Sykes Enterprises Inc (SYKE) Q4 2020 Earnings Call Transcript

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Sykes Enterprises Inc (SYKE)
Q4 2020 Earnings Call
Feb 24, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Sykes Enterprises Fourth Quarter 2020 Earnings Call. [Operator Instructions]. On the call today is Sykes management team including CEO Chuck Sykes; CFO John Chapman; and IR Head Subhaash Kumar. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Management has asked me to relate to you certain statements made during the course of this call as they relate to the company's future business and financial performance are forward-looking. Such statements contain information that are based on the beliefs of management as well as the assumptions made by and information currently available to management.

Phrases such as our goal, we anticipate, we expect, and similar expressions as they relate to the company are intended to identify forward-looking statements. It is important to note that the company's actual results could differ materially from those projected in such forward-looking statements. Factors that could cause the actual results to differ materially from those in the forward-looking statements were identified in the yesterday's press release and the company's Form 10-K and other filings with the SEC from time to time.

I would like now to turn the call over to Chuck Sykes, President and CEO. Please go ahead.

Chuck Sykes -- President and Chief Executive Officer

Thank you, operator. Good morning everyone and thank you for joining us today to discuss Sykes Enterprises' Fourth Quarter 2020 financial results. On today's call, I will provide a high level review of our results and John will walk you through the numbers and then we'll turn the call over for Q&A.

I want to begin by thanking in our dedicated employees worldwide for their hard work and in the phase of COVID-19. We are doing everything we can in our capacity into continuing to minimize disruption to them and to their families that financially depend on it. The good news is that the recently approved vaccines and other therapeutics against COVID-19 have proved effected and they are being rolled out. In the meantime, we are employing the latest safeguards that adhered to the highest operational safety standards for all the employees in our facilities. While we are happy to see 2020 in the rearview mirror, the truly historic year did highlight our strengths as a company, in particular our resilience. But, just as important in highlighted our strategic capabilities around our global work from home platform as well as our capabilities around full lifecycle customer experience management, which spans marketing sales, service and digital transformation whether it's about leveraging our portfolio of digital media properties to help consumers make informed purchase decisions or helping the enterprises grow their business with our turn-key marketing and sales solutions or even a little bit enterprises serve retain and grow their existing customers by leveraging our digitally enabled workforce. The strength of our strategic capabilities were foundational to our success against the challenges of the pandemic. The strategic evolution coupled with it's trend of our people, our culture, and our agility played a pivotal role in helping our clients proactively adapt to the shifting consumer trends around digital and to stay at home demand that is reshaping various sectors of the global economy. And, as our financial results underscore debt dynamic, for we have now delivered back-to-back record revenues to close out full-year 2020 with constant currency organic revenue growth of 5.7%. This revenue performance is at the top end of our 46% range. It is also worth noting that we have delivered these results despite the fact that we had at least 200 basis points of annual drag from the transportation vertical and more than 300 basis points of drag from the communications vertical in addition to some bargains a softness in clients with exposure to the small medium business marketplace. The good news is that the communications vertical reached an inflection point of the sword in the third quarter and the rate of declines in the transportation vertical or probably close to bottom me now, which means that the drag from this vertical should likely begin to moderate by the second half of 2021. Additionally, we are seeing sustained opportunities with traditional and new economy market segment within the traditional segment, it is support opportunities for banks and credit card holders as well as providers in wireless broadband, healthcare and technology verticals. We are leveraging our success across our vertical market base to target known global brands and also brands that are national in scope that are either outsourcing for the first time or entering new markets or accelerating their existing outsourcing. At the same time, we continue the program ramps across the new economy segment categories such as [Phonetic] e-retail, e-commerce, online food delivery and self-install security systems are all seeing solid growth.

