Sykes Enterprises Q4 2008 Earnings Call Transcript

Mar. 3.09 | About: Sykes Enterprises, (SYKE)

Sykes Enterprises, Inc. (NASDAQ:SYKE)

Q4 2008 Earnings Call

March 03, 2009 10:00 AM ET

Executives

Charles E. Sykes - President and Chief Executive Officer

W. Michael Kipphut - Group Executive, Senior Vice President and Chief Financial Officer

Analysts

Josh Vogel - Sidoti & Company, LLC

Robert J. Evans - Craig-Hallum Capital Group

Kevin McVeigh - Credit Suisse

Howard Smith - First Analysis Securities Corporation

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

Operator

Welcome to Sykes Enterprises, Incorporated Fourth Quarter 2008 Conference Call. 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 the company's Form 10-K and other filings with the SEC from time-to-time.

I would now like to turn the call over to Mr. Chuck Sykes, President and Chief Executive Officer. Please go ahead, sir.

Charles E. Sykes

Thank you, Kim. Good morning, everyone and thank you for joining us today to discuss Sykes Enterprises' fourth quarter 2008 financial results.

Joining me on the call today is Mike Kipphut, our Chief Financial Officer; and Subhaash Kumar, our Vice President of Investor Relations.

In keeping with the format of previous earnings calls, I'll make some opening remarks and briefly touch on the highlights of the quarter. Mike will then discuss the financials for the quarter in more detail. After which I'll wrap up the call with my closing remarks and then open the call up for Q&A.

Let me start by saying that I am very impressed with Sykes' operational and financial performance in 2008. Our strong business model helped us achieve what we set out to do, both strategically and financially, despite the rapid and short deterioration in the economy during the year.

As we enter 2009, we do so with a solid foundation and from a position of strength which should help us further build on our market position. Moreover, as a company, we are markedly different from what we were during the last downturn in the 2001 timeframe.

Let me briefly put that in perspective. Heading into 2009, we have a better business mix. Our service and product mix is currently spilt between 70% and 30% respectively. During the last downturn, that spilt was exactly the inverse. This is noteworthy as we have found the product side of the business to be more cyclical in nature than the services side of the business which is more annuity like. Our balance sheet is also stronger. We exited 2008 with $219 million in cash and no debt versus a net cash position of roughly $21 million during the last downturn.

In addition to our business mix and balance sheet, we also have a healthier client and industry risk profile. For instance, we exit 2008 with our largest client being 6.7% of revenues versus 16% during the last downturn. In addition, the technology vertical today represents 34% of our revenues versus 70% in 2001. As there is wider adoption of customer contact outsourcing among different industries and lines of business.

We also serve a larger addressable market today. We currently serve 17 markets with 20 different delivery geographies versus 11 markets from 14 delivery geographies during the last downturn. Most impressively, our offshore footprint is comprised of 18,400 seats versus a more sub-scale footprint of 1,100 seats in 2001.

And finally, and perhaps most importantly, we have a stronger focus on our core inbound customer contact business than we did before. This focus reduces distraction and complexity which in turn improves our ability to execute.

And with that, here are some of the key highlights for the fourth quarter. First, fourth quarter consolidated revenues of $200.8 million exceeded the high end of the revenue range of 195 to $200 million provided in our business outlook.

Our fourth quarter revenue performance was noteworthy considering the significant currency headwinds related to the strong U.S. dollar as well as the rapid and short deterioration in the macroeconomic environment. To put the currency headwind in context, fourth quarter 2008 revenue increased on a constant currency basis 13.1% making this the 12th consecutive quarter of double-digit revenue growth.

Second, we increased seat capacity by roughly 3,100 seats on a comparable basis,

a thousand of which were added during the fourth quarter. At the same time, we increased our capacity utilization rate by 100 basis points to 81% on a year-over-year basis underscoring sustained demand for our value proposition and strong operational execution.

In addition, we brought Brazil online. This entry into Brazil not only expands our addressable market opportunity in the long-term, but also sends a positive signal to our clients about our continued investment in our global business model despite the current economic environment. And finally, we maintained our industry leading low client concentration profile with our top 10 clients at 42% of fourth quarter 2008 revenues.

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. After which I'll turn to the business outlook for the first quarter and full year of 2009.

As Chuck mentioned, revenues for the quarter exceeded our fourth quarter 2008 business outlook even with the currency headwinds. Earnings per share for the fourth quarter of 2008 were $0.19 versus $0.23 over the same quarter last year.

Let me just take a moment to walk through some of the numbers. In our fourth quarter 2008 business outlook we provided an earnings per share range of $0.30 to $0.32, the reported $0.19 earnings per share was the net result of the higher than anticipated fourth quarter 2008 effective tax rate of 59.3%, which negatively impacted earnings per share by approximately $0.26.

The 59.3% tax rate was due to taxable foreign exchange gains realized from holding non-functional currencies as well as the German Supreme Court overturning a lower court ruling on a legacy tax position. Conversely, the earnings per share range of $0.30 to $0.32 provided in our business outlook was predicated on a tax rate of 17 to 18%.

Now, turning to fourth quarter 2008 consolidated revenues, the 1.5% comparable revenue increase was spread across various verticals, most notably financial services which was up 17%, technology up 14%, and communications up 9%. The growth from these verticals was partially offset by declines in the healthcare as well as transportation and other verticals. These declines were largely due to unfavorable currencies in the form of the strong U.S. dollar coupled with some declines in volume.

Operating margins during the fourth quarter 2008 were 6.8% versus 7.7% on a comparable basis, operating margins were impacted by higher compensation, ramp-up and facility expenses.

During the quarter the approximate net operating profit impact of all foreign currencies including hedges was an unfavorable 400,000 to operating income. Given the strength in the U.S. dollar relative to the Philippine peso, the Philippine peso hedge was an unfavorable 3.7 million. Conversely, the fourth quarter strength in the U.S. dollar relative to the Philippine peso favorably impacted our peso denominated expenses entirely offsetting the 3.7 million in the unfavorable hedge impact.

For the first quarter of 2009, we are approximately 70% hedged at an average rate of approximately 42.28 Philippine pesos to the U.S. dollar. Likewise for 2009, we are approximately 70% hedged at an average rate of 43.43 Philippine pesos to the U.S. dollar.

