients are hungry for and and knowledge and experience, which are addressing through the relaunch of our strategy and consulting practice.
In partnership with Zack.
I did about the opportunity to elevate conversations using or end to end experiencing capabilities.
Is worth noting that one of the primary reasons on here, it's because in the unique value proposition.
Well, delivering and and pre and post click commerce on a global scale.
This truly unique and our clients are the ones that benefit from this inside of knowledge.
As we accomplish our 2020 objectives I would expect to see library, a recognized reported for the work we do.
Last month for example, we were thrilled to receive the BP category. The platinum Aviate Digital award for our own lives Global Library a site.
As well as to platinum and five gold awards for the Crocs. She she's bids personalize are we designed and implemented populace futurebrand honoring our excellence in digital creativity branding strategy.
I've got positive report I'll turn it back over to Mike Mike.
Thank you Jim.
And for the benefit of our audience on this call and on behalf of all of our stakeholders. Once again welcome to the team.
We're glad you're here.
Before moving into the question and answer portion of my call I want to personally touched on the two fulfillment as a service or fast products that we introduced last year.
Retail connect and cloud pick.
Retail connect is designed to cost effectively Sol store fulfillment challenges for retailers.
And during the fourth quarter, we successfully completed our first in store pilot engagement.
Working with a local ours and shop in the Dallas Fort worth area for the entire holiday season.
This adrs in shop made their busiest store and the metroplex available for our pilot.
And our in store solution benefited both the store and their customers with positive reviews coming from store personnel and customers throughout the holiday season.
Our pilot client has asked to extend the engagement beyond the holidays and intends to rollout retail connect to three other metroplex area stores.
As we think about our sales strategy for retail can that there are two avenues to market for 2020.
The first is to identify and target the existing PFS in Liberia clients that already have omni channel capabilities, where we can easily tuck in our solution with minimal disruption to their processes, particularly at that client is already utilizing our order management platform.
The second Avenue to market is to work with our technology partners, including Amazon Shopify, and Adobe among others to identify new client prospects, which would benefit from our in store solution.
Prove both avenues, we've already identified several targets and our in active discussions that we hope will lead to close sales for retail connect.
We look forward to sharing updates as we move this initiative forward.
As for cloud pick.
We continue to actively worked to identify pilot customers.
And the final pricing model.
We remain in a similar position as we did our last quarterly update given that Q4 is not atypical time to sell a distribution center technology.
As it's the most active production time of the year for most Pcs and generally off limits for installing new solutions.
That said, we will continue our promotion and development of the product in 2020.
In fact this week, we're collaborating with our technology partner PC data to promote cloud pick at the mode ex material handling conference and trade show in Atlanta.
Are you might imagine we had been fielding several questions from investors regarding the impacts of cobot 19 on our business.
First I want to convey our sincere his thoughts and prayers to all those people directly impacted by the tragic outbreak of this novel Corona virus.
But as we work with our clients strategic partners and vendors and as we collaborate with our corporate peers through various user groups and business forums.
We've already made adjustments to move further toward a virtual operating model I.
Hi, adjusting travel policies.
Extending remote working arrangements and converting various internal and external meetings to virtual meetings.
We also continue to adjust our sales and marketing tactics as conferences or cancelled or converted to virtual events.
While cobot 19, certainly remains a glut a growing global concern and we will continue to institute our own measures across our global footprint to respond to the situation.
The outbreak has had no discernible impact on our operations to date.
As you know the situation remains very dynamic in uncertain evolving almost hourly so we'll update you accordingly, as we learn more as this is the best information we have as of today.
Intuitively however.
Broader conversation seemed to indicate that barring immaterial pullback in consumer spending altogether.
Online sales could benefit from shifting consumer buying behavior, resulting from the outbreak.
Just over the past few days several large multi channel retailers have announced promotions such as brief break for all orders, which appeared design to move sales to their online stores and away from brick and mortar stores.
It's reasonable to expect more multi channel and digital pure play retailers will follow suit and emphasize their online stores by diverting product and promotional investments to their digital channels.
It's also reasonable to expect retailers will seek to accelerate deployment of in store fulfillment solutions like retail connect so that brick and mortar stores can be used as many fulfillment centers for local and regional delivery.
