Q2 2022 Perficient Inc Earnings Call
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The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good day, and thank you for standing by.
Welcome to proficient Q2 2022 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask the question during the session you will need to press star one one on your telephone.
I would now like to hand, the conference over to your speaker for today, Jeff Davis, Chairman and CEO you may begin.
Thank you and welcome everybody appreciate your time with me on the call today is Paul Martin our CFO .
Yes.
Yes.
So prepared comments per usual after which one.
Before we proceed.
Please read the safe Harbor.
Thanks, Jeff and good morning, everyone. Some attention I will discuss in today's call concerning future company performance.
Statements within the meaning of the securities laws actual results may materially differ from those discussed. These forward looking statements. We encourage you to refer.
The information contained in our SEC filings concerning factors that could cause those results to be different.
Today's discussion at times during this call we will refer to adjusted EPS and adjusted EBITDA, Our earnings press release, including a reconciliation of certain non-GAAP financial measure to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles or GAAP is posted on our website at Ww.
Duffy John Professor Dr.
<unk> also posted a slide deck, which includes a reconciliation of certain non-GAAP guidance to the most directly comparable financial measures prepared in accordance with GAAP on our website under Investor Relations Jeff.
Thanks, Paul and once again, we appreciate your time this morning, as we discuss our second quarter performance.
So what was our optimism for the remainder of the year adjusted earnings per share was up 26% during the period with revenue up 21% North American average Bill rates remained at an all time high and offshore rates increased by double digits.
Well there are always project cancellations and delays are more than a normal number in the quarter and evaluating each of these weird.
They are isolated incidents.
We do not believe MTV indicative of any broader trends. These events combined with an accelerated shift to offshore modestly impacted revenue in the quarter.
Our bookings pipeline remains robust with.
Quarter, one at 40% versus the prior year period, a very deep bench.
<unk> bookings were up 40% organically versus the prior year period, representing also at all time high for Q2, but Q3 is also off to a great start July it was an incredible month for bookings just last week, because more than $55 million of bookings in a single day on a single client.
We continue to pursue nearly 207 figure plus opportunities in a number of deals weapons the eight figures.
Offshore revenue grew 44% in the quarter and offshore revenue grew 93% overall, our fully integrated global delivery model continues to resonate with clients and value of the combination of our local and global reach.
Offshore AVR reached an all time high as I mentioned before in double digit range.
As a percentage of revenue delivered by our U S colleagues. So we're delivering.
More and more revenue offshore, which again as I alluded to earlier has some impact.
<unk> revenue in the quarter.
Continuing to scale in both Latin America and India.
We opened a new office in Argentina, and increased our office space by nearly 60% in India expanding into new territory in Hyderabad.
And satellite offices in both Chennai, and Bangalore, and adding space to our facility in that quarter.
Industry analysts and partners continue to recognize us for our capabilities and expertise in fact recently horses Forrester named permission a strong performer.
Modern application development service provider wins, and just this week, our enterprise partners second or awareness with their sales Excellence award. So a solid quarter of continued growth with that I'm going to turn things over to Paul for more details on the numbers.
Thanks, Jeff services revenue, excluding reimbursement Reimbursable expenses for the quarter were $219 8 million, a 21, 3% increase over the prior year year over year organic services revenue growth was 14, 1%.
Services gross margin is going to reimburse expenses in stock comp was 40% for the second quarter compared to <unk> 42 in the second quarter of 2020, while SG&A expense was $40 9 million for the second quarter of 2022 compared to $37 4 million in the prior year SG&A expense as a percentage of revenue decreased to 18, 3%.
From 23% in the second quarter of 'twenty one.
Adjusted EBITDA for the second quarter, 2022 was $51 2 million or 23% of revenues compared to $39 million or 21, 2% of revenues for the second quarter of 2021.
Second quarter 2022 included amortization of $6 million compared to $6 3 million in the prior year period, a decrease in amortization is primarily due to certain intangibles for acquisitions, becoming fully amortized net interest expense for the second quarter of 2022 decreased to $1 8 billion from $3 4 billion.
