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TeleTech Announces Second Quarter 2016 Financial Results
Aug 3, 2016
Second Quarter 2016 Results
Revenue was $305.1 Million ($313.6 Million Non-GAAP Constant Currency);
Operating Income was $16.2 Million, 5.3 Percent of Revenue
(5.7 Percent Non-GAAP Constant Currency);
Fully Diluted EPS was 24 Cents
Signed $113 Million in New Business
Updates Outlook for Full Year 2016

DENVER, Aug. 3, 2016 /PRNewswire/ -- TeleTech Holdings, Inc. (NASDAQ: TTEC), a leading global provider of customer experience, engagement and growth solutions, today announced financial results for the second quarter ended June 30, 2016. 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, 2016.

"This quarter we made progress in many areas and faced challenges in others. It is clear from our results that our growth engine is underperforming and our sales execution must improve and accelerate," commented Ken Tuchman, chairman and chief executive officer of TeleTech. "We are refining our sales platform to deliver a greater volume of integrated outcome-based sales, and are intensely focused on sales execution and meaningful improvement in near-term profitability. With our blue chip client base, differentiated value proposition, and increasing market relevance, we remain confident in our strategy to be a leading global partner delivering transformational customer experience, engagement and growth solutions."

SECOND QUARTER 2016 FINANCIAL HIGHLIGHTS

Revenue        

  • Second quarter 2016 GAAP revenue decreased 1.6 percent to $305.1 million compared to $310.2 million in the prior year period.   
  • Non-GAAP constant currency revenue increased 1.1 percent to $313.6 million over the prior year.  

Income from Operations

  • Second quarter 2016 GAAP income from operations was $16.2 million, or 5.3 percent of revenue, compared to $23.4 million, or 7.5 percent of revenue in the second quarter 2015.
  • Non-GAAP constant currency income from operations was $18.0 million or 5.7 percent of adjusted revenue versus 7.6 percent the prior year.

Earnings Per Share

  • Second quarter 2016 GAAP fully diluted earnings per share attributable to TeleTech shareholders was 24 cents compared to 30 cents in the same period last year.
  • Non-GAAP fully diluted earnings per share was 28 cents compared to 34 cents in the prior year.

Bookings

  • During the second quarter 2016, TeleTech signed an estimated $113 million in annualized contract value revenue from new and expanded client relationships. The second quarter bookings mix was diversified across all verticals with 94 percent from existing clients, 47 percent from emerging businesses, and 12 percent from outside of the United States.  

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

  • As of June 30, 2016, TeleTech had cash and cash equivalents of $55.3 million and $146.2 million of total debt, resulting in a net debt position of $90.9 million.
  • As of June 30, 2016, TeleTech had approximately $420 million of additional borrowing capacity available under its revolving credit facility.
  • Cash flow from operations in the second quarter 2016 was $41.5 million compared to $81.7 million in the second quarter 2015.
  • Capital expenditures in the second quarter 2016 were $12.8 million compared to $16.5 million in the second quarter 2015.
  • TeleTech repurchased approximately one million shares of common stock during the second quarter 2016 for a total cost of $27.4 million. As of June 30, 2016, $33.5 million was authorized for future share repurchases. 
  • TeleTech paid a semi-annual dividend of $0.185 per share, or $8.9 million, in the second quarter  2016, which was paid to shareholders of record on March 31, 2016.

SEGMENT REPORTING & COMMENTARY

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

  • CMS second quarter 2016 revenue declined 3.0 percent to $212.8 million compared to $219.3 million in the year ago quarter. Income from operations was $8.3 million or 3.9 percent of revenue compared to $13.3 million or 6.1 percent in the prior year.
  • Non-GAAP constant currency revenue grew 0.5 percent over the year ago period and income from operations was $9.9 million or 4.5 percent of adjusted revenue. This compares to $13.4 million or 6.1 percent of revenue in the prior year.

Customer Growth Services (CGS) – Digitally-Enabled Revenue Growth Solutions

  • CGS second quarter 2016 revenue grew 20.7 percent to $36.9 million compared to $30.6 million in the year ago quarter. Income from operations was $3.5 million or 9.4 percent of revenue, compared to $2.1 million or 6.9 percent in the prior year.
  • Non-GAAP constant currency revenue increased 22.4 percent over the year ago period and income from operations was $3.7 million or 9.8 percent of adjusted revenue. This compares to $2.1 million or 6.9 percent of revenue in the prior year.

