Q3 2020 Earnings Call
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It sounds like to find the conference over to your Speaker today Florence, Matt. Thank you. Please go ahead.
Thank you good afternoon, everyone and welcome to end of the third quarter fiscal near Twentytwenty Earnings Conference call. As a reminder, this call is being recorded joining me today aren't trying to control and <unk>, Chief Executive Officer, and Mount <unk>, and <unk> Chief Financial Officer.
Before we begin a quick reminder, at your listeners are remarks today include forward looking statements, including our guidance for Q4 fiscal year Twentytwenty and to schools Kisco near Twentytwenty, Yeah impact of the Cobiz 19 endemic and associated global economic uncertainty the opportunities.
Our new generation technology services.
As ability to participate into recovery income to Cook at 19, pandemic and timing Dara and its ability to retain its employees and their income doing to close it 19 pandemic client demand friend services and other forward looking statements. These statements are subject to risks and uncertainties that could cause.
Actual results to differ materially from those contained in the forward looking statements.
Actual results and timing of certain events may differ materially from the results or timing predicted or implied by such forward looking statements and recorded results should not be considered I was in education, a future performance.
Please note that these forward looking statements made during this call speak only as of todays date and the company undertakes no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law.
Please refer to the risk factor section of our annual report on form 20-F as filed with the Securities and Exchange Commission on September 25th 29 team and supplemented by doing this factor update trial as exhibit 99.24 current report on form 6K filed.
With the FCC on March 31st Twentytwenty as well as they're there as you see filing.
Also during the call will present, both I encourage and non I FRS financial measures reconciliation of non I as far as two I am sorry measures is included in todays earnings press release, which you can find on our Investor Relations website.
Thanks to the replay of this call will also be at that level, there with that I'll turn the call over to John.
Thank you Lawrence.
Like to thank you all for joining US today I hope you enjoy family the old safe and well in these challenging times.
Okay, No I'm pleased to be here to provide an update on our business and financial performance.
Three months ended March 31st Twentytwenty.
To give a bit of color on how we're responding to the time at 19 pandemic.
Well, we see significant short term uncertainty, we'd like to give you some perspective on walks into all that is experiencing.
<unk> actions in response.
But firstly looking at Q3 fiscal year 2020, and dollar had another record quarter with revenue of 92.2 million pounds, a growth of 26.2% year on yeah.
From 73.1 million pounds in the same period in the prior yeah.
Our revenue growth in constant currency was 25.7% yeah yeah.
If we pro forma adjust for the revenue from the will pay captive divested last August.
Revenue growth on a constant currency basis was 30% year on yeah.
Our strong revenue growth was driven by the expansion of our existing customers and the acquisition of new ones during the quarter.
We continue to broaden our client nice and ended the quarter with 395 active clients up from 280 at the end of the same period in the prior year.
Hey, 41.1% yeah on your increase.
Next we want to turn to the ongoing Kibet 19 pandemic and its impact on it though.
Oh priorities have been as follows firstly, the health and wellbeing of all people.
Secondly, continuity of services to our clients.
Finally, the protection of the jobs and incomes of all people, particularly with an eye to what we expect will be an upturn in demand as we all that much for this crisis.
[noise] off the coast 19 was declared a pandemic we rapidly moved to a work from her model with almost 100% of all people able to work from home.
And took assets to provide office environments to minimize the risk of exposure for the small number you needed to attend that office.
These assets Cat Oh people healthy.
Oh business continuity plans were executed on this transition occurred over three intensive days.
With minimal disruption to productivity.
Evidenced by our excellent Q3 results.
Oh Im Internet connections you know a main delivery locations a state of the art and we've not seen connectivity present obstacles for our employees working from home.
[noise] clients have commented very positively on how quickly and painlessly, we transitioned to work from home operations.
And all of US distributed John at scale model fully supports such a distributed workforce, enabling continued high productivity and quality of services.
In fact, all measures show you the over the eight weeks since our transition to working from home, we have seen I, 5% to 7% increase and productivity.
In this way we have achieved our second priority of continued quality services to clients.
I'd like to express my appreciation to all indications has made this happen and continue to provide an excellent service to our customers.
[noise] as the coated 19 pandemic began to impact the global economy, many clients needed to reevaluate priorities.
And I'm pleased to say the vast majority of our client teams have continued as originally planned showcasing the criticality of the work and all the performance for our customers.
We hope twice weekly calls without team to discuss challenges and opportunities within our client base.
Well I have said articulated a need to preserve today and grow tomorrow.
Resulting in different priorities, depending on the sector and the anticipated speed of recovery.
Some clients, particularly those in hard hit sectors, such as travel and hospitality, a very focused on preserve today.
