TTEC Holdings Inc (TTEC) 2008 Q2 法說會逐字稿

Welcome to the TeleTech Second Quarter 2008 Earnings Conference Call. I'd 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 Karen Breen, TeleTech's Treasurer and VP of Investor Relations. Thank you, Ma'am. You may begin.

Good morning and thank you for joining us today. This is Karen Breen, Treasurer and VP of Investor Relations. We are hosting this call to discuss our results for the second quarter ended June 30, 2008.

Participating on today's call will be Ken Tuchman, our Chairman and CEO and John Troka, our CFO.

Earlier today, TeleTech issued a press release announcing that quarterly reports on Form 10-Q have been filed with the SEC. This call will reflect items discussed within that press release and Form 10-Q and TeleTech management will make reference to them this morning. We encourage all listeners today to read our quarterly report on Form 10-Q.

Before we begin I want to remind you of our disclosure regarding forward-looking statements. Matters discussed on today's conference call may include forward-looking statements relating to our operating performance financial goals, business outlook, future plans and performance which are based on management's current beliefs and assumptions. Such statements are subject to various risks, uncertainties and other factors that may cause our actual results, performance and achievements to differ materially from those described.

Such [chapters] include but are not limited to reliance on a few major clients; the risks associated with lower profitability (technical difficulties) or the loss of one or more significant client relationships; risks associated with achieving the coming 2008 business outlook; execution risks associated with expanding capacity in a timely manner to meet demand; and the possibility of additional asset impairment and/or restructuring charges.

A replay of this conference call will be available on our Website through August 18th. I will now turn the call over to Ken Tuchman, our Chairman and CEO.

Thank you, Karen, and good morning to everyone joining us on today's call. I would like to take a few moments to provide a high-level summary of our financial results. After that, John Troka will discuss the second quarter performance in more detail.

I am pleased that we delivered another quarter of solid financial performance. Our second quarter revenue grew to around $357 million with our BPO segment revenue increasing by 10.4% over the year ago quarter. We continue to capture market share and attribute this to several key factors, including a move by a growing number of companies to consolidate work with those providers who can deliver a high-quality customer experience while simultaneously driving more efficient business processes.

Increasingly these companies are finding that their choice of qualified providers has narrowed. as they seek financially stable BPO from our partners who are investing in innovation to successfully scale large, complex global outsource solutions.

These trends continue to favor TeleTech. Over the past year, we have enjoyed a strong pipeline with steady conversions of these opportunities and to some of the largest new business wins in our history. Although historically the second quarter has been our latest in terms of new business wins, this quarter signs were stronger than anticipated, reaching an estimated $65 million of annualized revenue.

The slowing global economy continues to be a catalyst for new existing clients to aggressively embrace outsourcing. We believe that our third quarter will again reflect another strong taste of new business as we are near closing on several new opportunities.

To this end, we are continuing to expand our delivery capacity especially in offshore locations. Our offshore capacity now represents more than 60% of our total delivery capability; and we are currently on track to add between 6,000 and 7,000 offshore workstations during 2008, a testament to the rapid scalability and technological sophistication of our global delivery platform.

While revenues have continued to grow, our profitability has also increased. Our second quarter operating margins, including restructuring and restatement-related charges, was 9.4% compared to 9.1% in the year ago quarter. Non-GAAP earnings per share rose 28% to $0.32 in the second quarter, up from the non-GAAP earnings of $0.25 in the year ago period. These numbers exclude restatement-related fees along with asset impairment and restructuring expenses.

Let me now highlight certain balance sheet and liquidity metrics. Our low debt to equity ratio and free cash flow continues to fund both of our organic growth and our share repurchase program. During the first half of the year our [pre] cash flow totaled $23 million and we ended the second quarter with $127 million in cash and cash [equipment].

As we discussed on the last call, our Board has increased the funding for our share repurchase program up to $100 million. The Board made this decision based on their belief that our stock is significantly undervalued and their strong belief in our industry position and Company fundamentals. We plan to begin aggressively repurchasing TeleTech stock in the coming days.

Lastly, we believe we have one of the highest returns on invested capital in the industry with a 27% ROIC at the end of June. Before I turn the call over to John, I also wanted to clarify some of the points I discussed on our last call, related to our updated 2008 outlook.

