Q4 2020 Information Services Group Inc Earnings Call
Yeah.
[music].
Please standby.
Good day and welcome to the information services group fourth quarter and year end of 'twenty 'twenty results Conference call. Today's conference is being recorded and a replay will be available on Isg's website within 24 hours at this time for opening remarks, and introductions I would like to turn the conference over to Mr. Barry Holt. Please go ahead Sir.
Thank you operator, Hello, and good morning, My name is Barry Holt I'm, a senior communications executive at ISG I'd like to welcome everyone to Isg's fourth quarter Conference call.
And today by Michael Kors, Chairman, and Chief Executive Officer, and David Berger Executive Vice President and Chief Financial Officer.
Before we begin I would like to read the forward looking statements. It is important to note that this communication may contain forward looking statements, which represent the current expectations and beliefs of the management of ISG concerning future events and their potential effects of 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 last night to the SEC and the risk factors section in Isg's form 10-K, covering full year results.
The share also read Isg's annual report on form 10-K, and then the other relevant documents, including any amendments or supplements to these documents filed with the SEC you'll.
You'll be able to obtain free copies of any of Isg's SEC filings on either Isg's website at www Dot ISG dash, one dot com or the SEC's website at Www Dot FCC Dot Gov.
I used the 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 ISG 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 should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP for.
For the reconciliation of all non-GAAP measures presented for the most closely applicable GAAP measure. Please refer to our current report on 8-K, which was filed last night with the SEC.
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.
This morning, I will review our fourth quarter results.
The introduce you to our new operating model of biopsy Ness and.
And then provide guidance for the first quarter.
Over the past year, all of our business has proven to be resilient net.
And highly adaptable the current market conditions.
As evidenced by the business results we are generating.
<unk> finished with a strong fourth quarter.
Mark by expanding margins strong cash generation and increasing demand for all things digital.
Our revenues EBITDA and EPS for the quarter all exceeded expectations.
Q4 revenues of $66 million were up 8% sequentially.
And of 5% over the prior year, excluding the impact of billable kidney was near zero with our ban on travel.
We saw good growth in all three regions during the quarter.
Americas revenues were up 8% sequentially Europe up 10% sequentially in Asia Pacific was up 13 percentage from a year ago.
Recurring revenues continued to expand at $22 million for the quarter.
The 17% versus the prior year and $82 million for the full Europe, 10%.
Recurring revenues now represent 33% of our firm wide culture.
During the year, we made significant progress with our government ex SaaS platform, a key component of our recurring revenues.
We increased the number of users by 90% to 12000.
We increased the number of contracts under management by 80% to 8000.
And we increased total contract value under management by 30% to for.
$46 billion.
At the end of quarter EBITDA margins rose again to the 14% as we delivered more than $9 million of EBITDA up 11% sequentially.
This capped a strong second half after client decision, making was impacted by the pandemic in the first half.
For more profitable mix of client solutions is driving our margin expansion. Our go digital strategy launched well before the pandemic is helping us whether the economic and health crisis.
Revenue from higher margin digital services was more than 50% of our total in the fourth quarter.
Our business is essentially now digital so we will not report on this metric going forward.
Our balance sheet has never been stronger in.
In the fourth quarter, we generated $7 million of cash from operations and a record $44 million for the year.
A testament to the cash generating power of our business and our disciplined operating approach.
During 2020, we repaid $8 million of debt lowered our balanced by 9%.
$79 million and ending 2020, where the net debt to EBITDA ratio of only one two times.
Clients are turning to ISC and increasing numbers of looking for expert advice and guidance on how to navigate through the pandemic.
In 2020, we served 722 clients up 3% versus last year.
Of that total 224 were new to ISG.
All the one in a work from home selling environment.
This client expansion, where we will serve us well in 2021.
In terms of client behavior or client slow their spending on large scale digital transformation initiatives last year, but they continue to invest in the digital technologies, they need to survive and emerge stronger from the pandemic.
