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TeleTech Announces Fourth Quarter 2007 Business Highlights
TeleTech Holdings, Inc. (NASDAQ: TTEC), one of the largest and most geographically diverse global providers of business process outsourcing ("BPO") solutions, today announced business highlights for the fourth quarter and fiscal year ended December 31, 2007. TeleTech reported record fourth quarter 2007 revenue of $373 million achieving its goal of reaching an annualized revenue run rate of $1.5 billion by year-end 2007. The fourth quarter was the ninth consecutive quarter of double-digit revenue growth and represented the highest sequential quarterly revenue increase in the Company's history at $37 million. Full year revenue was $1.37 billion, a 13.2 percent increase over 2006. Full year revenue in the BPO segment was $1.35 billion, a 16 percent increase over 2006.
Fourth quarter 2007 revenue from services performed for clients in offshore locations grew approximately 28 percent to $153 million and represented 41 percent of total revenue. Full year revenue from services performed for clients in offshore locations grew 37 percent to $549 million and represented approximately 40 percent of total revenue. TeleTech currently provides offshore services from seven countries including Argentina, Canada, Costa Rica, Malaysia, Mexico, the Philippines and recently began providing services from South Africa. TeleTech believes it has one of the largest and most geographically diverse offshore footprints of any global BPO provider with 24,000 offshore workstations representing more than 60 percent of its total delivery capacity. TeleTech believes its offshore revenue in 2008 will grow to approximately 50 percent of total revenue and represent more than 70 percent of its total delivery capacity.
Due to significant new business wins throughout 2007, TeleTech added a record 7,700 workstations in primarily offshore locations during 2007 bringing the total workstations in its global delivery network to 38,400 as of year-end. The Company's capacity utilization across its shared client workstations as of December 31, 2007 was 79 percent, an increase from 69 percent capacity utilization at the end of the 2007 third quarter.
On December 18, 2007, TeleTech, through its indirect subsidiary, TeleTech Europe B.V., completed the sale of its 60 percent interest in TeleTech Services ("India") Ltd., for $8.7 million, plus $450,000 in satisfaction of intercompany payables, resulting in total cash proceeds of $9.2 million. The sale of this business resulted in a pre-tax gain during the fourth quarter of $6.9 million, which will be reflected in "Other income (expense)."
EXECUTIVE COMMENTARY ON TELETECH'S FOURTH QUARTER BUSINESS HIGHLIGHTS
"I am pleased that we have achieved record fourth quarter revenue of $373 million representing our ninth consecutive quarter of double-digit revenue growth," said Kenneth Tuchman, chairman and chief executive officer. "Our centralized global delivery model, expansive offshore footprint and ability to provide innovative, high-quality solutions have enabled us to win an estimated $200 million in incremental annualized business over the last six months of 2007. This unprecedented level of new business wins, coupled with our operational excellence, gives us confidence in our ability to achieve our 2008 and 2009 financial goals."
REVIEW OF EQUITY-BASED COMPENSATION PRACTICES AND RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
On February 20, 2008, TeleTech announced that its Audit Committee had completed its review of the Company's historical equity-based compensation practices and the accounting related thereto (the "Review"). The Review, which covered the period from the Company's Initial Public Offering in 1996 through August 2007, is described in more detail in a Current Report on Form 8-K filed on that date with the Securities and Exchange Commission ("SEC").
Based on the Review and management's own additional review, the Company has concluded that incorrect measurement dates for certain equity grants were used at various times during the accounting periods covered by the Review. As a result, the Company has determined that it will be necessary to restate its financial statements for the fiscal years 2005 and 2006 and the first two quarters of 2007. The Company is working with its auditors to finalize the quantification of the restatement adjustment and the periods impacted. The Company intends to complete this restatement concurrently with the filing of its third quarter 2007 Quarterly Report on Form 10-Q and its 2007 Annual Report on Form 10-K. Restatement adjustments for periods prior to 2005 will be reflected as adjustments to the beginning balances of stockholders' equity in 2005. Given that the restatement adjustments are expected to largely impact periods prior to 2002, additional information on all pre-2005 restatement adjustments will be set forth in the notes to the restated financial statements.
