Q1 2021 Computer Task Group Inc Earnings Call
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Okay.
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the CTG first quarter 2021 Investor Conference call at.
At this time all participant lines are in a listen only mode. However, there will be an opportunity for your questions. You may queue up at any time during the call simply by pressing one then zero on your Touchtone telephone.
As a reminder, today's call is being recorded I will turn the call now over Mr. John Baugh Becker Chief Financial Officer. Please go ahead Sir.
Thank you John good morning, everyone.
On the call today.
Joining me on today's call US fleet today, Ctg's, President and Chief Executive Officer.
Before we begin I want to remind listeners that statements made during the course of this conference call state the companys or managements intentions hopes beliefs expectations and predictions for the future are forward looking statements.
It is important to note that the companys actual results could differ materially from those projected these.
These forward looking statements are based upon information as of today Thursday April 29 2021.
The company assumes no obligation to update these statements based upon information from and after the date of today's conference call.
Additional information concerning factors that could cause actual results to differ from those made in these forward looking statements is contained in today's earnings press release as well as the company's SEC filings.
In addition, the company's press release and management statements. During the call include discussions of certain adjusted non-GAAP measures and financial information.
These financial measures and reconciliations of GAAP to non-GAAP results are provided in both today's press release and the related form 8-K with that it's now my pleasure to turn the call over to fleet for his opening remarks.
Okay.
Thank you John.
Good morning, and welcome to all of you joining us from this mornings conference call.
We had a very good first quarter highly.
Highlighting by the achievement of another period of significant year over year growth in revenue and earnings per share us.
We continue to build upon the strong financial performance, we delivered in 2020.
Consolidated revenue increased 12% year over year.
Led by exceptional growth of our solutions business and continued new business momentum in Europe.
Revenue from solutions grew 25% year over year.
And represented 44% of total revenue.
Which contributed to higher gross profit and margins in the quarter.
Overall non-GAAP earnings in the first quarter increased 30% year over year.
Although the business environment has remained somewhat mixed.
Prospective clients taking longer to make complex related decisions.
Our sales organization continued to drive.
The pipeline of business development activity at new and existing clients.
We continue to see and capitalize on increased demand for ctg's growing portfolio of digital solutions as.
As companies maintain their previous shifts towards more employees working remotely.
Specifically.
The current environment has accelerated clients' needs for new technology as well as the speed in which these solutions are implemented.
We had a number of notable wins in the quarter, including securing multi million dollar contracts over multiple years.
Two different healthcare clients in the us to provide legacy application support and patient portal solutions.
Additionally, we experienced continued business momentum in Europe.
Which contributed to our strong consolidated revenue growth and profit margins in the first quarter.
Europe revenue increased 13% year over year.
Driven in part by the team secured a double digit number of new client wins.
We also maintained strong utilization across our European operations.
Client demand minimized unallocated bank's resources.
And billable utilization remains high.
During the quarter, we unveiled and successfully launched a comprehensive corporate rebranding.
Including the introduction of our new CTG tagline transformation accelerate.
This company wide effort.
The result of numerous months of planning and very hard work.
Pleased to report that it has been extremely well received by both our clients and technology partners.
As part of this rebranding initiative, we also implemented a comprehensive marketing campaign that clearly communicates Ctg's go forward strategy and mission.
Cheers, enabling clients to accelerate project momentum and achieved the desired outcomes and performance improvements from their digital transformation initiatives.
Importantly, this refined positioning reflects our increased emphasis on applying new digital technologies to us.
Help clients successfully transform their business models.
Digital transformation initiatives.
Top priority for nearly all businesses in effectively every industry vertical.
Without question.
Both the base and demand for delivering the solutions remotely is accelerating.
Okay.
As I previewed on our last conference call.
Our go forward digital solutions and services offering strategy is comprised of the following six key elements.
Industry, leading digital and technology talent.
Regardless of the level of service being provided or how elegant and offered solution maybe <unk>.
Success is dependent on having the right people.
It's one thing to talk about the goal of recruiting top talent how're.
