| Record Third Quarter Revenue Reaches $349 Million, GAAP Earnings per Share up 45%; Year-to-Date BPO Segment Revenue up 9.5 Percent; Strong Financial Performance and Balance Sheet Delivers $66 Million of Cash Flow From Operations; Efficient Capital Deployment Results in Record Free Cash Flow of $51 Million; Completes $75 Million in Share Repurchases While Maintaining a Low Debt-to-Equity Ratio
ENGLEWOOD, CO, Nov 04, 2008 (MARKET WIRE via COMTEX News Network) -- TeleTech Holdings, Inc. (NASDAQ: TTEC), one of the largest and most
geographically diverse global providers of business process
outsourcing ("BPO") solutions, today announced financial results for
the third quarter 2008. The Company also filed its Quarterly Report
on Form 10-Q with the Securities and Exchange Commission for the
quarter ended September 30, 2008.
TeleTech reported record third quarter 2008 revenue of $349.1
million, a 4 percent increase over third quarter 2007 revenue of
$335.7 million. Revenue in TeleTech's BPO segment grew 5.7 percent
from the year-ago period. The strengthening U.S. dollar relative to
currencies of certain foreign subsidiaries lowered third quarter 2008
revenue by nearly $5 million from the second quarter 2008.
TeleTech believes it has one of the largest and most diversified
offshore footprints of any global industry provider. At the end of
the third quarter 2008, TeleTech had over 25,000 offshore BPO
workstations representing more than 60 percent of total delivery
capacity. Third quarter 2008 revenue from TeleTech's offshore
delivery centers grew approximately 16 percent to $159 million over
the year-ago quarter, represented 45 percent of total revenue and
spanned seven countries including Argentina, Canada, Costa Rica,
Malaysia, Mexico, the Philippines and South Africa.
TeleTech's income from operations for the third quarter 2008 was
$27.2 million or 7.8 percent of revenue. Income from operations for
the quarter included $3.0 million of restructuring and impairment
charges and $2.1 million of final audit, legal, professional fees and
other expenses associated with the Audit Committee's completed review
of the Company's equity-based compensation practices and the
subsequent financial restatement. Excluding these charges, which
totaled $5.1 million, TeleTech's income from operations for the third
quarter 2008 was $32.4 million or 9.3 percent of revenue, an increase
from 8.4 percent, excluding unusual charges, in the year-ago quarter.
Furthermore, excluding $3.0 million of non-cash expense in the third
quarter 2008 for equity-based compensation, operating margin was 10.1
percent.
Fully diluted GAAP earnings per share for the third quarter 2008
increased 45 percent over the year-ago quarter to 29 cents on net
income of $20.2 million. Excluding the $5.1 million of unusual
pre-tax charges discussed above and a $2.9 million tax benefit for
the reversal of an international deferred tax valuation allowance,
third quarter 2008 non-GAAP earnings per share were 30 cents, up 20
percent from 25 cents non-GAAP earnings per share in the year-ago
quarter.
EXECUTIVE COMMENTARY ON TELETECH'S FINANCIAL RESULTS
"Our results demonstrate that the combination of a steady, well
diversified revenue base, a solid balance sheet, strong cash flows
from operations and ongoing investments in a highly capital-efficient
global delivery platform continue to position TeleTech as the
industry leader during both good and challenging economic times,"
said Kenneth Tuchman, chairman and chief executive officer. "Our
year-to-date BPO revenue grew 9.5 percent and our year-to-date
operating margin, excluding unusual and certain non-cash items,
increased to 10.2 percent. In the midst of this unprecedented global
economic environment, we maintain a low debt-to-equity ratio, have
one of the highest returns on invested capital in our industry and
have ample liquidity to fund our continued growth and share
repurchases."
THIRD QUARTER 2008 BUSINESS HIGHLIGHTS
Strong Balance Sheet Continues to Fund Organic Growth
- As of September 30, 2008, TeleTech had cash and cash equivalents of
$123.2 million and total debt of $112.6 million, resulting in a net
'positive' cash position of $10.6 million.
- Capital expenditures in the third quarter 2008 were $15.3 million of
which approximately 80 percent was for growth-related needs, with the
balance for improving TeleTech's embedded infrastructure.
- Free cash flow for the third quarter 2008 was a record $50.7 million,
up 40 percent from $36.3 million in the year ago quarter.
- Return on invested capital was 29 percent as of September 30, 2008, up
from 27 percent in the previous quarter.
Share Repurchases
- In the second quarter 2008, TeleTech's Board of Directors approved
increased funding for share repurchases up to a total of $100 million.
During the third quarter 2008, TeleTech completed $75 million in share
repurchases, leaving approximately $25 million still authorized under the
plan.
