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Sykes Enterprises, Incorporated (NASDAQ:SYKE)

Q4 2012 Earnings Call

February 26, 2013 10:00 am ET

Executives

Charles E. Sykes - Chief Executive Officer, President and Executive Director

W. Michael Kipphut - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Josh Vogel - Sidoti & Company, LLC

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

Howard Smith - First Analysis Securities Corporation, Research Division

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Operator

Good morning, and welcome to the Sykes Enterprises Fourth Quarter 2012 Financial Results Conference Call. [Operator Instructions]

Management has asked me to relay to you that certain statements made during the course of this call as they relate to the company's future business and financial performance are forward looking. Such statements contain information that is based on the beliefs of management as well as assumptions made by and information currently available to management. Phrases such as our goal, we anticipate, we expect, and similar expressions as they relate to the company are intended to identify forward-looking statements. It is important to note that the company's actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements were identified in yesterday's press release and in the company's Form 10-K and other filings with the SEC from time to time.

Please note today's event is being recorded. I would now like to turn the conference call over to Mr. Chuck Sykes, President and Chief Executive Officer. Please go ahead, sir.

Charles E. Sykes

Thank you, Laura. And good morning, everyone, and thank you for joining us today to discuss Sykes Enterprises' fourth quarter 2012 financial results. Joining me on the call today are Mike Kipphut, our Chief Financial Officer; and Subhaash Kumar, our Vice President of Investor Relations. On today's call, I will make some high-level remarks about our operating results, after which I will turn the call over to Mike Kipphut, who will walk you through our financials. And then we will open up the call to questions.

Let me begin by saying that we are pleased to end 2012 on a positive note and are encouraged by demand trends going into 2013. This is underscored by the implied revenue growth in our 2013 business outlook.

Focusing on the fourth quarter operating results for a moment, we reported respectable revenues. We saw stabilization and improvement in underlying demand trends across a broad range of clients. This includes clients within the communications, financial services, technology, health care and transportation verticals. Demand was driven by a combination of ongoing shift to outsourcing and vendor consolidation, a trend that is favoring large and strategic global providers such as SYKES. Within the communications vertical, we saw acceleration in growth with our key clients serving the consumer wireless and enterprise markets. Growth in the consumer wireless segment continues to be driven by new product introduction, growing 4G smartphone penetration and an increase in the number of customers adding multiple devices to their carrier's network through shared data plans. In the financial services vertical, demand was solid with our retail banking clients and within consumer finance segments, driven by auto financing as well as mortgage refinance and origination activity. In the technology vertical, we saw growth among clients serving both consumer and enterprise technology end markets.

Turning now to operating margins. Fourth quarter operating margins came in better relative to expectations. In particular, the EMEA region's operating margins increased further. This spotlights that the strategic actions in the region are yielding gains and are sustainable. In the Americas region, meanwhile, we saw sequential improvements in segment operating margins driven partly by improved productivity. We believe there is ample scope for enhanced productivity as we begin to operationally integrate Alpine Access into SYKES and continue streamlining underutilized capacity even as we invest for growth.

And finally, we exited the year with a solid risk profile, both in terms of client concentration and balance sheet. Thanks to strong cash flow generation during the quarter, we ended the year with a healthy net cash position.

Taken together, we are pleased with our fourth quarter operating results, and we are also pleased with what we accomplished during the year.

Before I turn the call over to Mike, let me just briefly put the year in perspective. 2012 was as much about investing for future growth as it was delivering on key strategic and tactical imperatives. We leveraged our strong balance sheet and made a strategic acquisition. The acquisition of Alpine Access considerably differentiates and strengthens our competitive positioning in the marketplace. In fact, since the close, the acquisition has already yielded some new opportunities within some of our core verticals.

We successfully executed on the strategic actions in EMEA, driving rapid and tangible gains. We delivered on our year-end capacity rationalization targets. And we announced the management realignment and the new client-centric operating structure, which should begin to bear fruit in the new year.

As we enter 2013, we have a full plate. Making sure we execute smoothly on our growth objectives remains the first order of the day, and we are off to a good start. The operational integration of Alpine Access is also top of mind, and it remains on track. In parallel with the Alpine integration, we continue to move forward with streamlining underutilized capacity. Because some of the actions around capacity rationalization will be contingent on client buy-ins, the timetable could vary a bit as the year progresses.

