Q4 2020 Earnings Call
Ladies and gentlemen, please standby your conference will begin momentarily.
Thank you for your pace.
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Good morning, and welcome to the Debbie and coding physical 2024th quarter and full year earnings Conference call.
This time, all participant lines are in listen only mode.
After managements prepared remarks, we will conduct a question and answer session and instructions on how to ask the question follow at that time.
As a reminder, this call is being recorded for replay purposes.
Now what I turn the call over to David Mackie, Debbie <unk> Executive Vice President Finance and head of Investor Relations David.
Thank you and welcome to our fiscal 2024th quarter and full year earnings call.
With me today on the call I have W. And that's a CEO keshav murugesh that'd be went out the CFO Sundeep Oreo.
C O golf abroad.
Press release detailing our financial results was issued earlier today.
Releases also available on the Investor Relations section of our website at Www Dot W and that's dotcom.
Today's remarks, we'll focus on the results for the fiscal fourth quarter and full year ended March 31st two thousands wanting.
Some of the matters it will be discussed on today's 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 statements.
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 the call management will reference certain non-GAAP financial measures, which we believe provide useful information for investors.
Reconciliations 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.
Revenue is defined as revenue less repair pain.
Adjusted operating margin is defined as operating margin, excluding amortization of intangible assets share based compensation and goodwill impairment.
Adjusted net income or a at night is defined as profit excluding amortization of intangible assets share based compensation goodwill impairment and all associated Texas.
These terms will be used throughout the call.
I would now like to turn the call over to W., unless the CEO Keshav Murugesh <unk>.
Thank you David.
Good morning.
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Hi, Brian fixtures.
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We remain confident in the long term VP of opportunity.
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Crisis.
Hi.
Great. Thanks, Peter Shorting on Android Preneed sales.
We continue to rapidly changing eat up a lot blacks.
I'd now like to join the call looked a lot fearful subject.
Before I discuss our results and outlook.
So I did.
Thank you Michelle.
In the fiscal fourth quarter.
Your next naturally when you gave me an AG $235.8 million up 14 find one was.
Drawn two little things spawning $6 million, both due in the same quarter off last year [noise].
Oh for do you just want to eat blizzard on a constant currency basis.
Gradually net revenue increased why do you find duesler soon on an important leases.
Point, let's say on constant currency basis.
The next impact of moving 19 on quarter for revenue was $5.5 million, we used our topline growth.
Mike 2.7 Blizzard.
I don't quite a full blizzard sequentially.
Got a full revenue strength was broad based across verticals modest ought to do.
With the exception of public school, we didn't impact in the second half off much finish pressure.
[noise] customer interaction services and automating contact us.
Revenue in both quarter over quarter sequentially, what's also adversely impacted by currency movements Nextel hedging.
In the fourth quarter doubling its regarded $9.9 million of sharp don't non recurring revenue, we try to the book and margins close to company average.
This includes $6.5 billion of projects well discussed last quarter.
$1 million fraud volume spikes related to 19.
Hi, good just operating margin in quarter four was 22 closer at summit Bank to bring new point, let's say reported in the Santa gardener, our fiscal 2019 and 22.8 Blizzard.
Quarter.
You know what are your existing operating margin increased as.
Operating leverage on higher volumes.
You can use next often in a few moments favorability from the IMF on its you've seen lease accounting change and improved procedure realization.
Did that any more than offset the impact soft moving to 19.
And on wage increases and is one for acuity.
Sequentially.
Operating margin decreased as a there between 19, which more than offset fuel.
Moving next on hedging and even putting operating leverage on higher volumes.
The company's net other income expense was led then I'll then it Darla next expense in the fourth quarter as compared to $3.9 million off net income reported in quarter four all fiscal 2019 and $5 million off next phase last quarter.
You know what are your dividends is actually were stable to up $3.6 million increased interest expense, resulting from the iOS lot of 16 leaves us owning change.
Non interest expense, resulting from share newer debt repayments [laughter] seek to initially the reduction in next expense is due to increased interest income driven by higher average cash balances and lower interest expense.
[noise], Nebraska effective tax rates look order for gaming and 18.3, plus <unk> down from 19.3% last year and from people it there last quarter.
Changes in the quarterly actually are primarily due to the mix of wasn't really award from incentive facilities and that makes up roughly between geographies.
The company's exit.
Fourth quarter for $42.4 billion, compared with $37.8 million in the second quarter fiscal 2019 and $14.9 million last quarter.
