SYKE - Earnings call transcript Q2 2020

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Operator

Good day and welcome to Sykes Enterprises Second Quarter 2020 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] On the call today are Sykes management team including CEO, Chuck Sykes; CFO, John Chapman; and IR Head, Subhaash Kumar. After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. financial to course you relate of company's business me made certain to asked future the forward-looking. during this and has relay that to statements the Management are performance call may statements as as available management to information beliefs information by well are on assumptions based Such the contain of management. and made currently that such our goal, intended similar relate they as company as we are and Phrases to identify to statements. forward-looking expressions anticipate, we the expect could that note from the to differ important results forward-looking materially projected actual is such in It those company's statements. results Factors cause yesterday's differ could company's in filings that those and SEC the release statements actual Form in to identified the materially other and time-to-time. with were from XX-K the forward-looking from press the Chuck conference over I now And to turn Sykes. would now to CEO, like sir. ahead go Please

Charles Sykes

will in the shareholders. our this recognize leadership are employees, world. of teams remain unleashed. the that ongoing Good to in our they provide dedication you to doing phase thank the begin results. for response doing this our our XXXX in I is doing They work relentless as over quarter the joining Thank you Enterprises' pandemic thanking the absolutely discuss will walk do critical alleviate everyone, our financial Q&A. through business the to for their you, and then hardship worldwide I what's operationally I for of insight Sykes want control. they call, also has numbers, across pandemic all operator. we'll today us second and want clients to are how can our that by deliver all for within to call On turn employees today's morning, their They John and and

their the to continues and minimizing safeguards while of that with to latest pace, vigilant depend pandemic safety our them. the the we employees livelihoods families on maintaining disruption ever operational about remain As

processes began, lockdown the our home results truly under differentiated performance strong second exceptional, our agent were belt our the full levels, able thanks even by and operating earnings COVID-XX that the organic revenue many break now These and absolute constant technologies flows. quarter of led proprietary and it, operating to achieve operating we growth, key currency in-house to quarter financial records include platform With margins, since revenue cash XXXX positioning, and underpin metrics. across were market

our offshore environment, financial of of with more toward results we continue metro of particularly the we facilities, indicators culminated the the to already major despite the in some and this target quarter. areas. of second in teams our around agent robust In discuss strengthening working brick-and-mortar Fundamentally, less will the and discipline results as and share The by redeployed of our and includes limited along demand offshore. were brick-and-mortar and maintained we and proud in fundamental John productivity. robust quarter Customer Meanwhile, a reliable very connection a our X% We scores ergonomics. outstanding idle. All on performance with focus in quarterly electricity bandwidth savings discretionary our did absenteeism were than infrastructure in working strong constraints continue home, working capacity were agent home safety This fluid all, operational from balance are XX% broad-based of spend, outside and some we detail but further all job agent gains, which of agents performance. than extremely and and those XX% on basic experience, sheet. through later. this more levels, utilization agent remain former balance satisfaction achieve had roughly lower attrition of drove key driven

toward year, cautiously remain we of remainder look we optimistic. the the As

of growth whole Areas of levels healthy the vertical industry. client complex, excluding market activity our span We travel seeing our are across base. existing

Specifically, economy market new traditional we and are segments. opportunities seeing with

result segments, new card online and their as the all disruptors addition entering the footprint, verticals. driven geographic same food to care fintech, across continue opportunities the categories health markets is solid banks time, systems seeing support delivery security the as we scaling e-retail, growth. programs soft In holders their At and in for collections the is economy program such segment, existing traditional related within it to models ramps Act. business and Within strategic adding e-commerce, do-it-yourself partnerships. and are being CARES growth wireless credit This these work. technology new new a of And

have I'd uneven operational still an we the openings have the headway. difficult entire of our some mix and long-term ways with capabilities, we up, worldwide. each Meanwhile, and wins, on sales to unprecedented hold final made Moreover, is John? overcome until solid in opportunities continue fast all logo certainly say the our limited our combined Chapman. And at demand to on look believe structural balance firm to the and how chain. are our cycle of That unpredictable new what we our clients across of be with differentiated value what us give and of is given between of positioning to costs challenges call John of of clients our home to late. like said, terms going will strategy economic over that, situation. But we the turn on efforts sheet our agent to been delivery capitalize enhances rebase this breadth and seen an the their commitments vertical extension front and short brick-and-mortar, depth run. is In to segments it have track, permanently, including nature Efforts for

