Ken Tuchman - Chairman, Chief Executive Officer Regina Paolillo - Chief Financial & Administrative Officer Paul Miller - Senior Vice President, Treasurer, Head of Investor Relations.

Mike Malouf - Craig-Hallum Capital Group Stephen McManus - Sidoti & Co Shlomo Rosenbaum - Stifel.

Welcome to TeleTech’s First Quarter 2015 Earnings Conference Call. I would like to remind all parties that you will be in a listen-only mode until the question-and-answer session. This call is being recorded at the request of TeleTech.

I would now like to turn the call over to Paul Miller, TeleTech's Senior Vice President, Treasurer and Head of Investor Relations. Thank you, sir. You may begin..

Thank you. Good morning and thanks everyone for joining us today. TeleTech is hosting this call to discuss its first quarter 2015 results ended March 31. Participating on today's call are Ken Tuchman, our Chairman and Chief Executive Officer; and Regina Paolillo, our Chief Financial and Administrative Officer.

Yesterday TeleTech issued a press release announcing its financial results for the first quarter 2015. While this call will reflect items discussed within those documents, we encourage all listeners to read our first quarter report on Form 10-Q.

Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based upon management's current beliefs and assumptions.

Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new information that may become available.

Forward-looking statements are subject to various risks, uncertainties and other factors that could cause our actual results to differ materially from those described.

Such factors include but are not limited to reliance on several large clients, the risks associated with lower profitability from or the loss of one or more significant clients, execution risks associated with ramping new business or integrating acquired businesses, the possibility of asset impairments and/or restructuring charges and the potential impact on the financial results due to foreign exchange rate fluctuations.

For a more detailed description of our risk factors, please review our 2014 Annual Report on Form 10-K. A replay of this conference call will be available on our website for two weeks under the Investor Relations section. I will now turn the call over to Ken Tuchman, our Chairman and Chief Executive Officer..

to deliver suitable profitable, top line growth; to dramatically increase market awareness and adoption of our transformational and differentiated solutions; to accelerate innovation; and execute upon strategic and accretive acquisitions.

Turning to the business environment; we live in a world where the pace of change by itself is a disrupter and where there is a disruption there is an opportunity. Nowhere is this truer than in the minute to minute battle for customer mindshare.

Every day we see new examples of how technology and economics forces are shifting power from brands to customers. In the face of this unprecedented change, businesses are embracing customer experience as the single most effective way to establish a competitive, sustainable advantage. The evidence is pervasive.

CEOs from Anthem Blue Cross, Blue Shield, Citibank, Delta Air Lines, Sprint recently highlighted customer experience metrics during their quarterly earning call. In a recent Forrester study, 73% of business leaders point to customer experience as the primary path to improve brand loyalty and revenue growth.

We could not ask for a better market environment. Everything we do at TeleTech is focused on helping clients deliver an exceptional customer experience; deepen customer engagement and ignite growth.

It our true north, it is the reason for being; for over 30 years we’ve been honing its expertise and investing in the future on how customers and brands will interact. The future is now. Across the globe C-suite leaders are seeking our expertise to navigate the new world order.

Our discussions are increasingly focused on outcome based end to end solutions give the importance and urgency of immediate results. Our clients are depending on us to provide integrated customer focused platforms that deliver a consistent brand experience across every touch point and channel. Let me share a few recent examples.

One of the nation’s largest retailers tapped us to help them make the pivot in customer experience as a cost to customer experience as a competitive advantage. They challenged us to design and deploy one branded experience that would be consistent across four business units.

They chose us because of our customer centric methodology and proven ability to deliver outcomes that improve both the customer experience and financial results. In the automotive industry, safety recalls are a critical make or break point in the customer relationship and the life of a brand.

One of our valued clients was struggling to improve customers response to an important safety recall. We applied an analytics model to match the most compelling messages to different customer profiles. The results were record braking. Through our insight driven campaigns, we more than doubled the standard response rate to the recall.

The impact was so significant that we believe our proprietary approach to addressing recalls will become a standard in the automotive industry. Recently our strategic partnership with a leading telecommunications provider culminated in the opening of a new customer experience Supersite.

