ACI Reports Lower Earnings

In step with the trend that is plaguing teleservices companies, ACI Telecentrics Inc., Minneapolis, reported lower than expected profits for the second quarter ended June 30. The company blames the results on the closing of its Lombard, IL, center and client withdrawal, but expects to return to profitability in the third quarter due to the addition of at least six new clients.

The company's second-quarter revenues increased 6.1 percent over second-quarter 1997, to $4.33 million, but the company reported a net loss of $300,000 ($.05 per share) for the second quarter compared to a net profit of $332,000 ($.06 per share) in second quarter 1997.

ACI's revenues for the six months ended June 30 increased 8.4 percent to $7.859 million over the same period last year. Net loss results for the six months was $544,000 ($.09 per share) compared to a net profit of $536,000 ($.09 per share) for the first six months in 1997.

The company acquired its Lombard center from Britcom properties but found it impossible to generate enough revenues to keep the center profitable.

“We were hoping to leverage our outbound client relationships to expand the inbound operation,” said Steve Kahn, vice president and chief financial officer for the company.

The net losses and closure costs of this call center accounted for $142,000 ($.02 per share) and $221,000 ($.04 per share) of the second quarter and six-month losses, respectively.

The loss of 50,000 hours of work in June also hit ACI with two telecommunication clients bailing out because of uncertainties concerning the companies' right to market additional products and services under the Telecommunications Act of 1996.

“This had nothing to do with ACI,” said Kahn. “They thought it best to pull out of the programs, awaiting further clarification by the courts and regulatory agencies.”

Labor shortages also affected the company. The favorable economic environment and low unemployment levels caused staffing problems during peak periods. As a result, ACI outsourced to other telemarketing companies providing for lower margins than similar revenues produced internally.

“But we are optimistic going forward,” said Kahn. The company has started a program with one of the top five credit card companies and also recently added five new clients, which are expected to contribute more than $1 million each in the second half of the year.

The developments mean that ACI will diversify its client base and no client will take up more than 20 percent of volume.

“This further decreases ACI's reliance on any single client,” said Rick Diamond, chief executive officer.

The recent appointment of Dana Olson to the new position of chief operating officer is also expected to help the company realize cost reductions in the second half of the year. ACI provides outbound teleservices to clients primarily in the telecommunications, insurance, financial services and publishing industries through nine call centers in the Midwest.

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