Q2 2019 Earnings Call
Incorporated earnings Conference call at this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time, if anyone should require assistance. During the conference you May Press Star then she wrote when your Touchtone phone as a reminder, this conference maybe recorded I would now like to introduce your host for today's conference, Steve Barlow, Vice President Investor Relations. Sir please begin.
[noise]. Thank you know.
Well, thanks, everyone for joining our call today, the second quarter 2019 financial results I'm, Steve Barlow, you Excel Vice President Investor Relations.
With me today in New York Heart, Rather Kapoor, Vice Chairman and Chief Executive Officer, and the shelter, our Chief Financial Officer, I Hope you've had an opportunity to review our second quarter earnings release, we issued this morning, we have also updated our investor Factsheet in the Investor Relations section of yourself website.
As you know some of the matters, we'll discuss in this call are forward looking please keep in mind that these forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.
Such risks and uncertainties include but are not limited to general economic conditions. Those factors set forth in today's press release discussed in the company's periodic reports and other documents filed with the Securities and Exchange Commission from time to time Excel assumes no obligation to update the information presented on this call.
During the call today, we may reference certain non-GAAP financial measures, which we believe provide useful information for investors reconciliation of these measures to GAAP can be found in our press release as well as on the Investor Factsheet.
I'll now turn the call over to wrote support you feel Chief Executive Officer.
Thank you Steve Good morning, everyone and welcome to our second quarter 2019 earnings call.
Our business performed very well in the second quarter on both topline and bottom line.
In the second quarter, we reported revenues of $243.5 million, which represents a 15.9% increase year on year or slightly outpacing the 15.8% growth in Q1.
Adjusted EPS for the quarter was 74 cents.
Excluding health integrated we achieved an adjusted EPS of 80 cents.
In the first half of this year, excluding both integrated.
Achieved organic constant currency revenue growth of 9% and adjusted EPS of $1.59 cents, which grew at 12%.
This has been a great year, so far and we are positioned well for a strong second half of the year.
And the second quarter, our operations management business reported revenues of $155.6 million up 3.4% year on year and 4.4% on an organic constant currency basis.
Excluding health integrated operations management grew by 4.9% on an organic constant currency basis.
We had strong performance in insurance, and finance and accounting, which grew by double digits.
[noise] analytics had another outstanding quarter.
Revenues increased 47.4% year on year to $87.7 million.
Organically analytics grew 16.4% year on year on a constant currency basis.
We have previously talked about the fact that he axa is one of the few players in the market with a full stack of analytics capabilities, coupled with domain expertise and that combination remains central to our growth dynamic.
We have the breadth and depth of service offerings to support large transformative deals in the data and analytics space across industry verticals.
Our analytics solutions encompass a court order goes up insurance healthcare and banking.
It also includes significant each one with media utilities and retail companies.
I'm pleased that our analytics business has been able to consistently grow over 15% over the past several years with an increasing revenue base.
[noise] separately today, I would like to highlight student growth area.
The expansion of our strategic partnerships with large insurance lines and our focus on technology enabled solutions to accelerate our growth in healthcare.
I Love this business or nickel insurance continues to grow and develop very nice.
Why do we have seen strength across multiple service lines in insurance I wanted to highlight our operations management business, which has grown by more than 10% annually since 2017.
We now work with over 255 across the U.S. UK, Europe , and Australia, which includes many of the top tier insurers in the property and casualty and life disability and I know what do you think those.
Our market, leading positioning and on ability to deliver superior outcomes across the complete value chain allows us to win about ideal from new clients globally.
As well as to deepen our strategic partnerships.
We continue to see significant opportunities to penetrate new product lines and business functions within our existing insurance accounts.
We currently provide three or more service offerings to 60% of our software any fight insurance clients.
One such example of how we are able to broaden and deepen our partnership is our long standing relationship with a fortune 50 insurer.
Despite being a mature relationship we have successfully increased our share of wallet across multiple business lines because of our strong understanding of the clients business.
The credibility, we have armed by delivering strategic business outcomes and by employing that XL digital intelligence framework.
We were recently named the chosen partner for the end to end servicing this appliance life insurance business.
We initiated this pursuit well that two years ago. When the clients began looking for a partner to manage their life insurance operations.
