Q1 2020 Earnings Call
Welcome to Sykes enterprises.
First quarter Twentytwenty earnings call.
On the earnings call today for management.
Our CEO Chuck sites.
I follow John Chapman.
And I are had two Bops Kumar.
Management has asked me to relate to you.
Certain statements made during the course of this call, let's see relate to the company's future business and financial performance are forward looking.
Such statements contain information that are based on the beliefs of management as well as assumptions made by.
And information currently available to management.
Phrases such as our goal we anticipate we expect.
Similar expressions, let's say relate to the company are intended to identify forward looking statements.
It is important to note that the company's actual results could differ materially.
Those projected in such forward looking statements.
Factors that could cause actual results to differ materially bundles in a forward looking statements right that applied in yesterday's press release.
And the company's form 10-K, and other filings with the FCC from time to time.
If you require operator assistance. Please press Star then zero.
Please note the coal is being recorded.
I would now like to turn the conference over to CEO Chalk Sykes. Please go ahead Sir.
Thank you.
Operator, I'm good morning, everyone and thank you for joining us today to discuss Sykes enterprises first quarter 2020 financial results.
On today's call I will provide insight.
And how our business is doing operationally [laughter] and his first in our market positioning.
The other group in 19 band.
[laughter] John will walk you through the numbers [laughter] then we'll start to color Q1 day [laughter] I want to begin by saying there are also once those affected by government like team [laughter] into those who have lost loved ones. We extend our deepest sympathies [laughter] is bad debt.
That's spread with great and density [laughter] I also want to say how grateful we are [laughter] to all of our employees [laughter] everyone has stepped up ROIC late in particular, we urge specially painful [laughter] do or brought one personnel.
Operations and I teams [laughter], then able to demonstrate great agility [laughter] tenacity.
In the face of this unprecedented [laughter] of course, you spoke said that the support of exceptional leaders across all functional groups [laughter] has their own and [laughter] Workstream, Oh deliverables to contribute to the heightened state.
Our operational readiness [laughter] has enabled us to distinguish ourselves and do you guys are clients. Both in terms up adaptability and to gauge [laughter] at all [laughter], it's been hyper vigilant.
And maintaining employee safety [laughter] dances cards.
Minimizing disruption to our livelihoods [laughter] continued to do an amazing job.
Oh deliver into our clients in customer.
[noise], let's discuss how weird distinguishing ourselves.
I want to frame my remarks at a broader and more [laughter] historical context, I hope you're better understand why we're winning mindshare with our current and prospective clients. [laughter] then I'll, let me know us as a company will recall that back in.
I guess 2012.
We made a highly strategic acquisition [laughter] best of breed work no major platform [laughter] Alpine access.
I don't do that 1998 Oh.
Oh, PPI and was all major sport business model, which over the years leveraged power.
Cloud computing combine will transform it is operational no [laughter] liver burst capacity [laughter] agents to clients [laughter]. It is important didn't go [laughter] work no isn't just replicating what you do in a break a more.
[laughter] bar [laughter] as many of our clients are beginning to appreciate.
Rather work no requires [laughter] reengineering, the entire operational value chain encompassing functions like recruiting training interaction management performance management workforce management [laughter] risk.
Schmidt.
It is a kid transitioning.
[laughter] model from a physical first experience to digital first experience, which is a very high bar.
Such all business processes around client programs.
You read about your weighted.
Imagine reconfigure and refined.
In order due to labor performance excellence, [laughter] paired with brick and mortar facilities.
<unk> Yeah acquisition, we have gained tremendous knowledge and created as product. This is around the inner workings of the old agent model.
Because we had such.
Long stretches of time running business model across there is clients industry verticals and geographies, we were able to respond rapidly do that bad debt, but [laughter] and we have taken our best practices.
[music] extend a warm agent model at scale.
As a key.
To our brick and mortar facilities.
All around the world.
On our fourth quarter earnings call. We gave you a taste the power up our home agent capability as it relates to China.
Appreciate the scale and scope of our agility.
We believe distinguishes us from our peers.
A span roughly 30 days.
I'm starting from parts 12.
We were able to migrate.
More than [laughter] up our brick and mortar age group it used to our Oh no major platform.
