Convergys Corporation Reports Second Quarter Results and Updates Guidance.CINCINNATI -- Convergys Corporation (NYSE NYSE See: New York Stock Exchange : CVG CVG Convergys Corp CVG Corporación Venezolana de Guayana CVG Clear Vertical Grain (woodworking) CVG Carrier Group CVG Corporacion Venezolana de Guyana CVG Comprehensive Video Group (South Hackensack, NJ, USA) ), a global leader in providing customer care, human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. , and billing services, announced today its financial results for the second quarter of 2007. SUMMARY * Earnings of $0.28 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share; equal to same period last year * Signed global HR BPO BPO Business Process Outsourcing BPO Benevolent & Protective Order (of Elks of the USA) BPO Benzoyl Peroxide BPO Business Process Optimization BPO Broker Price Opinions BPO Buffalo Philharmonic Orchestra contracts with Johnson & Johnson and Starbucks * Excellent cost management and continued growth of international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. in Information Management * Sixth consecutive quarter of year-over-year Customer Care revenue growth; margin decline attributed to currency and new capacity expansion * Employee Care revenues up 25 percent; operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. declined primarily due to expensing $6.1 million in implementation costs related to one HR BPO contract Convergys second quarter revenues of $707.0 million were up 2 percent compared to the second quarter of 2006 reflecting growth from the Customer Care and Employee Care segments. Significant improvement in operating income in Information Management was offset by declines in Employee Care and Customer Care. Operating results include expensing implementation costs of $6.1 million related to a large Employee Care HR BPO contract, approximately $7 million of negative impact due to the weakened US dollar, and capacity expansion costs of several million dollars in Customer Care. Convergys operating income was $58.1 million in the second quarter compared with $62.8 million in the same period last year. Net income was $38.8 million in the second quarter. Earnings of $0.28 per diluted share were the same as the prior year period. "Convergys continues to be well positioned for long-term growth. We've established a strong position in the HR BPO market, our Information Management business is doing an excellent job managing costs and continuing to grow in international markets, and there's a continuing trend toward outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. in the customer care industry," said Dave Dougherty, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Convergys. "However, as this quarter's results demonstrate, we've got short-term challenges with implementation costs on a large HR BPO contract, continued currency pressure, and increased capacity expansion costs in our Customer Care business. We have a great team of employees at Convergys and all of us are focused on overcoming these challenges to deliver higher revenue and earnings growth." Operating Performance by Segment Customer Care Customer Care revenues of $460.6 million were up 3 percent compared to the same period last year. Revenue increased with several clients in the Communication verticals which more than offset revenue declines with several clients in the Other Markets vertical. Customer Care operating income and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: were $44.7 million and 9.7 percent, respectively, compared with $48.2 million and 10.8 percent in the prior year. The impact of revenue growth and cost saving initiatives was offset by the negative impact of a weakened US dollar and capacity expansion costs incurred to support the anticipated future growth of several existing and new clients. Information Management Information Management revenues of $183.4 million were down $12.0 million, or 6 percent, compared to the same period last year. Double-digit revenue growth with several international clients was offset by the negative impact of two large North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. client migrations. At the same time, operating income was up $7.9 million, or 26 percent compared to the prior year period. Operating margin increased to 20.9 percent compared with 15.6 percent in the same period last year. This significant improvement resulted from operational efficiencies and cost controls. Employee Care Convergys signed large HR BPO contracts with Johnson & Johnson and Starbucks. During the second quarter, Employee Care revenues of $63.0 million were up 25 percent compared to $50.2 million in the same period last year. This reflects growth with several clients in early-stage, live operation. Employee Care operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. was $17.1 million compared to an operating loss of $8.2 million in the prior year. The increase in operating loss was primarily due to a single, large HR BPO contract that required expensing implementation costs of $6.1 million. This same contract is experiencing higher early-stage operations costs and a slower revenue ramp. Importantly, we expect this HR BPO contract to be profitable through its term. Other Items * Net non-operating expenses declined to $0.5 million from $3.5 million for the same period in the prior year due to additional equity earnings from the cellular partnerships and a reduction in net interest expense. * The effective tax rate was 32.6 percent, in-line with the same period last year. * Cash flow from operating activities was $39.9 million in the second quarter. Free cash flow was $18.3 million compared to $36.4 million in the same period last year. * The increase in deferred charges, net of amortization and implementation revenue received in the quarter, was $10.5 million. * Convergys repurchased 1.0 million shares at a cost of $25.3 million for an average price of $25.25 per share during the quarter. Update to Financial Guidance Convergys continues to expect record revenue in 2007, with increases in Customer Care and Employee Care more than offsetting anticipated declines in Information Management. Updates to full year revenue guidance are as follows: * Convergys now expects Customer Care revenue to grow 5 percent in 2007 due to a change in expected volume with a large communications client and slower than anticipated new client ramps. Our long-term expectation for annual revenue growth in this business remains 10 percent. * Convergys is raising revenue guidance for Employee Care due to progress with several clients now in live operation. We now expect revenue growth of 20-30 percent for the year in this business. First half 2007 earnings of $0.59 per diluted share puts Convergys on track to achieve previously provided full year earnings guidance of more than $1.20 per diluted share. However, full year earnings may be impacted by: * Expensing significantly higher implementation costs than originally planned for a large HR BPO contract, which is not included in our guidance. We are working to resolve the issue so that there would be no additional implementation costs expensed in the year. We continue to have productive discussions with the client. However, the end result could be additional