All in all, although the macroeconomic backdrop still remains mixed, we are cautiously optimistic about our prospects for the new year with above-normal program attrition beginning to subside and demand tracking in line. We believe we are well positioned to capitalize on the opportunities in the marketplace.

With that, I would like to hand the call over to Mike Kipphut. Mike?

W. Michael Kipphut

Thank you, Chuck, and good morning, everyone. On today's call, I'll focus my remarks on key P&L, cash flow and balance sheet highlights for the fourth quarter of 2012, after which I'll turn to the business outlook for first quarter and full year 2013.

During the fourth quarter, revenues were $304.3 million. They were $1.8 million above the midpoint of business outlook range of $300 million to $305 million. The revenue increase relative to the midpoint of our business outlook was driven by run rate demand across several clients spanning the communications, financial services and technology verticals. On a comparable basis, fourth quarter 2012 revenues were down approximately by 2.3%, excluding currency effects and Alpine Access. The moderating revenue decline on a comparable basis is a significant improvement from the 6.2% constant currency revenue decline comparably in the first and third quarters of 2012.

By vertical, communications was up 15%, health care up 8%, transportation up 8% and financial services up 6% in the fourth quarter of 2012 on a consolidated basis versus the same period last year.

Fourth quarter 2012 operating margin from continuing operations on a GAAP basis was 5.2% versus 3.9% in the comparable quarter last year. On a non-GAAP basis, fourth quarter 2012 operating margin was 7% versus 7.2% in the same period last year as benefits in the current quarter are -- from higher revenues, higher capacity utilization and the EMEA turnaround were partially mitigated by client program ramp expenses and investments in facilities for future demand.

Fourth quarter 2012 diluted earnings per share from continuing operations on a GAAP basis were $0.31 versus $0.14 in the comparable quarter last year and versus the business outlook of $0.18 to $0.23. Of the $0.17 increase compared to the same period last year, approximately

[Audio Gap]

$0.12 was due or $0.39 versus $0.27 in the same period last year and versus a business outlook range of $0.28 to $0.33, with a comparable increase driven largely by the above-mentioned factors. Relative to the business outlook range, the increase in diluted earnings per share was principally due to higher capacity utilization.

Turning to our client mix for a moment. On a consolidated basis, our top 10 clients represented approximately 45% of total revenues during the fourth quarter of 2012, down from 48% in the same period last year due largely to the revenue contribution from the Alpine acquisition. Excluding the Alpine acquisition, revenue contribution from our top 10 clients would have remained unchanged comparably at approximately 48%.

We continue to have only one 10%-plus client. Our largest client, AT&T, which represents multiple distinct contracts spread across 4 lines of businesses, represented 11.6% of revenues in the fourth quarter of 2012, unchanged from the year-ago period last year. After AT&T, client concentration dropped sharply. Our second largest client, which is in the financial services vertical, represented only 6% of revenues in the fourth quarter of 2012 versus 6.3% in the same period last year.

On a consolidated basis, during the quarter, the approximate net operating profit impact of all foreign currencies, including hedges, was approximately $300,000 favorable over the comparable period last year, $200,000 unfavorable sequentially and roughly $300,000 unfavorable relative to expectations.

For the first quarter of 2013, we are hedged approximately 72% at a weighted average rate of PHP 41.52 to the U.S. dollar. For the full year, we are hedged approximately 53% at a weighted average rate of PHP 41.13 to the U.S. dollar. In addition, our Costa Rica colon explosion -- exposure for the first quarter of 2013 is also hedged approximately 74% at a weighted average rate of CRC 514 to the U.S. dollar. For the full year, we are hedged approximately 68% at a weighted average rate of CRC 524 to the U.S. dollar.

Now let me turn to select cash flow and balance sheet items. Cash flow from operating activities in the fourth quarter was up 37% to $31.2 million from $22.7 million in the comparable year-ago quarter driven principally by the Alpine acquisition and higher earnings.

During the quarter, capital expenditures were $12.3 million. Our balance sheet at December 31, 2012, remains strong with a total cash balance of $187.3 million, approximately $182.9 million or 97.6% of which was held in international operations and would be subject to additional taxes if repatriated back to the U.S.

At year end, we had approximately $91 million of borrowings outstanding under our revolving senior credit facility with $154 million of undrawn borrowing capacity. Receivables were at $247.6 million. Trade DSO on a consolidated basis for the fourth quarter were 77 days, flat sequentially and up 1 day comparably. The DSO was split between 76 days for the Americas and 82 days for EMEA. Depreciation and amortization totaled $12.3 million for the quarter -- fourth quarter.

