TeleTech Announces Second Quarter 2013 Financial Results

  TeleTech Announces Second Quarter 2013 Financial Results

Second Quarter Revenue of $289.7 Million; GAAP Fully Diluted EPS of 23 Cents;
     New Business Momentum Continues with $105 Million in Signed Bookings

Business Wire

DENVER -- July 30, 2013

TeleTech Holdings, Inc. (NASDAQ: TTEC), a leading global provider of
data-driven, technology-enabled customer engagement solutions, today announced
financial results for the second quarter ended June 30, 2013. The Company also
filed its Quarterly Report on Form 10-Q with the Securities and Exchange
Commission for the quarter ended June 30, 2013.

“It was a very productive quarter as we gain momentum on our growth strategy.
We continued to make investments in leadership, innovation, global expansion
and our sales and marketing,” commented Ken Tuchman, chairman and chief
executive officer of TeleTech. “We are pleased with our bookings, more than 20
new client wins and a growing list of clients who are taking advantage of our
SaaS-based solutions.”

Tuchman also discussed the Company’s progress in attracting new talent to the
leadership team. “Last quarter, we brought Keith Gallacher on board as
Executive Vice President of Global Markets and Industries to build our
vertical-based account organization. Keith’s proven ability to lead
high-performing teams that acquire and develop long-term strategic client
relationships while at Accenture, EDS, CSC and Cognizant is fundamental to
accelerating our growth. We are also pleased to welcome healthcare leader
Tracy Bahl, former CEO of Uniprise, a UnitedHealth Group Company, to our Board
of Directors. With the addition of Keith and Tracy, we further solidify our
global talent.”

SECOND QUARTER 2013 FINANCIAL HIGHLIGHTS

  *Second quarter 2013 revenue was $289.7 million compared to $288.8 million
    in the second quarter 2012. The increase was primarily attributable to
    growth in new client programs and revenue contribution from acquisitions
    in the customer strategy and technology services segments, partially
    offset by $14.4 million from the exit of Spain. Excluding the above
    reduction, revenue increased approximately 5 percent on a constant
    currency basis over the year-ago quarter.
  *Second quarter 2013 income from operations increased to $19.7 million or
    6.8 percent of revenue compared to $6.4 million or 2.2 percent of revenue
    in the second quarter 2012. Second quarter 2013 non-GAAP income from
    operations was $23.5 million or 8.1 percent of revenue compared to $23.7
    million or 8.2 percent of revenue in the year-ago quarter. 2013 income
    from operations includes approximately $3.0 million of incremental
    investment related to leadership, sales and marketing and R&D.
  *Income from operations for the second quarter 2013 included $3.8 million
    of restructuring and impairment charges associated with the exit of
    certain operations as well as the restructure of the acquisitions within
    our Customer Strategy Services segment. Additionally, in 2013 as reported
    within other income and expense, we recorded a one-time charge of $3.7
    million related to the deconsolidation of a subsidiary within the Customer
    Strategy Services segment. TeleTech’s CFO Regina Paolillo commented “these
    charges collectively reflect the actions we have taken to fully integrate
    our consulting capability into a single, unified, regionally led
    consulting footprint. Now fully integrated and capable of representing our
    full suite of customer experience consulting globally, we expect this
    segment to improve its financial profile in the second half of 2013.”
  *Second quarter 2013 fully diluted earnings per share attributable to
    TeleTech shareholders increased to 23 cents from 10 cents in the second
    quarter 2012. Second quarter 2013 non-GAAP fully diluted earnings per
    share attributable to TeleTech shareholders increased to 35cents from 31
    cents in second quarter 2012.
  *During the second quarter 2013, TeleTech signed an estimated $105 million
    in annualized revenue from new and expanded client relationships. Across
    the bookings, 73 percent was attributable to recurring revenue, 40 percent
    was contributed by the emerging business segments and 33 percent was from
    international clients.

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

  *As of June 30, 2013, TeleTech had cash and cash equivalents of $150.6
    million and $122.5million of total debt, resulting in a net cash position
    of $28.1 million.
  *TeleTech had $586.2 million of additional borrowing capacity available
    under its revolving credit facility as of June 30, 2013. In June, TeleTech
    secured a new $700 million, five-year, multi-currency revolving credit
    facility with an accordion feature that permits, under certain conditions,
    an increase in total commitments to $1 billion. The credit facility
    provides TeleTech with additional financial flexibility under more
    favorable terms to fund working capital, strategic acquisitions and share
    repurchases.
  *Cash flow from operations in the second quarter 2013 was $33.7 million
    compared to $34.0million in the second quarter 2012.
  *Capital expenditures in the second quarter 2013 were $9.6 million compared
    to $11.0 million in the second quarter 2012.
  *TeleTech repurchased approximately 937,000 shares of common stock during
    the second quarter 2013 for a total cost of $21.2 million. As of June 30,
    2013, there was $19.4 million authorized for future share repurchases.