And have stopped projects will reduce team sizes.
We've seen some projects delayed from starting due to clients being overwhelmed and unable to commission you will work right now.
And we anticipate these projects coming back quickly as clients recover.
And some projects have been delayed for a longer period as part of cost saving measures.
These demand reductions of being balanced by other projects, where prioritization has resulted in significant team increases to accelerate delivery and greater tomorrow.
And others were specific cobot 19 related opportunities have arisen.
In these kind of at 19 driven opportunities on mutual agile delivery model has been instrumental in helping our clients to pivot quickly and rapidly deploying new capabilities.
Let me give a couple of examples.
In early April we were contacted to help our government that was implementing a pandemic response system on a double U.S. possible.
Against incredibly tight time lines and coordinating work across four countries and DAVA stood up the cloud based infrastructure and services for a mobile application to track and manage the pandemic as well as the data platform to support advanced data science activities.
The next step for this project is to evolve and improve the platform to support more functionality within the mobile experience as well as to enrich the data platform with additional sources.
[noise] on one of the global investment banks, we work with has temporarily introduced a soft hiring freeze which impacted that change the banks plans.
Were helping management fulfilled that commitments despite that reluctance to increase headcount by using machine learning data science and predictive analytics to improve efficiencies achieved delivery goals in the face as the current uncertainty.
As we begin to look to the business environment beyond kind of at 19 restrictions we'd be interested to see what is happening in Germany, one of our larger markets.
Our strict state high them and similar orders being east ahead of those in other countries.
We're seeing a definite shifts to grow tomorrow.
With pipeline and revenues picking up and a clear investment in digital.
Our revenue forecast for Q4 indicates a probable 5% to 10% increase in Germany on Q3 revenues. This uplift begins to come through.
For example, the biggest amusement park in the German speaking region, you're right. The park has been strongly affected by the kind of at 19 restrictions.
In order to help them prepare reopening under extended hygiene measures, we are implementing gamified digital apps to incentivize social distance, saying and enable virtual chewing.
Social distancing out will notify uses in the park when they are too close to other visitors.
And the virtual queuing will be integrated into the existing you wrote mobile app to notify visitors when it's that tend to go on rides.
This has enabled you right talk to satisfy regulators and actively plan for me opening first of Jane.
[noise] following the cancellation of the Geneva International Motor show another one of our clients Volkswagen asked us to create a fully interactive Volkswagen virtual might show.
It allowed streaming in real time from the cloud any device for mobile to desktop.
Order to provide an immersive showroom experience over 30 cause enabling interactive, but just to features such as paint colors and renters.
Entirely already item produced in a very tight time frame of three weeks. This cloud streamed real time showcase was a world premiere Volkswagen.
The project received bullet acknowledgment and VW has made this virtual might show an integral part of that digital strategy going forward.
Who conversations with clients, we anticipate that as the world attempts to emerge from the impacts of the first few months with its pandemic client focus will be even more concentrated on next generation technology services.
The services will be digital connecting clients that customers a news is to drive growth.
And fixing throughput bottlenecks and breakages in digital processes and operations.
Hi, John speed, notably much more flexible organizational and faster delivery models, the benefit of which has been massively demonstrated through this crisis.
Data analytics, enabling smart business decisions at speed.
And automation driving efficiency across the organization.
These are the areas way and all the focuses and we anticipate benefiting strongly from the predicted recovery as a result.
We believe that we will therefore be able to deliver on our third priority of retaining our people and they incomes through this crisis period.
Our client growth continues to translate into strong employee growth.
We ended the quarter with 6468 employees.
A 16.1% increase from 5573 in the same period last year.
And all the and its employees has also been working to resolve some of the challenges created by this pandemic in particular, we've been participating in numerous hackathons organized by supranational a national government agencies and other institutions globally.
In order to bring technology solutions to support global recession development efforts and to assist vulnerable people at risk.
On the marketing front, we have recently launched a campaign to refresh our branding go to market positioning with the goal to align our messaging across the business and the market.
Weaving the value that we provide to our clients.
Areas of expertise and on Nexgen technology capabilities into something that is engaging memorable and exciting on new brand positioning centers on the contribution we made over the last 20 years and re imagining the relationship between people and technology.
Well the parent crisis is somewhat impacted or very near term outlook, our fundamentals remain extremely solid with a strong balance sheet.
Well I want them on trust services remains strong despite the current crisis as digital transformation has become digital necessity. So many.
Mark and I and the entire team are extremely pleased with our excellent performance for Q3 and despite the challenging environment. We continue to have confidence in the opportunities ahead of us and in our ability to deliver value for all stakeholders clients, our investors and of course are people, who all what my.
