TTEC Holdings Inc (TTEC) 2011 Q2 法說會逐字稿

Welcome to the TeleTech second quarter 2011 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'd now like to turn the call over to Karen Breen, TeleTech's Vice President of Investor Relations. Thank you, ma'am. You may begin.

Thank you and good morning.

This is Karen Breen, Vice President of Investor Relations, and TeleTech is hosting this call to discuss its second quarter 2011 results as of June 30. 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 our financial results for the second quarter and also filed our quarterly report on Form 10-Q with the SEC. This call will reflect items discussed in those documents and we will make reference to them several times today on our call. We encourage all listeners to read our Form 10-Q.

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

Please note that these forward-looking statements reflect our opinions only as of the date of this call and we undertake no obligation to revise this information as a result of new data that may become available. Forward-looking segments are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those described.

Such factors include, but are not limited to, reliance on several major clients, the risk associated with lower profitability from or the loss of 1 or more significant client relationships, execution risks associated with ramping new business or integrating acquired businesses, and the possibility of additional asset impairments and/or restructuring charges. For a more detailed description of our risk factors, please review our most recent SEC filings, along with our Form 10-K for 2010.

A replay of this conference call will be available on our website through August 17. And I will now turn the call over to Ken Tuchman, our Chairman and CEO.

Thank you, Karen, and good morning to everyone joining us today.

I'd like to review our results for the second quarter, and then provide an update on the continued expansion of our capabilities focused on optimizing the customer experience. After that, John will discuss our financial results in more detail. Excuse me.

Second quarter revenue was $294 million, up 8% from $272 million in the year-ago quarter. Keep in mind that the second quarter last year included $36 million of revenue from the Census program which, as previously discussed, was an important program that we substantially completed in the third quarter of 2010.

Excluding the Census program, our year-over-year revenue growth on a constant currency basis was 19%. Second quarter 2011 results also reflect the acquisition of the Peppers & Rogers Group, along with 1 month of results from eLoyalty, which we closed in the end of May.

Backing out the revenue from these acquisitions, as well as the Census program in the year ago quarter, our second quarter revenue growth on a constant currency basis was 12%. This is a result of solid new business wins from both new and existing clients.

During the second quarter, we signed $75 million of annualized incremental business, including the addition of 9 new clients. This represents the fifth consecutive quarter of at least $75 million in incremental signings.

Keep in mind that our quarterly win amount will fluctuate, given varying deal sizes and the timing of when these deals close. Overall, we're very pleased with our sales pipeline. It remains strong, as we continue to target companies who recognize that in today's slow growth, fiercely competitive global environment, the service experience is what defines the brand.

Companies who understand this reality are seeking a partner who can help them redefine their business around the customer. Our fully integrated end-to-end solutions, from strategy to technology to execution, are designed to do just that.

Turning now to our operating performance. Second quarter operating margin, excluding unusual items and acquisition-related costs, was 8.7%. Non-GAAP earnings per share, excluding unusual items, acquisition-related costs, and a $5.7 million of certain unusual tax benefits, was $0.29. Our strong financial position enabled us to end the quarter with $194 million in cash and $73 million of net cash after subtracting outstanding debt.

TeleTech's strategy continues to be fueled by our clients' ongoing desire to rebuild their business around the customer. To that end, we are investing aggressively in revenue, product, and client diversification.

Let me take a few moments to elaborate on this strategy and to update you on the progress in these areas, including our recent strategic acquisition of Peppers & Rogers Group and eLoyalty. As global 1000 companies find themselves increasingly pressed for growth, their focus on retaining and growing existing customers is greater than ever before, and companies increasingly realize the need to put the customer first.

More and more companies are naming Chief Customer Officers to their leadership team, as 1 of our largest clients in Asia-Pacific just did last quarter. Many companies start this journey by holistically reviewing their entire approach to the customer. This is where our expanded strategic consulting solutions, through the acquisition of Peppers & Rogers Group, are gaining traction.

