Moshe Katri: Thank you.
Operator: One moment for our next question. Our next question comes from the line of David Grossman of Stifel. Your line is now open.
David Grossman: Thank you. Good morning. Rohit, if I heard you right, you said earlier in the call that the AI-infused offerings is kind of allowing you to kind of engage in more outcome-based kind of deals. So can you elaborate on that and maybe just explain exactly what the dynamic is?
Rohit Kapoor: Yes, David. So look, our clients are looking for business outcomes and business benefits. In the past, it used to be just about providing them with efficiency and efficacy. Now it’s much more about delivering tangible business outcomes to them that can be measured and that can be quantified. As that becomes a lot more transparent and a lot more clearly visible as to what is the cause of that increase in business benefit, our clients are becoming much more open towards having an outcome-based pricing mechanism with us where we take the risk of the implementation of the initial investment, but we get the benefit of sharing in that business benefit that we can deliver to our clients. And our clients tend to prefer that model because they don’t want to invest upfront and they don’t want to carry the risk of our ability to deliver that business benefit to them.
So we are seeing a gradual shift take place in this outcome-based pricing model. We frankly think this is going to be advantageous to our clients and it’s going to be advantageous to us. For us, it’s advantageous because we have high confidence in our ability to deliver the business benefit. And for our clients, it’s beneficial because they don’t need to put up the initial upfront investment and they don’t carry the risk.
David Grossman: So can you give us an example, perhaps of a current deal that has that characteristic?
Rohit Kapoor: Yeah. So, like I shared in my prepared remarks a number of these deals that we are doing in healthcare where we are identifying billing errors and identifying them upfront, or in terms of collections where we are able to collect a greater amount of dollar receivables for our clients, our clients are willing to pay us as a percentage of the collection or as a percentage of the billing errors that we are avoiding for them.
David Grossman: And I guess the second question I had was on your margin guidance. I think you’re guiding to flattish margins year-over-year. Maybe you could share it out, how much of that is the timing of wage and pricing versus maybe the upfront dilution you take on some of these outcome-based deals where, like you said, you’re taking risk upfront, assuming the cost of implementation with the opportunity, with downside participation and any other dynamics that may be affecting the margin in 2024.
Maurizio Nicolelli: Yeah, David, we are guiding to flat margins with 2023. And keep in mind, we went up 100 basis points in 2023. So we had a significant uptick in 2023. As Rohit talked about, in all of the Gen AI opportunities that are in front of us, there’s a lot of investments that we’re making to really grow that large, significant opportunity for us going forward. And so that is going to be a big area for us to invest in this year and it’s going to keep our margins fairly flat this year. Now, this year being flat is comparable to the prior years of having significant margin improvement. So this year is going to really be a year in which we’re going to make a number of investments within AI, really, as we pivot the business, and that’s going to be reflected in our AOPM or our profit margins.
David Grossman: Sorry if I missed it, Maurizio, but did you mention how we would expect margins? Would they be relatively flat all year, or is there going to be some variation across quarters?
Maurizio Nicolelli: No, no, no. So it will be — the total operating margin will be flat in total for the year compared to 2023. But when you look at it on a quarterly basis, it’s going to be in line with revenue growth. So you’ll see a lower margin increase on a quarterly basis and then the average for the year being right around flat with 2023.
David Grossman: Got it. Great. Thank you.
Operator: One moment for our next question. Our next question comes from the line of Dave Koning of Baird. Your line is now open.
Dave Koning: Yeah. Hey guys, thanks, and nice job. And I guess my question is on employees. Your sequential growth in employees was the strongest in, I think, over two years maybe, which I think is kind of setting you up for good growth, good wins for the future. I guess the other way to look at it is to say, I think year-over-year employees grew 19%, revenue only grew 10%. So do you need more people to get the revenue done? How should we look at it on either side of the way kind of I’m looking at it?
Maurizio Nicolelli: Yeah, David, it’s Maurizio. So when you look at our headcount growth, and you’re correct, it’s around 19%, slightly, right around 18.8% on a year-over-year basis with the end of the fourth quarter. If you break that down, you’ll see that analytics headcount has grown about 8% on a year-over-year basis, fairly in line with that revenue growth overall. It’s in digital operations solutions, where we’re making investments both in digital but also in ramping up new deals that we have that are coming, that are being implemented today for 2024 that will start to recognize revenue in 2024. So it’s a bit of an investment and also a ramp-up in employees, particularly in digital operations that’s embedded in that 18.8% growth year-over-year for the fourth quarter.
