TTEC Holdings Inc (TTEC) 2004 Q4 法說會逐字稿

Welcome to the TeleTech fourth quarter 2004 earnings conference call. I would like to remind all parties that you'll be in a listen-only mode until the question and answer session. This call is being recorded at the request of TeleTech.

If you would like to turn the call over over to Karen Breen. Thank you, ma'am, you may begin.

Thank you and good morning. My name is Karen Breen, Vice President of Investor Relations and Treasurer. TeleTech is hosting this conference call to discuss its results for the fourth quarter and full year 2004, ended December 31.

Yesterday, TeleTech issued a press release announcing that its Annual Report on form 10-K had been filed with the SEC. This call will reflect items discussed within that press release and form 10-K, and TeleTech management will make reference to it several times this morning.

Speaking on today's call are Ken Tuchman, our Chairman and Chief Executive Officer, and Dennis Lacey, our Chief Financial Officer. Ken will begin today's call with a top-level overview of the Company's performance during the fourth quarter and full year, 2004. Dennis will then review certain aspects of our financial results, following which Ken will make some closing comments. After our prepared remarks, Ken and Dennis will open the call to your questions.

Before we begins, I would like to remind you of our disclosure regarding forward-looking statements. Matters discussed on today's conference call may include forward-looking statements relating to future plans and developments, financial goals, and operating performance and are based on management's current beliefs and assumptions. Such statements are subject to risks and uncertainties.

Factors that could cause the Company's actual results to differ materially from those described include, but are not limited to: reliance on a few major clients; the risk associated with lower profitability from or the loss of one or more significant client relationships; execution risks related to achieving the Company's 3-year financial goals, including closing new business and selling new products and services; risks associated with performance-based pricing metrics and certain client agreements; the risks associated with achieving improved profitability in the International and Database Marketing and Consulting segments; execution risks associated with achieving our targeted cost reduction plans; and the possibility of additional assets -- asset impairments and restructuring charges.

I will now turn the call over to Ken Tuchman, our Chairman and Chief Executive Officer.

Thank you, Karen.

I'd like to start by reviewing our fourth quarter and full year financial results, after which I'll provide a business review of each of our segments.

In 2003 we established specific goals for 2004, including increasing revenue, improving profitability, strengthening our management team, and implementing global operational best practices and launching new products and services. I'll proud to say our management team was successful in each of those areas in 2004. I am also pleased to announce that, for the fourth quarter, we reported earnings of $0.13 per share, up nearly 45 cents -- oh, 45 percent, excuse me, from $0.09 per share in the year-ago quarter.

Operating income increased 6.6 million to 15.3 million over the prior year quarter. Additionally, our operating margin improved to 5.9 percent from 3.3 percent for the year-ago quarter. The fourth quarter results benefited from an adjustment to our healthcare accrual and tax benefit, associated with various tax planning strategies that Dennis will discuss later in the call.

For the full year, 2004, revenue increased more than 5 percent over 2003. The increase was after a -- after the 23 million previously disclosed decline in minimum commitment revenue from a large communication client. Excluding this reduction, revenue would have increased 7.5 percent versus 2 -- versus 2003.

The best way to measure the health of a company is based on client renewals, and during 2004 we renewed all significant client accounts. When you back out the 23 million revenue decline I just mentioned and the elimination of 25 million in unprofitable business that we exited as part of our revenue assurance program, our year-over-year attrition dropped to 7 percent in 2004, down from levels ranging between 10 and 15 percent over the past couple of years.

2004 operating income nearly tripled, from 17.4 million in 2003 to 48.5 million in 2004, an improvement of more than 31 million. I would like to point out that the 31 million improvement was also after the 23 million decline in minimum commitments. Without that decline, the gross operating income improvement was over 54 million, or more than 300 percent.

Our improved financial performance enabled us to eliminate all our commercial debt as of year-end. Since the beginning of 2004, we reduced total debt by 120 million. As a result, our balance sheet is strong, with 75 million in cash, access to 100 million revolving credit facility, and the ability to access additional capital when needed. As such, TeleTech is in a solid position to finance its future growth initiatives.

Although there have always -- there is always room for improvement, we are very pleased with our 2004 results and I am confident we can continue to improve in every area of our business. Our team has demonstrated its ability to drive significant positive results, both financially and operationally while at the same time investing for the future and driving innovation in our business. As such, we are a different company today than we were 2 years ago. We've launched innovative new offerings around our core business, invested in sales and account management leadership, centralized and standardized our delivery platform that has resulted in significantly lower CapEx requirements. Consequently, the Company is well positioned for growth from both an operational and financial perspective.

Let me now review our North American and International segments, as well as Percepta and Newgen. 2004 was a very successful year for our North American segment. We expanded key client relationships, renewed several large agreements, including 2 of our top 5 clients, and one new business with large global enterprises. This segment continues to benefit from improving gross margins, arising from the standardization of our global operational and technology delivery platform.

As you know, we've made a significant financial investment in developing this capability that took the last several years to fully implement. The North American segment's financial performance improved significantly in 2004. For the year, they generated an operating margin of 9.2 percent, compared to 6.6 percent in 2003; a 260-basis point improvement. EBITDA for this segment was 14.2 percent in 2004, up from 11.8 percent in 2003.

As you can see, the performance of this region has approached our year-end 2,007 goal of delivering a 10 percent EBIT margin and a 15 percent EBITDA margin. And our goal now is to continue to deliver these results on a consistent basis over the next 3 years.

Moving to our International segments: During 2004 we reduced the operating loss in this segment by more than 50 percent and, on a run rate, to further reduce the loss by another 50 percent in 2005, with the goal of being profitable in 2006.

Let me share with you some of the successes we achieved in our International segment during 2004 and the model we have implemented in turning around other unprofitable operations. We will not be satisfied until this segment -- this segment's operating results approach those of North America's. We plan to improve the International segment's performance by replicating the changes we implemented in North America.

In 2003 we implemented a detailed plan to turn around our Latin American region. That plan included consolidating and strengthening the regional leadership team; winning new business and expanding existing client relationships; focusing on client profitability at the EBIT level, including improving or transitioning unprofitable programs; implementing our North American methodologies and technology standardization; and locating North American executives in international locations to leverage their operational know-how.

The plan was extremely successful. Revenue in Latin American region grew by 67 percent in 2004 compared to 2003. This increase came primarily from increased capacity utilization throughout the region. As a result of these efforts, Latin America, at the regional level, generated an operating profit in 2004 of nearly 5 million, compared to an operating loss of more than 10 million in 2003: an improvement of 150 percent.

