Convergys Reports First Quarter Results

  Convergys Reports First Quarter Results

      Completes Acquisition of Datacom’s Asia Contact Center Operations

           Guides Adjusted EPS Growth to Exceed 15 Percent in 2013

Business Wire

CINCINNATI -- April 30, 2013

Convergys Corporation (NYSE: CVG), a global leader in customer management,
today announced its financial results for the first quarter of 2013.

The Company also announced that it completed the acquisition of Datacom’s Asia
contact center operations, finalizing an agreement first announced on April 3,
2013.

First Quarter Summary

  *Revenue of $494 million, compared with $498 million in the prior year;
  *GAAP EPS from continuing operations of $0.27, compared with adjusted EPS
    from continuing operations of $0.22 in the prior year;
  *EBITDA of $61 million, up four percent compared with adjusted EBITDA of
    $59 million in the prior year;
  *Repurchased 2.1 million Convergys shares for $35 million, or $16.65 per
    share;

  *$603 million cash and short term investments on balance sheet at quarter
    end;
  *Acquisition of Datacom Southeast Asia contact centers completed April 30;
  *Revised 2013 guidance includes adjusted EPS growth to exceed 15 percent.

“We performed well in the first quarter exceeding earnings expectations, and
we also experienced strong new business signings,” said Andrea Ayers,
president and CEO. “Broad-based growth with existing and new clients nearly
offset expected headwinds from legacy technology migrations and client volume
fluctuations in the quarter. Our investment in quality service delivery,
global capacity and sales success is driving solid execution, and we continue
to anticipate revenue growth and profit improvement for the full year.”

Ayers added, “A strong balance sheet is enabling our selective pursuit of
strategic growth which was evidenced by our acquisition of Datacom’s Southeast
Asia contact center business. We also continued to return capital to
shareholders, declaring a $6 million dividend and repurchasing $35 million of
stock.”

First Quarter Results – Continuing Operations

Revenue – Revenue was $494 million, compared with $498 million in the same
period last year.

Operating Income – Operating income was $37 million, a four percent increase
compared with adjusted operating income of $35 million in the same period last
year. Prior year GAAP operating income was $29 million including $6 million of
Information Management-related costs that did not meet the criteria for
presentation as discontinued operations.

EBITDA – EBITDA was $61 million, a four percent increase compared with
adjusted EBITDA of $59 million in the same period last year.

Net Income – Net income from continuing operations was $30 million, or $0.27
per diluted share, compared with adjusted net income from continuing
operations of $26 million, or $0.22 per diluted share, in the same period last
year. Prior year GAAP net income from continuing operations was $21 million,
or $0.18 per share, including the Information Management-related costs
discussed above.

Share Repurchase – Convergys repurchased 2.1 million shares in the first
quarter at a cost of $35 million. To date in the second quarter the Company
has repurchased 1.5 million shares at a cost of $24 million. The remaining
authorization to purchase outstanding shares is $193 million.

Quarterly Dividend – Convergys paid its quarterly dividend of $0.06 per share
in April to holders of record at the close of business on March 22, 2013. The
next dividend payment is scheduled to be made on July 5, 2013, to shareholders
of record at the close of business on June 21, 2013.

Free Cash Flow – Free cash flow was $11 million, compared with net use of $8
million in the same period last year.

Net Cash and Short Term Investments – At March 31, 2013, cash and short term
investments were $603 million, debt maturing in one year was $1 million and
long term debt was $60 million. Net cash and short term investments totaled
$542 million at March 31, 2013, compared with $578 million at December 31,
2012, and $310 million at the end of the first quarter last year.

Reconciliation tables of GAAP to non-GAAP results are attached.

2013 Business Outlook

Convergys expects revenue growth and profit improvement for the full year 2013
compared with 2012 adjusted results. Updated expectations including the impact
of shares repurchased through April and the expected contribution from the
acquisition of the Southeast Asia contact centers are:

  *Revenue to exceed $2,055 million, revised from prior guidance to exceed
    $2,045 million;
  *Adjusted EBITDA to exceed $248 million, improved from prior guidance to
    exceed $245 million;
  *Diluted shares outstanding to approximate 109 million, reduced from prior
    guidance of 112 million shares;
  *Adjusted EPS to exceed $1.05, improving from prior guidance to exceed
    $1.00.