However in practice it is far more difficult to attract and retain a diverse team of industry leading tenants.
I am proud to say that CTG.
CTG has accomplished this by consistently proving to be a great place to work.
We have successfully assembled and continue to expand the true World class Global solutions organization.
These multidisciplinary professionals, bringing together leading digital transformation expertise.
From a strategy to design and implementation for delivery and outcome and performance measurement.
Yeah.
Portfolio of breakthrough digital transformation solutions.
We are continuously working to expand ctg's portfolio of digital transformation solutions.
For the priority on offerings that enable accelerate the achievement of business outcomes.
This includes making ongoing investments in breakthrough technologies.
Such us clouds, Iot AI robotic process automation intelligent analytics and automated testing.
Innovative tools and methodologies.
As a complement to these breakthrough digital transformation solutions.
We are committed to investing in the requisite tools training programs and methodologies to ensure consistent and reliable delivery.
Ctg's growing portfolio of solutions enables clients to accelerate time to market.
<unk> innovation and supports high performance results.
Global delivery network.
Today CTG has an active network of established delivery centers in North America, Western Europe, India, and South America.
In addition to initiatives aimed at further leveraging this existing network. We are focused on expanding our delivery sensor platform.
To provide a broader scope of scalable digital solutions.
Including process automation application development, and maintenance testing infrastructure and cloud solutions management their maintenance.
<unk> service desk.
Industry expertise.
Industry specific knowledge is critical to both these finding and delivering digital transformation solutions.
Every industry has unique challenges requirements and all from the regulations.
In addition to leveraging Ctg's long history, and proven track record of servicing clients in key industries, including healthcare finance government manufacturing and energy.
We are committed.
To continuously enhancing the collective knowledge base and expertise that support CTG solutions offerings.
Strategic acquisitions with.
The final element of our strategy is to selectively pursue acquisitions that serve us either seeds for future growth.
Or accelerate the expansion of CTG digital solutions catastrophes and offerings.
We've established a successful track record with three acquisitions over the past three years and we'll continue to evaluate the potential complementary transactions have to.
To meet our strict investment criteria.
Okay.
Taken together these six elements for our go forward strategy.
The rest is a significant market opportunity.
And will serve us key drivers for future growth.
I also want to emphasize reemphasize that this strategy isn't new.
CTG has been active in many of these areas for multiple years.
These key elements reflect and narrowed focus on digital transformation.
As part of our larger and ongoing solutions strategy.
In conjunction with the introduction of our refined strategic focus on advanced digital solutions. During the quarter. We also published the vision for the company for.
For the company to achieve by the end of 2020 COVID-19.
In addition to solidifying ctg's position as a leading provider an accelerator of the digital transformation services.
Our 2023 vision includes growing solutions business to more than 50% of local business with.
With annual solutions revenue of $250 million.
We also aim to expand our existing global delivery network, enabling it to service the delivery of 20% of our solutions business.
And lastly, we believe these two goals will result in significant operating leverage enabling the achievement of $35 million in annual EBITDA.
In summary, our accomplishments and performance in first quarter represent another incremental steps towards the achievement of our 2023 vision.
While demonstrating that our larger solution strategy is producing consistent and tangible results.
Together with continued disciplined execution we.
We strongly believe our ongoing investments in enhanced capabilities and solutions offerings.
Result in CTG, continuing to capitalize on an opportunity to accelerate successful digital transformation for our growing client base.
I will now turn the call over to John for a detailed review of our first quarter results as well as commentary on our outlook for the coming quarters.
Yeah.
Thank you Felipe and again good morning, everyone. Thank you for joining us on today's call.
As reported in our press release earlier today consolidated revenue in the first quarter was $97 1 million compared with $101 3 million in the fourth quarter and $86 9 million in the first quarter of 2020.
The sequential decrease from first quarter revenue, primarily reflects two fewer billable days as well as the expected completion of a large multi quarter contract with a health solutions client in the fourth quarter of 2020.
The revenue increase of 11, 7% year over year was driven by a combination of a larger mix of revenue from solution and continued business momentum in Europe.
