Fourth Quarter Revenue Grows 10.7 Percent to a Record $337 Million
EPS Grows 114 Percent to 30 Cents
Operating Income Increases 177 Percent and Operating Margin Expands to 8.6
Percent
ENGLEWOOD, Colo., Feb. 7 /PRNewswire-FirstCall/ -- TeleTech Holdings, Inc.
(Nasdaq: TTEC), one of the largest global business process outsourcing (BPO)
providers with a customer management focus, today announced financial results
for the fourth quarter and fiscal year ended December 31, 2006. The Company
also filed its Annual Report on Form 10-K with the Securities and Exchange
Commission for the fourth quarter and year ended December 31, 2006.
TeleTech reported record fourth quarter 2006 revenue of $336.7 million,
the highest quarterly revenue in TeleTech's history and a 10.7 percent
increase over the year-ago quarter. Revenue in TeleTech's North American and
International BPO segments grew 16.0 percent over the year-ago quarter and
represented 98 percent of consolidated fourth quarter revenue.
Revenue from services performed for clients in offshore locations grew
approximately 40 percent to $400 million in 2006 and represented 33 percent of
total revenue. TeleTech currently provides offshore services from seven
countries including Argentina, Brazil, Canada, India, Malaysia, Mexico and the
Philippines and believes it has the largest and most geographically diverse
offshore footprint of any global BPO provider with a customer management
focus. TeleTech is currently expanding into two new emerging markets that
will exclusively provide offshore services and has plans to continue select
expansion into other attractive offshore markets.
Income from operations in the fourth quarter 2006 increased 177 percent to
$28.9 million from $10.4 million in the year-ago quarter. Income from
operations in the International BPO segment increased $13.1 million to $3.4
million compared to an operating loss of ($9.7) million in the year-ago
quarter.
TeleTech exceeded its fourth quarter 2006 operating margin goal of 7 to 8
percent, reporting an 8.6 percent operating margin compared to 3.4 percent in
the year-ago quarter. The North American and International BPO segments
combined had an operating margin of 10.0 percent. Stock option expense
included in income from operations for the current quarter was $1.9 million
which lowered operating margin by 56 basis points.
Fully diluted earnings per share in the fourth quarter 2006 was 30 cents,
up from 14 cents in the year ago quarter. The current quarter EPS included a
$3.3 million (5 cents per share) tax expense reduction related to recording
the benefit of certain tax loss carry forwards.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in
the fourth quarter 2006 was $43.5 million or 12.9 percent of revenue, an 86.8
percent increase over the year-ago quarter. Please refer to the discussion of
Non-GAAP financial measures below.
Capacity utilization in our multi-client delivery centers grew to 80
percent at the end of 2006, up from 72 percent at the end of 2005.
Return on invested capital, defined as earnings before interest and taxes
(EBIT) divided by average shareholders' equity, was 21.4 percent at the end of
2006 up from 10.2 percent at the end of 2005.
EXECUTIVE COMMENTARY
"We are extremely pleased that TeleTech delivered another quarter of
strong financial performance. This is our fifth consecutive quarter of double-
digit revenue growth driven by our expanding array of service offerings,
vertical industry expertise and global delivery capabilities. Our revenue
growth this quarter was combined with significant improvement in profitability
as income from operations increased 177 percent," said Kenneth Tuchman,
chairman and chief executive officer. "This solid performance is the result of
our outstanding global workforce and our carefully planned investments in
proprietary technology and best operating practices to further position
TeleTech as the premier global outsourcing partner in the minds of our
clients. As we begin the year, we are focused on achieving both our 2007 and
2008 financial goals through continued top line growth and improving
profitability."
FOURTH QUARTER 2006 BUSINESS HIGHLIGHTS
Strong Revenue and Operating Margin
- Revenue in TeleTech's North American BPO segment grew 17.0 percent to
$238.7 million over the prior year quarter. Operating income in this
segment grew 39.0 percent to $29.7 million and operating margin grew
to 12.4 percent.
- Revenue in TeleTech's International BPO segment grew 13.5 percent to
$91.8 million over the prior year quarter with an operating margin of
3.7 percent.
- TeleTech's improved financial results were attributable to solid
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, and ongoing profit
improvement initiatives.
Solid Balance Sheet Continues to Fund Organic Growth and Share Repurchase
Program
- As of year-end, TeleTech had cash and cash equivalents of $60.5
million and total debt to equity of 20 percent.
- TeleTech generated $7.8 million of free cash flow in the fourth
quarter compared to negative free cash flow of ($22.1) million in the
year-ago quarter.
- Capital expenditures were $14.3 million in the fourth quarter, up
from $10.8 million in the year-ago quarter. Approximately 70 percent
of this quarter's capital expenditures were related to growth in
offshore locations with the balance for maintenance capital.
- TeleTech repurchased $1.9 million of common stock in the fourth
quarter, bringing its total purchases of common stock to $16.6
million during 2006. Approximately $49.3 million remained under the
repurchase program as of year-end.
Business Outlook
- For 2007, TeleTech estimates revenue will grow approximately 15
percent over 2006 as it focuses on achieving its previously stated
goal of reaching a $1.5 billion revenue run-rate by the fourth
quarter 2007. Furthermore, TeleTech estimates fourth quarter 2007
operating margin will increase to 10 percent, excluding unusual
charges, if any.
