TTEC Holdings, Inc. (NASDAQ:TTEC) Q4 2022 Earnings Call Transcript

TTEC Holdings, Inc. (NASDAQ:TTEC) Q4 2022 Earnings Call Transcript February 28, 2023

Operator: Welcome to TTEC’s Fourth Quarter and Full Year 2022 Earnings Conference Call. I would like to remind all parties that you will be in a listen-only mode until the question-and-answer session. This call is being recorded at the request of TTEC. I would now like to turn the call over to Paul Miller, TTEC’s Senior Vice President, Treasurer and Investor Relations Officer. Thank you, sir. You may begin.

Paul Miller: Good morning, and thank you for joining us today. TTEC is hosting this call to discuss its fourth quarter and full year 2022 financial results for the period ended December 31, 2022. Participating on today’s call are Ken Tuchman, Chairman and Chief Executive Officer of TTEC; Shelly Swanback, Chief Executive Officer of TTEC Engage and President of TTEC; and Dustin Semach, Chief Financial Officer of TTEC. Yesterday, TTEC issued a press release announcing its financial results. While this call will reflect items discussed within that document, for complete information about our financial performance, we also encourage you to read our 2022 annual report on Form 10-K, which we anticipate will be filed at market close today.

Before we begin, I want to remind you that matters discussed on today’s call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based on management’s current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments that may occur. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our annual report on Form 10-K. A replay of this conference call will be available on our website under the Investor Relations section.

I will now turn the call over to Ken.

Ken Tuchman: Thank you, Paul. Good morning, everyone, and thank you for joining us today. We ended 2022 with solid execution and financial results despite the increased uncertainties surrounding the global macroeconomic environment, our performance reflects our broad and diverse base of global clients, our expertise across strategic verticals and our full range of digital CX technology, AI and service capabilities. For the full year of 2022, bookings were $762 million. Revenue increased 9.4% to $2.44 billion on a constant currency basis. Adjusted EBITDA was $326.6 million or 13.4% of revenue. In addition, last year, we enhanced our public sector vertical with a meaningful acquisition. We publicly launched our strategic partnership with Google, deepened our partnership with each of our core strategic CX technology partners, including the largest hyperscalers, we strengthened our first-mover advantage in AI with strategic investments in new offerings and several new client wins.

We expanded our client base by winning 93 new logos and we grew our delivery footprint with three new offshore geographies. And we were recognized as a CX leader by all four major analyst firms. In addition, we were named by Forbes as one of America’s best large employers for the third consecutive year. And lastly, we marked our 40th anniversary as a pioneer, a global leader and an innovator in customer experience. I’m pleased with our accomplishments in 2022, despite the fact that our financial performance was tempered by the increased macroeconomic headwinds that emerged in the second half of last year. As we look ahead, some clients in select verticals continue to have reduced visibility into their short to midterm outlook. And therefore, at this point in time, we believe it’s prudent to approach 2023 guidance conservatively.

Having said that, I could not be more excited about our strength in global leadership team and our differentiated platform. I’m confident in our ability to deliver significantly higher revenue growth and margins as we exit this current macroeconomic environment, and now let’s move to our views on the market. In any economy, an exceptional customer experience sets the most admired brands apart. Happy customers are loyal. They spend more money and become active promoters of their favorite brands. In an uncertain economy, keeping these loyal customers is paramount. Yet at the same time, businesses are challenged to do more with less. Our outcomes-based solutions are more critical than ever in this environment. Over the past decade, we’ve set up our company to capitalize on three game-changing megatrends.

From legacy giants to digitally native startups, these trends will be altering the face of every industry across the globe. We’ve been preparing for this inflection point, and we’re well positioned to capitalize on the opportunity ahead of us. So let me begin. Trend number one, the CX move to the cloud is no longer an option. It’s an imperative. Currently, only about 20% of large enterprises have completed their CX migration to the cloud. As the largest pureplay CX technology and services player in the world, we’re helping these companies use the modern capabilities enabled by the cloud to create customer experiences across every touch point that are personalized, effortless and differentiated. Our TTEC Digital business has implemented some of the most complex enterprise CX cloud migrations at scale across every major platform.

