APAC Customer Services Incorporated Q3 2009 Earnings Call Transcript

APAC Customer Services Inc. (APAC)

Q3 2009 Earnings Call

November 5, 2009 11:00 am ET

Executives

Jody Burfening - IR, Lippert/Heilshorn & Associates

Mike Marrow - President and CEO

Andrew Szafron - SVP and CFO

Analysts

Howard Smith - First Analysis

Tim White - Robert W. Baird

Brandon Dobell - William Blair

Ron Chez - Private Investor

Tim Wojs - Robert W. Baird

Peter Castellanos - Glacier Partners

Matt McCormack - Brigantine Advisors

Operator

Welcome to APAC's Third Quarter 2009 Earnings Call and Webcast. This call is being recorded. At this time, I would like to turn the conference over to Ms. Jody Burfening of LHA.

Jody Burfening

Thanks for joining us for the third quarter 2009 conference call for APAC Customer Services. The company issued a press release yesterday afternoon, containing financial results for the third quarter of 2009. This release is available on the company's website, as well as on various financial websites.

The company representatives on today's call are Mike Marrow, President and Chief Executive Officer, and Andrew Szafron, Senior Vice President and Chief Financial Officer.

Before opening the call, I would like to remind you that statement about future operating and financial results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to various risks, uncertainties, and other factors that could cause the company's actual results to differ materially.

Yesterday's earnings release and the company's Annual Report on Form 10-K for the fiscal year ended December 28, 2008 and its quarterly reports on Form 10-Q for the fiscal quarter ended March 29, 2009, and June 28, 2009 and September 27, 2009 discuss some of these factors. The company's forward-looking statements speak only as of today's date.

To supplement the company's consolidated financial statements, APAC uses certain measures defined as non-GAAP financial measures by the SEC, EBITDA and adjusted EBITDA. A reconciliation of these results to GAAP is attached to yesterday's earnings release, and additional information can be found in APAC's Annual Report on Form 10-K for the fiscal year ended December 28, 2008 and in its subsequent filings on Form 10-Q.

The company has posted a downloadable presentation to accompany the webcast in the Investor Relations section of its website, at www.apaccustomerservices.com. The presentation can be viewed in the webcast section of APAC's IR website, by clicking on the link shown under the title of today's event. It will also be posted under Investor Presentations after this call.

I will now turn the call over to Mike Marrow. Go ahead please Mike.

Mike Marrow

As we noted in our press release, we had a very solid quarter. Andrew will discuss those results in just a moment. Today, we are affirming the guidance we provided during our last earnings call and press release. We continue to expect revenue growth for fiscal 2009, to be in the low double-digits to mid-teens versus 2008. We also expect full year EPS for 2009 to be in the range of $0.60 to $0.65.

We are currently focused on the remainder of 2009, as well as refining our plans for 2010. We will discuss our thoughts on 2010 during our future call. I am now going to turn the call over to Andrew to discuss the results for the third quarter. Following Andrews’s discussion, I will provide a few insights in to some of the initiatives and activities going on at APAC, after that we will open the call to questions. Andrew let’s hear about the third quarter.

Andrew Szafron

Let’s jump right into review of our results. Those of you following along via the webcast, my commentary begins on page 5 of the presentation. The third quarter was another milestone of improvement in our performance. A year ago in Q3, APAC reported net income of $2 million or $0.04 per diluted share. I'm pleased to report that we more than tripled last year's numbers, and for the third quarter of 2009, we had net income of $6.6 million or $0.12 per diluted share, which is also $0.13 per basic share.

Let's take a look at how we achieved these results. Third quarter 2009 revenue of $68.4 million was up 15.4% from $59.2 million in the third quarter of 2008. Our revenue was impacted on net by less than $1 million from the migration of certain domestic business offshore.

Gross profit in Q3 was very solid at $14.2 million, with a gross margin of 20.7%, compared to a gross profit of $10.1 million, or a 17% gross margin in the prior year's quarter. This increase of 3.7 percentage points demonstrates the sustained improvements in efficiency that we have achieved in our service delivery.