Adjusted diluted earnings what do you still say spots share in quarter four versus 73 things in the fourth quarter off last year and 80 thing last quarter.
In the fourth quarter.
But do you think guarded on an omni getting impediment, Josh to GAAP profit of $4.1 million relating to the remaining goodwill balance author doubling this autoclaves business.
The company, we did impediment Josh was necessary you on changes in their anymore and lot of my foot Autoclaves services.
[noise]. This impairment charge has been excluded from our calculation of adjusted operating margin and adjusted net income as it is nonrecurring in nature.
As of March 31st 2020.
Well it is balancing gosh invest me [laughter].
$882.7 million and the company had $33.4 million up there.
No. It is generated $68.6 million off cash from operating activities this quarter.
Sure you weren't there remains a $14.2 million and includes $4.6 million in capital expenditures.
All three $1.7 million, what do you have desktops and laptops related recorded 19 lots from home delivery.
[noise] Dsos in the fourth quarter gaming AG 31 days as compared to.
Last year and it'll get his last quarter.
With respect to other key operating metrics total headcount at the end of this lager was 44292 I.
No actually should read in the fourth quarter was 28% down from 34.34 data in quarter four off last year and up from 26% in the previous quarter.
[noise] global seat capacity at the end of the fourth but to what 34779 average seat utilization increased to 1.28.
I would now like to provide you with a brief financial somebody bosses good great Randy before discussing our outlook for the coming year.
Net revenue for the year gaming that $896.2 million growing 12.9, 400, before databases and 13.8% on an organic constant currency basis.
The net impact of moving 19 on the company's full year growth rate wasn't line 7%.
And just go to any great. Indeed revenue growth was led by the travel healthcare insurance shipping and logistics and consulting professional services verticals, which all grew bordwell Blizzard.
The company is this pillar twentytwenty adjusted operating margin gaming AG 22.7, plus.
Up from 20.9 plus there.
In fiscal 2019.
Margin improvement was driven by the IMF audit 16, you the accounting change operating leverage on higher volumes improved productivity I see utilization and hedging gains next often see moments.
This benefit is more than offset the impact of our annual wage increases and the boyfriend timing.
Our effective tax rate was 19.8, plus they're down from 20.8% last year.
Primarily due to the makes all the blood delivered from the tax incentive facilities.
I'll probably between geography.
Full year adjusted net income increased 15% and adjusted diluted earnings per share Rose 16, Pulitzer, if it's going to any trendy reaching $161.4 billion.
All of a 10 cents respectively.
This improvement is despite negative impact of 10 cents per share from going 19th and five cents per share from the IMF audit 16 lease accounting change.
In fiscal two we need to any Dublin is generated.
$28.6 million in cash from operations.
Great point $8 million in free cash.
During the year. The company's you Plenti is 1.1 million shares of stock cost, all $63.7 million or $50 and one thing but share.
Spanning $27.9 million on capital expenditures and made sure Jordan payments of $28.2 million.
[noise] press release issued earlier today, Nobody has announced that the company has temporarily suspended our annual guidance.
As Kishore mentioned this is due to current global volatility and lack of visibility, which makes it difficult for us to provide.
Guidance range auto say couple assumptions.
While our delivery capacity continues to improve.
It really we have seen all clients businesses continued to deteriorate.
In response clients increasingly requesting business, I believe including lower volumes reduced pricing and extended payment terms.
We expect this volatility and will be ongoing for the foreseeable future and as it is our fiscal 2021 performance will be heavily dependent upon the duration of the pandemic and its impact on our client businesses.
That's really love Downs and travel restrictions.
Being introduced delivery capacity and client volumes, Dublin, asking me next quarter, one revenue will decline approximately 15 for 30 years.
Hi, this revenue level the company would expect lower to mid single digit adjusted net income margin for the thought.
This somewhat significantly change over the next few months as delivery capacity, but I volumes and pricing discussions the world.
Now, but as we continue to monitor the Colvin 19 situation and glad to resume guidance once visibility improves.
Despite the current lack of visibility dilutive.
Fiscal 2021, with a strong balance sheet and financial flexibility.
As of March 31st the company had $303 million in cash.
Right.
$64 million of unused lines upgrade and only 17 million instead, you weren't index, we made in fiscal 2021.
We also have little capex requirements and the ability to exit.
Operating cost to help manage profitability and cash flow.
We'll now open the call for questions operator.
[noise]. Thank you.
Ladies and gentlemen.
Question at this time. Please press Star then one on your Touchstone telephone.
If your question has to answer Mr moved yourself from the Q. Please press the pound cake.
