SYKE - Earnings call transcript Q1 2021

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Operator

Hello, and welcome to Sykes Enterprises First Quarter 2021 Earnings Call. [Operator Instructions]. Please note, today's event is being recorded.

On the call today is the Sykes management team, including CEO, Chuck Sykes; CFO, John Chapman; and IR Head, Subhaash Kumar. Management has asked me to relate to you that certain statements made during the course of this call as related to the company's future business and financial performances are forward-looking. that as on information assumptions to information management beliefs currently contain management. well as made statements are the based of available Such by and expressions anticipate, as intended are forward expect goal, such be relates we statements. Phrases and the our to similar as looking company it to we company's note differ results materially forward from important to actual such statements. It's those looking that the could projected in release those and cause time actual the the in results in from the can materially identified with forward-looking that XX-K Factors yesterday's to Form differ press in company's filings and were statements to time. other from SEC I Chuck Sykes. will over now turn you to Mr. Please Sykes, go ahead.

Charles Sykes

you, discuss call call, a through high Thank we'll you to Sykes thank Enterprises operating and level overview first turn then I'll the provide of financial Q&A. morning, and you and for today's walk operator, our John quarter will everyone, On the today for joining results and us XXXX over numbers good results.

we results our solid we a outlook deliver provided to year Our to highlighting first and that now to were after sells, and proven year full clients. in cycle span These life February on began capabilities strategic our back prove and digital continue marketing highly guidance quarter for above year-over-year service tracking I'm XXXX is One the our business continue say happy initial operating capabilities. as XXXX lockdowns basis, and our globally, our operational the transformation. while pandemic have resilience differentiated full

to the is in on and latest down for worldwide. our them them. depend are work our dedication employ course, letting in it would were undeterred disruption possible the hard delivering to of employees face our and approach success not remain COVID-XX the current employees be guard not And we while families their financially pandemic, minimizing our we Of of that were which to safeguards of for we none the the to and

the acquisition. a perspective, the on quarter as roughly standpoint, highest a up company, healthy Hoarder Penny revenue first from a and well to excluding this the new A XXXX quarter the in organic growth demand the From of after clients history existing quarter, Turning were as was new revenues first constant mix propelled traditional and market quarter. economy basis. our growth segments split X.X% between XX-XX in an even currency

pandemic, to our secular help continue customer redesign trends have proactively which of a service category driving every we to enterprises. and across digital, journeys As the driven product adapt it clients been within accelerated by is by virtually

and for change All boosting demand of we performance. of this value fruits our that is our proposition, see in the financial

that domain our differentiations from instance, deep expertise resonating and key back is just which in core one part to is our clients we of XXXX, for the of home, openness and our Our and capabilities, strategic work acquired with grow a is share.

client of seeing are retail traditional broad opportunities we financial the support the segment, Within and technology health a care, providers. services, from spectrum

into ramps their that existing such e-commerce in we and growth are as new either base our food fintech, brands Categories new online market. that vertical brands that solid and entering the outsourcing segment. in are in national time, the the across continued for geographic new first global markets see We are the to delivery same their similarly also or and economies program or e-retail, outsourcing. market markets target across time leveraging success accelerating you our expanding At scope are known

expansion here. equally the year-over-year We operating the operating margins prior of X% in saw proud year margin achievement front, On to our in we from our non-GAAP are X.X% period.