PRELIMINARY FOURTH QUARTER 2007 BUSINESS HIGHLIGHTS
Preliminary Balance Sheet Continues to Fund Organic Growth
As of December 31, 2007, TeleTech had cash and cash equivalents of more than $90 million and total debt of $72 million. Capital expenditures were approximately $17 million in the fourth quarter and totaled nearly $62 million for the full year. Approximately 80 percent of capital expenditures in 2007 were for growth related needs, which included the deployment of a record 7,700 new workstations during the year, with the balance for improving TeleTech's embedded infrastructure. Share Repurchase
TeleTech's strong balance sheet has given the Company the flexibility to fund organic growth while also repurchasing common stock. In 2007, the Company repurchased nearly $47 million of common stock. However, the Company has suspended repurchases under its stock repurchase program pending completion of the restatement of its historic financial statements and becoming current on its SEC filings. The Company expects that once it is current with all SEC filings, it will promptly review the resumption of its stock repurchase program.
New Business
During the third and fourth quarters of 2007, TeleTech signed an estimated $200 million in incremental annualized long-term revenue from new or expanded client relationships. In response to the significant new business wins, TeleTech continued its rapid workstation expansion. During the fourth quarter, the Company deployed 2,400 workstations, bringing the total workstations added during 2007 to 7,700. Business Outlook
Consistent with previous disclosures, TeleTech expects 2008 revenue will grow between 12 and 15 percent and operating margin will improve by approximately 200 basis points over 2007, before unusual charges, if any. TeleTech expects 2008 capital expenditures will approximate $70 million with the addition of an estimated 7,000 workstations to meet continued strong demand. TeleTech believes its offshore revenue by the end of 2008 will approximate 50 percent of total revenue and its offshore delivery capacity will approximate 70 percent of its total capacity.
For 2009, TeleTech expects that revenue will grow between 12 and 15 percent and operating margin will improve by at least 100 basis points over 2008, before unusual charges, if any.
PRELIMINARY BUSINESS HIGHLIGHTS SUBJECT TO CHANGE
Due to the forthcoming restatement, as discussed above, all business highlights described in this press release should be considered preliminary and are subject to change to reflect any necessary corrections or adjustments, or changes in accounting estimates that are identified as a result of the Review. In addition, business highlights for the fourth quarter and fiscal 2007, as well as comparable periods of earlier reported years, could be affected by any restatement of prior period financial statements.
CONFERENCE CALL
TeleTech executive management will hold a conference call to discuss fourth quarter 2007 business highlights on Tuesday, February 26, 2008, at 8:30 a.m. Eastern Time. You are invited to join a live webcast of the 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 of the call will be available on the TeleTech website through Tuesday, March 11, 2008.
Fourth quarter 2007 revenue from services performed for clients in offshore locations grew approximately 28 percent to $153 million and represented 41 percent of total revenue. Full year revenue from services performed for clients in offshore locations grew 37 percent to $549 million and represented approximately 40 percent of total revenue. TeleTech currently provides offshore services from seven countries including Argentina, Canada, Costa Rica, Malaysia, Mexico, the Philippines and recently began providing services from South Africa. TeleTech believes it has one of the largest and most geographically diverse offshore footprints of any global BPO provider with 24,000 offshore workstations representing more than 60 percent of its total delivery capacity. TeleTech believes its offshore revenue in 2008 will grow to approximately 50 percent of total revenue and represent more than 70 percent of its total delivery capacity.
Due to significant new business wins throughout 2007, TeleTech added a record 7,700 workstations in primarily offshore locations during 2007 bringing the total workstations in its global delivery network to 38,400 as of year-end. The Company's capacity utilization across its shared client workstations as of December 31, 2007 was 79 percent, an increase from 69 percent capacity utilization at the end of the 2007 third quarter.
On December 18, 2007, TeleTech, through its indirect subsidiary, TeleTech Europe B.V., completed the sale of its 60 percent interest in TeleTech Services ("India") Ltd., for $8.7 million, plus $450,000 in satisfaction of intercompany payables, resulting in total cash proceeds of $9.2 million. The sale of this business resulted in a pre-tax gain during the fourth quarter of $6.9 million, which will be reflected in "Other income (expense)."
