Q1 2020 Earnings Call
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[noise] for standing by and welcome to teach tax first quarter 2020, or any earnings conference call I would like to remind all parties that you will be in listen only mode until the question and answer session.
Call is being recorded at the request of Keetac I would now like to turn the call over time.
Hello.
Hi Tech Senior Vice President Treasurer, and Investor Relations Officer. Thank you Sir you may begin.
Good morning, and thank you for joining us today to check is hosting this call to discuss this first quarter financial results for the period ended March 31 2020.
Participating on today's call or Ken Tuchman, our chairman.
I want to remind you that matters discussed on today's call may include forward looking statements related to our operating performance financial goals and business outlook, which are based on management's current beliefs and assumptions.
Please note that these forward looking statements reflect our opinions as at the date of this call and we undertake no obligation to review.
Hi, such information as a result of new developments, which may occur forward looking statements are subject to various risks uncertainties.
And other factors that could cause actual results to differ materially from those expected and described today.
For a more detailed description.
Broad context on the impact of coded 19 on our business.
As well as outlined our collective response to.
Support our people and the resiliency, we're providing for our clients and their valued customers.
It is without question that we're living through an extraordinary crisis.
One that has enormous impact on every aspect of our lives.
The immediate effect of Cobot 19, global pandemic, the loss of life and the restraint on workforce mobility.
I'll have a pervasive lasting impact on how we use individuals and <unk>.
This is engage with one another.
The speed and magnitude of which we are reshaping our focus and ways.
Working to serve a growing list of point needs. As this pandemic has evolved is astounding.
Our top priority as we navigate this pandemic is the health and safety or.
People are clients and our shareholders.
Starting in mid March government officials around the world implemented threat.
I stick measures.
In a matter of weeks all team took operating centers were impacted by various restrictions.
Our <unk>.
Any years of experience and providing advanced at home capabilities globally have served us extremely well in our response efforts.
First few weeks of April we were serving an increasing volume of interactions supporting new and existing finance.
And services Hello.
Care and government clients. These organizations are providing essential services to citizens and businesses that are helping.
Change the trajectory of this pandemic stabilizing the economy and getting the war back to work.
We acted swiftly in establishing plans to preserve our financial help across a wide spectrum of scenarios.
These plans include measured adjustments to our cost structure and capital expense.
And it sure.
87 million for the quarter, our operating cash flow was so strong 62 million at our revenue backlog is.
Oh.
Of course for the time being cold in 19 has necessitated an abrupt shift in mindset navigating the customer experience impacted this global pandemic as required three core capabilities.
Enabling and managing a highly distributed workforce dynamically digitizing interactions to accommodate a dramatic.
Like in volumes and expertise in crisis management.
Our see its expertise and market, leading digital solutions has enabled us to reliably implement at home and other virtual technologies necessary to maintain our claims business continuity.
Well workforces or confined at home.
The speed and scale, which we have now implemented. These solutions is reflective of our long history of successfully supporting governments and enterprises remained previous unfortunate catastrophic events.
[noise] managing in times of prices.
Requires unique protocols that are cord.
She takes DNA.
Over the past 37 years, we regularly supported first responder organizations government entities and other blue chip commercial enterprises with.
Large scale disaster response and relief efforts [noise].
Given the nature of the work, we do for clients and the expansive delivery footprint we manage.
We have a dedicated cross functional team of highly agile disease disaster response experts in a constant state of readiness implementing our predefine protocols.
I'm proud of what it.
Our teams have accomplished in the wake up this crisis in an incredibly compressed timeframe.
Our clients credit or experience differentiated technology and proactive early engagement.
That's it.
And serve our people.
And enabling us to serve our peak or patients we should all be proud of the work. This project has accomplished.
From a blue chip computing point, we moved to limit to remote work on Tuesday, and there have been zero problems with anything to tech related.
Across the board we went from a couple thousand people in the office to a couple thousand people on the VPN and one day I expect it a lot of problems in failures and there have been few but our T. Tech support has been a shining star through this transition with all my many worries T. Chek is not in one of them.
To sum it up the early weeks of this pandemic, we successfully accomplished the shift to at home and dynamically increased the percentage of digitally served interactions within our existing client base.
Okay.
Our focus in more recent weeks has been on extending our capabilities to the many government commercial and health related organizations tasked with essential services supporting citizen.
Since.
Businesses customers and patients.
Our teams are working tirelessly to stand up and support the surgeon volumes. These entities are experiencing while naveen.
Providers, we've already signed and our executing a significant volume of covert.
Freeing them rapid deployment highly reliable and secure systems availability and professional frontline support.
<unk>.
These capabilities are accomplished be our newly launched T. now offering.
The speed in scale ability if this cloud based humana by at home solution provides organizations with everything that it takes to stand up and operate just in time omni channel contact centres, including the people training technology and processes for example.