We’re well positioned to capitalize on the remaining 80% of large businesses and governments still operating on outdated on-premise legacy platforms. These digital transformation initiatives are complicated and will provide us with technology and managed service opportunities for many years to come. Trend number two, the world’s leading brands are moving from reactive customer support to proactive customer experiences. Smart brands no longer are waiting for their customers to reach out when something goes wrong. They’re using advanced analytics to anticipate the future needs of their customers with proactive outreach and next best actions. With our investments in predictive digital capabilities, that enable customer acquisition, growth and retention, we’re delivering strong results for our clients in multiple industries, including health care, financial services and automotive.

Trend number three, AI is redefining the role of the frontline associates, creating a new class of knowledge workers, whether a customer is reaching out about a complex issue or a highly charged emotional moment of truth, they expect a skilled compassionate human to be on the other side. AI has the potential to turn these frontline knowledge workers into super agents by augmenting their skills with real-time insights and next best actions. These capabilities accelerate speed to proficiency, create new career pathways, deliver the best possible business outcomes and will create higher margin opportunities for TTEC. These three trends are putting pressure on companies across the globe to find a partner so that they can move quickly and with confidence.

For the past 40 years, we’ve led the market by helping our clients understand how new digital technologies fit into their CX ecosystem. While technology has always been fundamental to our solutions for clients, we’ve provided a steady hand to separate the helpful from the hype, from the earliest IVRs to today’s latest developments with AI, our focus has always been delighting customers and helping our clients grow. Our two distinct but connected business segments enable us to deliver differentiated results in this new phase of AI-driven CX innovation. Today, TTEC Digital is the largest pureplay CX technology and services player in the world. We have the data scientists, the CX consultants, the CX technology expertise across all leading platforms.

Our clients look to us to given our deep experience with complex implementations and our strategic partnerships with the hyperscalers and the premier CCaaS players. Complementing TTEC Digital is our TTEC Engage business, which handles millions of last-mile customer interactions on behalf of the world’s leading brands. Our teams of knowledge workers, conversational designers, data curators and analytic experts deliver experiences that consistently delight our clients and wow their customers. And when we combine the capabilities of these two business segments, we’re uniquely positioned to build and deliver proprietary CX solutions on top of Microsoft and OpenAI’s ChatGPT, Google CCAI and Amazon’s Lambda. We believe this not only helps us support the world’s leading brands more effectively with AI machine learning, but it also serves as a moat relative to the rest of our competitors.

As Google, Genesis, Microsoft, Cisco and AWS develop market applications for new technologies like generative AI, they are collaborating with us for our frontline knowledge and our CX technology domain expertise. Together, we’re investing in solution development, go-to-market strategies and delivery models for this new generation of customer experience. Human discernment and compassion will play a key role in building trust as these new AI functions are integrated into CX solutions. Like many digital innovations before, these new capabilities will augment our frontline knowledge workers. Now I’d like to share our thoughts on 2023. With a strong foundation and an agile mindset, we have the resilient and have preserved through the economic cycles, global pandemics and natural disasters.

We know that these events are cyclical and working as a team. We have demonstrated time and again that we have the determination, tenacity and long-term track record and vision to come out stronger on the other side. I’m more confident than ever about our path forward with Shelly Swanback and Dave Seybold, by my side. Together, we are actively navigating the current environment and doubling down on our priorities that will build momentum as we progress through the year. From the very beginning, we have aspired to build something truly unique in the industry, a single end-to-end resource for premium CX technology, AI and service to power the most customer-centric brands on the planet. And today, we are as excited as ever. And with that, I’ll hand the call over to Shelly.

