QUOTE AND NEWS
Market Intelligence Center  Sep 30  Comment 
MarketIntelligenceCenter.com's patented trade-picking algorithms have identified an attractive covered-call trade on Convergys Corp (CVG). Look at the Apr. '15 $17.50 covered call for a net debit in the $16.47 area. This trade has a duration of...
SeekingAlpha  Aug 12  Comment 
Convergys Corporation (NYSE:CVG) Q2 2014 Results Earnings Conference Call August 12, 2014, 09:00 AM ET Executives David Stein - IR Andrea Ayers - President and CEO Andre Valentine - CFO Analysts David Koning - Robert W....
Market Intelligence Center  Jul 30  Comment 
MarketIntelligenceCenter.com's option-trade picking algorithms have identified an attractive covered-call trade on Convergys Corp (CVG). Look at the Jan. '15 $20.00 covered call for a net debit in the $19.02 area. This trade has a duration of 171...
Automotive World  Jul 10  Comment 
Commercial Vehicle Group, Inc. (“CVG” or the “Company”) (Nasdaq: CVGI), announced the realignment of its executive leadership team, effective July 7, 2014. Under the new structure, Ulf Lindqwister will join CVG, effective August 4, in...
SeekingAlpha  May 14  Comment 
Convergys (CVG) Q1 2014 Earnings Call May 13, 2014 9:00 am ET Executives David Stein - Head of Investor Relations Andrea J. Ayers - Chief Executive Officer, President, Director and Member of Executive Committee Andre S. Valentine -...
Cellular News  Apr 18  Comment 
Outsourced customer care call centre operator, Convergys has announced plans to open a new centre in Northern Ireland and hire more than 300 staff. Click here for more.
The Hindu Business Line  Mar 4  Comment 
BPM major Convergys today said it has completed the acquisition of Stream Global Services which will help the US-based firm strengthen its position in the $55-billion outsourced customer managemen...
StreetInsider.com  Feb 28  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Earnings/Convergys+%28CVG%29+Adjusts+Q4%2C+FY13+GAAP+Results+on+Tax+Expense/9229933.html for the full story.
The Hindu Business Line  Feb 7  Comment 
Foreign exchange losses have led to declining net profits of major business process management (BPM) companies such as Genpact and Convergys during the fourth quarter last year. Genpact o...




 
TOP CONTRIBUTORS

Convergys Corporation (NYSE:CVG) offers hardware, software, services and consultancy to companies with a large customer base in industries like automotive, health, government and communication. The products and services they offer are aimed to help the companies recruit, service and retain customers while decreasing costs.[1] In 2009, Convergys reported an annual revenue of $2.872 billion, a 1% rise from 2008. The company acquired Intervoice, Inc for $335 million in September 2008. In June 2010, the company sold its Human Resource Management segment to Northgate Arinso for $100 million.[2] In 2009, the revenue from Intervoice, Inc was $63.3 million. [3]

Convergys' profit margins are susceptible to foreign exchange rate fluctuations since the company serves clients internationally and uses contact customer care centers located in the Philippines, India and Canada. Therefore, exchange rate changes affect the operating costs and expenses.[4] The company is highly client-dependent receiving a large portion of its revenue from a small number of companies. Therefore, the financial health of its clients tends to affect the company's financials. Moreover, client migrations due to consolidations and acquisitions are a frequent source of fluctuating revenue.

The company's debt ratings were downgraded below investment grade and this could affect future flow of capital from investments. Fewer companies will be interested in doing business with a company that has poor credit ratings which could lead to heavy loss in revenue.[5]

Company Overview

Convergys works towards enabling its clients to have better relationships with customers and employees and reduce costs while doing so. The company provides software, hardware, services and consulting products to clients to create a competitive advantage for them. The offerings of the company are divided into three segments - Customer Management, Information Management and Human Resource Management. Customer Management accounts for 70% of consolidated revenue. The company has headquarters in Cincinnati and Florida, with clients in 70 countries around the globe.

Business Financials

In millions of USD 2009 2008 2007
Revenue 2,827.2 2,785.8 2,844.3
Operating (loss) income (112.8) (191.3) 244.8
Net (loss) income (112.8) {191.3) 244.8

Key Financial Data

Convergys had a revenue of $2.827 billion in 2009, 33.1% of which is accounted for by the company's three largest clients.AT&T (T), their largest client, accounted for 19.8% of revenues in 2009 under Customer Management and Information Management contracts.[6] The second and third largest clients were The DirecTV Group (DTV) and Comcast (CMCSA), both under Customer Management contracts.

The company's revenue rose 1% from $2.785 billion in 2008 to $2.827 billion in 2009. The increase in revenue from Customer Management and HR Management were offset by the fall in revenue from Information Management. [3]

The company was restructured to streamline operations, which cost more in 2009 than 2008. Foreign exchange rate fluctuations resulted in a loss of $16.9 million as opposed to a $14.3 million gain due to exchange rate fluctuations in 2008. In addition to this, there was a 35% increase in investment in research and development, mostly in Information Management. [7] Despite all these losses and added costs, the net operating loss for 2009 was $77.3 million as opposed to $92.9 million in 2008.