Thanks, and all of a say special.
I'll now pass the call onto Mark who will walk you through our financial results for the quarter provide guidance for the coming quarter and update our guidance for the fiscal year.
Thanks, John.
Well this revenue totaled 92.2 million pounds for three months ended March 31st 20 to 20 compared to 73.1 million pounds in the same period last year.
26.2% increase over the same period in the prior year.
In constant currency revenue growth rate was 25.7%.
As John mentioned, if we pro forma adjusted for the revenue from the well paid captive last year, well revenue growth on a constant currency basis.
30% year on year.
[noise] profit before tax for Q3 fiscal year Twentytwenty was 18.3 million pounds keypads profit before tax or 7.6 million pounds in the same period in the prior year.
The Java limited Guernsey benefit trust or ABT beneficiaries of which are in dollars employees funded the second and final tranche. The previously announced nonrecurring discretionary employee bonus Omega save 20 to 20.
The Q3 fiscal year Twentytwenty results include accretive 2.9 million pounds arising from adjustment to the previously recognized this liability to reflect the prevailing share price and the exchange rate at March 31st Twentytwenty.
And DAVA expense a true charge in Q4 fiscal year 2020 of approximately 3 million pounds relating to the funding of the second and final tranche subject to exchange rate volatility upon payment.
Our adjusted profit before tax for the three months ended March 31st 2020, 16.0 million pounds compared to 13.2 million pounds for the same period last year.
Only 1.1% year over year increase.
Our adjusted profit before tax margin was 17.4 cents for three months ended March 31st Twentytwenty compared to 18.1 cents for the same period last year.
Year over year decrease in our adjusted profit before tax margin is mainly due to a bad debt charge during the quarter approximately 3% of revenue arising from our review of the client base in line to the current economic uncertainty created by kind of at 19.
This charge has an equivalent fix that negative impact on our adjusted profit before tax margin.
Adjusted profit before tax or adjusted PBT is defined as the company's profit before tax adjusted to exclude the impact to share based compensation expense discussion ABT bonds amortization of acquired intangible assets realized and unrealized foreign currency exchange gains or losses initial.
Public offering expenses incurred sarbanes Oxley compliance, but in this expenses incurred net gain on disposal of subsidiary secondary offering expenses incurred stem to T. On transfer she has a fair value movement of contingent consideration.
Share based compensation expense amortization of acquired intangible assets and fair value movements of contingent consideration a noncash expenses.
Adjusted PBT margin is the adjusted PBT as a percentage of total revenue.
Our adjusted diluted EPS with 23 plans for the three months ended March 31st 20 to 20 calculated on 56.3 million diluted shares as compared to 19 pads. The same period last year calculated on 54.9 million dollar to Chaz.
21.1% year over year.
Revenue from our 10 largest cods accounted for 36% revenue for the three months ended March 31st Twentytwenty compared to 40% the same period last year.
Additionally, the average spend per tried from our 10 largest clients increased from 2.9 million pounds to 3.3 million pounds for three months ended March 31st 20 to 20.
In the three months ended March 31st 20 to 20, North America accounted for 27% roughly unchanged compared to the same period last year.
Europe accounted for 25% of revenue compared to 27% in the same period last year.
The UK accounted for 45% revenue compared to 46% in the same period last year, while the rest of the world accounted for 3% of revenue.
Revenue for North America grew 25.7% for three months ended March 31st 2020.
The same quarter 29 team comparing the same periods revenue from Europe grew 15.3% and UK grew 24.2%.
Excluding the impact well pay captive from the prior year period capacity of growth would have been 9.8% higher well 34%.
We grew in all three of our industry verticals during the quarter.
Revenue from payments and financial services grew 27.1% to three months ended March 31st Twentytwenty, excluding the impact of the well pay captive from the prior period capacity growth would have been 8.4% higher well 35.5%.
Revenue from payments and financial services accounted for 54% revenue compared to 53% in the same period last year.
Revenue from TMT grew 15.7% for three months ended March 31st 2020.
The same quarter of 29 team accounted for 25% revenue compared to 28% in the same period last year.
Revenue from other grew 39.1%.
The months ended March 31st 2020 of the same quarter 29 team now accounts for 21% of revenue compared to 19% in the previous fiscal year.
This growth was mainly driven by clients in the logistics and service sectors.
I'd like to highlight that our exposure to the sectors. Most impacted by the can crisis, such as retail travel and hospitality is minimal and accounted for about 3% of revenue in the quarter ended March 31st Twentytwenty.
As I mentioned earlier during the quarter, we took a bad debt charge when reviewing our receivables.
This provision amounts to about 3% revenue.
