Startek Inc (SRT) 2004 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to the StarTek Second Quarter 2004 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. If anyone should acquire assistance during the conference, please press "*" then "0" on your touchtone telephone. As a reminder today's conference is being recorded. I would now like to introduce to your host for today's conference Miss. Amy Claire Wild, Vice President of Marketing and Communications. Please go ahead.

Thank you and again welcome to StarTek second quarter 2004 financial results conference call. As our operator mentioned, our call today is being recorded and we will provide a replay of the call available at our Company's website www.startek.com by August 3 and through August 31.

Please note that our discussions today will encompass certain statements which are forward-looking and subject to various risks and uncertainties as summarized in our 2003 Form 10-K and other SEC filings. Our actual results may be varied based upon these risks and uncertainties. I turn the call over to Bill Meade.

Good morning and welcome to the first ever quarterly earning conference call for StarTek. We are please to have this opportunity to speak with you. As Amy said my name is Bill Meade, I'm the President and Chief Executive Officer for StarTek, and I have with me on today on the call Gene McKenzie, our Chief Financial Officer. I will make some introductory comments and Gene will discuss our financial results, and I will make some concluding comments and then we will open the line for question and answers. This call will conclude at 10:00 a.m. Eastern Time at the latest. Gene and I will be available for the reminder of the day for further question if you have any.

During the course of our remarks today, we will not be providing any forward-looking financial guidance about our business nor will we provide financial guidance for the balance of this calendar year.

Over the 36 meetings we participated in during our June 2004 road show, we invited and solicited your feedback and how to shift towards an enhanced investor relations policy. Your overwhelming recommendations were to go slow and to basically put our toe in the water slowly. In keeping with that feedback, we will not be providing financial guidance at this time, but we do intend to provide more information and clarification around our results and business performance. In keeping our -- we will revisit our approach to guidance as we approach 2005. In addition, we received many encourage yesterday where people were a bit upset with the time lag between the press release going out yesterday morning and the conference call today. I apologize in advance if this created any inconvenience for you, and moving forward we will issue the release at close of business, the day prior to the conference call.

We are pleased with the -- we are very pleased with the very strong results of our second quarter performance. As you can see from the earnings release yesterday, our growth continues. Overall we grew revenue 18% over Q2 last year and our forward momentum on the business process management services side of our business continues. Our revenue growth demonstrates the proof of our operational excellence model and contributes to our ongoing strong EPS growth. With this, we believe our business model continues to distinguish us. Our solid service offerings coupled with fair pricing and crisp execution continues to be able distinguish us from our competition. Both Q2 and Q1 and Q2 combined benefited from the capacity we brought online and operationally at this time last year.

During Q2, we continue continued our successful process of ramping up slowly and deliberately two new clients, one in utilities and an addition is another key telecommunication's client. In the quarter, porting volumes for wireless number portability were not as strong as in the previous two quarters. This trend is concurrent with that in the overall industry which has experienced lower volumes compared to an initial consumer forecast and certainly slower than wireless number portability was first introduced to consumers in November of 2003. In our supply chain management services, volume with our largest client is continuing to slow relative to the work we do for them and is trended to be a smaller and smaller percentage of our total revenue. We continue to be encouraged by the activity in our sales pipeline. As I stated, we are currently in the middle of ramping two new clients which were secured earlier this year. We are encouraged by our recent close rates and the size of our sales pipeline. We anticipate replicating the success we had during the first half of 2004 with two new key client acquisitions during the second half of 2004, and we are very pleased with the ongoing positive response from both our existing clients and our newer clients and that they continue to reward us with more of their business. We firmly believe this is testament to the success and value of our operational excellence model. Our focus on people and process has been the foundation of this excellence. We believe delivering servicing quality day-in and day-out is what our clients value the most, and if we do this we will be rewarded with incremental business and gain share in the marketplace.