EXECUTIVE COMMENTARY ON TELETECH'S FOURTH QUARTER BUSINESS HIGHLIGHTS
"I am pleased that we have achieved record fourth quarter revenue of $373 million representing our ninth consecutive quarter of double-digit revenue growth," said Kenneth Tuchman, chairman and chief executive officer. "Our centralized global delivery model, expansive offshore footprint and ability to provide innovative, high-quality solutions have enabled us to win an estimated $200 million in incremental annualized business over the last six months of 2007. This unprecedented level of new business wins, coupled with our operational excellence, gives us confidence in our ability to achieve our 2008 and 2009 financial goals."
REVIEW OF EQUITY-BASED COMPENSATION PRACTICES AND RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
On February 20, 2008, TeleTech announced that its Audit Committee had completed its review of the Company's historical equity-based compensation practices and the accounting related thereto (the "Review"). The Review, which covered the period from the Company's Initial Public Offering in 1996 through August 2007, is described in more detail in a Current Report on Form 8-K filed on that date with the Securities and Exchange Commission ("SEC").
Based on the Review and management's own additional review, the Company has concluded that incorrect measurement dates for certain equity grants were used at various times during the accounting periods covered by the Review. As a result, the Company has determined that it will be necessary to restate its financial statements for the fiscal years 2005 and 2006 and the first two quarters of 2007. The Company is working with its auditors to finalize the quantification of the restatement adjustment and the periods impacted. The Company intends to complete this restatement concurrently with the filing of its third quarter 2007 Quarterly Report on Form 10-Q and its 2007 Annual Report on Form 10-K. Restatement adjustments for periods prior to 2005 will be reflected as adjustments to the beginning balances of stockholders' equity in 2005. Given that the restatement adjustments are expected to largely impact periods prior to 2002, additional information on all pre-2005 restatement adjustments will be set forth in the notes to the restated financial statements.
PRELIMINARY FOURTH QUARTER 2007 BUSINESS HIGHLIGHTS
Preliminary Balance Sheet Continues to Fund Organic Growth
As of December 31, 2007, TeleTech had cash and cash equivalents of more than $90 million and total debt of $72 million. Capital expenditures were approximately $17 million in the fourth quarter and totaled nearly $62 million for the full year. Approximately 80 percent of capital expenditures in 2007 were for growth related needs, which included the deployment of a record 7,700 new workstations during the year, with the balance for improving TeleTech's embedded infrastructure. Share Repurchase
TeleTech's strong balance sheet has given the Company the flexibility to fund organic growth while also repurchasing common stock. In 2007, the Company repurchased nearly $47 million of common stock. However, the Company has suspended repurchases under its stock repurchase program pending completion of the restatement of its historic financial statements and becoming current on its SEC filings. The Company expects that once it is current with all SEC filings, it will promptly review the resumption of its stock repurchase program.
New Business
During the third and fourth quarters of 2007, TeleTech signed an estimated $200 million in incremental annualized long-term revenue from new or expanded client relationships. In response to the significant new business wins, TeleTech continued its rapid workstation expansion. During the fourth quarter, the Company deployed 2,400 workstations, bringing the total workstations added during 2007 to 7,700. Business Outlook
Consistent with previous disclosures, TeleTech expects 2008 revenue will grow between 12 and 15 percent and operating margin will improve by approximately 200 basis points over 2007, before unusual charges, if any. TeleTech expects 2008 capital expenditures will approximate $70 million with the addition of an estimated 7,000 workstations to meet continued strong demand. TeleTech believes its offshore revenue by the end of 2008 will approximate 50 percent of total revenue and its offshore delivery capacity will approximate 70 percent of its total capacity.
For 2009, TeleTech expects that revenue will grow between 12 and 15 percent and operating margin will improve by at least 100 basis points over 2008, before unusual charges, if any.
PRELIMINARY BUSINESS HIGHLIGHTS SUBJECT TO CHANGE
Due to the forthcoming restatement, as discussed above, all business highlights described in this press release should be considered preliminary and are subject to change to reflect any necessary corrections or adjustments, or changes in accounting estimates that are identified as a result of the Review. In addition, business highlights for the fourth quarter and fiscal 2007, as well as comparable periods of earlier reported years, could be affected by any restatement of prior period financial statements.
CONFERENCE CALL
TeleTech executive management will hold a conference call to discuss fourth quarter 2007 business highlights on Tuesday, February 26, 2008, at 8:30 a.m. Eastern Time. You are invited to join a live webcast of the 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 of the call will be available on the TeleTech website through Tuesday, March 11, 2008.
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