Record Third Quarter Revenue Grows 11 Percent with EPS of 18 Cents
Operating Income Increases 71 Percent and Operating Margin Expands to
6.7 Percent of Revenue
Fourth Quarter 2006 Operating Margin Expectation Raised to Between
7 and 8 Percent of Revenue, Up From Original Range of Between 6 and 7 Percent
ENGLEWOOD, Colo., Oct. 25 /PRNewswire-FirstCall/ -- TeleTech Holdings,
Inc. (Nasdaq: TTEC), a leading global business process outsourcing (BPO)
provider, today announced third quarter 2006 financial results. The Company
also filed its Quarterly Report on Form 10-Q with the Securities and Exchange
Commission for the third quarter ended September 30, 2006.
TeleTech reported record third quarter revenue of $304 million, an
11 percent increase over the year-ago quarter. Revenue in TeleTech's North
American and International BPO segments grew 17 percent over the year-ago
quarter and represented 98 percent of consolidated revenue.
Income from operations increased 71 percent to $20.4 million from the
year-ago quarter. Operating margin was 6.7 percent compared to 4.3 percent in
the year-ago quarter. TeleTech achieved its fourth quarter 2006 operating
margin goal of 6 to 7 percent one quarter earlier than expected.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
was $34 million or 11 percent of revenue, a 38 percent increase over the
year-ago quarter. Please refer to the discussion of Non-GAAP financial
measures below.
Fully diluted earnings per share was 18 cents, up from 16 cents in the
year ago quarter. Included in the 16 cents in the year-ago quarter was an
8 cent net benefit from certain tax items.
EXECUTIVE COMMENTARY
"We are very pleased to have achieved the fourth consecutive quarter of
double-digit revenue growth while increasing income from operations by
71 percent," said Kenneth Tuchman, chairman and chief executive officer. "Our
continued strong performance is the result of solid top-line growth,
operational excellence, and our commitment to increased profitability as we
progress towards achieving our year-end 2007 financial goals."
"Our offshore BPO operations that serve U.S. and European clients have
organically grown 40 percent year-to-date. We believe this makes TeleTech one
of the fastest growing BPO companies of its size," Tuchman continued. "During
the fourth quarter, we are looking forward to the largest sequential revenue
ramp in our company's history. To support this growth we have more than 3,700
employees moving from training into production during the fourth quarter."
THIRD QUARTER 2006 BUSINESS HIGHLIGHTS
Strong Revenue and Operating Margin
- TeleTech's improved financial results were attributable to strong
performance in its North American and International BPO segments
resulting from growth in new and existing client programs, continued
expansion of business in offshore locations, the acquisition of Direct
Alliance Corporation (DAC) and ongoing profit improvement initiatives.
- Revenue in TeleTech's North American BPO segment grew 21 percent to
$207 million over the prior year quarter. Operating income in this
segment grew 61 percent to $25 million and operating margin was
12.2 percent.
- Revenue in TeleTech's International BPO segment grew 9 percent to
$90 million over the prior-year quarter. The operating results in this
segment were profitable for the first time in four years with operating
income of $0.2 million compared to an operating loss of $1.9 million in
the year-ago quarter.
Solid Balance Sheet Continues to Fund Organic Growth and Share Repurchase
Program
- As of quarter-end, TeleTech had cash and cash equivalents of $55 million
and total debt to equity of 26 percent. The increase in total debt from
the year-ago quarter is primarily related to the acquisition of DAC and
the Company's share repurchase program.
- TeleTech generated $26 million of free cash flow in the third quarter
compared to $7 million in the year-ago quarter.
- Capital expenditures were $23 million, up from $11 million a year-ago.
Approximately 70 percent of this quarter's capital expenditures were
growth related with the balance for maintenance.
- TeleTech repurchased nearly $15 million of common stock through the
first nine months of 2006, leaving approximately $51 million remaining
under the repurchase program as of quarter-end.
Business Outlook
- For the 2006 fiscal year, TeleTech estimates revenue will grow
approximately 11 to 12 percent over 2005. Furthermore, TeleTech
believes fourth quarter 2006 operating margin will increase to between
7 and 8 percent, higher than its previously stated goal of between
6 and 7 percent, excluding any unusual charges.
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 third
quarter 2006 financial results on Wednesday, October 25, 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 Wednesday, November 8, 2006.
