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TeleTech
Holdings, Inc. (NASDAQ: TTEC), a leading global provider of
technology-enabled customer experience solutions, today announced
financial results for the third quarter ended September 30, 2012. The
Company also filed its Quarterly Report on Form 10-Q with the Securities
and Exchange Commission for the quarter ended September 30, 2012.
“We continue to execute on our strategy of investing in both revenue
diversification and innovation to position the company for top line
growth,” said Ken Tuchman, TeleTech chairman and chief executive
officer. “Our diversified business segments grew to 22 percent of
revenue from 18 percent in the year-ago period. Our strong balance sheet
has funded our continued investment in scalable, technology-rich
offerings that keep us strategically relevant with the increasingly
complex customer experience needs of our clients,” continued Tuchman.
“Industry leading companies realize that creating strong emotional
connections with their customers is the key differentiator in today’s
dynamic global marketplace. As we celebrate our 30th year in
business, I am very excited about our future. We have been investing in
innovation for the past three decades and as a result, we are uniquely
positioned to help our clients deliver on the promise of their brand by
providing engaging customer experiences at every touch point.”
THIRD QUARTER 2012 FINANCIAL HIGHLIGHTS
Third quarter 2012 revenue was $286.3 million compared to $304.2
million in the third quarter 2011. The lower revenue was attributable
to a $27.7 million reduction from the Company’s previously announced
decision to exit certain underperforming business in addition to a
$4.5 million negative foreign currency impact. Excluding the impact of
the above reductions, third quarter 2012 revenue grew $14.3 million or
4.7 percent.
Income from operations for the third quarter 2012 included $2.6
million of net restructuring and impairment charges.
Third quarter 2012 income from operations was $27.4 million or 9.6
percent of revenue compared to $26.6 million or 8.7 percent of revenue
in the third quarter 2011. Excluding the restructuring and impairment
charges discussed above, third quarter 2012 non-GAAP income from
operations was $30.0 million or 10.5 percent of revenue.
Third quarter 2012 fully diluted earnings per share attributable to
TeleTech stockholders was 52 cents compared to 44 cents in the third
quarter 2011. Excluding restructuring, impairment and other items,
third quarter 2012 non-GAAP fully diluted earnings per share
attributable to TeleTech stockholders increased 11.4 percent to 39
cents compared to 35 cents in the year-ago quarter.
During the third quarter 2012 TeleTech signed an estimated $90 million
in annualized revenue from both new and expanding client
relationships. Approximately 75 percent represented recurring revenue.
STRONG BALANCE SHEET CONTINUES TO FUND OPERATIONS, SHARE REPURCHASES
AND STRATEGIC ACQUISITIONS
As of September 30, 2012, TeleTech had cash and cash equivalents of
$170.4 million, $88.0 million of borrowings on its credit facility and
total other debt of $12.8 million, resulting in net cash of $69.6
million.
TeleTech had approximately $408 million of additional borrowing
capacity available under its revolving credit facility as of September
30, 2012. This provides TeleTech with the continued financial
flexibility to fund organic growth, share repurchases and accretive
acquisitions.
Cash flow from operations in the third quarter 2012 increased to $14.8
million from a negative ($8.5) million in the third quarter 2011. The
increase was primarily due to the timing of certain working capital
items.
Capital expenditures in the third quarter 2012 were $15.8 million
compared to $8.8 million in the third quarter 2011. The higher capital
expenditures were principally related to increased investments in the
Company’s technology-based offerings.
TeleTech repurchased 0.9 million shares of common stock during the
third quarter 2012 for a total cost of $14.5 million. As of September
30, 2012, there was $26.5 million authorized for future share
repurchases.
SEGMENT REPORTING
To provide clarity as to the financial profile and performance of
TeleTech’s primary businesses, 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). Corporate expenses are
reported separately from the above. Highlights of the financial
performance of the primary segments are provided below.
CMS third quarter 2012 revenue was $224.0 million, representing
approximately 78 percent of total third quarter 2012 revenue, compared
to $248.7 million in the third quarter 2011. The lower revenue was
attributable to a $27.7 million reduction from the Company's
previously announced decision to exit certain underperforming business
in addition to a $4.1 million negative foreign currency impact.
Excluding the above reductions, revenue increased by $7.1 million or
2.9 percent.
CMS third quarter 2012 income from operations included $2.5 million of
net restructuring and impairment charges.
