Premier Global Services, Inc. Q3 2008 Earnings Call Transcript

| About: Premiere Global (PGI)

Premier Global Services, Inc. (NYSE:PGI)

Q3 2008 Earnings Call

October 23, 2008 5:00 pm ET


Boland Jones – Chairman, CEO

Theodore Schrafft - President


Sean O’Brien – Senior VP Strategic Planning, Investor Relations

Tavis Mccourt – Morgan, Keegan

William Sutherland – Boenning and Scattergood.

Rodney Ratliff – Stanford Group


Welcome to the Premier Global Service Inc. third quarter 2008 conference call. (Operator Instructions) At this time I would like to turn the conference over to the Senior Vice President of Strategic Planning and Investor Relations for Premier Global Services, Mr. [Sean O’Brien].

Sean O’Brien

Good afternoon everyone. If you've not received a copy of our third quarter earnings release, please visit our web site at where it is available in our investor relations section. Joining me on the call this afternoon are Boland Jones, our Chairman and CEO, Ed Schrafft, President of Premier Global and Mike Havener, our CFO.

Following some brief comments by managements, we'll open the call to your questions. Before I turn the call over to Boland, I'd like to remind everyone that statements made in this conference call other than those concerning historical information should be considered forward-looking and subject to various risks and uncertainties.

Such forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors including those we identified in our annual report on Form 10-K for the year ended December 31, 2007, our quarterly reports on Form 10-QA for the quarters ended March 31, 2008 and June 30, 2008, and our other filings with the SEC.

In addition, during this call we will present non-GAAP financial measures of our business. Please consult both our press release and Form 8-K filings this afternoon for reconciliations of these non-GAAP financial measures to the most comparable GAAP measures. These materials are also available on our web site at

At this point, I'll turn the call over to Boland.

Boland Jones

This is Boland Jones, Chairman and Chief Executive Officer of Premier Global Services. Welcome and thanks everyone for joining our third quarter earnings call.

I'm pleased to announce another good quarter performance by our company this afternoon. As reported, our consolidated revenues in the third quarter grew nearly 13% to $157.4 million. As defined in detail in our earnings release, our pro forma diluted earnings per share increased greater than 18% in the quarter to $0.26 per share versus $0.22 per share in Q3 of last year.

We continue to generate solid cash flows with net cash provided by operating activities totaling $34.9 million during the quarter. And finally, our balance sheet remains very strong with approximately $123 million in cash and equivalents and availability on our line of credit.

As many of you know, Q3 has always been a seasonally softer quarter for us due to the general slowdown of business activity that occurs during the summer months, especially in Europe. The good news is that our European revenue is growing at a substantial double digit rate this year. However, the faster rate of growth currently causes larger seasonal fluctuations in our third quarter.

This year our Q3 results were also pressured by unprecedented movements in foreign currency exchange rates. We normally would not mention currency movements on our call as they have worked both for us and against us in the past. However, the speed and magnitude of currency movements over the last several months has been extraordinary.

We estimate the changes in foreign currency exchange rates negatively impacted our third quarter revenues by approximately $3 million and our pro form diluted EPS by approximately $0.01 per share compared to the second quarter of this year.

Now looking ahead, if the exchange rates remain constant with the third quarter, we would anticipate that fourth quarter revenues would increase by several million dollars and that our diluted EPS would increase as well from Q3 levels. However, in the first few weeks of this quarter already, exchange rates have continued to move against us so at this writing and based on today's current exchange rates, we anticipate our fourth quarter results will be flat to modestly down from third quarter levels.

Unfortunately, the currency fluctuations experienced in the third quarter mask a very positive trend in our organic revenue growth. We estimate our year over year organic growth rate in Q3 excluding currency movements and acquired revenue was nearly 6.5%. This is the highest quarterly organic growth rate we've generated in more than three years.

We still have work to do to reach our goal of double digit organic growth. Our trends this year have been very favorable. We anticipate these trends will continue and that our organic revenue growth rate will improve again in the current fourth quarter from Q3 levels.

While there is no doubt our business has been impacted by today's significant economic issues, we believe our continuing performance in the face of global uncertainty reflects the value of the PGI communications operating system and what it provides to our customers. During these challenging times companies are reviewing, reducing and eliminating costs where they can; their capital budgets, their travel costs, training expenses and costs associated with their paper based processes.

