TeleTech Announces Third Quarter 2012 Financial Results

  TeleTech Announces Third Quarter 2012 Financial Results

  Achieves Third Quarter Revenue of $286 Million and Operating Margin of 9.6
                                   Percent;
             Diversified Businesses Reach 22 Percent of Revenue;
         Third Quarter Annualized New Business Wins Total $90 Million

Business Wire

ENGLEWOOD, Colo. -- November 07, 2012

TeleTech Holdings, Inc. (NASDAQ: TTEC), a leading global provider of
technology-enabled customer experience solutions, today announced financial
results for the third quarter ended September 30, 2012. The Company also filed
its Quarterly Report on Form 10-Q with the Securities and Exchange Commission
for the quarter ended September 30, 2012.

“We continue to execute on our strategy of investing in both revenue
diversification and innovation to position the company for top line growth,”
said Ken Tuchman, TeleTech chairman and chief executive officer. “Our
diversified business segments grew to 22 percent of revenue from 18 percent in
the year-ago period. Our strong balance sheet has funded our continued
investment in scalable, technology-rich offerings that keep us strategically
relevant with the increasingly complex customer experience needs of our
clients,” continued Tuchman. “Industry leading companies realize that creating
strong emotional connections with their customers is the key differentiator in
today’s dynamic global marketplace. As we celebrate our 30^th year in
business, I am very excited about our future. We have been investing in
innovation for the past three decades and as a result, we are uniquely
positioned to help our clients deliver on the promise of their brand by
providing engaging customer experiences at every touch point.”

THIRD QUARTER 2012 FINANCIAL HIGHLIGHTS

  *Third quarter 2012 revenue was $286.3 million compared to $304.2 million
    in the third quarter 2011. The lower revenue was attributable to a $27.7
    million reduction from the Company’s previously announced decision to exit
    certain underperforming business in addition to a $4.5 million negative
    foreign currency impact. Excluding the impact of the above reductions,
    third quarter 2012 revenue grew $14.3 million or 4.7 percent.
  *Income from operations for the third quarter 2012 included $2.6 million of
    net restructuring and impairment charges.
  *Third quarter 2012 income from operations was $27.4 million or 9.6 percent
    of revenue compared to $26.6 million or 8.7 percent of revenue in the
    third quarter 2011. Excluding the restructuring and impairment charges
    discussed above, third quarter 2012 non-GAAP income from operations was
    $30.0 million or 10.5 percent of revenue.
  *Third quarter 2012 fully diluted earnings per share attributable to
    TeleTech stockholders was 52 cents compared to 44 cents in the third
    quarter 2011. Excluding restructuring, impairment and other items, third
    quarter 2012 non-GAAP fully diluted earnings per share attributable to
    TeleTech stockholders increased 11.4 percent to 39 cents compared to 35
    cents in the year-ago quarter.
  *During the third quarter 2012 TeleTech signed an estimated $90 million in
    annualized revenue from both new and expanding client relationships.
    Approximately 75 percent represented recurring revenue.

STRONG BALANCE SHEET CONTINUES TO FUND OPERATIONS, SHARE REPURCHASES AND
STRATEGIC ACQUISITIONS

  *As of September 30, 2012, TeleTech had cash and cash equivalents of $170.4
    million, $88.0 million of borrowings on its credit facility and total
    other debt of $12.8 million, resulting in net cash of $69.6 million.
  *TeleTech had approximately $408 million of additional borrowing capacity
    available under its revolving credit facility as of September 30, 2012.
    This provides TeleTech with the continued financial flexibility to fund
    organic growth, share repurchases and accretive acquisitions.
  *Cash flow from operations in the third quarter 2012 increased to $14.8
    million from a negative ($8.5) million in the third quarter 2011. The
    increase was primarily due to the timing of certain working capital items.
  *Capital expenditures in the third quarter 2012 were $15.8 million compared
    to $8.8 million in the third quarter 2011. The higher capital expenditures
    were principally related to increased investments in the Company’s
    technology-based offerings.
  *TeleTech repurchased 0.9 million shares of common stock during the third
    quarter 2012 for a total cost of $14.5 million. As of September 30, 2012,
    there was $26.5 million authorized for future share repurchases.

