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Record Second Quarter Revenue Grows 15 Percent to $330 Million; Offshore BPO Revenue Grows 44%; ROIC Doubles to 28 Percent; Significant Sales Conversions Lead to Continued Capacity Expansion
ENGLEWOOD, CO, Aug 06, 2007 (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 second quarter 2007. The Company also filed its Quarterly Report
on Form 10-Q with the Securities and Exchange Commission for the
quarter ended June 30, 2007.
TeleTech reported record second quarter 2007 revenue of $329.8
million, a 14.8 percent increase over the year-ago quarter. Revenue
in TeleTech's BPO business grew 16.7 percent over the year-ago
quarter to $324.1 million and represented 98 percent of consolidated
second quarter revenue.
Revenue from services performed for clients in offshore locations
grew approximately 44 percent to $132 million in the second quarter
2007 and represented 40 percent of total revenue. TeleTech currently
provides offshore services from eight countries including Argentina,
Brazil, Canada, Costa Rica, India, Malaysia, Mexico and the
Philippines and is in the process of launching operations in South
Africa. TeleTech believes it has the largest and most geographically
diverse offshore footprint of any global BPO provider.
As part of TeleTech's review of strategic alternatives for its
database marketing and consulting segment, the company believes it is
"more likely than not" that it will divest this business. As a
result of reviewing the strategic alternatives for this segment and
in light of its current operating performance, TeleTech recognized
asset impairment and restructuring charges primarily related to this
segment of $13.8 million, or approximately 11 cents per diluted
share, during the second quarter.
Income from operations in the second quarter 2007 increased 22
percent to $15.4 million from $12.7 million in the year-ago quarter.
Excluding asset impairment and restructuring charges, income from
operations increased 122 percent to $29.2 million, or 8.9 percent of
revenue. Equity compensation expense included in income from
operations for the current quarter was $3.2 million and lowered
operating margin by approximately 100 basis points.
GAAP earnings per share in the second quarter 2007 was 13 cents,
compared to 17 cents in the year-ago quarter. Excluding the $13.8
million asset impairment and restructuring charge in the current
quarter as well as a $5.2 million, or an approximate 6 cent per
share, tax benefit in the year-ago quarter, non-GAAP earnings per
share increased 118 percent to 24 cents in the current quarter from
11 cents in the year-ago quarter.
Return on invested capital, defined as earnings before asset
impairment charges, interest and taxes (EBIT) divided by average
shareholders' equity, was 28 percent at June 30, 2007, double the 14
percent at the end of the year-ago quarter.
EXECUTIVE COMMENTARY
"As a result of significant contract awards from new and expanded
business, we anticipate adding a record 5,000 workstations in six
geographic locations during the second half of the year," said Kenneth
Tuchman, chairman and chief executive officer. "Our demand continues
to be driven by an overwhelming flight to quality as more companies
shift their focus from simply reducing costs to enhancing the
customer experience. This plays directly to our 25 years of
experience and industry-leading delivery capabilities, and has
resulted in many companies exiting their current BPO providers or
their captive operations and selecting TeleTech to further their
business goals."
Tuchman continued, "Our financial results illustrate the solid
execution of the TeleTech team in providing a globally integrated,
high-quality front and back office solution and the success of our
significant investments in new service offerings and global delivery
capabilities over the past five years. Our second quarter 2007
results represent our seventh consecutive quarter of double-digit
revenue growth, while increasing income from operations by 122
percent year over year, excluding this quarter's impairment and
restructuring charges. We remain committed to continued profitable
growth and are confident we can meet our 2007 and 2008 financial
goals."
SECOND QUARTER 2007 BUSINESS HIGHLIGHTS
Strong Performance in the BPO Business
- Revenue in TeleTech's BPO business grew 16.7 percent to $324.1 million
from $277.8 million in the year-ago quarter.
Solid Balance Sheet Continues to Fund Organic Growth
- As of quarter-end, TeleTech had cash and cash equivalents of $60.1
million and a total debt to equity ratio of approximately 13 percent.
- TeleTech generated $3.4 million of free cash flow in the second
quarter compared to negative ($6.7) million in the year-ago quarter.