Turning to our margin profile, we are especially proud of our achievement here, although our non-GAAP operating margins increased to 8.4% in 2020. They really hit a decade high. If you adjust for the 20 basis point impact of stock market driven EDC expense, the solid margin performance is on the back of revenue growth that was more than three times the level of 2015 when adjusted operating margins hit 8.5%, better yet. Our 2020 operating margins have further room for expansion as clients made commitments to work from home and we are able to strip out the carrying costs associated with underutilized capacity. Even if we have to make some incremental IT investment and pricing trade-offs because of change in mix between brick and mortar and home agent delivery, we believe the initiatives that are under way with the overhaul of our operational value chain will provide a further boost of margins in the coming years. And finally, we delivered solid non-GAAP earnings growth for the quarter in the year of 28% cash flow from operations in 2020 was a record giving us the dry powder to continue to reinvest in the business as we did with the acquisition of the company, the penny hoarder and to return capital to shareholders as we did when we repurchased 1.9 million shares during the year. So, as we enter 2021, we continue to have momentum in our business and with the gradual using the lockdowns and COVID-19 vaccine rollout worldwide and even with the virus mutations, we're hearing about, we are cautiously optimistic given the knock on benefit of these actions on consumer confidence and economic growth. Through our ongoing investments to strengthen our differentiated full lifecycle capabilities around digital marketing, sales and service as well as our investments in self service, artificial intelligence and robotic process automation, we believe that our market position is strong and at a place is on the path of the progress. Just as our investment in our work from home platform almost a decade ago placed is on the path of the progress in the midst of the pandemic. And, as our clients across various geographies begin the transition from their business continuity base to one that is more steady state. They will be looking for season operators and leaders with the work from home platform, which we believe will help us take share from competitors. While we can't predict the pace of economic recovery during this uncertain time, our solid balance sheet, along with our unparalleled portfolio of capabilities solidly positions us to deliver success to our clients and unlock value for our shareholders. With that, I'd like to turn the call over to John Chapman, John.

John Chapman -- Executive Vice President and Chief Financial Officer

Thank you, Chuck. I would now like to discuss our quarterly financial results, particularly key P&L, cash flow and balance sheet highlights. As Chuck mentioned, we continue to record financial performance in the quarter. We reported record revenues of $450.5 million versus $425.3 million last year, a growth of 5.9% in the quarter. Fourth quarter 2020 revenues also exceeded the top end of our revenue outlook range of $439 million to $444 million by 6.5 million. More than half of that performance was broad based volume increase with the remaining due to foreign exchange benefit. On a year-over-year comparable basis, fourth Quarter 2020 revenues included a 6.2 million foreign exchange benefit. Excluding the foreign exchange benefit, fourth quarter revenues were up approximately $19 million or 4.5% constant currency organic revenue growth. Thanks to our agility and our diverse business mix. By vertical market on a constant currency basis, technology was up around 19%, healthcare up to 16%, financial services up 5%, other which includes retail of 3%, communications was flattish, all of which was more than offset the 31% decline in the travel and transportation vertical. Fourth quarter 2020 operating income was set up to $32.3 million versus up to $33.1 million in the same period last year with an operating margin of 7.2% versus 7.8% for the comparable period. Fourth quarter 2020 operating income reflects various costs such as impairment, merger and integration etc. totaling $9.1 million versus 6 million in the prior year period or 200 basis points versus 140 basis points impact correspondingly. Excluding the impact of amortization of acquisition related intangibles, impairment, merger integration as well as other costs. Fourth quarter 2020 operating margin remained unchanged at 9.2% in both comparable periods due to higher accrual for long term and annual performance based compensation in the fourth quarter of 2020 driven by financial outperformance relative to fund operating results. Fourth quarter 2020 non-GAAP operating income still reflects an expense of approximately $1.7 million, or approximately 40 basis points, up from 700,000 or approximately 20 basis points in the year ago quarter related to the market-to-market adjustment of stock based deferred comp driven by an increase in global financial markets in the fourth quarter. Fourth quarter 2020 earnings per share were were $0.64 versus $0.56 in the same period last year. The fourth quarter 2020 driven by a swing and other expenses, a lower tax rate and a lower share count more than offsetting the aforementioned impairment of right-of-use assets and other assets. On a non-GAAP basis, fourth quarter 2020 diluted earnings per share were a record $0.81 versus $0.69 on a comparable basis. Of the $0.12 per share increase approximately $0.04 is driven by operations, another $0.04 due to positive swing in total other expenses,$0.03 due to a lower share count are the penny from a lower tax rate. [Phonetic] client mix for a moment on a consolidated basis, our top 10 clients represented approximately 39% of total revenues during the fourth quarter, down from 41% from the Utica period due to broad-based growth outside of our top 10 clients. In fact, we had note 10% client in both comparable quarters.