At the same time, they're still looking to add and retain customers to grow their revenues and of course, to accelerate their cash flow. We believe these are exactly the type of applications that PGI communications operating system addresses for our customers. Every day for instance, our conferencing and collaboration suite helps hundreds of the worlds largest companies around the world reduce travel costs and meet more efficiency.

Our notification and reminders applications help companies accelerate the collections of their receivables balances and drive critical cash flows. Our emarketing suite helps companies of all sizes attract, retain and upsell customers through targeted, highly personal and actionable campaigns.

Our document solutions help companies remove paper and people from the work flow to make many of their daily processes more efficient and more cost effective. We believe that the growing number of companies turning to our broad suite of platform based solutions to help them achieve their critical business objectives validates and reinforces our PGiCOS vision and strategy.

Now before I turn the call over to our President, Ted Schrafft, let me take a moment to look ahead to 2009. We look to enter the new year with better momentum in our business than ever before. We believe the hard work that we've done over the last few years to consolidate our broad suite of solutions into a single global on demand platform, will enable us to continue to differentiate ourselves from our competitors and to outperform during this period of economic uncertainty.

In addition, we will enter 2009 with the most exciting and robust new product pipeline in our company's history. We are developing these products with a renewed and intense focus on the user experience and we are specifically designing them to be more visually compelling, engaging and simpler to use than ever before.

Next year we plan to launch a revolutionary new product that combines the PGiCOS core technologies with newer technologies like gaming and virtual technologies, web 2.0 and social networking technologies. This exciting new product will embody our strategies in future application utility and design and we believe it will even further differentiate us from any of our competitors. We look forward to sharing more of this and other new products in the coming months.

Let me conclude by saying that despite the sobering realities of today's market, it remains a very exciting time for our company. We believe that we are continuing to make great progress in executing our plan for growth and that our vision and strategy are being validated and reinforced in the market every day. Let me thank all of our associates around the world for their continuing hard work and dedication.

At this point, I'll turn the call over to Ted who will share additional details of our third quarter performance.

Theodore Schrafft

Let me begin by saying that I too am pleased with our performance during the quarter. When I became President of Premier Global a little over two years ago, Boland, our leadership team and I, developed a road map for accelerated growth and improved customer value and higher profitability for our company. During the third quarter, we continued to execute on these growth plans to move closer to our vision of PGI becoming the global leader in on-demand applied communication technologies.

Before we open the call to your questions, I'd like to take a few minutes to discuss our third quarter results in more detail with a focus on some of the key items and questions we've received from investors of late.

Let me start with revenues. As reported, our third quarter consolidated revenues totaled $157.4 million. While slightly below our internal plan, largely due to the factors Boland discussed, we continue to feel optimistic about the underlying health, foundation and momentum of our business, most notably the positive organic growth we anticipate in the current quarter and in the year ahead.

In spite of today's uncertain global markets we continue to ramp significant business with new customers around the world. We have a healthy pipeline of potential new customer opportunities. We are generating record daily volumes across our PGiCOS platforms and we have a robust and exciting slate of new products coming to market.

One revenue related question we've been receiving lately relates to our exposure to the financial services industry. This broad industry group has historically been a strong growth category for us as these businesses are great candidates for all of our PGiCOS solutions. Despite the current environment, the financial services industry as a whole continues to grow for us.

In fact, revenues from this segment of our customer base grew modestly in the third quarter over Q3 a year ago as well as sequentially from the second quarter of 2008. We will continue to cautiously monitor the consolidation, employment trends and utilization of our services in this sector as well as the credit worthiness and receivables balances of these customers. But at this point in time, we remain comfortable with our business trends in this important industry.

That being said, there's no question that our growth rate has been tempered by recent market events but we believe our customer base as a whole remains healthy. We have a broad and diverse base of customers with no significant concentration in any particular size, industry or geography. We believe the diversity of our customer base is a great asset for PGI that is not often fully recognized by our investors.

Now, as we look ahead, one of our most important revenue initiatives remains pricing. We began introducing new subscription plans to our direct sales force in August and the initial results have been very encouraging. As our initial research suggested they would, our customers really appreciate the predictability in spend and the simplicity of the plans we are now offering them.

In just the last few weeks, we have sold nearly 700 new subscription plans for an annualized revenue opportunity of approximately $2.5 million. Our goal in 2009 is to close the majority of our new sales and customer contract renewals under a subscription plan or committed revenue contract. While we anticipate transitioning our base to these predictable pricing plans will take some time, we are pleased with our early progress.

