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ENGLEWOOD, CO -- (MARKET WIRE) -- 10/28/09 -- TeleTech Holdings, Inc. (NASDAQ: TTEC), one of the largest and most geographically diverse global providers of technology enabled business process outsourcing ("BPO") services and solutions, today announced financial results for the third quarter 2009. The Company also filed its Quarterly Report on Form 10-Q with the Securities and Exchange Commission for the quarter ended September 30, 2009.
THIRD QUARTER 2009 FINANCIAL RESULTS
TeleTech reported third quarter and nine months 2009 revenue of $281.5 million and $887.1 million, respectively. This compares to $349.1 million and $1,074.2 million in the year-ago periods. On a constant currency basis, revenue declined 16.0 percent from the third quarter 2008 and 10.5 percent from the first nine months of 2008. These declines were attributable to lower client volumes due primarily to reduced demand for clients' products or services given the weak economic environment, TeleTech's efforts to proactively manage underperforming business out of its portfolio and the increased migration of certain client programs to offshore locations.
Revenue from TeleTech's offshore locations reached a milestone in the third quarter climbing to $140.7 million or 50 percent of total revenue. For the first nine months of 2009 offshore revenue grew to $425.8 million or 48 percent of total revenue.
TeleTech's third quarter 2009 gross margin improved 330 basis points to 30.9 percent from 27.6 percent in the year-ago quarter. This improvement was primarily due to the increased delivery of professional services and technology-based on-demand offerings, the termination of underperforming client programs and lower workforce attrition.
TeleTech's third quarter 2009 income from operations was $28.0 million or 9.9 percent of revenue, representing a 210 basis point improvement from $27.2 million or 7.8 percent of revenue in the year-ago quarter. The increase in operating margin is primarily due to the gross margin improvement outlined above, in addition to lower restructuring and asset impairment charges and proactive management of the Company's operating and workforce-related expenses.
Third quarter 2009 fully diluted earnings per share were 32 cents compared to third quarter 2008 fully diluted earnings per share of 29 cents attributable to TeleTech shareholders.
EXECUTIVE COMMENTARY ON TELETECH'S FINANCIAL RESULTS
"We are pleased with our ability to deliver solid profitability and earnings per share along with record free cash flow," said Ken Tuchman, chairman and chief executive officer. "Our business is operating very efficiently and is a testament to the strength of our leadership team and their in-depth understanding of the key performance levers of our global operations. Our focus remains on improving our topline results. We are encouraged by the pace of new business wins thus far in the fourth quarter as well as the ongoing business discussions we are having with both current and prospective clients. The marketplace is expressing a high level of interest in our revenue generation capabilities, our on-demand suite of offerings, and our ability to help companies simultaneously reduce global delivery risk and overall cost to serve. The breadth of TeleTech's capabilities uniquely positions us to capture additional market share in 2010 and beyond."
THIRD QUARTER 2009 BUSINESS HIGHLIGHTS
Strong Balance Sheet Continues to Fund Operations
-- As of September 30, 2009, TeleTech had cash and cash equivalents of
$115 million, no borrowings on its credit facility and total other debt of
$9 million, resulting in a net positive cash position of $106 million.
-- Free cash flow for the third quarter 2009 was $54.0 million,
representing a 7 percent increase from $50.7 million in the year-ago
quarter.
-- Capital expenditures in the third quarter 2009 were $4.8 million, down
from $15.3 million in the year-ago quarter.
-- Return on invested capital was 28 percent as of September 30, 2009.
New Business
During the third quarter 2009, TeleTech signed an estimated $55 million in new annualized revenue from both new and existing clients. To date in the fourth quarter, TeleTech has signed an estimated $80 million in new annualized revenue and expects to close several additional new business opportunities before the end of 2009. Several of the new business wins in the fourth quarter included TeleTech's revenue generation and on-demand suite of offerings.
BUSINESS OUTLOOK
TeleTech believes volumes in its base business are beginning to stabilize across its key industry verticals although volumes continue to be soft in certain of its smaller verticals including automotive, logistics, and travel and leisure. Accordingly, TeleTech expects fourth quarter 2009 revenue will approximate third quarter 2009 revenue. The revenue lift from seasonal volumes is expected to offset the absence of approximately $8 million in revenue recognized in the third quarter 2009 related to the completion of the short-term program for the Federal Communications Commission's digital television conversion.
TeleTech expects 2009 full year operating margin excluding unusual charges will range between 9.0 percent and 9.5 percent, an increase from its previous expectation of between 7.5 percent and 8.5 percent.