We are seeing growing demand for cloud adoption network modernization and workplaces of future technology.
These technologies enable work from home model improved collaboration and enhance customer experience.
We remain somewhat cautious with the pandemic is still in front of us.
The good news is vaccinations are accelerating in the United States from the U K and the current Lockdowns in France, and Germany are expected to ease towards the end of Q2.
With these improving conditions, we see our clients accelerating their digital transformations.
That acceleration will start slowly, especially in Europe and begin to pick up steam during the course of the year.
Now turning to our regions the Americas delivered $38 million in revenue of the quarter up 8% sequentially and up 6% versus the prior year. When you exclude the impact of billable T D.
Our discussion of regional results in Europe, and Asia Pacific Likewise will exclude the T K.
Key client engagements in the Americas during the fourth quarter income.
Clearly the technology company, Florida.
Blackstone Canadian National Railway.
Petco and Abbott labs.
A lot of our significant wins ISG has signed a multiyear government ex contract with a global hospitality company.
I asked you also security of million dollar government ex agreement with of pop free technology join this.
This engagement expands government ex services to additional organizations within the tech client and positions the IFC to support more than $1 billion of spend across their supplier of portfolio.
ISG has been awarded the firm's first ever training as a service engagement for nearly a million dollars with the signing of an initial one year contract with the leading U S Bank.
The client in essence is outsourcing, it's the technology training the IFC.
He has an opportunity to generate recurring revenue from our enterprise change solution and being able to offer similar services to other clients.
And all of this was accomplished in the remote selling and delivery environment.
Even more impressive we are seeing an uptick in our client satisfaction scores as we work virtually with our clients.
Turning to Europe, our Q4 revenues of $23 million were up 10% sequentially and up 1% versus the prior year the law.
Locked down in most of Europe impacted the year over year comparisons.
During the quarter EMEA delivered double digit revenue growth versus Q3, and our research govern ex and automation businesses.
Among our industry segments, our insurance manufacturing and media vertical grew by double digits.
Key client engagements in Europe from the fourth quarter included BNP terrible for us.
The city, yes.
Deutsche upon.
Perceptive informatics.
In ICU EQ, a U K financial services company.
Among our wins ISG has been awarded a million dollar engagement with the European Transportation company.
To support their automation journey for customer engagement.
In addition, I S. T has been awarded of six months $1 million of engagement.
To support global sourcing for a leader in medical life Sciences and optics.
We will support sourcing implementation for this client of digital transformation.
Finally revenue from Asia Pacific were up 13% versus the prior year, driven by the public sector consumer banking and insurance industry vertical.
Key clients for the quarter included Rio Tinto, the Australian Taxation office, the Department of Defense Department of home of per the New South Wales Chamber of Commerce.
Protiviti and emphasis.
During the quarter of ISG was awarded a new engagement with the global mining company to implement the service integration and management operating model.
This new eight months of contract calls for IFC to provide transition and transformation services, including change management to support Onboarding of service contracts across the company's entire service portfolio.
Now, let me turn of our new operating model of IFC next.
IFC next will extend our market leadership enhance our growth opportunities and drive significant value for all stakeholders.
As with many of our clients of the pandemic reveal of the art of the possible for ISG.
We are now able to deliver the same or higher quality of services working remotely at higher margin.
Since the pandemic our client experience scores were up across all dimensions, our consulting utilization is higher and.
And we were able to attract over 200, new clients of the firm last year again, all while working remotely.
With an I S. T. Next we are focusing our business in two areas.
I S T digital.
In ISG enterprise.
I asked the digital offers clients solutions for technology modernization.
Enterprise agility digital platforms.
Workplace of the future.
With a focus on the CIO, Chief Technology Officer, and Chief Digital Officer community.
ISG enterprise deliver solutions focused on cost optimization business operations enterprise chain and the technology adoption with a focus on the C O O CFO.
The cheap purchasing officer humanity.