In the prior year, primarily as a result of adopting a new accounting standard purchase vertical that in the first quarter of 2022, our effective tax rate was 28%.
The months ended June 32022, compared to 27% in the comparable prior year quarter net income increased 67, 6% to $27 8 million for the second quarter of 2022 from $60 6 million in the second quarter of 2021, primarily as a result of higher revenues.
SG&A as a percentage of revenue diluted GAAP earnings per share increased to 77 cents a share for the second quarter of 2022 from <unk> 49 in the second quarter of 2021 adjusted earnings per share increased to $1 six for the second part of 2022 from 84 cents in the second quarter of 2021.
See the press release for a full reconciliation between GAAP and adjusted earnings I'll now turn to the year to date results services revenue. Excluding Reimbursable expenses were $439 3 million for the six months ended June 32022, a 26, 4% increase over the comparable prior year period year over year organic growth.
Our services was 18, 4% gross margin for the six months ended June 32022 increased 10 basis points to 38, 1% compared to the prior year SG&A.
SG&A expense was $83 1 million compared to $71 4 million in the comparable prior year period, and SG&A expense as a percentage of revenues decreased to $18 seven from 22%.
<unk> in the six months ended June 32021, adjusted EBITDA for the six months ended June 32022 was $98 5 million or 22, 1% of revenues compared to $73 6 million a 28% of revenues in the comparable prior year period.
Six months ended June 32022 included amortization of $12 million compared to $13 4 million in the comparable prior year period net interest expense for the six months ended June 32022 decreased to $1 7 million from $6 7 million in the comparable prior year period again, primarily as a result of adopting the new accounting standards.
The convertible debt in the first quarter of 2022, our effective tax rate was 23, 3% for the six months compared to 23 point.
6% for the.
Comparable prior year period net income for the six months ended June 30, 22 was $54 9 million compared to $30 $2 million in the comparable prior year period, primarily as a result of higher revenues and lower SG&A as a percent of revenues.
Diluted GAAP earnings per share increased to $1 52 for the six months ended June 32022, compared to <unk> 90.
For the prior year period.
Earnings per share increased to $2 <unk> for.
For the six months ended June 30, 'twenty to 'twenty two from $1 58 in the comparable prior year periods are ending billable headcount at June 32022.
It was 5810, including 5455 global consultants and 355 subcontractors ending SG&A headcount at June 30 was 937, our outstanding debt net of deferred issuance costs as of June 30, 'twenty to 'twenty two was $393 5 million we also.
At $38 9 million in cash and cash equivalents as of.
At June 32022, and $199 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 I'll now turn the call over to Tom Hogan for a little commentary behind the metrics.
Good morning, everybody as Jeff mentioned bookings momentum continued during the second quarter and the third quarter is off to a very fast start.
Shortly classified large deals as news worth $500000, our bar and beam.
Third our progress each quarter, winning work in that range given our success at scale, we now get $1 million and greater as a more appropriate framework. So I'll be sharing those results moving forward.
And of course at some point in the future we will reach a place where it makes sense to again just higher.
In addition to that large deal volume growth of greater than 50%. The average deal size went up as well.
Not only our global teams contributing to many of our largest accounts. They are also generally reading any bookings our Latin American sales team recently preceding won a seven figure projects, providing managed services to a pharmacy benefit management health care provider.
We continue to land new enterprise clients and expand existing accounts, we remain focused on investing in development of our internal systems and applications that enable us to scale more rapidly and create competitive advantages.
We'll also services client insights budget current dashboards, and even resource availability and insurers, we're maximizing utilization across the world.
We continue to add functionality to.
Further enables leaders to managed currently upcoming projects.
We added alerts for senior leaders when projects or client performance metrics product key thresholds, allowing us practically respond and improved financial outcomes for our project leaders. We made additional enhancements to further centralized project administrative staff into one tool freeing them to spend more time working directly with our clients.
Future innovation will include additional standardize reports and scale and certification management, which will make it easier to identify ideal resources for specific project cash at scales FMT to grow globally and with that I'll turn things back to Geoff just got the third quarter and remainder of 2020. Thanks.