For a large financial institution, we leverage to our actual humana by connect cloud platform, plus or virtual at home technology and thousands of T. Tech associates, <unk> provide customer care and fraud services.
For a government client that his processing unemployment benefits T. Tech digital increased associate productivity through implementing our digital messaging.
Solutions, leading to a 33% increase in concurrent interactions handle without this affected digitization.
It was in the crisis.
Post crisis back to work and business as usual customer experience initiatives.
The bottom line is that we're well positioned to win market share.
In and out of the current crisis.
We see significant opportunity ahead, both this week.
Consider our short term cobin 19 search volumes and longer term as we convert pent up demand related to the adoption of cloud Omni town channel intelligent automation and did you did it did it did you.
<unk> technologies.
<unk> 19 response offerings and and rapid shift.
To at home I've added important new client relationships.
Further advancing our growth opportunity.
We fully acknowledge that we are not immune to the near term disruptions in lingering uncertainties of covert 19.
<unk>.
Withdrawal of 2020 financial guidance in late March is not related toward near term or longer term prospects, but.
But rather gets effectively gauging the understanding timing and piece of getting back to normal [noise].
Operating environment.
Nearly every aspect of the market is under stress as we continue to be faced with widespread government.
Subsequent waves or how and when they know what pays the reopening of the economy will occur.
We've responded to these uncertainties utilizing the various lovers of our financial model affords us most noteworthy we've taken advantage of our variable cost base by cutting discretionary spending across the board.
And we've achieved additional liquidity.
Through a partial drawdown on our revolving credit facility to increase cash reserves.
I remain highly optimistic.
Think about the path ahead.
If cobin 19 is proving anything.
It is the degree of which our society already operates virtually.
As such the compelling global market forces related to enterprise demand for digital transformation cloud migration and intelligent automation are now more imperative than ever and should accelerate posts crisis, our reputation innovation and leadership.
In C.X. technology and services.
Provides the necessary ingredients to accelerate our growth and margin potential as the world recovers from this historic global pandemic and finds its new normal.
Our strategic initiatives have not changed we're relentless in our pursuit to bring the market differentiated C.X. is a service offerings increase our market share execute strategic into creative acquisitions expand or channel partnerships and leverage profit.
Well growth, which translate into increased shareholder value.
The strong fundamentals of our business well capital.
Oh, nice balance sheet and overall financial profile remain intact normalizing for cope at 19.
Are likely to be shorter term in nature. They offer a frightening financial bridge back to a more normalized environment that will.
Remain far more virtual.
As I have demonstrated is highly.
Conduct can conducive to our core set of digital solutions until then we'll control what is it.
In front of us and continue to boast a strong balance sheet and liquidity profile.
In closing.
I'm, both proud and humbled at the dedication endurance and ingenuity I've witnessed in working with our T. Tech teams as we journey through this extraordinary global pandemic.
I'm reminded of the ironic nature of crisis in its power to impart.
The team members across the globe for your hard work unwavering positivity and relentless passion for client services. During these extremely stressful times, we thank all of our shareholders for your continued support we look forward to updating you on our progress.
In the months ahead, and Regina will now covered the key financial highlights to the corridor.
[laughter] Regina you're on mute.
Thank you can think aborning everyone.
Mm.
Oh stop by expressing my empathy for all those who are impacted by describe [laughter] deep gratitude to the incredible people were complaining p. tech are crying in the community in which we operate.
I had my comment on our first quarter financial inhouse and outlook.
Provide a view of the impact of Coby 19, any action you know taking 2% of the financial strain can how I'm our company.
Inherent value in more diverse portfolio.
Marquee clients.
<unk>.
[laughter] drink of our balance sheet cash flow.
Even greater importance during on certain kind.
Well the near term.
<unk>.
Changed dramatically, we continue to use the long term fundamentals of our business.
And the value proposition, we provide an exceptionally durable.
How about 19 present meaningful short term and longer term clean opportunity.
Aggressively pursuing.
<unk>.
Spring and challenging times.
In the next few quarter you see <unk>.
Termination of paneling and handling.
Our towns include a strong first quarter and a bonding covert 19 hemorrhage work and early adjustments to include long construction working capital and liquidity.
The third Mark is within our government.
Health care financial services, E., commerce, and food delivery vertical.
Short.
Turning nature.
Helped bridge our financial performance.
We are closing significant volume on this work.
But are are only in ramping and executing making it difficult to judge it's exact scale and duration.
Regarding our clocks structure working capital Iniquity, we are taking several meaningful action.
To preserve.
Financial House [laughter], we identified immediate area to lower costs.
Including reducing or eliminating discretionary compensation professional services temporary workers travel real estate facilities and non essential investment initiative.
Second we are prepared to methodically consolidate streamline in rationalizing operations in function [laughter] circumstances, Orange [laughter] weren't such action.
