Q1 2020 Earnings Call
[music].
Ladies and gentlemen.
Getting by welcome to the Q1 2020 conference earning call.
At this time, all participants are in listen only mode.
After the speakers presentation, there will be a question answer session.
No actually question during the session unique superstar one of your telephone.
If you require any further since its please press star zero.
I would now like to have the conference over to your speaker today Justine stone.
You may begin.
Sure Hi, everyone welcome and thank you for joining that's where our Q1 2020 earnings call I'm Justine Stone Investor Relations for FMC technologies with me today builds down Chairman and Chief Executive Officer, Rahul Kanwar, President and Chief our Chief operating Officer, and Patrick put on T., Our Chief Financial Officer.
Before we get started me to review the Safe Harbor statement. Please note. The various remarks, you need today about future expectations plans prospects and clean the financial outlook. We provide constitute forward looking statements for the purposes at the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995 actual results may differ materially from those into it.
He did buy these forward looking statements as a result, various important factors, including those discussed in the risk factor section of our most recent annual report on form 10-K, which he is on filed the FCC and can also be accessed on our website. These forward looking statements.
Represent our expectations only as of today April Thirtyth 2020 by the company may elect to update before the can statements is specifically disclaims any obligation to do to do so.
As we anticipate a lengthy Q and especially in a request. The please limit yourself to one question and one follow up.
And I will now turn the call over to Bill.
Thanks, just seem and thanks, everyone for joining us today I Hope you and your first see healthy at home.
I'll discuss our results were and walk through our assumptions and for the remainder of the year. That's we me navigates is correct.
Cobra 90.
Yeah.
Our results for the first quarter of billion 178 million.
You had $170 million, just revenues up 2.4% and a dollar experience at dollar tree.
Adjusted diluted earnings per share.
<unk>, 13.2%.
Our adjusted consolidated EBITDA was 463.5 million.
And our adjusted consolidated EBITDA margin was 39.30 80 basis points from Q1 last year.
Q1 organic revenue growth adjusted for D.S.P. terminations prior to the close of that acquisition.
It was 2.7%.
This was driven by strong performance in our alternative fund administration business with over 8% growth.
Business was strong through February.
In March cylinder distancing and work from home.
7 million.
700000 up 10.3 million from Q1 2019 are secured net leverage ratio was 2.67 times.
And our total leverage ratio was 3.74 times.
Government restrictions as you know on our debt or light.
With only 6.75 times Mac secured leverage be relevant.
The three plus turns of leverage.
That are available to us represents 5.8 billion.
In available room.
We were living in unprecedented times, we've taken prudent steps and carefully review.
And just see plans covering personnel business operations and client delivery.
We have validated they operate as intended.
Since he moved swiftly to protect our employees and 99% of our workforce is now remote.
Overall, we have had minimal disruption disruption in client service.
In client satisfaction.
Means.
We have seen an uptick in interest for outsourcing services for our clients to create a more resilient and efficient operation.
One example is the SNC Alps customer asking us take on their settlement processing during the height of the crisis.
As they were challenged with work from home.
Our Ed.
Core client service saw 50% spike in client inquiries.
Given the unprecedented volume increases.
C products performed in our service level remain high.
With team work long hours and continue to deliver outstanding service.
[laughter] see health has deployed our AI based for the auto technology.
To state local governments to scan Han scan handwritten documents and forms.
To the uncertainties surrounding the global pandemic, where withdrawing or 2020 guidance.
We are providing possible revenue margin and cash flow scenarios based on different assumptions.
He scenarios, our best estimates given current economic climate.
Please refer to slides five and six of our earnings results slides.
And on our IR website.
And our Q3 revenue scenario.
That means that the economy recovers in Q3.
We expect revenues of 4.65 billion or little over 50 million less than our previous guidance.
In this scenario, we expect to have 38.5% EBITDA margins at 1.14, or 5 billion operating cash flow for the year.
If we don't recover until Q4, we expect revenues of 4.6 billion.
A little over 100 million less than our previous guidance.
In this scenario, we expect to have 38.2, EBITDA margins and 1.1 to five.
Billion in operating cash flow.
Finally, if we don't see economic recovery until Q1 2021.
We expect 2020 revenues of 4.55 billion.
