Q1 2021 Perficient Inc Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the Q1 2021 proficient earnings conference call.
At this time all participants are in a listen only mode. After the Speakers' presentation. There would be a question and answer session to ask a question. During this session you will need to press Star then one your telephone.
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And now like to hand, the conference over to your Speaker for today, Jeff Davis, Chairman and CEO you may begin.
Thank you and thank you everyone for your time. This morning. This is Jeff Davis with me on the call is Paul Martin, our CFO and Tom Hogan, our president and CFO I want to thank you again for your time.
As is typical we've got about 10 to 15 minutes of prepared material after which we'll open up the call for questions. Before we proceed Paul would you. Please read the safe Harbor.
Thanks, Jeff and good morning, everyone. Some other things we will discuss in today's call concerning future company performance will be forward looking statements within the meaning of the securities losses actually.
Our results may materially differ from those discussed in these forward looking statements and we encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause those results to be different than contemplated in todays discussion.
At times during this call we will refer to adjusted EBITDA EPS and adjusted EBITDA, Our earnings press release, including a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles or GAAP is posted on our website at www dot prefer.
<unk> Dot com, we've also posted a slide deck, which includes a reconciliation of certain non-GAAP guidance to the most directly comparable financial measures.
Peered in accordance with GAAP on our website under for industrial Relations Jeff.
Thanks, Paul and once again, good morning, and thanks, everyone for joining we're excited to be with you. This morning to discuss our first quarter and an updated outlook for the remainder of 2021.
Just more than two months ago, we issued a full year forecast that recall that called for accelerating revenue growth and increasing profitability. Since then the velocity and intensity of our met him his own momentum has only grown.
<unk> business and our optimism regarding the future is as strong as it has ever been right now.
As you know for several years, we've been working to transform proficient at from a primarily U S based firm to a true global digital consulting leader.
And as you can see from our results from the revised outlook, we are well on our way organic offshore revenue growth during the quarter was 42%, let me repeat that organic offshore revenue growth was 42% in the first quarter in total offshore revenue growth was 130% year over year.
New and existing customers are aggressively embracing our differentiated delivery model, which couples are strong and high touch domestic presence with the nearshore and global delivery capabilities enterprises require today.
Demand for our services has never been more robust and the same can be said for candidate and colleague interest and building careers at proficient.
Our channel and acquisition remains a core competency in another key differentiator for us and while we've built that team and function out substantially in recent years, we're continually enhancing our capabilities through improved tools and processes.
Along with increased capacity, so that we can identify and onboard talent and RF it to support our growth.
We continue to win Best places to work awards in several markets and have emerged as an employer of choice in many regards.
We're assessing talent and hiring at an extraordinary pace right now Tom will share the full details regarding large win shortly but already this year. We've closed two eight figure deals and a few dozen actually seven figure deals. What's most exciting is that our pipeline shows little sign of abating as quickly as we close these large deals more up here and again its.
Really unprecedented demand.
Some of that of course, we can attribute to a general client confidence as the economy improves alongside vaccination rates and consumer optimism.
But the success. We're realizing right now is also the result of some very specific decisions in investment we've made along with advantages that are unique to proficient.
We continue to scale, our sales organization, our brand is growing stronger and more relevant each day and our clients continue to refer to us as a breath of fresh air. They appreciate our pragmatism and the benefit of a true strategic partner and the full breadth and depth of our capabilities.
I mentioned earlier, our customers are gravitating to our collaborative approach and compelling blend of domestic or global delivery talent. The nearshore capabilities. We added in 2020 have proven to be an even bigger game changer than we anticipated in fact, we've introduced more than a dozen legacy proficient accounts are there and have many many more in the pipeline.
Across industries platforms and solution disciplines, we are succeeding and.
And we continue to collaborate with dealing with key technology partners and our strong channel relationships remain an important factor in our business.
