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TeleTech Announces Fourth Quarter And Full Year 2014 Financial Results

Revenue Increased 6.3 Percent to $338.2 Million (8.4 Percent to $344.9 Million Non-GAAP);

Operating Income was $30.1 Million, 8.9 Percent of Revenue (9.4 Percent Non-GAAP);

Fully Diluted EPS was 44 Cents (46 Cents Non-GAAP);

Signed $100 Million in New Business (an Increase of 25 Percent)

Initiates a Semi-annual Cash Dividend and Increases Share Repurchase Allowance

Provides Outlook for Full Year 2015 Revenue and Operating Income

DENVER, Feb. 25, 2015 /PRNewswire/ -- TeleTech Holdings, Inc. (NASDAQ: TTEC), a leading global provider of customer experience, engagement and growth solutions, today announced financial results for the fourth quarter and full year ended December 31, 2014. The Company will file its Annual Report on Form 10-K in accordance with regulatory guidelines, no later than mid March.

"We had a strong finish to 2014. We won a record $440 million in annualized contract value new business last year, acquired marquee new clients, introduced breakthrough technology innovations, completed two acquisitions, and achieved record client retention rates and Net Promoter Scores," commented Ken Tuchman, chairman and chief executive officer of TeleTech. "Our holistic customer experience services platform is providing clients with essential integrated capabilities that differentiate their brand experience at every touchpoint, delivers desired outcomes, and builds long-term loyalty and value with deeper customer engagement. Our business has significantly transformed over the past few years with customer experience solutions that fully unite strategic consulting with best-in-class technology solutions, customer growth services, and customer care management."

Tuchman continued, "While the variability in our customer technology services segment impacted the broader performance in the business last year, we have strong momentum going into 2015 and remain steadfast in our commitment to maximize value for shareholders. We are pleased to announce our Board's decision to increase the authorization under our long standing share repurchase program and initiate a semi-annual cash dividend. This decision reflects the Board's confidence in the business and the strength of our cash flows and balance sheet, while continuing a focused investment in innovation and growth."

FULL YEAR 2014 FINANCIAL HIGHLIGHTS

Revenue        

  • Full year 2014 GAAP revenue was $1.242 billion compared to $1.193 billion in 2013.
  • On a constant currency non-GAAP basis, 2014 revenue was $1.270 billion. This represents a 6.3 percent growth rate over the prior year, of which approximately 50 percent was organic.

Income from Operations

  • Full year 2014 GAAP income from operations was $96.5 million or 7.8 percent of revenue compared to $101.4 million or 8.5 percent of revenue in 2013.
  • 2014 income from operations on a constant currency basis and adjusted for $3.7 million in restructuring charges and asset impairments was $106.2 million, representing 8.4 percent of adjusted revenue versus 9.0 percent the prior year.

Earnings Per Share

  • Full year 2014 GAAP fully diluted earnings per share attributable to TeleTech shareholders was $1.44 from $1.29 for the full year 2013.
  • Non-GAAP fully diluted earnings per share was $1.52 compared to $1.48 in the prior year.

Bookings

  • During the full year 2014, TeleTech signed an estimated $440 million in annualized contract value revenue from new and expanded client relationships, representing an increase of 21 percent over the prior year. The bookings mix was well diversified across all verticals with approximately 92 percent from existing clients, 48 percent from emerging businesses and 20 percent from international clients. 

FOURTH QUARTER 2014 FINANCIAL HIGHLIGHTS

Revenue        

  • Fourth quarter 2014 GAAP revenue increased 6.3 percent to $338.2 million compared to $318.1 million in the year ago quarter.
  • On a constant currency basis, revenue was $344.9 million, representing a 8.4 percent growth rate over the year ago period when adjusted for $6.8 million in foreign currency impact.

Income from Operations

  • Fourth quarter 2014 GAAP income from operations was $30.1 million or 8.9 percent of revenue compared to $32.8 million or 10.3 percent of revenue in the fourth quarter 2013.
  • Income from operations on a constant currency basis and adjusted for $2.0 million in restructuring and impairment charges was $32.5 million or 9.4 percent of adjusted revenue. This compares to $33.0 million or 10.4 percent of revenue in the year ago quarter.
  • The operating results reflect a favorable revenue mix from our expanded offerings, acquisition contribution, and improved retention and capacity utilization, but were offset by foreign currency fluctuations, incremental investment, additional amortization expense from acquisitions, and variability in our customer technology services segment.

