Q4 2020 GP Strategies Corp Earnings Call
Good morning, and welcome to the GP strategies fourth quarter and year end 2020 earnings conference call.
All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask questions to ask a question and you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note that this event is being recorded I would now like to turn the conference every day, Kansas Hester Vice President. Please go ahead.
Thank you good morning, everyone and welcome to GP strategies fourth quarter and year end 2020 earnings call on the call today are uncertain, CEO, and President and Mike Dugan, Chief Financial Officer.
Before we begin I would like to remind you that today's comments will include forward looking statements, including statements about the potential effects of the COVID-19, pandemic and related events and our business and results of operation. Because these forward looking statements are based upon management's expectations and assumptions and are subject to risks and uncertainties.
Certain factors that could cause our actual results to be materially different from those expressed or implied by these forward looking statements.
For a complete discussion of these risks we encourage you to read our documents on file with the SEC, which are posted on the investors section of our website at GP strategies Dot com.
Replay of this webcast will be available on our website for 90 days following today's call.
And I sort of being presented today are also available on the quarterly earnings releases page of the investors section of our website at this time I'd like to turn the call over to Adam Scott.
And thank you Candice and welcome everyone for <unk>.
Today's call I'll share some high level information about our 2020 performance and provide you with some updates on the company's strategy going forward then Mike will share the detailed financials for Q4 2020, followed by a Q&A session.
We're pleased with the fourth quarter of 2020 results as we continue to execute on our initiatives to build a strong balance sheet and manage the company through the disruption caused by the COVID-19 pandemic and ultimately position the company for success going forward.
<unk> strategies successfully navigated through a challenging market environment and our efforts are reflected in the 2024th quarter and full year results.
Although revenue was impacted during 2020, the company's active management of the business enabled us to control the impact of the pandemic on margins and strengthen the balance sheet.
As we move through the year, our performance continued to improve in the fourth quarter of 2020. The company delivered a sequential increase and revenue gross margin adjusted earnings per share and adjusted EBITDA compared to both the second and third quarters of 2020.
I'd like to remind everyone that during the second half of 2019, GP strategies had and organic growth rate and 7% and.
We ended 2019 with a backlog of $349 8 million, which was the highest backlog and the history of the company.
The global slowdown tied to Covid impacted the company's revenue and 2020, yeah by leveraging deep knowledge of our customers and the markets. We serve the company to clear and decisive action, which translated into solid momentum as a result, we finished the fourth quarter with the.
Third consecutive quarter of adjusted EBITDA growth, a strong balance sheet and a clear strategy.
Now I'd like to take a minute to highlight the balance sheet just a bit more.
Since the summer of 2019, we've taken significant steps to Delever the company and as a result, our balance sheet is strong and the company is positioned well to take advantage of long term opportunities for growth.
During 2020, we improved cash flow conversion and expanded margins and executed divestitures in line with our overall strategy.
Now at this point I'd like to discuss the company's business environment.
<unk> industry leadership regional focus and talented team and our ability to scale to scale quickly enabled the company to attract clients and deliver superior service. We expect this to translate into organic growth the opportunity that we anticipate.
And demonstrated during past business cycles, historically during the economic recovery businesses scale, adding people processes and technology, all requiring training services and.
In addition, the training outsourcing market has been historically active during the recovery from downward economic cycles.
And we come out of the business downturn caused by the pandemic, we expect similar business cycle activity to occur that could drive growth for GP strategies.
We believe for 2020, one will likely return to more of a traditional quarterly revenue cycle, but the company has experienced in the past the standard cadence for our industry is that the first quarter of the year is the lowest revenue quarter of the year and below the cyclically higher fourth quarter.
And of the previous year.
No our focus strategy targets business development, and our corporate resources on for key industry verticals that we expect to drive organic growth.
During 2020, approximately one third of our revenue was within industries beyond the for focus industries.
This portion of the company serves many great clients and presents meaningful potential for growth, particularly for our training outsourcing services.
But with that said this portion of the company does include some specialized services and products that has significant business potential but are less applicable across our core focus industries.
We continue to evaluate these businesses with the objective of capitalizing on the opportunities that we expect to evolve and a post COVID-19 environment, while at the same time driving long term shareholder value.
