Convergys Reports Second Quarter Results, Delivers 14 Percent Increase in EPS, Updates...

Convergys Reports Second Quarter Results, Delivers 14 Percent Increase in EPS, Updates 2008 Guidance

CINCINNATI--(Business Wire)--
Convergys Corporation (NYSE: CVG), a global leader in Relationship
Management, today announced its financial results for the second
quarter of 2008.

Second Quarter Summary

-- Consolidated revenues of $689.5 million; operating income of
$47.4 million

-- Net income of $40.5 million, or $0.32 per diluted share,
compared to $38.8 million and $0.28, respectively, in the
prior year

-- Customer Management revenues of $469.0 million; operating
income of $19.4 million

-- Continued strong execution resulted in higher operating
margins of 23 percent in Information Management

-- HR Management reduced operating loss to $4.2 million

-- Strong cellular partnerships equity earnings of $11.3 million

"Convergys was able to grow earnings per share in the second
quarter in the face of a challenging economic environment. While I'm
pleased with the performance of Information Management and HR
Management in the quarter, our Customer Management results need to be
better," said Dave Dougherty, President and CEO of Convergys. "We have
put in place new leadership and we are taking decisive action to
expand and improve Customer Management revenue and margin trends in
the future. Our recently announced acquisition of Intervoice will help
us build a leadership position in Relationship Management solutions.
We remain committed to aligning the company's assets and capital to
our Relationship Management strategy and increasing shareholder value
in the process."

Second Quarter Performance

On a consolidated basis, Convergys reported second quarter diluted
earnings per share 14 percent above last year. Strong contribution
from the cellular partnerships, a lower tax rate, and an aggressive
share repurchase program helped offset largely anticipated operating
challenges. While Customer Management revenues were up slightly in the
second quarter, call volumes with certain large clients began to
reflect the weaker macroeconomic environment. Increased costs due to
foreign exchange of approximately $14 million significantly impacted
Customer Management operating income in the second quarter.

Revenues - Revenues were $689.5 million in the second quarter of
2008 compared with $707.0 million in the same period last year. The
revenue decline was mostly due to expected client revenue declines in
Information Management.

Operating Income - Operating income in the second quarter of 2008
was $47.4 million compared to $58.1 million in the same period a year
ago. The $13 million improvement in HR Management operating loss was
more than offset by a decline in Customer Management primarily due to
the negative impact from the weakened US dollar as well as increased
investment to support anticipated future growth.

Net Income - Net income was $40.5 million, or $0.32 per diluted
share, compared to $38.8 million, or $0.28 per diluted share, in the
same period a year ago. This includes a $7.7 million year-over-year
increase in cellular partnerships equity earnings and a lower
effective tax rate of 24.9 percent reflecting profitability
improvements in international operations.

Cash Flow - Cash flow from operating activities was $16.6 million
in the second quarter. Free cash flow in the quarter was negative $5.9
million reflecting the impact from a $52.3 million increase in
deferred charges, net of implementation revenue received and
amortization, primarily related to HR Management projects.

Share Repurchase - During the second quarter, Convergys purchased
3.5 million shares at a cost of $54.8 million. At June 30, 2008, 7.1
million shares remain authorized for repurchase.

Customer Management - Customer Management revenues increased to
$469.0 million compared to $460.6 million in the same period last
year. Price and volume increases with clients in the communications
and other markets more than offset a revenue decline with financial
services clients. Customer Management operating income was $19.4
million compared to $44.7 million in the same period last year.
Operating margin was 4.1 percent in the quarter compared to 9.7
percent in the same period last year primarily due to the
approximately 300 basis points negative impact of the weakened US
dollar and continued investment to support anticipated future growth.

Information Management - Information Management revenues were
$161.1 million compared to $183.4 million in the same period last year
largely due to client migrations in North America. Operating income
was $37.9 million compared to $38.4 million in the same period last
year. Operating margin improved to 23.5 percent in the quarter from
20.9 percent in the same period last year. This improvement in
operating results was due to continued cost management, including more
focused investment in new product capabilities, and growth in license
revenue.

