Q2 2020 Exlservice Holdings Inc Earnings Call
[music].
And that's in session and instructions will follow that.
If anyone should equate assistance during the conference lease rock stars Exensio, All your batched don't telephone.
I am I do this conference call maybe a question.
I like that seem to go on France, Bluetooth Speaker today, you stay Seeping Bible. Please go ahead.
Thank you and Hello, Thanks to everyone for joining excel second quarter 2020 financial results conference call have a cibolo itself Vice President Investor Relations with me today by telephone or <unk>, Our Vice Chairman and Chief Executive Officer, and Maurizio Nicolelli, Our Chief Financial Officer, We hope you had an opportunity to redo our Q.
220, 20 earnings release, we issued this morning, we've also updated investor Factsheet any investor Relations section of yourselves website.
As you know some of the matters will discuss in this call are forward looking please keep in mind that these forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.
These risks and uncertainties include but are not limited to general economic conditions. Those factors set forth in today's press release discussed in the company's periodic reports and other documents filed with the Securities and Exchange Commission from time to time, you fell assumes no obligation to update the information presented on this conference call during our call today, we've made reference certain non-GAAP.
Financial measure, which we believe provide useful information for investors reconciliation of these measures to GAAP can be found in our press release as well as the Investor Factsheet.
Now I'll turn the call over to vote Cooper Excel Chief Executive Officer.
Thank you Steve Good morning, everyone. Welcome to our Q2 Twentytwenty earnings call I Hope you and your families are all safe and healthy.
As each day brings headlines about the economic recovery a resurgence of over 19 cases I'm concerned about what comes next I'm reminded off the lessons we learned during the early days off the pandemic.
We need to stay I, John embraced uncertainty and keep focused on the things that matter.
This is no small task in this environment, but we are progressing thanks to the efforts and the innovation off our people and close partnerships with offline.
Good day, a vast majority of thought employees are walking from the safety of their phones.
Over 95% of offline demand is currently being food to walk from anywhere business models.
We are slowly reopening offices throughout Bob So, India, Europe, and the Philippines I stay at home all does all relaxed and conditions in those countries allow us to operate with enhanced safety protocols.
We have taken them, it's hard to go and pork full approach aligned with local guidelines on social distancing sanitization and although safety measures.
The same time, we continued to improve our walk from any bad capabilities.
Enabled the flexibility to switch between the two Marlins seamlessly and provide uninterrupted service delivery for our clients.
In fact, you have seen tremendous appreciation from our clients who have recognized our commitment to keeping critical functions operational I know fix it wouldn't be in creating new solutions to address sustained volatility in the marketplace.
Our efforts to date have positioned us very well for success in this environment.
This is a small group has not only remained intact, but even more relevant today.
With an increased need for digital and analytics capabilities and pressure to manage costs client organizations are ready to embrace change and to collaborate with excess to pursue new operating margins.
We are seeing a robust demand across industry verticals and business lines to elevate customer experience drive end to end operations digitization and optimize cost structure.
To illustrate this I would like to shed three specific developments over the last quarter that you reaffirmed my confidence in our current growth trajectory.
One.
We signed several significant long term renewals in Q2.
Do we have developed new solutions, leveraging our data and analytics capabilities to cater to the unique market requirements of this crisis.
Three.
I've signed multiple new clients in a completely butch will save cycle.
First.
We signed three strategic renewals in Q2, which included one of our top five operations management clients and tool apart dropped and analytics funds.
Each of these renewals faced strong competition, but in each case XL came out as the key strategic partner differentiated by our innovative approach.
Long execution focus and the trust varied across the organization.
Second we rapidly launched new solutions in direct response to the crisis, which helped our clients managed volatility in consumer demand and respond to the disruption from the pandemic.
These solutions include managing known so the thing demand for the U.S. small business basic protection program and the development of breakthrough recovery indicators to help our clients predict the shape and timing of the recovery across the U.S.
These new recovery indicators are an important example to demonstrate how we are innovating to help on clients improved agility.
Because this crisis is unprecedented in its scale and in fact.
Traditional models and crisis management plans are limited in that ability to support growth and the company related decisions.
Our solution Leverages, a large number of high frequency granular non traditional data elements aggregated across government directives infection, and hospitalization consumer behavior and business activity across industries to create a composite score.
We use the score to predict a range of metrics such as infection progression spending patterns unemployment trends and consumer confidence.
One of our large global bank lines is using these indicators to better align their marketing initiatives with the uneven recovery across the U.S.
Understanding these emergent trends have been critical to optimizing the timing of marketing and new business underwriting strategies and XL is playing a key role in unlocking these insights.
