Q3 2020 Information Services Group Inc Earnings Call
Good day and welcome to the information services Group third quarter results Conference call. Today's conference is being recorded and a replay will be available on I guess cheese website within 24 hours after.
At this time for opening remarks introductions I would like to turn the conference over to Mr. Barry Holt Sir. Please go ahead.
Thank you operator, Hello, and good morning, My name is Barry Holt I'm, a senior communications executive at all you see.
Like to welcome everyone to ice sheets third quarter conference call I'm joined today by Michael Connors, Chairman and Chief Executive Officer, and David Berger Executive Vice President and Chief Financial Officer.
Before we begin I would like to read a forward looking statement. It is important to note that this communication may contain forward looking statements, which represent the current expectations and beliefs of the management of Lifesci concerning future events and their potential effects. These statements are not guarantees of future results and are subject to certain risks and uncertainties that could cause actual results.
To differ materially from those anticipated.
For a more detailed listing of the risks and other factors that could affect future results. Please refer to the forward looking statement contained in our form 8-K that was furnished this morning to the FCC and the risk factor section and I guess G.'s form 10-K, covering full year results.
You should also read I She's annual report on form 10-K, and any other relevant documents, including any amendments or supplements to these documents filed with the FCC.
You will be able to obtain free copies of any of ice cheese FCC filings on either I guess she's website at www Dot ice sheet dash, one dot com.
The Fccs website at Www Dot FCC Dot Gov.
I see undertakes no obligation to update or revise any forward looking statements to reflect subsequent events or circumstances. During this call. We will discuss certain non-GAAP financial measures, which I assume he believes improves the comparability of the company's financial results between periods and provides for greater transparency of key measures used to evaluate the company's performance.
The non-GAAP measures, which we will touch on today include adjusted EBITDA adjusted net earnings and the presentation of selected financial data on a constant currency basis. non-GAAP measures are provided as additional information and should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP.
The reconciliation of all non-GAAP measures presented to the most closely applicable GAAP measure. Please refer to our current report on form 8-K, which was filed this morning with the FCC.
And now I'd like to turn the call over to Michael Connors, who will be followed by David Berger.
Mike.
Thank you Barry and good morning, everyone.
We had a very strong third quarter, even in the face of this global pandemic.
Revenues were up 7% and EBITDA up 11% sequentially.
The Americas in particular coming in strong.
With revenues up 11%.
Cash remains strong with operating cash for the quarter or $10 million.
And our cash balance growing to $38 million up 21% over Q2.
In the last 12 months why is she is generated $52 million of cash.
A testament to the cash generating power of our business and our disciplined operating approach.
Much of our success this quarter is due to the extraordinary efforts of our global team.
The ability of our people to quickly adapt to new ways of working.
Provide continuing high quality services to our clients.
And win new business in a work from home environment.
It's been outstanding.
Our go digital strategy launched well before the pandemic.
It's helping us weather this economic and health crisis.
Our results demonstrate the relevance of this strategy.
The resilience of our business and our people.
Our disciplined management in the Powerbar relationships.
With the world's leading companies.
During the third quarter, we saw bright signs that a number of our industry segments.
Our insurance public sector retail and telecom verticals were all up double digits over the prior year.
And sequentially, we saw double digit growth in our energy life Sciences and tech verticals.
On the books side hospitality banking in manufacturing were all down double digits versus the prior year.
Our pandemic ready services from cost takeout in captive monetization.
Supplier governance and pricing benchmarks.
The cloud automation data analytics, nexgen workforce solutions and networking.
Our helping clients adapt to the current situation and prepare for a digitally turbocharge future.
Virtually every enterprise knows digital is the future and the best way to improve efficiency.
Each customers find new opportunities and keep employees connected even when working apart.
That's why many of our clients continue to invest in digital.
The pace of that investment may vary depending on the industry, but it is continuing.
With these market in industry insights as a backdrop.
Let me further detail our financial performance.
Revenues, EBITDA and EPS for the quarter all exceeded expectations.
Revenues were $62 million up 7% sequentially over Q2.
On a year to year basis revenues were down only about 6% when you exclude the billable TD that was absent due to the ban on travel.
This is the result of continued softness in the travel transportation and hospitality industries.
And as mentioned last quarter, our working with a number of clients in distress like.
Like our cruise lines on hotels to offer reduce rates and extended terms.
