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TeleTech Announces Third Quarter 2016 Financial Results
Nov 9, 2016
Third Quarter 2016 Results
Revenue was $312.8 Million ($313.1 Million Non-GAAP Constant Currency);
Operating Income was $12.3 Million, 3.9 Percent of Revenue
(6.0 Percent Non-GAAP Constant Currency);
Fully Diluted EPS was 24 Cents
Signed $87 Million in New Business
Updates Outlook for Full Year 2016

DENVER, Nov. 9, 2016 /PRNewswire/ -- TeleTech Holdings, Inc. (NASDAQ: TTEC), a leading global provider of customer experience, engagement and growth solutions, today announced preliminary financial results for the third quarter ended September 30, 2016. The Company currently plans to file its Quarterly Report on Form 10-Q for the period ending September 30, 2016 with the U.S. Securities and Exchange Commission no later than November 14, 2016. The Company does not expect that the results finally reported will be materially different.

"As outlined in our last earnings call, we moved aggressively in the third quarter to execute initiatives to improve our top line growth and provide higher and more consistent levels of profitability, "commented Ken Tuchman, chairman and chief executive officer of TeleTech. "We implemented several go-to-market changes to be able to advance our top line growth and we completed a number of restructuring activities that are already contributing to higher profit margins in our Customer Management Services and Customer Technology Services segments. The demand for transformative customer experience solutions continues to grow and, with our holistic platform of technology-enabled customer experience assets, we are confident that our go-forward strategy will yield improved financial results in the near term."

THIRD QUARTER 2016 FINANCIAL HIGHLIGHTS

Revenue        

  • Third quarter 2016 GAAP revenue increased 1.2 percent to $312.8 million compared to $309.2 million in the prior year period.   
  • Non-GAAP constant currency revenue increased 1.2 percent to $313.1 million over the prior year.  

Income from Operations

  • Third quarter 2016 GAAP income from operations was $12.3 million, or 3.9 percent of revenue, compared to $15.6 million, or 5.1 percent of revenue in the third quarter 2015.
  • Non-GAAP constant currency income from operations was $18.9 million or 6.0 percent of adjusted revenue versus 6.2 percent the prior year.

Restructuring, Impairment, and Other Income (Expense)

  • Third quarter 2016 GAAP results include preliminary charges related to restructuring ($3.7 million), impairments ($5.9 million), and loss on assets held for sale ($5.3 million).
  • Additionally, the Company released $4.6 million in acquisition-related contingent consideration.

Earnings Per Share

  • Third quarter 2016 GAAP fully diluted earnings per share attributable to TeleTech shareholders was 24 cents up from 23 cents in the same period last year.
  • Non-GAAP fully diluted earnings per share was 39 cents up from 29 cents in the prior year.

Bookings

  • During the third quarter 2016, TeleTech signed an estimated $87 million in annualized contract value revenue from new and expanded client relationships. The third quarter bookings mix was diversified across all verticals with 93 percent from existing clients, 51 percent from emerging businesses, and 27 percent from outside of the United States.  

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

  • As of September 30, 2016, TeleTech had cash and cash equivalents of $61.3 million and $140.9 million of total debt, resulting in a net debt position of $79.6 million.
  • As of September 30, 2016, TeleTech had approximately $425 million of additional borrowing capacity available under its revolving credit facility.
  • Cash flow from operations in the third quarter 2016 was $54.1 million compared to $30.7 million in the third quarter 2015.
  • Capital expenditures in the third quarter 2016 were $11.1 million compared to $19.7 million in the third quarter 2015.
  • The Board of Directors declared an eight percent increase in TeleTech's semi-annual dividend to $0.20 per share in the third quarter, or $9.3 million. The dividend was paid on October 14, 2016 to shareholders of record on October 3, 2016.
  • During the third quarter 2016, TeleTech repurchased approximately 742 thousand shares of common stock for a total cost of $21.2 million. As of September 30, 2016, $12.3 million was authorized for future share repurchases. On November 9, 2016, TeleTech announced that its Board of Directors approved an additional share repurchase authorization of $25 million, consistent with prior authorizations.