My name is the next is the game changer for ISG it for.
This is our global capabilities of the two most important.
The two most important areas to our client.
Theyre, continuing digital transformation and getting the most from their digital investments.
Our new operating model and enhances our ability to integrate our solutions for better in the end client outcomes.
And it promotes increased cross selling opportunities that will drive greater penetration and revenue growth with our clients.
ISG digital on the ISG enterprise are supported by ISG research.
With its deep market analysis and provider of evaluations.
As well as ISC events, and our software platforms, such as the IFC governance.
With IFC next our expert advisers are delivering client solutions.
The renewed global integrated delivery model called the ISG I flex.
That enables us to rapidly deploy our resources to solve any client challenge, regardless of geography or time zone.
To support this model, we have launched an internal platform called the ISG workbench.
That allows our advisers to access all of the IFC tools and IP, they need to serve our clients and of remote working environment.
We expect the IFC next to provide a step change in financial performance for ISG, including expanding EBITDA margins by 400 basis points over the next two years versus full year 2020.
Now, let me turn to guidance.
The pandemic continues.
The effect on our clients is most pronounced at the moment in Europe due to continued locked down.
There also is a fair amount of uncertainty within certain industry segments like travel hospitality and leisure areas like casinos and cruise lines.
Despite this we see the demand environment for all things digital cloud network strategic sourcing automation and the digitization of businesses.
The thing overall for the first half of 2021 versus a year ago.
And this is.
Is the IFC sweet spot.
So our plan is to continue to provide you guidance on a quarterly basis. This year based on assumptions, we are making in what is still a pandemic environment.
For the first quarter, we see an overall strengthening of the demand environment for Iot services.
We are forecasting $63 million to $65 million in revenue in Q1.
We also see significant margin expansion in the quarter, resulting in a doubling of adjusted EBITDA to between seven and $8 million versus the prior year.
Our forecast takes into accounts several of pandemic related factors.
In Q1, we're planning no revenue from in person ISC produce destination event.
Which will impact our year over year comparisons by nearly $2 million.
And we are planning near zero of client T and E reimbursement revenue of this will impact our year over year comparison by another one $5 million.
For a total of $3 $5 million of year over year impact due to the continuing pandemic.
We also expect compressed revenue in a few industry segments like travel.
But balanced with double digit growth in digital services.
Yeah.
So even with these impacts we are expecting to deliver our most profitable first quarter ever driven by our new operating model of ISG next and higher margin in the band digital services.
So with that let me turn the call over to David Berger, who will summarize our financial results David.
Thanks, Mike and good morning, I had one day.
To reiterate what Mike said, we managed through a difficult operating environment and delivered a solid fourth quarter.
Revenues for the fourth quarter were $66 $4 million.
8% sequentially and up 1% on a reported basis compared with the fourth quarter last year.
Currency positively impacted reported revenues by $1 $7 million versus the prior of year.
Excluding reimbursable client travel costs of $2 2 million, which accounted for approximately a 340 basis point decline versus the prior year.
Revenue was up five per se versus last year.
Reported revenue, excluding <unk> was 37 8 million in the Americas.
Eight per se versus the third quarter and up six per se versus the prior year.
One of the $3 $1 million of Europe.
10% sequentially and up one percentage versus the prior year.
The five $5 million in Asia, The Asia Pacific.
The 4% sequentially and up for.
The key for say versus the prior year.
Fourth quarter 2020, adjusted EBITDA was 9.2.
$2 million.
11% versus the third quarter and down from $9 6 million in last year's fourth quarter.
We reported fourth quarter operating income of $3 $5 million compared with operating income of $5 1 million in the fourth quarter of 2019.
Net income for the quarter was $1 4 million and fully diluted income per share was up 3% versus the $2 1 million of four cents per share respectively in the prior year.
Adjusted net income for the fourth quarter was $4 $9 million or <unk> 10 per share on a fully diluted basis compared with adjusted net income of $4 8 million or 10 cents per share on the.