John Chapman

financial balance particularly Chuck. Thank to our P&L, flow results, like now I would discuss quarterly you, highlights. and key cash sheet

standout revenues last Chuck quarter, the record versus $XXX.X of second by As reported growth results X.X% in quarter. the a almost year, million measure. our $XXX every were mentioned, we quarter of In million a

$X included foreign a revenues XXXX million impact. quarter exchange negative Second

million organic revenue currency constant impact, approximately is or growth, were FX the X.X% Excluding which decade. in the a second quarter up highest $XX revenues

as basis, care, technology travel coupled As of vertical transportation XX%; broad-based our diverse on and in verticals. and in market with By up XX%; his around agility business to currency existing was offset XX%; and the services in growth. enabled up vertical roughly clients' more all decline alluded a X% our new responding X% grew other remarks, well in growth, health mix needs, constant than which both and Chuck communications as financial the program our prepared decline and to

decade versus period same X% margins execution operating second increased was agent the basis, with productivity, operating comparable year. period a The On in up increased Second to utilization from increase last demand combined margin quarter XXXX high, last X.X% X.X% due year. to capacity the solid the operating non-GAAP margin comparable higher and expansion a for quarter X.X% discipline. was in XXXX

or related quarter reflects of basis approximately Second -- million a $X.X approximately operating points stock-based XX expense the mark-to-market program. market adjustment of to margin XXXX deferred comp

per XXX% quarter $X.XX Of share the basis were in a year. up Second $X.XX $X.XX basis. same comparable versus diluted share Non-GAAP on last earnings versus XXXX were second period to earnings XXXX $X.XX diluted of per and $X.XX of $X.XX by split comparable with roughly net positive share $X.XX tax, remainder operations, count. diluted approximately from and that other driven benefit share per swing $X.XX between was lower interest in increase, the quarter

existing the clients a total our The quarter top from XX% by roughly of in new quarter, and the during at year On driven as as top-XX the the represented second approximately ago quarter. wins the last year clients in to basis, almost XXXX mix share well a for XX%, Turning to from grew moment. top-XX compared competitors. clients same of shift XX% revenues client period program XX up second in our consolidated

XX% We in no client comparable have quarters. both

to sheet items. let and select Now flow turn me balance cash

expenditures operations of due days capital from cash decreased year X.X% from $XX XX consolidated from the flow quarter to with days, more the period. basis and a million DSOs five tripled increase factors. million earnings due slightly quarter, to X.X% swing second Trade on in working for to up were than revenues ago During the strong comparably, XX EMEA. $XX.X Capital in roughly days worth a days' DSO from DSOs sequentially. DSO and a in factoring. weeks XX end. is of but clients The couple collected in receivables region were off the drop that for primarily quarter to XX The between split of was last Americas' compared mandating to We for increase days unchanged year

expect to to clients stated payment some further stretch as continue we more As even before, liquidity manage aggressively. we needs terms out have we

with approximately of Our balance and operations. or sheet equivalents $XXX.X held $XXX.X in which at XXXX, of of international cash million, XX.X% million remains June of was XXth strong cash

repurchased million an have an shares During million per of purchased at the $XX $XX.XX X.X for X.X total quarter, of share of average price $XX.XX. price average shares we million. we Year-to-date, a around at

end, XXXX. $XX sequentially share million $XX amended our under in we remaining million shares XXXX March borrowings program facility. million million in our X.X quarter August credit had in down outstanding, and roughly have million $XX $XXX We repurchase authorized under At

We hedge exchange our of continue to exposure. some foreign

year, XX.XX third U.S. PHP the to XX.XX and the of weighted For approximately hedged we're quarter XX% PHP and XX% and full average rates dollar. at

