CIBER CEO Discusses Q3 2010 Results - Earnings Call Transcript

| About: CIBER, Inc. (CBR)


Q3 2010 Earnings Call

November 4, 2010 11:00 am ET


Gary Kohn - VP, IR

Peter Cheesbrough - President and CEO

Dave Peterschmidt - EVP and CEO


Jeff Martin - Roth Capital Partners

Stefan Mikochik - PinkPlace Capital


Welcome to the Third Quarter 2010 CIBER Incorporated Earnings Conference Call. My name is Tamera and I will be your operator for today. At this time all our participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder this call is being recorded for replay purposes.

I would now like to turn the conference over to your host for today’s call, to Gary Kohn. Please proceed sir.

Gary Kohn

Thank you. Good morning everyone. My name is Gary Kohn, Vice President of Investor Relations here at CIBER. I would like to welcome you to our third quarter 2010 conference call. With me on today are David Peterschmidt, our President and Chief Executive Officer and Peter Cheesbrough, Executive Vice President and CFO.

Dave and Peter will discuss our results for the third quarter, our outlook for the remainder of the year and as always take your questions.

Before turning the call over to Dave, I will remind you some of our prepared comments and responses to your questions will constitute forward-looking statements. You should keep in mind that these forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Such risks and uncertainties include, but are not limited to those factors set out in today’s news release and discussed under the Risk Factors section of our Annual Report on Form 10-K and other SEC filings.

Also during the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We have included reconciliations of those measures to GAAP measures in our news release and on Investor Relations section of our website at

With that, it is my pleasure to turn the call over to our, Dave Peterschmidt, Dave?

Dave Peterschmidt

Thank you Gary, good morning everyone. I am pleased to report that demand for our services remained strong. Recent customer wins, renewals and improving industry trends continued to contribute to accelerating revenue trends for us.

Our third quarter revenue was the strongest in the past seven quarters at 4% reported and 5% organic. This is particularly encouraging considering all that I’ve been asking of the team here with the strategic planning, the new operational disciplines and the realignment of our North American sales and delivery operations.

On the earnings side, EPS was $0.05 and cash flow was positive in the quarter. Clearly, this financial performance particularly our level of profitability and cash flow is less than it should be. We need to capture more of the market opportunity and to pursue higher quality engagements that increased margins cash flow and return for our shareholders.

We must be on a path to deliver sustained, predictable and improved performance and the important strategic work that we are doing is all about getting us on that path.

Of course, it is equally important we take immediate steps, to address our operational shortcomings. To be specific, we have not exercised the appropriate level of discipline to avoid entering into the deals that are a drag on our margins.

This lacking discipline is reflected in depressed margins, reduced cash flows, growth and accounts receivables and DSOs and it has led to ineffective use of our various talented human resources.

We are consuming too much of the teams time dealing with exceptions, instead of thinking strategically and going after the highest quality engagements. We are encouragingly making progress on both the strategic and the operational fronts, thus laying the necessary groundwork for the longer term help of CIBER.

We have a strategic plan that will be reviewed by the Board later this month and we have implemented several of the many operational regiments that we will ultimately have in place. I’d like to update you on each.

On the strategic side, I oversaw an intense two day planning session, which included single leadership from around the world, a member of our Board of Directors, and a strategic planning consulting firm with more than 30 years of experience, helping companies plan there strategic direction.

What came out of the first planning session was consensus on our vision, our mission, our target market and finally the strategic initiatives to make this all happen. The next steps include finalizing the plan with our Board of Directors this month and communicating the new refined direction with our investors, employees and customers.

It’s our intention to communicate more with you before the end of this year. Let me give you a preview to the high level details of this strategic plan.

First, our vision is simple. Drive improved financial performance for our clients, through innovation. We are not talking about IT services we are getting our team focused, on looking at our perspective clients and how we can improve their business performance and presenting solutions to them that to do exactly that, through the use of new and innovative technology.

Our mission is to grow our share of the global IT services market while improving our own key financial metrics. CIBER has over promised and under-delivered for too long a period.

Improving key financial metrics is absolutely necessary if we are going to compete effectively, reinvest in our company and drive higher returns for our shareholders. A tighter focus on our market is central in accomplishing our mission we are spread way thin.

We must concentrate our force and mass on what we do well. Target and focus means an increased discipline around investments decisions. We will utilize this stringent fact-base market research approach to allocating investment dollars and for prioritizing our pursuit of the appropriate opportunities.