At the same time, as we anticipated, our GP percent is down 2.6%, from where we ran in the second quarter. The reason is simply that we had some startup expenses associated with the strong growth that we are experiencing from the ramping up of new business.

We also held the line in our operating expenses, reducing them from $7.8 million last year to $7.5 million in '09. As a percentage of sales, you can see how we leveraged our expense base as we brought expenses down from 13.2% last year to 11% this past quarter.

If we adjust our numbers to exclude $616,000 in severance and restructuring charges last year, we improved 110 basis points in our total operating expense from 12.1% to 11%. This yielded net income for the third quarter of $6.6 million or $0.12 for fully diluted share, which is also $0.13 per basic share, compared to net income of $2 million or $0.04 per fully diluted and basic share in the second quarter of 2008.

Our IBT or pre-tax profit was 9.8% of sales, and within our expected operating range of 9% to 13% that we have spoken about previously. We discussed in the past that we expect to be closer to 9% during periods of high growth, which is just what we’ve experienced in the third quarter. The initial expenses that come along with this growth will pay back in the form of improved earnings in future quarters.

I’d also like to point out that while management spends practically all of it's time focused on the numerator and our EPS calculation, the denominator has also grown this year, such that the number of fully diluted shares increased by 4 million shares from a year ago. APAC stock prices up, and this leaves to a jump in the money stock options. So we are now experiencing dilution for the first time in a long while, which equates to about a penny a share.

Finally as we noted again in yesterday’s press release, we do not expect to own any US Federal Income Tax in 2009 due to the company’s NOL carry forward and other tax credits. Moving on to adjusted EBITDA, we improved the quarter year-over-year by a $3.8 million, increasing from $5.8 million to $9.6 million. On a percentage of sales basis, adjusted EBITDA increased from 9.8% to 14.0% which keeps APAC in good company with the top performers in the industry.

Another noteworthy fact is that the company continues to generate positive cash flow during the quarter. We had $16.2 million of cash on hand versus $9.6 million at the end of the second quarter. Here is what's behind our cash flow since the end of Q2; we generated $10.2 million in cash from our operations excluding any changes in assets or liabilities.

We used about $1.7 million in working capital, chiefly driven by an uptick in our account receivable as our DSO move from 44 to 49 days. This was simply a timing issue caused by the fact that our fiscal quarter ended a number of days prior to the calendar quarter [at].

Changes in all other net assets and liabilities were flat and we spent $2.5 million in net capital expenditures on new business investment and on our IT infrastructure.

I'd like to quickly review how APAC has performed on a year-to-date basis, which you'll find on page six. Our top line was just over 13%, our gross margin improved by 7.6% to 23.2%. We've generated net income of $24.9 million versus a loss of $2.1 million. IBT or pretax profit was 12.2% of sales which is 1.2 percentage points over the mid point of our expected operating range of 9% to 13%.

EPS on a diluted basis was $0.46, compared to a $0.04 loss in the first nine months of 2008. Adjusted EBITDA improved from $14.5 million or 7.9% return on sales to $34 million or a 16.4% return on sales.

And finally, we had a $30 million improvement in our cash position, from $14 million in debt to $16 million of cash on hand.

So with my overview completed, I will now turn the call back over to Mike.

Mike Marrow

Thanks, Andrew. Nice report. At this point, I’d like to spend a few minutes and provide a handful of updates on some of the activities taking place at APAC. Earlier this year, we opened a new provincial site in the Philippines, Leyte to be exact. I am happy to report that the site has been well received by clients and that we now have over 600 employees there. We expect the site to be sold out soon and to be pulled by the end of Q1, 2010.

Just a couple of weeks ago, we assumed responsibility for the Tucson site, we mentioned in our last call. You’ll remember that this site has capacity for approximately 750 seats. We are using 250 of those seats to support the clients that previously occupied those site. We will use the remaining seats for expansion with current and future clients. Recently, we closed a small piece of business with one of the largest healthcare service providers in the U.S. We will be servicing them using a portion of our new Tucson space.

