Q1 2020 Startek Inc Earnings Call
Joining us today, our Starteks, chairman and CEO upper upscale group, though the company's president Rajiv Ahuja.
And the company's CFO Ramesh come out.
Following the remarks, well open the call for your question.
Before we continue we like to remind all participants that the discussion today may contain certain statements, which are forward looking in nature pursuant to the safe Harbor provisions of the Federal Securities Law.
These statements are based on information currently available to us and are subject to various risks and uncertainties that could cause actual results could differ materially.
Starting back advises all those listening to this call to review the latest 10-Q and 10-K posted on its website, where somebody a summary of these risk and uncertainties.
Hi Tech does not undertake the responsibility to update any forward looking statements.
Further the discussion today may include some non-GAAP measures in accordance with regulation G. The company has reconciled. These among these amounts back so the closest GAAP base measurement.
The reconciliations can be found in the earnings release on the Investor section.
Website.
I would like to remind everyone that a webcast replay of todays call will be available via the investor section of the company's website at www Dot Startek Dot com.
Now I would like to turn the call over to Starteks executive Chairman and global CEO Upper ups and group.
Sir Please proceed.
Thank you very much indeed love if a good afternoon, everyone and thank you all for joining [noise].
I would first like to acknowledge that we remain in uncertain and rapidly changing times as we navigate the Colby 19 pandemic.
We extended the deepest sympathies to the families around the world what dealing with the health and economic consequences of this tragic circumstances.
The World we live in today is not the same as we operated during the early months of Twentytwenty. So we will keep our initial comments on the first quarter beef.
Did you get most of what time to discussing the garden state of the business and what we're doing in response to covert 19.
Since the onset of the pandemic our top priority has continued to be our employees health and safety, while providing ongoing support for our clients.
Late March and already early April where the most challenging periods for a business as a sudden government mandated lockdowns immediately impacted their operations given this PT. It we've been operating with a fractional for global Love falls within box on the pandemic batting by geography.
Hi, what I can proudly say that we have since taken very effective measures to partially offset the impact of this unprecedented challenges faced by the world.
A key component off our response has been the implementation.
Our business continuing planning.
We enabled many employees who work from home after obtaining necessary climbed approvals and we took a people first approach to ensuring that the delivery campuses could operate under proper socially distancing and safety standards.
He will have more to discuss on this topic I think that's truly remarkable feat to enable remote working geography, it's like India very many homes, that's limited access to computers and wildfire.
To mitigate the financial impacts to our business from cold. It we have continuously managed our operating costs prudently and got all nonessential spending.
Despite the workforce challenges related to cool that are flying demand has been very strong, particularly with our largest verticals like telecom ecommerce cable media and healthcare.
We remain deeply committed to solving.
As a strategic balked outdoor clients and providing high quality customer experiences in every region, we self whether its home already not delivery campuses.
We're extremely proud of our team members coordination and hard to look through all this unprecedented times and where do you mean confident in the resiliency of our business going forward.
But no commanding Florida, I would like to turn a little calls to us here for a major comet to take you through Starteks financial results for the quarter rubbish, well what do you.
Thank you approve.
I will make the structure of the opening remarks, but keeping my view on 12 close quarter a brief.
I realize that that is on most of quarter one.
Now, let's element in today's environment.
Well that's good.
Net revenues for the quarter over 160.9 million.
Compared to 161.14 Squadron 29 Pete.
Net revenue in quarter, one twentytwenty was impacted by government mine due to drop downs.
In most geographies as we had to make several adjustments to properly equal or lesion reviews for the boardwalk.
No. One revenue was also affected by Fortyx depreciation of approximately 7.2 million.
Primarily relating to the Argentinian peso.
Gross profit for the Quadro.
Was 20.1 as compared to 27.2 million into your to go quarter with a gross margin percentage of <unk> 0.5 compared to 16.9%.
The degrees in gross margin was also driven by the sudden gallstones in several other geographies, such as India, Philippines and Honduras.
Maybe continues to be incurred expenses include importing beautiful expense as directed by local governments. Despite suspending operations for a period of time.
Selling general and administrative expenses decreased to 17.3 million as compared to 24.1 million into your goldcorp.
As a percentage of revenue.
Xeon D improved 200, and growing 420 basis points.
Good 10.7 per cent compared to 14.9% into you ought to go quarter.
The improvement driven by the cities of cost reductions that we implemented over the last couple months I was when the I'm, even sharper focus on prudent cost management.
The onset of the friend to me.