We were able to do this large significant competition because of our domain expertise and the ability to align with the clients long term profit operational goals.
The clients recognize the benefit of consolidating multiple windows to enable the transformation off an end to end life insurance operations with a trusted partner such as excess.
This is a significant win for us not just due to the size of the engagement, but also because of the significance of the long term value, we would be able to generate will decline by managing that entire life block operations.
During the same period, we also penetrated another key buying center within the slot.
The Cfos office.
We have recently been named their finance and accounting services transformation box no on an engagement that includes some of the most complex insurance finance and accounting work being done in the market.
Once again, we were able to unseat a large incumbent based on the strength of our digital capabilities too good and the clients confidence in our ability to deliver complex confirmation in an optimal cost effective manner.
This engagement also underscores the growth trajectory of our insurance M&A practice.
And the majority of our service offerings.
Moreover, we are currently pursuing multiple large deals across different buying centers within the same fun.
We see similar traction across many of our large insurance client and we expect continued momentum from these accounts.
Overall, our ability to expand into new geographies product lines and buying centers within existing clients continues to be a significant source of growth for our insurance business.
The second area I would like to focus on today and our health care business.
The appointment of sand Mickey as our new healthcare leader.
And the integration of seal has analytics within the excess has allowed us to focus on our growth strategy in health care.
Brent capabilities across clinical and back office operations data and analytics and technology platforms, such as Ken radius.
XL has a unique value proposition in the healthcare market.
Since the seal acquisition, we have now integrated capabilities to develop technology enabled solutions that align with key challenges across payors providers, Pbms and life Sciences companies.
We are seeing evidence that this combination of our capabilities is resonating in the market through recent deal with that leverage this targeted approach.
In one example, and emerging and disruptive health insurer.
I was looking for end to end utilization management support and to establish a single integrated platform that supports all can management needs.
XL introduced a new delivery processes to support the clients overarching need and deliver a single platform on care radius that supports that comprehensive care management workflow.
We were able to leverage successfully a hybrid delivery model of offshore non clinical and clinical resources combined with onshore critical functions.
To optimize utilization management costs and provide you right after that services.
This solution will allow our clients to better collaborate with their members and partners deliver a seamless and best in class health care experience.
In another example, exco has been selected to provide advanced natural language processing solutions for large healthcare provider focused on military and veteran communities.
This is a great example of how we are integrating our deep domain expertise in the healthcare space.
Without advanced analytics capabilities, and a robust technological infrastructure that C. O offers to create a bar for technology enabled healthcare solution.
This engagement marked our first combined seal, yes, so ren leveraging our capabilities from our digital consulting group, our population health solutions team can radius platform.
Seal and on the advanced analytics products team.
We won this deal because the blind trusted ekso deliver on a complex problem and the creativity that we demonstrated in crafting a solution that is integrated tightly within the overall business what Phil.
[noise]. This trust is a testament to the relationships, we have developed and our ability to orchestrate the full suite of digital capabilities and domain expertise to deliver superior outcomes.
This win demonstrates the best off the one XL approach to serve our clients with innovative secure and scalable solutions.
Finally in healthcare the wind down of help integrated is proceeding according to plan and will be substantially complete by the end of the year.
We are exiting the business with professionalism and in a responsible manner.
Our estimate for help integrated remained unchanged from our previous guidance and the rest of our core business continues to perform very rough.
Looking ahead, our pipeline is robust and continues to evolve beyond traditional operations management and analytics deals.
Increasingly we are orchestrating our domain expertise and digital capabilities to deliver on our strategic partners business outcomes across multiple C suite buying centers product lines and geographies.
We continue to see strong growth in insurance and an increasing share of wallet in existing bonds and we are winning new clients globally.
With that transition off help integrated we have been able to focus on our core healthcare strategy and are seeing good growth as a result of recent wins and the development of a strong pipeline.
Finally, our analytics business continues to build on its market leadership and is growing nicely with the pipeline being a healthy mix of data management data enabled solutions and advanced analytics solutions across business where that goes.
Overall, we are positioned well for growth in the second half of the year and beyond.
With that I will hand, it over to Michelle.
Thank you Ryan and thanks, everyone for joining us this morning.
