Good day ladies and gentlemen and welcome to the fourth quarter 2007 TechTeam Global Earnings Call. My name is Betsy and I will be your coordinator for today. (Operators instructions) I would now like to turn the presentation over to your host for today’s call Mr. Marc Lichtman Vice President and Chief Financial Officer. Please proceed sir.

Thank you, Betsy and good afternoon every one. Thank you for joining us today for TechTeam Global’s fourth quarter 2007 earnings conference call. A copy of our complete press release issued earlier today is available on our company’s website techteam.com in the investors section. With me today on the call is Gary Cotshott our new President and Chief Executive Officer and Director and Chris Brown our former President and CEO and current Director. Before we begin I would like to remind our listeners once again that certain matters that we may be discussing today, including, but not limited to the discussion of the company’s business strategies, business developments and future performance, as well as statements of expectation and belief consist of forward-looking statements. Actual results may vary materially from these statements. These forward looking statements are affected by many factors, including, but not limited to the factors set forth in our press release issued today, as well as the other risk factors disclosed in the company’s reports filed with the U.S. Securities and Exchange Commission, including our form 10-K for 2006. We recommend that you review these risk factors as you make your investment decisions. Today TechTeam reported net income of $0.17 per diluted share for the fourth quarter of 2007 compared to net income of $0.12 per diluted share for the same period in 2006 an increase of about 50%. For the full year of 2007 the company more than tripled net income and reported $0.60 per diluted share compared to net income of $0.18 per diluted share for fiscal 2006. Fiscal 2006 included unusual expenses related to a proxy contest, legal settlement and asset impairment and reduced 2006 net income by $0.18 per share. TechTeam reported revenue of $64.3 million for the fourth quarter of 2007, the company's…

Thanks, Marc, and thanks to our shareholders and other members of the investment community who have joined us on the call. TechTeam concluded an extensive executive search and leadership transition as announced on February 11th. I am pleased to be with you today fully transitioned into the role of President and Chief Executive Officer and a Director of TechTeam. I would personally like to thank Chris Brown for his support and efforts throughout the transition. He has done an excellent job of establishing a solid foundation for the company and led it to a very strong finish in 2007. I will return in a couple of minutes to provide some additional commentary on the many opportunities I see for TechTeam going forward. But first, I would like Chris to provide color around the fourth quarter and the full year. Chris.

Thanks Gary. We closed out the year having demonstrated substantial growth in revenues and improved profitability. Two important goals we set out to achieve at the beginning of the year. Total revenue was up 33% from 2006 and up close to 18% organically. Profitability on a net income basis increased over 50% year-over-year for the quarter. Our turnaround efforts that began in the latter part of 2006 and continued through 2007 paid off this year and bode well for our continued growth going forward. The fourth quarter of 2007 was another quarter of record revenue, the fifth consecutive quarter that we have achieved a new record. Our top line momentum continued, as revenue increased by 47% over the fourth quarter of 2006 and almost 9% sequentially over the third quarter of 2007. We generated growth in all of our business, but most impressively in IT outsourcing segment, which was up 13% sequentially. Our profitability on a net income basis grew significantly over 2006, as well, improving 50% over the last year to $0.17 per share. However, net income did decrease $0.3 per share from the third quarter'0s record to $0.20 per share. While much of the pressure was one time in nature, I want to provide some additional color to Marc's earlier comments. Our gross margin in the US commercial business was impacted by events at a large retail customer. As you know, the holiday season is their busiest time in the year and we ramped up our resources in anticipation of additional volumes, however this past November and December this customer did not see increased call volumes. And therefore our margins came in lower than anticipated. We also, encouraged some front end cost loading on a new project in the hospitality sector. In addition, we incurred some higher than…

