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TeleTech Announces Second Quarter 2014 Financial Results

Second Quarter 2014 Results
Revenue was $295.5 Million ($303.2 Million Non-GAAP)
Operating Income was $20.7 Million, 7.0 Percent of Revenue (7.7 Percent Non-GAAP)
Fully Diluted EPS were 34 Cents (33 Cents Non-GAAP)
Signs $110 million in New Business

 

 

DENVER, Aug. 11, 2014 /PRNewswire/ -- TeleTech Holdings, Inc. (or "Company"), NASDAQ: TTEC, a leading global provider of analytics-driven, technology-enabled customer engagement solutions, today announced financial results for the second quarter ended June 30, 2014. The Company also filed its Quarterly Report on Form 10-Q with the U.S. Securities and Exchange Commission for the quarter ended June 30, 2014.

"It is an exciting time to be focused on customer experience, customer engagement and customer growth, and our performance reflects it," commented Ken Tuchman, chairman and chief executive officer of TeleTech. "With strong second quarter bookings, new client wins, and expanded integrated products and services, our growth strategy continues to gain momentum. Furthermore, the announced strategic acquisition of consulting firm rogenSi not only brings essential leadership and change management competencies to our Customer Strategy Services segment, it is an important milestone in the diversity of our CSS segment," concluded Tuchman.

SECOND QUARTER 2014 FINANCIAL HIGHLIGHTS

Revenue        

  • Second quarter 2014 GAAP revenue was $295.5 million compared to $289.7 million in the second quarter of 2013. 
  • On a constant currency Non-GAAP basis, second quarter 2014 revenue was $303.2 million. This represents a 5.2 percent growth rate over the prior year period, of which approximately 50 percent was organic. 

EBITDA

  • Non-GAAP EBITDA increased 8.4 percent to $39.2 million, or 12.9 percent of adjusted revenue. This compares to $36.2 million or 12.6 percent of revenue in the year–ago quarter.

Income from Operations

  • Second quarter 2014 GAAP income from operations was $20.7 million or 7.0 percent of revenue compared to $19.7 million or 6.8 percent of revenue in the second quarter of 2013. 
  • On a constant currency basis and adjusted for $617 thousand in restructuring charges, income from operations was $23.4 million, representing 7.7 percent of adjusted revenue versus 8.2 percent in the year-ago quarter. Income from operations includes incremental investment in sales, marketing, and research and development. 

Earnings Per Share

  • Second quarter 2014 GAAP fully diluted earnings per share attributable to TeleTech shareholders increased to $0.34 from $0.23 for the same period last year.
  • Non-GAAP fully diluted earnings per share were $0.33 compared to $0.35 in the prior year period. 

Bookings

  • During the second quarter 2014, TeleTech signed an estimated $110 million in annualized revenue from new and expanded client relationships. The bookings mix was well diversified across all verticals with approximately 92 percent from existing clients, 71 percent in recurring revenue, 36 percent from emerging businesses and 15 percent from international clients. 

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

  • As of June 30, 2014, TeleTech had cash and cash equivalents of $97.8 million and $106.9 million of total debt, resulting in a net debt position of $9.1 million, due to increased share repurchases, capital expenditures, and acquisition-related payments.
  • As of June 30, 2014, TeleTech had $596.5 million of additional borrowing capacity available under its revolving credit facility.
  • Cash flow from operations in the second quarter 2014 was $18.1 million compared to $33.7 million in the second quarter 2013.
  • Capital expenditures in the second quarter 2014 were $19.4 million compared to $9.6 million in the second quarter 2013.
  • TeleTech repurchased approximately 666,000 shares of common stock during the second quarter 2014 for a cost of $16.6 million. As of June 30, 2014, $31.9 million was authorized for future share repurchases.

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 second quarter 2014, CMS revenue was $218.7 million compared to $220.6 million in the year-ago quarter. On a constant currency basis, revenue increased 3.1 percent to $226.0 million.
  • Operating income was $16.5 million or 7.5 percent of revenue, relatively unchanged from the year-ago quarter. Adjusted operating income margin was 8.4 percent reflecting $1.9 million of foreign currency translation and $535 thousand of restructuring charges. This compares to 8.8 percent in the year-ago period.

