[August 08, 2017] |
|
Convergys Reports Second Quarter Results
Convergys
Corporation (NYSE: CVG), a global leader in customer experience
outsourcing, today announced its financial results for the second
quarter of 2017.
Second Quarter Summary
-
Revenue of $687 million, down 1 percent as reported and a slight
increase on a constant currency basis compared with prior year,
including a 6 percent contribution from the buw acquisition;
-
GAAP operating income was $49 million, up 5 percent compared with
prior year; adjusted operating income was $58 million, the same as
prior year;
-
GAAP net income was $40 million, up 20 percent compared with prior
year; adjusted net income was $46 million, up 11 percent compared with
prior year;
-
Adjusted EBITDA was $86 million, the same as prior year;
-
GAAP EPS of $0.40, compared with $0.32 in prior year; adjusted EPS of
$0.46, compared with $0.41 in prior year;
-
Operating cash flow of $90 million, adjusted free cash flow of $72
million;
-
$31 million capital returned to shareholders via share repurchase and
dividend;
-
Updated 2017 outlook includes revenue decrease, margin expansion, and
EPS growth.
"We generated revenue, earnings and cash flow consistent with our
expectations and experienced strong new business signings," said Andrea
Ayers, President, and CEO. "Our operating team is providing quality
global delivery while generating solid profitability in the face of
significant volume volatility. Based on our visibility into the second
half including call volume fluctuations with our largest communications
clients we are revising our revenue expectations for the year. Our
profit expectations have improved due to strong cost management actions
and solid performance year-to-date, and we now expect higher EBITDA
margin with EPS at the upper end of our prior guidance range."
Ayers continued, "A strong balance sheet and ample cash flow generation
allow us to invest in the business while returning cash to investors. In
the second quarter, we paid a $9 million dividend and repurchased $22
million of our stock."
Second Quarter Results
Revenue - Revenue was $687 million including $7 million adverse
foreign currency impacts, a decrease of 1 percent as reported and a
slight increase on a constant currency basis, compared with $692 million
in the same period last year. Second-quarter revenue includes $42
million, an increase of 6 percent, from the acquired buw operations.
Operating Income - GAAP operating income was $49 million, a 5
percent increase compared with $46 million in the same period last year.
Excluding certain acquisition-related impacts discussed below, adjusted
operating income was $58 million, the same as the second quarter of last
year.
GAAP operating margin was 7.1 percent, up 40 basis points compared with
6.7 percent in the same period last year. Adjusted operating margin was
8.5 percent, up 20 basis points compared with 8.3 percent in the same
period last year.
Adjusted EBITDA - Adjusted EBITDA was $86 million, the same as
the second quarter of last year. Adjusted EBITDA excludes certain
acquisition-related impacts discussed below.
Adjusted EBITDA margin was 12.5 percent, up 10 basis points compared
with 12.4 percent in the same period last year.
Net Income - GAAP net income was $40 million, or $0.40 per
diluted share, compared with $33 million, or $0.32 per diluted share, in
the same period last year. Excluding certain acquisition-related impacts
discussed below, adjusted net income was $46 million, or $0.46 per
diluted share, compared with $42 million, or $0.41 per diluted share, in
the same period last year.
Share Repurchase - Convergys repurchased 1.0 million shares in
the second quarter at a cost of $22 million. At June 30, 2017, the
remaining authorization to purchase outstanding shares was $99 million.
Quarterly Dividend - Convergys paid a $0.10 per share quarterly
dividend in July to holders of record at the close of business on June
23, 2017. The Company scheduled the next dividend payment of $0.10 per
share on October 6, 2017, to shareholders of record at the close of
business on September 22, 2017.
Cash Flow - Operating cash flow was $90 million, compared with
$80 million in the same period last year. Adjusted free cash flow was
$72 million, compared with $58 million in the same period last year.
Net Debt - At June 30, 2017, cash and short term investments were
$175 million, debt maturing in one year was $1 million, and long-term
debt was $289 million. Net debt totaled $115 million at June 30, 2017,
compared with $156 million at March 31, 2017, and $55 million at the end
of the second quarter last year.
