Notes from the Q&A portion of the conference call:
Q: Can you elaborate on initiatives to reduce operating costs, and will
there be improvements regarding expenses in the 4th quarter?
A: There are three major initiatives:
1. Telecomm - When the six companies were rolled together each
had their own telecomm contract. TLSP is in the process of renego-
tiating a couple of those contracts to get better rates. And they're
doing a better job of making sure that all the circuits that they're paying
for are being used.
2. Raising the log-to-pay ratio - Means raising the amount of time that
agents are actually earning money for TLSP as a percentage of the
total hours that TLSP is paying agents (cutting non-productive time).
3. The Oracle database - Arthur Anderson is installing it for them.
Alessi expects to see continued improvement on the expense side in the
4th quarter, even though he expects higher volume of business. But he
cautioned that the improvements won't be as dramatic as this quarter,
rather incrementally over the next few quarters.
Q: What would you estimate the savings to be for the three initiatives
just mentioned?
A: The telecomm initiative represents a savings of about $2 million yearly,
some of that has already been realized. There's still another $1-1.5
million to be realized. On the payroll side, that's just an everyday execu-
tion thing; the savings opportunity is worth several million dollars. But don't
expect to see all of it at once. The bulk of the savings from the Oracle
database will show up in the first half of 1999 (est. $3 million).
Q: What are you seeing to make you optimistic about revenue growth in
1999?
A: Alessi said that they're being rewarded by existing clients with more
business because they're executing well. He said that visibility for the
outbound side is about 120 days; one can be very clear about the next
90 days, and gets foggier as you get out to 120 days. The feedback that
he's getting from existing clients, from his salespeople, and looking at the
number of new proposals make him optimistic. The inbound side,
on the other hand, is much more predictable because it's contractual, it
has a smaller universe of clients. A number of the larger inbound programs
have already made commitments for next year to expand.
Q: What are your goals for next year for inbound vs. outbound?
A: Alessi would eventually like to see more balance, and they're moving
their sales force in that direction. But having said that, he's not going to
walk away from outbound business that is profitable. So, while his objec-
tive would be to move the amount of inbound to around 25% of total revs,
if that doesn't happen it will probably be because they also grew the out-
bound side.
Q: Would you consider acquiring a company that did primarily inbound?
A: Alessi wants to be acquisitive, but the candidate would have to fit their
business strategy, their corporate culture, and be accretive almost imme-
diately. They've passed on a few deals already.
Q: It appears that TLSP is growing faster on the outbound side that its
competitors. Why is that so?
A: Alessi said he couldn't speak for the competition. As for TLSP, their
sales force has been in place for about 1.5 years, and they're getting more
productive. And as TLSP continues to execute well, their clients increase
the business given to them. On very few of these outbound accounts is
TLSP the only service provider. So, if they do a better job than one of
their competitors on the same account, TLSP gets more business.
Q: Has anything changed with the way salespeople are compensated?
A: No, they're commission salespeople. If they bring in higher margin
business they're paid a slightly higher rate.
Q: Is the inbound work more exclusive to one service provider?
A: Yes, it tends to be, because you're really getting closer to the client's
customer. While they may use more than one inbound vendor, it's usually
one vendor per inbound program.
Q: It appears that the whole teleservices industry has gone through a tough
time lately. Are you starting to see that coming to an end? It looks like
your pricing is improving, capacity utilization is rising; would you say that's
characteristic of the industry in general?
A: Alessi said he only has "anecdotal evidence of what's happening with
my competitors". But TLSP is recovering from problems "that were self-
inflicted, or were the result of the fact that we had made a heavy gamble
a year ago on one large account that accounted for over 30% of our
business, and subsequently left" (Was that MBNA?). "Anecdotally, I'm
hearing people say, some of our competition saying that business is
looking better, but I'll let them speak for themselves". Alessi says that
he's been fairly vocal about the lack on controls by some of the businesses
in this industry.
Q: Is pricing firming up for the industry in general?
A: "We made a conscious effort to walk away from some business that
was low-end business", and that had something to do with their overall
performance. Alessi doesn't feel that they lose business because of
price. "If you can't deliver, being the cheapest guy on the block isn't going
to do anybody any good".
Q: What point do you get in capacity utilization where you start to think
about expanding either through acquistion or adding locations?
A: Probably into the 90's%. They have several call centers worth of
equipment from when they downsized. They could add some seats in
some locations by reconfiguring. A couple of their outbound centers have
some empty space. Alessi says their capacity on outbound is about
500,000 hours per month; realistically they could probably grow that by
another 10% without a whole lot of expense.
Q: How many workstations were you operating in the quarter?
A: 2,700 total, 600 of which are inbound.
Q: Could you talk about any major new account wins?
A: They haven't, and they probably won't get into the practice of
announcing contract wins and losses. Certainly they'll announce a loss
if it is material. At this point they don't have any accounts that are
running over 9% of total sales. On the inbound side they're expanding
3 of their relationships: A major drug company grows TLSP's business as
they roll out new products. They have a government contract that "they're
still messing around in Washington" with, but it looks like that account is
going to grow significantly; to grow the program from 83 seats to about
300 over the next 3 or 4 quarters. And they have an auto company that
looks like it will expand their business. They opened a call center for a
computer manufacturer in the 2nd quarter that looks like it will grow.
|