We believe there are multiple paths that can provide ideal outcomes for both our clients and our shareholders. Currently we have one business unit and this segment that is listed as an asset held for sale and the balance sheet and the business unit generated $13 3 million and revenue in 2020.
Now the company's industry focused strategy is part of a broader business simplification strategy.
Lower overhead costs by reducing the complexity of the business.
Our 2020, the company was committed to taking actions that drove margin improvement and ensure the sustainability of business initiatives throughout the year.
One of the actions during Q4 2020 with hiring a specialized consulting firm, which resulted in some restructuring cost. This firm has specific experience, helping organizations address the challenge of simplifying the complexities and managing the costs that can arise from business.
Expansion and a global world.
And we engage this firm to assist with the transformation of our G&A and the operating model and there will be completed by mid 2021.
Our goal is to sustainably return GP EBITDA percentage to those realized between 2014 and 2016.
As we look forward, we're excited about the combined impact of our organic growth focused strategy and margin improvement plans and we believe these should be very positive for our clients our employees and our shareholders. So at this point I'll turn the call over to Mike and he'll provide you with some deep.
Regarding our current quarter.
Thanks, Adam and good morning, everyone before I get into the details of the quarter over quarter results I want to briefly go over our 2020 financial highlights on slide nine.
Q4 revenue was up seven 5 million or six 5% over Q3, which is consistent with our previously communicated outlook of revenue growing sequentially in Q3, and Q4 from Q2 results.
Gross profit and gross margin are both up and Q4 over Q3 and Q3 over Q2, demonstrating the results from our focus on margin expansion and cost containment strategy.
After adjusting for severance and the <unk> item in Q3, G&A and Q4 is down $1 1 million or seven 5% compared to Q3.
Adjusted EBITDA in Q4 is up $3 5 million or 35% over Q3 and represents the third quarter and our role of adjusted EBITDA increase over prior quarter and a very challenging economic environment.
And Q4, and the company was able to generate positive cash flow from operations of $13 $6 million and as a result, along with cash proceeds from our divested businesses. In 2020, we were able to flip long term debt net of cash to a positive net cash balance of $10 3 million, which is an $85 million.
Swing from a net debt balance of $74 7 million at the end of 2019.
I'll now go through some of the details of the drivers for the Q4 financial results turning to revenue and gross profit for the company on slide 10.
We reported Q4 revenue of $123 1 million, which is down $32 3 million or 28% from the revenue quarters and Q4 of last year.
Primary drivers of the revenue decline or a $17 9 million decline and revenue due to the cancellation and postponement of revenue that can be directly linked to COVID-19, a $6 $3 million decline due to the divestitures of the LNG and IC axon businesses.
And a net $9 4 million decrease in revenue that cannot be directly attributed to COVID-19 for divestitures when considering this $9 $4 million decrease I'd like to reiterate how the company is identifying the revenue impact related to COVID-19, our business can be broken out and the three main categories. The first cattle.
And as long term multi year contracts with clients and get funded each year. The second category is annual work that gets renewed each year with existing clients declines due to cancellations and delays in delivery and these two categories can be identified and quantified as directly directly related to COVID-19 as we have contract agreements and.
And place, but the work delivered is less than expected contract volume grows the third category for us for shorter term duration project base work with existing and new clients, primarily one to six months and duration. This category of work as the primary driver of the remaining decline of $9 4 million for <unk>.
This category our rate of project completions is slightly outpacing the rate of New project Awards. This decline is not directly classified as being related to COVID-19 since it can't be linked to contracted work that was delayed or canceled. However for this delay and new awards and our short term project based.
Cycle is indirectly linked to the overall macroeconomic disruption caused by COVID-19.
And finally, partially offsetting.
These declines and the quarter was $1 3 million increase and revenue due to FX exchange rates and terms of company gross profit and gross margin percent. The company reported gross profit of $23 1 million, which is down $2 million or 1% from the gross property reported and Q4 19.
While gross profit dollars are down slightly we are seeing improvements in gross margin percent as a result of our focus on margin expansion and cost containment initiatives.