To conclude on revenues, we believe our business momentum remains solid despite current global headwinds. Our organic revenue growth is accelerating and we have a broad and diverse base of customers that we believe minimizes our risk and continues to represent a great growth opportunity for us and we are excited about the early customer acceptance of our new pricing plans which we believe will both minimize the seasonality in our business and more importantly, provide customers with enhanced simplicity and predictability for their businesses.

Now let me turn to our profitability. We remain keenly intent on scaling our business as it grows. Said another way, we are looking for new revenue to not only be predictable and consistent but to generate a fair and reasonable margin for us as well. Our gross margin during the third quarter, while still within our recent historic range was slightly below our forecast.

Let me take a minute to discuss. This year we have closed an increasing number of new large global deals. As you would expect, these deals typically involve more favorable pricing in return for determined volume commitments. This more competitive pricing has pressured our gross margin in recent quarters.

However, it is important to note that the revenue concentration in these large deals provides healthy operating leverage hence typically accredited to our operating margins. To exemplify this point, since the fourth quarter of 2006, our gross margin has improved by about .015%. Over the same period of time however, we have generated an increase in our pro forma operating margin of four full percentage points. We believe this is a positive trend in our business, and one that we are working hard to continue.

Looking ahead, we anticipate our gross margin will continue to be within our recent historic range and we expect to continue to drive improvements in our operating margin in both the fourth quarter and the year ahead as we continue to grow and invest in our business, yet prudently manage our expenses.

Moving on from the income statement, our other business fundamentals remain solid. We continue to generate strong cash flows with net cash provided by operating activities totaling $34.9 million in the third quarter. The increase in cash flows of approximately $11 million from Q2 includes a one time tax refund of approximately $8.5 million.

This pick up was partially offset by restructuring payments and net legal settlements and related expenses of approximately $3.8 million. Consistent with our historical performance, we expect to generate meaningful cash flows in the current fourth quarter as well.

Capital expenditures were in line with our projections and totaled $11.8 million during the third quarter. We continue to anticipate that capital expenditures will decline as a percentage of consolidated revenues in 2008 and again in 2009. We believe our balance sheet remains strong as well.

As Boland mentioned, we ended the third quarter with approximately $123 million of cash and equivalents and liquidity available under our credit facility. In addition, trends in our trade receivables remain positive with third quarter end DSO's at historic low levels totaling less than 53 days when excluding earning but unbilled revenues.

Our allowance for doubtful accounts totaled 2.6% of trade receivables at the end of Q3 which is its lowest level on our company's history. We believe the improvement in our allowance for doubtful accounts this year, reflects the quality of our customers' credit and continuing success in our collections processes which are driven by our own PGiCOS accounts receivable management applications.

We believe that we have adequate liquidity and operating cash flows to fund our future growth plans. In addition, we remain comfortable with our leverage and coverage ratios and with the terms, tenor and security of our credit facility. As such, we are in no hurry to pay off our debt. However, we anticipate using a portion of our free cash flow to prudently pay down our debt in the coming quarters while at the same time continuing to be opportunistic in our acquisition and share repurchase programs.

In conclusion, let me say again that we are pleased with our progress in the third quarter as we execute our plan for growth and continue to lay the foundation for a much larger, sustainable and world class company. Let me join Boland in thanking all of our associates around the world for their continuing hard work and commitment to our future success.

At this point, we'll open the call to your questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Tavis Mccourt – Morgan, Keegan.

Tavis Mccourt – Morgan, Keegan

Can you elaborate on the gross margin commentary and where you see that going? Is there a currency impact to that gross margin as well or is it all just the large deals that come in at lower gross margin levels?

Theodore Schrafft

The pressure on the gross margin in the quarter is two elements. We did have a 40 basis point drop. Some of that certainly was foreign exchange impacted, no doubt about it. But my point in the comments were to say that we have gotten and continue to get, I know we actually closed another significant deal in the third quarter, and we continue to build our pipeline of what I call these large strategic global deals, again, really taking advantage of our global presence and all of our capabilities.

We see a continuing good trend there and those deals, certainly to get those deals we have to be competitively priced, and we are, and in return for competitive pricing we ask and get term and commit from these customers. I think that will put some element of pressure on gross margin but they're very, very accretive in the operating margin line.