- Capital expenditures were $15.5 million in the second quarter.
Approximately 80 percent of this quarter's capital expenditures were for
growth related needs, which included the deployment of 1,300 new
workstations, with the balance for maintenance capital.
Share Repurchase
- TeleTech's strong balance sheet has given the Company the flexibility
to fund organic growth while also repurchasing common stock. During the
second quarter, the Company repurchased $23 million of common stock and is
continuing its stock repurchase program. TeleTech's Board of Directors also
approved an incremental $50 million for additional share repurchases,
bringing the total amount currently authorized for future repurchases to
approximately $67 million.
New Business
- During the latter part of the second quarter, TeleTech was awarded a
significant amount of new and expanded business from clients in its
targeted vertical industries. As a result, the Company anticipates the
deployment of a record 5,000 workstations in both our offshore markets and
in the United States during the second half of 2007. This compares to
approximately 4,000 new workstations that were added in the second half of
2006.
Business Outlook
- TeleTech reaffirmed its previous full year 2007 business outlook,
estimating revenue will grow approximately 15% over 2006 as it expects to
achieve a $1.5 billion revenue run-rate and 10 percent operating margin,
excluding unusual charges, if any, by the fourth quarter 2007.
- For 2008, TeleTech reaffirmed its expectation that revenue will grow
between 12 and 15 percent and operating margin will improve by
approximately 200 basis points over 2007.
SEC FILINGS
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.
CONFERENCE CALL
TeleTech executive management will hold a conference call to discuss
second quarter 2007 financial results on Monday, August 6, 2007, at
4:30 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 Monday, August 20, 2007.
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: EBITDA, EBIT, Non-GAAP EPS and Free Cash Flow.
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 and in our SEC filings.
ABOUT TELETECH
TeleTech is one of the largest and most geographically diverse global
providers of business process outsourcing solutions. We have a
25-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 approximately 300 business process outsourcing programs
serving approximately 135 global clients in the automotive,
communications, financial services, government, healthcare, retail,
technology and travel and leisure industries. Our integrated global
solutions are provided by 50,000 employees utilizing 34,000
workstations across 88 Delivery Centers in 18 countries.
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; 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; estimated revenue from new, renewed, and expanded client
business as volumes may not materialize as forecasted or be
sufficient to achieve our Business Outlook; 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 execute our growth
plans, including sales of new services (such as TeleTech
OnDemand(TM)); our ability to achieve our year-end 2007 and 2008
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 or
the potential terms of a divestiture of this segment, which could
result in an additional impairment of its long-lived assets; risks
associated with attracting and retaining cost-effective labor at our
delivery centers; the possibility of additional asset impairments and
restructuring charges; risks associated with changes in foreign
currency exchange rates; our ability to find cost effective delivery
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; economic or political changes affecting the countries in
which we operate; achieving continued profit improvement in our
International BPO operations; 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, 2007, the Registration Statement
on Form S-3 filed on March 19, 2007 and the Annual Report on Form
10-K for the year ended December 31, 2006, 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,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Revenue $ 329,832 $ 287,334 $ 662,364 $ 570,756
Operating Expenses:
Cost of services 237,760 213,777 476,065 427,079
Selling, general and
administrative 49,479 48,451 101,966 95,861
