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Premiere Global Services, Inc.(NYSE:PGI)

Q4 2008 Earnings Call

February 19, 2009 5:00 pm ET

Executives

Sean O’Brien - Senior Vice President, Strategic Planning & Investor Relations

Boland T. Jones - Chairman of the Board & Chief Executive Officer

Theodore P. Schrafft - President

Michael E. Havener - Chief Financial Officer

Analysts

Srinivas Anantha- Oppenheimer & Co.

Tavis McCourt - Morgan, Keegan & Company, Inc.

Shyam Patil – Raymond James

Mike Latimore – Northland Securities

[Richard Padero – Kennedy Capital]

Operator

Welcome to the Premiere Global Services, Inc. fourth quarter year end 2008 conference call. Today’s call is being recorded. This call is also being simultaneously broadcast over the Internet. You can go to our website www.PremiereGlobal.com and go to our Press section. Alternatively you may listen to the rebroadcast from your telephone beginning at 8:00 pm Eastern time today through midnight Friday, February 27th.

The numbers for the replay are 1-888-203-1112, again that’s 888-203-1112 within the United States and Canada or at 1-719-457-0820, again that’s 719-457-0820 outside of North America. The confirmation code to access the replay is 5413842, again that’s 5413842. All lines will be muted throughout the presentation until the question-and-answer period begins.

At this time I would like to turn the conference to the Senior Vice President of Strategic Planning and Investor Relations for Premiere Global Services, Mr. Sean O’Brien.

Sean O’Brien

If you've not received a copy of our fourth quarter and 2008 earnings release please visit our website at www.PremiereGlobal.com where it is available in our Investor Relations section. Joining me on the call this afternoon are Boland Jones, our Chairman and CEO; Td Schrafft, President of Premier Global; and Mike Havener, our CFO.

Following some brief comments by management we'll open the call to your questions. Before I turn it 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, our quarterly report on 10-Q for the quarter ended September 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 of this afternoon for reconciliations of these non-GAAP financial measures to the most comparable GAAP measures. These materials are also available on our website at www.PremiereGlobal.com. At this point I'll turn the call over to Boland.

Boland T. Jones

This is Boland Jones, Chairman and Chief Executive Officer of Premiere Global Services. Welcome and thank you all for joining our fourth quarter earnings call for 2008. I’m pleased to announce another good quarter of performance by our company this afternoon as we continue to execute our strategic growth plans.

As reported our consolidated net revenues in the fourth quarter grew more than 8% on a constant currency basis driven by solid organic growth of nearly 6%. As defined and detailed in our earnings release our non-GAAP diluted earnings per share grew more than 17% on a constant currency basis in the quarter illustrating the operating leverage in our business.

In addition we continue to generate solid cash flows with net cash provided by operating activities totaling nearly $32 million during the quarter and greater than $106 million for the year. We ended the year with a strong balance sheet and good liquidity. During the fourth quarter we lowered our long term debt and capital lease obligations by nearly $11 million while at the same time repurchasing a million shares of our common stock in the open market.

We exited the year with a consolidated total leverage ratio of less than 2 times trailing 12 month EBITDA under our current credit facility our lowest level in nearly two years. In my opinion it was a great quarter and a solid year of performance by our company and we remain optimistic about the year ahead.

To put it bluntly we believe our company will continue to perform better than most in this environment because today’s economic challenges are forcing a change in business habits that is positive for PGI. Over the last few months we’ve heard a number of leading CEOs talk about taking cost out of their businesses through things like travel bans, reduced capital budget and various outsourcing programs.

We believe that these types of initiatives play right into the strengths of our PGI suite of on demand solutions and our history has shown that these habits and new ways of doing business stick even after conditions improve. Let me take a minute to review why we believe our PGI communication operating system solutions are perfectly suited to help companies in their efforts to be more productive and more efficient.

For example our PGiMeet Conference and Collaboration Solutions are great alternatives for companies looking to meet in a more productive and cost effective manner without the expense, hassle or lost productivity associated with business travel. In addition our PGiMarket Solutions enable companies to drive revenue growth through targeted emarketing campaigns that help close, retain and up sell customers all with fewer full time employees.

Our PGiNotify Solutions allows users to send automated reminders to their customers to notify them of things like flight delays, doctor’s appointments and overdue credit card balances. Finally our PGiSend Solutions enable companies to convert paper documents into electronic files in order to streamline and improve a variety of critical business processes.