Net loss attributable to start Dick shareholders for the quarter was going to 6.6 million or a loss of 69 cents, but share as compared to a loss of 3.3 million.
That is nine cents push it into you ought to go quarter.
Net loss for the full squadron couldn't do you couldn't be included approximately 22.7 billion goodwill impairment, primarily due to cool, we'd really picked forecaster declines in India, South Africa and Australia.
Adjusted net loss for the first quarter Twentytwenty was.
Point 7 million or Hussein's puts share as compared to an adjusted net loss of point threemillion or one cents push it into fourth quarter 29 Pete.
Adjusted EBITDA for the quarter was 10.5 million.
Compared to 10.9 million compared to the auto go Quadro.
As a percentage of revenue adjusted EBITDA was 6.5 person as compared to 6.7%.
From a balance sheet perspective at March 31st.
Oh, gosh unrestricted cash increased to 39.7 million.
Prior to 2.6 million at December 31 couldn't be nine Pete.
Our total debt at the end or what the was 175.2 million as compared to 174.7 million at the end of couldn't be 19, and net debt was reduced to 135.5 million as compared to 142.1.
As we look in the months I heard we wouldn't maintain our prudent approach to cost management and will actively Monica a working cap and cash flows who maintain adequate liquidity.
Yesterday, we are comfortable we got liquidity and cash balance navigate this and why.
With this I've completed my prepared remarks, and but you look.
Thank you Romania.
As Bruce mentioned at the beginning of the call our teams across the globe have done some incredible work to ensure that out personnel have the resources necessary.
Continue operating safely and effectively I mean the bank.
That evident that efforts are evident across our geographies, but.
But I do want to highlight a couple of regions in particular.
Read out Dean showed incredible cottage and to me when given the challenges that we faced.
In India for example.
The work from home mandate initially poses a great challenged what operating teams as many of our employees did not have the independent technological resources.
Chippy switch working remotely.
We responded to these situations like providing many of them, but laptops desktops wife, I access and similar second, namely Copeland all of which helped us to pick it was even more operations that continued to gradually improve even today.
In the Philippines, you faced a similar set of challenges as much of our workforce in the country. There is dispersed across areas that are far from arguably campuses and often don't have consistent internet access.
Also in government only allowed in flow east of go to work if they live within a two to three mile radius off the office locations. So we had to emphatically provide housing nearby for many of our team members do enabled them to continue so the thing not clients.
From our campuses.
This initiative help ensure that the majority of our team members had access to the resources they needed to be fully operational.
All of this.
As being made possible by the phenomenal partnership and teamwork between operations I'd facilities and administration.
In particular.
We're not team members a comfortable embolic booked we know that offline.
And that customers will be able to receive the seem high quality experience that we have all of his delivered.
It is very clear to us that the resources, we have committed over the last several quarters.
Without a strong leadership Dean.
I'm pleased with the passion and dedication displayed by our teams on the ground.
It's been golf as all the investments we have made improve our technology focus and global standard operating procedures.
As we look ahead like most businesses around the word we cannot predict falling back from corporate 19, as the off the Matt from the bind to make and its effect on the global economy.
Still remains very young so.
Nevertheless, we expect to continue adapting to the new wouldn't buy went accordingly, and we will continue to do all that we can support our global work force and client base as we collectively net new norm to the speed at a one that allergy and uncertainty.
Now I'd like to Boston called back to up <unk> for his closing remarks.
Approved.
<unk>.
Thank you very much indeed, rajiv or as a party poet for today's call I want to remind listeners that we came into twentytwenty with a very strong global blueprint.
Very efficient off for operations, an even stronger team. These elements drove our momentum heading into the first quarter and they will be the key component suffered ability to see through to the other side of this global pandemic.
Yeah. The month ahead, we will continue to place our highest priority on supporting and protecting our global work force, while improving our position as a value added sturdy bought not to act lines.
As more economies start to open we are preparing ourselves to operate as efficiently as weekend and we plan to remain flexible with a campus operations and remote book extensions until we are certainly enough for the new normally wouldn't be.
Despite the workforce challenges we have faced we are fortunate to be in a position with the client demand for services remain strong and a workforce is consistently increasing to meet.
The demand.
From a financial perspective, so we will maintain a strict focus and cost control and as rich mentioned earlier, we are comfortable with the cash balance and liquidity today I'm proud of the strip and effective organizationally pivots. The team has made up to this point.
And we look forward to building upon this work in the quarters ahead.
So if we will now open the call for any questions that people might huh.