However, given the difficulty in predicting the sort of outcome and considering the broader macro economic uncertainties at this moment in time, our annual guidance does not include any impact from the Cnineteen outbreak.
That aside from the comments made throughout the call it should be clear that we feel great about the position we're in for 2020.
We're very excited to move past the obstacles, we place last year, and we look forward to emerging from our transition and 2019 to return to growth in 2020.
As Tom mentioned, we're expecting consolidated mid to high single digit SNP revenue growth compared to last year with a strong improvement on the bottom line as we expand adjusted EBITDA margins.
As always Tom and I and now Jim exactly we're happy to engage with our investors to answer questions that communicate our exciting story.
And we're happy to make ourselves available by phone.
Linda will now open up the call for question and answer.
Thank you Sir the question and answer session will be conducted electronically if he would like to ask a question you may do so by pressing star one on your telephone keypad.
Please ensure your mute function has been turned off to allow your signal to reach out to our equipment.
Once again that is star one to ask a question and we'll pass for one moment.
And our first question will come from Greg.
Craig Hallum.
I haven't called worse so.
Oh.
How are you. So first I appreciate your having an exact in general the call I think that's helpful to get that detail I did want to.
My first question have you Tom and if we look out to Q4 2020, just sort of weekend, we can get through sort of the comparative challenges over the last three told from last year, we get the ultimate impact of what we would expect from the customers, you're adding now what's sort of grow.
Okay, Great should we take the year should be accident in.
2020.
But that seems to take that there would be yet it be at the high end or slightly above the high end of that range that I provided especially since the first quarter is negatively impacted year over year by the.
Carry over in the anniversary event effect of the bankruptcies from last year. So.
Expectation as we exit the year would be that it would be at the high end of that range or slightly above that higher.
Gotcha, Okay. Thank you and Jim I'm curious you mentioned you came in and you saw a bit of an untapped opportunity and bites prepared remarks, he talked about strategic partner opportunities I wanted to bring those two things together.
Good in terms of what the ultimate go to market opportunities is you see although we haven't necessarily enjoyed yet.
Yeah, I mean, I just want to reinforce the.
What I saw was an organization that had was working with great friends.
Hi, great people delivering on those projects and was really to a large degree unrecognized in the markets.
They weren't getting the credit they deserved in the market for the work that they were delivering.
And so so I I definitely think you know one of the key differentiators here.
You know going in the space, a long time and no over our competitors is we are the only one that can provide an end to end offering.
And that is not only just delivering on not offering, but there's many cases, where library and does not work and to hands right.
And in those situations. So our team brings for those engagements things at all of our competitors can't brain.
They bring insights into the post click experience, we're working on projects that have the and capability. So our clients come to us and even though they might have their own fulfillment logistics operation in place.
Come to us with the understanding that weekend.
Envision what the entire experiences understand with those key.
Data collection points are and help them really understand what a cohesive experiences.
And if I can give you a too much detail I think if you think about an experience a shopping experience there's your digital experience.
Then when you click on to purchase that reality is your experiences when that product gets to you and if you think about all the post post whoever experience returns call centers all of that needs to be buttoned up. So we have a really unique opportunity to help our clients understand what that experienced nice.
The answer.
So that's I'd say that was a big big draw for me.
Really understanding the talent and products that we deliver and then you know I think as I said in my my opening.
We are we added to the team we extended this one team approach and we've really a we've really seen tremendous momentum in the business and a rally cry for Ah for growth. So it's been done it's been fantastic to watch.
George You mentioned strategic partners and I'll just add that.
As we looked at changing the go to market strategy and really driving a lot more.
Activity in the top of the funnel.
We both felt like we were under investing in the attention that we pay to our strategic partners, particularly the larger ones that we're really in a position to influenced the best lead flow.
So one of the decisions. We made early on was to bring in late season leader for specifically for strategic alliances to really focus on giving them the attention that they deserved and then expecting that we see results in our funnel from that attention and that's paid off really really well over the past six months the lead flow that we're getting from our very strategic.
Owners is way up compared to where it would have been.
The 12 to 18 months before I.