And as well highlight shortly.
And I was relatively minimal.
Considering speed magnitude of the shift.
To put these <unk> birth or contacts you for March 12.
100%, Bobby agents that represent 73% capacity utilization number.
Consolidated basis, [laughter] Endo first quarter, we're in a brick and mortar facility.
As for were 30 days.
Almost 60% of that was brick and mortar agents were now working from home.
With the remaining roughly 30%.
Brick and mortar facilities.
The remaining 10% the agents were idle.
Most of them in the Philippines and El Salvador.
Oh, it reporting segments.
Data is even more impressive.
Let me as transition close to 85%.
It's break it more agents.
Who work from home.
15% the agents remaining at brick <unk> mortar facilities.
Well in the Americas region.
More than 50% the agents.
I've transition into <unk>.
Around 35% or in brick and mortar.
And 15% or idle.
Differential between AMEA.
And the Americas does do do a couple of factors.
Part of the Delta.
Well as admission due to book product.
And iron clad lockdowns.
And did it in certain geographies, particularly in offshore jurisdictions.
As time has gone on [laughter].
Since between up media in the Americas.
Client willingness to old age and certain lines of business for various reasons.
Come in second or constraints.
On the infrastructure, such as but not limited to.
Ace is and reliable broadband.
And dedicated workspace at home.
It's particularly the case in the Philippines, and El Salvador that said, we believe for now we are reaching an optimal point.
Delivering exited the Americas region.
It is reduced facility density sufficiently.
While delivering clients.
Illusion that you're seeking.
So what does the state of play look like from here.
As a pin debit continues to unfold we are a scenario play in help things change into short to medium term.
The good news is that number of client set up in very brick and mortar centric I've taken big steps and embracing norm agents. These clients range across virtually all broke those and complex lines of businesses. Although they are a second seem woods business goes home.
Which business stays in brick and mortar one thing that is becoming very clear to our clients.
Age, it's now working from home or performing at or above the quality levels that brick and mortar operations.
We're working with clients to see how much of a shift to at home is permanent.
Well take on a greater at this is the unwinding of Lockdowns occurs in fits and starts.
On the others like everyone else, we are dealing with unknown so from a demand perspective.
Just in the last 30 days, almost 26 million consumers and United States filed for an appointment.
And how does gets reconciled against the trajectory of the pent up demand remains to be saying.
Another area, where we're trying to get it in terms of growth.
It's how clients manage their own and now service centers.
More importantly.
It's been endemic serves as a catalyst for clients.
Ship more business do outsourcers.
And related leak out.
Oh, it's the end outlook <unk>, both current and future demand.
[laughter] into a profile is coming under increasing scrutiny.
Not at this takes into account.
Joel shifts in consumer behavior and supply chains across our industry, but we believe we're much more resilient.
And well position given that our business model is agile in April.
The first suite of capabilities.
Coupling that with our strong financial position, which is increasingly becoming top of mind for clients. We believe we can continue to proactively.
Reinvest in our business.
And capitalize on opportunities and what will likely remain above all owed to marketplace.
And with that I'd like turn call over to John Chapman John.
Thank you Chuck I would like to discuss our quarterly financial results, particularly keep CNL cash flow and balance sheet Highlands.
As Chuck mentioned, a team deserves tremendous credit for an amazing job in responding to the corporate 19 pandemic.
A data point that further underscores chumps remarks is if you have around six times as many more me Gen strong and less than 30 days.
Total number of whom agents over the last eight years three fagley twentytwenty.
With that let's start with actual revenues relative to what we projected in the quarter, we reported revenues of $411.2 million versus our projected I leave a 417 420 to me.
This was roughly 8 million below the midpoint of our business I wake of 419.5 no.
Of the 8 million GAAP, approximately 5 million was due to abrupt Corbett 19, weve locked items.
Agents were not able to access facilities, Mr remaining female yen due to foreign exchange volatility.
The 5 million revenue GAAP impacted operating margins by roughly 5 million.
On a 120 basis points, we continued on continue to pay employees in certain jurisdictions, even ft bridal.
In some instances we are paying a premium awaits premium two doors to their work.