Currency translation had a positive impact of $4 million on revenue in the first quarter of 2021, compared with a positive impact of $3 1 million in the fourth quarter and a negative impact of $1 1 million in the first quarter of 2020.
Total billable days in the first quarter was <unk> 65, compared with 67 days in the fourth quarter and 62 days in the year ago first quarter.
In conjunction with our focus on delivering digital solutions during the first quarter. The company made minor modifications to its definition of solutions business.
All references made the solutions revenue and solutions gross profit on this conference call and in today's press release have been recast using the new definition for consistent comparison across all periods.
Solutions revenue in the first quarter was $43 1 million.
For 44, 3% of total revenue.
This compared to $49 million or 48, 4% of total revenue in the previous quarter.
Year over year solutions revenue increased $8 7 million or 25% compared with $34 4 million for 39, 5% of total revenue in the first quarter of 2020.
Revenue from IBM in the first quarter was $19 6 million for 22% of total revenue.
Compared with $20 1 million or 19, 9% of total revenue in the fourth quarter.
And $19 9 million or 22, 9% for total revenue in last year's first quarter net.
No other client represented more than 10 per cent of revenue during the first quarter of 2021 or in recent comparable periods.
Gross profit in the first quarter was $20 8 million or 21, 4% of revenue compared with $21 6 million or 21, 3% of revenue in the fourth quarter of 2020, and $17 million or 19, 6% of revenue in the year ago first quarter.
SG&A expense in the first quarter of $18 7 million reflected our continued investment in solutions and business development resources consistent with our digital solution strategy.
This compared with $18 3 million in the fourth quarter and a 15 million for the first quarter of 2020.
GAAP operating margin in the first quarter was two 2% compared with three 3% from the fourth quarter and two 4% from the first quarter of 2020.
Non-GAAP operating margin in the first quarter, which excludes approximately $640000 of acquisition related and rebranding expenses was two 8% compared with three 5% in the fourth quarter and two 9% in the year ago first quarter.
The effective income tax rate in the first quarter was 22, 6% compared with 45, 6% in the fourth quarter and 39% in the first quarter of 2020.
The lower than historical effective tax rate in the first quarter of 2021 reflects the deduction of expenses that were previously non deductible for tax.
And the higher tax rate in the fourth quarter was a result of certain expenses incurred during that period, which were non deductible for tax purposes.
GAAP net income in the first quarter was $1 5 million or 10 cents per diluted share and included approximately 500000 or <unk> <unk> per diluted share of acquisition related and rebranding expenses.
Non-GAAP net income for the first quarter was $2 million or <unk> 13 per diluted share.
For comparison GAAP net income for the fourth quarter was $1 9 million or <unk> 13 per diluted share.
And included a net 140000 or <unk> <unk> per diluted share of acquisition related expenses.
Non-GAAP net income for the fourth quarter was $2 million or <unk> 14 per diluted share.
GAAP net income in the first quarter of 2020 was $1 1 million or <unk> <unk> per diluted share.
Which included 300000 or <unk> <unk> per diluted share of acquisition related expenses.
Non-GAAP net income was $1 4 million or <unk> 10 per diluted share in the year ago first quarter.
Adjusted EBITDA in the first quarter of 2021 was $3 7 million.
Compared with $4 9 million in the fourth quarter and $3 4 million in the first quarter of 2020.
Adjusted EBITDA for the trailing 12 months as at the end of the first quarter of 2021% to $16 million.
Ctg's total headcount at the end of the first quarter was approximately 3700 compared with 3900 at the end of the prior quarter and 4000 at the end of the year ago first quarter <unk>.
Approximately 90% of our first quarter of 2021 headcount was billable.
Turning to our balance sheet cash and cash equivalents at the end of the first quarter were $33 5 million.
And the company had no outstanding balance on its revolving credit facility.
And no long term debt capital expenditures in the first quarter were 891000, compared with 169004th quarter and 683000 in the first quarter of 2020.
Looking forward visibility into future activity across our end markets and clients continues to be limited compared with historical periods prior to the COVID-19 pandemic.