The Company expects second-half 2013 results to exceed first-half 2013
results.

Not included in this guidance is the impact of any future strategic
acquisitions or share repurchase activities. Also not included in this
guidance are results classified within discontinued operations related to the
sale of the Information Management business as well as other impacts from
corporate simplification actions initiated in prior years. These impacts may
include completion of real estate transactions and non-cash pension settlement
charges.

Forward-Looking Statements Disclosure and "Safe Harbor" Note

This news release contains statements, estimates, or projections that
constitute "forward-looking statements" as defined under U.S. federal
securities laws. In some cases, one can identify forward looking statements by
terminology such as "will," "expect," "estimate," "think," "forecast,"
"guidance, "outlook," "plan," "lead," "project" or other comparable
terminology. Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from our
historical experience and our present expectations or projections. These risks
include, but are not limited to: (i) the loss of a significant client or
significant business from a client; (ii) the future financial performance of
major industries that we serve; (iii) our inability to protect personally
identifiable data against unauthorized access or unintended release; (iv) our
inability to maintain and upgrade our technology and network equipment in a
timely manner; (v) international business and political risks, including
economic weakness and operational disruption as a result of natural events,
political unrest, war, terrorist attacks or other civil disruption; (vi) the
failure to meet expectations regarding the tax treatment of the Information
Management transaction; (vii) higher than expected costs of providing
transition services and other support to the Information Management business
and (viii) those factors contained in our periodic reports filed with the SEC,
including in the "Risk Factors" section of our most recent Annual Report on
Form 10-K and Quarterly Report on Form 10-Q. The forward-looking information
in this document is given as of the date of the particular statement and we
assume no duty to update this information. Our filings and other important
information are also available on the investor relations page of our web site
at www.convergys.com.

Non-GAAP Financial Measures

This news release contains non-GAAP financial measures as defined by the
Securities and Exchange Commission Regulation G; pursuant to the requirements
of this regulation, reconciliations of these non-GAAP measures to their
comparable GAAP measures are included in the attached financial tables. To
assess the underlying operational performance of the continuing operations of
the business for the quarter and to have a basis to compare underlying
operating results to prior and future periods, management uses 2012 operating
income, net income from continuing operations and diluted earnings per share
from continuing operations metrics excluding asset impairment charges,
corporate restructuring costs, certain Information Management-related costs,
interest expense for debt reduction, net non-cash post-employment benefit plan
charges, and tax benefits from certain discrete and other adjustments.

These charges are relevant in evaluating the overall performance of the
business. Limitations associated with the use of these non-GAAP measures
include that these measures do not include all of the amounts associated with
our results as determined in accordance with GAAP. Management compensates for
these limitations by using the non-GAAP measures, operating income, income
from continuing operations, net of tax and diluted earnings per share from
continuing operations excluding the items above, and the GAAP measures,
operating income, income from continuing operations, net of tax and diluted
earnings per share, in its evaluation of performance. There is no material
purpose for which we use these non-GAAP measures beyond those described above.

The Company presents the non-GAAP financial measures EBITDA and Adjusted
EBITDA because management uses these measures to monitor and evaluate the
performance of the business and believes the presentation of these measures
will enhance the investors' ability to analyze trends in the business and
evaluate the Company's underlying performance relative to other companies in
the industry.

Management uses the non-GAAP metric free cash flow to assess the financial
performance of the Company. Convergys' management believes that free cash flow
is useful to investors because it relates the operating cash flow of the
Company to the capital that is spent to continue and improve business
operations, such as investment in the Company's existing businesses. Further,
free cash flow facilitates management's ability to strengthen the Company's
balance sheet, to repurchase the Company's stock, and to repay the Company's
debt obligations. Management also believes the presentation of this measure
will enhance the investors' ability to analyze trends in the business and
evaluate the Company's underlying performance relative to other companies in
the industry. Limitations associated with the use of free cash flow include
that it does not represent the residual cash flow available for discretionary
expenditures as it does not incorporate certain cash payments including
payments made on capital lease obligations or cash payments for business
acquisitions. Management compensates for these limitations by using both the
non-GAAP measure, free cash flow, and the GAAP measure, cash flow from
operating activities, in its evaluation of performance. There is no material
purpose for which we use these non-GAAP measures beyond the purposes described
above.