I would like to emphasize that our revised business outlook and the timeline of our return to double-digit growth are not singularly tied to the economy. This period of time, relative to the last slowdown in the 2000 timeframe, is very different. During that period we had no revenue growth; we had virtually no sales pipeline; and new business wins were taking 12 to 18 months to close.

In today's business environment, we are seeing the exact opposite. We are enjoying meaningful revenue growth with increasing profitability. We have a robust pipeline that is resulting in significant new business wins and these deals are taking half the time to close.

We believe the strong sales pipeline, shorter conversions cycles, and size of new deals will ultimately allow us to sell through the near-term softness with certain clients.

All of the above gives me confidence in obtaining our updated 2008 guidance from both the revenue and profitability perspective.

In summary, as I've said before, TeleTech is the company built for the long-term sustainability, growth and free cash flow generation. Our reputation for solid execution and our unparalleled management team make us an even more attractive choice among the narrowing range of competitors. We believe that we are in a position to continue to gain market share via vendor consolidation and the flight to give quality that draws clients to our centralized, global delivery model; our innovative and high-quality solutions and our expensive offshore footprint.

Let me now turn the call over to John, after which I will make a few closing remarks.

Thank you, Ken, and good morning. I would like to provide some additional detail on our second quarter financial results. As outlined in today's press release and in our Form 10-Q, which we filed this morning, we reported record second quarter revenue of $357 million, an increase of 8.4% over the second quarter last year.

Our gross margin this quarter decreased 240 basis points to 25.6% compared to the year ago period. This increase in gross margin was due to several factors. These include lower client volumes that resulted in higher idle capacity; duplicative near-term costs associated with a more aggressive shift of business offshore by certain clients; and inflationary cost pressures affecting our work force in certain geographies.

Our SG&A decreased year-over-year in both absolute and percentage terms. SGA spending fell almost $3 million to $45.9 million, or 12.8% of revenue, down from 14.7% in the year ago quarter.

Included in our second quarter SG&A was a $3.4 million expense, related to our recently completed restatement of our historical financial statements. We expect to incur approximately $1.5 million of additional professional fees related to this restatement in the third quarter.

Our second quarter GAAP operating margin was 8.3% up from the 4.9% operating margin for the year ago quarter. Excluding restructuring, impairment and restatement-related charges that totaled $3.8 million, our operating margin was 9.4%, an increase of 30 basis points from the 9.1% operating margin in the second quarter of 2007, which also excluded unusual charges.

Our second quarter results included $2 million of equity compensation expense or about $0.02 per share. This compares to $3.2 million or about $0.03 per share of equity compensation expense in the second quarter of last year. Excluding this expense, our second quarter operating margin would have been 9.9%.

GAAP EPS for the second quarter was $0.28, compared to $0.12 last year. In our GAAP EPS was $0.04 of charges for restructuring and restatement-related expenses. Excluding these charges, our adjusted 2008 second quarter EPS was $0.32, compared to an adjusted EPS of $0.25 in the year ago quarter, a 28% increase.

Our effective tax rate for the quarter was 25.9%. This rate was positively influenced by earnings in the international jurisdictions currently enjoying an income tax holiday. Furthermore the distribution of income between the US and other lower tax rate jurisdictions internationally helped to reduce our overall rate. We continue to believe, however, that our effective tax rate in future periods will be approximately 30 to 33%, principally because we expect the distribution of our pretax income between the US and international tax jurisdictions to return to levels we have typically seen in recent years.

Turning to our balance sheet, we ended the quarter with $127 million in cash and cash equivalents. We had a low debt to equity ratio of 18.9% at quarter end. As Ken said earlier, the strength of our balance sheet gives us plenty of capacity to fund future growth initiatives, as well as our expanded share repurchase authorization.

In mid-July our Board approved an increase in funding up to $100 million for stock repurchases, and we plan to resume our repurchase program in the coming days. Our DSOs were 70 days in the second quarter up from 66 days in the year ago quarter but within our target range of 65 to 70 days.

Our capital expenditures for the second quarter were $21 million. Much of these expenditures related to the addition of 2400 workstations in the Philippines, South Africa and the UK. In addition, we continue to invest in our information technology and VoIP platforms.