During the quarter, we served 434 clients.
That's up 6% since the beginning of the pandemic.
And we generated $19 million in recurring revenues, representing 31% of our firm wide total.
From a profit perspective, our adjusted EBITDA of 8.2 million was up 11% from Q2.
Thanks to our early and aggressive cost actions and our higher margin mix of products and services that are helping clients whether this downturn.
We will likely continue to see revenue pressure in the near term as clients delay spending on major technology initiatives.
Even as demand remains focused on our higher margin pandemic ready services.
As a result of our actions and our resilient portfolio, our capital position continues to grow even stronger.
As I mentioned, we generated $10 million in cash flow from operations in the quarter.
Bringing our year to date total to $37 million.
And we ended the quarter with a cash balance of $38 million.
Versus $14 million last year at this time, even after investing 2 million from the neurology by acquisition.
As discussed last quarter in July we acquired and refine a market leader in intelligent automation enablement solutions and services since.
Since then neurology buys operations have been fully integrated into iced tea automation.
We are already benefiting from the combination with neurology by solutions, providing a strong market differentiator for our IC automation business.
Now turning to our regions the Americas delivered $35 million in revenue in the quarter up 11% sequentially down 13% versus the prior year.
Hey reduction in client billable Teeny contributed about 500 basis points of this decline.
As mentioned last quarter, we accommodate a number of clients in the U.S. on rate reductions extended terms and other areas in some of the harder hit segments like automotive travel and hospitality.
We did see good sequential growth in our higher margin services of cost take out automation in industries like energy life Sciences intact, all up double digit sequentially.
Key client engagements in the third quarter included Corning.
And teen.
Hydro one.
You as steel.
British Columbia public health and National grid.
Among our significant wins I asked you signed a three year govern ex deal for close to $2 million with a major financial services firm.
I asked you will migrate more than 1000 contracts for this client to our govern ex software platform.
We also were awarded a two and a half million dollar 29 month Governor contract with a major health care company one of the leaders in the fight against COVID-19.
And all of this done any remote selling and delivery environment.
At a time when we have seen an uptick in our client satisfaction scores.
Turning to Europe, our Q3 revenues of $21 million were in line with Q2.
Down 7% from the prior year.
During the quarter he will be a more than doubled its network services revenue and delivered double digit revenue growth in our research business.
Among our industry segments consumer energy life Sciences, and financial services were up offset by a decline in manufacturing.
Key client engagements in Europe in the third quarter included Alianca.
Venture Shaw all.
All the.
Volkswagen and new day.
Among our wins I assume it's been awarded a million a million dollar contract in Germany, with a multinational optics and medical device manufacturer to support their clients global strategic sourcing program.
In addition, a leading global for global pharmaceutical and life Sciences Company.
As engaged I see to lead the modernization of their enterprise landscape, but.
The win for nearly $1 million follows the successful delivery.
I'm, an HR tech engagement with the client earlier this year.
Finally in Asia Pacific, We reported double digit sequential growth with revenues up 19% to nearly $6 million driven by the public sector Tech financial services and insurance industry verticals.
During the quarter, while she was awarded a $1.4 million govern ex engagement.
With a Japanese multinational brewing and distilling company.
This contract represents the largest total contract value annuity deal to date variety in Asia and it builds on our success supporting this client through 10 engagements over the last two years.
Other key clients in the quarter. This region included Rio Tinto.
The Australian taxation office it.
The Department of Defense the Department of home Affairs.
Insurance Company I AG.
Hey, M.P. surfaces and aims at banking group.
Now, let me turn to guidance.
As we indicated last quarter, we're working through is still difficult Colgate environment.
And while it's too early to predict the trajectory for the recovery.
We continue to plan for a return to prior levels of activity.
The crisis as we all know is far from over.
Although there has been some flattening of the curve and in some countries. We continue to see surges and this is impacting our clients' decision making.
Especially those in consumer facing industries.
This crisis likely only begins to subside with the introduction of vaccines.
Apart from the pandemic induced impacts on client demand in Q4, we're looking for a continued reduction to near zero of client T. any reimbursable expense, which usually runs about 4% to 5% of our revenues.
And though we are planning for our lives is cheap produced destination events to eventually return.
We're not forecasting any revenue from in person events for the balance of the year.
