Convergys' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Convergys (CVG)

Q1 2012 Earnings Call

May 09, 2012 8:30 am ET

Executives

David Stein - Vice President of Investor Relations

Jeffrey H. Fox - Chief Executive Officer, President, Non Independent Director and Member of Executive Committee

Andrea J. Ayers - President of Customer Management Line of Business and Chief Operating Officer of Customer Management

Earl C. Shanks - Chief Financial Officer

Analysts

Eric J. Boyer - Wells Fargo Securities, LLC, Research Division

Matthew J. McCormack - BGB Securities, Inc., Research Division

Kevin D. McVeigh - Macquarie Research

Manish Hemrajani - Oppenheimer & Co. Inc., Research Division

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Giridhar Krishnan - Crédit Suisse AG, Research Division

Presentation

Operator

Welcome to the Convergys First Quarter 2012 Earnings Teleconference. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to David Stein, Vice President of Investor Relations. Sir, you may begin.

David Stein

Thank you, Mariane, and good morning. Welcome to the Convergys first quarter 2012 earnings call and webcast presentation. This call is the property of Convergys. Please note that slides accompanying today's prepared remarks are available on the Convergys Investor Relations website under Events and Webcasts.

Today's call contains forward-looking statements that address our expected future performance and that, by their nature, address matters that are uncertain. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements as a result of new information or future events or developments. Please refer to yesterday's earnings release and our most recent filings with the SEC for additional information regarding uncertainties that could adversely or positively affect our future financial results. This includes the risk factors provided in our Form 10-K for the year ended December 31, 2011, and the 10-Q filed yesterday.

Also, during the call, we'll discuss non-GAAP financial measures, including free cash flow, adjusted net income from continuing operations and adjusted EBITDA. A reconciliation of these non-GAAP measures is available in the news release and on the Convergys IR website.

With me on the call is today are Jeff Fox, our President and Chief Executive Officer; Earl Shanks, our Chief Financial Officer; and Andrea Ayers, President and Chief Operating Officer of our Customer Management business. Jeff will provide a summary of our operating results. Andrea will provide some insight into developments in the customer care industry. Earl will cover our financial performance and business outlook, and all will be available for the question-and-answer session.

Now I'll turn the call over to Jeff.

Jeffrey H. Fox

Good morning, everyone. In the next few minutes, we will review company performance and discuss the progress we're making on our strategic transformation. Operationally, both of our businesses continued to show progress in the quarter, and overall, we delivered solid revenue growth and profit improvement. As a result of our agreement to sell our Information Management business, let me focus on our continuing operations.

Our revenue of $498 million represents an increase of 7% compared to total revenue of $465 million in the first quarter last year. Customer Management operating income of $39 million was up 21% compared with last year, and Customer Management EBITDA increased 18%, $58 million compared with $49 million last year. EPS from continuing operations in the first quarter was $0.22 per diluted share on a non-GAAP basis. This represents a 29% increase from $0.17 per share last year. Overall, I'm extremely encouraged by our execution in the first quarter.

Based on the improved operating performance, we are raising our revenue and earnings expectations for the full year. Strategically, we made significant progress as we reached agreement to sell our Information Management business for $449 million. With the anticipated close of this sale later this month, we will successfully complete the strategic repositioning of our company into a well-capitalized, market-leading Customer Management business. Our process to focus, simplify and execute began 2 years ago with the sale of our HR Management business in 2010, followed by the sale of the Cellular Partnerships in 2011.

As we said in the release issued yesterday, we are planning several management changes to align the leadership team with our strategic focus on Customer Management. During the fourth quarter, I will become Executive Chairman and Andrea Ayers will succeed me as President and CEO. Andrea is a talented and proven leader with deep expertise and strong operational experience in the customer care industry. See has held a number of leadership roles at Convergys, including President and Chief Operating Officer of Customer Management, where she currently has full responsibility for profit and loss of the segment. She has also, in her time with Convergys, served as President of Customer Management for 2 years, President of Relationship Technology Management for 2 years, President of Government and New Markets for 3 years, and she has also served in a variety of roles during her 22-year career.

In the third quarter, after our next earnings call, Andre Valentine will take over from Earl Shanks as Convergys' CFO. Andre is a highly talented finance executive with a deep understanding of the Customer Management business. In addition to his experience as Senior Vice President, Finance and Customer Management, he previously served as Senior Vice President and Controller.

Through the efforts of Andrea and Andre and their entire team, we have a leading reputation in the industry. Under their leadership, we are confident that Convergys will continue to deliver outstanding value for our clients and superior returns for our shareholders. Earl and I will work very closely with our Andrea and Andre in the coming months to execute a smooth transition.

Read the rest of this transcript for free on seekingalpha.com

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