We believe our total capital expenditures for 2008 will range between $60 million and $70 million as we continue to ramp new business and transition some existing business to our offshore delivery locations. We generated [free] cash flow of $11.9 million during the quarter compared to $3.7 million during the second quarter of 2007.

Regarding our business outlook, as we discussed several weeks ago, we expect 2008 revenue will grow at a minimum of between 6 and 8%. Our operating margin in 2008 is expected to range between 9% and 10% excluding unusual charges.

In conclusion, we are pleased to again post financial results that confirm our industry-leading position. We believe demand for our services will remain strong and our significant new business wins will drive continued topline growth.

With that I'll turn the call back over to Ken.

In conclusion, we are very pleased with our financial performance in the second quarter. We continue to enjoy strong demand for our expanding array of offerings as demonstrated by our double-digit growth rates in the BPO business.

We believe there's no better way to demonstrate the conviction we have in our business than by aggressively buying our stock back. We will resume our share repurchase program in the coming days and believe it is the best use of capital, given our stock is significantly undervalued.

We'll now open the call to your questions. Thank you.

(Operator Instructions) Tobey Sommer of SunTrust Robinson.

I had a question for you about the nature of sales cycles right now and whether you are seeing any difference in those sales cycles from an entity industry perspective or a geographic perspective? Any color you could give there would be terrific. Thank you.

I think that, thus far -- this is something that we are obviously looking at on a weekly basis -- but thus far we think the cell cycle is pretty much in the six- to nine-month range and it is really for the most part unchanged. That said we are in the summer months and so things tend to slow down a little bit, but then they accelerate toward getting to the end of third quarter. At least that has been our historical path.

And so we have reason to believe that there is plane of business of their right now and are focused on converting it.

Thank you. Two other questions and I'll get back in the queue.

Returns on capital are very high right now. I was wondering if you could give us a sense for perhaps where you think they could go from here?

Then I had a question about your philosophies as far as your comfort level with debt and how much -- you are pretty underlevered right now -- how much you're willing to take on. And any kind of parameters you could share with us would be terrific. Thank you.

Relative to your first question on our return on capital, we believe that we can sustain a rate between 30% and 33% as we continue to invest in our infrastructure going forward as the Company is growing. As far as to your second question and the level of debt, we are comfortable right now with the debt we are carrying, but do believe that, obviously, with the cash flow of the Company that we could lever the business up 1 to 4 times EBITDA.

That's a pretty wide range. Anything more specific over the near-term given the (technical difficulties) authorization?

I think that we are right now being very opportunistic and looking to see what our opportunities are and at this point in time we believe the best thing we can be doing is acquiring our stock. But at the same time there might potentially be some other areas that could be viewed longer-term as strategic as well and so we want to keep our options open.

Bob Evans from Craig-Hallum Capital.

Good morning. First, John, on the SG&A side, it looks like SG&A was down actually year-over-year especially if you back out the onetime expense. Is that kind of the right run rate to use going forward or how should we think about that?

From a run rate perspective there are a couple of things that are in the second quarter. Obviously the equity-based compensation expense came down which is primarily an SG&A item. We did also enjoy a benefit from a reduction in our health care and workmen's compensation expense in the second quarter and that is for the US. That is based on actuarial studies that are done semiannually, where we adjust the expected liability so that contribute to the reduction.

So I would anticipate going forward with something in the 13% to 14% range is where we will be for SG&A as a percent of a revenue.

And the health care benefit if you will, can you give us a sense of magnitude there?

That was $2.3 million and again it was health care, workmen's comp, as well as in our other equity or our other insurance lines.

So more of a true up then?

Yes and again that occurs every six months. So to the extent that there's a change, we will have that change again in the fourth quarter.

Okay. Fair enough. Also on the international business, it looks like your revenue was up year-over-year. Your operating income was down somewhat year-over-year.

Can you give us a little color as to what may be happening from an international standpoint question? Just wondering about the variance.

On the operating income side, that's reflective of the restructuring that we've -- we had to do in a couple of countries. In Spain, we took some costs associated with movement of a particular center where we exited a lease in a large facility and moved it to a much smaller facility.