As such we are not providing quantitative guidance for the second quarter and full year 2021.
That said, we remain very pleased with our strong performance and the team's continued focus and execution in the first quarter.
As highlighted in our prepared remarks, we continue to realize tangible benefits from our strategic our strategic focus on digital solutions.
And the increased contribution from higher margin solutions revenue, which continues to drive improvement in the company's operating performance.
As we continue to invest in resources, new digital transformation solutions and the expansion of our delivery center platform, we expect to drive future growth and profitability during the remainder of 2021.
Specific to the second quarter. We currently anticipate revenue that is comparable to the first quarter on a per billable day constant run rate basis.
John could you. Please initiate manager question and answer session. Please.
Certainly and just as a reminder, if you do have a question. Please press one than zero to remove yourself from the queue you may repeat the one Joe command.
Again, we have a question from the call one zero.
And that will go to line of Josh Vogel with Sidoti. Please go ahead.
Good morning, Felipe and thanks for taking my questions Hope, you're both doing well good morning, Josh Good morning, Josh.
I have a couple of questions for you here and.
Going back a little bit earlier, you're you know, you're just sort of winning some COVID-19 related help desk and vaccine for projects and I was wondering you know as COVID-19 lingers in new variants pop up is there a potential for those long term engagements I ought to become long term engagements and secondly are there any other.
Related opportunities that youre seeing in the marketplace, whether from health care providers are or government agencies.
Okay.
Sure.
Josh now looking at us.
Project.
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Our aim whenever we win new clients.
And the New project is that this is the first project over a long series of projects so any.
<unk> help desk or for that matter any other development or integration project.
For US is the beginning all very strong and focused account management to find other areas within the clients wherever we can help them that's.
Just the way we operate them about colds for how we growth.
Now specifically on these help desks as well that's part of the fact that day.
Though with vaccination.
Definitely in the states, we see things.
Things picking up again and COVID-19 getting under control, there's no saying while there.
It's still going to happen with those new variants.
At this moment, it's more Europe that gets the negative influence of those new variants.
Obviously rare there.
The new evolutions, new elements Theres additional questions from patients from public which increases the verb.
Workloads on on those service desks.
And so regardless of that for the first part for your question could you repeat the second.
Yes.
Basically.
I mean, you pretty much answered. It I was just curious are there other COVID-19 related opportunities that youre seeing in the marketplace.
Well, we're still seeing a lot of the evolution from everybody moving to work from home.
Because of COVID-19 that indirectly and we're seeing now about comp.
Companies are trying to determine what for what they're going to do after COVID-19.
That's a that's a new thing so let's.
Let's say three or four months ago.
Our clients were not thinking about that yet now you see them determining or they're going to come back fully to the office part time or some already have decided that they stay very work from home for a long period.
And so that's an indirect consequence of COVID-19.
Yes understood.
Shifting gears, a little bit obviously really encouraging news about the <unk> the.
The new health care.
Contracts and I was just thinking about when you are selling.
You know a breakthrough attack services like cloud AI Iot a versus legacy application support are the sales cycles any different can you just give some commentary around that.
The sales cycles are not necessarily different from classic.
I T efforts.
At least we're not seeing that but.
But we're still seeing doctors.
A slow down compared the for pre compared by pre COVID-19 sales cycles.
There yeah when clients come to the contract decision moments that there are still some hesitation.
Because they also don't have enough visibility on the near term future.
I gotcha okay.
<unk>.
Obviously very strong results nice to see the momentum in Europe, you highlighted utilization.
The bench resources I was curious how much additional capacity you have overseas to handle new and expanded private assets, where you have to meaningfully add accounts.
Well, our European operations have the.
Habits, knowing they have the best practice of our recruiting ahead of time and to estimate the time necessary to recruit didn't notice periods that are following.
So in any circumstance they are keeping pipeline of candidates.
They are hiring people for the projects that we expect to close within three to six months.
We obviously are prudent in hiring those people ahead of time book.
But the fact that we have for a.
Very limited bench.
