TTEC Holdings Inc (TTEC) 2008 Q4 法說會逐字稿

Good morning, and welcome to the TeleTech's fourth-quarter and full-year, 2008, 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 Ms. Karen Breen, TeleTech's Vice-President of Investor Relations.

Good morning and thank you for joining us today. This is Karen Breen, VP of Investor Relations. TeleTech is hosting this call to discuss its results for the fourth quarter and year ended December 31st, 2008. Participating on today's call will be Ken Tuchman, our Chairman and CEO, and John Troka, our CFO.

Yesterday, TeleTech issued a press release announcing its financial results for the fourth quarter and year ended December 31st. And, also filed our annual report on Form 10-K with the Securities and Exchange Commission. This call will reflect items discussed within that press release and Form 10-K and Teletech management will make reference to it this morning. We encourage all listeners today to read our annual report on Form 10-K.

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 and future plans and developments 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 factors include but are not limited to reliance on a few major clients, the risks associated with lower profitability from or the loss of one or more significant client relationship, risks associated with achieving the company's 2009 business outlook, execution risks associated with expanding capacity in a timely manner to meet demands and the possibility of additional asset impairments and/or restructuring charges.

A replay of this conference call will be available on our website through March 10th. 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 minutes to review our financial performance for the full year, 2008 and then I will provide some commentary on the current business climate and our 2009 outlook. After that, John will discuss our fourth-quarter financial results in more detail.

Despite the challenging economic backdrop, especially in the latter half of 2008, the strength of our business model and value proposition again allowed us to deliver increased revenue, improve profitability and record free cash flows for the year. Our full-year revenue reached a record $1.4 billion. If you exclude the $31 million in revenue we had in 2007, from two business that were sold that same year, our 2008 revenue growth was approximately 5%.

Client retention reached 94%, the highest it has been in several years, clearly demonstrating the strength of our long-term relationships with clients, many of whom have worked with us for more than a decade.

Full-year revenue from offshore locations grew 14% to $628 million and represented 45% of total revenue and approximately 65% of our total delivery capacity. We believe our global footprint is one the largest and most diversified of any BPO provider as we now operate on five continents.

Full-year operating margin, excluding unusual items in both years, increased 11% or 90 basis points to 9.4% from 8.5% in 2007. Furthermore, excluding noncash equity comp based compensation, expenses of $10.1 million, operating margin was 10.1% for 2008. This improvement was primarily the result of increased asset utilization of our capacity across a 24-hour period along with stringent cost improvements throughout our global operations.

Earnings per share for the full year, excluding unusual charges, increased 15% to a $1.21 per share compared to $1.05 in 2007. The strength of our balance sheet and the strong liquidity continues to be an important differentiator for both our clients and our shareholders. At the end the year, we had $88 million in cash and essentially zero net debt.

We generated $161 million of cash flow from operations for 2008. After subtracting capital expenditures, free cash flow was a record $99 million for the full year. This was more than double the free cash flow in 2007. Our solid cash flow from operations continues to fund the majority of our organic growth and our ongoing share repurchase program.

On a return on invested capital, excuse me, our return on invested capital has more than doubled since 2005, and is a testament to the efficiency of our global delivery model. At year end, our ROIC was 29%, which we believe is one of the highest of any global infrastructure-based BPO company.

This leads me to the current business climate and our top priorities for 2009. Our strong financial position and reputation for operational excellence continues to distance us from other BPO providers in three important ways.

First, clients are increasingly seeking providers with solid balance sheets, who can fund both growth and continued innovation through internally generated cash flows, given the severely constrained capital markets. TeleTech is well positioned to do so given its balance sheet, which is arguably one of the strongest in the industry, along with our flexible capital structure, solid cash flows, strong current ratio and zero net debt.

Second, the competitive landscape continues to narrow as fewer companies have the ability to compete technologically, operationally and geographically to provide a high quality standardized services from anywhere in the world. Our goal is to capitalize on these trends and continue to gain market share.

