But like I said, we’re not ready to call Q2 yet, but for the full year, we feel that we’re definitely trending in that direction.
Tyler DuPont: Okay, great. That’s helpful, Xiao, I appreciate that. Then just as a follow-up, it looks like, based on my initial math here, that the top five clients saw roughly around an 8%, let’s say, decline in the quarter. Can you just sort of discuss the dynamics you’ve seen there among your top clients? Are those revenue declines due to pricing or are there any ramp downs in projects? Just what are the moving clients among those top clients would be appreciated.
Guo Xiao: Sure. Our top five, and I’d probably extend it further to top 10 even, the revenue decline is less driven by volume, it’s more driven by shifting to offshore for some of them, and also the pricing pressure we mentioned earlier. Many of them saw big extensions and renewals towards the late Q4 and then beginning of Q1, and we had to sharpen our pencils and work within their budgets, but we’re definitely retaining wallet share and volume with our top five and top 10 clients.
Tyler DuPont: Okay, great. I appreciate that, thanks a lot.
Guo Xiao: Thank you.
Operator: Thank you. Our next question comes from Dave Koning with Baird. Your line is open.
Dave Koning: Yes, good morning everyone. Thank you. I guess my question is around margins over time. I guess in 2023, revenue was down about 170 and EBITDA down 145, so very strong flow-through right to EBITDA. It was hard to see a lot of cost savings in 2023, but I’m wondering what happens as we go forward? Can you get back to 20% margin, and maybe describe a little why we didn’t see a little better EBITDA in 2023?
Erin Cummins: Thanks for the question, Dave. I’ll start. You know, it is fair to say that we did see impact from the revenue headwind on our EBITDA and our margins. The shifts that we’ve been talking about – you know, we did see some project ramp downs in the middle of Q3, those larger ramp downs that we had talked about before we had slowed down, so we see that as very positive, but that was a quick impact to our business that impacted margins. We also have touched on the move from onshore work to more offshore work, so actually we’re very proud of maintaining the client relationships as we have and as Xiao has talked about. We’re also proud of the agility that we demonstrated in our business, where we’re shifting service from one location to another without client disruption, so we did that very well.
But at the same time, that impact on the top line and pricing it, it did have an effect on 2023. Now more importantly, what are we doing going forward, which really is where your question is getting at. 2023, we saw lower utilization for the year on the whole. We did start to see improvement across the year – it’s telling us that we’re moving in the right direction, but it still was lower in 2023 than we expected, so that is a top focus for us. We are taking a programmatic approach to addressing the utilization. We have our operational excellence team that lives and breathes it every day, and again we’re on the right track. We’re seeing good progress and we expect 2024 to improve significantly. Now I touched on the shift from onshore to offshore, and as I said, the demand shift happened more quickly than the supply shift, and so we continue to work through those issues.
It does just take a little bit more time, again impacting 2023, but as we look across the improvement in 2024 that we anticipate, that’s definitely part of the story. There are pockets where there’s lower utilization and that’s oriented in the higher cost locations, and that has a disproportionate impact on our gross margin. It’s temporary, it’s going to take us a few quarters to fully address this, but we’re confident in our ability to do it. Then as we talked about, the pricing assumption embedded in our guidance is a headwind for 2023. It’s reflecting the general macroeconomic caution, the competitive dynamics we’re seeing, and lower levels of that consulting and growth-oriented work, so we do think these dynamics are temporary but at the same time, as we have considered our guide for the year, we’ve assumed they’re in place for 2024, so we don’t think that that’s going to benefit 2024 necessarily – it may, but perhaps in the second half of the year.
More likely at this point, it would be beyond 2024, into 2025. That’s the key piece of it, is around gross margin. I just also want to highlight from a cost restructuring perspective, we are doing really well. We took out $81 million in costs, which I touched on. The reorganization that we went through in Q4 is in the good but early stages, and so we still have efficiencies that we’re driving there. Bringing it all together, what we expect for 2024 is consistent margin improvement. We don’t think we’ll get back into that high teens level in 2024, but certainly the opportunity remains there for 2025 and beyond.