Thanks Chris. The numbers for the fourth quarter in 2007 do tell a great story and demonstrate the momentum that the company has achieved. TechTeam had a year of solid growth, improved profitability and made great progress on all fronts. It's a great foundation to build on and that is exactly what we intend to do, recognizing still that we operate in a very competitive environment with some equally challenging market and economic conditions. That said, I am excited to be here and believe that there are more untapped opportunities that will allow us to sustain the organic growth, acquire new capabilities, improve the efficiency of the operations, and drive continued improvements in operating income. Obviously, I have only been here a little over a week, but my initial observations and key priorities over the near-term are as follows. First, we have a great base of high profile logo customers in all of our business units. Continuing to expand our footprint in these accounts is our number one focus and priority. Our customers are asking us to expand the service portfolio that we offer, and extend our service capabilities globally, and we intend to pursue both aggressively. In addition, with a great set of offerings and a low cost structure, we will continue to compete for and win new accounts. Second, we need to raise our profile in the industry and particularly with large potential alliance partners like, CA in the US, and Orange Business Services, in Europe. As stated in our third quarter 10-Q, we added an alliance in Europe with a major US based manufacturer of computers, and we hope to be able to announce more specifics on this in the near future. With the focus on building alliances, we will extend our reach and leverage the demand creation resources of our partners to tap into a rich vein of new business. Third, although our cost structure is reasonably competitive already, we still have opportunities for margin and SG&A improvements and we are going after those opportunities aggressively. To improve margins, we intend to pursue higher value, higher margin offerings, optimize our cost structure further by improving agent productivity, establishing additional low cost offshore locations and examining our companywide expense structure. From an SG&A standpoint, we intend to continue to reduce these expenses as a percent of revenue over time. As we move forward, we will execute against these opportunities to grow profitability and sustain the momentum that TechTeam has created in 2007. I will also be working closely with the Board, to develop the strategy that will build on our current solid foundation and meet our goals of establishing TechTeam as the partner of choice for Fortune 1000 companies and government organizations when it comes to optimizing information technology costs for our customers. Now, I would like to ask the operator to open the call for questions.

(Operator Instructions) And your first question comes from Tim Brown from Roth Capital . Please proceed.

Hi, good afternoon guys. Couple of questions first on the fourth quarter, and thanks for that color on the growth margins, is there a way to quantify, maybe, both the unique project with the retail customer and the startup costs, I mean did that cost [Author ID1: at Fri Feb 22 20:23:00 2008 ][Author ID1: at Fri Feb 22 20:22:00 2008 ] [Author ID0: at Thu Nov 30 00:00:00 1899 ] [Author ID0: at Thu Nov 30 00:00:00 1899 ] [Author ID0: at Thu Nov 30 00:00:00 1899 ] [Author ID0: at Thu Nov 30 00:00:00 1899 ] Unidentified Analyst [Author ID0: at Thu Nov 30 00:00:00 1899 ] [Author ID0: at Thu Nov 30 00:00:00 1899 ] Cost [Author ID1: at Fri Feb 22 20:22:00 2008 ]you a [Author ID1: at Fri Feb 22 20:24:00 2008 ]100 basis points of gross margin in the quarter? [Author ID1: at Fri Feb 22 20:24:00 2008 ] end a[Author ID1: at Fri Feb 22 20:24:00 2008 ]A[Author ID1: at Fri Feb 22 20:24:00 2008 ]nd secondly do [Author ID1: at Fri Feb 22 20:24:00 2008 ]you expect that pump [Author ID1: at Fri Feb 22 20:24:00 2008 ]bump [Author ID1: at Fri Feb 22 20:24:00 2008 ]back up to the 25.5% to 26% range relatively shortly even in Q1 may [Author ID1: at Fri Feb 22 20:25:00 2008 ]be?

Hi Sam [Author ID1: at Fri Feb 22 20:25:00 2008 ]Tim [Author ID1: at Fri Feb 22 20:25:00 2008 ]this is Marc. I think that to answer your first question we are probably, we are[Author ID1: at Fri Feb 22 20:25:00 2008 ] talking about a less than a 100 basis point difference and I do anticipate that we should be able to get back into the 25% to 26% range that you mentioned in 2008 going forward. [Author ID1: at Fri Feb 22 20:25:00 2008 ] Tim Brown - Roth Capital[Author ID1: at Fri Feb 22 20:26:00 2008 ] Unidentified Analyst [Author ID1: at Fri Feb 22 20:26:00 2008 ] Okay.[Author ID1: at Fri Feb 22 20:26:00 2008 ].[Author ID1: at Fri Feb 22 20:26:00 2008 ] s[Author ID1: at Fri Feb 22 20:26:00 2008 ]S[Author ID1: at Fri Feb 22 20:26:00 2008 ]o,[Author ID1: at Fri Feb 22 20:26:00 2008 ] I guess is this [Author ID1: at Fri Feb 22 20:26:00 2008 ]it [Author ID1: at Fri Feb 22 20:26:00 2008 ]fair to say that at least with retail customer that’s really did [indiscernible] [Author ID1: at Fri Feb 22 20:26:00 2008 ]just a [Author ID1: at Fri Feb 22 20:26:00 2008 ]the [Author ID1: at Fri Feb 22 20:26:00 2008 ]Q4 event and with the start up I mean did you see that coming, as the [Author ID1: at Fri Feb 22 20:27:00 2008 ]-- and is [Author ID1: at Fri Feb 22 20:27:00 2008 ]startup going to [Author ID1: at Fri Feb 22 20:27:00 2008 ]be affecting[Author ID1: at Fri Feb 22 20:27:00 2008 ] in [Author ID1: at Fri Feb 22 20:27:00 2008 ]Q1, [Author ID1: at Fri Feb 22 20:27:00 2008 ]Q2 as well,[Author ID1: at Fri Feb 22 20:27:00 2008 ] as you ramped[Author ID1: at Fri Feb 22 20:27:00 2008 ] this [Author ID1: at Fri Feb 22 20:27:00 2008 ]those newer [Author ID1: at Fri Feb 22 20:27:00 2008 ]and your [Author ID1: at Fri Feb 22 20:27:00 2008 ]clients on? [Author ID1: at Fri Feb 22 20:28:00 2008 ]