Third, now more than ever, performing as the number one BPO provider is critical to both maintaining and growing business with our clients. Our 27-year operational history, six sigma-based quality processes and seasoned management team continues to position us as a high quality provider within the BPO industry.

In light of the benefits we continue to receive from the above industry trends, let me now discuss several of our key priorities for 2009.

First, we are actively working to further expand our global sales force. In 2008, we focused heavily on growing our embedded client base. While this focus paid off and resulted in $325 million of annualized signings primarily with existing clients over the past 12 months, our focus in 2009 is on winning new client relationships. To that end, we are aggressively adding seasoned sales executives with strong BPO industry experience and vertical experience to our sales engine.

We are nearly halfway to our goal of hiring this team and we expect to complete the remaining hires over the next six months. Once the team is fully staffed, we recognize it will take a period of time to reap the benefits and firmly believe this will put us in a strong position for renewed revenue growth in 2010.

In the fourth quarter alone, we signed an estimated $100 million of new annualized revenue. The unprecedented economic challenges of the past six months have helped further strengthen our business opportunities as more companies seek innovative and cost effective outsourcing solutions. The opportunity for incremental back office opportunities has also continued to grow and just recently a prominent healthcare insurer in the United States awarded us a portion of their claims processing business. In addition, we are now providing health savings account administration work for one of the world's largest financial institutions.

Another key priority that I touched on earlier was continuing to perform as the number one BPO provider to all of our clients along with furthering our reputation for innovation by investing in technologies that differentiate our offerings.

Many of our clients benchmark us against either their own operations or against other outsource providers. Because of our innovative IP-based technology our standardized processes and our global delivery capabilities, we are consistently outperforming these other operations. As a result, our clients continue to expand the amount of business they do with us as they seek more efficient and effective ways to manage their internal front and back office operations.

The final priority that I want to discuss today is our ongoing focus on managing capacity utilization and expansion. A key contributor to our improving profitability over the past several years has been the increasing utilization of our work stations across a 24-hour period. Our operations in the Philippines is a great example of this, as we are currently using our capacity in this country nearly 16 hours a day due to increased business from not only U.S. clients but also from other European and Asian clients. This is a model we are currently replicating in other markets, such as Latin America and South Africa, that will lead to further improvements and profitability over time.

In 2008, we continued to both add and rationalize capacity to meet the evolving needs of our clients and our business. During this year, we added nearly 5,700 work stations and new delivery locations, predominantly in Latin America, South Africa and the Philippines, where we continue to have strong client demand and a talented labor pool. Conversely, we rationalized 4,100 total work stations during 2008 in under performing locations primarily as a result of unfavorable labor or currency related costs or both.

Having shared our key business priorities with you for 2009, let me review our business outlook. As we monitor our clients' financial results and public disclosures, nearly all of them are acknowledging the difficult forecasting environment they find themselves in. This in turn has also greatly reduced our visibility for the coming year.

While we continue to sign meaningful new business and we believe the current economic environment is a positive catalyst for companies to increase the pace of outsourcing, we foresee two potential headwinds which could offset the benefit of new business wins during the year.

First, we currently estimate the strengthening U.S. dollar could adversely impact 2009 revenues by $90 million to $110 million.

Second, we could experience increased softness in existing client volumes due to further slowdowns in their business, which could negate some or all the benefits from new business ramps. In light of this situation, we are comfortable with the current analyst consensus numbers for annualized 2009 revenue, along with the current analyst consensus numbers for the full-year operating margin excluding any unusual charges, if any. We are keenly focused on the strategic objectives I have outlined and actively managing those variables that are in our control in this dynamic environment.

We are confident that our long-term vision and commitment to superior performance, along with ongoing innovation, will enable TeleTech to continue to deliver solid financial results and cash flows in 2009 and beyond. This confidence is demonstrated by the $90 million of share repurchase we completed in 2008 and the board's recent authorization of an additional $25 million of share repurchase at their last meeting. This increased authorization now brings the total amount currently authorized for future repurchases to $35 million.

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 fourth quarter and full year, 2008, financial results.

