EPAM Systems Inc (EPAM) — Q1 2015 Earnings Call Transcript

Thank you, and good morning, everyone. By now, you should have received your copy of the earnings release for the company's first quarter 2015 results. If you have not, a copy is available on our website at epam.com. The speakers on today's call are Arkadiy Dobkin, CEO and President; and Anthony Conte, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Arkadiy?

Thank you, Lilya and good morning, everyone. Thanks for joining us today. I am pleased to report that while the first quarter showed some continuing challenges, primarily with currency volatility in several of our markets, it proved to be another strong quarter for EPAM and a solid start to the year. We closed with revenue of US$200 million, above consensus and at the top end of the guidance, marking a 25% growth over the prior year. It was down sequentially about 1% which is relatively common for the first quarter as we deal with the quarter ending in January and short billing months in February and sometimes slow starts to customer budget allocations. Margins also closed strongly, with a 16.7% adjusted operating margin, 30 basis points above last year. It's important to state that our revenue in Q1 2015 faced approximately a 9% headwind compared to Q1 2014, meaning our constant growth was about 34%. At the same time, the impact on adjusted operating margin showed that we remain relatively hedged with a total impact from constant currency being less than 1 million tailwind or less than 3% impact on adjusted income from operations. With that note, I will let Anthony dive deeper into the numbers and the currency impact explanation. My updates on the business will be brief today because we already described our approach and our differentiation points regarding EPAM's move into the digital engagement space, which we discussed in detail during our calls last year. Additionally, Q1 is still just the beginning of the year, and it's too early to evaluate any new trends in our activities compared to what we addressed during our previous call when we discussed 2014 results and our overall plans for 2015. So the first quarter for us was a continuation of the growth strategy we began several years back as part of the EPAM 2015 region. While we continue to face many of the same challenges we still see dividends from our decisions to focus on the system of engagement space and the investments made during the last period. Our focus remains on global competencies in co-engineering, advanced technology, big data, analytics, and other drivers of digital engagements. All of this is underpinned by a very focused approach to regional and local team building. We strongly believe that closely aligned hybrid capabilities are a key component in our ability to deliver quality solutions that drive digital transformation and allow our clients to stay competitive. That is why our major ongoing effort today is to push harder to the highest level of engagement between the strategic capabilities we are developing, both organically and non-organically, during the last several years. Most importantly, we are focusing on creating strong results in software engineering and advanced technological services. Understanding that EPAM's essence is about building hybrid teams composed of strategic experienced designers, architects, developers, and business consultants means that we are working diligently to create this team, not just generally, but specifically where they need to be present and connect better with our clients for certain programs. While we are expanding our presence for such teams in our traditional markets in North America and Europe, we're also focused on improving our capabilities in the APAC region, where we started to operate last year and have already seen strong traction. We want to expand into new locations, including the recent opening in Guadalajara, Mexico. Furthermore, we continue to invest in developing capabilities in our key focused industries. We believe that EPAM will ultimately succeed precisely because we understand the technology platforms that exist in the context of specific industry needs. Many industries are going through massive disruption and shifts due to technological changes. We are excited about how we're increasingly able to help bridge business with technology in life sciences and financial services companies. A few words about our new capabilities in digital strategy and service design: we believe that by combining these, we create a strong product development mindset that should become a key driver for us, not just in digital engagement but also in helping to address the full scope of transformation programs by assisting clients in finding new solutions to connect the digital and physical worlds and make the total customer experience more natural and transparent. We see more of these opportunities emerging in the market, and we are excited to play a role in these new engagements. As in the past quarter of 2014, we continue to educate the market about our progress in all directions. This includes being recognized as a strong performer in the B2B commerce space and in terms of capabilities. We have also seen increased recognition from analysts like Gartner and Everest in our traditional industry segments, and we are beginning to receive accolades in new areas such as life science and healthcare. With that, I will turn it over to Anthony to provide more detailed information and our guidance for 2015.