Thanks, Tom proficient expects its third quarter 2022 revenue to be in the range of 227.
$33 million third quarter GAAP earnings per share is expected to be in the range of 75 to 78.
Third quarter adjusted earnings per share is expected to be in the range of $1 80 to $1 12, we expect full year 2022 revenue to be in the range of $907 million to $923 million and we are reaffirming our 2022 GAAP earnings per share range of $3 80 to $3 19 and reaffirming.
Our 2022 adjusted earnings per share range of $4 24 to $4 36.
And let me just comment that the adjustments that we're making into top line revenue reflects what I mentioned earlier, which were a couple of cancellations above the norm.
But also a material impact of our advanced era, I should say accelerated shift to offshore.
Actually as a positive it's actually enhancing margins, which of course is what's enabling us to reaffirm.
Earnings.
Even while adjusting.
Revenues that went down.
With that we'll open up the call for questions operator.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone.
Please standby, while we compile the Q&A roster.
Yes.
Yes.
Our first question comes from the line of Maggie Nolan with William Blair. Your line is open.
Hi, Thank you.
Lot of good details here on how you're feeling about Q3 and the large deals.
I'll ask on the cancellations, just a little bit more info on what are the circumstances there.
It gives you confidence that theyre isolated rather than indicative.
And then good day involve any maybe.
Maybe the top 10 clients or had any particular vertical.
That's one of the reasons that we're pretty confident or quite confident actually that is not a trend. It was not isolated to any particular industry and as we looked at each of them again in isolation.
It was really a function of shifting business priorities or business conditions of which werent macro related so.
Again this is a nature of the Beast in this industry it happens.
Was unusual in terms of the number that we had in the quarter.
Okay understood and then on the.
The offshore impact to revenue.
Good to see that that's a positive for profitability.
Profitability that you reaffirmed.
Bottom line guidance, but im curious is that accelerated driven by client preferences or request or.
Was it a matter of trying to absorb the amount that you had planned in the face of some of these cancellations.
No. It was real it's really more a function of the market and it's not so it is client preference spent a lot of it is.
It represents what would be incremental revenue to us.
What I was really specifically, referring to that I'd be very specifics.
We exceeded our forecast for offshore revenue in the quarter.
By more than $1 billion. So if you translate that back to U S revenue. So about a 4 million dollar debt franchise of part one ratio on the rates and we're seeing that trend continue through the year. So.
In addition to the cancellations are at some of the reason that we are a material component of the reason that we're adjusting our revenue and again it did have some impact in the quarter.
Okay. Thanks, so much.
Thanks Maggie.
Thank you.
Please standby for our next question.
Our next question comes from the line of <unk> with Needham <unk> Company. Your line is open.
Thank you good morning, Jack I wanted to just get maybe a broader sense of demand clearly the bookings are positive and that's a good sign for the back half of the year, but given the economic uncertainty and obviously you've lived through some.
Trying times for the economy before how is this different if at all in terms of client decision, making in client priorities as you look out over the next six months and beyond.
I would say in the current climate remains robust.
We we certainly.
Don't want any surprises going forward. So we can put what we believe is a pretty conservative guidance out there.
Again reflected things I mentioned earlier, but also reflect some of the volatility that exists however, having said that.
We don't believe these recent events are related to macro.
The activity and the pipeline remains very robust as we from what we see right now.
To your point.
Everybody in this industry is.
<unk> seen ups and downs and so the climate can change quickly, but I would say right now.
Im more confident than ever in terms of what we're seeing right in front of us, which is the pipeline and the bookings that we've already.
<unk> locked in.
Got it and then turning to the supply side I just wanted to get a sense of how are you navigating the cost pressures I'm sure like everyone in the industry, you're probably seeing some incremental wage inflation impact are you able to pass on these higher costs to your clients through price increases are there other levers you can pull beyond the offshore mix.
To help protect margins and earnings.
Actually we are.
I mentioned earlier that ABR up.
As well as substantially up offshore.
But are those increases, which I'm not going to disclose.
