EPS Doubles to 4 Cents
Generates $11 Million in Free Cash Flow and Repurchases $16 Million in Common
Stock
DENVER, May 4 /PRNewswire-FirstCall/ -- TeleTech Holdings, Inc.
(Nasdaq: TTEC), a global provider of customer management and business process
outsourcing (BPO) services, today announced first quarter 2005 financial
results. The Company also filed its Quarterly Report on Form 10-Q with the
Securities and Exchange Commission for the quarter ended March 31, 2005.
First Quarter First Quarter
2005 2004
Financial Results (Unaudited)
Revenue $254.3M $268.0M
Operating income $4.1M $6.1M
Net income $2.7M $1.4M
EPS -- diluted $0.04 $0.02
Non-GAAP Financial Measures
Operating margin percentage 1.6% 2.3%
Net cash* $59.8M $23.2M
Free cash flow* $10.7M $14.0M
Days sales outstanding (DSOs) 55 52
*See reconciliation of Non-GAAP financial measures below.
CEO COMMENTARY
Ken Tuchman, said, "The strategy we undertook almost two years ago to grow
and retain clients in a profitable manner through innovative new services,
along with the decision to globalize and centrally manage our business units,
is generating profits and free cash flow. Our plan to centrally manage our
business has been fully implemented in North America and will be completed
globally during the third quarter of this year. Newgen, our database
marketing subsidiary, was scheduled to be the last segment fully integrated
into this centralized model. As previously announced, Newgen entered into the
largest new product implementation in its history and the launch is taking
longer than anticipated resulting in this segment reporting an operating loss
of approximately $3 million, or 4 cents per diluted share for the first
quarter. We are accelerating the integration of Newgen's operational,
technological, and financial responsibilities under our North American and
corporate leadership teams and expect to complete this during the third
quarter and have dedicated the necessary resources to make the launch
successful.
"I am confident that under this centralized model, Newgen will return to
profitability later this year. I would like to add that due to key client
renewals along with continued pricing discipline and cost improvement efforts,
TeleTech, on a consolidated basis, will continue to be profitable throughout
2005."
REVENUE
First quarter 2005 revenue was $254.3 million, compared to $268.0 million
during the year ago quarter. The first quarter 2005 benefited from
approximately $3.0 million of currency translation gains, while the prior year
quarter benefited from $3.4 million of minimum commitments from a large
client.
As part of TeleTech's strategic plan, the Company invested in a dedicated
account management team more than a year ago to focus on growing and retaining
existing client relationships. As a result of this initiative and high client
satisfaction levels, TeleTech has successfully renewed a majority of its key
client relationships and has obtained new global business from existing
clients that is expected to ramp in the second half of 2005.
OPERATING INCOME
Income from operations of $4.1 million was $2.0 million less than the year
ago quarter. The decrease is primarily due to a $3.8 million decline in
Newgen's operating results and, as previously disclosed, a $3.4 million
reduction in minimum commitments from a large client. Partially offsetting
these declines was nearly $5.0 million in operational improvements from
TeleTech's ongoing profit improvement initiatives. Additional information
regarding comparability to the prior year is included in the Company's
March 2005 Quarterly Report on Form 10-Q.
INTEREST EXPENSE
Interest expense in the first quarter 2005 was $2.4 million lower than the
first quarter of 2004 as a result of de-leveraging the Company and repaying
more than $120 million in bank debt.
BALANCE SHEET
TeleTech ended the first quarter 2005 in a strong financial position with
$68.2 million in cash and cash equivalents and net cash of $59.8 million after
$8.4 million in total debt. DSOs were 55 days at the end of March and within
the Company's targeted DSO range of 50 to 60 days.
Capital expenditures for the first quarter 2005 were $4.4 million, a
decrease of $7.5 million from $11.9 million during the year ago quarter.