You know t[Author ID1: at Fri Feb 22 20:28:00 2008 ]T[Author ID1: at Fri Feb 22 20:28:00 2008 ]his is Chris, Tim.[Author ID1: at Fri Feb 22 20:28:00 2008 ] and t[Author ID1: at Fri Feb 22 20:28:00 2008 ]T[Author ID1: at Fri Feb 22 20:28:00 2008 ]he retail e[Author ID1: at Fri Feb 22 20:28:00 2008 ]a[Author ID1: at Fri Feb 22 20:28:00 2008 ]ffect is [Author ID1: at Fri Feb 22 20:28:00 2008 ]actually has [Author ID1: at Fri Feb 22 20:28:00 2008 ]is [Author ID1: at Fri Feb 22 20:28:00 2008 ]seasonal from year- to-year,[Author ID1: at Fri Feb 22 20:28:00 2008 ] fourth quarter be in [Author ID1: at Fri Feb 22 20:28:00 2008 ]being [Author ID1: at Fri Feb 22 20:28:00 2008 ]a big quarter for them, so that’s going to dissipate or has dissipated already in Q1. [Author ID1: at Fri Feb 22 20:28:00 2008 ] Tim Brown - Roth Capital[Author ID1: at Fri Feb 22 20:28:00 2008 ] Unidentified Analyst[Author ID1: at Fri Feb 22 20:28:00 2008 ] Okay.

All of our big IT ramp ups include a pretty hefty expa[Author ID1: at Fri Feb 22 20:51:00 2008 ]e[Author ID1: at Fri Feb 22 20:51:00 2008 ]nse at the beginning of the contract. Tim Brown - Roth Capital[Author ID1: at Fri Feb 22 20:29:00 2008 ] Unidentified Analyst [Author ID1: at Fri Feb 22 20:29:00 2008 ] Exactly.

So,[Author ID1: at Fri Feb 22 20:51:00 2008 ] as I have said before,[Author ID1: at Fri Feb 22 20:51:00 2008 ] it’[Author ID1: at Fri Feb 22 20:51:00 2008 ]'[Author ID1: at Fri Feb 22 20:51:00 2008 ]s a mix [washing][Author ID1: at Fri Feb 22 20:29:00 2008 ]blessing[Author ID1: at Fri Feb 22 20:29:00 2008 ], we want to continue to add as many of those of customers as possible and every time we do,[Author ID1: at Fri Feb 22 20:29:00 2008 ] we face some of this increased cost at the beginning of a contract,[Author ID1: at Fri Feb 22 20:29:00 2008 ].[Author ID1: at Fri Feb 22 20:29:00 2008 ] so b[Author ID1: at Fri Feb 22 20:29:00 2008 ]B[Author ID1: at Fri Feb 22 20:29:00 2008 ]ut the impact from the specific items that I have mentioned should be either may [Author ID1: at Fri Feb 22 20:52:00 2008 ]be a minor affect in Q1 but will be substantially lower than it was in Q4. Tim Brown - Roth Capital[Author ID1: at Fri Feb 22 20:52:00 2008 ] Unidentified Analyst [Author ID1: at Fri Feb 22 20:52:00 2008 ] Okay. a[Author ID1: at Fri Feb 22 20:52:00 2008 ]A[Author ID1: at Fri Feb 22 20:52:00 2008 ]nd then just a quick question on the balance sheet, [Author ID1: at Fri Feb 22 20:52:00 2008 ] [Author ID1: at Fri Feb 22 20:52:00 2008 ]can you just give us a little color on the AR and then maybe what the DSO's were in Q4 versus Q3? And if you could just give me a little more color on the big jump from Q3 to Q4?