Just this month, we were named the Red hat North American application platform success partner of the year as well as the talented U S partner of the year and Paul will speak to the financial resort results. Shortly but we were again pleased with the key performance metrics, particularly north American utilization, which we've sustained at or above our goal of 80% for the past four quarters.
Our business leaders are collaborating.
Constantly and proactively managing our entire talent pool across the spectrum of accounts and opportunities that's a key input to our quickly accelerating profitability.
The business really is firing on all cylinders right now nothing has slowed us down in the second quarter, so far and at the moment I can't see anything that prevents 2021 from becoming the strongest year in proficient history as the increased guidance, which we'll discuss shortly reflects.
With that I'll turn the call over to Paul who will share the financial results details for the first quarter Paul.
Thanks.
This revenue reimburse expenses were $166 5 million in the first quarter and $18 one per cent increase over the comparable prior year period gross margins for the quarter ended March 31 increased to 140 basis points to 37, 4% compared to the prior period SG&A.
SG&A expense was $34 million compared to $33 $2 million in the comparable prior year period, and SG&A expense as a percentage of revenue decreased to 21% from 22, 8% from the first quarter of 2020.
Adjusted EBITDA for the first quarter of 2021 was $34 6 million or 24% of revenues compared to $23 8 million or 16, 3% of revenues in the first quarter of 2020.
First quarter of 2021 included amortization expense of $7 1 million compared to $3 $9 million in the comparable prior year period. The increase was primarily associated with the acquisitions completed in 2020 net interest expense for the first quarter of 2021 increased to $3 3 million from $1 $9 million in the comparable prior year period Prime.
Merrily as a result from the August 2020 convertible debt offering.
Our effective tax rate for the first quarter of 2021 was 19% compared to 14, 6% in the first quarter of 2020, the increasingly effective rate was primarily due to the relative decrease in tax benefits recognized related to share based compensation deductions.
During the three months ended March 31, 2020, net income increased 51% to $13 6 million for the first quarter of 2021 from $9 million in the first quarter of 2020, primarily as a result of the improved EBITDA dilutive.
Diluted GAAP earnings per share increased to <unk> 41 cents per share for the first quarter of 2021 from 2007 cents per share in the first quarter of 2020 adjusted earnings per share increased to 75 for the first quarter of 2021 from 51.
In the first quarter of 2020 see the press release for a full reconciliation to GAAP earnings are ending global head count at March 31st 2021 was for 160 for including 3882, billable consultants and 282 subcontractors ending SG&A head count was 664.
Our outstanding debt net of unamortized debt discount and deferred issuance costs as of March 31, 2020 was $186 1 million. We also have 20.
Gives me $72 1 million in cash cash equivalents as of March 31.
2021, and $124 $8 million of unused borrowing capacity on our credit facility. Our balance sheet continues to leave us very well positioned to execute against our strategic plan.
Finally days sales outstanding on accounts receivable decreased to 66 days at the end of the first quarter of 2021 compared to 71 days at the end of the first quarter of 2020, I'll now turn the call over to Tom for a little more commentary behind these metrics Tom.
Thank you Paul and good morning, everybody bookings in 2021 really gotten off to an incredible start for.
For the quarter, we booked 92 deals greater than $500000. During the first quarter of 2021, that's far and away the.
A record in terms of large deal volume booked those 92 wins compare to 71 in a year ago period.
<unk> 70 during the fourth quarter of 2020.
As I mentioned, a couple of quarters now.
And it's really this type of success that really underscores the traction we have in the market and how well we're executing right now.
We still cannot travel to meet our customers and prospects and we're not working on site anywhere yet we have one more large deals than ever before during Q1.
Jeff talked about us work, but our work in transforming to be a true global firm more than 40% of our delivery resources are now offshore and our global talent is embedded into virtually every single large deal we went into liver.
As an example, we recently partnered with a nonprofit health insurance provider to overhaul its legacy web site mobile experience and customer portal all of which required modernization we.
We beat out several competitors for broad customer experience engagement due to our full scope of services and solution expertise. Our global team is engaged in this eight figure engagement that will improve processes across the providers digital platforms to enhance the customer experience and increase their competitive advantage.