As a leadership team we developed a list of strategic initiatives to implement this vision, mission and positioning. At the top of our list are three major initiatives.

First align CIBER’s offerings on high margin practices and solutions. This means bringing together our intellectual property and capabilities not only across the US but globally. Each operation must actively share its collective domain knowledge and intellectual property. This is the only way we will get to the force and mass of a truly $1 billion company.

This activity is already well under way with the consolidation and integration of the Custom Solution division, which has led to the beginning stages of an integrated, global, sales and delivery model.

This improved organizational design will drive margin improvement not only because it will deploy a lower cost model, but that also because it will allow us to pursue more valuable, higher margin engagements.

Our second key initiative is to build out a world-class sales force. In order to sell higher margin solutions we need to enhance our sales force with training, processes and intense go-to-market support. We are committed to investing an ongoing training including the establishment of a global training program center. We will leverage the collected knowledge of our delivery and in sales teams, so that we can identify, sell into and solve the complicated issues our client’s face.

Our third strategic initiative is to create a unified world-class IT infrastructure. Our current IT and business systems infrastructure lagged from what we see is optimal. Our systems currently do not support the collaborative, global, [vertical] nature of our service offerings.

Peter and key members of this team are taken on the challenge of upgrading our systems to assure that we have the infrastructure in place to support the more disciplined and strategic decision making we are undertaking. To further enhance the viability of this undertaking we have formally launched the search for a CIO.

Now, on the operational side, I feel very strong about getting the operational side right and that adherence to strict operational regimens is the most important thing we need to do in writing the shape of CIBER. Everyone here knows how serious I am about this and how important it is to move quickly.

We have begun installing a number of proven tools that I’ve utilized in the past to assure that our leaders understand the increased level of accountability and to ensure we are aligning our assets to the highest quality engagements. Many of these seem sample and just good business practices. However, many of these tools were not in place just a few months ago.

First, we had begun holding monthly and quarterly business reviews. Our senior leaders are being held accountable in these meetings for a more accurate forecast and more extensive review of their unit’s results.

More importantly, we are using these meetings to discuss and plan which opportunities we should pursue and how to work our way out of those engagements, which are a drag on our profits and resources. We must allocate and deploy our human and intellectual capital on the opportunities with the highest return.

Starting this Monday, we will be instituting another effective tool, a weekly global sales and bookings call. Each Monday, all of my senior leaders and frontline managers will participate in this call with a very focused purpose to report on bookings for the week and progress on the quarter.

The purpose is not only to drive more accountability but also to put us in the position where we can see trends much sooner and make corrections more expeditiously.

Another issue we faced is too many problem engagements. These engagements consumed too much attention, time, resources and unfortunately are hurting our financial performance. They lead to collection issues, growth in DSO’s, increased unbilled balances [leading to ] gross and operating margins.

Perhaps, worst of all we allocate resources to these projects in the lieu of more attractive assignments. It’s is no longer acceptable for CIBER to enter in to deals that were outside of our risk tolerance.

To address this we have established the deal review committee any to make sure we are evaluating the risk level of each large engagement. I have instructed our team to use a standard sales contract if there are any variations from the standard language required in certain levels of approval.

These simple steps necessary to lower the risk, we have been willing to accept in too many of our deals. Our goal is simple, significantly reduce the issues and the resulting surprises that arise from taking deals which are too risky. We need to align our assets to higher quality, lower risk engagements; this is just a business.

We are making the appropriate changes to realign the organization now, so that we can have everything in order as we enter 2011. I am personally working on compensation plans for senior management, for our sales and delivery people that will drive and align behavior to very strict sort of objectives.

We’ve have also made management changes which better align CIBER. We have and we’ll continue to hire key people who will supplement the existing team. We are eager to arrive at the end stage, which is a business model that generates sustained, predictable and improved financial performance.

We understand however, that this is a process, one that will take time. We are making solid progress moving the pieces on the chess board and we will continue to make these moves as fast as we believe the organization can digest them.

I look forward to speaking with you in more detail in the coming months. Thank you and now Peter will discuss the past quarters performances and outlook.

Peter Cheesbrough

Thanks Dave. Good morning everyone. I am pleased to report that we delivered third quarter revenue growth of 4%, which is the strongest of the past seven quarters. In constant currency terms we actually grew revenue 6% in the quarter versus the same period last year. 1% of this growth is attributable to the acquisition we completed earlier this year.