Thank you sorry to ask the question at this time, you will need to press star one on your telephone again, that's star one on your touched on telephone to withdraw your question press the pound tea.
Please standby, we compile the Q when a roster.
Our first question comes from a line.
Oh, John Godyn, Oh Lake Street Capital your question. Please.
Everyone. Thank you for taking my question first you've kind of Peel, the onion, a little bit more on some of the verticals, where you've seen strength somewhere you've seen weakness has anything really stuck out are surprised you and then second thinking about feedback from clients you know what does it been like is as your workforce.
That's true transition to work from home if anything else stuck out there and how the performance has been.
And then third just any commentary on overall volumes.
In addition across the different verticals would be helpful. Thanks.
Yeah sure I think I'll take each of these questions one at a time.
So if you look that up what we clearly faced is that a very interesting phenomenon is up as the pandemics that end up typically non discretionary order essential services continue to remain strong.
Unfortunately, we have a very significant bought off our clients who are in largely essential services that people continue to use and they are kind off non discretionary activities for example, making a phone call or switching on your television.
And so and so forth. However, we have seen though its oh overall in the industry, we have found that.
Sectors, such as airline travels transportation's automobiles, they have gone through some challenges because of those that kind of discretionary expenses and this spend any kind of created a huge amount of how ballpark them and there was.
Demand slowed down on that site.
And with regards to the workforce and the volume pick up and the Cline <unk> I would speak more on that line side. I mean, we found that lines are very receptive most of that lines are very receptive to our ideal off getting into a look from home and I would requested Rajiv to give you some additional color on that including.
Some understanding of ER volumes that we have seen that have found out though over the last few weeks well what do you read you.
Thank you approve I think you've got married to a very large extent.
I think we've been fortunate to be extent that an odd exposure to.
Does like airline, especially or a hospitality for that matter is relatively low in comparison to sell off our competitors, which is why the softness in demand is not as evident as a as it would be with some of our competitors.
Over 70% of our revenue is driven by sector that I consider an essential.
In these gotten tighter I eat telecom media and cable BFS I helped get et cetera. So we really haven't seen any softness in demand out there.
Clients have been extremely deceptive I'd just point I would I would say that.
This is going to their D, probably overenrolled any kind off concerns or you know surrounding moving from a secure environment.
I'm not so sick children bye bye.
But the solutions that we've put together I like to enable our book from home agent it'll be you've got very robust solutions put together in Klein said now increasingly stocking becoming more and more comfortable.
Without ability to be able to go out and deliver a to be the design extent when it comes to overall volumes and and utilization.
Overall volumes did see a little brother hit a bit Isle as scorebig or even back ticked up somewhere around the middle of March and the Philippines was amongst the first few geographies to go into locked down followed by India up so that was a little bit up and in fact information touched up on.
That during his remarks, his opening remarks by but I'm happy to state at this point that we.
We haven't neighborhood or north of 75% go far workforce is not even productive sturdy and ER and is busy and engaging serving our customers in that customers.
All right that's helpful and then.
One more on kind of the margin structure I guess can you give us anymore color on.
Or how that was impacted.
In the quarter and more importantly, do you anticipate any longer term impacts.
Whether you know.
Positive or negative depending on kind of the moving parts existing thank you.
[noise] when do you think me very difficult to give you. Some exact estimates at this point in time, but I can only comment on the quarter that has gone by and we had faced a this up and Debbie challenged shut the fagen don't look water, so and that's reflective of whats Ramesh had mentioned and bought typically happen.
And is that when he was suddenly get a kind of a supply shrink age or youre not prepared or basically at that point in time. So what happens is you get a overwhelmed with a lot of costs and then now with the sudden shut down you'll get a kind of almost like a blackout situation in the key geographies, where imply just can show up.
Oh I do they spent a volume decline, but they just don't show up so it was a heated week task I would say that Rajiv and his entire team had worked out well over a period of several weeks or we could bring back the workforce.
Complete p., new unknown, deputy off or making them work from home.
And and that was Ah I would say an incredible feet on the I think all we can proudly say this one of the very few organizations. Good effectively switch gears from a brick and mortar center to almost a virtual centre.
And most importantly, the entire leadership team kind of started working through a virtual command center and that really helped in looking at every moment of truth every action with military precision. So I think that was something remarkable to come out on this so sitting in the month of April I mean, if you're looking at something very scary.
But oh by the sheer passion and the rigor and the effective management almost on a 24 seven basis I think we got the ship back on track.