The third Adam an abundance of caution we proactively strengthen our liquidity in financial flexibility my drawing down an additional portion of the company's revolving credit facility for the purposes.
Building cash reserves in addition to intensely managing working capital.
In terms of headwind, we estimate that are backlog will be adversely impacted by declines in an automotive traveling hospitality and retail vertical and these organizations are significantly affected by clothing 19.
We also assume that some of the new business.
I am we originally anticipated could be signed in 2020 is that right.
Automotive comprises approximately 12% them are anticipated 2020 revenue.
Traveling hospitality and retail each comprise about 63%.
Even the strong booking.
<unk> auto in the second half of 19.
Putting a material when in the fourth quarter, replacing an incumbent provider. We currently estimate are auto vertical will grow your own here.
Traveling hospitality.
Inherent volumes and financial uncertainty.
As a result pipeline conversion on business as usual initiative is unpredictable.
Lastly in terms of headwind as we adjust to working in an at home mode. There was an impact on the productivity of our teams incremental costs.
Looking at our first quarter 2020 result, we continue to Overperform on revenue operating income adjusted either got any P.S.
Despite the Kobe 19 headwinds in the second half March.
We did experience with declining bookings.
Because 87 million of new business in the first quarter versus.
132 million in the same period last year.
Excluding the one time governing contract bookings, where 84 million in the first question.
<unk> of 2020 versus 114 million in the first quarter 149 in the first quarter of 19.
We had approximately 28 million of bookings verbally committed.
But for which signing was delayed due to cope with 19 some of which.
[noise] has already closed in the second quarter.
Engage bookings were primarily within our healthcare financial services and technology verticals, we continue to sign meaningful new business in our high margin high growth offerings are digital bookings were across consulting clown in systems integration.
Putting both existing and new logos.
Pipelines for messaging and automation offerings is progressing and began converting with approximately 2 million in the first quarter.
Expect the impact of Cobiz 19 to provide heightened interest in our at home automation messaging fraud and growth offering.
On a cat basis, we recorded in 9.6% year over year, increasing revenue to 432.2 million of which 2.9% wasn't organic while we swiftly moved 80% of our employees to work from home.
We estimate this transition affected the engaged March revenue by approximately 11 million, where 2.8 percentage point of revenue growth. Excluding the code 19 impacting gauge organic growth would've been 12.4%.
Operating income with 40.7 million or 9.4% of revenue compared to 8.1% and the prior year.
Restructuring charges.
1.2 million this corner.
Next impacted revenue by a negative 1.4 million primarily engaged the effects impact on operating income was next to them.
Earnings per share with 46 cents in the first quarter up from 41 sense and the prior year.
The remainder of my comments on a non gap basis, which exclude restructuring impairment expenses. A full reconciliation are gap to non gap numbers is included in the table attached to our press release.
On a consolidated basis adjusted he did a increased 15.8%.
[laughter] 50 110.
The prior here.
With our digital engage segments country.
Fitted to top and bottom line improvement.
As mentioned, we took precautionary measures to increase our cash reserves by advancing additional funds under our revolving credit facility at the end of the first quarter 2020, total cash with 520.4 million with 700 million Bard under our 900 million facility. The company is in.
Full compliance under its credit facility, which expires in February of 2024.
Our total net that position at March 31st 2020 was 195.2 million compared to 173.6 million in the price of quarter and two <unk>.
Right.
Oh from operations with 62.2 million versus 80 million in the prior year decreases attributable to 14.4 million increase in net cash and income from operation.
Offset by a 32.2 million negative change in working capital the changing working capital is primarily due to the timing of payroll and the pay out.
Hello.
[noise] incentive compensation.
D.S.L. with 66 days in the first quarter 2020, compared to 76 days in the prior your quarter and unchanged sequentially.
16.8 million or 3.9% a rabbit in in the first quarter compared to 13 point.
2 million internal revenue and the prior year.
<unk> increases attributable to the continue belt.
Platform and our site diversification, primarily in Europe in India.
<unk> with our actions to stay in a <unk>.
<unk>.
Our plan capital expenditure for 2020.
Proximal from approximately 65 million 240 million.
Recorded tax rate in the first quarter of 2020 with 29.2% compared to 26.7%.
Sent in the Brian near the increases primarily due to a higher mix of U.S. income our normalize tax rate was 23.2% compared to 24.7% and the prior year, we anticipate the 2024 year tax rate to be between 22 and 25%.
Capacity utilization was 73% in the first quarter or 2020 compared to 75.
Hi per cent in the.
And increase of 17.8% over the prior year, 15.5% was organic growth.
Adjusted EBITDA increase 35.7% to 15.3 million or 19.7 per cent of revenue versus 7.1 for 17.1% and the prior year and operating income increased 37.7% to 11.2 million or 14.4% of revenue and.
Increase from 12.3% and the prior year.