Sure Tim, this is Marc. The fourth quarter was a challenging quarter for us. We actually hit, as I would call it, the perfect storm with a number of customers running into some clutching challenges. No disputes, no issues and a lot of this logjam has become unjammed if you will in the first quarter, so we've had some good collections so far, starting out the year. But it really was a combination of a few customers across really all of our businesses and all of our business units that resulted in some significant collection delays. One customer in particular in the government space changed financial systems and processes and it has resulted in a tremendous amount of delay in getting payments out of one of our customers in the government space. So, without giving specific DSO numbers its safe to say our DSO did definitely trend up in Q4, but I have already began to see a trend back downward in the first quarter.

Yeah it's also fair to say that we'll be giving this our attention.

Okay. So, by the end of Q1 you expect the DSO's to be back to where they were in Q2, Q3. Is that temporary or…?

If it doesn’t get all the way back down to that level it should be within spitting distance.

Okay. Fair enough.

We do expect a number of things to get cleared up, well some of which have already been cleared up, but the remaining items we do anticipate over the next couple of weeks for that to happen. But, the check is always in the mail, so to speak, right. So if we're not there by the end of the first quarter, we should be within pretty close spitting distance.

Okay. And then Chris, just on the pipeline you mentioned, you guys were able to sign a $160 million worth of contracts in the full year.

Yeah.

Can you give us an idea of the percentage of that that is renewals? Is it those to new business?

That's a good question we didn't really think it out that way. There were a couple of -- I'd like to get back to you on it, Tim. I can think of a couple of our large scale renewals right of the top of my head, but that might misstate where we are. We are operating on primarily three-year contract basis. So, you can guess about a third of our contracts every year come up for renewal. So, we had as I pointed out, a big contract win at NewVectors, which is a renewal, a big automotive concern in Europe, which was a renewal and there were some others. I'm scratching my head I don't think there were any other substantive contract renewals that were open.

Okay. I mean, we could circle back on that.

Yeah, and I am more than happy to go get that for you.

Okay. And just in terms of we talked about renewals, were there any contracts that came up for renewal but you didn't win anything material?

No, we had one European customer that came up for renewal that we did not -- we were not successful in renewing. That was really the only substantive one. There might have been, some cats and dogs, by that I mean small staffing related things, which didn’t renew or that got put in abeyance for a while, but there was only one that was important to the long term benefit of the business.

Okay. And with Ford, I think that contract comes in end of September this year, have you started talking with them about renewing that contract and, I don’t know, if you can just give us a little color on where that's at.

Yes, Tim. Many of you can imagine, we spent a lot of time with our largest customer.

Sure.

We have a good fortune of a great relationship with Ford, developed over the years. That said it is competitive environment. However, we believe the renewal is progressing well at this stage.

Which stage is it in and have they already put out a formal RFP for it or are they going to do that, can you give us an idea of what state we are in, and what is the timing you expect it would be?

Well, that is really a Ford decision and issue, and I would actually prefer not to comment on that. Not, because I don’t want to disclose, but because that is a Ford prerogative.

Okay. Thanks for taking my question. I will jump back in the queue.

Okay, Tim. Thank you.

(Operator Instructions) And we have a follow-up question from Tim Brown from Roth Capital. Please proceed.

Okay. I am back.

So quick.

The other area I just wanted to touch on is if you guys could maybe give me your outlook and particularly on maybe both, the domestic and the European markets. And maybe just talk about what you are seeing with IT spending and I imagine both those markets are different and particularly, given that you guys are -- I know you have most of your contracts at a longer term and more of an outsourcing, is it affecting you as much as it might be just a straight consulting model.

I will make a couple of comments on that, Tim. It’s fair to say that there is a certain amount of economic uncertainty, of late. Now considering the credit issues and a general slowdown in the economy, and I believe that there is some prudence being exercised on the part of companies with respect to hiring and in general expense levels at this point, until there is a little bit more clarity. And I would say that's equally true in the US and Europe. The good news is that we do provide a service and a capability that causes companies to achieve savings. As they desire to do that. And so, for us represents an opportunity. That said, sometimes there are some embedded costs of transition, so forth that can be delayed as well so net-net caution. But we're not seeing anything that is dramatically affecting our business at this point.

And does anybody talk to you, I'm sorry go ahead

That obviously can change going forward depending on how economic conditions continue to fall out.

In past recessions have you seen, your customers basically, I guess they wouldn’t get out of their contracts, but they might look for a lower level of services receipts. Have you seen that in past recessions?