Thank you, Ark. Good morning everyone. I will spend a few minutes taking you through the first quarter results, then I'll talk more about our outlook for Q2 and the full year. As usual, you can find full details of our results in our press release and our quarterly factsheet located in the investor section of our website. As Ark mentioned, 2015 opened with another solid quarter of revenue just over $200 million, a growth of 24.7% compared to last year. Currency headwinds continued to compress our Q1 revenue by about 9%, translating to 33.7% growth in constant currency terms compared to Q1 2014. The final reported results came in above guidance and consensus by about 1%. Sequentially, we were down about 1% from Q4, which is not uncommon for the first quarter. However, in constant currency terms, we would have grown about 1.4%. The key currency mix of our revenue in Q1 has remained consistent with previous reports: 16% of our revenues were US dollar-based, 13% in Pound, 7% in Euros, 6% in Canadian and Swiss francs, while the Ruble dropped to constitute only 3%. North America was our largest segment, representing 52.3% of Q1 revenues, up 32.3% year-over-year. Europe grew 18.1% year-over-year, accounting for 39.7% of Q1 revenue. In constant currency, Europe would have grown 30% year-over-year. The CIS region continues to struggle, down 26.9% year-over-year and 36.4% sequentially, representing only 4.4% of revenue in Q1. The dynamics of the drop were influenced by both currency and volume, showing that in constant currency terms, CIS revenue would have been up 13% year-over-year but still down 28% sequentially. Our top 20 accounts generated 57.6% of revenue, growing 24%, while all other clients grew 27% year-over-year. The increased concentration of top 20 accounts is mainly driven by continued strength in the UBS account, which grew 54% year-over-year and 12% sequentially to represent 15.4% of revenue in Q1. Regarding our expenses, we completed the quarter with over 12,600 IT professionals, an increase of 29.8% compared to Q1 2014, with approximately 8% of this growth attributed to acquisitions, resulting in an organic headcount growth of about 22%. Currency generated benefits in the cost of revenue this quarter compared to the prior year, providing around a 12% benefit and 3% against the prior quarter. The allocation of our currencies across expenses remains consistent with prior guidance: roughly 63% U.S. dollar, 7% Ruble-based; 8% Hungarian forint; and 5% British pound, with the balance being insignificant. Utilization for the quarter was at 77.6%, essentially flat to Q4. GAAP income from operations increased 4.4% year-over-year to represent 11.4% of revenue for the quarter. GAAP IFL includes stock-based compensation expenses and certain acquisition-related costs that we exclude from our non-GAAP measures. Stock-based compensation expense for Q1 increased 185% over the prior year, with 50% of the total Q1 charge tied to acquisitions. Excluding acquisitions, stock compensation was up 92%, but total outstanding non-acquisition related equity grants stood at only 16%. The main driver behind the increase in stock compensation expense is the fact that our stock price surged over 90% this year. Our non-GAAP income from operations for the quarter increased 27% year-over-year to $33.4 million, representing 16.7% of revenue. For the quarter, we generated $0.61 of non-GAAP EPS, exceeding the top-end of our guidance and $0.29 of GAAP EPS based on approximately 51 million diluted outstanding shares. The GAAP EPS shortfall was primarily attributed to two main issues. First, non-operating foreign currency losses exceeded our estimate by about $4 million, leading to an approximate $0.08 negative impact on GAAP EPS. Many of our entities hold assets and liabilities in currencies different from the local currency; unrealized gains or losses are reflected in our P&L. The strength of the US dollar against EU currencies, especially the Euro at the end of Q1, caused this loss. The second issue impacting GAAP EPS stemmed from a significant rise in our share price during Q1, resulting in a larger-than-expected mark-to-market charge associated with stock issued in connection with acquisitions, leading to approximately a $0.02 impact on GAAP EPS. These two factors combined contributed to a $0.10 negative impact on GAAP EPS. Our balance sheet remains robust with approximately $222 million in cash, up 2 million from December 31. In Q1, operating activities generated about $6 million in cash, with unbilled revenues at $88 million as of March 31, and accounts receivable at $105 million, resulting in a DSO of approximately 50 days. Regarding our guidance, based on current conditions, we reafirm our expectations for the full year. We anticipate a year-over-year revenue growth of 21% to 23%. Non-GAAP net income growth for 2015 is projected to be in the 20% to 22% range, with an expected effective tax rate around 20%. For the second quarter of 2015, EPAM expects revenues between $213 million and $215 million, representing growth of 22% to 23% over Q2 2014. Second quarter 2015 non-GAAP diluted EPS is projected to be between $0.62 and $0.64 based on an estimated weighted average share count of 51.2 million. GAAP diluted EPS is expected to be in the range of $0.30 to $0.32. Now, I would like to turn the call back over to the operator and open up for Q&A.

Thank you. Good morning and good quarter. I guess my first question is trying to figure out how much incremental from the time you gave guidance to now, how much incremental FX headwind are you absorbing in your guidance for the full year?