Turning to read news in the year over year comparable basis, you are up 2% and reported basis and up 2.7% constant currency basis.
By vertical market and then a constant currency basis technology was up around 18% financial services up eight health care up for.
All of which was more than offset by the 11% decline and the other that 9% declining communications on the not 0.2% decline and travel and transportation.
It is worth noting that stripping out our once largest communications client communications vertical would have had a significant double digit swing and grow.
First quarter, Twentytwenty Lpds margin increased to 5.9%, 4.2% to the compatible period last year.
On a non-GAAP basis, which excludes the impact of acquisition related intangibles and fixed asset write offs charges and matching integration costs first quarter Twentytwenty operating margin increased to 7.2% from 6.7% in the same period last year.
The increase in compatible operating margin was due to strong overall demand higher capacity utilization and rationalization of seven claimed programs with subpar profitability.
And the absence of corporate 19 weighted negative impacts we estimated operating income for the first quarter of 20 to 20, we think would be approximately 5 million or 120 basis points higher.
First quarter two cents range operating margin also reflects the benefit of approximately 2.1 million or 50 basis points, which swung from an expense of approximately 1.2 million affected basis points vehicle quota related to the mark to market adjustment stock based comp programs.
On the three Rabbi Trust investments, which are impacted by a decrease in the global financial markets in the first quarter of Twentytwenty and an increase in the prior year quarter.
First quarter 22 cents diluted earnings per share were up 22% 74 cents versus 28 cents in the same period last year, driven mostly by a combination of higher demand.
Operating margins.
Posse utilization all of which were tempered by nine cents of 90 of corporate 19 way to negative impacts.
On a non-GAAP basis first quarter 20 to 23 cents per share. The 44 cents Vestas 45 on a comparable basis points for tampered by nine cents of Corbijn related negative impacts.
Turning to our client mix for the moment on a consolidated basis, a top 10 clients represented approximately 4% to 5% total revenues during the first quarter Twentytwenty.
Up from 42% from a year ago period.
Top 10 clients the first quarter of 2020 compared to the top 10 same period last year grew roughly at or above 8% driven by new program wins that we're rapidly ramping and more than offsetting the drive from our once largest client.
We had no 10% client.
In both compatible quarters.
Now, let me turn to select cash flow and balance sheet items.
During the quarter cash flow from operations declined 28.5 million compared to 9.3 million with a decrease due to working coptwo swing factors in support of revenue growth.
Capital expenditures increased 2.9% of revenues from 1.4% of revenues musical period.
Increase in capital intensity was largely driven by expansion of seats, mostly offshore under the EMEA, coupled with a technology refresh.
Treat dsos in the consolidated basis for the first quarter fiscal first quarter, what 80 days up four days can possibly and up one day sequentially. They increase in dsos compared to last yet is primarily due to drop off in clients, but that were mandating receivable factoring.
The diesel was split between 79 days for the Americas 81 days put EMEA, we collected roughly 15 days worth of Dsos and couple of weeks since quarter end.
We expect some clients to stretch out payment terms, even thought that I'd say manage liquidity.
Needs more aggressively.
Our balance sheet at March 31, 20, trying to remain strong cash and cash equivalents 118.4 million affects approximately 92.2% or 109.1 million was held in international operations.
At March 31st we had 75 million in borrowings outstanding up 2 million sequentially under our 500 million credit agreement.
During the quarter, we repurchased approximately 900000 shares at an average price of $26 60 per share for a total of 22.9 dollars. We continue to hedge some of the foreign exchange exposure for the second quarter two year, we're hedged approximately 77% and 65%.
At a weighted average weighted average rate of 52.5 see into 2.16 Filipino piece that you guys called respectively. In addition, our Costa Rica corn exposure for the second quarter fiscal year, 20, Twentys hedged approximately 44% booked periods.
So 596.55, and 518.45 column to U.S. dollar respectable.
Now, let's review some seat count capacity utilization metrics on a consolidated basis. We ended the first quarter with approximately 48600 seats.
Up approximately 700 seats comparable you see expansionary split roughly evenly between the Americas EMEA and is driven by the rocket.
The wrong of existing and new client programs.
The first quarter seat count can be further broken down to 40600 pneumatic has a deep ties that EMEA.