New Business
- During the third quarter 2008, TeleTech signed an estimated $70
million in new revenue primarily from expanded client relationships. Of
that amount, $60 million is new, annualized long-term revenue and $10
million is related to seasonal fourth quarter 2008 and first quarter 2009
work.
Business Outlook
TeleTech expects that 2008 revenue will approximate $1.4 billion and
2008 operating margin will range between 9 and 10 percent, excluding
unusual charges. These expectations are based on the following
business trends:
- While TeleTech continues to sign and ramp meaningful new business, the
expected revenue growth from these programs is being more than offset by
lower volumes with certain clients primarily in the logistics, retail,
transportation, and travel and leisure industries.
- Over the past several years, TeleTech has experienced significantly
higher seasonal revenue during the fourth quarter due to increased holiday
and other business requirements of its clients. At this time, TeleTech's
clients are not projecting significant increases in seasonal support needs
for the fourth quarter 2008.
- The U.S. dollar has strengthened significantly relative to currencies
in certain foreign subsidiary locations including Australia, Brazil,
Canada, the Philippines, New Zealand, Spain and the United Kingdom. As a
result, revenue in the fourth quarter 2008 versus the third quarter 2008 is
expected to decline by approximately $20 million to $30 million due to
lower revenue translation in these locations and an expected decline in the
value of certain hedged positions.
TeleTech plans to add approximately 1,200 offshore BPO workstations
during the fourth quarter 2008 bringing total workstation additions
for 2008 to 5,700, nearly all of which will be located in offshore
markets. Capital expenditures for the full-year 2008 are estimated to
range between $60 and $65 million.
Despite the challenging business environment, TeleTech continues to
further diversify its client base and strengthen its balance sheet via
ongoing free cash flow generation and proactive working capital
management. Further, the Company intends to continue repurchasing
its stock under the current program authorization. As in prior
years, TeleTech plans to provide its 2009 business outlook in
conjunction with its fourth quarter 2008 earnings announcement.
CONFERENCE CALL
A conference call and webcast with management will be held on
Wednesday, November 5, 2008, at 8:30 a.m. Eastern Time. You are
invited to join the 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, November
19, 2008.
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
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. The presentation
of 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.
ABOUT TELETECH
TeleTech is one of the largest and most geographically diverse global
providers of business process outsourcing solutions. We have a
27-year history of designing, implementing, and managing critical
business processes for Global 1000 companies to help them improve
their customers' experience, expand their strategic capabilities, and
increase their operating efficiencies. By delivering a high-quality
customer experience through the effective integration of
customer-facing front-office processes with internal back-office
processes, we enable our clients to better serve, grow, and retain
their customer base. We use Six Sigma-based quality methods
continually to design, implement, and enhance the business processes
we deliver to our clients and we also apply this methodology to our
own internal operations. We have developed deep domain expertise and
support more than 250 business process outsourcing programs serving
approximately 100 global clients in the automotive, communications
and media, financial services, government, healthcare, retail,
technology and travel and leisure industries. Our integrated global
solutions are provided by more than 50,000 employees utilizing 39,600
workstations across 86 delivery centers in 17 countries. For
additional information, 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:
general economic, business and industry conditions; the loss of
business or lower volumes from significant clients; delivery center
utilization and labor rates; the pace at which we are able to ramp
new business; the effect of TeleTech's failure to timely file all of
its required reports under the Securities and Exchange Act of 1934
and its restatement of previously issued financial statements,
including shareholder litigation and action by the SEC and/or other
governmental agencies; negative tax or other implications for TeleTech
resulting from any accounting adjustments or other factors;
unexpected regulatory changes, tax laws, and data privacy measures;
data privacy issues; our ability to accurately predict geographic
revenue mix and seasonal sales trends; information technology and/or
delivery center interruptions; issues or matters that may arise from
governmental and/or administrative agency investigations; our ability
to successfully remediate identified internal control deficiencies;
litigation and governmental investigations or proceedings arising out
of or related to accounting and financial reporting matters;
fluctuations in foreign currency exchange rates along with our