Hey driver for the sequential courseware the courts the increase in SG in a sense your revenue.
We're controlling near term discretionary expenses, while continuing to invest in the business for the medium term long term code.
As Joe mentioned, we have a strong balance sheet I'd like to spend a bit of time on our current cost position.
Our adjusted free cash flow was 9.6 million pounds for three months ended March 31st 2020, compared to 11.4 million pounds. During the same period last year.
We had a net cash position of 87.1 million pounds. The end of March 31st 2020, and we had in place an unsecured revolving credit facility, a 200 million pounds.
This revolving credit facility also provides for uncommitted accordion options for up to an aggregate of 75 million pounds additional borrowing.
As of today, we have not drawn on this credit facility.
The underlying cash position on a cash generation of the business remains strong.
Our adjusted free cash flow is on net cash provided by operating activities, let's grants received less net purchases noncurrent tangible and intangible assets.
Capex for three months ended March 31st Twentytwenty, essentially revenue was 2.4% compared to 1.6% in the same period last year.
At this time is difficult to predict that duration and full scope potential impacts to the body ongoing curve at 19 pandemic.
At the beginning of Q4 fiscal year Twentytwenty, we began to see a reduction in the size of some of our client teams delay in some projects sheets that global economic uncertainty created by the curve at 19 pandemic.
With these uncertainties and assumptions in mind and DAVA is providing updated guidance for Q4 fiscal year Twentytwenty full fiscal year Twentytwenty.
Our guidance for Q4 fiscal year Twentytwenty is as follows.
It's also expects revenues will be in a range of 86 million to 87 million pounds represents in constant currency growth of between 15.5% and 16.5 cents.
The dove expects adjusted diluted EPS to be in the range 15 pants 16 pence per share.
Our updated guidance for the full fiscal year 2020 is as follows.
And DAVA expects revenues will be in a range of 346.5 billion to 347.5 million pounds, representing constant currency growth of between 23.0% and 23.5%.
And DAVA expects adjusted diluted EPS to be in a range of 92 to 93 pence per share.
The Cps guidance adjusted for bad debt expense is broadly in line with product guidance.
Our guidance regarding constant currency growth is pro forma for the sale of into all the technology Srl also referred to as the will pay captive to will pay.
The transaction closed on August 31st 2019.
This quarter, we're providing guidance for Q4 fiscal year 2020 and for the full fiscal year 2020, using the exchange rates at the end of April when the exchange rate was born pound to 1.25 U.S. dollars at 1.15 Euro.
This concludes our prepared comments operator, we're now ready to open the lines Q in AG.
Thank you for at this time I would like to remind everyone in order to ask a question press star one of the number one.
Okay.
Your first question comes from Bryan Bergin.
Your line is open.
Hey, how families Dawn wall wanted to ask if you could talk about client behavior and really how that's progressing from April ended the first few weeks a may add anything notable the call out whether you're seeing any types of stabilization or the nature of projects that are being prioritized.
Versus those being pushed.
Sure. Thanks, Brian.
Well as well.
So I think the as we've spoken to clients that focuses as full on into two areas.
That was in sort of preserve today I mention around compensation.
And there has been to grow tomorrow.
A round.
Actually clients, saying.
The opportunities that digital and similar Nexgen technologies offer.
Down the line and starting to think about how that's going to impact that business.
Now the conversations have tended to be skewed a little bit delay.
Sector of the client that we're talking to.
So there's been some sectors that have been much harder hit.
By the current crisis and a.
Governmental advice and restrictions being put on.
Various forms of commerce.
So the fact is experiencing a tougher situation of actually pulled back a little bit pipe. It much more focused on the preserve today.
No I mention of that business, whereas the.
Many other sectors, we're already starting to look through that some have conversations with us about where they want them at best.
And push forward in terms of bank tomorrow.
Okay.
And then understand Fourq, you view still relatively healthy here all things considered.
Understand obviously the visibility as top here can you just give us a sense on whether the conversations you're having would indicate that that June activity that June quarter activity would be at trough from a growth standpoint or is it too early to call.
I think is exactly right.
Yes, I think is little bit too early to call at the moment.
I think it depends on People's assumptions about the shape of this debt level, whereas the shaped or al.
And you can see the different geographies.
Recovering at different writes a reference John's comment about Germany have cut well with me.
Pandemic coming out of walk down at about a geos and we've been encouraged by what we see implicit in the guide.
Looks like a growth of about 5% to 10% from Capitated Q4. So it's very much dependent I think on how the pandemic sort of plays and I think I'd Echo basically what John was saying about.
How the client base you know response today in terms of.
Today and grow tomorrow looking through the disruption that were in cancer at the moment and how can I hope that business on a better footing.
