2q00 Earnings narrative.
Good revenue and earnings growth for the second quarter. Yet the market punishes CVG; the price drops over 8 points.
Convergys Corporation Reports Second Quarter 2000 Financial Results
CINCINNATI--(BUSINESS WIRE)--July 27, 2000--Convergys Corporation (NYSE:CVG - news)
Revenues increased 22 percent and net income increased 31 percent
Operating income increased 38 percent
Diluted earnings per share increased 26 percent to $0.29
Cash earnings per share of $0.33
Convergys Corporation (NYSE:CVG - news), the global leader in providing outsourced, integrated, billing and customer care, announced today its financial results for the second quarter and six months ended June 30, 2000.
During the second quarter 2000, total revenues increased 22 percent to $521.9 million compared to $426.2 million reported in the second quarter of 1999. Operating income increased 38 percent to $77.6 million, up from $56.1 million, excluding a special item that was recorded in the second quarter of 1999. Operating margin increased to 14.9 percent from 13.2 percent. Net income increased 31 percent to $45.5 million or $0.29 per share (diluted), from $34.8 million or $0.23 per share (diluted) last year. Strong performance in the company's core operations offset lower results from the cellular partnership. The cellular partnership produced equity income of $5.4 million, or $0.02 per share compared to $9.1 million, or $0.04 per share last year. Cash earnings per share, excluding goodwill amortization, increased 27 percent to $0.33 from $0.26 in the second quarter of 1999. Last year's second quarter results included a $2 million special item relating to Convergys' acquisition of a controlling interest in Wiztec Solutions, Ltd.
``We had a successful second quarter with higher revenues and operating income. Our contracts with OmniSky, AT&T Business Services, and our progress in the IP billing and CRM marketplaces reflect our increased emphasis on sales and marketing,'' said Jim Orr, Chairman, President, & CEO of Convergys. ``I also want to acknowledge an important milestone for us -- our addition to the S&P 500 index, which recognizes the financial strength and performance of our company.''
For the first half of 2000, revenues increased 25 percent to $1.04 billion. Operating income increased 40 percent to $152.3 million and net income increased 34 percent to $90.0 million excluding the impact of special items. Diluted earnings per share excluding special items increased 30 percent to $0.57.
Second Quarter 2000 Highlights
During the second quarter of 2000, Convergys
Signed a 3-year contract with OmniSky Corporation, a provider of complete wireless Internet services for users of handheld mobile devices. The contract is for Convergys' Catalys(SM) integrated Internet billing and customer care solution as well as its integrated customer contact centers.
Renewed a billing contract with AT&T Business Services for three years. The contract is valued at more than $100 million.
To expand service offerings with associated underlying technology in the areas of integrated contact centers and eCRM, Convergys
Entered into a joint Internet video and VoIP marketing agreement with VideoGate.com, a developer of premiere customer communication tools for the Internet and Intranet. Convergys also made an equity investment in VideoGate.com. In April we entered into an alliance with NativeMinds (formerly Neuromedia), an automated natural-language sales and customer service solution for the Web. Convergys will incorporate NativeMinds' virtual sales and customer service representative (vRepTM) software into its customer management solutions for clients worldwide. Convergys also holds a small equity investment in NativeMinds.
Acquired MAXWorldwide LLC, a privately held company that designs and operates innovative and unique customer loyalty programs for Fortune 500 corporations.
To extend Convergys' acknowledged leadership in the area of billing for IP service providers and XSPs, it
Entered into a global alliance with XACCT Technologies, a leading provider of intelligent business infrastructure solutions for IP networks. We have integrated XACCT's advanced mediation capabilities into Catalys.
Announced the completion of benchmark testing that produced landmark results for IP usage collection and rating in conjunction with NARUS, Inc., the pioneer and leading provider of Internet Business Infrastructure (IBI) solutions. We demonstrated a throughput rate of nearly 6,000 billing events per second, an unparalleled demonstration of complex IP usage-based rating scalability. This is equivalent to 50 million subscribers on an IP services network.
Orr commented, ``A key component of our growth strategy has been to seek out strategic alliances and acquisitions. As you can see from our second quarter activities, we remained committed to this plan, and in turn continued to build our strong presence in web based customer care. The alliances and acquisition with prestigious eCRM solutions providers exemplify our commitment to creating or acquiring best-of-breed technology and services capabilities for our clients.''