So that's what I can say at this point in time and these are uncertain time. So you never know whether there is gonna be something coming up a in the future, but I think we have stated the ship and we feel ready.
Comfortable and really proud off then talk team had startek, it's indeed, starting very.
Very proud of them.
All right. Thank you congrats everybody on all your efforts and stay healthy. Thanks.
Thank you very much.
[noise]. Thank your next question comes from that Cummings, a b. Riley FBR your question. Please.
Hi, good afternoon, everyone. Thanks for taking my questions I guess just building upon some of the prior questions I.
I mean can you speak a little bit to the progress you've seen thus far through Q2, two months ended the quarter and I was just kind of curious on your approach by a geography by geography basis I mean as.
I guess countries, such as India, Philippines begin to relax some of their lockdown restrictions, what's gonna be or approach to having employees remain working from home versus having more and more employees move back into your physical delivery campuses.
[noise] philosophically I can give you an onsite and I'll be the tightening the looked rajiv up.
For some more clarification or <unk> and light that he can throw up on but what has happened is this whole thing that make up was basically a shop for both our customers as well as for ourselves. One was the government mandated locked down which means so suddenly m. and there was nobody who would come to work.
And that they could not true up I mean, I technology was wire ticking up model that was hardwired into our centers wherever it wherever we have on locations.
They were just making a.
And I'm talking about thousands and thousands of people both in India Philippines.
So while the customers overwhelmed the customer doesn't know what can be done and we don't know how to get them plays back into the place. So it was a situation I can say in those days was between a rock and a hot place.
But what we did together was as a leadership team we came down and say, it's how can we solve this problem for a cost him as the sheer passion of working with a customer.
To bring our workforce back even in the virtual World was up incredible task off desktop by desktop line by line agent by agent, making them enabled.
In the places like India, Philippines, where you don't have people, who have desktops and laptops or infrastructure at home. So.
So he meant the movement of good itself desktops off <unk> infrastructure I'm working at the backend with technology and Virtualizing, a wired infrastructure into a virtual environment was something a which happened up a true up a virtual command center, which was monitoring these activities.
On an hourly basis on a daily basis.
And then after we could just speaking this volume back as we passed by as our spots by as de espoused by we just started bringing it back.
Oh, it was a huge shrinkage be phased out and it was a huge chalk, but all the cheer resilience we brought it back.
There are more stories there more in details Nuggets. So I would a request is relative to speak to that but this is what I've seen and this is what the team has done dropped even what do you might get to give some color on how do you to enable all of those.
Sure approved.
So that gives me stocked with Oh, you wanted a little brother and [noise].
How this is laid out a across the different geography that we are present game. So a network today straddles talking different geography then.
If I start from the West you know Jamaica for a was probably amongst Ah.
He lost a in our network to get are affected by the widest.
And a and then you know Jamaica got it affected went into both locked down Jamaica like a number of other developing nations.
Among the one does have a challenges that on the internet penetration bandwidth availability.
And infrastructure issues so.
So just a moment like the brick block was that because Jamaica was amongst the loss to go down in our network, a we'd already a $11 lessons across some of the other geographies like India Philippines.
Where are you know where you had figured out how quickly puts together he a solution wear to work with moved from a brick and mortar.
Due to say the living room, which is look at home.
U.S. in Canada, 100% of our work forces a is fully operational between brick and mortar and and the mostly a enabler.
And then if I continue moving down further into lactam Honduras. They do Argentina also started going into lock down backed up but happy to say that there will be managed to enable a significant amount of our workforce.
To be able to be a working remotely.
And ER when it came to South Africa again faces. The challenge is that I just outlined for a for a Jamaica.
Issues to do with a internet penetration internet connectivity bandwidth availability et cetera. So.
It took us a little bit off dying to bootstrap E O us a large amount of people that he would have like a two to get them to work anymore.
However, now South Africa was also up and running.
Saudi Arabia fully enabled between brick and mortar and.
And our work at home solution.
India again faced a severe challenges because.
Again in account off the one point, which I've already mentioned to do would be developing countries. The other being locked down was being enforced extremely tightly or to be extend stack 'em, while they did call. It a lock down it was almost like a few that had been imposed.
Dr. A few obviously preventing people from moving by the time the government game, what I'll do a two opening up essential services and the I'd neighborhood services.
Industry, what did feature on that but then social distancing gnomes kicked in.
So obviously, we had to rely more on fighting up a larger amount a larger percentage of far workflows, we working from home and end up is the case a gun to you in India.
Applicator to a logic staying the same in the Philippines.
Well they show up.