This dedicated center incorporates our latest thinking in the future of customer experience delivery. It features an innovative layout, compelling new recruitment and training strategies, a state of the art Omni-Channel technology platform and importantly an outcome focused commitment to measuring and delivering increased customer value.

This Supersite is a prime example of a client partnership that puts the customer in the center of everything we do together with consistent improvement in customer acquisition, retention and customer satisfaction MPS. Our client has enjoyed 14 consecutive quarters of growth and income earnings per share, profit and net new subscribers.

This steady positive trend demonstrates that their focus on the customer is clearly paying off. When we think and act customer value first, the financial gains follow. Happy customers stay longer, spend more and become advocates for our brand and happy employees who are trained, empowered and supported play a key role in increasing customer loyalty.

Not a week goes by that I don’t promote the logic of customer economics. The best customer experience will always be the most financially sound. When we remove the obstacles for a customer and an employee and help them solve a problem the first time, first contact resolution goes up dramatically.

The brand achieves the best of all outcomes; they deliver the highest quality experiences at the lowest possible cost. Our clients are embracing our philosophy and our dramatically difference approach to growth. We measure success by the increase in positive outcomes instead of the decrease in cost per minute.

Our clients understand this and are moving away from point solutions and investing in our transformational platforms. In our vision of customer experience, friction, waste and inefficiency are replaced with a seamless experience that is predictive, personalized and flexible.

With a swipe of a finger customers can pick up a car for just a few hours and drop it off at their destination. They can select three channels instead of a 100 from their cable provider and they can arrive in a city and choose the best deal for a hotel room on the same day that they travel.

This is happening here and now and it’s creating new business models that are leading age old legacies in to dust. Survival will require new ways of thinking and new ways of partnering to achieve frictionless, value driven customer experience. Innovation is deeply engrained in our DNA and an important part of our completive differentiation.

We continue to invest in innovation that redefines the art of the possible for customers, brands and shareholders.

Currently we are growing our mobile and digital capabilities to build engagement across the entire buying and supporting journey, expanding our Omni-Channel platforms to facility interactions across any channel, anywhere, anytime; building analytics and knowledge management systems that provide more personalized and relevant responses; improving self-service tools to enhance and/or replace human middleware; and providing new leadership and learning platforms to enable a culture of customer centricity.

Through our customer experience ecosystem, our goal is to be wherever customers interact with brands, whether in the web sphere, through a mobile app or a retail kiosk. Everything we do is designed to make it easy and enjoyable for customers to connect with their favorite brands.

These innovations are being driven in part by over 1,000 professionals that have joined TeleTech through our acquisitions. They are customer strategists, user experienced architects, systems engineers, data scientists, process optimization experts and digital marketers.

As these new teams of experts come together to address client challenges, their impact is just beginning to be felt. This is an exciting time for TeleTech. We are operating at the epicenter of our global shift where customers are colliding with technology and brands.

Brands have one or two choices; enable people engagement and loyalty or insight anger and frustration. In an environment plagued with legacy systems, silo databases and misaligned management, it is difficult to deliver experiences that are elegant and effortless.

It is no wonder why so many nimble start ups are challenging the established giants with success. To win today it takes more than a well thought out strategy; sophisticated segmentation, the latest Omni-Channel technology and inspired and knowledgeable employees.

It takes all these capabilities and they must be carefully synchronized around the customer. TeleTech’s growing success largely depends on our ability to help our clients deliver an integrated experience that is simple and empathetic across every channel for every customer every time.

It’s a tall order, but it’s what our incredible 44,000 employees do every day. We combine the energy and enthusiasm of a start up with the stability, experience and strength of an established leader to bring this vision to life.

We are proud of our progress and excited about our future and we are redefining the customer experience for our clients and their customers and we look forward to sharing continued success in the quarters and years to come. With that I’ll now return the call over to Regina..

