DENVER, Aug. 2 /PRNewswire/ -- TeleTech Holdings, Inc. (Nasdaq: TTEC), a
leading global provider of customer relationship management (CRM) services and
solutions, today announced second quarter 2001 financial results.
SECOND QUARTER 2001 FINANCIAL RESULTS
Revenues for the second quarter 2001 were $225.2 million, representing an
increase of $7.8 million or 3.6 percent from $217.4 million in the year ago
quarter. Revenues for the quarter were in line with company guidance, and as
expected, decreased 5.3 percent from the first quarter 2001. The sequential
revenue decrease was primarily attributable to declines in certain client
programs as a result of the weak economy.
The company reported earnings of 10 cents per diluted share, before a
one-cent charge related to the operations of enhansiv. As a result, net
income for the second quarter 2001 was $6.9 million or 9 cents per diluted
share. This compares to net income of $11.9 million, or 15 cents per diluted
share, in the year ago quarter. The effects of non-recurring items in both
the second quarter 2001 and 2000 are excluded from these results.
During the second quarter, TeleTech made substantial progress on several
fronts to position the company for renewed revenue and earnings growth in
2002. These include:
-
Significant improvement in new business opportunities with Fortune 100
companies.
-
The renewal of two of TeleTech's largest clients and the addition of
several new customers.
-
Continuing efforts to streamline operations and reduce both its
corporate overhead and capital expenditures. TeleTech's cash position
improved as a result of these actions, generating free cash flow in the
second quarter 2001 of $12.9 million.
TeleTech believes the above steps will enable it to weather the current
economic downturn and create significant earnings leverage once new business
is closed.
"During the second quarter, we strengthened our pipeline of new business
opportunities and are finding that many Fortune 100 companies are more
interested in alternative CRM solutions given the current economic
environment," stated Ken Tuchman, TeleTech's Chairman and CEO. "As these
companies evaluate their CRM needs, they view TeleTech as a global provider
that has repeatedly demonstrated its ability to deliver a cost-effective,
multi-channel solution via its international workforce, best in class
processes and world class infrastructure and technology. We believe these
renewed relationships place us in a solid position to win new business going
forward."
During the second quarter 2001, the company took certain write-downs
related to its investment in enhansiv along with the carrying value of its
former headquarters building. As a result, TeleTech recorded a non-cash,
non-recurring, pre-tax charge of $23.5 million. The net loss in the second
quarter 2001, including non-recurring charges and the impact from enhansiv,
was $7.4 million, or $(0.10) per share.
Operating margin for the second quarter 2001 was 6.8 percent compared to
9.5 percent in the second quarter 2000 and 6.6 percent in the first quarter
2001. The effect of non-recurring items in both the first and second quarter
2001 are excluded from the operating margin comparisons. The second quarter
2001 operating margin continues to be impacted by excess capacity in
TeleTech's North American, multi-client, customer interaction centers due to
lower volumes from existing clients as a result of the economic downturn.
As a result of ongoing actions to reduce overhead costs, TeleTech's
selling, general and administrative (SG&A) expenses in the second quarter 2001
were $49.6 million or 22 percent of revenues down from 24 percent of revenues
in the first quarter 2001. TeleTech believes it can further reduce overhead
costs and achieve a sustainable SG&A level that approximates 20 percent of
revenues or less, by mid-2002.
As of June 30, 2001, TeleTech had $47.4 million of cash and short-term
investments, up from $43.0 million at the end of the first quarter.
TeleTech's borrowings under its line of credit were $73.5 million, unchanged
from the previous quarter end balance.
Capital expenditures for the second quarter 2001 were $15.2 million. This
was a decrease of nearly 37 percent from capital expenditures of $24.0 million
in first quarter 2001. Capital expenditures for the first and second quarter
2001 are before expenditures for its former headquarters building.
"As expected, we continue to be challenged by excess capacity and a
difficult economic environment in the near term. However as we look to 2002,
we remain sharply focused on winning large, complex, multi-year CRM business
to fill our current capacity and drive additional growth," stated Ken Tuchman.
"As we fill available capacity, there is significant earnings leverage in our
model. We believe this focus, along with stringent controls on operating
expenses and capital spending, will enable TeleTech to leverage its core
investments and return to consistent revenue and earnings growth in 2002."
CONTRACT RENEWALS
TeleTech has historically enjoyed high client renewal rates and this trend
continued into the second quarter as TeleTech renewed relationships with its
third and fourth largest clients and signed additional business with existing
clients.
TeleTech has renewed its multi-year agreement with UPS to continue to
provide services to UPS customers.
During the quarter, TeleTech won additional business with several existing
U.S. clients in the wireless, fixed wireless and ILEC-DSL areas and renewed
several international accounts, including Hewlett Packard in the United
Kingdom and Retevision, a subsidiary of Auna Group. Auna Group is the second
largest telecommunications provider in Spain.