Our fourth-quarter revenue was $326 million, a $46 million decrease from the fourth quarter last year. This is primarily due to $35 million of foreign currency impact and lower seasonal fourth-quarter volumes when compared to the year-ago quarter, primarily in the retail and logistics verticals.

In spite of the challenging economic environment, our fourth-quarter gross margin increased 310 basis points over the year-ago quarter to 27.6%. This improvement was due primarily to increased operating efficiencies and asset utilization of our global delivery platform across a 24 hour period.

Our fourth-quarter SG&A expenses decreased nearly $9 million to $51 million or 15.7% of revenue, down from 16.1% of revenue in the year-ago quarter. Excluding expenses related to the completed equity compensation review and re-statement of our historical financial statements, SG&A would have been $47 million or 14.5% of revenue. Decline in our SG&A expenses can be largely attributed to continued tight cost controls and leveraging our global purchasing power.

Our fourth-quarter GAAP operating margin was 7.1%, up from 3.4% in the year-ago quarter. Excluding $6.3 million of unusual charges for restructuring, impairment and re-statement-related costs, our operating margin was 9.1%. This is a 150 basis point improvement from the 7.6% operating margin in the fourth quarter of 2007, which also excluded unusual charges.

Our fourth-quarter results included $2.4 million of equity compensation expense or about $0.02 per share as compared to $4.2 million or approximately $0.04 per share in the year-ago quarter. Excluding equity compensation expense and the unusual charges I previously described, our fourth-quarter adjusted operating margin was 9.8%.

Earnings per share for the fourth quarter Increased 29% to $0.22 compared to $0.17 in the year-ago quarter. Excluding unusual items, our non-GAAP EPS was $0.28.

Turning now to the full year, we achieved record 2008 revenue of $1.4 billion. As our 10K illustrates in the segment footnote to the financial statements, our revenue is well balanced to cross multiple geographies and we expect this to continue in 2009. Gross margin was 26.8% for the full year and relatively unchanged from 2007. Full-year SG&A decreased from 15.2% of revenue to 14.2%. Excluding the re-statement related expenses I previously discussed, 2008 SG&A would have been $185 million or 13.2% of revenue, down from $196 million or 14.3% in 2007. Again this decrease is largely attributed to our continuing focus on cost containment.

Our 2008 operating margin increased 30% or 180 basis points to 7.8% from 6.0% in 2007. Excluding restructuring, impairment and re-statement-related charges totaling $22.7 million, 2008 operating margin increased 90 basis points at 9.4%, up from 8.5% in 2007, which also excluded unusual charges.

Excluding full-year equity compensation expenses of $10.1 million in addition to the other unusual charges, our adjusted 2008 operating margin was 10.1%, up from 9.4% in 2007 on the same basis. Strict cost controls and increased operating leverage continue to be the key drivers of our improved operating performance.

2008 earnings per share increased 45% to $1.06 from $0.73 in 2007. Excluding unusual items our non-GAAP EPS increased 15% to $1.21 over 2007 non-GAAP EPS of $1.05. Our 2008 EBITDA, adjusted for unusual charges and equity compensation expenses, increased 100 basis points over 2007. Our 2008 adjusted EBITDA was $195 million or 13.9% of revenue compared to 2007 adjusted EBITDA of $180 million or 13.2% of revenue.

Our effective tax rate was 31% for the fourth quarter, up from 20% in the year ago quarter. The tax rate in the 2007 fourth quarter was favorably impacted by the tax-free sale of our India joint venture. Our full-year 2008 effective tax rate was 26% and was positively impacted by $3.9 million of reductions in our deferred tax valuation allowances, primarily for our UK entity. We were able to reduce the UK allowance because of its improving profitability due to the launch of new client programs and various cost improvement initiatives. We expect our 2009 effective tax rate will range between 30% and 33%.

Turning now to our balance sheet. We ended the year with $88 million in cash and a debt to capital ratio of only 20%. Our current ratio is 2.2 times and the strength of our balance sheet provides us with plenty of liquidity to fund our continued growth.

