CGI Inc (GIB) 2002 Q3 法說會逐字稿

Good afternoon, and welcome to the American Management Systems' Third Quarter Earnings Conference Call.

Today's call is being recorded.

I would like to remind you that certain statements by AMS management during this conference call might constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such statements are based on management's current expectations and are made in good faith by the Company pursuant to the Safe Harbor Provision of the Act.

Forward-looking statements include financial projections, estimates and statements regarding plans, objectives and expectations of the Company and its management, as well as management's views regarding industry and economic conditions and trends.

These forward-looking statements involve known and unknown risks, uncertainty and changes in circumstances which may cause the Company's actual results to differ materially from any future results expressed or implied by such forward-looking statements.

Such risks and uncertainties also include other factors, some of which are beyond the Company's control.

Additional information concerning factors that could cause results to differ materially from those projected in the forward-looking statements is contained in Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, which is on file with the Securities and Exchange Commission.

These forward-looking statements should not be relied upon as representing the Company's investments or views as of any subsequent date.

I would now like to turn the call over to Mr. Ronald Schillereff, Senior Vice President and Director of Investor Relations.

Please go ahead.

Thank you, Wendy.

Good afternoon, everyone.

Welcome to AMS's Third Quarter Earnings Conference Call.

We'll begin our call today with AMS's Chairman and Chief Executive Officer, Alfred Mockett.

William Purdy, our President and Chief Operating Officer, and John Brittain, Executive Vice President and Chief Financial Officer, will follow.

Following their formal comments, Alfred will have some closing remarks.

Then we will open the call for questions.

Now, I'd like to turn the call over to Alfred T. Mockett, Chairman and CEO.

Thank you, Ron.

Good afternoon, ladies and gentlemen, and welcome to our Third Quarter Earnings Conference Call.

Before we embark in a discussion of the performance of the third quarter and the outlook for the fourth quarter, I'd like to pause and acknowledge William Purdy's retirement and recognize his tremendous contributions to AMS over the last 25 years.

His tenure was marked by increasingly responsible positions of leadership, for which Bill should be justifiably proud.

Since I joined AMS last December, Bill has been an energetic, creative partner in the restructuring of AMS, preparing for a new era of growth.

He has helped [me to] AMS through this last year of transition and will remain a valuable source of counsel.

Together, we've assembled an accomplished executive team, combining the best talent from within AMS and world-class executives from the outside.

This team is in place and fully engaged.

Bill made the decision to retire because he'd accomplished his goal for AMS and himself.

He sustained the Company through a difficult period and played a central role in our restructuring.

Bill's 62 years old, and he is retiring at this time to enjoy his success with family.

We will appoint a new CEO by next summer.

Meanwhile, the strong management team that Bill has recruited and assembled will report to me.

This will allow me to get much closer to day-to-day operations and provide an opportunity to work with the five or six strong internal candidates for the job, all of whom would make excellent COOs, and to assess their potential against external benchmarks.

In the coming weeks, all with AMS will join with our customers and friends in expressing our thanks and admiration to Bill and our best wishes to him and his family for the future.

Perhaps, Bill, you'd like to share your thoughts on your decision before we go on to the normal course of business?

Thank you, Alfred.

Being Chief Operating Officer at AMS is a terrific job, and an all-consuming job.

In the last year, I've helped Alfred both implement a new vision for our future and to build an exceptional management team to make the vision a reality.

Now, at 62, and after 25 years at AMS, I've decided to change my priorities and focus more of my time in other places.

I'm confident in our leadership, our management team, and AMS's future.

Thanks.

Again, good afternoon, everyone.

As we begin, there are two key points I want to emphasize today.

First, I’m pleased to report to you that during the third quarter, AMS met its operational and financial commitments while continuing with an aggressive transformation of the Company.

Second, we have improved upon our sound financial position with growing cash balances, zero debt, and solid operating fundamentals.

We will discuss this in more detail during the call.

We accomplished all of this in a macroeconomic environment that continues to be very challenging.

Overall, with the exception of the telecommunications sector, our markets are relatively stable but essentially flat in the third quarter.

The near paralysis of the telecommunications sector, combined with the ongoing weakness within the overall IT services industry, resulted in a revenue base slightly lower than the previous quarter.

We're seeing a continued softening in IT investments across several markets, as well as pricing pressure on new deals.

However, our immediate and proactive steps to cut costs to preserve our margins and profitability, as well as the new business [one], now primarily in public sector business, offset this decline.

While the flow of potential business is [pointed] in the federal government, there is not yet any definitive upward rebound in sight.

