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Technology Stocks : APAC Teleservices

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To: Robert O who wrote (215)	8/1/1998 10:34:00 AM
From: Northern Marlin	Read Replies (1) of 231

Here are my notes to the conference call: Reasons given for the poorer performance vs. 6/30/97 quarter: 1. Softness in outbound business for new & existing customers. 2. Hourly rate decreases due to product mix cost them $.04/share 3. Inbound business issues of "ramping a new project" and staffing it cost $.02/share. 4. Paragren closed deals worth $.01/share that will be recorded for the 9/30/98 quarter. ITI contributed revenues of $17 million for the 6/30/98 quarter, and roughly broke even. $11 million for outbound calls $6 million for sales solution (inbound) Excluding ITI, APAC revenues were down vs. the 6/30/97 quarter. Revenues from inbound calls grew 16% over 6/30/97 quarter, & 12% over YTD 6/30/97. Revenues from outbound calls decreased 15% from the 6/30/97 quarter. Their largest outbound account decreased by $6 million for the 6/30/98 quarter, and by $13 million for YTD 6/30/98. APAC will close 20% of their highest cost outbound capacity. Restructuring charges mentioned in the press release are for closing call centers and reducing headcount. They experienced a 10% pricing decrease on outbound telemarketing. Capital expenditures are down from 1997: YTD 6/30/97 = $30 million YTD 6/30/98 = $4 million QTD 6/30/98 = $2 million Debt load is now at $160 million. Earnings per share guidance given by COO Mark Simon: 3rd Q 98: $.07-.08/share 4th Q 98: $.09-.10/share YTD 1999: $.50/share EBITDA will exceed $20 million for the 9/30/98 & 12/31/98 quarters, and $100 million for all of 1999. For the 9/30/98 quarter: They see improvement in costs worth $.03-.04/share and a $.01/share increase for the Paragren business that did not sign in time for the 6/30/98 quarter. They expect a $.02-.03 improvement due to better quality clients to offset a $.02-.03 decrease for the costs of integrating ITI. For the 12/31/98 quarter: They expect seasonal revenue increases worth $.02/share All of these EPS forecasts assume no growth, and are based on an annual revenue rate of $500 million. Other announcements: 1. They were doing business with NTC worth $4 million per quarter. NTC stopped work in July. 2. The USPS has delayed announcing the winner or winners of their next teleservices contract. 3. APAC did start new business that won't affect results for the 9/30/98 quarter. During the Q & A portion of the call someone asked who their top 5 clients were: They responded that based on annual revenue of $500 million they expect: AT&T will be $60+ million UPS will be $60+ million CUC (Cendant) will be under $40 million They also said that they anticipate no one being more than 10% of total revenues. For 1996 they had 2 clients (AT&T & UPS) who were 55% of their revenues. In answer to a question regarding the EPS guidance they'd given, they responded that they'd renegotiated with some of their existing customers for better margins. Phil

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