CMS third quarter 2012 income from operations, before corporate
expenses, was $47.2 million or 21.1 percent of revenue, compared to
17.4 percent of revenue in the third quarter 2011. Excluding the $2.5
million of net restructuring and impairment charges, CMS third quarter
2012 non-GAAP income from operations was $49.7 million or 22.2 percent
of revenue. The higher third quarter 2012 operating margin was
primarily related to TeleTech’s profit improvement initiatives
including an increase in capacity utilization for its multi-client
centers to 77 percent from 74 percent in the year-ago quarter.
CGS third quarter 2012 revenue was $28.2 million, representing
approximately 10 percent of total third quarter 2012 revenue, compared
to $25.8 million in the third quarter 2011.
CGS third quarter 2012 income from operations was $5.8 million or 20.6
percent of revenue, compared to 19.5 percent of revenue in the third
quarter 2011.
Customer Technology Services (CTS) – Hosted and Managed Technology
Solutions
CTS third quarter 2012 revenue was $22.3 million compared to $22.9
million in the year-ago period, representing approximately 8 percent
of total third quarter 2012 revenue.
CTS third quarter 2012 income from operations was $3.3 million or 14.6
percent of revenue, compared to $4.3 million or 18.7 percent of
revenue in the third quarter 2011. CTS third quarter 2012 operating
results reflect the combination of its cloud- and premise-based
services along with an increased investment in technology and expanded
offerings to support its continued growth initiatives.
During the third quarter, TeleTech further enhanced its cloud-based
market opportunity and expertise by achieving Cisco’s Cloud Provider
Certification and Contact Center as a Service Designation.
Customer Strategy Services (CSS) – Customer Experience Strategy and
Data Analytics Solutions
CSS third quarter 2012 revenue increased 69.9 percent to $11.7 million
compared to $6.9 million in the third quarter 2011.
CSS third quarter 2012 income from operations was $0.8 million or 7.1
percent of revenue, compared to an operating loss of ($0.3) million in
the third quarter 2011. The higher operating margin was attributable
to the increased revenue enabling greater fixed cost absorption.
Corporate Expenses
The third quarter 2012 income from operations for the above segments
excluded $29.7 million of corporate expenses. TeleTech expects to
continue to further leverage its general and administrative expenses
as a percentage of revenue across its expanding suite of services.
BUSINESS OUTLOOK
TeleTech continues to expect 2012 revenue will range between $1.15
billion and $1.2 billion.
TeleTech continues to expect 2012 operating margin will increase from
2011 and range between 8.5 percent and 9.0 percent, before asset
impairment and restructuring charges.
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 Thursday,
November 8, 2012 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 through Thursday, November 22, 2012.
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. 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 our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2012.
ABOUT TELETECH
For 30 years, TeleTech and its subsidiaries have helped the world’s most
successful companies design, enable, manage and grow customer value
through the delivery of superior customer experiences across the
customer lifecycle. As the go-to partner for the Global 1000, the
TeleTech group of companies delivers technology-enabled solutions that
maximize revenue, transform customer experiences and optimize business
processes. From strategic consulting to operational execution, our more
than 39,000 employees drive success for clients in the 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 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; 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 the successful integration of acquired
companies and the 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 customer management industry, 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 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, 2011. 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 November 7, 2012. 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,
2012
2011
2012
2011
Revenue
$
286,268
$
304,235
$
867,720
$
878,850
Operating Expenses:
Cost of services
201,766
220,795
622,782
630,274
Selling, general and administrative
43,845
43,445
137,689
138,529
Depreciation and amortization