Our proprietary reasons, specifically, but both of those increases exceeded our cost increases at least modestly.
So.
We're having great success in terms of passing that on the climate, we're adding clients understand and particularly new engagements and new clients and we have a lot of pricing control on that.
I said, there are pretty reasonable and understanding in terms of the additional capacity and other ideas.
We're bringing in the largest we have already begun to and will continue to bring in the largest campus recruiting groups that we ever had in our history.
That's a relief area in terms of capacity very excited to get these.
New fresh blood and is well it's great to see these guys and gals and then I'll start right pass program, where we are reserving are pursuing underserved constituents.
And getting them in here as well and those are a couple of areas.
We're leveraging <unk>.
As I will reiterate and you mentioned it but offshore is going extremely well anywhere, it's very well received and when I say offshore.
Fluffy nearshore into that so we're seeing a tremendous amount of demand in both in Asia, specifically, India as well as Atlanta.
And just sorry, just one housekeeping item I think you've addressed this.
Sponsor Maggie's question, but what is the breakdown between the guidance adjustment for the cancellations versus the offshore revenue mix shift if you could just give that detail that'd be helpful. Thank you.
Sure I don't have the specific numbers in front of me, but I would estimate it's about 50 50.
Got it thank.
Thank you.
Thanks, Brian .
Thank you.
Please standby for our next question.
Our next question comes from the line of Brian Konigsberg Lichter with Alliance Global Your line is open.
Hi, Thanks for taking my questions guys.
For North American build billable head count at quarter end was lower than the average for the quarter, which was done for a growing company like proficient days.
Actually unusual for Pip proficient in general for the last several years. So when you are growing revenue I'm curious and <unk>.
<unk> with bookings up 40%.
Behind that.
Is it in their voluntary is it voluntary.
Maybe some details would help thanks.
Yeah sure Brian It's a combination of both and it was also a function of us allowing attrition.
The voluntary and involuntary to adjust the head count to reflect those cancellations that we've been talking about.
As you pointed out North America. So we've continued to add headcount at a very accelerated pace for both the offshore.
Offshore and near shore so.
Again, a lot of it is the shift that we're experiencing.
Hiring in North America has picked back up in this current quarter.
I assume that's likely yes, that's right.
My other question I'm sure everyone's kind of focused on the top line.
Given given the commentary on the guidance, but.
In the second quarter again in the many years I've covered per patient, especially as you invest in growth I've rarely seen.
Cash SG&A declined as much as it did sequentially in the second quarter versus the first.
Was there a one time benefit or was there some cost cutting just maybe some detail behind that thanks. So much.
Yes, there are a number of areas, where we cut cost to your point, obviously, we continue to enjoy scale.
Q1 tends to be seasonally high.
Expense quarter.
And then of course, a component of that based on the Q2 result is tied to bonus bonus accrual. So.
That was.
Substantially down from the first quarter.
Great. Thank you so much.
Thanks, Brian .
Thank you please standby for our next question.
Sure.
Our next question comes from the line of surrender of Dan <unk> with Jefferies. Your line is open.
Thank you.
Jeff can you. Please elaborate on the comment about the client preferences for offshore that's obviously been.
Apologies are secular theme for a while.
Is it accelerating at this point or is there anything where youre getting a sense that theres client concerns around cost budget and thats, maybe perhaps driving a little bit more sensitivity to how they want their global delivery.
I think it's really us taking share more than anything so certainly.
This client.
Fitness wave for a long time maintenance point, where clients are always looking for more for less right. So.
I would too.
So thats a factor and it's been there for a while but you know we at speeds that we really didn't have the critical mass.
Go and pursue aggressively and we do now.
So a lot of it is our own strategy, that's driving it and taking share away from others that would normally have got network and when I talk about that work I mean combined onshore offshore.
With a significant offshore component.
It's a blend of the two it isn't we're not necessarily competing against guys that do everything offshore.
Which is why our rates and margins are substantially better.
It's a blended the two and that blend is increasing on the offshore side.
Got it and then just.
Following up on the question about the cancellations I realize it's been asked a few different ways.