Breaking the Q4 revenue and gross profit drivers out by a regional reporting segments on slide 11.
And North America segment reported Q4 revenue of $80 1 million, which was down $23 4 million or 22, 6% from the revenue in Q4 of last year primary drivers of the decline in revenue or $12 4 million and decrease due to the cancellation or postponement of revenue due to COVID-19 impact a $6 $3 million decreased due to.
And the divestiture of ICI com and alternate fuel businesses and 2020.
And within the North America segment, the organizational performance solutions service offerings saw a decline of $1 4 million, primarily due to the decline and managed learning services and content development work. The technical performance solution service offerings saw a decline of $5 million, primarily due to a $1 $2 million decline and disaster recovery.
Covering services as a contract and this area winds down a $1 1 million decline and other government services that saw a large material spend in Q4 19 that did not repeat in Q4 of 2020, and a $2 $7 million declined due to the macroeconomic conditions impacting our shorter term project based work cycle.
The automotive performance solution service offerings saw net $1 7 million increase and revenue that was primarily due to the ramp up of the previously announced multi year outsourcing contract with a major automotive client that was partially offset by the completion of certain vehicle launch projects and 2019 that did not renew and 2020.
Publication revenue in this area and Q4, and 2020 was $5 1 million, which was down $4 9 million for publication revenue reported in Q4 of <unk> 19, as the customer cancelled a queue for 2020 due to COVID-19 for.
For 2021, the forecasted publication revenue by quarter is $4 million and Q1, which is a $4 7 million decrease from Q4, 2020 and $8 1 million in Q2, and $3 9 million and Q3 and $7 3 million and Q4.
The EMEA segment reported Q4 revenue of $28 6 million, which is down $5 2 million or 15, 4% from the revenue in Q4 of last year primary drivers of the decline or a $4 6 million decrease due to the cancellation or postponement of revenue due to COVID-19 impact and within the EMEA segment all three.
Solution areas are seeing a net decline of $1 9 million.
Which is primarily due to the macroeconomic conditions impacting our shorter term project base work cycle offsetting these decreases and EMEA segment was a $1 3 million increase and revenue due to changes and foreign currency exchange rates and the.
And the emerging market segment reported for Q4 revenue of $14 5 million, which is down $3 $7 million or 25% from the revenue in Q4 of last year primary drivers are at $8 million decreased due to the cancellation or postponement of revenue due to COVID-19 impact.
The organizational performance solutions area is down $1 $5 million, primarily due to macroeconomic conditions impacting and shorter term project based work cycle and the automotive performance solutions revenue was down $1 4 million, partly due to the completion of certain automotive contracts and the region and partly due to the macroeconomic conditions impacting shorter term project based.
For a cycle.
In terms of gross profit dollars and gross profit gross margin percentage at the segment level, our focus on margin expansion and cost containment strategy is delivering results. After excluding severance expense for both comparable periods. While gross profit dollars are down due to the revenue declines previously noted each of the operating segments is seeing.
For steady or improving gross margin percent in Q4, 2020 compared to Q4 dollars 19.
Moving on to total year revenue and gross profit for the company on slide 12 outside.
Outside of the impact of Covid, 19, divestitures, and FX and the other revenue changes and our three reporting segments next two a decrease of $10 1 million.
Within North America about half of that $8 million decrease can be attributed to the completion of certain vehicle launch events in 2019 that did not occur and 22020.
The rest of the North America decline as well as the small declines in EMEA and emerging markets, while not directly linked to COVID-19 can be attributed to the macroeconomic environment caused by COVID-19 impacting shorter term project based work.
While our 2020 gross profit dollars are down after excluding severance and other PTO policy change and the PTO policy change for both periods gross margin percent for 2020 was 17, 6%.
Versus 15, 6% for 2019 more details of the 2020 versus 2019 comparisons by segment are included on slide 13, and in our MD&A section of the 10-K for for this call I will skip this slide.
Before we move on however, I want to provide a little insight as we look forward to 2020 as you heard as you heard from Adam We are excited about the outlook for 2021, our strong balance sheet with with GPS industry leadership position regional focus and talented team as well as our ability to scale quickly enabled.
