TeleTech Announces Fourth Quarter and Full Year 2012 Financial Results

  TeleTech Announces Fourth Quarter and Full Year 2012 Financial Results

                   Fourth Quarter Revenue of $295 Million;

Fourth Quarter Fully Diluted Earnings Per Share Grows 36 Percent to 38 Cents;

                 Guides to Revenue and Profit Growth in 2013

Business Wire

ENGLEWOOD, Colo. -- February 26, 2013

TeleTech Holdings, Inc. (NASDAQ: TTEC), a leading global provider of
technology-enabled customer experience solutions, today announced financial
results for the fourth quarter and full year ended December 31, 2012. The
Company also filed its Annual Report on Form 10-K with the Securities and
Exchange Commission for the year ended December 31, 2012.

“We celebrated our 30 year anniversary in 2012 and attribute our continued
success to designing and delivering technology-enabled customer experiences
that drive measurable outcomes for our clients,” said Ken Tuchman, TeleTech
chairman and chief executive officer. “As customers become more connected and
broadcast their experiences across a variety of social networking channels,
the quality of the customer experience is having a profound impact on brand
loyalty and business performance. We believe customers are increasingly
shaping their attitudes, behaviors and willingness to recommend on the
totality of their experience,” continued Tuchman.

“In 2012, we significantly expanded our suite of fully-integrated
customer-centric offerings by adding greater data-driven consulting and
technology expertise to enable our clients to maximize the lifetime value of
their customers,” said Tuchman. “Our diversified business segments grew to 21
percent of revenue from 17 percent in 2011. Our strong balance sheet has
facilitated our continued investment in scalable, technology-rich offerings
that keep us strategically relevant with the increasingly complex customer
experience needs of our clients.”

FULL YEAR 2012 FINANCIAL HIGHLIGHTS

  *2012 revenue was $1.163 billion compared to $1.179 billion in 2011. The
    lower revenue was attributable to a $64.2 million reduction from the
    Company’s previously announced decision to exit certain underperforming
    business and a negative foreign currency impact of $14.8 million.
    Excluding the impact of the above reductions, 2012 revenue grew $62.6
    million or 5.3 percent.
  *Income from operations for 2012 included $26.0 million of net
    restructuring, asset impairment and acquisition-related charges compared
    to $5.0 million in 2011.
  *2012 income from operations was $78.5 million or 6.8 percent of revenue
    compared to $93.5 million or 7.9 percent of revenue in 2011. Excluding the
    restructuring and impairment charges discussed above, 2012 non-GAAP income
    from operations was $104.5 million or 9.0 percent of revenue compared to
    $98.5 million or 8.3 percent of revenue in 2011.
  *2012 fully diluted earnings per share attributable to TeleTech
    stockholders was $1.26 compared to $1.28 in 2011. Excluding restructuring
    and other items, 2012 non-GAAP fully diluted earnings per share
    attributable to TeleTech stockholders increased 8.7 percent to $1.37 from
    $1.26 in 2011.
  *During 2012 TeleTech signed an estimated $305 million in annualized
    revenue from both new and expanding client relationships. Approximately 75
    percent represented recurring revenue.

FOURTH QUARTER 2012 FINANCIAL HIGHLIGHTS

  *Fourth quarter 2012 revenue was $295.3 million compared to $300.5 million
    in the fourth quarter 2011. The lower revenue was attributable to a $21.7
    million reduction from the Company’s previously announced decision to exit
    certain underperforming business partially offset by a foreign currency
    benefit of $2.9 million. Excluding these items, fourth quarter 2012
    revenue grew $13.6 million or 4.5 percent.
  *Income from operations for the fourth quarter 2012 included $2.2 million
    of net restructuring charges.
  *Fourth quarter 2012 income from operations was $26.0 million or 8.8
    percent of revenue compared to $20.8 million or 6.9 percent of revenue in
    the fourth quarter 2011. Excluding the net restructuring charges discussed
    above, fourth quarter 2012 non-GAAP income from operations grew $6.0
    million or 27.0 percent to $28.2 million or 9.5 percent of revenue.
  *Fourth quarter 2012 fully diluted earnings per share attributable to
    TeleTech stockholders grew 35.7 percent to 38 cents compared to 28 cents
    in the fourth quarter 2011. Excluding restructuring and other items,
    fourth quarter 2012 non-GAAP fully diluted earnings per share attributable
    to TeleTech stockholders increased 31.0 percent to 38 cents from 29 cents
    in the year-ago quarter.
  *During the fourth quarter 2012 TeleTech signed an estimated $75 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 December 31, 2012, TeleTech had cash and cash equivalents of $164.5
    million, $119.5 million of debt, resulting in net cash of $45.0 million.
  *TeleTech had approximately $388 million of additional borrowing capacity
    available under its revolving credit facility as of December 31, 2012.
    This provides TeleTech with the continued financial flexibility to fund
    organic growth, share repurchases and accretive acquisitions.
  *Cash flow from operations in the fourth quarter 2012 was $43.5 million
    compared to $74.3 million in the fourth quarter 2011. The decrease was
    primarily due to the timing of certain working capital items.
  *Capital expenditures in the fourth quarter 2012 were $7.4 million compared
    to $17.1 million in the fourth quarter 2011.
  *TeleTech repurchased 1.5 million shares of common stock during the fourth
    quarter 2012 for a total cost of $26.0 million. As of December 31, 2012,
    there was $25.4 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).