It sounded like there wasn't a pattern whether it was industry but.
Anything to do with maybe the types of projects that the clients were thinking or client durations or was it truly just.
Everyone was literally unique to internal client reorganizations and.
Put another way is that potentially a theme where the.
Again, if we have.
A.
Reading economic environment, we may see more.
Internal deliberations at clients that may potentially impact work.
Yes.
Really shifting priorities it was businesses that.
Might be struggling on their own but again not a trend for their industry as an example.
Frankly, one of it is.
One or two of them.
I should say at least one of these and sometimes as the cases, the regime change and with that kind of a new priorities.
And often new partners. So some of it is that like I said I mean, if you take each one and its story and isolation.
You won't be able to put any correlation together among them.
Got it.
And then a final question here on.
The revision to the metrics on the deal size.
Any color on what the metric would be under the old <unk>.
Methodology of project sizes greater than $500000.
Yes.
And then in terms of just further breakdown of that number obviously.
Alright, where these clinics.
The break points start to move at this point is it $2 million is it $5 million projects I know that in the past you've talked about potentially even pursuing eight figure projects, but.
Yes, let me.
The 1 million dollar plus deals making up.
50%.
<unk> of our revenue and that's up substantially from 40% a year ago.
Okay got it thank you.
Please standby for our next question.
Hey, guys. Thanks for taking my questions.
Have you seen any notable changes to to engagement type.
Over the course of the quarter, whether that's there because of shifting delivery or macro related concerns and any sort of color there would be helpful.
Yes, not much.
And what we've talked about I mean.
If anything.
Improved throughout the quarter, if you look at bookings and the types of projects their size and duration complexity.
All are increasing.
And Thats a function of our building brand.
Some of those are with repeat customers much of our revenue comes from repeat customers, which I think is a testament to our quality and delivery.
And then having more confidence and faith in giving us more business and letting us take on larger and more complex engagements that sir.
We've got a lot of new engagements that are starting at a higher level.
The way this business works and it always has is that often in a new relationship you start pretty small and build from there as you gain trust, but we're actually seeing clients.
Well I think because of reputation and brand and things like that are willing to bite off a bigger chunk out of the gate. So thats, helping you move up the average as well.
Got it that's helpful color and look historically, you've been very acquisitive any any sort of update as to how youre thinking about future acquisition or what are you looking for in these acquisitions and what's the current landscape pipeline Mike for targets.
Yes.
Sort of all things digital.
Of course.
As we move our focus more and more almost exclusively to that.
<unk> of our revenue base.
But we also really like.
The near shore, that's worked extremely well for us as the offshore continues to so we're going to continue to look for things that are digital.
So have that component is to say, we wouldnt do something that was North America only.
But we like the combination and we like that back end for sure.
We're pretty optimistic it's been a while since we've gotten the deal done.
And a lot of discussion a lot of talks and we are in later stages now with a couple of firms. So we're optimistic that we'll have a deal that here probably in this quarter.
And perhaps another one before the end of the year behind that possibly even do more.
Thanks for the color guys.
Thank you.
Thank you one moment for our next question.
Our next question comes from Atlanta Puneet.
With J P. Morgan your line is open.
Hi, Thanks for taking my question.
A question on margins for this year, given a higher offshore but since you hired offshore in that.
Oh further expansion into Argentina, India.
Should we expect FERC margins like this year EBITDA margins for this year.
Can you remind us the sensitivity Martin sensitivity with increasing offshore mix.
Yes, if you look at the.
The guidance that we reaffirmed.
That's kind of point to probably about 150 basis points or more of adjusted EBITDA expansion.
Got it.
As a percent.
We arent necessarily expanding gross margins again that said, even holding gross margins flat. We do have an opportunity to continue to expand EBITDA I do think however that gross margin can and will expand gradually but on the face of wage inflation and everything else. We're applying some of that additional margin.
On a location basis to your point.
More to pricing and more too.
The wage increase.
Got you and then secondly, Jeff I'd like to take a step back let's look at the business like you Ed Lockwood.