We believe our broad suite of applied communication technologies on a single on demand platform continues to differentiate PGI from our competitors. In 2008 we strengthen our PGI communication operating system portfolio with the highest level of investment in new product development in our company’s history.

In this year ahead we look to harvest this investment in new products and to use our technology to advance our position in the market. Most notably this year we will launch a next generation virtual meeting platform that we believe will dramatically change the conferencing industry.

By specifically focusing on how people engage in energizing productive and efficient meetings we hope to leave users asking why wasn’t this always like this? Our goal is to empower every one of our million users with tools that make their virtual meetings just as powerful as their face to face meetings.

By doing so we believe we will expand the market significantly beyond the $5 billion to $6 billion conferencing industry as traditionally defined. In my opinion it’s a lot like when we introduced automated conferencing in the late ‘90s. Back then we were a small company and the industry was less than $1 billion.

Through the introduction of automated conferencing and our other innovations over the past decade we have helped drive significant growth in our industry as well as our own business. As we continue to bring new tools, easy to use features and fun to our virtual meeting products we will get closer to our ultimate goal simply put if there is a meeting any time, anywhere with anyone we want it to be hosted by PGI.

Now in 2008 we also expanded our global footprint with our entry into India and China. Our global presence remains one of our key strategies as we believe it gives us a significant advantage in the market against our competitors who for the most part are regionally focused.

With these new strategic agreements we had meaningful new customer opportunities and deepened our existing relationships by being able to offer our services to customers in these emerging markets and as a result we continue to generate a healthy pipeline of new large scale global opportunities. Finally since I spoke with you this last year we have strengthened and streamlined our leadership team.

Last spring we unified our technology development and operation team to ensure a higher quality of service and a quicker time to market for our products. Last summer we hired a new Chief Marketing Officer with significant experience in user advocacy and brand management. This afternoon we announced the addition of David Trine to lead our finance and accounting organization.

We believe that our team has the experience, discipline and expertise to extend our lead in the global markets. Now before I turn the call over to our President, Ted Schrafft, let me take a minute to comment on our financial outlook for 2009. While it’s still early in the year we are pleased with our current volumes and pipeline of new business and we’re excited about the suite of new products we plan to bring to market this year in PGiMeet and our other solution sets.

Based on our current momentum and projections we believe that we will grow our revenues modestly in 2009 barring any significant foreign currency moves against us. We also anticipate that we will continue to expand our operating margins in 2009 as we begin to generate returns on many of the investments we’ve made in sales, marketing and product development over the last few years.

We will continue to operate and invest for growth while at the same time being even more prudent in the management of our discretionary and capital expenditures. We will focus and sharpen our spending on the must have, the true drivers of our business in order to execute our market strategy while we still maximize our cash flow.

Let me conclude by saying that it remains and exciting time for our company as we continue to execute our strategic operational and financial plans. We look for 2009 to be another good year for PGI as we work to continue to grow our business, differentiate our products and our company from our competitors and improve our customer and shareholder value.

On behalf of our entire leadership group I’d like to welcome David Trine to the PGI team and to thank all of our associates around the world for your continuing hard work and dedication to our company. At this point.

Theodore P. Schrafft

Let me begin by saying that I too am pleased with our performance in 2008. I’m proud of our management team and all of our associates around the world for the progress we are making in building a world class company at PGI and I’m optimistic about the year ahead. Let me take a few minutes to discuss our fourth quarter and 2008 results in more detail before opening up the call to your questions.

I’ll start with revenues. As reported our fourth quarter consolidated net revenues totaled $152.4 million. As detailed in our earnings release we estimate that changes in foreign currency exchange rates during the quarter negatively impacted our revenues by approximately $5.7 million compared to Q4 of 2007.

Revenues in the second half of December were a bit softer than anticipated we believe as a result of longer than typical holiday breaks for some of our customers. However our volumes have rebounded in the beginning of the first quarter as anticipated and as Boland mentioned in his remarks while it’s early on we’re pleased with our performance in 2009 to date.

Today our organic growth continues to be driven by significant volume increases in our PGiMeet Conference and Collaboration Solutions as companies of all sizes around the world look for more productive and cost effective ways to meet. We are winning a number of new deals and have a healthy pipeline of new customer opportunities which are driving continuing volume records across our conferencing platforms.