Fully diluted basis in the prior years fourth quarter.
Consulting utilization for the fourth quarter was <unk>.
The 3% versus 66% in the prior year.
Reflecting the impact of our new ISG net operating model.
Year end head count was 1258 down slightly versus last year.
Our balance sheet continues to have the strength and flexibility to support our business over the long term.
Net cash provided by operations for the fourth quarter.
$7 million.
A record $44 million for the year.
$24 million versus the prior year.
We ended the year with $43.7 million of cash.
Up from $18 2 million in the prior year and $38 1 million in Q3.
We repaid $1 $1 billion of debt in the quarter and Asia.
The point $1 million during the year lowering our debt balance of $78 8 million.
Our average borrowing rate for the quarter was $2 five per say less than half of last year's rate.
And we had $48 4 million shares outstanding as of March 30 <unk>.
In terms of modeling for 2021, we're looking at interest expense of approximately $2 8 million for the year.
Depreciation of expense of approximately $2 7 million.
Intangible amortization of around $2 7 million stock.
Stock compensation flat with this year.
Cash taxes of between $5 6 million.
Capital expenditures of approximately $3 million.
For the effective tax rate of 55% in line with this year and changed.
The contingent consideration and the add back to arrive at adjusted EBITDA will be around the 500000 starts in the first half.
Mike will now share concluding remarks before we go to Q&A.
Okay.
Thank you David the summarized ISG is a much stronger firm emerging from this pandemic.
Our balance sheet has never been stronger with 44 million.
More of.
The double <unk> Covid and our net debt is down to one or two times EBITDA.
Our new operating model ISG next is driving of more profitable enterprise and will result in a step change in our financials over the next few years.
Our revenue EBITDA in EPS beat expectations in the queue for thanks to our early and decisive cost actions and improved mix of higher margin products and services.
We continue to serve our clients without interruption and deliver the services they need to contend with the current global help of economic crisis.
R Q1 guidance reflects the strong start the 2021 with the expected EBITDA results more than double a year ago.
As always we are focused on creating balance shareholder value for the long term and we are steadfast in our mission to deliver operational excellence to our clients. So thank you very much for calling in this morning, and now let me turn the session over to the operator for your questions.
Thank you if you would like to ask the question. Please signal by pressing star one on your telephone keypad. If you are using the speaker phone. Please make sure your mute function as turned off till I, you're sitting out of reach our equipment again that is star one of to ask the question and we'll pause for just a moment to a lot of everyone an opportunity to <unk>.
Second of all.
We'll take our first question from Mark Riddick with the Sidoti.
[noise] like in the morning.
The more and more.
So certainly a lot of of good news to report and certainly the red.
<unk>, well above where we were for fourthquarter as well as your guide I wanted to talk a little bit about the cadence and and maybe get a sense of the how how that develops give me the quarter in the fourth quarter of them into you know, what you're saying for the the.
Providing the guidance that you have and it kind of I guess I'm trying to get a sense of maybe when the <unk>.
<unk> when you saw the revenue sort of tick off versus meeting of the last time and the the last conference call and the guys for about a day.
Sure. Thanks, Thanks, Mark for the question walk the it's a combination I think of of marketing inflection point.
Costs are all new operating model.
I think with the announcement of the vaccines during two for a lot of our large global 2000 clients are beginning to ramp up the technology investments, particularly the digital oriented initiatives the hell.
<unk> be better position day of the World begins and finally opens up as we evolve for the year. So I think an unusual demand inflection point of the same time, we had just recently launched.
Our core go the market Manuel I S. T next which is resonated very well with our clients and every region and.
And I think this allowed us the more easily put forward are full set of offerings.
To both integrate and crossville across a lot of our engagement.
So I think the timing of of our new model of ISC next turned out to be spot on and kind of an alignment with the market. Kevin if the will to kind of begin the acceleration of the technology investment so.