Sales to be a bright spot for us a there well lockdowns in place like that but the government quickly announced that the IP enabled services a industry will be featured as essential services and that's such a the woman controller.
Did not apply to the I'd neighbors services industry. So we saw very little impact or eating or adverse impact in Malaysia.
Australia between now work at home and ER, and making more Toby are totally fired up almost on a sinopharm workforce.
He is a is a naive and in production for that gives you a set itself. The the 13 geographies that there would be our present thing and when it comes to.
Oh.
What do we see a I'd be going to be relying more on work at home as you move forward absolutely yes.
I think assigned to make has proven that work at home will prove to be winter like security protocols et cetera in place could prove to be and extremely good and viable alternative working from a brick and mortar. So we do see if oh.
Without walls.
Now, becoming more and more popular with a with clients in terms of that acceptance rate.
And ER and our sales teams will also continued to focus on pushing.
For this as a solution as a part of our service offerings.
The fact, I I hope that.
Broadly on says what you were looking for.
No. That's extremely helpful. I really appreciate all the incremental color and I guess in terms of liquidity.
Actually saw net that moved down here in Q1 of course I was shocked to the system in April and just kind of curious if you could give us a sense of maybe where the cash balances at it may or anything like that they give us a better sense of where you're at from a balance sheet standpoint.
HM see exactly as you know I think all we had been working with our banks Oh on on.
On the debt that we have.
Themself argue payments could deal and ER and also a very tight or.
Lease that we have taken into our cost management board. This put together a gives us up I would say significant comfort for what we see each quarter to in terms of liquidity, Oh, I need keeps on changing or by the weak and what we saw a eat.
Our lead months of April.
Maybe the first or second week of people, what we saw and what we see today is distinctively better.
From where it was and you know I mean, this kind of shock and create have walk on liquidity and we understood that pretty much early on in the game and we did a lot of actions and fundamentally I would say the speed of action. He is the most important part in managing liquidity.
It is not Oh, one it is not up kind of a mathematical model that you see it's a dynamic model that is a little bit non linear in nature. So if you take actions spur actively.
Early on in the game he will save money. If you don't you lose for example, if you have not taken action a 1000 people will just get paid without getting any work to do and vice versa. So that the strains that liquidity of the organization. So this whole idea off the virtual command center led by Rajiv that was put in place into.
Sure that every every dollar that we spend wasn't effective dollar was a productive dollar and all nonproductive dollars that where there were acts either delayed or deferred art art eliminated.
Oh, So why did this happened on the cost side. We also started a building our capability and capacity to create new service offerings, and we became like a running R&D lab as we have a learning to the pandemic as to what are some of the knowledge that we can take to the marketplace.
And therefore became stronger on that and that has helped our sales team and business development team and I can probably say, which has been led by Rick Freddie He was just come on board.
A few months back is working overnight to ensure that we get deals through the door and there has been some very significant success that we have achieved over the last three to four weeks on new logos and new business is coming.
And some of them are subscribing to Disneylife idea off a hybrid model off a a virtualized contact center, which is the you can do a lift and shift and work it anytime anywhere.
For any client a across all geographies across called shows across continents. So that is something which we believe the upside off.
Of course <unk> use this would you some of those learnings came out and though we therefore I feel very strong motivated and the concern that we had in April is not that I can only say as much.
As a much I could say qualitatively or quantitatively I've been on people, who given answer.
[laughter] understand that's and then just final question for me.
I know with moving to a virtual environment. It's still requires approval from clients to to perform those services I'm. Just wondering if you've had any issues getting those approvals or any sort of delays with some key clients that that could be impacting your business Phil.
Oh I do you feel like can you answer this question specifically give some color.
Exactly.
So yeah I think.
If I missed a broadly categorize it I would say it as well.
He.
Then and then I'll give you this ah why I'm, saying eating and 80% of our clients Vicki came to the table and and agreed to bronchus. The a the necessary veeva is et cetera.
So as to be able to you know help.
A fire it up I worked at home population.
And the sale of the clients a look a little bit off dying or you know and I'm wondering who the view the situation because at that point of time, I don't think or anybody have any clarity as to how civeo does this up.
Going to be when it when it actually gone out to be a pandemic would be more often and epidemic all would just be localized and ER and 10% Oh stock lines were very clear in very foam that are that they would.
They would they would dot preferred a work at home solution happy to say that all of that 10%.
Some of those clients have agreed now two or two.
Oh.
Oh look at home solution being fired up by the but what they have done is they have a.