In addition to the healthcare services provider, we also recently signed a new logo contract with one of the leading social media companies. We will be servicing this account out of the Dominican Republic. We are in discussions with several other existing and prospective clients about servicing them out of the Dominican Republic, both Art DiBari, our Head of Operations and I have extensive experience delivering services to clients from the Caribbean and Latin America.

We are very familiar with all the pros and cons of the various locations within this region and we think that this location in the Dominican Republic is terrific and many of our clients do as well. We are exploring additional near-shore, domestic and offshore sites to support future growth. This includes locations in the U.S., the Philippines, the Dominican Republic and elsewhere.

Our revitalized sales team continues to build our pipeline. In addition to the recent wins with the social media company and the healthcare services provider, we expect to close some additional key wins in the near future. We have a lot of positive things going on at APAC. Those are just a few examples to give you a flavor of how we are progressing.

As always, we're focused on our four priorities, and I'll take just a minute and reiterate what those are. Our first priority is to continually enhance the quality and dependability of our services that we provide for our clients. Our second priority is to maintain a constant focus on eliminating waste and reducing overhead, so we can operate as efficiently as possible.

Our third priority is to continue to win business with both new logo companies and existing clients. Our fourth priority is to ensure we continue to develop, as well as recruit talented people to operate the business and service the needs of our clients. So those are some of the updates on what’s happening at APAC. At this point we are ready to take some of your questions. So, operator please go ahead.

Question-and-Answer Session

Operator

[Operator Instructions]. And we will go first to Howard Smith with First Analysis.

Howard Smith - First Analysis

As we talk about the operating margin and to some extent the gross margin, as you layer on new customers and there is always that startup ramp expense. Where are we in that cycle as we look out to Q4? Do we still have more ramp expense and expect those numbers to continue to slide a little bit or are we now ramped enough that we are starting to get the benefit of those at higher margins?

Mike Marrow

Well it's a mixture. We certainly have been ramping in anticipation of, in preparation for Q4 and I guess our good fortune is we also have some recent wins and those will be ramping as well. So we are sort in a fortunate position to be brining on new business, but in terms of erosion in the margins what we have been ramping for previously is certainly going to contribute. I don’t see really any continued slide as we sort of increase in size and increase the base of the revenue.

Howard Smith - First Analysis

Okay, one quick follow on. On the Tucson facility which you’ve taken over, is the new healthcare client that you signed to take some of that capacity, will that be coming on in the fourth quarter or is that a program that would ramp next year.

Mike Marrow

It's more next year than this year. There is going to be training that is going to occur, and it's predominantly in preparation for production early in the new year.

Operator

We will go next to Tim White with Robert W. Baird.

Tim White - Robert W. Baird

Just to kind a follow on a little bit. Looking at the revenue growth, historically you guys from Q3 to Q4 have grown revenue in the kind of 9% to 10% range sequentially. Is there any reason why, just given the environment and given some of the ramps you are going through that that should be largely different than historical pattern?

Mike Marrow

We are expecting certainly growth quarter-over-quarter.

Andrew Szafron

The big difference between this year and historically is just the general uncertainties in the economy. As you know a large client of us is involved in package shipping and we have considerable business in the wireless space. So I think the way it's going to play out is depending on their businesses and the volumes. It's going to be difference between good and very good plus.

Tim White - Robert W. Baird

On the cost services line you guys did about $54 million this quarter. Should that tickup a little bit or should that stay fairly flat going forward? Is that a good baseline to build off of?

Mike Marrow

Tim you've got to look at the gross profit margins on the expected revenue in line with our guidance.

Tim White - Robert W. Baird

Just on the new client win, could you guys quantify any of the seat counts that you guys are expecting on the two new clients?