We've been building momentum on those deals. I think we talked about one on the call last quarter, so we're very, very focused on both lines, but the operating margin is certainly the line that we're really driving and these deals are going to help us on. We'll take them all day long is the bottom line.

Tavis Mccourt – Morgan, Keegan

You made some pretty significant sales and marketing investments in the first part of this year. That line item came down quite a bit in Q3. I suspect currency helped you there, but can you talk about the investment plans for sales and marketing going forward?

Theodore Schrafft

The sales and marketing expense did drop from Q2. That basically put the commission plans in place. They're usage based commission plans and we'll talk to you more about this movement towards subscription based pricing and revenue under commitment that we're working so hard to go get and we're excited about.

Our commission plan also follows the seasonalities. Because it's usage it kind of follows the seasonality part of our business so we have invested in sales and marketing and we are going to continue to invest in sales and marketing because we are very, very strong believers of our strategy, our opportunity. So that has not changed.

The fluctuation you saw in the third quarter had nothing to do with investment. We continue to invest. It really had more to do with how we pay the reps and the effect of seasonality that we saw in the third quarter.

Boland Jones

Head count in the third quarter was on a estimated basis sequentially up from the second quarter in the sales and marketing area.

Tavis Mccourt – Morgan, Keegan

Can you talk about the environment, obviously your conferencing service are very transactional in nature but some of your other email services specifically, I presume have longer sales cycles. Are you seeing a lengthening of the sales cycle to get those deployed or are customers dragging their feet at all?

Boland Jones

We haven't yet on any of our applications really and in fact, we won't talk to investors like this again until February, but in January when we host all our sales people in our kick off meetings, this is the biggest year yet that we have to harvest new products and new technology. In fact in the email alone, we've come out with an even lower start up version for smaller businesses and for departments in larger businesses to get going specifically in email marketing specifically with the new product. It ought to draw people even faster to the revenue line.

Tavis Mccourt – Morgan, Keegan

You mentioned in the press release the currency impact sequentially. Do you have the currency impact year over year in the quarter?

Michael Havener

On a year over year basis looking back the last year has the opposite effect of $3 million impact.

Tavis Mccourt – Morgan, Keegan

It looks like the next year or two is going to be kind of a big year for transitioning this monster subscriber base over to subscriptions. How are you managing the yield and the revenue in limiting the risk of some of these new pricing plans not creating some kind of pick up between planned revenues and actual revenue realization from customers?

Theodore Schrafft

We've said we are planning to get subscription pricing rolled out to our entire sales force this year. We actually began to roll it out in the August/September time frame. As I said in my opening remarks, we already have 700 plus customers that have already signed up with us on these subscription based plans.

We're getting excellent, early on, and it's very early on, excellent early on results and feedback and what we're also hearing from customers is that they like the budgeting and predictability aspect of it for their own business. We are going to continue to push it. We are analyzing it in terms of its impact. We are going to stay very, very measured and deliver it relative to how we roll it out.

The early on indicators are extremely strong so as we go into next year, we have set some very aggressive goals for ourselves next year. We'd love to see 75% to 80% of new customer contracts come in to this company with either that customer under subscription plan or with some type of committed monthly revenue amount.

We'll build that. The focus has been predominantly on new customers. We want to move as quickly as we can with it because we're excited about it and our customers' reception has really been great, but we're pushing hard on new customers. And then as customer contracts come up for renewal during the course of the year, we're going to be pushing extremely and sending our sales force significantly to move them also to sell the subscription or the revenue under contract.

There's an element that we like too, back to margins. There's a productivity element of this that we are extremely excited about because obviously we're looking at the productivity of our sales force because it's obviously a critical aspect of our financials and a major, major driver of our performance.

The net of the subscription plan also, is when we sell them, we sell them once. On the usage based plan, we can go get a deal, but we really don't get the revenue until we get the usage. So early on what we're extremely excited about is the leverage of that sales investment that we've made and continue to make and how subscription pricing we think is actually going to assist that.

Tavis Mccourt – Morgan, Keegan

Have you seen any competitors mimic this offering yet?

Theodore Schrafft

We haven't seen competitors to date do it. A couple of things in that regard; one is, we hope to lead this charge and we're going to lead it in two ways. One is obviously, we've changed, I'm proud of the guys, we have totally redone our compensation plan.

So what happens there is a salesman, instead of being paid over time, is more heavily weighted to be paid up front. So we're attracting a better quality of sales person we hope in the near future and we even hope to attract some of the competitors' top sales people, because we have an early jump on this.