Out of a combination of this market inflection point, the vaccinations for creating a confidence level and our new operating model all coming together really allowed us to kind of accelerate what we may have been expecting for the fourth quarter of so all good news.
There.
Okay excellent and I wanted to <unk>, So I switched to the next day. So if it gets really give us a little bit of of a.
A broad overview as cheap maybe the the development of it and and sort of of how it I was in that implementation. So are are we sort of is there a a timing of how you expect it to to sort of filter through the organization or is it kind of something that's just.
Yeah, it's already already kind of of happening how should we think about that that the execution.
Yeah. Good good question, Mark Uhm, well I think you should look out of it has having been implemented during the fourth quarter. So we are fully operationally global globally with I have two next we launch what we called our global integrated delivery model and we call it the ice blacks and what.
This enables us to do is to take our full experts from resource pool globally.
And whether you're a cyber expert or your of network expert or of software expert you can serve clients in Frankfurt, Germany, Seattle, Washington, Sydney, Australia, all on the same week.
And if you think about pre Covid, we would be having our team kind of get into their planes. The loss of Microsoft up in Seattle of go over the buyer in Germany Frankfurt of go over two I G insurance in Sydney and they would be focused on a client and of course, the productivity a little bit last because you're not playing.
Now with the new model, we're able to take that the same cyber expert or network expert and they can serve our clients anywhere at any time on any kind of level of service that is what is driving our productivity that helped drive our utilization the 73 per cent in consulting org.
<unk> and that is enabling us we believe over the next two years drive on margins.
At 404 hundred basis points kind of flop over that timeframe. So you should make of this of now fully implemented fully operational ISG next is here.
Okay, Great and one more for me if I could speak one more indie wanted to talk about the the the significant cash generation and the the progress that was made that reduction day. During the year certainly put you in the very positive positioning of the end of the year. So so why don't you talk a little bit of <unk>.
Pete how are you thinking about use of cash prioritization of how we should think about you know what the additional financial flexibility mean price. Thank you.
Yeah. Thanks for the noted we redecorated $7 million of cash in the corner January of record $44 million of cash for the year and ended with the 40 for a million dollars of of of Cats, I had I'm thinking of <unk>.
Get the gently strengthened our for financial position you know the fifth.
No that was gonna continue to preserve our cash continue to the monitor macro condition Uhm and you know as the other progressive we will address the <unk>.
The the use of the of cash.
Thank you day.
Thanks for.
We'll take our next question from Jo comes with a noble capital.
Good morning, and congratulations on the corner.
Thanks show the morning.
So I wanted to start off touch of on here.
In the past and even today about you know some of the the the conditions there you're facing with of Lockdowns of everything but you know sequentially. You saw 10 per cent increase in revenues. There would you kind of surprised by those results and and what was driving the results in the corner.
Even with the the Lockdowns that will be implemented across some of the country fabric.
Yeah, Joe on Europe, I think we I think our our product mix.
Sort of the extremely well, especially in Germany, which is our second largest market in the world and if we think about Europe I would say that I think that you know are you look at the kind of of the pay T and the insurance industry segments in particular.
Uhm, we served I think almost 30 clients in Europe in that sector of long, which revenue wise I think for me rough about 12% with those clients.
I would say that's kind of smart manufacturing.
Is very soft throughout Europe at the moment I think the pandemic is caused some supply chain issues with that particular industry segment.
But when you look at all kind of of our overall business there the the Germany market in particular is what really drove back area for the fourth quarter and I think what I was trying to say for 2021 is that we would expect Europe to be a little slower than the U F.
Because of markets like of like France, the south of of Europe.
And frankly, the U K as the work their way through the Brexit the N as in the Alps, and what is happening in that market. Both of those can the market for US I think we'll we'll way down a little bit of of the Germany uptick and that's why we're saying I think of Europe, We'll we'll start out of the slower and build up.