Oh, I see X. cloud subscription based revenue was 43 million in the first quarter, increasing 80% versus the same period last year <unk>.
Excluding the shorter term government contract cloud revenue group, 46%.
Comes integration revenue was slightly under 12 million approximately 4% over the prior year and included 2.5 million of <unk> contribution from our new messaging and automation offering the lower growth in systems integration is a function of delays attributable to <unk> 19, the delays are twofold.
Prioritization and transitioning our clients employees to work at home in March was impacting the bins out of a new technology and.
Slow down in the converging version of large enterprise level deals consistent with industry trends.
To some extent this delayed volume is being replaced by covert 19 related programs, which are shorter term and less complex requiring minimum systems integration.
For full year 2020, excluding the shorter term government contract and businesses that are we are exiting we continue to estimate year over year growth in digital.
We estimate our cloud and systems integration revenue, excluding the shorter term government contract to grow in line with our previously stated mid term target plus 20% and 15% respectively.
In our engage segment rather than it was 354.7 million in the first quarter 2020, and increase of 8% over the prior year, excluding effects the acquisition of F.C.R.N.A.S.C. six so six revenue little 1% as previously mentioned engage revenue was temporarily impacted in the second half of them.
Arch by approximately 11 million or 3.4 percentage points of growth.
Our sites were subject to lock down six.
Excluding the same pack the engage organic growth would've been over 4%.
Highlights in the quarter include the continued growth in our high growth high margin offerings, which collectively grew over 35%, including but not limited to the acquisition of S.D.R.
Adjusted eat it die increase, 10.6% 48.3 million or 13.6% of revenue.
13.3% in the prior year.
<unk> operating income increased 16.4% to 3.8 million or 8.7% of revenue increase from eight.
0.1% in the prior year.
Bottom line improvement reflects increased top line scale improve vertical in offering mix and lower operating S.G.N.A. and depreciation expense to remedy ratios.
[noise] indicated earlier for engaged 2025 year, we anticipate declines in our travel and hospitality and retail articles and lower than expected net new revenue from 2020 business as usual bookings offset by the Annualization of the F.C.R. acquisition and shorter term syringe work in our government health care.
[noise] financial services, E., commerce, and food delivery portfolios.
These are challenging times income anyways.
Stay safe been getting the world back to a healthier place initiating an x.
How very essential effective communication is in balancing the challenge of not being able to provide highly reliable guidance, while continuing to effectively communicate we offer the following comments regarding our 2020 financial.
Performing.
Our performance in the first quarter in second quarter to date reflect continues strengthen the fundamentals of our business and financial.
Profile, namely our total addressable market is significant in and out of crisis.
Differentiated solutions and operational expertise enable us to win market share, our strong cash flow and balance sheet or a source of significant growth capital when the economy is expanding and a source of security when it can track we have a strong working capital positioning.
Putting $500 million of cash.
March 31st our total 2020 backlog with a billion 62.
[noise], despite a 24 million negative impact from changes in effects rates since the beginning of the year.
Currently we have modest exposure to <unk>.
Well pipeline will negatively impact or fourth quarter.
In summary at this moment and didn't balancing the Tailwinds and headwinds previously described we believe the current consensus model for T. Tech for the remaining quarters and full year.
<unk> provides a relatively balanced view of a likely 2020 financial performance for T. Tech mix.
Back to have a much better view by the time a report our second quarter results on now turn the call back to Paul.
Thanks for Gina as we open the call. We often you limit your questions to one or two at a time operator, you may know opened a lot.
Thank you will will now began to question and answer the question to ask a question keys pressed tar one season, you're finding record, giving fairly ones prompted you needed to introduce your question.
Cancel your request Kimi pressed hard to Wyoming piece for the first question.
Our first question is from the line of towards Oh, Okay.
<unk> <unk>.
Thank you [noise].
As I know, it's been a 24 by seven upward who are pretty much.
Entire team or much of the quarter. So congrats on the results a little limit my question to one, but I'm going to make it somewhat multi part and I'm going to address at the 10 10 as you think through the long term flexibility that is being sort of enabled by all of these.
Changes I wondered if you could.
Me too geography worked at home options as you see them in the future staffing levels and how that might change over time and all you bidding differently on work given some changes.
Good morning, George.
That's a a multi part question for sure. So I guess, what I would say two is is that in the short term all of the deals that we've been winning as well as the <unk>, we will be implementing in the future post covert I'd say for the most part or taking.
Into consideration.
Significant mix at home and then futuristic we when we get back to some new normal a higher percentage of bricks and mortar we're not there yet Ah breaks we we don't actually know when will be there because of different countries have different predictions on when they're going.
To open up and then when they do open up.
It will be more or less probably a 50 per cent opening with a significant social distancing and then for how long that's going to last we don't know so for now what we've done us we've prepared or it's higher business to operate virtually worldwide.
