Q3 2021 Resources Connection Inc Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the Resources Connection Inc. Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question answer session and instructions will follow at that time, if any once you.
It requires assistance during the conference call. Please press Star followed by the Bureau of button on your touched on telephone and you will be connected to an operator, who will assist you as a reminder of this conference call is being recorded at this time I would like to remind everyone that management will be commenting on results for the third quarter ended February 27 2021.
They will also refer to certain non-GAAP financial measures an explanation and reconciliation of these measures for the most comparable GAAP financial measures is included in the press release issued today today's press release can be viewed in the Investor Relations section of our G piece of web site and was also filed today with the SEC.
Also during this call.
Management may make forward looking statements regarding plans initiatives and strategies and the anticipated financial performance of the company.
The statements are predictions and actual events or results may differ materially. Please see our G. P's report on form 10-K for the year ended May 32020 for a discussion of risks uncertainties and other factors that may cause the company's business results of operations of financial condition to the to differ materially from.
One of the expressed or implied by forward looking statements made during this call I'll now turn the call over to Archie P. C. L K can share.
Thank you operator, good afternoon, everyone and thank you for joining US with me today are Tim Brackney, our Chief operating officer on Jennifer <unk>, Our Chief Financial Officer.
I'll start with an overview of the third quarter, which I'm pleased to report showed continued improvement I will then discuss opportunities that are building as we execute on our define the strategy next I'll provide an update on our digital initiatives Hugo on.
Most of my remarks with insights on the macro environment that we believe bode well for fiscal 'twenty two and beyond.
Then I will turn the call over the Tam and Jen for further color and detail.
From a revenue perspective, we delivered $156 6 million in Q3, representing a sequential improvement of 3.4% same day constant currency, despite the seasonal holiday impact.
This performance continues to narrow the year over year decline caused by the global pandemic.
The fourth quarter trends continue to show improvement.
Another highlight from our financials. This quarter is the 200 basis point improvement in adjusted EBITDA margin from prior year performance driven by sequential revenue improvement and cost improvement of 12% year over year, excluding contingent consideration on restructuring.
Cost we remain.
Main focus of unimproved our margin performance as we continue to drive topline growth extract operational efficiencies and lower costs, including real estate expenses.
I want to now make a few remarks about our strategies and how they align with the opportunity instead of been building throughout the fiscal year.
Results achieved during this quarter reinforce more so than in any other prior quarter, our strategy to build more capability in the digital and technology and health care practice areas.
With the practice areas are delivering growth despite the COVID-19 impact specifically brass. These revenue was up 20% year over year, and we believe the pipeline of opportunity of near pre Covid levels.
Health care opportunities across the client set of payer provider medical device and pharma are all increasing as projects that were delayed due to COVID-19 reemerge or new needs created by Covid arise.
For example, we're currently engaged in multiple significant projects in the areas of revenue integrity continuum of care vaccine distribution in clinical trials development. We also recently entered into a multiyear contract with the preeminent group purchasing organization in the health care space and.
You've seen our pipeline continuing to expand.
Additionally, technology and digital revenue continues to rise as the percentage of our overall mix now.
Now for a quick update on our digital transformation initiatives, specifically Hugo for Andy.
The one who is new to our story you go with our digital engagement platform to offer clients and talent the opportunity to connect digitally for project work in the counting of finance space with speed transparency and choice.
What is special and different about our platform is the foundation of employment versus an independent contractor model.
We have purpose built this platform for the professional knowledge worker, who wants the safety net and community of employment with the agility and choice of a gig oriented career.
We believe Hugo will be one of the first platforms to revolutionize how accounting and finance professionals joined the fluid work force of the new gig economy.
We're in the final stages of product development testing and marketing readiness for the initial rollout of Hugo.
We will launch Hugo first in the New York Tri State area, although specific timing remains fluid.
We're keeping a close eye on market conditions for launch to ensure the pandemic recovery of stable enough to support on premise work if required.
Many clients are in various stages of office reopening plans. So we will carefully evaluate their readiness when determining the final timeline for launch we're excited that the digital engagement model creates a new pathway to serve clients and consultants with user experience at its heart.
We believe this approach will only grow in the coming years as digital natives become our core buying debt.
Let me now share a few insights on trends materializing on the anticipated backside of Covid, which we believe should serve as longer term drivers for our business.
We know the economic environment of strengthening GDP growth is expected to exceed 6% on the U S. This calendar year. According to the Fitch ratings global economic outlook March 2021 report.