Oh I wanted to give you some color on new client wins.
We signed a leading Australia based property and casualty insurance as a part of that operational resiliency enhancement plan.
We weren't able to ramp up in a matter all weeks in the middle of the crisis to support that finance and accounting operations and and shore uninterrupted closing effect books.
In another deal you said it was selected to transform complex actuarial services for a leading global investment management and insurance company.
This win was a direct result of the early successes and in fact delivered for other clients in this complex area.
Another compelling win was a utilization management engagement with a large you what health plan that had never previously outsourced its operations.
All of these wins are great examples of opening new clients with strong potential for expansion into new buying centers and product lines.
This gives us confidence that we will continue to win grow and develop our business in a walk from anywhere operating model.
As a result of these efforts are Q2 20 financial performance was better than expected on both revenue and adjusted D. P. S.
Our Q2 revenue was $222.5 million, which represented 9.3% decline quarter over quarter on a constant currency basis worsen the expected 15% sequential decline.
There are three key drivers for this strong performance one.
It does unexpected fulfillment off the available in demand due to foster walk from any anywhere enablement across our businesses.
Two.
Higher than expected revenues from ramp ups, and new wins, driven by our pivot to new offerings relevant to our clients given the current market.
And three lower than expected decline in demand as the quarter progressed.
Operations management revenue declined 8% sequentially on a constant currency basis.
The most significant drop as expected wasn't not travel business.
In insurance, we saw some impact from degrees in claims volume.
Premium audit and survey businesses were impacted by stay at home mandates.
This was partially offset by new growth in insurance business, resulting in a relatively no one in fact in the business.
Our analytics business revenue declined 11.5% sequentially on a constant currency basis, which was also better than our projection.
We expected a steeper decline in analytics revenue due to a higher proportion of project revenue in the business and marketing budgets being temporarily put on offered by our clients.
However, we proactively and certainly pivoted our teams to develop and launch new solutions to help our clients navigate the pandemic.
This resulted in new demand and new revenue in Q2.
Notably, we also added new relationships with be firms to assist their portfolio companies in data management and predictive analytics to respond to the crisis.
As the quarter progressed, we saw appliance resumed their customer acquisition efforts and other projects.
As a result, the monthly revenue run rate off the analytics business has continued to improve.
With the implementation off Q2 wins ongoing client conversations for engagement expansions and a strong pipeline for our new solutions, we expect a strong bounced back in the analytics business in the second half of fear.
Our adjusted EPS for the quarter was 53 cents higher than our guidance off 20 to 40 cents.
This was the result of better than expected performance on revenue.
And the timely and proactive cost containment actions taken during the quarter.
As you know we temporarily reduced senior leadership compensation and took a shock look at discretionary expenses, such as professional fees and subscription costs.
We also took some employee actions to align our cost base without revenue.
Overall, we continue to have a solid financial position and we have better prepared to withstand the crisis.
Throughout this period I have been inspired by the selflessness and the resilience off that XL community.
We have navigated through a challenging few months and we continue to build momentum both in terms of new business development and personal growth.
[laughter] I'm very proud to be part of that effort and I want to tank waterfall associates for that commitment.
As we move ahead, we continue to collaborate closely with our clients on new solutions and operating margins.
Leveraging our ability to unlock the full power off our data and analytics capabilities and striking the right balance off work from anywhere flexibility will be critical to future growth and to a growth of our clients businesses.
This is why we continue to invest.
In and develop our robust digital capabilities across due diligence and knowledge capture.
Sure transition on process training and performance management.
Our ability to ramp up new businesses in a virtual environment has given our clients the confidence to continue with new ramp ups without hesitation.
This is a strong foundation for business development and growth for excess in a walk from an even more.
Our focus remains on the long term sustainability of XL and we are optimistic about our future growth.
In the near term the crisis continues to be ball.
Collectively the overall health off the global economy remains uncertain and the pace of recovery is likely to be gradual an uneven, causing some clients to delayed decisions or slow transitions.
At the same time excel and our clients both have increased confidence and better visibility into Q3 and Q4 financials. Then we did three months ago.
Our full year revenue guidance isn't the range of 922 million to 938 million with growth coming from the implementations of wins from the first half of the year and conversion of our pipeline across new and existing accounts.
We expect an adjusted EPS in the range of $2.60 to $2, an 80 cents.
Driven by higher revenue more work from home enablement expenses and the full benefit of cost actions taken over the past few months.
Overall, we are well positioned to acquire our share of market growth as the economy recovers.