Our DSOs were 67 days in the fourth quarter, up one day from 66 days in the previous quarter and unchanged from the DSOs in the year-ago quarter. We continue to proactively manage cash collections to further enhance our working capital and free cash flows.

We continue to see excellent improvement in our cash flow. We generated $35 million of cash flow from operations in the fourth quarter and $161 million for all of 2008. After $10 million of capital expenditures in the fourth quarter, our free cash flow increased 280% to $25.4 million, up from the negative free cash flow of $14.1 million in the year-ago quarter. I am very pleased that our free cash flow for the full year, 2008, reached a record $99 million. This was a 133% increase from $42 million of free cash flow in 2007.

Our net capital expenditures for the full year were $62 million. The majority of these expenditures related to the addition of nearly 5700 BPO work stations primarily in non-US locations. We also continued to invest in the expansion of our innovative technology and telephony platforms.

In 2009, we will continue to tightly manage our capital. Current plans include further expansion in locations that continue to be highly attractive for both Teletech and our clients. We expect 2009 net capital expenditures to range between $45 million and $55 million. As always, we are being extremely prudent with the timing of adding new capacity and continue to seek firm client commitments before expending significant capital.

Given our strong cash flow from operations, our $88 million of cash on hand and nearly $140 million of additional borrowing capacity under our credit facility, we have ample liquidity to fund our ongoing operations.

As Ken mentioned earlier, we repurchased $90 million of stock since resuming our share repurchase program in late 2008. $15 million of these repurchases occurred in the fourth quarter. Given the board's recent authorization of an additional $25 million for repurchases, we intend to continue buying back our stock throughout 2009.

In summary, we are confident in our ability to execute during these challenging economic times and we are comfortable with the current analyst consensus for 2009 annualized revenue and operating margin. With that, I will turn the call back over to Ken.

Thank you, John. While many companies are merely focused on survival during these challenging economic times, TeleTech continues to be focused on innovation and leveraging the growing market opportunity for both front and back office outsource solutions. Our strong balance sheet, exceptional operational performance and diversified global delivery capabilities have positioned us as a critical and strategic business partner to our longstanding client base. We look forward to updating you in the coming quarters and we will now open the call to your questions. Thank you.

(Operator Instructions) Our first question today comes from Ashwin Shirwaikar. Your line is open and please state your company name.

It is Ashwin Shirwaikar from Citi. Congratulations on the quarter. My first question is on can you comment on the visibility of existing client volume growth or even maybe volume stability?

I am sorry, Ashwin, hi, it's Ken. Could you just repeat the question? We are not hearing you well. There was a loud buzz in the background.

Sure, is this better?

Yes, it is.

So the question was, can you comment on the visibility of existing client volumes and possibly even when you might see some volume stability?

Yes. Our clients provide us with 90-day rolling forecast and from what we can see, the volumes do appear to be stable. We do weekly volume checks internally. We are across the globe. We scan all of our clients and we try to identify where the volumes are in relationship to the forecasts that they've provided us. And thus far, we see nothing that is concerning or that's outlining of our forecast. So, overall, I think we believe the volumes are in fact stable.

Okay. And how many new sales people are you hiring relative to the base?

We are adding in strictly in the, what we call the new logo area, 15 senior sales executives, of which we now have seven on board. And last night, we just added another one which would take us to eight.

Okay.

So we are halfway there. And our belief is that sometime between the end of second or third quarter, we will have the entire staff on board. And then of course, it will take some time for them to build their pipeline, et cetera.

Okay. Now, if I look at say approximately $1.00 in EPS for 2009, which is sort of in line with the consensus, and I take into account that part of that EPS performance will be increased share buyback, is it fair to then assume that sort of backing into the operating cash performance expectation for 2009 that you would be maybe 5% to 10% below but still pretty good cash performance relative to 2008?

You mean cash flow from operations?

Cash from operations, yes.

Yes, I think it is an indicator -- the net income would be a good indicator of what the potential cash flow from operations would be.

