FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (TMF Debit)

ATC Communications Group, Inc.
(Nasdaq: ATCT)
5950 Berkshire Lane, Suite 1650
Dallas, TX 75225
(214) 361-9870

UNION CITY, CA (May 2, 1997)/FOOLWIRE/ --- ATC Communications released their third quarter 1997 results on April 30th. Revenues were $24.5 million, a 6% increase from revenue of $23.1 million for the year-ago quarter. Gross profit declined 1.1% to $7.699 million from $7.788 million last year. The gross margin was 31.5% representing a 4.8% increase from the 27% gross margin recorded last quarter, but a 6.7% decline from Q3 last year. Operating profit was $730,000, a 67.4% decrease from $2.239 million in the comparable period last year. Operating profit was lower due to increased overhead incurred in providing the infrastructure for the company's future growth. Net income was $413,000, a 64.3% decrease from the $1.157 million recorded for the comparable 3-month period last year. Earnings per share was $0.02 versus $0.05 last year.

NINE MONTH RESULTS. For the first nine months of the fiscal year, revenues increased 18.7% to $76.1 million from $64.1 million for the same period last year. Gross profit rose 17.4% to $23.6 million from $20 million for the prior period. Gross margin was constant at 31%. Operating profit was $5.5 million, a 2.7% decrease from the $5.6 million for the comparable period last year. Net income was $3.384 million, an 11.1% increase from the $3.36 million for the comparable nine-month period last year. Earnings per share was $0.14 versus $0.13 last year.

CASH. The company has a working capital position of almost $14 million and they haven't had any material changes from the last quarter in terms of their balance sheet positions. The details of their credit facility will be outlined in the 10-Q. There is no prohibition of them using their debt facility to purchase stock. Their cash flow is adequate for their capital expenditure requirements looking forward, as is their debt capacity. They feel very comfortable that, given their approach to pricing of acquisitions, that they will be able to obtain financing if required to get them completed.

ACQUISITION STATUS. ATC will continue to focus on acquisitions as an avenue of growth. They are currently in discussions with several potential acquisition candidates and they believe that these acquisitions will fit with their corporate and operating strategy and will be structured to be accretive to ATC shareholders. In terms of the letter of intent discussed in the last conference call, their progress on that acquisition was delayed by the seller. However, they are continuing their negotiations with that party at this time. The company they are in talks with provides them expansion in remote centers, small remote centers in locations they are already in today and provide ATC additional capacity. Second, they have a great deal of competency in their management team in remote locations that will help ATC expand their business. Third, ATC feels the company's technology base is equal to the technology base they have today but allows them to get into other markets they are pursuing. Finally, they are a financially stable company. ATC has no definitive agreements or binding letters of intent in place with any acquisition candidates at this time.

STATUS OF MAJOR ACCOUNTS. Comparing year-to-year they see some considerable growth from their major accounts -- American Express and AT&T -- in particular, the confidence show by American Express in their ability to perform. They continue to increase the amount of work they do for American Express and it will have a fairly significant impact in 1997. If they take a look at their portfolio in 1997 and try to take a look year-to-year at the different industries where they see a big impact, it seems like the communications industry has the most sensitivity that they have in their portfolio in terms of flattening revenue trends. The communications industry as a whole is somewhat retrenching for its new approach in the long distance and local market areas.

GTE. The biggest impact from an account position in the third quarter was GTE who is a major contributor to ATC's revenue base completed its migration internally from its centers that ATC was handling to their own internal centers.

AMERICA ONLINE. What will have a big impact on ATC in the fourth quarter will be that their account with America Online, because of regulatory issues they are going through, have been stopped in doing any marketing until they get their infrastructure in place so that they can move forward. Once AOL completes that, ATC thinks there will be an opportunity to pick up that business once again, but they will be losing that in their portfolio.

AT&T. On a quarter-to-quarter basis from last quarter, they see a downward trend with AT&T and they any vendor that has been dealing with AT&T in the telesourcing area has seen a drop because of AT&T's refocusing and how they are having to address the competitive environment. What they saw was less than anticipated growth in terms of their forecast, with regard to AT&T, not necessarily a decline in that account quarter over quarter for the prior period. Sequentially they did see a decline that was approximately 10% or so. The indications ATC has received from AT&T is that their slowdown in marketing programs is across-the-board as they are retrenching in a new mode of competition. The reduction has been primarily in the outbound side. ATC has experienced some reduction on the inbound side, but it has been primarily on the outbound side because AT&T is retrenching and redoing their marketing programs at this time. AT&T does judge ATC on the basis of their competitors and price/performance and ATC is at the top of the rating on both the inbound and the outbound side. That is why their discussions with AT&T indicate that they will continue to grow volume from this point forward.

AMERICAN EXPRESS. Quarter-to-quarter on American Express, it is growing very rapidly and ATC continues to have discussions with them on how they may be able to expand their business there.

COST REDUCTION PLAN. They are facing the slower growth in revenues, slower than they expected, but they are committed to manage their overhead at the appropriate levels. They have already taken action and have put plans in place to reduce their expenses at the operating level and they are focusing a great deal on SG&A and nonessential costs including nonessential staff and recurring costs. Those have been put in place and should begin having an impact in the next quarter. They do not expect margins to return to normal target levels until Q1 1998, however. At the end of the quarter, they had 3200 seats.