Really means that they're doing a fantastic job and we are not having to postpone client engagements because we don't have enough people.
I think also if you look at the are a great place to work certification is everywhere.
We're kind of in an organization that people are attracted to and are following two so our inflow and our potential candidates pool in Europe and us.
Significant.
Yeah.
Great.
Maybe this one's more for Don you mentioned, if I heard it right head count in Q1 was 37 1 million down 200 sequentially is that just seasonality or was there anything else there.
Hey, John It's John.
Yeah, I'll take that one fleet.
Sure.
Was mostly timing if anything else.
Really as Felipe said, our utilization is high and robust in our European teams have done a fantastic job with minimizing their bench resources, we were coming off of that very significant.
Health care project that we had completed in the fourth quarter and so we still had some of those resources onboard debt blood very slightly into the new year.
So once that project was fully ended those people came out of the off the head count listed.
That was really the big difference between year end and ended the first quarter.
That makes sense.
And you mentioned in Q2 revenue comparable on a billing day basis.
Do you have the billing day.
The billing day number for Q2 sure want to make sure I have the right one at 63 days in Q2.
Okay, and now just thinking about that I understand you're not giving guidance, but with the ongoing investments towards digital transformation.
Can you give me any sort of directional commentary around how we how we should think about SG&A in Q2, and the balance of the years and the balance for the year and then also any other areas that you plan to invest in that aren't necessarily related to digital transformation.
Okay.
John Your accounts to continue sure no problem.
I think our run rate on this Josh as we look at more of it as an investment opportunity.
For the SG&A and that's really what we did in Q1, we took the opportunity because it really good sort of robust numbers and again for the reasons. We've mentioned on this call us for our utilization and maximizing or minimizing the bench rather.
We saw that in the U S.
Total gross profit margin I'm sure it was up year over year as well pretty robustly.
'twenty one for from $19 six we took that opportunity to make investments back into the business to grow for later this year and next year and so on so I don't necessarily anticipate the run rate for SG&A to dramatically increase.
From here because I think we've made some of those investments here in Q1, what I do I don't expect it to necessarily go down either until revenue starts to grow a little bit.
From those investments that we've made and they start to produce.
New engagements.
So from that perspective, I think the run rate that we've established in Q1 will be pretty consistent throughout the year.
It hurt us making investments other than in solutions, it's it solutions and sales so its business development.
We've made investments as we saw we did.
And some of those back for the specific rebranding exercise, but in marketing, making sure that our recruiting teams have the right talent to recruit solutions and solutions adjacent type skills going forward. So.
Are we making significant investments outside of business development or solutions or activities that drive our solutions business, our digital solutions business the interest now.
I gotcha, well, thanks for answering my questions and I'll hop back in the queue.
Thanks, Josh.
Thank you.
Okay.
Yeah.
And we have a question from Kevin Liu with Kiwi with company. Please go ahead.
Hey, good morning, everyone.
I'll take US first question yeah. Good morning.
Good morning on the recast of the revenues are from staffing our solutions can you just talk about the nature of what those services, where and it looks like it also kind of boosted the solutions gross margin net lease on a historical perspective.
And then just kind of curious what those services were then perhaps how much that may have contributed to Q1 solutions just for comparability purposes.
Sure, Kevin how I'll, maybe start with that.
The general picture on them.
For them to John for more color.
As we are expanding our portfolio of services into digital solutions book.
We did this we reviewed all of our solutions destination.
To ensure we have clear consistency going forward across the portfolio.
We then evaluated what week provides two declines against our business technology operations solutions do.
And ensure everything is correctly identified.
<unk> categorized.
And we also looked at high margin staffing services, we provide to determine if a portion of those.
Earnings debt solutions, rather than staffing because.
Primarily given the margin when you have staffing services have really high margin. That's an indicator that it's more perceived and book by the client as a solution than us or staffing.
So basically that was the process that we went through to.
To make sure we have a.
Our strong.
Well strong rules and approached us.
Going forward with the digital solutions portfolio.
John you want to add some color.