Thank you, Ken. Good morning. I’ll start with a review of our first quarter 2015 consolidated results followed by our segment performance. Our first quarter 2015 consolidated GAAP revenue was $325.5 million, an increase of 7.7% over the year ago period. On a constant currency basis revenue was $335.1 million, representing a growth rate of 10.9%.

Revenue from acquired companies in their first 12 months was $11 million, resulting in a first quarter organic constant currency growth rate of 7.2%. Non-GAAP EBITDA was $43.4 million or 13.3% of revenue. This compares to $41.1 million or 13.6% in the year ago period.

The decline in EBITDA margin was due to an increase in R&D and the timing of variable compensation, which collectively were $2.5 million higher in the first quarter of 2015 versus the first quarter of 2014. SG&A expense declined 15.4% of revenue in the first quarter of 2015 from 16.7% in the prior year.

The decline in SG&A as a percentage of revenue is representative of the improved margin we gain on accelerated revenue growth in combination with the timing of our sales and marketing investment, which are lightest in the first quarter. Our GAAP operating margin in the first quarter of 2015 was 8% versus 8.1% in the prior year.

On a non-GAAP basis adjusting for restructure charges, the operating margin was 8.3%. Our first quarter GAAP based tax rate was 18% compared to 11.9% for the same period last year. The higher first quarter 2015 tax rate reflects a large prior year benefit from the release of an international tax payable.

First quarter fully diluted GAAP EPS was $0.38 compared to $0.40 in the prior year period. Non-GAAP fully diluted EPS was $0.38 compared to $0.36 in the same period last year.

The change in fully diluted non-GAAP EPS was primarily attributable to a $0.035 improvement from operating income or $0.015 improvement from a lower share account and a $0.03 decrease from higher other expense in income taxes. Cash flow from operations in the first quarter was $3.8 million compared to $13.5 million in the year ago period.

The change in our cash flow from operations is almost exclusively related to the increase in our accounts receivable balance. In the last two years the increase in accounts receivable has absorbed approximately $50 million of cash flow, increasing from $246 million in March of 2013 to $296 million in March of 2015.

As we integrate our acquired businesses and accelerate our revenue growth rate, we realize the importance of improving and standardizing our worldwide systems and processes to support billing to collection practices and DSOs that preserve our long history of strong cash flow.

Capital expenditures were $13 million in the first quarter, down from $15.1 million over the prior year. CapEx is primarily related to new facility bills and expansion, investment in our cloud platforms and other R&D initiatives.

It’s worth noting that capital expenditures related to facility build outs are client demand driven, with a sizable amount of current cost supporting a five year contract expansion with a large international client.

Terms of this engagement include the construction of a dedicated Supersite in return for committed volume of significant period before which term for convenience is permitted and the repayment of amortized capital invested on contract termination.

Costs associated with this project will continue over the next few quarters as the project is completed in stages. Capacity utilization was 82% in the first quarter of 2015, unchanged over the prior year. Utilization is expected to temporarily decline in the near term as we move the previously mentioned Supersites from construction to production.

We expect utilization to reach current levels as the new programs ramp throughout the year. In the first quarter we repurchased approximately $261,000 shares, up nearly $5.9 million. As of March 31, 2015 there was approximately 30.9 authorized for future repurchases.

We also paid our first semi-annual dividend in the first quarter, totally $8.7 million or $0.18 per share. Cash and total debt balances at quarter end was $65.7 million and $131.2 million. In the first quarter of 2015 we deployed a total of $24.7 million in share repurchases dividend and acquisition and technology related investments.

Moving now to a review of our segments; customer management services first quarter revenue was $243 million versus $227.9 million, up 6.6%. On a constant currency basis revenue was $250.8 million, up 10.1%.

The growth was attributable to broad program expansion, particularly in healthcare and technology, new program launches and the Sofica Group acquisition. Of the 10.1% constant currency growth rate, organic growth was 8.7%.

While CMS segments operating income was $21.7 million or 8.9% of revenue compared to $20.8 million or 9.1% in the year ago quarter, adjusted for restructuring cost, the non-GAAP operating margin was 9.3% in the first quarter of 2015, down slightly from 9.4% in the prior year.