SEGMENT REPORTING

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). Financial
highlights for the segments are provided below.

Customer Management Services (CMS) – Customer Experience Delivery Solutions

  *In the second quarter 2013, the CMS segment continued to make top line
    progress delivering 2percent constant currency growth versus the prior
    year when adjusted for the $14.4 million from the exit of Spain. The
    segment’s ability to optimize resources and dynamically align capacity and
    demand contributed to a non-GAAP operating income margin of 8.7 percent
    compared to 7.8percent in the year-ago quarter.
  *Second quarter 2013 revenue was $220.6 million compared to $229.4 million
    in the second quarter 2012 and operating income was $16.5 million or 7.5
    percent versus $0.7 million or 0.3percent. The 2012 operating income
    included significantly higher restructure charges related to the exit of
    Spain.

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

  *The CGS segment continues to progress in transforming its solution
    portfolio. In the quarter CGS was impacted by a delay in a significant
    integrated solution ramp for which the revenue generation component will
    now launch in the third quarter 2013. Additionally, a large client
    unexpectedly discontinued one of its products. The Company expects the
    expanded capabilities of its pending acquisition of WebMetro, a top
    digital marketing firm, to accelerate the segment’s multichannel customer
    acquisition strategy. (See related press release – TeleTech Expands its
    End-to-End Revenue Generation Portfolio through the Acquisition of
    WebMetro)
  *CGS second quarter 2013 revenue was $22.4 million compared to $24.4
    million in the second quarter 2012 and the loss from operations was $614
    thousand versus operating income of $1.1million in the year-ago quarter.

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

  *CTS continued to execute its growth and investment strategy. Revenue grew
    46.8 percent in the second quarter 2013 compared to the second quarter
    2012. While the acquisition of TSG on December 31, 2012 is a primary
    source of the sequential growth, the remainder of the business continues
    to grow, including momentum in closing new business related to the
    evolving cloud portfolio.
  *CTS second quarter 2013 revenue was $36.6 million compared to $25.0
    million in the year-ago quarter. Income from operations was $5.8 million
    or 15.9 percent compared to $4.4 million or 17.5 percent in the year-ago
    quarter. The decrease in operating margin is primarily related to the
    amortization expense from the TSG acquisition.

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

  *In the first half of 2013, the CSS segment was reorganized to reflect a
    full integration of the recent consulting acquisitions including Peppers &
    Rogers, iKnowtion and Guidon. The Company expects the integrated platform
    and related resource paring, which has prompted certain restructure and
    impairment charges, to enable both top-line growth and resource
    optimization. This is anticipated to result in improved financial
    performance in the second half of 2013.
  *CSS second quarter 2013 revenue of $10.0 million is flat to the year-ago
    quarter and the loss from operations of $2.0 million, including $1.1
    million of restructuring and impairment charges compared to income from
    operations in the year-ago quarter of $0.3 million.

BUSINESS OUTLOOK

TeleTech reaffirms its previous 2013 guidance as follows:

  *Revenue is expected to grow between 4.5 percent and 6.5 percent to $1.215
    and $1.240billion.
  *Operating margin is expected to range between 9.25 percent and 9.5 percent
    before asset impairment, restructuring or acquisition-related charges.
  *Capital expenditures are expected to range between $50 million and $60
    million with 70 percent expected to support growth initiatives.

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, July
31, 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,
August 14, 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
TeleTech’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.

ABOUT TELETECH

TeleTech, founded in 1982, is a leading global provider of data-driven,
technology-enabled services that puts customer engagement at the core of
business success. The Company offers an integrated platform that combines
analytics, strategy, process, systems integration, technology and operations
to simplify the delivery of the customer experience for Global 1000 clients
and their customers. This holistic multichannel approach improves customer
satisfaction, increases customer loyalty and drives long-term profitability
and growth. From strategic consulting to operational execution, TeleTech’s
more than 39,000 employees deliver results for clients in the automotive,
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, healthcare 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 its 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 July 30, 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           Six months ended
                        June 30,                     June 30,
                        2013          2012           2013          2012
                                                                   