For about 220 million less than our previous guidance.
Well have 37.8% EBITDA margins and about 1.1 billion in operating cash flow.
I'll now turn the call over to who'll discuss the revenue impacts in more depth.
Thanks Bill.
We have noted at various times that even in the same so significant market volatility we expect the impact on our fund administration business to be beauty.
It did you fixed fees minimum thresholds and non aways related revenue drivers.
We're pleased to see this hold up in the current environment, what we're expecting our alternatives business will continue to grow through 2020, albeit at the lower end of historical ranges.
The reduction is primarily due to do.
Ladies.
Launches on new funds delayed decisions, where new customers are not eager to switch from competitors, while in the business continuity mode.
And let us slowed down in new sales and customers delaying large scale conversions.
We also see the negative impact of FX from the British pound some reduced interest earnings on balances.
And our trading software on financial markets businesses, including as our OEM SMS trading software, we get some incremental benefit from Mark.
That volatility, which largely offsets and expected reduction.
Sure.
Given the advent and institutional investment management or expect to see reduced growth from our initial guidance as a result to customers delaying new license license purchases until conditions stock.
To normalize.
We continue to see them.
And in essence he held.
By reduction in elective and prevented procedures.
A bright spot is algorithmic. So we expect revenue would be on the high end up our initial guidance in the 2021 recovery scenario around 60 million.
Arrhythmics is a high quality business with talented management and we have high expectations.
Now I will mention some key deals for Q1 2020.
And existing client with a longstanding relationship with DSD chose SNC his retirement outsourcing services, including customer interface development.
A managed care provider extended their relationship with FMC health to professional services and technology.
The Hong Kong wealth management on local multi national bank upgraded its AWB platform, a large new York in single family Office, Ceausescus Unsubscribe of capital Fund services.
And existing assets since equal Bob on Badman Cline.
I thought to improve its data model two assets.
Include the real assets funds, a deep understanding of their fund structures and internal processes allowed us to provide a solution quickly.
A 4 billion dollar.
And at that stress from chose a suite of vessels and the advent products for family office, including partnership accounting. They were previously contemplating building Thats in house.
600 million dollar aid UN bank asset manager base in the middle East and existing Adx client license and Cola and invest correct.
Greenwich, Connecticut based hedge fund upgrading to the as equips cloud platform from was impressed with the analytics capabilities for analysts and portfolio managers to access from a laptop or tablet I will now turn it over to Patrick to run through the financials.
Thanks results for the first quarter of 2020.
Lets GAAP revenues of 1 billion 173.6 million.
GAAP net income of 99.2 million.
EPS of 37 cents.
Adjusted revenue was 1.178 billion.
Excluding the impact for the adoption.
Other revenues to six so six and for acquired deferred revenue adjustment for the DST links.
During the next acquisitions.
Overall, we had a strong quarter adjusted revenue was up 2.4%.
Adjusted operating income increased 5.5%.
Adjusted diluted EPS was a dollar three at 13.2% increase over Q1 2019.
Adjusted revenue and total increased 28 million or 2.4% over Q1 2019.
The acquisitions of invest track Alco resin mix.
Kept trulicity contributed 18.1 million in the quarter.
Foreign exchange has unfavorable impact of 5.5 million or 0.5%.
And adjusted organic growth on a constant currency basis was 2.8%.
Driven by the strength of the institutional investment management alternatives and has businesses.
Adjusted operating income was 444.2 million, an increase of 23.3 million or 5.5%.
On the first quarter 2019.
Foreign exchange had positive impact of 4.8 million on expenses in the quarter.
And adjusted operating margins improved from 36.6%.
The first quarter of 2019, 37.7% first quarter of 2020.
Adjusted consolidated EBITDA, which is defined no three in our earnings release was 463.5 million.
Were 39.3% of adjusted revenue increased 4.5% over Q1 19.
Net interest expense for the first quarter was 77.4 million.
Includes 3.5 million of non cash.
Amortize financing costs and I'd.
The average rate in the quarter.
For our amended credit facility, including the senior notes was 4.18%.
Compared to 4.77% in the first quarter of 2019.
We recorded a GAAP tax provision in the quarter 24.8 billion over 20% or pre tax income.
Adjusted net income was 274 million of adjusted EPS was at the dollar tree.