And the enter sometime into enable everyone on the call to participate please limit your questions. One question and one follow up.
Our first question comes from the lot of course, Marcello with Deutsche Bank. Your line is now open.
Hey, guys. Thanks for taking my questions and hope everyone is safe and well.
I guess I just wanted to start out you mentioned a little bit about some of the covered 19 headwind on the pipeline maybe you could just elaborate there.
Maybe.
Are you seeing some some of these deals maybe put on hold versus.
How many might be lost for good in any kind of color you could give on sort of the pipeline.
Sure Corey.
I think when you look at the pipeline what we are encouraged by the fact that we don't see business falling out of the pipeline either in terms of the new initiatives that we were working on or the expansion opportunities with existing clients. What we're seeing our some delays and I think the easy way to.
Look at it is to say that the more transformational deal the more complex the deal the newer the client is to outsourcing the less likely it is that something is going to get them done in this environment.
So we are encouraged by the fact that we're not seeing deals drop out they are getting pushed.
We also have seen deals close in this environment, we have seen some expansions with existing clients. We have seen some additional business come to us from.
Providers, who are unable to service.
Some of our clients as well so there are some good encouraging signs, but overall the pipeline is getting pushed but not not drop entirely.
Got it.
And I guess as a quick follow up on the next natural question, probably just on the pricing trend. If there's any color you can give us there in terms of the strategy dependent retained business, while maintaining price and margin and then how do you guys view yourself coming out of this crisis, you think that we could get some increased demand and what type of.
Looking at thanks.
So currently from up.
Sorry.
No I slipped warm extra.
Yeah.
Hi.
We believe we are crazy supply skirts three.
We really like we saw rare to have gone through.
Yes.
Beyond the policies.
Probably bluntly democracy.
I'm not sure.
I'd like to quite a bit mentioned reduce that during the fourth quarter or.
Yes, we are seeing.
Well we are also see.
If you need to be strong healthy.
We do not be.
[laughter] cdrs through results.
JJ.
You saw an outsourcing.
We also believe there is fast.
Hi, everyone relative scarcity outsourcers.
So serves the doctors, who want Alex and almost.
We will begin.
We are blinded prospects, who wants to see more money.
Please go ahead.
Even faster.
Therefore, we are confident.
Hello This is over.
Should result.
Hello.
Even acceleration for office.
And then maybe just to add a lot Kishore mentioned, specifically on the pricing as you all in all right now about the are receiving request from that line.
Regarding the discount and those are temporary in nature of specifically for quarter. One. So what we believe is needle once situation going back to normalcy, we'll have all of those today bye.
What is already contracted fall.
And I just add one piece of color to that Corey I think in addition to with Suntrust said about clients asking for relief.
For us what that means in most cases is reductions in volume reductions in volume out of scope with what what's included in the contract. So we aren't seeing lots of requests for just Hudson rate cuts in absolute pricing. What we are seeing more is cuts in the amount of volume or the number of people we.
We have working on clients processes.
Got it that's very helpful. Thanks, guys.
What does occur.
Thank you. Our next question comes on the line of Bryan Bergin with Cowen. Your line is now open.
Hi, guys. Thank you.
I wanted to just ask on this one Q framework and can you help us with the moving parts on supply versus demand in that outlook. Obviously seems like supply constraint is a primary headwind, but I'm curious if you were able to deliver at 100% capacity, where would that projection fall and I'm not sure. If it seems to imply you would still grow mid singles.
Digits absent that capacity headwind or if there's more to it.
Yes, there's definitely more to a core is we've kind of I'm sorry, Brian It as Weve talked about we've got kind of several moving parts in the quarter, one is our ability to deliver and execute on what clients need today.
Second is the fact that what clients need today is less than it was a quarter ago in a year ago and then the third is the component on pricing and volume that we just discussed so we have these three moving parts that are all impacting the top line today as Keshav mentioned, we are very clearly supply constraint. So so we've gone.
From being 100% in office to essentially having zero percent delivery capacity towards the end of March to now where we're able to deliver more than 80% of what our clients want doesn't to do and what that means today is that we really don't even have a feel for where the demand is because we haven't been able to service what.
Some of these demands ours, so as we get to 85% potentially 90%, 95%, we're going to find out where the demand in the supply curve starts across each other but but as of today. We are clearly supply constrained. The expectation. However is that over the next two months, we will be demand constrained did not.
Supply constrained.
Okay. That's helpful.
