EPAM Systems Inc (EPAM) — Q3 2015 Earnings Call Transcript

Thank you. Good morning, everyone. By now, you should have received your copy of the earnings release for the company’s third quarter 2015 results. If you have not, a copy is available in the Investor Relations section on our website at epam.com. The speakers for 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. Good morning, everyone and thanks for joining us today to share with you our third quarter results. The large portion of our revenue at EPAM is generated outside of the United States and with corresponding significant currency headwinds all around the globe, it was not an easy quarter for us to navigate. At the same time, during this period we continued to outperform the market by posting significant and consistent growth. While our Q3 revenue of $236 million represents a 22% topline and 8.4% sequential growth, our growth in constant currency was 31% year-over-year and 11% sequentially. Overall despite the recent acceleration of currency headwinds which affected $32.7 million of our Q3 revenue just since our last earnings call, and we’ll have an estimated $3 million impact on Q4, we are confident that our 2015 performance will still be in line with our guidance. Anthony will provide a more detailed update on our financial performance in the quarter as well as full 2015 guidance. From a strategy perspective, we continue to follow the plans that we laid out in previous quarters, focusing largely on expanding EPAM's capabilities in our effort to help clients as they transition into becoming digital businesses. As we incorporate a much more consultative approach into our mix of services, we expect that our top clients will continue to grow significantly as well as drive engagements further up the value chain. From a vertical perspective, we are pleased with the growth in our newer focus areas as well as continuing strength from our established business in financial services, business information and media, and travel and consumer industries. Our largest vertical, banking and financial services, grew over 20% in constant currency, and we expect our digital business there, particularly in wealth management, to see additional opportunities that will diversify our presence in that segment over the next several quarters. Accelerating growth in our travel and consumer and business information and media is also being driven by an increase in digital platform work. We expect this to continue, especially as the benefits of the new skills we developed organically and through recent acquisitions merge with our current capabilities and are realized by our clients. We see significant potential upticks as a result of both existing accounts as well as the acceleration of new logo acquisitions. We also continue to see growth from our independent software vendor segment at 20% in constant currency. However, there is a challenge now in drawing the line between traditional segments and many of our strong technology-driven clients, focusing on generating revenue based on business services and solutions versus selling software licenses or subscriptions directly. We will continue to evaluate how we categorize customer growth in our verticals to address this blurring line. One of the most interesting industry stories is the significant growth we have seen within our Life Science and Healthcare business, with our guiding growth rate of over 46% year-over-year. The work we are doing in this vertical highlights a key shift towards consumerism where EPAM is building integrated experiences in transactional platforms by bringing together critically important expertise we accumulated in working with more traditionally consumer oriented industries and our strong subject matter knowledge base. Today, for example, we are involved in truly groundbreaking innovation work with companies at the forefront of healthcare. We’ve helped them to translate the latest insights in innovations and genomics and digital information and virtual reality technologies into new business models for delivering healthcare and precision medicine targeted at patients’ unique genetic and phenotypic profiles. From a horizontal practice view, we continue our integration efforts of recent acquisitions and we are increasing our investments into our key capabilities in digital strategy, user experience, data analytics, and service design methodologies. We see a significant increase in customer traction in what we call our end-to-end engagement portfolio. Our continued investment in merging our traditional software and engineering services with new imaging capabilities is one of our primary focuses. In this past quarter, we added 10 significant new accounts, of which seven represent these new digital and analytics engagement models, and we initiated several new digital initiatives across our existing clients. We believe this strength will accelerate into the upcoming quarters. From a deliberation standpoint, our investment in key locations and in turn, our key iteration platform that allows us to identify and distill our talent pool are enabling us to do a better job in staffing new hybrid teams of consultants, designers, architects, and engineers. In Q3, our global headcount increased to 14,000 employees. We continue to expand our footprint across all our main delivery geographies, including North America, Western as well as Central and Eastern Europe, and now in Asia and Latin America. While competition for technology talent is very strong globally and poses a significant challenge for all players, our ability to identify and track qualitative and quantitative methods will allow us to hire and retain the best talent in key global locations. As a result of these efforts, we continue to build on our reputation as a leader in product and platform development sales. With that, I will turn to Anthony to share more details on our performance and guidance.