Beginning in the fourth quarter 2012, TeleTech allocated its previously
reported corporate expenses to the above four business segments and has
reflected this change in the historic periods for comparison purposes.
Financial highlights for the segments are provided below.

Customer Management Services (CMS) – Customer Experience Delivery Solutions

  *CMS fourth quarter 2012 revenue was $235.5 million, representing
    approximately 80 percent of total fourth quarter 2012 revenue, compared to
    $240.7 million in the fourth quarter 2011. The lower revenue was
    attributable to a $21.7 million reduction from the Company’s previously
    announced decision to exit certain underperforming business partially
    offset by a foreign currency benefit of $3.1 million. Excluding these
    items, revenue increased by 5.6 percent.
  *CMS fourth quarter 2012 and 2011 income from operations included $2.2
    million and $1.3 million of net restructuring and impairment charges,
    respectively.
  *CMS fourth quarter 2012 income from operations was $21.8 million or 9.3
    percent of revenue, compared to 6.0 percent of revenue in the fourth
    quarter 2011. Excluding the above charges, CMS fourth quarter 2012
    non-GAAP income from operations was $24.0 million or 10.2 percent of
    revenue compared to $15.7 million or 6.5 percent in the year-ago quarter.
    The higher fourth quarter 2012 operating margin was primarily related to
    exiting underperforming business including an increase in capacity
    utilization for its multi-client centers to 79 percent from 72 percent in
    the year-ago quarter.

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

  *CGS fourth quarter 2012 revenue grew 4.9 percent to $25.4 million,
    representing approximately 9 percent of total fourth quarter 2012 revenue,
    compared to $24.2 million in the fourth quarter 2011.
  *CGS fourth quarter 2012 income from operations was $0.8 million or 3.3
    percent of revenue, compared to $2.0 million or 8.1 percent of revenue in
    the fourth quarter 2011. The lower operating margin was primarily
    attributable to increased investments during 2012 in CGS’s rebranding
    initiatives and its digital platform.

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

  *CTS fourth quarter 2012 revenue was $24.0 million compared to $27.8
    million in the year-ago period, representing approximately 8 percent of
    total fourth quarter 2012 revenue.
  *CTS fourth quarter 2012 income from operations was $4.6 million or 19.3
    percent of revenue, compared to $4.4 million or 16.0 percent of revenue in
    the fourth quarter 2011.
  *The revenue decline was attributable to higher product sales in the
    year-ago quarter while the operating margin increase was due to higher
    recurring revenue from managed services.

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

  *CSS fourth quarter 2012 revenue grew 32.0 percent to $10.4 million
    compared to $7.9 million in the fourth quarter 2011.
  *CSS fourth quarter 2012 income from operations was a loss of ($1.3)
    million compared to breakeven results in the fourth quarter 2011. The
    lower operating margin was primarily related to increased investments in
    select geographic expansion.

BUSINESS OUTLOOK

  *TeleTech expects 2013 revenue will grow between 4.5 percent and 6.5
    percent to $1.215 billion to $1.240 billion.
  *TeleTech expects 2013 operating margin will increase from 2012 and range
    between 9.25 percent and 9.5 percent, before any asset impairment,
    restructuring or acquisition-related charges.
  *TeleTech expects 2013 capital expenditures will range between $50 and $60
    million.

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 Wednesday,
February 27, 2013 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
Wednesday, March 13, 2013.