I would like to start by providing insight into our financial performance for the second quarter. The first half of 2019, followed by updated guidance.
We had a strong quarter with revenues up to $42.5 million up 16.8% year over year on a constant currency basis.
And delivered adjusted EBITDA of 74 cents up 10.4% year over year.
As you are aware, we are winding down the head into good business substantially by December 31.
Hi discussions all the financial result, encompassing the revenues and expenses will be excluding the impact of pellets indignant did in order to underscore the performance of the core business.
I'm going to discuss health integrated separately later in my remarks.
All revenue growth numbers mentioned after odd on a constant currency basis.
We had a strong quarter over the revenues of $40.6 million up 17.3% year over year.
Sequentially revenues grew 2.2%.
For the quarter revenues from our operations on the business as defined by five reportable segments, excluding analytics water on 52.7 million up 4.9% year over year.
This growth was primarily driven by clients from insurance and that's an accounting healthcare segments.
In short has continued its double digit revenue growth performance was 12.6% year over year growth.
This growth was driven by expansion as existing client relationships and ramp up of 2018 wins.
Finance and accounting for the sixth consecutive quarter continued its double digit growth momentum and grew 10.2% year over year.
This growth was driven by ramp ups of 2018 Vince.
Hello, guys showed signs of improved confidence with revenues up 4.9% year over year compared to 1.7% in Q1 due to new client wins in 2018, and new business expansion in 2019.
And your next continues to perform strongly revenues of 87.9 million up 47.9% year over year, including revenues of 18.8 million from Seo has done analytics.
On an organic basis analytics grew 6.4% year over year.
This broad based organic growth rate.
Well, it's driven by new client wins and expansion in existing client relationships in healthcare insurance.
And banking and finance working for us.
Sequentially analytics grew 1.3%.
Gross margin for the quarter declined 40 basis points year over year.
34.2% due to investments in new deal wins expansions.
Adjusted operating margin for the quarter was 14.6%.
Our adjusted EBITDA for the quarter was 42.2 million compared to 28.7 million last year.
Up 9% year over year.
Our GAAP tax rate for the quarter was 17 at the opposite end.
But excluding the impact of discrete items, namely an excess tax benefits recognized on stock compensation.
And the evaluation of our effort tax taxes, our normalized tax rate for the quarter was 27.5%.
We expect our normalized tax rate for the year will be in the range of 27% to 28%.
We had 253 million of cash and short term investments and ordering up to 52.2 million.
Excluding health integrated on an adjusted diluted EPS for the quarter was 80 cents up 9.6% year over year.
Now moving to our first half performance excluding health integrated.
In the first half our revenues grew 18.3% year over year before 76.2 million and increased 9% year over year on an organic basis.
This growth was broad based driven by expansion in existing plans and incentives and ramp up of 2018 2019 when.
Operating environment grew 5.4% and analytics, 50.5% year over year.
On an organic basis analytics grew 18% year over year.
Our revenue for employee was 32400 up 9% year over year.
Gross margins held up you heard improved 40 basis points year over year to 34.8% due to operating efficiencies.
Adjusted operating margin for the Peter declined 40 basis points to 14.6%.
This decline was driven by increased investments in digital capabilities solution than investment in new deals and ramp up of new teams.
Our adjusted EBITDA for the period was 84.2 million compared to 74.2 million last year up 13% year over year.
Adjusted EPS for the first six months was $1.59 cents up 12% year over year.
We generated strong cash flow from operations of 47.7 million in the first half of 2019 compared to 13.8 million in the same period last year.
This increase was due to higher EBITDA better working capital driven by VSR reduction to 59 days from 61.
During the first half of the year, we spent 22.3 million on capital expenditure and repurchased 478000 shares for $26.1 million.
Under the share repurchase program.
Now I would like to discuss that has integrated business.
Revenues for health integrated or 4.9 million in Q2 compared to 2.5 million Q2 2018.
I think you mentioned that dilutive impact of 140 basis points on an adjusted operating margin leading to an adjusted EBIT loss of six cents for the quarter.
In addition, we recorded impairment and restructuring charges of 5.6 million for the quarter, which is excluded from RMBS.
From our adjusted EPS.