Adjusted net income excludes honor and 57.6 million.
The amortization of intangible assets.
The 2.5 million of stock based compensation.
Point $5 million purchase accounting adjustment, mostly deferred revenue adjustment.
Depreciation related.
The revaluation of assets.
<unk> point 5 million of amortization of dawn cash amortize financing costs and I'd.
2.8 million of loss extinguishment that related to our repricing in the first quarter.
2.3 million of adjustments related to.
Yes, see six so six revenue standard and point Sevenmillion.
Equity in earnings 'cause unconsolidated affiliates.
48.8 million of non operating costs, including.
31.4 million of severance costs related to staff reductions.
11.3 million loss on.
Mark to market adjustment on investments.
6 million on foreign exchange impact.
The effective tax rates for use for adjusted net income was 26%.
On our cash and cash flow for the quarter. We ended March was approximately 374 million a cash.
Net debt position of approximately 7 billion.
Operating cash flow for three somebody that's a 147.7 million 10.3 billion or southern and a half percent increase compared to same period of 2019.
Two highlights on our.
The quarter we.
Hey, gross that up 95.9 million.
And we borrowed 246 million from our revolver as a proof caution to provide near term liquidity if necessary.
We've paid down 2.142 billion up debt since we acquired CST.
In the quarter, we paid 102.5 million of cash interest compared to 96.4 million in the same period last year.
In the quarter, we pay 17.7 million of cash taxes compared to 60.3 million the same period last year.
We will be deferring our tax payments into Q3 has provided by the care sacked.
Accounts receivable DSL was 52.4 days compared to 49.7 days.
As of December 19, and 53.7 days as of March 2019.
We used 26.5 million, a cash or 2.2% of adjusted revenue for capital expenditures.
Capitalized software.
See I T and leasehold improvements.
It was a corridor, we declared a dividend of 31.9.
Billion.
An increase from 25.2 million in the same period last year.
Our LTM consolidated EBITDA was 1.873 billion as of March.
Includes about 25 million of acquired EBITDA in cost savings related to for acquisitions.
Baseline net debt of 1 billion. The total leverage ratio was 3.74 times.
Secured was 2.67 times.
[noise] on our view for the year, you know do that occurred a predictability of market and economic conditions. You know, we're we're throwing or a specific guidance.
Providing three scenarios for the year, depending on the timing of the recovery.
A few assumptions we've used the nurse scenario, we've assumed that.
Focus will continue to be volatile large scale outsourcing deals and license deals will be impacted.
Hey, you weigh inflows and outflows <unk> Fund administration business will continue to be volatile.
Currency exchange, we've assumed current levels.
And that will impact the business approximately $30 million for the remainder year.
Parents, who are original plan.
Adjusted as a result, adjusted organic growth for the year in the range is will be between zero percent and negative 2%.
We've assumed that interest rates on our term long facility will be approximately the current 12 month I bore.
Plus our current spread which is 175 bits.
And on the expense size will manage our expenses during this period by controlling variable expenses and staff hiring.
But we'll continue investing in our business for a long term and capital expenditures will be approximately 2.7 per cent of revenues.
On the tax rate, we've assumed for gap.
In the range of 24, 25%.
The tax rate for adjusted earnings to be 26%.
So the.
So Patrick apparently drops.
The first scenario as soon as an economic conditions start improving insert word or 2020.
[laughter], we expect approximately the problem results adjusted revenues 4.65 billion.
Adjusted net income a 1.077 billion.
Looted cheers 269.5 million and operating cash flow 1.14, or 5 billion.
Second scenario assumes that economic conditions start improving in the fourth quarter of 2020.
Under this assumption we expect approximately the following the results.
Adjusted revenue, a 4.6 million adjusted net income a 1.5 billion.
Deluded cheers of 216.5 million in operating cash flow of 1.1 to 5 billion.
The third scenario assumes that the economic conditions, but I'm, starting pruning until 2021.
Well this assumption, we expect approximately the problem results.
Adjusted revenues of 4.55 billion adjusted net income of 1.25 billion.
<unk> 267.5 million.
And operating cash flow of 1.1 billion.
That would come out turn it over to me for final comment.
You can.
Passing up on the thanks, Patrick but thanks battery.
