APAC Customer Services, Inc. (

APAC

)

Q3 2010 Earnings Call Transcript

November 10, 2010 11:00 am ET

Executives

Jody Burfening – IR, Lippert/Heilshorn & Associates

Kevin Keleghan – President and CEO

Andrew Szafran – SVP and CFO

Analysts

Tim Wojs – Robert W. Baird

Howard Smith – First Analysis

Matt McCormack – BGB Securities

Robert Riggs – William Blair & Company

Michael Kim – Imperial Capital

David Cohen – Midwood Capital

Josh Vogel – Sidoti & Company

Mark Cooper – Pacific Ridge Capital

Presentation

Operator

Good morning and welcome to APAC's third quarter 2010 earnings conference call and webcast. This call is being recorded.

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At this time, I would like to turn the conference over to Ms. Jody Burfening of LHA. Please go ahead, ma'am.

Jody Burfening

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Thank you, Mimi. Good morning. Thank you everyone for joining us for the third quarter 2010 conference call for APAC Customer Services. The company issued a press release yesterday afternoon containing financial results for the third quarter of 2010. This press release is available on APAC’s website, as well as on various financial websites.

Company representatives on today's call are Kevin Keleghan, President and Chief Executive Officer; and Andrew Szafran, Senior Vice President and Chief Financial Officer.

Before opening the call, I’d like to remind you that statements about future operating and financial results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to various risks, uncertainties and other factors that could cause the company’s actual results to differ materially.

Yesterday’s earnings release and the company’s annual report on Form 10-K for the fiscal year ended January 3rd, 2010 and its quarterly reports on Form 10-Q for the fiscal quarters ended April 4th, July 4th, and October 3rd, 2010 discuss some of these factors.

The company’s forward-looking statements speak only as of today's date. To supplement the company’s consolidated financial statements, APAC uses certain measures defined as non-GAAP financial measures by the SEC, EBITDA and adjusted EBITDA. A reconciliation of these results to GAAP is attached to yesterday’s earnings release and additional information can be found in APAC’s annual report on Form 10-K for the fiscal year ended January 3rd, 2010, and in its subsequent filings on Form 10-Q.

The company has posted a downloadable presentation to accompany the webcast in the Investor Relations section of its website at www.apaccustomerservices.com. The presentation can be viewed in the Webcast section of APAC’s IR website by clicking on the link shown under the title of today's event. It will also be posted under Investor Relations after this call.

With that, I would now like to turn the call over to Kevin. Good morning, Kevin.

Kevin Keleghan

Good morning, Jody and thank you. And I also want to thank everyone else for joining us on the third quarter conference call. Although this is only my second month as CEO of APAC, I'm no stranger to the company, having served on the Board for the prior year.

Since joining as CEO, I have been spending as much time as possible trying to our key clients, visiting our call centers, and while there spending as much time with the management team as possible. This is validated observations that I made while I was on the Board that APAC has a very talented that is focused on exceeding the expectations of our clients.

Our clients have told me that they hold us in very high regard as one of their most trusted partners. Specifically, they have told me what they like about APAC is our excellence in execution, our flexibility in customized solutions to meet their needs, and the engagement at levels of the company from the associate all the way up to the CEO. All of these differentiate us, especially when compared to our largest competitors.

They also shared what they'd like to see from us next in the future. They want to see an expansion of our global footprint and they want us to continue development of our complementary services that support our best-in-class call center management. For the first initiative, they have been very pleased with our expansion in the Philippines, our growing presence in the Dominican Republic and jointly exploring new delivery locations in locations like Latin America.

As far as the second initiative, we've been piloting adjacent non-voice and back-office services with a number of new and existing clients. And although it's early in our development cycle for these services, we feel very optimistic about growing these areas in the future.

As we noted in our press release, we had a strong quarter and have continued our trend for a good year. While we continue to expect revenue to be in the range of our original guidance of $320 million to $330 million, we anticipate that it will be at the lower end of the range. Furthermore, we expect our full year EPS to be $0.41. This modification is chiefly being driven by the expenses associated with transitioning the CEO.

I am now going to turn the call over to Andrew Szafran, our Chief Financial Officer, to provide additional detail on the results for the quarter. Following Andrew's discussion, I will add some additional comments, and then after that we will open it up to questions. Andrew?

Andrew Szafran

Thank you, Kevin. We posted another solid quarter and I'd like to walk through the results. My discussion begins on Page 6 of the presentation.

Third quarter of 2010 revenue of $76.9 million was up 12.5% from $68.4 million in the second quarter [ph] of 2009. As in the first half of this year, our growth came both organically from existing clients, as well as from new clients signed up in the back half of last year, plus some revenue from new clients commenced earlier this year.

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