Thank you, Ark, and good morning everyone. I will spend a few minutes taking you through the third quarter results; then I will talk more about our outlook for the full year. As usual, you can find the full details of our results in our press release and on the quarterly fact sheet located in the Investors section of our website. Q3 was another solid quarter of revenue, closing at $236 million, which is a 22.5% increase over last year and an 8.4% increase over the prior quarter. As Ark mentioned, currency remains a big piece of our story, as headwinds have continued compressing our Q3 revenue by about 8%. In constant currency terms, we would have grown 30.8% over Q3 2014 and 10.8% sequentially. North America remains our largest geography, representing 52.9% of our Q3 revenues, up 27.7% year-over-year and 31.3% in constant currency. The continued weakening of the Canadian dollar is a primary driver of the nearly 4% currency headwind. Europe was up 26.3% year-over-year, representing 38.7% of Q3 revenue. In constant currency terms, EU revenues would have been up 34.3% year-over-year, reflecting the impact of euro and sterling volatility over the past year. For APAC, this is the first full quarter of 2015 that is comparable to the prior year, given the Q2 2014 acquisition of Jointech. As a result, we saw 19.7% growth year-over-year and 23.1% in constant currency. We continue to see acceptance of our APAC offering as more non-banking and financial services customers move into that region. CIS continues to struggle and is down 27.7% year-over-year, accounting for only 4.6% of revenue in Q3. In constant currency terms, the region would have seen 15.1% growth, clearly highlighting the drastic drop in the rouble over the past year. Even the 15% constant currency growth rate is well below our other regions, reflecting the pressures on the business from the macroeconomic situation in CIS. In terms of our industry verticals, growth in banking and financial services this quarter remained consistent with Q2, showing a 10.7% year-over-year growth and 4.6% sequentially. The significant slowdown in the Russian banking industry, compounded by the drop in the rouble, is still offsetting the healthy growth in key banking and financial services accounts in other regions. In constant currency, banking and financial services grew 20% year-over-year, and if you exclude CIS, it would have grown 23%. Travel and consumer turned in another strong quarter, growing 36.9% year-over-year and 13.7% sequentially. In constant currency terms, we saw 51.6% year-over-year growth, with about 3% of this coming from navigation arts, who brought some strong logos into this vertical when we acquired them. Life sciences and healthcare grew 46.6% year-over-year, with Q3 being the first fully comparable quarter since we acquired GDA in June of 2014. Sequentially, it grew 27.1% and now represents 8.4% of Q3 revenue. Currency had a minor impact here, shifting the year-over-year growth rate to 49%. Business information and media had a solid quarter with 34.2% year-over-year growth and 9.9% sequentially. Currency in this vertical is immaterial, as most customers are U.S. dollar-denominated. The ISV vertical saw a drop in the year-over-year growth rate, reporting 15.9% growth in the quarter and about 3% sequentially. Currency headwinds would add about 4% year-over-year, and a key factor impacting this vertical is the work that was concluded due to the acquisition by Cognizant. Excluding this account from all periods, year-over-year growth for the balance of the vertical would have been 24.4%. Our other vertical, which is a collection of customers from various industries, grew 4% year-over-year and is down 3% sequentially. In our customer concentration numbers, we are seeing some positive trends; our top 20 accounts grew 19.2% year-over-year and 22.7% in constant currency. They now represent 53.9% of our Q3 revenue, which is down about 2% from last quarter. Our other clients outside of our top 20 grew 26.8% year-over-year and 40.3% in constant currency. Turning to our expenses, we completed the quarter with over 14,000 IT professionals, an increase of about 22% compared to Q3 of 2014 and an 18% increase year-to-date. Currency generated some benefits to the cost of revenue in the quarter when compared to the prior year, with about a 6% constant currency benefit versus Q3 2014, and the allocation of our currencies across our expense base remains fairly consistent. Utilization for the quarter was at 75%, slightly down from Q2 due to the heavy July and August vacation season. GAAP income from operations increased 27.2% year-over-year, representing 11.8% of revenue for the quarter. GAAP IFO includes stock-based compensation expenses and certain acquisition-related costs that we exclude from our non-GAAP measures. Stock-based compensation expense for the third quarter increased 61% over the prior year, driven mainly by an over 80% increase in our average closing stock price, with 38% of the total Q3 charge and 43% of this increase related to acquisitions. Our non-GAAP income from operations for the quarter, after all adjustments, increased 30.5% over the prior year to $41.5 million, representing 17.6% of revenue. Our effective tax rate for the quarter came in at 20.2%, and for the quarter, we generated $0.70 of non-GAAP EPS, $0.02 above the top end of our guidance, and $0.44 of GAAP EPS based on approximately 52 million diluted shares outstanding. Our balance sheet remained strong; we finished the quarter with approximately $214 million in cash plus $30 million in time deposit accounts. During the third quarter, operating activities generated approximately $55.5 million in cash. Unbilled revenues were at $105 million as of September 30th. Accounts receivable totaled $126 million and DSO ended the quarter at approximately 51 days. With that, I'll now turn to our guidance. Due to the strong volatility in the currency markets, which we believe will continue into 2016, we are adjusting how we provide guidance. For the full year, we expect to achieve revenue growth of at least 30% in constant currency, and at least $900 million in GAAP reported revenue. Non-GAAP net income growth for 2015 is expected to be at least 25% year-over-year, with an effective tax rate of approximately 20%. Full-year non-GAAP diluted EPS is expected to be at least $2.65 per share based on the weighted average share count of approximately 52 million diluted shares outstanding. GAAP diluted EPS is expected to be at least $1.55 per share. In February, we will provide you with full-year guidance for 2016 and then provide updates quarterly. With that, I'll now like to turn the call back over to the operator and open up for Q&A.