The amount of of the year, but that that's how that's how the European theater the unfolding for us.
Okay. Thanks for that.
And last <unk>, you mentioned about you thought you'd seen a little bit of of law and public sector of spending.
I'm, just trying to get a little better handle on more of that you guys see that what happened to the fourth quarter and how you've seen it so far.
You know you're the day here in the first court are you seeing any kind of.
And the loosening so to speak of the purse spring of strings, and the and the government markets.
Yeah look I pick on the government side.
We were pretty pleased with how the government's set for perform during the for for quarter of yellow.
And I would say that when you think of that sector of even think of that in both of the U F Australia and over in the European area of UK in Italy and.
In particular, and so I've been held up it held up pretty well, especially in the Australian market and some of the state governments here in the United States as I think about the first half of this year I think it's gonna hold up pretty well well the spending that we anticipated.
And frankly for slowed down a little bit with the pandemic. They also recognize a lot of the opportunities around the digital initiative around the automation and other areas moving work to the cloud and how that can benefit the state government.
So I would say knock on wood of good fourthquarter on the government side for us and I think during the first half we would anticipate a similar of kind of steady.
From the from the government sector and I do not see of softening there at least for in the first half of 21.
Okay, Great and what one last one for me if I'd day. So you know, it's fantastic and you're talking about you know the.
Anticipated EBITDA margin expansion with the I S. Jim that's the program I know another goal of the company has been since.
Yeah, Hi single digit revenue growth.
Uhm, what when when do you think you can start seeing those types of returns the the revenue side.
And thank you will see that in 2021, we think we will be there for your basis. It will it will pick up steam as we move through each quarter, but we expect to be at those levels and 2021.
Great. Thanks for the inside of appreciate it.
Thank you Joe.
We'll take our next question from the instant Caliche out with Barrington Research.
Yeah, nice quarter, Mike I'm curious.
You're welcome oriented January where it the marching out of the current quarter just curious what what's your pipeline looks like maybe for for continued growth in the queue to period.
Yeah, I think two two looks the shaping up nicely. The the demand environment is picking is picking up and I would say a lot of the on the digital side of the.
Ah cloud implementation sort.
Services are scaling of kind of enterprise cloud with clients.
Sourcing for cloud transformation of clouds.
Cloud governance billing charged back of those kinds of things those are all very hot topics. We also envision some of our larger clients that were harder. He had so thanks casinos think some of the hotel.
We see them beginning to emerge better so instead of having 10% to 20% occupancy rates were now beginning to see 35, 40, 50% occupancy rates that the good thing that means necessary they'll be back in business. So to speak on spending on these kinds of initiatives as I think we move into the queue to.
So we're anticipating some of those industries some of our clients in those industries harder yeah to also pick up as we go into the second quarter of so I would say that it it looks it looks good then.
And as you look ahead this the eight Uh huh.
Hopefully in a much improved the environment of the second half of the year, how should we think about how your expense structure of it will change.
Did you say expense structure.
Yes, yes.
Yeah. So look I think you know we are certainly as as clients will allow us to return to on site work.
Some of them will allow us to continue doing all of the remote work, but I would expect during the the second half of the year that our T N E.
For bold billable and non billable would pick up a bit and I say non available in the sense that today, we've been able to do all of our selling almost all of them are selling virtually and things begin to open up some clients will allow us to continue to do that others may not so we would.
C a bit more expense.
Coming on the non billable side in the back half of 2021 ask the name is open up a little bit that's probably the only big Delta on expenses that we would have.
Okay and any any.
Any changes in the price of an environment. This code the rest of the last quarter.
I would say on on the digital on all of <unk> digital areas pricing is very good for us fits in high demand and with high demand. We can continue to keep our premium.
We feel we have premium pricing.
The firm because of the expertise and the data of that.
Underpins everything that we do and I would say our premium pricing is holding.
Okay. Thank you.
Yep thank goodness.