Well, you're all adjusting to this new normally and we were evaluating our operations customer service and productivity on an ongoing basis.
Strong company and these trying times reiterate the resiliency and that's it these business model.
We report, it's 373.7 million and cash in cash equivalent as of March 31st.
We expect to generate at least 1 billion in operating cash flow for the year.
Our capital allocation strategy will remain the same.
And we will prioritize that pay down and allocate Catholics were high quality acquisition.
And then methodically opportunistic man.
As we begin to open the call for questions I wanted to reiterate.
That's nice to see is a strong company with a highly educated and productive work workforce.
Stands at 23000 strong.
That's just didn't see markets and sells its products and services.
Two a worldwide client base them over 18000.
Total addressable market in the hundreds of billions.
<unk> innovative company.
With little or.
Who with little or no disruption, we redeployed 19, 99% of our workforce to work from home.
Since our I.P.O. on March 31st of 2010.
<unk> has annually compound it it's adjusted revenue revenues for sure.
Cash flow by 34%.
27%.
<unk>, 38% respectively.
Oh, well now open it up for questions.
Mmm.
Plenty sorry there.
Yes, we do have a question from the line of Alex Crown.
Yeah, Hey, Hawaii ice cream U.B.S., thanks for the the good detail here.
One of the the anew guidance one of the things that sit out to me was the assumption that retention rate is going to remain at this 96% level. Just wanted you to me flushes out a little bit more I mean, I guess the question is why it's a comfortable you know if this carnage out they are certainly hedge funds maybe going under I mean, it's is is there <unk>.
I guess is a is what I'm, saying or if you know it is a bad environment, which I just outline is just more they flowing into 21 2021 or the results. Then that's why you didn't really touched since I I guess, what what are the puts and takes it could make this get a little bit worse.
Well I mean, obviously, Alex you you hit the nail on head if everybody goes out of business it won't be 96%.
But so far what we have seen is.
Little.
Shutting off the doors.
We have seen more where it's not as quick to launch.
But as you saw on Q1, we had eight per cent growth in the sound administration business.
And you you know I I don't think you'd think that you know most of the major banks are most of the major insurance insurance companies are.
Or mutual fund complexes are going to.
Going to.
Oh.
So.
You're really looking at the alternatives space and we've seen really no change in private equity.
And and our car hedge fund business.
Has shown remarkable strength and I I think it will continue and I think.
You know that this may be a catalyst to essence isgro not a uh huh.
Short term, it's not going to be but.
But you know three or four or five quarters out it could certainly be a.
We need an administrator that this is all they do and they focus on it and they're resilient and they have experts and it's all the way up to the top of the house. So I don't know if you have anything bad.
But I I would just echo what you said, which is we've seen some slow down and people that we're going to start new funds, but with porn customers I think if anything what we've seen in the last six eight weeks is more opportunity where folks from looking at how they have done.
Environment and what their business continuity plans are and and trying to figure out of taken outsource more activity cool.
By creating then maybe just another quick one and now jump back in the queue, but one of the things double your messaging last quarter was you know pricing, becoming a little bit of a bigger lever.
Just wondering if you know in this environment is that basically just off the table is that still kinda Norma inflate is happening or is this going to be more again, that's the way that we need to revisit next T.S. people, maybe have different things to worry about right now.
Well I you know, we we as we spoke spoken we'll have two two calls I mean, we we have we have implemented a lot of this.
So.
Behind Us no Alex.
No that doesn't mean that was 100% behind those but but I'm guessing that was.
Yeah, you know probably in the 60 70, 75% range, maybe so it's not really nearly as so.
As front and center as it was and then we'll revisit it you know obviously again in in December and depending on what what's transpired between now and December we'll we'll see whether or not you know <unk> a modest increase is.
Is is sustainable.
Hi, fair enough I'll jump back in the queue. Thank you.
Yeah, we haven't had a question friends of mine.
<unk>.
Hey, guys English make from city. Thanks for taking my question.
Yeah.
Trajectory as we progress throughout this year, maybe you can talk a little more about just what you should expecting a quarterly basis and Mr. Clarification. When we we think about <unk> cetera is that a comment on revenue bottoming out or is it a comment in terms of return.
The new ground.
Mm.