The pandemic has created many business challenges, but just has also spot the mandate to innovate and introduce new ways of bookings that are driving companies of all types to challenge the status quo.
We are encouraged by what we're seeing in our own business as well as you're not client businesses.
Our client relationships will strengthen my working even more closely throughout this period of heightened stress and we continue to collaborate and innovate to find solutions to emerging challenges.
Look forward to embracing this culture of change as an opportunity to grow I'll now turn the call over to monitor.
Thank you Robert and thanks, everyone for joining us this morning.
Provides insight into our financial performance for the second quarter of Twentytwenty, followed by our outlook where the business.
All revenue growth numbers matching hereafter or on a constant currency basis, my discussion of year over year growth percentages for improvements will be excluding how integrated for 2093 true comparison with 2020 worms on west Magic otherwise.
The quarter, we generated revenue of 222.5 billion down 6.8% year over year.
This includes one time cobot related pass through revenue of three point Threebillion.
Sequentially from Q1 revenue was down 9.3% revenue for the quarter was higher than the guidance. We provided you to more than anticipated demand and a higher level of fulfillment.
Revenue from our operations management business line by three reportable segments, excluding analytics was 140.8 million.
Down 6.7% year over year.
Paired to Q1 of this year revenue was down 8%.
Sure. It's had revenue of 81 point Threebillion down 4.2% year over year. This decline was driven by lower volumes and supply constraint related to clients refusal to out work from home due to data sensitivity.
Okay Fair showed strong improvement with revenue of 25 million Oh.
3.2% year over year.
This growth was driven by the ramp up of new client wins in 2019.
<unk> area of clinical services.
Emerging reported revenue of 34.5 billion, which was a year over year decline, 26.8% due to the reduction in travel transportation and logistics volumes.
Analytics had revenue of 81.7 billion down 6.8% year over year. This decline was driven by lower volumes banking and financial services lines due to covert related demand contractions, while insurance analytics continued to grow year over.
A year.
Our asking expenses declined 80 basis points year over year, 18.8% of revenue driven by cost initiatives initiatives, we announced in may and lower discretionary spending.
<unk> quarterly impact of these cost initiatives should be reflected in the second half of the year.
Adjusted operating margin for the quarter was 9.4% down.
30 basis points.
Year over year, driven by lower revenue due to kobin related demand and supply constraints higher employee cost and net kobin related expenses of 6 million.
Our GAAP income tax rate for the quarter was 32.4.
Excluding the impact of a one time discreet tax expense totaling one point threemillion related to the re measurement of deferred tax balances, India. Our income tax rate was 22.1%.
Our adjusted.
Yes, the quarter was 53 cents down.
28.4% year over year on a reported basis. During this pandemic period liquidity cash conservation remains a key priority.
We exited the quarter with a very strong balance sheet.
Our cash flow from operations for the quarter was 72.5 billion, which is the highest quarterly amount we have ever jeez.
We ended June with 336 million of cash and short term investments.
And borrowings of 249 million, resulting in a net cash position of 87 million up from 32 million on March 31st as a reminder, in April we repaid 100 million of a mouse previously drawn from our credit facility in March.
Now moving to our six month performance our revenue for the period was 468.5 billion down <unk>, 0.9% year over year. This decline was driven by cobot related supply and demand constraints as mentioned earlier.
Adjusted operating margin for the period was 12.3% down 220 basis points year over year, driven by onetime kobin related headwinds and negative operating leverage.
Adjusted EPS for the period was $1.35 down 7.5% year over year on reported basis.
In the first half of the year, we generated cash flow from operations of 58.9 billion compared.
47.7 billion in the same period last year.
This reflects in an effective implementation of our cash conservation strategy any fishing working capital management.
During the first six months of a year, we spent 22 million on capital expenditures as we continue to invest in the business for the long term, we expect our capital expenditures to be between 30 to 38 million in 2020.
Our effective tax rate for the first half of the year was 25.5% and we expect the 2020 <unk> effective tax rate to be between 25, 26%.
During the first quarter, we repurchased 12 million, although our shares we suspended our repurchase program in the second quarter, but we have resumed purchases in the third quarter with our intent to keep our share count flat in 2020 over 20 Nike.
Now moving on to the outlook for the year, the economic environment remains uncertain and the piece of recovery Bob Each day, given the nature of the pandemic. So there are number actors that we may not be able to predict accurately does our outlook could change later this year however, as many.
I wrote it we have better visibility in the business today as we look at the second half of the year compared to May this year.
We have seen increased demand in operations management as the economy slowly opens up in a pandemic has provided multiple opportunities in analytics as our clients re evaluate their risk models and opportunities. This gives us confidence to read zoo, providing full year 2020 guidance.