Dave Koning: Got you. That totally makes sense. That’s great. And then the one other question, revenue by industry, the emerging markets, I think in 2022 grew somewhere around 50%. The last couple of quarters have only been kind of low- to mid-single-digits, while the other industries, healthcare and insurance, are doing really well. But what’s happening in the emerging market industry for you?
Maurizio Nicolelli: So when you take a look at the revenue growth within our Emerging segment, they had extremely solid revenue growth in those previous periods that you mentioned. I think there’s a little bit of the comparables on a year-over-year basis that make the growth rates a little bit more difficult on a year-over-year basis. When you look at the Emerging pipeline, it’s still very significant in all the different segments that we operate in. And Emerging is a segment of ours that has many smaller segments in it, and that creates a lot of opportunity for that group to really bring on new clients and then really scale up those new clients over time. So we still see a significant opportunity within emerging. I think you just when you look at the comps over a year-over-year basis, it makes it a little bit difficult in terms of the growth rate.
Dave Koning: Yeah, totally makes sense. Well, thanks, guys. Good job.
Operator: One moment for our next question. Our next question comes from the line of Vincent Colicchio of Barrington Research. Your line is now open.
Vincent Colicchio: Yeah, most of mine were asked. Curious, Rohit, if you can talk a little bit about the new clients added in the quarter, what verticals did they come from and was AI a key driver in adding some of these clients?
Rohit Kapoor: Sure, Vincent. So first of all, for the full year, we added 63 new clients and we are very, very pleased with the pace at which we are adding new clients. The quality of clients that we are adding up are also very good. So there are a number of clients within this that are Fortune 1000 clients. And like we mentioned, some of these deals are large deals that we are signing up. Amongst the industry verticals, clearly, the insurance industry vertical is seeing a tremendous amount of growth and traction, and then we are also seeing growth in our emerging industry vertical. Keep in mind that the emerging industry vertical is pretty well diversified across a number of different sub-industries. So we see that trend across.
We are signing up some companies that are scaling up their businesses. And so in terms of size of companies that we’ve signed up, we’re seeing a number of growth companies, we are seeing a number of mature size companies and a number of global companies. We’re also seeing growth rate in UK and Europe to be stronger. So that’s a good thing for us because we’d love to be able to diversify our business a lot more across the globe and we’ve been very happy with the pace and the quality of new client logos that we are signing up.
Vincent Colicchio: And did marketing analytics meet your expectations in the quarter? And if I heard you right, you expect a return to growth in the second half. If you can give us a little bit more color on what gives you confidence.
Rohit Kapoor: Sure. So marketing analytics, as you know, for us is in a number of different segments. It’s in Insurance, it’s in banking and financial services, it’s in Healthcare. In Insurance, marketing analytics had come to — had slowed down quite significantly because carriers were not being able to get price increases over the last couple of quarters. That has now changed and insurance regulators are allowing carriers to increase pricing and therefore, we are seeing insurance companies go back into the market and we’re seeing initial signs of that acquisition of new customers take place. Within the banking and financial services, the interest rates had gone up and therefore the marketing for new customers had dried up in 2023.
If interest rates stabilize out here or start to move down, we would expect that the banks and financial services will again restart that acquisition of new customers. And then Healthcare was a new segment for us and a new industry vertical for us that we started to target in ’23 and we picked up revenue from a number of different payers in ’23 and we got the revenue in. Is it as much as we’d like to get? No, we think there’s a lot more opportunity. So we’d love to get a lot more revenue out there, but we’ve got a very nice base that’s been built up on that as such. So our expectation is that these things will continue to reverse out themselves and we should be able to see some growth on that in the second half of the year. And then certainly Q1 of ’24 in Analytics should be higher in absolute dollar terms as compared to Q4 of ’23.
Vincent Colicchio: That was helpful color. Thank you.
Rohit Kapoor: Thanks.
Operator: I’m showing no further questions at this time. I would now like to turn it back to John Kristoff for closing remarks.
John Kristoff: Thank you, Rivika. I just wanted to reiterate what Rohit said. We are going to be conducting a Strategy Update session for investors on May 7. This will be a live event held in New York City and details will be forthcoming on that event, but please mark your calendars. And thank you for joining our call today. And as always, follow up with me with your individual questions. Thank you.
Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.