Business Segments

Convergys Corporation operates in three segments: Customer Management, Information Management and Human Resource Management. Customer Management is the largest segment, accounting for 70% of consolidated revenues. Information Management and Human Resource Management account for 15% of consolidated revenue each. Both Information Management and Human Resource Management faced a operating loss in the year 2009, while Customer Management profited.

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Customer Management (70% of revenue)

The Customer Management segment of Convergys offers a number of customer relationship management products and services to large companies in customer-intensive industries and governmental agencies. Their services are divided into two categories : agent- assisted services and intelligent technology solutions. [8]

Under agent-assisted services, the company sells products for customer acquisition, customer service, customer retention, technical support, back office support and business-to-business support. Convergys’ IT services include voice portals, speech automation, identity verification, mobile services and analytics. In September 2008, the company acquired Intervoice Inc.

In 2009, the revenue for Customer Management increased 2% from 2008 to $1.98 billion. The increase was due largely to the increased efficiency from acquiring Intervoice, Inc. [9] Their largest clients in this segment are AT&T (T), accounting for 18.7% of consolidated revenues in 2009.[10] This segment employs 63,000 employees, 90% of the company's workforce. [11]

In millions of USD 2009 2008 2007
Revenue 1,986.7 1,954.8 1,866
Operating income 133.9 92.6 176.7

Information Management (15% of revenue)

The Information Management segment of the company includes a billing and business support system (BSS). This is divided into three areas: revenue management, product and order management, and customer care management.[11]

The revenue management system includes software for billing, collections and broadband convergent video and telephony markets. The product and order management section offers software for product control, shopping and ordering, service activation and fulfillment. The company’s customer care management system meets inventory and field service needs. This segment incurred a loss of 24% in revenue compared to last year. This loss was due to client migrations in North America as well as restructuring charges of $30.4 million compared to $9.7 million. [9]

The largest clients in this segment are AT&T (T), Cincinnati Bell (CBB), Inc and MetroPCS (PCS) Communications, Inc. [12] This segment employs 3,000 employees, 4.2% of the company's workforce.[11]

In millions of USD 2009 2008 2007
Revenue 434.3 571.5 723.0
Operating Income 21.9 96.4 130.9

Human Resource Management (15% of revenue)

The Human Resource Management(HRM) segment of Convergys offers products and services aimed to reduce costs and improve employee relations by automating HR processes and improving service delivery.

The products offered are targeted at improving the administration of benefits including health and welfare administration services, retirement services and pension administration, absence management and tuition reimbursement. There are also products for improving recruitment processes, payroll administration, compensation administration and collation of paperwork into a workable online system. HRM revenues increased 57% to $406.2 million from 2008 to 2009. This increase was, in part, due to the accelerated recognition of deferred revenue of two large contracts.[9]

The largest HRM clients in 2009 were Boston Scientific (BSX) Corporation, E.I. du Pont de Nemours & Company (DD), the State of Florida, JOHNSON & JOHNSON (JNJ) and the State of Texas.[13] In June 2010, the HRM segment of the company was sold to Northgate Arinso for $100 million.

In millions of USD 2009 2008 2007
Revenue 406.2 259.5 255.2
Operating Income (246.1) (358.8) (38.3)

Trends and Forces

Vulnerability to acquisitions and consolidations of large clients

33.1% of Convergys' revenues in 2009 came from three clients - AT&T, DirecTV and Comcast, with 19.8% of all its revenue for 2009 coming from AT&T. This means that the company is heavily dependent on these three clients. If any of them stopped working with Convergys, it would result in an appreciable loss of revenue. For instance, if AT&T were to migrate to a different system, Convergys would lose nearly 20% of its revenue. In 2009, AT&T moved some processes to a different system which led to a $30 million loss for the company. Losses for similar reasons are expected to be $40 million for 2010. [14] Any such changes like acquisitions or migrations has a large potential of affecting the company. [15]

Future of the BPO industry a concern

With almost 60% of Convergys' operations outsourced from India, The Philippines and Canada, changes in sentiments about the BPO industry are a definite cause for concern.[4] Outsourcing jobs from the United States to other countries reduces the tax liability for companies while reducing the number of available jobs for American citizens. This was a major cause for concern for the Obama administration. Any tax reform that evens out the tax benefits that offshoring provides will cost Convergys. The added tax cost will adversely affect company revenue. [16]

Sale of business segment

In June 2010, Convergys sold its HRM segment to NorthgateArinso for $100 million. NorthgateArinso is a specialist in Human Resource Management software and the deal is expected to bring better quality services to Convergys' HRM clients.The HRM segment of the company had been experiencing losses of $246.1 million in 2009 and accounted for 15% of consolidated revenues each year. The company will be removing revenues of $250 million from its 2010 guidance. [2]

Fluctuating foreign exchange rates cause heavy gains or losses

Convergys operates largely in foreign markets, with clients in 70 countries and operations running out of India, The Philippines and Canada. This makes it highly susceptible to changing exchange rates. In 2008, the fluctuations in exchange rates, caused it a gain of $14.3 million while in 2009, it resulted in a loss of $16.9 million.[7] Therefore, the company is highly vulnerable to exchange rate fluctuations. Moreover, any international factors like political and economic instability in any of the countries that it runs its operations out of, which leads to a disruption or shut-down of activities in the region will increase the company's operating costs.