Globally distributed and delivery now the projects that you are trying to pursue larger than what they used to be before.
Is there like a risk or rather like maybe not.
Is that a consideration about project management labor contract management like a few years ago, I think you talked about insight platform.
Back to your platform to manage for project management Internal project management is that something that you need to pay more attention to.
<unk> become larger as you become more distributed.
<unk>.
And sat with global customers.
Yes, most definitely and I'm not sure if you may be.
The early part of the call in the prepared statements, but Tom.
Covered what we're referring to as compass or what is our internal proprietary tools.
Scott.
Called Compass, that's exactly what you described.
The tool that management can use to not only allocated resources to make sure. We've got the right people aligned with the right opportunities, but also monetary in real time, the performance of any given project.
The Turkey financial as well as progress so drew.
You are right.
As important to scale the entire business, putting the infrastructure not just head count and we're doing that with commerce.
Got you. Thank you.
Yes.
Thank you.
Please standby for our next question.
Our next question comes from the line of Brooklyn, Colicchio with Barrington Research. Your line is open.
Yes.
Yes, Jeff I am curious on the health care and financial services verticals, which have been mainstays for the company in terms of growth. They were down sequentially should we expect a rebound in the near future.
Yes, absolutely.
Are those are actually very healthy.
And I'll make no secret that we talk about Kaiser Permanente for a long time.
30, some odd million dollars of business with them last year I have mentioned for a long time that we're exiting that account and thats going to be down to single digits. This year. So some of that sort of at least year over year basis is coming from just bad account at.
At the same time, we're adding more and more on growing the existing ones. We have so we still continue to see robust demand in healthcare Super excited about financial services, I know youre going to see us I think increase that obviously, absolutely but also relatively.
Going forward, we've finally gotten to the point, where we've penetrated more on the technology side, we've done a lot of management consulting over the years in that space.
Have not been underrepresented.
On the technology piece, which we're gaining a lot of traction with right now and starting up a lot of new accounts and new engagements in existing accounts and I think youll see that in demeter pretty substantially material here by the end of the year.
And any thoughts on the changes in Colombia is government.
Impact that may have on the business.
No.
There have some concern.
Yes, because you never know in those situations and I think the individual has a reputation of.
Maybe not being the most.
Maybe U S friendly however.
I was at least pleased that Valley's bank.
Shortly after the election is.
And for Us as the Hughes once again relationship with the U S.
No.
We also have to see how it goes and taken as it comes but.
Right now from what we understand in talking to the folks that live there of course and understand the climate better than I do.
They're pretty optimistic.
And one thing I'd add there is as we did the overactive acquisition last fall, which essentially broadened our delivery capability in Latin America, and as Jeff said on the M&A front.
If we do something to Latin America, we would likely slightly again further reduce our dependence on quality.
And one macro question.
I think I know the answer but.
Any easing in wage inflation.
And any of your geographies.
I would say, it's been surprisingly manageable yes.
Definitely it's Doug.
Increased but not as not as much as you'd think.
Given the.
The.
Lack of supply.
But it's a lot of these folks are.
I guess Jay Z.
Not necessarily motivated just buy money and of course, everybody needs to make a good living and that's an important sort of yardstick for where you are in your career.
Right.
There are other factors that come into that I think we're seeing that come into play.
And.
I think very competitive.
Those wage increases as well as new higher wages.
And we're very well in terms of.
Landing new people, so I feel like we've got it at the right level and right now, it's very manageable and as I said before our rates are actually slightly out of it.
Thanks for answering my questions.
Thanks Vince.
Thank you.
Please standby for our next question.
Our next question comes from the line of Jack Andrews.
Rd with Maxim Group your line is open.
Great. Good morning, Thanks for taking my questions.
Jeff.
The EPS guidance range maintained for the year, despite the lower revenue guidance.
I know you mentioned contract cancellation, not pure mix shift and factors.
But was there any other impact maybe from currency fluctuate and stronger dollar maybe delays in large projects.
Maybe greater uncertainty of the timing of large projects how much.
Should that play a role.
That's a good question.
We have.
FX pretty largely hedged.