Capacity utilization rates at the end of first quarter of Twentytwenty was 74%, the Americas and 69% to the EMEA region, especially 71% CMS cuts and 73% for EMEA enable court.
The decrease in the Americas utilization was driven by higher demand cost reduction in EMEA was mostly due to utilization of a lot whom platform as a complement to brick and mortar facilities.
Capacity utilization rate on combined basis is 73% versus 72% in the prior year ago quarter with the increase mainly due to higher demand coupled with our ability to rapidly mobilize our brick and mortar agents to the home to set to home to service that Dimont.
Before closing I'd like to state that given the unprecedented nature of this event. We believe it is prudent spend providing business cycle for the time being.
I think pandemic unfolds the impact to clients lines of business geographies I'm Fatsicles in which the company operates is not likely to be uniform.
With a robust and tenure at home agent model, we can pivot from purely virtual to hub and spoke delivery, we have been agile and shifting work from brick and mortar facilities to hold the agents.
Clients are validating this differentiation by shifting demand in our direction from other providers.
Thus far we had experiencing strong demand from seven lines of business such as customer support for food delivery on digital business seven seas providers. Similarly, we are picking up opportunities related to hardship support for banking credit card clients along the support for fin Tech ops.
The same goes for opportunities clients in the communications and Btwob at schools as more people work from home.
Some of this is expected to be offset by forecasted downturn the demand in to travel that's cool.
Similarly, and broadly speaking it is challenging to model them on train given the subs and global unemployment levels on the impact on final demand as well as expectations of pent up demand.
Second the truck of the bias remains uncertain as the as the progresses and high some federal state and municipal authorities, we opt could impact access to LIBOR.
It remains uncertain high clients will change service level expectations.
Along with their service delivery strategies, and finally, reviewing historical trends to access future I say future demand trajectory, which we typically utilizes a way to calibrate client forecasts are likely to have limited application given the scope and speed of dislocation in the marketplace.
I've said with our strong financial position relative to many industry and the highly differentiated business model, which is being validated by client auctions. We believe we are well positioned to navigate the cut backdrop I know match, even stronger as we have the clear with all to continue reinvesting.
And the.
I thought I'd like to open the call for questions operator.
We will now begin the question and answer session.
Lastly question in the press Star then one telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then to.
At this time of a pause momentarily to assemble our roster.
The first question.
Comes from Josh Vogel of Sidoti and company.
Please go ahead.
Thank you good morning, Chuck and John I Hope you guys about doing well.
First question space on the.
The comments that you had John just talking about the the jump in demand.
From food delivery in digital business service providers as well as hardships support for banking Fintech clients.
Is this is this surge that you're seeing is it more short term in nature do you think this could be.
Played out over the long term.
And there's a small amount that you describe it does mean very small.
I think on some of them, we've seen the acceleration of ROM.
More than a temporary increase and we think will go away in those programs.
And so it's not like up against the government program that maybe there's a huge swing just and I will quickly go away and that there is a few hundred seats you describe it surge, but the majority of as we believe it will be one come goal that we're excited about and especially on the deliveries have is saving digital.
That was that was all within our.
Our footprint it should we definitely got like salary Ed just like in some program, where we were ramping offshore, especially in Philippines with the challenge it'd be hard there and we've seen some of those program not so much Paul has that slowed down. So we've kind of got two things working with US just 90, but we just want to call I.
But no every vertical negatively impacted to get them really nice points.
And the majority of those pause as we believe will be.
Longer term and not just here today and going to more.
Okay, great and shift shifting gears, just thinking about what the new normal could look like coming out of this and maybe that the new state of operations, having half the labor in brick and mortar versus at home I'm just curious.
Your thoughts around with the business model could look like structurally at half the workforce is at home versus brick and mortar does it give you an opportunity that pared down your physical footprint and you know what could this potentially due to your margin profile and I know you've always are now 8% to 10% targets. So just thoughts on that please.
Hi, Josh.
Yes.
[laughter].
[laughter] structure.
No we aggregate what you see.
More.
Well.
And.
Hi.
And so if you.
Okay all of our people today.
And moved at all.
And kept our centers.
They were.
Okay.
That ratio.
Hey.
