Convergys Q1 Results Beat View; Issues Upbeat Outlook, Hikes Dividend

(RTTNews) - Customer management business process outsourcing solutions provider Convergys Corp. (CVG) on Monday reported a 43 percent decline in profit for the first quarter from last year, as higher revenues were more than offset by costs related to the acquisition of Stream Global Services Inc.

However, both revenues and adjusted earnings for the quarter beat analysts' estimates. Looking ahead, the company forecast financial results for fiscal 2014 above analysts' expectations and raised the quarterly dividend by 17 percent.

Andrea Ayers, president and CEO of Convergys said, "Our consolidated results reflect continued strong execution with improvements to revenue and adjusted earnings. We are making good progress integrating the Stream business."

The Cincinnati, Ohio-based company's net income for the first quarter was $14.2 million or $0.13 per share, down from $25.1 million or $0.23 per share in the comparable quarter last year.

Convergys completed the $820 million acquisition of Stream Global Services in early March 2014.

The latest quarter's results include Stream acquisition-related impacts consisting of $15 million transaction-related expenses, $10 million integration expenses, $3 million amortization expense for acquired intangible assets, and $2 million depreciation expense related to the fair value write-up of acquired property and equipment.

The results also include Stream acquisition-related cash payments consisting of $27 million for taxes related to repatriation of international cash, $22 million for transaction and integration expenses, and $15 million to fund escrow receivables associated with future working capital settlement.

Adjusted net income from continuing operations for the quarter was $34.0 million or $0.32 per share, compared to $30.9 million or $0.28 per share in the same period last year. On average, four analysts polled by Thomson Reuters expected the company to report earnings of $0.29 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter grew 23 percent to $605.7 million from $493.5 million in the prior-year period and includes $86 million from the acquired Stream operations for the month of March. Analysts had a consensus revenue estimate of $589.31 million for the quarter.

Total costs and expenses rose 28 percent from last year to $583.7 million.

Operating margin for the quarter was 3.6 percent, compared to 7.4 percent in the year-ago period.

Convergys said its board of directors approved a 17 percent increase in the quarterly dividend to $0.07 per share. The first dividend payment of $0.07 per share is scheduled to be made on July 3, 2014, to shareholders of record at the close of business on June 19, 2014.

Looking ahead to the second quarter, Convergys expects normal seasonal impacts in the quarter, with sequential increase in second-half 2014 results compared with first-half 2014 results.

For fiscal 2014, Convergys forecasts adjusted earnings in a range of $1.45 to $1.50 per share and revenue to exceed $2.9 billion. Analysts currently expect earnings of $1.40 per share for the year on revenues of $2.89 billion.

CVG closed Monday's regular trading session at $22.00, up $0.42 or 1.95 percent on a volume of 883,626 shares. In after-hours, the stock further gained $0.77 or 3.50 percent to $22.77.