Thank you. Hi, Ark, hi, Anthony. So, if I understand this correctly, I'm kind of laying out three factors here. One is currency in CIS and Canada. The second is CIS revenue weakness, which have been there for a while. And the third is Trizetto moving out, but that sort of stuff is kind of normal ebb and flow of contracts that can happen. Is that sort of the sum total of all the impact or am I missing something with regards to the miss and I don't miss everyone according to guide down, because the lower end of the range seems to move up a little bit. Is that what the impacts are?

Yes. All of these factors clearly play through all, but I don't think it's exactly a right analysis. I think on FX, definitely – FX definitely plays a major role. As we mentioned it was a $2.7 million impact. And clearly, specifically Canadian dollars were the biggest surprise for us. This happened practically after our last announcements and we didn't expect it at this level, so Canadian dollars led to a higher FX loss versus previous sequential quarter by $1.5 million. So, in general again, $2.7 million came from FX. Another $1.3 million to $1.5 million against what we were expecting our guidance came from reviewing and making some decisions about how to proceed with the capabilities we required during the last several quarters. As we always mentioned, our acquisitions mostly focus on additional capabilities which would utilize the growth in different EPAM units. In this quarter, we had to make calls where we had to decide about the advantages of longer-term versus short-term revenue, and how to utilize capabilities we acquired for potentially larger deals in the future versus smaller, short-term available positions. So, that was actually another $1.3 million to $1.5 million. Trizetto was expected, mostly expected. We thought it might be little bit longer, but it was finished, but we didn't count on this much. And as you mentioned shares also more or less with what you understand how it’s what’s happening there?

Okay. So...

If you take out for example $2.7 million then this $1.3 million which is on kind of short-term revenue which we decided to give up, its a couple of percent of mix.

Right, right. No. And that kind of gets us to where I think consensus was. As you look at that process of calling contracts and making that long-term versus short-term decision, is that process behind us? I know that as you grow it can come up again, but for now is it behind us and what is the forward-looking impact?

I think it's still – yes, I understand. So I think it's still could be partially drew in Q4.

Okay.

But after this, we should start realizing the benefits of what we're doing. And we'll see.

But that's built into our guidance.

Right. That's right.

And when you talk about the benefits, the forward benefit of walking away from shorter term revenues; is that mainly a resourcing type issue where you move resources towards getting longer work?

Yes. That's the right word. Yes. This is like, again, we're talking about here resource constraints, but we clearly were optimizing the long-term opportunities with high quality capabilities otherwise it would short-term billable practice.

Okay. And my last question. Does any of this change your forward view with regards to the nature of investments you're making as you go through that process whether on an organic or inorganic basis?

No. We don't think that it's impacting us. So, again, we said it before our approach to M&As and we were talking about multiple purposes, multiple growth of this including capabilities, specific expertise, and probably some additional delivery locations, but it’s all still in place right now. So, we're not changing this approach and I don't think we’re thinking that anything changed in the longer term perspective as well.

Okay, great. Thank you.

Thanks, guys. Good morning. So, if the current spot rate holds through all of next year what would be the OpEx headwinds on the top line in 2016?

I'm sorry, headwinds on 2016.

If current spot rates stay in effect through all of next year what would be the FX headwind on revenue in 2016?

I mean, we haven't really released our forecast for 2016, so I don't know that I could really compute for you what the headwinds would be. I mean, we'll factor that into our guidance when we give it. So, you're saying as compared to this year I guess is what you're saying?