We expect revenue for the year range of 922, and 938 million, which represents a year over year decline of 3.5% to 5% on a constant currency basis.
Actually we expect steady quarter over quarter revenue growth for the rest of the year.
Analytics should have a higher growth rates in operations management.
Highpoint is strong and the sales cycle is shorter.
Our guidance for adjusted EPS is for a range of $2 in 60 cents to $2 an 80 cents.
In conclusion, we think the second quarter was the trough in revenue and adjusted EPS, We cannot control outside economic forces created by the pandemic that may impact our business, but our visibility gets better as each month goes by we do have the flexibility to manage our cost and we have shown.
That we can adapt our infrastructure to changing conditions.
No rodent high we'll be happy to take your questions.
[noise].
And the original queuing up the questions.
You say, ladies and gentlemen, if you have a question at this time, we spread hi, Ben to number one.
Stone, California, because that's been happening and paid are you we stay loved it sounds from the Q basket bounty. Please note that we will only allow one you feel question and one follow up question.
[noise] be handling first question from to line up I'd be Connie from B. Riley. Your line is hoping you may ask your question.
Yeah, Hey, guys, thanks, and nice job.
Thank you.
Yeah in I guess I was wondering so Q, you know Q2 or the revenue declined in the high single digits. It it seems like the guidance for the rest of year is also kind of along those same lines kind of mid to high or I guess high single digit decline huh.
Why wouldn't that get a little bit better or you know maybe this is a little bit of conservatism just kinda we've done.
So dave or be guidance for the full year for us at the is basically between a decline of 3.5% to 5% on a constant currency basis and as you know that in 2019, we had revenues from 10th integrated which was.
As completely gone down so the decline really is only 3.5% to 5% from last year.
Which is much better than the decline that has taken place in the second quarter. So we do see.
Sequential improvement in our revenues to take place in Q3, Q4, and a you know that's how we've modeled out our business.
Okay, Okay, Gotcha, and I guess, the second thing you know we look at margins ex health integrated from from last year. You know I think I think they were around a a 14% 14.5% or something like that this year. When we look at the revenue decline it it seems like give or.
To take 50 million dollar revenue declined lets say, but about a 25 million dollar adjusted EBIT decline, which is pretty high incremental margin in I'm wondering I guess why is that and then I would imagine next year you get a lot at that back again, but maybe you can just talk to the margin dynamics.
Yeah, Dave I'd be happy to take that question.
So we've done a lot of work in terms of our cost initiatives.
In many different areas, you know compensation, 60% of our costs.
And we've done a lot of work in the last three months to really to really.
Bring down that cost to be better aligned with our rep. You know going forward. If you look at our margin in our guidance you know you're going to see that Q3 Q4 margin is getting very close to what our historical margins are.
And we feel very confident about that because we put a lot of that in place and we feel like we put ourselves in a nice position.
For the next six to 12 months as we get out of this pandemic.
And then what you'll see is whose revenue growth smarts. It starts to grow we'd run into year end. It used to 2021 and that's when you'll see some the cost come back, but I think the one thing that has no shown us in this though in this last read a four month that you know we can adjust our model.
And get back to our historical margins even in a period that we have no you know reduced revenue versus the prior period.
Yeah. That's helpful. It seems like you're really well positioned for the for for the snap back. So thanks, Thanks a lot.
Yeah.
Thank you we don't have another question from the line from Marci Kathy from Wedbush Securities. Your line is open you may ask your question.
Hey, Thanks, a good job guys can you comment on a new logos for the quarter, maybe some color there the booking pipeline also for the quarter maybe for the first half.
And then in this context, where do you see the most promise in terms of your pipeline into the second half and maybe even into calendar 2001. Thanks.
Sure machine. So look I think I'm very proud of the fact that we were able to sign up or 19 wins in the first half the year and many of these are large renewals. In addition to the new wins that we had.
In and also in the second quarter of the or we had as we announced nine when so actually it's itself fairly even based activity a little bit better than 2090.
In terms of bookings, we really don't provide any information on that but in terms of our pipeline.
Our pipeline at the end off the second quarter is much stronger than bad we were at the end of the first quarter. So actually we've seen new deals coming into the pipeline larger deals coming into the pipeline and the total size of the pipeline has increased at the end of the second quarter so beyond that.
Very encouraged by B.
Client conversations about taking things and.
How that pipeline is progressing.
Looking forward into the second half of the year.
Oh, the one thing that we've been pleased about is that not only have lead the neighbor too.