ability to effectively hedge exposure to changes in foreign currency
exchange and/or interest rates; the ability to attract, retain and
motivate key personnel; and political instability, the effect of armed
hostilities, terrorism and natural disasters. A detailed discussion of
these and other 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, 2007. 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.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Revenue $ 349,110 $ 335,727 $ 1,074,162 $ 998,075
Operating Expenses:
Cost of services 252,666 246,558 788,599 721,028
Selling, general and
administrative 51,157 46,968 148,387 147,675
Depreciation and
amortization 14,998 14,250 45,782 41,598
Restructuring
charges, net 2,015 2,588 4,657 2,850
Impairment losses 1,033 2,274 1,033 15,789
----------- ----------- ----------- -----------
Total operating
expenses 321,869 312,638 988,458 928,940
----------- ----------- ----------- -----------
Income From Operations 27,241 23,089 85,704 69,135
Other expense (777) (6,826) (2,368) (10,338)
----------- ----------- ----------- -----------
Income Before Income
Taxes and Minority
Interest 26,464 16,263 83,336 58,797
Provision for
income taxes (5,368) (1,082) (20,697) (16,193)
----------- ----------- ----------- -----------
Income Before Minority
Interest 21,096 15,181 62,639 42,604
Minority interest (936) (808) (2,992) (1,750)
----------- ----------- ----------- -----------
Net Income $ 20,160 $ 14,373 $ 59,647 $ 40,854
=========== =========== =========== ===========
Net Income Per Share:
Basic $ 0.30 $ 0.20 $ 0.86 $ 0.58
=========== =========== =========== ===========
Diluted $ 0.29 $ 0.20 $ 0.84 $ 0.56
=========== =========== =========== ===========
Income From Operations
Margin 7.8% 6.9% 8.0% 6.9%
Net Income Margin 5.8% 4.3% 5.6% 4.1%
Effective Tax Rate 20.3% 6.7% 24.8% 27.5%
Weighted Average Shares
Outstanding
Basic 68,217 70,214 69,373 70,367
Diluted 69,508 72,343 70,921 72,909
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Revenue:
North American BPO $ 233,171 $ 229,231 $ 738,871 $ 689,468
International BPO 115,939 101,198 335,291 291,714
Database Marketing and
Consulting - 5,298 - 16,893
----------- ----------- ----------- -----------
Total $ 349,110 $ 335,727 $ 1,074,162 $ 998,075
=========== =========== =========== ===========
Income (Loss) From
Operations:
North American BPO $ 19,974 $ 25,430 $ 78,975 $ 87,777
International BPO 7,356 4,475 7,213 9,449
Database Marketing and
Consulting (89) (6,816) (484) (28,091)
----------- ----------- ----------- -----------
Total $ 27,241 $ 23,089 $ 85,704 $ 69,135
=========== =========== =========== ===========
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2008 2007
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 123,156 $ 91,239
Accounts receivable, net 248,629 270,988
Other current assets 95,839 97,598
------------- -------------
Total current assets 467,624 459,825
Property and equipment, net 172,003 174,809
Other assets 119,185 125,661
------------- -------------
Total assets $ 758,812 $ 760,295
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 198,554 $ 186,810
Other long-term liabilities 159,310 118,729
Minority interest 5,135 3,555
Total stockholders' equity 395,813 451,201
------------- -------------
Total liabilities and stockholders'
equity $ 758,812 $ 760,295
============= =============
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,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Reconciliation of EBIT:
Net Income $ 20,160 $ 14,373 $ 59,647 $ 40,854
Interest income (1,327) (650) (3,801) (1,535)
Interest expense 1,595 1,395 4,649 4,457
Provision for income taxes 5,368 1,082 20,697 16,193
--------- --------- --------- ---------
EBIT $ 25,796 $ 16,200 $ 81,192 $ 59,969
Reconciliation of Free Cash Flow:
Cash Flow From Operating
Activities:
Net income $ 20,160 $ 14,373 $ 59,647 $ 40,854
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 14,998 14,250 45,782 41,598
Other 30,836 22,444 19,870 17,833
--------- --------- --------- ---------
Net cash provided by
operating activities $ 65,994 $ 51,067 $ 125,299 $ 100,285
--------- --------- --------- ---------
Total Capital Expenditures 15,320 14,768 51,728 43,788
--------- --------- --------- ---------
Free Cash Flow $ 50,674 $ 36,299 $ 73,571 $ 56,497
========= ========= ========= =========
Reconciliation of Non-GAAP
Income from Operations:
Income from Operations $ 27,241 $ 23,089 $ 85,704 $ 69,135
Restructuring charges, net 2,015 2,588 4,657 2,850
Impairment losses 1,033 2,274 1,033 15,789
Equity comp review and
restatement expenses 2,070 100 10,424 100
--------- --------- --------- ---------
Non-GAAP Income from Operations $ 32,359 $ 28,051 $ 101,818 $ 87,874
Reconciliation of Non-GAAP EPS:
GAAP Net Income $ 20,160 $ 14,373 $ 59,647 $ 40,854
Add: Asset impairment and
restructuring charges, net
of related taxes 2,094 3,525 4,080 12,432
Add: Equity comp review
and restatement expenses,
net of related taxes 1,422 73 7,474 67
Less: Release of Income
Tax Valuation Allowance (2,915) - (2,915) -
--------- --------- --------- ---------
Non-GAAP Net Income $ 20,761 $ 17,970 $ 68,286 $ 53,353
Diluted shares outstanding 69,508 72,343 70,921 72,909
Non-GAAP EPS $ 0.30 $ 0.25 $ 0.96 $ 0.73
Investor Contact:
Karen Breen
303-397-8592
Media Contact:
KC Higgins
303-397-8325
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