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TeleTech Announces Third Quarter 2013 Financial Results
Oct 30, 2013 (03:10 PM EDT)


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

"We continue to make progress executing our strategy.  While our results this quarter were impacted by certain external factors, most notably a negative impact from foreign currency translation, we are encouraged by the progress in our emerging businesses.  These businesses showed meaningful improvement with CSS and CTS delivering double-digit revenue and operating margin growth.  We signed $80 million in new business including attracting 15 new clients to our growing roster of leading global brands.  The acquisition of WebMetro was completed and is being integrated into our CGS segment.  We continued to deliver early returns to shareholders and repurchased an additional 857 thousand shares at a cost of $20.6 million in the quarter.  Cash flows from operations were a strong $36 million in the quarter.  Our normalized operating margin, adjusted for foreign exchange and other non-recurring items, was 9.8%," commented Ken Tuchman, chairman and chief executive officer of TeleTech.

THIRD QUARTER 2013 FINANCIAL HIGHLIGHTS

Revenue        

  • Third quarter 2013 revenue was $297.0 million compared to $286.3 million in the third quarter of 2012. 
  • Adjusted revenue was $305 million reflecting $6.9 million in foreign currency translation and $1.2 million in non-recurring items.  This represents a 6.9% growth rate over the year-ago period when adjusted for $5.2 million in exited business from Spain.

Income from Operations

  • Third quarter 2013 income from operations was $26.0 million or 8.7 percent of revenue compared to $27.4 million or 9.6 percent of revenue in the third quarter 2012.  This change was primarily due to foreign currency translation, incremental investment, and other non-recurring items, but was partially offset by increases in capacity utilization and income related to acquisitions.
  • Adjusted income from operations was $29.9 million or 9.8 percent of revenue reflecting $2.3 million of foreign currency translation and $1.6 million in other non-recurring items.  This compares to $29.8 million or 10.3 percent of revenue in the year-ago quarter.

Earnings Per Share

  • Third quarter 2013 fully diluted earnings per share attributable to TeleTech shareholders was 34 cents from 52 cents in the third quarter 2012, which included a one-time significant tax benefit of 16.2 cents in the year-ago period.
  • Fully diluted earnings per share, adjusted for 3.3 cents of foreign currency translation and 4.0 cents of non-recurring items, increased to 41 cents from 39 cents in third quarter 2012.

Bookings

  • During the third quarter 2013, TeleTech signed an estimated $80 million in annualized revenue from new and expanded client relationships.  The bookings mix included approximately 80 percent from existing clients, 66 percent in recurring revenue, 50 percent from emerging businesses and 20 percent from international clients.

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

  • As of September 30, 2013, TeleTech had cash and cash equivalents of $144.9 million and $129.4 million of total debt, resulting in a net cash position of $15.5 million.
  • As of September 30, 2013, TeleTech had $578.5 million of additional borrowing capacity available under its revolving credit facility.
  • Cash flow from operations in the third quarter 2013 was $36.4 million compared to $14.8 million in the third quarter 2012.
  • Capital expenditures in the third quarter 2013 were $18.2 million compared to $15.8 million in the third quarter 2012.
  • TeleTech repurchased approximately 857,000 shares of common stock during the third quarter 2013 for a total cost of $20.6 million. As of September 30, 2013, $23.8 million was 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 third quarter 2013, the CMS segment revenue was $217 million from $224 million in the year-ago quarter.  Adjusted for $6.4 million of foreign currency translation, $5.2 million related to the exit from Spain, and $1.2 million from other non-recurring items, revenue grew 2.4 percent.
  • Operating income was $17.9 million or 8.3 percent compared to $21.0 million or 9.4 percent in the year-ago quarter.  Adjusted operating income margin was 9.9 percent reflecting $2.3 million of foreign currency translation and $1.5 million of non-recurring items.

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

  • CGS third quarter 2013 revenue was $25.9 million compared to $28.2 million in the year-ago quarter.  Income from operations was $0.6 million or 2.3 percent versus $2.5 million or 8.8 percent.

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

  • CTS third quarter 2013 revenue was $40.6 million compared to $22.3 million in the year-ago quarter.  Income from operations was $5.2 million or 12.7 percent compared to $3.1 million or 13.7 percent in the year-ago quarter.  The change in operating margin is primarily related to the amortization expense from the TSG acquisition, which represented 1.6 percent of revenue, and investments in the cloud platform and sales channel.

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

  • CSS third quarter 2013 revenue grew 14.8 percent to $13.4 million from $11.7 million in the year-ago quarter.  Income from operations grew to $2.3 million or 16.9 percent of revenue from $0.8 million in the same period last year.