Sequentially, reported and constant currency growth was flat in the second quarter of the year. Importantly we grew revenue in four of our five operating segments in the quarter. These four segments comprise nearly 90% of our total revenue.

Our International business which represents 34% of our total revenue achieved the strongest year-over-year revenue growth of all our divisions of 5% or 13% adjusted for currency. Sequentially revenue growth was 4%. The success in the International division was driven mostly by an increase in demand for CIBER’s SAP services outside of the US.

Our foot print in Europe is primarily in countries and geographies where demands remain strong. While we are in Spain, we have no presence in Greece, Italy or Portugal where the economies remain under strain.

Also contributing to International’s revenue growth was improving demand for our newly launched CIBER Managed Services in Germany. We have been investing in this new offering for several quarters and are please to see it contribute more meaningfully to our growth.

The offering is focused on a niche market, that we are well positioned to serve, providing SAP maintenance and support to small and midsized businesses in Germany. The segmental acquisition contributed 4% to International’s growth this quarter.

Our largest operating division Custom Solutions represented 35% of our quarterly revenue. Custom Solutions grew revenue 5% over last year’s third quarter and 2% sequentially, as a result of recent contract wins particularly within the healthcare vertical.

The US ERP segment totaled 12% of revenue this past quarter. Revenue growth here was 5% compared to the third quarter of 2009, while sequential revenue declined 3%. The year-over-year growth was driven by projects in and both the public and higher education verticals, IT Outsourcing our new international businesses and as a result was able to increase revenue 4% from the same period last year and 5% sequentially.

The revenue growth we achieved in those four segments was offset by $0.1 decline in revenue at our Federal segment. This segments performance continues to be impacted by delays in contract award dates and spending limitations in place throughout the US federal government.

Gross profit for the third quarter of 2010 was $66 million. Gross margin was 24.6% compared to 25.3% for the same period in 2009 and 25.1% last quarter. There are several trends, some up and some down affecting gross margin. Pressures on gross margins stems from our launch and continued investments in CIBER Managed Services or CMS, the offering in Germany that I mentioned a few moments ago.

CMS is expected to become profitable in the fourth quarter of this year, so we are pleased that our investments here is driving success. Additionally, gross margin was impacted by an increase in the use of higher costs subcontractors on the delivery side.

These two items relate to our International division and resulted in an overall decrease in International’s operating margin for the quarter. We also used more subcontractors in U.S ERP than originally planned which impacted the segment and total gross margin. These items were somewhat offset by SG&A reductions mostly in International headcount. I will address overall SG&A in a moment.

Improvements to gross profit were driven in part by our Custom Solutions division, where we have been engaged in high margin projects, in place of lower margin legacy projects. Overall, Customs Solutions operating profit increased 50 basis points from the third quarter of last year as a result of these gross margin improvements.

Offsetting some of these improvements within Customs Solutions, were increases in SG&A related to our ongoing realignment, including severance costs as well as investments to supporting growth in distinct verticals including healthcare.

As a reminder, when we discussed last year’s third quarter operating results, we called out a nonrecurring $2.2 million litigation settlement. This settlement was included in 2009 third quarter’s SG&A at a consolidated level and not in the segment results. In my discussion that follows, I will speak to reported numbers as well as numbers excluding the settlement from last year’s results.

In total SG&A cost for the third quarter of 2010 were $57.3 million, equaling 21.6% of revenue. This compares to 22% reported or 21.1% excluding the settlement in last year’s third quarter and 22.1% last quarter excluding impairment on executive change charges.

SG&A was impacted by investments in Custom Solutions for its increased activity in certain key verticals, increased corporate expenses related to management changes and transitions. These increases were offset somewhat by savings from reduced headcount within the [International] division.

Operating margin for the quarter was 2.7% yielding an operating income of $7.1 million. Last year’s third quarter operating margin was 2.7% and operating income was $7 million. Excluding the settlements from last years third quarter, operating margin would have been 3.6% and operating income would have been $9.2 million.

Third quarter tax rate was 32% compared to 28% in last year’s third quarter. Earnings per share this quarter were $0.05 the same as the reported EPS in the last year’s third quarter. Excluding the settlement EPS would have been $0.07 in last year’s third quarter.

Moving on to cash flow, net cash provide by operating activities was $7 million for the first nine months, driven by positive changes in working capital items including improved payroll and other liabilities.