And overtime, we believe that there's gonna be more of a geographic dispersion of our clients requirements. So that they can withstand any form of future set of issues and therefore, as we mentioned in previous call for expanding our global footprint.
Fairly aggressively in the in the near term.
Well in excess of 40000 frontline agents to their home at our processing interactions as though they were operating at a bricks and mortar environment.
I answered your question I know that multiple and maybe good to also hit on Georgia's question on our Rebidding differently.
Oh, we bidding differently I mean, I I don't <unk> I would say what's different about our digits.
Is that there's much for digital included in them and that we are adding a fair bit of tech O.G. to every single, you'll so that weekend offset somebody incredible searches that we're seeing in certain verticals the weather.
The fitting in providing things like conversational messaging capabilities using machine learning a <unk>.
<unk>, adding robotic process automation to our clients back end systems to create more efficiency on the middle one back office, which is why we did the acquisition of surrender bite or whether it's overhauling their entire all me channels set up.
Capabilities, and I would say that a high percentage of our deals we are incorporating up from digital technology component to it as a way to not only deal with high demand search volumes, but also to offer a lower costs to serve and so.
Would say that's that's one of the main differences, obviously temporarily there's all kinds of differences in how we're having to bid on business and labor costs et cetera, It's a very unique dynamic out there, especially temporarily in the United States with the <unk> cares acting on unemployment.
And therefore, we need to ensure that were highly competitive at our pay so that we can attract the best and brightest people to their positions.
Thank you very much.
Thank you George.
Thank you and our next question is fun to line up Mike more off Northland Capital My Kids Yeah.
Okay.
Yeah, Congratulations on my.
<unk> [noise] I, just wanted to focus a little bit on the <unk>.
Clouding consulting part of your business, Yeah, a little bit more about what you're seeing in terms of bookings in pipeline. There are are things certain sort of tracking as expected. Overall you know are you seeing kind of the.
Puts and takes you know castle <unk> each other out some things are attracting as expected hallmark color on sort of pipeline bookings for clog the call them be right.
Yeah, I mean, what I would say is all just repeat a little bit about what Regina said, we had a lot of very significant deals in the pipeline.
And those deals are still very active but I would say that many of them are being pushed due to the fact that these large quiets are focusing on their crisis at hand versus very significant transformation projects that said or.
Many of those clients have come to us and asks us to add home technology ahead of their major transformation projects as well as embedded bayes clients have asked us to help them quickly move to at home and as we mentioned in our script, we've moved on the digital side over 50000.
Agents from their bricks and mortar to at home as it relates to the the future what I would say to you is is that we think that there's going to be a little bit of a lag.
As people kind of again assess their business their priorities and figured. This this out of the larger deals that said there is a fair amount of activity focused on automation focused on what we can do with our with.
<unk> crosses automation and our messaging capabilities.
And so we're putting a lot of energy into that you could imagine that if you're a large corporation and you have large captives of your Oh.
You're looking for ways to automate an add new channels or capabilities, whether that be messaging capabilities chat capabilities self service capabilities et cetera.
So we're really putting a huge part of our focus in those in those areas. Overall, we feel really good about a business and we we feel like will you know <unk> you know long term that the business will produce everything that we have.
Consistently stated as it relates to to growth rates, both tops and bottom line, we're going to continue to expand the capabilities of the digital business. So that we can truly be a one stop shop for all of our clients customer experience customer engagement customer gross.
Needs.
The only thing, but add to that Mike is that you know we do have a very healthy Q2, Q3 pipeline I think collectively it's just under 250 million and it is more and more filled with went back C.C.E.D.L.'s as well as time, a traditional H.C.S. we actually.
Went into production on a small way back C.C. deal. This week and so we're we're confident that the deals are there and that they will be converted.
You know, but also say that the the inroads that we've made further into government notches federal state and local and the downstream opportunity to be in those organizations in a big away and having then see early on the positive impact of not only are Ami channel but.
You know the applications that we bring to the table in terms of messaging and automation that you know those should be organizations that even add more into that pipeline. The the challenge we have given the enterprise level magnitude that we deal with in in a large government is.
Just a tiny in which folks.
Will kind of finalize those decisions and can you know be focused on those very significant initiative.
Right right. Thanks for much good luck.
Thank you.
Question is from the line of Maggie Williams <unk> <unk>.
The morning, so you're at 80% work from home I'm, sorry about that dynamic okay.
The much corridor no was that downside, they're primarily driven by constraints on the supply side at you moves towards that 80% work from home and an inability to meet demand or what's the downside primarily due to volume bike.
And then how do you expect that kind of supply and demand dynamic play out in the coming quarters, given that you're at 80%.
Now and and any application of higher than that.
[noise] Hi, it's Ken how are Ya.
So so first of all.
So we feel pretty good about second quarter, and we think that the bookings that we've already done today in this quarter.