They've asked us to move from a white space support the more to check me support back, but we do have a a small segment of our client base, which are currently still feels that that worked at home is a is something that they wouldn't like to they wouldn't like to walk that block at something like 80 Bucks.
And if our clients immediately.
Wanted to act under Saddam quickly.
Wanted to ensure business continuity at the earliest and that's how we weren't able to partner with them and quickly fired up we'll look at homes.
Understood well. Thank you for taking my questions and best of luck as we move forward from here.
Thanks actually thing.
Thank you. Your next question comes on a line of the Koning of Baird. Your line is open.
Yeah, Hey, guys. Thank you and I guess first of all just when we think about how revenues trending from Q1. The Q2, you talked about about 75% of of agents are up and running I mean, it's the easiest way just to think of that 25% of revenue goes away sequentially I know, 10% as travel I would imagine a lot of that just pretty quickly goes away but.
Does that is that kind of the right a pace.
Actually mathematically it will not be that I mean, the what happens is that I give you an ideal to headcount, but what happens is a many of them also suddenly come back because as it opens the volume, which was spent up and which was.
Getting stuck in long wait times now get a distributed to they see de because nowadays and long been agent. So many dynamite function of how the agents come quickly and what is the pent up but kind off a offered goal that needs to be basically addressed so so that's a that's one of any linear equal.
Mission that if you have 75% of this stuff coming in a it has a daddy getting on the revenue per se. So if you take a quarterly look I mean, you find it appeared that 75 is becoming 85 or a three week period or a four week Theodora six expedia. He did all depend as to how fast they come back and whether you are you have.
<unk> ability to get the same age into went there come back to you. Because then you have to is fired up a training cycle. So it's a combination off of a kind off a new batch off a university students who are coming so you can say that the freshman year, we'll have a 50% phosphate or 75% boss rig.
It depends on whether all of their those extrusions, who have been completed those credits are coming on board. Then you can have already linear math, but that's not how we basically pans out just to give you a little bit of example, let's say 10 people had been working and suddenly because of locked down. They just went away they could not come.
And many of them maybe to all of them have been enabling for work from home on the eight have not been enabled for work from home, they're figuring out in doing something else, let's say the volume comes back after one and a half month to month those eight may not be of 11. So therefore, you took one train those eight again and get those workforce back on track. So you will not.
People to get this 75 back to 100% volume overnight.
Biden. He will also have to spend more money because it was trained reaching some of those people. So those dynamics off the economic modeling in this contact center plays out.
So it will be very difficult for me to gauge as to based on that 75% or 80% work force out there for yeah, we will be able to extrapolate the same number so far as their revenue is concerned and this gets the juxtaposed to by the new sales that you have for example.
Which during this crisis, we have also looked on enabling and onboardings lines and getting them up and running so they also add to the Florida and so it's a combination of all this together. So we will have a clarity on that as in this quarter. So I can't give a prognosis at this point in time, but overall.
It looks good.
Okay, well, that's good and interest on the cost of services.
If revenue I guess whichever way revenue goes if revenue goes goes down I mean are a lot of those cost of services fixed in the near term or or should we expected to be a little more like normal where you know your your margins pretty quickly can get back to what X spend kind of that 16, 17% right and that was 12 and a half in Q1 I'm just.
And I'm wondering the margin trajectory as revenue eventually recovers.
Yeah, that's our goal to have as much elasticity as possible.
Because a significant part of your cost is obviously isn't costs. So that's that's the goal and that's what that's what we drive two and a and therefore in this whole I hold pandemic. We have tried to see how much off value realization that we can do you not cost structure and those are sounds very interesting learnings, we had I need goes to excruciating detail.
Of all the line items I do see for example, if you have a bandwidth.
That is there for a sent out for 300 seats or let's say, it's occupied by only 40% done done not anymore. So you can turn off those bandwidth talk on negotiated we have a spend management team that negotiates and darns done done those off so all those vital points of basically getting into the debt off or economic modeling all.
Our cost structure and working towards that so today I can say that wise Ramesh comedies. This year for but we have a 50 see all like people who are there in the operating doom quarter thinking like entrepreneurs, what thinking like how can we saved his dollar. This is wasteful. This is can we negotiate with the landlord can we do this can we do that so old.
Just kind of stuff has really worked in ensuring as much as possible to bringing elasticities in our business and that's why we are I'll be very in a position that was very scary in the early days as to how this is going to pan out in terms of liquidity and other things. We today stands a little dollar that maybe talk.
We will be in April and kudos to the wonderful teamwork or that was led by Rajiv.