BUSINESS OUTLOOK

"Based on our expectation that current foreign currency trends extend into the fourth quarter, in combination with temporary delays in four sizable client ramps and the decision to reduce certain unprofitable seasonal volumes, we are updating our guidance," commented Regina Paolillo, executive vice president and chief financial officer of TeleTech.

Updated full-year 2013 guidance is as follows:

  • Revenue is expected to range between $1.175 and $1.185 billion. 
  • Operating margin is expected to range between 8.75 percent and 9.00 percent before asset impairment, restructuring or acquisition-related charges.
  • Capital expenditures are expected to range between $50 million and $55 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 Thursday, October 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 Thursday, November 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 Revenue, 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 September 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 October 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


Nine months ended




 September 30,


 September 30,




2013


2012


2013


2012











Revenue


$296,995


$286,268


$875,070


$867,720











Operating Expenses:










Cost of services


208,648


201,766


625,689


622,782


Selling, general and administrative


50,165


43,845


142,080


137,689


Depreciation and amortization


11,463


10,695


33,281


31,040


Restructuring charges, net


758


2,440


4,181


20,694


Impairment losses


-


161


1,205


2,958

         Total operating expenses


271,034


258,907


806,436


815,163











Income From Operations


25,961


27,361


68,634


52,557












Other income (expense)


(434)


(1,252)


(5,537)


(2,802)











Income Before Income Taxes


25,527


26,109


63,097


49,755












(Provision for) benefit from income taxes


(6,358)


3,611


(12,603)


3,030











Net Income


19,169


29,720


50,494


52,785












Net income attributable to noncontrolling interest


(1,526)


(1,291)


(2,575)


(3,152)











Net Income Attributable to TeleTech Stockholders

$  17,643


$  28,429


$  47,919


$  49,633











Net Income Per Share Attributable to TeleTech Stockholders


















Basic


$     0.35


$     0.53


$     0.93


$     0.90












Diluted


$     0.34


$     0.52


$     0.91


$     0.89





















Income From Operations Margin


8.7%


9.6%


7.8%


6.1%

Net Income Attributable to TeleTech Stockholders Margin

5.9%


9.9%


5.5%


5.7%

Effective Tax Rate


24.9%


(13.8)%


20.0%


(6.1)%





















Weighted Average Shares Outstanding









  Basic


50,732


54,093


51,643


55,233

  Diluted


51,678


54,905


52,499


55,991

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(unaudited)





















Three months ended


Nine months ended



 September 30,


 September 30,



2013


2012


2013


2012










Revenue:









Customer Management Services


$217,035


$224,041


$660,258


$688,318

Customer Growth Services


25,893


28,200


71,148


75,373

Customer Technology Services


40,649


22,343


110,855


72,851

Customer Strategy Services


13,418


11,684


32,809


31,178

Total


$296,995


$286,268


$875,070


$867,720










Income (Loss) From Operations:









Customer Management Services


$  17,944


$  21,001


$  55,135


$  38,438

Customer Growth Services


588


2,487


1,250


1,409

Customer Technology Services


5,165


3,054


13,882


11,089

Customer Strategy Services


2,264


819


(1,633)


1,621

Total


$  25,961


$  27,361


$  68,634


$  52,557

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)













 September 30,


 December 31, 



2013


2012



(unaudited)








ASSETS





Current assets:





   Cash and cash equivalents


$         144,903


$         164,485

   Accounts receivable, net


245,080


251,206

   Other current assets


77,026


87,853

      Total current assets


467,009


503,544






Property and equipment, net


120,111


112,276

Other assets


251,249


231,353






Total assets


$         838,369


$         847,173






LIABILITIES AND EQUITY





Total current liabilities


$         178,998


$         171,405

Other long-term liabilities


188,000


175,431

Total equity


471,371


500,337






Total liabilities and equity


$         838,369


$         847,173

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION

(In thousands, except per share data)

 (unaudited)





Three months ended September 30,


Nine months ended September 30,



2013


2012


2013


2012










Reconciliation of Revenue:


















Revenue


$296,995


$286,268


$875,070


$867,720

   Changes due to foreign currency fluctuations


6,886


4,451


3,949


17,702

   Lost revenue from typhoon


1,216


-


1,216


-

Non-GAAP Revenue


$305,097


$290,719


$880,235


$885,422



















Reconciliation of Gross Margin:


















Non-GAAP Revenue


$305,097


$290,719


$880,235


$885,422

Cost of services


208,648


201,766


625,689


622,782

   Adjustments related to Non-GAAP revenue adjustments


4,939


4,575


1,769


16,012

Non-GAAP Gross margin


$  91,510


$  84,378


$252,777


$246,628










NON-GAAP Gross margin percentage


30.0%


29.0%


28.7%


27.9%



















Reconciliation of EBIT & EBITDA:


