CRC exposure the of weighted XXX.XX quarter and is average XXX.XX at XX%, third year dollar. the addition, rates respectively, In and colón Costa the for full XXXX CRC hedged Rica XX% and to U.S. approximately

the demand Virtually count approximately capacity second start the of some utilization was expansion all up approximately year. EMEA. a XX,XXX seat seat with contracted metrics. basis, consolidated Now seats, and let's driven X/X this capacity split X/X at comparably. quarter and seats Americas ended is we review On The X,XXX roughly of

utilization was XX% be the capacity timing ability the in EMEA rate quarter were quarter higher by the was Americas at at-home and XX% XX% mobilize due of Capacity EMEA. further with and driven second year increase utilization the end region broken agents brick-and-mortar of rates EMEA contracted Americas demand. to Americas versus in rapidly in XX% of X,XXX for additions the the the in of XX,XXX year start The seat Americas EMEA increase period, while to in coupled in demand, quarter. mainly a combined the second XXXX to the ago was with to our service year. and our in of versus XX% count The the basis -- ago the The for higher capacity XX% to end to can down the demand the on utilization due at reduction

off What this business positioned model, providing prudent Operator? annual in quarterly hold record the in up visibility record is of Before which it's nature closing, our our into like the giving is second resulting for in unpredictable believe That This unemployment. call with further large changes related the due long differentiated high term and I touch-and-go in point, the are we is marketplace due final guidance. frequent part openings also pandemic, a and have that, their the our believe at highly capitalize restrictions well is us coupled clients' to of given products place levels and said, and they uneven like forecast demand we services. highly to pause stemming quarter, the would fragmented well we our say economic on the among from for to industry. open questions. limited to competitors as of to dislocation I'd as potential With the to

Operator

Sidoti. [Operator from Vogel Instructions] the And first question from Josh comes

Joshua Vogel

from Thank the came you, John. looking from was revenue, performance the Pretty is much for results in there. My at Chuck referenced? also, environment currency questions. of Thanks impressive quarter? gains good of this morning the the of QX, you constant first X% programs any, in taking and how question And out if share percent in light of sense growth any my what when temporary

John Chapman

of one spread It's about U.S. across and out terms in Europe the X%, is There and Josh. the they're temporary In programs, globe.

you'd QX. or say, due we've programs COVID, if the which we've also okay, revenues, benefit They is to continue X%. from programs. But may an So again, you X% related not can offset those bit a got at beyond you travel weakness as got temporary temp look our overall, imagine, to may

Joshua Vogel

the then and about... Okay, part

John Chapman

tell. where of it's terms really we are winning In hard to from, the business

us give not and not moving giving one been of see around than clients by it we've the daily, we're is forecast, have why they're their going said, adjusting week guidance we to week, normal. certainly, but reasons more As

that exactly either have, our So get tell. it's hard asked from, when we're to look increase at - internally whether are productive struggled where volume in competitors clients was to to because to in to centers higher All or share we're achievements, job volume that supply real just have chain we taking year-over-year, significant or how much we unlike take, been in or their our It's just it's a either but for know or our maybe deliver us we we obviously there's there. is volume that that the whether clients' what out competitors than it really real we much a increase of don't compared - increase anticipated. doing delivering know the internal a better we've

So super been able what we executed, it our quarter, of little makes execute productive bit deliver unknown, has us in we're unprecedented our kept really our the behalf that's really employees are company I what employees about it's mean for number. on conditions. at how We're clients year-over-year how in growth pleased a to QX but safe, record but what a is well is we've get pleased to

Joshua Vogel

Yes thank you.

trends saw the you're So, you through from can understanding also refraining monthly QX share revenue July? giving that guidance, you what any in and

John Chapman

July, but we I say, Well, ready about I'm give to about not talk QX. if talk - would you

because the asking and of at get thing did it low into our explained in going Salvador places, of and in could of were much travel, the of of suspect I really X% and other, start April I but Josh, the on And conference seasonal that we look the QX. sometimes we dislocation because trends May X% would because X ramping was when know program back say And I say, although would is was the we is, simply you're to would XX% had you If we're lower par each only I a we you thing call, I view, in aggressive. maybe June weaker quarter. What with Manila well, on X% only again trending kind April historically, said, weak really and the is. there's - increase. agents. how bit El remember to QX terms in annual say The in but say the probably if to be, as as I terms help at try terms you I in trends looking we I of volumes, But would out of little lines. QX but much possibly client that around in give target, you year-over-year again, I would and bit to where QX, been think so revenue than kind July. it our of outside a uncertainty that in guide, down my just want revenue and those maybe little past, is X% understand don't commentary would not that would a I X% and forecasts more bit a growth us That's in and seasonal X% And little see but there May kind June pretty to there's in