Versus when we gave guidance, you're asking? I didn't hear the first part, I’m sorry.

Yeah versus when you spent.

It was about $2 million with additional headwind beyond what we gave guidance on Q1.

No, I meant for the full year.

For the full year we haven't changed our expectations on headwinds for the full year. The difference between when we gave guidance and today wasn't significant enough to shift, so we're still looking at about 6% headwinds for the full year. However, clearly, there is going to be more headwinds in Q1 and Q2 versus Q3 and Q4 because 2014 is when FX started to ramp up. We expect to see more impact earlier in the year and less in the back half, but our expectations remain around that 6% headwind.

Okay. And I guess the follow-on is really... I mean you guys are growing at a pretty hectic pace and in what seems like all the right areas. The headcount growth, if you could address what challenges you faced regarding hiring, training, and the capability to keep ramping that at a healthy pace.

Ashwin, this is a difficult question because that's the challenge you see in all the work. As you know, there's a shortage of talent, and I've answered this question many times. We are investing in multiple areas across the company to support all kinds of software engineering skills because while we're seeing an issue with vendors, most of our competitors also don't want to lose this advantage. I have shared this a couple of times, like what investments we make. We have a special division of the company focusing on this. We dramatically expanded our talent acquisition capabilities during the last couple of years. Two years ago, we brought on board a person from a large competitor who has experience managing large-scale hiring. Our talent acquisition is led by such a person, and he has put a lot of effort into making it scalable. Our relationships are very strong. We are expanding into different geographies, having opened additional offices in Central and Eastern Europe, and we now operate in regions like Mexico as well. One key challenge is integrating additional skills and advancing consultant capabilities, which have become significant as digital skills are in demand. If we can combine them effectively, this becomes a strong advantage. It is difficult to bring diverse groups together to work as a team, so this involves considerable effort on our part. It's a complex topic that could be elaborated upon in detail.

That's actually pretty good color. I mean, part of the reason to ask, as you know, is that as you grow, a 20% growth rate means more people compared to volume.

It's not, and you understand it's not just about more people; it's about what type of people and how they're working together. Obviously, we are changing the portfolio of our engagements as well. It becomes more solution-based or sometimes entails end-to-end implementations, requiring different types of people and processes. There is much training involved, not just for half-qualified people but also for processes that are involved.

Okay. My last quick question was: have you updated the onsite headcount percentage metric? Is there a new target you guys used to have it?

We don't have a specific target like we had a couple of years ago to achieve 10%. What I can tell you is that it's definitely going to be increasing over time. We will need to assess the situation before we can set new targets, but the trend is definitely to increase.

Great. Thank you and congratulations.

Thanks. Good morning, guys. Congrats on the numbers. Just wanted to talk a little bit more about the full-year outlook and make sure we understand kind of the moving parts as we go through the year and look at the year-over-year growth rates by quarter. Q1 showed you came out ahead of guidance, no matter how you slice it with currency, without currency, etc. You're maintaining the full-year guidance, so that would imply you're expecting some deceleration in year-over-year growth during the remainder of the year. Is some of that just lapping of acquisitions? Maybe you can remind us how much inorganic revenue contribution there was in Q1 and how much was embedded in the full-year guide of 21 to 23 in terms of acquisition contribution.

Well, we don’t really separate out our forecast into organic versus inorganic when we do our planning. We pretty much did the planning as one consolidated entity, and most of these acquisitions have actually been fully integrated at this point, so separating them is quite difficult. I can offer a view on actuals in Q1 and it’s a rough separation; if you look at the constant currency basis, our organic growth was around 24%, excluding the contribution from acquisitions that we received in Q1. That’s a very rough percentage because many of these accounts have been integrated. We've grown them post-acquisition from both EPAM's side and the acquisition side, so it's very hard to slice them at this point.

To give you context, when we say this is an organic number, we estimate by deducting revenue associated with accounts that existed. Companies we acquired may contribute revenue to existing accounts, but it's difficult to delineate. In some situations we see significant revenue increases on existing EPAM accounts because we bring in new capabilities from acquiring companies, and sometimes it's the opposite, making it difficult to calculate.

Okay. So the implied deceleration for the rest of the year, is that more of a conservative outlook as you've only been through a quarter, or is it more a function of anniversarying some of the acquisitions, understanding that it's hard to pull out or quantify those?