Net Income Attributable to TeleTech stockholders


$  17,643


$  28,429


$  47,919


$  49,633

Interest income


(938)


(780)


(2,182)


(2,235)

Interest expense


1,799


2,129


5,567


4,810

Provision for (benefit from) income taxes


6,358


(3,611)


12,603


(3,030)

EBIT


$  24,862


$  26,167


$  63,907


$  49,178










Depreciation and amortization


11,463


10,695


33,281


31,040










EBITDA


$  36,325


$  36,862


$  97,188


$  80,218



















Reconciliation of Free Cash Flow:


















Cash Flow From Operating Activities:









   Net income


$  19,169


$  29,720


$  50,494


$  52,785

   Adjustments to reconcile net income to net cash provided by operating activities:









          Depreciation and amortization


11,463


10,695


33,281


31,040

          Other


5,770


(25,661)


(7,162)


(20,414)

   Net cash provided by operating activities


36,402


14,754


76,613


63,411










Less - Total Capital Expenditures


18,172


15,781


31,832


33,149










Free Cash Flow


$  18,230


$   (1,027)


$  44,781


$  30,262



















Reconciliation of Non-GAAP Income from Operations:


















Income from Operations


$  25,961


$  27,361


$  68,634


$  52,557

Restructuring charges, net


758


2,440


4,181


20,694

Impairment losses


-


161


1,205


2,958

Net affect of foreign currency fluctuations


2,343


(124)


2,576


1,690

Net affect of revenue lost from typhoon


820


-


820


-

Acquisition-related expenses


-


-


-


159










Non-GAAP Income from Operations


$  29,882


$  29,838


$  77,416


$  78,058



















Reconciliation of Non-GAAP EPS:


















Net Income Attributable to TeleTech stockholders


$  17,643


$  28,429


$  47,919


$  49,633

Add:  Asset impairment and restructuring charges, net of related taxes


501


1,835


3,616


15,097

Add:  Acquisition-related expenses, net of related taxes


-


-


-


95

Add:  Deconsolidation of subsidiary


-


-


3,556


-

Add:  Net affect of foreign currency fluctuations, net of related taxes


1,697


(81)


1,801


1,200

Add:  Net affect of revenue lost from typhoon, net of related taxes


574


-


574


-

Add:  Changes in judgement for uncertain tax positions recorded in prior periods


1,000


(8,904)


(509)


(9,441)










 Non-GAAP Net Income Attributable to TeleTech stockholders


$  21,415


$  21,279


$  56,957


$  56,584










    Diluted shares outstanding


51,678


54,905


52,499


55,991










 Non-GAAP EPS Attributable to TeleTech stockholders


$0.41


$0.39


$1.08


$1.01



















Reconciliation of Non-GAAP EBITDA:


















Net Income Attributable to TeleTech stockholders


$  17,643


$  28,429


$  47,919


$  49,633

   Interest income


(938)


(780)


(2,182)


(2,235)

   Interest expense


1,799


2,129


5,567


4,810

   Provision for (benefit from) income taxes


6,358


(3,611)


12,603


(3,030)

   Depreciation and amortization


11,463


10,695


33,281


31,040

   Asset impairment and restructuring charges


758


2,601


5,386


23,652

   Acquisition-related expenses


-


-


-


159

   Net affect of foreign currency fluctuations


2,343


(124)


2,576


1,690

   Net affect of revenue lost from typhoon


820


-


820


-

   Equity-based compensation expenses


3,265


3,465


9,842


10,310










 Non-GAAP EBITDA


$  43,511


$  42,804


$115,812


$116,029

 

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 Services


$    234,876


$    229,401


$       224,041


$         235,456

Customer Growth Services


22,764


24,409


28,200


25,399

Customer Technology Services


25,552


24,956


22,343


23,997

Customer Strategy Services


9,462


10,032


11,684


10,409

Total


$    292,654


$    288,798


$       286,268


$         295,261










Income (Loss) From Operations:









Customer Management Services


$      16,707


$          730


$         21,001


$          21,833

Customer Growth Services


(2,130)


1,052


2,487


849

Customer Technology Services


3,679


4,356


3,054


4,625

Customer Strategy Services


494


308


819


(1,319)

Total


$      18,750


$       6,446


$         27,361


$          25,988

 

(Logo: http://photos.prnewswire.com/prnh/20131017/LA99244LOGO)

SOURCE TeleTech Holdings, Inc.