Joshua Vogel

that just or helpful, you. be three I new maybe change XX-XX entail? And could lastly, about part it's think your you does could That's -- at-home give a at XX% split we thank than to guess and And scale just could between that profile when greater X% opportunity this and normal to the think estate footprint of agents maybe targets a And down question. referenced one it what centers XX%? real was home even last but basically brick-and-mortar that that? long-term more, the Chuck so, I then if quarter. like margin an

Charles Sykes

Josh, yes, understanding they're work so our been trying the about and XX%, we're positioned. on to now, home. everything, And right where get talking from long XX% to term, about clients we've

probably at work go XX%? home right XX%. at will to But based don't look that's thinking term, So could think about on we below XX%. back it remain But now we're will we I conversations, regress believe as long that say possible. those would really it I

say up. I the goes X% we that as to when the higher, XX% come margins, X% say long-term for could Now wouldn't but it's XX%, --

superior quarter-to-quarter bigger home on annual tighter, from is range company be not it growth. an margins. better overall have which make about at the the would to about basis, So speed as as slightly is would The issue work margins about much

is home, physical staying critical. yes, it we're long from opportunities turn, mind current So our we're everything. inventory our if lumpiness term because X%. in COVID, capture able in the only business at which which was and to we limited prior have where workforce, by XX% have easier of we to much keep And removes And that, not

definitely real estate a So We doubt. it's have a shift. significant to without eliminate opportunity

Joshua Vogel

really my hear That's Thank voice great you for always helpful, to guys Chuck. taking your questions.

Charles Sykes

Josh. thanks right, All

Operator

Fargo. the Warmington is Thank Wells next you. And question with Bill from

William Warmington

everyone. So, good morning

So this tell can't sell limiting the So - call XX%, to I with much. sell - effect. can bring Kumar up Subhaash, Wall Also the I questions, almost side three and with bow think a stock the that analyst, on definitely we you you take always just them mind a that the saying just Street,

the keep to attrition high and wanted working you about I'll utilization these home were like were sustainable? guys and it to utilization helped the home improvements I the So consider of you And really pre-COVID looked what and from lot. levels three. the levels levels It attrition in a ask agent whether

John Chapman

Bill, programs fits And and Yes. in would in attrition. compare really we've if go it's seen varies. home to annual an pool, like have really and program terms they're seen I program. by what attrition. annualized what all. programs, XX% for same is varies XX% brick-and-mortar, whether home. program two and you management, effectively in That brick-and-mortar probably one varies agent again, and compare I got that to it places same we've annualized It some at size by that in But It's reduction some it number, it of the - down geo you. not is comparison better work say same now a at that at a And mean, work need we is probably any look hard and really was

in we're in the So dealing But times. I different what again, that's of terms impact. would say

to is we've of because simply work say. all to So from moved that difficult seeing home

we improvements. absenteeism, the And agents going office same at obviously the we've home. only makes of to When look places a environment in others, big absenteeism, seen going In that it's absenteeism terms down Doesn't back maybe running - that work terms was difference X% in terms of But but to sound pool at X%. numbers. at of before some from a in is at to rates, XX% X% change. our much, of

some that the some it result absenteeism a naive. to we not We've that as attrition the you in had do because home. how manage to benefit, simply of to work agents we And you some now understand of to situation how managing the we've just have is of do to from We tools the of transform is tools believe are to also in in that. have that both see. but work we're of who and agents expertise of we terms that, home distributed but those knowledge levels, do that because in we workforce are those it's place had managers manage transform employment they used not Now that us of can't moved the of in from helped a sight to think line kind

comparing working at we're actually work seen to term make to home. improvements not So that they're are short longer And the nice we've those the yes, term, programs and same brick-and-mortar improvements stick. sure improvements that

William Warmington

and runs revenue remember revenue back I about seem recession, attrition wanted your going now, got on to ask to I attrition X%. about Well, think I the And to it as in last thoughts forward. that bad typically as X% X%

John Chapman

we even because call Bill, X% our with honest, now. client, attrition it's is of X% be once growth, actually revenue our over largest what just I'll our

and even existing shows as deepen impressively logos grown So how existing new as well and logos. expand it we've well more