Rawpixel.com/Shutterstock.com

Shelly Swanback: Thank you, Ken, and good morning, everyone. As Ken mentioned in his opening statement, we delivered a strong fourth quarter. Our solid performance was possible due to our trusted and long-standing partnerships with our clients and the passion, hard work and contributions of our amazing 69,000 teammates across the globe. Like Ken, I’m very enthusiastic about the relevance of our CX solutions and the market demand for the outcomes we deliver. Clients across industries continue to be focused on the importance of a great customer experience. We’re well positioned to help them apply the most relevant talent, technology and AI solutions for their business. Shifting now to our Engage business. The weakening macroeconomic environment is creating a few specific short-term challenges.

The uncertainty in this economic environment is affecting the short and midterm outlooks for some of our clients, subsequently impacting our visibility. We’re responding to their needs by remaining agile. While we have continued strength of resilient verticals like public sector, financial services and health care, we are experiencing weakness in our hyper growth sector. Unfortunately, several of our hyper growth clients have been impacted by the post-pandemic renormalization. In the short term, the decline in this sector is putting pressure on our margins. We’re confident that we’ll successfully navigate these pressures while we continue to make investments in technology, infrastructure, our global footprint and M&A integration. This will give us momentum as we exit 2023 and head into 2024.

Now let me share our Engage initiatives that will add velocity to our growth engine, improve our margin profile and set the company up for long-term success. We’re accelerating our efforts to expand our delivery and language footprint. In 2022, we added three new geographies to our operational footprint that now spans more than 20 countries. In 2023, we plan to add new language capabilities and thousands of new associates in Latin America, EMEA, Asia and Africa, where we’re seeing increasing demand from both current clients and prospects. Additionally, we’re moving quickly and have a qualified pipeline for offshore delivery that has increased over the same – this same time last year. We expect this momentum to continue to build. We’re building our talent base with highly skilled knowledge workers to support more complex interactions, a place where we’re uniquely qualify.

As we help our clients migrate simple interactions to non-voice channels, the demand for more highly trained and experienced knowledge workers is growing. AI-based tools are enabling us to find, train and onboard these knowledge workers with speed. Initiatives like our Flex EX platform are offering knowledge workers more flexibility with their schedule while allowing us to better match supply with the ebbs and flows of demand. We’re leaning into resilient verticals where we offer differentiated solutions, the specialized nature of the work and licensing requirements in health care, financial services and public sector provide us with a competitive advantage. Our domain expertise and proven best practices in these verticals are enabling us to attract new companies as well as expand our embedded base.

In health care, in 2022, we implemented 14 open enrollment programs for 10 clients, and we were consistently the top performer. As we build on the trust earned from these successful client programs, we will sell new asynchronous offshore services delivered at a higher margin. In financial services, we continue to expand our business with new logos and grow our embedded base with additional claims, collections, fraud and back-office services. We’re also growing in property and casualty and now support three out of five of the industry leaders in this category. In this highly competitive marketplace, we’re partnering with insurers to use analytics as a differentiator with just-in-time estimates and hyper personalized offers. In public sector, we continue to scale as we complete the integration of the public sector assets we acquired last year.

For example, our work with New York Metro tolling and transportation authorities is well underway with an anticipated go-live date in 2024. This comprehensive contract includes CX technology, account management, customer support and back office services. And more broadly, we’re focusing our go-to-market on opportunities to help companies reduce costs by taking advantage of our expanding global footprint and scaling our trust and safety and AI operation solutions. I’m particularly excited about helping our clients harness the power of AI with expanded services and data annotation and curation supported by our skilled knowledge workers. Now I’ll move on to our TTEC Digital segment. Given the rapid pace of CS technology innovation, companies are looking for a partner with the breadth and depth to design, build, operate and also manage their digital transformation.

These technology consulting and long-term managed service contracts fall right in our sweet spot. It’s the only pure play CX technology partner that also manages millions of customer interactions every day, we deliver value and customer insight that no one else can. And it’s so great to have Dave Seybold on our team with his deep partner and client relationships and strong track record of growing global businesses at scale, Dave brings extensive cloud and CS expertise to the business at a pivotal time. He’s already making an impact with our people, our clients and our partners. Dave and his team are accelerating progress on our digital priorities. First, capturing the growth opportunity to help clients with our CX cloud migration, AI and large digital transformation initiatives, enabled by our strategic partnerships with Genesis, Microsoft, AWS, Cisco and Google.