Now, let me turn to select balance sheet and cash flow items. Our cash and cash equivalent at quarter end December 31st, totaled 219.1 million with 199.1 million or 91% held in international operations and would be subject to additional taxes if repatriated back to the U.S.

Cash and cash equivalents declined by 1 million at quarter end from the third quarter of 2008 due to the favorable impact of foreign currency translation which entirely offset the cash generation during the quarter.

Cash flow from operating activities in the fourth quarter of 2008 almost doubled to 24.4 million from 13 million in the comparable period last year. The increase in cash flow from operating activities was due to an increase in non-cash reconciliation items.

Similarly, free cash flow from operations increased to 15.5 million from 4.3 million in the same period last year. At quarter end, we had no outstanding debt, receivables were at 157.1 million, trade DSOs for the fourth quarter were 70 days up, one day sequentially and up four days comparably. The DSO was split between 62 days for the Americas and 87 days for EMEA.

The increase in DSOs is partly structural in nature with extended terms in the EMEA region and partly due to clients window dressing their balance sheet at year-end. In fact, we collected 2.5 days worth of receivables in the few days following year-end. Although, we have a blue chip client list given the current economic backdrop we have been proactively monitoring our receivable balances.

We spent 8.9 million in capital expenditures, depreciation and amortization totaled 6.8 million for the fourth quarter. Trailing 12 month return on invested capital was approximately 35%.

So now let's review some seat count and capacity utilization metrics. We ended the quarter with approximately 29,600 seats, split between 23,750 in the Americas region, and 5,850 in the EMEA region.

Total seat count was up by almost 3,100 from the fourth quarter of 2007 and up approximately up 1,000 seats sequentially. The sequential increase in seats occurred across the U.S., Brazil and EMEA region.

Offshore seat count at the end of the fourth quarter was approximately 18,400 or 62% of our total seat versus approximately 17,100 in the same period of last year. Capacity utilization rates at the end of fourth quarter of 2008 were 80% for the Americas region and 82% for the EMEA region.

On a consolidated basis the capacity utilization rate was 81%. Capacity utilization rates in the same period last year were 81% for the Americas region and 75% for the EMEA region. On a consolidated basis the capacity utilization rate in the prior year period was 80%.

Now, let me turn to our business outlook, although we remain cautiously optimistic given the rapid deterioration in the macroeconomic environment, we see encouraging overall demand trend. Current and future clients operating in this challenged economic environment are increasingly turning to outsourcing non-core functions including customer contact management services as a way to cut cost and preserve capital while turning each fixed operating expenses into variable expenses.

As such, our 2009 business outlook reflects the following assumptions. First, continued growth worldwide in customer care demand from programs with new and existing clients in the communications and financial services vertical. That demand however is negatively impacted by the strength in the U.S. dollar. The strong U.S. dollar is expected to negatively impact first quarter and full year 2009 revenues and earnings per share by approximately 25 million and 70 million as well as $0.01 and $0.04 per share respectively.

Second, net new capacity additions of between 1,200 and 1,400 seats coupled with direct expenses associated with the ramp-up of new and existing client program. The net seat additions are expected to be split roughly evenly between the Americas and EMEA region.

More than half of the capital expenditures and related ramp-up expenses associated with capacity deployments are expected to be incurred during the first half of 2009. And finally, anticipated interest income of approximately 500,000 per quarter, we are not providing guidance on foreign exchange transaction gains or losses in other income.

Considering the above factors, the company anticipates the following financial results for the three months ended March 31, 2009. Revenues in the range of 203 to 205 million, tax rate of approximately 25%, earnings per share in the range of $0.28 to $0.30 per diluted share, and capital expenditures in the range of 10 to $12 million.

For the 12 months ended December 31, 2009 the company anticipates the following financial results, revenues in the range of 839 to 843 million, tax rate of approximately 25% earnings per share in the range of $1.26 to $1.32 per diluted share, and capital expenditures in the range of 28 to 32 million.

So with that I'll hand the call back over to Chuck for few closing remarks.

Charles E. Sykes

Thanks Mike. In closing, I'd like to say that our employee executed extremely well when considering the significant currency headwind and the tough macroeconomic environment we faced. We continue to see a relatively healthy pipeline of our opportunities worldwide with existing and new clients within the communications and financial services verticals.

And our 2009 business outlook is a testament to that, as we are on a path to deliver organic revenue growth when growth remains largely illusive across the broader economy. And although the idea of outsourcing contact management services is not new, the current economic environment has made it a strategic imperative.

Many companies are under pressure to cut cost and preserve capital while turning fixed operating expenses into future variable expenses. Under such circumstances, those that have started outsourcing are accelerating the process, while those who are on the side lines are showing a heightened interest.

As companies go through the vendor selection process and in some cases the vendor consolidation process, it is our belief that our financial strength coupled with our global delivery model, breadth of experience, depth of capability and a strong operational focus, will help us further differentiate among competitors.

Now, it's not to say that we won't be tested and particularly if in the short run economic uncertainty leads to delays among decision makers and a rational behavior in the marketplace. Still the long-term secular trend toward outsourcing of customer contact management services remains favorable. And as long as we stay focused and provide our clients a compelling price and service proposition, I believe we're well positioned to meet not only the challenges but also the opportunities that will emerge from this economy.

With that I'd like to open up the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question today is from Josh Vogel from Sidoti & Company.

Josh Vogel - Sidoti & Company, LLC

Hey, good morning. Thank you.

Charles Sykes

Hey, Josh.

Josh Vogel - Sidoti & Company, LLC

How are you?

Charles Sykes

Good.

Josh Vogel - Sidoti & Company, LLC

My first question was... I guess if we normalized your revenue guidance for the FX, just curious why it was decelerating from the 13% you put up on a constant currency basis last year? Is that just you are trying to be a little bit more conservative on that front?

Charles Sykes

Well, I think, Josh, for us certainly we're going to start hitting to some extent the law of big numbers and we do also have from a standpoint of just the FX issue which I know you'd come out there with the normalization. If you renewed the FX issue, I would just say we're looking more at the law of big numbers. I think on an absolute basis with our revenue when you often normalize it, I think you'll see that our ability to consume new revenue in here which keep in mind in this business if the market conditions are presenting right, I would say that the thing that companies in our space have to really focus on to be ready for growth is middle management.