At this time, I would like to turn it over to Gene to go through some financial remarks with you.

Thanks, Bill. As Bill reviewed StarTek did experience another strong quarter. One underlying reason as Bill stated earlier, Q2 2004 was so strong is because during the same quarter of last year we were bringing up two sites to the full operational levels and in Q2 this year in the first half of this year, we're enjoying the incremental value from those ramps. We did do a good job of managing expenses too, we continued to grow but kept a strong eye on operating expenses without being to fragile about restraining our investment and infrastructure. Q2 revenue increased 17.7% year-over-year from 54.5 million last year to 64.7 million this year.

For the first half of the year revenue increased 22.7% over 2003 from 105.1 million to a 128.9 million. Q2 gross profit increased 3.8 million year-over-year or 30%. As a result gross margin improved 250 basis points from 23.4% last year to 25.9% this year. For those of you that might be wondering what is driving the decline in margin in Q2 2004 from Q1 2004, one element is the impact of our renewed and extended contract with our largest customer which went into effect April 1, 2004. For the first half of the year gross profit increased almost $10 million over the first half of the year in 2003. The first half of the year gross margin growth is 330 basis points from 23.8% last year to 27.1% this year. Operating expenses are almost flat from Q2 2003 to Q2 2004 increasing only $60,000 from 7,203,000 last year to 7,263,000 this year. For this same period as a percentage of revenue, operating expenses have declined a 190 basis points from 13.2% last year to 11.3% this year. For the first half of the year, operating expenses were up 11.3% from 13.6 million last year to 15.1 million this year. For the first half of the year, operating expenses as a percentage of revenue have declined a 120 basis points from 12.9% last year to 11.7% this year.

As a result of all of this, operating income for Q2 2004 was 9.3 million, an increase of almost 3.8 million or 67.8% over Q2 2003. Operating margin for Q2 2004, was 14.5%, 430 basis points better than last year, -- last year's result of 10.2%.

For the six month ended June 30, 2004 operating income was 19.9 million, almost 8.5 million better than 2003's results. Operating margin for the first half of 2004 was 15.4%, a 450 basis point increase over 2003's 10.9%. Net income for Q2 2004 was 6.5 million, an increase of 2.3 million or 54.7% over Q2 2003. Net income for the first six months of 2004 is 13.3 million, an increase of 5 million or 60% year-over-year. Earnings per share was 44 for Q2 2004, growing 5 over Q2 2003’s 29 almost 52%. Earnings per share for the first half of 2004 is 90 , 33 higher than last year’s 57 , a growth of almost 58%. DSO at June 30, 2004 is 58 days compared to 68 days at the end of Q1 2004 and 60 days at December 31, 2003. Our current ratio at June 30, 2004 is approximately 4.6 and cash and investments combined are 57.8 million on a total asset based of a $169 million.

Now I'd like to turn it to back over to Bill for some closing comments.

So all in all, we are proud of the results for Q2 and through the first half of 2004. We continue to expand profitability growing both our topline and our bottomline at a health pace. We are taking great care of our existing customers and we are continuing to add new ones. Our near-term focus will continue to be on new business acquisition and the diversification of our client base. As I conclude our prepared remarks on our second quarter performance, I do want to restate our current IR practice of not offering a forward-looking financial guidance at this point in time and for the duration of 2004.

Thank very much Bill. We'd like to open up the call now for the question-and-answer session and please stand by while we ask the operator just to refresh our memories on the call practice.

Thank you ladies and gentlemen if you have a question at this time please press the "1" key on your touchtone telephone. If your question has been answered or if you wish to remove yourself from the queue, please press the ""#"" key, Once again if you do have a question press the "1" key.

Our first question comes from Kristen Cooper of Lehman Brothers. Please go ahead.

Hi everybody thanks for taking my call this morning. Bill, you said in your prepared remarks number of comments about your future pipeline through the rest of the year. I am wondering if you’d be able to quantify for us and possibly dollar volume and/or number of opportunities. I know you mentioned Q and client industry concentration for your current pipeline?