of the a quarter, decade better, XXXX the high. our first margins some out operating of reaching were strip If non-GAAP in quarter you noise even

believe delivery remaining facilities. XX% facility to years. from earnings Currently, a the from $XX.X mode current will for client trade-offs boost from room overhaul share XX.X%. those in said, through state our Hoarder delivered the XX% operating gradually investments million. the home of and in are coming to ago, have for transitioned on further more our to was record and up one, Based operations initiatives it that mix quarter inverse position will with potential mortar even percentages. and a capital non-GAAP quarter, And the believe changing also with our a the We the Penny if a a brick further the finally, mix, in value returned resulting COVID with their we a from at first we that clients for roughly of in to as rationalization which as Cash year to business underway the As margins continue the business was background. shareholders as we reinvesting we provide have aggregate the lingers solid is continuity quarter margins mix, geographic cash we Even repurchases. higher than clients and a due along is we incremental have at most operational flow with acquisition same chain did with even IT least closed the belief the of net even delivery pricing period steady as expansion our delivery growth

a to on outlook to XXXX first scores So results we off further up with of quarter heels were and already XXXX. closing, the we strong the our business momentum upward the the And on. were a capitalizing revision start in solid

with of we as is the and leaves optimistic vaccines, lockdowns, lifting second with cautiously experiencing us ahead. While are forge still pandemic some us the coupled countries the waves, the

our unlocking I Chapman. gave in to results turn would life over delivering further shareholders. highlighted differentiated full proposition resilience, value and the With to our us in conviction John? also cycle the it call that, like our XXXX John for potential for clients While our of value

John Chapman

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

record million versus financial $XXX.X we the we As $XXX.X to Chuck have reported year, last of in the million XX.X% mentioned, growth of record continue quarter, a revenues performance. quarter. In

outlook First $XXX XXXX million the revenue close million $XX.X comparable $XX.X included of quarter our benefit. million from and were million. revenues a quarter of range year-over-year $XXX revenue the On end first basis, contribution exchange foreign a acquisition Penny an XXXX to revenues to Hoarder top

of Excluding an in XX%; or health mix. our the market acquisition business thanks quarter foreign $XX.X care constant and in revenue organic offset up million first X.X% communications was vertical. up decline constant retail the growth, services and XX%, to up around agility which XX% all and X%, exchange XXXX. communications X% up travel tougher transportation up vertical were expects comps vertical financial decline diverse includes approximately others, basis, third in technology, approximately By The of and in organic benefit, technology which in currency more XX% than around lot quarter to our the revenues

to costs income XX.X% of for year. and margins with impact million, other merger which costs of amortization, related excludes assets from non-GAAP increasing X.X% operating increased integration other to and comparable XXXX XX.X the related right fixed period of facility last use intangible related impairment facility exits, the operating acquisition driven and to quarter First X.X% On access. a basis, COVID-XX assets

operating rationalization, and increase the related COVID-XX year true-up temporary of approximately agility X% impact was The due and overall transportation ago including incentive long-term as versus partially accommodations, the benefits without First infrastructure from operating company's government strong facility facilities IT-related margin margin to moderated was points year. XX operating XXXX was net investments absent approximately capacity cost comp lockdowns, points comparable of period by employee margin X.X% of in workspace related as the and ramp and to demand, IT to basis marketplace. the mandated in XX in from impact costs sanitization payments and COVID-XX cost costs. quarter by unavailable utilization The reinforce wage last also moderated same revenues, in higher the employees corresponding well a basis client

quarter First XXXX Penny basis, basis. cents, same comparable factors, by the was On rate increase combination and versus other operating quarter of to The tax per lower the increased XX.X% driven last cents in strong count. $X.XX per acquisition, effective performance, year. up on share from a a Hoarder share period XX.X% lower earnings first expenses, earnings contributions versus a diluted diluted including non-GAAP $X.XX the $X.XX XXXX $X.XX was share lower

non-GAAP $X.XX per diluted by share guidance exceeded which driven First share, earnings quarter per midpoint XXXX the a range $X.XX to lower-than-projected of by $X.XX was the rate. tax