- For 2008, TeleTech estimates 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
fourth quarter 2006 financial results on Wednesday, February 7, 2007, 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, February 21,
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, Free Cash Flow and Non-GAAP EPS. 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 its SEC filings.
ABOUT TELETECH
Our 25 year history has enabled TeleTech to become one of the largest
global providers of onshore, offshore and work-from-home business process
outsourcing (BPO) services with a customer management focus. TeleTech helps
Global 1000 companies sustain and enhance their strategic capabilities,
improve quality and lower costs by designing, implementing and managing their
critical front and back office processes. We provide 24 x 7, 365 day, fully
integrated global solutions that span people, process, proprietary technology
and infrastructure for clients and governments in the automotive, broadband,
cable, financial services, healthcare, logistics, media and entertainment,
retail, satellite, technology, travel, wireline and wireless industries.
TeleTech has one of the largest and most globally diverse footprints of any
public provider with 47,000 employees in 17 countries on four continents. 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;
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; achieving continued profit improvement in
our International Business Process Outsourcing (BPO) operations; 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; the
possibility of future impairments and / or restructuring charges in our
Database Marketing and Consulting segment; 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; 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 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)
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
Revenue $336,737 $304,155 $1,211,297 $1,086,673
Operating Expenses:
Cost of services 238,779 232,166 885,602 812,174
Selling, general and
administrative 54,094 45,534 199,226 182,262
Depreciation and
amortization 14,736 12,680 51,429 53,317
Restructuring charges, net 175 1,193 1,630 2,673
Impairment losses 87 2,174 565 4,711
Total operating
expenses 307,871 293,747 1,138,452 1,055,137
Income From Operations 28,866 10,408 72,845 31,536
Other income (expense) (439) (182) (4,459) 680
Income Before Income Taxes and
Minority Interest 28,427 10,226 68,386 32,216
Provision for income taxes 6,787 (688) 14,676 2,516
Income Before Minority
Interest 21,640 10,914 53,710 29,700
Minority interest (209) (829) (1,868) (1,542)
Net Income $21,431 $10,085 $51,842 $28,158
Net Income Per Share:
Basic $0.31 $0.14 $0.75 $0.39
Diluted $0.30 $0.14 $0.73 $0.38
Income From Operations Margin 8.6% 3.4% 6.0% 2.9%
Net Income Margin 6.4% 3.3% 4.3% 2.6%
Effective Tax Rate after
Minority Interest 24.1% (7.3)% 22.1% 8.2%
Weighted Average Shares
Outstanding
Basic 69,798 69,646 69,184 72,121
Diluted 71,777 70,711 70,615 73,631
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
Revenue:
North American BPO $238,680 $203,951 $814,963 $678,803
International BPO 91,829 80,881 356,106 325,038
Database Marketing and
Consulting 6,228 19,323 40,228 82,832
Total $336,737 $304,155 $1,211,297 $1,086,673
Income (Loss) From Operations:
North American BPO $29,684 $21,362 $86,642 $62,675
International BPO 3,370 (9,733) 1,583 (21,814)
Database Marketing and
Consulting (4,188) (1,221) (15,380) (9,325)
Total $28,866 $10,408 $72,845 $31,536
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $60,484 $32,505
Accounts receivable, net 237,353 207,090
Other current assets 63,307 58,292
Total current assets 361,144 297,887
Property and equipment, net 156,047 133,635
Other assets 141,525 90,650
Total assets $658,716 $522,172
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $182,015 $160,915
Other noncurrent liabilities 107,417 61,339
Minority interest 5,877 6,544
Total stockholders' equity 363,407 293,374
Total liabilities and stockholders'
equity $658,716 $522,172
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
Reconciliation of EBIT & EBITDA:
Net Income $21,431 $10,085 $51,842 $28,158
Interest income (859) (342) (2,209) (2,789)
Interest expense 1,452 1,579 5,943 3,510
Provision for income taxes 6,787 (688) 14,676 2,516
EBIT $28,811 $10,634 $70,252 $31,395
Depreciation and amortization 14,736 12,680 51,429 53,317
EBITDA $43,547 $23,314 $121,681 $84,712
Reconciliation of Free Cash Flow:
Cash Flow From Operating
Activities:
Net income $21,431 $10,085 $51,842 $28,158
Adjustments to reconcile net
income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 14,736 12,680 51,429 53,317
Other (14,045) (34,011) (8,537) (39,989)
Net cash provided by
(used in) operating
activities $22,122 ($11,246) $94,734 $41,486
Total Capital Expenditures 14,309 10,843 65,528 37,606
Free Cash Flow $7,813 ($22,089) $29,206 $3,880
Reconciliation of Non-GAAP EPS:
GAAP Net Income $21,431 $10,085 $51,842 $28,158
Less: tax benefit from
reversal of deferred tax
valuation allowance (3,247) (2,696) (8,413) (12,617)
Plus: one-time, tax expense
from repatriation of foreign
monies under the American Jobs
Creation Act of 2004 -- -- -- 3,935
Non-GAAP Net Income $18,184 $7,389 $43,429 $19,476
Diluted shares outstanding 71,777 70,711 70,615 73,631
Non-GAAP Net Income per Diluted
Share $0.25 $0.10 $0.62 $0.26
CONTACT:
Investors
Karen Breen
+1-303-397-8592
Media, KC Higgins
+1-303-397-8325
Both for Teletech Holdings, Inc.