That's just one of the many examples of our continued success in healthcare, where we continue to be a recognized leader for our technology and industry expertise. In fact, just last week, we announced that modern health care.
<unk> us the fourth largest health care it consulting firm.
Our momentum in this space are significant and as we work with our clients to enhance healthcare delivery and improve the patient experience.
Financial services is in other industries, where we continue to shine.
As an example, we recently answers the next phase of a project with an investment banking services holding company.
Previously supported the company's strategic initiative to change how they treat and use data by creating a centralized location allow stakeholders from across the organization to interact with information they need.
During the second phase of the project are initial delivery team will expand to include more than 130 onshore and offshore subject matter experts, providing expertise and data platforms and core development solutions. So again, just a fantastic quarter a lot of momentum and what appears to be a great 2021 ahead of us and with that I'll turn things back over to Jeff.
To discuss second quarter remainder of the year.
Thanks, Tom So proficient expects our second quarter 2021 revenue to be in the range of $173 million to $179 million second quarter GAAP earnings per share is expected to be in the range of 41% to 40 for second quarter adjusted earnings per share is expected to be in the range of 77 to 80.
Proficient is raising its full year 2021 guidance to a range of 685 million to $710 million raising 2021, GAAP earnings per share guidance to a range of $1 72 to $1 87, and raising 2021 adjusted earnings per share guidance to a range of three to $3 15.
With that operator, we can open up the call for questions.
Thank you.
Good day, ladies and gentlemen, Thats star one to ask the question to withdraw your question press the pound key.
Again, Thats star one to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of Mike tandem.
With Needham <unk> Company your line is open.
Thank you good morning, Jeff Congrats on the strong start to our fiscal 'twenty one.
I wanted to.
First ask you as you look at the guidance for the remainder of the year. How are you thinking about growth from <unk>.
Recruiting versus additional pricing leverage I know you've talked about ABR increases in the past and then is there still room for utilization expansion or should we look at head count expansion and pricing leverage to be the main catalyst for revenue growth this year.
Yes, I think it's going to be primarily through hiring we're running as I mentioned that utilization.
At or above 80%.
Which we think is the long term sustainable level, obviously, we can we can.
Let debt creep up a little bit for a quarter or two but for the most part that's I think a great sustainable goal a b R. I think as I mentioned on the last call. We're not pushing for a lot of rate increase we might see a little bit this year.
Our goal primarily is to.
Gain margin expansion through that mix shift to offshore, which actually is up to 14% of our revenue now I think thats nearly double about a year ago. When we were roughly eight.
Got it and then for my follow up I, just wanted to given how strong demand is I wanted to turn to the supply side. So given how much there is a war for talent are you finding the people to fulfill demand and then if you could maybe also speak to from other headwinds one may see in a strong demand climate such as.
Wage pressures and attrition rates that could potentially.
Crimp on margins if that is the case, so any perspective on that would be helpful.
Sure absolutely.
I'll start at the at your last point, there a comment regarding attrition attrition.
Throughout COVID-19 was quite low not surprising, but even in the quarter annualized it was about 17, 18%, which is right in the middle of our 15% to 28% goal.
So attrition is.
From our perspective quite favorable relative to the market at large.
Certainly the market's tightening, but I'm going to let Tom comment.
Tom leads talent acquisition or reports to him and I'm going to let him comment on what we were able to accomplish in the first quarter in terms of hiring and a little commentary maybe on on why we are a preferred employer.
Jeff.
Yeah.
Jeff.
<unk>.
We really have a differentiated solution as far as what we're adding for North America individuals' we've added.
100, <unk>, United States 300, plus in North America alone.
On top of the 100, as we added India as well as Colombia demand is quite high as Jeff mentioned as we're showing in our results I will say, we have a differentiated approach.
We are not getting into a bidding awards with talent, we have a location in a demand that people want to join proficient as well we've added to the way in which we're driving talent acquisition and gave me an employer of choice I think Jeff mentioned the awards of Best places to work, but we're really looking at a holistic approach to talent.
