Welcome to TeleTech Fourth Quarter and Full Year 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 and Corporate Treasurer. Thank you, sir. You may begin.

Good morning, and thank you for joining us today. TeleTech is hosting this call to discuss its fourth quarter and full year 2014 results ended December 31. Participating on today's call are Ken Tuchman, our Chairman and Chief Executive Officer; Regina Paolillo, our Chief Financial and Administrative Officer. Yesterday, TeleTech issued a press release announcing its financial results for its fourth quarter and full year 2014. While this call will reflect items discussed in that document, we encourage all listeners to read our most recent Form 10-Q and 10-K. 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 most recent Annual Report on Form 10-K. A replay of this conference call will be available on our website under the Investor Relations section. I will now turn the call over to Ken Tuchman, our Chairman and Chief Executive Officer.

Thank you, Paul, and good morning to everyone. We finished the fourth quarter in 2014 on a strong note. The full year 2014 non-GAAP revenue was $1.27 billion on a constant currency basis up 6.3% over the prior year. In the fourth quarter non-GAAP revenue was $345 million up 8.4% over the year ago period. Full-year non-GAAP operating margins were 8.4% in 2014 to 9% the prior year. In the fourth quarter the non-GAAP operating margin was 9.4% versus 10.4% in the year ago period. In 2014, operating margins reflected planned incremental investments and sales and R&D increased acquisition related amortization expenses and the variability in our technology services segment, as we reposition the business for sustained profitable growth. This includes the investments being made to support the growing client demand for our cloud base offerings. Our strong bookings momentum continued in the fourth quarter, resulting in a strong annualized contract value bookings of $440 million in 2014, a 21% increase over 2013. New business signings in 2014 continued to variably spend across all four segments with 48% coming from CSS, CTS and CGS, an increase of nearly 20% over 2013. Last, we are especially proud that we achieved the highest client Net Promoter Scores and client retention rates in our company's history. Four years ago, we started a journey to transform our customer management business into a platform for competitive differentiation. We saw a new age coming with digital, social, mobile and analytics and cloud technologies which converged to fundamentally alter the dynamics between customers and the companies they choose to do business with. As this era of unprecedented digital change began to unfold, we were designing our holistic customer experience growth platform, prudently deploying resources to develop it and executing our strategy. Three years later, we are very…

Thank you, Ken, and good morning everyone. I’ll start with a few comments on our full year 2014 performance and cover our fourth quarter and end with our 2015 guidance. Our GAAP revenue was $1,242 million, an increase of 4.1% over the year ago period. On a constant currency basis, 2014 revenue was $1.270 million representing 6.3% year-over-year growth rate. Revenue from acquired companies in the first 12 months was $38 million resulting in a 2014 full year organic constant currency growth rate of 3.1% versus a negative organic revenue growth rate of 1.9% in 2013. Our GAAP operating margin in 2014 was 7.8% versus 8.5% in the prior year. On a constant currency basis and adjusting from restructure and impairment costs, the operating margin was 8.4% compared to 9% in 2013. The operating income from acquisitions in the first year was $4.9 million. It's important to know that the adjusted operating margin is impacted by 70 basis points of incremental sales in R&D investment and 20 basis points of incremental expense related to the amortization of acquired intangibles. Pro forma to these amounts, the operating income margin was 9.3%. The decline in CTS's operating income year-over-year had an additional 120 basis point impact on the consolidated operating income. We view the CTS operating decline is temporary and expect the operating margin to return to double digits by the end of 2015. We are early in yielding its potential return, the $9.3 million of incremental investment or 70 basis points of operating margin was pivotal to our growth an bookings from $365 million to $440 million, and the increase in our backlog selling from 85% in 2014 to 88% as we enter 2015. Turning to the fourth quarter of 2014, GAAP revenue was $338.2 million compared to $318.1 million in…

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.

[Operator Instructions] Our first question is coming from the line of Mr. Mike Malouf from Craig Hallum. Your line is open.

A couple of questions, keep it to two. Ken, I'm hoping maybe you can just give us a little bit of color on the acquisition environment out there, how is prices, and may be in particular where are you focusing your efforts these days? Thanks.

When you say acquisition or when we talk about acquisition of client, so we’re talking about acquisition of companies?