X% So is call our the of at higher to as actual going this to be end attrition, X% suspect range. year, you it, the I probably

really telco to trend result another think going actions, believe but this the about we go. telco would will client X%. it when change, exiting. as that don't that's where see We be remember, as we Now year in But of be it's we're the year's last this that largest well we don't about spoke once our that's the higher. long-term But do number client year

Charles Sykes

necessarily agent. back on things. I I at before Yes. environment, really to One question, would COVID, on more your work was employee of thing the that versus is always to Bill, first it to a want that focus someone go home with about one has wanted lifestyle work. didn't X type around home to that

clients a of of particular is type second that typically call using agent stuff. The had type, a thing were seasonality home it and the lot for

away, will of year, have core work world And work, of then now when we the career, the a looking higher just more facility where the people think call truly goes work to of being bunch so attrition. are main build then where to worker whole of a nature I'm through -- a not type so-called But at to I a in the and we hire are the new we home, moved if create is the today to volume type is and worker, stable the from now see worker but had environment you're margins a going a wide that to sustainable. that

like quite it's going that environment looks to so for the better, what actually. And bit work a change

So anyway...

William Warmington

Okay.

for third a mean you was quarter the so I revenue G&A with grew the leverage looked this X% it And impressive. basically G&A. flat like question,

see that, that So don't often. we

So sustainable going how that I think and really is on a color to maybe you much forward. about little of wanted ask that

John Chapman

look, if at clearly Bill, traveling. benefit I look don't relatively it's you much first year-over-year, there's I no in compared G&A change flat. quarter's mean a business - this year What think is I it levels. not Yes. We if from see two is to you we would the mean as say, say, I

them, in lot seminars, - they've saving there's some discretions, are kind those ways, So just what of people even buildings call a got of our - we're cost. travel, you less utilities that in in

would opposite an of but the - great gross is inside we sitting and what mean equal I look might that's yes, terms that's not really it margin. got probably I G&A, overall, cost say However, in

to obviously G&A, line, it yes, we're in if but may So be above for looks productive. we to hotels like, having connectivity. obviously pay, had to agents to having sites to to margins near pay them agents offshore, saved pay quarter, keep of amount look get We've money in on get We're work. be in our significant the at especially a to agents the allow you to to

tell in that and fact, G&A line. lite, than I So the although it your equal you saying, there's you're in more that looks at an GP opposite, looking and would

So yes, be back. we're there G&A once comes out this, element of some will of that

However, Chuck once about, is expectations how work terms at we stick. much going as clients' in to understand, spoken home of of

the facility again, the home less and Chuck's higher, our but potential that point move X% we'll get, results. towards it we've it impact XX%, in to in X% at home, able be footprint. always can the back it reduce less utilization operating got have been significant costs the variability maybe to the it the then way. allow less permanently - drag that's can said, will look more And Chuck G&A do work of than has also and moves about will to if goes we We a And X% in you G&A get if where, that the you staying more margins can terms operating a so our that last our margins. sitting have to XX% in think that, of us of adjusting of we as it less that think, having if Obviously, But full. in lower work we years, as proportion grow the at XX% think on a sites will couple unrestricted our company the doesn't were to maybe I of

William Warmington

it, you well all much for guys. the Got thank very right, insight

John Chapman

Thanks Bill.

Charles Sykes

Thanks.

Operator

comes you. Instructions] Thank The Barrington question from Colicchio Vincent Research. [Operator next with

Vincent Colicchio

we up Yes, are a here? the Chuck ticking or John, mix, with bottom in communications nearing

John Chapman

growth. hope be QX, still we once it again, said thought. We going I to but we kind QX in little then. turnaround getting more you always largest we'd vertical, had I excluding Yes, mean see think Vince. Yes, client than it we've growth you'll client, Because if But it's I was contracted see not our our at that. a closer. it, bit look QX, suspect that - Whether definitely much definitely that largest sure, excluding we of see again, in a we're

Vincent Colicchio

vertical, I'm the And I that. not companies? sure strength services financial Did the there? on credit is driving card what hear