Acquisition-related Impacts - GAAP second-quarter 2017 results
include acquisition-related impacts consisting of $7 million
amortization expense for acquired intangible assets, $1 million
depreciation expense related to the fair value write-up of acquired
property and equipment, and $1 million integration expenses. Prior year
second-quarter 2016 GAAP results included $7 million amortization
expense for acquired intangible assets, and $2 million depreciation
expense related to the fair value write-up of acquired property and
equipment, $1 million integration costs, and $1 million expense related
to the buw transaction.
Reconciliation tables of GAAP to non-GAAP results are attached.
2017 Business Outlook
Updated Convergys expectations for the full year now include:
-
Constant currency revenue change of negative 4 percent to negative 2
percent, revised from prior guidance of negative 3 percent to positive
1 percent;
-
Adjusted EBITDA margin to approximate 12.6 percent, increased from
prior guidance to approximate 12.5 percent;
-
Adjusted effective tax rate to approximate 20 percent, unchanged from
prior guidance;
-
Diluted shares outstanding to approximate 100.5 million reflecting
shares repurchased through the second quarter, reduced from prior
guidance to approximate 102.5 million;
-
Adjusted EPS growth of positive 1 percent to positive 3 percent,
improved from prior guidance of negative 3 percent to positive 3
percent;
-
Adjusted free cash flow to approximate adjusted net income, unchanged
from prior guidance.
The Company also now expects third-quarter results to be approximately
the same as second-quarter results with sequential improvements in the
fourth quarter.
This guidance does not include severance charges in the first quarter
related to discrete actions to streamline the business,
acquisition-related impacts such as integration costs, transaction
costs, intangible amortization and depreciation related to the fair
value write-up of acquired property and equipment, as well as impacts
from future currency movements, non-cash pension settlement charges, or
any future share repurchase activities. Adjusted effective tax rate
reflects the Company's expectations for the effective tax rate,
excluding the tax impact of items discussed above, tax expense
associated with cash repatriation and significant discrete tax
adjustments.
The Company believes quantitative reconciliations of the outlook to GAAP
measures cannot be provided without unreasonable efforts due to the
forward-looking nature of the acquisition-related adjustments and future
currency movements, and their inherent variability; therefore, the
Company does not present guidance on a GAAP basis. For the same reason,
Convergys is unable to address the probable significance of the
unavailable information, which may have a material impact on the
Company's GAAP results.
Forward-Looking Statements Disclosure and "Safe Harbor" Note
This news release contains statements, estimates, or projections that
constitute "forward-looking statements" as defined under U.S. federal
securities laws. Forward looking statements may be identified by words
such as "will," "expect," "estimate," "think," "forecast," "guidance,"
"outlook," "plan," "lead," "project" or other comparable terminology.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
our historical experience and our present expectations or projections.
These risks include, but are not limited to: (i) the loss of a
significant client or significant business from a client; (ii) the
future financial performance or outsourcing trends of our largest
clients and the major industries that we serve; (iii) contractual
provisions that may limit our profitability or enable our clients to
reduce or terminate services; (iv) our failure to successfully acquire
and integrate businesses, including buw; (v) our inability to protect
proprietary or personally identifiable data against unauthorized access
or unintended release; (vi) the effects of complying with
jurisdiction-specific data privacy requirements, including increased
expenses, operational and contractual changes, and diversion of
resources; (vii) our inability to maintain and upgrade our technology
and network equipment in a timely and cost effective manner; (viii)
business and political risks related to our global operations, including
ongoing political developments in the Philippines, uncertainty regarding
the impact of Britain's vote to leave the European Union (Brexit) or
other similar actions by European Union member states, and economic
weakness and operational disruption as a result of natural events,
political unrest, war, terrorist attacks or other civil disruption; (ix)
the effects of foreign currency exchange rate fluctuations; (x) the
failure to meet expectations regarding our future tax liabilities,
changes in tax laws or regulations that increase our future tax
liabilities or the unfavorable resolution of tax contingencies; (xi)
adverse effects of regulatory requirements or changes thereto,
investigative and legal actions, and other commitments and
contingencies; (xii) costs associated with conversions of our
convertible debentures that may occur from time to time; and (xiii)
those factors contained in our periodic reports filed with the SEC,
including in the "Risk Factors" section of our most recent Annual Report
on Form 10-K. The forward-looking information in this document is given
as of the date of the particular statement and we assume no duty to
update this information. Our filings and other important information are
also available on the investor relations page of our web site at www.convergys.com.