It would still be what 73%.
And our profit margins would still be reporting.
Yeah.
Not a whole lot of extra.
Variable costs.
We incurred by movement our guys.
Well.
With our platform.
One caveat is that.
Hey, before code that.
Our whole agent people.
Sure.
Typically.
He is already 40.
More lifestyle they work.
Hours.
And.
Brick and mortar we got more hours now the reason why I bring that up.
Because hold the agent in general.
I'm not have a better profit margin profile, but here is the big question.
Because the new normal.
As the majority of people now have worked well and they need the income.
Lifestyle.
Then without workers are equally what you do it in the center if not more.
Can you.
Things like that so in that.
Actually would have.
A more profitable.
This model.
Your agent.
So what we have right now.
We're not sure if our client.
Are we going to allow was completely go away.
At home.
Even if they don't we don't see any tear used to.
Asia that margin.
Hey, do allow us to go ahead.
No.
Your point, we have no.
Oh.
Thanks.
You can eliminate.
So don't be downside risk bombing.
Anything.
State.
The.
Big opportunity or changing the operating model.
Okay.
No.
Yes, it does.
It's great to hear your voice Chuck Thank you.
Just.
Building off of that comment that you're not sure yet its clients will.
Completely 100% at home outside of Uh Huh.
Potential security or confidentiality or what are some of the reasons that clients would not.
What would want to stay in a brick and mortar facility.
I have it out.
This board.
Honestly I think.
Oh, yes, there were comfortable with.
Oh really no logical reasons not want to be at all.
Currently.
And.
Environment.
And then.
It's even more difficult to wonder.
Well I wanted to be let's set are now impurity aspect.
Let me.
Our clients.
Yes, it's all part of one to get over.
It's.
Every client every industry.
Every country.
Great all age so the Europe, a pandemic and respond.
Looking forward.
It is concerned.
And.
I think a lot of it.
I really do.
So only indications where.
You have maybe exposure.
I'm a client ends up in bad happen.
Paul.
And people felt when you work.
Well, we're happy people at home working secured facility.
Hi, Thanks Bye.
Got it.
Building.
Banking client.
Sure.
Or if we're handling short.
Paul.
Dealer.
Things like that but really there the relevant.
In my mind.
Oh.
Sure.
Certain things around security that no major won't work.
So I.
I think it's got to be.
I'd be a big change.
I really do the only exception to that.
Sure. So you really important.
Offshoring.
Hey, maybe at our offshore operations will have 20% working from home now, but that's going from zero. So.
That is probably.
<unk>.
Push or in the offshore but not dramatically.
Okay.
Good morning.
No no other than the security aspect, that's always been well, we fail held a buyback and just going back to Chuck's comments on the margin profile and there is nothing negative about the whole model I mean, if we can we do get to understand when you normalize.
And if those if not I will say occupancy I mean can deal with.
And we'll just have to figure out how we do it if we can get back to more normal ligation fan, but yet this is still a significantly higher percentage out will not give that operational and ability to reduce call physical X unique cough and as you know one of the benefit of our whole made that being so much more flexible into.
Sounds as if you do get and I've done today, it's not like you've got large gionee around your neck, you've got Tonight, no get rental and one thing I would say is in the whole made.
A building, it's great mean, but it's always been unlimited thought of in terms of how quickly could we can grow and how quickly we can wrong and there's always based on how many people come the Hyatt and not geography in Oman and got call it wrong and not building that Scott only X number of trading group. The next Clos as you can put on et cetera.
So I think as we walk through that and we understand how much recall, there's going to be Bakken center.
Absolutely believe that noma hydroxide, a significant hyatt significantly higher piece is going to be left our whole I'm not going to give a significant opportunity to hopefully ria reassess.
Margin expectations for business and so that that's Michael if you go forward that certainly yeah, I don't think if any.
I'd say the security I'm like Chuck I don't see any other reason why Kong would not want to embrace that well we see as it is one thing preaching agent dark pool, that's another thing adequately managing them and that's good I think sites expertise of managing well made Jen and especially when you look at a mere models, which we spoken about.
Over the last couple of years about how the site ligation with coming down but margins were going up and that was because we were successfully implementing the blended model of home and brick and mortar working cohesively together and.