Plus kind of it.
And perhaps a little bit of sector analysis, given that that's what's driving that behavior helps a little bit.
I think I rule funding as a business that was sitting in the sectors that.
Turning to be.
Stronger.
So you know.
The weaker ones around.
Travel and hospitality around retail and so on.
Outside of the grocery space.
It's a very small sectors for us.
Whereas others.
Mike banking logistics insurance.
I'd say.
Held fairly steady.
And indeed are starting to pick up.
Payments is an interesting one for us because it's our largest segment.
And we expect that to be down in Q4 pretty much in line with the I'm a little delve a guidance. However, if you look under the surface, there's going to completely different dimensions going on as the.
Services area, where it's been a strong downturn in volumes for all customers.
Last red led to reductions in short term investments.
And the Lake project startups.
Actually clear signs that investment even there is picking up.
Whereas the other arenas in payment.
Like such as online and E commerce.
Opened banking digital Onboarding.
Clearing and real time settlement and so on in those areas investment is picking up.
Matching of quite a bit as the downturn, we saw in the motion services side.
Okay very helpful color. Thank you take care.
Thanks, one thing.
Your next question comes from Ashwin.
Citi. Your line is okay.
Hi, John I'm our color.
The here you're already.
Okay.
And.
I guess my my first question is.
Slightly more than a month before the next fiscal year start I would imagine years fairly deep into your planning process.
[music].
And I. Thank you.
Guidance, our outlook, but could you speak to maybe you're planning assumptions as to how your.
Thinking through the current level off.
The and.
And lower the ability.
Yeah, Matt commentary on headcount planning resource planning.
Ill.
Would be helpful. Thanks.
Okay. So let me give an overview and mark might fill in with a little bit of detail.
So so in all current planning obviously, we've got some scenarios dimensions that.
Make sure in this kind of uncertainty that.
On the downside as well as they.
Upside as we said is covered.
But from a budgeting point of view.
Assuming no way and I see a step up in activity.
Budgeting and planning in terms of headcount.
And recruit and locations and so on.
In order to be able to cater for that.
Doesn't when it comes through.
And if you look at our actions in Q4, we are retaining.
The workforce indeed, we'll expect to be growing slightly as we still filling in some specialist skills and so on that we need for projects coming through.
So even though we've got a downturn, we're holding the team together in the anticipation of leading them as the stuff that comes through.
Well no had anything tomorrow.
I think that's.
Right. So you can you can see us anticipating.
Pick up even though it's a little bands on stage is we are continuing to add.
Had a head count and capabilities make sure that we are well positioned to deal with the time when it comes but one of the short term impact. Since this is we're going to carry bench in the current quarter, which is what you're seeing in our revised outlook for the year in terms of the margin yes consequences.
Yes.
Understood.
No. Thank you for that.
The other question I had was with regards to sort of the conversations you're having.
And as as these near term impact.
Yes.
And while you want.
Maybe.
Comes to is that also a corresponding conversation with regards to try thing.
I would not in digital transformation and emerging Tech type award given just not so long ago. They were in a.
In a innovate tight employment situation, but I'd like to get your view as to how the pricing conversation that proceeding.
I can say that so I.
I think pricing at the moment is.
Is remaining as you've seen.
Sort of courses.
Can I could change reason, they sort of quickly, but we haven't seen any.
Soft softness so.
I just reflects our position as a company in terms of that quality hands specificity of to sort of services that we offer.
So.
Implicit in this over guide for Q4, expecting our pricing, that's who being maintained and us being borne out by conversations that we've had clients.
Since we of course in Q3.
Got it I.
Thank you bye thank you.
Thanks I should.
Your next question comes from Bryan Keane of Deutsche Bank. Your line is open.
Hi, guys. Good to hear you guys are doing well.
Just want to ask about the guidance is this the current revenue run rate you're seeing in April and May or does the guidance imply further deterioration just thinking about the 15 and a half to 16 half a percent constant currency revenue guide just seeing how its track so far to that so far.
You know in the quarter.
Compared to what we might expect in June.
So.
Not deteriorating.
I think we suffered alongside a number companies.
Pretty rapid sort of shock as a result, and sort of kind of it.
And so it's sort of guide reflects what we are currently seeing.
We see how April revenues and we have also looks out there to June in terms of formulating misguide as well.
And so how does it how does the business rebound I mean, what do you see the pickup is it just that.
The sudden pauses come back and they say, hey, let's resume or how does that look like.
So I think there's a you know the thing that's been going on through this call from what's been driving the uncertainty is that we've had the highest level of clients reprioritizing, meaning you know you much larger volume of projects being.
Stopped or delayed or teams reduced.