Now, let's turn to slide, cash flow and balance sheet items. During the quarter, cash flow from operations jumped to $32.8 million from $3.7 million due to a combination of strong earnings and working capital swing factors. Capital expenditures increased to 3.8% of revenues from 3.3% of revenues in the year ago period. The increase was driven by a combination of timing, PC refresh, and the sheer number of PCs purchased for home agents along with targeted capacity expansion at existing sites to support growth. Trade DSOs and the consolidated basis for the fourth quarter were 81 days, up to this comparably and unchanged sequentially. The increase in DSOs compared to last year is prime due to drop off in clients that were mandating receivable factoring. The DSO was 81 days for both Americas and EMEA region and as we have stated before, we expect some clients to continue to stretch out payment terms as they manage liquidity needs more aggressively. Our balance sheet at December 31, 2020 remains strong with cash and cash equivalent of $103.1 million, of which approximately 84.1% or 86.7 million, was held in international operations.

During the year, we purchased around 1.9 million shares with prices ranging from $23 to $33 to $33 per share. We have roughly 1.7 million shares remaining under our 10 million share repurchase program authorized in August, 2011 and amended in March, 2016. At the year-end, we had 63 million in borrowings outstanding, down from $73 million and the end of 2019 under our 500 million credit agreement. We continue to had some of our foreign exchange exposure for the first quarter and full year 2021, we are hedged approximately 12% and 6% at a weighted average rate of 48.5% and 45.7% Philippine peso of US dollar respectively. In addition, our Costa Rican colon exposure for the first quarter and full year is hedged at approximately 38% and 28%, at weighted average rates of 574.87 and 586.43 colon to the US dollar respectively. Now let's review some seat count and capacity utilization metrics. On a consolidated basis, we ended the fourth quarter of approximately 45,600 seats, down approximately 2,600 seats comparably. The reduction in the capacity reflects decisions made by certain client dependently all through the delivery mix away from brick and mortar to our home agents solution due to COVID-19. The fourth quarter seat count further broken down to 38,000 in the Americas, and 7,600 in EMEA, from 40,300 and 8000 respectively in the year ago quarter. Capacity utilization rate at the end of the fourth quarter of 2020 was 74% for the Americas, and 75% for EMEA, versus 76% for the Americas and 72% for EMEA in the year ago quarter. The capacity utilization rate on a combined basis and comparable basis were unchanged at 75% including home agent in the compatible utilization calculation; however, would have shown utilization would have increased comparably.

Now turning to our business outlook. Our first quarter and full year 2021 business outlook reflects healthy levels of demand stemming from existing and new clients as well as new lines of business across our vertical markets consistent with the pattern that has driven those verticals to date. We expect our first quarter through full year, I would to largely maintains it's historical pattern as we ramp client programs and step up levels of information and IT-related investments to reinforce our infrastructure and agility in the marketplace. Our first quarter 2021 outlook also reflects the revenue and diluted earnings per share contribution of $15 million or $0.02 respectively from the pending hoarder acquisition. For 2021, we expect the acquisition to contribute approximately 60 million in revenues and approximately $0.08 in diluted earnings per share. We remain well positioned strategically to address opportunities in the market, justice as we have throughout the pandemic. Secondly, we continue to work with clients than the future view of their delivery strategy between home agent and brick and mortar facility driven by COVID-19. And as such, we continue to adjust our capacity footprint similar to actions taken facility leases in 2020 as we get greater clarity around those decisions. Third, our revenues and earnings per share assumptions for the first quarter and full-year are based on the foreign exchange rates as of January 2021. Therefore continued volatility in the exchange rates in US dollar and the functional currencies of the markets we operate could impact both positive and negative revenues and both GAAP and non-GAAP and per share relative to the business outlook for the first quarter and full year. Fourth, we anticipate total other interest expense, net of approximately $1.4 million on $5.6 million for the first quarter and full year respectively. In the first quarter, roughly $1 million of the 1.4 million reflects the impact of the company's stake in EXL technologies which is poised to accelerate as growth investments in this business under the accounted for under the equity method.