It's fairly easy to get facilities fired up and get the IT and everything fired up. But there is to some extent and if you go back and follow all the other companies and their peer group, there is kind of a threshold of readiness that if we ever blow through that middle management readiness layer, it can start causing you problems in about a year, year and a half by starting to lose clients.

So we kind of look at the absolute revenue growth number as probably a really key thing but certainly when you do that you are going to see on a percentage basis from all big numbers kind of kicking in.

Josh Vogel - Sidoti & Company, LLC

Okay. Great.

W. Michael Kipphut

And just to add there we're somewhat cautious about the macroeconomic environment, we did take that into consideration. And then one thing just to point out that we are growing at or above the industry growth rate and we could still maintain that we'll do so in the future.

Josh Vogel - Sidoti & Company, LLC

Okay. So then thus far year-to-date you haven't seen any notable or alarming volumes declining from any of your current programs?

Charles Sykes

No, nothing that I would say that's alarming broad base; but the thing is you've heard us talk about that and I think we sort of chatted about this on those two phone calls ago may be three, our perception in the marketplace about this product mix versus service mix and even though we are not necessarily getting it directly from clients, we just have to kind of apply our own thinking into that.

And when you read in the papers about how these sales volumes are going down, we have to start accepting whether or not we think our clients have more capacity to outsource or not and if we think that their unit volumes, particularly in product sales are going to drop off. And we have applied some of our own thinking into our guidance going out.

Now, that's probably the bigger thing that's difficult right now in this environment is that you are hearing us say out of one side of our mouth, we are seeing great favorable demand characteristics while on the other hand, really the underlying concern outside of FX, is, is trying to predict the health of our underlying clients and it used to be you can identify those clients fairly easily, but in today's environment, you got to really do a lot of deep thinking about it and try to extrapolate out who do you think may cause you some problems. So we have trying to do as best as we can without getting way, way too conservative, we have really taken that into our numbers.

Josh Vogel - Sidoti & Company, LLC

Okay. That's helpful, thank you. And Chuck, I know you've spoken about this in the past and I know that as utilization increases the impact it has on the bottom-line, increases at a decelerating rate, and I was just curious now that we're consistently above 80%, what is every 100 basis point incremental improvement due to the bottom-line?

Charles Sykes

Yeah. When you... once you get to an 80% level and like if you were to go to 80 to 90, in that range, you'll see that drop to probably more like 0.5, I have to think over the top of my head where it would be, but that's probably a safe estimate, 0.5 to may be 2. But one thing Josh it will make a different form though and I try to just give this to you guys, because you guys are building your own models in our business.

One sense you can make a really, really complicated which you can't get to, but I'm speaking at a broad total company perspective. But the truth is if you are going to grow in utilization in an area the world where your G&A as a percent of your cost is higher which for us is in an offshore location consequently as while we have higher gross profit margins there, you will get more leverage in there. But if you start growing in another geographies where the G&A is less. So when I am giving you those numbers I'm just kind of taking the total collected picture per site and giving that you as a direction with it, but I still think your point is pretty accurate.

Josh Vogel - Sidoti & Company, LLC

Okay.

Charles Sykes

Over 80 I think you're probably looking at 0.5 or may be 2.

Josh Vogel - Sidoti & Company, LLC

Okay. That's great. And now, you've discussed capacity utilization but what about agent utilization, is there a leverage there and if so how do you plan to get the most out of your agents?

Charles Sykes

There is but that's a really difficult number for us to give to you guys because every program that we win or that we have to manage, the assumptions that we make around agent utilization is all built into our pricing factors. And of course it's all contingent upon the volume a client is going to give you, the hours of coverage when those calls are going to come in, the service levels, so forth so on.

And so that becomes more of a unique characteristic to every program that we manage. Now with that being said we are always looking for ways and in fact typically I would say it's probably an industry factor when you win a new program typically in that first year that could be assumed a six month it depends on how dynamic the program is.

But one of the reasons why we really don't have to go back after first year and typically ask for price increases, is because we have found those agent improvements, we've learnt what the client call volume is, we've learnt how good these clients are in forecasting, we've began to tweak when the calls really coming in, even though they give us a guidance we can now apply our own logic to it.

Our agents and management had settled down to and now they really can start applying the discipline and things. So as usually why when you think about the history like going through with our program it's usually about the second year that we typically have to go down, may be talk to our clients about price. Because in that our first year, we can give them the speed and our performance criteria.

So really just depends on how mature our programs are and to answer your question if we have a whole bunch of new programs that we've added, there is always ample opportunities to do that. But if you ever got to the point that you are just sitting in your steady state, meaning running the same client, never added a new program then you're pretty much probably going to be as optimized as you can get.

Josh Vogel - Sidoti & Company, LLC

Okay. Great and just one more before I jump back in, Mike, you gave us a little bit info about the verticals and we saw it in your press release. But I didn't notice that the healthcare business was down pretty sharply year-over-year and sequentially. And I was wondering if you could just give us a little bit more detail onto that?

W. Michael Kipphut

Okay. Good question. There is two major items that come into play with the decline in the healthcare. One is in the prior year during the fourth quarter, we did have some incentive, and they've changed at that point in time, they're pretty much volume driven at this point. So the incentives are a little bit harder to obtain overall and obviously we did not get those incentives in the fourth quarter of 2008.

One other factor that you have take into consideration is the currency, I hate to keep pointing towards that, but if you look back in '07, the Canadian dollar was at parity or better I think it was 101, 102, in that range during the fourth quarter of 2007, compared to 0.826 in '08. Those two factors really have a big impact overall on the healthcare vertical.

One other thing I said to but there is one other thing that came to my mind I was talking about this is that this is more of a mature program than we had previously. And as you know we deal with the Ontario, Canadian Government provinces and it's a more mature cycle at this point.

There are no elections going on, in Canada during this timeframe and there is less advertising of the healthcare services during this timeframe and that drives volume. And I think, overall, there has not been a SARS scare or flu virus going along that there is creating the additional volumes. So it's a combination of all those factors.