So it doesn't play much of a factor in reality of course, most of our revenue is north American revenue.
So it's really more on the cost side and again, we have that mostly hedged and then we will continue to do that as we continue as we continue the expansion obviously in offshore and near shore.
Okay, Great and then maybe just in terms of organic growth and maybe Paul can help here too.
If you can share what the overall organic growth rate was in the second quarter.
And then the implied if you can imply organic growth for the third quarter guidance in mid 2022 Rev Guide.
Sure, Yes, so the organic growth for Q2 was 14% in the guide is 11, 5% to $14 five in the.
In Q3 and.
14 to 16 for the year.
Yes.
Okay, great. Thank you that's it from me guys. Thank you.
Thank you.
Yeah.
Thank you please standby for our next question.
Our next question comes from the line of <unk> with Scotiabank. Your line is open.
Good morning, everyone.
So I have.
I have this plucked a question.
On the guidance for the ear.
You did get the guidance down by approximately $10 million to $20 million, but you continued to maintain your EPS guidance. So do we anticipate material cost cutting here or is it due to the off shoring is why you see that benefit.
It's mostly offshore.
We're not aggressively cutting any cost we always try to manage costs carefully.
But in fact, we're actually making.
Investments.
Obviously baked into that guidance.
Above and beyond what we've done in.
In most recent years I would say so.
It's more it's a little bit of a bonus reduction, but mostly its scale.
Great. So on the same topic could you talk to us a little bit about your expansion across India and then currently all these offshore locations or your cost basis, but do you see them, becoming revenue basis. Eventually as you continue to expand your presence there.
Sure.
We're going to continue to expand I think we see the market primarily as delivery centers for four U S customers.
The acquisitions that we did in Latin America, we do a modest amount of work for in country customers anymore, and we will continue to evaluate that with our scale in India likelihood would pick up.
The in country customers, so to speak up over overtime there.
But there is no such plans for now.
Right now not so much in India, we do actually do that Adam with Latam that a little bit in China, and China is actually servicing our clients.
We already had a pre existing relationship with in the U S.
Currently no.
We're managing India.
Basically a development center.
Okay.
And one more topic on the staffing side of things. So you did mention that you are aggressively hiring and obviously you do see a huge amount of demand, but something that is an industry wide theme is tech services are doing well on the companies on the <unk> I was just wanting to be hiring but could there be a risk of over hiring overstaffing consider.
<unk>.
Expansion across India and in general this trend.
Carlos Hi.
Yes, I think Thats, a good question and Thats always.
Our balance in this business I think we're doing a good job with it as I mentioned before we've got tools in place proprietary tools that we're using to manage the proper capacity.
And again, mainly allowing attrition if we feel like we need to slow increase more allowing attrition than slowing hiring we've.
We've got a very kind of real time hiring model with 20, some odd fulltime people and our talent acquisition and.
We will continue to flex that as we need.
Perfect and just my last question on the <unk>.
M&A front.
Do you see.
M&A coming more from.
Access to technology or would it be more offshore wot Io general expansion plans in the next few quarters.
Yes.
<unk> interested in adding to our offshore and near shore capacity, but also in a way that fills skill gaps right. So it isn't just that.
Head count in play.
These are targets that have a meaningful account base.
That will be introducing additional services into.
But also a great talent pool that in many cases have either more depth or even the unique skills that we don't have enough.
Or have gaps today.
Great sorry can I just ask one more last question will come.
<unk>.
Hello, I'm sorry.
Is that an internal total only or is that an IP that you use externally as well.
Operator.
Yes can you hear me.
Yes.
Alright, there was a question.
Do we have a question.
Sure.
Your line or region.
Sorry, Geoff I was just asking about samples of the door do you do you use that internally or do you use that do you use that as a proprietary to externally as well and sell it to external customers.
Currently its internal.
A lot of it.
<unk> data coming out of it as is.
Geared towards driving client success, but we are the future plans for it is to the extent it actually to the client where they can log in and see a lot of these details directly.
Perfect. Thank you so much for answering my questions.
Thank you.
Thank you please standby for our next question.