<unk> versus getting into bidding wars, and that's working people want to be part of a winning team. They wanted quite a growing team. They weren't part of great technology, and digital transformation and Thats, where pressure really comes to play. So we were competing for talent quite successfully and we don't have to overpay for it which is a big advantage for us.
Got it and then just sort of one housekeeping items, what was the organic growth in <unk> and your expectations for organic growth in <unk> and for the full year. Thank you.
Yeah, It was about 10%.
The first quarter.
Look at the midpoint.
The second quarter I want to say, we're right around <unk>.
<unk> thousand $14 15 per I'm, sorry, 15, 16%.
On a total growth of.
20.
For the year, the midpoint is roughly about 13% a year over year.
Thanks, Jeff.
Thank you.
Our next question comes from the line of Maggie Nolan with William Blair. Your line is open.
Good morning, Congrats on the results.
And what makes me a little bit more about that offshore delivery and kind of the mix into off shore. What is the balance of moving existing work offshore that was previously being delivered onshore versus new engage from being delivered from offshore from the start.
It's a blend of the two but predominantly it's new business. So we're not in some cases.
We're helping clients maximize their budget potential by transitioning some work to offshore and by that I wanted to be clear. The budget remains the same so the outcome is a win win for both the client and US we get better margins.
And they get more work done for the same budget. So we're we're shifting that's primarily the model.
I would say and I'm estimating here, but I would say 70%.
What we're driving offshore is new business might be new business from existing accounts, where we werent pursuing or or werent considered offshore.
That's changing very rapidly as you can see.
Or completely new relationships, where we're introducing offshore into the mix on pretty much every deal we propose.
Okay, great. Thanks, and then when you think about the kind of near term plan to be moving more work offshore.
Are you looking at offshore and near shore differently for 2021 than you maybe were in the past just given the kind of resurgence of COVID-19 in some key geographies like India.
You know.
We're ferring extremely well from a business perspective, I know that.
It's.
Sort of a human tragedy or challenge whats happening in not only India, but several other countries.
But so far we've really not been negatively impacted by that so our decisions are based pretty much exclusively on what we feel like is mapped best for the customers needs.
In some cases, they have their own requirements or requests.
Sure versus near shore.
But often where we're in control of that again, we assess what their needs are and what our capacity and skill sets are in the various locations and make decisions pretty much exclusively based on that.
Okay. Thank you.
Thank you.
Thank you.
Our next question comes from the line of Puneet Jain with JP Morgan Your line is open.
Hi.
Thanks for taking my question and good.
Performance in the quarter.
As you emerge from the pandemic, obviously, but.
<unk> low cost mix.
It is competitive.
Set changing like other competing I don't see new competitors competing mode with debt.
Please of mode with offshore names now than before.
It's interesting I wouldn't say, we're seeing any new competition I would say that some of the stalwarts that we compete with day in and day out and have for many many years now.
Our improving their capabilities from a digital standpoint offshore, but I'm convinced in the evidence shows that we still have we're still ahead of the curve.
We've been pretty much because we built our offshore as digital was emerging as a big surge we focused on digital so all about offshore as digital capable I think that's not true probably any of our competitors.
For those competitors, who claim that we don't actually see interestingly enough. We don't compete with them. So we're competing primarily again with the majors and I'm confident that we're ahead of them almost day there.
Got you and then.
Obviously in India.
COVID-19 cases has significantly increased this quarter could you talk about how that pricing can you slow might impact your ability to hire and ramp up in that location.
<unk>.
Inc.
Yeah. It's a good question and some of that I guess remains to be seen but I will tell you.
Even as we speak literally in the month of April we've had phenomenal success obviously.
Growing it at greater than 40% for the last two quarters.
In terms of head count So we've had great success, adding adding resources.
Even in the COVID-19 environment again, I think as Tom pointed out earlier.
