Record Second Quarter Revenue Grows 13 Percent, Operating Margin More Than
Doubles; 2006 Revenue Growth Expectation Raised to Between 11 and 12 Percent
ENGLEWOOD, Colo., Aug. 1 /PRNewswire-FirstCall/ -- TeleTech Holdings, Inc.
(Nasdaq: TTEC), a leading global business process outsourcing (BPO) provider,
today announced second quarter 2006 financial results. The Company also filed
its Quarterly Report on Form 10-Q with the Securities and Exchange Commission
for the quarter ended June 30, 2006.
TeleTech reported record second quarter revenue of $287 million, a
13 percent increase over the year-ago quarter. Further, revenue in TeleTech's
North American and International BPO segments, representing 97 percent of
consolidated revenue, grew 19.3 percent over the year-ago quarter.
Income from operations more than doubled from the year-ago quarter,
increasing to $11.6 million or 4.0 percent of total revenue.
Fully diluted EPS increased more than three-fold over the prior-year
quarter to 17 cents per share. This includes a $5.2 million (7 cents per
share) tax benefit from the reversal of certain international deferred tax
valuation allowances due to continued and improved profitability in these
regions.
EXECUTIVE COMMENTARY
"We are very pleased to have achieved record second-quarter revenue while
more than doubling our operating margin," said Kenneth Tuchman, chairman and
chief executive officer. "This is the third consecutive quarter of
double-digit revenue gains achieved entirely from organic growth. Our
improved performance resulted from solid execution and an ongoing commitment
to profitable growth as we focus on achieving our year-end 2007 financial
goals. We plan to further complement our strong organic growth with Global
500 clients by pursuing strategic and accretive acquisitions, such as our
recent purchase of Direct Alliance Corporation," said Tuchman. "We will also
continue our share repurchase program given our belief in the prospects for
our business and our leading industry position."
SECOND QUARTER 2006 BUSINESS HIGHLIGHTS
Strong Revenue and Operating Margin
- TeleTech's improved financial results were attributable to solid
performance in its North American and International BPO business
segments due to growth in new and existing client programs, continued
expansion of business in offshore locations and ongoing profit
improvement initiatives.
- Revenue in TeleTech's International BPO segment grew 8.3 percent to
$88 million over the prior-year quarter. The operating results in this
segment approached breakeven, excluding restructuring and asset
impairment charges of $0.4 million, representing a significant
improvement over the $6.0 million operating loss for the year-ago
quarter.
Expansion in Its Global 500 Client Base
-
Through the first six months of 2006, TeleTech signed an estimated
$135 million of incremental annual revenue from new and existing
clients.
- During the same six months, TeleTech also renewed an estimated
$75 million of annual revenue.
- TeleTech is in the final stages of multiple deals with Global
500 companies and plans to announce these agreements when completed.
Completed Acquisition of Direct Alliance Corporation
As planned, on June 30, 2006, TeleTech completed the acquisition of Direct
Alliance Corporation, a global provider of sales and e-commerce solutions.
Throughout its 13-year history, Direct Alliance has enabled some of the
world's best-known hardware, software, and electronics manufacturers to expand
market reach and increase revenue by offering outsourced professional sales,
e-commerce and account management capabilities. These capabilities help the
Global 500 efficiently serve small and midsize businesses, governments and
disparate divisions of large corporations.
Strong Balance Sheet Funding Organic Growth and Share Repurchase Program
- As of quarter-end, TeleTech had cash and cash equivalents of
$31.3 million and total debt to equity of 29 percent. The increase in
total debt from the year-ago quarter is primarily related to the
acquisition of Direct Alliance.
- EBITDA was $23.4 million for the second quarter 2006, a 30 percent
increase over $18.0 million in the year-ago quarter.
- As a result of increased global demand, capital expenditures were
$13.9 million, up from $ 11.4 million a year-ago.
- TeleTech repurchased $10.6 million of common stock through the first
six months of 2006, leaving approximately $55.2 million remaining under
the repurchase program as of quarter-end.
Business Outlook
- For the full year 2006, TeleTech projects revenue will grow
approximately 11 to 12 percent over 2005, including the Direct Alliance
acquisition. Furthermore, TeleTech believes fourth quarter 2006
operating margin will approximate 6 to 7 percent and EBITDA margin will
approximate 10 to 11 percent, both excluding unusual charges.
- TeleTech projects the acquisition of Direct Alliance will contribute
approximately $35 million to revenue during the last six months of 2006
and will be slightly accretive to earnings during the first twelve
months of combined operations.
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
second quarter 2006 financial results on Tuesday, August 1, 2006, at 5:00 p.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 Tuesday, August 15, 2006.
NON-GAAP FINANCIAL MEASURES
To supplement the Company's consolidated financial statements presented in
accordance with generally accepted accounting principles in the United States
(GAAP), the Company uses the following measure defined as non-GAAP financial
information by the Securities and Exchange Commission: EBITDA. The
presentation of this financial measure is not intended to be used in isolation
or as a substitute for the financial information prepared and presented in
accordance with GAAP. A reconciliation can also be found in the Company's
Form 10-Q for the second quarter ended June 30, 2006.
ABOUT TELETECH
TeleTech is a leading global business process outsourcing (BPO) company
that provides a full range of front-to-back office outsourced solutions
including e-commerce, professional sales, customer management,
transaction-based processing, and database marketing services. TeleTech's
comprehensive solutions include fully managed, OnDemand services including
infrastructure, software, and business intelligence. TeleTech's ability to
deliver innovative solutions globally over a centralized and standardized
delivery platform ensures a high quality, consistent customer experience
enabling clients to increase revenue, improve profitability, and develop
stronger customer relationships around the world. TeleTech is a valued
partner for clients that include Global 1000 businesses and governments.