These non-GAAP measures should be considered supplemental in nature and should
not be considered in isolation or be construed as being more important than
comparable GAAP measures. The non-GAAP financial information that we provide
may be different from that provided by our competitors or other companies.

Webcast Presentation:

Convergys will hold its Fourth Quarter Financial Results webcast presentation
at 8:30 a.m., Eastern time, Wednesday, May 1. It will feature its President
and CEO Andrea Ayers and CFO Andre Valentine. The webcast presentation will
take place live and will then be available for replay at this link -
http://tinyurl.com/1Q13ConferenceCall. This link will replay the webcast
presentation through June 1. You may also access the webcast or the recording
via the Convergys website, www.convergys.com. Click “Company,” then “Investor
Relations,” then “Events and Webcasts.”

Supporting Resources:

Follow us on Twitter and Facebook

About Convergys

As a leader in customer management for over 30 years, Convergys Corporation
(NYSE: CVG) is uniquely focused on helping companies find new ways to enhance
the value of their customer relationships and deliver consistent customer
experiences across all channels and geographies. Every day, our nearly 76,000
employees help our clients balance the demands of increasing revenue,
improving customer satisfaction, and reducing overall cost using an optimal
mix of agent, technology, and analytics solutions. Our actionable insight
stems from handling billions of customer interactions annually for our
clients. Visit www.convergys.com to learn more.

(Convergys and the Convergys logo are registered trademarks of Convergys
Corporation.)

                                                                    
CONVERGYS CORPORATION
Consolidated Statements of Income
(Unaudited)
   
                                                                        
                                                For the Three Months
                                                Ended Mar 31,           %
(In millions except per share amounts)          2013        2012        Change
                                                                        
Revenues:
    Communications                                292.8       295.2     (1   )
    Technology                                    44.6        41.8      7
    Financial Services                            46.1        52.6      (12  )
    Other                                        110.0     107.9    2
    Total Revenues                              $ 493.5     $ 497.5     (1   )
                                                                        
Costs and Expenses:
    Cost of Providing Services and Products       318.2       317.7     0
    Sold
    Selling, General and Administrative           114.6       124.7     (8   )
    Research and Development Costs                2.1         3.9       (46  )
    Depreciation                                  20.9        20.3      3
    Amortization                                 1.2       1.9      (37  )
    Total Costs and Expenses                     457.0     468.5    (2   )
                                                                        
    Operating Income                              36.5        29.0      26
                                                                        
Other Income, net                                 2.3         1.4       64
Interest Expense                                 (2.9  )    (3.6  )   (19  )
                                                                        
    Income Before Income Taxes and                35.9        26.8      34
    Discontinued Operations
                                                                        
Income Tax Expense                               5.7       5.4      6
                                                                        
    Income from Continuing Operations, net of     30.2        21.4      41
    tax
    (Loss) Income from Discontinued
    Operations, net of tax                       (5.1  )    4.7      NM
    (benefit) expense of ($2.9) and $3.0,
    respectively
                                                                        
Net Income                                      $ 25.1     $ 26.1     (4   )
                                                                        
Basic Earnings Per Common Share
    Continuing Operations                       $ 0.28      $ 0.19
    Discontinued Operations                     $ (0.04 )   $ 0.04  
    Net Basic Earnings Per Common Share         $ 0.24     $ 0.23  
                                                                        
Diluted Earnings Per Common Share
    Continuing Operations                       $ 0.27      $ 0.18
    Discontinued Operations                     $ (0.04 )   $ 0.04  
    Net Diluted Earnings Per Common Share       $ 0.23     $ 0.22  
                                                                        
Weighted Average Common Shares Outstanding
    Basic                                         105.7       115.9
    Diluted                                       110.3       118.9
                                                                        
Market Price Per Share
    High                                        $ 17.05     $ 14.23
    Low                                         $ 15.05     $ 12.13
    Close                                       $ 17.03     $ 13.35
                                                                        