Well I I think you know I I I'll comment, maybe we're hoping comment <unk>, but I would I would say is that.
Andrew is is that the the scenarios you're trying to do is to give you.
You know, we're not all looking at the code.
Endemic as being an accelerator in our businesses.
Unless maybe your Julie had or some other pharmaceutical company.
List of us are trying to.
You know navigate the rapids.
And so you have the the scenarios that you see us.
Delivering too you are.
Or an expectation that no we don't get the fun launches we expected.
Or hesitant about large <unk>.
Perpetual licenses would chest to get you know.
Sometimes capital.
Capital improvement capital approval from a board.
So there's a lot of things like that large scale outsourcing.
Mandates when people are in business continuity mode. I think are are less likely and so yeah. This is.
An analysis of what could happen.
You know, while the world's economy comes back to full strength.
<unk> would you comment.
Sure I think in terms of the.
<unk> in in general what we've assumed in the queue through recovery scenario assumes that things start to normalize towards the end to keep too. So two or three is you know we're building our way back up and Q4 is nearly.
You know almost as good of a quarter as perhaps we would have anticipated previously <unk>. The coupons scenario you know, it's the same thing, but one quarter delayed so towards the end acute three people are getting back to work and q. for a better from that point forwarding 2021, you know once again all of these are just timings and 2021 worse.
That really doesn't happen.
Don't start to normalize some people start to buy again at historical levels until the end of the year. So we don't really see the full benefit that on some of the first call them 21.
Okay. Thank you that's helpful context, and then just from I follow up Yep.
It's the proportion it gets just beneath narrow analyses <unk> what is.
What's the proportion of revenues that are there are just delayed implementations versus may be a slower still cycle.
Comment on that and then just to maybe correspond with that just going to talk about what you've been hearing from clients recently I mean, you made some pretty positive comments in terms of just sounds like clients consulting with you more didn't see how naked outsourced a little bit better and things like that but maybe just a question in terms of.
<unk>, what you're hearing in when clients will be prepared to get back and start.
Start start implementing solutions.
Oh, Yeah, and I I I've been talking to a lot of our clients. It had the most senior levels and you.
<unk> most of them have been has been quite complimentary.
A bar response to this covert 19 crisis and.
And I can understand why I mean, we we <unk> redeployed you know 23 20.
22750 people and we did it mm.
A week or two and.
And we we have not had disruptions in our service and I don't know if that's true around.
No the financial services marketplace.
Oh, you know when you can.
Being a crisis and you can differentiate yourself.
And when things start to come back to normal.
People say I never want to go through that again.
And where can I turn.
And I think you know we have a chance to be that.
You know that's shining light on the Hill.
We got to continue to execute and you know they took these are not the easiest to times and you know all of this hope that.
You know the pandemic goes away.
But I don't think we're just going to snap your fingers and it goes away. So we have to be intelligent, we have to focus and.
You know I I think we'd have great team and I think that's what they've been doing.
Alright, Thank you very much guys.
Thanks.
Really do have a questions on the line Peter helped me.
Hey, good afternoon, everyone.
You.
You can turn for me that done most recent acquisitions are not included in your scenario analysis.
<unk> possible can you give us a a revenue asked him at any aggregate the guitarist and even the two pending deal.
Yeah. This is Patrick.
So they give you an idea for a 10 in a vast was.
<unk> that above $42 million Oh.
Revenue in 2019.
And that could probably.
Oh, it's hard to predict they'll have some impact this year, but they're probably <unk> been growing the high simple digits.
And rather than yeah.
And then.
Okay, Chris today.
You know assuming assuming that close in June 1st.
And they were the remainder in here would probably be around $20 million forever now.
Oh that that's the capita deal.
Capita pepper Yeah capita.
Kept person is already included for.
That's right Alright, perfect and then just as a a follow up <unk> can you just give us a little bit of color on within find in bad I see last slide of the tag here is the way yeah, just that hit the one per cent sequence will decline can you talk about the the interplay between market action in that flows on that.
Sure. So you know we had [noise].
Pretty good.
<unk>, particularly if it's fair to Q1. So you know there's there's some included in there is obviously those those assets coming on.
The we we did see market declines in our heads one business and you know been particularly at the end the March.
And we are starting to see something recovery there as well.