M&A

Okay. I only hesitate just because I’m not sure, I have to answer in general terms, we don't typically discuss our M&A activities. What I’d just tell you is, that we have a robust M&A pipeline. We're focused on continuing to strengthen geographies. We're focused on continuing to take capabilities that we have in various markets and make sure that they are equal in every single market. We're clearly focused on the digital aspect of our business. We're clearly focused on the analytics aspect of our business and we're clearly focused on the technological side of our business. That's where we're going and that's where you're going to see activity. So I think that, 2015 should be a pretty good year. As it relates to - did you ask a question about pricing?

Yes.

I think you probably know the answer to this, everybody thinks that company is obviously very valuable. And what I would say to you is, that we've got to go through a lot of hay to find a needle that strategically makes sense and is going to be accretive. And so clearly things are getting very pricy right now in this market but the reality is that we still believe that there are lot of strategic accretive fits out there that makes sense. And so we're going to keep our head down and try to do deals that are for the most part consistently accretive for our shareholders.

Can you just give us a couple of comments on the dividend, the strategy behind that, what prompted it now versus at this point in your lifecycle, and does it have any ramifications on perhaps the size and scope of your M&A program?

Well, I mean, I think if you look at our balance sheet it's quite strong. It's probably one of the strongest in the industry. We have very little net debt on our balance sheet. We have the ability to pretty much at the appropriate time in theory we could exercise all the way up to close to $1 billion in borrowings and we're nowhere near that right now. So no, we don’t really feel that it limits it. As, for the timing I think that our attitude is the following that we want to demonstrate to our shareholder that we are going to do everything humanly possible for value creation and so we have been consistent more so than probably any public company in the last 10 years of acquiring our stock. We have recently been very consistent with acquiring companies and we believe the third lever now is to pay a dividend. And so, this is really our reflection on our conviction that our company has tremendous cash generating capabilities that personally I believe the stock is obviously undervalued or we wouldn’t be putting our money where our mouth is and buying the stock day in and day out. And we just think that this is all part of the journey. And as for the timing, we just felt that it was time based on the fact that we feel that we can accomplish purchasing our stock while still purchasing great companies while also giving our shareholders the benefit of a dividend. And then the last point that I'll make is, that we've actually had several investors ask us why are we not paying a dividend. And we listen to our investors and it really got us thinking as to why aren’t we paying a dividend. We really, it wasn’t something that we are really very focused on. And so our board debated it for multiple quarters and we came to the conclusion that this was the best thing we could do. Do you want to add anything Regina?

Yeah, I think the only other thing I would say is tag on to that last piece that is not only our existing shareholders as we meet with potential shareholders it's a frequent topic. And even our affordability relative to cash flow we think it's a good balance of certain shareholder returns in near term as we patiently await market reward for our strategy mix and ultimate financial performance.

Great, thanks a lot for the color, I appreciate it.

Thank you. Our next question is coming from Mr. Tobey Sommer of SunTrust. Your line is open.

Thanks. How much longer do you think it will take to get the sales force to a point where not any kind of incremental investment, but sort of noteworthy incremental investment may be behind us? Thanks.

Yeah, I think it's, I'll start. I would say to begin with look we're not fully satisfied, but I would look at 21% increase in bookings as a noteworthy start to that momentum. We started out to invest total of around $12 million in sales, marketing and R&D in 2014, as we had challenges with additional incremental and as we had challenges with CTS and because we have made a commitment to balance profitability as we do this transformation we did pull back. We feel we need that for investment we pull back to collectively around $9.3 million. You've heard us say today we're going to invest another incremental $10 million going into next year. The lion's share of that is in, into '15 sorry, the majority of that is going into sales. We've built out the CBU units, we're building out the sales execs and the client execs and now the other part of that strategy is to open up Mexico as a domestic market for us, to open up Asia/Pac. So we feel this is another investment year, but as we turn into '16 you will stop hearing that at least relative to sales we think we'll have the pipeline in place.