We continue to be chosen by these partners for complex and first-of-a-kind CX engagements, including generative AI. Next, continuing to scale our offshore delivery platform to strengthen our margin profile. Last year, we successfully grew our offshore footprint by 60%, and we have plans underway to further scale in 2023. And finally, continuing to build and scale our IP-based software that we directly embed in our solutions and also sell across the hyperscalers marketplaces. I’ll wrap up our segment discussion with a few thoughts about the exciting progress being made in AI. Discussion around AI has been happening for some time. What’s different now is that practical business benefits are within reach. Having worked with clients to take advantage of previous AI and technology innovation cycles before, it’s clear that technology is only one part of the equation in terms of delivering tangible business results.

We’re uniquely positioned to capture the opportunity because of our combination of deep CX domain expertise, CX technology services at scale and our experience delivering frontline customer engagement. In conclusion, we’re managing for today while we continue to strengthen the foundation for our future, reviewing 2023 as a year focused on disciplined and agile execution as we continue to drive towards diversification across clients, geographies, languages and solutions to optimize our revenue mix and further strengthen our margin profile. Our outlook for TTEC in 2023 is low single-digit growth with tempered margins driven by our Engage segments performance being impacted with the points I mentioned earlier. With our focused strategy, prudent investments and strengthened leadership team, we expect margins and growth to accelerate in 2024 and beyond.

And I look forward to sharing our progress as we continue to deliver best-in-class solutions for our clients, growth opportunities for our employees and returns for our shareholders. And now I will turn the call over to Dustin.

Dustin Semach: Thank you, Shelly, and good morning. We appreciate everyone taking the time to join us today. I’ll start with a review of our fourth quarter and full year 2022 results before providing you context on our 2023 guidance. Turning to our bookings. Despite the dynamic environment, our go-to-market teams delivered a solid year. In the fourth quarter of 2022, bookings were $197 million compared to $206 million in the prior year period, resulting in full year bookings of $762 million, an increase from $751 million in the prior year. Bookings in our Digital segment were particularly strong, increasing 10% in the fourth quarter over the prior year period and 23% in 2022. The business signings were predominantly driven by demand for our Genesis and Microsoft CX technology solutions, in addition to Amazon Connect and Cisco, many of which are large multiyear CX transformational engagements.

While our sales cycles have extended, our enterprise and public sector clients continue to recognize the long-term benefits for modernizing and digitally enhancing their CX ecosystem. In our Engage segment, there was solid demand for our core offerings in the fourth quarter and full year of 2022. Bookings were well diversified across our key industries, with particular strength in financial services, health care, automotive and travel and hospitality, as well as across our expanded geographic footprint, including continued momentum in our EMEA region, which had bookings growth 60% in the fourth quarter and 40% in 2022. We added 22 new client relationships in the fourth quarter and 93 for the full year 2022. This represents an increase of 13% over the prior year full period.

Due to recent acquisitions, our Digital revenue as a percentage of our overall revenue has increased. Due to the nature of the business, Digital bookings reflect a higher mix of non-recurring services relative to Engage. As a result, moving forward, we will begin giving color on each individual segment’s performance rather than discussing bookings at the overall TTEC level. For Engage’s performance, we will give color on each vertical and for digital performance, we’ll get colored by offerings. I will share our 2023 backlog details in my closing remarks. In my discussion on the fourth quarter and full year 2022 financial results, reference to revenues on a GAAP basis while EBITDA, operating income and earnings per share on a non-GAAP adjusted basis.

A full reconciliation of our GAAP to non-GAAP results is included in the tables attached to our earnings press release. My references to the term on a like-for-like basis describes our revenue growth, excluding the impact of foreign exchange translation and treating acquisitions as if we’ve owned them in the prior year period. As mentioned, we are pleased with our fourth quarter financial performance, especially when considering the headwinds that both Ken and Shelly highlighted earlier. On a consolidated basis in the fourth quarter of 2022, revenue was $658.3 million, an increase of 7.5% on a like-for-like basis, excluding the impact of pandemic-related volumes, revenue grew 4.7%. Organic growth was 2% on a constant currency basis. Adjusted EBITDA was $84.8 million or 12.9% of revenue compared to $84.1 million or 13.7% in the prior year.