Non-GAAP Financial Measures
This news release contains non-GAAP financial measures as defined by the
Securities and Exchange Commission Regulation G; pursuant to the
requirements of this regulation, reconciliations of these non-GAAP
measures to their comparable GAAP measures are included in the attached
financial tables. To assess the underlying operational performance of
the continuing operations of the business for the quarter and to have a
basis to compare underlying operating results to prior and future
periods, management uses operating income, net income, and diluted
earnings per share metrics excluding certain non-operational or
restructuring-related activities.
These items are relevant in evaluating the overall performance of the
business. Limitations associated with the use of these non-GAAP measures
include that these measures do not include all of the amounts associated
with our results as determined in accordance with GAAP. Management
compensates for these limitations by using the non-GAAP measures,
operating income, net income , and diluted earnings per share, in each
case excluding the items above, and constant currency revenue growth, as
well as the GAAP measures, operating income, net income, diluted
earnings per share and revenue growth, in its evaluation of performance.
The Company presents the non-GAAP financial measure constant currency
revenue growth because management uses this measure to assess underlying
revenue trends by providing revenue growth between periods on a
consistent basis. Constant currency revenue growth is determined by
using the comparable prior year period's currency exchange rates to
translate current period revenue from local currencies. The Company
presents the non-GAAP financial measures EBITDA and adjusted EBITDA
because management uses these measures to monitor and evaluate the
performance of the business and believes the presentation of these
measures will enhance investors' ability to analyze trends in the
business and evaluate the Company's underlying performance relative to
other companies in the industry.
Management uses the non-GAAP metrics free cash flow and adjusted free
cash flow to assess the financial performance of the Company. Convergys'
management believes that free cash flow and adjusted free cash flow are
useful to investors because they present the operating cash flow of the
Company, excluding the capital that is spent to continue and improve
business operations, such as investment in the Company's existing
business. Further, free cash flow and adjusted free cash flow provide an
indication of the ongoing cash that is available for debt repayment,
returning capital to shareholders and other opportunities. Management
also believes the presentation of these measures enhances investors'
ability to analyze trends in the business and evaluate the Company's
underlying performance relative to other companies in the industry.
Limitations associated with the use of free cash flow and adjusted free
cash flow include that they do not represent the residual cash flow
available for discretionary expenditures as they do not incorporate
certain cash payments including payments made on capital lease
obligations or cash payments for business acquisitions. Management
compensates for these limitations by utilizing the non-GAAP measures,
free cash flow and adjusted free cash flow, and the GAAP measure, cash
flow from operating activities, in its evaluation of performance.
These non-GAAP measures should be considered supplemental in nature and
should not be considered in isolation or be construed as being more
important than comparable GAAP measures. The non-GAAP financial
information that we provide may be different from that provided by our
competitors or other companies.
Webcast Presentation
Convergys will hold its Second Quarter 2017 Financial Results webcast at
9:00 a.m., Eastern time, Wednesday, August 9. The webcast presentation
will take place live and will then be available for replay at this link
- 2Q17
Conference Call. This link will replay the webcast presentation
through September 8. You may also access the webcast via the Convergys
website, www.convergys.com.
Click "Investors," then "Releases, Events & Presentations."
About Convergys
Convergys delivers consistent, quality customer experiences in 58
languages and from more than 150 locations around the globe. We partner
with our clients to improve customer loyalty, reduce costs, and generate
revenue through an extensive portfolio of capabilities, including
customer care, analytics, tech support, collections, home agent, and
end-to-end selling. We are committed to delighting our clients and their
customers, delivering value to our shareholders, and creating
opportunities for our talented, caring employees in 33 countries around
the world.
Visit www.convergys.com
to learn more about us.
Supporting Resources
Follow us on Twitter
and Facebook.
(Convergys and the Convergys logo are registered trademarks of Convergys
Corporation).