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
Annual Report on Form 10-K for the year ended December 31, 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 43,000 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; new legislation or government regulation that adversely impacts our
tax obligations, health care costs or the customer management industry;
service interruptions, security threats or other disruptions at our facilities
relating to our computer and telecommunications equipment and software
systems; our ability to develop and protect our intellectual property and
contractual rights and avoid infringement; disruptions in the supply chain of
the Customer Technology Services segment; risks associated with unauthorized
disclosure of sensitive or confidential client and customer data; compliance
with credit facility covenant restrictions; and our ability to obtain
financing and manage counterparty credit risks from financial institutions. 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, 2012. 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 February 26, 2013. 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              Twelve months ended
                     December 31,                    December 31,
                      2012          2011          2012             2011      
                                                                        
Revenue              $ 295,261       $ 300,538       $ 1,162,981        $ 1,179,388
                                                                        
Operating
Expenses:
  Cost of              212,021         218,088         834,803            848,362
  services
  Selling,
  general and          44,945          50,273          182,634            188,802
  administrative
  Depreciation
  and                  10,126          10,061          41,166             44,889
  amortization
  Restructuring        2,181           1,353           22,875             3,651
  charges, net
  Impairment          -             -             2,958            230       
  losses
Total operating       269,273       279,775       1,084,436        1,085,934 
expenses
                                                                        
Income From            25,988          20,763          78,545             93,454
Operations
                                                                        
  Other income        (1,881  )      279           (4,683    )       (1,900    )
  (expense)
                                                                        
Income Before          24,107          21,042          73,862             91,554
Income Taxes
                                                                        
  Benefit
  (provision)         (2,969  )      (3,797  )      61               (13,279   )
  for income
  taxes
                                                                        
Net Income             21,138          17,245          73,923             78,275
                                                                        
  Net income
  attributable
  to                  (756    )      (1,132  )      (3,908    )       (4,101    )
  noncontrolling
  interest
                                                                        
Net Income
Attributable to      $ 20,382       $ 16,113       $ 70,015          $ 74,174    
TeleTech
Stockholders
                                                                        
Net Income Per
Share
Attributable to
TeleTech
Stockholders
                                                                        
  Basic              $ 0.38         $ 0.29         $ 1.28            $ 1.31      
                                                                        
  Diluted            $ 0.38         $ 0.28         $ 1.26            $ 1.28      
                                                                        
                                                                        
Income From
Operations             8.8     %       6.9     %       6.8       %        7.9       %
Margin
Net Income
Attributable to
TeleTech               6.9     %       5.4     %       6.0       %        6.3       %
Stockholders
Margin
Effective Tax          12.3    %       18.0    %       (0.1      )%       14.5      %
Rate
                                                                        
                                                                        
Weighted Average
Shares
Outstanding
Basic                  53,262          56,309          54,738             56,669
Diluted                54,196          57,500          55,540             57,963
                                                                        

                                                          
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(unaudited)
                                                                   
                                                                   
                     Three months ended            Twelve months ended
                     December 31,                  December 31,
                      2012          2011         2012           2011
                                                                   
Revenue:
Customer
Management           $ 235,456       $ 240,657     $ 923,774       $ 983,627
Services
Customer Growth        25,399          24,210        100,772         95,629
Services
Customer
Technology             23,997          27,785        96,848          66,978
Services
Customer
Strategy              10,409        7,886        41,587         33,154
Services
Total                $ 295,261      $ 300,538     $ 1,162,981     $ 1,179,388
                                                                   
Income (Loss)
From Operations:
Customer
Management           $ 21,833        $ 14,346      $ 60,271        $ 71,945
Services
Customer Growth        849             1,955         2,258           6,387
Services
Customer
Technology             4,625           4,443         15,714          13,652
Services
Customer
Strategy              (1,319  )      19           302            1,470
Services
Total                $ 25,988       $ 20,763      $ 78,545        $ 93,454
                                                                   

                                             
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                  
                                                  
                                 December 31,     December 31,
                                 2012             2011
                                                  
                                                  
ASSETS
Current assets:
Cash and cash equivalents        $   164,485      $   156,371
Accounts receivable, net             251,206          243,636
Other current assets                87,853          78,275
Total current assets                 503,544          478,282
                                                  
Property and equipment, net          112,276          100,321
Other assets                        231,353         168,375
                                                  