So again just continuing the program of working with clients to make sure we can get the profitability we need. If we can't we'll exit that building. And so there's some -- or that program. And there is costs associated with doing that.

And I believe you said 6,000 to 7,000 seats this year. How much -- how many are moving from North America to offshore?

The 6,000 to 7,000 seats that we are building (multiple speakers) will be net, new and will be all predominantly offshore. We did add some seats in the UK which, obviously, is not one of our offshore markets. The bulk of them will be in offshore locations.

Yes, we have a conscious plan to take out approximately 1,000 workstations a year in North America and somewhere between 1,000 to as high as 1500. And I think that we will be on track to accomplish that.

And those seats that you are taking out, are they being taken out or are they transitioning to offshore?

In most cases they are transitioning to offshore and we are coordinating them simultaneously with some setting leases, etc.

Okay. How should we look at --? I know you don't give specific guidance, but how should we look at Q3 relative to Q2 from a seasonality standpoint or a trend standpoint? Both from a revenue and margin standpoint?

I think that we are comfortable with the guidance that we put out there from a growth standpoint. We are going to stick with that for now. And we think the margins are going to be in similar kind of range that we've also communicated. So we don't see really any changes there, but we are feeling very good and yet, of course, we always try to be conservative.

But should we view due to -- I know there is seasonality with Europe. Should we view from an operating margin standpoint, sequentially down somewhat there? Just do Europe and maybe not that onetime benefit of the health care?

The answer is yes, slightly.

Dhruv Chopra.

Good morning. I had some quick questions. One is we've seen a couple of acquisitions on the automated customer care space over the past month or so. Is there anything that you are seeing from your clients as it relates to that? And how is (inaudible) in the event that that is a growing trend?

We are actually not seeing a huge trend in that area. As a matter of fact that was a trend that was taking place more about five years ago than now. We are seeing that the majority of the clients that are more focused on a high-quality experience are actually looking to have live humans interface and interact more with their customers where they can truly ensure that they are satisfying them as well as look for every opportunity to potentially grow revenue through upselling and cross selling.

We are seeing the business that is a little bit more on the transactional side which is business that we are typically not focused on. It tends to have more of a front end IVR capability. But we are targeting business that tends to have more of a high touch approach.

That said, of course, we have a complete complement of very sophisticated voice recognition interaction in our IVR capabilities. And we do have clients using it all over the world.

But at the end of the day even when you are doing large volume because of the billable rate's so low it's really an insignificant part of our business. So we don't view it as anything that's a huge focus of ours and nor do we plan on it being a huge focus of ours.

One sort of follow-up question on the guidance. I mean, if we dig the mid point of the full year range and call it 7% that's basically going to imply sort of less than 5% year-over-year growth in the second half or 6%, including NewGen.

Given that your new contract ramps at the 12-month rate should start to kick in at least by 4Q, how much of this is conservatism? Or has the base volumes kind of slowed to to the extent that its offsetting the new customer ramps?

But, if I heard your question -- or if I understand your question I should say, there is seasonal adjustments to volume. And we did tell you that we had approximately six clients that volumes slowed, they said due to the economy.

So we believe that business that we've more recently sold will be the business that ultimately backfills that business. And that said, because the business is taking nine to 12 months to ramp, unfortunately we can't just bill it instantaneously.

The good news is that we are building a great long-term reocurring backlog of revenue, but sometimes there's just a timing differential. And it's just a few quarters or so where you kind of get that lag as you are backfilling into the business where the volumes drop.

Now that said, this economy, as negative as I have been on the economy, we are actually seeing signs that things might be potentially improving. And if that in fact were to happen, then we would fully expect the majority of the volumes that had been reduced to come back which would put us in even a better position when you couple that with the long-term business that we've been signing quarter after quarter after quarter and all of that layering on.

I think the other thing you need to know is that we are obviously continuing our active program to manage our client relationships and again those unprofitable clients. Client programs we have we continue to manage out of the business, regardless of our topline growth rate. If it's bad business, we obviously would prefer not to have it.

So we will continue at a rate similar to what we have discussed before. (multiple speakers).

(Operator Instructions) Matt McCormack with FBR.