Secondly, as Ted said, the sales people have already noted the fact that once they sell something, they can go hunt the next thing instead of babysitting the acquisition through usage adoption. That goes through all of our applications. Very strong advantages in this regard.

Boland Jones

If you look at the PGI communication operating system and a number of solutions that are out there, we have a number of single product competitors that have been subscription based for some time. We're not necessarily, we're clearly pioneering certain aspects of it, but we're also participating in a lot of momentum that's going in the market.

So if you look at marketing, and you look at things like desk top notification reminders, there are competitors out there that are subscription based. They've already kind of set and educated the market which helps us too.


Your next question comes from Bill Sutherland – Boenning and Scattergood.

Bill Sutherland – Boenning and Scattergood

I was wondering if you provide any metrics on the sales force in terms of head count, productivity and that kind of thing.

Theodore Schrafft

Absolutely, we clearly do. We look at productivity by channel, by all aspects of our sales force. Absolutely we look at productivity and we look for ways to always measuring if $100 is being spent, what are the most productive channels.

As we're heading into '09, we're looking at how do we even improve the mix of spend and the whole conversation we have around subscription based pricing is basically part of your question as well. That we're viewing as another aspect or element of how we drive incremental productivity out of an existing spend and then increasing spend that we're going to make in sales and marketing.

Bill Sutherland – Boenning and Scattergood

How much of the sales is driven by your own quota bearing sales force?

Theodore Schrafft

Usually we come in around 60% of our year is contributed by the quota carrying new sales and another 30% to 40% of the year is contributed by same store sales growth or customer growth. There's usually a split in our financials year after year.

Sean O’Brien

About 75% to 85% of revenues in a typical quarter will come through our direct sales channel. We do have a small and rapidly growing indirect partner and strategic partner channel that's about 10% to 15% of our revenues. Our web channel is growing very quickly as well but that's still between 5% and 10% of revenues.

Bill Sutherland – Boenning and Scattergood

I was also wondering about progress in terms of the web leads.

Theodore Schrafft

I'll invite on the comments on the web leads we've made and I invite everybody to go visit our site. We've made a ton of really positive turns on the site as recently as the third quarter. In terms of both the leads generation opportunity, but also self service opportunity for customers as well, so we made some excellent terms.

The site has never looked better. We continue to generate, I want to say between 3,000 and 4,000 leads were generated off the site this particular quarter. I know hundreds of new deals came in. We still have more work to do there no doubt, but we've made some great, great terms on the site and in terms of its marketability and demonstration of what we're doing, as well as enhancements of functionality of the site too to allow customers to go to the site not just to acquire but also to administer and support themselves over the site.

Bill Sutherland – Boenning and Scattergood

I was looking at my model based on the guidance that you provided in the release and I am coming up with a fourth quarter revenue growth number that is in the 7% range. I'm just confused in the fact that you talk about organic growth picking up in the fourth quarter when it looks to me like there deceleration. I'm not sure if I'm not taking into account the FX issues.

Sean O’Brien

If you want some specific help on modeling, it's very much a real time environment. The last two weeks we've seen absolute historic movements in these foreign currency exchange rates and it's very difficult to peg. At this current time, we anticipate that our revenues will be flat to modestly down in the fourth quarter and then our organic revenue growth will accelerate from the 6.5% we had in the third quarter.

Bill Sutherland – Boenning and Scattergood

So you're talking about organic growth on a constant currency basis aren't you?

Michael Havener

Basically what Sean is trying to answer is on a constant currency basis. Unfortunately we're not experiencing constant currency in these days right now. It's probably something I can help with you off line because this is a [inaudible] on a weekly basis with us from the foreign exchange perspective. I'd say that the 6.5% growth or greater organic when you strip out the foreign exchange. That is what we expect.

Bill Sutherland – Boenning and Scattergood

Are you seeing that split that you typically have between the conference collaboration line and the Legacy fax business?

Theodore Schrafft

It's less than 10%.


Your next call comes from Rodney Ratliff – Stanford Group.

Rodney Ratliff – Stanford Group

Given your targeting of larger deals and especially those that have worked in telecom understand how the dynamic works because of COS is a variable expense, you give the pricing concessions, you're going to see it impact on gross margins negatively and a positive impact on operating margins because of the bulk of the deal. Given you're targeting larger deals, should we be modeling gross margins a little more conservatively going forward?