We are encouraged by the positive global trends in our PGiMeet solutions which currently comprise approximately three quarters of our consolidated net revenues and our IP fax solution Fax to Mail which also continues to be a strong grower for us. Some of our more transactional solutions like PGiSend and PGiNotify are being negatively impacted by today’s economic slowdown particularly in the financial services and travel and hospitality industries.

While we believe these applications will be long term growers for us we expect to continue to see lower transactional volumes in some of these areas in the near term resulting from today’s lower rate of business activity. Now looking at the year ahead we feel confident about our ability to provide consistent results in spite of today’s challenging economy due to a healthy diversity in our product suite and global customer base.

We believe out PGI [COS] solutions will continue to be embraced by companies as they look to drive even greater business productivity and efficiencies in their businesses this year. We currently anticipate a significant headwind in 2009 from changes in foreign currency exchange rates. However we believe that we will grow our revenues modestly this year from 2008 levels assuming no material changes in today’s currency exchange rates.

We continue to monitor employment trends and the utilization of our services very carefully across our customer base as well as the creditworthiness and receivables balances of our customers. Today our receivables trends remain favorable with DSOs dropping by about a half a day in the fourth quarter and with allowances for doubtful accounts at a record low level.

Before I move on let me hit one final note on revenue in response to a number of recent investor inquiries we’ve received on pricing trends in the conferencing space. Today pricing trends remain within recent historic ranges. However our outlook for 2009 anticipates a modest uptick in price compression due to current market conditions and the increased corporate focus on cost savings.

However we currently anticipate price declines in our conferencing services will be more than offset by volume increases this year. Now let me turn to our profitability. Our gross margin during the fourth quarter declined modestly from third quarter levels resulting from the negative impact of foreign currency fluctuations during the period.

Today Europe continues to generate the highest gross margin of our reportable segments. The strengthening of the dollar against the euro and other currencies in this region resulted in a lower contribution of revenue from this segment in our consolidated Q4 results. Without this headwind we estimate our gross margin would have improved modestly during the fourth quarter from third quarter levels.

Looking ahead in 2009 we anticipate continuing to build on our recent history of expanding operating margins as we scale our business and prudently manage our expenses as Boland discussed a moment ago. We believe that we exited 2008 with solid business fundamentals. We continue to generate strong cash flows with net cash provided by operating activities totaling $31.6 million in the fourth quarter and greater than $106 million for the year.

Capital expenditures were in line with our projections totaling approximately $11 million in Q4 and just under $50 million in 2008. We anticipate capital expenditures will decline on an absolute dollar basis in 2009 while at the same time we’ll be shifting a greater portion of our capital spend to the development of new future growth products. We believe our balance sheet remains strong as well.

We ended the year with $269 million in long term debt and capital lease obligations and with greater than $135 million in cash and equivalents and liquidity available under our credit facility. Today substantially all of our long term debt is on a revolving credit facility that matures in April of 2011.

Now that our consolidated total leverage ratio has dropped under 2 times our pricing grid on the facility will improve by 25 basis points beginning next month to 125 basis points over LIBOR. We continue to be comfortable with our leverage and coverage ratios and with the terms, tenor and covenants of our credit facility.

That said we anticipate continuing to use a portion of our free cash flows to prudently pay down our debt in 2009 while at the same time continuing to be opportunistic in our acquisition and share repurchase programs. In conclusion let me say that we are pleased with the progress we made in the fourth quarter and in 2008 as we continue to build a larger sustainable world class company.

In the year ahead we will continue to focus our operational initiatives on further improving our business and building on our foundation specifically our energies will remain on developing and launching innovative products and customer self service tools that improve our users’ experience, crafting pricing strategies aimed at enhancing the overall quality and consistency of our revenues and continuing our efforts to build a brand that is a recognized and sustainable asset for our company.

I look forward to updating you on our progress toward these important objectives on our future calls. Until then let me join Boland in welcoming David to the PGI team and 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 up the call to your questions.

Question-And-Answer Session

Operator

(Operator Instructions) For our first question we go to Srinivas Anantha- Oppenheimer & Co.

Srinivas Anantha- Oppenheimer & Co.

Could you guys talk about the competitive environment and maybe can you give us any color on pricing? That’s one. Second, where do you guys stand on your migration to the flat rate pricing model and given the macro environment we are in do you guys plan to accelerate on that strategy or is going to be the gradual migration of customers to that particular platform as you talked about previously?