In terms of the new business signed during the quarter to $65 million, could you provide a little more detail on the size of those deals? The verticals? And how the sales cycle progressed throughout the quarter?

Sure. Okay. So I would say that there were four larger wins. Some in the technology area that were average size. Some in the consulting area as it relates to working with large global consulting companies. And some in the comm and media area, both telecommunications as well as media area, and some in the health care area.

Pretty much that is where we saw the new ads for this quarter of clients that we are now ramping.

As for third quarter, we believe that third quarter signings will be up over this quarter and are very pleased with the pipeline as to what we are in the process of converting. And hence, it's giving us confidence to build the amount of workstations that we are building now offshore.

In terms of the peer group, I mean, most have said they are being affected by the economy in some way or the other. Could you talk about the current pricing environment and if pricing still remains rational?

I believe the pricing does remains rational. I believe that all of the legitimate providers are in a very aggressive mode right now to increase their pricing due to their input costs have gone up. And I think with the flight to quality by our clients, they are fully understanding that there is a need for vendors such as ourselves to raise our prices.

And thus far, we are getting very little push back. So as I've said to you multiple times the marketplace is truly bifurcated. There are a few providers that have the overall capability and have the reputation of execution and they are commanding a higher price because they have higher costs since they've got [eper] management.

They are hiring better employees and they have more technology and more infrastructure. And clients don't want to get caught in a situation where their quality is falling off. So we have recently enjoyed the ability to bring our prices up in areas where we've seen increase in costs.

Okay, and then my last question, in terms of your offshore revenue, looks like that was down sequential. And I think that is the first time we've seen that happened.

Has your business offshore reached the point where we should now start to see seasonality with it? Or was there any specific programs that might have ended that could have caused that?

Yes, no, I don't think you should read anything into that at all. I think the only thing that maybe is a skewing the number is, this is a historical legacy thing about our business which is that Canada was included in our offshore.

So Canada will be shrinking, but we are still growing very rapidly in places like Costa Rica and Mexico and the Philippines, etc. So no, I wouldn't come to that conclusion at all. To the contrary.

Thank you.

Shlomo Rosenbaum. Stifel Nicolaus.

On the press release you indicated you were going to have a strong bookings quarter in 3Q. Last year in 3Q, you signed about $100 million. Are you expecting a similar type number?

I think that is in the realm of possibility. I think to give more than that would be giving you guidance and we don't do quarterly guidance.

So that implies you are either very, very close or you've already signed a lot of that business so far?

That could be the case.

Okay. How many -- can you go over the gross versus net new workstations added in the second quarter?

Yes. 2400.

And that was a net number?

That was a gross number.

Gross number. And the net number was? I'm sorry.

There really wasn't a lot taken out in the second quarter, Shlomo. There's always some movement but there shouldn't have been a lot taken out.

One more housekeeping then I will sneak in one other question. Could you go over what your level two assets are? Are those currency contracts or something like that?

The level of jobs that's related to the (inaudible).

Excuse me?

There are derivative assets. So the hedging instruments and the like that we are using.

Okay. Then I will ask one more and get back into queue. Ken, the level of repurchase authorization is definitely a vote of confidence in the cash flow of the business, but the ultimate vote of confidence in the cash flow of the business would be a take private offer over here.

Even with the debt environments where they are in the credit environments, given the amount of stock they've grown, you could -- and the fact that you guys are trading (inaudible) at 2008 (inaudible) which is between 4 and 4 1/2 times EBITDA, why don't you just try to take the Company private?

At this point in time I would say that we understand that we have many options and many opportunities and when the time is appropriate, we will explore all of them, but right now we think that the best option for our shareholders is for us to invest in our own stock.

You know things change and we will see where things go. And for now, I would say that we are going to stick with a plan of repurchasing seen of shares, but you know what? You never know what is going to happen in the future in this crazy market.

Thanks a lot.

Tom Smith from First Analysis.

Good morning. My first question was to follow up on the new business. You had mentioned that it was I think better than what you had expected. Can you talk about what you had targeted for the quarter and maybe also what new business sign-ins were in Q2 of last year?

Yes. I think our internal number goal was right around $50 million. So that's -- we were happy to see that we came in above our goal. And we are pretty comfortable that third quarter is usually a strong sign in quarter and therefore that we will be able to do better than that in third quarter.