As a business lines on we expect revenues of 10 to 14 million, which was our expectation in April but 6.8 million of revenues generated in the first half of the year.
In terms of our destiny, yes. It has been a 14 cents loss in the first half and we remain on track to incur a loss of 23 to 27 cents for 2019.
On July 16th is E filing.
Stated that we expect to incur pretax impairment and restructuring charges in the range of 8 million to 10 million to wind down they have integrated business.
Of that amount, we took a charge of 1.2 million in the first quarter and 5.6 million in the second quarter totaling to us.
Also in the amount of 6.8 million for the future.
The balance of the $1.7 billion to 2.2 million will be taken in the second half of the year.
As they exist thoughts on onetime costs. They are excluded from adjusted EPS and not part of our guidance.
Cash expenditure connection in connection with the wind down are estimated to be in the range of seven to 8 million.
Now moving to our guidance for 2019.
We are increasing our revenue guidance to $976 million to $996 million from $969 million to $906 million based upon our first outperformance and our increased visibility for the rest of the year.
This includes 10 to 14 million of health Indigo revenues as mentioned earlier.
This guidance represents.
A year on year growth of 11% to 13% on a constant currency basis.
And 8% to 10% on our organic business, excluding and independent.
Our adjusted EPS guidance is it new to put all ages six to $2 98 from food already due to $2 98.
Excluding has integrated our adjusted EPS increased to $2 per diem to $2 per diem to $3 21.
As Roy mentioned, the business is healthy and our largest segments, often turns finance and accounting and analytics.
In addition, healthcare has generated positive revenue growth this year.
We have achieved 9% organic revenue growth for the first half of the year and have met our financial goals you set out to achieve at the beginning of the year.
Now what is that I would be happy to take questions.
Thank you.
Ladies and gentlemen at this time if you have a question. Please press Star then one on the tax downtime. If your question has been answered or you wish to remove yourself from the queue. You May press the pound cake, we ask that you limit yourself to one question with one follow up also to prevent any background noise. We ask that you. Please place your line on mute. Once your question has been stated.
Our first question comes from Maggie Nolan of William Blair. Your line is open.
Thank you.
Can you give us an updated outlook for adjusted operating margin. This year, but then also how you're kind of expecting that margin to trend in the medium term.
Integrated behind you.
Yes, hi, Matt Thanks So.
As I stated in my prepared remarks, the opium for first half is 14.6%.
In the second half, we expect that adjusted operating margins will expand and we expect that to be in the range of 15.4% to 15.6%.
That's an improvement of 9200 basis points in the second half.
That would've been driven predominantly by gross margin expansion.
Due to more productive ramps inflow of first Tom becoming more productive in the <unk> and not any other self insurance healthcare and improving utilization in analytics and consulting.
Cobranded operating leverage when to get them to think about as good as our revenue and expense.
In terms of long dumb things.
We do have said before that.
Our expectation is that we will be for the year with this profile in the second half and up at between 15.1% to 15.2% of just our operating margin.
And we think in the long term the expansion of margin will continue but we're not giving any specific.
The engine than amounts at this time.
Okay. Thanks, and then so you've obviously had some strong growth within you know insurance in finance and accounting with that within ops management.
But that has been offset by some weaker vertical and so can you talk through.
It's been going on maybe in travel and transportation logistics and the other vertical and how you expect those to kind of perform overtime as well.
Yes short Maggie.
So you know the growth of our business actually is a pretty broad based across the industry verticals.
Obviously, we report our.
Five.
From the industries and analytics separately.
And you know there will be periods of time, when one particular industry may not grow in a particular quarter I think the overall demand environment as well as our ability to serve clients and grow our business with existing clients as well as when new clients.
Remains quite healthy across industry verticals and across geographies.
In a number of these industry verticals, we are creating a very effective digital solutions that are helpful to the clients to solve some of their biggest and most complex problems and therefore, the engagement takes a little bit of time, but our expectation is that the growth will be a pretty broad based.
Certainly in insurance and finance and accounting, we've been able to demonstrate that neither ship you're also seeing that traction build up in healthcare and in banking and our expectation is that the same will be true for travel transportation and logistics and the other industry verticals.
[noise].
Thank you.
Thank you.
And our next question comes from Mayank.
Tandon with Needham and company your line is open.