But I also think what's important is, is that you have the tracking point of looking at our bookings and we are very, very conservative on our bookings and obviously there, PWC weighs in on the measurement of how we do the bookings et cetera and so what I would say to you is that we fully are confident that we are already receiving a return as you look at what it was in 2013 versus what it was in 2014 and what we now see in our pipeline and what we believe will take place in 2015. So we're not just making this investment haphazardly. We're making this investment based on the fact that we feel the market opportunities are absolutely there. And if you had an opportunity to listen to what I was saying in my script, the gist of what I was saying is that we've entered a time that frankly I've been doing this for 33 years and I can't remember a time where I've seen more CEOs have a stronger sense of urgency of having to do something drastically different than what they're currently doing today. So, it's our intention and our plan and our will that we are going to take advantage of that market opportunity that we see right in front of our face. And the only way to do that is to have more feet on the street and more people in front of our prospective clients and our embedded base clients, and so hence the logic behind that. I hope that helps, thank you.

Yeah, yeah, it absolutely does. My second question relates to the intellectual property and how that is influencing sales and customer retention. Is there a way of expressing, for example perhaps new sales relative to new product supported by the intellectual property new investments and maybe patents? Thanks.

That’s a great question. And what I would just say to you is stay tuned. That is all part of the plan. We are a big believer in not talking about something until we have very significant proof points and what I would just simply tell you is, we have been telling you for many quarters, that we are investing in this area and that we are gaining traction and we've now announced one of the companies, Humanify, it is out there. It is on the market and we're very excited by the opportunity and in the not-too-distant future we will start to share with you the kinds of impact that we're having, the amount of clients that are taking it up, the amount of revenue impact that it's having et cetera, but suffice to say that we feel that it is premature at this point because we are really just now in the market and just now launching multiple new clients on the platform. So that is clearly one example of where we will be showing that. Another area is in our Acquisition 360 product that we have currently launched and launching multiple clients on and we will start to talk about that as well. But one step at a time and we don’t want to get ahead of our skis, we don’t want to over build too much buzz and then create too much expectation. Instead what we want to do is make sure that we bed down the clients that we're launching and that they are reference able and very happy and then we'll start to brag about what it is that we're accomplishing in the marketplace with it.

Okay, we'll stay tuned. Thank you.

Thank you. And our next question is coming from Mr. Kevin McVeigh of Macquarie. Your line is open.

Great, thanks and congratulations. Hey Ken, I wonder given a lot of the success you've had on kind of the evolution of the service offerings, has that helped reduce the current churn at all in terms of just being a net positive to revenue as a result of losing less clients at the door?

We believe so. But again, what I would say to you is, is that we are still we believe very early days in really demonstrating what these combined capabilities can do. But there is no question that clients are very sophisticated and they measure us based on the outcomes that we deliver and the E to R that we deliver, meaning expense to revenue. And so, the more capability that we can show them that demonstrates better deeper value and better expense to revenue the stickier the client becomes, it's just that simple. And what I tried to express in our script is, is that our goal is, we want to get out of this pending any permanent type business and we want to basically be delivering outcomes that are more variablized and the clients are more interested in achieving instead of being more focused on what I would classify as sophisticated technology-enabled labor augmentation.

That's helpful. And then in terms of, obviously with the dividend and the buyback acquisition, is there anyway to think about just in absolute dollar level or range in terms of what the capital commitment would be into ’15 and just, just generally dividend was obviously dividend we can calculate but versus buyback, versus may be acquisitions or is it really opportunistic on the deal side.

I would say on the dividend, the Board has an intention that this would be ongoing dividend and we look every six months at that dividend based on the circumstances at hand. But I think we've demonstrated those circumstances we look to, we’re very stable and very strong. So we wouldn't have initiated this, if we didn't expect to continue to execute it and have it grow as our cash flow grows. We think that's an important part of the shareholder return. Buybacks, what I would say is that, we manage organic investment against the performance of the P&L will continue to do that, that’s first and foremost. Second, is inorganic and third are opportunistically continuing to buyback our shares. I mean, in no way is the use of our cash to a dividend that at $0.18, on an annualized basis is $20 million, $22 million in no way do we feel that that is something that we can maintain while continuing to execute acquisitions and organic investment as we have while scaling these businesses and getting to our higher double digit profit rates.

Super. Thank you, and congrats again.

[Operator Instructions] Our next question is Mr. Bill Warmington of Wells Fargo. Your line is open.

Good morning everyone. So a question for you on the overall call center market in CMS. If you can talk a little bit about where you're seeing strength in the verticals, where you’re seeing some weakness in the vertical, that look like pretty strong performance overall so.