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 third quarter 2016 revenue increased 5.2 percent to $223.7 million compared to $212.7 million in the year ago quarter. Income from operations was $12.3 million or 5.5 percent of revenue compared to $8.9 million or 4.2 percent in the prior year.
  • Non-GAAP constant currency revenue grew 5.2 percent over the year ago period and income from operations was $13.0 million or 5.8 percent of adjusted revenue. This compares to $9.4 million or 4.4 percent of revenue in the prior year.

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

  • CGS third quarter 2016 revenue grew 4.3 percent to $35.3 million compared to $33.9 million in the year ago quarter. Income from operations was $0.2 million or 0.5 percent of revenue, compared to a loss of $0.3 million in the prior year.
  • Non-GAAP constant currency revenue increased 4.2 percent over the year ago period and income from operations was $0.2 million or 0.6 percent of adjusted revenue. This compares to $2.8 million or 8.3 percent of revenue in the prior year.

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

  • CTS third quarter 2016 revenue declined 13.2 percent to $36.6 million compared to $42.1 million in the year ago quarter. Income from operations was $3.7 million or 10.1 percent of revenue compared to $3.8 million or 9.0 percent in the prior year.
  • Non-GAAP constant currency revenue declined 13.2 percent over the year ago period and income from operations was $4.8 million or 13.1 percent of adjusted revenue. This compares to $3.8 million or 9.0 percent of revenue in the prior year.

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

  • CSS third quarter 2016 revenue declined 15.9 percent to $17.3 million from $20.5 million in the year ago quarter. Loss from operations was $3.8 million or negative 22.2 percent of revenue compared to $3.2 million or 15.5 percent in the prior year.
  • Non-GAAP constant currency revenue declined 15.1 percent over the year ago period and income from operations was $0.9 million or 5.3 percent of adjusted revenue. This compares to $3.3 million or 15.9 percent of revenue in the prior year.

BUSINESS OUTLOOK
We are updating our full year guidance as follows:

Revenue – We are reducing our revenue guidance to a range of $1.265 and $1.270 billion, compared to $1.285 and $1.295 billion.

Operating Income Margin – We are decreasing our operating income margin guidance to a range between 7.0 and 7.2 percent before asset impairments and restructuring charges, compared to 8.4 and 8.6 percent.

Capital Expenditures – We are maintaining our capital expenditure guidance at 4.2 percent of revenue.

"Our priorities are focused on closing the sales execution gaps underlying the adjustment to our 2016 revenue guidance and ensuring we pick up the pace on delivering higher levels of profitability," commented Regina Paolillo, chief financial and administrative officer of TeleTech.  "While we have work to do in delivering higher revenue growth, we are clearly seeing margin expansion in our third quarter results and expect continued improvement in the fourth quarter. On a pro forma basis, we expect the full year benefit from the profit improvement initiatives in the third quarter and the sale of selected small non-strategic assets to deliver an operating margin in the 8.4 to 8.6 percent range that we guided to in the short term, albeit not for the full year ending December 31, 2016."

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 November 10, 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 43,500 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


Nine months ended




 September 30,


 September 30,




2016


2015


2016


2015











Revenue


$312,796


$309,195


$930,311


$944,939











Operating Expenses:










Cost of services


233,541


225,978


691,649


682,579


Selling, general and administrative


40,628


48,418


130,902


146,031


Depreciation and amortization


16,811


15,486


51,761


46,529


Restructuring charges, net


3,688


622


3,890


1,629


Impairment losses


5,861


3,066


5,861


3,066

           Total operating expenses


300,529


293,570


884,063


879,834











Income From Operations


12,267


15,625


46,248


65,105












Other income (expense)


(690)


(1,995)