Oh. Thank you good morning, North at a high level could you talk about the automation opportunity or threat. How do you view that in terms of impacting your business over time, you know what percentage of deals our automation today and maybe also the financial profile of these types of deals as you go about scaling them overtime.
Yeah sure Matt.
So automation you know for us or you know I think in the past couple of years, you know with certainty or something that.
Oh, well is a a headwind to our growth rate and as you know we expect we saw a headwind of about 2% to 3% on the overall the company's growth rate because of automation, but today automation is actually turning into a strong opportunity set for us and what we're finding is.
With our demonstrated capability of being able to embed interest or other technologies and digital capabilities into our clients' operations.
And delivered digital intelligence to them.
We are being sought out by our clients and by our prospects to come in and do this work across different business units across multiple buying centers and across geographies. So if you take a look at our pipeline today or the activities and then the client names and the prospects that are out there in the pipeline.
The complexity of that pipeline is heavily weighted towards.
A lot of automation advanced analytics, and Digitization being part of the agenda.
And I think we are in a very strong and fortunate position to have developed this competency in this capability and we are a very attractive partner to these clients that are seeking these types of transformational.
Changes to be made to their operations. So the way we see it is most of the clients are looking to digitize their existing legacy operations and invest in new digital capabilities to expand their market and we can actually help them in both sides of that equation.
And maybe just to add that such deals and are usually outcome based or.
Transaction based on that mix.
Different margin then.
On outcome provide for us.
Great. That's helpful color, if I could just ask one quick one on accretion.
I think that's probably the highest attrition we've seen in a long time, if you could just comment on what the drivers, whereas it held integrated or is there something else systemic to Oh, the business that is impacting attrition or this quarter.
Oh, yes, Mike you're right the attrition number is high but.
When we analyze that attrition number there are two fundamental reasons for the spike in attrition in Q2.
Keep in mind that Q2 typically is.
A higher attrition quarter for us historically, because we give salary increments you know on the first of April and typically there is a higher attrition in this quarter, but the two fundamental reasons as you rightly pointed out number one is a reduction in workforce in integrated which had an impact in the second quarter and the second is some structural changes that we have made to our workforce, particularly as we engage with a lot more automation digitization and using the right location for providing services.
To our clients. So a combination of this has basically resulted in a one time structural change and that has led to the attrition rate going up in Q2.
Great. Thank you for the answers thank you.
Thank you.
And our next question comes from Joseph Foresi with Cantor Fitzgerald. Your line is open.
Hi, So I wanted to start by asking about health integrated.
And its impact on 2020, so I figured I would give it a shot.
The numbers are going to obviously, you're going to start to face better comps next year.
And I just don't want to get ahead of.
What do you think is realistic to build into the model.
On a topline margin and EPS side. So maybe you could just give us a little bit of early color.
On what you think.
That impact.
Ill health integrated not being in the numbers next year would be.
Sure Joe.
So as we stated in our prepared remarks, we expect the wind down of has integrated to be substantially complete by December 31st of this year.
And therefore, we really don't expect there to be any revenue that would kick in for the next year.
But please keep in mind that we are doing the wind down of health integrated end up extremely professional and responsible manner and we want to make sure that the transition for our clients have held integrated they land in a safe and secure place. So whatever we need to do to make sure that that transition is as smooth as possible.
And whatever we need to do to make sure that we wind this down in a responsible manner. We are going to do that but our expectation is that we would be substantially complete from a business standpoint by the end of December this year.
From a margin perspective, certainly the headwind that we've been facing with health integration were largely again get consummated.
In calendar year 2019.
There are some wind down costs, which we have clearly specified in our 8-K that we expect to incur.
$7 million to $8 million of these wind on cost our cash costs and some of that cost will actually take place in 2020.
Because of.
Those costs only been possible to be incurred once the business has completely shutdown. So.
We don't really expect there to be any material impact in 2020 as well. However, there may be some cash.
<unk> expense that does get spread over from Bernie 19 for granting training.
Okay.
And then I think you said in your prepared remarks that.
There's going to be multiple where you're talking about multiple large deals.
And I Wonder if you could talk a little bit more about what those deals look like versus what the deals look like before I know my on Cas about attrition, where you need to be hiring for those deals are busier rebadging associated with them and how they flow through.