Mike Marrow

No. What I will tell you is that they are large companies with large outsourcing needs. Our work is somewhat modest to start with. We’re not highly obsessed on the starting number; we’re highly obsessed on our performance. Our track record is that as we perform for these clients, they generally grow pretty well with us. So, not huge starting numbers, but big opportunity based on our performance.

Tim White - Robert W. Baird

So, it sounds like you guys are pretty comfortable with being able to grow with them overtime?

Mike Marrow

Absolutely.

Operator

[Operator Instructions]. We’ll go next to Brandon Dobell with William Blair

Brandon Dobell - William Blair

A couple of big picture questions and some financial ones. From big picture point of view, how do you get feel about the pace of the sales cycles and the pace of conversations now compared to let’s say six months ago, and within that question, is there a big difference as you’re talking to clients that you’ve got small projects with versus clients that are relatively new to your sales team?

Mike Marrow

There is a couple of things. One is that I had used the word, revitalize in terms of our sales team, so the pace of the conversations has certainly quickened in our view and some of that is probably due to companies starting to get out of the environment where things are so unpredictable, it's tough to make a decision, because you don't know what's going to happen next week. We are in a unique position because we've really have a much better pipeline and really a great sales team that Chris Crowley has put together.

I look and say, I think some of that has to do with just the business environment in general, I think a lot of it is attributable to Chris and his team and having some real professional sales people in here. Overall, it has quickened.

Brandon Dobell - William Blair

Related question. Is there be [C] count or a tenure relationship at which point, you are trying to get to that tipping point where the conversations about part of expansion does get a lot easier or business comes in trends, or is that doesn't really matters if you all to go out and sell new business and sell new projects and even to existing customers?

Mike Marrow

I'm not quite sure, I followed you. Sorry.

Brandon Dobell - William Blair

For some customers you may have, you've moved from a 100 seats to 500 seats over the course of the time and then at that 500 seat level, it gets a lot easier for you guys to walk in and say, if you wanted to expand this project or [should add] couple of ideas whereas 200 or 300 seat contract or seat customer, the sales process is almost like being with the new client. Is there even a difference as you expand the number of seats in terms of how fast that business can be added on?

Mike Marrow

No, I chuckled a little bit. It's always hard. Now generally if you think about the kinds of clients we have there for the most part there very large organizations that use multiple vendor. So we are always in competition. When we expand often times the procurement group is involved and the business people would love to just give us the work but the procurement group insists on competitive process. The best thing we have going for us is our performance which really helps the decision making at our clients and it's also very important in terms of reference ability when we go out and speak to new clients but they really doesn’t seem to be a size that I have noticed that it's easier if that’s the right word to add new business within existing client.

Brandon Dobell - William Blair

Just trying to get a sense of sometimes in the outsourcing business or the point at which either basement center or the relationship, the size that either business comes, the trends and a little more frequently or you just got an easier sell because you have been doing things for so long with somebody that.

Mike Marrow

Yes opportunities to participate come more frequently within interesting client. A few years ago adding business was tended to be a little bit easier but really in the last couple of years most large organizations procurement has become more and more engaged and their job is to make sure that there is competitive bids and they seem to be doing their job.

Brandon Dobell - William Blair

You guys mentioned about the tax situation here this year. How do we think about the tax situation going forward, and in particular booked on the numbers we see versus the cash tax impact? Any color would be helpful for first quarter and the next year.

Andrew Szafron

Yes. We are working with Ernst & Young on that as we speak and are our intent is to give a comprehensive look at that when we release our full year results at our next earnings call. As you know and I am sure most investors know at the current time we have a valuation allowance against our NOL which is just over $32 million and there is number of analysis that we have to do to look at whether or not we remove that valuation allowance and there will be accounting implications that occur if that happens.

Mike Marrow

On a cash basis, as we have spoken about before we are not going to be paying any cash taxes this year.

Operator

And we will go next to Ron Chez, Private Investor.

Ron Chez - Private Investor

Why the Dominican Republic and what are the cost associate with it and when will it start?