Effectively operationalize the work from anywhere business model, but we are also being able to do remarks transitions remote hiring and the more processing. So frankly that is giving us the confidence to be able to bill and grow our business in Q3 and Q4.
And that's giving our clients and prospects to commit to us and engage with us in terms are creating more demand and more revenue growth into the second half of the so frankly, we think you know we are well positioned to benefit from this as we move forward into the next two quarters.
Yeah.
Thank you pay Allen next question, it's constant to line up and Bryan Bergin from Cowen. Your line is open you Matthew Weston.
Hi, all good morning. Thank you one of a keen on the deal signings that you called out, particularly the new ones can you give us a sense on whether those are a competitive takeaways or more so initial outsourcing relationships just curious how you're seeing demand play out in those two subsets.
Sure. So [laughter] Ah I think the three do you, but be I'm not you know a highlighted in our prepared remarks are two of those were actually sole sourced a deal.
And you know, that's where we had a client relationships and I think declines felt that we will best position to support them in those endeavors. One of them was a competitively bid deal and we went back against our competition.
I think in this period of uncertainty and volatility or there will be a shifting of client relationships and I think we will see winners and losers. So clients will gravitate towards doors plans that they have higher confidence in terms of providing them.
Brad uninterrupted service delivery and the high quality service delivery, but also I've been thinking about embracing digital transformation and using a lot more data and analytics, they're going to gravitate towards those players that can effectively deployed digital transformation.
And effectively deploying a better use of data management and analytics and I think that trend plays very favorably for us.
Okay, and then a follow up here on fulfillment or are there first our there's still some short term for film and constraints in three queuing for Q and then just longer term, how you're thinking about the operating model here given how it's it's working well and this work from home environment.
Sure Brian So yes, that's still is a fulfillment a you know issue for us and we think it's roughly about 5% at the present moment, we think it's gonna get a little bit better in Q3, and we think a you know it might only be two or 3% and then there would probably the main two or 3% or you know in the fourth.
Quarter.
The reason for that is as you know that on a you know the spikes in the covert cases, taking place all across different geographies and different.
Cities and countries are being impacted by that are on a continuous basis. So as that takes place. There is a shifting off our working in an operating business model that we have to enable I'm not definitely calls for some amount of slippage.
Now going forward into the future, we're really trying to build up this work from anywhere business model, which will allow us to seamlessly transition from work from home owners are more or you know operating model to a walk from office and and you know work.
Not facilities on enough premises.
Oh, we really think that we as an organization and and as a strategic partner to our clients.
Needs to have the fluidity and the flexibility to rapidly move from one business in order to the next and this kind of volatility in this kind of uncertainty is going to demand for long periods of time, so we need to be prepared to be able to make that ship as as its needed and you know I think introduced.
I think that level of resiliency into our business model is going to give our pipelines increased amount of confidence of partnering with us, giving us more work to do more strategic work doing more complex work to do as they move forward and again, we think that that is a very very positive development.
But you know we can see as a long term trend as we partner with our clients.
Okay makes sense. Thank you.
Thank you you have another question from the line out that's when you tie ins on baby more then your line is hoping you may ask the question.
Hey, Thanks for taking my question and good to hear boys and that's all of you Uh Huh.
Go ahead are you seeing declines are willing to outsource well that they would not have considered offshore in before.
You mentioned one has climbed.
Oh that had never outsourced Oh.
And you find declined in the quarter I'm wondering if your addressable market within some of their existing clients could also increase as a result, though the spend too much.
[noise] sharply and good to show you as well and know that Youre safe and nobody as well, let's hope everybody says that way.
Yes, we are seeing a number of new clients emerge that previously would not have considered outsourcing or using a partner for operations management as well as for our analytics practice.
And I think a you know in many ways to spend it makes has been a catalyst in terms all companies thinking about the resiliency in a much much more broadly.
And in a much more open we Oh, you know as such so today, what we're seeing is.
Clients and prospects are willing to engage with partners. If that relationship is going to help them improve the resiliency improved their ability to provide uninterrupted service delivery to the end customers and actually lowered that cost and allow them to use data and analytics in a much more.
Significant way.
So we just see one or healthcare or you know client embrace this for the first time or in the second quarter and there are many other clients and prospects that we have in the pipeline.
No not thinking off going in the same direction.
Now I see our when we entered Q2 was that the transition might be difficult. The due diligence on these processes by us might be difficult and clients would in generally be hesitant to embrace a operations management and outsourcing in this environment.
It seems like that's not proving out talking to be corrected on what you're seeing is actually we're quite effective in recruiting remotely training remotely you know migrating remotely and actually introducing a lot more resilient seen into the system and Ah that's visible to us and that's visible.