Company to attract clients and deliver superior services, and we expect to translate into organic growth going forward with that being said as we look to bridge from Q4, 2020 revenue for Q1, and 2021 revenue I want to point out a couple of factors that come into play.
And as I mentioned before the publication revenue will be down $4 $7 million and Q1, 'twenty, one compared to Q4 'twenty simply due to the timing of publication shipments and 2021 second as Adam mentioned, we expect 2021 to have a revenue profile that returns more towards our historical.
<unk> quarterly cyclicality and looking at our historic results for 2015 to 2018, which are time periods uninfected by material acquisitions or COVID-19, the average decline and revenue from Q4 for Q1 was around 3%. This is excluding pumps. So this.
And as a natural cyclical headwinds that we anticipate for Q1 and 2021.
Compared when compared to Q4 of 2020.
In terms of gross profit as we look forward to 2021, we do expect our focus on margin expansion to continue to deliver results. However, it's important to calibrate that and 2021 as our business picks up there will be a corresponding increase and cost of sales related to two items that could offset margin expansion efforts.
First as the global economy Reopens, we expect to incur more indirect travel expenses as we support our business development activities and client relationship initiatives and second in 2020, there was very little short term incentive earned under the Companys STI plan due to the impact that COVID-19 had.
And our overall results we.
We will potentially book higher STI costs in 2020, one compared to 2020.
Moving on to SG&A on slide 14.
General and administrative expenses for Q4 was $13 6 million, which is down $4 1 million or 23, 3% from Q4 dollars 19. The primary drivers of the decrease or $1 9 million decrease and G&A labor and expenses due to cost reduction initiatives, a $1 $2 million reduction and bad debt expense.
As Q4 of 19 had a large bad debt write off related to the final final settlement of and a balanced with a foreign oil and gas client that advent and dispute since Q4 2017.
And.
$8 7 million and reduction in amortization expense, primarily due to divestitures and a $3 million reduction related to a onetime credit for legal expense that were in excess of and insurance deductible for which we received a refund.
Sales and marketing expense for Q4 of 2020 was $1 8 million.
Which is down $3 million compared to Q4 19.
Moving on to other P&L items on slide 15 and to touch upon just a few.
Restructuring charges in Q4 totaled $5 million, which relates to a transformation initiatives aimed at increasing efficiencies within our G&A function as well as within our operating model as Adam mentioned. This initiative is expected to be completed by mid 2021.
And what the game of difference and the gain on sale of business Q4 decreased by $7 1 million base.
Based on the accounting for the sale of the tuition management business in Q4 of 2019 versus sale of the IC axon business and Q4 and 2020.
The effective income tax rate for 2020 was 17, 9%. This rate was impacted for several discrete items, including the sale of IC axon and as we look forward. While there are a lot of variables that could impact the future tax rate for <unk>.
2021, we are projecting a tax rate and the neighborhood of 30%.
Moving on to the earnings summary on slide 16.
After adjusting for special items, we reported adjusted earnings per share for Q4 of 38.
Which is 15 more than the adjusted earnings per share reported and Q4 dollars 19.
Adjusted EBITDA for Q4 was $13 6 million, which is up $2 6 million from the adjusted EBITDA reported in Q4 last year for.
For details on adjusted EPS, and adjusted EBITDA and you can refer to the appendices at the end of this presentation.
Moving on to some balance sheet drivers on slide 17 operating cash flow for Q4 was $13 6 million unit and year to date was $59 million.
One note one item to note when considering cash flow performance year to date is that the company currently has deferred payroll tax and other tax liabilities totaling $10 $4 million related to the cares Act and other COVID-19 relief, which will be paid through 2020, a rough wind down of this deferred liability as a net $7 4 million.
Decrease.
And as payments come due in 2021, and a $3 million decrease as all remaining payments are due in 2022.
I would point out that our 12 31 and balance sheet as a carve out for the pending sale of a business that serves one of our non target industries. The asset held for sale is $42 5 million, which is mostly comprised of intangible assets and liabilities held for sale are $5 9 million.
Turning to backlog on page 18 backlog as of Q4, 2020 was $316 1 million, which is down $33 7 million or nine 6% compared to the backlog that was reported for Q4 and 19.