And our private equity business and real assets business continue to have bolts good sales levels as well that's good aspect inflows into current phones.
Got it got it in any notable changing the mix, but we should think about.
No not not not really.
Okay. Thank you very much.
Hmm.
Mm.
Yeah.
As a reminder.
Please buy started one and run never again for one question in one follow up.
And we have a question from the line.
Mm.
Thank you good evening below Rahho can you comment on the visibility in terms of how much of that recording piece of revenue that you have is truly under longterm contract that would.
Vulnerable, but then what is the projects centric or the variable piece that could be more exposed, especially the downturn is prolonged.
<unk> might bend or some of the scenarios, maybe not as conservative and maybe they'll recoveries more later in 21, just want to get a better feel for the visibility you have all these various scenarios.
Well I I'll take a quick crack and then like <unk> comments, but you know may on when you do you think about about.
The various components of our of our revenue streams.
The the per basest point.
Charges that we get from the hedge funds in private equity funds.
No it's fun to funds.
That has all kinds of offers in it. So you know depending on you know them <unk>.
Crying in in various asset prices are asset values that that can have more impact but.
You have the volatility like you saw.
You know in.
<unk> you know has continued through April.
No that that that uses more kind of like a sail swinging from side inside it ultimately because not impact.
Revenue.
Very dramatically you know when we do tax returns in financial statements and stuff like that that are all you know.
For peace or or per year charges.
The the other <unk> recurring revenue, we haven't seen maintenance so on our software contracts.
And you know.
I said values are not impact I do not impact gross are already set fees.
In similar I think with our.
Or maintenance on our current licenses, which is you know all he S.C. six so six to find anyway.
So almost all of our revenues that is occurring.
It's not impact.
Per piece revenue that we get that.
Like on our.
Network or on our or.
Data businesses or on no some of as his business that gets paid by a number trades.
That that that will be more tied to volatility and volume.
You asset values.
So we're we're pretty insulated.
For a whole maybe you.
Man.
Really I think I would just add that in the businesses, where we do have to some degree of durability tied to some external driver.
We tried to take a conservative view on those.
So my Inc. What's what's I think we do have plenty good visibility into <unk> do you mind skills that are the same some get a lot worse and then okay, maybe mob, but you know based on what we've seen so far in a business we've got pretty good visibility.
That's a very helpful and just one quick one for Patrick could you size. The expenses that you laid out and then how much more lovers do you have if you were to have to pulled in the case up again up more pro long down Kern that goes beyond early 21.
Thank you.
Well I think it it ranges.
So the three scenarios.
Oh, but I think it's you know it's somewhere between.
75 million and 50 million.
Consistently.
Took out from our original projections for the year.
Got it we're also burn it were also benefitting.
From.
Lie board G.N. down significantly this corridor.
Oh, we've assumed in our plan.
The the library for 12 months slide bar.
But you know <unk> significantly for the first quarter. So that's helping us how to on top of interest rate in line item.
Thank you.
Your next question kind of something line objects.
Right.
Yack Nader from J.P. Morgan on [noise].
Build the the question that I have is on large skills.
I understand that things are being delayed either one lunches are large outsourcing deal is getting delayed but.
You see any risk in the more time these deals or delayed maybe they get modified for the downside to here.
You're saying fewer products or maybe moving <unk>.
You know Jackson I, I really think it's going to be the opposite of that.
Do you know if you go back to made often other things that really kind of rocked.
Female would be.
The investment services out sourcing business.
People want to independence people wanted strong internal controls.
<unk> businesses that will run by experts in these things. So like these were not banking business is these are accounting businesses.
Right there systems businesses so there.
Systems in accounting businesses, you're really doing accounting systems.
Oh, and you know all three people that you're talking to here or.
Or accountants by training.
And I I think that that we understand what's the 23000 people we have.
What they do.
For a living you know in somewhat of an expert fashion.
So our ability to move quickly and and with confidence is greatly enhanced.
Right, where we were used to.
A.S.C. six so six or.
Whereas 91 or fast 52, R.E.I.T.F. 90, 920, or some other arcade accounting and reporting <unk>.
That that regulators and.
[noise] taxing authorities or or you know very intense about.
I think.
Clients look around and they start and.
Well, we'd better get combined is it's really steep and these things and I think will be.