Consistent with prior years, TeleTech plans to provide its 2010 business outlook in conjunction with its fourth quarter 2009 earnings announcement.
CONFERENCE CALL
A conference call and webcast with management will be held on Thursday, October 29, 2009 at 8:30 a.m. Eastern Time. You are invited to join the 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 through Thursday, November 12, 2009.
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 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. 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.
ABOUT TELETECH
TeleTech is one of the largest and most geographically diverse global providers of business process outsourcing solutions. TeleTech and its subsidiaries have a 27-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. TeleTech and its subsidiaries have developed deep domain expertise and support more than 250 business process outsourcing programs serving more than 90 global clients in the automotive, communications and media, financial services, government, healthcare, retail, technology and travel and leisure industries. Our integrated global solutions are provided by approximately 45,500 employees utilizing 36,000 workstations across 71 delivery centers in 17 countries. For additional information, visit www.teletech.com.
FORWARD-LOOKING STATEMENTS
Statements in this press release that relate to future results and events (including statements about future financial and operating performance) are forward-looking statements based on TeleTech's current expectations. Actual results and events in future periods could differ materially from those projected in these forward-looking statements because of a number of risks and uncertainties including: achieving estimated revenue from new, renewed and expanded client business as volumes may not materialize as forecasted, especially due to the global economic slowdown; achieving profit improvement in our International BPO operations; 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; our ability to execute our growth plans, including sales of new products; 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 services 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 find cost effective locations, obtain favorable lease terms and build or retrofit facilities in a timely and economic manner; risks associated with business interruption due to weather, fires, pandemic, or terrorist-related events; risks associated with attracting and retaining cost-effective labor at our delivery centers; the possibility of asset impairments and restructuring charges; risks associated with changes in foreign currency exchange rates; 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 adversely impacts our tax obligations, health care costs or the BPO and customer management industry. A detailed discussion of these and other risk factors that could affect our results is included in TeleTech's SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2008. 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. All information in this release is as of Oct 28, 2009. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
----------- ----------- ----------- -----------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenue $ 281,524 $ 349,110 $ 887,066 $ 1,074,162
Operating Expenses:
Cost of services 194,609 252,666 626,500 788,599
Selling, general and
administrative 42,565 51,157 136,061 148,387
Depreciation and
amortization 15,664 14,998 43,534 45,782
Restructuring
charges, net 703 2,015 5,014 4,657
Impairment losses - 1,033 4,587 1,033
----------- ----------- ----------- -----------
Total operating
expenses 253,541 321,869 815,696 988,458
----------- ----------- ----------- -----------
Income From Operations 27,983 27,241 71,370 85,704
Other income
(expense) 445 (777) 1,570 (2,368)
----------- ----------- ----------- -----------
Income Before Income
Taxes 28,428 26,464 72,940 83,336
Provision for income
taxes (6,971) (5,368) (18,479) (20,697)
----------- ----------- ----------- -----------
Net Income 21,457 21,096 54,461 62,639
Net income
attributable to
noncontrolling
interest (935) (936) (2,746) (2,992)
----------- ----------- ----------- -----------
Net Income Attributable
to TeleTech
Shareholders $ 20,522 $ 20,160 $ 51,715 $ 59,647
=========== =========== =========== ===========
Net Income Per Share
Attributable to
TeleTech Shareholders
Basic $ 0.33 $ 0.30 $ 0.82 $ 0.86
=========== =========== =========== ===========
Diluted $ 0.32 $ 0.29 $ 0.81 $ 0.84
=========== =========== =========== ===========
Income From Operations
Margin 9.9% 7.8% 8.0% 8.0%
Net Income Attributable
to TeleTech
Shareholders Margin 7.3% 5.8% 5.8% 5.6%
Effective Tax Rate 24.5% 20.3% 25.3% 24.8%
Weighted Average Shares
Outstanding