You know, again Christine our practice is going to be not to state specific dollar volumes. I can't say that our pipeline and the quality of our pipeline is stronger than I think it has been since I have been with the company. I think on the diversification issue the thing about our pipeline that is good news is there are more high probability to close prospects that are outside of just telecommunications. So again you know -- we are -- our sweet spot is telecommunications, but we are continuing to look through to diversify in to other new verticals and again particularly in utilities and financial services,

Okay, thank you. Your hesitancy to provide guidance for the rest of the year may also pertain to this question, but I am going to try any way. Can you update us on your current capacity plans may be even just qualitatively in terms of the number of centers for the balance of 2004?

Yeah currently we have got 20 physical locations or what we call 19 operational sites. We have a site in process right now terms of ramping which again will bring us to 20 operational sites. In the near term, we are continuing to look and have in our plans for this year having a presence offshore in Asia and having seat capacity most likely in the Philippines by year end and then again, based on the pipeline, we could anticipate perhaps an additional facility by year end.

Okay and not those agency facilities that you referenced those would be pure StarTek or are you looking at any type of joint venture with somebody already --.

Currently, we are still in that evaluation process that will either be through a joint venture or through StarTek on its own, but we do intend to have that capacity available no later than yearend.

Okay, great. My final question was just on current thoughts on CapEx and D&A through the rest of the year, again may be even just qualitatively or --?

From a CapEx standpoint, we've disclosed a couple of times a spend this year of approximately -- an estimated spend this year of approximately $25 million and will remain fairly close to that estimate. We are finalizing the remainder of the year plans right now, you know, might be $23 million, I don't know -- but we'll stay consistent with that notion.

Okay, great. That's all I had. Thank you so much.

Thanks.

Our next question comes from Bill Warmington of SunTrust Robinson.

Bill Warmington of SunTrust Robinson Humphrey. Couple of quick questions for you. First, I want to see how the two new clients you mentioned were ramping in the second quarter? How are they ramping, and did they contribute anything in the second quarter? Is that really something that's going to happen more in the third and fourth quarters?

Yeah, Bill, both those clients are coming online and I think it is -- you know, our historical practice particularly as it relates to nailing our operational excellence model, we tend to bring that but just slowly making sure again we have really got the quality and focus. So, there was a revenue contribution in Q2, but you know relatively small, you know from comparative standpoint, but again you know the good news is about both of those clients particularly as we forward over the next couple of years as there are besides where we think we can replicate the strong growth we’ve had with some of our existing clients.

So it sounds like, it's following a pattern of some of your previous new client as where the first quarter it might be some small contribution to revenue. Second quarter, do you have that -- you start to see the ramp in the revenue to cover the expenses and then really in the third quarter of the new client, you start to see the real contribution to revenue and profit?

Exactly, the same pattern.

Okay. I wanted to ask you on the new business pipeline whether you are seeing a lot of contribution there from existing clients or you are really looking for net new clients?

No, when I speak -- that’s a good question. When I speak to new business pipeline that would be brand new clients. You know and that’s good feedback, we should talk -- you know the existing business would be from again the current clients, but anytime I referenced new business pipeline, just think of brand new clients for StarTek.

And so how are things going on with your existing clients and demand there?

I think, you know, it's going very well. I would say that again our operational excellence model and just refresh what we mean by that for people, our operational excellence model is we believe we can ramp capacity faster than any of our competitors in a quality way. We believe we are delivering quality and service day in and day out better than any of our competitors. And then thirdly, it’s the way we staff. Our staffing model relative to 15 minute intervals, and we I think, you know, again we are certainly experiencing continued growth with the majority of our large clients within the business process management services area.