Boland Jones

If you look back at the history of those gross margins we're still in the neighborhood of where we've been for years. We've reached COS of 59 and change and almost 60 and we're always under pressure to strive back to that as we are pressured to strive towards a margin expansion in all different parts of our income statement.

Just to add some color to what Ted said earlier, when he said those larger deals are accredited to that operating margin, I want to say that they're most of the times they're as much as twice as accredited as our normal operating margin. So they're pretty substantially accredited.

We hope we'll get more of those, but we hope our whole business will grow. I wouldn't lead you to believe that we're only looking for larger deals, but I would lead you to believe that we're seeing larger deals that we've never seen before because of the technology we're presenting in some of these companies on some of the managed services deals we've been proposing and winning and some of the deals where we've been able to combine all of our solutions into one match up composite solution.

It's fun to see larger deals being included in the larger stuff. It's a mix depending on how that works.

Theodore Schrafft

We're certainly continuing all aspects of our business with our channels. I hope we do run into and end up closing a ton of these larger deals. That would be "a good problem to have", which would put some pressure on that line. But on the flip side of it, as we've said before, moving a lot of the service elements of our model to online, the new products that are in the works getting ready to be announced will drive higher margins as we continue to build automated parts in the solution.

The subscription pricing model that we know will have an element of breakage and overage, we expect, I view the large deals as "a high class problem to have" relative to gross margin. There's a number of initiatives that will put some pressure on it but there are also a number of issues that we can continue to focus on and are going to roll out in a major way that are going to continue balance that out.

Boland Jones

I think if you track our operating margin conversely, as we've talked about here, it's one of two things. It could be strong on the gross margin and weaker on the operating margin. It could be strong on the operating margin and weak on the gross margin. You track what our operating margin has done over the last 8, 16, 20 quarters, I think it's risen pretty steadily.

It was flat Q2 to Q3 but I think that's one of the quarters that it's been flat in the last 10 quarters and hasn't risen. EBIT as well has gone from 9% to 14% in the last three years, so a lot of positive movement there.

We'd like to see all the margins increase, but our business is super healthy and we're acclimating ourselves to the market as we go down the road with the products and services the market needs and wants and the prices are dictating themselves in some cases, and in some cases we can dictate them.

Rodney Ratliff – Stanford Group

Can you give me some indication of what percentage of the existing base bought second or third service in the quarter? Is the trend still looking good there, and what percentage of the new customers that came on board bought more than one?

Theodore Schrafft

That continues to be a major focus of our selling and marketing strategy, but we had over 500 customers that we signed up this quarter for a second or third solution. We had 150 customers that just started with our services that signed up for two or more of those services upon the initial time at contract. Almost half of our revenues now are coming from customers that have more than one PGiCOS solution, and that trend is going up.

We look at that as a very, very important metric because the more solutions and tentacles we have with that customer, the more value we drive, the thicker we are. I'll go back to difficult economies and all that that we're dealing with, but we like our story because we feel like we're in the sweet spot.

We're helping these companies drive efficiencies, drive productivities, touch customers, reduce costs, manage costs, which everybody is totally buttoned down doing right now. I know it's a bit of a storm out there, but we like the position we're in in the midst of that storm.

Rodney Ratliff – Stanford Group

Would you give a little bit better granularity in terms of the new deals and leads landed over the web? You said 3,000 to 4,000 new leads and hundreds of new deals. Could you be more specific?

Theodore Schrafft

That's actually about 3,400 leads and about 430 deals that were actually closed off those leads. It's about 13% of the leads turned into deals.

Rodney Ratliff – Stanford Group

Would you remind me of the terms of the credit facility?

Michael Havener

The credit facility is up in May of 2011 at this point. That's what you were asking for?

Rodney Ratliff – Stanford Group

The calculation of the interest rate.

Michael Havener

It's flat book plus 1.25 and we are also, keep in mind $200 million of it is fixed rate right now and interest rate swaps right now that are between 4.5% and 5%. Our live board is 125 basis points.

Rodney Ratliff – Stanford Group

What percent of your total revenues was international?

Theodore Schrafft

38% in the quarter.


We have no further questions. Mr. O’Brien, I'll turn the conference back over to you for any closing remarks.

Sean O’Brien

Thank you all for your interest and participation. If you have any follow up questions, please dial me on my direct line. That number of 404-262-8462. Thanks and have a great day.

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