John Chapman

Yes. I got I our major I mean, you've in say, collections, card, mean, all I fintech. of I we've we've we've mean board, got seen vertical pieces. strength soft center got the services we've think regional got got across - banks, relatively varied. is we've money those banks. would if financial - credit We've

we're really we've some about. - the in clients we feel parts yes, is So the of different pleased, which of both across in there, spread pretty But Yes. terms vertical, that big good in understandable. got

So financial services, you're a right, it's for months. the been last XX nice growth us in

Vincent Colicchio

also from situations? of opportunities you is your - in distressed competitors that, of coming part to your part And And share from distress? financially gain financial related benefiting in are seeing any to invest

John Chapman

Again, that But say in with it in think more trouble. Vince. to internal us hard really financial It's our or we're are expected productive terms having clients a with it's to agents understand get our how them lines, who is increase, you tell are asking as hard well to in volume we we've got kind of we our supply is, ability terms sure whether volume only we've to for our we're us world. I think understand doing can coming supply from getting those of competitors. supply us about issues really It's and the around No. more potentially than I chain are because said vendors them competitors distressed I wouldn't other of chain do for financially whether centers. don't winning issues, having -- we and not think us

at have our TP many, robust if indeed, In and Concentrix, for essential to look mean, again, very consumers has would of industry fact, be our an clients out what think you reported, our I or who've be many I service, whether and say I many, is, proven it already many competitors, there.

sense But And so geography, you're say market a really performance who our proven a out travel to as struggling. and to disproportionately as of or feel impacted. flexible intellectual over be maybe so as be, lot obviously, that's channel But an if we there's I industry that's will terms all the very There benefit we pleased think leading, verticals. diverse pleased. indexed in distributed from get as having one we're of don't be seems again, how in distributed where again, a you're right in of these that delivery be to our I when really in adaptable or there is competitors in are work to we've we've of now of well from XX% workforces always employees our home. moved understanding about -- And this said having distributed clients well you'll manage

Vincent Colicchio

you, quarter. a thank on congrats Okay strong

John Chapman

Thanks.

Charles Sykes

Thanks.

Operator

you. And Baird. from comes next the question Thank Bamberger with Robbie

Robert Bamberger

for thanks questions. my Yes, taking

on operations So overall COVID trends, to just shift outsourcing few the more contact an you months an environment? over accelerated as past struggle the center in-house have first, seen question in current

John Chapman

mean we've whether - happening a wouldn't say for terms wouldn't there's again it's move. think seen in see trend, what's a I exactly of to I quickly Robbie, longer-term I I difficult - know is very us

clients us have from ramp programs. We to benefited asking new

lines new of for asked business. have We

for shift think numbers. come coming know to and from to how expected from believe and think is performance, to have us. shown outsourcing this benefited of. should getting we've as will our to we've whether tell maybe a I We be - seen I well don't our share we quite percentage quality the that But we've real as yet, clients think of versus don't flexibility, - of hard get clients more through because back how I something that say. much that We sit the this suspect greater growth of responded that really yet is that makes people will and volume just than And time us

Robert Bamberger

there in question Okay, onetime be And good the will were costs. just in QX, QX next away? of actually on quarters? a sort couple COVID great. And higher of Margins margins but were go costs any can that

John Chapman

back the say suspect excluding being similar But to already if see always I to different. levels quarters, G&A next QX. I G&A don't look will materially can until wouldn't couple say, to COVID-related move, we of what I I normal, you said, is FX have get I because - think would continue will costs I've not at we that

support model they've change XXXX. I I'm those sure making think kind terms we our our changing So keep get more of in workplace, cost safely it's really down. than - in in the same, trends the anything our there. dramatic I sure don't significant up to employees or employees of get see got sure would a the much But more safe, broadband to adequate wouldn't I clients, guess certainly not make our us of I of

Robert Bamberger

Okay, thank great, you.

Operator

else All any at Instructions] would [Operator to you. floor the as management present time, nothing there comments. for the to like is I closing return Thank right,

Charles Sykes

No.

good Just participation, as Everybody Thanks. up a quarter. next always, thank catching you have with you for day. we forward to and your look

Operator

The conference Thank today's presentation. you. concluded. has now attending you for Thank

disconnect may your lines. You now

Sykes Enterprises (SYKE) 8 Aug 202020 Q2 Earnings call transcript