And we'll take our next question from Michael Rodriguez Whetstone, the gate capital markets.
The morning, guys. Thanks for taking my questions for the.
The marca.
Alright, I was wondering if the caught up a little bit more about the iced tea next goal here that the laid out to increase your adjusted EBITDA margins by 400 basis points over the fish called the 20 results. Obviously physical 20th was not of nowhere years. So I'm just kind of trying to understand that <unk>.
Fanchon over a normalized base. If you will and then also kind of in relation to your at least you're historically longterm model of adjusted EBITDA kind of growing at one of the have found your red Negro sort of color you can provide the.
Yes, well I think our new model, which is.
Really focusing on more higher margin products and services around digital and will be calling of June or fried.
Is going to the service well over the next two years and that's why we believe we can get for hundred plus of of margin enhanced enhancement from there.
And and as we focus on that and continue to focus on our SaaS platform and on a recurring revenue streams.
All of that will help us drive a higher margin and to the point about one and a half times on the bottom line. We think that will definitely continue to move US forward, we see that in 2021 of 22. So for the next two years, which the.
<unk> bye.
We expect to have at least one of the half time.
EBITDA for all over the revenue growth.
I mean I understood and then just also trying to kind of of get a little bit finer tune understanding on this new model. So.
Obviously, you you just mentioned that you have some higher margin services that you'll be focusing on recurring revenues the trip, which are higher margins uhm.
I'm trying out and also understand the delivery model of itself cause the kind of sounds as if you actually have some clients I want you to get on a plane and come visit them, but it sounds like you're shaking it more too.
For your consulting for our working remotely and hence don't have the extension downtime.
And my kind of understanding that correctly and if so what what sort of the utilization rates for your consultants or just sort of targeting verses what you've done historically.
So yeah, good question and and I think we do have it right and what we're saying is that on our delivery model of which were calling the I S. T I flecks of.
We've added tool we've added the <unk> of workbench, which is the platform that all of our expert for around the world can now access all of our I T. All of the more tools et cetera on with the thought being that are likely 80% of them or more will be working remotely through.
Of 2021 that will probably be a little less than that in 22, depending on how the world opens often and behaves but that also will drive higher productivity. As you can imagine you saw us up Oh 700 basis points in the quarter to 73 per cent.
Utilization on the consulting side I think that was the first is 66% previously so you should be we are looking for something that has the seven in front of it as we go forward and all of that of course, Uhm will add two or more of an expansion.
Got it for helpful and a couple of of just quick kind of housekeeping items here, so with the speed delivery model the the T and the impact on revenue what you've called out on the sea as I need to get your of physical 20 that that revenue stream Uhm Lucky not gonna return to like what.
Was for in the past does that is that correct.
Yes, that's correct. So the respect the the T. V revenue you know you would be will be near zero certainly for the first two quarters of the year, possibly quarter, three and then there might be a bit coming in the queue for.
Got it and the the one time expenses that you had in the quarter our day at about 1.7 million with some acquisition cost severance in the change of contingent liability was that the all M. S. G mail or is it spreading the different areas.
What's it all of the line I'm sorry.
What is it all of <unk> T a or or was there also some of that call today or just the other.
Oh, that's all of those all those items for an S. T a day.
Got it in the password you correctly on for about a half a million of contingent of consideration change anything to the contingent of consideration that you're projecting so the first half of the physical 21.
Correct.
Got it thanks, a lot bye the I really appreciate the time.
Thank you Monica.
I Hope you have no further questions at this time I'd like to turn the conference back for our presenters for any additional are closing remarks.
Thanks, very much so let me let me just close by saying Thank you to all of our professionals worldwide for stepping up to the challenges presented by this corona virus.
Even working remotely there's been no let up in our passion for delivering the basket advice and support to our clients and thanks for all of you on the call for your continued support and confidence in our firm stay well everyone have a great rest of the day.
And that does conclude today's conference. We thank you for your participation you may now disconnect.
[music].