Two numbers as we look at next year. Thanks.
Sure so.
First of all we are seeing that our pipeline is increase in value and its strong and that's because we are seeing some larger deals enter into the pipeline.
As our clients gain confidence and XL, providing digitization to them.
The size of the deals is actually expanding and actually the work complexity is becoming.
A lot better where we can add a lot more value to these clients. So we are seeing that.
Our trend.
A place we'd also winning a number of deals and in the past few quarters, we've been able to successfully win a number of these views I. Just gave examples of two such deals that we won in health care and a couple of expansions that we saw in the insurance market in my prepared remarks. We're also seeing that same trend play out in some of the other verticals.
We're also seeing larger sized deals in analytics, where the data play and that data management play is allowing us to start new client relationships on a much bigger size and scale and what we did previously so frankly.
We think the demand environment is healthy our capability set is resonating very well in the marketplace.
On the attrition question, Yes, we had a spike in Q2, but you would notice that.
We've also added to our headcount quite significantly in Q2 and that in response to some of the deals that we have won and to be able to manage the growth expectations from these newer deals that we won so all in all the feel that we are in a very good place as far as our growth of our business is concerned and this trend is up bringing our very favorably for us.
Great. Thank you.
Thank you.
And our next question comes from Vincent Colicchio of Barrington Research. Your line is open.
Yes, Rohit I'm curious.
Are any of the clients added in the quarter three of them have the potential to become a top 10 clients.
So this is a.
Weve added.
A number of new clients in the past several quarters that have the potential to become.
Our top end client I think you're going to see.
And see how this thing develops.
Certainly some of the new clients want to test us out in delivering the digital capabilities to them.
Our existing clients have already seen that and therefore, there is a lot more confident about expanding their work with us much more in a much more accelerated manner.
So I think we are going to see the opportunity set both from existing clients as well as from new plants.
In this particular quarter.
We've certainly seen.
A number of deals kind of come through.
I don't know if theres any that's.
I'm going to be in the top 10 going forward, but I think certainly over the last two or three quarters. We have signed several deals where these clients will have opportunities to be a top 10 client for us.
And curious the consulting business, which has been trending in a better direction.
As I continue to.
Performed well and what's the outlook for the rest of the year.
Yes, the consulting business as you know is always going to be based on discretionary spending and it's going to be something which.
It's going to be volatiles in terms of how that progresses.
What we are seeing is up because of new regulatory changes that are being brought about particularly around the management of data.
When we saw that with GDP RBC that with the TCPA in California, and we are seeing that.
Across multiple.
Client situations. So we are seeing a lot of opportunity in terms of helping our clients deal with some of these are regulatory challenges. We're also seeing a lot of opportunity in consulting.
Around robotics as well as.
In our digital and that's something which is playing to our strength.
And finally, we do see our consulting engagements as a precursor to some of the large deals that we've got in the pipeline and therefore as we engage with clients on these large deal pursuits and b.
Develop creative solutions for them to be able to solve some of them more complex challenges, that's playing out nicely for us so all in all.
I think there is adequate opportunity for us to be able to play out here and be able to leverage our skill sets.
Thanks for answering my questions.
Thank you.
And our next question comes from Bryan Bergin of Cowen Your line is open.
Hi, Thank you.
Wanted to ask on CEO within the quarter did the 18.8 million revenue contribution to that come in line within your your expectations and then just broader analytics growth outlook post the Seo integration on a loader a larger overall base, how should we be thinking about that going forward.
Yes, Hi, Brian .
The CR revenue for us at 18.8 million for the quarter was a bit soft and.
But keep in mind that.
The payment integrity revenue portion of the business within seal is usually lower in the first half of the year as compared to the second half of the year.
And so we think.
And also the CR revenue is outcome based so it can be unlocked more variable.
We think that for the full year. The CR revenues are going to play out fine.
And the place where we are most heartened with is the new deal that we just announced that be one which was leveraging the capabilities of Seo and combining that with the advanced analytics capabilities of XL and bringing together a very creative solution and very nice win for us.
In the healthcare space.
So I think.
Overall in summary, we are pleased with sales performance and the outlook for that business and the demand for future years continues to remain very good.