Theodore P. Schrafft

First of all on the pricing trends, we are seeing pricing trends I think pretty consistent with historical trends. As I said I think we’re seeing consistency there, we’re seeing consistently all solutions, our markets are competitive and obviously we’ve been in competitive price areas for a while but again the trends the same.

What we like about, again I’m going to turn back, we like the diversity in our portfolio and what I mean by that diversity is I’m talking about the fact that we exist across three regions in Europe Asia Pac, North America and have the four solutions in the PGI COS portfolio. It just gives us a lot of diversity in our business model and therefore from our standpoint gives us health relative to pricing and pricing with customers, etc.

Anyway trends are the same and we like our business diversity. On the subscription and the movement toward revenue under contract, as we said before we have been and we’re going to stay very measured and deliberate in terms of our approach there. Again our goal overall is to improve the quality of every revenue dollar that we bring into this company in terms of moving it toward a consistent and predictable model as well as committed model.

We are working on marketing programs, sales programs, we’re getting some good traction as we said before in our SMB space, small mid-size business space. On the subscription based revenue we tend to see more revenue under contract as e move up market. Some of the numbers we’re seeing since the beginning of this year, 70% of the new deals we’re closing in SMB are under subscription.

Since the beginning of this year about 50% of the deals we’re closing in our larger markets have a revenue under contract component to them. Again, we’re going to be very measured, very deliberate in our movement there. But we love our strategy and our customers love the predictability of it so we’re positively moving forward. It’s going well.

Srinivas Anantha- Oppenheimer & Co.

Ted, I know you guys previously talked about making pretty good progress with some of your large customers especially IBM. Is it possible to give any color on how that particular revenue is progressing and what we should expect from that customer as we look in 2009?

Theodore P. Schrafft

Sri, I can’t comment on any particular customer. Obviously they’re a great customer. We have a longstanding relationship and that relationship continues to grow. Other than I really can’t comment.

Srinivas Anantha- Oppenheimer & Co.

One last question, on broadcast side any color you guys can share with us. Has that revenue declined pretty much stabilized or should we expect further decline in that revenue?

Theodore P. Schrafft

Sri, as we predicted that business has run off and we’ve purposely gone into those accounts and moved them to new technologies, etc. I think the good news there, we’ve I’ll say executed against our strategy and executed against our goals and plans there. It is less than 9% of our consolidated revenues right now. It certainly is I’ll say a much smaller headwind.

We just are going to continue to execute on that business the way we’ve been executing on it.

Operator

We go next to Tavis McCourt - Morgan, Keegan & Company, Inc.

Tavis McCourt - Morgan, Keegan & Company, Inc.

A financial question, remind me when, I know you fixed LIBOR under the bank line right now, but when is that fixed until?

Michael E. Havener

LIBOR was set about a year ago in August. One tranche is going to expire this August, there’ll be a second one the following August in 2010 and they’re set at about 4.75% interest.

Tavis McCourt - Morgan, Keegan & Company, Inc.

In terms of the seasonality in '09, I know you’ve typically had an uptick in selling and marketing expense in Q1. Would you expect that again this year or will it be more muted and I guess if you want to weave into the answer what you guys are doing in terms of investing in sales and marketing this year?

Boland T. Jones

This year we used our own virtual tools and did 90% of the meetings that we normally do face to face where we bring people from around the world to have our meetings. We used a large part of our virtual tools and some of our newer virtual technologies that we’ve yet to debut to the market and we used those to bring those people together.

We’ve muted the cost somewhat. There’ll probably be a mixture of those tools and the old way of doing things to some extent for some while until we move totally over to those meeting tools 100% but this year those expenses, I like your word, those expenses were muted somewhat as opposed to what they’ve been historically in the January month in that regard.

On the sales and marketing expense I don’t want to get ahead of the story but we’ve actually invested in sales and marketing throughout the fourth quarter and continued on in this quarter. We feel like this is the time to try to capture some of those people in the new habits that they’re turning to and changing to and we’re going to be as competitive as anybody else and try to capture those customers in those new habits.

Tavis McCourt - Morgan, Keegan & Company, Inc.

In terms of overall quota bearing sales force this year, would you expect that to be generally up or stable?