Approximately 60 percent of TeleTech's revenue is generated internationally
with services offered from nearly every continent on the globe. For
additional information, visit www.teletech.com.
FORWARD-LOOKING STATEMENTS
This press release may contain certain forward-looking statements that
involve risks and uncertainties. The projections and statements contained in
these forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance, or achievements to be materially different from any future
results, performance, or achievements expressed or implied by the
forward-looking statements. All statements not based on historical fact are
forward-looking statements that involve substantial risks and uncertainties.
In accordance with the Private Securities Litigation Reform Act of 1995,
following are important factors that could cause our actual results to differ
materially from those expressed or implied by such forward-looking statements,
including but not limited to the following: our belief that we are continuing
to see strong demand for our services and that sales cycles are shortening;
risks associated with successfully integrating Direct Alliance Corporation
("DAC") and achieving anticipated future revenue growth, profitability, and
synergies; estimated revenue from new, renewed, and expanded client business
as volumes may not materialize as forecasted or be sufficient to achieve our
Business Outlook; achieving expected profit improvement in our International
Business Process Outsourcing ("BPO") operations; the ability to close and ramp
new business opportunities that are currently being pursued or that are in the
final stages with existing clients and potential clients in order to achieve
our Business Outlook; our ability to execute our growth plans, including sales
of new products (such as TeleTech On Demand(TM)); our ability to achieve our
year-end 2006 and 2007 financial goals and targeted cost reductions set forth
in our Business Outlook; the possibility of our Database Marketing and
Consulting segment not increasing revenue, lowering costs, or returning to
profitability resulting in an impairment of its $13 million of Goodwill; 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 BPO and customer management market, 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, pandemic or terrorist-related events; risks associated with
attracting and retaining cost-effective labor at our 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 we operate;
changes in accounting policies and practices promulgated by standard setting
bodies; and new legislation or government regulation that impacts the BPO and
customer management industry.
Please refer to the Company's filings with the Securities and Exchange
Commission, including the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006, and the Annual Report on Form 10-K for the year
ended December 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
Revenue $287,334 $253,933 $570,756 $508,259
Operating Expenses:
Cost of services 214,823 187,161 429,016 378,171
Selling, general and
administrative 48,451 46,110 95,861 90,086
Depreciation and amortization 11,975 13,683 23,776 27,991
Restructuring charges, net 183 (10) 940 943
Impairment losses 302 2,537 478 2,537
Total operating expenses 275,734 249,481 550,071 499,728
Income From Operations 11,600 4,452 20,685 8,531
Other income (expense) (184) 132 (516) 1,006
Income Before Income Taxes and
Minority Interest 11,416 4,584 20,169 9,537
Provision (benefit) for income
taxes (1,520) 623 1,461 2,772
Income Before Minority Interest 12,936 3,961 18,708 6,765
Minority interest (692) (249) (1,076) (312)
Net Income $12,244 $3,712 $17,632 $6,453
Net Income Per Share:
Basic $0.18 $0.05 $0.26 $0.09
Diluted $0.17 $0.05 $0.25 $0.09
Income From Operations Margin 4.0% 1.8% 3.6% 1.7%
Net Income Margin 4.3% 1.5% 3.1% 1.3%
Effective Tax Rate after Minority
Interest (14.2)% 14.4% 7.7% 30.0%
Weighted Average Shares
Outstanding
Basic 68,925 73,008 68,926 73,594
Diluted 69,974 74,501 70,159 75,611
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Six months ended Three months ended
June 30, June 30,
2006 2005 2006 2005
Revenue:
North American BPO $369,667 $303,922 $189,930 $151,670
International BPO 173,941 161,561 87,857 81,141
Database Marketing and Consulting 27,148 42,776 9,547 21,122
Total $570,756 $508,259 $287,334 $253,933
Income (Loss) From Operations:
North American BPO $31,120 $25,098 $18,377 $13,865
International BPO (4,232) (10,317) (1,539) (5,994)
Database Marketing and Consulting (6,203) (6,250) (5,238) (3,419)
Total $20,685 $8,531 $11,600 $4,452
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2006 2005
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $31,315 $32,505
Accounts receivable, net 219,662 207,090
Other current assets 62,980 59,558
Total current assets 313,957 299,153
Property and equipment, net 144,362 133,635
Other assets 129,588 85,443
Total assets $587,907 $518,231
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $236,970 $160,183
Other noncurrent liabilities 33,324 58,130
Minority interest 7,064 6,544
Total stockholders' equity 310,549 293,374
Total liabilities and stockholders'
equity $587,907 $518,231
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
Six months ended Three months ended
June 30, June 30,
2006 2005 2006 2005
Reconciliation of EBITDA
Net Income $17,632 $6,453 $12,244 $3,712
Interest income ($687) ($1,566) ($519) ($754)
Interest expense $2,080 $1,204 $1,198 $687
Provision for income taxes $1,461 $2,772 ($1,520) $623
Depreciation and amortization $23,776 $27,991 $11,975 $13,683
EBITDA $44,262 $36,854 $23,378 $17,951
CONTACT:
Investors
Karen Breen
+1-303-397-8592
Media
KC Higgins
+1-303-397-8325
Both of TeleTech Holdings, Inc.