Yes. Yes, just year-over-year, in other words, if we stay at these types of levels?

Honestly, I haven't done that calculation to really determine that.

But I think it might be held for a little bit different timeframe, I mean, answer to a little bit different question. So, for example if I estimate how much revenue will be lost based on the FX situation from the time when we gave guidance for the year, then this number would be $17 million right now.

Okay. That's helpful.

And another number which might help everybody as well, if we compared last year’s FX versus last year, then this number would be $51 million.

Okay. Understood. And so, just shifting gears to the competitive environment, can you give us a sense these days, how often are you competing versus the multinationals, you know, Accenture, Capgemini etc. versus the big Indian players versus some of the other regional players in the CIS area; I mean, has that made changes at all?

This is already a pretty diverse competitive landscape for us. We are seeing all of those companies. We are seeing all of these companies on our competition list. And it might be a little bit different between different verticals, but it is pretty much everybody from those you mentioned.

Okay. And can you give us a sense today of how penetrated the Fortune 1000 by EPAM, in other words, what percentage of the Fortune 1000 roughly are your clients at EPAM today?

I don't have. This one is not on top of my head, so probably we can't give this answer to you separately. So…

Okay. All right. Thank you, guys.

Hey, thanks guys. Look, I just to start off, I know it’s a little early, but regarding the outlook in terms of what you're seeing from your clients right now, any indications into 2016 in terms of trends and budgets and how clients are feeling right now? It would be helpful, especially given some of the settlement we're seeing out of some of your areas in Russia and another areas around there.

I probably can repeat what I am repeating during the quarters, quarter after quarter. So I think from our perspective, we’re seeing pretty healthy demand in North America and Western Europe. Clearly, Russia or CIS is a different story. So from this perspective, we will see in the next year in similar terms like previous years. So that's our long-term answer; we're looking forward to grow at least 20%.

Okay. What about with some of your top clients? I mean, I guess, it's been a pretty big driver for you seeing is specifically UBS. I'm carrying a fair amount of growth for you guys over the past years. I mean, I think it was about 22% or low 20% this quarter as what we calculate, a little bit of deceleration although it's obviously offered a very high growth rate before and maybe FX impacted you that as well. Maybe just give us a little more color on the top few clients when we get there?

As far as UBS growth, the one thing I want to point out, remember that we acquired Jointech in Q2 of last year. So that brought us a significant uptick in UBS revenue since they were primarily servicing UBS. So the growth rate in UBS has to be adjusted for the fact that this is the first fully comparable quarter for 2015. So it was about 21% growth rate for UBS this quarter. Constant currency would be about 25% for UBS. I think the growth there remains solid and strong. The growth rate is obviously down from where it was in Q1 and Q2 because of the Jointech acquisition but it’s growing in line with where we expected to be and in line with the rest of the company.

Okay. Anything for the other Top 5 guys that you can just comment on any risk or opportunities that we should be aware of given how there are some pretty large clients out there?

Well, we spoke about UBS. You mean, from the top 10 or 20 or…

Yes. You can go as far as Top 10 perhaps. I mean, I was really thinking just given the concentration of the Top 5 or so, but yes, I mean, Top 10 is great?

So, I can tell you that Top 5 in general grew about 20%. And I think that's like Top 10 grow in 25%. So this is all in line with general growth.

Going through the list, there are no specific big stories in any of them; the stories there are pretty consistent with what we've always talked about, continuing to gain traction and penetrate deeper into those clients.

Okay. Just last question for you guys.

There is no special story.

I appreciate that. Just last question again on the margin side, again, you've maintained margins in a certain band and you've done a pretty good job with that and reinvesting in the business. Just give us a little comfort level on the cushion you have to continue to reinvest and what's needed given just how competitive digital has become across your top few names out there; really to pull ahead of the pack around digital, and you guys have done a stellar job given the percentage your mix is digital. But again, it’s always a challenge to know what you invested in and the margin is a story for you guys to be able to maintain. So, are you still comfortable with that capability going forward, whether it’s a next quarter or even year, given just how competitive digital is becoming?

Yes. We are comfortable, and we clearly plan to continue to compete in this space very seriously. We believe that we have a very interesting distinction against most our players in this space, because we're really trying to invest in integration between the digital part of this and really strong engineering skills. We do think that this will become a competitive advantage for us and differentiator. So, from this point of view, we're not trying to replicate some other companies’ approach into this overlap of digital agencies all around the globe. We're trying to bring this capability and actually deeply integrate it with our delivery skills.