And then you mentioned that some of the pressure on the gross margin line coming from the contract renewals what's your largest client, the question there is whether you saw whether that impact was on existing business or whether that it represents incremental business that is impacted there? How does that contract, how does that pricing work and how does the contract work?

I am sorry Bill I was looking down at something, will you repeat that?

Sure the question is on your largest client, you had mentioned that the new contract that went into affect in early April was part of the reason you saw a tick down in the gross margin line, so the question is how is that affecting the -- is that affecting the revenue line or is it affecting and how is it affecting the margin? Is it only on incremental business? Does it affect the entire pool of business how does that work?

Okay great question I basically we renewed and extended this contract with our largest customers through December 31st of 2006; and is structured with a [peered] pricing such that we believe will generate higher volume over the duration of the contract but it will be at a lower margin. The terms of the contract did go in to affect I think I said this before April 1, 2004.

Okay, well thank you very much. I leave the floor.

Thank you our next question comes from Arnold Ursaner of CJS Securities

Hi good morning.

Good morning.

A couple of questions if I can, the one number in your release that was disappointing to me and I want to focus on it, if I can, is your operating margin, your EBIT margin, and it appears we have two key factors that are affecting it; expenses to ramp-up to new clients and your new tier pricing, the impact of the renewal on the expanded contract; is it fair to say those are the two key factors and can you give us a little better help in understanding whether they will continue to be a problem going forward?

Yeah, Arnie, those two are key factors, clearly when we ramp they will, as is the case in our industry there will always be that impact when we are ramping, so you short-term impact, long-term gain and the answer to the second part of the question is yes we do have the operational excellence model, we do intend to improve productivity to play against the period pricing and the lower margins. The third thing I would point to in Q2 over Q1 is that we do have higher mix of supply change business relative to Q1. Arnie and still the only other I had is over the duration of contract we do focus on improving productivity year-over-year so as we move forward we hope to offset some of the margin degradation with productivity increase, but certainly Q2 was the first you know the first quarter that the pricing change was effective.

Without disclosing specific clients, can you, you know porting volumes you mentioned were less than you thought they would be. Can you actually give us what your porting volumes were with your mix of customers?

No, you know we won't talk to this specific size to the volume. What I will tell about porting is that -- I think as everyone is well aware porting, you know came in last November of 2003, and we brought on some additional capacity that was devoted to that for one client. The issue was there is no history relative to the porting volumes and trends, and at the time if you read the, you know external publications roughly a 135 million people were eligible -- subscribers were eligible to port and the range is from any where from 5% to 25% of those people would port during the first year. We have no historical data to go-off of so we built a financial model working with will our client on a set of assumptions. What is going on with porting is really primarily two things. Since the introduction, the clients in the industry are working very, very hard to automate a large percentage of this volume that in initial stages was done manually, and then the second that's happening is the carriers and their marketing departments became very astute to instead of letting porting happening -- a lot of happened relative to enhancing contracts that were expiring with new devices and things like that. So what we are just really seeing with porting is the way we build our 2004 financial plan, I would -- you know what we read relative to the industry trends porting volumes to-date is in the single digits versus where there were projections, again as it being as high as 25%. Our financial model was certainly built more in the double-digit range of porting volume growth that was currently taking place in the marketplace.

As a follow-up to that; in your renewed or extended contract if porting volumes had been the same or had kept the rate of growth that you would have expected, would you have maintained margin or was your margin coming down even if you maintained the volume?

The porting issue has no impact relative to the extension of the contract with the largest client.

Okay and again focusing on the ramp up of expenses, you have two -- I guess two facilities or two clients are ramping up, do you actually absorb the expenses in Q2, and can you freshen up when you anticipate opening these facilities.

We do absorb the expenses in Q2 and we are -- I mean, we are currently ramping those sites right now and starting to enjoy revenue and then I just referenced back to what Bill said earlier with Bill Warmington which is sort of how -- you know, how those tend to come online.