                                                                 
CONVERGYS CORPORATION
Reconciliation of GAAP EPS from Continuing Operations to non-GAAP EPS from
Continuing Operations
(In Millions Except Per Share Amounts)

                                                         Three Months
                                                         Ended Mar 31,
                                                         2013        2012
                                                                     
Revenue                                                  $ 493.5     $ 497.5
Operating income as reported under U.S. GAAP             $ 36.5      $ 29.0
     Operating Margin                                      7.4   %     5.8   %
     Information Management costs not qualifying as        -           6.0
     Discontinued Operations ^(a)
Adjusted operating income (a non-GAAP measure)           $ 36.5     $ 35.0  
     Adjusted Operating Margin                             7.4   %     7.0   %
                                                                     
Income Before Income Taxes and Discontinued              $ 35.9      $ 26.8
Operations as reported under U.S. GAAP
     Operating charges above                              -         6.0   
Adjusted Income Before Income Taxes and Discontinued     $ 35.9     $ 32.8  
Operations (a non-GAAP measure)
                                                                     
Income from continuing operations, net of tax, as        $ 30.2      $ 21.4
reported under U.S. GAAP
     Total operating charges from above, net of tax       -         4.8   
Adjusted net income from continuing operations (a        $ 30.2     $ 26.2  
non-GAAP measure)
                                                                     
Diluted EPS from continuing operations as reported       $ 0.27      $ 0.18
under U.S. GAAP
     Net impact of total charges included in              -         0.04  
     continuing operations
Adjusted diluted EPS from continuing operations (a       $ 0.27     $ 0.22  
non-GAAP measure)
                                                                             

(a) In March 2012, the Company signed a definitive agreement to sell the
Information Management business and the sale substantially closed in May 2012.
The results of operations of this business met the criteria for presentation
as discontinued operations and therefore are presented on this basis for all
periods presented. Certain costs previously allocated to the Information
Management business do not qualify for discontinued operations accounting
treatment and are required to be reported as costs within continuing
operations. The Company classified $6.0 of these costs, which previously would
have been presented within the Information Management segment, within
continuing operations for the three months ended March 31, 2012.

Management uses operating income, income from continuing operations, net of
tax and earnings per share from continuing operations excluding the above
items to assess the underlying operational performance of the continuing
operations of the business for the year and to have a basis to compare
underlying operating results to prior and future periods. These charges and
credits are relevant in evaluating the overall performance of the business.

Limitations associated with the use of these non-GAAP measures include that
these measures do not include all of the amounts associated with our results
as determined in accordance with GAAP. Management compensates for these
limitations by using the non-GAAP measures, operating income, income from
continuing operations, net of tax and diluted earnings per share excluding the
charges, and the GAAP measures, operating income, income from continuing
operations, net of tax and diluted earnings per share, in its evaluation of
performance. There are no material purposes for which we use these non-GAAP
measures beyond those described above.


                                                                    
CONVERGYS CORPORATION
Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA
(Unaudited)
  
                                                                        
                                                                        
                                                 For the Three Months
                                                 Ended Mar 31,          %
(In millions)                                    2013        2012       Change
                                                                        
Income from Continuing Operations, net of tax    $  30.2     $ 21.4     41
      Depreciation and Amortization                 22.1       22.2     (0   )
      Interest expense                              2.9        3.6      (19  )
      Income tax expense                           5.7      5.4     6
   EBITDA (a non-GAAP measure)                   $  60.9     $ 52.6     16
                                                                        
      Information Management costs not             -        6.0     NM
      qualifying as Discontinued Operations
   Adjusted EBITDA (a non-GAAP measure)          $  60.9    $ 58.6    4
                                                                        
   EBITDA Margin                                    12.3 %     10.6 %
   Adjusted EBITDA Margin                           12.3 %     11.8 %
                                                                        

The Company presents the non-GAAP financial measures EBITDA and Adjusted
EBITDA because management uses these measures to monitor and evaluate the
performance of the business and believes the presentation of these measures
will enhance the investors' ability to analyze trends in the business and
evaluate the Company's underlying performance relative to other companies in
the industry.