And in the other regions in which we operate they project growth in the range of 5% to 8%.
Last week the conference Board reported that consumer confidence is the highest it's been in a year and last week's jobs report beat expectations.
Tapping industry analysts also projects U S staffing revenue to grow 12% in 2021.
Specifically for our G. P's clients Covid has hastened the shift of fluid talent strategies as a dynamic force for improving corporate performance in other words and of world filled with technology change demographic shifts and the economic uncertainty having the <unk>.
Right talent in the right place at the right time has become an imperative to compete and thrive in today's business environment.
Add the dimension of evolving labor preferences toward remote work additional flexibility and increased choice and the human capital marketplace has drastically changed.
These factors explain why growing number of large enterprises will now define staffing needs with agility in mind.
A recent study published by Harvard Business School M. B C. G. Henderson after serving 700 business executives in companies with more than 100 million in revenue highlighted the importance of adopting of strategic approach to an on demand work force.
Here are a few of the salient research findings from that study.
60 per cent of the executive surveyed expect that they will increasingly prefer to rent borrow or share of talent with other companies.
Almost 90% of business leaders report agile talent platforms will be somewhat or very important to their organization's future competitive advantage.
And nearly 50% of the executives expect their use of new digital platforms to increase significantly in the future.
We believe that this research like many other studies recently published confirms that the full time equivalent paradigm is yesterday's framework.
All of fluid talent strategies are taking hold today play right to our G P strengths and capabilities and will accelerate as we move forward in the now of work.
I'll now turn the call over to Tim for his operational update.
Thank you Kate and good afternoon, everyone. During the quarter, we saw progress on our revenue on operating metrics as clients embrace the start of a return to normalcy.
Top of the funnel of activity is approaching pre pandemic levels as new and existing buyers have become more eager to discuss current and future initiatives.
Opportunities identified through our enhanced the outreach led to an appreciable increase in pipeline and closed engagements as.
As the overall macro environment continues to improve our revenue has also gained strength.
As Keith touched on the kind of sequential quarterly revenue trended up three 4% on the same day constant currency basis, despite the seasonality.
Buoyed by the positive dynamics of clients resuming of engagements that have been paused starting projects that were delayed and generally committing to larger spend on initiatives, including initiatives that had been driven by the changes to the work force paradigm.
As a result of the pandemic.
Covid has it still does present challenges for our business.
At the outset demand creation was challenged however, as client initiatives of continue to ramp it has impacted the timing impact in terms of engagement starts creating a lag between closed one engagement and revenue generation.
We are seeing improvements in this dynamic as well, but timing continues to be fluid on an engagement by engagement basis.
Overall momentum coupled with our ability to deliver border Leslie has given us capacity to pursue a more robust set of strategic initiatives.
While there have been increased calls for on Prem Resourcing. We also continued to deliver with blended teams and still in many cases fully remotely.
We believe that the blended approach will be the standard operating model going forward as we serve clients that are comprised of increasingly distributed teams and it become more condition the flexible ways of engagement focusing on outcomes versus Zip codes.
We have seen numerous examples of this including helping a large consumer goods company headquartered in the U K drive trade promotion efficiencies and benefits through better processes tooling using advanced analytics machine learning and AI.
Our delivery team for that project has worked for both onsite and remotely and is based on various localities across Europe and North America.
Another example of the fast ramp of assistance, we delivered to our client for stack readiness.
This was the quick turn and featured a multicity team delivering on a blended fashion to help for parents want to go public and then comply with ongoing public company requirements around the financial systems, Sarbanes Oxley and equity administration.
As we have stated before we believe this new way of working is here to stay and that it allows us to operate with increased efficiency, while offering clients and consultants more choice and agility.
As we push into more of a post pandemic environment, we believe that utilizing a mixture of traditional and remote delivery models will be critical in the commercial environment rife with pent up demand specifically.
Specifically, our ability to capitalize on speed the market and to spin up solutions that produce the desired outcomes was one of our core competencies before the pandemic and has been further enhanced by lessons learned during the last year.
We believe that the foundation provides the backbone for growth and profitability as we fully embrace life and our board of lists world.
Now, let me turn to our third quarter operations during the quarter, we began to see of strengthening pipeline and increased average daily revenue rates the strengthening increased throughout the quarter, partially offset by some of the adverse weather effects that impacted parts of North America.
And renewed COVID-19 outbreaks in parts of the APAC and Europe.