HR Management - HR Management revenues were $59.4 million compared
to $63.0 million in the same period last year, largely due to timing
of project completions. The HR Management operating loss was $4.2
million compared to $17.1 million in the same period last year. The
operating loss reduction in the quarter was driven by a reduction in
SG&A expenses. Last year's results included expensing $6.1 million of
implementation costs related to a large contract.

Forward Financial Guidance

The company believes that results in the second half of the year
will be softer than previously expected due to the effects of adverse
economic conditions including a slowdown in call volumes. Convergys'
expectations for 2008, including the anticipated acquisition closing
in the third quarter, are as follows:

-- Full-year consolidated revenues at the lower end of the
previously provided range of $2.85 billion to $3.0 billion

-- 2008 GAAP earnings of $1.15 to $1.20 per diluted share,
including the dilutive impact of the Intervoice acquisition

-- Customer Management revenues of approximately $2.0 billion,
with operating income and margin improving in the fourth
quarter

-- Information Management revenues above $600 million with an
operating margin in excess of 17 percent

-- HR Management revenues of $260 million to $270 million and an
operating loss of approximately $20 million

-- Continued strong contribution from the cellular partnerships
and an effective tax rate of approximately 25 percent for the
year

FORWARD-LOOKING STATEMENTS DISCLOSURE AND "SAFE HARBOR" NOTE:

This news release contains forward-looking statements that reflect
Convergys' expectations as of July 23, 2008. Actual results of
Convergys could differ materially from those discussed herein.
Potential risk factors that could cause or contribute to actual
results being materially different from those in the forward-looking
statements include, but are not limited to, the loss of a significant
client or significant business from a client, difficulties in
completing a contract or implementing its provisions, difficulties in
completing or implementing an acquisition, continued consolidation in
the markets we serve, terrorist activities and responses of the United
States and other nations to such activities, changes in the legal and
regulatory environment in which Convergys and its clients operate, and
competitive and other factors disclosed in the Form 10-K for the year
ended December 31, 2007, and subsequent filings with the SEC by
Convergys Corporation. The company has no current intention of
updating any forward-looking statements that may be included herein,
other than in publicly available statements. The company now refers to
the Customer Care business segment as Customer Management and the
Employee Care business segment as HR Management.

NON-GAAP FINANCIAL MEASURES:

This news release contains non-GAAP financial measures as defined
by the Securities and Exchange Commission Regulation G. Pursuant to
the requirements of this regulation, reconciliations of these non-GAAP
measures to their comparable GAAP measures are included in the
attached financial tables.

Management uses free cash flow to assess the financial performance
of the company. Convergys' management believes that free cash flow is
useful to investors because it relates the operating cash flow of the
company to the capital that is spent to continue and improve business
operations, such as investment in the company's existing businesses.
Further, free cash flow facilitates management's ability to strengthen
the company's balance sheet, to repurchase the company's stock and to
repay the company's debt obligations. Limitations associated with the
use of free cash flow include that it does not represent the residual
cash flow available for discretionary expenditures as it does not
incorporate certain cash payments including payments made on capital
lease obligations or cash payments for business acquisitions.
Management compensates for these limitations by using both the
non-GAAP measure, free cash flow, and the GAAP measure, cash from
operating activities, in its evaluation of performance. There are no
material purposes for which we use this non-GAAP measure beyond the
purposes described above. This non-GAAP measure should be considered
supplemental in nature and should not be considered in isolation or be
construed as being more important than comparable GAAP measures. The
non-GAAP financial information that we provide may be different from
that provided by our competitors or other companies.

CONFERENCE CALL NOTE:

Convergys will host a conference call on Wednesday, July 23, 2008,
at 10:00 AM, EDT, to discuss the company's second quarter results. It
will feature Dave Dougherty, President and CEO, and Earl Shanks, CFO.
This call will be carried live and will be archived on the Internet. A
link to the conference call is available at www.convergys.com

ABOUT CONVERGYS

Convergys Corporation (NYSE: CVG) is a global leader in
relationship management. We provide solutions that drive more value
from the relationships our clients have with their customers and
employees. Convergys turns these everyday interactions into a source
of profit and strategic advantage for our clients.

For 25 years, our unique combination of domain expertise,
operational excellence, and innovative technologies has delivered
process improvement and actionable business insight to clients that
now span more than 70 countries and 35 languages.