SEGMENT REPORTING

To provide clarity as to the financial profile and performance of TeleTech’s
primary businesses, TeleTech reports financial results for the following four
business segments: Customer Management Services (CMS), Customer Growth
Services (CGS), Customer Technology Services (CTS) and Customer Strategy
Services (CSS). Corporate expenses are reported separately from the above.
Highlights of the financial performance of the primary segments are provided
below.

Customer Management Services (CMS) – Customer Experience Delivery Solutions

  *CMS third quarter 2012 revenue was $224.0 million, representing
    approximately 78 percent of total third quarter 2012 revenue, compared to
    $248.7 million in the third quarter 2011. The lower revenue was
    attributable to a $27.7 million reduction from the Company's previously
    announced decision to exit certain underperforming business in addition to
    a $4.1 million negative foreign currency impact. Excluding the above
    reductions, revenue increased by $7.1 million or 2.9 percent.
  *CMS third quarter 2012 income from operations included $2.5 million of net
    restructuring and impairment charges.
  *CMS third quarter 2012 income from operations, before corporate expenses,
    was $47.2 million or 21.1 percent of revenue, compared to 17.4 percent of
    revenue in the third quarter 2011. Excluding the $2.5 million of net
    restructuring and impairment charges, CMS third quarter 2012 non-GAAP
    income from operations was $49.7 million or 22.2 percent of revenue. The
    higher third quarter 2012 operating margin was primarily related to
    TeleTech’s profit improvement initiatives including an increase in
    capacity utilization for its multi-client centers to 77 percent from 74
    percent in the year-ago quarter.

Customer Growth Services (CGS) – Technology-Enabled Revenue Generation
Solutions

  *CGS third quarter 2012 revenue was $28.2 million, representing
    approximately 10 percent of total third quarter 2012 revenue, compared to
    $25.8 million in the third quarter 2011.
  *CGS third quarter 2012 income from operations was $5.8 million or 20.6
    percent of revenue, compared to 19.5 percent of revenue in the third
    quarter 2011.

Customer Technology Services (CTS) – Hosted and Managed Technology Solutions

  *CTS third quarter 2012 revenue was $22.3 million compared to $22.9 million
    in the year-ago period, representing approximately 8 percent of total
    third quarter 2012 revenue.
  *CTS third quarter 2012 income from operations was $3.3 million or 14.6
    percent of revenue, compared to $4.3 million or 18.7 percent of revenue in
    the third quarter 2011. CTS third quarter 2012 operating results reflect
    the combination of its cloud- and premise-based services along with an
    increased investment in technology and expanded offerings to support its
    continued growth initiatives.
  *During the third quarter, TeleTech further enhanced its cloud-based market
    opportunity and expertise by achieving Cisco’s Cloud Provider
    Certification and Contact Center as a Service Designation.

Customer Strategy Services (CSS) – Customer Experience Strategy and Data
Analytics Solutions

  *CSS third quarter 2012 revenue increased 69.9 percent to $11.7 million
    compared to $6.9 million in the third quarter 2011.
  *CSS third quarter 2012 income from operations was $0.8 million or 7.1
    percent of revenue, compared to an operating loss of ($0.3) million in the
    third quarter 2011. The higher operating margin was attributable to the
    increased revenue enabling greater fixed cost absorption.

Corporate Expenses

  *The third quarter 2012 income from operations for the above segments
    excluded $29.7 million of corporate expenses. TeleTech expects to continue
    to further leverage its general and administrative expenses as a
    percentage of revenue across its expanding suite of services.

BUSINESS OUTLOOK

  *TeleTech continues to expect 2012 revenue will range between $1.15 billion
    and $1.2 billion.
  *TeleTech continues to expect 2012 operating margin will increase from 2011
    and range between 8.5 percent and 9.0 percent, before asset impairment and
    restructuring charges.

SEC FILINGS

The company’s filings with the Securities and Exchange Commission are
available in the “Investors” section of TeleTech’s website, which can be found
at www.teletech.com.