The remainder reflects the interest expense related to the acquisition of the penny hoarder. For the year, roughly $4 million due to excel and the remaining 6 million interest expense due to the penny hoarder. The amounts in the other interest income expense however exclude any potential impact of foreign exchange gains and losses. Finally, we expect our full year in 2021 effective tax rate to be below prior year levels, because prior year was impacted largely by non-deductibility of goodwill impairment. We expect full-year 2021 non-GAAP tax rate to be roughly in line with the prior year.

Considering the above factors, we anticipate the following financial results for the three months ending March 31. Revenues in the range of $454 to $459 million, an effective tax rate of approximately 24% in both the GAAP and non-GAAP basis. So, we do need to share kind of approximately 40 million, diluted earnings per share of approximately $0.58 to $0.61. Non-GAAP to listen $9 per share in the range of $0.67 to $0.70, capital expenditures in the range of $14 to $16 million. For the 12 months ending December 31, 2021, we anticipate the following financial results. Revenues in the range of $1.833 billion to $1.853 billion effective tax rate of approximately 24% both GAAP and non-GAAP, fully diluted share kind of approximately $40.1 million, diluted earnings per share of approximately $2.60 to $2.73, non-GAAP diluted earnings per share in the range of $2.94 to $3.07 and capital expenditures in the range of $47 to $53 million. One final note the outlook, non-GAAP diluted earnings per share for the first quarter and full year exclude the impact of XL technologies while GAAP diluted earnings per share does include the impact of EXL technologies. With that, I'd like to open the call up for questions, operator.

Questions and Answers:

Operator

[Operator Instructions]. Our first question comes from Josh Vogel with Sidoti & Company. Please go ahead.

Josh Vogel -- Sidoti & Company -- Analyst

Thank you. Good morning, Chuck and John and Chuck, I got to say you're sound in much better, likely to the Super Bowl [Indecipherable] was so you didn't have to do a screen, much of the TV.

Chuck Sykes -- President and Chief Executive Officer

Yeah, I can hear you. Yeah. I appreciate it.

Josh Vogel -- Sidoti & Company -- Analyst

Yeah. So, my first question is when we think about client commitments between home agent in brick-and-mortar store, do you still feel comfortable that it would be like a [Indecipherable]

Split post pandemic?

Chuck Sykes -- President and Chief Executive Officer

Josh, I think in general that number is pretty safe right now like in the European market, we're [Phonetic] into our clients. And we're actually think it could be anywhere from 35% to 50% would remain work from home. In the US, we're probably closer to about the same range. I would think it depends, because in the US, we support a lot of financial services and the financial services companies want to get back into the centers. So that, that affects that a little bit there offshored. Well, it's interesting. And, that our clients for the most part, want to come back into the centers. But, when we survey our employees, and this is pretty much around the world, it's 85% want to state working from home. So, in 2021, I think it's got to really BD year that we get clarity, because you've got employees want to do one thing, clients wanting to do another, and then we've got to look at the government policies that are being put in place. So, with governments or say we can only utilized buildings 50%, but clients want to go back again and employees well it stay out. We're trying to figure out exactly all that's going to shake out in the end. So, I think 2021 done in general for commercial real estate. I'd be, we're going to all of a lot more clarity, but I bet is going to take that before. We got to wait and see what happens with the buyer is, I mean these mutations they is created where people stay at home more and and everything, but in the end with everything that I'm saying. Absolutely, we believe on a long-term basis. We'll have at a minimum 30% of our workforce working promo at a minimum, but I'm just trying to go to more color as to what we're having they kind of wait to see what unfolds here.

Josh Vogel -- Sidoti & Company -- Analyst

Yes, of course, I appreciate all that color there. What's usual pricing concession that you give up for at home?. But, but then again, also the accretion, you could see on the margin line or net incremental benefit as at-home usage goes up. So, let's say the split ultimately does become 35 to 65 or even 40 to 60, what should where is the incremental benefit there?.