Operating income was $69.9 million or 10.6% of revenue compared to $68.3 million or 11.2% in the prior year. And lastly, EPS was $0.89 compared to $1.08 in the prior year. The strengthening of the U.S. dollar had a $12.6 million negative impact on revenue in the fourth quarter over the prior year period, while benefiting operating income by a positive $4.5 million, primarily within our Engage segment. Our fourth quarter year-over-year top line performance primarily reflects the contribution from the April 2022 annual asset acquisition in our Engage segment, as well as increased CX technology services in our Digital segment, driven by the increasing adoption of cloud CX technologies. Turning to our operating and EBITDA margins. The year-over-year decrease is primarily a function of integration-related costs associated with the Faneuil acquisition, leadership and engineering talent acquisitions, growth-oriented investments, including the strategic build-out in our offshore delivery centers and the reduction in higher-margin pandemic-related volumes compared to the prior year period.

Moving forward, we will no longer report the impact from pandemic-related volumes given its modest remaining impact. However, for consistency, we felt it was important to share through the end of fiscal year ’22. On a consolidated basis for the full year 2022, revenue was $2.44 billion, an increase of 7.5% and 8.3% on a like-for-like basis, excluding the impact of pandemic-related volumes. Organic growth was 1.6% on a constant currency basis. Adjusted EBITDA was $326.6 million or 13.4% of revenue compared to $354.4 million or 15.6% in the prior year. Operating income was $248.5 million or 10.2% of revenue compared to $286.2 million or 12.6% in the prior year. And lastly, EPS was $3.68 compared to $4.62 in the prior year. The strengthening of the U.S. dollar in 2022 at a $42.4 million negative impact on revenue, while positively impacting operating income by $13.9 million, primarily within our Engage segment.

Our full year top line growth was primarily driven by the Engage Faneuil acquisition in April of 2022 and Digital’s Avtex acquisition in April of 2021, alongside increased business across our core offerings from new and existing clients. The full year bottom line decline is driven predominantly by the same reasons mentioned for the fourth quarter. Turning now to our fourth quarter and full year 2022 segment results. Digital segment revenue increased 4.2% to $123.4 million in the fourth quarter of 2022 of the prior year period, all organic. Operating income was $16.5 million or 13.3% of revenue compared to $20.2 million or 17.1% of revenue in the prior year period. Our fourth quarter revenue growth is a function of increased cloud and systems integration services across our Tier 1 CX tech partner platforms, slightly offset by lower year-over-year product sales and on-premise managed services as more clients move to the cloud.

Our combined recurring cloud and managed services revenue grew 4.5% in the fourth quarter of 2022 over the prior year period, representing 54% of Digital’s total revenue and our reoccurring systems integration revenue grew 18%, representing 27% of total revenue. Decline in operating margins reflect incremental investment in CX leadership and engineering talent sales and marketing and product and technology developments. On a full year basis, Digital’s 2022 revenue increased 13.9% to $471.5 million over the prior year period, of which 1.7% was organic on a constant currency basis. Operating income was $63.5 million or 13.5% of revenue compared to $59.6 million or 14.4% in the prior year period. Full year revenue primarily benefited from the Avtex acquisition.

Operating margins were impacted by the reasons noted in the fourth quarter in addition to acquisition-related integration costs. Our Cloud and Managed Services revenue grew 15% in 2022 over the prior year period, representing 54% of Digital’s total revenue, and our systems integration revenue grew 20% representing 27% of total revenue. Moving to Engage. Our Engage segment reported fourth quarter 2022 revenue of $534.9 million an increase of 8.3% over the prior year, 4.6% on a like-for-like basis, excluding the impact of pandemic-related volumes. Organic growth was 1.3% on a constant currency basis. On a full year basis, revenue increased 6.1% to $1.97 billion, 9.7% on a like-for-like basis, excluding the impact of pandemic-related volumes. Organic growth was 1.6% on a constant currency basis.