 

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

  • CGS second quarter 2014 revenue increased 29 percent to $28.9 million compared to $22.4 million in the year-ago quarter. Income from operations was $1.8 million or 6.3 percent versus a loss of $0.6 million.   

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

  • CTS second quarter 2014 revenue was $35.7 million compared to $36.6 million in the year-ago quarter. Income from operations was $1.6 million or 4.5 percent compared to $5.8 million or 15.9 percent in the year-ago quarter.

 

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

  • CSS second quarter 2014 revenue increased 22 percent to $12.2 million from $10.0 million in the year-ago quarter. Income from operations increased to $0.7 million or 6.0 percent of revenue from a loss of $2.0 million in the same period last year.

 

BUSINESS OUTLOOK

"As we continue to invest in our growth strategy, we remain keenly focused on managing the key metrics that drive shareholder value," explained Regina Paolillo, chief financial and administrative officer of TeleTech. "These metrics include top line growth, return on invested capital, cash flow generation, and earnings per share expansion from increased profitability and stock repurchases," remarked Paolillo.

TeleTech raises lower end of 2014 revenue guidance, as follows:

Revenue – Revenue estimated from $1.245 to $1.260 billion, reflecting an expected two percent adverse impact from foreign exchange translation. 

Operating Margin – Operating margin range estimated between 8.75 and 9.0 percent (before asset impairment, restructuring or acquisition-related charges), but including approximately $10 million investment in sales, and research and development.

Capital Expenditures - Range between $55 and $65 million with 70 percent expected for growth initiatives.

 

 

SEC FILINGS

The Company's filings with the U.S. 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 August 12, 2014 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. 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, founded in 1982, is a leading global provider of analytics-driven, technology-enabled customer engagement solutions. The Company offers an integrated platform that combines consulting, technology, care and growth services to simplify and personalize interactions that build deep engagement between people and brands.  This holistic, multichannel approach improves customer satisfaction, increases customer loyalty and drives long-term profitability and growth. From strategic consulting to operational execution, TeleTech's 40,000 employees speaking over 50 languages deliver results for Global 1000 clients in the automotive, communications and media, financial services, government, healthcare, technology, transportation and retail industries. Through the TeleTech Community Foundation, the Company leverages its innovative leadership to ensure that students in underserved communities around the globe have access to the tools and support they need to maximize their educational outcomes. For additional information, please 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 U.S. 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.

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 (Unaudited)

                   
                   
     

Three months ended

 

Six months ended

     

 June 30,

 

 June 30,

     

2014

 

2013

 

2014

 

2013

                   

Revenue

 

$295,490

 

$289,692

 

$597,711

 

$578,075

                   

Operating Expenses:

               
 

Cost of services

 

212,315

 

208,809

 

426,102

 

417,041

 

Selling, general and administrative

 

47,802

 

46,168

 

98,169

 

91,915

 

Depreciation and amortization

 

14,089

 

11,263

 

27,259

 

21,818

 

Restructuring charges, net

 

617

 

2,572

 

1,157

 

3,423

 

Impairment losses

 

-

 

1,205

 

-

 

1,205

         Total operating expenses

 

274,823

 

270,017

 

552,687

 

535,402

                   

Income From Operations

 

20,667

 

19,675

 

45,024

 

42,673

                   
 

Other income (expense)

 

2,880

 

(3,099)

 

2,702

 

(5,103)

                   

Income Before Income Taxes

 

23,547

 

16,576

 

47,726

 

37,570

                   
 

Provision for income taxes

 

(5,417)

 

(3,854)

 

(8,293)

 

(6,245)

                   

Net Income

 

18,130

 

12,722

 

39,433

 

31,325

                   
 

Net income attributable to noncontrolling interest

 

(1,268)

 

(407)

 

(2,353)

 

(1,049)

                   

Net Income Attributable to TeleTech Stockholders

 

$  16,862

 

$  12,315

 

$  37,080

 

$  30,276

                   

