Question-and-Answer Session
Operator
(Operator Instructions). Our first question comes from the line of Anthony Paolone with JPMorgan. Please go ahead.
Anthony Paolone - JPMorgan
You’d alluded to your operating margins being weaker for a couple of reasons. I was wondering if you could just elaborate on that, your gross margins, and what needs to be done to get those back up into the 40s where they’ve run historically?
Brett White
Sure. Anthony, this is Brett. Let me just make a few general comments and I’ll turn the question over to Bob, who’ll hit it specifically. But the two points I’d make, Anthony, first of all, what you are seeing in margins in our business late last year and early this year is primarily a result of mix.
So as you see the precipitous decline in transaction activity globally, which are traditionally higher margin businesses, you are now seeing a much higher [rating] of revenues in the 40% range coming from the outsourcing businesses and these are lower margin businesses. That’s the main story.
And before I turn it over to Bob, I would like to make a point about margins. Our margins may have been a bit lower than you expected, and I read that in your report last night, do keep in mind, our margins are materially higher than any competitor we have in the business. And we think we do an exceptionally good job of managing the business to produce profits and not just revenues.
So with that comment, Bob, I’ll let you answer the question on gross margins.
Bob Sulentic
Thanks, Brett. And Anthony, Brett hit the high points. There’s really two things. Number one, in our cost of services, there is an element of fixed cost even though there is large variable cost tied to production in those numbers, and that’s for our transactional businesses, there is an element of fixed cost.
And then, secondly, as Brett said, we now experienced at the end of the first quarter that 44% of our revenues were our management businesses, which were by far the most stable revenues and we’re very-very glad they are there at this point in the market cycle, they do operate on different margins than our transactional businesses.
Our view of this is we want to see those margins come back up, but we think that being where we are today is indicative of the fact that we’re going to have great opportunity for operating leverages as things turns around.
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