Mike Marrow

Well the Dominican Republic why there is a lot of choices in the Caribbean, Central America, South America. Art DiBari actually ran that entire region for me that are former employer is very familiar with it. The Dominican Republic offers both Spanish and English; the competition is not quite as fierce. There is some of the popular locations such as Costa Rica and Panama, a very strong affinity with the US, so our employees, many of them will have relatives in the US, many of them will have lived in the US.

They understand the culture of the customers, they are speaking with. Cost is competitive with the rest of the region, stable economy and government, clients love going there, that’s always way up on the list.

In terms of cost, we have a very unique deal where all is looking to be creative, as we had mentioned with our Tucson site, sort of going out and building something from scratch. We acquired an underutilized site from a client in the Dominican Republic, because again of the experience has there.

We know that someone who has built call-centre infrastructure, they are not in the call-centre business, what they do is they lease cubes, computers, phones to other organizations. So, it’s like us going out and leasing any other building except this one comes fully equipped. So it’s great for us in terms of not having a huge CapEx investment.

We’ve got clients that are in a hurry to get going there, and that’s a very, very good opportunity for us. Meanwhile we expect to at some point, expand beyond their ability to provide infrastructure for us, so we are looking at a couple of really key locations where we would, in addition to this space have our own captive space.

Ron Chez - Private Investor

How many seats are at this site?

Mike Marrow

The lease site? We can put up to about 500 seats there and it’s pay as you go. So we don't have to pay for all those seats in advance, we pay for them as we fill up.

Ron Chez - Private Investor

So this is significantly better? Can you quantify it at all, or it's just playing significantly better than if you were building it?

Andrew Szafron

I'd say what it helps us do is convert a lot of upfront fixed cost into variable cost, which is favorable as we ramp up.

Ron Chez - Private Investor

Are margins going to be impacted negatively virtue of lease cost versus captive facilities?

Mike Marrow

Not necessarily. Our cost in this facility will be comparable to the cost we would have if it was our own facility, but we don't have to lay out a large chunk of cash upfront to make it happen.

Ron Chez - Private Investor

So can you quantify at al whatever CapEx is involved in this, or is it not a significant number?

Andrew Szafron

Our CapEx will continue along the trend we have spoken about in the past. So we've said that we anticipate spending between 3% and 5% of revenues, and for this year we will be right up the middle on that number.

Ron Chez - Private Investor

So if this has the potential to get there, start it very quickly. Can say how many seats or what (inaudible)?

Mike Marrow

We won't employees in that facility working this calendar year.

Ron Chez - Private Investor

Andrew should we expect margins to trend north as some of these new client come on and some of them, can you quantity how much was spent in ramp up expenses in the third quarter? Do you want to quantify that?

Andrew Szafron

I think generally it is the rate that you ask us that if we are in more of a steady heady state we are operating at that 12%-13% range. As we are bringing on new business that would be more the 9% -10% range. So, in this last quarter we were at that more 9% to 10% range. So you could translate that until we were ramping up new business.

Ron Chez - Private Investor

Shouldn’t there be a point at which the gross margin expands though, or is it going to continue with nice prospect of more business, is it going to continue to modulate from what we have seen earlier this year?

Andrew Szafron

It depends on how much new business we are bringing as a percentage of the base.

Mike Marrow

But for a particular program it will certainly modulate positively right? As we get those startups expenses behind us and then it's just a rate of how much new business that Chris and his team are bringing to APAC.

Ron Chez - Private Investor

Can you comment on are you continuing to improve your turnover rate with employees?

Mike Marrow

Yes. As a matter of fact we are. We spend tremendous amount of effort on making APAC a great place to work. We spend a tremendous amount of effort on training our supervisors to be good leaders. Much of the challenge of staffing call centers with high quality people is keeping what you have and that's the huge focus of ours and we are doing pretty good.

Ron Chez - Private Investor

You have made steady improvement there; quantitatively you've made steady improvement.