Sure Felicia so Kevin the second part of your question was around maybe the change in numbers from one period to the next as we.
As we indicated we recast all numbers presented.
In the release and in today's call so going back to Q1 of last year under these refined definitions and so when you look at the.
The year over year increase of nearly 25% $8 7 million in solutions revenue those are using the same definition. Both in Q1 of 2021 and again applying those same definitions back to Q1 of 2020 so.
The change in definition definitions didn't really cause an increase in or a change in the numbers from one period to the next because youre using consistent definitions. It really was just a fantastic job across the organization as far as selling solutions business in Q1 of 'twenty one.
A higher price than we did in Q1 of 'twenty.
Yeah understood.
And then just in terms of the momentum in Europe that you're seeing you know what services are driving that currently and given that Europe seems to be a little bit slower than maybe the Americas in terms of vaccinations and lifting of restrictions and such I'm curious that as things start to be eased over there do you expect further acceleration in terms of <unk>.
All cycles and the growth rate there.
Sure well, Kevin I think if you look at our digital transformation portfolio.
We see.
Good traction and good pipeline in all of the three main areas and if you look to the digital accelerators the.
General areas for looking up in the digital transformation.
We see a lot happening in that agile debt pick ups.
Intelligent automation cloud.
Automated testing, it's not a surprise because this thing has been.
One of our flagship offerings in Europe, and it's starting to evolve like that in this case too.
Also make affecting us is going for works in.
That direction.
So it's kind of a well spread over the portfolio I think that's been that's attributes to our global solutions team, that's really outputs debt.
Portfolio together very well so.
Selling something in one area triggered us to an opportunity in another area.
On your question of acceleration.
Yes, we see it.
Finally, I might say that the vaccination is picking up.
A little bit of St.
But still we're by no way in the area there.
Already in all the states is already in line.
Kind of hurt us almost anybody who wants a vaccine.
You can get from them it doesn't even have to make an appointment.
In Europe, we're not there yet.
All right.
US to say, Belgium, well theyre, starting to Vaccinate My age group and I'm over 60 so.
And we're really not there yet and there's.
There was a concern about new Indian.
Jerry and Thats good.
Come into our countries.
So I see the impact from that from the business.
Yes, yes, we see traction, yes, we see a good pipeline.
For the moment, we don't see the sales cycles significantly accelerates.
I think we need to.
A little more confirmation about the open about frankly, if you look at for countries.
France is in Lockdown, Germany is in locked down.
Belgium is now opening the doors of restaurants for the first time and in walked in for five months. So it's February.
Call it fragile at this moment.
Okay. That's helpful context, and then.
In our staffing isn't a core focus for you guys anymore, but at the same time it did return to growth.
This quarter.
Just curious whether that's kind of a sign of a.
He started to reopen again.
Particularly in Americas, and then as you move into the next few quarters here kind of what your outlook is for us it staffing business.
Well for stocking our our strategy is a it's very clear it's on one of them.
Looking out to lower margin staffing business on critically evaluate.
And continue to disengage does lower margin margin staffing agreements, we still have.
But how.
Helping the growth and what's.
New in our staffing it hurt us that we're aligning our new staffing engagements with the skill sets.
We need for our digital transformation solutions, which means that our recruiting engine is fully focused on those skill sets.
And we can use them to staff our own solutions and also staff clients needs in those areas. So it's the same digital transformation trends.
<unk> momentum that this fueling our solutions business and is also helping our staffing business.
To grow and the areas, where we wanted to growth.
But there still are combined.
Moving in areas that are growing and staffing in areas that we're disengaging from.
Okay, and then a couple of quick ones on the 20th twenty-three vision here I guess the first one is just obviously acquisitions are likely to play a role in that.
You aren't able to find something in that channel can you just talk a little bit about health.
How confident you are you're still achieving the goals that you've outlined there and then just separately.
Can you give us a kind of a baseline for what percentage of your solutions business is currently going through the delivery centers and any sort of.
Numbers you can put around you know what it means in terms of margin improvement.
<unk> 20 per cent of that business is going through that.
Sure.