The annual asset acquisition was the primary contributor to growth in the quarter and the full year, alongside increased volumes across our virtual and digital delivery capabilities, contribution from our EMEA region and select verticals, including health care and financial services, excluding the pandemic-related volumes. Our embedded base performance remains strong as demonstrated by Engage’s last 12-month revenue retention rate of 97%, excluding pandemic-related volumes, Engage’s revenue retention rate was 105%. In the fourth quarter, operating income was $53.4 million or 10% of revenue compared to 48.1 or 9.7%. On a full year basis, operating income was $185.1 million or 9.4% of revenue compared to $226.6 million or 12.2%. Our Engage operating margins reflect the impacts highlighted in my earlier comments.

I will now share other 2022 measures before moving to our outlook. As of December 31, 2022, cash was $153.4 million was $963.6 million of debt of which $960 million represented borrowings under our $1.5 billion credit facility. Net debt increased $171.3 million to $810.2 million year-over-year primarily related to acquisition-related investments associated with the Fannie asset acquisition and capital distributions, partially offset by cash flow generation. Cash flow from operations was $137 million in 2022 compared to $251.3 million in the prior year. The reduction in cash flow from operations was primarily a function of lower profitability, higher interest payments and a DSO of 58 days in the fourth quarter compared to 54 days in the prior year period.

Capital expenditures were $84 million or 3.4% of revenue for the full year of 2022 compared to 60.4 or 2.7% in the prior year. The increase is driven by investments in IT security and infrastructure and our accelerated geographic expansion efforts. Our full year normalized tax rate was 23% in 2022 versus 21.3% in the prior year, increase is primarily related to the change in tax regulation related to PSA a special economic zone within the Philippines, jurisdictional mix of income and a reduction in select international tax benefits. In the fourth quarter of 2022, TTEC paid a $0.52 per share dividend or $24.6 million. On February 23, 2023, the Board declared the next semi annual dividend of $0.52 per share, payable on April 20, 2023, to shareholders of record as of March 31, 2023.

Turning to our 2023 outlook. I’m going to provide some context supporting our guidance. First, our outlook reflects the impacts Shelly discussed earlier, including continued uncertainty due to further weakening macroeconomic environment that we first signaled in the second half of 2022, and we expect to persist in the first half of 2023, affecting select verticals. While we are seeing strength in resilient verticals like financial services, health care and public sector, this is being offset by continued weakness in our hyper growth sector. We expect the growth will ramp in the second half of 2023, driven by recovery in the previously mentioned impacted Engage verticals and continued go-to-market execution throughout the year. Digital’s growth will accelerate in fiscal year ’23 driven by increased adoption of CX Cloud Technologies muted by a continued turnaround within our Cisco practice and macro-driven LinkedIn sales cycles.

We are continuing to make investments to further globalize our delivery and language footprint, complete the integration of recent acquisitions, strengthen our executive leadership team and enhance our infrastructure and technology landscape. Continued investments, coupled with impacts in our hyper growth sector is putting pressure on our margins in fiscal year ’23. Last, we entered 2023 with total revenue backlog of $2.211 billion, 87% of our full year guidance at the midpoint. Now turning to the midpoint of our 2023 guidance as outlined in greater detail in our fourth quarter and full year 2022 earnings press release. GAAP revenue of $2.5 billion, an increase of the prior year of 2.3%, adjusted EBITDA of $300 million, a decrease of 8.2% over the prior year and 12% of revenue compared to 13.4% in the prior year.