In addition, TeleTech successfully renewed its agreement to provide
customer information services to the United States Postal Service's (USPS)
national customer base in its dedicated facility in Kansas City, Kansas. This
facility first began operations on behalf of USPS in late 1998 and currently
employs more than 800 employees.
ENHANSIV
Enhansiv was founded in July 2000 and TeleTech holds preferred stock and
convertible debt investments in enhansiv. During the second quarter TeleTech
reduced the carrying value of its investment in enhansiv by $16.5 million.
Enhansiv offers a centralized, open architecture, CRM solution that
incorporates a leading edge contact management database across all customer
contact channels, including voice, e-mail, Web chat, Web co-browse, fax,
intelligent voice response and voice over Internet protocol (VOIP). In
today's environment, large enterprises face tremendous challenges implementing
multi-channel CRM strategies because of disparate CRM platforms across the
organization. Enhansiv is designed to address this challenge, providing a
cost-effective solution that can be quickly implemented without the
significant capital expenditure or maintenance requirements of an in-house
solution.
"Although we reduced the carrying value of our investment in enhansiv, we
remain steadfast in our commitment to the strategic importance of enhansiv's
capabilities and will continue to invest in its ongoing development," said Ken
Tuchman. "We believe our investment in enhansiv will enable TeleTech to move
to a centralized technology platform and 'virtualize' the way we do business.
A centralized technology platform will further strengthen our competitive edge
resulting in increased client satisfaction and lower capital and operating
costs."
BUSINESS OUTLOOK
The following statements are based on current expectations regarding
TeleTech's outlook on its future financial results.
TeleTech expects third quarter 2001 revenues to range between $220 million
and $225 million, relatively flat compared to second quarter 2001 revenues.
TeleTech believes this represents an important and positive underlying shift
from second quarter 2001, where sequential revenues were down $12.7 million or
5.3 percent from the first quarter 2001.
The company expects third quarter 2001 earnings per share from operations
will be in line with current expectations and range between $0.10 and
$0.11 cents per diluted share excluding a full quarter impact of enhansiv's
operations. Including the impact from enhansiv, earnings per share is
expected to range between $.08 and $.09 cents per diluted share.
Additionally, as a result of realized benefits from streamlining its
business processes and aligning its workforce to match current client volumes,
TeleTech reduced its workforce by approximately 200 employees in the third
quarter 2001 and expects to record a non-recurring, pretax charge between
$6 and $7 million in the third quarter.
As a result of stringent capital controls and effective asset
reutilization, capital expenditures for 2001 are estimated to range between
$65 million and $70 million, before expenditures for TeleTech's former
headquarters building. This estimate is down nearly 15 percent from
TeleTech's earlier guidance of $75 million to $80 million.
"As we begin the new quarter, we are pleased that revenues have stabilized
and that we have renewed relationships with two significant customers," said
Margot O'Dell, TeleTech's Chief Financial Officer. "Additionally, we have
made solid progress in reinvigorating our pipeline of new business
opportunities. This combined with the actions we have taken to reduce our
capital and operating costs gives us confidence in our ability to improve our
performance in 2002."
CONFERENCE CALL
TeleTech executive management will host a conference call to discuss
second quarter 2001 financial results today at 5:00 p.m. ET. To participate,
please dial 212-287-1615 (passcode: TeleTech). Replay of the conference call
will be available by dialing 402-998-0666 (no passcode required), starting at
approximately 8:00 p.m. ET and will play until August 15, 2001. The
conference call will also be simulcast live on the Internet via TeleTech's web
site at http://www.teletech.com. Replay will be available at this location
for 30 days.
TELETECH PROFILE
Founded in 1982, TeleTech is a leading provider of integrated customer
relationship management (CRM) services and solutions for global organizations
predominantly in the communications, financial services, government and
transportation industries. TeleTech has operations in 11 countries, which
include Argentina, Australia, Brazil, Canada, China, Mexico, New Zealand,
Singapore, Spain, the United Kingdom and the United States. TeleTech's CRM
capabilities, including B2B electronic channel management and database
management, help companies inform, acquire, serve, grow and retain their
customers throughout the entire relationship lifecycle. TeleTech integrates a
full spectrum of voice and Internet communications, including custom e-mail
response, "chat" and extensive Web co-browsing capabilities. Information
regarding TeleTech Holdings can be found on the Worldwide Web at
http://www.teletech.com.