But that being offset by a much higher than normal level of new business going through.
So the two things ending up with a net down.
As opposed to.
Normal times, we have a much lower level of projects are being reduced.
And then the new stuff.
Driving that the growth levels, you're used to saying.
So you know as we look forward, we're seeing a slowdown in that level of reductions as mark was saying much that came through and hit very hard through April.
But we're continuing to see the new opportunities coming through.
So you know das that's where we then seeing a balance through May and June.
And looking forward.
Our guidance around seeing opportunities coming from clients.
Around digital and what we're turning digital necessity as a law clients if it issues as the large additional volumes of hit them.
Whether that's on that process is a broken a need fixing.
And that's driving some quite urgent activity with clients. That's that's leading some of the ramp up we're talking about.
Got it got a then my last question just for Mark.
Just thinking about protecting margins or how you're thinking about in margins in the downturn or other costs.
That can be taken out versus investment.
You know is or short term long term investments that you can think about changing or is this kind of a.
A blip that that theres not much to take out in terms of cost.
For the margin side.
Well aware.
Got the along sort of black basically where we're taking actions.
Yes shelter in nature basically.
Yes, so we continue to invest because basically we see a short term phenomena, but we should start to how long that will be so we want to investment recovery. So that means maintaining a bench to make sure you haven't skills in place for all women to cover we also selectively investing marketing campaigns.
Obviously adopting them for the kind of it.
Environment that we are tempering with differing expansion, which isn't deemed essentially in the near term. So yeah pretty obvious one is travel has largely.
Stops as you would expect and we were looking at.
Projects, which can improve the efficiency through I'd say, we're looking at those with heavy sort of scrutiny, but I think we're taking a sort of balanced balanced view and our intention is basically saying remained in good shape. When we come through this we can now sees the opportunity that will no doubt presents itself one way.
With us God situation.
Got it thanks for the color.
Your next question comes from making.
Your line is.
Hi, Thank you.
I'm wondering if you're seeing any sign.
Vendor consolidation that your client.
You talked about you know your transition was seamless.
You are seeing any side. So the work from home environment. If you are seeing any signs of that there's an opportunity for indaba to be able to pick up any market share.
Hi.
Thank you we are seeing some signs of that.
And we do think there's a possibility of cannot market share.
However, it's been a relatively small number of projects that we've actually signed off the back of clients not being able to use on the other and vendors. They were perhaps you still working with.
So we don't know how quickly that's going to come through I suspect it will take a little bit longer than.
You know hitting hitting hard in Q1.
But certainly there are conversations and opportunities, though sales teams are uncovering in that space already.
Got it and then.
You saw nice uptick in Europe this quarter.
Talked about that in past quarters, it's kind of a medium term focus we've talked about private equity.
Okay.
With that strategy has to be adjusted in the near term or are kind of.
Medium to long term areas of growth.
Even in the current environments or if not what has changed.
Yes, they certainly in the medium to long term.
Yes, absolutely room nines.
And.
We are seeing.
Europe.
For us as a business coming out of this little bit ahead.
Let by Germany is I covered in the opening remarks.
But we will continue to invest in that I.
I think it may take us a little bit longer in Europe, because the hiring process and so on around staffing upsells teams et cetera is a little bit slower than people might be a little bit more wary of changing at the moment, whereas we're not finding that in the U.S. the tool and continuing to be able to a provision.
And teams and so on the sell side.
Private equity things a different story obviously.
The current market.
On the M&A deals.
Happening has dropped.
Got it like a study in its it's really drops so the activity levels that we have on the P. front.
All right down and we expect rise to stay down until M&A levels.
Recover.
However, the underlying strategy, which is to build relationships with a PE firms.
So we have a route into that portfolio companies and I'm, Ken when some of the downstream transformation work after they've done deals.
Remains very much off like us, we actually had a win this week.
Which is the first major translation deal than intuitive P. client portfolio company. So the strategy is beginning to execute as planned even although the actual M&A volumes are lower apartment.
Understood and then quick housekeeping.
Again, a growth embedded in the guidance.
Thanks, guys.
So.
So pro forma constant currency guy.
It is.
They are hard 16 cents, an important 16% that does include.
And they are core to work off.
Access.
As Mike mentioned side, the organic growth is probably around.
Sorry.
Your next question comes from.
Needham Your line is.
Thank you, Rob John and Mark will be doing well.
A couple of questions. Your first I was just wondering if you could talk a little bit above the sales process in terms of winning new logos going to get to.
How important is after when new logos at this stage to be able to fuel growth in fiscal 21, if you do get type of recovering economy, where you get dr. greenlight growth.
What are sort of the level of new logos, you need to went to be able to.