Convergys is a member of the S&P 500 and has been voted a Fortune
Most Admired Company for eight consecutive years. We have
approximately 75,000 employees in 87 customer contact centers and
other facilities in the United States, Canada, Latin America, Europe,
the Middle East, and Asia, and our global headquarters in Cincinnati,
Ohio. For more information, visit www.convergys.com

(Convergys and the Convergys logo are registered trademarks of
Convergys Corporation. Intervoice is a registered trademark of
Intervoice, Inc.)

To receive Convergys news releases by email, click on
http://www.convergys.com/news_email.html

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Convergys Corporation
Consolidated Statements of Income
(Unaudited)

(In millions except per share amounts)

For the Three Months For the Six Months
Ended Jun. 30, % Ended Jun. 30, %
2008 2007 Change 2008 2007 Change
--------- ---------- ------ --------- --------- ------

Revenues $ 689.5 $ 707.0 (2) $1,405.9 $1,426.9 (1)

Costs and
Expenses:
Cost of
Providing
Services and
Products Sold 459.6 461.6 (0) 931.6 920.4 1
Selling,
General and
Administrative 139.7 137.1 2 289.9 281.8 3
Research and
Development
Costs 11.7 19.6 (40) 22.3 38.7 (42)
Depreciation 29.1 28.4 2 57.8 58.3 (1)
Amortization 2.0 2.2 (9) 3.9 4.4 (11)
Restructuring
Charges 0.0 0.0 NA 14.1 0.0 NA
--------- ---------- --------- ---------
Total Costs
and Expenses 642.1 648.9 (1) 1,319.6 1,303.6 1
--------- ---------- --------- ---------

Operating
Income 47.4 58.1 (18) 86.3 123.3 (30)

Equity in
Earnings of
Cellular
Partnerships 11.3 3.6 NA 18.1 5.6 NA
Other Income
(Expense), net (0.8) 0.5 NA (1.9) 2.7 NA
Interest
Expense (4.0) (4.6) (13) (7.8) (9.4) (17)
--------- ---------- --------- ---------

Income Before
Income Taxes 53.9 57.6 (6) 94.7 122.2 (23)

Income Taxes 13.4 18.8 (29) 18.3 39.8 (54)
--------- ---------- --------- ---------

Net Income $ 40.5 $ 38.8 4 $ 76.4 $ 82.4 (7)
========= ========== ========= =========

Earnings Per
Common Share
----------------
Basic $ 0.33 $ 0.28 18 $ 0.61 $ 0.60 2
========= ========== ========= =========
Diluted $ 0.32 $ 0.28 14 $ 0.60 $ 0.59 2
========= ========== ========= =========

Weighted Average
Common Shares
Outstanding
----------------
Basic 123.0 136.3 125.0 136.5
Diluted 125.3 140.2 127.2 140.5

Market Price Per
Share
----------------
High $ 16.75 $ 27.26 $ 16.75 $ 27.26
Low $ 14.62 $ 23.95 $ 13.66 $ 23.84
Close $ 14.86 $ 24.24 $ 14.86 $ 24.24

The above amounts reflect the Company's results of operations, as
reported under U.S. Generally Accepted Accounting Principles (U.S.
GAAP), that will be presented in the Convergys 10-Q for the quarterly
period ended Jun. 30, 2008.

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Convergys Corporation
Consolidated Balance Sheets

(Unaudited)
Jun. 30, Dec. 31,
(In millions) 2008 2007
----------- -----------

Assets
-----------------------------------------------

Cash and Cash Equivalents $ 54.9 $ 120.3
Receivables - Net 572.0 557.7
Other Current Assets 170.7 183.6
Property and Equipment - Net 343.1 364.4
Other Assets 1,446.3 1,338.2
----------- -----------
Total Assets $ 2,587.0 $ 2,564.2
=========== ===========

Liabilities and Shareholders' Equity
-----------------------------------------------

Debt Maturing in One Year $ 51.1 $ 0.6
Other Current Liabilities 446.9 426.3
Other Liabilities 415.0 356.3
Long-Term Debt 255.7 259.3
Common Shareholders' Equity 1,418.3 1,521.7
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,587.0 $ 2,564.2
=========== ===========