PIPELINE. They are really making an aggressive pursuit of changing the entire portfolio of business. The downfall we have seen in the revenue base has been because of the volatility of short term contracts, that has been primarily built on a cost basis. The focus they have from the sales and marketing positioning is focusing on long-term contracts with value. This would include, for example, work in call center management and full-service outsourcing. In terms of call center management, they mean the type of call center management they are doing at Pac Bell where it is ATC's facility, systems, and management, but they are facilitating Pac Bell's people. Another example is the work they are doing at the Chicago Transit Authority where it is the Transit Authority's facilities and systems, but ATC's people and ATC does the recruiting and management of them. ATC thinks that on an ongoing basis and in the future this is a very viable segment of the marketplace for them but also has an additional value proposition of talking with Fortune 500 and Fortune 1000 companies about the possibility of purchasing their assets involved in call centers and allowing ATC to use their core competencies to run those call centers while the company takes that capital for use in their own plant and equipment. In turn for that, ATC is going to be looking for a long term contract such that the net present value of that contract reflects their investment in the initial capital. ATC thinks that is a very lucrative position for them and they are having discussions today in the marketplace in that area.

The next area of pursuit is full-service outsourcing, much like they are doing today with American Express. It is a big opportunity to take a look at the Fortune 1000 companies that are extremely interested in leveraging other companies' core competencies while they focus on their own.

"GAP ANALYSIS." One of the things they did when looking at these two market segments in the past quarter was take a look at the bandwidth of competency held within their own company in order to go out and wave a banner of full outsourcing and call center management. What they did find in their "gap analysis" is that they needed two pieces. The first is a consulting front end and the second is a fulfillment piece at the tail end. Their competency in the past and today is the actual integration and implementation of call center management which they refer to as telesourcing. What they have done is gone out in a pursuit of filling those gaps and they recently announced their alliance with Arthur Andersen who they will be using in their alliance to do the front-end consulting management for them in taking a look at these larger opportunities. And, they will be doing the fulfillment piece through an alliance they have with ISI and an organization through Cushman-Wakefield. This offering is being well received and they have a backlog of business in their portfolio underway.

SALES CYCLE AND OUTLOOK. What they have found as a result of getting these longer-term opportunities in their pipeline is that they witness a longer sales cycle. Where before sales cycles for RFPs were somewhere in the 30-45 day timeframe, they are now seeing sales cycles they estimate are 6-9 months. Because of that they will see a possible closing of a number of these in the fourth quarter with revenue impact coming in the first quarter of 1998. They are confident that their pipeline of business with this type of activity will have an impact on fiscal 1998. They expect to attain a 35-40% growth rate in fiscal 1998 and that a fair amount of that will come from new business of the type just discussed above.

GOVERNMENT SECTOR. One of the other alliances they mentioned, ISI, they have found in market research and because of taking a look at the Federal and state government is that there is a big move in the government sector to do call center management. ATC partnered with ISI because of their premier position in the government as a prime contractor already involved in that area as well as a previous relationship they have with Cushman-Wakefield on the fulfillment side. They already have several responses to RFPs into the government sector today for evaluation and they feel very confident about that.

OTHER ISSUES. They talked about changing some of the infrastructure. They have completed a great deal of that -- changing out their computer systems -- but they still have the ongoing maintenance of that. They are already seeing a positive impact by the implementation and change of that new infrastructure. They are making a big effort in terms of changing their basic model of having large core megacenters into having smaller remote centers out away from the Dallas/Ft. Worth area. The reason they are doing that is to reduce their overall cost burden and labor is certainly the biggest extent of their cost. The labor pool they are finding in the Dallas/Ft. Worth area is quite competitive and they think they are just simply competing with other people in the same marketplace. They have looked at sites and the optimum size they are targeting is a 300-seat center. They should have the first one in place in the August timeframe. They are focusing on attrition and turnover. It is an effort that all the senior management is focusing on because it has a great impact on their profitability.

VERTICAL MARKETS. They were going to start focusing on some new vertical markets, one of which is the utilities industry and one of which is the financial services industry. They are responding to RFPs in the government sector. They are not responding necessarily to the RFPs, but they have several proposals of which they have generated the business opportunity in the utilities industry as well as the financial services industry.

STOCK REPURCHASE. They announced a share repurchase program and indicated that they will be in the market and the company is committed to doing that. They think the stock is undervalued at this point and think it is a good use of their capital to own their shares at this time. They wouldn't give specifics on timing or target prices for obvious reasons, but said it would happen shortly.

INSIDER SELLING. They were asked to comment on the magnitude of insider selling, the reasons, and whether it will continue. They responded that their chairman unfortunately is in a position where he has had stock sold out from under him in a margin account. They do not know the magnitude of that or whether it will continue or not. That is subject to the account managers at the firm where he had the account. He purchased a great deal of stock at higher levels because he believed in the company. He still does believe in the company but, unfortunately the recent decline in the stock price resulted in a margin call.

TAKEOVER POSSIBILITIES. The company was asked whether, with the stock price at the current level, they have any concerns that the company is a likely takeover target. The responded that the company is not for sale, but they have a responsibility as board members in the event that there is something brought to the table. They will have to evaluate it for the benefit of their shareholders. They wanted to make it clear though that the company is not for sale and they are very bullish on their long-term opportunities. They feel that the stock is clearly undervalued and that is why they are looking at the share repurchase program. But, they have a fiduciary responsibility to their shareholder that if someone comes in the door they have to take a look at it, but nothing like that has happened to date.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.

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