10,695
11,807
31,040
34,828
Restructuring charges, net
2,440
1,616
20,694
2,298
Impairment losses
161
-
2,958
230
Total operating expenses
258,907
277,663
815,163
806,159
Income From Operations
27,361
26,572
52,557
72,691
Other income (expense)
(1,252
)
(633
)
(2,802
)
(2,179
)
Income Before Income Taxes
26,109
25,939
49,755
70,512
Benefit (Provision) for income taxes
3,611
496
3,030
(9,482
)
Net Income
29,720
26,435
52,785
61,030
Net income attributable to noncontrolling interest
(1,291
)
(1,064
)
(3,152
)
(2,969
)
Net Income Attributable to TeleTech Stockholders
$
28,429
$
25,371
$
49,633
$
58,061
Net Income Per Share Attributable to TeleTech Stockholders
Basic
$
0.53
$
0.45
$
0.90
$
1.02
Diluted
$
0.52
$
0.44
$
0.89
$
1.00
Income From Operations Margin
9.6
%
8.7
%
6.1
%
8.3
%
Net Income Attributable to TeleTech Stockholders Margin
9.9
%
8.3
%
5.7
%
6.6
%
Effective Tax Rate
(13.8
)%
(1.9
)%
(6.1
)%
13.4
%
Weighted Average Shares Outstanding
Basic
54,093
56,476
55,233
56,790
Diluted
54,905
57,748
55,991
58,173
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(unaudited)
Three months ended
Nine months ended
September 30,
September 30,
2012
2011
2012
2011
Revenue:
Customer Management Services
$
224,041
$
248,690
$
688,317
$
742,969
Customer Growth Services
28,200
25,793
75,373
71,419
Customer Technology Services
22,343
22,876
72,852
39,193
Customer Strategy Services
11,684
6,876
31,178
25,269
Total
$
286,268
$
304,235
$
867,720
$
878,850
Income (Loss) From Operations:
Customer Management Services
$
47,181
$
43,385
$
120,797
$
141,223
Customer Growth Services
5,818
5,020
11,108
12,596
Customer Technology Services
3,272
4,289
11,734
10,158
Customer Strategy Services
824
(322
)
1,671
1,450
Corporate
(29,734
)
(25,800
)
(92,753
)
(92,736
)
Total
$
27,361
$
26,572
$
52,557
$
72,691
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30,
December 31,
2012
2011
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
170,377
$
156,371
Accounts receivable, net
244,175
243,636
Other current assets
95,830
78,275
Total current assets
510,382
478,282
Property and equipment, net
111,431
100,321
Other assets
183,791
168,375
Total assets
$
805,604
$
746,978
LIABILITIES AND EQUITY
Total current liabilities
$
161,568
$
170,011
Other long-term liabilities
145,117
106,720
Total equity
498,919
470,247
Total liabilities and equity
$
805,604
$
746,978
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,
2012
2011
2012
2011
Reconciliation of Gross Margin:
Revenue
$
286,268
$
304,235
$
867,720
$
878,850
Cost of services
201,766
220,795
622,782
630,274
Gross margin
$
84,502
$
83,440
$
244,938
$
248,576
Gross margin percentage
29.5
%
27.4
%
28.2
%
28.3
%
Reconciliation of EBIT & EBITDA:
Net Income Attributable to TeleTech Stockholders
$
28,429
$
25,371
$
49,633
$
58,061
Interest income
(780
)
(896
)
(2,235
)
(2,282
)
Interest expense
2,129
1,143
4,810
3,814
(Benefit) Provision for income taxes
(3,611
)
(496
)
(3,030
)
9,482
EBIT
$
26,167
$
25,122
$
49,178
$
69,075
Depreciation and amortization
10,695
11,807
31,040
34,828
EBITDA
$
36,862
$
36,929
$
80,218
$
103,903
Reconciliation of Free Cash Flow:
Cash Flow From Operating Activities:
Net income
$
29,720
$
26,435
$
52,785
$
61,030
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
10,695
11,807
31,040
34,828
Other
(25,661
)
(46,721
)
(20,414
)
(56,356
)
Net cash provided by operating activities
14,754
(8,479
)
63,411
39,502
Less - Total Capital Expenditures
15,781
8,804
33,149
21,166
Free Cash Flow
$
(1,027
)
$
(17,283
)
$
30,262
$
18,336
Reconciliation of Non-GAAP Income from Operations:
Income from Operations
$
27,361
$
26,572
$
52,557
$
72,691
Restructuring charges, net
2,440
1,616
20,694
2,298
Impairment losses
161
-
2,958
230
Acquisition-related expenses
-
-
159
1,066
Non-GAAP Income from Operations
$
29,962
$
28,188
$
76,368
$
76,285
Reconciliation of Non-GAAP EPS:
Net Income Attributable to TeleTech Stockholders
$
28,429
$
25,371
$
49,633
$
58,061
Add: Asset impairment and restructuring charges, net of related taxes
1,835
1,136
15,097
1,777
Add: Acquisition-related expenses, net of related taxes
-
-
95
640
Add: Changes in judgement for uncertain tax positions recorded in
prior periods
(8,904
)
(6,568
)
(9,441
)
(6,405
)
Non-GAAP Net Income Attributable to TeleTech Stockholders
$
21,360
$
19,939
$
55,384
$
54,073
Diluted shares outstanding
54,905
57,748
55,991
58,173
Non-GAAP EPS Attributable to TeleTech Stockholders
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