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
TeleTech Announces Third Quarter 2012 Financial Results
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