LIQUIDITY AND FREE CASH FLOW
TeleTech generated $10.7 million of free cash flow during the 2005 first
quarter, which was less than the year ago quarter due in part to higher DSOs
and the timing of payroll-related liabilities.
During the first quarter 2005, TeleTech repurchased 1.5 million shares for
$16.3 million, leaving approximately $27 million authorized to be repurchased
under the Company's buy-back program.
SECOND QUARTER 2005 OUTLOOK
TeleTech is currently in advanced discussions on several new, global
business opportunities. Should the Company be successful in winning some or
all of these opportunities, they would contribute to TeleTech's financial
results during subsequent quarters.
As a result of the above and the migration of certain client programs to
international locations, along with Newgen taking longer than expected to ramp
a large new client program, TeleTech believes second quarter revenue will be
comparable to the first quarter revenue.
Newgen's operating loss is expected to be approximately half the first
quarter loss, with further improvement expected in the latter half of 2005 as
a result of ramping future new business, the integration of its recently
completed acquisition, and ongoing cost improvement initiatives.
NON-GAAP FINANCIAL MEASURES
Pursuant to Regulation G as issued by the Securities and Exchange
Commission, the tables below provide a reconciliation of the differences
between the Non-GAAP financial measures as discussed above including "Net
cash" and "Free cash flow," and TeleTech's closest comparable financial
measures in each case calculated in accordance with GAAP.
First Quarter First Quarter
2005 2004
Net Cash:
Cash and cash equivalents $68.2M $146.6M
Less: current portion of long-term
debt and capital lease obligations $(0.3)M $(76.6)M
Long-term capital lease obligations $(0.1)M $ (0.1)M
Other long-term debt $(0.9)M $(39.3)M
Grant advances $(7.1)M $ (7.4)M
Net Cash $59.8M $23.2M
First Quarter First Quarter
2005 2004
Free Cash Flow:
Net cash provided by operating activities $15.1M $25.9M
Less: purchases of property and equipment $(4.4)M $(11.9)M
Free Cash Flow $10.7M $14.0M
These Non-GAAP financial measures should be used in addition to, but not
as a substitute for, the Company's comparable GAAP measures. They are
presented because TeleTech's management uses this information when evaluating
current results of operations, and believes this information provides the
users of the financial statements with a useful comparison of TeleTech's
current results of operations with past and future periods.
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
TeleTech executive management will hold a conference call to discuss first
quarter 2005 financial results on Thursday, May 5, 2005, at 11:00 a.m. Eastern
Time. You are invited to join a live webcast of the 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 of the call will be
available on the TeleTech website through Thursday, May 19, 2005.
ABOUT TELETECH
TeleTech is a global business services company that provides a full range
of front- to back-office outsourced solutions including customer management,
BPO, and database marketing services to measurably enhance clients' core
customer management processes. TeleTech's ability to create innovative
strategies, combined with its global technology platform and delivery
infrastructure, helps clients increase revenue, lower costs, and retain their
customers around the world. TeleTech's products and services, standardized
processes, and recognized capabilities to implement complex global projects
make the Company a valued partner for clients that include Global 1000
businesses and governments. TeleTech partners with clients to offer
150 languages, through its more than 32,000 employees, in 17 countries. For
additional information, visit www.TeleTech.com.