On the upside as mentioned previously we are seeing strong client interest in our.
A rapid cost optimization services.
Supplier and risk management.
Network capability and resiliency.
Digital workplace solutions.
And business recovery planning.
Longer term, we think the pandemic will accelerate client demand for and investment in digital transformation services I SG provides.
Balancing all of this we will continue to provide guidance on a quarterly basis based on assumptions, we are making on a continuing volatile environment.
For the fourth quarter, we are forecasting revenues of between 56 and $58 million.
And adjusted EBITDA between seven and $8 million.
As a result of the cost actions, we have taken and in anticipation of higher margin services being delivered in the quarter.
So with that let me turn the call over to David Berger, who will summarize our financial results David.
David.
Thanks, Mike and good morning, everyone.
To reiterate what Mike said, we managed through a difficult operating environment and delivered a solid third quarter.
Revenues for the third quarter were $61.6 million up 7% sequentially.
This compared with $68.1 million in the prior year down 10% on a reported basis and 11% in constant currency.
Currency positively impacted reported revenues by $1.1 million versus the prior year.
Excluding reimbursable client travel costs of $2.4 million, which accounted for approximately 350 basis points of the year to year decline.
Revenue was only down 6% versus last year.
Reported revenues were $35 million in Americas up 11% sequentially.
And down 13% versus the prior year.
20 point Ninemillion in Europe flat sequentially and down 7% on a reported basis and 11% in constant currency versus the prior year.
$5.7 million in Asia Pacific up, 19% sequentially and up 8% on a reported basis versus the prior year and up 4% in constant currency.
Third quarter 2020, adjusted EBITDA was $8.2 million up 11% sequentially and compared with $10.3 million in the prior years third quarter.
We reported third quarter operating income of $3 million compared with operating income up 5.7 million in the third quarter of 2019.
Net income for the quarter was $2.1 million up 19%.
Paired with net income of 1.7 million in last year's quarter.
Reported fully diluted income per share was four cents.
Flat with the prior year.
Adjusted net income for the third quarter was $5.2 million or 10 cents per share on a fully diluted basis.
Compared with adjusted net income of 4.4 million or nine cents per share on a fully diluted basis in the prior years third quarter.
Utilization for the third quarter was 69%.
Quarter, Ed had quarter end head count was 1261 down slightly versus last year.
Our balance sheet continues to have the strain.
Add flexibility to support our business over the long term.
Net cash provided by operations for the third quarter was $10 million.
$37 million year to date.
Versus less than 6 million in the prior year's nine month period.
We have generated $52 million of cash flow from operating activities over the last 12 months.
We spent $2.3 million on the acquisition of neurology, why and we ended the quarter with $38.1 million of cash up from 18.2 million at year end and 14.2 million in 2019 Q3.
We repaid $1.8 billion of debt in the quarter and $7 million year to date, lowering our debt to $79.9 million.
Our average borrowing rate for the quarter was 2.6% less than half of last years rate and.
And we had 48 million shares outstanding as of October 34%.
Mike will now share concluding remarks before we go to Q1 day Mike.
Thank you David.
To summarize I as she continues to gain momentum in the face of Cobot 90.
And I think it's a testament to our resilient operating model and pandemic ready portfolio.
Our revenue EBITDA EPS beat expectations. Thanks.
Thanks to our early and decisive actions.
And improved mix, some higher margin products and services.
We had $38 million in cash at quarter end after generating an additional $10 million of cash in the quarter.
And we continue to pay down debt with our debt down 8% since the end of last year.
We continue to serve our clients without interruption and deliver the higher margin services they need to contend with this downturn.
Longer term, we see the pandemic being an accelerator for clients digital transformations.
And demand increasing for our digital services in 2021.
As always we are focused on creating shareholder value for the long term and we are steadfast in our mission to deliver operational excellence to our clients.
Well. Thank you very much for calling in this morning, and now let me turn the session over to our operator for your questions. Operator. Thank you Sir if he would like to ask a question. Please signal by pressing star one on your telephone keypad.
If you're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Again, Please press star one to ask a question well pause for just a moment to allow everyone the opportunity to signal for questions.
Our first question will come from Joe Gomes with noble capital.
Good morning, guys. Thanks for taking the questions and nice quarter. Thanks.
Thanks, Joe Good morning.
Just a couple of quick technical ones here.