These non-GAAP measures should not be considered in isolation or as a
substitute for income from continuing operations, net of tax or other income
statement data prepared in accordance with GAAP and our presentation of these
measures may not be comparable to similarly-titled measures used by other
companies. Management uses both these non-GAAP measures and the GAAP measure,
income from continuing operations, net of tax, in evaluation of its underlying
performance. There are no material purposes for which we use these non-GAAP
measures beyond the purposes described above. These non-GAAP measures should
be considered supplemental in nature and should not be considered in isolation
or be construed as being more important than comparable GAAP measures.


                                                      
CONVERGYS CORPORATION
Consolidated Balance Sheets
(Unaudited)

                                                         
                                             Mar. 31,    Dec. 31,
(In millions)                                2013        2012
                                                         
Assets
                                                         
Cash and Cash Equivalents                    $ 525.0     $ 554.7
Short Term Investments                         78.0        83.8
Receivables - Net                              325.7       319.8
Other Current Assets                           109.6       107.7
Current Assets - Held for Sale                 35.2        34.6
Property and Equipment - Net                   268.4       279.2
Other Assets                                  652.2      658.1
Total Assets                                 $ 1,994.1   $ 2,037.9
                                                         
                                                         
Liabilities and Shareholders' Equity
                                                         
Debt Maturing in One Year                    $ 0.8       $ 0.7
Other Current Liabilities                      260.7       285.8
Other Liabilities                              321.2       319.6
Long-Term Debt                                 59.8        59.9
Common Shareholders' Equity                   1,351.6    1,371.9
Total Liabilities and Shareholders' Equity   $ 1,994.1   $ 2,037.9
                                                           

                                           
Convergys Corporation
Summarized Statement of Cash Flow
(Unaudited)
                                                                      
                                                                      
                                              For the Three Months
                                              Ended Mar 31,
(In millions)                                 2013          2012
Net cash provided by operating activities     $ 22.7        $ 11.9
Net cash used in investing activities           (12.6 ) (a)   (20.0 ) (a)
Net cash used in financing activities          (39.8 )      (3.2  )
Net decrease in cash                          $ (29.7 )     $ (11.3 )


(a) Includes  $12.1 and $20.0 of capital expenditures, net of proceeds for
disposals, for the three months ended March 31, 2013 and 2012, respectively.

                                                            
CONVERGYS CORPORATION
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)

                                                                
                                                                
                                                For the Three Months
                                                Ended Mar 31,
(In millions)                                   2013            2012
Net cash provided by operating activities       $  22.7         $ 11.9
                                                                
             Capital expenditures, net           (12.1  )      (20.0 )
Free cash flow (a non-GAAP measure)             $  10.6        $ (8.1  )
                                                                        

Management uses free cash flow to assess the financial performance of the
Company. Convergys' Management believes that free cash flow is useful to
investors because it relates the operating cash flow of the Company to the
capital that is spent to continue and improve business operations, such as
investment in the Company’s existing businesses. Further, free cash flow
facilitates Management’s ability to strengthen the Company’s balance sheet, to
repay the Company’s debt obligations and to repurchase the Company’s common
shares. Management also believes the presentation of this measure will enhance
the investors' ability to analyze trends in the business and evaluate the
Company's underlying performance relative to other companies in the industry.

Limitations associated with the use of free cash flow include that they do not
represent the residual cash flow available for discretionary expenditures as
they do not incorporate certain cash payments including payments made on
capital lease obligations or cash payments for business acquisitions.
Management compensates for these limitations by using both the non-GAAP
measure, free cash flow, and the GAAP measure, cash from operating activities,
in its evaluation of performance. There are no material purposes for which we
use this non-GAAP measure beyond the purposes described above. This non-GAAP
measure should be considered supplemental in nature and should not be
considered in isolation or be construed as being more important than
comparable GAAP measures.

Contact:

Convergys Corporation
Investor Relations
David Stein, +1 513-723-7768
investor@convergys.com
or
Public/Media Relations
Krista Boyle, +1 513-723-2061
krista.boyle@convergys.com
 
Press spacebar to pause and continue. Press esc to stop.