You also have to factor in what’s happening in the CIS region. We are seeing a combination of currency and volume impacts. We are forecasting a significant drop in the CIS business, so that is decelerating due to currency and the macroeconomic issues going on there. North America and Europe continue to grow in line with our expectations. What you see is the blend of the drop we're seeing in CIS, with the FX impact we expect will smooth out the overall growth rates throughout the year.

Okay. Understood. And maybe just a question more generally about the demand environment. I know you don’t typically provide a bookings metric per se, but can you qualitatively discuss what the environment has looked like through the first four months of the year in terms of your ability to compete for and win brand new business, either at existing clients or adding new logos?

From our perspective, it seems to be a healthy environment. While we're growing at around 25% to 30% over the last few years, even after our IPO, we still represent a relatively small share of the global market. In our niche of services that we provide, we haven't seen changes during this year, and I perceive pretty strong demand across the board. Our primary goal is to provide quality at this point.

Okay. And then just one last one on the supply side. I know you mentioned all the investments in hiring and recruiting. Do you have any statistics on the percent of job offers you make that are accepted? Just trying to gauge your success rate as you focus on recruiting the right number of people but also the right type.

We probably have all the statistics but we haven't provided them for this call, and I don’t have those numbers at the top of my head. However, I can tell you that EPAM has become a much more attractive company for talented people due to our recognitions and significant improvements compared to several years ago. I know this from numerous specific cases, but I don’t have the exact statistics at this moment.

Okay. Understood. Thank you for the color.

Hey, thanks. Good morning. Good quarter. A couple of follow-ups. First, did you provide a revenue breakdown by verticals during the call? I missed that.

No, I stopped quoting them. They come out on our factsheet which you can access, but I can read through them quickly if you'd like.

Sure. Let's start with financial services.

It was 28.3% of revenue.

And growth?

Growth was about 19.4% year-over-year.

Okay.

ISV made up 22.2% of revenue and growth was 27.7%. Information and media was 13.1% of revenue, and the growth was 24.7%. Consumer goods accounted for 21.8% of revenue with a 20% growth. Life sciences, which we began breaking out this quarter for the first time, made up 7.2% of revenue with almost 200% growth, primarily driven by the acquisition of GGI and NetSoft.

Okay, great. That's helpful.

Our revenue breakdown encompasses these verticals.

And then UBS you said was up 54% for the quarter, that accounted for 15% of revenues. It would be helpful if you could provide some color in terms of what's going on in this account, what you're doing more there, what sort of traction you're seeing. Should we expect that mix to continue to move higher than 15% in the upcoming quarters?

As you may remember, the acquisition we did in APAC was primarily driven by all UBS revenues when we acquired them, so the jump year-on-year is significantly due to that. If you look at UBS growth from last year, it grew almost 100% year-over-year from 2013 to 2014. It's basically just the continuation of that growth in Q1.

We're involved in a digital program with UBS which has grown since the beginning of last year. It's difficult to predict the pace of this account since we did specific projects rather than just incremental increases in headcount in other areas. We will see how this develops.

How large was Barclays during the quarter?

Barclays comprised about 5.7% of our revenue in the quarter.

Okay. And Arkadiy, you spoke about increased traction in APAC. Could you discuss that in terms of what we've observed year-to-date? I'm assuming it's coming via the acquisition you made last year.

As Anthony mentioned, the acquisition was mainly about the UBS account. We needed strong engineering capabilities in that region, so now that we have hubs there, we are starting to bring new clients in the region. Most of these international companies are seeking our services, and we have multiple opportunities with existing clients where we operate globally. We hope to replicate the UBS situation we have in North America or Western Europe.

Did you staff the 700 or so seats you have in China?

Excuse me, what?

With the acquisition, I remember you had about 700 seats of delivery out of China. Have you staffed these, or are you considering staffing them?

No, it’s not completely staffed now. In China specifically, we still have around 300 people working in that capacity.

Okay. And the attrition for the quarter, that's the last question.

Attrition for the quarter was right around 7%.

Remind us how does that compare to last quarter?

It's low. Typically, we’ve been around 10% to 11%, so this quarter came in quite low at around 7%.

Well impressive. Okay guys. Thank you.

Thank you. Good morning. This is Peter in for Steve. Thanks for taking my question. In regards to the headcount, this was the largest sequential gain you've had excluding acquisitions. Can you give us a sense of where the employee growth was? Was it more juniors versus lateral hires, and are you seeing any wage pressure in constant terms?

