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(1) Highlights of Business Performance and Growth Prospects
- Pace of Revenue Growth is expected to continue – in part due to success of end-to-end solution sales strategy and in part due to success of cross sell and upsell program across our top 350 customer;
- Added $19.8 million in customer contracts in the 3rd Fiscal Quarter with $10 million from existing customers; and $60.2 million over the last 3 quarters;
- Average deal size increased during the 3rd Fiscal quarter to $1.5 million from $0.6 million in the 1st quarter with many deals in the pipeline that are larger than average for the 3rd Fiscal quarter;
- Our top 350 cross sell/up sell program yielded $10.1 million in contract value in the 3rd quarter as compared to $1.7 million 2nd quarter when the program was launched; and
- Strong ramp up and growth in Healthcare Payer/Provider services, ARM and Accounts Payable underway
- HOV Services expects strong growth momentum to continue in our last quarter of 2008 with Total Income estimates for FY 2007-2008 of $222 to $224 million including 4th quarter revenue between $55 to $57 million; EBITDA estimate for FY 2007-2008 is between $32.4 to 33.4 million; this EBITDA estimate includes ramp-up cost of approximately $1.4 million
(2) Key Accomplishments and Noteworthy Items in the quarter
- Accounts Receivable Management (“ARM”) business got a boost by acquisition of a portfolio of healthcare receivables for $20.4 million by our subsidiary
- ARM business saw a decline in collections during the quarter due to economic environment and seasonality in the 3rd Fiscal quarter but decline was offset by growth in revenues due to acquisition of portfolio’s
- Rationalization strategy to leverage our core strengths and key service offerings across industry verticals resulted in divestiture of our Tax Services group
- Substantial savings from integration and rationalization of global operations in the 4th Fiscal quarter and beyond;
- Launch of new facility in China with capacity for approximately 1,400 associates of which 1,100 will be added in the 4th Fiscal quarter
- Productivity gains achieved due to LEAN, six sigma and technology initiatives are gaining momentum to improve quality, reduce cost and turnaround time and are expected to increase capacity
- Foreign Exchange management resulted in a gain of $1.3 million in the 3rd Fiscal quarter
(3) Right Shore Delivery Model - 11,641 employees across over 40 delivery centers in India, China, Mexico, U.S. & Canada
- To meet customer ramp up requirements, we need to add 2,300 associates; out of which we have added 135 as of December 31, 2007 and we are in the process of adding additional 2,165 employees by March 31, 2008
(4) Established reputation for Reliable, High Quality and Secure service
- Over 50% of the FORTUNE 100® companies are reference-able clients in our core Service offering;
- Long Standing Relationships: Top 30 clients have been with us for 5+ years;
- In a recent customer survey 98.1 % of respondents said they would “definitely recommend” HOV Services to others
- Diversified Client Base and low penetration among the major clients; top 100 clients represent over 73% of total revenues
In conclusion, HOVS made great strides to build upon our past successes and solidify its position as Top Tier Indian BPO Service Provider.
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