In the Asia-Pacific region, we renewed several key client agreements in the communications and travel industries during 2004. Although Asia-Pac is profitable at the regional level, we believe their financial results have room for improvement. Consequently, we're implementing the same profit improvement plan I described for Latin America. We recently hired a new general manager for the Asia-Pac region and are restaffing the regional sales force, similar to Latin America. We are standardizing the operational and technological processes in every country in Asia-Pac to mirror our North American and Latin American best practices.

Across the Asian-Pacific region we see opportunities for growth and are aggressively pursuing new client opportunities for the foreseeable future. I believe the Asia-Pacific region will be one of the largest growth engines for the global economy and we intend to capitalize on that opportunity and remain a leader in Asia-Pacific Customer Management in the BPO marketplace.

Moving to Europe: in 2004, a key initiative was to improve the financial performance of Spain. We accomplished that goal by improving profitability in existing client programs, including renegotiating certain large client agreements. During 2004, Spain generated a positive operating income at the regional level of nearly 3 million, compared to a loss of 3 million in 2003. And we again expect it to be a positive contributor to our 2005 results. We accomplished this in part by providing Spanish operations teams with tools to improve asset utililization and better understand their client profitability.

With the right operating foundation, we are now positioned to focus this region on profitable revenue growth and recently announced the renewal of one of Spain's largest client agreements. In addition, given high client satisfaction levels, several other clients have continued to expand their business with us.

In the U.K. we also saw improved financial results in 2004 compared to 2003. Having reduced their operating losses by 30 percent, returning the U.K. to profitability is a top priority in 2005 and the key to improving financial performance in this region is primarily sales driven. We were recently awarded business with a large U.S.-based client and our U.K. operations will be an important component of this integrated, multi-country solution.

Our extensive global footprint continues to be a differentiator for TeleTech and we continue to believe it is important for us to be in the U.K. We recently hired a new general manager and a new sales and operational -- operational leadership, and similar to what we did -- similar to what we did to turn around Latin America, we are intently focused on client profitability, cost improvement initiatives, and implementing global best practices in the operations and technology area.

Having discussed the International operations, let me provide an update on Percepta. Percepta operated profitably in 2004 and paid 8 million in dividends to its joint-venture partners, of which we received 4.4 million, related to our 55 percent ownership interest. We have now recovered more than 75 percent of our invested capital since the venture was formed. Based on Percepta's profitability run rate, we expect to recover 100 percent of our invested capital by the middle of this year.

Newgen recently signed an agreement to be the exclusive provider of Ford's new service retention program. This solution incorporates personalized service in targeted marketing campaigns and is designed to increase both customer satisfaction and retention levels, leading to greater brand loyalty.

As we have mentioned on previous calls, although Newgen is profitable at the company level, we are very focused on returning Newgen to its historical levels of growth and profitability. We have commenced a plan that includes continuing to upgrade the technology infrastructure, which is a key driver of Newgen's success, and integrating Newgen's and TeleTech's technology teams into one, and consolidating Newgen's operations under the oversight of our North American customer management team.

The good news is the plan is progressing. However, it has taken longer than anticipated to add the new capabilities and has resulted in higher implementation and sales and marketing cost. As a result, we believe Newgen will operate at approximately break even for the first quarter. We do believe Newgen's profitability will improve in subsequent quarters, as we complete the migration of dealers to the new platform and implement certain cost improvement initiatives.

Before I turn the call over to Dennis, let me review our plans to increase shareholder value over the next 3 years. We recently announced our 3-year financial goals, including generating 1.5 billion in revenue and an EBIT of 10 percent un a run rate basis by the end of 2007. How will we accomplish those goals? At a macro-level, our 3-year strategic plan includes growing revenue at a rate faster than the 10 percent projected industry growth rate; improving profitability at a faster rate than revenue; and generating free cash flow and utilizing our balance sheet to pursue selective acquisitions.

I would like to briefly address each of the four components to our strategic plan. Let's discuss revenue growth, which will come from our pri -- from the 4 primary areas.

One: expanding business with our existing clients. While many of our clients retain a majority of their customer management, BPO needs internally, in many instances we have successfully increased our existing client relationships by delivering global solutions at a lower cost, at a higher service level, than the client's own internal operations.

Two: closing large business opportunities with new clients. We continue to be awarded new client agreements in diverse industries throughout the globe. Our business development team is comprised of business people with deep industry-focused sales backgrounds, and our sales pipeline continues to grow. Regarding Newgen, our goal would be to double their revenue by the end of 2007.

Three: we are marketing new higher margin services, such as on-demand and in-culture. Our goal is for these services to grow to a revenue run rate of approximately $100 million by the end of 2007.

And, four: with 75 million in cash and available borrowing capacity, we are in a position to pursue selected acquisitions. Acquisitions will most likely be focused on targeted vertical capabilities, select geographies, or additional back office solutions. We believe acquisitions can increase assess utilization as we leverage our global standardized technology and operational platform.

The second focus of our 3-year plan is to improve profitability. There are 3 primary components of this plan, which include, first: we're sharply focused on improving profitability in our international segment. We are currently rolling out our North American operational best practices to the international regions and we are already seeing significant operational benefits similar to those that were achieved in Latin America and Spain. In addition, we're completing and leveraging our technology centralization efforts, which will drive increased operational flexibility and lower capital and operating costs going forward.

Second: we recently announced the third phase of our cost improvement initiative, which the Company believes will lower its operating costs by an additional $20 million annually and is expected to be fully realized in 2006. These savings are anticipated to result from increased automation and implementation of global best operating practices, among other initiatives. When the third phase is completed in 2006, the Company will have improved the cost structure by a total of 80 million over a two and a half year period.

And third: we are focusing our resources on initiatives that increase profitability in various areas of the business. For example, human capital represents 70 percent of our total cost. We are automating employee life-cycle and training, among many other initiatives.

The fourth and fifth aspects of our three-year plan are interrelated. The fourth focus is on continued strong cash flow generation, and the fifth being strategic acquisitions. As we successfully increase revenue and improve profitability, we will continue to generate free cash flow. We continue to evaluate various uses of cash and one of which is to pursue select acquisitions. As I mentioned, acquisitions will most likely be focussed on vertical, geographic, or back-office solutions that complement our existing customer management and BPO capabilities.