We'll we'll make up or last quarter's booking shortfall, so ah, okay to date or quite strong.
And and the unique aspect of the bookings to date is that we are executing on them at a much faster taste due to the nature of the bookings themselves.
I think the unknown in that we're we're trying to be very transparent about is.
You know what happens post this search and and again whatever the new normal is going to be and when is that going to be so right now there's a significant amount of surge opportunity business out there frankly, we're we're drinking from afar.
<unk>.
And so I I don't know if I'm answering your question, but I wouldn't be overly concerned about the first quarter bookings numbers and I think that you know, we'll be justifying little kids and second.
Think the other thing can Maggie is said please don't read that 80% at home means where you know 80 per cent productive or yeah. Oh, we still have sites that are open we have work, where our clients for security and other reasons.
Did not feel comfortable having at home we have appropriately distance people in those sites.
You know we deep Queen. So you know safety is most important but there are many many other associates, who are still working but in sight.
Yeah, Let me just at one other thing so that you don't Miss enter.
Interpret the 80% so when we look across the Globe North America is 95% to 98%.
Operating right now at home that number might even be slightly higher just because every day that goes by we find new ways to get people, who do I didn't have the ability to come on line come online.
The area that's been impacted the most from the ability to get to 98%.
Is the Philippines, and there's obvious reasons for as to why that is part of it has to do with the infrastructure that is afforded in neighborhoods part of it is just the nature of.
Housing, there et cetera, but what I want to remind you of is that our business in North America searching.
So for every dollar that we book in North America. That's that's implemented in the United States are in Canada, it's comfortably more than two for one of dollars that we didn't receive in the Philippines. So please do not take from this.
Call that our revenues are gonna be off by 20% because that is not the case all our revenues are intact and we like I said I want to reiterate we feel good about second quarter.
Oh, Yeah question magazine or is or.
Yeah, but that was helpful. Thank you.
And then if we think about the full year.
Can you provide a little granularity about how to think about engage.
Did you know in the context about higher level guidance that you put out there on.
On on the lobbyists side, but also on the margins side and understanding some of it.
And.
There's nothing to to protect the margins.
Thank you.
Yeah. So you know given.
Surged as I sat right given the strong backlog, we have and we we have not seen our backlog deteriorate and as I said it deteriorated about 24 million just by virtue of what these foreign currencies have gone against the U.S.D.. So I think it's important to understand that since we began to show.
Here, when we gave our guidance.
Right <unk> the the currencies have moved to the point, where it's about a 24 million dollar negative impact, but aside from that right. When you consider the search work that we have the strong backlog that we have.
And the acquisition so that we Don you know very monitor relative to surrounded by more more impacts on F.C. are you know as I said in.
Comments I think if you look at the consensus model. It is you know directional they I think a fair play relative to where we are likely to be with I would say probably more opportunity on on the bottom line.
In the sense that we have early taken actions.
That you know we will not on due until which time, we're highly confident that we're back on track.
But that early move will help to protect you know, our our either die and our operating income.
So you know having to go online and talk a little more about it but you know if you have specific questions. You know I also attempted to make some comments on what I would say on strategic components of our digital business, which is we remain even in 2020, believing as we said that are cloud based business.
<unk> above 20 between 20 and 25% than our.
Systems integration, despite being at 4% in the first quarter, we'll end up for the year you know in that plus 15% that we've got it kind of mid term.
Thanks again.
Thanks.
Question is trying to align assign brigade of Colleen airline how okay.
Hi, good morning, Thank you.
I wanted to ask on cost flexibility first can you give us a sense of the potential cost reduction you can take out of the operations. Currently and then maybe longer term is a changing your strategy around cost structure and the operating for printing engaged to.
I would say, it's you know the plan that we put forward was the ability to take out 100 million.
Have cost right should we should we need to you know at an extreme situation and so we have that plan and will act on it as and when we need to certainly from discretionary spanned it you know near near $50 million of expense that is tied to.
Financial performance, which naturally will adjust and you know being in the business, we are especially on the heritage business engage for 37 years.
You know, we're very astute at adjusting our cost in line with our top top line volume.
No I would say that you know relative to your your your question on the.
The the longer term impact of these.
These actions I think it's less about longer term, but please remember in our three near plan in our kind of mid term guidance as we talked about getting our margins.
In a in a kind of mid to high <unk> margin percentage and and a line that's above 10% and when you look at both the E. <unk> improvement in Q1 in both engage end digital you know you're seeing behind that and number of initiatives.
The company has over time to get to that targeted cost structure. So lots of things going on at T. Tech beyond covert 19 to assure that we start to realize that you know hi, teen either Dom origin higher keep it down origin and double digit Oh why margin.
Yeah, and then I guess, so all I would say to to further to Regina you asked a question about is there anything in the model that's going to change going forward that will impact cost and what I would say to you is is that we have.
