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Year-to-Date Revenue up 14 Percent; Core BPO Revenue up 17 Percent; Eighth Consecutive Quarter of Double-Digit Revenue Growth; Record 3,600 Workstations Added in the Quarter; Completes Sale of Newgen; Reports Options Practices Review and Likely Restatement of Financials
ENGLEWOOD, CO, Nov 08, 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 preliminary financial
results for the third quarter 2007. The results below should be
considered preliminary in light of TeleTech's self-initiated review of
accounting for equity-based compensation practices and likely
restatement of prior period financial statements as discussed below
and in the Company's Form 8-K filed today.
TeleTech reported record third quarter 2007 revenue of $335.8
million, a 10.5 percent increase over the year-ago quarter. Revenue
from services performed for clients in offshore locations grew
approximately 33 percent to $136.5 million in the third quarter 2007
and represented 41 percent of total revenue. Year to date, revenue
from services performed for clients in offshore locations grew
approximately 41 percent to $396 million and represented nearly 40
percent of total revenue. The third quarter also marked the largest
amount of capacity additions in any given quarter with approximately
3,600 new workstations deployed predominantly in offshore locations.
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.
On September 28, 2007, TeleTech sold substantially all of the assets
and certain liabilities related to Newgen Results Corporation
(Newgen), its database marketing and consulting segment, as part of
the company's review of strategic alternatives for this business. The
sale of this business resulted in a pre-tax disposition charge, net
of a software sale, during the third quarter of $7.0 million, of
which approximately $2 million were cash related expenses. Of this
$7.0 million, $3.1 million has been recorded as an asset impairment
and restructuring charge which reduced preliminary income from
operations, and the remainder was recorded as a loss on the sale of
assets and is reflected in "Other Income (Expense)."
Preliminary income from operations in the third quarter 2007 was
$25.9 million. Included in third quarter 2007 income from operations
was a total of $4.8 million in asset impairment and restructuring
charges. Excluding these charges, preliminary income from operations
was $30.7 million, or 9.1 percent of revenue.
REVIEW OF EQUITY-BASED COMPENSATION PRACTICES AND LIKELY RESTATEMENT
OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
TeleTech announced that it will file a Notification of Late Filing on
Form 12b-25 with the Securities and Exchange Commission indicating
that it will not meet the prescribed deadline for filing its
Quarterly Report on Form 10-Q for the quarter ended September 30,
2007 due to a review of TeleTech's historical stock option and other
equity-based compensation grant practices being conducted by the
Company's Audit Committee. The review, which was initiated by the
Company during the third quarter, is being conducted with the
assistance of independent legal counsel to the Audit Committee and
outside accounting experts.
Although TeleTech believes that significant progress has been made in
the review, it is not complete. Based on the work conducted so far,
management presently believes that it will be required to incur
additional non-cash compensation charges for prior periods and that
restatement of previous interim and annual financial statements for
the periods 1999 through 2007 is likely. There also may be an impact
on the current fiscal year's results of operations including those
reported in this release. Accordingly, management and the Audit
Committee concluded on November 8, 2007 that TeleTech's financial
statements for the periods 1999 through 2006 and the first and second
quarters of 2007 should not be relied upon. Because the review has
not been concluded, the amount of additional non-cash compensation
expense that will have to be recorded in any prior period, along with
the resulting tax impacts, and the specific periods that require
restatement have not been determined. Although the Company will not
be able to determine the amount of additional compensation expense
that will have to be recorded as a result of the equity compensation
review until the Audit Committee has completed the review, management
does not expect that such additional expense will have a significant
adverse effect on the fundamental business operations of the Company.
In addition, no conclusions have been reached as to the specific
bases on which adjustments may be required.
The Form 10-Q for the third quarter of 2007 and restated financial
statements, if required, will be filed following completion of the
Audit Committee's review and the review of the required adjustments to
the Company's financial statements by the Company's independent
registered accounting firm. TeleTech management and the Audit
Committee have discussed this review with the Company's independent
auditors for the affected periods and have also voluntarily informed
the Securities and Exchange Commission of the review described above.
"Management is fully supporting the Audit Committee in completing its
review of the Company's equity-based compensation practices and will
take all actions necessary to complete our required SEC filings,
including any necessary restatement of our financial statements, as
soon as possible," said Kenneth Tuchman, chairman and chief executive
officer.
EXECUTIVE COMMENTARY ON TELETECH'S PRELIMINARY THIRD QUARTER RESULTS
"TeleTech's strong third quarter performance was underscored by the
largest demand-driven capacity expansion ever completed by TeleTech in
any one quarter," said Mr. Tuchman. "Our market opportunity continues
to grow as clients are increasingly consolidating work with TeleTech
given our ability to deliver strategic capabilities with a
demonstrated track record of global operational excellence. Our
unprecedented expansion coupled with the most significant business
opportunities in the Company's history gives us confidence in our
ability to achieve both our 2007 and 2008 financial goals."