XXXX, consolidated function clients of of acquisition. first Turning The approximately both to a of client top XX% ago during quarter on from our of represented in the Hoarder broad-based down clients basis, our the and the our growth mix, of contribution of total outside XX decline the top period. XX Penny revenues XX% year

fact, client in In had quarters. XX% both comparable no we

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

The security XX invest day for $XX.X During a the XX expenditures the earnings expansion. operations revenues period. The Trade and basis was for X.X% of million refresh, jumped targeted PC of revenues IT combination decreased a for quarter, from sequentially. Capital driven. decrease ago million of days to and to continues timing The were on factors. flow year X EMEA. cash company $XX.X working XX consolidated DSO quarter was X.X% due and to XX.X% strong capacity the DSO comparably down in days, to from first in Americas, capital days largely swing from unchanged

approximately and $XX.X end, had cash the million strong equivalent credit at year or borrowings $XX.X the million sheet held we remains international down from million XXX million balance which $XX in facility. $XX of $XXX.X in Our XXst million operations. our of of end, quarter cash was under outstanding, At million, at March with

to PHPXX.XX hedge approximately dollar. rate full to X% exposure some exchange hedged year continue the PHPXX.XX of of quarter a We and U.S. average at and weighted was second foreign the and XX% the for

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

seats we and seat some with first seats, permanently brick-and-mortar to ended home to a the down by metrics. capacity coupled reduction in of basis, with to reflects turn The decisions a away let's mix made XX,XXX X,XXX facilities. capacity On approximately certain from quarter delivery consolidated COVID-XX, solution approximately agent utilization due count alter to comparably. underutilized clients Now consolidation

rates quarter. region XX% utilization a and even in for home versus The basis comparable in further. have further quarter EMEA first broken at of Americas the utilization down Americas The can X,XXX X,XXX XX,XXX and quarter ago region, the and quarter. EMEA the from from and capacity the Americas the count calculation ago rate seat on ago were permanent for XX% to year increased EMEA be XX% of respectively end utilization XX% in Including period. XX% increased to in would utilization Capacity capacity agent XX% and comparable comparable and X,XXX, year for year for the XXXX first combined

turn let's business Now to items.

a We share existing outlook a full by due earnings the diluted initial a revenue increasing are the driven base broad outlook in of markets provided per diluted per tax and to XXXX. clients relative The to the increase February is share guidance while in increase earnings rate. revenue year XXXX vertical primarily lower-than-projected company's back the across in is

Second, we future of delivery continue facilities in and agent the COVID-XX. home brick-and-mortar view determining clients with to driven between by work strategy

to capacity As we taken those similar such, footprint around XXXX we decisions. as in facility greater continue in get leases to adjust clarity their actions

of the the other roughly year is and and rates the the the the per foreign continued discussed functional year, The of $X.X earnings exclude between the Hoarder. previously its impact method. equity of exchange are or serve the growth in as however, the rates per the million related of for full business could the interest the technologies, full reflects XSELL Therefore, a investments interest share million and is which in anticipate and the the second non-GAAP and quarter, and company's the in income $X.X our million negative The acquisition total revenues potential GAAP relative expense exchange outlook In XXXX. reflects its other based currencies poised positive for full to income revenues and we on respectively. foreign any share on stake second expense impact million net, losses. interest the April for Fourth, the volatility both U.S. approximately quarter Third, earnings second markets and dollar business assumptions to year. we net impact on further $X.X foreign expense of quarter the of candidate to amount under second of Penny quarter $X exchange and gains accelerate or remainder

both the Considering following non-GAAP expect tax a and ending Revenues the diluted capital share of year diluted benefits basis, range tax count factors, XX% $XXX to anticipate above range to range we rate X per million shared $X.XX XX, $X.XX in the $XX fully compensation. GAAP full $XXX million on to relating of effective the months diluted earnings $X.XX, of reform as well million, approximately financial we the than non-GAAP be Philippines approximately rate share lower approximately per Finally, projected XXXX discrete expenditures stock to the previously in tax million, effective to results as due for of XXXX. the to in to XX.X earnings $XX million. of and $X.XX of June

count $XX the months Revenues billion, XX.X XX% rate following approximately XX, non-GAAP shared billion a ending of $X.XXX to million, and $X.XX, earnings For in like in the to XX% December With of diluted of $X.XXX earnings on XX to in per effective results. to the up we of $XX basis, anticipate range capital I'd for approximately of XXXX, diluted of per the tax open financial fully approximately call share expenditures Operator? diluted share range questions. range to $X.XX million million. the the that, $X.XX, non-GAAP $X.XX