Then follow up on margin. So absent that's over 19 impacting Q4, you would have been over 24% on op margin can you help us parse what drove some the factors and that strong performance did here the higher nonrecurring piece, but any other onetime items. There and then as we think about kind of post pandemic view what may change in your operate.
Any model that that could hamper the ability to operate at such high levels.
Yes, So let me take the the margin in or are you looking when you're looking at reconciling. It are you looking sequentially quarter over quarter, Brian or on a year over year basis.
A year over year.
Okay. So year over year, if you look at what's happened on the operating margin line, we're up about 120 basis points. The biggest upsides to year over year would be volume and currency. So so both of those are roughly 150 basis points of tailwind to margins.
On top of that we had the favorability from IRS. So those are the really the big three drivers for margin improvement the offsets or co bid and our annual wage increases so.
Some of that its operational obviously some of it is non operational in nature, but overall pretty good margin performance in the quarter.
Oh.
Okay, and then going forward.
Any change.
Yes, so I think going forward, obviously, if you looked at the implied margins that we've we've kind of indicated for Q1. The expectation is that we've got a pretty significant mismatch between revenue and cost.
Centrally what we've done as we've taken the lower revenue.
Factors into consideration.
Based on our current supply constraints and based on.
How do we see that progressing because that number is based on where we are today okay.
But we've also made the assumption for Q1 at this point in time that we're not going to make significant impacts to the cost and education mentioned what that means at this point in time is that we're not planning to throttle back on our investments and we're not planning to let go of people or to adjust compensation for the first quarter. So so essentially what we've done as we made an investment.
In our people we've made an investment in our business, it's something that obviously as we go forward throughout the year, depending on where demand is we're gonna have to revisit but at this point in time. The assumption is that we're not going to meaningfully impact the cost structure in fiscal Q1.
[noise] and maybe you know just add ordered as Dave mentioned follow up.
Competition, all of them like adding cost perspective.
But just to I don't beyond that we'll continue to have or ER business continue to be flat cost, obviously with that at all but a wife I connections and the laptops and desktops and it does our transportation and allowances and some of that definitely been gag also offset by some cost we should not be.
Yeah, I know like a facility running cost at only other follow are already it all their travel costs. Our decision on its thing. So all those actions is also looked a bit there, but no. One wanted it should wind is up from a productivity lost perspective that also impacts the margin and along with a a revenue because.
They do work from home due to the Internet connectivity.
There are some losses that on that.
Okay.
Thank you.
Okay.
Thanks, Brian.
Thank you. Our next question comes from the line of Mayank Tandon with Needham. Your line is now open.
Thank you up.
It's just staying on the margin team or Dave could you comment on just how we should think about the gross margin impact from lower utilization and other factors that you called out on Sunday called out as well and then the impact on DST and airline just to sort of square away the margin impact on both those items.
Well I think the easy way to look at this my guess it to essentially look at kind of the cost run rates that we've had and assume that they're not going to change I mean realistically. If you look at what it would take for us to get to that low to mid single digit operating margin net income margin. What essentially means is that we're taking they hit on the topline.
As we described but there's not a meaningful impact any of our cost. So so at this point in time.
Essentially that's what's driving the margin depth, but what you're looking at a relatively flat costs on both the direct cost in the upstream anyone.
Got it makes sense.
And then if I could just ask more on the revenue breakdown, but could you talk about as you exited margins and into early April maybe talk a little bit about the demand trends that you're seeing a lack of it across the various sub verticals and service lines, maybe break it down between travel, which I would have you made the most exposed and other verticals as well where you might have seen.
More of an impact versus less.
Yeah, I mean, clearly the biggest impact in the quarter was in within the travel vertical and we would expect that to continue into fiscal Q1, but we have started to see impacts in all of our businesses. I mean, the reality is that this pandemic is affecting.
Every line of business and whether it's just putting financial pressure on them or whether its actual declines in volumes for things that we manage we are seeing that so you know the expectation is that.
You may have different different views today, but you're going to have secondary and derivative.
Impacts across all these sectors throughout the years so.
The good news is I think given where the travel vertical is today hopefully we've kind of hit a bottom on that but we're certainly leary as we look forward here about kind of what what could be next and how long is left so those are things that we don't have a lot of certain thier lot of visibility into and that's part of the reason why we haven't provided our.
Normal annual guidance at this point in time, but certainly coming into the second half of March our business was essentially clicking on all cylinders. I mean, we were extremely healthy we put up 15% constant currency growth in the fourth quarter had we not had a cobot impact we would have been north of 17%. So clearly the.