As for last year, we weren't giving out that information last year. And so, frankly we weren't tracking that and, therefore, I don't have the information to give you.

Just to follow up on the international segment, and it seems -- .

Hello?

Sorry. In the International segment you had pretty good results. And I know you have talked about some already, but was there anything onetime in nature that would have benefited the revenue? I mean were there any short-term programs that may have boosted it for the quarter?

I don't believe so.

Okay. Just a follow-up on the workstations. What was the -- you said 2400 gross ads in Q2. What was the number of gross ads in the first quarter?

200.

200 gross ads?

Right.

Yes. Okay. Great, thanks a lot.

Josh Vogel from Sidoti & Company.

Good morning. Just building off some of the earlier questions on the international business, I know the last couple quarters you had mentioned there was some restructuring cost and what not, but I was curious.

As we look out over the next six months, now that you are back to profitability there, what should we expect the margins to come in at?

So the question is guidance on the next six months?

Just do you think that margins are going to be up sequentially off of what you did in Q2?

Is that international or --?

International yes.

Josh, typically in Europe we do see a little bit of softness related to (inaudible) margins in the International segment. There is a little bit of compression as the margins from the addition of (technical difficulties) South Africa and some of the other sites, but over time we should expect those to improve.

I mean, there were the restatement-related costs that do fit in the International segment and year-to-date (technical difficulties) for the plan. For the restatement-related costs.

Okay and on the last conference call, you discussed that your long-term operating margin goals like if we look at it I guess, at 2011, would be 12% to 14% for the whole business, but what are your long-term goals for the International business?

Yes. It is almost better at this point to the event in aggregate because of the way we do about transfer pricing and management -- various ideas for tax-related reasons, you are almost better to consolidate them and look at them as a whole.

Okay. Now I'm just trying to get a better sense of the volume that you are planning to migrate over the next several quarters. These migrations aren't -- they are usually wrought with a lot of expenses here. I was just curious that, absent the migration, do you have an idea where that would put your operating margin guidance today?

I don't think we've have done a cut on the numbers that way. I understand your question. What I would just say to you is that there's obviously a cost when you are migrating business from one country to another country.

That said, there's a long-term benefit that far outweighs the short-term cost, which is that the margins tend to be significantly higher.

Could you maybe quantify in a percentage of volume? Maybe in terms of revenue or total hours of volume that you are planning to migrate?

No, I would just tell you that it's not anything to lose any sleep over. My guess is between now and the end of the year it's no more than probably -- we've already migrated them. So maybe 1,000 workstations and that for a company of our size with 55,000 employees, that's something that we can absorb.

Lastly, looks like revenue from Sprint was down 13% sequentially. I was just curious if this is just some seasonality with their business or perhaps a negative [value] trend that's developing here?

So the question is -- I'm sorry.

Basically, the relationship with Sprint was -- revenue from Sprint was down 13% sequentially, which is kind of a big drop here. And I was just curious if there was seasonality in their business or if volumes are coming down and you expect them to continue to be down over the next several quarters?

Yes. No, the Sprint business is fine. The only reason why you are seeing revenue down -- this is something that we did budget for. It was the planned exiting of certain business in Canada that was not profitable for us. And so we actually requested that we could get out of this business and we are very happy that we did and I think that what our investors should understand is that because we sell proactively, manage the clients that are not profitable, it's what has allowed us to really maintain the level of the improving profitability, and the levels of profitability that we're seeing and, frankly, the rest of the industry isn't seeing right now.

Eric Boyer. Wachovia.

Thanks. Sorry if I missed your comments. Any thoughts on People Support being acquired here and future M&A activity?

We applaud all companies that acquire or merge with small companies. We think this industry historically has been played with way too many small players that have basically become somewhat irrelevant.

And we never competed with People Support. We never competed with Aegis. And we congratulate them on what I'm sure is good for both of them.

Any thoughts for M&A for TeleTech? As far as regards a acquire here?

I think that, again, we look at what's out there and we are evaluating all kinds of opportunities, etc. So we have an open mind, but it wouldn't be in the area of some of these companies, these smaller companies. That wouldn't really be of interest to us.