So it looks like for the quarter is that the E. P. S. B so to speak.
Driven by a lower tax rate in the <unk> this quarter versus the year ago quarter, I'm, just give a little more color on that and what we could expect possibly for the fourth quarter in terms of tax rate.
Yeah. Thanks, Joe So yeah. There there was a reduction in a foreign unremitted earnings related to tax law change in India, which favorably impacted the quarter.
I think for the fourth quarter, if you use a in an effective tax rate of around 50% you'd be you'd be good.
Okay.
And you.
You can't kind of on the technical part here real quick.
So nice build in the cash assuming some of that is.
Deferral of payroll taxes.
Which eventually do got to be repaid in 21, and 22 I'm just wondering how much of the payroll taxes have been have been deferred some of you trying to get an idea of how much of that cash actually just needs to go back to the federal government on a delayed basis, but does need to go back to them.
Yeah, I mean, the <unk> on a U.S. federal you know, it's not it's going to be paid over a two year period, starting at the end of next year. So you know the impact is not a big significant but not not not that big and some of the foreign taxes.
That were delayed or actually were repaid in Q2 in.
In Q3, so we would expect cash to to go up slightly in the in the fourth quarter.
Okay.
And.
No out like last quarter, you talked about this a integrated delivery platform that you want to talk a little bit more about you know and in the future and wondering if you might be willing to give us a little more insight into that.
Provide some more color and detail into what that integrated delivery platform you can mean for the company.
Okay. Thanks, Joe Yes, we are in the process of implementing this and essentially what it is is taking our our global workforce and instead of operating it and its geography.
We are essentially because we are now primarily work from home with the new environment with clients.
We're essentially able to take the workforce pull it together and have every one available to every client anywhere in the world.
And what that enables us to do is we have experts of course and so our experts in the U.S. can help clients in Germany, and Australia, and vice versa, and what this will enable us to do is essentially if you will wring out more margin.
In our business because it allow us to smooth the little bit of the Resourcing that you get with the ups and downs. When you have people traveling from city to city or country to country and you lose out on a little bit of that productivity when they're on the road.
So we'll talk about this more in March when we talk about 2021, but this is a fairly significant development for us we're calling it is GE next which is our operating model going forward and we'll talk about it further in March but what we believe it will do is it will enhance our.
Our profitability.
To a significant degree as we move through 2021.
Okay. Thanks for that update I want one last one from me and then I'll jump back in queue.
So obviously you know one of the concerns here in dealing with the pandemic is his state budgets.
I know you you weren't expecting to see any any.
Slow down I think it was last quarter just wanted to see kind of where are you guys.
Or what that market is looking like today in terms of selling into into states and their budgets yeah.
Yeah. So for the you know we have we have kind of.
Three areas of government work for us. So let me just make sure. We're all clear one is in the U.S., where its state and local governments.
No federal.
In Europe, it tends to be the federal government, so things like the Ministry of Defense and UK Ministry of interior in Italy.
And then down under a with the Australian government. So there was kind of those three areas.
Our public sector grew double digits.
Year over year in the quarter.
Globally and it approached 20%.
And the you asked if you think about it from a state standpoint. It also grew 20% not at those levels, but call. It in the low teens in the quarter year over year.
We are watching this as we've said before we felt like there was a law and the public sector spending.
One of the areas that they certainly recognize.
He is that they have to get cost out because of the way there with the cobot situation and of course, the tax before that is putting pressure on state and local budgets.
That can be good news for us because of the work we do tends to be around cost management and we're seeing that reflected so you know we're optimistic cautiously optimistic that we will see continued growth in the public sector in the fourth quarter.
Okay. Thanks, guys.
Thanks, Joe.
Thank you. Our next question comes from Vincent Colicchio with Barrington Research.
Yeah, Hi, Mike Nice quarter [laughter]. Good morning, Vince Good morning, I'm just curious.
What are your what are your expectations for your guidance for by geography, you know sequentially and do you expect some of the same vertical market drivers as you saw this quarter.
Okay. So you know look I think on a global basis.
I would say the U.S.
Is faring a bit better only because you can tell where the surges are happening in the moment in Europe.
So UK, France, Germany are all you know in a kind of semi locked down for the month of November.
So you know if we were looking at our geographies I think you'll see that Asia Pacific.
The public sector spending the way it is.