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CONVERGYS CORPORATION
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Consolidated Statements of Income
|
(Unaudited)
|
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Three Months Ended
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Six Months Ended
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|
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June 30,
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%
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June 30,
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%
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(Amounts in millions except per share amounts)
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|
2017
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|
2016
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Change
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|
2017
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2016
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Change
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
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Communications
|
|
$
|
318.3
|
|
|
$
|
348.4
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|
|
(9
|
)%
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|
$
|
649.7
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|
|
$
|
713.6
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|
|
(9
|
)%
|
Technology
|
|
|
139.5
|
|
|
|
153.9
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|
|
(9
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)%
|
|
|
289.5
|
|
|
|
318.3
|
|
|
(9
|
)%
|
Financial Services
|
|
|
60.3
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|
|
|
51.1
|
|
|
18
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%
|
|
|
126.6
|
|
|
|
106.2
|
|
|
19
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%
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Other
|
|
|
168.7
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|
|
|
138.9
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|
|
21
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%
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348.6
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|
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|
276.3
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|
|
26
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%
|
Total Revenues
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|
$
|
686.8
|
|
|
$
|
692.3
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|
|
(1
|
)%
|
|
$
|
1,414.4
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|
|
$
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1,414.4
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|
|
-
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%
|
Costs and Expenses:
|
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Cost of providing services and products sold
|
|
|
426.7
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|
435.1
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(2
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)%
|
|
|
876.9
|
|
|
|
885.5
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|
|
(1
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)%
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Selling, general and administrative
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|
|
174.1
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|
|
|
169.5
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|
|
3
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%
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|
|
351.6
|
|
|
|
340.6
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|
|
3
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%
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Depreciation
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|
27.1
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|
|
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31.2
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(13
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)%
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54.5
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63.1
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(14
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)%
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Amortization
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7.3
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6.9
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|
6
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%
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14.5
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|
13.8
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5
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%
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Restructuring charges
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1.7
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1.0
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70
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%
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16.7
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2.5
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NM
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Transaction and integration costs
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1.1
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2.3
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(52
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)%
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|
|
2.6
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|
|
|
2.3
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|
|
13
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%
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Total Costs and Expenses
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|
|
638.0
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|
|
|
646.0
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|
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(1
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)%
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|
|
1,316.8
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|
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|
1,307.8
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|
|
1
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%
|
Operating Income
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|
|
48.8
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|
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46.3
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|
5
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%
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97.6
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|
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|
106.6
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(8
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)%
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Other income (expense), net
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1.6
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(0.8
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)
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NM
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2.9
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(2.0
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)
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NM
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Interest expense
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(4.3
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)
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(4.5
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)
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(4
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)%
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(9.6
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)
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(9.0
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)
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7
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%
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Income before Income Taxes
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46.1
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41.0
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|
12
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%
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|
|
90.9
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|
|
|
95.6
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(5
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)%
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Income tax expense
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6.3
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7.8
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(19
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)%
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13.2
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17.9
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(26
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)%
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Net Income
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$
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39.8
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$
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33.2
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|
20