FORWARD-LOOKING STATEMENTS
This press release may contain certain forward-looking statements relating
to future results. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. These forward-looking
statements are subject to risks and uncertainties that may cause TeleTech's
and its subsidiaries' actual results to differ materially from those expressed
or implied by such forward-looking statements, including but not limited to
the following: the ability to close and ramp business opportunities that are
currently in advanced discussions; the ability for the Company to execute it's
growth plans; to increase profitability via the globalization of its North
American best operating practices; to achieve its three-year financial goals
and targeted cost reductions; the ability to successfully launch and generate
revenue from new product introductions; the estimated revenue associated with
new or renewed client agreements; the possibility of the Company's Database
Marketing and Consulting segment not returning to historic levels of
profitability; the possibility of lower revenue or price pressure from
client's experiencing a downturn in their business; the ability of the Company
to fund its future growth initiatives; greater than anticipated competition in
the customer care market, causing adverse pricing and more stringent
contractual terms; risks associated with losing or not renewing significant
client relationships, or early termination of a client agreement; the
Company's ability to close new business and fill excess capacity; consumers'
concerns or adverse publicity regarding the products of the Company's clients;
higher than anticipated start-up costs or lead times associated with new
ventures or business in new markets; execution risks associated with
performance-based pricing metrics in certain client agreements; execution
risks associated with achieving targeted annualized cost reductions; the
Company's 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-related events; risks
associated with attracting and retaining cost-effective labor at the Company's
customer management centers; the possibility of additional asset impairments
and restructuring charges; risks associated with changes in foreign currency
exchange rates; economic or political changes affecting the countries in which
the Company operates; changes in accounting policies and practices promulgated
by standard setting bodies; and, new legislation or government regulation that
impacts the customer care industry.
Please refer to the Company's filings with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the year
ended December 31, 2004 and Quarterly Report on Form 10-Q for the three months
ended March 31, 2005, for a detailed discussion of factors discussed above and
other important factors that may impact the Company's business, results of
operations, financial condition, and cash flows. The Company assumes no
obligation to update its forward-looking statements to reflect actual results
or changes in factors affecting such forward-looking statements.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended
March 31,
2005 2004
Revenue $254,326 $267,998
Operating expenses:
Costs of services 191,010 203,731
Selling, general & administrative 43,976 40,366
Depreciation and amortization 14,308 15,982
Restructuring charges, net 953 (1) 1,842 (2)
Total operating expenses 250,247 261,921
Operating Income 4,079 6,077
Other income (expense) 874 (2,360)
Income Before Income Taxes 4,953 3,717
Income tax expense 2,149 2,522
Income before Minority Interest 2,804 1,195
Minority interest (63) 206
Net Income $2,741 $1,401
Basic Earnings Per Share $0.04 $0.02
Diluted Earnings Per Share $0.04 $0.02
Operating Margin 1.6% 2.3%
Net Income Margin 1.1% 0.5%
Effective Tax Rate 43.4% 67.9%
Weighted Average Shares
Basic 74,179 75,069
Diluted 76,720 76,524
Notes:
1. Represents a $1.0 million charge related to a reduction in force.
2. Represents a $1.6 million charge related to a reduction in force, a
$(0.2) million benefit related to revised estimates of restructuring
charges, and a $0.4 million charge related to facility exit costs in
connection with SFAS No. 146.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT DISCLOSURES
(In thousands)
(Unaudited)
Three months ended
March 31,
2005 2004
Revenue:
North American Customer Care $152,252 $162,276
International Customer Care 80,420 80,424
Database Marketing & Consulting 21,654 25,298
Total $254,326 $267,998
Operating Income (Loss):
North American Customer Care $11,233 $9,799
International Customer Care (4,323) (4,717)
Database Marketing & Consulting (2,831) 995
Total $4,079 $6,077
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2005 2004
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $68,215 $75,066
Accounts receivable, net 155,159 148,627
Other current assets 53,505 54,342
Total current assets 276,879 278,035
Property and equipment, net 124,658 132,214
Other assets 89,288 86,546
Total assets $490,825 $496,795
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $145,347 $136,192
Other noncurrent liabilities 29,838 30,186
Minority interest 7,003 7,872
Total stockholders' equity 308,637 322,545
Total liabilities and stockholders'
equity $490,825 $496,795
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
March 31,
2005 2004
Cash flow from operating activities:
Net income $2,741 $1,401
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 14,308 15,982
Other (1,951) 8,481
Net cash provided by operating
activities $15,098 $25,864
Total Capital Expenditures $4,397 $11,866
Free Cash Flow $10,701 $13,998