Operator

[Operator Instructions]. David question from And the Koning with first Baird. comes

David Koning

on good Congrats quarter. another

Charles Sykes

Dave. Thanks,

John Chapman

Dave. Thanks,

David Koning

Yes. can pretty you're good. year like I to I like talk is I flat the And the It you QX, guess little more guiding given, all, selling anything bit seems Maybe about a first it organically. something than maybe of comp just that. seems environment ago. And the in like think think

kind but some it's really when hits the year then is items is than driving think the I up half, XXXX But to into even normalized ago. of growth the extra revenue better it's back it growth had you type return do that in COVID-related pipeline year and that a now how second accelerating pretty revenue? setting the full we you're translate of Maybe sales that maybe sales strong, a that? really momentum really the

Unidentified Company Representative

Yes, you're David. right,

held the speak about but if QX, we've how In have about really We this year headwind. some we last terms up vertical. do travel travel QX, remember of year-over-year And you headwinds. really spoke we year, a got last

back. right, the currency to if you forecasting going And of guidance, you're so a growth from our below And organic And we're kind down of travel. come that look be to a to X% is X% that's is lot our X not It's at really to headwind this target. year constant the things. going

the starting we probably QX and year-over-year you got until growth bit think if telco, of QX, look little a at we there. headwind I travel some there to still got

future We We've we've a that no range no client get I think especially X% spot you've we'll We terms that be in to travel, this got our constant target longer we in for the start love I see years. fact numbers that's there the the of X% as and broad-based us. QX for over growth. And on. still the organic fact love again, XX%. currency over large to QX and probably we the with year client think have into we is got

of us kind to sales volume we're nice ago, the we're I months got nice same we about as high-growth would much position you giving We've pipeline. pretty ago. Pretty companies those than as the headwinds, much months thought same positive are two X other think we be in we spoke So increases. the still really Dave,

David Koning

time? Is past or potentially a even boost reductions kind putting when to that in to you a made about XX.X% that further just further period boost, some a and some go whatever, you range of ways Chuck margin, to whatever there's remember, other or of just that. about talked facility get types you costs I talked that about that around can't above comments could in, some towards, over be you you've it of the mean may to the numbers And say rationalization, maybe X.X%

John Chapman

Yes.

still spoke Our still and this same like pretty the we that's going today we keep guidance about assumes, much year said think forecast we got said how pretty that case. facilities I much were we've last our quarter, to the

got. always that the you've not margins. are the facilities' just range, that It's costs, need theory, about waiting to still about really of but then do thinking clients We in yes, decisions it's facilities. increasing we of permanent make said from But improve more about top the we goes instead market Where to like reductions help is fixed the not simply XX% to labor believe projecting on the cost it permanent again, costs facilities that definitely less on decisions home, those of the aspect. their our to the think them X% the we've the the it end we'll that it total We range, out less X% end margins. we the bottom, take action obviously limits to we're XX% And to boost have bottom should costs aspect.

only more if as probably are also at today, same virtual, facilities We our and a we going markets, then making the position we've when even especially while we're most the still we in utilized. fundamentally people for those domestic forecast of the months sit access we've our we we are to because get got as reflects to decisions. utilization, as here they're in really clearly, the tailwind ago is that clients XX% you believe XX% when us home, But to be today, got look X labor where at

guidance where going from So is yes, I say our from we're for XXXX. think how year until assumes the David, to we and when and that. you're I not really would Exactly still unclear, really right, that will benefit benefit that

David Koning

Yes.

thinking QX in quick just The Hoarder, that its term? on And growing you is fast own Thanks. just that longer real own, and one how Penny growth how of Okay. one. are organic its