Just to add to that also we've extended.
The definition of what a partner is from your typical sell salesforce or Sep software partner.
Two ones such as private equity, we're looking across a lot of different types of businesses extend that partnership model, So and we see a lot of upside associated with that.
Great I appreciate the detail guys. Thank you.
Yeah. Thanks.
Thank you Mr. Sutton next we'll hear from Kara Anderson of B. Riley FBR.
Hi, good afternoon or evening for you guys.
Okay.
So Mike I appreciate all the commentary on the current a virus and you know I certainly understand that it's fluid and changing hourly like you said on even around allow maybe perhaps you can comment on how the company has battled recessionary environments in the past where contractions in consumption and spending.
Well so.
Some aspects of this current situation are kind of unparalleled for us its interesting because if you look at all of the data that we have coming into the company. It doesn't necessarily match up with our own experience, where we are at this moment in time.
But you can't ignore you know all of the.
Things that we're all seeing.
So yeah, we're responding to this in some ways like you would to an emergency but in other ways, we're responding likely due to say a holiday peak.
Where we are putting in the company in a position to be very agile.
And responsive and some of the same operational tools and processes that we have to help us manage through the very unpredictable nature of that five to six week six week period. During holiday. We've now deployed to help us manage through what is turning out to be very unpredictable cycle associated with this.
And we think that the resilience that we've created within the company over the past five or six years operating successful holidays will help us see through some of the.
Unexpected twists and turns we might experience over the next.
Four to six weeks hopefully limited to that.
With regard to this sort of economic impact I guess, the closest thing I could point, you and I hope it doesn't turn into this but if you go back to.
2008, which was our last major correction.
We saw.
Overall retail sales.
Decline.
Year over year from 2008, 2009, and even carrying over into 2010.
While online sales continued to grow although at a much slower pace.
I would expect based on the trends and online spending to continue accelerating over the past 10 years 12 years since that time.
That this has the potential to even further increase the velocity of consumer behavior moving towards digital.
And that if we were to experience that extended downturn.
Obviously the same phenomenon.
Potentially over.
No pressure on overall retail sales, but online sales continuing to grow maybe at a slower rates and will be extreme maybe not.
And as I said earlier I do think you'd see pressure on on companies really rethinking the role of brick and mortar stores and accelerating initiatives to turn them into many fulfillment centers, which I think place right to our strength.
So our obligation here is to look at this and see the challenges, but also look for the opportunities.
In this particular situation.
Thank you that's really helpful and then and Tom for you know just wondering if you could expand on some of the savings on you cited in your prepared remarks and at Genie.
Okay. So.
Well, it's kind of start with the library aside with the reduction in revenue that occurred earlier in the year.
And we had made comments about this kind of throughout the year. We ended up really taken a look at some of the resource pool that we had and reduced our cost in order to better align with the revenue stream that we are experiencing at that time.
We've talked about the revenue.
Activity now it seems to be picking up so we do see some increases as we look at the especially the sales and marketing spend in order to support that aren't going strike, but early part of the year, especially at the library business unit you would've seen some decreases on a year over year basis, primarily just to reflect the reductions in revenue active.
The there.
In other areas in our shirt shared services environment, we've been working to try to.
Makes him.
Decisions from an efficiency standpoint.
We have been working with the.
Business segments in order to better align the component. So what we did what the corporate shared services team should be doing versus what the functional areas in the business area should be doing and I think that has allowed us to identify some opportunities for cost savings as well. So thats been very helpful to be working with him and Zack.
On that component business as well.
Great and then just one more for me I'm can you quantify the client bankruptcy impact.
Impact on the quarter.
Yes so.
We take a look at.
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It's about three but three and $3.3 million of revenue in Q4 of 2000 18.42 to two quite bankruptcies scenarios.
And we had zero this year.
Thank you.
Thanks, Karen and once again as a reminder, if you would like to ask a question you may do so by pressing star one on your telephone keypad. Once again that is star one if he would like to ask a question.
Moving on to Ryan Macdonald of Needham.
Yes. Good evening, thanks for taking my questions and congrats on a great quarter I'm against the first one is I'm gonna be focused on the PSS business. Obviously every year after a successful holiday season, or maybe not so successful for other vendors that don't use PFS you tend to see an opportunity to display.