Boland T. Jones

I’d say probably pretty stable. We’re doing some shifting around and we’re becoming much more effective in the web sales and much more effective in the telephone sales and we’ve got a bunch more money this year in our current budget for marketing. We’re investing heavily in the marketing like we have not done in previous years with our new Chief Marketing Officer on board.

The sales expense won’t all be seen in the sales dollars for direct heads as much as a lot of the investment will also be seen in the marketing dollars.

Operator

With a follow up question we return to Srinivas Anantha- Oppenheimer & Co.

Srinivas Anantha- Oppenheimer & Co.

As you guys look at the free cash flow next year could you guys talk about priorities? Was it going to be more directed towards debt repayment or are you guys still committed to buying back shares?

Boland T. Jones

We’ve been pretty consistent about this over the last two or three years other than the big tranche buy back that we did, the big tender that we did. We’ve been pretty consistent being opportunistic. We’re certainly conscious of the need to be prudent with our cash this year and so forth but we’re still going to be opportunistic like we were in the last quarter.

We bought back a million shares when it just got to a price that we thought was unreasonable beyond reason and we’re still going to be opportunistic like that in the future but we’re going to be more conscious of expanding that cash flow as best we can to service our debt and the opportunities we have in the market.

Srinivas Anantha- Oppenheimer & Co.

I know you guys talked about margins improving in 2009. I know Ted previously talked about gross margins improving but as we think about margins improving is it more about the EBITDA margins so most of the leverage is going to come from the operational expenses? Is that how we should look at it?

Theodore P. Schrafft

Yes, I think that is a good way to look at it. What we said is we get a lot of at bats on some large global sales opportunities now, Sri, just because of our solution sets and because of our global presence. I think we said on the last call they tend to put a little pressure on the gross margin line but they’re very nice as they flow down to EBITDA. The real focus that we have as you’re looking at the P&L is going to be on the operating margins in the business.

I think you can probably expect to see gross margins probably where they‘ve been over the last few quarters.

Srinivas Anantha- Oppenheimer & Co.

Boland, on acquisitions I know you guys have steadily done acquisitions every year. Should we expect this year and are you guys seeing any attractive deals out there given the macro environment?

Boland T. Jones

We are. We’re just starting to. We remain super opportunistic about those items too. Certainly We wouldn’t want to talk about anything that we weren’t ready to announce but we’re in that game just as we have been before and we plan on looking hard and as opportunities come our way we take each one at a time. Same business as usual in that regard.

Operator

We go next to Shyam Patil – Raymond James.

Shyam Patil – Raymond James

I just had a question on the interest expense, it looks like it was a little higher than we are modeling. Can you talk about what happened there and how should we think about that in '09?

Michael E. Havener

In '09 I think you can still model it downward from what you saw in the fourth quarter. We had some one time items going through, interest expense and fourth quarter related more toward things we were doing related to tax related accruals. It wasn’t interest expense associated with anything related to our revolvers.

Shyam Patil – Raymond James

I know you guys recently rebranded your offerings. Can you talk a little about your product strategy going forward particularly in the conferencing business and what enhancements and differentiating features you plan to add to capture the opportunity?

Boland T. Jones

I don’t know if you caught the front end of the earnings announcement but if you didn’t you can replay it later but I talked about the fact that we had a huge investment over the last couple years that we’re harvesting a new product development this year.

Most of that that we’ve done in the last two years and we’re pretty excited about especially the meeting space and what we have on the plate to bring out and introduce the market this year and I think I even used the words that we thought it would change the way the market was looked at for the meeting, conferencing, web conferencing, audio conferencing, we think we’ve got some technology in our roadmap that will change the way people look at our industry for a long time.

We’ve mentioned on many calls before about virtual technology, about gaming technology, we’ve talked about user defined technology, web 2.0 technology and we’ve talked about making these environments immersive. We’ve talked about social networking trends and we’re trying to give hints to what our product roadmap looks like.

I don’t want to say too much more because in the short term you’re going to see some announcements that we hope will begin the game changing moments for us and this company in the meeting space and hopefully for the industry that will show that there’s a huge expansion in this industry ready to come due to some of the technology and product that we’re getting ready to release.

Shyam Patil – Raymond James

Can you just try and give us an update on your web initiatives?

Boland T. Jones

Do you want web sales or web initiatives in what regards? I’m sorry.