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: non-GAAP
EPS, EBITDA and Free Cash Flow. TeleTech believes that providing these non-
GAAP 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 can be found in the financial tables attached to this press
release.
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. Nearly 65 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") which we recently acquired 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 continued 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 and/or
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, including those 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 September 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 Nine months ended
September 30, September 30,
2006 2005 2006 2005
Revenue $303,804 $274,259 $874,560 $782,518
Operating Expenses:
Cost of services 220,702 202,492 649,718 580,663
Selling, general and
administrative 49,271 46,642 145,132 136,728
Depreciation and amortization 12,929 12,659 36,705 40,650
Restructuring charges, net 515 537 1,455 1,480
Impairment losses -- -- 478 2,537
Total operating expenses 283,417 262,330 833,488 762,058
Income From Operations 20,387 11,929 41,072 20,460
Other income (expense) (597) 524 (1,113) 1,530
Income Before Income Taxes and
Minority Interest 19,790 12,453 39,959 21,990
Provision for income taxes 6,428 432 7,889 3,204
Income Before Minority Interest 13,362 12,021 32,070 18,786
Minority interest (583) (401) (1,659) (713)
Net Income $12,779 $11,620 $30,411 $18,073
Net Income Per Share:
Basic $0.18 $0.16 $0.44 $0.25
Diluted $0.18 $0.16 $0.43 $0.24
Income From Operations Margin 6.7% 4.3% 4.7% 2.6%
Net Income Margin 4.2% 4.2% 3.5% 2.3%
Effective Tax Rate after Minority
Interest 33.5% 3.6% 20.6% 15.1%
Weighted Average Shares
Outstanding
Basic 69,085 71,650 68,979 72,946
Diluted 70,366 72,591 70,228 74,604
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
Revenue:
North American BPO $206,616 $170,930 $576,283 $474,852
International BPO 90,336 82,596 264,277 244,157
Database Marketing and Consulting 6,852 20,733 34,000 63,509
Total $303,804 $274,259 $874,560 $782,518
Income (Loss) From Operations:
North American BPO $25,194 $15,654 $55,995 $40,752
International BPO 182 (1,871) (3,731) (12,188)
Database Marketing and Consulting (4,989) (1,854) (11,192) (8,104)
Total $20,387 $11,929 $41,072 $20,460
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2006 2005
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $55,192 $32,505
Accounts receivable, net 220,668 207,090
Other current assets 66,600 59,558
Total current assets 342,460 299,153
Property and equipment, net 154,614 133,635
Other assets 129,222 85,443
Total assets $626,296 $518,231
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $175,900 $160,183
Other noncurrent liabilities 113,162 58,130
Minority interest 6,731 6,544
Total stockholders' equity 330,503 293,374
Total liabilities and stockholders'
equity $626,296 $518,231
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,
2006 2005 2006 2005
Reconciliation of EBITDA :
Net Income $12,779 $11,620 $30,411 $18,073
Interest income (662) (882) (1,350) (2,448)
Interest expense 2,410 727 4,491 1,931
Provision for income taxes 6,428 432 7,889 3,204
Depreciation and amortization 12,929 12,659 36,705 40,650
EBITDA $33,884 $24,556 $78,146 $61,410
Reconciliation of Free Cash Flow :
Cash Flow From Operating
Activities:
Net income $12,779 $11,620 $30,411 $18,073
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation and
amortization 12,929 12,659 36,705 40,650
Other 23,005 (6,860) 5,496 (5,991)
Net cash provided by operating
activities $48,713 $17,419 $72,612 $52,732
Total Capital Expenditures $22,753 $10,645 $51,219 $26,763
Free Cash Flow $25,960 $6,774 $21,393 $25,969
Reconciliation of Non-GAAP EPS :
GAAP Net Income $12,779 $11,620 $30,411 $18,073
Less: tax benefit from reversal
of deferred tax valuation
allowance -- (9,921) -- (9,921)
Plus: one-time, tax expense from
repatriation of foreign monies
under the American Jobs Creation
Act of 2004 -- 3,935 -- 3,935
Non-GAAP Net Income $12,779 $5,634 $30,411 $12,087
Diluted shares outstanding 70,366 72,591 70,228 74,604
Non-GAAP Net Income per Diluted
Share $0.18 $0.08 $0.43 $0.16
CONTACT:
Investors
Karen Breen
+1-303-397-8592
Media
KC Higgins
+1-303-397-8325
Both of TeleTech Holdings, Inc.