$11 million of this decline is due to the divestiture of the LNG and IC axon business and 2020.
The remainder of the decline can be attributed to backlog reduction is primarily due to the COVID-19, cancellations and economic disruptions. While the company used backlog is more of a notional leading indicator. It is a positive trend that our 12 $31 20 months of backlog metric exceeded the year end 2019 metric along with the fab.
And that our Q4 2020 backlog is up $29 7 million or 10, 4% over Q3 of 2020.
This concludes the financial update and I'll now turn the call back to Adam.
Thank you Mike I appreciate that and we're excited about where we are as Mike said and I believe now we will open up for the Q&A.
And we will now begin the question and answer session.
Ask your question and you May Press Star then one on your Touchtone phone.
And you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two once again that it started and wanted to ask a question and at this time, we will pause momentarily to assemble the roster.
Okay.
And our first question today will come from Alex Paris.
Barrington Research. Please go ahead.
Hey, Alex.
Okay.
Pardon me, Alex you may be muted.
Yes, I am sorry, and thanks for taking my call.
Congratulations on a strong finish to what was a tough year.
And we have a couple of calls.
Questions here for you and I wanted to dive a little deeper and get a better sense of the restructuring program that you've commenced in the fourth quarter by hiring a consulting firm and then.
And then I have a follow up related to business units held for sale and Sean.
Yes, Yes, Alex Hey, How're you doing.
Yes, so the restructuring effort, we've done some benchmarking and if you look at our G&A growth over the year as we expanded global globally.
We've done some benchmarking and determined that we got to look at.
Where are opportunities, where we can make that organization more efficient part of our focused strategy has been as the company grew globally the level of complexity.
And outpaced our revenue growth and that shows up and.
And the G&A support services and so we've done that assessment of where are there opportunities that started in Q4. We are currently in the and the planning phase to outline a plan and then start the implementation of the initiatives identified during that as part of that overall restructuring effort, so with and in process.
Yes.
Initiative right now, but again, it's in line with our goal.
Margin expansion and cost containment and cost reductions to help improve overall margins for the company.
So related question.
Yes.
The restructuring charge and the quarter was $1 4 million, we should anticipate additional restructuring charges in Q1 and Q2.
I believe in the quarter was 500 K.
Okay.
And the quarter is 500, K and yes, we should we do anticipate.
Additional restructuring charges in Q1, and Q2 related this too ambitious to this initiative and then we expect and the second half of the year to be primarily done with that initiative and.
See the results of Av.
The efficiencies to be gained there.
Do you have any target for SG&A, our G&A as a percentage of revenue and I realize it has been increasing.
And are you willing to share that.
We don't have a target that we're willing to share, but I certainly can share the notion that we're looking to.
And have our G&A trend to be.
Start to turn back towards the G&A as a percentage of revenue that we've had historically.
So I can give you a notional or goal there. That's our objective. That's why we started this initiative, but we're not we're not providing any any specific targets there and overall Alex.
And between gross margin improvement, which is also.
And of what we're doing within this as well as G&A cost improvement as we said our goal is to get back to EBITDA percentage is that.
We experienced 2014 to 2016.
That's helpful. And then just kind of going back to the restructuring charges.
Mike do you want to.
It can be for me at this point or no.
<unk> of magnitude and size of the remaining restructuring charges to be taken in Q1 and Q2.
No I don't think we're going to we're providing that information on a forward looking basis.
Okay Fair enough and then my related question and my last question and as John just wanted to talk about the one third of revenue and industries that are beyond the for focus industries.
One other revenue means a $165 million and revenue and 2020 and you say you have one business unit lifted is for sale as of December 31 for $13 million and revenue how should I think about the difference in the $150 million or so and revenue.
Could we see more significant divestitures and other.
Yes.
And it's possible, but it's also quite possible that we don't I don't think you could really characterize it other than saying that.
We anticipate there are parts of that business that historically had been very strong and the training outsourcing market and we would expect that to potentially occur again in.
And the economic recovery and we plan to take full advantage of that but.
But there are other businesses that aren't necessarily tied to that so all I can say at this point Alex is that we can we're continuously evaluating those business is to determine.