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%
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$
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77.7
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$
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77.7
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-
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%
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Basic Earnings per Common Share
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$
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0.42
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$
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0.35
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$
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0.83
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$
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0.81
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Diluted Earnings per Common Share
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$
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0.40
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$
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0.32
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$
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0.77
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$
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0.75
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Weighted Average Common Shares Outstanding:
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Basic
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93.7
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96.2
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94.0
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96.4
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Diluted
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100.1
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102.7
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100.6
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103.0
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Market Price Per Share
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High
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$
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25.00
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$
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28.54
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$
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26.60
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$
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28.54
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Low
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$
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20.60
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$
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24.30
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|
|
|
$
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20.15
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$
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22.53
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|
|
Close
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$
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23.78
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|
|
$
|
25.00
|
|
|
|
|
$
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23.78
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|
$
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25.00
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CONVERGYS CORPORATION
|
Reconciliation of GAAP Revenue Growth to non-GAAP Constant
Currency Revenue Growth
|
(In Millions Except Per Share Amounts)
|
|
|
|
|
|
Three Months Ended June 30,
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|
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2017
|
|
2016
|
Revenue
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$
|
686.8
|
|
|
$
|
692.3
|
|
Revenue growth, as reported under U.S. GAAP
|
|
|
(0.8
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)%
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|
|
(3.4
|
)%
|
Foreign exchange impact (a)
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1.0
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%
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0.8
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%
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Constant currency revenue growth (a non-GAAP measure)
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0.2
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%
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(2.6
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)%
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CONVERGYS CORPORATION
|
Reconciliation of GAAP EPS to non-GAAP EPS
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(In Millions Except Per Share Amounts)
|
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Three Months Ended June 30,
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%
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2017
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2016
|
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Change
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Operating Income as reported under U.S. GAAP
|
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$
|
48.8
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$
|
46.3
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5
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%
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Operating Margin
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7.1
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%
|
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|
6.7
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%
|
|
|
Depreciation of property & equipment write-up (b)
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|
|
0.9
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|
|
2.3
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Amortization of acquired intangible assets (c)
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|
|
7.3
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|
|
|
6.9
|
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Transaction related expenses (d)
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|
|
-
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|
1.2
|
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Integration related expenses (e)
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1.1
|
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1.1
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Total Charges
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9.3
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|
11.5
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Adjusted Operating Income (a non-GAAP measure)
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$
|
58.1
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|
$
|
57.8
|
|
|
1
|
%
|
Adjusted Operating Margin
|
|
|
8.5
|
%
|
|
|
8.3
|
%
|
|
|
Income before Income Tax as reported under U.S. GAAP
|
|
$
|
46.1
|
|
|
$
|
41.0
|
|
|
12
|
%
|
Total operating charges from above
|
|
|
9.3
|
|
|
|
11.5
|
|
|
|
Adjusted Income before Income Taxes (a non-GAAP measure)
|
|
$
|
55.4
|
|
|
$
|
52.5
|
|
|
6
|
%
|
Net Income as reported under U.S. GAAP
|
|
$
|
39.8
|
|
|
$
|
33.2
|
|
|
20
|
%
|
Total operating charges from above
|
|
|
9.3
|
|
|
|
11.5
|
|
|
|
Income tax impact from total operating charges
|
|
|
(3.0
|
)
|
|
|
(3.1
|
)
|
|
|
Adjusted Net Income (a non-GAAP measure)
|
|
$
|
46.1
|
|
|
$
|
41.6
|
|
|
11
|
%
|
Diluted EPS as reported under U.S. GAAP
|
|
$
|
0.40
|
|
|
$
|
0.32
|
|
|
25
|
%
|
Net impact of total charges
|
|
|
0.06
|
|
|
|
0.09
|
|
|
|
Adjusted Diluted EPS (a non-GAAP measure)
|
|
$
|
0.46
|
|
|
$
|
0.41
|
|
|
12
|
%
|
|
(a) Changes in currency exchange rates resulted in reduced revenues
in the current quarter primarily due to the strengthening U.S.
dollar relative to the British pound and euro.
|
|
(b) During the second quarter of 2017 and 2016, the Company recorded
$0.9 and $2.3, respectively, of depreciation expense resulting from
the fair value write-up of property and equipment acquired from
Stream and buw.
|
|
(c) During the second quarter of 2017 and 2016, the Company recorded
amortization expense of $7.3 and $6.9, respectively, related to
acquired intangible assets.
|
|
(d) During the second quarter of 2016, the Company recorded $1.2 of
expense associated with the acquisition of buw, related to fees paid
for third-party consulting services.
|
|
(e) During the second quarter of 2017 and 2016, the Company recorded
$1.1 of acquisition integration expenses, primarily related to
third-party consulting services and severance.
|
|
Management uses constant currency revenue growth to assess
underlying revenue trends by providing revenue growth between
periods on a consistent basis. Constant currency revenue growth is
determined by using the comparable prior year period's currency
exchange rates to translate current period revenue from local
currencies. Management uses operating income, net income and
earnings per share excluding the above items to assess the
underlying operational performance of the business for the year and
to have a basis to compare underlying operating results to prior and
future periods. These charges and credits are relevant in evaluating
the overall performance of the business.
|
|
Limitations associated with the use of these non-GAAP measures
include that these measures do not include all of the amounts
associated with our results as determined in accordance with GAAP.
