Ramsey El-Assal: Thank you. And a quick follow-up. A lot of your peers who are also calling out big demand headwinds right now, they view these headwinds in terms of sort of discretionary headwinds versus non-discretionary spend. Do you have a view of your own portfolio in that context? What percentage of your portfolio is sort of discretionary?
Jason Peterson: Yes, I guess it all depends on how you define that. We’ve never – as I think we all know, we had a large portfolio of multi-year maintenance or multi-year BPO or that type of thing. So a lot of our work generally is kind of newer build, digital. And as we talked about, the modernization programs, which we still believe, are generally intact but are slow to ramp in some cases, as Ark indicated, is that people have kind of descoped some of those programs. So we still think that demand is in the future. But arguably, when it comes to discretion, you can certainly delay those programs and expenditures.
Ramsey El-Assal: Fair enough. Thanks so much.
Operator: Your next question comes from the line of Ryan Potter with Citigroup. Please go ahead.
Ryan Potter: Hey, thanks for taking my question. I wanted to start on pricing. Have you seen any changes to the pricing environment since last earnings? And are you still offering some discounting to when business in certain areas like you were in the past? Just trying to figure out you’re finding a greater presence from certain lower cost locations like India that’s leading maybe to some client pushback on current arrangements or if the pricing pressure is more on net new engagements?
Arkadiy Dobkin: We believe the pricing environment did not grow. So as the only improvement could happen if demand will go up. So – and with the current status quo, I think pricing environment is pretty tough and challenging continuously.
Jason Peterson: So it’s not incrementally worse, but it continues to be challenging. It’s one of the reasons why there is kind of a bias towards India at the lower bill rates. And the market is – yes, with, what I call kind of an imbalance in supply and demand, it continues to be a less friendly market when it comes to trying to get rate increases for certain.
Ryan Potter: Got it. And a follow-up, I guess, on your investment level and kind of net hiring. Now that you’re seeing more of a challenging demand environment, will you look to dial back some of the growth investments you were trying to do when you started the year or refranchise those? And then from a headcount perspective, are you expecting headcount to decrease further sequentially off these levels? Are you likely to kind of maintain the bench you have to meet demand as it returns?
Jason Peterson: I think you’ll see us continue to invest in India as we’ve talked on this call. I think you’ll see us continue to increase our position in Latin America. I do think, and I implied this or I think maybe even stated it in our prepared remarks, is that with this kind of budget caution with clients, we are seeing less demand for in-market resources. That continues to be a place where we do have more bench than we would like. So that’s a bit of a challenge for us. And again, I think what you’ll see us do, at least for the coming couple of quarters is to continue to invest more in again, India and Latin America. We still think that there’s a demand environment in our future for Central and Eastern Europe and also for the market. But today, it certainly continues to be a challenging environment, particularly for the higher cost in end market resources.
Ryan Potter: Got it. Thanks.
Operator: Your next question comes from the line of James Friedman with Susquehanna. Please go ahead.
James Friedman: Hi. Thank you for taking the question. Jason, in your prepared remarks, you called out some of the trends in billing and the DSO. I remember when you first started there, that was a big conversation, you improved that immeasurably. I’m just wondering is what’s going on in the DSO? Is this something that we need to watch for like billability and collections?
Jason Peterson: Yes. So we’re really focused on managing that, and again very careful to make certain that obviously, our revenue recognition is appropriate and also that we’re trying to avoid any potential kind of write-off of AR. So I’m not concerned about that. What we are seeing as clients are taking more time to review and make payments and that type of thing and I assume it’s just based on the environment. And so we are trying to manage it, but I suspect that DSO is going to remain above 70 for the remainder of the year. Again, I don’t have concerns about it either in terms of revenue recognition or potential write-offs, okay? But yes, I wish we could maintain at 70 or 69 and I think that’s a little bit unlikely in today’s environment where everyone is kind of managing their cash flow a little bit more carefully.
James Friedman: Got it. And then is there any way to unpack the revenue because you alluded to this – you both alluded to this in your prepared remarks, the ramp downs versus the sluggishness in everything else. Like how much is the ramp-down dynamic impacting the revenue commentary and guidance?