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Convergys Corporation
Summarized Statement of Cash Flow
(Unaudited)

For the Three Months For the Six Months
Ended Jun. 30, Ended Jun. 30,
(In millions) 2008 2007 2008 2007
---------- ------- -------- -------

Cash provided by operating
activities $16.6 $39.9 $42.1 $105.1

Cash used in investing
activities (26.4)(a) (30.5)(a) (37.4)(b) (54.3)(b)

Cash used in financing
activities (15.3) (34.8) (70.1) (64.9)
---------- ------- -------- -------

Net decrease in cash ($25.1) ($25.4) ($65.4) ($14.1)
========== ======= ======== =======

(a) Includes $22.5 and $21.6 of capital expenditures, net, for the
three months ended June 30, 2008 and 2007, respectively.

(b) Includes $41.4 and $45.6 of capital expenditures, net, for the
six months ended Jun. 30, 2008 and 2007, respectively.

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Convergys Corporation
Segment Revenues and Operating Income
(Unaudited)

For the Three Months For the Six Months
(In millions) Ended Jun. 30, % Ended Jun. 30, %
2008 2007 Change 2008 2007 Change
---------- --------- ------ --------- --------- ------

Revenues:
Customer
Management $ 469.0 $ 460.6 2 $ 945.0 $ 929.6 2
Information
Management 161.1 183.4 (12) 324.3 369.3 (12)
HR Management 59.4 63.0 (6) 136.6 128.0 7
---------- --------- --------- ---------
Total $ 689.5 $ 707.0 (2) $1,405.9 $1,426.9 (1)
========== ========= ========= =========

Operating Income
(Loss):
Customer
Management $ 19.4 $ 44.7 (57) $ 41.3 $ 101.0 (59)
Information
Management 37.9 38.4 (1) 67.4 63.7 6
HR Management (4.2) (17.1) (75) (9.1) (24.5) (63)
Corporate and
Other (5.7) (7.9) (28) (13.3) (16.9) (21)
---------- --------- --------- ---------
Total $ 47.4 $ 58.1 (18) $ 86.3 $ 123.3 (30)
========== ========= ========= =========

The above amounts reflect the Company's results of operations, as
reported under U.S. Generally Accepted Accounting Principles (U.S.
GAAP), that will be presented in the Convergys 10-Q for the quarterly
period ended Jun. 30, 2008.

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CONVERGYS CORPORATION
Reconciliation of Cash Provided by Operating Activities to Free Cash
Flow
(Unaudited)

For the Three Months For the Six Months
Ended Jun. 30, Ended Jun. 30,
(In millions) 2008 2007 2008 2007
---------- --------- --------- --------

Cash provided by operating
activities $ 16.6 $ 39.9 $ 42.1 $ 105.1

Capital expenditures, net (22.5) (21.6) (41.4) (45.6)
---------- --------- --------- --------

Free cash flow (a non-GAAP
measure) $ (5.9) $ 18.3 $ 0.7 $ 59.5
========== ========= ========= ========

Free cash flow - Management uses free cash flow to assess the
financial performance of the Company. Convergys' management believes
that free cash flow is useful to investors because it relates the
operating cash flow of the Company to the capital that is spent to
continue and improve business operations, such as investment in the
Company's existing businesses. Further, free cash flow facilitates
management's ability to strengthen the Company's balance sheet, to
repurchase the Company's stock and to repay the Company's debt
obligations. Limitations associated with the use of free cash flow
include that it does not represent the residual cash flow available
for discretionary expenditures as it does not incorporate certain
cash payments including payments made on capital lease obligations or
cash payments for business acquisitions. Management compensates for
these limitations by using both the non-GAAP measure, free cash flow,
and the GAAP measure, cash from operating activities, in its
evaluation of performance. There are no material purposes for which
we use this non-GAAP measure beyond the purposes described above.
This non-GAAP measure should be considered supplemental in nature and
should not be considered in isolation or be construed as being more
important than comparable GAAP measures.
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Convergys Corporation
Investor Contact
David Stein, Investor Relations
+1 513 723 7768 or investor@convergys.com
or
Media Contact
John Pratt, Corporate Communications
+1 513 723 3333 or john.pratt@convergys.com

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