Welcome to the First Quarter 2012 Earnings Conference Call. [Operator Instructions] This call is being recorded at the request of TeleTech. I would now like to turn the call over to Karen Breen, TeleTech's Vice President of Investor Relations. Ma'am, you may begin.

Good morning, and thank you for joining us today. TeleTech is hosting this call to discuss its first quarter 2012 results ended March 31. Participating on today's call will be Ken Tuchman, our Chairman and CEO; and Regina Paolillo, our Chief Financial Officer. Yesterday, TeleTech issued a press release announcing its financial results for the first quarter 2012 and also filed our quarterly report on Form 10-Q with the SEC. This call will reflect items discussed within those documents, and we will make reference to them on the call today. We encourage all listeners to read our quarterly 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 relating to our operating performance, financial goals and business outlook, which are based on our current beliefs and assumptions. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise this information as a result of new data 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 major clients, the risks associated with lower profitability from or the loss of one or more significant client relationships, execution risks associated with ramping new business or integrating acquired businesses and the possibility of additional asset impairments and/or restructuring charges. For a more detailed description of our risk factors, please review our most recent SEC filings along with our 2011 annual report on Form 10-K. A replay of this conference call will be available on our website through May 16. And I will now turn the call over to Ken Tuchman, our Chairman and CEO.

Thank you, Karen, and good morning to everyone joining us today. I'd like to start by reviewing the 2012 priorities that we originally highlighted on our fourth quarter call, then discuss our progress against these initiatives during the first quarter. After that, Regina will review our financial results in detail. In 2012, our mission remains steadfast, to be the global leader helping companies design, build, grow, manage -- excuse me, and manage the next-generation customer experience. This, in turn, will drive meaningful economic value for our clients and our shareholders. This mission requires much more than just the labor-based delivery model. It requires the ability to impact multiple aspects of the client's business, including strategy, analytics, technology and business process redesign. As we continue to execute on this vision, let me review the priorities for 2012 that we outlined on our last call. First, we wanted to deliver a winning growth strategy. Second, we will continue to invest in innovation via our proprietary, fully integrated platform that spans strategic consulting, data analytics, revenue generation, technology and global delivery. Third, we will leverage our strong balance sheet to pursue strategic accretive acquisitions that further complement and enrich our existing suite of capabilities. And last, we want to provide increased visibility to the financial profile and performance of our new segments so investors can properly value these businesses. Let me now review our first quarter progress against these stated objectives, beginning with our growth strategy. We have 3 primary areas of focus, including, one, expanding the breadth and depth of our offering with the existing clients, while selectively adding new relationships; two, positioning ourselves for increased vertical growth and delivering a fully integrated value proposition across our business segments, focused on complex engagements that drive empirical results and substantial economic value for…

Thank you, Ken, and good morning, everyone. Let me start with the review of our first quarter results. Revenue for the first quarter was $293 million, up 4.2% from $281 million in the year ago quarter, and up 5.5% in constant currency. Our non-BPO businesses, now brought to light in our newly reported segments, comprised $57.8 million or 20% of Q1 2012 revenue, up from 12% in the year ago quarter. Sequentially, revenue declined from $300.5 million in the fourth quarter to $292.7 million in the first quarter. This decline was directly related to the seasonal wind-down of holiday volumes that peaked in Q4, the reduction of certain non-strategic programs and geographies associated with the $100 million to $115 million revenue restructure we announced earlier this year, offset by growth from new logos and existing clients. Our first quarter 2012 GAAP operating income was $18.8 million or 6.4% of revenue compared to 7.6% in the year ago quarter. Adding back $3.9 million of restructuring impairment and acquisition-related charges, along with a $1.4 million negative FX impact, our first quarter 2012 non-GAAP operating income was $24.1 million or 8.2% compared to 8.1% in the first quarter of 2011. The decrease in non-GAAP operating margin is related to lower capacity utilization in the quarter. As we actively ramp several new logos and existing client programs, we continue to have confidence in our ability to exit 2012 with solid improvement in our asset utilization. SG&A expenses in the quarter were 16.4% of revenue, down 17% a year ago -- down from 17% a year ago, as a result of profit improvement initiatives undertaken throughout 2011 and continuing into this year. We're actively managing our SG&A costs to enable increased investment in R&D and sales and marketing, while gaining increased leverage from our general…

Thank you. [Operator Instructions] Mary Anne, you may now open the call to questions.

[Operator Instructions] Our first question comes from Mike Malouf of Craig-Hallum Capital Group.

I'd like to focus, first of all, on the corporate expenses. Can you just give us a little bit of color, $32.3 million, where you think that, that might go over the next couple of years? Is that a big focus to take that down, or is that going to kind of edge up over the next couple of years, just maybe less than revenue growth?

Yes, what I would suggest, number one, I guess, is that in the corporate expenses, as you can imagine, is our shared services, HR, IT, finance, our corporate offices and such. And within that also, certain marketing expenses and sales expenses. And I think what you can expect is that the G&A components, components of IT, components of HR and finance, will largely come down, absolutely come down as a percentage of revenue. In the midterm, you're going to see a tick up relative to investment in sales and marketing and R&D. I'd parallel that expense along with SG&A. I mean, it's not a complete compare, it's only a component of the SG&A. There's other SG&A that sits directly in the segment. But as we stated, you will see, longer-term, our SG&A as a percentage of revenue coming down in the 15% to 16%, probably around 16.5% this year. But the corresponding decrease as a percentage of revenue will largely be seen in that corporate line item, albeit growth in sales and marketing within it, as well as continued ramp of R&D as we drive a more technology and analytic-based platform.