Depreciation and
amortization 13,380 11,971 26,634 23,768
Restructuring charges, net 262 183 262 940
Impairment losses 13,515 302 13,515 478
--------- --------- --------- ---------
Total operating
expenses 314,396 274,684 618,442 548,126
--------- --------- --------- ---------
Income From Operations 15,436 12,650 43,922 22,630
Other income (expense) (2,077) (1,234) (3,139) (2,461)
--------- --------- --------- ---------
Income Before Income Taxes and
Minority Interest 13,359 11,416 40,783 20,169
(Provision) benefit for
income taxes (3,681) 1,520 (13,344) (1,461)
--------- --------- --------- ---------
Income Before Minority
Interest 9,678 12,936 27,439 18,708
Minority interest (508) (692) (942) (1,076)
--------- --------- --------- ---------
Net Income $ 9,170 $ 12,244 $ 26,497 $ 17,632
========= ========= ========= =========
Net Income Per Share:
Basic $ 0.13 $ 0.18 $ 0.38 $ 0.26
========= ========= ========= =========
Diluted $ 0.13 $ 0.17 $ 0.36 $ 0.25
========= ========= ========= =========
Income From Operations Margin 4.7% 4.4 % 6.6% 4.0%
Net Income Margin 2.8% 4.3 % 4.0% 3.1%
Effective Tax Rate after
Minority Interest 28.6% (14.2)% 33.5% 7.7%
Weighted Average Shares
Outstanding
Basic 70,599 68,925 70,467 68,926
Diluted 72,973 69,974 72,926 70,159
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Revenue:
North American BPO $ 226,015 $ 189,930 $ 460,252 $ 369,667
International BPO 98,112 87,857 190,517 173,941
Database Marketing and
Consulting 5,705 9,547 11,595 27,148
--------- --------- --------- ---------
Total $ 329,832 $ 287,334 $ 662,364 $ 570,756
========= ========= ========= =========
Income (Loss) From Operations:
North American BPO $ 27,581 $ 18,236 $ 59,970 $ 31,347
International BPO 5,166 (348) 5,383 (2,514)
Database Marketing and
Consulting (17,311) (5,238) (21,431) (6,203)
--------- --------- --------- ---------
Total $ 15,436 $ 12,650 $ 43,922 $ 22,630
========= ========= ========= =========
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2007 2006
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 60,138 $ 60,484
Accounts receivable, net 239,172 237,353
Other current assets 76,202 63,307
------------ ------------
Total current assets 375,512 361,144
Property and equipment, net 165,686 156,047
Other assets 124,167 141,525
------------ ------------
Total assets $ 665,365 $ 658,716
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 175,442 $ 182,015
Other long-term liabilities 72,577 107,417
Minority interest 5,181 5,877
Total stockholders' equity 412,165 363,407
------------ ------------
Total liabilities and
stockholders' equity $ 665,365 $ 658,716
============ ============
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Reconciliation of EBIT & EBITDA :
Net Income $ 9,170 $ 12,244 $ 26,497 $ 17,632
Interest income (492) (519) (885) (687)
Interest expense 1,417 1,194 2,701 2,080
Provision (benefit) for income
taxes 3,681 (1,520) 13,344 1,461
-------- -------- -------- --------
EBIT $ 13,776 $ 11,399 $ 41,657 $ 20,486
Depreciation and amortization 13,380 11,971 26,634 23,768
-------- -------- -------- --------
EBITDA $ 27,156 $ 23,370 $ 68,291 $ 44,254
Reconciliation of Free Cash Flow :
Cash Flow From Operating
Activities:
Net income $ 9,170 $ 12,244 $ 26,497 $ 17,632
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 13,380 11,971 26,634 23,768
Other (3,665) (17,036) (2,395) (17,501)
-------- -------- -------- --------
Net cash provided by operating
activities $ 18,885 $ 7,179 $ 50,736 $ 23,899
-------- -------- -------- --------
Total Capital Expenditures 15,514 13,894 29,020 28,466
-------- -------- -------- --------
Free Cash Flow $ 3,371 ($ 6,715) $ 21,716 ($ 4,567)
======== ======== ======== ========
Reconciliation of Non-GAAP EPS :
GAAP Net Income $ 9,170 $ 12,244 $ 26,497 $ 17,632
Add: Asset impairment and
restructuring charges, net of
related taxes 8,266 321 8,266 894
Less: Tax benefit from reversal
of deferred tax valuation
allowance - (5,166) - (5,166)
-------- -------- -------- --------
Non-GAAP Net Income $ 17,436 $ 7,399 $ 34,763 $ 13,360
Diluted shares outstanding 72,973 69,974 72,926 70,159
Non-GAAP Net Income per Diluted
Share $ 0.24 $ 0.11 $ 0.48 $ 0.19
Investor Contact:
Karen Breen
303-397-8592
Jennifer Martin
303-397-8634
Media Contact:
KC Higgins
303-397-8325
