George Schindler: It’s a good question. I kind of highlighted that. The finding historically has led us to believe that they’re bigger deals. So business, typically, they do shorter ROI deals. IT tends to do big modernization, but it’s more focused on technology. And as you said, not always 100% aligned. But when they get aligned, it drives bigger ROI, quite frankly, less price-sensitive, more outcome-focused deals. But it’s at the highest levels. So it’s transformative. It affects everybody. We’ve been — I’ve personally been championing some of these through the process, and there’s a lot of different stakeholders within the organization to get aligned. So even though business and IT agree, you still have to get the individuals and the sign-off because it’s going to hit more departments across the organization.
So the more complex deals, just by their nature, take longer. And so that’s what we’re seeing. And again, this is the fresh information. So it’s more about the go forward than where we’ve been.
Daniel Chan: Thanks, George.
George Schindler: Yep.
Operator: Your next question comes from Paul Treiber with RBC Capital Markets. Your line is now open.
Paul Treiber: Good morning.
George Schindler: Hi, Paul.
Paul Treiber: Good morning, George. Just in regards to AI and GenAI, it does seem like everyone is evaluating it at this point. Do you believe that there may be a pause related to other initiatives, just that companies are trying to evaluate AI relative to those other initiatives?
George Schindler: It’s a great question. I’m not sure if that’s exactly what I see. What I do see is given kind of where we’ve been economically, everybody has been a little more focused on the cost cutting and saving. And so I think most organizations are taking advantage of that current backdrop to do that investigative work. And so I don’t think they’re necessarily related one for one. But I do agree with you that evaluation will drive. We see that as a catalyst for driving the next wave of digital spending. And when I say digital spending, it’s not just discrete AI spending, it’s the next wave of digitization. Most of the CEOs that I speak with, COOs I speak with and heads of lines of business, they all talk about, they think of this as just the next iteration of what technology can bring to them.
And so they’re viewing it pretty — in a pretty holistic way, not just as the discrete services. I think that’s also why you don’t see just as big spending indiscriminately on the AI. I think they’re really thinking about that as the next wave of where they’re going with digital.
Paul Treiber: That’s helpful. Still regarding AI, you called out a number of internal use cases, where do you see or what magnitude of potential efficiencies do you see AI driving over time?
George Schindler: Yeah. Well, definitely, it will drive some over time. Right now, it’s really still discrete. So, holistically, you’re not seeing a lot yet dropping to the bottom line. But the reason you go through this work is to actually get to that point. So that’s why I highlighted some of those areas. Right now, it’s less about cost and just more about effectiveness and efficiency. So if you think about the bid generation element I spoke to. It’s really about getting better quality of bids out there. So leveraging all of our information and making that available so that the individuals can spend their time really crafting that and customizing that for the individual client opportunity. So, it’s more about that than it is right now about cost savings.
I think over time, you’re going to see some of that. And by the way, this is what we see a lot of our clients looking at. They’re really now looking at this as more about the business impact to this not just from a cost savings, but from an opportunity perspective of driving the business forward. So that’s what we see right now.
Paul Treiber: And then one last one for me, just in terms of the M&A environment, there’s news around several companies for sale. And it spreads across the quality and the valuation spectrum what’s your thought in terms of leaning one way or the other in terms of or deviating from your historical to lean more either towards quality or more towards lower valuations?
George Schindler: Yeah. Well, at the end of the day, we’re resolute in making sure that we’re going to drive the EPS accretion and do that in a definitive way throughout the process. So I’ve mentioned this before, it’s why areas like the gross margins the rate equation versus the salary equation become very important. You can do a lot on the SG&A side. You can’t do as much on the gross margin side. So and that then, that runs the gamut then, right? Because you can have companies that are stronger and companies that aren’t that are in that manner. But we do see and assess all the market deals on an ongoing basis. And we’ll act when there’s something that makes sense for us and our shareholders.
Paul Treiber: Thanks for taking my questions.
Operator: Your next question comes from Robert Young with Canaccord Genuity. Your line is now open.
Robert Young: Good morning. Just a couple of questions around utilization, the head count dropped year-over-year and quarter-over-quarter. Just trying to understand the dynamic is there a shift towards low cost where you’re hiring? Or is it — are you just — is there more attrition or hiring is not offsetting the attrition? And then, how is that dynamic impacting your utilization? I think you said utilization had improved.
George Schindler: Yeah. Utilization is actually up. A big part of that drop is us getting ahead of it on the cost optimization. As you’re probably aware two-thirds of that cost optimization was focused on SG&A. That’s why you can see that, even though you see the drop in the people you don’t see a drop in the revenue at least we’re staying consistent with the revenue. And then, I think in general, we’re not as linear because of some of that IP. And so you see the IP growing faster and not being dependent necessarily on the people. Having said that, yes, we are seeing some of that shift to global delivery. Interestingly enough, that actually to get the same revenue you actually have a higher head count when you’re using global delivery. So that’s not really what’s going on at the current point in time. But utilization is up and that’s what you see ultimately in the margin, despite the deceleration on the revenue.
Robert Young: Is it fair to say that, there’s more benefit to come from utilization just as some of these you don’t have as many new employees coming in maybe maturing the consultants you have today?
George Schindler: I don’t necessarily see that. I think we’ve got a great team. We continue to train and re-skill our talent. We’re doing a lot around the AI reskilling talent. We’re bringing new talent in all the time, including through some of the outsourcing deals. Over 100 new employees joined us through several outsourcing agreements this quarter. And attrition is under control and is down on a year-over-year basis. And it’s right in the range that we would expect. So other than cost optimization that’s, I think we’re managing it very well.