Okay. And one last question, if I could sneak that in. In terms of when you sign new contracts. Are you seeing any changes to credit terms and/or DSO expectations or anything like that? And what are clients saying to you when you sign new contracts that's different from what they might have said 12 months ago?

Yes. We have always been very conservative from a credit standpoint. And I think part of what makes our job maybe a little bit easier to manage as it relates to credit is we pretty much don't do business with anyone outside the global 1,000. That said, in these times, there's been multiple companies within the global 1,000 that have had some challenges.

But, for the most part, the new contracts that we are negotiating and being awarded, there is no change in credit terms whatsoever. And in fact, in some cases, we are actually asking for better overall terms where we can bill in shorter cycles, i.e., every two weeks et cetera. So, thus far, we are not seeing that. And certainly our DSOs, we are pleased with. They've been right within target and we're confident that we can continue to maintain them in the same range.

Okay, thank you. Good performance. Thank you.

Thank you very much, Ashwin.

Our next question comes from Bob Evans. Sir, your line is open and please state your organization.

Craig-Hallum Capital. Good morning, everyone, and nice job on the quarter and free cash flow. First, on the business mix of the $100 million that you signed in Q4, can you give us a little greater sense of where it is coming from and how much is new versus existing customers?

Yes, hi, Bob, health care, which would be in the payer area, communications in the wireless area and the broadband area, government which would come from multiple areas, and then financial services would be the areas that we have seen increased business,

How about in terms of -- and that increased business, is it mainly-- how much of that $100 million would you say is new versus existing, if you were going to ballpark it?

I'd say the majority of it is embedded base; however, that doesn't-- that should not be confused as not new business. And what I mean by that is, we are winning several new projects that are out of scope of the original SOW, and that's something that is always very important to us, that we grow our relationships so that we have a much more diversified overall relationship with the client and that it's coming from multiple different areas so we might be doing insurance work for a bank as well as standard bank work as well as back office work, et cetera. And those are the types of things that we look for to span across their product line.

So, to answer your question more, I would say most of the business is from the embedded base at this point, which is hence the reason why we believe we have a need to have a dedicated force that is solely focused on attacking new logos that we're currently not doing business with.

How would you characterize the new deal environment in terms of deals you are looking at now and how much is embedded base versus potential new logos? And would you say the level of activity has increased, decreased, give us some sense given the economic backdrop?

Well, I would say that in our pipeline there are a number of deals that are actually quite a bit larger than what we've historically seen. The question is, are these deals that will actually get done. And I only say that because it is just-- it's very hard to tell. And if they were to get done, then they're very meaningful and we typically have a track record over the last 27 years of being successful in winning large deals. That's what we are focused on and we are definitely seeing more of them.

Some of it is just really, frankly, outsourcing due to the economy and the need for cost improvement within these large multi nationals of business. So overall I'd say that we are uncovering a healthy amount of opportunities. That said, we are taking it quarter to quarter as it relates to what the closed ratios are going to be. And I only say that just because it just seems like every single day there is something new that gets announced via our federal government et cetera, that in some indirect way or direct way impacts our clients and sometimes that changes their opinions on whether they are going to outsource sooner versus later.

So, overall, I think we feel good about the pipeline and I think we feel good about the prospects for the future. But candidly, our main focus is to have a company that is profitable and that has a very strong balance sheet, that gets through 2009 with no risk whatsoever, and that is prepared for the future to really begin to start growing in the 2010 and '11 time frame.

I understand, thank you. And a couple quick questions. The free cash flow question from the previous caller. If we view cash flow from operations maybe down 5% or 10% year over year, I believe you said your CapEx is probably going to be down around $10 million if you use the midpoint. Is it fair to say that free cash flow will be somewhat comparable or close to comparable?

This is John. Bob, relative to the free cash flow, yes, the capital is going to come down so that's going to benefit the free cash flow. As well as again, there was a lot of expense that was incurred in 2008 relative to our re-statement and the like that will not have to occur in 2009. So, both of those factors together will help to maintain that cash flow. So again, we are not expecting to see a significant reduction in that number.