Revenue                 $ 289,692     $ 288,798      $ 578,075     $ 581,452
                                                                   
Operating Expenses:
Cost of services          208,809       209,121        417,041       421,016
Selling, general and      46,168        45,709         91,915        93,844
administrative
Depreciation and          11,263        10,229         21,818        20,345
amortization
Restructuring             2,572         16,296         3,423         18,254
charges, net
Impairment losses        1,205       997          1,205       2,797   
Total operating          270,017     282,352      535,402     556,256 
expenses
                                                                   
Income From               19,675        6,446          42,673        25,196
Operations
                                                                   
Other income             (3,099  )    (1,470  )     (5,103  )    (1,550  )
(expense)
                                                                   
Income Before Income      16,576        4,976          37,570        23,646
Taxes
                                                                   
(Provision for)
benefit from income      (3,854  )    1,272        (6,245  )    (581    )
taxes
                                                                   
Net Income                12,722        6,248          31,325        23,065
                                                                   
Net income
attributable to          (407    )    (925    )     (1,049  )    (1,861  )
noncontrolling
interest
                                                                   
Net Income
Attributable to         $ 12,315     $ 5,323       $ 30,276     $ 21,204  
TeleTech Stockholders
                                                                   
Net Income Per Share
Attributable to
TeleTech Stockholders
                                                                   
Basic                   $ 0.24       $ 0.10        $ 0.58       $ 0.38    
                                                                   
Diluted                 $ 0.23       $ 0.10        $ 0.57       $ 0.37    
                                                                   
                                                                   
Income From               6.8     %     2.2     %      7.4     %     4.3     %
Operations Margin
Net Income
Attributable to           4.3     %     1.8     %      5.2     %     3.6     %
TeleTech Stockholders
Margin
Effective Tax Rate        23.3    %     (25.6   )%     16.6    %     2.5     %
                                                                   
                                                                   
Weighted Average
Shares Outstanding
Basic                     51,861        55,125         52,104        55,809
Diluted                   52,628        55,712         52,912        56,558
                                                                             

TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(unaudited)
                                                              
                                                                   
                           Three months ended        Six months ended
                           June 30,                  June 30,
                           2013          2012        2013          2012
                                                                   
Revenue:
Customer Management        $ 220,641     $ 229,401   $ 443,223     $ 464,277
Services
Customer Growth Services     22,399        24,409      45,255        47,173
Customer Technology          36,644        24,956      70,206        50,508
Services
Customer Strategy           10,008      10,032     19,391      19,494  
Services
Total                      $ 289,692    $ 288,798   $ 578,075    $ 581,452 
                                                                   
Income (Loss) From
Operations:
Customer Management        $ 16,460      $ 730       $ 37,191      $ 17,437
Services
Customer Growth Services     (614    )     1,052       662           (1,078  )
Customer Technology          5,819         4,356       8,717         8,035
Services
Customer Strategy           (1,990  )    308        (3,897  )    802     
Services
Total                      $ 19,675     $ 6,446     $ 42,673     $ 25,196  
                                                                             

TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
                                          
                                             
                               June 30,      December 31,
                               2013          2012
                               (unaudited)
                                             
ASSETS
Current assets:
Cash and cash equivalents      $  150,623    $   164,485
Accounts receivable, net          244,823        251,206
Other current assets             73,948        87,853
Total current assets              469,394        503,544
                                             
Property and equipment, net       108,523        112,276
Other assets                     232,721       231,353
                                             
Total assets                   $  810,638    $   847,173
                                             
LIABILITIES AND EQUITY
Total current liabilities      $  160,310    $   171,405
Other long-term liabilities       176,628        175,431
Total equity                     473,700       500,337
                                             
Total liabilities and equity   $  810,638    $   847,173
                                                 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(unaudited)
                                                              
                                                                   
                         Three months ended          Six months ended
                         June 30,                    June 30,
                         2013          2012          2013          2012
                                                                   
Reconciliation of
Gross Margin:
                                                                   
Revenue                  $ 289,692     $ 288,798     $ 578,075     $ 581,452
Cost of services          208,809     209,121     417,041     421,016 
Gross margin             $ 80,883     $ 79,677     $ 161,034    $ 160,436 
                                                                   
Gross margin               27.9    %     27.6    %     27.9    %     27.6    %
percentage
                                                                   
                                                                   
Reconciliation of EBIT
& EBITDA:
                                                                   
Net Income
Attributable to          $ 12,315      $ 5,323       $ 30,276      $ 21,204
TeleTech stockholders
Interest income            (575    )     (695    )     (1,244  )     (1,455  )
Interest expense           1,911         1,583         3,776         2,681
Provision for (benefit    3,854       (1,272  )    6,245       581     
from) income taxes
EBIT                     $ 17,505      $ 4,939       $ 39,053      $ 23,011
                                                                   