Total assets                     $   847,173      $   746,978
                                                  
LIABILITIES AND EQUITY
Total current liabilities        $   171,405      $   170,011
Other long-term liabilities          175,431          106,720
Total equity                        500,337         470,247
                                                  
Total liabilities and equity     $   847,173      $   746,978
                                                  

                                                     
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(unaudited)
                                                                 
                                                                         
                        Three months ended             Twelve months ended
                        December 31,                  December 31,
                         2012          2011         2012            2011      
                                                                         
Reconciliation of
Gross Margin:
                                                                         
Revenue                 $ 295,261       $ 300,538      $ 1,162,981       $ 1,179,388
Cost of services         212,021       218,088      834,803         848,362   
Gross margin            $ 83,240       $ 82,450      $ 328,178        $ 331,026   
                                                                         
Gross margin              28.2    %       27.4    %      28.2      %       28.1      %
percentage
                                                                         
                                                                         
Reconciliation of
EBIT & EBITDA:
                                                                         
Net Income
Attributable to         $ 20,382        $ 16,113       $ 70,015          $ 74,174
TeleTech
stockholders
Interest income           (743    )       (782    )      (2,978    )       (3,064    )
Interest expense          1,886           1,304          6,696             5,118
(Benefit) provision      2,969         3,797        (61       )      13,279    
for income taxes
EBIT                    $ 24,494        $ 20,432       $ 73,672          $ 89,507
                                                                         
Depreciation and         10,126        10,061       41,166          44,889    
amortization
                                                                         
EBITDA                  $ 34,620        $ 30,493       $ 114,838         $ 134,396
                                                                         
                                                                         
Reconciliation of
Free Cash Flow:
                                                                         
Cash Flow From
Operating
Activities:
Net income              $ 21,138        $ 17,245       $ 73,923          $ 78,275
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation and          10,126          10,061         41,166            44,889
amortization
Other                    12,245        46,991       (8,169    )      (9,365    )
Net cash provided
by operating              43,509          74,297         106,920           113,799
activities
                                                                         
Less - Total
Capital                  7,394         17,144       40,543          38,310    
Expenditures
                                                                         
Free Cash Flow          $ 36,115        $ 57,153       $ 66,377          $ 75,489
                                                                         
                                                                         
Reconciliation of
Non-GAAP Income
from Operations:
                                                                         
Income from             $ 25,988        $ 20,763       $ 78,545          $ 93,454
Operations
Restructuring             2,181           1,353          22,875            3,651
charges, net
Impairment losses         -               -              2,958             230
Acquisition-related      -             57           159             1,123     
expenses
                                                                         
Non-GAAP Income         $ 28,169        $ 22,173       $ 104,537         $ 98,458
from Operations
                                                                         
                                                                         
Reconciliation of
Non-GAAP EPS:
                                                                         
Net Income
Attributable to         $ 20,382        $ 16,113       $ 70,015          $ 74,174
TeleTech
stockholders
Add: Asset
impairment and
restructuring             1,584           947            16,681            2,724
charges, net of
related taxes
Add:
Acquisition-related       -               34             95                674
expenses, net of
related taxes
Add: Changes in
judgement for
uncertain tax            (1,305  )      (152    )     (10,746   )      (4,721    )
positions recorded
in prior periods
                                                                         
Non-GAAP Net Income
Attributable to         $ 20,661        $ 16,942       $ 76,046          $ 72,851
TeleTech
stockholders
                                                                         
Diluted shares            54,196          57,500         55,540            57,963
outstanding
                                                                         
Non-GAAP EPS
Attributable to         $ 0.38          $ 0.29         $ 1.37            $ 1.26
TeleTech
stockholders
                                                                         
                                                                         
Reconciliation of
Non-GAAP EBITDA:
                                                                         
Net Income
Attributable to         $ 20,382        $ 16,113       $ 70,015          $ 74,174
TeleTech
stockholders
Interest income           (743    )       (782    )      (2,978    )       (3,064    )
Interest expense          1,886           1,304          6,696             5,118
Provision for
(benefit from)            2,969           3,797          (61       )       13,279
income taxes
Depreciation and          10,126          10,061         41,166            44,889
amortization
Asset impairment
and restructuring         2,181           1,353          25,833            3,881
charges
Acquisition-related       -               57             159               1,123
expenses
Equity-based
compensation             3,066         4,294        13,376          15,856    
expenses
                                                                         
Non-GAAP EBITDA         $ 39,867        $ 36,197       $ 154,206         $ 155,256

Contact:

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