Now let's review some seat count and capacity utilization metrics. On a consolidated basis, we ended fourth quarter with approximately 39,300 seats, down 2,000 seats comparably and down 900 seats sequentially. The comparable decline of seat capacity is consistent with the targeted reductions of a net 2,000 seats we guided toward at the beginning of 2012. The fourth quarter seat count can be further broken down to 34,000 in the Americas region and 5,300 in the EMEA region. Consolidated offshore seat count at the end of the fourth quarter was approximately 22,000, or approximately 56% of our total seats.

Capacity utilization rates at the end of the fourth quarter of 2012 were 74% for the Americas region and 82% for the EMEA region. Capacity utilization rate on a combined basis was 75%, up from 73% sequentially and comparably. The increase in the consolidated capacity utilization rate on a sequential and comparable basis was due principally to capacity rationalization associated with the strategic actions.

Now let me turn to our business outlook. Although the macroeconomic environment is still somewhat mixed, we are encouraged by the upward demand trajectory going into 2013. This demand is driven by growth from both existing and new client programs that span the communications, financial services, technology and travel verticals across the Americas and EMEA regions. Concurrent with the demand, the anticipated reduction in the end-of-life program year-over-year is also providing further support to our 2013 revenue outlook.

As in prior years, with the combination of seasonality and the timing of ramps related to program wins, we expect consolidated second half 2013 revenues to be slightly greater than the first half. Because of the effects of seasonality coupled with the statutory or nominal merit wage increases, the cold winter in Canada, capacity build-out expenses, facility transfers and training program ramps, operating margins in the first half and somewhat through the third quarter of 2013 are expected to disproportionately be impacted.

Separately, we remain on track to completing the original -- the operational integration of Alpine Access by the second half of 2013. Integration process is expected to result in long-term operating efficiencies.

Second, first quarter and full year 2013 business outlook reflects the unfavorable impact of foreign exchange rates, principally or particularly a stronger Filipino peso and Costa Rica colón relative to the U.S. dollar.

Third, the combination of unfavorable foreign exchange rates and a higher effective tax rate and the higher interest and other expenses are expected to unfavorably impact first quarter and full year 2013 diluted earnings per share relative to the first quarter and full year 2012 actual results by approximately $0.07 and $0.28, respectively. Equally important, our revenues and earnings per share assumptions for the first quarter and full year 2013 are based on foreign exchange rates as of February 2013. Therefore, the continued volatility in foreign exchange rates between the U.S. dollar and the functional currencies in the markets we serve could have a significant impact, positive or negative, on revenues and both GAAP and non-GAAP earnings per share relative to the business outlook for the first quarter and full year.

Fourth, we plan to add approximately 6,000 seats on a gross basis in 2013. Approximately 75% of the seat count is expected to be added in the first half of 2013, with the remainder obviously in second half. A number of these seat additions are related to previously discussed facility transfers. Total seat count on a net basis for the full year, however, is expected to increase by approximately 1,000 seats.

Fifth, we anticipate interest and other expense of approximately $1 million for the first quarter and $4 million for the full year 2013. Included in the aforementioned amounts is net interest expense of $400,000 and $1.6 million for the first quarter and full year 2013, respectively, related to the debt associated with the acquisition of Alpine Access. The increase in other expense relative to 2012 is driven primarily by forecasted foreign currency transaction losses due to a weakening U.S. dollar relative to certain functional currencies. These amounts exclude the potential impact of any future foreign gains or losses and other expense.

And finally, we anticipate a higher effective tax rate for the first quarter and full year 2013 versus the same periods last year due principally to a discrete adjustment related to the American Taxpayer Relief Act of 2012 passed on January 2, 2013, which resulted in withholding taxes on our offshore cash movements.

And finally, the combination of unfavorable foreign exchange rates, a higher effective tax rate, a higher interest and other expense and -- is expected to unfavorably impact first quarter and full year 2013 diluted earnings per share relative to the first quarter and full year 2012 by approximately $0.07 and $0.28, respectively.

Considering the above factors, we anticipate the following financial results for the 3 months ended March 31, 2013: revenues in the range of $298 million to $302 million; effective tax rate of approximately 41%; on a non-GAAP basis, an effective tax rate of approximately 37%; fully diluted share count of approximately 43.1 million shares; diluted earnings per share of approximately $0.10 to $0.12 per share; non-GAAP diluted earnings per share in the range of $0.18 to $0.20; capital expenditures in the range of $10 million to $15 million.