All in all, we are very pleased with our accomplishments in 2004. During 2004 and year-to-date in 2005, we've purchased 2.3 million of our shares and the reason for this purchase is simple. I have confidence in our management team and together we believe we have an executable plan to drive increased shareholder value. In addition, I believe our improved performance, our solid balance sheet and access to capital, places us in one of the strongest financial positions in our industry.

Let me now turn the call over to Dennis Lacey, after which I'll make a few closing remarks.

Thanks, Ken and good morning to everyone.

As Ken mentioned, our efforts in 2004 to improve the Company's profitability have been successful. Our primary focus now is on, 1: Revenue growth and diversification; 2: Returning Newgen to its historic profitability levels; 3: Continue in our efforts to realize future savings from standardizing our global delivery platform; and 4: implementing our ongoing cost-reduction initiatives.

Let me review with you now our fourth quarter and full-year 2004 results and the factors affecting comparability of those results to prior year periods. As outlined in yesterday's press release, we reported fourth quarter revenue of 261 million, down 3 million from the 264 million for the year-ago quarter. Fourth quarter revenue was up nearly 3 million on a sequential basis from the 258 million we reported for the third quarter.

Changes in foreign currency exchange rate had a positive impact to revenue, over 4 million in the fourth quarter, when compared to the prior year.

We reported diluted EPS of $0.13 per share, which includes certain significant items impacting the quarter's results, as discussed in our press release and for 10-Q. The first of these items is the reduction of 4.8 million in liabilities related to employee healthcare. As you know, a component of our cost improvement initiatives was a reduction in our healthcare expense. We estimate healthcare liabilities based on historical claims experience and consultation with third party administrators and independent advisors.

In 2004, we modified our plan for U.S.-based employees, with the goal of offering the appropriate coverage levels while also reducing costs. We have been tracking this quarterly and based on a significant reduction in the number of employees enrolled in the healthcare plans for the third and fourth quarters of 13 percent and 32 percent respectively, we reduced our estimated healthcare-related reserves by approximately 1.5 million in the third quarter or 4.8 million in the fourth quarter.

Second item was a benefit to tax expense of approximately 1 million, which resulted from several factors including state tax refunds and a partial reduction of the U.S. valuation allowance based on our earnings -- earning income in the U.S. Without these items the effective rate for the quarter would be just over 36 percent.

Now that we have closed our books for 2004 and have a better -- and have been working on our tax return estimates, we are in a better position to discuss our possible effective tax rate for 2005, which, unfortunately, will be somewhat a complex discussion because of our existing deferred tax valuation allowances. But here goes:

First, without regard to any impact on earnings that may arise from our U.S. deferred tax evaluation allowance, our effective tax rate would be around the 40 percent we previously guided you to. Second, thanks to our various tactics, such as cost reductions, etcetera, we are now generating taxable income in the U.S. To the extent we continue to generate U.S. taxable income next year, our U.S. deferred tax valuation allowance will be reversed into earnings, resulting in a much lower than 40 percent effective tax rate. There could even be a point during 2005 where, based upon the preponderance of the evidence, the remaining U.S. valuation allowance, which was 13.8 million at December 31, 2004, might be reversed into earnings. Should that happen, the effective tax rate for that quarter -- during the quarter in which the determination is made -- will be negative.

In normal -- in quarters subsequent to that determination, we would have a more normal-like tax rate of close to 40 percent. Having said that, it is difficult to give you a precise number to incorporate in your models. The best guidance we can offer is that for the first quarter and full year of 2005, barring any decision to reverse the remaining U.S. valuation allowance in full, we currently estimate our effective tax rate will range between 10 percent and 15 percent.

Let me now review with you the highlights of our full year 2004 results. Revenue for the full year 2004 was just over 1 billion, an increase of more than 5 percent in 2003. Approximately half of the increase is related to changes in foreign currency exchange rates.

As a result of our focus on client profitability, cost improvement initiatives, and lowered interest expense associated with less outstanding debt, diluted earnings per share on a GAAP basis in 2004 was $0.32 compared to a loss of $0.41 in 2003. Actually, all the puts and takes, if you will, for the year are on page 23 of the 10-K, which I'll get to in a moment.

Further, our cost reduction initiatives and client profitability programs allowed us to generate 94 million more in free cash flow this year versus last year. Naturally, we are very pleased that our profit improvement initiatives paid off in 2004. Although we still have work to do, our successes in 2004 give us confidence that we can further improve profitability going forward.

We have identified six initiatives that will help drive toward our 3 year financial goals that Ken just outlined for you. These include 1: Continuing our cost improvement initiatives, including the recently announced third phase $20 million cost reduction plan; 2: Completing the globalization of our best practices; 3: Further centralizing and leveraging our technology; 4: Automating employee life cycle and training; 5: Increasing capacity utilization; and 6: Selling higher margin services.

I would now like to direct your attention to the financial comparison chart that appears within the MD&A section of the form 10-K, which will be approximately page 23 of your printed documents. You will see it contains the same transparent explanation of our results compared to the prior year that we have included in our SEC filings. We believe this chart is helpful because it quantifies the impacts of the various moving parts, if you will, of our business and how our strategies and tactics have impacted our financial results.

The line item in that chart labeled "net increase to income from operation" shows a positive impact to income from operations of approximately 53 million in 2004 compared to 2003. The nature of the items driving that change are discussed in the management discussion analysis section of our form 10-K, but they are the same items we have talked about today: Client profitability focus, cost savings and controls, etcetera. However, let me comment on some of these a bit further.

OUr cost reduction tactics have affected 3 lines in the income statement: Cost of services, SG&A, and future depreciation as our capital expenditures per new site have been declining. As discussed more fully on page 21 of the 10-K, when comparing the full year 2004 to the period a year ago, cost of services as a percent of revenue declined to 73.6 percent from 76.4 percent. This is a decrease of approximately 300 basis points, which on roughly a billion of revenue is a substantial improvement. Depreciation declined from 5.9 to 5.6 percent. These improvements resulted from our cost reduction programs.

On the other hand, SG&A as a percentage of revenue increased to 15.7 percent from 15.0 percent for the year ago quarter. We have talked on several conference calls about how we deliberately reduced cost of services in order to invest in sales, marketing, and product development to impact our revenue growth and diversification strategy. In 2004 we made a substantial investment in sales, marketing, and product personnel, which is the bulk of the increase, along with higher employee incentive bonuses being earned, due to our return to profitability.