Filled that funnel or that you might need to drive that 20% plus growth eventually longer term. Thank you.
Sure.
So you know weve always as a business had a reasonable proportion.
New logos and new activity that we've won in a remote video conference style.
And so we've used the experience that we have to rapidly pivot towards business winning in this way.
This occurs right through our sales cycle from you know initial lead generation through right through to closing this.
Deals.
And you know and we are continuing to close new logos through through this period.
I was looking a little as we do in our regular calls at the metrics.
We have seen a slight decline in new meetings by about 20% over the past eight weeks, but it's already returning to normal levels and if you look through the overall pipeline.
Today, it's the strongest that we've ever had right through to through the progression stages, but particularly in respect of deals to be closed.
How much of this is medium to long term in nature, not necessarily and Plasschaert recovering one I have to say well that remains to be saying I do think it's a strong indicator of the of the medium term horizon.
That's very helpful. And then just turning to Mark sorry, if I missed this but did you talk about the idea. So cycles, just wondering if you're seeing longer payment terms from your clients because of the uncertainty and also in that brand. If you could talk about our capital allocation priorities as we go into the new fiscal year. Thank you.
So in terms of so receivables.
We will not seeing any significant change we saw similar level going from Q2 Q3 and April is in line with what we saw in March.
We continue to monitor clients paint Records show.
Delinquency and of course, you that part of that.
Diligence basically resulted in the.
Bad debt charge that we took in the quarter.
So.
At the moment.
I think the cash flow generation is strong for the business.
With that you then in terms of launching the client base.
In terms of capital allocation.
I think in ads on lines in the comments, we've been strong cash flow generics business.
Cool.
Bank facilities.
Yes, so liquidity is not an issue for us we're doing the normal things.
In an environment like this where scrutinizing investments in Capex as you'd expect.
We have.
Power too.
Supplement that structure the company, so M&A should the rise of opportunity sort of rice.
If the common is referring to are we looking to tap the equity markets then when all.
Yes.
Mark just on the M&A team are you seeing more opportunities given again, the uncertainty and maybe the valuations might be down for certain assets in the market does this create more of a tailwind for you in terms of by doing tuck in deals and threatening your portfolio to come out even stronger on the other side of the pandemic.
Oh thanks.
No.
No you got.
So.
The challenge with us on M&A is that well, we continue to have conversations it really needs.
Business, some face to face element.
Now we know there are some businesses were talking to Wi Max pre.
Pandemic.
And you know, saying some of those could progress and.
We feel pretty confident about them, but in terms of new opportunities coming into the pipeline, where we're wrestling with how we we do that the fall as a little bit more traveled and little bit more opportunity for face to face conversations with people.
Great that makes sense congrats on a quarter. Thank you.
Thanks.
Your next question comes from Jamie Friedman of Susquehanna. Your line is.
Hey, guys glad to hear you are doing well John I was hoping you could share some perspective on how your payments customers are doing at least at a high level, what's important to them now.
Any change in cadence in their spending.
Yeah, what's going on with the payments ecosystem.
Sure.
So I covered a little bit of this on one of the earlier questions in terms of the.
Volumes being down on merchant services merchant acquiring might have things.
And that has led to some reductions on themes and delight project starts in that area.
However, it has been offset and we are seeing acceleration.
In other areas, namely the online E commerce space, which is trends buying and shift in consumer buying power.
On the open banking space.
Digital Onboarding.
Merchants.
Clearing and real time, Sakhalin Island, Oh picking up so moving beyond Q4, we expect to see some expansion coming back into this segment.
Giving our recent conversations.
Got it.
In terms of your prepared remarks, John you profiled amusement park fastening use case.
The social distancing I'm, just wondering is that something that you could apply more broadly because it seems like a lot of industries could use a function functionality like that.
Yes, and we're looking at that so good people about about it.
Early days.
Okay, and then Mark I apologize if I missed this.
I should know this but with regard to.
So.
With the will pay captive.
It's got it differently than that but is when when you're given that.
The UK or the North American growth rate the 25 seven.
Yes.
Is that does that Ics is that excluding that organic meaning excluding world pay.
So what would it be I know you gave the consolidated number but do you have the regional number absent that asset disposition.
Uh huh.
Okay. So.
Results that we gave the reported numbers by the GE said North American 25.7.
Well paid captive was a UK.
On the majority of it was UK intensive is delivering so the UK holds it was 24.2%, but again if you strip out the captive growth was around 34 has them.
Okay.
Alright, thanks, guys be well.
Okay. Thanks.
Your next question comes from Alex.
Yeah.
Yes. Thanks, Thanks for taking my question.
Revisit Germany and.
You are seeing or expect to see there.