The comments and the Differentiators that he mentioned don't apply just to the U S. They apply to India as well, maybe even more so India because the alternatives in India, frankly are not as interesting, they're not as exciting and as Tom pointed out we're winning in.
We have a lot of people very interested in coming to work for proficient both in India, Colombia.
All of our locations.
As in the U S. So we've had great success.
The pandemic doesn't seem to be driving any sort of reluctance on the part of our targets.
And the other demographic that we hire frankly.
As a.
A little below the threshold for where people are mostly susceptible.
Two to COVID-19, So I think that's a benefit as well.
Got it thank you.
Thank you.
Yeah.
Thank you. Our next question comes from the line of Surinder.
With Jefferies.
Hi, Jeff I'd like to start with a question on just the bookings number obviously, the 92 large deal wins.
As Tom mentioned Thats, one of the biggest numbers you've seen can.
Can you provide any additional color in terms of the client's willingness to commit at this point or are they simply just opening up the spigot.
How should we think about that the ability to win kind of future business on a go forward basis, obviously <unk> is seasonally strongest but.
Is there still a lot left to tap in that pipeline at this point.
Yes, absolutely good question, so year to date.
And we don't disclose specifics, but year to date, our bookings are probably a record year.
Year over year.
I don't know that for a fact, but I'm pretty sure they are aware.
Multiple double digits year over year organic normalized organic in our in our bookings along with that I'll comment that our weighted pipeline in particular and then when we look at that those are deals at 50% or better.
85% historically of which typically close.
Is substantially up year over year as well.
So.
The outlook as well as the year to date results have been very very strong.
Got it that's helpful. And then in terms of the actual mix that youre seeing any color in terms of the relative to historical new logo wins versus wins at existing clients.
Yes, good question.
I commented earlier alluded to the investments that we've made in sales in terms of per.
Processes compensation structure management structure being more prescriptive in adding capacity.
Much of that is geared towards new logos.
That said.
It's a combination of the two but certainly shifting more towards the new.
And I.
I don't have the numbers sliced between new logos versus say legacy accounts, but we're seeing strength in both and part of the strength that we're seeing in the existing accounts I think it's worth pointing out is not just debt theyre spending has increased and there are a lot of our clients are fortune 1000 customers, who really didn't draw.
Rob a lot or we recall last year, given the backdrop isn't a bad wasn't a terrible year for us we didn't contract in any given quarter.
And a lot of that was because of our sort of stalwart existing customer.
Customers. So we're seeing increased spend there are increased share is what I should say.
The spend is up a little you know as you would expect I think gardeners whoever's got it.
Mid single digits upper single digits for digital.
And our low double digits, perhaps and we're seeing more than that are out of our existing relationships, but again.
New logos, making up for <unk>.
Significant percentage of the bookings, we're enjoying right now and a lot of those new logos.
We've identified as enterprise accounts, which we define as accounts that we can we believe we've got a good shot at getting to $5 million annually or more in many cases more we're just beginning those relationships. So I think the stage is set.
Very well for for the future beyond 2021 going into 'twenty to 2022 and beyond.
Good to hear and then I guess related to the bookings number in terms of obviously the earlier commentary about the strength of the consulting practice with respect to the health care business.
Any color on maybe the mix that youre seeing in terms of the bookings wins.
I believe last quarter.
A bit more than your revenue mix was.
Within the healthcare segment any color there.
Yep No health care is up substantially I want to say the bookings are up about 24% year over year.
But financial services is improving dramatically you know we had a very robust management consulting practice, we have a very robust management consulting practice.
Been served.
Where we work with clients on regulatory issues et cetera, pretty pretty high end stuff bill rates in the high hundreds or two hundreds of dollars an hour, but in the last year or two back to that kind of prescriptive comment I had made earlier, we've really focused on driving more technology business, there and thats getting a lot of traction and taking off so that was.
Up about 17% year.
Year over year and those are our top two.
Talk to.
Verticals, they represent probably about half of our revenue between the two.
Got it I'll get back in the queue for additional questions.