Charles Sykes

Josh, this is Chuck. I think one thing to add to it and goes to Mike's comment about maturity level. Every time you hear us speak about where we see our growth coming from in the next couple of years, you always hear us talk about the communication and financial services. Then technology is always a foundational part of our business and things and will be. But we still see the most significant piece coming from communication or financial services around the world.

The healthcare piece for us is something we have always alluded to saying that we'll see it, I don't know, three years down the road. The reason for that is because at this point in time if you look at our go-to-market strategy for healthcare, it's really contained only in the Canada. And Canada is the market itself is not an infinite amount of growth opportunity we have there.

So we are running there on a mature cycle and we are using that platform, if you will, to be opportunistic for our growth strategy which we anticipate to see coming more in fruition in a couple of years down the road. And once we get into that mode then we would see healthcare being more like an industry sector where you may have one client that's got it's ebbs and flows of volume increases and declines like any client in any industry. We would also be able to offset it because we'd have more new growth coming in. But today that's not really where we are.

Josh Vogel - Sidoti & Company, LLC

Okay, that's helpful. So do you think though as you try to expand healthcare business are you going to target may be countries that have nationalized healthcare system?

Charles Sykes

Well, I'd tell you it's one of the things. We've looked at that for sure but we would really like upon the way to capitalize and get into the U.S. market and not to get ahead of any other questions but everybody is always asking about cash and we always tell you guys were looking at acquisitions, and healthcare would always be an industry that would be a nice way to get that go-to-market strategy going.

Josh Vogel - Sidoti & Company, LLC

Got you. Okay, thank you very much. I appreciate it.

Charles Sykes

Thank you.

Operator

And moving on our next question comes from Bob Evans from Craig-Hallum Capital.

Robert Evans - Craig-Hallum Capital Group

Good morning, everyone and thanks for taking my call.

Charles Sykes

Hey, Bob.

Robert Evans - Craig-Hallum Capital Group

First, can you comment a little bit more as it relates to pipeline of business that you are looking at? How much is new versus existing clients and also how much is vendor consolidation?

Charles Sykes

Well, where we are right now is we see still within the overall mix when you look at absolute dollars, we're still kind of seeing the number around 80:20 mix from our existing base now. Now, that 20%, though, is really, really key, Bob. What we're seeing right now... let's just talk about technology, finance and communications.

In the technology sector, keep in mind that technology has been outsourced for quite a long time and if you look at the percent of the business that each of those clients have outsourced, I would say it's easily 50%, some 70, 80%. And because of that when their volume start to reduce, what happens, in general, is that the pricing that they received from each one of the suppliers begins to go up, because it's a tier pricing structure and of course they can afford to do that.

So what happens is they typically have to start consolidating suppliers. And in that regard we are seeing the wins that we get in technology being more from taking business from people.

Now, if we get into communications, now when we talk about communications for the years, it's mainly been relegated to the broadband side; both cable and on the phone side with DSL. But in the last year and a half, what we've been excited about process that we broken into wireless, and wireless is a very, very large consumer of our business.

So wireless is also growing as an industry and so what we're seeing there is two things. I would say the majority of the growth is coming from that sector deciding to outsource more followed by just the sheer fact that their pie is getting bigger because they are continuing to add more wireless subscribers.

The third thing is we are seeing from time-to-time some opportunity to take away business from suppliers but that's none as much of the factor, it's mainly just new growth and coming from outsourcing and growing in the wireless side all together.

Robert Evans - Craig-Hallum Capital Group

How much would you say wireless is in aggregate outsourced right now?

Charles Sykes

I would say right now in the wireless side, you are probably looking in a range about 40%.

Robert Evans - Craig-Hallum Capital Group

How about financial services?

Charles Sykes

Financial services for me, if you are looking at retail banking, I would say probably 15%, if you are looking at credit card, you can see the order of magnitude anywhere from 40. Now, I could show you some clients that have done 70, but it's a more aggressive level. And for us right now we are seeing retail banking we're seeing in the insurance field. Those areas, there is a lot of pent-up demand in the sense they have only outsourced may be 10 to 15%.

Robert Evans - Craig-Hallum Capital Group

Okay.

Charles Sykes

And wireless again has been a big consumer of this, they are somewhat limited because they do have some union concessions and things that limit somewhat how far they can go with outsourcing, but the pie is getting bigger there, and that's where that growth is coming from.

Robert Evans - Craig-Hallum Capital Group

Okay. Thanks. And then I'm not sure if you can answer this question or not but given your guidance how much are you assuming in aggregate volume decline from existing customers? I'm trying to get a... I think you said you factored some of that into your guidance I'm trying to just get a sense of magnitude?

W. Michael Kipphut

Well, we talk to each of our clients individually, try to get updates on forecast but on aggregate the volumes are holding up so far. And again if you go back to the services versus product or consumer goods we are seeing on the product side some volumes coming down and it's principally from items that you would expect such as appliance manufactures and other consumer electronic goods. But as Chuck mentioned earlier when that happens sometimes the vendors look at consolidation and you get additional volumes from that standpoint.

But overall, I would say in aggregate the volumes are holding up, but certain clients and certain verticals they are coming down a little bit and that's based on our day-to-day contacts and forecast that we get from them on a 30-60-90 day basis.

Robert Evans - Craig-Hallum Capital Group

And what I was getting at is I think in your guidance, I think you said you took some level of conservatism and I was wondering if you be willing to detail a little bit more, are you kind of looking at 3 to 5% type volume decline just to, from a conservatism standpoint or I don't know if you be willing to elaborate?

Charles Sykes

Well, I would say that it's in the low single digits where you are talking about and keep in mind that's in contrast to really always standing on a foundation of seeing that increasing. So we know we have some clients but we do see the possibility where there would kind of controlling that.

Keep in mind too Bob, and I know you guys are looking at this constantly with a bit like Mike said in the script I mean, we've got $70 million that's taken out which is purely on FX alone. And if you add on top of that just some of the way that we show whatever money we make on our hedges is baked into our revenue as well, $200 strengthening right now which I think Michael showed in the peso position of 43 or so.

Robert Evans - Craig-Hallum Capital Group

Yeah.

Charles Sykes

And we're setting that, that's also taken some revenues steam out, you know what I mean?

Robert Evans - Craig-Hallum Capital Group

Yes, no.

Charles Sykes

That's a big chunk.

