Convergys saw its financial ink bleed from black to red in 2008 primarily owing to a combination of HR management services losses and declining information system operating income caused by a slowdown in communications industry spending.

 

These factors outweighed strong performance of Convergys’ (News - Alert) Customer Management sector, including teleservices and solutions, bolstered by its acquisition of Intervoice in 2008. Growth in this division, from steady demand for live agents and automated applications, and in the HR management unit could shift the ledger ink color back.

 

Convergys reported a net loss of $92.9 million in 2008 compared with a $169.5 million profit in 2007 while revenue dropped to $2.786 billion from $2.844 billion over the same period. The fourth quarter (4Q) losses were equally dramatic: to a $29.3 loss in 2008 from a $45.3 million gain in the same period in 2007 while revenue in that period fell to $703.7 million from $713.7 million a year earlier.

 

Customer Management, Convergys’s largest unit, saw its revenues grow to $1.955 billion in 2008 from $1.866 billion in 2007. The 4Q2008 (4Q08) revenues increased to $526.6 million compared with $473.6 million in 4Q07.  Operating income dropped to $92.6 million in 2008 from $176.7 million in 2007, and to $28 million in 4Q08 from $35.3 million in 4Q07, the latter owing mainly to currency fluctuations.

 

In contrast, Information Management revenues plummeted to $571.5 million in 2008 from $723 million in 2007 and to $113.6 million in 4Q08 from $176.1 million in 4Q07. Operating income declined over the same periods: to $96.4 million in 2008 from $130.9 million in 2007, and sank to $11.6 million in 4Q08 from $33.1 million in 4Q07.

 

HR Management revenues increased slightly in 2008 compared with 2007: $259.5 million from $255.2 million while it dipped somewhat in 4Q08 from 4Q07: $63.5 million from $64 million. The year to year loss fathomed to $358.8 million from $38.3 million, which incurred mostly in the 3Q08. The 4Q08 operating loss was $69.9 million compared to $5.5 million in the same period last year. 

 

Convergys admits that it and its clients are facing a challenging economic environment in which forecasting is difficult.  For planning purposes, the company has assumed that the economic environment in 2009 will be generally consistent with current conditions. 

 

With these caveats, Convergys is expecting revenue growth including modest increases in Customer Management and HR Management and a decline in Information Management. It also projects operating income improvement, including modest improvements in Customer Management and HR Management and a decline in Information Management, more than offset by higher interest expense.

 

Convergys cited strong sales of its Intervoice (News - Alert) product, whose revenues grew from $14.2 million in 3Q08 to $49.1 million in 4Q08. There has also been a turnaround in the HR management with implementation progress and subsequent “go-live” of key portions of a major HR services contract for a Fortune 50 Company.

 

 “We made significant progress in the fourth quarter toward improving our liquidity and balance sheet,” reports David Dougherty, president and CEO of Convergys. “In Customer Management, live-agent operations continued to improve, our recent Intervoice acquisition contributed positively, and demand remained steady for both live-agent and automated solutions.”

 

“In Information Management we continued to find ways to reduce costs and invest in our high value, modular Infinys platform to win new clients.  We expect that all three of our business segments will contribute to the company’s improved free cash flow in 2009,” added Dougherty.