Okay, so maybe, think flattish or so. Also, the 4100 seats that I think you said you contracted for various reasons in '08. Can you give us a greater sense of where those seats were located?

There is a large percentage of those seats are in Canada or the U.S. and then in Spain and Australia.

Were most of those seats migration seats to offshore or just programs that you chose to wind down?

Predominantly migration to offshore and again opportunities arise to allow us to step away from facilities and then we take advantage of those as they come up.

Okay, all right, thank you.

Thank you.

Our next question comes from Tobey Summer. Your line is open and please state your organization. Tobey, you may go ahead with your question.

Maybe we should move on to another question.

Certainly. One moment please. Our next question comes from Josh Vogel. Your line is open and please state your organization.

Good morning, Sidoti & Company. My first question. I was wondering if you could maybe quantify how much revenue is coming up for renewal in '09 from your top five clients and if you started these negotiations? And if so, are you getting any push back from these clients on the pricing side?

Yes, in terms of the revenue, about 15% is up for renewal in 2009. We are well down the path in terms of renegotiating with the particular clients for the programs that we are interested in keeping and again are comfortable that the ones we are working on will be renewed.

And there's nothing unusual about the amount of revenue that is up for renewal this year versus any other year that we do business in. And based on our client retention numbers that are consistently getting better year-over-year-over-year, we are very comfortable with the revenue that is under-- that is coming up for actual renewal.

Okay, and what about on the pricing side, are you getting any push back there?

No, I would say, no, not at all. We're not really seeing a lot of that type of activity. I think that most of our clients, because they are going through consolidation and in many cases they are leaving smaller providers and going to larger providers. One the main reasons why they are leaving is because they are feeling like they are not getting the overall depth and breadth and technology. And they understand that a company of our size and our capability has cost associated with delivering these capabilities. And so, that's really not a huge-- at least at this point in time, I should say, that's really not a big part of the negotiations. And so, we are not really seeing much of that type of activity.

That is helpful, thank you. As we look towards net seat additions for '09, do you have any estimate-- is this-- should we expect it to be somewhere along the lines of '08, where you added about 1500 net seats?

Yes Josh, this is John Troka. Right now it is actually an amount lower than that. It is probably around 4,000 if we actually do execute on the plan that we have in place. Again, that seat add is highly sensitive to the demand that's out there. So, if we see a lot of demand come in we will add the seats to make sure that we can meet it.

You should also note we are very focused on overall work station utilization. And so, now what is happening now that we've become-- our size is -- with over 40,000 seats and 26,000 work stations offshore, we are able to really put a lot of energy into getting better overall work station utilization. And so, as we can continue to do so in these other countries, that means that for every $1.00 of revenue we generate, we can spend far less capital. So if we can continue to get the kind of work station utilization that we now have in the Philippines-- if we can get that into other countries, then in theory you could make the argument over time that we'll need somewhere in the realm of 35% to 50% less work stations to build out going forward just because we are getting double the actual utilization.

Right. Okay. So, as we look at '09, on the non-dedicated seats, you think we can get back to utilization levels that we saw in '07, which was, I think was around 79%?

Yes, I think that's very possible. But again, our -- you're talking about capacity utilization and I would remind you that our number one focus is always the actual work station utilization itself. That drives the highest overall profitability potential versus just the capacity. But yes, I think 79% is a very reasonable target for us to achieve in '09.

Okay. Great. And you have done a nice job growing the offshore business year-over-year. I was wondering if you had any internal targets of where you expect that business to get in '09 or over the next couple of years in terms of total revenue.

You know, we don't. I would say that it is naturally going to continue to grow. But, my guess is between now and '010 that the offshore business will most likely pick up another 5 points or maybe as much as 10 points but that's about it, over a two-year period of time.

Okay. Great.

We are very comfortable with the distribution of business. We actually do so see some opportunities to expand work stations in the United States and we are excited to add as many jobs here as possible.