And do you ask the whole mortal until and I was very much on end brick and mortar or a whole when I really taken the Latin into the pod in Europe, and making sure be through the across the world at the high we manage this britt workforces marked whether in office in line of sight of out of our team lead or a whole bunch Chile.
We understand monetize out program.
Seamlessly back to clients and not with whom you look at that the impact of that have Expedia and hopefully we believe will help all grab market share and an increase that market should go forward because of the expertise, we pod and less than 2012.
Thank you for for all that insight that just one more quick one.
When I think about the travel vertical.
Can you give some thoughts around what the true discretionary portion is within that and then I guess, if we look at the.
The 1.6 billion base of business coming out of 2019.
Looking at that total pie what portion do you think susceptible to to an impact from cobot. Thank you.
And.
Seth Workovers.
So that's a long way.
[laughter] travel you've mentioned and I would say we had about 5%.
Number would be what you described as travel that basically people are not flying and not looking holidays and not meeting customer care dot the element I would say is discretionary.
The.
No not vertical performed particularly well in Q1 and I think it will be okay. In Q2. The question is for Q3, we quit as that business going to go how quickly things in the open up and again.
No no one is partly the reason why you really just said, let's take a pause on guidance movement, but I would say roughly $900 million with the business.
Discretionary piece.
So far that will go down we don't noise yet.
Okay, well. Thank you guys, taking my questions I'm glad to hear you're doing well and I stay tape out there.
Good.
The next question comes from Bill Warmington of Wells Fargo. Please go ahead.
Good morning, everyone.
Well I wanted to ask about.
Some modeling we're trying to do for Q2.
It seasonally normally there'd be maybe 3% sequential decline there.
And a and then perhaps some.
Some softness there also from the travel vertical that you mentioned, but it was also trying to so I was trying to get a sense for kind of the revenue trajectory whether that would make sense.
Were modeling and then also what.
Mark can we expect the margin impact could be dollar for dollar.
Like the 5 million was in Q1.
Yes, I mean, it is difficult Bill I know, you're trying to get our guidance from off in Q2 that we don't really the war I go there and if you let you take the 5 million because I think it's worthwhile just explained in high we came about number is the five no not really pull coffee qubec, notwithstanding Italy premium.
That the out facility that basically got cold dive immediately and we had new access to use those employees not with the revenue margin you lost in the last two and half weeks in March so 90% of as really the hardcore halide and not in the Philippines, and Manila and then alfalfa.
Hello.
So that's why it was dollar for dollar literally the hot 100% of our people. There did you read you can access debt.
People.
Well I would say is as we sit today not that insight number it Doug a number four.
It's 70% life than it was.
So there was a dollar for dollar effect and the end of Q1.
Statements made today, which is 7% black box and we still got roughly boot dies and people that we've gotten a repeating and still employing that we're still trying to work hard to get them out work.
Good the impact.
And my most of it would not labor to offshore, but we can man if you want and model at most of what that would do to that to that number et cetera.
I would say in terms of Q2.
In terms of your your modeling what are we cannot though.
Got it.
Then I wanted to also ask your thoughts on heading into a recession last downturn 2008, 2009, I think revenues were down five or 6% margins are down 200 200 basis points from the peak.
You know I know there are a lot of caveats around the timing in the magnitude, but what do you think heading into this one.
Yes.
Hey.
Couple of.
First of all.
Oh.
Thank you Paul.
Slower pace.
[noise] overtime and.
Who is crazy.
That every client every country.
Yes simultaneously.
So.
The next thing is that.
We're now shipping completely to home age it.
That's a positive.
And to reduce.
Todd sitting here today, we really good.
Hey, what's clients, we think are going to be struggling.
But those Kate we can pretty much identify.
The one we think or really just like we're talking about travel.
Or just like we're thinking about big box retailers.
And as you think about it.
Whatever.
Trend.
Place prior to that so.
So people working from home was a trend going up gig economy.
Cloud computing trend E Commerce was the trend.
All those factors now it's been accelerated not go away.
If you have a negative trends like big box retailers for none of us until goods. Okay, that's really probably extrapolate out and be hurt significantly. So we're able to step back and look at our business.