In addition, we incurred approximately $3.5 million related to Sarbanes Oxley, of which 2.8 million was incurred in 2004 and 700,000 will be incurred during the first quarter of 2005.

Looking at the chart on page 23, you will see we had to overcome, if you will, the scheduled decline in minimum commitments of approximately 23 million. We also had to absorb approximately 10 million in debt restructuring charges. Some of these, too, is a large number which is why we early on targeted significant savings with the first and second phase cost reduction plans so that we could retool the Company and at the same time, operate profitability.

Now I would like to comment on the strength of our balance sheet, which we feel is very strong. Cash and cash equivalents were 75 million at year-end. We had no bank debt outstanding at year-end, having paid off 120 million in debt during 2004. As a result, we entered the quarter in a net positive cash position of 67 million, which is net of 8 million in borrowing, primarily related to outstanding grants.

Going forward, we anticipate operating with minimal amount of debt, except for potentially leveraging the Company to pursue selective strategic acquisitions and to finance our share repurchase program. We also ended the year with equity of 323 million, up 37 million from the prior year. The increase results from our 24 million in 2004 net income along with a $7 million benefit from foreign currency translation.

DSOs were 52 days, a 5-day improvement for 57 days for the previous quarter and an increase of one day versus the year- ago quarter. We have consistently stated a target range for us is 55-60 days and the 52 days for this quarter is below that range.

We are particularly pleased that our free cash flow, which we define as cash flow from operations less capital expenditures, was 74 million for the year compared to negative 20 million for the year-ago period. This level of free cash flow enabled us to deleverage our balance sheet.

Our capital expenditures were 12.4 million during the fourth quarter and 38.5 million for the year. We currently expect CapEx for all of 2005 to be approximately 40 million. Finally, we have an active share repurchase program and during 2004 we acquired 821,000 shares for 5.3 million. Since the beginning of 2005, Teletech has repurchased 1.4 million shares for approximately $16 million.

Before closing, let me update you on the results of our Sarbanes Oxley compliance testing. As required by the Sarbanes Oxley act of 2002, we've completed a comprehensive assessment of our internal controls over financial reporting. The assessment included our domestic operations as well as many of our international operations, and was completed using a substantial amount of internal and external resources.

In addition to controls you would normally associate with financial controls, we also assessed controls relating to such matters as corporate ethics, risk assessment procedures, governance oversight, organizational structure, and information technology. We did not identify any material weaknesses as defined by the Public Company Accounting Oversight Board and therefore, we concluded that the Company's controls over financial reporting were effective as of December 31, 2004. Additionally, as required by the Sarbanes Oxley Act, our external auditors tested our internal controls and provided a clean opinion.

Moving on to the first quarter of 2005, as Ken mentioned, we expect Newgen to operate at approximately break even results for the first quarter of 2005. As such, their fourth quarter contribution to operating income of approximately 2 million on a fully loaded basis will not recur during the first quarter of 2005. And, of course, the one-time benefit of 4.8 million from the reversal of accident health reserves during the fourth quarter is not expected to recur during the first quarter. So, for analysis purposes, the fourth quarter's results should be reduced by this amount, which is about $0.04 at EPS. However, as I mentioned earlier, we expect our effective tax rate will be in the range of 10-15 percent for the first quarter versus the 30 percent rate for the fourth quarter of 2004. Had the lower rate of 15 percent been in effect during the fourth quarter, tax expense would have been lower by almost 2 million for that quarter. As such, we view the two items we reported in the earnings press release under First Quarter 2005 Outlook as a push for the first quarter of 2005.

To conclude, I am very pleased with our successes for 2004, both financial and operational, and have confidence in the strategic plan developed by the management team, as Ken outlined for you. I would now like to return the conversation back to Ken.

Thank you, Dennis. Looking back on 2004, we are extremely pleased with our improved profitability which has enabled us to deleverage our balance sheet. It has also provided increased financial flexibility to fund our future growth initiatives. We are also excited about our recent new business wins, client renewals, and expanded product sweep that complicates our core customer management and BPO offering.

We recently completed our 2005 strategic planning process, and from that process, each of our senior executives has a clearly defined set of 2005 objectives that will drive us towards the long-term, three-year goals I outlined for you. I can assure you that the heightened level of financial and operational discipline we exercised in 2004 has and will continue in 2005.

Our compensation plans are directly correlated to meeting or exceeding our financial goals and as a result our team of more than 32,000 professionals is working toward exceeding their individual financial and operational objectives.

Our objectives are clear: Grow revenue at a rate faster than the projected 10 percent industry growth rate; improve profitability at a faster rate than revenue; and generate free cash flow and utilize our balance sheet to pursue select acquisitions.

To close, I especially want to thank our dedicated employees who have embraced our internal vision and are making it happen. We are confident we have the right strategy in place and the right people to execute our plan. With that, let's open the call to your questions.

Thank you. At this time if you would like to ask a question, you may press star, 1, on your touch tone phone. You will be prompted to record you name and company name. Once again, press star, 1, for any questions, and if you would like to withdraw your question, you may press star, 2. One moment for the first question.

Thank you. Our first question from Brandon Dobell from CSFB. Your line is open.

Good morning. I wonder if we can talk a little bit about how to think about '05 from a modeling perspective on the top line. I know, Ken, in recent calls and at Investor Day, you talked about how the pipeline continues to improve. You got some signs of some good renewals, some good new wins. I just want to get a sense of how we think about the revenue line this year, especially if we could get some more granularity on how some of those contracts might look, International versus North America? .

Well, I mean, as you know, we're not providing any guidance so that's a tricky question that you're asking. What we would ask that you would consider is that we did provide 3-year guidance and that within that 3-year guidance we are comfortable with you dividing up the topline growth in almost equal increments. Naturally, that's a little bit risky for me to say, only because we are talking about potentially doing some acquisitions, and therefore those acquisitions could happen in a later cycle.

So, what we would like you to look at is, between now and 2005 approximately 150 -- oh, excuse me -- between now and the end of 2007, approximately doubling the size of Newgen, which will be another $100 million of incremental revenue, approximately $100 million of new services revenue coming out of our On-Demand, our In Culture and other product offerings that we plan on announcing in the near future. So that obviously would take you up to 200 million on top of the base of 1.50 billion, which would put you at 1.250, then approximately 150 million of organic growth from the core DPO and Customer Management business, which would put you at 1.4 billion, and then the remainder would be acquisitions.