expense for Convergys of as much as approximately $35 million in the second half of the year. A $6.1 million expense was recorded in the second quarter. Regardless of the outcome of these discussions, we expect this contract will be profitable over its term. * Potential restructuring expenses to further streamline the business and capture operating efficiencies. FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. DISCLOSURE AND "SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " NOTE: This news release contains forward-looking statements that reflect Convergys' expectations as of July 25, 2007. Actual results of Convergys could differ materially from those discussed herein. Potential risk factors that could cause or contribute to actual results being materially different from those in the forward-looking statements include, but are not limited to, the loss of a significant client or significant business from a client, difficulties in completing a contract or implementing its provisions, difficulties in completing or implementing an acquisition, continued consolidation in the markets we serve, terrorist activities and responses of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and other nations to such activities, changes in the legal and regulatory environment in which Convergys and its clients operate, and competitive and other factors disclosed in the Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2006, and subsequent filings with the SEC by Convergys Corporation. The company has no current intention of updating any forward-looking statements that may be included herein, other than in publicly available statements. NON-GAAP FINANCIAL MEASURES: This news release contains non-GAAP financial measures as defined by the Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of these non-GAAP measures to their comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures are included in the attached financial tables. Convergys provides non-GAAP free cash flow and revenues excluding AT&T. Convergys' management believes that these non-GAAP financial measures provide management and investors with (1) a more comprehensive understanding of the company's underlying performance, (2) a useful comparison of current results with past and future results, and (3) an enhanced understanding of the company's prospects for the future. However, Convergys recognizes that there are limitations associated with the use of these non-GAAP financial measures as they do not reflect all of the amounts associated with our results as determined in accordance with GAAP. These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures. The non-GAAP financial information that we provide may be different from that provided by our competitors or other companies. As described above, Convergys uses the following non-GAAP measures: Free cash flow -- Management uses free cash flow to assess the financial performance of the company. Convergys' management believes that free cash flow is useful to investors because it relates the operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of the company to the capital that is spent to continue and improve business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets , such as investment in the company's existing businesses. Further, free cash flow facilitates management's ability to strengthen the company's balance sheet, to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. the company's stock and to repay the company's debt obligations. Limitations associated with the use of free cash flow include that it does not represent the residual cash flow available for discretionary expenditures as it does not incorporate certain cash payments including payments made on capital lease obligations or cash payments for business acquisitions. Management compensates for these limitations by using both the non-GAAP measure, free cash flow, and the GAAP measure, cash from operating activities, in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purposes described above. Revenues excluding AT&T - In December 2006, Cingular became a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of AT&T. The company uses revenues excluding AT&T to assess the revenue growth of the business excluding the impact of Cingular's migration of subscribers off billing systems that Convergys supported for a predecessor company. Beginning in 2005, the company assisted Cingular with migrating subscribers off the AT&T Wireless billing systems onto Cingular's in-house systems, one of which Convergys continues to support in a managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality environment. The Cingular migration is now complete. Limitations associated with the use of this non-GAAP measure include that this measure does not include all of the amounts associated with our results as determined in accordance with GAAP. Management compensates for these limitations by using both the non-GAAP measure, revenues excluding AT&T, and the GAAP measure, revenues, in its evaluation of performance. There are no material purposes for which we use this non-GAAP measure beyond the purposes described above. CONFERENCE CALL NOTE: Convergys will host a conference call on Wednesday, July 25, at 10:00 AM, EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT , to discuss the company's second quarter results. It will feature President and CEO Dave Dougherty and Earl Shanks
The shanks and tattlers are wading bird species in a number of genera characterised by a medium length bill and long, often brightly coloured legs. , CFO See Chief Financial Officer. . This call will be carried live (with scheduled repeats) on the Internet. A link to the conference call is available at www.convergys.com ABOUT CONVERGYS Convergys Corporation (NYSE: CVG) is a global leader in providing customer care, human resources, and billing services. Convergys combines specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. knowledge and expertise with solid execution to deliver outsourced solutions, consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" , and software support. Clients in more than 70 countries speaking nearly 35 languages depend on Convergys to manage the increasing complexity and cost of caring for customers and employees. Convergys serves the world's leading companies in many industries including communications, financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. , technology, and consumer products. Convergys is a member of the S&P 500 and a Fortune Most Admired Company. Headquartered in Cincinnati, Ohio “Cincinnati” redirects here. For other uses, see Cincinnati (disambiguation). Cincinnati is a city in the U.S. state of Ohio and the county seat of Hamilton County. , Convergys has approximately 75,000 employees in 77 customer contact centers, three data centers, and other facilities in the United States, Canada, Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , Europe, the Middle East, and Asia. For more information visit www.convergys.com (Convergys and the Convergys logo are registered trademarks of Convergys Corporation.) To receive Convergys news releases by email, click on http://www.convergys.com/news_email.html [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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