Just to reiterate, we're really not quote unquote focusing on the call center market. I think that may be many of the other company's you cover, that's their strength and their focus. We're truly focusing on much more of an end-to-end capability. So I'm not sure that my commentary would really be relevant as it relates to the call center marketplace. Just remember, many of our technologies don't, that we're providing on a cloud basis, allow our clients to utilize the capability internally and don't take advantage of our bricks-and-mortar. In addition to that, many of our technologies are also being offered by our clients to these call center companies. So, what I would just say to you is that, from a vertical standpoint we're focused end-to-end on providing an outcome based capability. The verticals that are strong - we’re really strength in every vertical and we're their certain ones that we’re doubling down on but I'm not prepared to really talk about, the ones that we’re doubling down on. I would just simply tell you that we feel generally very good especially in the United States where the economy is strong, where the consumers finally kind of peaking its head out and taking advantage of buying, paying et cetera. And so overall I would say across the board, we feel very good about the verticals as I’m sure you’re hearing just through other companies that you cover.

The booking being down sequentially, how do we interpret that?

The booking sequentially, so what I would say is, we're going to have variability quarter-over-quarter. When you look at the size of our bookings from 500,000 all the way to $30 million, obviously the quarters in which we're bringing over the $30 million bookings are going to be different. I think its most important to look it in half years or full years.

Okay. And then one last question, if I may, how much - what percentage of revenue and what percentage of operating income is coming from outcome based contracts?

I would say at this point it's still pretty nascent, and it's a relatively small amount of our revenue, but what I would tell you is that high percentage of our new deals that we're initiating, definitely have more of that component. Our CGS Group is moving much more towards outcome based pricing and that's frankly what our clients would like to get because they're experiencing that with different channel partners. So, what I would say to you is that, its building momentum and it's an area of focused but more so in the CGS area than in the other areas. It goes without saying that CMS and even CSS are all have outcome components, outcome bonuses et cetera but that's a little bit different than what we are - what we've been explaining as it relates to what we're doing in the CGS area. Thank you.

Thank you very much.

Thank you. And our next question is from Mr. Shlomo Rosenbaum of Stifel. Your line is open.

Good morning and thank you for taking my questions. Regina, what's the organic growth contemplated in the 2015 revenue guidance?

There is about two points of in organic in that number. It's the annualization really of - for the most parts of the annualization of the rogen. We had them for little over a quarter, so we get back two points of growth in our overall number that is acquisition related.

So I should think of it as three points headwind from currency, two points tailwind from M&A?

Yes.

Okay, good. And then this is the first time, I can recall since 2007 with the expectation of the restatement period that how the 10-K was not in conjunction with the earnings, do you think we shouldn't be reading into that?

No, actually last year we did at the same way, it's just really a matter of timeline and felt that we should get out with the numbers final. And obviously additional work to get to the K but that should be out in the next eight to 10 business days, won't be a little conservative but expected to be out by end of next week if not early as one week.

Okay. And then just finally, when I think about the cash flow generation capability of the business and kind of an ongoing basis, with the business that you got right now, how should I think of that?

I can understand the question based on the cash flows both for the quarter and the year. I will tell you that we had abnormally our cash caught up in AR and we add some acquisitions right that added to some of our - current assets. And then we're building that managed servicing cloud business which adds to the prepaid. So I can tell from the surface level, - I would say that from a surface level that bags questions. But when I look where our EBITDA will be into next year, into the 13%, 14% level and take that kind of cash based more cash based, bank based EBITDA take out our CapEx will be a point higher. Then, what it was in 2014, we have very strong cash line, I think as we look at 2016, you will see a more normalized very high EBITDA to cash conversion. That CapEx is going towards the build out of our cloud, the build out of the R&D in the from of capitalized labor and we do have a bit of outlier in the CapEx this year around a very large contract that has been a client for over 20 years, where we are building out specific space for them. And that is built into a five year contract with very good piece in it, a no time for convenience for three years and then amortizing any cost that are left on the balance sheet should they exit, so its really an outlier Shlomo and expect to return in 2016 afterwards through the build out of the cloud and this outlying super site that we are building to more normalize levels.

Okay, great. Thank you.

Thank you. And at this time, we have no additional questions on queue. I would now like to handover back to speakers.

That concludes our call today. Thank you everyone for your participation.