And really, outside of that it would be difficult for me to give you more guidance other than to just simply tell you that our pipeline on a global basis, we are very satisfied with its filling up, and we're also comfortable with the phases that we're in, as it relates to where we are from a closing perspective of those deals. More than that would -- you know, we would then be giving -- breaking our own internal rule of providing guidance. So, I hope that's helpful and I hope I'm not in any way -- not avoiding your question.

No, that's fair enough. I appreciate the color. If we look at the International business, it seems to have the most opportunity, at least in the near-term, for margin improvement. And you kind of highlighted some of the progress you made in Spain, but the issue still in the U.K. How do we think about utilization rates there or your success in terms of unbundling or repricing contracts? I just want to get a better sense of what you've had success with so far in those markets, relative to, let's say, the North American progress you've made. You know, what kinds of things are you still able to do? Are there different types of contracts or services that you're seeing opportunities for? I'm just trying to get a better sense of how we can think about the International opportunity.

Sure. Well, without getting into the proprietary nature of exactly how we go about applying what it is that we've done successfully in the past to the various different countries, what I'll try to do is just give you kind of headlines.

First of all, we are absolutely committed that we will only do business with people who want to do business with us, where it is a profitable relationship and a mutually beneficial relationship. And I think we've done a very good job of ferreting out more than 35 clients in 2004 and with our revenue assurance team monitoring client profitability 24 hours a day, 7 days a week, you can be assured that we will continue to keep that type of focus.

That being said, in the U.K., we do not have a profitability issue. As a matter of fact, the profitability is quite good in the U.K., on a gross margin basis on a per client basis. The issue is, we've had historically a sales issue. And that is why when we reengineered the management structure there, we put a lot of energy in making sure that we had what we believed were the best and the brightest as it relates to being able to bring in new deals. And in a very short period of time, they have built a very realistic pipeline that we believe they will be able to -- to -- that they will be able to demonstrate success in a very short period of time. Short period of time to us is in the next one to two quarters. So in the next 1 to 2 quarters, we believe we will be closing business in the U.K. which will have an impact on the U.K.'s negative profitability.

So in the U.K. the operations are running great. It's really all about, at this point in time, just filling the empty capacity that's there.

In Spain things are going fantastic. We're out of capacity in Spain and we actually just authorized them to add more capacity for new client wins and expansions that they're doing in Spain. And we believe that Spain will continue to show improvement in profitability.

In virtually every area where we believe that there is significant high growth opportunity, we have added very significant sales leadership, whether it be in Asia-Pacific or in Asia, or whether it be directly in Australia, etcetera, we are seeing signs that there is some real opportunity for us to get some -- some good growth out of those markets.

The fact of the matter is, is that the Company is out of the turnaround mode and really has 3/4 of its energy on the growth mode, the profitable growth mode, and therefore, we believe that 2005 is the year that we can put much more energy into identifying, targeting, and onboarding and signing up new business than we were able to do so in 2004, because in 2004 we were distracted with some pretty tactical objectives that were, to say the least, not sales focused.

The other thing is -- and I think it's important to state this -- with the elections over and with the political party that's in place, because I'm not in any way making a political commentary, good or bad, it's clear that corporations are now feeling comfortable about the concept of outsourcing, whereas in the November time frame, there was some consternation as to whether or not from a public relations standpoint it was something that they felt comfortable doing. So, we believe that there's a bit of a pent-up demand of people that have delayed that decision, that are now getting very serious and are giving us fairly aggressive time frames, etcetera, of opportunities that we are hopeful that we can take advantage of.

Am I answering your question?

Yes, that was very helpful, actually. The last area that I wanted to focus on was the On-Demand, the technology services part. Some good interest from people that I talked to about how that might play out. A couple questions there. One, as you think about how much capacity you have on your existing -- or, in your existing infrastructure to add new clients, or the investments needs, going forward, for that product. How should we think about that?

And then, second, in terms of business model -- obviously, not how you guys are going to price this but how do we think about how the contracts would look? Is it a volume kind of thing? Is it a multi-country kind of thing? Just trying to get a better sense for how it would look, relative to an IT services contract, for example, that somebody like an IBM or and ADS would put in place?

Well, the contracts that we're looking at would be 3 to 5-year type contracts. And I'm not sure that there's, you know, hopefully that answers your question. As far as capacity, I'm not sure whether that was directed towards On-Demand or whether that was directed towards the core business.

More towards On-Demand. Just trying to get a sense from a technology perspective what investments you might have to make or if you don't, then kind of how do we think about the opportunity there.

Well, so the good news on On-Demand is, is that we identified almost 5 years ago that we needed to build part of our model that had leverageability. Because when a big focus of our business is labor intensive, obviously your leverage comes from human beings and there's -- and although we're very pleased with the profits that we can achieve from that, we can achieve even more profits from technological solutions. So right now, we could bring on 25 percent more overall capacity, whether it be to our core outsourcing business or whether it be to On-Demand, without adding any additional OpEx. So I wanted to -- and that is something our CIO has committed that we can do. So that, to us, is very, very exciting, that we now are finally seeing the leverage points in our business, from scale and from technology.

As it relates to CapEx, we can bring on a fairly significant amount of revenue without significant CapEx on OnDemand because we've already made those CapEx investments. As to the exact amount, I'm not going to tell you.

That's no problem. That was all very helpful. Thanks a lot, Ken. Appreciate it.

Thank you. Next question, Bob Evans with Craig-Hallum Capital. Your line is open.

Good morning. Can you comment first, to follow up the previous question, Ken, I know you can't give guidance as it relates to '05, but can you give us some sense of quarter seasonality? I mean, should we view the revenue -- I mean, if you kind of do the math on the '07, you get the, you know, 10 percent revenue growth or better. I mean, should we see that growth more back-end weighted, more evenly split? Can you give us some sense of how you see that, Ken -- Ken or Dennis?

On the revenue side, Bob?

Yes, looking on the revenue side. On the revenue growth side.

There are so many facets to that question. In general, as it relates to the new products we've been describing, those are more back-end loaded because the sales process is starting now and bringing clients on board, it's more back-end loaded. However, there are other impacts going on with our business, in terms of foreign exchange rates and things like that, and depending on which way the dollar goes. You know, the dollar -- although it's recently strengthened against certain currencies, which is an impact on our first quarter -- but if our dollar was to continue to decline throughout the remainder of the year, that means we would have greater revenue from the affects gains. So that's a tough one to pick. But if I was a betting man, overall, for the whole year the dollar will probably decline, which adds to our top line.