Well its competitors what does that activity looks like this thus far this year and are you seeing a nice pipeline I guess in terms of net you. In addition to the expansion opportunities.
Yes. So thanks for the question as I mentioned in the prepared comments, we have a very strong pipeline headed into 2020.
Really our objectives through holiday as with every year is one to make sure that we're providing the best possible customer service for clients to ensure that we retain as much business as possible into open ourselves up for the opportunity for our clients to choose another vendor but to your point.
Certainly opens the door for the sales pipeline and certainly having a successful holiday and a track record of successful holidays allows our team to aggressively sell against potential weak points with our competitors and as such we believe we have a very well positioned pipeline as we head into 2020 and certainly that's as a tool that arsenault seem.
He is using to drive that pipeline.
So Ryan just for a little bit of color that there were a couple of very specific instances in 2019, where we actually had competitors that went out of business, including a trade global which was one of our larger direct competitors.
Yeah, we're not necessarily yet seeing anything like that it would be that dramatic.
And we certainly benefited from that specific situation in a couple of others, where you know some competitors had some dramatic.
Downturns in their business.
I would say, it's really early to comment on this and we'll probably have more to say you know and.
A few weeks when we talk to you about Q1.
But the current.
A situation, where do you have retailers and brands, making contingency plans for in house operations actually might be a more interesting lead flow situation for us so while it's very early.
We are starting to get calls from brands that are looking for kind of contingency plans that could turn into a longer conversation so that could be really interesting.
Are there things and then in terms of the why various business great to see the continued progress. There you know as you look out into 2020, obviously a lot of optimism about business, but given the fact that a lot of these projects are or decisions to move in modern I'd say your E commerce platform tend to be tied with digital transformation type investments.
Are you seeing any changes there in terms of how companies or thinking about this as they react to what's going on globally right now.
Yeah, I think I think you know our our projects are largely I'm not always tied to your digital transformation effort right. So there's situations what about what I'm seeing is a lot of companies that are investing in technology is like a mess for example to really ensure that the experiences that their customers got.
Across channels is consistent either or better than what they're can come from competition is doing.
So we're not seeing any impacts you know currently too you know what the of what's happening currently with the market.
And she are these projects are you know they continue to be very strategic for for our clients now.
I would bring up is.
We've made a concerted effort over the last several months to extend into multi cloud solutions.
And you know a lot of our key software alliances, whether it be salesforce or S&P. They all have a multi cloud solution and and we in the past its got a lot of work concentrated in just the commerce cloud or commerce, plus marketing cloud so what we.
And does that.
Through working with our new head of alliances that we need to really be focused on expanding the number of clouds that we deliver on so we've made a concerted effort over the last say four months and increasing the number of projects that we're doing in those areas to allow us to be in front of larger more strategic initiatives that truly you know sort of arm.
More digital transformation in nature.
So to answer your question.
Absolutely, yes. Thank you very much just a clarification.
Right and I would just adds maybe as a day to comment if you actually look at the bookings data that we provided for Q4 and you do the math.
One of the things that you'll see is that the size of the project any engagement has grown dramatically.
So while the number of projects and engagements is somewhat similar to 2018 Q4 the value of those is significantly up so we are seeing.
Chunky or projects more valuable projects and that more valuable engagements I just add on to that like I think we have also a broader sort of go to market perspective, right, which is allowing us to really elevate those conversations with clients.
And allowing us to spend it into other offerings right. So so instead of being very tactical to deliver a project. We're trying to really elevate those conversations with clients and get in front of much larger initiative. So I think that's that's very helpful. So.
Awesome, Thanks for the clarification.
Correct.
At this time this concludes our question and answer session I.
I would now like to turn the call back over to Mr. Willoughby for closing remarks.
Thank you Melinda I'd really like to thank everyone does tend to be call today, especially given all the things that are going on I. Thank you for giving us a your time and we look forward to speaking with our investors or analysts.
When we first report our Q1 results in May and as I said earlier, Tom and I and Zac and Jim.
Certainly available via phone to answer questions. You may have about the results that we just released.
You have a great day.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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