Chuck Sykes -- President and Chief Executive Officer

Well, right now, I will say that for a client, once to be a 100% at home and willing to commit to that pricing that can be around 8% to 9% less than brick and mortar. However, as a company, with that, I got a pricing, we will make the same absolute dollar amount of profit. So, it does it translate into a reduction and that case it would be, it would be a better situation and clients that are wanting right now to have what we call somewhat of a hybrid situation, there is no price reduction. I mean we really, because it's not affording us the opportunity to really be able to maximize our facility utilization and that's, so, but.

John Chapman -- Executive Vice President and Chief Financial Officer

Yeah, I mean the way I look at this, Josh, is if you look at, in the worst case scenario, it's neutral to margin and then if you look at the other side, best I mean what you're talking about those of reduces the more whole reduces the long-term capital intensive in the business and also as we've spoken about before is when you get swings in demand, you don't have G&A certain around its idle and not improved. I mean that's accretive and in Chuck's also spoken in the past about our home in terms of your ability to grab opportunities if you're not box by a physical facility. You've also got bear growth opportunities. So I don't think there's any downside to hire it goes. The question is, how good is the upside. And, I think that's what chuck seek near in the perfect world. We could give some of their price decrease, it'd be great if we could keep some of that, but we can keep the absolute dollars, the same. So we're no worse off. All, we've got a business is less capital intensive and more flexible.

Josh Vogel -- Sidoti & Company -- Analyst

Yes that makes complete sense. And just, one more on this vein, you made a comment about what but level of investment are you planning on making this year in building out our maintaining the Remote Infrastructure considering that the delivery model continues to make up a bigger piece of the pie?.

Chuck Sykes -- President and Chief Executive Officer

There is not really any one item. I mean if you look at our operating margins. Josh, I mean you would look at and think we're being conservative in our overall margin expectations. We've got double-digit earnings-per-share growth, but the margin percentage is a little bit higher than what it was in 2020. I think what you're seeing and there is a combination of things, one of which is investment in our region end points. But also, and there is also investing probably accelerated investing and moving to the cloud and being more nimble in our IT infrastructure. So, those two things are kind of embedded in our guidance, plus the fact, and Chuck's mentioned there were, we've still not got clients making final decisions, and we've got this difference between what employees, what government demand and clients want just no. And so, in our guidance, we've kind of assume that the facilities we've got today we'll have the rest of the year. Now, when we get to those further out quarters that may not be the case and we will it make those changes that will help help the margin profile, but at this moment in time until we get clarity, we kept our annual assessment of call. So, maybe that helps you a little.

Josh Vogel -- Sidoti & Company -- Analyst

Yeah, it definitely does, and just one last one for me kind of building off of that you've had a long-term operating margin target of 8% to 10% range. If we see greater traction in digital portfolio in the pare down reliance on brick and mortar that footprint there, do you think this could be a long-term 10% to 12% margin business or have you thought about what it would look like then?.

Chuck Sykes -- President and Chief Executive Officer

We are still focused on 8 to 10, Josh, I mean we are clearly got record quarter performance and we've had a record year for Sykes and we do want to be at the upper end of the 8 to 10. So, it's about for me it's not about to 10 has been at the higher end of that and being consistent. Because when you look at our company in the past, that where we need to think about, not about growth being greater than 3% to 5% but being consistently 3% to 5% and then yes, let's talk about what we think, it can be achieved, but we don't voice talk about something that we think in terms of the market is definitely doable but guided us that kind of thing that we think we can do and it's the same with the operating margin profile, we'd like to begin in the 9s. So, we were sometimes in a few years back into the 5% and 6% years. We don't want to ever be back there with notable prints solidly in the years we want to get to the upper end of the 8 to 10. And then if you look at some of our compare, some of them actually can get to the 10% margin. So even even some the like a TP when you strip out there especially services they really just over the 10 number. So, it does get to the point where it's difficult to get to the connect, especially the 12 number that you mentioned. That's a real challenge and even some of the best operators in the business that have delivered consistent growth and find out and can be a challenge, but we are still focused on the 8 to 10. We just want to be in the upper echelons of that before we start talking about what we think we can do, I would say that.