Business was performing extremely well before this hit.
Right.
Thanks for the color appreciate it.
Thanks, Mike.
Yes.
Thank you Hi next question comes from the line of Ashwin Shirvaikar with Citi. Your line is now open.
Thank you.
Good day everyone.
I Hope you know staying safe in the midst of this patent that we can lock down.
I also appreciate you guys being able to clearly your books and conduct this earnings call and time, many companies that pushing not by a week or two.
And I would say appreciated in fourth place comments.
So I guess my my first question is about the.
Management approach to the planning process for the year.
Hey, I'm.
I understand this is difficult, but since we don't know how long the current situation might last we don't know necessary to pay itself recovery.
How are you thinking about costs.
City headcount, but sales and delivery, how you balance getting ready beyond the quarter meet you you have talked about.
Getting ready for eventual coding. So you can hit the ground running whenever that happens.
He's had a bogey that you have what profitability such as you will remain at least pods.
Yet in terms of profitability.
Yes, [laughter] that's a good question.
And let me just mix trends there.
Comping off.
Oh, I'm back and forth Walker.
Last year.
From our point of view.
You know, we continue to be because if the market for our business.
Almost monster.
Very very strong.
You know, while we see is 400 time.
Oh.
You know some constraints from our own [laughter] supplier because ER.
We also received.
Sponsored powerful catastrophe, just hawkins shows a broad safety, making sure.
But I would like to our clients and doing all the right things begin to affect our cost for all stakeholders. So far.
We.
See how big is actually you know Chicago Chicago.
In terms of you know all gets our girls excuse me.
Whatever whatever.
[laughter] calls.
Sure.
I think Steve. This is the team who walk is right for employees on clients and also in the medium to long term will be very focus on portfolio and doing whats right for heavy shared order so [laughter] reagents either.
First quarter crew.
You know looking at Walker.
Yeah.
And then I'm just answered that add to that asked when one of the things we do have some comfort with it but when you look at our cost structure over 50% of our cost.
In the short term are highly variable, which means that if we need to make.
Short term decisions, if we need to impact the cost structure and a meaningful way in a short amount of time, we have some ability to do that.
Gotcha Gotcha Gotcha understood Guinea also speak to that there or how you're working with the government, particularly heavy duty geography them and you are important.
Actually locally to local economies and he can sit the financials. It needs in terms of your return floater say for example, keeping employment.
So even though you from people that they monitor all Uh huh.
From a sixth Gen basketball.
Various long risks are constructed government, it's not just in a year, but also beyond air handling units have been Rusty frantz pickup in attracting all across.
No no represents your service has the right all the industry bodies to customers.
All of them ought be seriously consider this sponsored by.
Okay great appreciate.
He is available.
Obviously at some stage if.
They do have the companies, including comprehensive because you are close [laughter] Frankenstein. The assumption is not there is no you know [laughter] forthcoming.
We are focused we are managing all of this our service and that's the reason why somebody else administrative appears to be.
Yeah see were making it also has a very progressive discussions rich.
Across as low as growth in order to shares to bother us in this journey across as well, but [laughter] broader all industry are too short he's.
Thank you for active across the world.
Okay.
Excuse me this quarter.
You'll see walk so it's actually forthcoming.
Oh Wow.
Oh, how long does factor makers OS.
Understood. Thank you for that they stated and wish you on the best Thanks.
Thank you.
Thank you. Our next question comes from the line of Maggie Nolan with William Blair.
Your line is now been.
Thank you.
Right I wanted to ask about the guidance.
For the quarter and how it was built so that the 15% year over year decline.
Right and understanding that this is built off of the kind of plus 80% delivery that you're currently achieving or is there an expectation about 80% improved built into that 15% decline.
Yeah, No you get your understanding exactly right Maggie that's it's based on that 80% delivery assumption.
Which is where we are today, we do believe that that number can get better as the quarter progressing but we're also obviously somewhat concerned that the the business environment and our clients volumes could also get worse as the quarter progressing. So you know, it's just the way to kinda give everybody a stake in the ground in terms of what we see it.
Today, but as we all know this situation is highly fluid in changing extremely quickly.
That's helpful. Thanks, and then on terms of kind of see exposure up the business across verticals.
You can you give us a little bit more granularity about the weakness I mean, he said, obviously travel and leisure are there any spots within travel and leisure that maybe holding up and where it's kinda back short term kobin revenue that you saw in the March quarter coming from whereas some of the spots of kind of resilience in the business model that we may see.