I think beyond just the reopening sooner than maybe other country, that's driving it or are there certain industry there that are outperforming.
It's actually that you're you're well.
Exposure to so just wanted to better understand.
Little bit more beyond just the timing of.
When business starts opened up in Germany.
Sure.
So the sectors, where we've seen some step up coming through is.
Finally in the broadcasting space.
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Perhaps for obvious reasons.
Insurance.
Payments.
Telecoms and and then some travel and hospitality you republics those two.
And just broadly speaking as you've gone through this period and looking into the current quarter.
As a.
Priority today.
Roger sounds like it.
I'm level yet.
I say right ecommerce and maybe.
Forms like that but if anything it struck you guys in life.
A month or so where things are being pushed down and things are starting to really move up to the top effect.
Yes. So I mean this is very much in the in the theme that I mentioned earlier preserve today growing tomorrow. So.
That has.
Caused a significant amount of reprioritization so.
We've seen a high level of projects being.
Not to delay.
And and a high level of new ones starting.
The it's interesting the are the ones that are being delayed.
Half of them.
Being delayed full cost saving reasons the in the preserve today category.
The other half being delayed mainly because clients all capering.
With the pressures of coded and I've been unable to.
Initiate the new projects and we expect those to come through fairly fast as clients.
Get their own teams and organization settle down again.
The it's then very much sector driven so.
In terms of what's driving it.
All of that fold into what we call this digital necessity.
The sharp increase in demand across that digital.
Platforms has actually revealed so growth in a bottleneck processes that they actually need fix.
So you know logistics as being a lot around fixing digital flies.
Equally around that last mile delivery.
To enable that continue to work well.
I insurance has been pretty robust outside of travel insurance.
But once again significant digital necessity prices issues.
When they called US start working from home for instance, how do you now the president of the processes that previously worked in a call center environment for work as well.
Hi banking.
It's been a lot pickup in automation and tighter insights.
And huge increases in his volumes and additional banks.
Caused visibility and some broken price so activity going on.
Hopefully that gives you a little color of the sorts of things driving that the new volumes offsetting some of the downturn stuff.
Very helpful. Thank you.
Your next question comes from Charlie Brown of Credit Suisse. Your line is.
Perfect. Thanks, very much I've got two questions if that's possible.
The first is just a clarification mark on your comments on on bad debt.
I missed.
The size of those in your prepared remarks.
How much revenue.
Supported by the fact that seem to fill up that revenue creates a great headwind for you for the next 12 month.
And then the second questions just digging deeper on for Q4, I'm still trying to understand the trends in the momentum.
15, or 16% growth is still very impressive stands alone.
That is a 15 point compression from from Q3 that feels like it's a big impact from cave that the missing elsewhere in the fact.
Why don't you think you're being hit more than most by what's happening with David.
Charlie.
So the bad debts was pretty significant staff, 3% of revenue in the quarter.
Why we're seeing this bigger than normal impact.
No. It's nice to run to you in cues three some of that maybe a little bit of cue.
No, it's probably mostly Q3 actually we we're providing services still to those cards and we are monitoring the sort of a position.
He's one of these sort of situations, where we're in conversation with the almost on a sort of weekly basis about how bad their funding is sort of progressing.
So it in terms of the the out all it it is isn't a significant driver of that guide from Q3 to queue for the where we've seen a sort of slow down as John is sort of laid out it's been mainly in the sort of payments space, which John went twenties earlier comments.
Seeing other source axes remain sort of robust, but I was mainly why we saw the slowed down so the but that isn't that sort of driver of the grow grow headwinds.
In terms of the second question about the the 15, 16% constant currency groceries I think it is pretty much in line with what.
We seem to like set of <unk> comments on.
In terms of the guide for the next quarter.
And I think also in terms of the the globe God I think they were guarding or something like you know 13 or per cent on a report it sort of base. So.
We're out of kilter with others are seeing.
But maybe I'll pick it up with her but later.
Yeah.
There are no further questions at this time.
Oh for joining us obviously these are interesting and on certain times.
Been able to get get some real insights into how in Dover is responding.
You know, we sat the business up in a recession Buck in 3000.
We continue to grow through the global financial crisis. So we're incorporating some of our past experiences into how we respond to this crisis.
All belief.
This crisis is underlined the importance of digital and next Gen technologies to draw if successful business models in future.
This is going to drive a strong recovery for us as a business.
Focus right now is on preparing for that come back retaining and developing our capabilities strengthening our client relationships.
Oh strong balance sheet, an excellent delivery model mean that we're actually in a strong position to execute successfully.
And therefore, we look forward with confidence I look forward to updating your next quarter on how things are going and thank you for today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may notice.
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