John Chapman

know thought $XX it you million what closer was organic. the much came it hit pretty guys to we in to the we help impact $XX I number QX, that a David. I gave actually and but million, that, in don't just number but have on understand

to they're growth they the For going in hasn't came looked had in annual changed still be numbers and at if I guidance XX%, year, number. before the they've XX% range. year-over-year it's Their about their our

So they're the probably number. at going XX%, XX%

Operator

Colicchio question Barrington. next comes from our And Vincent with

Vincent Colicchio

or of quarter, includes pandemic? what short-term I'm revenue related the curious, to Yes. guidance nice revenue portion guys. A Chuck a John,

John Chapman

of we've nothing programs the tell afraid. are In Vince, pandemic, COVID specific temporary doing the about note are it's programs that some don't got because doing that simply basically we of of there's any I'm because pandemic, any terms have better But now. worse. Clearly overall, it, you of clients to

Vincent Colicchio

And that I would Is right? be the the assume. quarter, same for that

John Chapman

yes, yes. Yes,

Vincent Colicchio

given concerned And how coming is the all U.S.? people hire the to of money are Washington, hire it out difficult you to and people how in

Charles Sykes

Yes, I right our would that say is headwind the biggest single now. probably U.S we're facing

it as to this to back right QX, we and benefits were we attrition perspective, put time in last soon Just the And in year, reversed biggest normal. the in, all it kicked absenteeism. when as unemployment drop in saw

very anticipate benefits specific pretty So tremendously. when the think now time And going that we tough the right unemployment we're U.S. us stop, help in the it's do having a in to that's we But U.S.

Operator

And with next our Vogel Company. & comes from Joshua question Sidoti

Joshua Vogel

seeing redesign opportunity capability is a and because as journey question, early first have functions lot to enterprises place or they it in are anymore. and market in looking operation their those customer when of the large may don't emerging in-house your of to captive they're taking tremendous personnel a outsource peers prepared but missed remarks, have noting Chuck, one I that My your

in So you're clients? can talk seeing and marketplace you bit little amongst your about just a what the

Charles Sykes

self-service. so I giving really redesign. their At are accurate an looking if think outsourcing them into seeing definitely to to it's I how of say journey just companies many resilience are the them I'm I build was time, wanting customer know it's flexibility. same safe it think What model that implement that much at and of is don't to because statement. is

your And facilities you're so at trying you invest the in the time logic to offerings. is digitize why if would same brick-and-mortar

outsourcing now are would So embracing pretty say a I in right in way. the general just significant people

I to wanting So would lot an comments would the their of [indiscernible] companies seeing with we're facilities a lose resiliency. agree to I say outsourcer, that but

Joshua Vogel

you. your today expansion win thinking that and just the versus I within about pipeline existing does And the your base? from got coming new marketplace guidance, client what it's -- and assume

John Chapman

historic. growth It's I in there's no that developing majority been different expanding our existing comes And the Josh. vast of from and mean change not really client a from our us base.

months those in a significant that is you the of top especially it's about lot where and we've about those think in looking same. nice spoken us eventually the line. win solid of go year this retooled close success past, a that's those we team to the our still and growth We're helps really But to seeing really that out lot space, logos, I really But of getting of sales new logos. your have now in been pipeline, for at unchanged But the the what at and largest executing previous number, in the growth -- XX really vast look when the more. the growing overall contribution in out to to but client, we've are that you got and revenue it's their I well, is clients short look because majority it when existing last, solidly take outsource for term. that brand if why getting clients clients if us

So outsourcers. again, multiple got all clients we of know that most our

top to and to opportunity be. want you at that's And ladder that so And where the business, the progress if the of are we the more performance, and of win see. get in executing you we part that's terms of that