Robert Evans - Craig-Hallum Capital Group

No, I understand it, I will ask my last question, as it relates to the dollar versus the Philippine peso and your hedging there, can you refresh our memory in terms of how much of the, because certainly this trend helps showing the cost side. So how much impact might we see in '09 and does this set up well for '10?

W. Michael Kipphut

Yeah, on the hedging program it's not changed dramatically. We look at layered on additional hedges as time goes. Right now we're about 70% hedged on the Philippine peso only, from a cash flow hedge standpoint.

And we feel pretty comfortable that at the current time especially in light of the strengthening U.S. dollar. As we go out into future quarters we may increase that a little bit but not substantially. I think most of the layer that you will see is in 2010 as we go out to the first quarter and get more comfortable with the forecast. Then we'll start layering on hedges at that point, right now we're pretty comfortable where we're at.

Robert Evans - Craig-Hallum Capital Group

Okay. Thank you.

Charles Sykes

Thanks.

Operator

Our next question today comes from Kevin McVeigh from Credit Suisse.

Kevin McVeigh - Credit Suisse

Great, thank you. Hey, Mike, one thing I wondered if you could clarify what was the adjusted EPS relative to the guidance? I know there is a tax impact but then if you look at the other just apples-to-apples, what's the best way to think about the earnings in the fourth quarter?

W. Michael Kipphut

On earnings per share basis, I would say if you just take into consideration the $0.26 that I spoke about in the opening comments from some of the one-off tax items, one way in the German Supreme Court ruling on that legacy tax position and that relates back to an acquisition that we did, the acquisition we did in Germany which was in 96 - 97 timeframe.

We could step-up basis and we had won that ability to depreciate that step-up basis at several court levels. However, the German Supreme Court reversed that decision in December, so we had to turn that around; that was 4.1 million.

And the other piece of that in the volatility that we saw in the fourth quarter with the FX, we had some opportunities to write a trend where the U.S. dollar was strengthening and as a result of that realized some currency gains by converting fact from U.S. dollars to local currency and we did that. We, in essence, made a lot of money doing that. But as a result of that we also had to pay a lot of taxes because that's not part of the tax holiday exemption stream.

So those two factors really impacted the tax rate... the earning per share pretty significantly. So if you back off those $0.26, I will still stay with that and I think overall on top of that if you look at where we were from a operating margin standpoint, we are little short and we are little short primarily because of ramp-up expenses.

We originally anticipated I think if I recall properly around 700 seat addition in the fourth quarter, and we actually came up with 1,000 seats. So there are a few expenses associated with that. But all in all, not too far off where we thought we would be on operating margins.

Charles Sykes

Yeah, Kevin, this is Chuck, to add there on to that a little more with it, when we talk about those seats, it's not only that it's 300, you know what just back up again on it. When we talk about seat expansions, one of the things it's a good and bad in our business right now. We're pretty much adding seats everywhere in the world, that's great.

The tough thing is that every time now we are looking at our seat expansions and we're looking at the sales forecast, we have to start estimating where we think those seat additions are going to come from. It used to be... in the late 90s we always knew it was going to be in the U.S. if you want some in the U.S. because we didn't have offshoring. And then from 2001 all the way through 2006, we pretty much knew that it was going to be done in for us so it was going to be Costa Rica or the Philippine.

But now, we have to cut estimated, there's going to be U.S., Costa Rico, El Salvador, Argentina, Philippines, it makes it little more complicated. My point in bringing that up is that when you look at the way that our facilities are and this is pretty much for the industry if you look into Philippines, their centers are much, much larger than what we have here in the United States. That gives us a big benefit we'll go into a high rise in the Philippines and say you have lease that's negotiated for ten floors but we only need five right now.

But we haven't set up to where we can execute the next portion of lease to get floor six, floor seven, floor eight but we've already got a high leadership, we've already got the IT infrastructure in, we've already got everything. So when we're saying we're adding 400 seats in the Philippines that doesn't compare to when we say we're adding 400 seats in the United States because in United States we use centers that are about 400 in capacity.

So out of the 1,000 seats that we did in Q4 not only did we add 300 more, we also go winning more business for the U.S. And we opened two sites, two more sites in the United States in Q4 plus we opened up Brazil. So it isn't just like expanding the facility if it's launching new operations in new sites and that's where the predictability and I think the visibility that we gave in our numbers caught us a little bit there in those economies of scale; should I give a little more color on that?

Kevin McVeigh - Credit Suisse

No, that's helpful Chuck. My next question was if you look at the seat allocation as you work your way through '09 looks like it's half in the U.S. if I picked up the commentary right. As you think about that what's driving that trend obviously it's a client are there any specific verticals that they focus more on that number one. And then number two as you think about those adds relative to geography is your kind of an incremental headwind on the SG&A to quantify? And just kind of...just in absolute numbers because I think it's important point you talked about those adds in the Philippines relative to other geographies?

Charles Sykes

Yeah. And in regards to where the industries that are coming from, the financial services particularly in the retail banking side is domestic. The other thing is on the wireless side for us it's domestic. Those are the two main drivers for that business. Now, we do still see in communications some opportunities in the offshore as well and certainly for technology and there is some financial particularly we are in credit card side that's still offshore.

But for our business that we've got I'd really say retail banking and wireless. The other thing there in regarding, getting back on the question with G&A Kevin was it now that your--?

Kevin McVeigh - Credit Suisse

Is there an incremental kind of cost in terms of, in the numbers in '09 opening kind of those U.S. sites opposed to they were purely in the Philippines, the delta there?

Charles Sykes

There is, but I am trying to think I have most, I want to go into that detail, but I am certain the initial will get to be pretty crazy. I can tell you that, that if you looked at the G&A in the United States one of the things that's interesting about is even though the launching aspect of with a new facility, new site, in IT and every thing is probably relatively the same what it is now we have with our lease expense and the rates that we and paying things, and it just probably more in that the labor that it takes. So we have to factor these sites struggle leveraging when the site in the Philippine has got 2,500 people versus the site in the U.S. has got 400.

But usually if you are looking at in the U.S. utilization, that G&A is the percentage of total cost. We are probably at about a point less than what we had experienced in the Philippines for facility utilization.