Yes, so obviously in this environment, there's not too much in the travel vertical that is holding up well our exposure is largely in the OTI a space and in the airline space, which have both been hit relatively hard.
I think the interesting thing is when you look at the volume spikes that we had in in the fourth quarter that helped contribute to that $10 million and short term revenue and help manage the cobot impact to only $5.5 million on the revenue like we had roughly $2 million the volume spikes and that was largely in the travel.
So what we did see kind of on the front end of this.
As Ed and customers were looking to cancel rebook reschedule there there their travel plans that we had significant activity levels with several of our clients that we were required to handle so we did have a volumes like on the front end from the travel business, but as expected.
Kind of fell off a cliff after there.
Understood. Thank you.
Thank you.
Thanks [noise].
[noise] Yeah. Our next question comes from the line again Connie when Baird. Your line is now open.
Yeah, Hey, guys, thanks, and congrats on really really good or fourth quarter.
And you know maybe first of all just on the cost side and a lot of questions, but you know when we look at revenue, it's gonna be down give or take 50 55 million sequentially and EBIT is gonna be down almost as much. So basically what you said costs are just thing you know very very stable or close to stable is is there any.
Downdraft of kind of the normal cost, but uplift in kind of some nonrecurring or new types of costs are coming on or is it literally just the existing cost are just staying roughly flat.
[laughter].
[noise], sorry to beat all side you're right.
Cost of what is coming up.
It's all about.
It all dubbed business starting at the cost what I mentioned.
Oh, you know the rental laptops and desktops and they are the wife I don't goes and so my competition. So that implies can walk Doctor's office depot my read it wouldn't be habit, but mission.
And it goes on right, but those cost go to offset by some of the facility running cost me is not going to be data like power Audino. There don't employed transportation as well as some of their travel which is not happening. So next snagged executing offset each other in the smartest looking like right now and you know very little bit.
One of the revenue.
Well there David it all almost $10 million was coming from the nonrecurring arbitrage that in quarter. Four was not go do we did in quarter one.
Okay Gotcha, that's helpful and then I.
I guess secondly, this probably gives you some new insights kind of into how much of the revenues is the recurring you know is there anyway like have you looked at the portfolio and said, while it's kind of amazing, but let's just say 75% of our revenue no matter how bad. This environment is it's just coming through because people the clients need it is.
It is there is there that I guess part of the question too is if we get anywhere north to it back to normal economy should fiscal 20 to be higher revenues in fiscal 20, just based on that recurring you know components of revenue and stuff.
Sure let me take that Dave I think you you're on a percent right I mean, I think we've kind of stress tested if you will the model through this and what we're seeing is that you know that we do have a healthy base that is recurring in nature that is not subject to any volume impacts.
Obviously, one of the challenges that we have now is that this goes beyond kind of a standard.
Recession, or a standard business challenged environment, where things get moderately worsen you look at the airlines in the down 95%.
Your your what is you know what is recurring in nature not recurring in nature changes dramatically. When you start looking at potential bankruptcy situation. So you know this is kind of a unique environment to kind of the stress testing to look at this end, but but I do think you're right. We do feel comfortable that theres a lot of the things that.
We do for our clients that regardless of what happens, we'll still be there. It gives us a nice base of business. The real question is how quickly can weigh in how quickly do we want to adjust the cost structure to what that is you know the hope certainly with the way. We've provided you know insight into Q1 is that it represents about.
Adam for us that that the 15% down year over year in the low to mid.
Single digit margins are things that we can improve upon throughout the year as the quarters progress.
In the hope certainly is a case of mentioned given the fact that we think we're going to exit this pandemic into an environment that could be ideal for BPM services.
I hope is that we'll see a rapid conversion of some of the things that are in the pipeline and some of the things that have been pushed out over the last you know.
Month, now when I would assume several months going forward, but we start to see rapid conversion on that and the opportunity to accelerate growth in fiscal 22, assuming that the pandemic is largely behind us and certainly there so.
You know excited about the long term opportunity you believed that this has the potential to be a catalyst for adoption of BPM, but no. We're kind of been a wait and see mode to see how long. It takes for this to the run its course and how long it takes for our clients volumes to start stabilizing on return.
Great. Thanks, guys.
Thanks, Dave.
[noise]. Thank you. Our next question comes on the line up for neat Jain with JP Morgan Your line is not open.
Oh, Thanks for taking my question and you your family everyone is safe.
So this oh I should think about doubling this is positioning then that's covered 90 intellect. It had been sent behind us.