CONFERENCE CALL

A conference call and webcast with management will be held on Thursday,
November 8, 2012 at 8:30 a.m. Eastern Time. You are invited to join a live
webcast of the conference call by visiting the “Investors” section of the
TeleTech website at www.teletech.com. If you are unable to participate during
the live webcast, a replay will be available on the TeleTech website through
Thursday, November 22, 2012.

NON-GAAP FINANCIAL MEASURES

To supplement the Company's consolidated financial statements presented in
accordance with generally accepted accounting principles (GAAP) in the United
States, the Company uses the following non-GAAP financial measures: Free Cash
Flow, Non-GAAP Income from Operations, Non-GAAP EBITDA and Non-GAAP EPS.
TeleTech believes that providing these non-GAAP financial measures provides
investors with greater transparency to the information used by TeleTech's
management in its financial and operational decision making and allows
investors to see TeleTech's results "through the eyes" of management. TeleTech
also believes that providing this information better enables TeleTech's
investors to understand its operating performance and information used by
management to evaluate and measure such performance. These financial measures
are not intended to be used in isolation or as a substitute for the financial
information prepared and presented in accordance with GAAP. A reconciliation
of these non-GAAP financial measures is available in the financial tables
attached to this press release. We also encourage all investors to read our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.

ABOUT TELETECH

For 30 years, TeleTech and its subsidiaries have helped the world’s most
successful companies design, enable, manage and grow customer value through
the delivery of superior customer experiences across the customer lifecycle.
As the go-to partner for the Global 1000, the TeleTech group of companies
delivers technology-enabled solutions that maximize revenue, transform
customer experiences and optimize business processes. From strategic
consulting to operational execution, our more than 39,000 employees drive
success for clients in the communications and media, financial services,
government, healthcare, technology, transportation and retail industries.
Through the TeleTech Community Foundation, the company leverages its
innovative leadership to ensure that students in underserved communities
around the globe have access to the tools and support they need to maximize
their educational outcomes. For additional information, please visit
www.teletech.com.

FORWARD-LOOKING STATEMENTS

Statements in this press release that relate to future results and events
(including statements about future financial and operating performance) are
forward-looking statements based on TeleTech's current expectations. Actual
results and events in future periods could differ materially from those
projected in these forward-looking statements because of a number of risks and
uncertainties including: achieving estimated revenue from new, renewed and
expanded client business as volumes may not materialize as forecasted,
especially due to the global economic slowdown; the ability to close and ramp
new business opportunities that are currently being pursued or that are in the
final stages with existing and/or potential clients; our ability to execute
our growth plans, including the successful integration of acquired companies
and the sales of new products; the possibility of lower revenue or price
pressure from our clients experiencing a business downturn or merger in their
business; greater than anticipated competition in the customer management
industry, causing adverse pricing and more stringent contractual terms; risks
associated with losing or not renewing client relationships, particularly
large client agreements, or early termination of a client agreement; the risk
of losing clients due to consolidation in the industries we serve; consumers’
concerns or adverse publicity regarding our clients’ products; our ability to
find cost-effective locations, obtain favorable lease terms and build or
retrofit facilities in a timely and economic manner; risks associated with
business interruption due to weather, fires, pandemic, or terrorist-related
events; risks associated with attracting and retaining cost-effective labor at
our delivery centers; the possibility of asset impairments and restructuring
charges; risks associated with changes in foreign currency exchange rates;
economic or political changes affecting the countries in which we operate;
changes in accounting policies and practices promulgated by standard setting
bodies; and new legislation or government regulation that adversely impacts
our tax obligations, health care costs or the customer management industry. A
detailed discussion of these and other risk factors that could affect our
results is included in TeleTech's SEC filings, including our Annual Report on
Form 10-K for the year ended December 31, 2011. The Company’s filings with the
Securities and Exchange Commission are available in the “Investors” section of
TeleTech’s website, which is located at www.teletech.com. All information in
this release is as of November 7, 2012. The Company undertakes no duty to
update any forward-looking statement to conform the statement to actual
results or changes in the Company’s expectations.