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 TeleTech's actual results to differ materially from
those expressed or implied by such forward-looking statements: lower than
anticipated customer interaction center capacity utilization; the loss or
delay in implementation of a customer management program; TeleTech's ability
to build-out facilities in a timely and economic manner; greater than
anticipated competition from new entrants into the customer care market,
causing increased price competition or loss of clients; the loss of one or
more significant clients; higher than anticipated start-up costs associated
with new business opportunities and ventures; TeleTech's ability to predict
future revenues and associated costs, as well as the potential volume or
profitability of any future technology or consulting sales; TeleTech's
agreements with clients may be canceled on relatively short notice; and
TeleTech's ability to generate a specific level of revenue is dependent upon
customer interest in and use of the Company's clients' products and services.
Readers are encouraged to review TeleTech's 2000 Annual Report on Form 10-K,
first quarter 2001 Form 10-Q, and other publicly filed documents which
describe other important factors that may impact TeleTech's business, results
of operations and financial condition. TeleTech undertakes no obligation to
update its forward-looking statements after the date of this release.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
Revenues $225,211 $217,375 $463,091 $409,701
Operating expenses:
Costs of services 145,832 142,241 296,144 267,725
Selling, general
& administrative 49,586 42,920 106,649 82,633
Depreciation and
amortization 14,469 11,605 29,388 21,055
Non-recurring items 7,000(1) -- 27,251(3) --
Total operating
expenses 216,887 196,766 459,432 371,413
Operating Income 8,324 20,609 3,659 38,288
Other income (expense) (2,671) (54) (3,867) (24)
Non-recurring items (16,500)(2) 12,762(4) (16,500) 12,762
Income Before Income
Taxes (10,847) 33,317 (16,708) 51,026
Income tax
expense (benefit) (4,009) 11,283 (6,325) 17,746
Net Income before
Minority Interest (6,838) 22,034 (10,383) 33,280
Minority Interest (530) (399) (851) (399)
Net Income $(7,368) $21,635 $(11,234) $32,881
Basic Earnings
Per Share $(0.10) $0.29 $(0.15) $0.45
Diluted Earnings
Per Share $(0.10) $0.27 $(0.15) $0.42
Operating Margin 3.7% 9.5% 0.8% 9.3%
Net Income Margin (3.3)% 10.0% (2.4)% 8.0%
Effective Tax Rate 37.0% 33.9% 37.9% 34.8%
Shares Outstanding
Basic 75,522 73,985 75,138 73,672
Diluted 75,522 79,063 75,138 79,209
Excluding Non-recurring
items:
Operating Income $15,324 $20,609 $30,910 $38,288
Operating Margin 6.8% 9.5% 6.7% 9.3%
Net Income $6,854 $11,921 $15,240 $22,759
Basic Earnings
Per Share $0.09 $0.16 $0.20 $0.31
Diluted Earnings
Per Share $0.09 $0.15 $0.20 $0.29
Diluted shares
outstanding 76,328 79,063 76,250 79,209
Effective Tax Rate 41.7% 39.1% 40.5% 38.9%
Notes:
1. Represents a non-recurring, pre-tax charge of $7.0mm related to the
write down of the carrying value of the company's formerly planned
headquarters building.
2. Represents a non-recurring, pre-tax charge of $16.5 related to the
asset impairment of the company's investment in enhansiv.
3. Represents a non-recurring pre-tax charge described in Note 1 above,
in addition to $20.3mm of other non-recurring charges recorded in the
first quarter 2001 related to a workforce reduction and the closure
of a customer interaction center.
4. Represents a non-recurring gain, principally due to the sale of a
portion of an equity investment.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2001 2000
ASSETS
Current assets:
Cash and cash equivalents $39,850 $58,797
Investment in available-for-sale securities 3,168 16,774
Short-term investments 4,336 8,904
Accounts receivable, net 177,827 193,351
Other current assets 32,585 23,595
Total current assets 257,766 301,421
Property and Equipment, net 189,041 178,760
Other assets 110,695 100,718
Total assets $557,502 $580,899
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $115,113 $128,298
Total noncurrent liabilities 86,560 76,427
Minority interest 13,660 12,809
Total stockholders' equity 342,169 363,365
Total liabilities and stockholders' equity $557,502 $580,899
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(In thousands)
Six months ended Three months ended
June 30, June 30,
2001 2000 2001 2000
Cash flow from operating
activities:
Net income (loss) $(11,234) $32,881 $(7,368) $21,635
Adjustments to reconcile
net income to net cash
provided from operating
activities:
Depreciation and amortization 29,388 21,055 14,469 11,808
Other 20,660 (49,519) 24,996 (16,746)
Net cash provided by (used in)
operating activities $38,814 $4,417 $32,097 $16,697
Total Capital Expenditures $59,576 $49,936 $19,224 $37,514
SOURCE TeleTech Holdings, Inc.
CONTACT: Karen Breen, Karen.breen@teletech.com, 303-397-8592, or Dan
Campbell, Investor Relations, Dan.campbell@teletech.com, 303-397-8634, both of
TeleTech Holdings, Inc./