Do they create the most value inside of the firm or outside of the firm and are they best for our.
And I did a best serve the clients and the shareholders. We have some great clients and this part of the business that we've worked with for many many years, we intend to continue working with those clients.
But we do we are analyzing this part of the business a little differently.
With the overall goal of reducing the complexity of the company, reducing the overhead of the company and improving the margin profile of the company without impacting our ability to organically grow revenue.
Got it that's very helpful. I appreciate the color guys. Thanks again.
Okay.
And our next question will come from Jeff Martin with Roth Capital. Please go ahead.
Thanks, Good morning, Adam and Mike Hope, you're doing well.
Hey, Jeff.
One of the dive and a little deeper on the.
The non for industry verticals piece as well it sounds like a good portion of that is outsourced training, but help us understand from a high level, what the big and the loss.
Just pieces of that.
Third a business comprised of.
And so we haven't really broke that down and a way.
And a way.
If you look at our overall industry sectors.
Continue to have a very strong industry and sector in life Sciences, as well, which is not in our four key industries.
Our core focus industry energy oil and gas is another sector inside of there and then you have a lot of smaller sectors. So the two largest industry verticals, our life Sciences and energy oil and gas now life Sciences is a great industry for us is.
<unk> clients and training outsourcing, we have a very very.
And exciting proposition for training outsourcing in that space and we continue to plan to focus on that heavily training outsourcing and the life Sciences space. So those are the two largest industry verticals and then it breaks down into different pieces from there.
Our intention and the future is to break down this business, a little bit more and a granular way in terms of service lines to help you understand that but at this point and time, we havent broken it out in that way.
Makes sense.
Sure that's helpful. Paul Congratulations on improving the balance sheet getting back to nice levels of profitability and the second half of 2020 and now that you've got the stronger balance sheet.
And what's your outlook in terms of acquisitions, what areas would you be targeting and and how does this shape the company over the next three to five years.
So I think it positions the company very well historically, there has been opportunities to buy business is.
On the <unk> during the back end of and economic down cycle, and very favorable pricing to the company would be open to that.
And so we're definitely looking at that if it was something that was clearly aligned to what we're trying to do it's important that as.
As we look forward on any acquisition that we may do it is going to have to be and acquisition that doesn't add to the complexity of the business, we want something that would enable the business to grow it.
<unk> and allow us to drive further organic growth without adding to the complexity of the business. So at this point from a capital structure and capital allocation structure, we would be open to that and there are other avenues that we're looking at in terms of what's the best use for our capital allocation for <unk>.
In terms of organic growth shareholder value and all other factors that we consider so right now we have not.
Clearly defined where we think we're going to go forward with the capital allocation it's opportunistic.
And we're comfortable with the balance sheet that we're in right now and.
And if we get to a point, where we have more cash on hand.
We're obviously going to be looking for what's the best use of that capital.
Right right. Okay, and then last question do you have a specific timeframe in mind, when youre targeting and returned to historic EBITDA margins.
Yes.
So not specifically, but what we are targeting is the first half of this year, we want to we want to be done with the restructuring and the positioning of the company to take full advantage of the all of the opportunities presented by.
The recovery from the Covid downturn, and and return to a more normal clean.
And income statement that doesn't have the adjustments as much and really is positioned for long term growth starting in the second half of this year to take full advantage of it.
Right right. Okay. Thanks for taking my questions.
Thank you Jeff.
And once again, if you would like to ask a question. Please press Star then one.
Our next question will come from Zach Cummins with B Riley. Please go ahead.
Hi, Good morning, Adam and Mike Thanks for taking my questions.
Adam I just wanted to ask a question about what youre seeing and the environment. So far this year.
In terms of the overall recovery are you seeing a different pace and recovery across each geography.
Absolutely not only each geography each country.
If you look at for example, if you look at our business in China, and it's recovering much faster than our business in Japan because.
And.
The situation the government's position and the Covid situation and so really our regional strategy that we implemented our regional structure, we implemented during the summer.
Has been very beneficial for us in terms of being able to respond very quickly and still control all of our cost around the world, but it is absolutely a country by country situation industry by industry situation, but what we do feel optimistic about it and <unk>.