Earnings Per Share

  • Fourth quarter 2014 GAAP fully diluted earnings per share attributable to TeleTech shareholders was 44 cents compared to 38 cents in the fourth quarter 2013.
  • Adjusted fully diluted earnings per share was 46 cents compared to 43 cents in the prior year.

Bookings

  • During the fourth quarter 2014, TeleTech signed an estimated $100 million in annualized contract value revenue from new and expanded client relationships, up 25 percent over the prior year.

STRONG BALANCE SHEET CONTINUES TO FUND OPERATIONS, SHARE REPURCHASES, STRATEGIC ACQUISITIONS, AND INVESTMENTS

  • As of December 31, 2014, TeleTech had cash and cash equivalents of $77.3 million and $105.9 million of total debt, resulting in a net debt position of $28.6 million.
     
  • As of December 31, 2014, TeleTech had $596.8 million of additional borrowing capacity available under its revolving credit facility.
     
  • Cash flow from operations in the fourth quarter 2014 was $32.2 million compared to $61.4 million in the fourth quarter 2013.
     
  • Capital expenditures in the fourth quarter 2014 were $15.4 million compared to $18.5 million in the fourth quarter 2013.
     
  • TeleTech repurchased 414,245 shares of common stock during the fourth quarter 2014 for a total cost of $9.8 million. As of December 31, 2014, $11.8 million was authorized for future share repurchases. For the full year 2014, TeleTech repurchased nearly 2.4 million shares of common stock for a total cost of approximately $57.1 million.

SEGMENT REPORTING

TeleTech reports financial results for the following four business segments: Customer Management Services (CMS), Customer Growth Services (CGS), Customer Technology Services (CTS) and Customer Strategy Services (CSS).  Financial highlights for the segments are provided below.

Customer Management Services (CMS) – Customer Experience Delivery Solutions

  • In the fourth quarter 2014, the CMS segment revenue was $250.1 million, up 8.4 percent from $230.6 million in the year ago quarter. On a constant currency basis revenue increased 10.9 percent relative to the same period last year.
  • Income from operations was $20.9 million or 8.3 percent compared to $20.5 million or 8.9 percent in the year ago quarter. Adjusted operating income margin was 8.7 percent reflecting $0.3 million of foreign currency translation and $1.2 million of restructuring and impairment charges. This compares to 9.0 percent in the same period last year.

Customer Growth Services (CGS) – Technology-Enabled Revenue Generation Solutions

  • CGS fourth quarter 2014 revenue declined 3.2 percent to $28.9 million compared to $29.8 million in the year ago quarter. Income from operations was $1.9 million or 6.4 percent versus $1.8 million or 6.0 percent.   

Customer Technology Services (CTS) – Hosted and Managed Technology Solutions

  • CTS fourth quarter 2014 revenue declined 15 percent to $35.5 million compared to $41.6 million in the year ago quarter. Income from operations was $2.9 million or 8.1 percent compared to $6.1 million or 14.6 percent in the year ago quarter.

Customer Strategy Services (CSS) – Customer Experience Strategy and Data Analytics Solutions

  • CSS fourth quarter 2014 revenue increased 48 percent to $23.7 million from $16.0 million in the year ago quarter. Income from operations was $4.5 million or 19.2 percent compared to $4.4 million or 27.2 percent in the year ago quarter.

BUSINESS OUTLOOK

"With strong growth in 2014 bookings across the segments, industries and services, we are benefiting from our planned investments in innovation, acquisitions and our verticalized sales organization," commented Regina Paolillo, chief financial and administrative officer of TeleTech. "The outlook for 2015 is favorable. We estimate a growth rate, including existing acquisitions, in the six percent range, which includes an estimated three percentage points of adverse impact from foreign currency translation. We anticipate that revenue and operating income will follow similar trends as last year with a greater percentage of business delivered in the second half of the year," continued Paolillo.

Revenue – Year-over-year revenue growth estimated between $1.315 and $1.325 billion, reflecting an estimated three percent adverse impact from foreign exchange translation.   

Operating Margin – Operating margin estimated at 8.25 percent  (before asset impairment, restructuring and acquisition-related charges), but including an incremental $10 million investment in sales and research and development.

Capital Expenditures – Estimated to be approximately six percent of revenue.  