To our prospective customers as well so frankly, a this has been quite positive.
I'm, Oh, and how should we think about sales cycles and transition expenses like you mentioned in a bunch will mark.
Oh, Yeah. He is just too long term changes to the cost structure margins of pricing and I've loved to sales and transition Mark.
Yeah. So you know that there's several questions that you Boston in that so I'm trying to address each will be elements.
So on the sales cycle [noise] or we clearly are seeing a bi polar decision, making by our clients on the one side, we have seen clients actually accelerate the decision, making and that cycles or you know and they want to move forward much more rapidly.
And enjoy the benefits off to kind of value that we can deliver to them and the kind of partnership that we can provide to them.
On the other side, we are seeing some clients who are pushing out decision, making as well because they don't want to undertake this kinda put transition in this kind of an uncertain and the Walton environment. So frankly, we know we've got clients and prospects at both ends of the spectrum Uh Huh.
Which are there.
I would tell you that are taking a look at about pipeline and taking a look at the deal activity on average, we're actually seeing and improved our decision making on behalf of arc mines.
The second question around but sure transition and migration and battery, reducing the cost absolutely because there is no cost a you know for people to travel.
Ah that cost us certainly goes down up very significantly there are no issues in terms of visa and things of that but that takes on the timeline quite significantly.
But on the upper hand on the time period, and the tools that need to be developed in order to have knowledge transfer and learning.
That is an investment that we are making to allow our employees to be able to learn a much more quickly on in a remote environment. So that there's a fair amount of investment that is being made in terms of enhancing the learning and re skilling opportunities.
For our employees and that kind of offset some of the travel related costs that are that Ford migration and transition.
I think overall.
The cost structure and the margins are our expectation is that it would not be remained the same as what it was before.
So that should not really change and this should be perhaps a much more stable and kind of situation that we will enter it.
Got it thank you.
Thank you. Our next question, it's time to line up Vincent Colicchio from bearing everything. They can we think your line is open he may ask your question.
Yes, well it I'm curious are.
Are you seeing opportunities to outsource more processes as clients and some of your weaker verticals such as travel to sort of.
Sure. So my current you know weakness.
Mm.
Children's until you know first of all for US the travel industry vertical is a very small percentage of our total revenues and you know definitely impact to US there has been a you know minimal.
But at the same time, you're right I I think in those industries and in those areas, where our clients business models have been more significantly impacted there is a greater propensity for them to think about innovative bees off being able to reduce.
Sure.
Be able to create.
Increased amount of flexibility into that operations and introduce a lot more resiliency. So we are seeing a you know that the traditional conventional or ways in which clients will partner with us those business models are being changed and now people are looking at this.
With a much much more holistic and open way of thinking about it.
And the drivers of this really are resiliency flexibility and cost and Oh plays very well to our spreads.
And so we're hearing that that there's some captive opportunities out there or is that something you'd consider now or is that a you know something that's so often the distance.
Yes, so a full circle, a you know a captive for us and a growth in the captive is always a positive trend because it it validates the business model.
But I think your question is much more about whether there's an opportunity to take over operations from a captive or might that actually happened. The other way around better you know a client might set up a captive and try and build or something on that at all.
I think we are definitely seen that those captives, which did not performed well.
During the second quarter and during the height of this crisis.
Clients are definitely read thinking as to how they should be setting up the operating business margins for the long term and that's certainly our a number of opportunities for us to partner with these clients and to help them with our size our scale, our geographic distribution and our leadership talent, but.
And managed large scale operations and so there are definitely a number of opportunities out there for us to be able to manage.
On the other had a there are definitely concerns on information security and that's something that is something which will lead to a.
A greater creation of captains as well so again, we're going to see this trend play out in both directions.
And I think.
You know on balance a this is again going to be positive for the industry and positive for us.
Thank you.
Thank you say like it will have a magic lessons from the line outside testing that does not.
I'm a lot of financial your line is okay. You may ask your question.
Hi, Thanks for taking my question.
The first one.
It's pretty seen any sort of volume or transactional work in your.
Health care or insurance business that could be just temporary Billy gifford rather than last in general.
Sure Justin So Oh, we have seen a reduction in volume, particularly around the claims in the insurance space on on the PNC sign on the property and casualty side.
But on the flip side, we have actually seen greater volumes on disability and life and annuities.
In healthcare a again some of the work that is done around Precertification Oh, we've seen a reduction in more remote there because obviously the number of elective surgeries came down quite significantly.