Okay. Given where the dollar is right now, from a conservative standpoint, is it best to kind of view Q1 as the most conservative quarter from a revenue growth standpoint? And then, you know, sequentially better as the year progresses. Is that the right way to think about things?

Yes, Bob.

Okay.

And actually, Bob, there is seasonality, as you know, historically, in our fourth quarter. So, you know, historically there's a small amount of seasonality and the revenue tends to, because of various different, you know, because of the Christmas season package delivery, blah, blah, blah, there tends to be an impact in fourth quarter. Some years larger than others.

Okay. Fair enough.

And I also wanted to get a question for you on the operating margin. If you include the healthcare accruals that you got this quarter, which I recognize is a one-time adjustment, it was 5.9 percent operating margin, you can back that out. But on the other hand, you do have some benefits from the fact that you don't have as many people in the pool that you used to before. What's the right way to think about the recurring nature of that and how to view this quarter's operating margin as a baseline, looking forward?

Well, you're right, Bob. There's a permanent feature to that. You know, when we put together our Phase 1 and Phase 2 cost-cut plans, it added up to roughly $60 million. This benefit was contemplated in that. And I'm not really sure how each of you may have put that into your models, but to the extent you modeled in the full 60 million, you have that in there. Of the 4.8 reduction that occurred, I would say on a permanent basis almost half of that amount would be flowing through every quarter. However, I would not want to have you add that amount to the models going forward because you'd be double counting to the extent you've assumed that into your $60 million cost-cut plan from before. If that makes any sense.

Sure. So, if you've had it in the model before, then -- Okay. That's a fair statement. I understand what you're saying.

The reduction just ratifies and confirms the fact that we were successful at that particular element of it. And there will be an ongoing, permanent benefit.

Okay. Fair enough.

And Ken, can you talk about Newgen deal that was signed with Ford? Can you give us any more color as it relates to, you know, how big a deal is that, in terms of what can it mean to Newgen in terms of size and scope and so forth?

Well, it's a very significant deal. We -- you know, again, it's always tricky to talk about the size, especially because of the confidentiality natures of these deals. But what I will say is that it involves thousands of dealers. It's very significant, not only to us but very important to Ford. It is material to Newgen's numbers on a go-forward basis as it relates to its impact on top line and bottom line. It takes advantage of all the new technology that we just installed at Newgen, which we are very excited about which is the whole new data warehouse and data analytics capability, which just went live approximately three weeks ago.

And because of the way Newgen, the way they sell, once we were awarded the contract -- and it's a multi-year contract -- now they naturally need to go onboard all of the dealers. And so we will be seeing revenue, new revenues coming on off of this new contract, my guess is through second and third quarter. It will take that long to bring on the amount of dealers that are involved in this particular transaction. I guess all I can say to you is this is significant. We don't usually use words like significant unless that means it's material. Beyond that, I'm not sure that I can really give you any more information.

Would you expect a large percent -- I mean, you know, a high percentage of the dealers to take on the new services?

Yes. We are confident in that.

Okay. Thank you.

Thank you. Next question, Jeff Kessler with Lehman Brothers. Your line is open.

Hi. This is [inaudible] for Jeff. Just a quick question on the global operations, I guess. In Latin America we saw a good swing from negative 10 million to 5 million. Are you guys seeing increasing momentum in this area? And I guess, what's your capacity level situation in Latin America? And in relation to that, just in terms of the the acquisitions that you guys are talking about, is that more domestically or globally or both?

Okay. Well, as it relates to Latin America, we are seeing obviously considerable growth in Latin America. We do expect to continue to see considerable growth. As to whether we are fortunate enough to see a number as large as what we saw in '04, that's to be determined, but we are expecting considerable growth in Latin America. We do have available capacity in Mexico which is where we're putting a lot of our efforts right now to fill all that available capacity.

We are -- we have -- by second quarter we will have filled all capacity in Brazil and Argentina's capacity is currently at 100 percent and we are in the process of just completing expansion in Argentina to add more capacity of which almost 85-90 percent of the capacity that we've committed to is already spoken for and contracted for.

So our push is really now to see the growth taking place, more-so in Brazil and in Mexico, and we are feeling very confident about both of those, about our opportunities in both of those markets. We're the largest provider in Mexico, we're the largest provider in Argentina, we're the third largest provider in Brazil and my guess is that we'll become, you know, we'll get to the number 2 ranking in Brazil some time this year or maybe early next year and our commitment is to be number 1 and number 2 in every market that we operate in, or quite frankly, it probably doesn't make sense for us to continue to operate in those markets.

Now, you had another question towards the end, but you faded out so I'm not sure what it was.

It was in terms of the acquisitions that you are planning to pursue. Just wanted to know if you are focusing more in the domestic region, in North America, or are you -- is it a general sort of look on a global basis?

I'd say that it's more -- it's more general, but that being said, we have -- there's a cornucopia of opportunities out there and we're in no rush. We don't have money burning a hole in our pocket and our goal is to make sure that the first acquisition as well as all other acquisitions is conservative in nature and that in fact it truly complements the existing infrastructure that we have in place.

That being said, because we see growth internationally and we think that futuristicly there will be a lot more growth there, we do have heightened interest in many of these international -- in these international markets. And then furthermore, from just an overall affects and currency standpoint, it would be nice to have -- continue to have more of a nice balance since we have a dollar that's kind of, you know, bouncing a little bit up and down. And so there's -- we think that there's a benefit to having some more in-country business in some of the stronger currency areas, etcetera.

So stay tuned. I think that people will be very pleased with what we choose to do. But, again, we're in no rush and we're not going to do anything that's silly. Our goal is to do things that are absolutely going to be accretive and also expand our product offerings.

Okay. I guess -- and one final question. I guess you renewed 2 of your top 5 clients in the year 2004. Could you give us an idea how much percent of total revenue are those top 5 clients? And the remaining 3, what is the time-line, in terms of their contract expiration?

Well, the top 5 represents roughly 50 percent of our revenue. That, I believe, was one of your questions. And the second part of your question was -- ?

You renewed 2 of the top 5. What is the time-line for the other 3, like the existing contracts that you have with them. When do they expire? What is the status with those guys?

Some of those we have multiple contracts with, multiple dates, so it's not just one date for -- that we can give you.

How about like a general, like over the years, sort of?

What was the question?

Of the remaining top five clients, when do they renew?