CMS delivered a solid quarter with additional booking, double digit revenue growth and an industry leading operating margin. Our largest booking in the quarter came from the large retailer Ken mentioned earlier, whereby we were hired for our expertise in delivering measurable outcome that improved customer experience, brand loyalty and profitability.

Customer Growth Services first quarter revenue was $26 million, down 10.2% from $28.9 million in the year ago periods. On a constant currency basis revenue declined 7.3%. The year-over-year reduction in CGSs first quarter revenue is a combination of the planned runoff of certain low margin legacy accounts and the timing of new business implementation.

In the first quarter of 2015 we launched a number of new programs, both in the third and fourth quarters of 2014. These programs revealed significant sequential growth in 2015, supporting a near term double digit revenue growth rate.

Additionally, in the first quarter of 2015 CGS had record bookings of $20 million, a further indication of future revenue growth.

CGSs bookings were nicely diversified comprised of business across verticals and geographies, a combination of new logos and existing client expansion and a mix of programs, including digital marketing, B2B and B2C outbound sales and our turnkey search to sales platform.

Our CGSs segments operating income was $26,000 in the first quarter of 2015 compared to $1.8 million in the prior year. The reduction is due to the variability in revenue and program launch expenses and other technology related investments.

We estimate increased profitability as the new programs ramp and expect to achieve a double digit operating income within the next few quarters. Customer Technology Services first quarter 2015 revenue is $35.7 million, up 9% from $32.8 million in the prior year period.

Operating income was $2 million in the first quarter, up from $311,000 in the same period last year. CTS performed above plan in the first quarter with year-over-year growth in both our Cisco and Avaya platforms, including our on-premise CRM and cloud based solutions.

The CTS segment is clearly trending in the right direction, as it benefits from the early stages of the transformative initiatives we shared with you earlier, including strengthening our CX technology leadership, integrating certain operating and G&A functions, re-engineering our go-to-market platform, leveraging both direct and indirect channels, including our GMI sales organization and expanding technology offerings, including the fast growing subscription based cloud market across both Avaya and Cisco platform.

We are particularly pleased with the volume and diversity of pipeline activity across the business, resulting in a year-over-year sequential increase in CTSs first quarter bookings. Several of the new business signings in the quarter were significant with transformative offerings in both the private and public sectors. Two distinct U.S.

government agency booking represent multichannel upgrades to their current context in our infrastructure. Both are multiyear, multi-million dollar contracts that utilize our consulting, product and managed service capabilities. Customer Strategy Services first quarter revenue was $20.8 million, an increase from $12.6 million in the year ago period.

The growth came from our acquisition of rogenSi, a global provider of learning and change management practices, as well as our analytics and process optimization consulting services. Excluding acquisition, organic revenue growth was 2.4%.

The segment’s operating profit was $2.4 million in the first quarter of 2015 versus $1.5 million in the prior year period. Operating income margin was 11.5% in the first quarter, unchanged over the prior year. Excluding additional amortization expense from the rogenSi acquisition, the first quarter 2015 operating margin was approximately 13.5%.

Organic operating income was just under 16%, up from 11.5% in the year ago quarter. New business signings in our CSS segment grew year-over-year in the first quarter with 56% of the remaining revenue already in our backline, indicating a solid year of growth for CSS in 2015.

We’re seeing a growing focus on customer experience consulting from our prospects and clients seeking to leverage our expertise and strategy analytics, process optimization and change management.

We are also growing our consulting business with repeat opportunities from long standing clients, most recently earning a large analytics management with the automotive client that Ken discussed earlier. In closing, the first quarter 2015 was a solid quarter.

We accelerated growth in our bookings and revenue, while improving our operating margin and EPS. On the heels of a growing customer experience market, we are beginning to realize meaningful returns on the go-to-market sales and R&D investments we have made.

As our revenue scales, we expect to realize significant operating leverage across our technology, sales, marketing and G&A investments. With continued strengthening of the U.S. dollar, we have further eroded our 2015 revenue productions by $20 million; however, we are reaffirming our 2015 guidance.