Mike Marrow

If you look at where we were at the beginning of the year versus the end of the year, we are better. That's interesting because at the beginning of the year there virtually won't appeared any jobs for our employees to move over to. I think environment may be is little better now. Our most recent retention figures I am happy with.

Ron Chez - Private Investor

And you trend on key performance indicators as it relates to your four major goals.

Mike Marrow

Good. I've always said that if we perform, we will be awarded additional business and that's what's happening. I translate the new business with the specially existing clients with growth there and the new ones, new clients they certainly check us out very thoroughly with other of our clients in terms of references and so on. The existing clients are happy and going and new clients are hearing good things about us and that’s why they have chosen to place some work with us.

Ron Chez - Private Investor

So your ranking in terms of competitors is improving steady state. How would you give some color to that?

Mike Marrow

Well, sometimes we get there. We get specifics from our clients where they stack rank us. Generally speaking, they don’t. They don’t give us the numbers and say, here’s how you are doing versus your competitors, but anecdotally we hear that on a pretty regular basis that we’re doing a good job.

Operator

[Operator Instructions]. We’ll take a follow-up from Tim Wojs with Robert W. Baird.

Tim Wojs - Robert W. Baird

I just wanted to follow-up on vendor consolidation. You guys have done a really good job signing new logos this year and some of your competitors have commented that was vendor consolidation it’s difficult getting into some new clients. Give me the comment as to why, maybe you guys are winning some new logos versus some of your competitors?

Mike Marrow

We are doing a good job. It’s, the vendor consolidation is interesting we hear that. Clients are always looking for good performers. They may do some consolidation and some of that is consolidating from 10 vendors to three, some of that is picking vendors they have providing different services and finding vendors that can provide multiple services, right, so they are dealing with one vendor for several different services. Plenty of competition out there but I don’t think that we’re running really into anyone that says, we don't want to talk to you right now, because we are consolidating vendors.

Operator

[Operator Instructions]. Peter Castellanos with Glacier Partners.

Peter Castellanos - Glacier Partners

I think I may have misheard you, but earlier today did you say something about you are going to comment on 2010?

Mike Marrow

At a later call.

Peter Castellanos - Glacier Partners

Later call, that's what I missed. The other thing is, on the gross margin discussion, the answer still is not really complete. I understand what you are saying about, you are adding new customer, so that margin takes a bit of a hit and yet and but as if customers mature, the margins go up a little bit, but basically you are getting to the point where you've got a fairly good critical mass here, in my thought most companies will begin to see some stabilization in the margins, and possible an upward creep or finding some level where it just kind of sit. Can you give us a little bit more? I'm looking at margins of close to 25% that's Q1 going to roughly 21% in Q3, can you just tighten that up a little bit as to wherever you might model this thing going forward?

Mike Marrow

Peter, we've spoken at length that we intend have our operating margins between 9 and 13, and that's going to be impacted most by the modulation in the gross profit, as you've just pointed out, and that in periods of high growth, when we have our startup expenses. So, if you look at our growth from Q2 to Q3, we went from about 8% or 9% to 15% to 16%, that’s a big ramp up in growth, and along with that we have a number of startup expenses around recruiting and training new agents as well as outfitting our sensors for that business.

So when we see a sharp increase in growth, a very robust growth, which I don’t think you are seeing in a lot of industries or even amongst our competitors, our operating margins will shift towards the 9%.

Then clearly as we’ve demonstrated in the past, when we are more of a steady state, so you are not seeing a sharp increase in growth we expect our operating margins to shift up to the higher end of the 9% to 13% range.

So as you model out our growth you have to look at those increases from quarter-to-quarter, year-over-year and say, I am getting great growth, but there is an initial investment in startup expenses and we here at APAC work very hard to get those operating returns towards the higher end of that range.

Peter Castellanos - Glacier Partners

Let me ask you this, if you took the top say 30% of your business right now, what would be the average maturity of that business?