And just general comments on wage inflation and voluntary [attrition] made in the Philippines and some of your other offshore geographies?

Yes, relative to wage inflation, specifically in the Philippines, I think we as with others see wage inflation. Again we are in a situation where because of the site selections we've chosen, the potential areas that it's not as impactful.

When others follow that strategy and end up in the same locations we are, it does create a supply and demand issue which does drive it a little bit. But we are cognizant of it and are working obviously diligently to address it to the extent that it is something that takes place. That is where we are going back again to our clients and making sure they understand what is going on in the marketplace and seeking the right type of price increases to offset that.

I think our clients are very sophisticated companies that operate globally and they are experiencing the same type of higher input costs in everything that they do. And, therefore, having a conversation with them about the increases in costs are ones that tend to be well-received and fully understood, and that really turns into a negotiation of Windows increases actually take place.

So we are comfortable with where the portfolio is now and with the work that we have to do which is part of the normal course of us running our business to continue to improve the profitability and we also believe that the customer mindsets are also in the same place. Because they understand that high-quality and low attrition is ultimately what drives a better customer experience.

So hopefully I've answered your question.

Right. What about voluntary attrition? Are you seeing an increase their?

Voluntary attrition meaning someone leaving?

Right.

I would say no. Actually to the contrary. We -- especially in the offshore markets, we are consistently ranked the employer of choice. We are consistently in a position where people want to come to work for us because of our training programs, etc.

So we are really not experiencing, I think, the same level of attrition that some of the other providers are providing.

Ashwin Shirvaikar from Citigroup.

Nice quarter. I apologize if these questions were asked. I was disconnected a couple of times.

First question. [When we see that you added specifically linked to client signings], most of them at least.

Yes they were.

Most investors are already beginning to look at 2009 and sort of what happens in the next five months here, but the economy stays where it is. What kind of revenue growth might you anticipate in '09 ballpark? (inaudible) directionally? I mean I know you might not give exact numbers, but --?

So, for 2009 I think that in this point just because it's -- the economy is a bit of an unknown, I think that we are -- short-term, if the economy doesn't change -- the guidance with the what we put out there and then most likely toward the middle of 2009, when several of the deals that we've signed and have flushed through our system and they've ramped, we would potentially be in a position to change our guidance.

But signs that I really don't see a lot changing from our existing guidance that we have out there. So I would say that we are comfortable with what we have right now and then look forward to updating your guidance.

So what you have right now implies second half much weaker, so that would imply that next year -- take the second half and lay it on. You know increasingly lay it on the contract that you want (technical difficulties).

Part of it is that as we have said and the reason why we modified the '08 guidance. It's not so much we realize that we would have good performance in the second quarter both as we looked into the third and fourth of this year and felt that we were seeing some profits with those clients (technical difficulties).

So I think what Ken take is saying is it's a little bit too early now to try to give a specific range for guidance for '09. But we are so comfortable simply with what we said for this year and as we get further along, we will try to update as we get out there.

We traditionally grow in a close to twice the size of the industry. So obviously it pains us to have a guidance that is in the range that we currently have out there right now.

But we really want to be in a position where, regardless of what happens with the other providers, that we are viewed with credibility throughout and so we think that it is more important that we demonstrate that we execute on what we say. This quarter -- this last quarter that we just reported, I believe, represents our 11th or 12th consecutive quarter of double-digit topline growth contiguously.

And we just want to make sure that when people look back they say when these guys see something, they tell us the way it is. They execute on it and when they see something new, they update and they execute on that.

And at the end of the day we are really only as strong as our clients are; and so some of our clients are experiencing some lower volumes. And the good news is that we are signing a fair amount of new business. And so that will get us past them, and we're far more diversified than even where we are today.

But temporarily while we absorb their new volume commitment along with the new business, you have a temporary seesaw effect and we would hope to to like I say revise probably sometime in the middle of '09.

My last question is (technical difficulties) doing the buyback, but is management (technical difficulties) buying for it themselves at these levels?

I believe management is considering buyback stock at these levels.

Any other questions?

No, that was a perfect ending, actually.

Thank you. It's good to hear from you.

This concludes the TeleTech conference call. You may disconnect at this time.