TTEC Announces Fourth Quarter and Full Year 2017 Financial Results

DENVER, March 12, 2018 /PRNewswire/ -- TTEC (NASDAQ: TTEC), a leading global technology and services provider focused exclusively on the design, implementation and delivery of transformative customer experience for many of the world's most iconic and disruptive brands, today announced financial results for the fourth quarter and full year ended December 31, 2017.

"2017 was a strong year for us. We exceeded our financial goals with record revenue and adjusted operating income, completed two strategic acquisitions, added many marquee names to our client portfolio, launched our insight-driven, technology-enabled Humanify Customer Engagement as a Service offering, strengthened our leadership team and continued to lead the industry in client satisfaction," commented Ken Tuchman, TTEC chairman and chief executive officer.

"With these accomplishments, combined with the underlying momentum across the business, we also took the step to rename the company to TTEC to reflect our successful transformation to an integrated end-to-end omnichannel customer experience services partner and leader in digitizing the customer experience. The name change was a strategic business decision representing the culmination of hundreds of millions of dollars of investment in strategic acquisitions, R&D including over 100 patents, and our diversified capabilities, alongside the successful adoption of our end-to-end platform by clients across the globe," Tuchman explained.

"With the proliferation of channels in combination with relevant and dynamic customer insights, every touchpoint is a unique opportunity to form a lasting customer relationship. Service experience is the new brand differentiator and captivating omnichannel experiences is the modern day currency for retention and growth. Across the globe, we are being chosen as a strategic partner for customer experience transformation combining strategy, analytics, AI and technology with human talent to drive growth, increase profitability and deepen customer loyalty," concluded Tuchman.

FULL YEAR 2017 FINANCIAL HIGHLIGHTS

GAAP - In accordance with Generally Accepted Accounting Principles.

Non-GAAP AHFS/WD (Excluding Assets Held for Sale and Wind-down) - As discussed below and shown in the attached reconciliation table, the definition of Non-GAAP AHFS/WD excludes from revenue and operating income i) assets held for sale and wind-down, and ii) impairment, restructuring and integration charges.

Revenue

• Full year 2017 GAAP revenue increased 15.8 percent to $1.477 billion compared to $1.275 billion in 2016.
• On a non-GAAP AHFS/WD basis, 2017 revenue grew 17.3 percent over the prior year to $1.457 billion. Organic revenue growth was 4.3 percent.

Income from Operations

• Full year 2017 GAAP income from operations was $100.5 million or 6.8 percent of revenue compared to $52.8 million or 4.1 percent of revenue in 2016. 
• 2017 income from operations on a non-GAAP AHFS/WD basis, excluding $20.0 million in restructuring and integration charges, and asset impairments, was $122.5 million, representing 8.4 percent of adjusted revenue versus 8.6 percent the prior year. 

Earnings Per Share

• Full year 2017 GAAP fully diluted earnings per share attributable to TTEC shareholders, including a one-time mandatory deemed repatriation tax of $62.4 million (or $1.34 per share) related to new U.S. tax reform legislation, was $0.16 compared to $0.71 in 2016.
• Non-GAAP fully diluted earnings per share was $1.80 compared to $1.32 in the prior year. 

Bookings

During the full year 2017, TTEC signed an estimated $442 million in annualized contract value revenue from new and expanded client relationships, a 4.7 percent increase over the prior year. The bookings mix was diversified across verticals with approximately 77 percent from existing clients and 13 percent outside of the United States.

FOURTH QUARTER 2017 FINANCIAL HIGHLIGHTS

Revenue        

• Fourth quarter 2017 GAAP revenue increased 23.7 percent to $426.6 million compared to $344.9 million in the prior year period.  
• Non-GAAP AHFS/WD revenue increased 25.4 percent to $423.2 million over the prior year period. Organic revenue growth was 7.5 percent.   

Income from Operations

• Fourth quarter 2017 GAAP income from operations was $36.6 million, or 8.6 percent of revenue, compared to $6.2 million, or 1.8 percent of revenue in the fourth quarter 2016.
• Non-GAAP AHFS/WD income from operations, excluding $10.2 million in restructuring and integration charges, and asset impairments, was $47.5 million or 11.2 percent of adjusted revenue versus 10.1 percent the prior year.

Earnings Per Share

• Fourth quarter 2017 GAAP fully diluted loss per share attributable to TTEC shareholders, including a one-time mandatory deemed repatriation tax of $62.4 million (or $1.34 per share) related to new U.S. tax reform legislation, was $0.89 compared to a loss of $0.01 in the same period last year.
• Non-GAAP fully diluted earnings per share was $0.67 compared to $0.42 in the prior year.

Bookings

• During the fourth quarter 2017, TTEC signed an estimated $119 million in annualized contract value revenue from new and expanded client relationships. The fourth quarter bookings mix was diversified across verticals with 72 percent from existing clients and 10 percent from outside of the United States. 