I think here's an easy way to look. On any given year there's anywhere between 12 and 15 percent of our revenue that's up for renewal. I think that's the best way to look at it. I'm talking about across the globe. You know, it changes.

Some years, because of just the way the contracts were designed, it can be less than that. But I just think that conservatively you should look at that, and our track record of renewing business is extremely good. In the last twelve months we renewed virtually everything that we've targeted. We are very confident in where we are, renewal-wise in '05 and we think that by second quarter there really won't be any exposed revenue to be renewed. So we're very -- we're feeling very good about our renewals.

All right. That's very nice. Thank you, guys.

Thank you.

Thank you. Next question, Jeff Nevins with First Analysis. Your line is open.

Just a follow-up to the renewal question: but what's the contract then you're waiting for in this quarter? You think by the second quarter, you won't have any renewal exposure?

Yes. The material -- you know, what potentially could be material, our goal would be to have all of the significant business renewed or not renewed.

Is there a contract that's up for renewal by the end of this month? Is that what you're saying? .

I believe there's one particular contract that is potentially up this month that we are very confident in rolling into a long-term contract.

Okay. Is it one of the 2 top accounts? Nextel or Verizon?

It's a piece of one of the top accounts.

Okay. My -- just my other questions were, on Newgen and the outlook for next year, a little over a month ago, you know, my feeling on Newgen was that the margin in the business was going to ramp pretty quickly to some of the historical levels it's reached, which is double digits. You know, on the outlook you have for the first quarter would certainly imply that maybe you're not going to get there. Has there been a change in your outlook, your internal outlook, for '05 on Newgen?

You know, really only slightly, not a lot. It's a couple of things. Number one, the Ford contract was signed a while ago and after it was signed we were basically asked to not market to the dealers and that delayed, that was a surprise to us for a period of time and so that put us back by 2 months. Since then, that has been lifted. The reason is that Ford needed to get their own plans in place, etcetera, and has been lifted and now we're out aggressively doing what we need to do and we're very pleased with the amount of dealers that are being brought on on a weekly basis. So that had a little bit of a delay.

The other thing that degradated was just the mere fact that the conversion took quite a bit longer than we expected last year and we made the decision to get involved and take the conversion over, working in conjunction with the Newgen folks and that conversion is now done. But prior to that, we were not really able to sell all the new functionality that we had because it was off our Legacy system that didn't have the functionality. So that slowed us down as well.

The good news is that all these issues are behind us and now we're in a sales mode and now we're signing up dealers. So we feel pretty comfortable that you will see margin lift and revenue lift and that will start to become obvious in the second quarter and third quarter time-frame.

Okay. And on the international losses, Ken, I think you said and correct me if I'm wrong you expect the losses to be natured by 50 percent in '05?

Correct.

Okay. And is that based on the operating income loss in that segment of about 18.4 million? I know there's some one-time items. I just wanted to be clear.

That's correct. So, we would have a goal of the loss to be in the $9 million range, based on that. We feel very comfortable with that.

Right. And --

-- the goal to get it to zero, but for now what we're going to do is we are showing that we're making, you know -- we think 50 percent is significant progress and we'll hedge our bets and if we do better than that, then hopefully you'll feel good about it.

Okay. And then on the share buyback, you also said 2.3 million shares you bought back. That's for the full year of '04 and '05?

That's correct.

Okay. So, for the year to date in '05 though, the number is the 1.457?

That's correct.

Okay. Last question, just for Dennis. Minority interest shifted around a little bit in the fourth quarter. What kind of happened there and how do you think about that line item next year?

Jeff, is that on the income statement or balance sheet? (Inaudible)

The income statement. The, you know, 1.1 million.

Oh. Well, that -- well, we had improved performance and Percepta.

Okay. But that was a much bigger number than it normally is. I'm just trying to understand how that is going to fair out, I guess, consistently.

Well, India has improved over this period of time, too. Both issues there. In India, we did a lot of business in the fourth quarter that was seasonally driven, so their results looked better during that quarter than they did in prior quarters, and plus Percepta had a good quarter.

Okay. Thanks a lot.

Thank you.

Next question, Donna Jaegers with Janco Partners. Your line is open.

Hi. Thanks for taking my question. Congratulations first on a great turnaround in the last year. I know you've given us a lot of guidance on Newgen already. I was just curious -- since you've had the new platform in for about 3 weeks now, can you give us some sort of anecdotes, as far as how sales of the new services are going and what sort of revenue lift that could provide?

As far as an anecdote. I'm trying to think -- without giving away, since it is a competitive business and we -- let me try to be clever here. They're -- we're -- they're clearly adding more vehicle -- VIN numbers than they are -- you know, than would be attriting, number one. Number 2, they are -- their sales -- the number of dealers that are being added is is many-fold times what they had -- what they were adding just previously, a month ago or so. So they're bringing on -- I'm only hesitating because I just can't give you the number, even though we know the exact number because we get a daily report.

But they're bringing on a material amount of dealers daily that are signing up and turning their databases over to us. And that's really all I can probably tell you, unfortunately, at this point in time. But as I said before, those dealers will translate to revenue and to profitability that you will begin to see in second quarter and it will be obvious in second quarter and it will be -- we think very beneficial in third quarter and beyond.

Great. Thanks, Ken.

Thank you.

Thank you. Next question, John Mahoney with Raymond James. Your line is open.

Thank you very much, and congratulations, guys, on the turnaround and completing the -- most of the turnaround, and there's some more cost savings still yet to be wrung out. My questions are, on a constant currency basis, I know you have a long -- a three-year goal to grow revenues faster than 10 percent, which is the industry -- you mentioned the industry forecast. When will we start to see that? You know, will it be as soon as this year, and when?

You mean the growth of the -- we believe we'll grow faster than the industry this year.

Okay. So, will you be able to grow better than 10 percent this year? I think you mentioned this quarter, I think Dennis mentioned that, you know, this quarter was 7 percent . [Inaudible.] I'm sorry, go ahead.

I said we're going to give it our all for that to take place.

Okay. And this quarter was up 7 percent, excluding the minimum payments, and on a constant currency basis, would that have been like 4 or 5 percent?

Yes.

Okay. One other question. Unfortunately, we self-guided guys have to publish estimates for all the quarters on an earnings basis to the best of our ability. And I imagine, Dennis, you mentioned -- you wouldn't have mentioned it if it wasn't a possibility, a significant possibility, that you might have that valuation reversal during the year and go to a 40 percent tax rate. Might it be best for us to publish a taxed and as-reported numbers? Or fully-taxed and as-reported?