Okay. And just lastly here. You are obviously doing a good job generating cash. What is your number one priority now in '09? Are you going to look to continue buying back shares or are you going to maybe try to take advantage of some acquisition opportunities? Or debt repayment.

Well, I think that at this point in time. We believe our shares are tremendously undervalued. And so, we are not sure of anything else that we could do that is more accretive than acquiring our own shares. That said, as we get later into the year and as some of the debt pressures start to mount and grow on various different target companies, there might be some opportunistic acquisitions that we would then take a look at and focus on. But for now, I think the focus would just be to invest internally, and grow internally, as well as to invest in our share repurchase.

Thank you very much.

Thank you.

Our next question comes from Eric Boyer. Your line is open and please state your organization.

Thanks, Wachovia. Can you talk about how the street estimates and your guidance compares to the range of outcomes that you are working against in your internal planning projections, is in the middle or the lower end of the possible scenarios you see playing out in '09?

I think just the safe answer would be to say it is in the middle.

Okay, great. Also, could you talk a little bit about the prospects for Sprint and Ford in '09?

I am not sure I understand the question. But, as you may know, we tend to not really comment on any of our clients. It is just part of our overall confidentiality agreement. That said, we enjoy a good relationship with them and we are looking forward to -- continuing to work with them and support them.

Could you give us an idea what the share count is today?

I believe it is around 65 million shares.

63.8.

Great. Finally, the pace of the business entering the pipeline and moving through it, have you seen any changes from Q4/ Is it starting to loosen up a bit because you had a strong Q4 and early read on your Q1 awards.

I would say our pipeline is pretty much remains somewhat the same. There are some opportunities that we are working on that, like I've mentioned before, that are fairly large. That said, we do not have visibility as to, if there is a closing opportunity in this quarter or not. What we find in our business is not unlike most businesses. We tend to sign the majority of our business in the last month of the quarter. And it is just a pretty common phenomenon.

So, at this point, we have signed business thus far in the quarter, and it is still too early to say or to give a real good feel yet as to how large this next quarter of signings is going to be. But we are, based on the dynamic aspect of the economy that we are in, we are pleased with the business that we signed last quarter. And, our goal would be to obviously try to continue to keep increasing the level of signings that we are doing.

Also, did you talk about tax rate assumption for '09?

Yes. For '09, we expect tax rate to be between 30% and 33%.

Thanks a lot.

Our next question comes from Shlomo Rosenbaum. Your line is open.

Hi, thank you very much for taking my questions. Ken, I wanted to ask you what the plans are for rationalizing capacity over 2009. You did a tremendous amount of that over 2008 and I am sure it helped utilization a lot. I just wanted to know what you guys are planning this coming year.

This is John, Shlomo. In terms of the capacity, again, we continue to take a hard look at the capacity that we have available, when things are coming up, particularly in the markets, where we are seeing labor pressures, currency pressures and the like that we don't believe will change any time in the near future. Taking a hard look at Canada. We've rationalized several sites up there in 2008.

Looking at 2009, the good news for us is that we have, of the sites remaining, close to 70% of the capacity we can exit from a lease perspective within the next 12 months. And so we have plenty of opportunity if current conditions continued to exit in that particular area. We are also taking a hard look again at some of the capacity we have in our Asia Pacific region.

What kind of capacity would you be having in the Asia Pac? You're talking outside the Philippines and stuff like that.

Yes, we're talking about Australia, New Zealand, Singapore, Hong Kong.

So would you say that you've got a lot less coming in front of you in 2009 versus what you had in 2008?

I think what we are saying is we are in a very flexible position and that we believe that we have a pretty good handle on our destiny. And that we can throttle this either direction. So, I think if you wanted to model something, I think it is probably safe to say that we will take out somewhere between 1500 and 2,000 work stations.

That said, if we need to, we could take out more. And we do it for multiple reasons. If we believe we are seeing trends in a particular labor market that over -- looking back several years are just continuing to become negative as it relates to employee attrition, turnover, attitude towards the job, et cetera, et cetera, et cetera, then, we are very proactive and we deal with it.