Looked at <unk> significantly different more distributed model that blends a whole with bricks and mortar in a more fluid at a more seamless way and what I mean by that is instead of it just being either all bricks and mortar.
Or all at home you are going to see a pretty unique model that will be introducing very shortly that actually is a hybrid of both so that when we come back to the new this new normal we will be able to provide dramatically more flexibility to our clients drum out.
Ugly more agility.
And even better cost structures. So we are although we're dealing with the the now suffice to say, we're not letting grass to grow under our feet. We are looking at every aspect of our business or Hydra bought operations are off to a great start and we're putting a lot of energy.
In that area into innovation to help continue to stream on our organization and automate more and more and I'm very confident that we will be able to have a very cost effective cost structure and I don't think that that Regina nor I have any <unk>.
Sermons about our ability to take the cost out that we're focused on a a big chunk of which is already you know well on its way though.
Okay. That's helpful. And then on on somebody short term clan agreements understanding of volumes are down in some verticals curious if you're also seeing notable pricing concession at night and more favorable payment terms as well and if so what type of duration or or some of these short term agreements.
But the answer is no.
We are we have always been the high quality provider, we do not play a a price game, we offer a fair price work for the highest value delivered and we do not see price concessions actually I would say, we see the opposite right now because companies right now or.
Looking for companies that can deliver.
And they were so let down and hurt.
When this crisis hit by very significant interruptions in service and we had virtually no interruptions. We continued all the way through the crisis transition from bricks and mortar to at home in a way, where we are and we're not leaving any of our clients high and dry.
And with that consequently created a spike in search volume where clients were actually adding to our volumes because they felt that we could reliably deliver upon them. So a we are a chance. Your question, we are not compromising on price be or.
Clients or understanding that the labor markets, even though there is a huge amount of unemployment you know record proportions. The fact of the matter is is that the cares act on the on employment program. That's currently in place is affording employees the ability to.
In a very generous short term income through July.
And our clients cognizant of that and want to ensure that we're not competing with that temporary benefit which insects people.
In some ways to not go back to work until July.
So what I would say two is we are we feel very comfortable with the search work that we're doing very comfortable that we'll be able to maintain profitability on the search work and.
So that's not an issue at all.
Relates to the length of these search contracts. It's it's it's a great question and I don't have a precise answer because some of them or six months. Some of 'em are rolling 90 days and there's it's too early.
For them to determine whether they're going to role pass that 90 days and add on whether they're going to reduce or whether they're not going to have a neat and in some cases, we are helping them with their own captives that they've not been able to you know bring back fully up et cetera.
You don't mind, you when you think about it a lot of these major a fortune 100 companies pets very significant captives off shore.
<unk>, Okay. There are certain banks as an example that might have had.
And to 25000 people just in one country.
Those people in most cases are not working and they had to transfer that volume to other other locations and use a partners to be able to help them with that so what I would say to you is the search volume is short term in nature. However, we're very confident that.
Percentage of this good percentage of the search volume that we're winning is from that new logos and that new clients at our goal is to bed that down and turn it into longer term relationships and when it's appropriate well you know, we'll we will be focused and marketing.
To to that.
In that area.
Thanks for the detail.
Thank you.
From the line <unk>.
Your line is that okay.
Hi, This is <unk> ontology. Thanks for taking my question that we just want to clarify I know you guys know personally with 2020 guidance, but I think on the last quarter you introduce that to me your time to put up new growth in the range of 8% margin depend to pop up it sounds like you know 16 do you think that's still going on.
Intact.
19 quite isn't anything anything.
You know I think it's really hard to update our three or guidance at this point.
That's sad you know as we've talked internally if anything it potentially.
It's potentially delayed <unk>.
Can you are on.
Intentionally a delayed you know a a half year or so so again very strong very strong pipeline from both business is very strong opportunity in the Tam.
You know, we're seeing very good adoption and you know if anything we may be delayed but have a two lovers right. One you know these new offerings and you know the adoption of those we also see that the market is likely to have an want to end demand.
Than a celebration of the conversion that was going to be done as we've gone through this pandemic and then last but not least.
The.
Excuse me.
And and last but not least.
The the in organic activity that we can deploy a making up for some of the last time.
Apologies for the background noise [laughter], Yeah, no problem and just one another question. So I'm just thinking about sort of organic that'd be a girl or two q. It sounds like you actually that that March corner.
Oh, you got sound like modestly positive relics and one q. at what sort of revenue run right did you actually get that March quarter like coming into that April time, and in any of the scenario <unk> you guys man like could just turn negative in the next couple of quarters I'm, just looking back sort of thinking in the 2000 each of the nine financial crisis, you guys just yeah pretty significant.
<unk>, so thinking could we see that this time around as well and started the differences in the business.
Now I'll bet, you have digital now but.