For the 12 months ended December 31, 2013, we anticipate the following financial results: revenues in the range of $1,220,000,000 to $1,235,000,000; effective tax rate of approximately 25%; on non-GAAP basis, an effective tax rate of approximately 27%; fully diluted share count of approximately 43.1 million; diluted earnings per share of approximately $0.87 to $0.97; non-GAAP diluted earnings per share in the range of $1.15 to $1.25; and capital expenditures in the range of $55 million to $65 million.

Before I open up the call to questions, I'd like to provide a quick bridge between Q4 2012 non-GAAP EPS of $0.39 and Q1 2013 non-GAAP EPS of $0.19, which is the midpoint of the Q1 2013 earnings range. Of the $0.20 EPS delta between Q4 2012 and Q1 2013, approximately $0.07 is related to seasonality and our claims in Canada, $0.06 is related to the tax rate differential, $0.04 is related to expenses associated with capacity build-out and ramps, approximately $0.02 is related to FX and approximately $0.01 is related to merit wage increases.

So with that, I'd like to open up the call for questions. Laura?

Question-and-Answer Session

Operator

[Operator Instructions] And our first question is from Josh Vogel of Sidoti & Company.

Josh Vogel - Sidoti & Company, LLC

Based on your revenue guidance for 2013, can you just talk about the organic revenue growth that's implied for your legacy business and what's implied for Alpine?

W. Michael Kipphut

Yes. Yes. Let me take that one. This is Mike. As you look at 2013 for our guidance, overall we're looking at about a 3% to 5% growth rate. Now looking at SYKES on a legacy basis, that's -- I think you can look at it at the lower single digits for a growth range. And Alpine, looking at our pro forma basis of 2013 versus all of 2012, I think you're probably looking for more along the lines of mid-teens, mid-double digit for 2013.

Josh Vogel - Sidoti & Company, LLC

Great. And now, with the 6,000-gross-seat build-out, I was curious how much is for growth of -- or volume increases from new and existing clients versus facility transfers.

W. Michael Kipphut

Okay. Josh, overall, with the 6,000 additions, I think it probably boils down to about 4,000 for facility migration. And then the remaining amount is principally -- well, 1,000 is going to be for just shutdown and eliminated completely. And that's pretty much it. So you're looking at a net overall 1,000-seat addition.

Josh Vogel - Sidoti & Company, LLC

Okay. And if I could just sneak one more in. There's a big spike in the CapEx for 2013, and I know that a lot of that is coming from the large amount of gross seat build-outs. But is this just kind of a 1-year anomaly? Do you expect CapEx to come back down in 2014?

W. Michael Kipphut

Yes, good question. I guess that's at the -- right at the amount that we've forecasted. It represents probably about 5% of revenues, which is typically a little bit more than what we've had historically. I think historically 3% to 4%. So it's not much more, but it really is attributable to the 6,000-seat addition. And with the -- as well as with the growth that we are experiencing with the Alpine acquisition. Or at home, you got some platform expansion going on at the same time. So this year, it would be 5%. Whether it goes back down to 3% to 4% is questionable. Hopefully, we continue to grow and are faced with additional 5% of revenue CapEx in the future.

Operator

And our next question is from Mike Malouf of Craig-Hallum Capital Group.

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

A couple questions. Can you talk a little bit about pricing? Obviously, the peso's going against us. And I'm just wondering, are you able to get any pricing over in the Philippines? And then maybe just a comment on how your success is on pricing in the U.S. as you're shifting to more of a tier 2 city provider versus a tier 3.