The comparison of cash flow from operations for the first nine months of last year, to the first nine months of this year is driven by a change in accounts receivable. Through nine months last year accounts receivable reductions provided $22 million in cash flow. While increases in accounts receivable this year has been a use of cash totaling $37 million.

A portion of this increase in accounts receivable is result of increased sales. The lengthening of DSOs for services to 71 days was also a contributor. Part of the increase in both receivables and DSOs is attributable to the growth in unbilled revenue. Most of the unbilled revenue stems from a small number of larger state and local government contracts where deliverables need to be complete and accepted before billing can take place.

Making improvements to accounts receivable, DSOs and our cash collection cycle are top priorities. Frankly, we need to reduce our DSOs and shorten the time from when work is performed to when it is billed and ultimately collected.

We have begun implementing several programs to address the issues, including more frequent billing milestones in our fixed price contracts; increase discipline around payment terms; develop and use a standard contract; and the establishment of a deal contract review team, whose approval is now required on every significant deal.

Furthermore as Dave indicated this morning he understand the impact that write-offs and other surprises have had on our creditability and is eager to put them behind. We are now taking a more disciplined approach to engagements, we will pursue with the goal of reducing uncertainties in our balance sheet, growing revenue, improving margins and increasing collectability.

Our CapEx for the quarter was $3.1 million and $9.6 million for the nine months of the year. Our free cash flow calculated as net cash from operating activities less CapEx was $15 million for the quarter and a negative 2.5 million so far this year.

Now let’s turn to the balance sheet. At the end of the third quarter the balance drawn on our senior credit facility was $93.1 million, down from $97.5 at year end. Our total cash position at the end of the quarter was $51.5 million.

In terms of guidance we continue to expect to achieve revenue of at least $1 billion and $6 billion for the year. On the earnings side we expect full year EPS of at least $0.20 excluding the second quarter impairment and the executive change charges. Full year 2010 GAAP EPS including the impact from goodwill impairment and executive change charges is now expected to be a loss of no greater than $1.02

We modified our EPS estimates, primarily as a result of specific items in the fourth quarter. The first is increased SG&A spending from the ongoing realignment and some management changes.

Second, gross margin will be impacted by some customer delays. We have begun incurring costs but will not be recognized in the revenues since the stock bases of those engagements have slipped out into the fourth quarter.

Third, to meet the deliverables timing in certain seven contracts we will continue to use subcontracts that carry a higher rate and lastly ongoing delays in US federal government contract awards will continue to impact margins in that division.

These EPS estimates do not account for any future charges they may be incurred as a result of management’s continual review the business as well as customer relationships.

With that operator we are ready to take questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from the line of Jeff Martin from Roth Capital Partners.

Jeff Martin - Roth Capital Partners

Dave, why don’t you give a sense of what is your plan for communicating a Board approved plans, specifically will include things like 2011 guidance, your target operating model you talked about, key emerging targets, operating structures that kind of things, what should we look for?

David Peterschmidt

We’re attempting to do that. We’ve got two things in front of the Board right now. One is the final acceptance of the strategic plan and the second item is the 2011 planning cycle. My goal is to get all of that done in early December with the Board. The strategic plan actually goes to the Board next week.

If we can get all of that, put together with the Board and get approval for the 2011 plan, we then want to come out and actually hold an analyst day before the end of the year where we review both the 2011 operating plan as well as the strategic plan.

Now, all of this is work-in-progress and since it’s my first time through the planning cycle and our bets for a lot more detail in the planning cycle than has been done here before. I’m just not yet sure we’ll get it all done by then, but that’s what we’re shooting for. Once we have it done, we’ll share it with you.

Jeff Martin - Roth Capital Partners


Dave Peterschmidt

And, I mean the 2011 plan.

Jeff Martin - Roth Capital Partners

Any idea what you think the target gross margin would be at the point. The reason I ask is the 300 basis point improvement in gross margin would more than double your EPS?

Dave Peterschmidt

Yes, we don’t have it yet, but let me tell you how I think about business plans. Whatever targets we set for gross margin improvement, I am going to demand that we have very detailed plan of this is how we will make those improvements.

That is, I want to be able to have specific projects and programs that we now were going to change the gross margin outcome. So when we get that all done then we will be able to share with you what I think we can get accomplished.

I think, I should point back to comment in my remarks today that said, we have clearly with the team taken on the challenges. So as we want to grow our market share. That means we’ve got to grow faster on the top-line than we have been doing.