Nonetheless average daily revenue rates ended the quarter at the highest they've been in nearly a year enterprise revenue grew sequentially. Despite typical seasonality and pipeline of booked revenue also nearly reached pre pandemic levels.
Average daily revenue rates in Europe ended the quarter nearly matching pre COVID-19 levels. Despite some late in the outbreaks while North America also continues to make good progress.
In fact, the majority of North American markets continued sequential progress, while several markets, including Tri State Detroit.
Eveland, Toronto, and Mexico had Q3 revenue results that exceeded the prior year quarter.
APAC was slightly down sequentially due to renewed waves of Covid and some holiday impact, although Japan continued their strong run improving both sequentially and over the prior year quarter.
Finally, there was continued strong performance from strategic client program healthcare veracity in county, which either equaled or exceeded prior year quarter results and are building a strong pipeline.
We are laser focused on strategic growth and expansion and we are also concentrating heavily on operating leverage executing in the more borderlands fashion continued migration to a more agile footprint and consistent focus on expense management has yielded improvement in operational leverage and a reduction in SG&A. We believe as we return to a more open.
<unk>, our discipline around driving operational efficiencies combined with our increased sophistication and adapting to the new modalities, we use to meet deliver and commune will allow for a more efficient and effective operating model in the future.
We will continue to invest in the areas, where we see upside opportunity and allow us to elevate and widen our relationships within our client base, including in Hugo Digital and technology health care client programs and office of the CFO.
Before handing over to Jan I want to provide some additional insight on the early four quarter trends.
The early weeks of Q4 has shown the continuation of positive trends in both revenue and growing pipeline, while we were optimistic given the operational in the IND.
Caters and broad economic trends, we recognize that there are still some fluidity in the macro environment I.
I will now turn the call over to Jen for a more detailed review of our third quarter results.
Thank you Kim and good afternoon, everyone.
Starting with an overview of our third quarter results revenue continued to improve sequentially. Despite the typical holiday impact gross margin was in line with our expectation given the typical seasonality at.
SG&A continues to benefit from our restructuring initiatives as well as our increasingly virtual operating model.
We delivered a solid 6% adjusted EBITDA margin of 200 basis point expansion from the same period last year.
Our balance sheet remains strong with an increase in available liquidity during the quarter and we continue to generate positive cash flow from operations.
Now, let me provide more color on our operating results starting with revenue.
We generated $156 $6 million of revenue of 2.2% increase sequentially and of six 8% decrease from the comparable quarter a year ago narrowing the year over year revenue GAAP.
After adjusting for business day, and currency impact revenue increased three 4% sequentially and decreased 10, 4% year over year.
North America led the sequential improvement with the five 8% increase on the same day constant currency basis, largely driven by a 12% growth in digital transformation services and of 3% improvement in both health care and financial services.
Europe, and Asia Pac revenue sequentially declined by seven 1% and five 6% respectively.
It was primarily impacted by the re institution of Lockdown in Germany and to a lesser extent the expected shrinkage from unwinding our businesses in certain European markets in connection with the restructuring initiatives.
The tax revenue recovery was hindered by heavier adjacent impact on various holidays in the third quarter.
Our third quarter gross margin was 36, 4% down 10 basis points from the prior year quarter.
The change in gross margin was largely due to a slight decline in the bill pay spread.
Comparing to Q2 of fiscal 'twenty, one gross margin declined by 160 basis points, primarily due to an increase in payroll taxes at the start of the calendar year on FICA earnings reset.
The average hourly bill rate for the quarter was approximately 125 up from 123 in the prior year quarter and $1 24 in Q2 of fiscal 'twenty. One the average pay rate for the quarter was <unk> 64 up from 63 in both the prior year quarter and the prior quarter sequentially.
SG&A expenses for the quarter were $49 $5 million after excluding $2 7 million of contingent consideration expense and point of $7 million of restructuring charges of meaningful improvement of $6 $7 million compared to the prior year quarter.
Reflecting the benefits from our restructuring efforts management compensation costs were reduced by $3 million and occupancy costs were reduced by $9 million compared to Q3 of fiscal 'twenty.
General business expense also continue to improve down $1.6 million compared to Q3 of fiscal 'twenty due to reduced travel and reduced discretionary spend.
Turning to other components of our financial statements income tax provision was the $1 1 million, representing an effective tax rate of 65 per cent compared to an income tax benefit of $4 million in the prior year quarter. The.
The increase in effective tax rate for the current quarter was driven by our inability to realize any tax benefits on losses in certain foreign entities due to required valuation of outages.