DIVIDEND AND SHARE REPURCHASE

The Board of Directors has approved the initiation of a regular semi-annual cash dividend and an increase in the share repurchase program. An initial cash dividend of $0.18 per common share will be paid on March 16, 2015 to shareholders of record as of March 6, 2015. While the Board of Directors intends to authorize subsequent dividends on a semi-annual basis, such approvals will be based on the company's performance, among other factors. The Board of Directors also authorized a $25 million increase in the share repurchase program, which has no expiration date. The pace of repurchase activity will depend on cash balances and needs of the business, cash flow from operations, market conditions, stock price and acquisition opportunities.  

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

A conference call and webcast with management will be held on February 26, 2015 at 8:30 a.m. Eastern Time. You are invited to join a live webcast of the conference 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 will be available on the TeleTech website.

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: Free Cash Flow, Non-GAAP Revenue, Non-GAAP Income from Operations, Non-GAAP EBITDA and Non-GAAP EPS. Additionally our discussion of revenue and income from operations contain references to constant currency amounts. Constant currency measures are calculated by translating the current year reported amounts using the prior year foreign exchange rates for each underlying currency. 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. 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. We also encourage all investors to read TeleTech's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

ABOUT TELETECH

TeleTech is a leading global customer engagement company.  Founded in 1982, the Company helps its clients acquire, retain and grow profitable customer relationships. Using customer-centric  strategy, technology, processes and operations, TeleTech partners with business leadership across marketing, sales and customer care to design and deliver a simple, more human customer experience across every interaction channel. Servicing over 80 countries, TeleTech's 46,000 employees live by a set of customer focused values that guide relationships with clients, their customers, and each other. To learn more about how TeleTech is bringing humanity to the customer experience visit TeleTech.com.

FORWARD-LOOKING STATEMENTS

Statements in this press release contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995, relating to our operations, expected financial position, results of operation, and other business matters that are based on our current expectations, assumptions, and projections with respect to the future, and are not a guarantee of performance. We use words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend," "project," "would," "could," "target," or similar expressions, or when we discuss our strategy, plans, goals, initiatives, or objectives, we are making forward-looking statements.

We caution you not to rely unduly on any forward-looking statements. Actual results may differ materially from what is expressed in the forward-looking statements, and you should review and consider carefully the risks, uncertainties and other factors that affect our business and may cause such differences as outlined but are not limited to factors discussed in the sections entitled "Risk Factors" included in TeleTech's filings with the US Securities and Exchange Commission (the "SEC"), including our most recent Annual Report on Form 10-K and subsequent quarterly financial reports on Form 10-Q. TeleTech's filings with the SEC are available in the "Investors" section of TeleTech's website, www.teletech.com and at the SEC's public website at www.sec.gov.  Our forward looking statements speak only as of the date of the press release and we undertake no obligation to update them, except as may be required by applicable laws.

Investor Contact

Media Contact

Paul Miller

Elizabeth Grice

303.397.8641

303.397.8507

 

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

                   
                   
                   
     

Three months ended

 

Twelve months ended

     

 December 31,

 

 December 31,

     

2014

 

2013

 

2014

 

2013

                   

Revenue

 

$ 338,170

 

$ 318,087

 

$1,241,781

 

$ 1,193,157

                   

Operating Expenses:

               
 

Cost of services

 

240,146

 

220,942

 

886,492

 

846,631

 

Selling, general and administrative

 

50,537

 

51,343

 

198,553

 

193,423

 

Depreciation and amortization

 

15,386

 

12,783

 

56,538

 

46,064

 

Restructuring charges, net

 

1,600

 

254

 

3,350

 

4,435

 

Impairment losses

 

373

 

-

 

373

 

1,205

         Total operating expenses

 

308,042

 

285,322

 

1,145,306

 

1,091,758

                   

Income From Operations

 

30,128

 

32,765

 

96,475

 

101,399

                   
 

Other income (expense)

 

2,138

 

(3,793)

 

3,984

 

(9,330)

                   

Income Before Income Taxes

 

32,266

 

28,972

 

100,459

 

92,069

                   
 

Provision for income taxes

 

(8,971)

 

(7,995)

 

(23,042)

 

(20,598)

                   

Net Income

 

23,295

 

20,977

 

77,417

 

71,471

                   
 

Net income attributable to noncontrolling interest

(1,329)

 

(1,508)

 

(5,124)

 

(4,083)

                   

Net Income Attributable to TeleTech Stockholders

$   21,966

 

$   19,469

 

$    72,293

 

$     67,388

                   