We have a follow up question from the line of Brian <unk> with all Alliance. Your line is open.
Great. Thank you.
In your presentation healthcare is 25% of revenue compared to 31% in the prior second quarter and using back of the envelope.
Suggesting industry contributions down despite M&A how are you.
That same methodology retail and CPG were down as well last quarter, you talked about the natural conclusions of some projects so with a 40% increase in bookings and the solid pipeline youre discussing when should we expect these verticals are going to return to growth.
Oh, I think youll see it this year.
Not sure if you caught it earlier, but some of the contributor on a year over year basis.
Cereal contributor on a year over year basis too.
Healthcare is K P.
That debt in the past.
Substantial decrease there this year.
And as I think I mentioned earlier financial services, increasing retail CPG, it's an interesting climate out there in a consumer driven economy, we will see what happens.
So im not as probably bullish on that in general.
As I have healthcare, so I do think that we'll see an increase there I think some of the percentage of the price declines are actually.
Dilution from increases in other other industries great.
Great. Thank you so much for the follow up.
Thanks, Brian .
Thank you please standby for our next question.
We have a follow up from the line of Surinder <unk> with Jefferies. Your line is open.
Thank you.
A question about.
Just your expansion in India. In addition to the new global delivery locations.
Can you talk a little bit about that in terms of the relative cost of opening up a new location versus maybe expanding an existing location.
Also in terms of the selection of the location, perhaps moving to smaller cities.
Is there maybe a more of a work from home model. There how should we think about the forward looking expansion plans versus existing real estate footprints.
Alright, so during the.
Pandemic and we're doing a lot of work from home that was happening in India, we're pretty strategic and where we made those hires for our operators working remotely actually the infrastructure. We're building is just a supply for the individually hiring specifically in certain areas. So we are expanding in Chennai is a very large city, we're actually expanding to another site.
Chennai, which helps us their costs are relative.
Good position for us there as well as when we look at <unk>.
We have an infrastructure a team there are providing placement to work debate now come back into the office and provide better collaboration and get out of their homes and work more in our office space.
Locations are very specific to hiring that we did during 2021 and currently.
And easier.
Alright, guys. Please go ahead.
Especially on the cost side of that you asked about.
Yes.
You probably know well.
Very effective.
And pretty low cost however.
Heart of your question, we are actually expanding.
In existing facilities, where we can.
So.
That's a pretty darn low cost gas.
Got it.
And then a follow on on the M&A question earlier.
It sounds like you.
During the processor.
Maybe a deal this quarter, maybe something there.
And thereafter in the following quarters can you talk a little bit about valuations it seems that.
It's been more difficult to get deals done simply because valuations are higher and they haven't quite reset the way the public markets have.
Any color there in terms of the attractiveness and consideration of valuation versus the strategic piece of the deal.
Absolutely.
It is there is a higher premium today than there was.
A year ago, and a year before that.
And we really haven't seen a lot of a pullback maybe a little bit.
And I think the difference between that and the public market is that there are other factors impacting the public market.
That aren't impacting these private businesses, I mean debt or our own in terms of demand I mean.
And then what we've already talked about.
Folks are.
Are very optimistic theyre.
They are not desperate.
Continues to be a premium however.
Again, we work hard look at a lot of different businesses and a lot of different elements of those businesses and weather.
That for us or not and we will walk away from deals that we think are just too expensive.
And then one final housekeeping question.
Under the new.
Large project metric.
Are you able to provide the numbers for last quarter.
Yes.
Yes.
Sure.
Okay.
Okay.
Whereas.
Yes 53.
Deals over $1 million in Q1 of 'twenty two and.
47 in the similar quarter last year.
Got it. Thank you that's it for me.
Thank you.
Thank you.
I'm showing no further questions in the queue I would now like to turn the call back over to Jeff for closing remarks.
Well. Thank you all for your time today, while our results I'm sure many perspective were mixed.
I think the outlook is fantastic and I hope we can.
Hopefully we conveyed that today.
And I'm confident we'll be back here in 90 days.
Another great result, thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Okay.
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