Management compensates for these limitations by using the non-GAAP
measures, constant currency revenue growth, operating income, net
income and diluted earnings per share excluding the charges, and the
GAAP measures, revenue growth, operating income, net income and
diluted earnings per share, in its evaluation of performance.
|
|
|
|
CONVERGYS CORPORATION
|
Reconciliation of GAAP Revenue Growth to non-GAAP Constant
Currency Revenue Growth
|
(In Millions Except Per Share Amounts)
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
Revenue
|
|
$
|
1,414.4
|
|
|
$
|
1,414.4
|
|
Revenue growth, as reported under U.S. GAAP
|
|
|
-
|
%
|
|
|
(2.9
|
)%
|
Foreign exchange impact (a)
|
|
|
1.0
|
%
|
|
|
1.0
|
%
|
Constant currency revenue growth (a non-GAAP measure)
|
|
|
1.0
|
%
|
|
|
(1.9
|
)%
|
|
|
|
|
|
CONVERGYS CORPORATION
|
Reconciliation of GAAP EPS to non-GAAP EPS
|
(In Millions Except Per Share Amounts)
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
%
|
|
|
2017
|
|
2016
|
|
Change
|
Operating Income as reported under U.S. GAAP
|
|
$
|
97.6
|
|
|
$
|
106.6
|
|
|
(8
|
)%
|
Operating Margin
|
|
|
6.9
|
%
|
|
|
7.5
|
%
|
|
|
Depreciation of property & equipment write-up (b)
|
|
|
1.9
|
|
|
|
5.5
|
|
|
|
Amortization of acquired intangible assets (c)
|
|
|
14.5
|
|
|
|
13.8
|
|
|
|
Company-wide restructuring (d)
|
|
|
12.8
|
|
|
|
-
|
|
|
|
Transaction related expenses (e)
|
|
|
-
|
|
|
|
1.2
|
|
|
|
Integration related expenses (f)
|
|
|
2.6
|
|
|
|
1.1
|
|
|
|
Total Charges
|
|
|
31.8
|
|
|
|
21.6
|
|
|
|
Adjusted Operating Income (a non-GAAP measure)
|
|
$
|
129.4
|
|
|
$
|
128.2
|
|
|
1
|
%
|
Adjusted Operating Margin
|
|
|
9.1
|
%
|
|
|
9.1
|
%
|
|
|
Income before Income Tax as reported under U.S. GAAP
|
|
$
|
90.9
|
|
|
$
|
95.6
|
|
|
(5
|
)%
|
Total operating charges from above
|
|
|
31.8
|
|
|
|
21.6
|
|
|
|
Adjusted Income before Income Taxes (a non-GAAP measure)
|
|
$
|
122.7
|
|
|
$
|
117.2
|
|
|
5
|
%
|
Net Income as reported under U.S. GAAP
|
|
$
|
77.7
|
|
|
$
|
77.7
|
|
|
-
|
%
|
Total operating charges from above
|
|
|
31.8
|
|
|
|
21.6
|
|
|
|
Income tax impact from total operating charges
|
|
|
(11.3
|
)
|
|
|
(6.1
|
)
|
|
|
Adjusted Net Income (a non-GAAP measure)
|
|
$
|
98.2
|
|
|
$
|
93.2
|
|
|
5
|
%
|
Diluted EPS from as reported under U.S. GAAP
|
|
$
|
0.77
|
|
|
$
|
0.75
|
|
|
3
|
%
|
Net impact of total charges
|
|
|
0.21
|
|
|
|
0.16
|
|
|
|
Adjusted Diluted EPS (a non-GAAP measure)
|
|
$
|
0.98
|
|
|
$
|
0.91
|
|
|
8
|
%
|
|
(a) Changes in currency exchange rates resulted in reduced revenues
in the current year primarily due to the strengthening U.S. dollar
relative to the British pound and euro.
|
|
(b) During the six months ended June 30, 2017 and 2016, the Company
recorded $1.9 and $5.5, respectively, of depreciation expense
resulting from the fair value write-up of property and equipment
acquired from Stream and buw.
|
|
(c) During the six months ended June 30, 2017 and 2016, the Company
recorded amortization expense of $14.5 and $13.8, respectively,
related to acquired intangible assets.
|
|
(d) During the six months ended June 30, 2017, the Company recorded
restructuring charges of $12.8, associated with a company-wide
initiative to reduce headcount and better align the Company's
resources, principally for corporate functions.
|
|
(e) During the six months ended June 30, 2016, the Company recorded
$1.2 of expense associated with the acquisition of buw, related to
fees paid for third-party consulting services.
|
|
(f) During the six months ended June 30, 2017 and 2016, the Company
recorded $2.6 and $1.1, respectively, of integration expenses
associated with Convergys' integration of the acquired Stream and
buw operations. These expenses were primarily related to third-party
consulting services and severance expense.
|
|
Management uses operating income, net income and earnings per share
data excluding the items above to assess the underlying operational
performance of the business for the year and to have a basis to
compare underlying operating results to prior and future periods.