You too.
Thank you.
Our next question comes from the line of Vincent Colicchio with Barrington Research. Your line is open.
Yes, Jeff you sound excited about the near shore business I'm curious is that helping you is that part of the.
The strength of new deal signings in the quarter.
It absolutely helps again I think.
We've improved our messaging we've improved our strategy.
For offshore collective, but near shore is just a hot place right now customers like at the time zone. As an example are proficient Latin America is in the mountain time zone right. So at times when it's perfect.
And English is as good as.
Skills are strong and clients really embraced that and the pricing is a little higher obviously than India.
But but valuable and the clients see the value in it. So it's certainly helping win new deals absolutely and expand some of those existing relationships that I mentioned a minute ago.
Could you give us an update on the sales force that you've been expanding in recent years are.
Are you seeing a broadening of productivity that you were looking for.
We are absolutely well.
What's exciting is I think certainly as I mentioned earlier, we can attribute some of the improvement to the climate.
But I think a lot of it has to do with.
US really coming into our own relative to those investments we've made.
You've probably heard me talk about this before that we had dry powder, what I mean by that is you know.
New order sales people that aren't quite hitting their stride, yet going back a couple of years.
Many of those have become more seasoned now.
And the productivity is increases substantially it's really kind of an exponential curve as they get that second third year under their belt. So we're seeing some of that and we're continuing to expand and hiring really our goal is to hire ahead of organic growth and to continue to help fuel that growth.
Thank you a nice quarter.
Thanks.
Thank you. Our next question comes from the line of Jack Vander <unk> with Maxim Group. Your line is open.
Great. Thank you good morning, guys congrats on the solid quarter and strong guide.
I guess, just a couple of questions to start with a question for Jeff.
Clearly your organic growth for the business has been has been solved in terms of returning back to growth.
Maybe I just want to touch on the acquisition front of the business.
You closed three acquisitions during the first half of 2020 and just wondering if we can expect any more to acquisitions.
In the near term debt, providing any too much details, but just given your acquisitive strategy I'm wondering if any thoughts on that.
Sure Yeah. Good question, yes.
Yes, we're very active in the program still.
And I have a number of things in the pipeline I would say nothing.
Pending so we're hoping to get maybe something done this quarter.
Could be more Q3 as I've mentioned before.
It really ebbs and flows quite a lot as you can see last year. We as you pointed out we closed three in the first half.
But we're very very selective and that's that's really the reason I think we've had great success with our acquisition program. So.
We are we've got a few things in the works are very attractive and hopefully we will get something done here.
Again in the near future and I'm still optimistic we can get a couple of three deals done this year.
But it will see what we can we could find.
Okay. That's helpful. Maybe just a follow up to that.
Is there I think before previously are historically, you've targeted kind of a certain revenue level from acquisitions as I'm not sure. If that's a rough ballpark, but somewhere between 5% and 10% of your overall revenue, which is not baked into the guidance, obviously, but is that still some how you think about it.
Yes, I think last year was a great year for we I think we did about $60 million of acquired run rate.
Revenue and.
Our goal our stated goal has always been around 50 to your point as we're growing I'd like to see that move up and we'd love to repeat last year, even add more so.
Debt deal, we did with PSL was really kind of a poster child in many ways, including the size.
30 million plus revenue run rate so.
We've got an appetite for that at the same time, a lot of emerging technologies very dynamic industry right. Now it really is always I think maybe now more than in recent years. So.
We're pivoting to these new hot skills acquisitions makes sense and some of them may well be smaller if they've got debt debt rate equation.
Yeah.
That's helpful color and then maybe just one more question maybe for Tom.
Tom large deals obviously everyone's kind of touched on this but 90 twos or just you know it's exceptionally strong.
Im just wondering like the delta of that relative to last year and every quarter last year basically we're in history.
Is that sort of is that level of the delta an outlier here or is that kind of what you expect.
Going forward as proficient as clearly being more recognized.
On a global scale I'm, just wondering about the delta.