Net Income Per Share Attributable to TeleTech Stockholders

             
                   
 

Basic

 

$      0.45

 

$      0.39

 

$        1.47

 

$         1.31

                   
 

Diluted

 

$      0.44

 

$      0.38

 

$        1.44

 

$         1.29

                   
                   

Income From Operations Margin

 

8.9%

 

10.3%

 

7.8%

 

8.5%

Net Income Attributable to TeleTech Stockholders Margin

6.5%

 

6.1%

 

5.8%

 

5.6%

Effective Tax Rate

 

27.8%

 

27.6%

 

22.9%

 

22.4%

                   
                   

Weighted Average Shares Outstanding

             

  Basic

 

48,714

 

50,439

 

49,297

 

51,338

  Diluted

 

49,514

 

51,465

 

50,102

 

52,244

 

 

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

                 
                 
                 
   

Three months ended

 

Twelve months ended

   

 December 31,

 

 December 31,

   

2014

 

2013

 

2014

 

2013

                 

Revenue:

               

Customer Management Services

 

$     250,076

 

$     230,625

 

$    923,497

 

$     890,883

Customer Growth Services

 

28,889

 

29,848

 

115,434

 

100,996

Customer Technology Services

 

35,475

 

41,630

 

139,182

 

152,485

Customer Strategy Services

 

23,730

 

15,984

 

63,668

 

48,793

Total

 

$     338,170

 

$     318,087

 

$ 1,241,781

 

$  1,193,157

                 

Income From Operations:

               

Customer Management Services

 

$      20,851

 

$       20,549

 

$      76,792

 

$       75,689

Customer Growth Services

 

1,854

 

1,780

 

7,255

 

3,024

Customer Technology Services

 

2,878

 

6,083

 

4,519

 

19,965

Customer Strategy Services

 

4,545

 

4,353

 

7,909

 

2,721

Total

 

$      30,128

 

$       32,765

 

$      96,475

 

$     101,399

 

 

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

         
         
   

 December 31,

 

 December 31, 

   

2014

 

2013

         
         

ASSETS

       

Current assets:

       

   Cash and cash equivalents

 

$          77,316

 

$       158,017

   Accounts receivable, net

 

276,432

 

236,099

   Other current assets

 

90,383

 

75,435

      Total current assets

 

444,131

 

469,551

         

Property and equipment, net

 

150,212

 

126,719

Other assets

 

257,291

 

246,072

         

Total assets

 

$        851,634

 

$       842,342

         

LIABILITIES AND EQUITY

       

Total current liabilities

 

$        199,122

 

$       190,787

Other long-term liabilities

 

186,448

 

175,564

Mandatorily redeemable noncontrolling interest

 

2,814

 

2,509

Total equity

 

463,250

 

473,482

         

Total liabilities and equity

 

$        851,634

 

$       842,342

 

 

 

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,

   

2014

 

2013

 

2014

 

2013

                 

Reconciliation of Revenue:

               
                 

Revenue

 

$  338,170

 

$  318,087

 

$1,241,781

 

$ 1,193,157

   Changes due to foreign currency fluctuations  1

 

6,762

     

28,049

   

   Lost revenue from typhoon

 

-

 

-

 

-

 

1,216

Non-GAAP Revenue

 

$  344,932

 

$  318,087

 

$1,269,830

 

$ 1,194,373

                 
                 

Reconciliation of Gross Margin:

               
                 

Non-GAAP Revenue

 

$  344,932

 

$  318,087

 

$1,269,830

 

$ 1,194,373

Cost of services

 

240,146

 

220,942

 

886,492

 

846,631

   Adjustments related to Non-GAAP revenue adjustments  1

 

6,334

 

-

 

22,088

 

396

Non-GAAP Gross margin

 

$    98,452

 

$    97,145

 

$   361,250

 

$    347,346

                 

NON-GAAP Gross margin percentage

 

28.5%

 

30.5%

 

28.4%

 

29.1%

                 
                 

Reconciliation of EBIT & EBITDA:

               
                 

Net Income Attributable to TeleTech stockholders

 

$    21,966

 

$    19,469

 

$     72,293

 

$     67,388

Interest income

 

(224)

 

(378)

 

(1,769)

 

(2,560)

Interest expense

 

1,749

 

1,946

 

6,946

 

7,513

Provision for income taxes

 

8,971

 

7,995

 

23,042

 

20,598

EBIT

 

$    32,462

 

$    29,032

 