Talked about higher adoption of automation transaction outcome based pricing, what I'm doing a slide to do in the near term to position ourselves.
Has been us coming out of it.
Yeah, Okay [laughter] respite.
[laughter] formal I must say to you know we will continue.
Do more Oh, Wow, we have to easily boss.
While we are [laughter] Sloppier died.
From a competing your model.
Beginning there is also working I think back.
[laughter] saltwater technology enhancement programs that we had a softer off maybe sometime last year, because we are now very comforting.
Got it.
A meeting our clients who Chris.
Gross.
But it would want to see if suffered in various virus will now walk though [laughter].
All these farms, so I just want to make it clear.
Wow Okay.
So with a box.
Who are for your exhausting.
Yes.
[laughter] hugely.
Yes, Brian.
Excuse me Brown, our Michigan strong.
Through technology introducing.
New Microsoft Oh, absolutely everything.
Hi.
And.
Also as you know sophomore technology.
[laughter] Foster better.
This is usually power that's really affect.
I focus from our perspective, we will continue to drive to 15 like pricing right.
Well, you know weaker who.
So what [laughter], we would be.
You know you ask you are aware you have a behavioral what across many quarters every one of our where to gross actually had greater.
If you create very interesting technology in England cargo. So users. We believe there often also solutions was good.
Okay stronger Wow.
[laughter].
Exactly the whole all work, so where you don't want to accelerate cost saving measures.
Yes, yes, its blanket guy.
Uh huh.
The CE Mark for their WSS service offerings. We also believe that Oh, Gee [laughter], there's going to be [laughter] tracker.
Correct.
Because actually.
[laughter] really spiked [laughter] northern.
Certainly our policy.
Even more so.
Regardless.
Uh Huh [laughter] Barker across the bridge [laughter], what was sort of longer.
Got it. Thank you and then you also talk about.
I live in so bill, but a low cost delivery model assigns a look to look for ways to cut cost.
No that is a new some disruption.
But something out of things like HM.
Do you expect in teased offshore.
As a result effect.
Okay.
The onset our show some real hard you know more color to our papers have book hardware.
[laughter] I'll call them, I actually think that they need to save cost.
[laughter] stronger operating.
Operating model, we [laughter] Walker.
Well the long term.
Sure that even if you strip or why.
All right rocket is oh, great people, a futility or the lower costs and higher.
Contributor to grow so from my point of view I think more cost model as well as offshore Hardwick or your dorm room to who.
[laughter] I think what we're also who is how big very much or discussions right now [laughter] prospects here, John Oh, Yeah [laughter] slot.
Quite often from our offshore point of view right.
[laughter], Yeah, we do not want these [laughter].
Absolutely Something's got to should actually be hang onto a processor dropbox or want to sand domain. So that's good.
Hi.
We're making good progress.
Oh, those discussions [laughter] mixture that most of what some of them. So.
Not to their own peers, but also looking.
Oh.
Yes, [laughter] Narendra order property owners.
We will now be play I think are Crawford Boston I was like.
Who have actually seen through this process, we should be beneficiaries.
Our mission is going to Europe. It strikes me is not increase bar on regular run off right [laughter] feed ads relative to make sure.
Yeah.
[laughter].
Those conversations also.
Well, we need to boy actually.
Brian who maybe working in almost all right.
Who are not.
The required for [laughter] Frankenstein, Fracchia particular partner.
Actually make sure the Americas lifestyle.
I feel like credit for good already from software. So [laughter] strong walk all of this is lower but could you sure requirements or lower costs higher.
[laughter] wouldn't continue to who knows.
I think its digital.
[laughter].
[laughter] more lubricant models, we [laughter] and that's where we are focused.
But it only two I probably.
Well, it's just to add communication mentioned.
Besides feed cost operating model that kept up domain that recadi and our ability to manage process. This.
Product line.
We have made over the last few years and the technology and the transformation of side of the business allows us to actually try rapid automation and Digitization score. These clients, which is going to be a big there for us in the short term.
Thank you.
Thanks Bonnie.
[noise]. Thank you. Our next question, sometimes a lot of most she said tree with Wedbush Securities. Your line is now open.
Yeah. Thanks, just a couple of here first.
How challenging has it been to get security clearances, especially as the model kind of changes for remote work that's number one.
Does that continue to be a challenge or free with increased productivity and then the second question is going back to the UK customer base has that been acting differently than some of the other clients that you'd have globally. Thanks.
<unk>.
Yeah.
Got them I will take that.
[laughter] clearances for from an infill six perspective, where technology solutions perspective.