Prior year quarter's tax benefit included a discrete tax benefit of $6 $6 million relating to certain deductions, we took upon dissolution of entities in the nordics.
Adjusted diluted EPS for Q3 of the fiscal 'twenty, one, which excludes the net of tax impact of restructuring charges stock compensation and contingent consideration was <unk> 14 per share compared to 25 cents per share in the prior year quarter, which included the favorable impact of <unk> 18 per share from the discrete tax.
Benefit just mentioned earlier.
Our balance sheet remains strong we ended the quarter with cash and cash equivalents of $84 million compared to 96 million at the end of fiscal 'twenty, we generated approximately $35 million of positive cash flow from operations in the first nine months of the fiscal year and paid down $35 million of outstanding debt under our credit facility.
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We maintained our 14th of per share quarterly dividend in the third quarter.
We remain prudent in managing our liquidity considering the lingering impact of the pandemic in the near term cash requirements to fund our digital transformation efforts.
I'll close with our fourth quarter outlook and an update on clients statistics.
Given the pace of recovery from the pandemic and increasing stability in the macro environment and in our business. We're pleased to provide guidance for Q4.
We expect continued revenue growth in the fourth quarter in a range of $1 $64 million to $167 million gross margin is expected to rebound from the third quarter, given fewer holidays and is expected to be in the range of 37.5% to 38%.
From an SG&A perspective, we expect to achieve sub 30% in the quarter during which the top line is still recovering from the pandemic estimate it to be in the range of $48 million to $50 million.
Finally, rdp's client continuity with outstanding this quarter and we believe our retention statistics demonstrate the value add we bring to clients every day.
During Q3, we served 49 of our top 50 clients from fiscal 2020, and 45 of the top 50 from 2019. The stickiness has remained consistent year over year, despite the global pandemic.
In addition for Q3, our top 50 clients represented 42 five per cent of total revenue, while 50% of our revenue came from our top 80 clients.
Reflecting our efforts to continue to diversify our solution mix, 94% of our top 50 clients procured multiple services or functional expertise from RDP during the third quarter an improvement from the start of the second half of the year.
Now we're happy to take questions.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone.
Chart of your question first of the balance sheet. Please stay on board with compile the Q&A roster.
Yeah.
Our first question comes from Josh Vogel with Sidoti You May proceed with your question.
Thank you good afternoon, everyone. Thanks for taking my questions.
Jen appreciate the.
The guidance that you gave for Q4.
I I know, it's still early but I was wondering if you know.
If you could frame I'll start thinking about the gross margin profile of the business once the spin into mid year.
Specifically fiscal 'twenty two.
Thinking about mix.
Search revenue, increasing but also perhaps an increase in client reimbursements could could the gross margin get back to and above 39% on a full year for fiscal year basis.
Yeah, Hi, Josh.
Yes, I mean as you know as we think about gross margin I think of it in really three three components. One is obviously, the bill and pay ratio and the second one is exactly what you said, which is the mix of our revenue search conversion revenue, which is of 100% gross margin versus firstly of the client reimbursement.
And revenue ended the and the third one is really what I consider to the the fixed cost.
Salt true fixed benefit costing as revenue increases you know in.
Fiscal 'twenty, two and that that leverage is really going to it's going to increase the from the bill pay standpoint, we do expect that debt, we have some kind of room.
To increase our bill rate is particularly in the in the areas of digital as well of health care on.
On a solution and so.
Yeah, I mean, we we we expect the bill page for you to get better and I remember too this year because of Covid, we did have to make some concessions on pricing.
Where it's appropriate to current to our clients and clients in order to balance our top line and our gross margin. So we do expect to get some of that back. If we hadn't you are mid fiscal 'twenty two.
Great.
When we when we look to the future we think about the bill rates in digital from health care and.
Looking to operating against this blended delivery model do you think that's going to have any impact on the bill rate side of the business.
Hmm, maybe I should clarify what each other.
The high Tech.
Break that down a little bit better when I think about the blended blue for remodel of whether it's on premise of versus virtual or remote is there any notable changes.
Or deviations in the bill rates that we should expect to see longer term.
Yes, I don't like I think let.
Let me answer this in this way the I mean, we will still price relative to the work that we're doing sort of irrespective of where the delivery asset lives. So to the extent that we have that we can.
Match, a better resource for as part of the delivery team that's off site that allows us a better delivery outcome with the pricing the.
Pay and pricing will be.
Sort of split rights of you gives us an opportunity for for actually margin uplift, depending on kind of where the delivery assets sits relative to the.