That's been reduced no longer term our expectation is that in the healthcare side, you know, particularly with elective surgeries, but this is going to come back over a period of time, because you know those folks that needs to undertake to surgeries are going to undertake them and therefore that volume will come back on.
On the property and casualty side with things like auto claims, it's obviously dependent on the number off.
You cars in cars sales and auto sales that take place and the amount off a usage of automobiles that takes place.
And then it's a it's a mixed picture because.
Yeah. The I know people are moving away from a shared right model and going more into a direct ownership or leasing off their own automobiles and taking more control looking with themselves and therefore, we see that as a positive trend and also since people less people are flying more people on actually taking road trips.
I think eventually we'll see more traffic a you know as such so eat it obviously depends on how things play out some of the recovery indicators that we monitor and thus are which is on the basis of mobility.
Seems to indicate the back William will come back well for us, but that's not something we'd have to wait and watch and see how it progresses.
I appreciate the color there.
And then just as a follow up can you talk a little bit about how you're managing your talent pool I'm, having a static capacity to the starting to fulfill the demand when it comes back you know versus some of the near term.
Decisions to maybe put people on that ensure character for per well.
Yes, I I think that's an incredibly important a question then you know we're dealing with that in a very thoughtful strategic oh unplanned manner. So we know that there will be some ebbs and flows are with regard to the requirement of the deployment of talent.
Yeah. So.
And when there's a reduction of volume in a particular client area or in a particular process, we'd look at ways in which we can redeploy that talent in other client areas, where there is actually an increase in requirements and therefore, what becomes really critical is an ability to quickly.
Leased skill and rely on a capabilities and redeployed resources.
We've actually been very successful in terms of redeploying our resources are not only across clients and processes, but also across geographies and that's been up very helpful and I think maintaining that agility.
And giving the right tools to our employees to be able to be skill and you know redeploy them, that's going to be very very critical.
Oh in areas, where we do have surplus talent, we've actually used this time to train and develop them and we've undertaken a huge amount of training and development of our talent pool. During this time period.
And with the higher productivity that we are seeing Ah that's been a very very effective.
Now going forward, we do see a number of areas that were really be adding on new talent. So for example in our analytics business.
We do have an annual cycle of hiring from campus and from college campuses that program for Us is.
Fully intact and we would we are hiring you know a new employees from the campuses.
And we'd be hiring more than 300 employees then in the analytics side over the next several months or you know to be able to help us with the groups that we anticipate in the analytics business.
Thank you.
Thank you again, everyone. If he would like I said question, we spread if part and then the number one key on your Touchstone telephoned. We do have another question from the line Maggie No line from William Blair. Your line is hoping you may ask your question. Please.
Hey, this is Ted on for Maggie I kind of wanted to build on that.
Point there.
Could you expand on the deal pipeline or started to pipeline that you're seeing within the analytics is that a little bit more color to what you're seeing there. Thanks.
Sure.
So Ted what one of the things, which we anticipated unexpected is that the use of data and the use of analytics will increase given the increased one utility in the market environment.
So every single client in order to be able to take better decisions in a volatile economic environment needs to actually leveraged data and analytics.
And make decisions based on the data and knock on the basis of a gut feel.
That's becoming a you know that's being highlighted very very clearly in this environment.
So what we're seeing is there many clients who actually have a lot of data internally as well as externally, but this data is dark for them and they're unable to use it because the data has not been stored in a manner that is usable it has not been cleanse in a manner that allows it to.
Maybe a you know a use for a predictive model and there's a lot of effort that's required in terms of helping them, but that data management architecture and the data management capabilities. So we're seeing a among focus out there.
Also saw that some of the marketing initiatives, what initially pushed back in the months off March and April and me.
And now that the economy is reopening we're seeing all of those marketing efforts come right back.
And as you know or whether it's a bang on an insurance company or a retail company or whatever.
There are risks associated with marketing, where if you acquired the wrong kind of customers you have higher level of credit losses and on the upper hand, if you do not acquired the rights kind of customers you will lose market share. So.
So frankly, our ability to deploy analytics and help these clients precisely figured out where they should be extending more loans and more credit or more underwriting and more risk and where they should be pulling back is a critical component to the eventual success or failure and therefore the.
The use of analytics is actually going up very very significantly so the pipeline for us today in analytics is actually very cool and this is across.
Industry verticals and you know I think the other thing that happens in analytics is that the decision cycles are small and now and then much shorter in timeframe and our ability to deploy and quickly realize revenue from this is also much better so frankly.
We have increased confidence in our analytics business the growth of that in the second half would be.
Thank you.