Non-GAAP operating income of $231 million, a decrease of 6.9% over the prior year and 9.3% of revenue compared to 10.2% in the prior year. Non-GAAP earnings per share of $2.54, a decrease of 31% over the prior year. The EPS decline is driven predominantly by the interest rate hikes across 2022 and anticipated interest rate hikes in 2023 that will impact our variable interest rate. Other relevant guidance metrics include capital expenditures between 3.4% and 3.6% of revenue, of which 65% is growth-oriented, a full year effective tax rate between 22% and 24% and a diluted share count between $47.3 million and $47.5 million. Please reference our commentary in the business outlook section to our fourth quarter and full year 2022 earnings press release to obtain our expectations for first quarter and full year 2023 performance at the consolidated and segment level.

In closing, we are confident we will successfully navigate the dynamic environment ahead of us, position the company for accelerated growth as we exit the year. We are excited about our future, supported by our 40 year track record of delivering innovation and value-driven CX outcomes for our clients, strong executive leadership team and an unmatched CX technology and services platform. I will now turn the call back to Paul.

See also 12 Top Performing Consumer Staples Stocks in January and 13 Top Performing Bitcoin Stocks in January.

Q&A Session

Paul Miller: Thanks, Dustin. As we open up the call, we ask that you limit your questions to one at a time. Operator, you may open the line.

Q – Maggie Nolan: Thank you so much. It seems like the revenue guidance is perhaps a wider band than we’ve seen in the past. Could you elaborate on some of your assumptions there? And what would get us to the high end versus the low end of the guidance?

Dustin Semach: Hey, Maggie. This is Dustin speaking. I’m going to take that first and let Ken and Shelly comment afterwards. So a couple of comments, Maggie, as we discussed in the first half of 2022, we kind of indicated that there was emerging headwinds in the second half, and we’re seeing that now persist and, to some degree, even continued weakness in the beginning of first half of 2023, and it’s really reflecting that uncertainty in our outlook. So in the assumptions that we have right now relative to what will get us to the high end of that range, is how this hyper growth sector performs in the full year. And to give you some context, if you think about hyper growth where it’s at, you take a decline in that business, the rest of the business right now, when you talk about resilient and verticals like financial services, health care, et cetera, they’re growing right now in roughly 7% growth versus the hyper growth business that’s in the decline.

So it’s really about we need to continue to execute in the resilient verticals that we’ve discussed. And then if hyper growth kind of comes back and doesn’t decline to the degree that we expected to at this point in time, then we’ll see it kind of guide up to the higher end of the range.

Ken Tuchman: Hi, Maggie. It’s Ken Tuchman. Good morning. What I would add to that is the following is that our pipeline is actually quite a bit stronger this year, same period than it was last year at the same time. That said, being through now five recessions I want to be realistic about will we see the same level of conversions that we were seeing, let’s just say, same time last year? And with clients all expressing visibility issues across the globe we really just want to take a conservative approach. We would rather guide conservatively and have the potential to exceed then let our investors down. And so we’re taking this conservative approach and we feel, like I said, very confident in our business and where it’s going.

We’re very excited about the current pipeline that we have. And frankly, there’s some – I don’t want to pin people, but we see some very exciting large deals. And unfortunately, during a cloudy time like this from a macroeconomic standpoint, sometimes clients take a bit longer to make a decision, sometimes they change the overall commitment of how large they’re going to commit to in some of these large new deals, et cetera. And so we just felt that it was prudent to take this conservative approach.

Maggie Nolan: Thanks, Ken. That makes sense. And then when you think about those large deals that might be building, is there any kind of incremental demand for maybe more of an offshore component within those deals. I know you’ve added a couple of locations. And then would there be any impact from that kind of incorporated into your revenue or your guidance?

Ken Tuchman: Absolutely. So I don’t want to speak for Shelley, but what I would just tell you is the following. Our focus for 2023 goes without saying it’s all about execution. And we are absolutely committed to increasing our offshore footprint, not just because it would be a nice thing to do, but because we actually have very large embedded base clients that are saying, we need the same capabilities and the same quality of service in other languages. And so we are fast tracking bringing online Asian languages, fast tracking, bringing on more European languages, et cetera, in the markets that we’re entering. So to answer your question, there will be more offshore business coming on, as a matter of fact, our pipeline has a significant amount of offshore business.