And we are very pleased with how we have been able to continue to kind of shape our business. And we think that it is good that we are in a situation where our lease structures are so flexible that we can, in fact, make these decisions as needed.

Just want to ask one more question about pricing, as it relates to excess capacity in the industry. It seems like there is a lot less excess capacity at least domestically than there was in the last downturn. Can you talk about how that might be affecting competitor pricing on the deals that you're seeing and what you think is going to happen going forward over the deals you have in your pipe?

I think the market has gone through a pretty significant lesson in educational process as it relates to pricing. I think the larger providers that are striving to provide a quality service are in fact providing rational pricing and understand that you can't be in this business when you have as much of a percentage of your expense and labor by making it up in volume. And so, I think the prudent ones are charging a price that affords them a fair profit margin. And therefore, allows them to maintain their balance sheet and not dig a deeper hole.

I think the smaller companies, unfortunately, the only way they can win business is typically by buying the business. And I think that's why we are confident you're going to see dramatically more consolidation in the space because we believe their financials are continuing to deteriorate at a more rapid level.

We don't compete with tier two or tier three providers. And so overall we are seeing a pretty rational pricing marketplace. I say that today, knowing full well that this economy is going to get worse before it gets better and obviously things are subject to change. But thus far, it is so important to our clients that they are being delivered high customer satisfaction, which is measured by third parties, and that they're being provided very high overall up-times et cetera. And so they realize that the infrastructure that we're delivering and the management we're delivering and the technology that we're delivering does have a cost associated with it. So we think we will be able to continue to charge rates that are fair and are competitive and yet afford us the ability to make a reasonable profit.

Then, just a housekeeping. I wanted to ask you again that share count question. Did I understand it right, it was 63.8 million and that was an end of quarter share count number?

That's the number that is on the 10K, Shlomo for the actual shares outstanding. The (inaudible) would be the 65,217 for the quarter and then the year was about 69. But, it's coming down, as you know, because of the share buyback.

Can you us any update as to what you guys are expecting in the end of first quarter for shares since repurchases seem to be a good component of the EPS story?

I don't think we--

I can talk with you about that. There is going to be both some vesting of RSUs that happened in the first quarter which would add to the share count, but then there will be buybacks. So, if you want to talk about it further, we can do that off line.

Okay. Thanks a lot, and good job on the free cash flow again.

Thank you very much.

We have time for one further question. Kevin McVeigh, your line is open and please state your organization.

Great, Credit Suisse, thank you. Nice job on the quarter. I was wondering if you could give me a sense of the 15 sales people you are targeting, are there specific verticals you are focusing on?

We are really focusing just on the traditional verticals that we have always enjoyed success in. So, it is the obvious places of financial services and common media, healthcare, government, et cetera. We're probably not putting as much focus on retail as we have in the past for obvious reasons nor in automotive. But there is really nothing unique about the areas that we're focusing on. We might be adding a couple new verticals that we are not prepared to talk about at this point in time, that we think there are some pockets of opportunity that are maybe not being mined as actively. But that's about it.

Great. And then, I understand that it's a tough environment right now, but in a more normalized environment, what would be a target for new logo wins for each of the sales people? If you could quantify a range on that as you think about 2010.

You mean, is that, are you asking what their quota would be?

Yes.

I am going to give you intentionally a very wide range, just because I kind of view it as a bit proprietary. But I would say it is anywhere from $10 million to $15 million.

Great. That's helpful. One last question. It seems like there was a negative seasonal effect in terms of revenue. What was that number, if you could give us a range, obviously you didn't have the season that you normally would. How much of that impacted the top line in the fourth quarter?

How much uplift did we get from seasonal or how much --?

No, how much did it—-- I know typically you do get the seasonal lift, this year given the--

It was about a $10 million delta over the prior year that we didn't see because of the impact of the economy.

Great. Thank you.

Thank you.

Thank you. This concludes our call today. We appreciate everyone attending.

This concludes the TeleTech fourth=-quarter, 2008 earnings conference call. You may disconnect at this time.