In general, deals are more competitive than in the past, and many customers have continued to delay spending on information technology.

We expect the market to grow – show a gradual improvement during 2003, with progress weighted towards the end of the year.

We hope to see a return to what we consider to be a normal growth rate of 11 or 12 percent in 2004.

In the meantime, our business strategy and efforts in business development should facilitate our profitability despite reduced revenue growth opportunities.

During the last conference call, I spoke at length about the difficult conditions in the global telecommunications industry.

As everyone is aware, telecommunications is experiencing a dramatic downturn and shows few signs of improvement.

It is unlikely that it will improve until at least 2004.

Our Communications, Media and Entertainment group has responded to the challenges faced by its customers with solutions that deliver immediate and positive results, such as faster billing and collections.

We continue to monitor this business very closely, to contain our costs and earnings exposure.

Our strategy going forward is to maintain our market position in defined segments in this sector during this difficult period without comprising the Company's ability to meet its earnings targets.

We continue to be very confident of our ability to meet the demands of our targeted markets and customers while maintaining strong financial discipline.

In contrast to the telecom sector, the federal government market is stable.

Homeland security continues to be an important area for us; however, the establishment of the department has been delayed, and as a result, much of the revenue we previously anticipated has not yet materialized.

We anticipate growth in this area once the department becomes fully operational in 2003.

We are positive about our prospects in this area because of the strong information technology components and national security needs.

Further, entitlement programs, such as Medicare and Medicaid, will continue to be funded despite tight budgets in this sector.

AMS is increasingly winning IT work in this area.

We're also seeing a slight uptick in our Financial Services sector business, our strength in consumer credit, origination, collections, decisioning analytics, and the ability to integrate large, disparate information systems play well for this market.

Of all of the attractive elements of our business model, it generates strong cash flow, which funds the operations and provides available investment dollars.

We continue to remain debt free, a distinct advantage in the current market conditions.

Our cash position at the end of the quarter had increased to roughly $18 million.

In order to maximize financial flexibility and preserve our ability to take advantage of market opportunities, we continue to focus on net cash from available liquidity.

Currently, we have available liquidity of approximately $196 million.

These resources are available to us in the event that we wish to capitalize on the depressed market conditions and acquire businesses that are attractive to us.

We continue to invest in our people, our brand, our product evolution, and further implementations of our benefits-funded contracting model.

Acquisitions are also an important part of our strategy.

Any acquisitions will be designed to broaden our scope and reach, or to acquire a skill set in targeted or existing businesses.

Specifically, any acquisitions would add customers, contract base and backlog in our existing core areas.

Throughout the year, all at AMS have worked to leverage our solid platform of business with a lower cost structure, a revitalized management team, and a customer-centric sales focus.

We are rolling out new service lines that represent repeatable, scalable solutions for our customers and that will create annuity revenue streams to finance our future.

Simultaneously, the cost-containment effort that we have pursued aggressively all year is yielding results.

We continue to align our operations with the new business strategy while right-sizing the business in line with market expectations.

This is a delicate balance of pruning where possible, spending where advisable, and maximizing the impact of our investments across the board.

John Brittain will discuss later in this call how we are performing against our value metrics as well as against more traditional measures of financial performance.

Our executive team is now in place and is leading our transformation to a culture driven by results, sales, and customer satisfaction.

We're investing in developing our management and people, while right-sizing the organization.

We've also identified new leaders for our service groups.

Paul Turner, who has served as our Chief Technology Officer for nearly four years, will, in addition, head the Innovation and Transformation Group, and Roger [McGee], who has served as Managing Director of our Australian operations, has relocated to the U.S. to lead the Enterprise Integration Service line.

Now, heading into the fourth quarter, we face the toughest market conditions of the year.

A great deal of political and economic uncertainty, the threat of war, a mood of corporate pessimism, and ongoing cuts in capital expenditure.

With the exception of a war, we have geared the Company to these conditions.

In addition, in January we set an aggressive strategy.

Each quarter, we have made commitments about our performance toward delivering on this strategy.

We have met our commitments at a very difficult time.

We've implemented dramatic change in this organization, refocused the business through a new business model that enables us to leverage the full strength of the corporation, built a strong management team, and set in place a solid foundation.

We're well on our way and continue to position for growth when the market turns.

I'd now like to turn the call over to William Purdy for an overview of our operations and a look at how we're helping our customers achieve better results.

Bill?

Thank you, Alfred.

Since the beginning of the year, we've added 66 new customer accounts to our book of business, all in line with our business strategy laid out earlier this year.