Charles E. Sykes

Yes, the -- there's no doubt that the change in currency with the weakening dollar, I mean, it affects us quite a bit, as you note in our outlook. But the thing is, is in regards to pricing, we do have pretty good success when the contracts renew. But the challenge is that while we're in the contract and we're having to perform to it, we're pretty much locked to just what the hedging strategy is. Some of the contracts that we have are 1 year, but I would say probably on average, we're probably a little more around a couple years within our contracts that we have to kind of work through that. The other thing is in regards to whether or not when it does renew, it depends on what the status of the client's business and just really what's driving a lot of their decisions. But by and large, I would say in today's environment when we renew, we're able to stay a little more current with the pricing. But here's the thing that will change it is, is that if it gets to the point that with our pricing, the value proposition isn't meeting their needs, then they may decide to want to shift some work. And that's some of the stuff that you're seeing as far as driving some of the movement that we have with volumes and everything. But all in all -- look, all in all, I think the pricing and the value proposition for the Philippines, we don't focus quite as much in thinking necessarily about the currency. It's always got to be in relative basis to what's going on with the U.S.. As long as we have wage increases here in the U.S. and cost of doing business and in comparison to the Philippines, clients are going to make a decision and just say, "Look, 5 years ago, I saved 50%." Now when they're -- they look at the currency, maybe it's down to 25%, 30%. And if the quality remains in the Philippines, that's still savings. And so there are other things that are affecting their decisions besides currency. It could be confidence in labor supply in the Philippines. It can also be their own risk management. Sometimes, they've perhaps put enough business there and they want to diversify. Anyway, I just don't want to get too focused on the concern around currency affecting the outlook with the off-shoring, and we believe it still fits. But we do think you need a balanced delivery capability to continue to grow in the total market.

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

And how about in the U.S.?

Charles E. Sykes

In the U.S., I would say the pricing is good. The growth that we have with our seat capacity, the one thing that I would highlight that's a little different is we have probably 50% of that business, maybe a little more, is actually in the what we call domestic markets, which means that the centers are located in the same market that the source of the client is. So that's the United States. And in Europe, we're building some centers in the Nordic region for serving the Nordics. So that's something that's a little different. And then the pricing, of course, is relative to the current state of the market. So it's good.

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

Okay. And then my -- for our second question, with regards to EMEA, obviously very good results out of there. It seems have gotten to the point where your profitability is somewhat in that target range. Is that a sustainable number now that we're at? Is there some -- I mean, obviously, a tremendous amount of macro headwinds there still. How do you feel about the sustainability of that success?

Charles E. Sykes

Well, the comment you made about the macro environment is why you always hear us talk about being cautiously optimistic. There's no doubt that anything that would change in a regard that would affect our clients, I mean, if suddenly, the volumes dramatically dropped off, I mean, there's nothing we can really do to avoid the short-term impacts that hits in the margin. That is one of the things I know in this business. So when you get hit with that, I mean, your numbers can turn kind of quickly. But if you can get your hands on the sites or with the line then, you can get things turned around in fairly short order. There's not an exact science answer to it, but point is, is we feel good in Europe with the changes because we've got a different structure in place, we have aligned the way we attack the markets, we pick the markets where we think we have a good competitive advantage and we're beginning to see actually a nice sales funnel. So answering your question today, absent the macro environment, we feel good it's sustainable, and we like the trajectory we're on. But I don't think we can ever discount the impacts of macro environment situations on this business.

W. Michael Kipphut

Just to add to that a little bit, though. Keep in mind, though, that there is a holiday season in Europe towards the first half of the year. So margins do come down in the first half compared to the second half. But even if you look at our fourth quarter on an adjusted basis, our EMEA margins came in right between 5% and 7%, as we had hoped they would steady that -- steady out. And we kind of see the same thing as you go into 2013 with the first couple -- first half of the year a little bit -- a bit lower, as historically has been the case, with the latter half of the year with higher margins.

Operator

And our next question comes from Howard Smith of First Analysis.

Howard Smith - First Analysis Securities Corporation, Research Division

Two questions. First, a quick one on the discrete tax item. It sounds like it is a cash impact to Q1 but not something that's going to be an ongoing drag in future years in terms of your tax rate. Am I thinking about that correctly?

W. Michael Kipphut

Yes, Howard, that is correct. What basically has happened is on January 2 with the passage of the tax relief act. They also allowed at the same time what they call the CFC look-through rules. So what's happening is we're able to move some cash from certain countries up to parent company, not bring it back to the U.S. If we brought it back to the U.S., it would be subject, obviously, to U.S. taxes. However, the CFC look-through rule allows you to move that without triggering U.S. taxes. However, you do have the withholding tax impact. So that's what you're seeing in the first quarter. Since they allowed it for all of 2012, in the first quarter we had a catch up. So it's about a $2.5 million impact, which took our tax rate up to about 41%. Absent that, it would have been at the about 11%, 12% range. And so for all of 2013, we can take that. It's going to be same CFC look-through rule will apply to all 2013, and we'll take that ratably over the year, as you normally would do.