Vulnerability due to dependence on single industry

Many of Convergys' clients are in the broadcasting and communications industry, like DirecTV and Comcast who make up 13.3% of the company's revenue. Recent developments like the shift from television to digital media have reduced demand for traditional broadcasting media like television. This has reduced the revenues and customer base of DirecTV and Comcast. Since Convergys depends quite heavily on these companies for its revenue, these industry-wide change will reduce the customer base and revenue of the company. [17]

Competition

Convergys competes with other relationship management companies like Accenture (ACN) Limited, International Business Machines (IBM) , Sykes Enterprises (SYKE) Enterprises (SYKE), Amdocs (DOX) Ltd, CSG Systems International (CSGS) and TeleTech Holdings (TTEC).

  • Accenture (ACN) Limited is a management and technology consulting firm. Like Convergys, it offers Customer Management and Information Management software and consultancy services to companies. It too has centers in India, Canada and other low-cost countries which gives it a competitive advantage. A Fortune 500 company, it is considered the largest IT consultancy company. In 2009, the company grossed $21.58 billion in net revenue.
  • IBM is the world's fourth largest technology company and is the second most profitable IT and services employer. [18]. It is Convergys' largest competitor in Customer and Information Management. In 2009, its annual revenue was $95.8 billion
  • Sykes Enterprises (SYKE) provides customer contact services and telephonic health services. It reported an annual revenue of $14.3 million in 2009. This number is forecasted to fall to $1.8 million in 2010. [19]
  • CSG Systems International (CSGS) provides outsourced customer care and billing solutions to the cable and direct broadcast satellite industry. As of December 31, 2009, the company had processed 48 million customer accounts. The company's revenue for 2009 was $500.2 million.[20]
  • Amdocs (DOX) is a provider of customer relations management and billing software to communications companies.Like Convergys, it gets most of its revenue from softwares designed for customer management. The company's revenue was $2.88 billion for the year 2009.[21]
  • TeleTech Holdings (TTEC) is a direct competitor of Convergys in Customer Management and Information Management. It offers offshore and onshore BPO services to 90 clients worldwide. The comapany received a revenue of $1.17 billion in 2009.[22]
Amount Revenue Net Profit Market Cap
Convergys 2,827.2 M -77.3 M 1.22B
Sykes Enterprises 846.04 M 43.21 M 565.34 M
IBM 95,759.00 M 13,425.00 M 164.43 B
CSG Systems 500.72 M 41.86 M 643.81M
Accenture 23,170.97 M 1,938.15 M 28.24 B
TeleTech 1,167.92 75.57 809.21 M


References

  1. Convergys Corporation Company Overview
  2. 2.0 2.1 NorthgateArinso buys Convergys HRM for $100 million. Manila News, June 4, 2010
  3. 3.0 3.1 Convergys Corporation 10-K 2009 Item 7 Page 49
  4. 4.0 4.1 Convergys Corporation 10-K 2009 Item 12 Page 76
  5. Convergys Corporation 10-K 2009 Item 7 Page 43
  6. Convergys Corporation 10-K 2009 Item 7 Page 28
  7. 7.0 7.1 Convergys Corporation 10-K 2009 Item 7 Page 35
  8. Convergys Corporation 10-K 2009 Item 1 Page 2
  9. 9.0 9.1 9.2 Convergys Corporation 10-K 2009 Item 7 Page 18
  10. Convergys Corporation 10-K 2009 Item 1 Page 8
  11. 11.0 11.1 11.2 Convergys Corporation 10-K 2009 Item 1 Page 10
  12. Convergys Corporation 10-K 2009 Item 1 Page 8
  13. Convergys 10-K 2009 Item 1 Page 8
  14. Convergys Corporation 10-K Item 7 Page 38
  15. Convergys Corporation 10-K Item 1 Page 16
  16. Obama vs Outsourcing. Businessweek, May 6, 2009
  17. Comcast(CMCSA)
  18. "The Global 2000: Sorted by Profit". Forbes. April 8, 2009
  19. Sykes post weak Q2, cuts FY view, shares sink. Reuters, Aug 2, 2010
  20. Key Metrics and Competitive Analysis for CSG Systems
  21. Key Metrics and Competitive Analysis for Amdocs
  22. Key Metrics and Competitive Analysis for TeleTech Holdings
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