Net Income Per Share Attributable to TeleTech Stockholders

               
                   
 

Basic

 

$     0.34

 

$     0.24

 

$     0.75

 

$     0.58

                   
 

Diluted

 

$     0.34

 

$     0.23

 

$     0.73

 

$     0.57

                   
                   

Income From Operations Margin

 

7.0%

 

6.8%

 

7.5%

 

7.4%

Net Income Attributable to TeleTech Stockholders Margin

 

5.7%

 

4.3%

 

6.2%

 

5.2%

Effective Tax Rate

 

23.0%

 

23.3%

 

17.4%

 

16.6%

                   
                   

Weighted Average Shares Outstanding

               

  Basic

 

49,351

 

51,861

 

49,696

 

52,104

  Diluted

 

50,111

 

52,628

 

50,536

 

52,912

 

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)

                 
                 
   

Three months ended

 

Six months ended

   

 June 30,

 

 June 30,

   

2014

 

2013

 

2014

 

2013

                 

Revenue:

               

Customer Management Services

 

$218,683

 

$220,641

 

$446,607

 

$443,223

Customer Growth Services

 

28,875

 

22,399

 

57,780

 

45,255

Customer Technology Services

 

35,737

 

36,644

 

68,513

 

70,206

Customer Strategy Services

 

12,195

 

10,008

 

24,811

 

19,391

Total

 

$295,490

 

$289,692

 

$597,711

 

$578,075

                 

Income From Operations:

               

Customer Management Services

 

$  16,493

 

$  16,465

 

$  37,316

 

$  37,196

Customer Growth Services

 

1,831

 

(620)

 

3,601

 

656

Customer Technology Services

 

1,616

 

5,819

 

1,927

 

8,717

Customer Strategy Services

 

727

 

(1,989)

 

2,180

 

(3,896)

Total

 

$  20,667

 

$  19,675

 

$  45,024

 

$  42,673

 

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

         
         
   

 June 30,

 

 December 31, 

   

2014

 

2013

   

(Unaudited)

   
         

ASSETS

       

Current assets:

       

   Cash and cash equivalents

 

$     97,778

 

$         158,017

   Accounts receivable, net

 

251,436

 

236,099

   Other current assets

 

82,067

 

75,435

      Total current assets

 

431,281

 

469,551

         

Property and equipment, net

 

141,381

 

126,719

Other assets

 

243,975

 

246,072

         

Total assets

 

$   816,637

 

$         842,342

         

LIABILITIES AND EQUITY

       

Total current liabilities

 

$   161,905

 

$         190,787

Other long-term liabilities

 

162,950

 

175,564

Mandatorily redeemable noncontrolling interest

 

3,274

 

2,509

Total equity

 

488,508

 

473,482

         

Total liabilities and equity

 

$   816,637

 

$         842,342

 

 

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,

   

2014

 

2013

 

2014

 

2013

                 

Reconciliation of Revenue:

               
                 

Revenue

 

$295,490

 

$289,692

 

$597,711

 

$578,075

   Changes due to foreign currency fluctuations

 

7,731

 

(1,345)

 

21,384

 

(2,937)

Non-GAAP Revenue

 

$303,221

 

$288,347

 

$619,095

 

$575,138

                 
                 

Reconciliation of Gross Margin:

               
                 

Non-GAAP Revenue

 

$303,221

 

$288,347

 

$619,095

 

$575,138

Cost of services

 

212,315

 

208,809

 

426,102

 

417,041

   Adjustments related to Non-GAAP revenue adjustments

 

5,601

 

(1,623)

 

15,419

 

(3,170)

Non-GAAP Gross margin

 

$  85,305

 

$  81,161

 

$177,574

 

$161,267

                 

NON-GAAP Gross margin percentage

 

28.1%

 

28.1%

 

28.7%

 

28.0%

                 
                 

Reconciliation of EBIT & EBITDA:

               
                 

Net Income Attributable to TeleTech stockholders

 

$  16,862

 

$  12,315

 

$  37,080

 

$  30,276

Interest income

 

(492)

 

(575)

 

(1,003)