$   100,512

 

$     92,939

                 

Depreciation and amortization

 

15,386

 

12,783

 

56,538

 

46,064

                 

EBITDA

 

$    47,848

 

$    41,815

 

$   157,050

 

$    139,003

                 
                 

Reconciliation of Free Cash Flow:

               
                 

Cash Flow From Operating Activities:

               

   Net income

 

$    23,295

 

$    20,977

 

$     77,417

 

$     71,471

   Adjustments to reconcile net income to net cash

               

       provided by operating activities:

               

          Depreciation and amortization

 

15,386

 

12,783

 

56,538

 

46,064

          Other

 

(6,498)

 

27,606

 

(39,865)

 

20,444

   Net cash provided by operating activities

 

32,183

 

61,366

 

94,090

 

137,979

                 

Less - Total Capital Expenditures

 

15,407

 

18,532

 

67,641

 

50,364

                 

Free Cash Flow

 

$    16,776

 

$    42,834

 

$     26,449

 

$     87,615

                 
                 

Reconciliation of Non-GAAP Income from Operations:

               
                 

Income from Operations

 

$    30,128

 

$    32,765

 

$     96,475

 

$    101,399

Restructuring charges, net

 

1,600

 

254

 

3,350

 

4,435

Impairment losses

 

373

 

-

 

373

 

1,205

Net effect of foreign currency fluctuations  1

 

428

     

5,961

   

Net effect of revenue lost from typhoon

 

-

 

-

 

-

 

820

                 

Non-GAAP Income from Operations

 

$    32,529

 

$    33,019

 

$   106,159

 

$    107,859

                 

Non-GAAP Income from Operations Margin

 

9.4%

 

10.4%

 

8.4%

 

9.0%

                 
                 

Reconciliation of Non-GAAP EPS:

               
                 

Net Income Attributable to TeleTech stockholders

 

$    21,966

 

$    19,469

 

$     72,293

 

$     67,388

Add:  Asset impairment and restructuring charges, net of related taxes

 

1,342

 

223

 

2,456

 

3,840

Add:  Deconsolidation of subsidiary

 

-

 

-

 

-

 

3,556

Add:  Changes in acquisition contingent consideration, net of related taxes

 

(949)

 

1,146

 

(2,804)

 

1,146

Add:  Net effect of foreign currency fluctuations, net of related taxes  1

 

325

     

4,226

   

Add:  Net effect of revenue lost from typhoon, net of related taxes

 

-

 

-

 

-

 

574

Add:  Changes in valuation allowance and returns to provision adjustments

 

272

 

1,488

 

(126)

 

880

                 

 Non-GAAP Net Income Attributable to TeleTech stockholders

 

$    22,956

 

$    22,326

 

$     76,046

 

$     77,384

                 

    Diluted shares outstanding

 

49,514

 

51,465

 

50,102

 

52,244

                 

 Non-GAAP EPS Attributable to TeleTech stockholders

 

$0.46

 

$0.43

 

$1.52

 

$1.48

                 
                 

Reconciliation of Non-GAAP EBITDA:

               
                 

Net Income Attributable to TeleTech stockholders

 

$    21,966

 

$    19,469

 

$     72,293

 

$     67,388

   Interest income

 

(224)

 

(378)

 

(1,769)

 

(2,560)

   Interest expense

 

1,749

 

1,946

 

6,946

 

7,513

   Provision for income taxes

 

8,971

 

7,995

 

23,042

 

20,598

   Depreciation and amortization

 

15,386

 

12,783

 

56,538

 

46,064

   Asset impairment and restructuring charges

 

1,973

 

254

 

3,723

 

5,640

   Net effect of foreign currency fluctuations  1

 

428

 

-

 

5,961

 

-

   Net effect of revenue lost from typhoon

 

-

 

-

 

-

 

820

   Changes in acquisition contingent consideration

 

(2,719)

 

1,878

 

(6,629)

 

1,878

   Equity-based compensation expenses

 

2,276

 

3,392

 

11,307

 

13,234

                 

 Non-GAAP EBITDA

 

$    49,806

 

$    47,339

 

$   171,412

 

$    160,575

                 
                 

Note 1 -  Foreign currency fluctuations are calculated on a constant currency basis by translating the current year reported amounts using the prior year foreign exchange rates for each underlying currency. 

Investor Contact:
Paul Miller
303.397.8641

Media Contact
Elizabeth Grice
303.397.8507