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OVERVIEW
We are an international outsourcing provider of integrated business process
outsourcing solutions to major brand name companies seeking to maximize their
supply chain efficiencies and to extend their e-commerce initiatives. We derive
our revenues from a broad range of services, including professional consulting,
technology collaboration, order management, managed web hosting and web
development, customer relationship management, billing and collection services,
information management and international fulfillment and distribution services.
We offer our services as an integrated solution, which enables our clients to
outsource their complete infrastructure needs to a single source and to focus on
their core competencies. Our distribution services are conducted at our
warehouses and include real-time inventory management and customized picking,
packing and shipping of our clients' customer orders. We currently provide
infrastructure and distribution solutions to over 30 clients that operate in a
range of vertical markets, including technology manufacturing, computer
products, printers, cosmetics, fragile goods, high security collectibles,
pharmaceuticals, housewares, telecommunications and consumer electronics, among
others.
Our service fee revenue is typically charged on a percent of shipped
revenue basis or a per-transaction basis, such as a per-minute basis for
Web-enabled customer contact center services and a per-item basis for
fulfillment services. Additional fees are billed for other services. We price
our services based on a variety of factors, including the depth and complexity
of the services provided, the amount of capital expenditures or systems
customization required, the length of contract and other factors. Many of our
contracts with our clients involve third-party vendors who provide additional
services such as package delivery. The costs we are charged by these third-party
vendors for these services are passed on to our clients (and, in many cases, our
clients' customers) and are not reflected in our revenue or expense.
Historically, our services have also included purchasing and reselling client
product inventory. In these arrangements, our product revenue was recognized at
the time product was shipped. During the quarter ended September 30, 1999, our
primary client agreement under which we previously purchased and sold inventory
was restructured to provide transaction management services only on a service
fee basis.
Our expenses are comprised of:
- prior to September 30, 1999, cost of product revenue, which consisted of
the price of product sold and net freight costs;
- cost of service fee revenue, which consists primarily of compensation and
related expenses for our Web-enabled customer contact center services,
international fulfillment and distribution services and professional
consulting services, and other fixed and variable expenses directly
related to providing services under the terms of fee based contracts,
including certain occupancy and information technology costs and
depreciation and amortization expenses; and selling, general and
administrative expenses, which consist primarily of compensation and
related expenses for sales and marketing staff, executive, management and
administrative personnel and other overhead costs, including certain
occupancy and information technology costs and depreciation and
amortization expenses. In addition, for the periods prior to fiscal 2001,
certain direct contract costs related to our IBM master distributor
agreements have been reflected as selling and administrative expenses.
HISTORICAL FINANCIAL PRESENTATION
We believe our historical financial statements for the periods prior to
fiscal 2001 may not provide a meaningful comparison to our current and future
financial performance for the reasons described below.
In 1996, we entered into an agreement with the printer supplies division of
IBM. Under this agreement, we provided IBM with various transaction management
services, such as call center services and order fulfillment and distribution.
We also served as an IBM master distributor of printer supply products. Under
this master distributor arrangement, we purchased the printer supply products
from IBM and resold them to IBM customers. Following our initial agreement with
the printer supplies division, we entered into several similar agreements with
other divisions of IBM, both in the U.S. and Europe, and expanded our then
existing agreements to include more product lines.
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