PRELIMINARY THIRD QUARTER 2007 BUSINESS HIGHLIGHTS
Strong Performance in the BPO Business
- Revenue in TeleTech's BPO business grew 11.3 percent to $330.5 million
from $297.0 million in the year-ago quarter. Year to date, TeleTech's core
BPO business grew 16.8 percent to $981.3 million compared to the same
period in 2006.
Preliminary Balance Sheet Continues to Fund Organic Growth
- As of quarter-end, TeleTech had cash and cash equivalents of $73.9
million and a total debt to equity ratio of approximately 10 percent.
- Capital expenditures were $15.7 million in the third quarter.
Approximately 80 percent of this quarter's capital expenditures were for
growth related needs, which included the deployment of a quarterly record
3,600 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. In the third
quarter, the Company repurchased over $23 million of common stock for a
total of nearly $47 million year-to-date. However, the Company has
suspended repurchases under its stock repurchase program pending completion
of the review of its equity-based compensation practices. The Company
expects that, once the Audit Committee's review is completed and the
Company is current with all SEC filings, it will address resumption of its
stock repurchase program.
New Business
- TeleTech continued its rapid workstation expansion, deploying
approximately 3,600 new workstations during the third quarter in response
to a significant amount of new and expanded business. To meet continued
strong client demand, TeleTech expects to deploy an additional 2,000
workstations in both offshore and U.S. markets during the fourth quarter of
2007, bringing the total workstations added during 2007 to an estimated
7,500.
Business Outlook
- TeleTech reaffirmed its previous full year 2007 business outlook,
estimating revenue will grow approximately 15 percent over 2006 as it
expects to achieve a $1.5 billion revenue run-rate and 10 percent operating
margin, excluding unusual charges, 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.
PRELIMINARY RESULTS SUBJECT TO CHANGE
Due to the pending review, all financial results described in this
press release should be considered preliminary and are subject to
change to reflect any necessary corrections or adjustments, or
changes in accounting estimates that are identified as a result of
the review. In addition, financial results for the third quarter and
year to date, as well as comparable periods of earlier reported
years, could be affected by any restatement of prior period financial
statements that is required as a result of any conclusions reached by
the review.
CONFERENCE CALL
TeleTech executive management will hold a conference call to discuss
preliminary third quarter 2007 financial results on Friday, November
9, 2007, at 8:30 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 Friday, November 23, 2007.
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 more than 52,000 employees utilizing 37,700
workstations across 90 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: all of the results reported above
are presented without taking into account any adjustments that may be
required in connection with the ongoing review of TeleTech's
accounting for equity-based compensation plans and should be
considered preliminary until TeleTech files its Form 10-Q for the
third quarter ended September 30, 2007; the review and possible
conclusions may have an impact on the amount and timing of previously
awarded non-cash equity-based compensation expense for current and
previous financial periods; the effect of TeleTech's failure to
timely file all of its required reports under the Securities and
Exchange Act of 1934, including the potential of a default under its
credit facility; our ability to meet the requirements of the NASDAQ
Stock Market for continued listing of our shares; potential claims
and proceedings relating to such matters, including shareholder
litigation and action by the SEC and/or other governmental agencies;
and negative tax or other implications for TeleTech resulting from
any accounting adjustments or other factors; 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; our ability to achieve our
year-end 2007 and 2008 financial goals, including those set forth in
our Business Outlook; 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.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
REVENUE SEGMENT INFORMATION:
Three months ended Nine months ended
September 30, September 30,
------------------------- ------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Revenue:
North American BPO $ 229,305 $ 206,616 $ 689,557 $ 576,283
International BPO 101,197 90,336 291,714 264,277
Database Marketing and
Consulting 5,298 6,852 16,893 34,000
----------- ----------- ----------- -----------
Total $ 335,800 $ 303,804 $ 998,164 $ 874,560
=========== =========== =========== ===========
PRELIMINARY INCOME FROM OPERATIONS :
Three months
ended
September 30,
-----------
2007
-----------
Revenue $ 335,800
Operating Expenses:
Cost of services 244,942
Selling, general and
administrative 46,386
Depreciation and
amortization 13,751
Restructuring charges, net 2,510
Impairment losses 2,274
-----------
Total operating
expenses 309,863
-----------
Income From Operations 25,937
PRELIMINARY RESULTS SUBJECT TO CHANGE :
Due to the pending review, all financial results described above should be
considered preliminary and are subject to change to reflect any necessary
corrections or adjustments, or changes in accounting estimates that are
identified as a result of the review. In addition, financial results for
the third quarter and year to date, as well as comparable periods
of earlier reported years, could be affected by any restatement of prior
period financial statements that is required as a result of any conclusions
reached by the review.
Investor Contact:
Karen Breen
303-397-8592
Jennifer Martin
303-397-8634
Media Contact:
Maggie Pisacane
212-687-8080
Email Contact
Paul Kranhold
415-568-9570