Jason Peterson: Well, so we had this that the few customers that we talked about where a competitor has sort of taken over their IT function. And that obviously had a step down on a year-over-year basis as well as a quarterly – a sequential impact Q4 to Q1. There’ll be another slightly sequential impact associated with that same client between Q1 and Q2. And then we had a large BIM client who is continuing to sort of tighten up their spending. And because they are a large client, if they tighten up their spending, that’s certainly reducing the level of revenue that we were generating from them, and it is showing up in our growth rates. I don’t know whether I call it kind of a ramp down, but certainly they’re reducing the level of headcount that…
Arkadiy Dobkin: Just to kind of – there is no any real impact from ramp downs, which kind of new to us. There is a redistribution of delivery, and we talked about it when there is a switch to lower-cost locations. There are new business which faster growing there as well, and this is all related again to pricing environment. So – but, no, ramp downs, right now not as a real factor.
James Friedman: Got it. All right. Thank you.
Arkadiy Dobkin: It’s more like a normal, like it’s always would happen. It’s happening as well, but in a very normal way.
James Friedman: Thank you.
Operator: The next question comes from the line of James Faucette with Morgan Stanley. Please go ahead.
James Faucette: Thank you very much. This morning, wanted to ask just in terms of your planning assumptions and kind of given the experiences of the last few quarters, how are you thinking about – or how are you changing your planning assumptions in terms of pipeline, conversion rates or timing, et cetera, not just in terms of like what you’re seeing right now, but are you building in more conservatism from that perspective? And how does that impact your planning from a hiring perspective, et cetera, right now?
Arkadiy Dobkin: We definitely learning our lessons and we put much more pragmatic view because, yes, we were a little bit more optimistic in the past when markets will come back. So right now, we’re looking at this very pragmatically with a good level of – strong level of kind of conservatism. And I don’t know what to add, so I think that’s actually exactly what is happening. We’re looking for the next 90 days, where we can predict it and predict the future based on this. But by the end of the quarter situation, we will change. We will start doing this differently until we will say that general conditions is directionally good, more like to one or another direction.
James Faucette: Great. That makes sense. And then in terms of like from a revenue perspective with the mixing geographic shifts and kind of pricing that your customers are asking for. Any sense for how long we should think about that being a revenue headwind? Do you have in your mind like, I guess, a distribution of delivery and when we might hit a stable level there?
Jason Peterson: Let me comment, and then Ark will probably say something much smarter and more insightful. How I think about it is going to be a trend that we’re going to see throughout 2024, but I don’t see it as a forever trend. At some point, I think it kind of stabilizes. And I think that we’ve done a good job of sort of creating a balanced delivery with options or optionality for our clients. And at the same time, I still believe that there’s demand for Central and Eastern Europe so far.
Arkadiy Dobkin: I’ll say – we said before, we do believe that we’ll be able to put very balanced global delivery capability, as well as from geographical point of view, and equalizes as much as possible the quality kind of components of it. With this, it’s, again, in our segment and our IT services and specifically and kind of sub-segment, which we believe we plan, which is more transformational platform build, conflicts enterprise solutions. Right now, difficult to miss GenAI, and GenAI-enabled solutions, which we consider it, a part playing, and we’ll be playing in the future. And this situation, it’s an all factor of changing in demand when actually our client base will feel that modernization is not just a shift to cloud, but actually changes the applications, changes the platforms to actually benefit from this with maximum.
And this is very different level of the game. As soon as this will be happening, then demand for the talent will be equalized as well. And then it will be growing all over the place. And I think from this point of view, very similar to what Jason just said. I think India will be a very big portion of the bond, but we will be balanced in demand will be coming to Central Europe and Eastern Europe and Latin America and it would be all about the quality of delivery and kind of value per dollar versus just dollar per hour. And I think it should happen. Still, we were hoped it would happen in the kind of sooner. But I think all is here and vendor side and investor side, I think we all believe that this will turn around because there is no way right now.