Yes.
I'd Love to say you have to get promised that going forward, but I would tell you. The pipeline is strong for deal size continues to grow as far as what word for it.
Going after I don't think its an outlier I don't know if they'll always be as strong as far as incremental growth from a year over year basis, or even sequentially, but I don't think its an outlier that does deal volume is up but I'll tell you the size of deal is up as well.
Thats indicative also of the pipeline for large increase pipeline the deal volume size is.
Quite significant so I don't think it is an outlier.
Can't say, it's going to be that high of a.
Year over year compare every single quarter, but it's definitely trending in that direction.
Really good velocity right now.
Great well, that's very encouraging to hear and congrats on the strong quarter again guys. Thanks.
Thank you.
Thank you as a reminder, ladies and gentlemen, Thats star one to ask a question.
Our next question comes from the line of Brian Chin for linger.
Your line is open.
Yes, hi, guys nice to talk to you and sorry, I hopefully don't repeat a question I got knocked off for 10 minutes, but.
40% of your colon consultants are either offshore or nearshore I want.
To dig into your expectations of delivery mix over the next year or two the Indian Outsourcers traditionally targeted 70 30 in the offshore onsite mix. What's your long term goal and where do you think you'll be in say 18 or 24 months.
Yes, it's a good question.
We expect to continue to drive the pace that we are we're actually exploring additional acquisitions in fact in Latin America, but organically alone.
That's going to quickly move from 40 to 50.
Perhaps by the end of this year given the pace of growth that we have.
Certainly into next.
Next year in terms of our mix on a project basis of course, it really depends on the engagement.
But I will tell you I don't think we're going to get to that high ratio that.
Some of our competitors.
Pursue.
Frankly, I don't think our digital implementation lends itself to those really really high ratios.
We use it more of a hybrid approach where the folks that are offshore our peers in terms of tenure experience level and skill set.
For the folks that are onshore and it's a blend and digital's high touch so I don't know that its going to be a 30 70 onto off for us.
Anytime in the near future and like I said, depending what happens in the industry in general.
A lot of the demand for these clients, it's really about business. It's about change management, it's about their customer understanding it understand their business understanding the business culture in the United States.
Are all relevant factors. So I think that's an advantage that we have it's a differentiator that we're going to protect.
Great I have one follow up on net and then I'll ask one more question.
Can you just talk about the differences between the gross margin of near share versus nearshore versus offshore is it significant as it close.
Oh, it's close yes, it's basically the same.
Yes.
Yep, So nearest for us obviously, better given the higher bill rate and similar margin.
Yes, yeah, Okay lastly.
I wanted to touch on two sectors, we don't talk about much auto as well as retail and CPG. They they posted kind of a breakout sequential uptick in revenue granted there were smaller than health care and.
Financial services, but maybe if you can put some context into any commonalities are what are driving the growth in these two sectors and should we continue to expect a ramp in these sectors.
Thank you.
Yes, I think so we've got without naming names we've got some really significant accounts in each of those sectors, particularly in automotive and other.
Relationship that we've had for many many years, where we've actually moved to a tier one supplier.
Which is very unique theres only a handful globally.
And that's going to yield us quite a bit more work just in that one account, but that's happening across the board and I do expect that those sectors are going to grow pretty nicely there.
They're just being well outpaced with the 24 and 2017, respectively, respectively in health care and financial services.
So on a relative basis, there, maybe not growing quite as fast, but they're still growing absolutely.
Great. Thanks, so much.
Thanks, Brian.
Thank you.
I'm showing no further questions from the queue I would now like to turn the call back over to Mr. Jeff Davis for closing comments.
Great well. Thank you all for your time today as you can see we're really excited about where the business is at what 'twenty, what Q1 reflected and what the rest of the guidance for the year Q2, and the rest of the year reflects I think the stage is set for another year in 2022, and obviously, we'll be talking more and more about debt as the year progresses.
But again, thank you for your time and look forward to speaking to you in about 90 days. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
[music].