We now anticipate foreign currency changes to impact our full year 2015 revenue estimates by $60 million versus the $40 million we assumed when we provided guidance in our February earnings call.

We remain committed to our strategy in increasing shareholder value through innovation, competitive differentiation and sustainable profitable growth, as well as continued returns and stock purchases in semiannual dividends. I‘ll now turn the call back to Paul..

Thanks Regina. As we open the call, we ask that you limit your questions to one or two at a time. Operator, you may now open the lines..

Thank you, sir. [Operator Instructions] Our first question comes from Mike Malouf of Craig-Hallum Capital Group. Sir, your line is open..

Hi, thanks. Great quarter guys. It’s nice to see the growth in the CTS business really picking up. Just had a question about the accounts receivable and not affecting cash flows.

So are you guys offering better terms to clients or what’s going on there?.

I would say that from time-to-time we are expanding our terms a bit, but as I said in my comments, we have an issue here of two kind of sequential quarters in ’14 and ’15 with eight days of incremental DSO in both and I think it really comes back to basics in terms of an intense focus on the systems and the processes and the day-to-day monitoring and tracking.

So we’ve got lots of plans in this space to change the trajectory. This is not a change in the profile of the company’s historical ability to drive significant cash conversion from its OI. It’s really quite frankly a little bit of taking our eye off the ball and we’re committed to ensure that we start to change that immediately..

Okay, thanks. And also you touched on Cisco and Avaya doing well with the CTS above plan.

Could you elaborate on that a little bit and talk about the opportunity there?.

Yes. I mean as we’ve been laying the foundation, we continue to have significant opportunity around the globe with regard to the technology requirements of our clients as they drive a refresh of their infrastructure to be able to up their game in customer engagements. We do that in a premise basis. Two examples were the U.S.

government contracts that we signed where we will help them architect that infrastructure for citizen engagements, procure and deploy the products, as well as then manage that environment for them. Not only including the infrastructures, but the surround application.

Alongside that we see significant movement in the industry from on premise to cloud and we continue to build out both a multi tenant as well as customize and configure cloud environment for our clients, but I think at the core of this is the intensity around which the market is focused on, customer engagement anywhere, any place, any time and our clients who have large distribute customer basis in B2C and B2SMB can execute that without solid rich customer engagement technology platforms..

Okay, great. Thanks a lot..

Our next question comes from Mr. Stephen McManus of Sidoti & Co. Sir, your line is open..

Hey guys. Thanks for taking my questions..

Hi..

So my first question was just regarding the CTS group. It was defiantly encouraging to see a pickup there.

I just wanted to see if you guys can talk a little bit about what were some of the initiatives put in place to improve the execution issues that impacted margins in the last few quarters and maybe what an expected normalized operating margin that we could expect moving into the remainder of the year. .

Yes, so a couple of things. First of all we have integrated or CTS sales force into our GMI and recruited a new head who has demonstrated background both in Avaya, Cisco and in communications in general, that’s Jack Denault.

He’s been with us now since December and that’s having a significant impact directly with the CTS sales group, but also having that within GMI and impacting the other CBUs through account planning and such. The other thing that we’ve done is to drive integration of the operations.

There are layers of that operation, certainly G&A but also in the operations of the managed services and the cloud environment we’ve integrated layers of the Avaya and Cisco talent and that have given us more scale and efficiency.

And last but not least, we continue to look at in this business a balance between onshore and offshore resource, which is allowing us a fairly good efficiency. .

Okay great, that helps a lot. And then just touching again on the CGS group, I know you mentioned that it was mainly due to timing variability, the impact on operating margins.

Should we expect that to carry into the next quarter or expect the improvement to hit pretty quickly?.

Yes, you will see pretty nice sequential uptick in both the revenue NOI quarter-after-quarter. We have very good visibility from Q3 and Q4 bookings, as well as the $20 million in Q1.

We are clearly about 50% through the quarter in Q2 and so as planned, as we grow this business, we have been flushing out what we would call legacy inbound commoditized business.