Shyam Patil – Raymond James

I know you were transitioning aspects of your business to web in terms of your sales and your support primarily.

Boland T. Jones

We continue on a couple fronts. One is on the user front. We have migrated the majority of our users to the web. In regards to product usage we’re working now on migrating those people to self help and to other ways to address a more automated fashion of service for our users. That’s what they want and that’s what we’re trying to deliver and obviously that’ll create some major efficiencies for us but that’s one front of the web on the user side.

I don’t know if that’s the front you wanted to talk about versus the web sales side.

Theodore P. Schrafft

The other aspect of that obviously in addition to the user support capabilities that our customers are going to get over the web is the leads we’re generating over the web and that continues to be a healthy part and a big part of our focus on web. We had over I think it was in Q4 over 3,200 leads generated from the web that we typically funnel off to our SMB or corporate account sales force. It continues to be a good solid lead generator for us as well.

Operator

With a follow up question we return to Tavis McCourt – Morgan, Keegan & Company, Inc.

Tavis McCourt - Morgan, Keegan & Company, Inc.

Two follow ups, first what is your expected tax rate for '09, Mike?

Michael E. Havener

I think that number is probably going in a range anywhere between 33% and 34%.

Tavis McCourt - Morgan, Keegan & Company, Inc.

In terms of do you have if not exactly at least the rough amount of the debt that comes off the swap this year? It’s pretty material I would imagine once you get that interest rate coming down to today’s LIBOR.

Michael E. Havener

You’ve got $100 million of tranche coming off in August and the differential of LIBOR sitting around the low one’s versus the 4.75%. You’re going to see 3% on something like that, 3% on $100 million.

Operator

We go next to Mike Latimore – Northland Securities.

Mike Latimore – Northland Securities

On your indirect channels, can you talk a little bit about any initiatives you have there this year or should we see indirect grow as a percent of overall sales in '09?

Theodore P. Schrafft

Yes, we’re extremely excited about the indirect channel and its opportunities not just in North America but around the world. That channel is a very broad channel for us and it consists of anything from sales agents to resellers to very, very large strategic partnerships that we’re developing.

I think as I said to an earlier question we’re getting a lot more at bats with those kind of opportunities just because again of the solution sets and because of our global presence, etc. The indirect channel and the strategic partnerships for this company continues to be I think a very, very exciting area and an area that we’re going to continue to focus on.

Mike Latimore – Northland Securities

In terms of companies or opportunities as prospective customers where the customer has their internal systems and they’re looking to outsource. Are you seeing more opportunities develop where companies are going to look to outsource to a service provider as opposed to spending cap ex in internal systems?

Theodore P. Schrafft

That’s a great question and that’s why we love our position. What companies are doing now is they’re just hunkering down and buckling down as they’re focused on what their core competencies are and beginning to move things out that are not and that’s where we come in. We’ve seen actually in more recent quarters more of a trend for companies to step out of the business that we’re in and let us come in and show our expertise.

We believe that trend is going to continue. That works in our favor and you’re right, a lot of it has to do with tight operating budgets and tight capital budgets. They’re cutting back on those capital budgets so that plays right into our business model.

Mike Latimore – Northland Securities

In terms of the conferencing revenue what percent roughly of the conferencing revenue was web conferencing?

Michael E. Havener

It’s 10%.

Mike Latimore – Northland Securities

Just to clarify, I think someone said earlier that broadcast fax was 9% of total fourth quarter revenue, is that right?

Michael E. Havener

Yes, it was little less than 9%, actually 8.75% of consolidated revenues in the fourth quarter.

Mike Latimore – Northland Securities

I know it’s hard to predict, but as you exit 2009 do you have a rough range of what you’d like that to be or think it will be?

Michael E. Havener

We’re probably looking at the same kind of flow reductions. If we continue to manage it down like we have and you’ll probably get in the mid sixes as a percentage of overall revenue probably as you interpolate what it’s come down in the past couple years.

As we manage those people to email solutions or other solutions it’ll probably be right around the 6% range, maybe a little bit less or a little greater than 6%, somewhere around there by the end of next year if we do a good job managing that.

Mike Latimore – Northland Securities

Last on the financial services sector, can you talk a little bit about what you’re seeing out of that sector in both the conferencing and non-conferencing segments and whether there’s a prospect for that to grow going forward?