It is going to be in good shape, we think that the U.S.
We'll also be in good shape in Europe likely would be more in the flat arena and depending on how the lockdown pursues in December we'll keep an eye on that we've taken all that into consideration in terms of trying to get to.
What we think is a good guidance number for everyone for the quarter.
[laughter].
And your your your margins are you know.
40, Percentish gross margin they are down year over year, I'm pretty pretty similar sequentially. I'm. Just curious is that decline all volume or is there any pricing pressure you're seeing.
Yes, so late last year, you might recall that the.
Q3 was a record quarter for the for the company and that was driven in the quarter, we had too.
To gain shares in the network services area.
That are added to the to them the margin last year. So we would expect the margin to be consistent with that but last year was a no anomaly and not enough well last year was driven by the fact, we had those two deals that contributed to the margin.
Also during the quarter it was actually.
License is were associated with our automation business.
And those margins tend to be lower than the other for our marriage, Although I would say you know our our EBITDA margin is up about 50 points 50 basis points for the quarter.
For Q2, and again I think it's the mix of our.
Our margins and the beginnings I'll call on the beginnings of our integrated delivery platform.
Vince and recurring revenue I may have missed it how did that perform in the quarter what are your thoughts about that going forward.
Yep, So performed well, we did $19 million roughly 31% in the in the quarter I would say that repeatable kinda platform sales continued to.
Resignation.
Resonate and grow I mean, our our goal for example, our Governor X platform for software and contract management.
It's a full fast kind of cloud based solution that takes our hey, I dated and best practices and we've seen a tripling of the number of contracts that we have managed since the pandemic began.
We now have nearly we were 10000 last quarter, we now have nearly a little over 12000 users on the software platform. Now. So you can see that that is a that has picked up considerably.
And it has to deal with supplier assist the supply chain supply chain management risk management, how long Oh around a lot of these enterprise.
Clients. So we continue to think that our research business.
Ticket or those two areas will continue to drive our recurring revenue streams.
Thank you Thanks, Chris answer my questions Yeah.
Thank you Vince.
Thank you again as a reminder, please press star one if you would like to ask a question.
Our next question comes from Marco Rodriguez with Stonegate capital.
Good morning, guys. Thank you for taking my questions.
Morning Marco.
Hey, Mark Mike I was wondering if maybe you could talk a little bit more about government acts it kind of sounds like you guys had a lot of success in the quarter kind of with that service well what do you attribute perhaps to that strengths. There was that just maybe some timing issues or additional marketing efforts that you guys.
With underwent.
So I think what's happened is sense co mid hit a lot of enterprises had their supply chains interrupted.
There were issues with a lot of industry supply chains.
And what govern X brings to the table is an ability to Manny.
The risk around their supply chain management and many of the contracts. The good the bad et cetera, and so we have had a large uptake in our govern ex interest level from large enterprises.
To use our platform, which is a fast.
Cloud based solution.
That enables us to take all of the contracts from these major enterprises put them into our onto our software and allow our enterprises, then to manage and health risk mitigate risk mitigate some of their supply chain issues they've seen during the pandemic. So I would say the pandemic.
Kind of Turbo charge. This area you know we ended up with 2000, plus new users during the quarter over quarter to and we're now up to 12000 users pre pandemic that number was in the four to 5000 category and we're now up to 12000 gives you kind of indication of that.
Usage of the.
We have to have the software that we have on government acts. So it's a great great great asset and a recurring revenue stream.
Got it and would you attribute that strength you saw there I mean aside from all the other digital aspects that that obviously customers are.
Moving more towards that and perhaps accelerating with the pandemic just trying to get a better sense as far as the revenue set the strength you saw in the quarter.
Versus your guidance I mean, obviously very strong results on topline just kind of trying to understand where were the big surprises work.
Yes definitely.
The recurring revenue streams research was very hot govern ex was hot we certainly had a pick up in several industry segments in the U.S. that I mentioned think about insurance the public sector. All the technology sector. All in the U.S. grow which helped contribute a and have a little bit of overheating.
An 11% growth quarter over quarter, and I think you know when we look at the you know when.
When you look at the kind of third party risk you look at spend management with enterprises.
It all kind of ties together and I would say the other aspect is around cloud adoption cloud adoption is certainly accelerated.
Over the last 678 months a lot of it is the inability of enterprises to access.