Well, that's really up for you to decide.

Okay. But, I guess I'm trying to get back to -- you mentioned in your prepared remarks, Dennis, that we probably would see that this year. You didn't say "probably," I'm sorry. But it's a possibility that at some point this year you might have that and switch to a 40 percent rate. I guess you wouldn't have done that -- you wouldn't have put those in your prepared remarks if that wasn't a, you know, close to 50 percent reality?

I think it's a distinct possibility for this year. We have to wait and see how the next 6 months plays out, but I think it's a distinct possibility.

Okay. And then I think -- I'm sorry I've been driving during the call, but did you mention that Newgen is going to -- is going to break even the first quarter, I know, but when will it return to its historic profitability? Maybe just -- Ken, did you say the third quarter?

No. What I said was is that Newgen is going to continue to see ramp growth and profitability and we'll see profitability in third quarter. We feel certain about that, and as far as when it will see margins like 12 percent type margins, because it's in a -- in a -- in such a ramp up mode and a growth mode and it has all these new products that it's selling, you know, our goal would be for that to be in '06.

Okay. Thanks a lot.

Thank you.

Thank you. Next question, Mark Bacurin with Robert W. Baird. Your line is board.

Hey, this is Eric, in for Mark. Just had a quick question. Wanted to know, on the consolidated gross margin, that ramped all through 2004, sequentially, and just -- do you have an expectation for that to continue in 2005? And also, is the 187 million in direct costs a pretty good run rate, going forward?

We have a sharp focus on expanding our gross margin and we have very definitive plans on a global basis, on a country-by-country basis, and on a center-by-center basis, and so the answer is, yes. We expect gross margin to expand over the -- you know, throughout this year and next year.

And is it going to -- do you think it's going to see that same sequential ramp or have -- you know, have you kind of overlapped some of those cost take-downs?

You know, as you always -- as you know, the last 10 percent or 20 percent of anything is always the hardest to get to. So I would rather be conservative, and although we're highly confident that we're going to achieve this, based on the results we've achieved in Latin America and North America, I would rather be conservative and say that -- not necessarily identical as to what you've been seeing, but you will see improved gross margin increases throughout the quarters over the next couple of years.

Okay. And lastly, can you just -- is there any way you can quantify the added costs in Q1 '05, related to the Ford implementation?

If I could, I couldn't do it on this call because I don't have the numbers at hand. But -- you know, I have to discuss with Dennis and others as to whether that's something we want to give out. But those costs are primarily in the IT area. And like I said, I want to stress: those costs are behind us for the most part. We still -- there are still product enhancements going on, etcetera, that will -- go ahead. I'm sorry.

And we also had some additional sales and marketing expenses this quarter with the kickoff of the program --

That we'll see through the next few quarts.

Yes. So that's going to be going on for a little bit longer. But I guess we really haven't tried to quantify them in that manner. We're not really prepared --

Right. But mind you, this is a three-year contract. So, we take this because I've said, this is material to Newgen, we take this contract very seriously. And we believe that this will be a significant contributor to Newgen's go-forward growth, along with other contracts that they are working on.

Okay. And one more thing: The ramp for the $115 million, 5-year contract: has that begun or when is that expected to start?

Oh, yes. No, it's definitely begun and it's well on its way and doing quite well. It's already -- we're live in many countries across the globe, as we speak.

All right. Thanks, guys.

Thank you.

Thank you. We have time for one final question. Tobey Sommer with Suntrust Robinson Humphrey. Your line is open.

Hi. Good Morning. It's Jack Schirken for Tobey Sommer. Ken and Dennis, a few quick questions for you. First I guess, on the $20 million in cost reductions in the third phase, what will be the timing of that throughout the year? Will it be fairly steady or should we expect more in the front half versus the back half?

Back half would be where you'd see the benefits from that. We're -- a large portion of that plan is tied to our international globalization project which is underway now and we've discussed before that we don't think we'll have that done until the first half of the year is completed. So, I would look at these phasing in, starting in the second half of the year and then being fully realized in our income statement during 2006.

However, I do want to tell you that we are on track and we are on schedule with the 20 million and we are confident that we will achieve every penny out of that $20 million reduction plan. So, although it -- you know, whenever someone says something is back loaded, you know, sometimes you -- maybe one might question. But we have no concern whatsoever on the ability to achieve that. And then we'll let you know after that is completed whether or not there's an opportunity for a phase 4.

Okay. And then, in terms of the reduced healthcare benefit costs that you're driving at, with lower subscriber enrollments, did you see any increase in employee turnover related to that, or anything there?

No, none whatsoever. As a matter of fact, our employee turnover appears to be dropping since we have moved to -- we've moved to a very significant focus, a very significant focus on employee retention.

Okay. And then one final question for you on the new contract pipeline, or new business pipeline as opposed to your existing clients, and you mentioned you had great success with your existing clients. But as far as new clients go, are you seeing any sort of, I guess, business worth walking away, whether it's financially not feasible or the terms of the contracts all seem appropriate? .

So, is the question are we seeing any opportunity for improvement on certain existing clients or potential transition?

No. I guess, in regards to new client contracts and signing up new clients, are you walking away from any business where the pricing is not -- not favorable to your business? Or is everything coming in line as you would expect?

For 23 years I've walked away from business. There's always people that have unrealistic expectations, regardless of what the economy is or the marketplace is, etcetera. We have a goal at TeleTech to win our fair share of business, but we're more than happy if we win somewhere between 3 to 4 out of 10 deals. Once you start winning more than that, that means that your pricing is wrong, it's too low, and you're leaving too much on the table. And we know that we have a product that's unique and that's different from the entire marketplace. We can prove it to our clients quantifiably, empirically, with as many references as any perspective client wants. And therefore, our product, we believe, is worth more and we're going to charge more for it. And we're going to stick to that as long as I'm the CEO of this company.

So, to answer your question, we are not seeing anything unusual today. If anything, we're actually seeing pricing kind of starting to rationalize and strengthen, due to the fact that there's a much smaller universe of potential competitors that are viable in the marketplace and therefore, the large deals that are out there are only focusing on a couple of key suppliers. Which is another reason why we're beginning to feel pretty bullish about our revenue outlook and our opportunities, just because there is less disruption in the marketplace with people that thought they would make it up in volume.

Makes perfect sense. Great. Thank you very much.

Thank you for your questions.

Thank you. That concludes today's conference. You may disconnect and thank you for joining.