We can always have those two things; the new business and the legacy business running off convergent in perfect timing, but we are highly confident in the comments that we made during the February call in and around this business getting to double digit revenue growth and double digit operating income as we go through this year. .

Yes, the only last point I’d make is that the pipeline that we see going forward, it’s also adding to our confidence as it relates to the future potential of the business units. So it’s probably the strongest pipeline we’ve seen in CGSs history. .

Okay, great. Thanks a lot guys. I appreciate it. .

Thank you very much. .

[Operator Instructions]. We have one more question. Our next question comes from Mr. Shlomo Rosenbaum from Stifel. Sir your line is open. .

Hi, good morning. Thank you for taking for my questions.

Hey Ken, can you give me a little more detail on the Café X communications investment and just how that plays into your strategy and what you’re doing there?.

Sure, thanks Shlomo. We, as you know and as we have communicated over the last few years, we have been very, very focused on R&D and very focused on being able to have a platform that is built for the future versus focused on what has taken place in the previous 30 years.

Café X has developed a very unique capability using WebRTC technology, which we think is the future of how voice and video will be communicated.

Basically what that means is the ability to do real time communications through browsers and so from a mobile standpoint and whether it be a mobile browser or whether it be a website browser, they have built a enterprise class capability that we have now integrated into our suite of offerings that CTS is selling, as well as that Humanify is now offering, which allows us to provide routable video, as well as direct connect voice with all in high definition quality.

And we are very happy with the investment. We are also excited that the company is really taken off.

We are co-marketing together and its sufficed to say that almost every major financial service account that matters to us, they are already into and this is be becoming a standard in the financial services industry and we are doing everything we can to help them be successful, whether it be through our CTS distribution and our integration capabilities or whether it be through all the additional Omni-Channel capabilities that we have through our proprietary Humanify.

So that was the reason for this particular investment. We sit on the board. We are one of the largest shareholders in the company and again, I’m happy to say that they are hitting their numbers and we think that they are on to something that is going to be quite big.

We also think that the future of video is something that is taking off in a very major way and so our goal is to able to address our clients’ needs from a kiosk standpoint, from an ATM standpoint etcetera.

You’re going to start to see video being introduced at ATMs across the globe and it’s our goal to be providing not only the technology, but also the potentially be able to provide the actually live video associates to assists people.

So it was important to us that we weren’t just the service provider, but that we had the technology bones and the creditability to be able to win those types of accounts.

You then couple that with what’s going on just at the consumer level with Periscope and with Instagram and with everybody adding live view to their consumer social media apps and we think that it’s just a matter of time until both one way and two way video becomes an absolute norm, especially in the financial services industry.

So it’s just yet another investment where we are kind of following the puck shall we say, and fells very comfortable that it gives us a unique differentiated capability. The product you should also know is already integrated into the Cisco platform and it is now become a Cisco standard.

It is also being integrated as we speak into the Avaya platform and will be in Avaya standard. So you marry that with what we are doing with CTS and you can start to see the logic behind all this connective tissue. .

Okay, great, thank you. And then Regina I thought I heard you say that there was about $1 million of acquisition revenue in the quarter. I’m just comparing that with almost $13 million noted in the 10-Q and I wanted to ask you for the bridge. .

Yes, so its $11 million, it’s just shy of $11 million in the quarter. The $11 million that I talked about or to be derived from the numbers I gave is different than the $13 million, because the Q requires that we put the full quarter regardless of the animalization.

So differently we acquired Sofica at the end of February in ‘14 and so in my number we are not counting the period in Q1 of this year from end of February through March. .

Okay, good, that’s good color. And then could you just run through the organic growth on each of the segments again, just organic constant currency. .

Yes. So organic constant currency overall is – I believe it’s 8.2. Let me just get these in front of me, so I have them. Overall its 7.2; in CMS its 8.7; in CGS it’s a decline of 7.3 and really that’s the bulk of it. It’s in the period; it’s not CTS and very material in CSS. .

Great, thanks so much. .

Thank you. .

Thank you for your questions. That is all the time we have today. This concludes the TeleTech first quarter 2015 earnings conference all. You may disconnect at this time..