Outcome, a couple of the project and the <unk>.
The associated with it.
So I don't I think it will have more impact on margin than it will on billing in short of our to answer your.
The kind of get back to your original question, but it does provide real opportunities for us when you think about profitable growth.
Sure No that's helpful. Thank you and.
Shifting gears, a little bit you had a comment around clients committing to larger spend on certain initiatives can you just quantify what this larger spend is how it looks versus.
Pre pandemic levels.
Yeah, I mean, it's hard to give you.
I'll give you I'll give you a couple of ways to look at it I mean, our average deal size right now is larger than it's been.
And well over a year. So that's one way to look at it the at the other way to look at it is just the the outcome.
The the types of projects that were being asked to come in and for their large initiatives, where we're asking for dozens of people of quite different then.
Towards the beginning of the pandemic and certainly when we were in the middle of it where we're very much more smaller projects and the commitments. Both in terms of the timing number of and number of people and certainly bill rates were lower.
Alright, great and two more quick ones, if I may and I'll hop back in the queue.
It sounds like veracity is doing very well.
I'm just curious you know how you know given the the contingent consideration pay of you know how are they performing relative to your your from them are maxed gets you would put on that day.
I'm, sorry, Josh I lost the very end of your question.
I'm sorry, so I'm just curious you know veracity is for Bart.
Are they performing relative to the minimum of Max targets that debt prefer it.
Yeah.
Josh I'll take that one on.
Is there for me.
It's moving very well and as you can see we had contingent consideration of $2 7 million during the quarter and you know right now they are exceeding the minimum thresholds.
To make the earn outs that we do expect it to exceed on you know the.
The minimum thresholds.
When we get through the earn out period, which is July.
Great Great and lastly.
Can you just talk a little bit about the recent investment in APAC. The collaboration with the service now you know what it immediately brings to the table for you and is this something we could see you do and potentially other other regions.
Yeah, I think the answer Hey, Josh It's Kate I think the answer is yes, I mean veracity. When we purchased them. We knew was a largely domestic business, but the need for collaboration streamlining workflow and automation is a global problem or issue.
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So our start in expansion is in Asia Pac as the.
Typically in Singapore, where we hired a leader out of the big for <unk>.
To lead our digital practice, there and he brought with him a small team.
And we hope to do the same thing in Europe. When the time is right for Europe, we needed to get through project strength first, though and stabilize that business and then we'll as well the focus I think in fiscal 'twenty two on.
How do we add to the global platform for breathy.
That's great and I'm, so sorry, I just wanted to sneak in one more quick one day based on your expenses or any other additional restructuring type of Europe, that's baked into those numbers.
No we're substantially complete with with our restructuring in Europe and there are a couple of our of real estate look we're still working on but we work with there.
Okay, great well.
For my question is it's great to see the movements in the business on looking for being had the euro.
Thank you Josh.
Thank you. Our next question comes from Andre Childress with.
Sir you May proceed with your question.
This is the auto children's calling in for Mark Mark on Thank you for taking our questions.
So my first question is on the Hugo implementation I know you provided some detail that you know the New York Tristate area is going to be the first market that you're implementing at you, but what does the timeline look like beyond that from the initial rollout rollout to the dedicated market to the complete rollouts of the all market just walking through kind of what that roadmap looks like would be very helpful.
Sure Hi, Andre Nice to meet you it's Kate.
So we will start in the start of the fiscal year fiscal 'twenty two with our rollout in the Tri state area that'll be a soft launch and I imagine we'll continue to iterate the product the bet our plan for fiscal 'twenty two is to be able to roll out fully in three major markets.
We next intend to move to the Texas region, and then move to the West Coast in Northern California, and from there. We believe that the adoption will be more rapid across the country.
So we'll cover those three markets in fiscal 'twenty, two and then move to accelerate in fiscal 'twenty three across the domestic market.
Okay that is very helpful and so within fiscal quarter of three results and kind of looking forward how much of a contribution.
Did you guys see from assisting with kind of the spec business and kind of how much of the activities going on.
Yeah.
Andre Hi, it's Tim to quantify that I think the little is it.
It's difficult for me to give you sort of a percentage of business. What I would tell you from what I will tell you is that prior to this quarter, we were doing transaction support and other.
The pro readiness of more sort of in the traditional arena and it feels like in this quarter I.
I think much like a lot of others the.
The the Genie is out of the bottle on snacks and so our pipeline is very full and we expect that.