As clients remains challenged by empowered customers and the growing complexity of communication channels, they're asking PRG to help them define, segment, and build their customer-centric strategy. PRG is increasingly benefiting from TeleTech's existing global relationships, and we're actively engaged in multiple joint pursuits. Just recently, PRG won several important US-based engagements, including work with a large wireless company and a prominent social networking provider.

More often than not, the implementation of customer-centric strategies also requires the need for a thorough technology review to ensure seamless multi-channel connectivity with customers. We are directly benefiting from this opportunity through our recent acquisition of eLoyalty.

ELoyalty has significantly expanded TeleTech's existing suite of technology solutions, with its 20-year track record and long-standing client relationships in IT consulting, systems integration, applications development, and oversight of large complex customer delivery center solutions. Some of the nation's largest retailers, financial institution, and insurance companies rely on eLoyalty's managed service solution.

With the completion of the acquisition in late May, we moved rapidly to integrate the combined businesses and align our joint sales efforts. Together, we bring an unmatched suite of solutions to both a fully hosted and managed delivery center environments.

Following the acquisition of eLoyalty, our existing client base now stands at 150 multinational companies. As in the past, we will continue to leverage these relationships, given a significant part of our historic growth has come from our existing client base.

Since its founding, TeleTech has been an innovator in every area, including offshoring, cloud computing, and now, with a robust social offering. We recognize that social media has a tremendous amount of influence in defining a brand's image.

Our solution leverages today's best social and traditional CRM practices to help our clients maximize social media and digital marketing to enhance customer acquisitions, retention and loyalty.

We utilize listening posts to gauge customer sentiment and provide our clients with the ability to both engage and then act on customers' conversation in a highly relevant and personalized fashion. Looking ahead, next generation social capabilities are an integral component of our strategy and we intend to continue to invest and innovate in this area.

Moving to our revenue generation offering. We are seeing particularly strong growth in this area, and expect it to surpass $100 million in revenue this year. There is robust demand for solutions that enable clients to maximize revenue, retain customers, and increase brand loyalty, while gaining large share in large, fragmented markets.

We generate billions of dollars in revenues for our clients through the customized design and management of more than 8,000 electronic store fronts, sophisticated segmentation strategies, lifetime value modeling, robust data analytics, and highly targeted digital direct marketing.

As we continue to scale this and other businesses, along with increasing our R&D efforts, we will continue to explore both strategic acquisitions and ways to illuminate these internal businesses such that shareholders can properly value their contribution.

This brings me to our financial outlook. TeleTech is raising its full-year 2011 revenue guidance. We estimate full year 2011 revenue will grow approximately 9% to 10% over 2010, up from our previous estimate of 5% to 6%. As we continue to broaden our suite of capabilities, we estimate full-year 2011 operating margin will range between 8.7% and 9.5%, excluding unusual charges, if any.

Going forward, we believe our ability to win and retain profitable business will be squarely focused on further investment in both technology and innovation. We remain confident that our continued investment in revenue, product, and client diversification will fuel future growth, as well as strongly position us to respond to the rapidly increasing customer demand, and further drive our market and financial leadership.

With that, I will now turn the call over to John Troka, after which I will make a few closing remarks.

Thank you, Ken, and good morning.

Let me take a few minutes this morning to provide some additional insight into our second quarter results. Revenue for the second quarter was $293.6 million, up 8% from $271.9 million in the year-ago quarter.

Putting it on a basis consistent with analysts' estimates by excluding the acquisition of eLoyalty, our revenue was $287.1 million. I think it is important to reiterate the underlying organic growth in our consolidated revenue.

Absent the benefit of acquisitions and foreign exchange, and backing our the $35.7 million in Census revenue booked in the second quarter of 2010, our organic revenue growth was 12.2% over the year-ago quarter. This clearly demonstrates the strong growth we are experiencing in both new and existing client programs.