Yeah and Arnie, I think that, you know, there will be some continued expense ramp in Q3, in addition I should say part of the ramp of those new clients is capacity and that -- you know, I mean, where the physical infrastructure that was in place and then you know part of that relates again that to future capacity, but there will still be -- still will be some expense ramp in Q3.

Okay and the two new key clients you hope to add in the second half, I assume your are in pretty serious negotiation right now, if you hope to add them in the second half, will be in -- do you expect to incur expenses for them in Q3?

Yeah, I mean for the two new, yeah, -- I mean no, there will be expenses because based on how we are viewing the pipeline today, that could be something that again triggers another additional site beyond what we have in place today, so that could impact the expense line and then again the way they ramp, you know, the sites ramp, I mean the way our clients come on, we believe we will have, you know, hopefully again replicate the first half year performance in the second half. Not significant revenue contributors relative to the second half just to get in terms of how they ramp, but heading into '05, hopefully extremely well positioned with incremental clients over '03.

And just the final question. If you are successful with the various new clients you have, would you expect any of them to be disclosable in '05n would they be 10% people by '05?

We -- that certain -- I think, both of those clients have the demand curve internal for those to be disclosable clients, you know during '05. I would say it's more likely that one of them might be in the '05 timeframe and you know again the second one could be later than that. But they certainly have that kind of volume potential.

And they are not in the telecom space?

One of the new clients is within the telecommunications space and the other is within the utilities.

Okay. Thank you.

Thanks, Arnie.

Our next question comes from Troy Mastin of William Blair & Company.

Good morning, Thank you. In your prepared remarks you mentioned that you have been pleased with your close rate on new business recently. Just want to understand if there has been additional clients but on that are smaller than the two main ones or are you primarily referring to be close rate on those two?

You know, Troy I am primarily referring to the close rate within business process management services, you know we have had on the supply chain management services side of the business those tend to be driven more from a purchase order standpoint or jobs standpoint, and we have had some you know new client activity on that side, but when I refer more of the close rates in the pipeline I am talking about business process management services.

And have there been more than two I suppose their might be some smaller one, I am trying to understand if your business is getting more diversified because of this close rate or is client -- large client concentration is still going to be very evident given this close rate that you're seeing?

I think that again as we move you know out of '04 and into '05 and kind of based on the previous questions as you move through '05, you will see decline concentration change for sure in terms of percentage of our revenue coming from specific clients, the diversification will change relative to I think number you know of key clients and then the part that we are continuing to focus on as I said in my opening remarks we also want diversification outside of just the telecommunications vertical today, which is driving the majority of our revenue today.

Okay were they're a business process clients outside of those two?

There is nothing, -- no nothing substantial or meaningful there in the first half outside of those two.

Okay and then another question, the recent announcement out of AT&T on their consumer business, their decision to pull-out of some consumer markets, do you have any sense if this can be impactful to your business relationships with them indeed of positive or negative manner?

Troy, our relationship in business today with AT&T is primarily, you know all on the business service side so I mean we certainly watch closely announcements and trends within AT&T, but the announcements just recently on the consumer side of their business has no impact on us.

I guess the likelihood they maybe more focused on business could mean a ramp in investments any sense if that may be the case, have you heard any dialogue out of them along those lines?

You know maybe I think as we all more read in the press, there is just a lot going on there and a lot of change, so we don't have anything you know firm on that.

Okay and then I wanted to ask about your SG&A expenses, they dropped versus the first quarter on both in absolute dollar basis and on a percentage revenue basis, is there anything in particular that led to this one-time either that made it higher in Q1 or lower in Q2?

Yeah if you go back and look at the Q for Q1, we had a one-time hit of $500,000 for some reductions we made in the UK and that is substantially all of the difference and then beyond that we’re just you know leveraging.

I think the Q1 level was comparable in absolute dollar to Q4 as well, was there an add up in Q4 may be just seasonality?