In other words for every 10 points in the Philippines you're probably looking at about a 4 point bump, if you warrant from a 65 to 75 to 85, in the U.S. it's probably more like 3. So in that sense you don't get quite as much of a leverage over there.

Kevin McVeigh - Credit Suisse

Okay.

Charles Sykes

But I am just trying to give you I know it's anecdotal and I wish sometimes I give you guys more specifics, we try to be as transparent as possible, but I am a little hesitant to start giving in too specific with some of the numbers, but I hope that gives you a little bit of a feeling about it.

Kevin McVeigh - Credit Suisse

Yep, that's helpful. And just one last question, Mike did you increase your provision for bad debt at all in the first quarter or--?

W. Michael Kipphut

It was a slight increase, it still at about 2% of our total receivables and I think our allowances for doubtful accounts is about 3.1 million in total. And that's something we do watch very carefully particularly with the economic situation and it always has our attention. We're just very fortunate and have a great client list to begin with. And we do a lot of our homework on the front-end, so hopefully we won't get into as much problems as long as we make sure we have our research and get the terms the way we want it on the front-end.

Kevin McVeigh - Credit Suisse

Okay, thank you.

Charles Sykes

Thank you.

Operator

Our next question is from Tim Roche (ph) from Robert W. Baird.

Unidentified Analyst

Hi, guys, good morning.

Charles Sykes

Hey, Tim.

Unidentified Analyst

Just looking at the impacts of other income and just the effects on the tax rate, they are just a little bigger than we thought, could all these really be positive to impact in 2010, as the hedges starts to become more favorable for the peso rates can possibly improve on the interest and then the tax rate might stay the same, or possibly decline a little bit?

W. Michael Kipphut

Tim, Mike. That's probably the reason I don't like to forecast other income and transaction gains or losses because you've got both realized and unrealized and as compared to cash and receivables in different currencies then where ever that subsidiary is located. And quite frankly sometimes it's just because the rate went down the last day of the quarter or the last day of the month and it's unrealized and it's very temporary and we've not done anything to recognize that.

We were just in a extraordinary position in the fourth quarter to capitalize again on some of the stronger U.S. dollar and we did so. We realized a little over $12 million in currency gains but unfortunately we had to pay 4.1 million of tax freeze on it. What you see for the total quarter, fourth quarter though was I think 5.2 million in other income. What happened in the last two weeks of the quarter, or last two weeks in December, was the currencies got volatile again and they went in the other direction. However, we did not realize those gains or losses as a result of that even though we had to run it through other income.

As you look in the future, overall, we think we pretty much have indicated what we think the currency impact is going to be on revenues and earnings per share in our P&L through the operating income. It's just the other income portion I hesitate to give any type of guidance whatsoever. It's only temporary and unless we see a giant trend go in a different direction where we can take advantage of that, I don't think it's going to be as material as you saw in 2008.

Unidentified Analyst

That's fair. And then just on the hedging strategy; are those... are we typically looking still forward contracts? Have you guys really considered options at all?

W. Michael Kipphut

We look at both where they call NDF, non-deliverable force as well as options. For the most part we have done the NDFs versus the options but options are something that we can't do and to look at from time-to-time.

Unidentified Analyst

Okay. And then just finally on the cash position I guess. Stocks are a little weak today and you guys have about 1.5 billion left on your share repurchase. Could you just may be comment a little using the large cash balance for just kind of utilize that repurchase authorization?

W. Michael Kipphut

Sure.

Unidentified Analyst

Given kind of the $0.03 I think that EPS that you'll probably add.

W. Michael Kipphut

Yes. We do have a 10b5 plan in place. We are active but we are very disciplined in approach. We look at not only stock buybacks but acquisitions as well. And you heard Chuck earlier mention that we would be interested in acquisitions, particularly, if they opened up opportunities in the healthcare vertical. That makes sense for us overall.

So we think the biggest thing for our book is reinvesting back into the business. However, as you noted, we do have about a 1.3 million remaining on our share buyback program 1,300,000 shares and during this timeframe especially with the stock coming down quite a bit, I do anticipate that we'll be doing some repurchases through our 10b5 that has been previously set up.

Unidentified Analyst

Yes, thanks. That's very helpful, congratulations on the constant currency revenue growth.

W. Michael Kipphut

Thank you.

Charles Sykes

Thank you, Tim.

Operator

Moving on, our next question is from Howard Smith from First Analysis.

Howard Smith - First Analysis Securities Corporation

Yes, good morning. Thank you for taking my question.

Charles Sykes

Good morning, Howard.

Howard Smith - First Analysis Securities Corporation

We are now starting to see some of the Obama administration, kind of tax policies and they're certainly not shy about putting more ops equation (ph) on areas. But I am curious your analysis of what you've seen so far, both good and bad, as you look out.

W. Michael Kipphut

I don't think the President is really come to meet... in spite of that but I understand your question overall and we just don't know until it gets there. What you hear out there as far as the proposals run from one end into the extreme to an another end and I hate to speculate without really knowing what is at or specifically what's going to be proposed.

I think we would love to see something along the lines of what was available half dozens years ago where you can bring back cash from other parts of the world, internationally and do so to... and reinvest in the U.S. and to do so with a 5% tax rate which was offered about five or six years ago. We would like to see some type of program like that, we think it will be very beneficial for us and other companies to... we'd love to put more of that money to work in the U.S. on a very, from a very economic standpoint.

Now, with respect to where we stand right now the undertone that I get from a lot other questions that I have heard this morning was that we see that your taxes are increasing; they are, it's right now we are at an estimated 25% rate. And it's not due to anything specifically; it's a lot of items; one item is the German Supreme Court ruling that obviously is going to affect or impact our effective tax rate going forward.

But it's also the mix of earnings as we become more profitable in the U.S. and higher tax years that seems it will increase our effective tax rate. And another thing it's going to be somewhat lumpy too, although we say 25% in the first quarter and 25% for the full year, if... as we go into the second and third quarter the way we see it right now based on the effective tax rate calculations may be up to 26% in the second quarter and then come back down to 23% in the third and fourth quarter.

So it's going to be somewhat lumpy and that's a just a function of how we earn revenues and where we earn revenues there as far as fix of earnings. So with all that said and certain tax cash movements that we make internationally to take an advantage of certain tax rules such as the sunset of so far out income and U.S. taxes which gets a little more technical and we really need to get into.