Howard Smith - First Analysis Securities Corporation, Research Division

Understood. And then in regards to -- a little bit of currency question and maybe philosophical question on your contracts. I had the belief that especially relative to some of your peers, you emphasize shorter-term contracts. You said most of them now are maybe more 2-year. I thought at one point, you tried to keep them 1 year just so you could reprice them in these scenarios a little more quickly than otherwise. Maybe you can just shed some light on that.

Charles E. Sykes

Yes, I would say that's still a true statement that we have. But the thing is it's coming off of the last couple of years. And particularly, as you note, with the things around our end-of-life comments and clients, we had a little bit more of a different situation when you have the downturn. Now that we're coming more into a steady-state type of involvement, I think all of those comments still are true. As long as we have clients that are committed to the delivery strategy we have in place and if they don't have any severe challenges going on inside their own business, the rational conversations that we have do allow us to stay relevant. That is a true statement. But we're kind of coming off of a 2-year wait here. Our '08 and '09 was a very good time in the recession. Our '10, '11 and as you go in '12, we had the tail end with some of the end-of-life situations. So that kind of muddies the water a little bit. But again, going forward, on existing clients that are committed to the current delivery staying in the Philippines, staying in Costa Rica, we can have rational conversations with them and get it adjusted. That is true.

Operator

And next, we have a question from Shlomo Rosenbaum of Stifel.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Just I want to get some like housekeeping things out of the way. Can you give us what the 2012 pro forma number is for Alpine that we should look at for the mid-teens growth?

W. Michael Kipphut

Sure. On a pro forma basis for 2012, it's about $103 million.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And did Alpine grow in the fourth quarter on a year-over-year basis?

Charles E. Sykes

Yes, they did.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Do you mind sharing with us how they grew?

Charles E. Sykes

Through additional client...

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

The rates, I mean. Sorry, the rates.

Charles E. Sykes

Yes, on -- Shlomo, are you asking on a percent growth or are you asking literally the means, whether it was organic or...

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Yes, so I'm looking at Alpine -- I mean, I'm not sure if you're able to split out the organic Alpine growth because you're clearly selling that through other parts of the company. But however, you have a good look just so we could see how Alpine is tracking. Or is it like 4Q '12 versus 4Q '11, are they up? Are they down? How should we look at that? And what percent are they -- did they move?

Charles E. Sykes

Yes.

W. Michael Kipphut

I think we better just stick to the information that we have rather than go back on a pro forma basis. I'd rather look on a go-forward basis more so than anything else.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. So on that side, you're saying to expect a mid-teens growth for the year?

W. Michael Kipphut

Yes.

Charles E. Sykes

Yes.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then...

Charles E. Sykes

But I think again that just going forward, I mean, things that might make -- in some of the previous questions or comments, in our organic legacy business or -- the growth is in the mid-low single digits that we're at. And we are -- in the go-forward, we are in double digits. And that is not giving credit, if you will, to Alpine for any existing SYKES business that maybe we consolidated. That is purely on their basis of growth and our ability to win new business.

W. Michael Kipphut

Yes. And Shlomo, just to go back and address that as -- such that -- I'd rather not dwell on prior to acquisition, but we are looking at 2% to 3% growth if you look at just on a quarter-to-quarter fourth quarter basis.

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then the issue that you guys have been dealing with have been -- over the last year-plus has been the end-of-life contracts and kind of the volume movements that you're moving to different facilities. It seems like in -- towards the fourth quarter of this year, you guys are expecting to kind be through most of that. Can you -- just to the extent that you move past that, it seems like you'll have a much easier time managing the company for profitability besides just the growth. Can you talk about the confidence level you have that that's going to materialize in that time frame?

Charles E. Sykes

Yes. With the year-end guidance and with the Q1 guidance, I mean, you guys can see this trajectory that we're on. And we have good visibility into that from the standpoint of the facility rationalization that we're getting into. The thing right now that would put any type of risk into our outlook has more to do with timings of ramp-ups, if there's any kind of delays or anything that we would incur, which is a much better story and feels much better inside the company that we are focused on ramping business rather than trying to deal with the other scenario. But it does -- in the sense of trying to get in the confidence and working through that, right now we have a high degree of confidence as you look at the trajectory. But there's always -- when you're dealing with ramps, there are things that could happen and get in the way, and that's the risk that we have right now going forward.

Operator

[Operator Instructions] This will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to management for any closing remarks.

Charles E. Sykes

Okay. All right. Well, we appreciate everyone's interest and the questions, and we look forward to updating everybody next quarter. So everybody have a good day. Thank you very much.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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