And then to answer your question from a vertical perspective, where we see, I think, the biggest challenge is still tech and retail, as you mentioned. We continue to see further pullback of spending as our clients going through this tight budget cycles. From our perspective, our clients in financial services is relatively stable on a whole, but obviously, revenue decline was impacted Q-on-Q from some of the client-specific scope reductions we mentioned last quarter, including a large one in Q2. And then energy, public, healthcare is a strategic focus for us. And then they are more recession resilient. And we’re seeing the sector doing reasonably well. But similarly, with a large client ramp down, we called out again last quarter, which was at the beginning of July, that impacted the overall revenue growth from a year-on-year perspective, but we’re happy that we’re now — 26% of our portfolio is in energy, public and health care.
And finally, Automobile, Travel and Transportation remained strong in Q3 with 12% growth and also a positive outlook.
Operator: Our next question comes from Bryan Bergin with TD Cowen.
Bryan Bergin: I guess the first one, any early learnings you can share here from the centralized delivery structure?
Xiao Guo: For sure. Thanks, Bryan, for the question. So we’re seeing — one of the things Erin called out is the utilization getting back to the range we’re aiming for, even though it’s still at the lower end of the range. This is largely to do with the DEC, the center we created now that we’re managing supply capacity in a more centrally matter as opposed to each country or even a subsegment in a country doing own thing. So we’re seeing a very obvious improvement on utilization optimization in several regions that they have to get back to the midrange or even getting back to the high end of the range of their utilization, which is a clearly good sign. From a go-to-market perspective, we are still in the middle of getting through the transition to have the market team be more client-centric and vertical-centric.
We’re definitely seeing signs where our teams are generally spending more time with the client with less internal friction. We do believe that is going to help us to become more intentional and strategic in funding investment in demand generation. I think Erin can probably comment some of the lessons learned on the operational centralization side of it.
Erin Cummins: Thanks, Xiao. I think the point that I would want to add around the operations side of it would simply be — we’re opening up a lot of opportunities to drive both efficiencies and process improvements in our business. And for us, we’re seeing that very much as a win-win. Xiao touched on an example of that from a demand perspective, where decentralization of how we’re going to market is actually reducing friction for some of our demand leaders and enabling them to be in front of clients more, and that’s a great thing. That’s not the only place that we’re seeing and I think going through this restructuring and looking for these opportunities, we’re refining processes that really again, not only will provide cost savings by moving into a lower cost part of the business, but just general improvements overall. So on the whole, things are trending very well.
Operator: Our next question comes from Jason Kupferberg with Bank of America.
Tyler DuPont: This is Tyler DuPont on for Jason. It seems like the industry trend of moving towards more cost reduction programs compared to growth seems to have been occurring for the past several quarters now, given the choppy macro understandably, I’d be curious to hear your strategy to sort of capture some of that demand? For example, like how much of the $1.4 billion in bookings is focused on more of the cost takeout initiatives versus your higher bill rate consulting projects? And maybe if you can just sort of how — speak to how that impacts both the top line and margin profile of the business?
Xiao Guo: Thanks, Tyler. So our clients are definitely more cost conscious. And then their internal priority is moving to cost reduction more than growth initiatives. And then what we’ve been doing from a service offering perspective is to focus more on offerings that can help to create efficiency and then targeting cost saving programs. For example, engineering effects in these programs that we’ve been rolling out, which is resonating with a lot of our clients in North America and Europe. That’s targeting building an engineerings akin platform to allow our clients to be more efficient with their own internal R&D and then delivery practice. The other thing we roll out is DAMO, it is Digital Application Management Operation services.
This is more of the digital version of the traditional support maintenance. It helps our clients to both keep running their digital assets in a modern way, but also put the program in a run mode versus the build mode and then to allow them to reduce cost in the short term, but also paves the way to get back to the build phase when the budget situation with their priorities started to change. The other thing I think we do a lot is, as Erin alluded to earlier, is to move a lot of the engineering work to offshore, so that we can deliver more with less. And this is happening across the board, across the verticals. That’s how we’re seeing some of the top line revenue being affected because even though we’re delivering the same hours, it’s delivering in a lower cost, lower bill rate country.
But at the same time, in the long run, it should be margin accretive because we generally get higher margin with offshore. But in the short term, we’re not seeing that margin benefit instantly because of the transition and then — which also resulted in lower utilization in some of the onshore capacity we have, it’s causing also a small dent on the margin side of it. But overall, we feel that we are working with our clients, helping them with their priorities, and our churn rate is very low. We continue to work with the clients we’ve been working with for a long time. Our top 10 clients, average tenure is nine years. We feel confident that if we help them through a difficult time, we’re going to be better positioned to ramp up and focus more on the growth initiatives when the time gets better.
Tyler DuPont: Okay. Great. That’s super helpful, Xiao. And just quickly to follow up on the margin dynamics that you were alluding to. It looks like EBITDA margin was particularly healthy during the quarter, the 4Q guide may be modestly below Street expectations. But how should we be thinking about the moving pieces of the margin story as we look through the rest of the year? For example, when will the offshore margin tailwinds sort of actually hit the business? And just how do we think about margins as we go forward to 2024 and beyond, should we see a more new normal in the low double-digit range? Or should we anticipate kind of a return to the more mid- to high teens. Just sort of any clarity there would be appreciated.
Erin Cummins: Thanks for the question, Tyler. So how to think about margins, I did touch on a couple of these points earlier, and I think it’s worth repeating. So you asked around the offshore tailwinds and how long until we start to see that work through. it’s hard to say exactly, but my view is that it will probably take about two more quarters to work through that fully. And so maybe about halfway into 2024. Things do improve as we move along. So it’s not as if we will wait to see the benefits fully until that point. But the impact is — it’s incremental. And so we’re focused on seeing those improvements, but at the same time, committed to working with our clients to make the shift. I touched on utilization before as did Xiao.