 

(1,244)

Interest expense

 

1,861

 

1,903

 

3,551

 

3,768

Provision for income taxes

 

5,417

 

3,854

 

8,293

 

6,245

EBIT

 

$  23,648

 

$  17,497

 

$  47,921

 

$  39,045

                 

Depreciation and amortization

 

14,089

 

11,263

 

27,259

 

21,818

                 

EBITDA

 

$  37,737

 

$  28,760

 

$  75,180

 

$  60,863

                 
                 

Reconciliation of Free Cash Flow:

               
                 

Cash Flow From Operating Activities:

               

   Net income

 

$  18,130

 

$  12,722

 

$  39,433

 

$  31,325

   Adjustments to reconcile net income to net cash

               

       provided by operating activities:

               

          Depreciation and amortization

 

14,089

 

11,263

 

27,259

 

21,818

          Other

 

(14,126)

 

9,732

 

(35,062)

 

(12,932)

   Net cash provided by operating activities

 

18,093

 

33,717

 

31,630

 

40,211

                 

Less - Total Capital Expenditures

 

19,388

 

9,555

 

34,483

 

13,660

                 

Free Cash Flow

 

$   (1,295)

 

$  24,162

 

$   (2,853)

 

$  26,551

                 
                 

Reconciliation of Non-GAAP Income from Operations:

               
                 

Income from Operations

 

$  20,667

 

$  19,675

 

$  45,024

 

$  42,673

Restructuring charges, net

 

617

 

2,572

 

1,157

 

3,423

Impairment losses

 

-

 

1,205

 

-

 

1,205

Net effect of foreign currency fluctuations

 

2,130

 

278

 

5,965

 

233

                 

Non-GAAP Income from Operations

 

$  23,414

 

$  23,730

 

$  52,146

 

$  47,534

                 

Non-GAAP Income from Operations Margin

 

7.7%

 

8.2%

 

8.4%

 

8.3%

                 

Reconciliation of Non-GAAP EPS:

               
                 

Net Income Attributable to TeleTech stockholders

 

$  16,862

 

$  12,315

 

$  37,080

 

$  30,276

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

 

399

 

2,527

 

746

 

3,116

Add:  Deconsolidation of subsidiary

 

-

 

3,556

 

-

 

3,556

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

 

(2,416)

 

-

 

(2,416)

 

-

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

 

1,657

 

143

 

4,123

 

104

Add:  Changes in valuation allowance and returns to provision adjustments

 

196

 

(330)

 

(1,777)

 

(1,608)

                 

 Non-GAAP Net Income Attributable to TeleTech stockholders

 

$  16,698

 

$  18,211

 

$  37,756

 

$  35,444

                 

    Diluted shares outstanding

 

50,111

 

52,628

 

50,536

 

52,912

                 

 Non-GAAP EPS Attributable to TeleTech stockholders

 

$0.33

 

$0.35

 

$0.75

 

$0.67

                 
                 

Reconciliation of Non-GAAP EBITDA:

               
                 

Net Income Attributable to TeleTech stockholders

 

$  16,862

 

$  12,315

 

$  37,080

 

$  30,276

   Interest income

 

(492)

 

(575)

 

(1,003)

 

(1,244)

   Interest expense

 

1,861

 

1,903

 

3,551

 

3,768

   Provision for income taxes

 

5,417

 

3,854

 

8,293

 

6,245

   Depreciation and amortization

 

14,089

 

11,263

 

27,259

 

21,818

   Asset impairment and restructuring charges

 

617

 

3,777

 

1,157

 

4,628

   Net effect of foreign currency fluctuations

 

2,130

 

278

 

5,965

 

233

   Changes in acquisition contingent consideration

 

(3,961)

 

-

 

(3,961)

 

-

   Equity-based compensation expenses

 

2,720

 

3,386

 

5,880

 

6,577

                 

 Non-GAAP EBITDA

 

$  39,243

 

$  36,201

 

$  84,221

 

$  72,301

Investor Contact, Paul Miller, 303.397.8641
Media Contact, Elizabeth Grice, 303.397.8507