These charges and credits are relevant in evaluating the overall
performance of the business.
|
|
Limitations associated with the use of these non-GAAP measures
include that these measures do not include all of the amounts
associated with our results as determined in accordance with GAAP.
Management compensates for these limitations by using the non-GAAP
measures, operating income, net income and diluted earnings per
share excluding the charges, and the GAAP measures, operating
income, net income and diluted earnings per share, in its evaluation
of performance.
|
|
|
|
|
|
|
|
|
|
CONVERGYS CORPORATION
|
Reconciliation of Net Income to Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
%
|
|
June 30,
|
|
%
|
(In millions)
|
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
Net Income
|
|
$
|
39.8
|
|
|
$
|
33.2
|
|
|
20
|
%
|
|
$
|
77.7
|
|
|
$
|
77.7
|
|
|
-
|
%
|
Depreciation and Amortization
|
|
|
34.4
|
|
|
|
38.1
|
|
|
(10
|
)%
|
|
|
69.0
|
|
|
|
76.9
|
|
|
(10
|
)%
|
Interest expense
|
|
|
4.3
|
|
|
|
4.5
|
|
|
(4
|
)%
|
|
|
9.6
|
|
|
|
9.0
|
|
|
7
|
%
|
Income tax expense
|
|
|
6.3
|
|
|
|
7.8
|
|
|
(19
|
)%
|
|
|
13.2
|
|
|
|
17.9
|
|
|
(26
|
)%
|
EBITDA (a non-GAAP measure)
|
|
$
|
84.8
|
|
|
$
|
83.6
|
|
|
1
|
%
|
|
$
|
169.5
|
|
|
$
|
181.5
|
|
|
(7
|
)%
|
Company-wide restructuring
|
|
|
-
|
|
|
|
-
|
|
|
-
|
%
|
|
|
12.8
|
|
|
|
-
|
|
|
100
|
%
|
Transaction related expenses
|
|
|
-
|
|
|
|
1.2
|
|
|
(100
|
)%
|
|
|
-
|
|
|
|
1.2
|
|
|
(100
|
)%
|
Integration related expenses
|
|
|
1.1
|
|
|
|
1.1
|
|
|
-
|
%
|
|
|
2.6
|
|
|
|
1.1
|
|
|
NM
|
Adjusted EBITDA (a non-GAAP measure)
|
|
$
|
85.9
|
|
|
$
|
85.9
|
|
|
-
|
%
|
|
$
|
184.9
|
|
|
$
|
183.8
|
|
|
1
|
%
|
EBITDA Margin
|
|
|
12.3
|
%
|
|
|
12.1
|
%
|
|
|
|
|
12.0
|
%
|
|
|
12.8
|
%
|
|
|
Adjusted EBITDA Margin
|
|
|
12.5
|
%
|
|
|
12.4
|
%
|
|
|
|
|
13.1
|
%
|
|
|
13.0
|
%
|
|
|
|
The Company presents the non-GAAP financial measures EBITDA and
Adjusted EBITDA because management uses these measures to monitor
and evaluate the performance of the business and believes the
presentation of these measures enhances the investors' ability to
analyze trends in the business and evaluate the Company's underlying
performance relative to other companies in the industry.
|
|
These non-GAAP measures should not be considered in isolation or as
a substitute for net income or other income statement data prepared
in accordance with GAAP and our presentation of these measures may
not be comparable to similarly-titled measures used by other
companies. Management uses both these non-GAAP measures and the GAAP
measure, net income, in evaluation of its underlying performance.