And get a pretty good idea. This isn't we look at our portfolio.
When you see a lot in demand and it's picking up but you everything that make it a different is that last time.
Still brick and mortar so what happens is you've got 80 centers all around the world.
And then start subsiding.
This is already started going from 85% down to 60.
And you add outlets sales model to put that to work.
You may recall, we were using that term called Swiss cheese, you were basically we have like pothole bake anything at all of our centers.
Good thing about this situation is that all convert the whole.
So we have clients today.
Typically in North America.
Our given those hundreds and hundreds of feet.
No we can capture rate right now.
Into recession before we had that centers in the white market capture that demand.
So.
Okay interpret and so that is going to be something we think is going to be murky or Q2 Q3, we got into the second.
Bike happens and how government responded that kind of it.
What we should have that through or leaves behind skew to Q3.
But on the overhead what we see is when we exit out.
If we have an operating model now can capture all the demand.
We don't really have to worry about whether or not we have quite simply isn't or white places.
I think we'll cycle is very quickly.
So no big change in the operating model and I think it will make last recession.
Responds very delta there will be much more acute in Q2 Q3.
We exit here.
Quite optimistic about what future because we're in an industry that is desperately needed.
No that's a good places to be.
Hard thing to say at least so many people working right now but.
It is true we're ahead of where we're putting bugs central store.
Our clients.
So.
Anyway.
A little different color, you know Oh agent and sudden impact so I will.
Everybody little easier to the terms.
Come out stronger non.
And I don't see going out over two to three years.
The way the recession got a leaner and just got hitting companies.
Different stages of the recession.
So.
Thank you very much for that color.
One more if I if I could.
You guys have.
No.
Pretty complete a global coverage across channels and you've got a pretty strong balance sheet.
I think when you're one of the few players in a in the space with the net cash position.
And.
I wanted to ask whether you're whether thats, helping you guys pick up share specifically around vendor consolidation, whether you guys are actually benefiting.
Sure I don't think we've seen any of that as yet what I do noise.
Uhhuh chip clients are clearly, making sure they understand the financial position to their supply chain.
And many of them hopping, reaching out and making sure they understand.
Position and I'm sure that looking at off relative to competitors.
And I don't think it it's going to heart talking strong balance sheet and position that we gall.
And I don't I don't see that is being an immediate reaction from a client to consolidate.
And then delay I mean, I think warranted.
Sean Penn many we I want to make sure that maintains as much capacity is at con, especially when.
The only one than in new geographies the of golf struggled to get all of it employing and the right place to deliver senses for client client.
Notwithstanding this level not where you have customers will expect would be once that I'd say that but think consumers will understand by long wait times and service levels might be little but I will go away I, just don't see how clients will look to Gulf cat vendor consolidation.
Got it thank you very much further insight.
Okay.
The next question comes from Vincent Colicchio Barrington. Please go ahead.
Yeah, most of my were asked but.
Oh, we looked at the sales pipeline Chuck.
Can you characterize <unk>, how much you're seeing delays versus cancellations.
I wouldn't say, we're seeing any constellations, then I wouldn't use of what confirmation anywhere and professional services Symphony businesses had significant delays because a lot lot worse than client sites et cetera, So, but that's only $7 million that business I'm really not no no huge well I would say.
And again I think I've touched as we've seen some acceleration and Rob said in a few places, especially in the food delivery side and digital services and Weve zone. We've seen some rahm that you described is flawed and but the endgame till the end game, it's just going to take us longer again.
And some to some of the challenges in the way, but in some of those market and I would note. This guide anything in the and the console that postponed.
Yeah.
In some cases accelerated in some cases delayed and in some cases float.
And then you know Chuck and spoke quite quite quite a bit about you know the willingness for the at home model for.
Even.
Historically sensitive industries I wondering if you can provide a little bit more color on financial services healthcare in particular, obviously very sensitive areas.
Is there a portion of both of those verticals, where you think.
Yeah, Theres no way, they're going to.
Usually at home I assume it's not everything was there any way to characterize though.
Oh.
Yeah, I wouldn't say that and thinking if we're handling.
For all Joanne.
I don't want that to be into center.
And we're doing the healthcare.
Yes.