You're talking about headcount increase, right?

Correct.

It was about 7% sequential growth. There is nothing unique about that. We continue to hire in line with our needs and to staff the projects we have. Utilization remains relatively constant. This growth supported the overperformance in the quarter and was driven by the additional headcount to service the revenues.

If you look at our count on the floor, it’s a bit bulky; for example, end of last year, we had very high utilization over 80%. Now, for this quarter, we’re doing... we probably will start to utilize with a relatively high percentage in areas like Belarus and Ukraine, where we often spend 2-6 months on internal training. So it’s pretty standard, and you'll see that the utilization will be slightly higher.

And were there any wage changes regarding wage pressures?

That's a specific question given the currency volatility, so I have to look at this. But I'll give you...

Overall, we saw blended wage increases last year at about 4% to 5% in local currency. However, FX significantly helped us on this front, leading to almost zero wage inflation in US dollar terms. Thus, the FX benefits almost entirely negated the wage inflation we experienced, which is why you see a gross margin pickup of over a percentage.

That's helpful. And then relative to last year, do you think M&A will pick up in the next couple of quarters?

Peter, we will see.

Okay. And then finally, several larger vendors, including Century, Capgemini, and even Cognizant, have had strong quarters, particularly in quoting growth in digital, especially in North America. When you're competing for new deals, are you seeing more competition coming to the table? Have you seen any changes in your win rates for new business?

Again, based on our perspective, competition is increasing. However, I believe market and demand have been growing, perhaps faster than the capabilities for delivery. It’s a very interesting market, and many players are trying to build capabilities quickly, which is not simple, especially when it comes to delivering comprehensive solutions and integrating them with existing systems. So while competition is growing on the surface, quality delivery remains a key demand in the market.

Great, thanks for the commentary.

Thank you. Good morning. Arkadiy, you mentioned earlier about the challenges in terms of hiring people. I'm just wondering if you are exploring other delivery locations, whether in Asia, Latin America, or India, to diversify your delivery over time and perhaps mitigate some of the challenges you face in hiring.

First, I don’t recall when we didn’t have hiring challenges, probably when we were very small and nobody wanted to work in Belarus and Ukraine. Unfortunately, that changed. We have opened several new locations in Central Europe and are now operating in Bulgaria and expanding in Poland, Hungary, Belarus, Ukraine, and Russia because we have strong hubs now due to the acquisition of GGI in Russia. We also recently opened in Guadalajara, Mexico, and while it’s currently a greenfield operation with a couple of people, we already have some clients starting to work with us there. We have additional plans, but it's too early to share specifics. This has been part of our routine challenges, not unusual, for every quarter or year.

Great. Okay, that’s very helpful. And then I know in the past you’ve talked about most of your business historically being won through referrals, but over the last 18 months or so, you’ve been investing in the sales force. Can you give a sense of how that’s progressing in terms of impacting new logo wins and expanding relationships with existing customers?

I would say I don’t see any negatives from having referrals; in fact, this is a valuable business source reflecting our reputation and delivery quality. I expect it to remain a substantial portion of our business, which is typical for service operations, as we aim to maintain hundreds of clients rather than thousands. At the same time, we have improved our marketing and sales operations significantly during the last several quarters, which has led to new opportunities, along with increasing brand recognition from industry analysts, positioning us as strong performers or leaders in multiple categories. This helps us gain new opportunities, and with our new head of North American sales, we’re adjusting our sales personnel accordingly. A simple metric to illustrate our progress: we’ve recently identified at least 20 accounts that have surpassed the $1 million run rate, with several exceeding $3 million, and around 5 or 6 accounts potentially reaching $10 million.

Great, that’s great color. And then just two final questions from me, for Anthony. Anthony, I don’t know if you mentioned this earlier, but what was the pricing uptick for the quarter, and what do you expect to build in for fiscal '15 guidance? Also, utilization over the quarter, and what are you projecting for the rest of the year?

Pricing has remained in the 6% to 8% range, and that's what we've seen. A lot of that has been neutralized by FX, along with our wage inflation, but that’s the baseline we’re building on. Utilization for the quarter was at 77.6%, and our forecast is to maintain that throughout the year, aiming for a range of 76% to 77%. We anticipate a normal dip in Q3 due to the vacation cycle, but it should pick up again in Q4, averaging across the year.