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

• As of December 31, 2017, TTEC had cash and cash equivalents of $74.4 million and debt of $361.3 million, resulting in a net debt position of $286.9 million.
• As of December 31, 2017, TTEC had approximately $350 million of additional borrowing capacity available under its revolving credit facility.
• Cash flow from operations in the fourth quarter 2017 was a negative $36.5 million compared to $1.0 million in the fourth quarter 2016. For the full year, cash flow from operations was a positive $113.2 million compared to $111.8 million in 2016.
• Capital expenditures in the fourth quarter 2017 were $8.0 million compared to $12.0 million in the fourth quarter 2016.  For the full year, capital expenditures were $52.0 million compared to $50.8 million in 2016.
• Declared a 25-cent dividend per share, or $11.5 million, which was paid on October 17, 2017 to shareholders of record on October 5, 2017. The dividend represented a 25 percent increase over the distribution paid in October 2016. 
• No shares of common stock were repurchased in the fourth quarter 2017. For the full year 2017, approximately 609 thousand shares of common stock were repurchased for a cost of $18.3 million. As of December 31, 2017, $26.6 million was authorized for future share repurchases.

SEGMENT REPORTING & COMMENTARY

TTEC 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 fourth quarter 2017 GAAP revenue increased 32.1 percent to $343.3 million compared to $259.9 million in the year ago quarter. Organic revenue growth was 8.8 percent. Income from operations was $34.4 million or 10.0 percent of revenue compared to $14.4 million or 5.5 percent of revenue in the prior year.
• Non-GAAP income from operations was $39.2 million or 11.4 percent of revenue. This compares to $27.0 million or 10.4 percent of revenue in the prior year.

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

• CGS fourth quarter 2017 GAAP revenue declined 9.9 percent to $31.8 million compared to $35.3 million in the year ago quarter. Income from operations was $1.5 million or 4.7 percent of revenue compared to $2.8 million or 8.0 percent of revenue in the prior year.
• Non-GAAP AHFS/WD revenue declined 9.0 percent to $30.9 million over the year ago period and income from operations was $2.1 million or 6.9 percent of adjusted revenue. This compares to $2.9 million or 8.5 percent of adjusted revenue in the prior year.

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

• CTS fourth quarter 2017 GAAP revenue grew 4.6 percent to $33.5 million compared to $32.1 million in the year ago quarter. Income from operations was $1.0 million or 3.0 percent of revenue compared to an operating loss of $9.0 million or negative 28.1 percent of revenue in the prior year.
• Non-GAAP AHFS/WD revenue increased 21.6 percent to $33.5 million over the year ago period and income from operations was $4.4 million or 13.0 percent of adjusted revenue. This compares to $2.2 million or 7.9 percent of adjusted revenue in the prior year.

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

• CSS fourth quarter 2017 GAAP revenue grew 2.1 percent to $18.0 million from $17.7 million in the year ago quarter. Loss from operations was $0.3 million or a negative 1.7 percent of revenue compared to an operating loss of $1.9 million or negative 11.0 percent of revenue in the prior year.
• Non-GAAP AHFS/WD revenue declined 2.7 percent to $15.5 million over the year ago period and income from operations was $1.8 million or 11.5 percent of adjusted revenue. This compares to operating income of $2.0 million or 12.7 percent of revenue in the prior year.

BUSINESS OUTLOOK

"We are pleased with our 2017 performance, which exceeded our expectations and guidance," commented Regina Paolillo, chief financial and administrative officer at TTEC. "In addition to our unwavering strategic focus to differentiate our solution portfolio and improve our go-to-market platforms, it is clear that the sales execution and profit optimization initiatives that we executed in 2016 was a noteworthy catalyst to our record 2017 performance."

Paolillo continued, "We enter 2018 with a strong backlog supporting our continued progress in growing our top line and expanding our profit margins. Our revenue backlog is a premium to prior years, our cost structure is streamlined, and our sales and operations teams are aligned to increasingly deliver our full suite of unified capabilities across TTEC Digital and TTEC Engage. Last, our Board remains committed to maximizing shareholder value by utilizing our balance sheet and cash flow to invest in acquisitions and other strategic investments as well as distribute capital to our shareholders."

We anticipate full year 2018 guidance, excluding non-GAAP AHFS/WD (Assets Held for Sale and Wind-down), which represents approximately $8 million of revenue and breakeven operating income, as follows:

• Revenue – GAAP revenue estimated to increase 3.3 to 4.7 percent between $1.505 and $ 1.525 billion. 
• EBITDA Margin – Non-GAAP EBITDA margin estimated between 13.0 and 13.3 percent.
• Operating Income Margin – GAAP operating income margin estimated between 8.7 and 8.9 percent.
• Capital Expenditures – Capital expenditures estimated at 3.8 percent of revenue, of which approximately 70 percent is growth oriented.

SEC FILINGS

The Company's filings with the Securities and Exchange Commission are available in the "Investors" section of TTEC's website, which can be found at www.ttec.com.

About TTEC (pronounced T-tec): 

TTEC (NASDAQ: TTEC) is a leading global technology and services provider focused exclusively on the design, implementation and delivery of transformative customer experience for many of the world's most iconic and disruptive brands. The Company delivers outcome-based customer engagement solutions through TTEC Digital, its digital consultancy that designs and builds human centric, tech-enabled, insight-driven customer experience solutions for clients and TTEC Engage, its delivery center of excellence, that operates customer acquisition, care, growth and digital trust and safety services. Founded in 1982, the Company's 56,000 employees operate on six continents across the globe and live by a set of customer-focused values that guide relationships with clients, their customers, and each other. To learn more about how TTEC is bringing humanity to the customer experience, visit www.ttec.com.

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SOURCE TTEC Holdings, Inc.