Information on the screen.
That by late.
Issues.
Oh.
I'm, probably going to want to be in the center as well.
So but.
No one phasing billing.
It is just kind of a claim.
That's great.
In July.
Todd.
But you don't really understand what the underlying health issue is.
That will be at all people will be comfortable with that in fact, as we speak we are ramping bite NGL programs.
Home agent for them first time, new word new work.
Outdoors to third party as.
We're ramping hundreds of phase right now in United States.
We're also ramping healthcare is a way.
So and this was not acting too.
Yes.
The decision.
About four were booking changes to the operating model.
So.
As you know.
Okay. That's it is the mother of all innovation.
[laughter] pandemic.
If you think about the millennium.
Well, yes Terry.
I'd Love in 2001 right off.
The dotcom bubble.
Great.
2008.
No.
10, 11 years later that we have a pandemic I mean, we've had almost three global issues that impacted world that I think.
Makes people stop and think we.
We better have operating model that can respond to an uncertain environment, which were certainly and balancing you know.
I think those.
Barriers to change or other come down meaningfully.
But to answer your question, though the was worth a fault and concerns or security concerns or does too much.
Oh.
And the centers or little bit, but there's a lot of technology that we're getting ready to the boy I think may also help.
Silver.
So.
It's going to be addressing.
Okay.
Thanks for the color yeah.
That's it from an ex.
Thank you. The next question comes from Dave Koning of Baird. Please go.
Oh, Yeah, Hey, guys. Thanks.
And I guess I guess first of all my question.
When we think it all the way you guided Q1, I think was kinda up mid single digits are still ended up two to three so really not that far off but.
I I would imagine trends kind of held up pretty well mid mid March, but maybe you could give a little insight to like what year over year growth was kind of exiting March and maybe what you're seeing kind of real time through through April just to give a little context for how to just think about recent trends.
Maybe only only point David on Q1, as it ops and cool that we would have been and the cost of that 4%.
Constant currency organic growth in Q1.
Other than telling everyone that Doug considers the impact in the late March in telling you that was 10000 people and the notable that down to 4000, that's kind of the number I think you should use I know really why teller stopped talking about April yet, but we're just about through it but I don't want it's not.
Welcome to exactly where they are other than demand still strong and it's really out of the ability to get in.
These folks that are still not capable of working either and I sent out or hold back to work, that's what's going to be the guide and thought prefer to get back to call normal seasonality.
Yep. Okay. That's helpful. And then I guess theatrical just you know your cash balance is is really strong you know I guess relative to a lot in the industry does this give you guys a big advantage either from a customer standpoint, you know clients wanting to choose you'd given given the right.
It is stability and be maybe even you know give you. Some you know I guess some.
Ability to make acquisitions right now in a time, where maybe some competitors are a little bit disrupted and you could maybe get pretty attractive valuations to buy something.
Yeah, I'm sure that had some compared to our and significant will disrupt the Davidson.
Well with is that while we always would want to keep an eye on opportunities that I, let us know driving forces driving forces keeping an employee save gannett's many of those working as possible deliver for our clients and look off the balance sheet for those shareholders and basically be ready.
Before I believe that we think will come when the guy that's in Q4 as model proves that we are resilient capabilities and can monitor this but workforce manage proved.
No my whether the distributed and in our home and office nothing we're focused on.
Will there be opportunities that we will look I, absolutely and our clients, making sure there they understand the.
Of the supply chain as in terms of financial strength, yet does not leave off and probably the prime position, yes, absolutely.
That's a combination things claims so not just give you business because you got strong balance sheet, I think it'll give us business because the strength of operational capability movement now, but it's nice to have at this point in time that's for sure.
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Great and I guess, just one quick one on tax rate, if if margins like move around a lot like are there certain fixed component to the tax rate that can make the tax rate change a lot or or mid twentys is pretty good.
Now you'll get your good tax rate wasn't that much David.
No I don't see I don't see that's impacting tax rates much.
Alright sounds good well, thanks glad everybody's well.
Thanks, David.
This concludes our question and answer session I would like to turn the conference back over to sites for any closing remarks.
Hi, Thank you everyone is always.
We wouldn't board joint.
Dave.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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