Okay. Thanks, guys.

Hi. This is Elizabeth Chwalk for Mayank. Thank you for taking my questions. Are there been any changes in hiring or hiring plans in your key delivery locations?

As I mentioned today, we are hiring people across all locations. Mostly during the last 18 months, we expanded in Central Eastern Europe like we opened in Bulgaria, and we're growing in Poland. We opened a center in the Czech Republic, and we mentioned that we're building operations in Mexico, bringing existing clients with us. So we're looking at this from a global perspective on how to serve clients from different locations and potentially 24x7.

Okay. Thank you. And can you give us any color on how attrition is trending and how wage inflation or deflation looks like given the recent currency issues?

Attrition remains pretty low for us. For the quarter, we saw about 8.2% voluntary attrition, much lower than our historical average which is usually in the low teens. Again, as we've talked about in past quarters, this kind of driven by the situation in the CIS region allowing us to keep attrition down. We don’t know if this will be a long-term permanent effect or not at this stage, but we're taking it for this year. As far as wage inflation goes, we did a small mid-year promotion cycle. So, we saw about 2.5%, 2.6% wage inflation coming from that mid-year cycle. Otherwise for the year, it remains very low, close to zero because of the benefits of FX.

Okay. Thank you.

Good morning. Thanks for taking my questions. Ark, I look back, I think about two years ago, you had Thomson Reuters rolling off and at that time the company was intentionally lowering utilization, investing in the pipeline of work that you saw coming in. Now today, with Trizetto rolling off, you talked about some new accounts coming into the pipeline with important key digital initiatives and utilizations now in the mid-70s. Can we draw parallels between these two periods? Am I thinking about this correctly that you are saving your power there for longer-term potential here?

Thomson Reuters was the largest client versus Trizetto, which was one of the Top 10. I don't see this as a direct comparison. We're also talking about Trizetto because it’s a very kind of unique situation when Cognizant acquired them, but during the past three years, we have similar situations, where we've lost large clients from the top due to various reasons. So, I wouldn't draw strong parallels. At the same time, yes, Trizetto was a big enough client, and we clearly had opportunities to reinvest the talent in different directions. So, no, I don't think they are directly comparable. By the way, I would mention that since three years ago Thomson Reuters has now again become one of our Top 5 clients.

Okay. Thank you.

And probably this is now compared to three years ago.

Okay. And then, I think we've heard a little bit during the quarter about potentially some areas that you're looking into in Blockchain. Is this a key capability that you're looking to build upon and do you see this as a big opportunity for the company?

I don't think we've been talking about Blockchain on our calls, but in general yes, it could be interesting opportunities including we're looking into this, which is relatively new but very important for financial markets right now.

Great. And then, Anthony, can you give us a breakdown of the difference between GAAP and non-GAAP for the full year, I guess, giving that full year?

Sure. For the quarter, stock comp is obviously the biggest component, it was just under $12 million, and for the full year it will be about $45 million. M&A activity will be about $500,000 for the year, while for the quarter, it was about $427,000. Amortization and purchase intangibles was $1.3 million for the quarter and will be about $5 million for the year. FX impact was about $150,000 negative for the quarter and will be about $6 million positive for the year, and I think that's it.

Great. And then the stock-based comp that was tied to M&A, is that size of that, is that recurring, do you believe that level or was that more one-time in nature?

No, it's not one-time. It will continue probably a little bit into next year about halfway as we start to fall off, so next year we'll start to see some fall off in lets say 2012 acquisition, some amortization, and it will start to fall off from there as acquisition ages.

Right. Thanks for taking my question.

Hi, Ark, hi, Anthony. I think that we have talked about some of your large accounts clearly showing a surge in all of these accounts, but what are some of the inflection points at a client that will help the account grow from like a $4 or $5 million account to $20 million? And what are you doing from a process perspective to enable more of the accounts to get to this $20 million plus mark?

We don't have kind of these accounts at this $20 million mark here. I think it's still pretty individual improvisation happening. Yes, we have probably around six or seven accounts right now. What we're trying to do is exactly what we’ve been doing over the last three years, bringing strong strategic capabilities to the clients and being able to start more consultative engagements, people who can handle these types of conversations and provide valuable insight. We’re building a strong reputation as a delivery partner. After each client comes to us and starts asking for more strategic capabilities and advice, we have been really lacking in talent like three, four years ago. That's what we are doing and will continue to do. Increasing our large clients is showing that the strategy works and we plan to continue this approach.