On your broader question on analytics.
Weve shared in the past that.
We would expect our analytics business to grow in the mid teens and combined with CEO . Our expectation is that the analytics business will grow at about 12% to 15% going forward.
So that's something which.
Now is going to be a strong double digit growth for us and is clearly going to be a differentiator.
As compared to many of our peers and we think that this is going to be an advantage for us going forward.
Okay. Thank you for that.
And then on healthcare so you have a new leader in place it looks like the operations management business, Obviously X X health integrators is starting to recover can you comment on on what's being done differently going forward in that business and how you see.
Normalized growth profile and then.
In that part of the business. Thanks.
Sure.
So in in healthcare.
We're really delighted that Sam Mickey is leading all of our health care business today, and Sam has got a tremendous amount of experience and knowledge about the healthcare business and has operated a business at scale.
Fundamentally what we are doing out there is creating technology enabled healthcare solutions for our clients, which is what is the need of the hour today.
And we've been able to expand our.
Client footprint to Payors providers, Pvms and life Sciences companies. So that's given us a much larger footprint to plan.
We've also chosen some very targeted and specific service offerings and solutions that we are bringing to market.
And when you combine the data analytics capability that we have the care radius, our technology platform that we've got the strong onshore and offshore clinical expertise that we have got.
These are very very powerful and unique differentiated healthcare solutions that are out there. So that's something which was always our core pieces for building up our healthcare business and now are the building blocks are in place and we think that this is working very well and some of the early client wins that Weve had certainly seems to validate that strategy.
Okay. Thank you very much.
Thank you.
And our next question comes from Suneet Jane.
Of JP Morgan Your line is open.
Yes, hi, thanks for taking my question.
So it seems like.
Based on that.
Common health care without told integrated is doing well.
But travel transportation and logistics and other verticals continue to Greek can you talk about like what's driving weakness, there and where do you expect for those verticals going forward.
Yes, Hi Felipe.
No I would say that our business is.
Performing well throughout.
There are areas and pockets of weakness switches in utilities.
The utilities business for us.
As you know is largely UK base and in the UK, there's been a fair amount off.
Activity in the utilities industry and there we are driving a lot more automation and a lot more digitization and that's resulting in a lower headcount and a lower revenue stream associated with that business. So this is something which you're going to find that's going to happen from time to time, that's when we introduce a greater amount of automation and we have greater amount of digitization, we might be able to create a greater amount of efficiency and therefore, there may be periods of buying when the work will actually shrink and that's something we're just seeing it but when you take a look ended on a broader timeframe and you take a look at.
What that capability does with other clients in the same industry vertical it basically attracts more new clients to come towards us.
Because we can actually deliver a greater amount of benefits for them.
Got it thank you.
And what do you expect for how to integrate it impact on margins this year.
I know you said like autos.
Yes, you did.
Yes, so we expect to have tended to be a headwind of one project 260 basis points in the first half of that impact was about 140 basis points.
Got it thank you.
Thank you.
Again, ladies and gentlemen ask a question that star one.
Our next question comes from Edward Caso of Wells Fargo. Your line is open.
Hi, This is Justin Denardi on for Ed. Thank you for taking my question.
As you talked about the.
Analytics business continuing to grow faster or can you.
Talk about.
How much that could incrementally add to the margins going forward.
Sure listen so right now we are focusing on growing that business as quickly as possible.
The current margins of our analytics business are about the same as the corporate average for US we do think that as we go in to more advanced analytics capabilities as well as as we start to leverage our proprietary data assets and get into data management, that's going to give us an opportunity to be able to expand margins up within analytics.
So thats, something which I think is a longer term trend that will play out but for right. Now I think we are focusing on growing this business as quickly as we can and establishing.
Very very strong relationships with our clients and developing new capabilities in this space and Justin as I mentioned in.
That the margin for first half gross margin for analytics business was 34.6% in the plus when Google We do expect that to improve in the second half and Thats one of the drivers are.
You'll be margin expansion as we get a better.
Our utilization and productivity and on an expense.
Great. Thank you.
Thank you.
Ladies and gentlemen. This concludes the program you may now disconnect everyone. Thank you for attending have a great day.
Yes.
Yeah.