All right.
Uh huh.
Hello.
Oh.
I think a good fleet.
Hello.
Okay.
Hello.
Now for your back.
Okay.
Sorry about that.
Sorry, Kevin debt.
Getting at last night also lost your your question could you briefly repeat.
Yeah no problem.
Two questions on the 20th twenty-three vision. The first one is just if you arent able to complete an acquisition kind of in the next couple of years here.
How much does that impact your ability to reach our targets.
You've talked about and then the second part is just asking for a baseline for how much of your current solutions business is going through your delivery centers.
What the uplift to 20% would mean from a gross margin perspective.
Okay.
So the first part of your question.
Yes, when we looked at our vision, our 'twenty to 'twenty three envision however, looking at the combination of organic and acquisition growth.
But if you look back to the acquisitions, we have done so far the three acquisition.
You definitely can see that we are not at all.
Wiring for.
Adding a volume or revenue were.
Adding kept capabilities in our solution step for us.
No that's happening yet for that we want to develop faster.
We're looking at adding a client portfolio or a talent pool that we didn't have.
So it's more like an accelerator than it is adding an amount of revenue.
I think though we are looking I am continuing to look at.
Acquisitions going forward.
We're confident that we will get to the targets that we have.
Put forwards.
With us.
A very reasonable.
Look at the acquisitions debenture.
Net charge offs, which you want to add something for that.
No I thought that that was.
That was very good at it certainly Kevin as part of our.
The plan and part of ultimately coming up with the numbers that are in the 2023 vision, but it's more of a.
Acquired solutions and something that's additive to the solutions portfolio to drive revenue in that manner going forward.
Great and then just on the gross margin aspect of that was curious what the the delivery centers and shifting more business into there. What you know what does that differ from a margin perspective.
Well, if you look to for instance, moving work offshore to India.
That easily could.
Lower delivery costs.
With two thirds or even more.
<unk> delivery is one part of the equation if you move work offshore.
You always have to be careful for what they called us.
It's a double edged sword.
The clients who are sophisticated also no.
The delivery costs are lower and you won't be able to ship vertical for sure.
Net you also have.
And incentive profit for the client so.
<unk> revenue could also be affected us.
But when you look at the selling new business I'm, having a better mix like.
The end goal of 20%.
Being from our global delivery network.
And then you can definitely lower delivery costs significantly.
Even though at some places us sometimes need to add resources.
It caused the communication on the interaction isn't always.
I E.
And John do you want to add color.
That was that was great Kevin I think part of your question. Two originally was talking about maybe.
The numbers of the head count we that's not something we released as far as the head count we currently have.
What I can tell you that we have hundreds of people in the delivery center concept today at our planned by the end of 'twenty three would be to more than double that so it is a significant increase in the total people working out of delivery centers in us flip indicated.
As you leverage those delivery centers, whether that'd be India, Bogota or other locations you can then maximize.
The efficiency the effectiveness the price efficiency, which should deliver those services.
Alright, great. Thank you for taking the questions and congrats on the strong cycle here.
Hey, Kevin.
Yeah.
And with no further questions I'll turn the call back to management for closing comments.
Thank you John.
In closing.
Our accomplishments and financial results in the first quarter represents a solid start to the year.
Fundamental to our success is the team's ongoing execution of our strategic plan.
We continue to drive the growth of Ctg's solutions business.
Looking forward we are.
We'll continue to expand our portfolio of digital solutions, and then hence our global delivery capabilities, while supporting these offerings with industry leading.
Together with our recently launched rebranding.
I believe we are poised to build on our recent momentum in the coming quarters and solidify ctg's new positioning on the catalyst for digital transformation.
As we pursue and execute on our mission to help our it and business neither for accelerate their digital momentum and achieve their desired outcomes.
CTG in for will succeed in our strategic objectives.
Driving above market growth improving profitability.
And increased value for shareholders.
Thank you for participating on today's conference call.
And for your ongoing support of CPG.
John you may now disconnect the call.
Yeah.
Yes.
We're sorry your conferences ending now please hang up.