Yeah I mean in Q4 was an extremely robust period with the number of portability coming up. In addition during Q4 -- I'm trying to remember this. We did have a lot of ramp cost in there and I don’t’ have the numbers off top on my head, Troy but we did have a lot of ramp cost in there.

Okay so the level seen in Q2 a fairly normalized level than in terms of maybe dollars, percentage of revenue?

Yeah, I mean I think what we would say relative to dollars, you know, we certainly, are not going to give financial guidance. I want to be very careful there. I -- you know, hopefully our trends will help you and me understand [quarter] that will have.

Okay thank you.

Thank you. Our next question comes from David Grossman of Weisel Partners.

Thanks, you know, Bill, can you talk a little bit about the competitive environment, you know, you talked about opening up capacity in the Philippines hopefully by year end, can you give us a sense for, you know, how the customer is distinguishing between capacity in North America versus offshore and any insights you can give us and you know, kind of how the competitive environment is evolving?

Okay, David I will answer, you know two comments more from what I [believe] in from reading what’s going in the industry and then secondly in terms of how we are looking at and I think again you know certainly right now I think we have seen across the board, the demand curve slowed down a little bit for offshore seats, primarily just because we are in the election year and you know the political environment, but I think what we have seen over the course of the last couple of years and it has been to our benefit of going a little slower, it’s sorting itself out and certainly clients do have an interest for leveraging low-cost labor arbitrage as it relates to what I would call lower and more commodity-based type transaction. I think what we have seen over the last year, the higher and more complex transactions that require an agent offshore to move outside of a highly scripted environment. There have been some, you know, significant challenges around there at least with the perception of the consumer and the perception of the consumer as it relates to the quality. So that's kind of what we see going on, you know in the industry. That being said, I mean again the offshore train has left the station. How we are approaching it, is a little different than our competition and some of our competitors have made announcements about, you know I mean significant capacity and the thousands and thousands of seats in Asia. What we want to do is we need to have that capability for our clients and we got, you know, very key, very large clients. We want to have the capability to offer to them the ability to leverage the more commodity-based e-mail, chat, commodity-based transaction types. However, relative to our growth, you know, we believe there is a tremendous amount of opportunity left within North American companies as it relates to outsourcing. I mean industry statistics, which show there is still more volume insourced today then there is outsourced. So, what we want to do is to continue to go after what we do well, which is the more complex customer care work and then at the same time though know -- that our clients are going to not want to use multiple vendors, somebody that can do complex and then somebody offshore, so that's where we've got a fill in that capability.

So, based on those comments would that suggest that, you know, the vast majority of your revenue with your existing clients would stay in North America and then any incremental business that you would take on in the segments that you described would be going offshore as the first two, taking existing business that you are doing for those customers and moving offshore?

Yeah, exactly. I mean right now, you know, today we are viewing our volume that we would move offshore would be incremental revenue, but we do not have plans or see right now what we moving a large chunks of our existing volume offshore.

Is there anything we should think about in terms of different costs to ramp or time to ramp with an offshore contract versus one in North America?

Yeah, I mean, you know, again we will stay away from the guidance side, I suspect, you know I probably don't want to elaborate further than that.

Okay and then, just you know, secondly just a follow-up questions on the capacity side, is there any kind of rules that’s on you can give us perhaps that you have provided in the past about, you know, current capacity utilization and as you add clients should we at least at this point assume that you will need to add new facilities to service new clients or is there anyway for us to gauge -- some metric to gauge capacity utilization as you add new clients?

You know, again we’d very shy away from providing you know the financial guidance all [amount] of that. I think, you know, we are very conservative company. We leveraged capacity very, very effectively, we're not in a, you know, we will build and hope they come type of environment. Usually the best leading indicator of what goes on is just a follow press releases closely. Usually what happens to us is when we identify a location or a site we want to go to, the [Mayor] or the Head of Economic Development and the Community gets little bit of excited and gets ahead of us relative to saying StarTek is coming to town because of our conservative nature when that happens, you could be pretty much assured that somewhere right behind that there is a client in the pipeline. So that’s the best leading indicator of our capacity and how the capacity relates to grow.