2000 Highlights to Date
A five-year contract for a billing and customer care system with Verizon Wireless, the largest wireless communications provider in the U.S. with more than 25 million wireless voice and data customers. With this new contract, Convergys will now serve the top four wireless providers in the United States. The new relationship with Verizon Wireless extends Convergys' pre-existing relationships with AirTouch, PrimeCo, and GTE, and adds some important new markets.
A contract and alliance with Naviant Marketing Solutions, Inc., a leading provider of precision marketing solutions to Web advertisers, Web publishers, and consumer marketers to provide additional capabilities in the development of Convergys' suite of eCRM services and products.
Orr continued, ``Our third quarter is off to a very strong start as evidenced by the major announcement regarding Verizon Wireless. This contract win underscores our leading position in our industry as we continue to sign major customers with significant market share positions within their respective fields. It also exemplifies the value of our reputation for operational excellence in servicing carrier class wireless operators and the functionality and scalability of our systems.''
Information Management Group Revenues Increased 13 Percent;
Operating Income Increased 17 Percent
Excluding intercompany sales, second quarter 2000 Information Management Group (IMG) revenues increased 13 percent to $184.2 million, from $162.4 million in the same period last year. Data processing revenues increased 15 percent to $116.3 million from $100.8 million, primarily as a result of subscriber growth at key wireless clients. Professional and consulting revenues decreased 9 percent to $34.1 million, reflecting the expiration of a small Canadian wireless client billing relationship. License and other increased to $12.3 million from $11.1 million due to higher license fees. International revenues increased over $8 million or 65 percent to $21.5 million, primarily reflecting implementation fees associated with IMG's wireless billing contract with Telesp Celular.
Operating income for IMG increased 17 percent to $38.2 million from $32.7 million excluding the special item reported in the second quarter 1999. Operating margin for IMG in the second quarter was 20.7 percent compared to 20.1 percent in the second quarter last year. IMG's results reflect earnings from higher revenues partially offset by higher spending on research and development, higher depreciation from data center upgrades, and higher amortization of acquisition-related intangibles.
Customer Management Group Revenues Increased 28 Percent;
Operating Income Increased 64 Percent
Customer Management Group (CMG) revenues were $337.7 million, up 28 percent compared to $263.8 million in the second quarter of 1999, fueled by strong demand for services from AT&T and DirecTV as well as increases in technical support services and web-based customer relationship management services. These revenue increases were partially offset by a decrease in traditional, program-based services.
Operating income for CMG increased 64 percent to $41.3 million, up from $25.2 million in the same period last year. Operating margin improved to 12.2 percent in the second quarter 2000 versus 9.6 percent reported in the comparable year-ago period. This marks the eighth consecutive quarter of margin improvement and stems from the profit flow-through from higher revenues and the ongoing benefits of continuous process improvements.
Orr concluded, ``As we look to the second half of 2000, we are encouraged by our competitive position. Our financial results for the quarter, in addition to new customers in IP billing and customer care, exemplify our ability to execute on our growth strategies providing value to our clients and our shareholders.''
About Convergys
Convergys Corporation (NYSE:CVG - news), a member of the S&P 500, is the global leader in providing outsourced, integrated, billing and customer care services, bringing together world-class resources and expertise to help clients transform customer relationships into a competitive advantage.
Convergys software produces more than one million bills each day, and Convergys contact centers handle more than one million customer interactions each day.
Convergys(SM) provides billing, customer care, and employee care services to the top companies in a wide range of industries, including communications, Internet, cable and broadband services, technology, consumer products, financial services, utilities, healthcare and hospitality.
Headquartered in Cincinnati, Ohio, Convergys employs over 42,500 people in its 41 customer contact centers and in its data centers and other offices in the United States, Canada, Israel, and Europe. Convergys is on the Internet at convergys.com (Convergys is pronounced: kun VER jis. Convergys, Catalys, and the Convergys logo are service marks of Convergys Corporation.)
NOTE:
Information included in this news release contains forward-looking statements that involve potential risks for Convergys Corporation. The future results of Convergys could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, the loss of a significant client, difficulties in completing or integrating acquisitions, and other factors disclosed in the Form 10-K for the year ended December 31, 1999, filed with the SEC by Convergys Corporation |