Yet my primary focus and belief about how this business goes forward is, we have to focus on the gross margin line. We must expand that gross margin line because if we do that the rest of it will drop through and so that is my strategic focus for us is improving that gross margin line, first and foremost.

Jeff Martin - Roth Capital Partners

Right, great. Any thoughts in terms of the stock itself, I mean its trading below $5 and that keeps the lot of institutions I think from even being able to buy the stock. Any thoughts about doing a reverse split or are you content climbing your way above $5 based on your operating performance?

Dave Peterschmidt

We haven’t given any consideration to any type of reverse split. I believe this company has got plenty of potential to climb back out and get this stock back moving the way it should. And I wanted to do that based on driving the operational performance and I wanted to be able to do that in a way that demonstrates it’s not just, okay, so we had good quarter but if you can clearly see we are going to have sustainable performance and I think, we are on the way to doing that.

Jeff Martin - Roth Capital Partners

Okay, and then, what do you think, if doing itself but in terms of implementation timeline when will we start to see positive results from this plan?

Dave Peterschmidt

Well, as I said before Jeff, I think we’ve got to have positive results from this plan by the second quarter of next year. I’d love to see it happen in the first quarter, I just don’t know how aggressively we can drive the business but definitely the impact should flow through to both our P&L and our balance sheet by the second quarter.

Jeff Martin - Roth Capital Partners

Okay. And you mentioned investment in IT infrastructure. What kind of budget are you looking at for that and what specifically are you going to put in place above and beyond the CIO?

Dave Peterschmidt

Well, what we’re attempting to do right now is fundamentally the issue we face is that our European operations which is really our International operations, is all running on SAP and North Americas is running on PeopleSoft. And I believe we’ve got to get this company on one unified platform globally and the biggest area that we’re working on short-term, so that we can see and manage profitability by project, which we cannot do today.

We think we are going to have the first cut of our ability to do that in North America beginning in January but I think the longer-term plan of going to a unified platform globally we probably have another three or four months of planning before I can give you some assessment of, what’s the investment cost to do that. And I am hopeful with by that time we also will have the new CIO in place

And Jeff, just along with that to give you a sense of the level of work we are doing here, I started a complete audit on a global basis of everyone of our IT assets, both our physical assets as well as our human capital, and I believe that’s going to yield some significant benefit in cost reduction for us. Because quiet frankly we have a lot of despaired IT system right now.

Jeff Martin - Roth Capital Partners

That’s very helpful, and then finally is type for Peter about, where do you stand you’re your existing debt covenants and how does the next couple of quarters look.

Peter Cheesbrough

At the of September Jeff, we were in compliance with all of our covenants and our concerns there and as we look forward we don’t see any particular concerns with respective to that, given the current scenario.

Jeff Martin - Roth Capital Partners

Great. I look forward to the plan in December.


And your next question comes from a line of [Stefan Mikochik with PinkPlace Capital].

Stefan Mikochik - PinkPlace Capital

Thanks, good morning. A couple of questions kind of may just going down the income statement, your other revenue and the cost of other revenue, the margin on that shrunk. Is that with the subcontractors going through, what was happening in those lines?

Peter Cheesbrough

Our other revenue is largely hardware and software sales. The margins on that is reflective of the margins that we get out of the hardware and software suppliers quite frankly. So, none of the services revenue go through that line.

Stefan Mikochik - PinkPlace Capital

Okay. Was there something specific this quarter that why the margin on that other revenue was lowered?

Peter Cheesbrough

Nothing is specific. We’re just seeing a reduction or an erosion of margins in that general area over the last several years and that will just continue that trend, there is nothing particular unusual in this quarter.

Stefan Mikochik - PinkPlace Capital

Okay. What’s leading to the use of the subcontractors? Is it that you’ve taken on some of these projects that you shouldn’t have and so, you’re kind of eating up man hours that you could be allocating to better projects?

Dave Peterschmidt

I think it depends on whereabouts in the world you are. In some instances, in some geographies, its because its difficult to find long-term employees that we can hire and so we are forced to go to the market and hire people who are prepared to provide their services on a subcontract basis.

In some instance, we need to start up the project very quickly in which case, we may do that. We’re using subcontractors and then gradually you replace them with more permanent employees over a period or months and quarters.

So, it depends on where you are geographically. But, its not unusual for us. We have seen market pressures in terms of availability of certain skill-sets.