                                                              
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
                                                                   
                                                                   
                      Three months ended            Nine months ended
                      September 30,                 September 30,
                      2012           2011           2012           2011
                                                                   
Revenue               $ 286,268      $ 304,235      $ 867,720      $ 878,850
                                                                   
Operating Expenses:
Cost of services        201,766        220,795        622,782        630,274
Selling, general        43,845         43,445         137,689        138,529
and administrative
Depreciation and        10,695         11,807         31,040         34,828
amortization
Restructuring           2,440          1,616          20,694         2,298
charges, net
Impairment losses      161          -            2,958        230     
Total operating        258,907      277,663      815,163      806,159 
expenses
                                                                   
Income From             27,361         26,572         52,557         72,691
Operations
                                                                   
Other income           (1,252  )     (633    )     (2,802  )     (2,179  )
(expense)
                                                                   
Income Before           26,109         25,939         49,755         70,512
Income Taxes
                                                                   
Benefit (Provision)    3,611        496          3,030        (9,482  )
for income taxes
                                                                   
Net Income              29,720         26,435         52,785         61,030
                                                                   
Net income
attributable to        (1,291  )     (1,064  )     (3,152  )     (2,969  )
noncontrolling
interest
                                                                   
Net Income
Attributable to       $ 28,429      $ 25,371      $ 49,633      $ 58,061  
TeleTech
Stockholders
                                                                   
Net Income Per
Share Attributable
to TeleTech
Stockholders
                                                                   
Basic                 $ 0.53        $ 0.45        $ 0.90        $ 1.02    
                                                                   
Diluted               $ 0.52        $ 0.44        $ 0.89        $ 1.00    
                                                                   
                                                                   
Income From             9.6     %      8.7     %      6.1     %      8.3     %
Operations Margin
Net Income
Attributable to         9.9     %      8.3     %      5.7     %      6.6     %
TeleTech
Stockholders Margin
Effective Tax Rate      (13.8   )%     (1.9    )%     (6.1    )%     13.4    %
                                                                   
                                                                   
Weighted Average
Shares Outstanding
Basic                   54,093         56,476         55,233         56,790
Diluted                 54,905         57,748         55,991         58,173

                                                              
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(unaudited)
                                                                   
                                                                   
                         Three months ended          Nine months ended
                         September 30,               September 30,
                         2012          2011          2012          2011
                                                                   
Revenue:
Customer Management      $ 224,041     $ 248,690     $ 688,317     $ 742,969
Services
Customer Growth            28,200        25,793        75,373        71,419
Services
Customer Technology        22,343        22,876        72,852        39,193
Services
Customer Strategy         11,684      6,876       31,178      25,269  
Services
Total                    $ 286,268    $ 304,235    $ 867,720    $ 878,850 
                                                                   
Income (Loss) From
Operations:
Customer Management      $ 47,181      $ 43,385      $ 120,797     $ 141,223
Services
Customer Growth            5,818         5,020         11,108        12,596
Services
Customer Technology        3,272         4,289         11,734        10,158
Services
Customer Strategy          824           (322    )     1,671         1,450
Services
Corporate                 (29,734 )    (25,800 )    (92,753 )    (92,736 )
Total                    $ 27,361     $ 26,572     $ 52,557     $ 72,691  

                                            
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
                                               
                                               
                               September 30,   December 31,
                               2012            2011
                               (unaudited)
                                               
ASSETS
Current assets:
Cash and cash equivalents      $   170,377     $   156,371
Accounts receivable, net           244,175         243,636
Other current assets              95,830         78,275
Total current assets               510,382         478,282
                                               
Property and equipment, net        111,431         100,321
Other assets                      183,791        168,375
                                               
Total assets                   $   805,604     $   746,978
                                               
LIABILITIES AND EQUITY
Total current liabilities      $   161,568     $   170,011
Other long-term liabilities        145,117         106,720
Total equity                      498,919        470,247
                                               
Total liabilities and equity   $   805,604     $   746,978

                                                   
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(unaudited)
                                                              
                                                                   
                         Three months ended          Nine months ended
                         September 30,               September 30,
                         2012          2011          2012          2011
                                                                   
Reconciliation of
Gross Margin:
                                                                   