But as we move some cash in accordance with that we'd have to play patience withholding tax but not U.S. taxes and we get it further upstream, so, we can call on that a little bit more easily on the international cash management basis. So all those factors do increase taxes overall.

Howard Smith - First Analysis Securities Corporation

Okay. And then one question on different note. In your comments you mentioned both lengthening decision cycles which I think we understand an irrational behavior in the marketplace and also potential near-term risk here, are you seeing yet any type of that irrational behavior in pricing or anything else?

Charles Sykes

No, this is Chuck, Howard I can't say that that we are but it doesn't mean that we wouldn't see that. But going back and drawing the comparison we have got a lot of questions about the fact, we have been through, we've not got a cycle like this, but we have been through certainly a downturn in this industry.

And the thing that was so different last time is that volumes came down that caused pricing pressures in the discussions. But what happened was we also had the offshoring that took place. And to me that exacerbated the pressure in paying point serve what was going on, we also had the Do Not Call legislation that came out.

So there were a lot of things that were taking place that I think exacerbated the pricing pressures that we saw in the last downturn in 2001. This time what's interesting is that I believe overall as an industry the fact that the majority and particularly as it speaks for sites, I mean we have our footprint established. We are seeing some movements on the small scale where we're moving some programs from Central America to the Philippines and we have some clients I think may be in the U.S. want to go over to the Philippines but they want to replace some more business in the U.S.

It's not been on the order of magnitude that we went through in 2001. And just to put that in perspective, in '01 we had 22 centers in United States, we shut 15 of those down, okay? So what we're talking about or kind of slight movement and things, but it does impact some of the P&L.

But I think the industry is just healthier, I think we're smarter, as an industry. Our client certainly understand what it takes to be successful in this business and the last thing that these guys want to have is while they may be making a decision to outsource to reduce costs, they do not want to be getting caught into the CEO's office having to explain all the negative letters that get written from consumers about the bad experience. So they still focus on quality, they're not just throwing everything out the door just for cost.

The only exception that you'll have to that is when you have a client situation that the thing what we call it distressed situation and in an absolute survival mode. And in that case they don't really care about quality, they are just taken at this price throughout. And that's one of the things that going back to your question that would be the, the administration today, it is difficult for us I think for anyone to predict what is going to be decided on and how it's going to be executed.

But I do think that our risk profile as a company is a huge difference compared to many other companies in this space and it's something that I don't think in the past carried as much weight. But today it is something that I think makes us some more prepared company in that case.

Howard Smith - First Analysis Securities Corporation

Well, thank you. That's great color and congratulations again on the positioning.

Charles Sykes

Yeah. Thanks, Howard.

Operator

Our next question today is from Shlomo Rosenbaum from Stifel Nicolaus.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

Hi, guys, thank you very much for taking my question.

Charles Sykes

Absolutely.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

I just want to make sure I understood what you're saying, you're not seeing declining volumes right now but your guidance is assuming that, that is going to occur?

Charles Sykes

No, if you go back on the question a while back ago, there is probably in the single digits some deterioration in the base and I think the reason why that's causing difference outside the bigger thing being the FX and the hedging is that in the past that's always been more of an assumption of single digit increases added on top of that with our new revenue grow that we got.

So we're seeing what's good right now that's going on is we're seeing nice new wins, we're continuing to see the demand characteristics but layered on top of that is that when you go in and start looking at specific clients, okay? And keep in mind that we are not dealing with thousand of clients here, we have a situation where you can literally look at everyone, and there are some that if you are sitting in our chair you would be saying, no, do we really think that your forecast towards the latter part of the year is going to be strong, because also keep in mind our clients only give us really a 90 day forecast.

And so we're really dependant on how good their internal communication is between their selves and operations, and how big our sales guys are with having their own finger on the pulse of the market. And so we're just trying to bake in and just make sure that we are taking a middle of the road approach as we can. We don't want to get too crazy and conservative but we don't want to get too optimistic in either.

And I know that I'm giving in specifics of the numbers, that's just more of the color of what's out there. It's the base of our clients, stay healthy and if they can continue to get us more business, we are in a nice spot.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

So you are seeing it in pockets and you just are not going to not being as optimistic as your client base is telling you for the duration of the year. That I'm just trying to count a little bit here to what effect you are seeing?

Charles Sykes

Yes, the clients don't give us the forecast for the year. But what we can do is we can certainly take the revenue today and extrapolate it out. And which is what we do. And it gives us pretty nice visibility. But this time what we are looking at is we're kind of layering on top of their may be some of our own feelings about what we think is going to happen with a particular customer.

And I'll just give you some example at and this is why if you didn't see the detail but I think when explaining you will understand how and why we can do this. If we have a product based company today, product based companies today the call volume that comes with the product company is typically co-related to new product sales. So when our clients we have seen the paper leaving at those sales forecast that they are going down, all right?

We know that within a six month period when they are going to tell us there is a model, we know the call volume is going to start going down. Now, is that good or bad for us? Throughout of the bad is bad. But here is what we can change. If that client has already outsourced 80% of their business, chances are they won't do the other 20%. Most clients like to keep a lift on merchant. So there what we do is we have to say well how many suppliers do they have? And if they have three or four suppliers, then we have to start assessing okay who are the stronger ones? And who's going to end up picking up that business? And there were three things they'll typically look at.

Number one is operational performance. So we are marking that up you are done, all right? Number two, gets into where they want to see who's got the most capability because there is a low range suppliers, they are now saying we will open more eggs in one basket so we want a company that has capability of offshore, near shore, domestic and this is a new one, they really look at the financial strength.

So we are seeing that right now those things are playing to our favor but first and foremost we got to be performing. And so we are working to assess the situation and say wow. We think their volumes are going to go down but you know what we may pick a business from the suppliers. And that's why I said earlier, this technology grew this what we are seeing growth coming from supplier consolidation.

But if we have clients to where they've outsourced the majority of the business and where this is whole sourced, there is nothing we can do our business is going to mirror what their business is doing. And so what we've done is we've just taken that profile and we've kind of modulated it as best as we can. But keep in mind we are not running these companies, we are doing it based on our outside perception of what we understand of that.