Andrew Szafron

You are talking in terms of tenure? We have a lot of long standing relationships.

Mike Marrow

The top 30% would all be multi-year, but they all have also have very significant growth in the last 12 months.

Andrew Szafron

So we are growing with them.

Mike Marrow

So if we took the portion of business with those customers that had been around for say 12 months ago, the margins on those would be very nice. If you have customer that caps on another 10% or 15% business on top of that, that incremental business, that depresses the margin for the clients overall for the short term.

Peter Castellanos - Glacier Partners

Last question here just on the SG&A number. You have done a great job just kind of holding that number down. I am wondering how much longer that could last?

Andrew Szafron

I think we've worked very hard to have an operating model where we will leverage our SG&A. So I would expect our SG&A to grow in terms of dollars, but not in terms of percent relative to our revenue.

Peter Castellanos - Glacier Partners

It’s roughly 11% now, is there a number? Can it get down 9% or are you kind of at the deep level where (inaudible).

Mike Marrow

There is always room for improvement. There is nothing we do we don't believe can be improved upon. The nice thing about the SG&A is that in this most recent quarter, if you compare to a year ago there is a healthy chunk of change in there for commissions. A year ago there may be wasn't even a $1 in there for commissions.

So that's good that we are paying commission, that's because we are growing, yet we are keeping the SG&A dollar growth much lower than the revenue growth of the company

Peter Castellanos - Glacier Partners

Could tell us just in Q4 what you’ve seen now there. Is that level likely to stay pretty close to where it was this quarter or would you anticipate any non-recurring or a year-end type things that will bump that up a lot?

Andrew Szafron

No, it should stay in the same range.

Operator

We’ll take our next question from Matt McCormack with Brigantine Advisors

Matt McCormack - Brigantine Advisors

So your revenue growth of 15.4% year-over-year, it was definitely in this feeling and I think that closest has been (inaudible) at about 7.5%. So, could you give us a little more color on why you’ve been so successful with your win, and if you could specifically address how you are pricing your services in the pricing environment, that would be great?

Mike Marrow

I think it’s a pretty simple answer. A good chunk of the growth has come from existing clients, and I sound like a broken record but that is entirely based on our performance. What’s nice also is that a good chunk of this has come from new logos. Those new logos, we’ve been servicing for eight, 10 months and they’ve enjoyed good service from us and they’ve grown as well. In terms of pricing, our pricing is market pricing.

As of late we’ve seen some things out there that some companies are operating well below market pricing to fill up empty capacity, I think that short-term, but we are not offering deep discounts. We don't have to find ourselves going on, we are disciplined. We have market pricing out there, not the cheapest, not the most expensive.

Matt McCormack - Brigantine Advisors

Turning to your guidance, you reiterated the $0.60 to $0.65 range; you did talk about the two new wins. It sounds like they are going to start ramping again, and then I know you talked about growth versus profitability. Growth is expected to slow slightly in the fourth quarter. Are you as equally comfortable with the midpoint of that range or should we be really looking more towards the lower part of that range?

Andrew Szafron

I think what I have said the last time in our last call is that we were extraordinarily confident with the 60, and 65 is based on some good things happening, right? The good things are the volumes coming in from the clients that we have, and I have mentioned earlier the wireless and the packaging shifting. We are right there at the time of the year when historically they increased pretty significantly in volumes, so the next six, seven weeks is going to tell the story. As I had said earlier on the call, that will be the difference between good and very good in our minds.

Operator

Thank you and with no further questions, I would like to turn the call back over to Mr. Marrow for any additional or closing comments.

Mike Marrow

I'll close by once again saying thanks to everyone for joining us this morning. As you know, we're a results-oriented company. We appreciate the additional interest our business has been receiving from the financial community. We appreciate all the questions that everyone has posed today. We look forward to our next call where we will be sharing the results of our fourth quarter for 2009. Thank you all very much.

Operator

That does conclude today's call. Thank you for your participation.

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