Revenue                  $ 286,268     $ 304,235     $ 867,720     $ 878,850
Cost of services          201,766     220,795     622,782     630,274 
Gross margin             $ 84,502     $ 83,440     $ 244,938    $ 248,576 
                                                                   
Gross margin               29.5    %     27.4    %     28.2    %     28.3    %
percentage
                                                                   
                                                                   
Reconciliation of EBIT
& EBITDA:
                                                                   
Net Income
Attributable to          $ 28,429      $ 25,371      $ 49,633      $ 58,061
TeleTech Stockholders
Interest income            (780    )     (896    )     (2,235  )     (2,282  )
Interest expense           2,129         1,143         4,810         3,814
(Benefit) Provision       (3,611  )    (496    )    (3,030  )    9,482   
for income taxes
EBIT                     $ 26,167      $ 25,122      $ 49,178      $ 69,075
                                                                   
Depreciation and          10,695      11,807      31,040      34,828  
amortization
                                                                   
EBITDA                   $ 36,862      $ 36,929      $ 80,218      $ 103,903
                                                                   
                                                                   
Reconciliation of Free
Cash Flow:
                                                                   
Cash Flow From
Operating Activities:
Net income               $ 29,720      $ 26,435      $ 52,785      $ 61,030
Adjustments to
reconcile net income
to net cash
provided by operating
activities:
Depreciation and           10,695        11,807        31,040        34,828
amortization
Other                     (25,661 )    (46,721 )    (20,414 )    (56,356 )
Net cash provided by       14,754        (8,479  )     63,411        39,502
operating activities
                                                                   
Less - Total Capital      15,781      8,804       33,149      21,166  
Expenditures
                                                                   
Free Cash Flow           $ (1,027  )   $ (17,283 )   $ 30,262      $ 18,336
                                                                   
                                                                   
Reconciliation of
Non-GAAP Income from
Operations:
                                                                   
Income from Operations   $ 27,361      $ 26,572      $ 52,557      $ 72,691
Restructuring charges,     2,440         1,616         20,694        2,298
net
Impairment losses          161           -             2,958         230
Acquisition-related       -           -           159         1,066   
expenses
                                                                   
Non-GAAP Income from     $ 29,962      $ 28,188      $ 76,368      $ 76,285
Operations
                                                                   
                                                                   
Reconciliation of
Non-GAAP EPS:
                                                                   
Net Income
Attributable to          $ 28,429      $ 25,371      $ 49,633      $ 58,061
TeleTech Stockholders
Add: Asset impairment
and restructuring          1,835         1,136         15,097        1,777
charges, net of
related taxes
Add:
Acquisition-related        -             -             95            640
expenses, net of
related taxes
Add: Changes in
judgement for
uncertain tax             (8,904  )    (6,568  )    (9,441  )    (6,405  )
positions recorded in
prior periods
                                                                   
Non-GAAP Net Income
Attributable to          $ 21,360      $ 19,939      $ 55,384      $ 54,073
TeleTech Stockholders
                                                                   
Diluted shares             54,905        57,748        55,991        58,173
outstanding
                                                                   
Non-GAAP EPS
Attributable to          $ 0.39        $ 0.35        $ 0.99        $ 0.93
TeleTech Stockholders
                                                                   
                                                                   
Reconciliation of
Non-GAAP EBITDA:
                                                                   
Net Income
Attributable to          $ 28,429      $ 25,371      $ 49,633      $ 58,061
TeleTech Stockholders
Interest income            (780    )     (896    )     (2,235  )     (2,282  )
Interest expense           2,129         1,143         4,810         3,814
(Benefit) Provision        (3,611  )     (496    )     (3,030  )     9,482
for income taxes
Depreciation and           10,695        11,807        31,040        34,828
amortization
Asset impairment and       2,601         1,616         23,652        2,528
restructuring charges
Acquisition-related        -             -             159           1,066
expenses
Equity-based              3,465       3,848       10,310      11,563  
compensation expenses
                                                                   
Non-GAAP EBITDA          $ 42,928      $ 42,393      $ 114,339     $ 119,060

Contact:

TeleTech Holdings, Inc.
Investor Contact
Karen Breen, 303-397-8592
or
Media Contact
Jeanna Blatt, 303-397-8507
 
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