Josh Vogel -- Sidoti & Company -- Analyst

Totally understand. if I could just sneak in one more. thank you, what was the revenue split in Q4 of traditional versus new economy clients and how does that differ from the year prior?. Thank you.

John Chapman -- Executive Vice President and Chief Financial Officer

I don't have that, because we really look at verticals. So, I would say is I could get we can try and find out, Josh. But, it's really hard to define for you describe as new economy versus old economy. Well, I would say is those high growth clients at a disproportionate reason why we've been growing versus versus what you describe as traditional clients. I don't specifically have the number of exactly before. That is because I think defining those clients with an eye of the beholder as Google and new economy clients they've been around for a long time. So, I think they are high growth clients that help help you grow but they are really embedded within and our financial services sector. we've got lots of new fintech helping us grow our vertical. But, we've also got some traditional money banks is helping us grow that not vertical. So, we more look at is the vertical of which I would say a disproportionate number of new logos and end the new economy space, but I need to us the Bosch the circle back with you on the exact number.

Josh Vogel -- Sidoti & Company -- Analyst

It sounds good. Well, thank you for taking my question and stay safe guys.

Chuck Sykes -- President and Chief Executive Officer

Hi, thanks.

Operator

Our next question comes from David Koning with Baird. Please go ahead.

David Koning -- Baird -- Analyst

Yeah, hey guys, Congrats on that was really good 2020.

Chuck Sykes -- President and Chief Executive Officer

Thanks David.

David Koning -- Baird -- Analyst

Yeah. So maybe to kick it off Q1 guidance is quite good in terms of growth in normally your Q1 is kind of the low part of the year for revenue. But, the way this year, it looks like you're guiding is for revenue to be pretty similar all of the quarters or at least similar to be at the Q1 number kind of as an average for the whole year. And I'm just wondering, what might be different this year that would kind of just allow the normal sequential Ram pattern through the year?.

John Chapman -- Executive Vice President and Chief Financial Officer

So, Q2 usually is our lowest quarter debit. Well, I would say to you in general is we did talk about this and we spoke about whether we want to just give a Q1 number of where we would guide for the full year. We decided we wanted to guide for the full year. But, what I would say is clients are still struggling on forecasts. I think we are much more confident in our Q1 forecast and if you look at the full year, clearly, there's more variability, but I would still say today in COVID world, there is much more variability than existed in previous years. And so, we've obviously work with our clients to produce forecasts. Well, I would say to you is, if we simply used what clients says, we would have vastly under forecast 2020 numbers. And, I think the same is true in the quarters of 2021. So, as what we are guiding, but I would say is there is more uncertainty to the normal in the Q2 to Q4 numbers, but we wanted to give a number out there because we fell if that helped everyone understand what we are currently seeing even if we think that might be a little bit on the conservative side, but traditionally Q1 is always. I think it's about 2%, Q2 is usually about 2% lower, David and I think we might see that this year and, overall I think Q1 strong and we're focused on and we are, continue to work with clients to try and make the forecasts more accurate and we are hopeful, we can exceed our guidance, but our guidance is our guidance at this point.

David Koning -- Baird -- Analyst

Yeah. Okay that makes sense. And then secondly, on margins in Josh was asking some of this type of stuff, too, but it looks like the way you're guiding us for incremental margins to be somewhere in the 10% ballpark, give or take, but it would seem like this might be one of the best incremental margin years you've ever had just simply because you'll get the core revenue growth, which will drive some, but then I know you've cut capacity some, what I mean it showed up in your last 10-Q that could add. I don't know if it was $10 million or whatever that would seem to go on top of that. So yeah, I guess I'm just wondering why we won't get a little more margin flow through guidance this year?