(2,744)


(3,701)











Income Before Income Taxes


11,577


13,630


43,504


61,404












Benefit from (Provision for) income taxes

853


(1,192)


(6,627)


(13,438)











Net Income


12,430


12,438


36,877


47,966












Net income attributable to noncontrolling interest

(1,198)


(1,243)


(2,804)


(3,303)











Net Income Attributable to TeleTech Stockholders

$  11,232


$  11,195


$  34,073


$  44,663











Net Income Per Share Attributable to TeleTech Stockholders



















Basic


$     0.24


$     0.23


$     0.71


$     0.92












Diluted


$     0.24


$     0.23


$     0.71


$     0.91





















Income From Operations Margin


3.9%


5.1%


5.0%


6.9%

Net Income Attributable to TeleTech Stockholders Margin

3.6%


3.6%


3.7%


4.7%

Effective Tax Rate


(7.4)%


8.7%


15.2%


21.9%





















Weighted Average Shares Outstanding








  Basic


47,081


48,345


47,771


48,346

  Diluted


47,315


48,936


48,089


49,052

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(In thousands)

(Unaudited)





















Three months ended


Nine months ended



 September 30,


 September 30,



2016


2015


2016


2015










Revenue:









Customer Management Services


$223,664


$212,690


$664,392


$675,015

Customer Growth Services


35,301


33,853


105,713


90,379

Customer Technology Services


36,580


42,134


109,198


115,935

Customer Strategy Services


17,251


20,518


51,008


63,610

Total


$312,796


$309,195


$930,311


$944,939










Income (Loss)  From Operations:









Customer Management Services


$  12,255


$    8,930


$  36,189


$  43,956

Customer Growth Services


161


(257)


4,138


1,891

Customer Technology Services


3,682


3,774


9,838


9,033

Customer Strategy Services


(3,831)


3,178


(3,917)


10,225

Total


$  12,267


$  15,625


$  46,248


$  65,105

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)








 September 30,


 December 31, 



2016


2015











ASSETS





Current assets:





   Cash and cash equivalents


$           61,308


$           60,304

   Accounts receivable, net


257,893


283,474

   Other current assets


70,350


71,294

   Assets held for sale


9,967


-

      Total current assets


399,518


415,072






Property and equipment, net


164,357


168,289

Other assets


244,744


259,966






Total assets


$         808,619


$         843,327






LIABILITIES AND EQUITY





Total current liabilities


$         198,191


$         206,906

Liabilities held for sale


1,121


-

Other long-term liabilities


214,463


191,473

Mandatorily redeemable noncontrolling interest


-


4,131

Total equity


394,844


440,817






Total liabilities and equity


$         808,619


$         843,327

 

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,



2016


2015


2016


2015

Reconciliation of Revenue:


















Revenue


$312,796


$309,195


$930,311


$944,939

   Changes due to foreign currency fluctuations  1


261




18,758



Non-GAAP Revenue


$313,057


$309,195


$949,069


$944,939



















Reconciliation of EBIT & EBITDA:


















Net Income Attributable to TeleTech stockholders


$  11,232


$  11,195


$  34,073


$  44,663

Interest income


(397)


(196)


(826)


(877)

Interest expense


2,041


2,337


5,758


5,711

(Benefit) Provision for income taxes


(853)


1,192


6,627


13,438

EBIT


$  12,023


$  14,528


$  45,632


$  62,935










Depreciation and amortization


16,811


15,486


51,761


46,529










EBITDA


$  28,834


$  30,014


$  97,393


$109,464



















Reconciliation of Free Cash Flow:


















Cash Flow From Operating Activities:









   Net income


$  12,430


$  12,438


$  36,877


$  47,966

   Adjustments to reconcile net income to net cash









       provided by operating activities:









          Depreciation and amortization


16,811


15,486


51,761


46,529

          Other


24,879


2,727


18,508


21,669

   Net cash provided by operating activities


54,120


30,651


107,146


116,164










Less - Total Capital Expenditures


11,120


19,679


38,863


49,184










Free Cash Flow


$  43,000


$  10,972


$  68,283


$  66,980



















Reconciliation of Non-GAAP Income from Operations:


















Income from Operations


$  12,267


$  15,625


$  46,248


$  65,105

Restructuring charges, net


3,688


622


3,890


1,629

Impairment losses


5,861


3,066


5,861


3,066










Non-GAAP Income from Operations


$  21,816


$  19,313


$  55,999


$  69,800










Non-GAAP Income from Operations Margin


7.0%


6.2%


6.0%


7.4%



















Reconciliation of Non-GAAP EPS:


















Net Income Attributable to TeleTech stockholders


$  11,232


$  11,195


$  34,073


$  44,663

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


7,782


2,161


7,930


2,801

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


(4,435)


557


(4,435)


102

Add:  Estimated loss on assets held for sale, net of related taxes


4,208


-


4,208


-

Add:  Changes in valuation allowance and returns to provision adjustments


(530)


172


1,903


1,758










 Non-GAAP Net Income Attributable to TeleTech stockholders


$  18,257


$  14,085


$  43,679


$  49,324










    Diluted shares outstanding


47,315


48,936


48,089


49,052










 Non-GAAP EPS Attributable to TeleTech stockholders


$0.39


$0.29


$0.91


$1.01



















Reconciliation of Non-GAAP EBITDA:


















Net Income Attributable to TeleTech stockholders


$  11,232


$  11,195


$  34,073


$  44,663

   Interest income


(397)


(196)


(826)


(877)

   Interest expense


2,041


2,337


5,758


5,711

   (Benefit) Provision for income taxes


(853)


1,192


6,627


13,438

   Depreciation and amortization


16,811


15,486


51,761


46,529

   Asset impairment and restructuring charges


9,549


3,688


9,751


4,695

   Changes in acquisition contingent consideration


(4,567)


784


(4,567)


281

   Estimated loss of assets held for sale


5,300


-


5,300


-

   Equity-based compensation expenses


2,694


3,291


7,278


8,569










 Non-GAAP EBITDA


$  41,810


$  37,777


$115,155


$123,009


1Foreign 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)








THIRD QUARTER 





(three months end, Sep 30, 2016)












Revenue









GAAP Revenue

Non-GAAP
Adjustments

Non-GAAP Revenue

Foreign Exchange
Impact

Constant Currency
Revenue

CMS


$         223,664

$            -

$               223,664

$                  126

$            223,790


YoY Growth Rate:

5.2%


5.2%


5.2%








CGS


$           35,301

$            -

$                35,301

$                  (17)

$              35,284


YoY Growth Rate:

4.3%


4.3%


4.2%

CTS


$           36,580

$            -

$                36,580

$                  (12)

$              36,568


YoY Growth Rate:

-13.2%


-13.2%


-13.2%

CSS


$           17,251

$            -

$                17,251

$                  164

$              17,415


YoY Growth Rate:

-15.9%


-15.9%


-15.1%

Emerging Businesses


$           89,132

$            -

$                89,132

$                  135

$              89,267


YoY Growth Rate:

-7.6%


-7.6%


-7.5%








Company (Consolidated)


$         312,796

$            -

$               132,796

$                  261

$            313,057


YoY Growth Rate:

1.2%


1.2%


1.2%








Operating Income









GAAP Operating
Income

Non-GAAP
Adjustments

Non-GAAP Operating
Income

Foreign Exchange
Impact

Constant Currency
Operating Income

CMS


$            12,255

$       3,526

$                15,781

$              (2,797)

$               12,984


Operating Margin:

5.5%


7.1%


5.8%








CGS


$                 161

$          108

$                     269

$                   (53)

$                    216


Operating Margin:

0.5%


0.8%


0.6%

CTS


$              3,682

$       1,138

$                  4,820

$                   (20)