Depreciation and          11,263      10,229      21,818      20,345  
amortization
                                                                   
EBITDA                   $ 28,768      $ 15,168      $ 60,871      $ 43,356
                                                                   
                                                                   
Reconciliation of Free
Cash Flow:
                                                                   
Cash Flow From
Operating Activities:
Net income               $ 12,722      $ 6,248       $ 31,325      $ 23,065
Adjustments to
reconcile net income
to net cash
provided by operating
activities:
Depreciation and           11,263        10,229        21,818        20,345
amortization
Other                     9,732       17,516      (12,932 )    5,247   
Net cash provided by       33,717        33,993        40,211        48,657
operating activities
                                                                   
Less - Total Capital      9,555       10,994      13,660      17,368  
Expenditures
                                                                   
Free Cash Flow           $ 24,162      $ 22,999      $ 26,551      $ 31,289
                                                                   
                                                                   
Reconciliation of
Non-GAAP Income from
Operations:
                                                                   
Income from Operations   $ 19,675      $ 6,446       $ 42,673      $ 25,196
Restructuring charges,     2,572         16,296        3,423         18,254
net
Impairment losses          1,205         997           1,205         2,797
Acquisition-related       -           -           -           159     
expenses
                                                                   
Non-GAAP Income from     $ 23,452      $ 23,739      $ 47,301      $ 46,406
Operations
                                                                   
                                                                   
Reconciliation of
Non-GAAP EPS:
                                                                   
Net Income
Attributable to          $ 12,315      $ 5,323       $ 30,276      $ 21,204
TeleTech stockholders
Add: Asset impairment
and restructuring          2,527         10,843        3,121         13,278
charges, net of
related taxes
Add:
Acquisition-related        -             -             -             95
expenses, net of
related taxes
Add: Deconsolidation       3,556         -             3,556         -
of subsidiary
Add: Changes in
judgement for
uncertain tax             (231    )    1,016       (1,509  )    (537    )
positions recorded in
prior periods
                                                                   
Non-GAAP Net Income
Attributable to          $ 18,167      $ 17,182      $ 35,444      $ 34,040
TeleTech stockholders
                                                                   
Diluted shares             52,628        55,712        52,912        56,558
outstanding
                                                                   
Non-GAAP EPS
Attributable to          $ 0.35        $ 0.31        $ 0.67        $ 0.60
TeleTech stockholders
                                                                   
                                                                   
Reconciliation of
Non-GAAP EBITDA:
                                                                   
Net Income
Attributable to          $ 12,315      $ 5,323       $ 30,276      $ 21,204
TeleTech stockholders
Interest income            (575    )     (695    )     (1,244  )     (1,455  )
Interest expense           1,911         1,583         3,776         2,681
Provision for (benefit     3,854         (1,272  )     6,245         581
from) income taxes
Depreciation and           11,263        10,229        21,818        20,345
amortization
Asset impairment and       3,777         17,293        4,628         21,051
restructuring charges
Acquisition-related        -             -             -             159
expenses
Equity-based              3,386       3,457       6,577       6,845   
compensation expenses
                                                                   
Non-GAAP EBITDA          $ 35,931      $ 35,918      $ 72,076      $ 71,411
                                                                             

TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
                                                
                                                                  
                                                                  
                          Three months ended
                          March 31,    June 30,   September 30, December 31,
                          2012          2012        2012          2012
                                                                  
Revenue:
Customer Management       $ 234,876     $ 229,401   $   224,041   $  235,456
Services
Customer Growth             22,764        24,409        28,200       25,399
Services
Customer Technology         25,552        24,956        22,343       23,997
Services
Customer Strategy          9,462       10,032       11,684      10,409  
Services
Total                     $ 292,654    $ 288,798   $   286,268   $  295,261 
                                                                  
Income (Loss) From
Operations:
Customer Management       $ 16,707      $ 730       $   21,001    $  21,833
Services
Customer Growth             (2,130  )     1,052         2,487        849
Services
Customer Technology         3,679         4,356         3,054        4,625
Services
Customer Strategy          494         308          819         (1,319  )
Services
Total                     $ 18,750     $ 6,446     $   27,361    $  25,988  
                                                                             

Contact:

TeleTech Holdings, Inc.
Investor Contact
Paul Miller, 303-397-8641
or
Media Contact
Jeanna Blatt, 303-397-8507
 
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