Thank you Yeah look I think if you reflect on my comments about you know the the relevancy of the consensus model to you're our internal views and then the <unk>. The the backlog that I described you know we don't necessarily see.
You know <unk> like incremental level of fall off from that run right right.
But it is you know it's not for me to say, whether there's going to be a second wave. It's not for me to saying right. When there is going to be and a when we can be more mobile when we get back to work as normal you know it for example, you know this gets extends it or if we have.
In other ways, you know clearly there'll be a an impact on consumer spend so I'd rather at this point not you know project into next year, but you know given a reliable backlog given the search work given the pipelines that we have.
That while you know, we we believe will be down from our original guidance and they point with a million 765.
You know where the analysts have us at this point to think is Ah you know very very bounce view.
Oh.
Really need connecting away from a different line no just put a store employees.
Oh.
<unk>.
<unk>.
Thanks for answering my mush.
[laughter] or the.
Thank you and our final question is from the line after well Gosh Oh go off duty. Your line is now okay.
Oh good morning. Thank you so in thinking about the opportunity per share games can you just I'm sure. Some insight as to whether you think you could come mostly from volume that other band vendors handle or maybe even a greater percentage of taking clients in house dying, because they don't necessarily have that flexibility or agility to go remote or virtual.
I really think it's all the above Josh.
I really think that there's opportunity and I think the good news is is that.
There, there's a significant amount the business just in general out there due to the fact that every major corporation has come to the conclusion that they have to the only way they can survive the only way they will make it across the river is if they virtualized their business and so what we're seeing as it or.
Detailing clients are doing fantastic all of our clients that are focused on logistics and being able to operate in the virtual environment, they're seeing record volumes of their business and their businesses growing incredibly well. The businesses that are that are challenged are obviously to in person businesses that are tied to.
You know the current Lockdowns and shutdowns et cetera, but every one of them.
Is realizing that without a doubt that this new normal that we're entering into has changed or or habits forever.
Whether it be my wife, who never an or wildest dreams ever thought that she would have someone grocery shop for her now is using grocery shopping services and so you know whoever got everyone. Realizing what the instant economy was along with Amazon and now what we're seeing is is that more and more people are taking advantage.
Of all the different virtual capabilities every time a company at any form of virtual requirements. So that you can do business with them they need some form of customer experience capabilities and so whether it be banking insurance retail.
Healthcare government every one of them are realizing that they have to virtualized and therefore, they get to take advantage of our digital capabilities, along with our engage capabilities and so we actually believe that as we get through this but medium in longer term that this is actually.
You're really positive positive opportunity for us to expand our business. So yes of course, we're gonna take away some share from competitors that if maybe not had the the robustness of their infrastructure and that kind of the just the overall scale that we have et cetera, but we're also.
Seeing the opportunity to win that new logos and we're also seeing the opportunities to for clients that were solely captives that are realizing that frankly, they would've been better raw or they had a mix of their captors internal operations with a partner like T. Tech.
Thank you pretty inside there and and just a one last one on prior comments when you're discussing you know potential for the hybrid model in this new normal and I was curious what maybe the margin profile give any thoughts on what the market profile of each business could look like if we see that structural change with.
Half the workforce working at home or remote and maybe there's less reliance on the brick and mortar print and is there an opportunity maybe two pair that didn't work and work for for down a little bit maybe move you know given how well things are going in North America, maybe <unk> some of that volume back.
Back to the U.S.
Thank you.
So I think you're definitely going to see a trend of of business moving around just in general in some cases from offshore too near shore in some cases from near shore to onshore. So I definitely think you're going to see that I think some clients, maybe got a little spooked and felt like.
They cut out over.
Maybe over compensated with their with their allocation of business to one particular country or another.
As it relates to real estate it goes without saying, we have a lot of real estate add it goes without saying that we fully intend to rationalize as well as restructure our sites. So that they permanently have better social distancing employs all of our sights or.
That we even when we were open as well as the ones that still have openness have been doing you know all the necessary things required would it be social distancing, whether it be real time temperature monitoring whether it be a fucking the sites every single night.
<unk> Antibacterials et cetera, but I think we're going to also look at overall reduction in real estate as we have a higher blender shift to home.
And.
You know obviously again, there's just so much on known as it relates to what percentage clients ultimately going to feel comfortable with at home and so for now it's premature for us to be adjusting significant amounts of our real estate, but we certainly are evaluating.
All about across the globe.
And there are certain countries, where frankly at home is just not that conducive.
Especially level sure Yep.
I got it thank you and.
No one wants answers.
In the same to you we appreciate.
Thank you for your questions that that is all the time, we have to me I will now trying to <unk> yeah.
Yeah. We're we're concluded you can close the line. Thank you.
Thank you everybody.
Thank you I'm desk includes T. talks first card or 2020 earnings conference call.
Okay.
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