Their data centers has effectively from kind of a work from home you know posture. If you will and then of course the E Commerce area with a lot of these clients has gone through.
Through a lot of multi years of learning in the last six months.
So think about online store builders like Shopify, Squarespace and others.
This is a whole area that is beginning to explode, so where the retail environment was shut down and no. One was going into stores E. Commerce has picked up a lot of the slack and then of course you have your health care.
Industry as well that's in kind of in a lot of turbulence with the health Sciences area, whether it's the vaccines and the researchers on that side or whether its the health care environment overall with Covance. So lots of kind of factors that are merging together that's enabled us to take or pay.
Portfolio of products and services and kind of focus them around the cloud adoption focus them around supply chain management informing them with our with our with our research.
And also continue to allow our clients this.
This digital journey, that's money of them were on prior to co but that certainly.
Is accelerating and depending on the industry they'll move at a pace that there. They can do it the pace with hospitality and travel and automotive is a little slower, but they all will be there.
They just have to continue to work through this kind of low on the show.
In the in the environment.
So that's what I would say is whats driving things.
Okay. Thanks, very very helpful. Then just kind of shifting here towards cash flows I'm, obviously very strong results here year to date, driven looks like primarily through some some obviously liquid liquidation of working capital just kind of wondering how should we be thinking about.
Cash flows from operations free cash flow as we kind of head into fiscal 21, where do you think that sort of normalize is obviously assuming that the environment normalizes in fiscal 21, you guys have revenue growth working capital well, obviously have to be there to support that growth, but just any sort of color.
Or any sort of drivers that you can talk about data to help us think a little bit more about the cash flow from ops in fiscal 21 would be helpful.
Yes, so as you pointed out and what were the big driver of this year's cash flow is a change in the working capital we've been able to.
Strong collection effort has increased the amount of cash driven.
Taxes had been very low you know weve paid $2 million of taxes through.
Through three quarters on a more ongoing basis.
You know you would that you would expect a cash to be more in the 50% EBITDA range would be in a more normalized cash flow for the for the business.
Got it thanks, a lot guys I really appreciate your time.
Thanks Margo.
Thank you. Our next question comes from Marc Riddick with Sidoti.
Hi, good morning, gentlemen.
Morning, Mark.
So very encouraging a lot going on but that's that's moving in the right direction given everything that's taking place out there I was wondering if you could talk a little bit and maybe.
Touch on the neurology by a little bit on some of the things that have taken place since the acquisition and then give a sense of maybe how that then leads you to think about the kind of where we are with the acquisition pipeline in what that prioritization might look like going forward to fit the portfolio and service offerings.
Okay, great well first of all I'm, just remind everyone neural a fight the key.
Asset that we wanted to get our hands on it and we're all Fi as what we believe to be an industry leading.
Digital enablement platform that allows kinda enterprises enterprise clients, the kind of quickly scale or the adoption of RPK.
And considering that everyone's kind of working from home, having a digital platform to be able to scale couldn't fit at a better time for off so number one that is the asset that we wanted to get our hands on it neurology side. The reason for that is.
Coupled with the services that we as I as GE automation have you add this digital enablement platform you didn't have a unique selling proposition.
In the market and we saw that in the third quarter. When we were able to sell to a client we had been chasing unsuccessfully but by adding a digital enablement platform.
We ended up selling over $1 million a piece of business in in September I'm.
Two is kind of fortune 20 company, a and the digital enablement platform is the one that allowed us to kind of get there. We think it's kind of the gold standard on hands on kind of continuous digital learning around all around our P.A. The second asset that neuro up I had for us that we wanted to get our hands on.
Was what is called in the industry had code quality analyzers CQ a is that we referred to it as which essentially allows enterprises to automate their code review process and that helps accelerate if you will the scaling of our PPA. So those are the two reasons. We went after neuralgia five.
And we fully integrated that in its first 30 days.
When we did that back in in July I would just comment on the overall automation business that we have discussed.
In the past the pipeline is very strong and automation, we still believe however that this asset is coming.
Completely undervalued by the market and we will continue to focus on.
On exploring ways, where we may be able to enhance that value for all of our shareholders. So they're all a buy in our view. It's early days has as delivered on what we expected it to to deliver on for us.