Okay. Thank you. Great job on the quarter.

Thank you.

Thank you. I just have two very quick follow-ups. First, I think you mentioned that first quarter is typically a flat sequential quarter, which was obviously different from how you guided three months ago. I'm curious whether the guidance three months ago reflected exogenous factors like currency or unrest in Ukraine, or were there fundamental reasons for thinking you would be down sequentially more than you have historically?

I think when we did the forecasting, we always anticipated a slower Q1 ramp. We did see some things kick off a little earlier this year, similar to last year, which benefited the quarter. The overperformance was only $2 million, so it wasn't a significant strike; everything else is in line with expectations.

Okay. And then just secondly, regarding your largest customer, which is outpacing the growth of the rest of the business and is now 15% of revenue. Can you help us understand the growth in that account, its permanence, and how that relates to the overall risk of the business in terms of growth if that account decelerates over time?

The growth is partially due to our acquisition. We're also expanding in diverse areas and opening new sections in specific digital programs. I don’t see this becoming a risk at 15%, or possibly 20%, which I don't foresee. Further, among our top five or top 10 accounts, we are still relatively well balanced.

Can you help us understand how many components exist within that account, geographically or within divisions?

This is a very diverse account. We're working on three continents: in Europe, North America, and APAC. This is significant business spread across different business lines, with delivery happening from Hungary, Poland, Ukraine, Switzerland, the UK, China, Hong Kong, and Singapore, creating a very diverse operational footprint.

Okay. And Anthony, can you provide what we should model for the non-GAAP adjustments for the year concerning Barclays comp, intangibles amortization, etc.?

Sure. Stock comp is projected to come in Q2 around 11.8 million, dropping to 11.3 million and 11.4 million in Q3 and Q4, ending the year around 43.7 million. For amortization of intangibles, it's about 1.4 million per quarter going forward.

Great. Alright, guys. Thank you.

Thanks, guys. I just want to follow up first on the strong growth at UBS. Obviously, it’s continuing to pace well even organically. My question is whether UBS sets any parameters on how much they work with any given vendor, as they also engage with one of your large competitors. How much growth can that account sustain without worrying about risk management in that relationship?

I believe clients have some internal policy regarding how much business they can allocate to specific vendors, but we are far from that limit. Thus, we have room to grow in this partnership.

That's helpful. And then, on the other side, I am trying to figure out the growth rate of your top 10 clients. I believe we're calculating it around mid-teens, maybe 16% or 17% growth rate of the top 10 clients, excluding UBS. I think currency impacts this since one of them is likely from the Russian region. Can you provide some color on the organic constant currency growth of the other nine of your top 10?

UBS is certainly a large driver. For the other top accounts, most are primarily USD-based with some Canadian currency mixed in. From a constant currency perspective, the impact will not be dramatically different, but I don't have those numbers handy right now.

On the top 10 accounts, the impact is indeed coming significantly from one Canadian client whose dollar has dropped about 25%.

I just had one follow-up. You’ve received quite a bit of media around the SEC contract. It seems like another area of growth potential for you guys. Can you comment on that and outline where the opportunity arises?

We secured the contract with the Securities Exchange Commission; it was an honor to be selected as this sector demands many implementations. We might have opportunities now to position ourselves to address early implementations and regulatory compliance work. We have started engagements with two major banks that are also growing significantly.

That sounds promising. Thank you.

Hi, most of my questions have been answered, but Arkadiy, in your opening remarks, you mentioned that budgets can sometimes be tentative in the first quarter, whereas you’ve seen more predictability this year. I am wondering if you can identify specific areas where budgets might have a better cadence, either by industry or service line.

I don’t have any specific details to share, as it’s fairly standard across most accounts and industries.

In terms of your digital practice, are you primarily selling to the Chief Marketing Officers now, as opposed to Chief Technology Officers or the financial office?

This shift has been noted by many; while we still sell significantly to IT professionals, we see increasing interactions with business leaders and digital influencers on the client side.

I think at your Analyst Day, you indicated that you had a couple of significant accounts presented at that time. Can you shed any updates regarding their growth, particularly Canadian Tire and Google?

Both Canadian Tire and Google remain growing accounts. It’s a bit more challenging due to the significant drop in the Canadian dollar. Nonetheless, we continue to see growth in our top 10 accounts and several others growing rapidly in digital.

As always, thank you for listening to us and asking questions. We hope to continue the conversation in three months. Thank you.