Right well thank you.
Thanks.
Thank you. Our next question comes from the line of Analyst Omar Samalot. Your line is open.
Thank God.
Hi, how are you thinking for taking my questions.
So I I did see in an article from your CTO that mentioned that I think you had 55% of the global workforce moved to a work from home platform I was quite impressive I thought in such a short period of time so.
I was wondering.
How do you see that that work from home portion fluctuate during more say more normalize times and I'm wondering about the cost impacts you know versus maintaining campuses for example.
It's a very good question. We're also trying to grapple with those questions. I mean, it's it's a wonderful journey of course from nowhere to somewhere to almost everywhere damage and a what I strongly believe is that we cannot have extreme views that I mean, the tomorrow's what is going to be everything.
But he bought and work from home and all the centers will go away and vice versa that all work from home will go away and everything will go back to the center it will be somewhere in between its like those classical debates. We had that we will people will not traveled once you get videoconferencing up and running people will travel there's a need for organic.
Exchange they did the need for customers to come and visit a center and say Hello to all during bashing that massad ours, well servicing their clients. It's at times very difficult to do those when they're virtually spread apart.
So are there is a economics there is psychology there is comfort to all these play a as to how this thing is going to pan out and we didn't that their underlying layers of security off loss of control and some of those elements. So we don't know as to how this is going to a unfold, but definitely none of them.
I'm going to go away. So there will be work from home there will be brick and mortar what's going to be the model is going to be a function off for each individual client their aspirations and how they want to see and toward Lear is the preparedness off picking it into the cloud environment. Then that's what about technology team has worked is to create something like a star cloud Diamond which is.
To create a cloud environment from nothing we've had so you don't look from on home agents to do that in a seeks to expedia it wasn't running lap diamond and where people really created that infrastructure and that virtualization. So that's how I see Rajiv I think your views I think we have always debated on that as to where do you feel school and we can be.
On that enroll earlier like a casino, but these are some of the criteria I taught that comes to my mind, often Rajiv your views.
Thank you up real.
Hey, Omar.
Well I was just stop or you know I would certainly [noise] [noise].
I would certainly love to be a fly and was a in a in the boardrooms a fellow far a larger clients, especially red I'm sure. These conversations happening.
You know as to what the product mix or the workforce mix should look like moving forward.
I suspect, it's going to be a function of up to like <unk> and and and it does depend on bad those two lines into say one one of those lines would be you know the risk appetite than a client has because obviously when you move book.
From a a less I'm, calling it drags down 100% secure.
You know location to a notch so secured location and that's the weak line. So you know approach a work from home and a and on the other hand balancing that out weird or you know they need for business continuity and the spend to make has shown how how something can come from so far left.
<unk> and a and literally batter life, the world and bring it to it.
So ah so I suspect the mine moving forward would be a function of do these two things, but I am you know I feel pretty confident that work from home is going to form a bulk of the new normal what extent like approved rightly pointed out I think each client win.
We'll decide individually or as a as we speak we had in touch with outlined for the regular basis.
Trying to get a sense off Oh, what those numbers would look like backed up but the good part is that that you know tomorrow.
If a client saes knockdowns I've been deferred social dismissing noms et cetera, now it'd be nice job and we need to bring them back into our brick and mortar centers. We can do that you know literally.
On a 12 on notice and and they even better part is if tomorrow applying turns around and says I want hundred effect on my work force to be operating from Ah Ah at home you know give me an eye Colm solution.
Like couple who said our star cloud is up and running the you've entered into partnerships with some of that he let alone a bands all over the world and we can now fired up a at home solution and almost a and almost six hours.
So so I think that only downwards data what that mix would look like.
But if you will have any insight on that I'm showing up rule I mentioned I would love to take some guidance from you.
Well and all the other question following that it would be obviously the cost side I guess it make would make common sense that well you know work from home solution would probably be less costly. So you don't have to pay rent, but at the same time you have to somehow deal with the current capacity that you. Currently have there you have to pay for it. So I guess it is kind of a balancing act parents.
Well.
That is correct and but do I understand that you're not let's let's stick anyone sent a index and I'm just using this I'm, making it a binary just for the purposes off this discussion that though that 100% OLED workforce that existed out there let's assume there.
It was a 500 feet or are we at all in all 500 move a you know two way work.
Solution up we would love to exit.
All that expensive realistic, but then we are also bound by the lease agreements et cetera that out in place back, but I do know that Ah you know our legal teams on examining with with the donation Dean odd examining have examined pretty much every lease that we have across the 49 sites that are currently form.