$                4,800


Operating Margin:

10.1%


13.2%


13.1%

CSS


$            (3,831)

$       4,777

$                     946

$                   (20)

$                    926


Operating Margin:

-22.2%


5.5%


5.3%

Emerging Businesses


$                   12

$       6,023

$                  6,035

$                   (93)

$                5,942


Operating Margin:

0.0%


6.8%


6.7%








Company


$           12,267

$       9,549

$                21,816

$              (2,890)

$              18,926


Operating Margin:

3.9%


7.0%


6.0%



Segments Defined:

CMS (Customer Management Services), CGS (Customer Growth Services), CTS (Customer Technology Services), CSS (Customer Strategy Services) Emerging Business: CGS, CTS, and CSS



Methodology: 

Constant currency adjustments translate the current period reported amounts using the prior year FX rates, which in turn shows the underlying financial performance of the company as if foreign exchange rates did not change.  This methodology also provides greater transparency to the information actually used by management in its financial and operational decision making. 



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




(nine months ended, Sep 30, 2016)











Revenue









GAAP Revenue

Non-GAAP
Adjustments

Non-GAAP Revenue

Foreign Exchange
Impact

Constant Currency
Revenue

CMS


$         664,392

$            -

$               664,392

$             16,683

$            681,075


YoY Growth Rate:

-1.6%


-1.6%


0.9%








CGS


$         105,713

$            -

$               105,713

$               1,304

$            107,017


YoY Growth Rate:

17.0%


17.0%


18.4%

CTS


$         109,198

$            -

$               109,198

$                    24

$            109,222


YoY Growth Rate:

-5.8%


-5.8%


-5.8%

CSS


$           51,008

$            -

$                 51,008

$                  747

$              51,755


YoY Growth Rate:

-19.8%


-19.8%


-18.6%

Emerging Businesses


$         265,919

$            -

$               265,919

$               2,075

$            267,994


YoY Growth Rate:

-1.5%


-1.5%


-0.7%








Company (Consolidated)


$         930,311

$            -

$               930,311

$             18,758

$            949,069


YoY Growth Rate:

-1.5%


-1.5%


0.4%








Operating Income









GAAP Operating
Income

Non-GAAP
Adjustments

Non-GAAP Operating
Income

Foreign Exchange
Impact

Constant Currency
Operating Income

CMS


$           36,189

$       3,675

$                39,864

$              (2,443)

$              37,421


Operating Margin:

5.4%


6.0%


5.5%








CGS


$             4,138

$         108

$                  4,246

$                  321

$                4,567


Operating Margin:

3.9%


4.0%


4.3%

CTS


$             9,838

$       1,181

$                11,019

$                 (142)

$              10,877


Operating Margin:

9.0%


10.1%


10.0%

CSS


$            (3,917)

$       4,787

$                     870

$                   (83)

$                   787


Operating Margin:

-7.7%


1.7%


1.5%

Emerging Businesses


$           10,059

$       6,076

$                16,135

$                    96

$              16,231


Operating Margin:

3.8%


6.1%


6.1%








Company


$           46,248

$       9,751

$                55,999

$              (2,347)

$              53,652


Operating Margin:

5.0%


6.0%


5.7%



Segments Defined:

CMS (Customer Management Services), CGS (Customer Growth Services), CTS (Customer Technology Services), CSS (Customer Strategy Services) Emerging Business: CGS, CTS, and CSS



Methodology: 

Constant currency adjustments translate the current period reported amounts using the prior year FX rates, which in turn shows the underlying financial performance of the company as if foreign exchange rates did not change.  This methodology also provides greater transparency to the information actually used by management in its financial and operational decision making. 



Non-GAAP Operating Income:

Adjusted for restructuring and impairment costs

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/teletech-announces-third-quarter-2016-financial-results-300360179.html

SOURCE TeleTech Holdings, Inc.