Occasionally there will be. I would tell you Tim that on an ongoing basis, we see service levels moderating up and down depending on the needs of the moment which could be economic or could be a better end user experience. There are always different pressures in the business. And so, I don’t think there is a specific answer to that question. One of the things that we do provide to our customers is provide that degree of flexibility which they value in our relationships.

Okay. And then just on the government side, do you expect 2008 to be as challenging as 2007, particularly, and I don’t know if there is anything out there that is going to have the Federal government loosen their purse strings. But do you expect that in 2009, you're going to start seeing a better environment on the government side?

As you know there are a lot of forces that will dictate the government environment going forward, including ongoing spending and allocation of resources, as well as, the political environment, which will weight heavily on the government, as we proceed toward an election and subsequent to an election. So, it's fair to say that there are, it won't be like it's been historically. A smoother kind of environment. It will have ups and downs. And our challenge is to deliver compelling value to the customers so that they are prepared to take advantage of that to the extent, if they have the funds to do so.

Okay. I think that pretty much does it, and thanks for your time.

Hey Tim, thank you.

Your next question comes from Nelson Obis from Winfield Capital. Please proceed.

Yeah. I just wonder if you can breakout some of these SG&A one-time expenses that led to the same SG&A -- lower percentage but the same dollar amount. There were a couple of things in there I think you could breakout, succession costs for example that's an SG&A item, correct?

That's correct.

Our CEO succession costs Nelson, were approximately $200,000 in the fourth quarter.

Okay. And then what other issues were there? Where there some recruiting issues and things of that nature?

We have incurred some higher recruiting related expenses throughout the organization, little bit higher than our normal run rate, probably in the range of $100,000 to $150,000. There were some higher than normal travel expenses, probably in that same range.

I had a bigger picture question, which is, in the industrial arena we saw a number of companies outsource a lot of their manufacturing offshore. And the phenomena that we saw basically was that, first everybody went to Mexico and by the time they got established in Mexico, they realized that Mexico was no longer the lowest cost place to do things, so they had to up and go other places. How and some people did it and some people didn’t and some people are still trying, but all in all it was somewhat inconvenient, when you look at your outsourcing efforts, are you encountering the same things, obviously different kinds of services and much lower sum cost on your side, but is it also a moving game as you look at outsource opportunities?

Yes. What I would tell you is this. You are correct in that the economics of any given geographic location do change over time, as companies sort of flock to those locations. And that does raise the aggregate cost of delivery in those locations; however they are still lower than the cost structures of alternative locations. And so, it’s still good. It just is not as good, And some times being a first mover into the two edged sword , some times being the first mover into these environments is a wonderful thing, that said being the first mover can also be a challenge, in the context of being able ramp up into new areas. We feel comfortable that as we expand into, as minimum one additional location that we will be taking advantage of the combination of lower costs and higher quality for our customers which they demand.

Okay.

It’s easy to go into the very lowest cost environment and upset your customers. We obviously have a high standard of performance for our customers and choose not to do that.

The other bug picture question -- I get out of way is, certainly in your arena consulting unbundling has had an effect on margin compression. Are we sort of through that phenomena and don’t have to worry about that going forward in your opinion, creating additional margin compression?

Nelson the unbundling is continuing right? And yet every time it happens there is a new challenge to competitiveness in margins and we are going see pressure, continued pressure, not so much margin compression from unbundling, but from just the general economic climate across the board. Right, I mean it’s what have you done for me lately, right.

I understand that you always going have to show the value proposition, but the actual size of unbundling was some what a bit dramatic for some consulting companies and I get a sense that the worst is over, as far as that's concerned.

Yeah, its actually good for us, so unbundling or de-bundling, as I can call it is actually advantageous to us, because we tend not to compete for, just say, billing and dollar outsourcing contracts so its sort of like out of our reach, but when the customers decide to de-bundle parts of those become very attractive for us to compete for so.

Yeah for the most part the sort of the historical model of faceable, all you can eat, outsourcing is over. Customers are very much into selective sourcing today. And they're looking for best in class providers in the functional areas that they choose to selectively source. And so, as Chris mentioned, it is absolutely an advantage to us. And we do so at a cost structure that’s very competitive, vis-à-vis some of the larger companies that are out there in the market.

Okay. Thank you. Good luck!

Thank you Nelson.

There are no questions at this time. I would like to turn the call over to Mr. Gary Cotshott and for final remarks.

Hey Betsy, thank you and thanks everyone for their participation today. We'll look forward to updating you on our progress next quarter. Until then we'll sign out. Thanks again. Bye now.