Okay, great. And then with regards to the restructuring in Europe, I'm wondering if you can just give a little bit of color. Do we have any major hurdles to go over, maybe this summer and into the fall, or is it basically on track with regards to the plans?

We continue to work through that. As you can see, we expected to go as we planned in Q1 where you continue to see this as $100 million to $115 million hit to the top line, costing us $15 million to $18 million but returning a point of margin, so we have a break-even point in the 15 to 18 months period. And it's a number of clients and a couple of geographies, and so has some variables that we're working through. So hard to call exactly in Q2, in Q3, in Q4 how it's going to continue to lay out, but we're on track.

Our next question is from Tobey Sommer of SunTrust.

My question is, are these elements of the business, some of which are new through acquisition, integral to the whole in beneficial in getting your work as you kind of described in some of the examples in the prepared remarks? Or are they separable in allowing them to kind of flourish in their faster growth trajectory?

Tobey, it's Ken. They're both. The reality is that we did these acquisitions as being able to provide an end-to-end integrated capability. It's something that we believe that the market, over time, is going to move towards. And more importantly, the clients that we target, which tend to be more sophisticated clients, tend to have more complexed requirements, need a heck of a lot more than a technology-enabled labor-based solution. So it's both. It's an integrated capability and the great news is, is that they all have solid management teams and they all have the ability to attract their own clients and grow independently, which then gives us the ability to cross sell from their client base to ours and vice versa. And so frankly, we're very pleased with the traction that we've gotten in such short period of time, and we're excited to be able to share more with you in the coming quarters.

And my follow-up and I'll get back in the queue is that you've done an awful lot of available borrowing capacity now and your recent M&A has been relatively small, so should we expect that the tuck-ins, that you described as being your focus from an M&A strategy, to be slightly larger than they have been recently?

I think that we're going to be strategic with whatever we do. And I think that, although it would be interesting if something was strategically relevant and also had some more scale to it, the fact of the matter is, is that we're going to make sure that we are conservative and that we're not surprising anybody, and that everything that we do is going to be accretive and strategic to the overall plan. What I would just tell you is that to us, it's all about the focus of the quality of the asset that we're looking at. And frankly, there's -- on the larger side, there's not as many interesting or high-quality assets that we think could really add a lot of value. And also, we look at the cultural fit because we're not looking to buy broken companies. We're looking to buy companies that, as we've told of The Street, can grow 20% or better on the top line and can get to 20% or better on the bottom line. And so right now, we're very comfortable with the strategy that we have. I think it's rather interesting, there was an article not too long ago in the Wall Street Journal that discussed what the most successful companies have historically done. And in every case, what they said is that they did not do a bet to company acquisition but instead did a series of strategic acquisitions that allow them to expand their product offering, which is something that we've been focused on for the last 36 months. So yes, we've got a great balance sheet, we've got great borrowing power and I think you'll see that we'll use it wisely and that we will -- ultimately, we will deliver shareholder value that our shareholders will be very pleased with.

[Operator Instructions] Our next question comes from Shlomo Rosenbaum of Stifel, Nicolaus.

Can you just, first, tell me how much of the revenue that was exited on purpose happened in the quarter? I saw you mentioned $14 million in one segment and then there was a certain amount from another segment, and I want to just get a total number.

The number is $14 million. That restructure is entirely within our Customer Management Services.

So there was something else in the Customer Growth Segment that I thought came out that's not being counted towards that?

Yes, so slightly different, right? I mean, when we talked about the $100 million to $115 million, this is largely a geographic exit in our Customer Growth, Revana, that business. In preparation last year of moving this business to a profile that is technology-enabled, information-enabled, we made a decision that there were certain customers that didn't hit that profile and/or a profile that we believe is higher growth and, importantly, a higher margin, given the outcomes that we're driving for our clients. So slightly different. Very strategic decision to make, to reset, I would say, the customer base in that group. But not to be confused with the $100 million to $115 million of restructure that we're doing, which is largely a geographic exit.

Okay. And then is there some currency movements that's impacting the Philippine revenue? It seems to have declined sequentially in each of the last 2 quarters?

No, I think that -- one of the things that we're seeing both in our existing base and new logo, is a bit of a move to back to the states, and certainly more growth in the states. But if you listened to the prepared comments on Customer Management, again, we did have a continued compression in that business as well, and that's just in alignment with that.

What's going on exactly over there? Is the trend towards outsourcing in the Philippines starting to moderate? I mean, could you give some color on that.

No, I don't think it's starting to moderate. I think what's happening is that there is the segment of the client base that is coming to the conclusion that if they really want to drive and focus on the highest possible Net Promoter score that they've been doing testing in their in-country markets. And what they're finding in some cases, not all cases, that they can deliver a higher overall Net Promoter score, and consequently, that is leading to companies that are growing at a faster rate, retaining their customers longer and tend to be more profitable on a higher ED value. And so we have a stable of customers that are very interested in expanding more so rapidly in the U.S., while still maintaining a very significant footprint offshore. And this is something that we've actually been predicting was going to happen almost, probably, 36 to 48 months ago. And where we think it's normal, we think it's healthy. And we're very positive on it. And it also, we think, will help us drive our top line over the -- in the near and the medium term. And so consequently, we are seeing more demand for U.S. That said, we're still seeing significant opportunities in the Philippines and in other offshore markets.

At this time, there are no other questions. This concludes the First Quarter 2012 Earnings Conference Call. You may disconnect at this time.