These non-GAAP measures should be considered supplemental in nature
and should not be considered in isolation or be construed as being
more important than comparable GAAP measures.
|
|
|
|
|
|
CONVERGYS CORPORATION
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
At June 30, 2017
|
|
At December 31, 2016
|
(In millions)
|
|
|
|
|
Assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
162.7
|
|
|
$
|
138.8
|
Short-term investments
|
|
|
12.2
|
|
|
|
12.4
|
Receivables, net of allowances
|
|
|
547.2
|
|
|
|
555.0
|
Other current assets
|
|
|
98.1
|
|
|
|
78.6
|
Property and equipment, net
|
|
|
284.1
|
|
|
|
304.1
|
Other assets
|
|
|
1,300.9
|
|
|
|
1,282.9
|
Total Asset
|
|
$
|
2,405.2
|
|
|
$
|
2,371.8
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
Debt and capital lease obligations maturing within one year
|
|
$
|
1.1
|
|
|
$
|
1.8
|
Other current liabilities
|
|
|
329.0
|
|
|
|
345.8
|
Other liabilities
|
|
|
362.3
|
|
|
|
350.0
|
Long-term debt and capital lease obligations
|
|
|
288.8
|
|
|
|
297.0
|
Convertible debentures conversion feature
|
|
|
60.4
|
|
|
|
61.3
|
Shareholders' equity
|
|
|
1,363.6
|
|
|
|
1,315.9
|
Total Liabilities and Shareholders' Equity
|
|
$
|
2,405.2
|
|
|
$
|
2,371.8
|
|
|
|
|
|
CONVERGYS CORPORATION
|
Reconciliation of Cash Provided by Operating Activities to Free
Cash Flow
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net cash provided by operating activities
|
|
$
|
89.5
|
|
|
$
|
79.7
|
|
|
$
|
122.4
|
|
|
$
|
156.3
|
|
Capital expenditures
|
|
|
(19.0
|
)
|
|
|
(23.3
|
)
|
|
|
(27.9
|
)
|
|
|
(34.3
|
)
|
Free Cash Flow (a non-GAAP measure)
|
|
$
|
70.5
|
|
|
$
|
56.4
|
|
|
$
|
94.5
|
|
|
$
|
122.0
|
|
Acquisition - cash paid for transaction and integration related
expenses (a)
|
|
|
1.1
|
|
|
|
1.4
|
|
|
|
2.8
|
|
|
|
2.8
|
|
Adjusted Free Cash Flow (a non-GAAP measure)
|
|
$
|
71.6
|
|
|
$
|
57.8
|
|
|
$
|
97.3
|
|
|
$
|
124.8
|
|
|
(a) Payments associated with investment activity for acquisition
related items.
|
|
Management uses free cash flow and adjusted free cash flow to assess
the financial performance of the Company. Convergys' Management
believes that free cash flow and adjusted free cash flow are useful
to investors because they present the operating cash flow of the
Company, excluding capital that is spent to continue and improve
business operations, such as investment in the Company's existing
businesses. Further, free cash flow and adjusted free cash flow
provide an indication of the ongoing cash that is available for debt
repayment, returning capital to shareholders and other investment
opportunities. Management also believes the presentation of these
measures will enhance the investors' ability to analyze trends in
the business and evaluate the Company's underlying performance
relative to other companies in the industry.
|
|
Limitations associated with the use of free cash flow and adjusted
free cash flow include that they do not represent the residual cash
flow available for discretionary expenditures as they do not
incorporate certain cash payments, including payments made on
capital lease obligations or cash payments for business
acquisitions. Management compensates for these limitations by using
both the non-GAAP measures, free cash flow and adjusted free cash
flow, and the GAAP measure, cash from operating activities, in its
evaluation of performance. These non-GAAP measures should be
considered supplemental in nature and should not be considered in
isolation or be construed as being more important than comparable
GAAP measures.
|
|
|
|
|
|
|
|
CONVERGYS CORPORATION
|
Summarized Statement of Cash Flow
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(In millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net cash provided by operating activities
|
|
$
|
89.5
|
|
|
$
|
79.7
|
|
|
$
|
122.4
|
|
|
$
|
156.3
|
|
Net cash used in investing activities
|
|
|
(18.3
|
)
|
|
|
(23.3
|
)
|
|
|
(27.2
|
)
|
|
|
(35.1
|
)
|
Net cash used in financing activities
|
|
|
(85.6
|
)
|
|
|
(35.2
|
)
|
|
|
(71.3
|
)
|
|
|
(83.2
|
)
|
Net (decrease) increase in cash
|
|
|
($14.4
|
)
|
|
$
|
21.2
|
|
|
$
|
23.9
|
|
|
$
|
38.0
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170808006396/en/
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