I was just what's your what's in your current levels on into full year guidance and iron ore benefited from the low end to the rest.
Under the right.
Yeah.
Let maurizio answer that question for you.
So.
Could you could you just repeat your question that you came in and out a little bit.
Yeah sure. So what is the current levels visibility into guidance and then.
What is kind of represented at the bottom end of the range and then what gets you to Tappan Zee bridge.
Yes. So we are we're very focused at the midpoint of the range. You know we have about 90% visibility into the second half of the year, which has come up significantly since we released back in early may and it really comes and it really we start to seed in each of the differ.
And segments and a lot of what role. He just went through particularly in analytics, where we whereby we have more a much stronger pipeline and also a lot more visibility.
When you look at our reach 922 to 938.
We are focused at the midpoint at that 930 area 922 is more of of conservatism because we really you know it we really don't know to certain extent.
If if if if the environment will change at all between now and yet the year in terms of the pandemic and how business conditions could change. If there is a worsening conditions that that occur because it depends on it and now and that's what that 922 really reflects the 938 is more of it.
Its case scenario.
Within our pipeline is it potentially everything comes through.
That we believe we would would give us the ability to get that high yet, but you know core for modeling purposes, and how we're kind of looking at the second half of the year. It's really at that midpoint is what we're focused on.
Alright, great. Thank you very much.
Thank you we do have another question from the line of Ashwin Shirvaikar from Citi. Your line is hoping you may ask your question.
Thanks.
Hey, guys.
Hope you guys are doing well I My question I just wanted to kinda.
I think past it could kind of the current situation and ask about or.
How do you feel with regards to the industry.
Exiting all of this do you think.
That you guys will be in a situation you can grow faster than before I mean, how how well positioned argue as it relates to the types of conversations that you are currently having with your.
With your clients do you need to add any capabilities can you comment on that.
Sure I'll start Assurant and.
Oh, yeah, youre, staying indoors and safe as well.
You know I think I'm thinking about our business model and the industry over a longer some period. We certainly think that this pandemic has actually been a catalyst for an acceleration of the use of digital transformation. It's been a catalyst for the use of data and analytics and.
Over a period of time cost management is going to become really really critical.
For a number off the businesses, but be sort of.
So frankly, all three of these are extremely positive trends for the industry.
And for for our business model as such.
The areas that we will need to invest in a lot more around is gonna be about how to be a neighbor digital transformation, particularly by serving our clients on the cloud and how do we transition a lot about beta onto the cloud and make this a basically a model which can allow.
I was to work from anywhere.
There are also a number off a remote.
Our execution remote training remote learning our remote transition that with that we will need to invest in on a number of tools and technologies to be able to enable that.
Oh, you if you think about it we're gonna go to a much more distributed workforce rather than a workforce that is focusing on concentrated in a few cities in a few geographies, so enabling bad enabling collaboration enabling learning, enabling well being off Oh.
Workforce, a those are going to be critical elements that will have to investing and continue to focus in on but I think up you know the opportunity set for our industry.
Does become a lot better with the with the how these trends are going to play out and it's something which I think should benefit or the industry are greatly.
Understood and if I can hone in a little bit more on the investments you mentioned many of them sound you know collaboration tools and things like that.
That sounds more like a internal investment that you might make in in your own technology.
Rather than an acquisition would that be.
So these are not necessarily capability sets from the perspective Oh.
You know domain expertise. These are more how do you deliver is that connected anchorage representation.
Oh, well, they're two different things Ashman I think over and you talk about collaboration learning and well being.
I think it's important to think about that as what we might need to do internally, but actually I think about it.
We need to create an ecosystem with our clients to be able to ensure ongoing collaboration with our clients because a lot of the innovation on digital transformation a lot of the innovation around analytics is going to be in a partnership more with our clients. So as you know today, if you know the business relationship.
As much more intertwined and I think the talent relationship is also going to be much more intertwined. So many of these collaboration tools learning tools work flow tools are going to involved not only us, but also our clients and therefore being able to put them on the cloud and be able to engage with any cline any person.
Anywhere is going to become extremely important the second part could you spoke about it is for us to be able to add on new capabilities and new services that we can offer to our clients. Many of those were going to create organically ourselves as we've already demonstrated that capability, but you're right.
There will be others, where we will acquire and we will integrate and those capabilities and those are services. So that we can be a much more of a full service from product lines.
Got it. Thank you for that we certainly they've been interesting times.
Yes, [laughter] due [laughter].
Thank you all for your Internet. This concludes todays call.
Thank you.
Thank you.
Thank you for scientists have every day.
[music].
[music].
[music].
[music].