Part of our network and ER [noise].
We've drawn up a complete my math that a in the event we need to go from a you know.
Brick and mortar <unk> at home or what are you going to contain how long when they.
We've mapped out the complete thing. So you know me we will obviously look at the how can we introduce some of those fixed costs and a and not make up group said earlier moved to a model bad or when there's more valuable <unk>, maybe you can variabilize out costs as opposed to.
Being a lot chunk of money or on account girlfriend, and utilities and holding all other things that kick in when you know when you don't know exactly.
Okay, well that that's very helpful and or whatnot and yeah, no matter what will happen is that I mean as you have let's say you have a vacant capacity because though there's work from home. So there's two ways to look at age that do you have a vacant capacity one model is to exit the other model is to fill it up with the which.
To be a brick and mortar business it cannot be work from home, it's like telemedicine off outsourcing radiology, which is a which is not that mission critical or not to somebody else, which can be done externally I because it's a photograph being viewed by a qualified dr. as opposed to maybe surgery that has to be down into hospital, so imagine that.
As a hospital and pharmacy kind off a teen unfolding depending on mission critical activities like a very complex <unk> for site process switching fall Scalds. It involves credit cards. It involves lot of other access to core banking or in the healthcare paradigm.
Getting into very critical conversations about a customer's privacy, which isn't necessarily cannot be take out because the screen displays. So some of the vitals off a individuals there people regulation. So all those kind of work will remain in a quarter and dined environment sanitized environment in a militarized zone. So.
It's those brick and mortar centers LIBOR required. So the idea is that how cohesively. This dynamic unfolding of inventories are always work from home unfolding and how much is that we can capacity and what's the sales pipeline a how's the sales team working together as a team.
Is what I'm I would call is a secret sauce of getting into an optimized environment.
And that's quite dynamic in nature, but I feel very proud that with rig coming on board and our team working as one star team.
It is giving us a lot of confidence that we are seeing a in managing some of those uncertainties. If I if I may.
Micronutrients, if I may I, just had one more comment.
Go ahead. Please go on Mars and think Omar I also wanted to clarify deal that you know, let's assume that as a situation where again I'm. Taking this example of that given earlier were 500 feet or is is emptied out totally in that book forces moved a you know at home and and let's deal.
And does it mean months more to go up we are very no oh listen to the fact that the centers being paid for the income utilities would have to continue to be paid for the seats and being paid for the infrastructures in place and that is the time, it's not it's not going to be that you're going to keep that center.
No. The lights, we can always then do a work off a marginal pricing as opposed to say an incremental pricing and then go inside sell the seats and data center.
For the duration or you know that is left so up so if anybody cognizant of the fact that Ah you know such spend when are we directly affect our bottom line, our ability to deliver value to our shareholders. So so we will obviously be making sure. We've covered we modeled a number of the.
Cincinnati bells, and a fully cognizant of the fact that Oh wherever we have centers they have to be running at full capacity and.
Of course on the side, we've been trying to continue to push ANAC home solution, because we feel that though it is gonna be a part of a new normal it wouldn't have us. It will there will be a significant companies don't look at home as we keep moving forward.
Got it okay.
Okay, and then finally I I just wanted to touch on a previous question you know where you were talking about measures are you were taking too to maintain adequate liquidity I think you mentioned the bank. So I don't know theater, if you're in a position to maybe a talk about.
You know, obviously I don't know how much the impact of all those had on your restructuring efforts on the on bad debt and and a if they're being reset that love you know any any a deferral payment or anything like that so you may need.
Yeah, I can only say that you have had very good discussions with the lenders and they have been extremely supportive friend they understand the current situation.
So we have Ah kind of reach any principal agreement on the amendment to our facilities and we are now working with them and the documentation and the moment, we have a and inflammation and agreement we will definitely filing it get eight can't.
Get back to.
Very good well think your guys. Thank you very much in the best of luck.
Thank you Mark.
Thank you at this time. This concludes our question and answer session I like to turn the call back over to Mr. single to please proceed.
Okay. Thank you very much in deep them and that was Oh, great question answer session and ER on thank you very much latif.
And I really think each one of few binney on this call for joining this afternoon and for your continued support for starting.
And I look forward to speaking to you with Oh, The next report and the second quarter results and Lucky. Thank you very much and thank you ladies and gentlemen are really appreciate your thank you Brent. Thank you very much.
Thank you Sir Thank you, ladies and gentlemen, you right now and good center.
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