Okay, great there and I wanted to touch a little bit on and is it fairly commonplace for a lot of folks that are in the midst of cost cuts that they saw earlier in the year I just wonder if you sort of give every everyone an update as to sort of how you're viewing that's the cost actions that have been taken up to this point and then maybe what you think is.
Hi, there that might have greater legs going forward or might be sort of short term in nature and Joel so low revenue other revenue opportunities pickup.
You're talking about privacy or with our clients for certain prior history. That's okay. Yep. So just as a reminder, a you know we have oh, we have eliminated the bulk of discretionary spending or reduced it.
Significantly weve eliminated eliminated internal travel and for the most part clients are allowing us all the work from home. We do have a few exceptions to that that were on premises.
But we have that elimination of travel so keep in mind, that's all flow through expense.
And we likely going forward, we will talk about our revenues.
On a net basis on a on a net basis. So that you can see kind.
Kind of year to year, what we're talking about excluding the travel teeny, because we think that will be out for some time.
We reduced our marketing expenses and at the end of the day, what we've done is we've taken the opportunity during cold bid with this new business model that enterprises are allowing and that's why we've launched what we call IMS Ci next which includes kind of resetting our cost base.
Including this integrated delivery our platform that as I said, we will chat more about in March when we talk about 2021. So as we move forward. We think we have a good set of cost structure going forward. We've also moved out of a few area.
As we've moved out of Spain, we moved out of a few other areas, we sunset a few products and services and yes that revenue will not come back but that revenue was not very profitable revenues. So our view was that we will be a more profitable farm by having sunset some of our products and services and sunsetting some.
Our on the ground teams in Europe, and certain points and as we move through 21, we expect to see that the margins in our firm will continue to advance. So that's that's how we see all that mark.
Okay, Great and then the last thing for me and this is sort of more bigger picture I suppose but I just wonder if you could sort of talk about you talked a little bit about those.
Actually the customer the consumer facing a clients that word we're having more of a timing impact as to their their decision making in activity.
What's with second wave onset I was wondering if you sort of talk about the differences of what you're seeing from the industry or the customers and the industries that are able to sort of move a little further forward and maybe what it is that they are implementing the things that you're seeing them kind of the ones that are a little further along as to making that digital transformation as supposed.
Those that are that are that are dealing with more of a consumer facing challenges.
Yeah. So you know just to contrast, you have your travel you have your hospitality.
Hospitality, you have some manufacturing and some automotive that I would put on the scale of still struggling.
Others.
That are our are focused on areas like.
Health care, the health Sciences, the pharma some of the retail as we talked about with E commerce.
And cetera, or all are I think doing pretty pretty well and also what are they doing.
The ones that are advancing if you will at the moment is really around cloud they are trying to move as much.
Work to the cloud as possible I would say pre co bid.
Workloads to the cloud on average with the enterprises in the global 1000, we're probably sitting somewhere in the Twentys, 20% range.
Everyone is trying to accelerate that to 40% to 50% of their workloads to move to the cloud.
Again, some moved faster before cobot now everyone's trying to move as fast as possible that requires time energy and dollars to do so there is a great ROI on it but those that are not as distressed are moving at a rapid pace on cloud adoption. Those that are not are not moving quite nearly as.
As fast if you will we also have the workforce of the future. If you think about with everybody working at home, it's put extreme pressure on networks.
I mean in some cases, we would put networks at 95% plus capacity difficult to keep up with the demands a lot of enterprises.
So how do we how do we how do we help our clients manage through the.
The kind of the workplace of the future be here and now and what does that mean from a tenant technology standpoint excuse me.
And how can we help them work through through that in terms of our network expertise.
Which as we said earlier was doing quite well in the quarter and we expected to do quite well as we move into 22021. So look we're also seeing some monetization going on so think about a zohr and AWB asset or making a play to buy out data centers from enterprises. These are large global too.
And 300 companies, who own physical datacenters the ability to monetize those eight data centers with large providers is injecting cash into some of those businesses we are.
Surely the client the the leader around asset monetization will.
We're working on a number of those right now with major clients and so those are the areas I would say that clients that are.
Able to move continue to move kind of rapidly right now that's the areas that they're focused on digital cloud adoption asset monetization workplace for the future.
That's really helpful. Thank you very much for the color.
Okay. Thanks Mark.
Thank you I'm currently showing no further questions at this time I would now turn the call back over for closing remarks.
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Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
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