Okay. Great and just one last question, perhaps for Gene, did the currency have a much of an impact during the quarter?

No, in Q2 it was nominal relative to Q2 of last year.

And how then on a sequential basis?

On a sequential basis, you know David, I don’t have those numbers in front of me certainly it moved a little negatively from Q1 to Q2, but I don’t have the numbers in front of me.

Okay. Great, thank you.

We have a follow-up question from Bill Warmington. Please go ahead.

I wondered if you could ask for the breakdown of the percentages of dis-closable clients by concentration of percentage of revenue?

Yeah. Those will be in the Q, let me pull those up. For Q2, AT&T Wireless is 41.2%.

Okay.

T-Mobile is 26.2%, AT&T Business Services is 10.2%, and while do not disclosable this time, we will continue at least through the end of this year disclosing Microsoft and for Q2 2004; they were 9.7%.

Right and then could you talk a little bit about quarter-to-quarter seasonality that you see in the BPM business and what the drivers of that are?

You know, Bill we have been asked that a number of times since as fast as we’ve grown the BPM business over the last six years is grown at you know caver of 50%ish and so its really hard for us to get our arms around what seasonal versus what‘s just going on with the business and then the whole number of portability business in addition of that has further clouded it for us. Our understanding and the way we view it is Q4 tends to be the strongest quarter and Q2 tends to be the softest quarter and there is nothing that we've seen that would lead us to view that otherwise.

Got you and then could you talk a little bit about what you guys are doing in the collection space, there has been a lot of interest in that space recently some of the acquisition going on?

Yeah, you know Bill we are in the receivables management business today I mean relative to providing receivables management work and you know, but I want to distinguish that from collections work. I spend over 20 years in financial service industry and I think we are going to continue to work relative to leveraging our experience in receivables management. I do see I know that some of our competitors and some of our esteem competitors, one in particular just recently made another acquisition in the collections arena.

That was really -- that included a dead buying pizza.

Yeah, but in general you see the movement in to the -- it’s a top business. We are conservative. We have been approached by some collections work but I think right now we are stay focused on leveraging receivables side and monitoring much going on, you know on the collection side.

Great. Alright thank you very much.

Thanks Bill.

Once again if you have a question please press the "1" key. We have a question from Jeff Nevins of First Analysis.

Do you guys have any home agents that act as your capacity to serve some new customers or is it primarily just the typical call centre?

Jeff today we do not home agents but right now we are currently in an evaluation process as we move forward currently, you know a number of our competitors doing, let’s say a trend is picking up in the industry so we are looking at that.

Are you seeing that type of business I mean an obviously there are lot of private companies that are sprouting up and doing quite well in that area. You know get in the bidding process or get involved in competing with some existing or [prospective] business?

Relative to you know our key clients and or the key deals we are either bidding on or responding the proposals on today -- today, we have not seen that.

Okay. Do you break out the total number of workstations you had at the end of the quarter?

No we don’t disclose that.

Any sort of physical metrics you can give number of call centers?

Well, again as said you know we currently have 20 physical locations and 19 operational sites and we do disclose in, you know our Qs and our Ks, you know, all of our sites and the square footage.

That doesn’t have workstations, right?

Correct.

Okay thanks.

Once if you have a question press the "1" key. I am showing no further questions.

Alright well if there is no further questions, we would like to thank you all for your time, you know we hope you find this call helpful and informative. This was a departure from our past IR practice and policy, and again we hope we provided some insight and clarification as to what's going on in our business and was available to a much broader audience. So thank you for you time.

Ladies and gentlemen this concludes the conference. We thank you for your participation. You may now disconnect. Everyone have a great day.