Significant beneficiary of that.
Okay that makes sense monkey and then.
The follow up question [noise].
We took out a little bit more that you know from the revolver in that particular corridor as we look at some of these some of the online thing, but <unk>, possibly <unk>, maybe thinking about either you know.
Levels and that either to the applied it may be patient pay down okay.
Well I I'm thinking all three scenarios I think the.
So.
The one with the most impact will have received 2021 we.
We still expect a billion 25 million and.
And operating cash flow. So you know we have.
Obviously.
One of your money to pay for our.
Or calf X. men are interesting snacks, and so you know when you look at the.
You know the.
100 million Bucks that we can do with.
<unk>.
I'm a capital allocation standpoint, you know my my guess is is.
You know a vast majority of of that will go to pay down dead.
And and you know obviously, we like good acquisitions I think.
If we take we acquisitions that we've done over the.
Last year, you know, we're we're getting really good businesses.
At reasonable prices.
You know there is there hasn't been.
Reasonableness in this market place for.
A couple of years and.
And interest rates are a historical low so you know.
See in general wouldn't be prowling.
You know in and looking for.
You know something the fee.
Leading the pack.
And and I think that would interest rates, where they are in the capabilities, where we are in the number of.
People that means not want to operate companies anymore I.
I mean, these things or.
Or.
Very difficult for entrepreneurs and and even for private equity firms that have great games and now see their gains gets flags.
So we're we're there we have the capital we have the expertise we have though.
Management capability and so.
<unk>, we're we're optimistic where we are.
Right.
Thank you.
You have another question and the line of.
<unk>.
Bedrock.
Hi, Thanks for taking my question, maybe just a quick question.
Mr. did you got those cost savings built them.
Oh no under this plan will reduce costs variable costs.
An additional about.
And then and then we continue to.
Oh bring our.
Can be as teas.
Contractor, India workforce in house workforce and that'll save us there's some additional funds so.
So in the assumptions we've included a week or you know we've put a significant amount of other additional cost reductions.
Well. This you know business runs at a lower level of revenue.
And remember almost all of our costs are variable.
So you know the flexibility we haven't you know what cobot 19th proved to be is.
He would be meats and all the millions that you spend now on travel and entertainment, which we spend millions monthly.
And do you need to go to all the all the various.
Conferences that are now being done virtually so then I mean, the cost structure of lot of American business I think.
It's going to change in and.
For people, who like crop, it's going to change in a positive way.
Yes, that's very helpful billing that checks on it that's once again on a solid quarter and and it's good to see the resilience of the revenues even in a global pandemic. So thanks.
Your next question comes from the line of James.
Okay.
Hey, This is John certainly on for James from Morgan Stanley.
First question you mentioned minimal disruption in your prepared remarks can you talk through some of the disruption that you did see and whether you think that will be a headwind during the rest of year.
Well I mean, I think we I think that we really had that were that were at all disruptive were.
Well, we shipped everybody home in India, some of the remote areas in and around.
Varagon, Andrew buy ins might do bad into ne.
They didn't have as as good of.
Ill.
Telecom infrastructure, so we upgraded lots of.
Lots of routers and.
And make sure that that we gave them the best possible speed.
And we also shipped out thousands of laptops to people in India and make sure they had.
After the equipment to work to work on our guys.
Sneaky office team and all the team there.
In India did an outstanding job and they continue to do an outstanding job.
Those were the hip.
Yes, the major point to have any disruption I mean, I've talked to any number of.
Senior people in our clients and.
The comments are great.
Got it thanks, Phil and as a follow up you touched on pricing earlier are there any customers asking for pricing concessions.
I don't know that we have.
Fiftyx on people asking so.
Pricing concessions I can tell you.
But we don't have people asking for pricing increases.
Yes, I'd just add to that we really haven't seen any.
Systemic.
Plans for price reductions or things like that it seems really been business as usual.
Thanks.
Okay.
Yes, when there's winners.
Turmoil like this by real turmoil.
You mentioned there are asking about price.
No you're asking about stitches.
By those out so.
So I think that then you know.
Who knows over the next multiple quarters, whether or not that comes into focus but right now it's a we need to get our stuff done then.
And we're having trouble enough in our own internal operations. Thank God, we have you.