Excited about is.
And specific industries and specific countries begin to operate and more of a post COVID-19 type of manner.
The patterns of recovery that we've historically seen and the business are happening in those specific areas. So we believe as more and more countries more and more of our verticals and start to move into more of a post COVID-19 recovery environment. It will pick up speed for.
Yes.
Understood and then just following up on that I'd be curious to hear your feedback that you've received from clients. When it comes to training budgets for this year.
And also with you shifting to kind of a hybrid model with both face to face and virtual modalities.
And any sort of insight you can give around the potential mix between those two as we proceed forward.
So we're definitely seeing we're definitely seeing budgets for 2021 that are higher than budget for our higher than actuals for 2020.
Vast majority of our clients spent less in 2020 than they had budgeted going into the year simply because they did not and.
<unk> the impact of Covid going into the year when their budgets were set at the end of 19. So if you compare the budgets for 'twenty one versus the actual for 'twenty that's there.
Once again on a country by country business by business basis, we have industries that are eager to return to face to face training.
Have other businesses that are have and.
And other clients that have had to quickly convert to virtual training and so now they're budgeting process.
Taking what was quickly done.
And making that into something more sustainable and more effective long term. So there was a push to move from live instructor to virtual instructor. However, it can be done as fast as possible now there is a push to let's revisit the curriculum and lights redesign it let's optimize it for this new virtual mode.
So once again, it really depends upon the industry and the country in terms of their appetite for face to face, but going back to face to face versus optimizing the virtual.
Understood. That's helpful. And then just one question for Mike.
Finally I'd share.
Really impressive and free cash flow generation throughout the year I know you did get a little bit of a benefit from the deferred payroll tax liabilities and other things around the cares act, but how should we be thinking about cash flow on a go forward basis, I mean, excluding the anticipated headwinds that youll see what the payback of those deferred liabilities.
Yes. So if you look at what happened in 2020, a couple of things were and play it on top of.
The deferred liability benefit of around $10 million.
We ended Q4 of 2019 with $155 million of revenue and and as the revenue decline and we kind of converted a lot of that working capital into cash flow generation and so there was there was a natural increase in cash flow generation from that aspect.
And in addition.
I think that there was a heightened focus on on accounts receivable collections, we've seen some improvement in that as well as.
Our laser focus on making sure our Unbilled and then we're getting our billings out the door as rapidly as possible.
Again.
All steps, we took to make sure that we've maintained.
Good financial discipline. During this time, so I think it's kind of a factor of the wind down and the working capital at lower revenue volumes converted a lot of that working capital cash improved collections and improved.
And timeliness of.
Really laser focus on the timing and thats getting invoices out the door along with that debt.
Benefit of $10 million of Covid really as we look forward, we typically historically outside of all of those anomalies I just talked to typically somewhere around 50% of EBITDA converts to cash.
As we go forward Thats generally been our rule of thumb, and we might be and the 50% to 55% of EBITDA conversion to cash as we go forward and Thats generally been the profile that we use and our modeling.
Great. That's helpful. Congrats again on the progress here in Q4 and best of luck going forward.
Thanks, and thanks Zack.
And this will conclude our question and answer session I'd like to turn the conference back over to Adam for any closing remarks.
Thank you and so.
No.
As we close as you said, we believe historically speaking.
We're entering into a period of time that has been very positive for the company. We are positioning ourselves to take advantage of that we feel that we are positioned to take advantage of it there is excitement with and within our client base around how does a equip their workforce with the knowledge skill.
<unk> and ability the day need to be successful and the new world that has been defined by the COVID-19 situation and to enable that human capital to reach its full potential they need help in terms of developing those knowledge skills and abilities and their workforce, we believe that that prevents presents a significant.
<unk> opportunity for us and we're doing everything we can to position ourselves to take full advantage of that deliver maximum value for our clients and our shareholders. So I appreciate everybody taking the time today.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
And then.
[music].
And then.
And.
Okay.
And.
[music].
And.
[music].
Okay.
And.
And.
[music].
Yes.
Yes.
[music].
And.
Yes.
[music].
And.