Great. Helpful. And just very quick on Russia, as expected, the business continues to get smaller, so what's the thinking? What's keeping the Russia business ongoing? Is that at some point it's a little too expensive to maintain that business or is the thinking behind keeping the Russia business ongoing so the environment gets more conducive to growth; you’re there to take advantage of the opportunity? Just trying to get a clearer sense of your long-term position in Russia.

Basically, if I rephrase, are you asking why we still stay in the market and why we are not exiting the market completely?

Yes.

I think it would be a bit premature for us to do something like this. Russia and Former Soviet Union countries have a quarter million population which again, yes, we know that it's decreased, but there are still major businesses there. There is still ongoing international business that needs to be served there. For us, it would be somewhat silly to exit the market where we could still conduct business as we have 2,000 delivery capacity in the market. So, we'll be staying there no matter what from a delivery perspective. We just need to be more careful about what we're doing, how we're doing it and what type of clients to serve. That's already happening during the last three years, as even before ruble crash you probably saw that our share in that market was decreasing.

Yes. That's very helpful. Thank you very much and good luck for the rest of the year.

Thank you.

Yes. Good morning, guys. Quick question for you on North America, it seems that sequential revenue grew roughly $15 million which is arguably one of the largest deltas we've seen in a region for the last several quarters. Could you be more specific about what drove that in terms of accounts and also your verticals?

You said sequential you saw a growth that was progressing.

From Q2 to Q3, right, from Q2 to Q3.

Right. So on a reported basis, North America is up about $14 million. I don't have any specific accounts to point to for that growth. North America remains very strong and is our best-performing sector. The growth is widespread across various verticals. I don't have a specific story that differs from what I've mentioned before. Travel and consumer sectors were particularly significant for us this quarter globally, and that's also the case in North America. We observed growth in several other verticals, but again, I don't have a specific story to highlight for that.

And as far as going forward for the fourth quarter, should we expect it to be fairly similar or do you expect it to be more in line with Q3?

Yes, Alex, it was actually coupled kind of fixed cost deliverables which we did in North America which probably was a little bit extra. So I think life science contributed well in this segment. Probably next quarters may not be as strong as this one, but in general, it's going to consistently grow like it did in the past.

Sounds good. Thank you.

Hi, I wanted to follow up on a question. When you transition to providing at least a lower bound instead of a range, there are both positives and negatives. For Q4, I want to understand your assumptions regarding budget flush, foreign exchange, and demand trends. It seems that foreign exchange will remain stable and demand trends are generally good, except for the call you mentioned, which leaves mainly the budget flush. What are your assumptions for Q4?

I think everybody has too memory, because this spike in Q4 was happening like more like in 2013 I think. So it was smaller last year and we don’t expect much this year. It would probably would be kind of regular quarterly increase as anybody else. Because like in 2016 it was probably imparted by the CIS market where it had more fixed cost deals closing in Q4. Last year it was already different and this year we don’t expect it.

Okay, that…

In response to your question about foreign exchange expectations, our forecast incorporates some of the forward rates for the quarter, which informs our expectations. The accuracy of this will ultimately depend on the reliability of the forward forecasts.

Super. That’s good to know, great. Thank you guys.

Hi, this is Maggie Nolan in for Anil Doradla. I had a question on I know you spoke some about your talent strategy, but I’m wondering if the focus in the long term is going to be more on growing this existing talent and finding new opportunities within those accounts or if you are looking more towards really growing the client base overall. Hoping you can shed a little more color on that?

Yes, probably my answer would be very simple that we are trying to do both, but we have really strong opportunities in our existing base, and we will continue to grow this and find new lines of revenue there, especially taking into account that we are expanding our capabilities and venturing into new areas. I think existing accounts present big potential for us; we have a significant number of large clients which could grow in double digits with us. But we also have a very strong potential right now in the new logos.

Great. That helps thanks. Because we have heard some of your peers mention trying to zone in on some of those existing accounts a little bit more. So, I’m wondering, is there a target for the number of new opportunities that you want to bring on, or do you just intend to continue to grow headcounts just for that growth?

What we do believe is that we need to have a pretty diversified client base and not have to concentrate it. So I think what we have today and with our potential growth of around 20% plus, we will try to maintain similar client concentration.

Okay, great. Thanks for taking my question.

Again, thank you everyone for joining us today, and I hope we have addressed concerns that we understand were valid. We hope to see you in three months again. Thank you. Bye.