So that's why we are cautioning and saying, look, people want to outsource more. We're picking a business they want to consolidate; they're talking about wanting to grow the business but at the same time we're sitting here every time we get a new deal. The first thing they walk in our door we think are they going to be around in a year, okay?

So you can pretty excited when somebody says they will give you a 1,000 seats but in today's environment you got to really start going and thinking do we want those 1,000 seats? And that's a very, very unique time that we're in.

We have always been disciplined about looking at the obvious clients that have a distressed balance sheet. But today you got to kind of look beyond where they are today and you got to think a little bit about the future. And we're just trying to share with you guys the same thinking that we have. We don't have absolute answers to it. But we're just trying to give you guys the insights so you can make your own feelings about that too.

So today where we are I think it's pretty strong. But again I think it's foolish to sit there and be too hopefully optimistic in this environment. I'll move that out just so that you get your little color with it.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

Well, thank you for pretty detailed then I was just wondering if you went through that range with everyone of your clients in what you're dealing with, how come the range of revenue guidance for the whole year you got and since only $4 million spread, I am just trying to figure what went into that?

Charles Sykes

Well, we think that with us with the visibility that we've got, we think that that we can come in with that range. The one thing that's a big caveat, if you wanted to make a bigger range with it, it would be if you wanted to build a buffer in there for FX. But at this point in time we're going to give a guidance from the models with the FX and outside of that we can all sit around and estimate who we think is most accurate in that. And that's probably where most of those the variability is going to come from.

W. Michael Kipphut

And keep in mind we do have a pretty large amount of FX on the revenues and which we stated in our outlook, and so that's coming into play as well. On a constant currency basis it's a little bit higher.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

So would you I mean with my calculations on a constant currency you guys are looking for '11, 11.5% year-over-year organic growth in it. Does that sound to you to be in the middle of the road?

Charles Sykes

We're comfortable with that range based on our forecast right now.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

Okay. That's fair. And how much of your business is tech support?

Charles Sykes

Tech support, the technology sector is 33%, 34 I think in the script that we've said within, and the majority of that by the way is product based.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

So it's not like help desk type support?

Charles Sykes

No.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

Okay.

Charles Sykes

It's mainly the majority of what we do with the technology is supporting consumers and we do have about actually about 15% now, our business is business-to-business. So in that case it's still now what we call a help desk but it is more technical in nature.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

Okay. And why was financial services down sequentially it looks like you're just doing the math taking into it, was there anything in there was particularly hit by the FX during the quarter, or any detail on that?

Charles Sykes

Well, we had there within the financial services first of all just it doesn't change, don't look at our a one quarter thing as extrapolating now would be a trend, we are still very confident that financial services is a source of growth for us for a long-term with it. But with that being said with some of the new programs that we've won, what happens in particularly here in the U.S. we had a couple of unique situations where in order to migrate the business from existing our clients business into our environment we actually went in and took over some of the in site operation with the people and then what we did was we migrated that over.

Now, what that did was you can picture this in a normal situation for a client. When a client says, look I got a 1,000 people today, and I'm going to outsource those 1,000 people to you, on their P&L they have a little bump in the outsourcing. It's a bubble because they have to keep their 1,000 people plus they start paying typically for your training expense and that's what they see on the P&L. In this sense since what we did in this case to help some of these clients was we went in and took over some of the staffing which kind of gave us a little bubble in revenue but they once migrated it off we've eliminated those people.

So we got a little bit of a bump in that. The other is that we do have sporadically there are some things around volume adjustments and changes and things are always taking place and then to risk some FX. But it isn't anything to say that that is the trend that we would see going forward. I will just say it's more than acute thing just to this quarter on a sequential basis.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

What sort of a lift going to the 25% tax rate? How much of that is the adverse ruling from the German Supreme Court on a going forward basis?

Charles Sykes

It's less than 1% but still, it is of one of the factors that you have to take into consideration when you look at the increase in the effective tax rate overall versus the prior year.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

And so should I assume that a lot of it has to do with growth in the U.S.?

Charles Sykes

Yes, it's mix of earnings, growth and higher tax jurisdictions such as the U.S., such as Germany and other locations.

Shlomo Rosenbaum - Stifel, Nicolaus & Company, Inc.

Okay, thanks a lot guys.

Charles Sykes

Yeah, thank you.

Operator

And we have a question from Donald Yeager (ph) from D.A. Davidson.

Unidentified Analyst

Hi, guys. Thanks for taking my question. I appreciate all your comments on the pipeline and what you're seeing in the business. One of the areas it seems like it's prime for cutting cost of companies that are owned by private equity and I was just curious about your exposure to those companies and to what you're seeing in your pipeline as far as those companies are really looking at outsourcing now to cut their cost?

Charles Sykes

Companies, you mean clients that are owned by private equity firm?

Unidentified Analyst

Yes, yes.

Charles Sykes

The ones that we have today for our clients... I won't have that specific number but just going on top of my... taking through and professing through in my mind all of our clients; most of them are substantial public companies, yeah.

I don't think we have... there isn't anything really I would say as material for us. I just want to think that take a lot of strength and is that the quality of the companies even in this crazy environment we're in, we're fortunate that I would say we are dealing with some of the stronger, larger organizations that are out there. But I am fine. Mike, can you think of--?

W. Michael Kipphut

No, not at the top my head. The one or two that comes to mind they're looking at more of an offshore solution and our new clients in the last year and so it's something that it's worked pretty well from that standpoint. I wonder you're getting a lower cost solution. And it's immaterial amount overall to us from a financial statement standpoint. But I can't pick up anything else off of top of my head.

Unidentified Analyst

Okay, thanks guys.

Operator

And that's all the questions we have today. Mr. Sykes, I'll turn the conference back to you for additional or closing remarks.

Charles Sykes

Well, thank you operator. And thank you everyone for the questions. I know it's a very interesting time right now. But I just leave you guys with the last thought; this isn't here in my script noted down but the company for us, I mean we're on solid footing and absent just the unpredictability of this economic environment. We feel as optimistic as ever about the health of our business and particularly that the preparedness that we've to deal with anything that's comes our way as unforeseen.

So I appreciate all the questions and appreciate your support. And we look forward to chat with you guys in the next quarter. Thanks.

Operator

And that does conclude our conference call today. Thank you all for your participation.

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