Being difficult across most clients because what we have given cautiously donkeys [laughter] cool created also new ships with the client I see seems on an individualized basis.
Seemed to ensure debjit themes I mean, it seems have signed up on those solutions.
We have actually built over solutions. This to ensure that there are four layers of monitoring.
Hardening of devices.
It really lender and growing I suppose protection from a work from home perspective as possible.
I don't know of course, a few clients better due to certain things challenging conditions and needs that they have not come together with work from home operations now happening. So do I see only anti R. bad we have not been able to take the work to work from home.
Basis.
And in terms of the wider geographical mix I think the issues and challenges have been the same in this case, whether it is [laughter] Oh youre up all of the United States, They backed out or similar on the client behavior. So similar it just becoming more of an industry specific issue that I, just I know John how many Spanish.
Understood. Thanks, a lot.
Thanks not fit.
Thank you. Our next question comes from the line as Vincent Colicchio with Barrington Research. Your line is now open.
Yeah. Thanks, taking my questions. The Fisher some are your supply constraints, you know impacting service levels as a in a way that's causing any large clients to increase or work with other providers.
[laughter] frothy authorization.
I've got or.
So in terms of first and foremost no. That's not the case actually I think we have work with every clients to understand we saw priorities.
Sure the ads to be here.
Yes, so yes, I left off so we have you saw.
The required sauce, where.
GAAP purposes, pocketing if industrial.
[laughter], we see there.
Okay. So you're talking [laughter], you know walk.
Okay rapidly over a period of time.
Oh.
You know.
Make sure that actually offices are very sticky, but that's not in fact, our clients I appreciate very much.
You know he asked me.
[laughter].
Hello.
I see more.
I actually I couldn't be happier excuse me service offering.
[laughter] everything everything was there.
Rick is actually going to any other.
Vendor partners at this point in time.
In conversations with many of them on you know going after new area, because they're not outsourced before.
Yes.
Yes, and also just to add to what Keshav mentioned over the course since the crisis started.
Okay single silly breach.
Secondly, we have got agreements with the clients and as Tom So certain SLM neighbors and deferments, given the business and audio [laughter] also given the fact that basis.
I think of any program.
Yes, I mean, even for example for all companies that we manage finance and accounting processes that we had in Montana yawning.
Closes we actually got seemed like a weather was at a time in fact 15 minus one for most clients. This book what do you still want to be much cheaper for them and as Steve alluded earlier.
And Oh certain businesses, that's not our class when it was multi millionaire strategy.
Vendors haven't been able to provide tonight seven oprah's here. So we have seen an inflow Williams from there and also be having a strong discussions and almost close just stages spend a couple of prospects [laughter] gone to us because it existing when it was absolutely shocked.
Thank you for all the colors as.
Thanks Vince.
Thanks.
Thank you. Our next question comes from the line of saying in line with Bang for your line is now open.
Hi, guys. Thanks, taking the questions. The first one could you just talk about your ability to ship well between joke with meets all locations. If we see a standard we openings about the different countries or regions that you all Brian.
[laughter], yes, I'm not an issue in terms of the.
Given our network infrastructure.
And as he is planning our ability to I'm sort of up from one side to another one country to another is not.
If it goes back to own employees, just any color you predicated on the slightest providing us the requisite but missions for us to shift to up from one center to another and secondly, if some of the financial services industries and also mean up enough regularly.
Got it would be required but besides these two there was no problem from operating infrastructure to move Werent quite easily from center just sent Dutch.
Yeah, and just just to add to that Sam I would say that you know that that is our standard business continuity approach. So this is how this industry has operated the last 15 20 years to where when you have specific issues in a city or in a country you move critical work to other areas and whether that.
Based on medical or health issues, like we're seeing today or natural disasters or political unrest. The terrorism. This has been the standard approach the business continuity and this is probably how we would have handled this crisis had it not been a truly global crisis.
Okay, Great and then the next one was just on hiring and capacity additions I assume everything pretty much on hold for now is there anything good Mickey too that you, perhaps the guy three rig and how quickly would you try and ramp back up the hiring and capacity additions that when things get back up and running.
Yeah, just to add [laughter], sorry go ahead.
Oh I was going to say at this point in time, Sam I don't think we have commitments looking forward to hiring beyond what we have today and the focus is on trying to make sure that we keep the people that we have today billable for our clients.
Okay, great. Thanks.
Thank you.
Thank you.
This time, we have no further questions in the Q.
This will conclude today's conference call. Thank you for your participation you may now disconnect.
[music].