Stefan Mikochik - PinkPlace Capital

Okay, so, I mean is there something you expect to continue in to the fourth and the first quarter of ’11 or can you plan around it sometime?

Dave Peterschmidt

I think, it will probably continue largely in to the fourth quarter. Whether it will continue in to the first quarters a little far out for us to be able to predict that with certainty. I am sure there will be some pressure in that regard.

Peter Cheesbrough

Well, I think let me had also that this is part of the whole program of paying attention to the deals we take and a lot higher scrutiny now through the project committee that is reviewing every one of our proposals. So we start paying close attention to this and that would taking business opportunities where we are much better aligned with our own resources in house.

Stefan Mikochik - PinkPlace Capital


Peter Cheesbrough

There is no doubt, this is a source of profit maker, and it’s got our full attention.

Stefan Mikochik - PinkPlace Capital

Okay. And then in the, I know you talked about the CIBER Managed Solutions was somewhat of a drag in the third quarter and then its going to flip positive in the fourth quarter? How big of a swing is that?

Dave Peterschmidt

Well, I am not going to give specific detail at those levels. For the fourth quarter in terms of the year-to-date its probably cost us a little over $3 million in terms of total earnings impact to develop that business.

So we hired a number of people through the course of the first three quarters and been gradually building up the revenue stream, associated with those people and we expect it to be profitable in the fourth quarter. The impact in the third quarter was probably a little less than a $1million negative and that will turn positive in the fourth quarter.

Stefan Mikochik - PinkPlace Capital

Okay. Longer-term should that be a high margin business or more of corporate average?

Dave Peterschmidt

I think will be more of the corporate average but I think we see a real good opportunity for growing that both in Germany and perhaps in other geographies.

Stefan Mikochik - PinkPlace Capital

Okay, all right, and then lastly I know its early to, given where you’re with your strategic plans but when long ago that this company was doing 5% operating margins and now we are half of that? Is it reasonable to expect that we can get back to at least the 5% level at some point in the future?

Dave Peterschmidt

We better. My goal is way beyond 5% but again, as I said earlier, I want to make sure that we have a very specific plan about how we’re going to climb back through improving gross margin.

And let’s talk about the items here and I will let wrap your own ideas around where you think we should take gross margin and then when we’re really there with the plan we’ll share with you but the drag on gross margin today is a factor of one, we’re not selling in to high-quality value proposition scenarios, which we have plenty of skills already developing.

Quite frankly, we have a number of practices that yield much higher gross margin than you average for this company, is selecting. So by putting a tighter focus on the verticals and the practices that we’re going to drive ourselves in to, that’s going to help gross margin.

The second thing quite frankly is we are doing it to ourselves in that we’re allowing in the past ourselves to get in to what would consider less and reasonable risk scenarios and what that’s doing is, we are finding ourselves spending a lot of our precious man hours in scenarios where we are investing our billable time and not getting paid for it because of scope creed and scope ambiguity and we are working very quickly to close that probably goes in the margin line.

So I think there is plenty of opportunity here to improve the margins of this company both from just an operational discipline as well as the strategic market focus and believe me we are as anxious as you are to get these operating profits up much beyond where they are today and this is not acceptable.

Stefan Mikochik - PinkPlace Capital

Okay great and I especially appreciate the summary you gave at the beginning and about the delay and lay out some your plans for the company.

So good luck and I look forward to hearing about that in the fourth quarter.


I don’t see any more questions with that I will turn it over to Dave for closing comments.

Dave Peterschmidt

Yes I just appreciate and thank you for the time. Again and obviously we are pleased that we got a market that shows continued robustness for us to increase our revenue but as I said in my comments, I am not satisfied that all with the margin performance and the profit performance and the cash performance. Its obvious we can yield much higher returns and we are working very quickly.

I believe the operating disciplines that we now have in place are going to start to reflect in the way of performance comes out, but more importantly I am absolutely convinced that after visiting with the lot of our clients and CIOs, that our strategic directions are going to bear long-term fruit for the company. So, we’re anxious to get on with all that execution. And I would just leave you with this.

This management team is responding admirably. I am putting a lot of demand on this team to do a lot of things simultaneously, at a pace that they probably haven’t worked at for a long time. And they are responding is that in very positive fashions. So, I’m very encouraged by the progress that’s being made.

Thank you. We look forward to talking with you later in the fourth quarter.


Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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