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

  • CTS second quarter 2016 revenue declined 1.9 percent to $37.4 million compared to $38.1 million in the year ago quarter. Income from operations was $3.4 million or 9.0 percent of revenue compared to $3.3 million or 8.5 percent in the prior year.
  • Non-GAAP constant currency revenue declined 1.9 percent over the year ago period and income from operations was $3.4 million or 9.1 percent of adjusted revenue. This compares to $3.3 million or 8.5 percent of revenue in the prior year.

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

  • CSS second quarter 2016 revenue declined 18.9 percent to $18.1 million from $22.3 million in the year ago quarter. Income from operations was $1.0 million or 5.7 percent of revenue compared to $4.7 million or 20.9 percent in the prior year.
  • Non-GAAP constant currency revenue declined 17.5 percent over the year ago period and income from operations was $1.1 million or 5.8 percent of adjusted revenue. This compares to $4.8 million or 21.6 percent of revenue in the prior year.

BUSINESS OUTLOOK

"While we are disappointed with our current results and near-term outlook, we are confident in both the market demand for digital, outcome-based customer experience solutions, and the relevancy and differentiation in our holistic customer experience platform," commented Regina Paolillo, chief financial and administrative officer of TeleTech. "Our priorities are focused on closing the sales execution gaps underlying the change in our 2016 revenue guidance and ensuring we pick up the pace on delivering higher levels of profitability, as reflected in the uptick in our 2016 operating income margin guidance."

We are updating our full year guidance as follows:

Revenue – We are reducing our revenue guidance to a range of $1.285 and $1.295 billion, compared to $1.335 and $1.345 billion.

Operating Margin – We are increasing our operating margin guidance to a range between 8.4 and 8.6 percent before asset impairments and restructuring charges, compared to 8.1 and 8.3 percent.

Capital Expenditures – We are reducing our capital expenditure guidance to 4.2 percent of revenue compared to 4.5 percent.

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 August 4, 2016 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 (NASDAQ: TTEC) is a leading global provider of customer experience, engagement and growth solutions. 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 41,500 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, continuation of client relationships, 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)

 (Unaudited)
























Three months ended


Six months ended




 June 30,


 June 30,




2016


2015


2016


2015











Revenue


$305,105


$310,223


$617,515


$635,744











Operating Expenses:










Cost of services


226,768


223,617


458,108


456,601


Selling, general and administrative


44,774


47,376


90,274


97,613


Depreciation and amortization


17,221


15,680


34,950


31,043


Restructuring charges, net


114


198


202


1,007


Impairment losses


-


-


-


-

         Total operating expenses


288,877


286,871


583,534


586,264











Income From Operations


16,228


23,352


33,981


49,480












Other income (expense)


(734)


(18)


(2,054)


(1,706)











Income Before Income Taxes


15,494


23,334


31,927


47,774












Provision for income taxes


(2,952)


(7,841)


(7,480)


(12,246)











Net Income


12,542


15,493


24,447


35,528












Net income attributable to noncontrolling interest

(926)


(797)


(1,606)


(2,060)











Net Income Attributable to TeleTech Stockholders

$  11,616


$  14,696


$  22,841


$  33,468











Net Income Per Share Attributable to TeleTech Stockholders



















Basic


$     0.24


$     0.30


$     0.47


$     0.69












Diluted


$     0.24


$     0.30


$     0.47


$     0.68





















Income From Operations Margin


5.3%


7.5%


5.5%


7.8%

Net Income Attributable to TeleTech Stockholders Margin

3.8%


4.7%


3.7%


5.3%

Effective Tax Rate


19.1%


33.6%


23.4%


25.6%





















Weighted Average Shares Outstanding








  Basic


47,873


48,325


48,120


48,347

  Diluted


48,221


49,064


48,483


49,113

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)





















Three months ended


Six months ended



 June 30,


 June 30,



2016


2015


2016


2015










Revenue:









Customer Management Services


$212,807


$219,316


$440,728


$462,325

Customer Growth Services


36,893


30,570


70,412


56,526

Customer Technology Services


37,350


38,087


72,618


73,801

Customer Strategy Services


18,055


22,250


33,757


43,092

Total


$305,105


$310,223


$617,515


$635,744










Income From Operations:









Customer Management Services


$    8,339


$  13,324


$  23,934


$  35,026

Customer Growth Services


3,482


2,122


3,977


2,148

Customer Technology Services


3,376


3,250


6,156


5,259

Customer Strategy Services


1,031


4,656


(86)


7,047

Total


$  16,228


$  23,352


$  33,981


$  49,480

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)








 June 30,


 December 31, 



2016


2015











ASSETS





Current assets:





   Cash and cash equivalents


$  55,330


$           60,304

   Accounts receivable, net


261,569


283,474

   Other current assets


80,641


71,294

      Total current assets


397,540


415,072






Property and equipment, net


170,124


168,289

Other assets


254,484


259,966






Total assets


$822,148


$         843,327






LIABILITIES AND EQUITY





Total current liabilities


$177,998


$         206,906

Other long-term liabilities


219,951


191,473

Mandatorily redeemable noncontrolling interest


-


4,131

Total equity


424,199


440,817






Total liabilities and equity


$822,148


$         843,327

 

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,



2016


2015


2016


2015

Reconciliation of Revenue:


















Revenue


$305,105


$310,223


$617,515


$635,744

   Changes due to foreign currency fluctuations  1


8,503




18,497



Non-GAAP Revenue


$313,608


$310,223


$636,012


$635,744



















Reconciliation of EBIT & EBITDA:


















Net Income Attributable to TeleTech stockholders


$  11,616


$  14,696


$  22,841


$  33,468

Interest income


(263)


(364)


(429)


(681)

Interest expense


1,753


1,676


3,717


3,374

Provision for income taxes


2,952


7,841


7,480


12,246

EBIT


$  16,058


$  23,849


$  33,609


$  48,407










Depreciation and amortization


17,221


15,680


34,950


31,043










EBITDA


$  33,279


$  39,529


$  68,559


$  79,450



















Reconciliation of Free Cash Flow:


















Cash Flow From Operating Activities:









   Net income


$  12,542


$  15,493


$  24,447


$  35,528

   Adjustments to reconcile net income to net cash









       provided by operating activities:









          Depreciation and amortization


17,221


15,680


34,950


31,043

          Other


11,725


50,520


(6,371)


18,942

   Net cash provided by operating activities


41,488


81,693


53,026


85,513










Less - Total Capital Expenditures


12,794


16,467


27,743


29,505










Free Cash Flow


$  28,694


$  65,226


$  25,283


$  56,008



















Reconciliation of Non-GAAP Income from Operations:


















Income from Operations


$  16,228


$  23,352


$  33,981


$  49,480

Restructuring charges, net


114


198


202


1,007

Impairment losses


-


-


-


-










Non-GAAP Income from Operations


$  16,342


$  23,550


$  34,183


$  50,487










Non-GAAP Income from Operations Margin


5.4%


7.6%


5.5%


7.9%



















Reconciliation of Non-GAAP EPS:


















Net Income Attributable to TeleTech stockholders


$  11,616


$  14,696


$  22,841


$  33,468

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


93


143


148


640

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


-


(500)


-


(455)

Add:  Changes in valuation allowance and returns to provision adjustments


1,558


2,175


2,436


1,586










 Non-GAAP Net Income Attributable to TeleTech stockholders


$  13,267


$  16,514


$  25,425


$  35,239










    Diluted shares outstanding


48,221


49,064


48,483


49,113










 Non-GAAP EPS Attributable to TeleTech stockholders


$0.28


$0.34


$0.52


$0.72



















Reconciliation of Non-GAAP EBITDA:


















Net Income Attributable to TeleTech stockholders


$  11,616


$  14,696


$  22,841


$  33,468

   Interest income


(263)


(364)


(429)


(681)

   Interest expense


1,753


1,676


3,717


3,374

   Provision for income taxes


2,952


7,841


7,480


12,246

   Depreciation and amortization


17,221


15,680


34,950


31,043

   Asset impairment and restructuring charges


114


198


202


1,007

   Changes in acquisition contingent consideration


-


(545)


-


(503)

   Equity-based compensation expenses


1,825


2,588


4,584


5,278










 Non-GAAP EBITDA


$  35,218


$  41,770


$  73,345


$  85,232










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. 

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION

(In thousands)

(Unaudited)








SECOND QUARTER 







(three months ended  June 30, 2016)













Revenue









GAAP Revenue

Non-GAAP Adjustments

Non-GAAP Revenue

Foreign Exchange Impact

Constant Currency Revenue

CMS


$           212,807

$            -

$           212,807

$               7,681

$            220,488


YoY Growth Rate:

-3.0%


-3.0%


0.5%








CGS


$            36,893

$            -

$            36,893

$                  510

$              37,403


YoY Growth Rate:

20.7%


20.7%


22.4%

CTS


$            37,350

$            -

$            37,350

$                     9

$              37,359


YoY Growth Rate:

-1.9%


-1.9%


-1.9%

CSS


$            18,055

$            -

$            18,055

$                  303

$              18,358


YoY Growth Rate:

-18.9%


-18.9%


-17.5%

Emerging Businesses


$            92,298

$            -

$            92,298

$                  822

$              93,120


YoY Growth Rate:

1.5%


1.5%


2.4%








Company (Consolidated)


$           305,105

$            -

$           305,105

$               8,503

$            313,608


YoY Growth Rate:

-1.6%


-1.6%


1.1%








Operating Income









GAAP Operating Income

Non-GAAP Adjustments

Non-GAAP Operating Income

Foreign Exchange Impact

Constant Currency Operating Income

CMS


$              8,339

$           62

$              8,401

$               1,492

$                9,893


Operating Margin:

3.9%


3.9%


4.5%








CGS


$              3,482

$            -

$              3,482

$                  183

$                3,665


Operating Margin:

9.4%


9.4%


9.8%

CTS


$              3,376

$           43

$              3,419

$                  (35)

$                3,384


Operating Margin:

9.0%


9.2%


9.1%

CSS


$              1,031

$           10

$              1,041

$                   29

$                1,070


Operating Margin:

5.7%


5.8%


5.8%

Emerging Businesses


$              7,889

$           53

$              7,942

$                  177

$                8,119


Operating Margin:

8.5%


8.6%


8.7%








Company (Consolidated)


$            16,228

$         115

$            16,343

$               1,669

$              18,012


Operating Margin:

5.3%


5.4%


5.7%















Segments Defined:

CMS (Customer Management Services), CGS (Customer Growth Services), 



CTS (Customer Technology Services), CSS (Customer Strategy Services)



Emerging Businesses: CGS, CTS, and CSS








Methodology: 

Foreign exchange fluctuations are calculated on a constant currency basis by



translating the current year reported amounts using the prior year foreign exchange



rate for each underlying currency









Non-GAAP Operating Income:

Adjusted for restructuring and impairment costs


 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION

(In thousands)

(Unaudited)








YEAR-TO-DATE







(six months ended June 30, 2016)













Revenue









GAAP Revenue

Non-GAAP Adjustments

Non-GAAP Revenue

Foreign Exchange Impact

Constant Currency Revenue

CMS


$         440,728

$            -

$           440,728

$             16,558

$            457,286


YoY Growth Rate:

-4.7%


-4.7%


-1.1%








CGS


$           70,412

$            -

$            70,412

$               1,320

$              71,732


YoY Growth Rate:

24.6%


24.6%


26.9%

CTS


$           72,618

$            -

$            72,618

$                   36

$              72,654


YoY Growth Rate:

-1.6%


-1.6%


-1.6%

CSS


$           33,757

$            -

$            33,757

$                  583

$              34,340


YoY Growth Rate:

-21.7%


-21.7%


-20.3%

Emerging Businesses


$         176,787

$            -

$           176,787

$               1,939

$            178,726


YoY Growth Rate:

1.9%


1.9%


3.1%








Company (Consolidated)


$         617,515

$            -

$           617,515

$             18,497

$            636,012


YoY Growth Rate:

-2.9%


-2.9%


0.0%








Operating Income









GAAP Operating Income

Non-GAAP Adjustments

Non-GAAP Operating Income

Foreign Exchange Impact

Constant Currency Operating Income

CMS


$           23,934

$         150

$            24,084

$                  354

$              24,438


Operating Margin:

5.4%


5.5%


5.3%








CGS


$             3,977

$            -

$              3,977

$                  374

$                4,351


Operating Margin:

5.6%


5.6%


6.1%

CTS


$             6,156

$           43

$              6,199

$                 (122)

$                6,077


Operating Margin:

8.5%


8.5%


8.4%

CSS


$                (86)

$           10

$                  (76)

$                  (64)

$                 (140)


Operating Margin:

-0.3%


-0.2%


-0.4%

Emerging Businesses


$           10,047

$           53

$            10,100

$                  188

$              10,288


Operating Margin:

5.7%


5.7%


5.8%








Company (Consolidated)


$           33,981

$         203

$            34,184

$                  542

$              34,726


Operating Margin:

5.5%


5.5%


5.5%















Segments Defined:

CMS (Customer Management Services), CGS (Customer Growth Services), 



CTS (Customer Technology Services), CSS (Customer Strategy Services)



Emerging Businesses: CGS, CTS, and CSS









Methodology: 

Foreign exchange fluctuations are calculated on a constant currency basis by



translating the current year reported amounts using the prior year foreign exchange



rate for each underlying currency









Non-GAAP Operating Income:

Adjusted for restructuring and impairment costs


 

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SOURCE TeleTech Holdings, Inc.