John Chapman -- Executive Vice President and Chief Financial Officer

Yeah, I mean we did touch on with Josh, you're right, I mean, we did have, there is a number of little things, David, kind of making the EPS or the margin growth a little bit more muted. We do assume that we will have additional stock comp. So, forget the EDC and we will have additional stock comp in the year a little bit year-over-year and as we said with Jos, we are going to accelerate some of our IT transformation clint this year. It does give us far describes a little bit of a bubble where we've got both and premise and cloud setting in the business this year. We've accelerated some of our agent endpoint refresh to build a run secure and handle our home platform as is also said, we're still working to try to understand the work from home permanent and volume, so that we can then take further action on facilities. So these are all, I guess been a little bit of a headwind to the margin growth that you'd see year-over-year. However, if you actually look at EPS growth, It's clearly it's 10% if you actually look at 2019 versus mid point of 2021. I think we're talking about over 40% EPS growth. So, you're right to kind of a question will be in cautious on our margin expectation, but there is some reasons for the muted number in 2021 and a few of which are transitional and a few of the which just headwinds. But again, going back to Josh's question but 8 to 10. We are still focused on come again in the '9s because that's where our next point of call is in terms of a clearly operating above the 0.5 percentage points now, probably get toward the 9. So, yes, those, that's kind of some of the color as to why we're not guiding in the 9% versus the high 8s this year just now.

David Koning -- Baird -- Analyst

Sure. Great. Well, thanks guys. Nice job.

Chuck Sykes -- President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions]. Our next question comes from Vincent Colicchio with Barrington Research. Please go ahead.

Vincent Colicchio -- Barrington Research -- Analyst

Yeah, chuck and John, should we be concerned that the financial services growth has slowed somewhat the past two quarters, is that just lumpiness of business or is there some maturing there?.

Chuck Sykes -- President and Chief Executive Officer

No. I don't think I would just say is it's more kind of the lumpiness in the business, the way to sell cycles, kind of have been flow, financial services is still very strongest out there for us. And, and in fact, John alluded to, we are winning if you want to use the new economy definition, we are winning a lot of FinTech companies in that space. Now, the company is today that we're winning are there smaller in revenue size, but these are the kind of the companies that in year 2, 3, 4. Well, typically generate they can be into an app to 4 times the revenue that we're doing the nationally. So, even though there may not be in the needle a lot right now for us. We definitely think they're going to offer us better growth in the years ahead for us. So, I wouldn't worry too much about that on financial services.

Vincent Colicchio -- Barrington Research -- Analyst

I'm sorry if I missed this, but our clients asking for price decreases for at homework as of yet.

Chuck Sykes -- President and Chief Executive Officer

In general, they are not. And, that is because they have not made in general, made definitive statement or decision to completely stay work from home. So, as of now, we are not really dealing with that in a major way. No.

Vincent Colicchio -- Barrington Research -- Analyst

And, what does the pipeline look like symphony and how much is in your guidance for the year?

John Chapman -- Executive Vice President and Chief Financial Officer

Well, again Symphony simply back in 2019 that about $50 million of external revenues Vincent. And last, and that was a growth of over 100% that we saw in the year. Last year, they were down $14 million. No. We've got growth coming back in, in the second half of this year, but it will still be operating below the 2019 number. So, we believe in the market long term. I think, we've spoken about how we've done there automation scales inside the company to help reemerging a lot of our operational value chain, which we think will eventually come through and improved margins. So, we're not wasting the time that we've got. So we expect them to be somewhere between 20 and 30 million of revenues in 2021, but we still believe the skill set and see the company and we are actually still we're doing a lot more on Symphony work related to Sykes existing clients. So, we're encouraged by some of those changes bar. Sadly, we're still going to be operating below 2019 levels in 2021.

Vincent Colicchio -- Barrington Research -- Analyst

Okay, thank you.

Chuck Sykes -- President and Chief Executive Officer

Thanks.

Operator

[Operator Instructions]. I would like to turn the conference back over to Chuck Sykes for any closing remarks.

Chuck Sykes -- President and Chief Executive Officer

No additional remarks, just as always, we appreciate everyone's participation and look forward to catching up next quarter. Everybody have a good week. Thank you.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Chuck Sykes -- President and Chief Executive Officer

John Chapman -- Executive Vice President and Chief Financial Officer

Josh Vogel -- Sidoti & Company -- Analyst

David Koning -- Baird -- Analyst

Vincent Colicchio -- Barrington Research -- Analyst

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