Michael E. Havener

I think there will be. I think as you would expect we’re seeing a little bit of softness in that sector with all the dynamics going on in the sector, with lower volumes, with consolidation in the industry, with banks shutting down certain parts of their businesses, etc.

What we’re seeing more though is we’re seeing flattish on the conferencing and collaboration side, where we saw a little bit of the weakness was on one, the transactional side, just more your trade confirms, etc. While we’re seeing that we’re also seeing nice upticks in other industries like technology, etc. that again going back to our diversity more than offset it.

So I think that’s a great market and industry for us and as it rebounds I think we’ll be rebounding in that space with it. While it’s going through its issues we’re certainly serving a whole bunch of other industries that are growing for us.

Mike Latimore – Northland Securities

Last question would be then because that diversity [inaudible], what percent of revenues were your top 10 customers?

Theodore P. Schrafft

It’s just over 10%, Mike. It’s about 12%.

Operator

We got next to Richard Padero – Kennedy Capital.

Richard Padero – Kennedy Capital

Two quick questions, on the new products that you’re rolling out on the conferencing, the cutting edge stuff, who would be the first users or how will we actually see that? I assume it’s in beta now with customers or how do we start to see that come through from our side?

Boland T. Jones

You’ll see a combination of some beta customers that are more high profile that’ll choose to announce it in the term going forward. You’ll also see some significant opening announcements about it at some trade shows and so forth and so on.

Over the next 90 to 120 days you’ll see a series of things and then you’ll see it in production in some controlled environments that we sell through, strategic partners as well as directly to customers during the beginning of the third quarter, end of the second quarter and at that point it’ll begin to be full on. That’s assuming everything goes good with the beta and we don’t get some comments that we’ve got to go back and make some adjustments that may extend that 30 days or so plus or minus.

Richard Padero – Kennedy Capital

The customers that you’ve at least talked to initially or showed this to, do they seem as excited about it as you are or are you having to do a really hard sale on this or how are you thinking about it?

Boland T. Jones

I don’t want to preempt it too much but the customers that have seen it have ranged from some of the biggest companies in the world to some small users and there’s been technology companies, all kind of industry customers and so far we’re extremely encouraged that it’s a, comments like I’ve never seen this before, this is pretty cool.

The comments, why hasn’t it been like this always, those type of comments that we remain very encouraged but we’ve still got some execution to do so I don’t want to get out in front of it too far.

Richard Padero – Kennedy Capital

Just a cash flow item, next year your cap ex estimate, roughly what would that be?

Michael E. Havener

I think the cap ex estimates right now, they’re going to be lower than what we ran this year, probably somewhere close to the mid 40s.

Theodore P. Schrafft

You’re going to see absolute dollar decline in cap ex this year but within the cap ex number you’re actually going to see the mix shift, actually a little bit more of an increase in dollars spent on product development just as a follow on to Boland’s comments about the new products, etc. So even though the absolute dollar decline but a mix shift toward product development.

Richard Padero – Kennedy Capital

What was cap ex this year? I’m sorry, I just don’t have that.

Theodore P. Schrafft

Cap ex this year was about $29.6 million.

Operator

With a follow up question we return to Srinivas Anantha- Oppenheimer & Co.

Srinivas Anantha- Oppenheimer & Co.

Ted, if you could talk about the volumes. I know earlier one of your biggest competitors talked about volumes coming under pressure especially in November, December. Is that something similar that you guys have seen especially on the conferencing side and if so, have you see any pick up back in January and February?

Theodore P. Schrafft

Sri, actually I think as we said in our opening remarks our volumes have continued to be very, very solid. We saw just a little bit of softness in the back half of December as we said in the opening remarks and I think as we also said we’ve seen it rebound back to projected and expected levels in January.

Our volumes have continued to be very solid.

Srinivas Anantha- Oppenheimer & Co.

What other softness are you seeing from financial as being offset by growth in other industries? Is that a good way to think about it?

Theodore P. Schrafft

Yes.

Operator

With that, ladies and gentlemen, we have no further questions on our roster. Therefore, 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 calls please call me on my direct line which is 404-262-8462. Thank you very much and have a great day.

Operator

Ladies and gentlemen, this does conclude the Premiere Global Services, Inc. fourth quarter year end 2008 conference call. We do appreciate your participation and you may disconnect at this time.

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Source: Premiere Global Services, Inc. Q4 2008 Earnings Call Transcript
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