Barring something happening from a macro perspective that will have more of these types of projects.
But we're working on into Q4 and probably in the Q1 as well.
And so looking forward, particularly like what you saw on March and going forward can you dive into some details that you saw.
With the trend in North America, and sort of like for example of Howard.
This performance.
Since they really opened up here.
The Tri State region, and California, Anthony until there was very helpful.
Okay I think all.
Alright, Thank you broke up a little bit so let me just I'll take you on sort of.
Sort of a quick tour of North America, let's start on Tri State, which I can hear you asked about.
Tried to it got hit hard early with Covid and they've come out really swinging in the second half of the year. There Q3 was very strong I mean, there had year over year growth sequentially.
Excuse me year over year growth year over year growth and sequential I should say.
I think the the.
Texas had been having a very strong year.
Here, but they were hit by some of the inclement weather and other things that happened in this quarter.
For the Midwest and southeast for probably the probably the of our slowest recovers, but we've got some real signs of life. There now when I look at sort of leading indicators Midwest, even with sort of manufacturing coming back Detroit I haven't had a very good quarter.
And then on the West Coast West Coast has been strong the I think when I look at their pipeline and I look at the trend line.
The level and sort of top of the funnel and I think about the progression relative to deal size and velocity.
We're expecting them to you.
Continue to have a strong fourth quarter and then for you into Q1 from the summer.
Okay, great and so just on that.
With some economies reopening has that driven you know stronger pipeline activity at least people re engaging in certain conversations in and thinking about bringing certain projects back.
I mean definitely I mean, it's sort of like a double edged sword, so but the answer to that is yes.
I'll get to the double edged sword of the second but just the idea of know of having some certainty around what has been very uncertain times.
Lot of our clients, particularly the large ones are moving more quickly.
Relative to projects that were either shelved or paused or the sequence differently. What we see is that the stacking their projects.
And trying to move them move quickly on that so for the answer to that is yes relative to it's not really relative I would say to you on the economy opening faster than the other its more about certainty of uncertain times the <unk>.
Double edge sword piece I would just say is that I think theres a lot of people, who feel I mean, we see a little bit of an exaggerated.
Holiday and vacation effect because of people who have been cooped up for months at the time, who now also have that sense of optimism and one of you utilize the opportunity to spend time with people that they haven't been able to spend time with before.
So I feel bad calling out of double edged sword, because that's a very positive thing for all of us but.
It's sort of it's a mild one thing effect to the upside of the economy opening up again.
Yeah, that's that's very encouraging and great to hear thank you for answering the questions.
Got it thanks Andre.
Thank you. Our next question comes from Andrew Steinman, who at the JP Morgan You May proceed with your question.
Hi.
Two questions one on day, one on SG&A. So John just a quick one on days going on.
Over the quarter of the third quarter, just reported what day different year over year, and then again for the fourth quarter, which we're now all of our day different year over year the.
And my question about SG&A, obviously, thank you for for guiding the fourth quarter with SG&A and overall. My question is you know as we move past the fourth quarter is this a period of higher SG&A, you know I'm thinking about discretionary cost coming back and then of course you know the.
The the launch of Yugo.
Yeah.
Hi, Andrew so with respect to date.
Q2, I'll just talk about on North America, because that's what drives the majority of our business, though in Q2 I'm sorry in Q3, we had 62 days.
Oh, I'm, sorry, 61 days and vs. Chief Q4, we're expecting to have 65 days business day.
And I asked you year over year, and the SG&A, yeah, and with respect to SG&A I mean, I think you know beginning in FY 'twenty. Two you know some of the SG&A favorability. This year was a it was really attributable to about six 6% expected to be 6 million to be attributable to the reduced travel costs and I expect that going for.
And in FY 'twenty two as the economy in the World opens up we would give back some of that savings I would expect of the give back for about maybe maybe in the range of 50% of that of that savings that that youre seeing in this in this fiscal year.
And then with respect of Hugo too and as we as we launch.
Hugo in fiscal 'twenty, two we will add additional SG&A.
In the next year, just because you know roughly about 75% of the cost today is has been capitalized right and did you give days year over year. I think you just gave it for the current quarter I'm at the year over year.
I'm, sorry, Q3 of 'twenty is 15 90.
And Q for Q4 of 'twenty.
People of 2016 nine okay perfect. Thanks for the help.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Kate Mcshane for any further remarks.
Thank you everyone for your interest in our G. P and we look forward to talking to you again at the end of our fiscal year. Thanks very much.
Yeah.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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