Charles Sykes

winning seats. think average when companies, seats looking XXX Josh you X,XXX clients fortune them they XXX the you give on yet the on and difficult to other it's started. that large get for probably that new were hand, when these at not And we're Yes, economy about it

revenue. And the think of XX bad a will percent large one fortune why takes always I that's standpoint be equal of it the XXX So to our growth of one. those from

in is That's However, these about so X.Xx we that economy revenue that Xx. the love that -- new sustains the the the Xx it's XX:X is, just by key. typically third year, what year, to future. we That year that ratio. clients typically first second keep and that thing the it bringing it on the mean in growth know we I revenue is our

your feels you're be X want it clients. but don't before it when and to just turns, past X good around it's You business not pleasant. growing, experienced in growing We've if that ever or our too

Joshua Vogel

gears, shift Shifting growth in certainly give Can X Is the was way it in what's And driving in performance thoughts over structural just you're is there? there that there strong really the demand just to a EMEA, quarters. last that? I curious can you on approach longer-term different or drive a that? selling some outsize

Charles Sykes

over would a the a is from not it, source we're But is hire from in from all can say right you thing now people offshore because platform when -- I think the past benefiting German easy really we from continent. Europe, home Scandinavian to lot with about the too of so biggest offshore. home the languages. in now can't Well, you that work work in location, our

have So it's in to now XX% really we home. working growth able of winning. from is we're be helping to And our Europe workforce the capture that right us

like in big pretty a So way. probably us helping I feel that's

Joshua Vogel

last just one Okay, one for great. me. And

address portfolio see you needs place how that feel the in in Just thoughts and and potential you have to digital offerings capabilities your pipeline the client's today? today on you about a whether

Charles Sykes

proposition that serve can looking with about one help just I also they is The thing I our we're about look their customers, good their they're not value think us them smaller would us us to that these to say companies resonates help to real to that. grow business. feeling

at and capture their until help candidly, grow years, focus the service to sector. as ourselves in we kind serve position XXXX. say and demand. So weren't really we're of with were our as I marketing digital would that to mainly And in last on critical capability, into a We putting much up Fortune time a them company and that X probably

So success we're about I now. feel having good the right that very

Joshua Vogel

impressive and for and over you of thank luck Well, results great. insights the balance good certainly the Sounds the year. all

John Chapman

Josh. Thanks,

Charles Sykes

Thanks, Josh.

Operator

Baird. we David a And have from Koning from follow-up

David Koning

like row guys think Yes, much. just good and where margins a something for gross one -- so they're it's this this follow-up. in have I first -- is year-over-year time you not I the progression the is up really margin noticed quarters gross had XX down are that

but little they're the down obviously in And a good, a really, your time gross year-over-year, margins margin points basis XX was think I while. yes, down for to first year-over-year. operating continued be really your

wondering Just of and that what's driving influx kind will that back?

John Chapman

Yes.

impact. and there's think There's if were numbers that's opportunity those to get things we've a U.S. Europe those stimulus as reason little the can also proportion a lot think David, challenges the difference margin of of that's is of offshore, really about the in couple the the a that that rest if to to in at because look about board, because the Chuck I the we in QX like they don't you in say the nearshore of the I a watch, we the there, is biggest bit a it But year, main over and of Plus you in business, why, saw dip look the you number. U.S. yes, the where attrition, starts unwind gross spoke slightly guide always really we back the challenges and in the they billing got checks work terms the that get U.S., will it's had If and of looked think and the Europe and David. year-over-year, if margin. year across the there as U.S. I to I think and gets down we'll are look unemployment we remember, bigger that and the But our adjust the people as gross again. stimulus get absenteeism we in as of at and that

Operator

attending question-and-answer as that much the as you presentation. for call. today's both session concludes And Thank well the so

disconnect now your may You lines.

Charles Sykes	President, CEO & Executive Director
John Chapman	EVP & CFO
David Koning	Robert W. Baird & Co.
Vincent Colicchio	Barrington Research Associates
Joshua Vogel	Sidoti & Company

Sykes Enterprises (SYKE) 9 May 212021 Q1 Earnings call transcript