Basic 62,159 68,217 63,051 69,373
Diluted 63,832 69,508 64,122 70,922
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
----------- ----------- ----------- -----------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenue:
North American BPO $ 215,949 $ 245,945 $ 674,827 $ 776,856
International BPO 65,575 103,165 212,239 297,306
Database Marketing and
Consulting - - - -
----------- ----------- ----------- -----------
Total $ 281,524 $ 349,110 $ 887,066 $ 1,074,162
=========== =========== =========== ===========
Income (Loss) From
Operations:
North American BPO $ 30,882 $ 20,337 $ 84,623 $ 81,206
International BPO (2,899) 6,969 (13,253) 4,922
Database Marketing and
Consulting - (65) - (424)
----------- ----------- ----------- -----------
Total $ 27,983 $ 27,241 $ 71,370 $ 85,704
=========== =========== =========== ===========
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2009 2008
------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 114,889 $ 87,942
Accounts receivable, net 201,613 236,997
Other current assets 78,244 79,949
------------- -------------
Total current assets 394,746 404,888
Property and equipment, net 132,486 157,747
Other assets 101,520 106,307
------------- -------------
Total assets $ 628,752 $ 668,942
============= =============
LIABILITIES AND EQUITY
Total current liabilities $ 161,682 $ 180,099
Other long-term liabilities 36,293 127,949
Total equity 430,777 360,894
------------- -------------
Total liabilities and equity $ 628,752 $ 668,942
============= =============
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
----------- ----------- ----------- -----------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Reconciliation of Gross
Margin:
Revenue $ 281,524 $ 349,110 $ 887,066 $ 1,074,162
Cost of services 194,609 252,666 626,500 788,599
----------- ----------- ----------- -----------
Gross margin $ 86,915 $ 96,444 $ 260,566 $ 285,563
----------- ----------- ----------- -----------
Gross margin
percentage 30.9% 27.6% 29.4% 26.6%
Reconciliation of EBIT
& EBITDA:
Net Income attributable
to TeleTech
shareholders $ 20,522 $ 20,160 $ 51,715 $ 59,647
Interest income (579) (1,327) (2,091) (3,801)
Interest expense 466 1,595 2,629 4,649
Provision for income
taxes 6,971 5,368 18,479 20,697
----------- ----------- ----------- -----------
EBIT $ 27,380 $ 25,796 $ 70,732 $ 81,192
Depreciation and
amortization 15,664 14,998 43,534 45,782
----------- ----------- ----------- -----------
EBITDA $ 43,044 $ 40,794 $ 114,266 $ 126,974
Reconciliation of Free
Cash Flow:
Cash Flow From
Operating Activities:
Net income $ 21,457 $ 21,096 $ 54,461 $ 62,639
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation
and
amortization 15,664 14,998 43,534 45,782
Other 21,719 29,900 54,683 16,878
----------- ----------- ----------- -----------
Net cash provided by
operating
activities 58,840 65,994 152,678 125,299
Less - Total Capital
Expenditures 4,791 15,320 19,092 51,728
----------- ----------- ----------- -----------
Free Cash Flow $ 54,049 $ 50,674 $ 133,586 $ 73,571
Reconciliation of
Non-GAAP Income from
Operations:
Income from Operations $ 27,983 $ 27,241 $ 71,370 $ 85,704
Restructuring
charges, net 703 2,015 5,014 4,657
Impairment losses - 1,033 4,587 1,033
Equity-based comp
review and
restatement expenses (745) 2,385 (260) 10,739
----------- ----------- ----------- -----------
Non-GAAP Income from
Operations $ 27,941 $ 32,674 $ 80,711 $ 102,133
Reconciliation of
Non-GAAP EPS:
Net Income attributable
to TeleTech
shareholders $ 20,522 $ 20,160 $ 51,715 $ 59,647
Add: Asset impairment
and restructuring
charges, net of
related taxes 498 2,094 6,442 4,080
Add: Equity-based
comp review and
restatement exp, net
of related taxes (528) 1,638 (174) 7,700
Less: Release of
Income Tax Valuation
Allowance - (2,915) - (2,915)
----------- ----------- ----------- -----------
Non-GAAP Net Income
attributable to
TeleTech shareholders $ 20,492 $ 20,977 $ 57,983 $ 68,512
Diluted shares
outstanding 63,832 69,508 64,122 70,922
Non-GAAP EPS
attributable to
TeleTech shareholders $ 0.32 $ 0.30 $ 0.90 $ 0.97
Reconciliation of
Non-GAAP EBITDA:
Net Income attributable
to TeleTech
shareholders $ 20,522 $ 20,160 $ 51,715 $ 59,647
Interest income (579) (1,327) (2,091) (3,801)
Interest expense 466 1,595 2,629 4,649
Provision for income
taxes 6,971 5,368 18,479 20,697
Depreciation and
amortization 15,664 14,998 43,534 45,782
Asset impairment and
restructuring charges 703 3,048 9,601 5,690
Equity-based comp
review and
restatement expenses (745) 2,385 (260) 10,739
Equity-based
compensation expenses 2,881 2,956 8,960 7,690
----------- ----------- ----------- -----------
Non-GAAP EBITDA $ 45,883 $ 49,183 $ 132,567 $ 151,093
Investor Contact: Karen Breen 303-397-8592
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