Second quarter revenue for the North American BPO segment was $200.9 million, compared to $212.5 million in the year-ago quarter and $192 million in the first quarter. As previously mentioned, the year-ago period included $35.7 million of Census revenue, which is reflected in this segment.

Revenue for the international BPO segment in the second quarter grew 56.1% year-over-year, to $92.8 million, and also increased from $88.9 million in the previous quarter. This is related to the growth in the international client programs and the acquisition of PRG, whose results are included in this segment.

Looking at our gross margin, our second quarter gross margin was 28.4%, up from 27.1% in the year-ago quarter. Gross margin in the North American BPO segment was 29.6% in the second quarter, compared to 30.8% in the year-ago quarter.

This decrease reflects the absence of the Census Technology Solution revenue in the year-ago quarter, offset in part by improved operating efficiencies realized in the second quarter of 2011. The international BPO segment gross margin was 25.7%, compared to 13.8% in the year-ago quarter.

This improvement is the result of strong growth in existing client programs, and certain contractual changes, which particularly drove improvements in Spain, as well as the addition of PRG.

Turning now to SG&A. Our second quarter SG&A was $47.3 million, or 16.1% of revenue. This includes approximately $850,000 of acquisition-related costs associated with eLoyalty. Excluding these costs, SG&A was 15.8% of revenue.

This compares to 14.6% of revenue in the year-ago period and 17% of revenue in the previous quarter. In light of the financial profile of our recently completed acquisitions, we expect our SG&A as a percent of revenue to range between 15% and 16%. Excluding equity compensation expense of $4 million, and the acquisition-related costs for the quarter, SG&A as a percent of revenue was 14.5%.

Our second quarter GAAP operating income was $24.6 million, or 8.4% of revenue. Subtracting restructuring and impairment costs, and adding back $850,000 of acquisition-related expenses, our second quarter non-GAAP operating margin was 8.7% of revenue.

Relative to analysts' expectations, which did not reflect the 1 month of eLoyalty results or associated acquisition costs, our second quarter operating income, excluding these items, was 8.5%. As previously disclosed, eLoyalty will be accretive to our full-year 2011 results, but given we only recorded one month's results in the second quarter, eLoyalty did not have a significant impact on our operating income.

As for our segments, our North American BPO segment reported a non-GAAP operating margin of 9.5% in the quarter, compared to 12.5% in the year-ago quarter. This decrease is a result of the factors I mentioned earlier. The international BPO segment generated a non-GAAP operating margin of 6%, versus a negative operating margin of 9.1% in the year-ago quarter.

The continued improvement in this segment's profitability reflects the ongoing efforts of our management team to improve program pricing and operating efficiencies, as well as from the contribution from PRG. Our effective tax rate in the second quarter was 0.6%. Second quarter tax expense includes a one-time benefit of $5.7 million related to the settlement of a US tax refund claim and other discrete items.

On a normalized basis, our effective tax rate was 24.9% for the quarter and was 22.1% through the first 6 months of the year. The increase in the second quarter rate reflects changes in jurisdictions in which income was recognized. However, we continue to expect the full-year effective tax rate will range between 20% and 23%.

Finally, our second quarter GAAP fully diluted earnings per share was $0.38. Adjusting for the impact of the 1-time tax benefit, restructuring and impairment charges, as well as the acquisition-related costs, our fully diluted earnings per share was $0.29.

Focusing now on our cash flow and liquidity. We continue to be pleased with our generation of solid cash flow. Our cash flow from operations was $23.4 million for the second quarter. After our capital expenditures, free cash flow was $14.9 million. We ended the second quarter with $194.3 million in cash, $118 million borrowed on our credit facility, and $3.3 million of other debt.

As mentioned on our previous earnings calls, the increased borrowings on our credit facility are related to the expiration of certain tax regulations which allowed for the short-term tax-free repatriation of international cash. At the end of the second quarter, our total debt-to-capital ratio was 21.1% and our current ratio was 3 times.

Looking now at our DSOs, our second quarter DSOs were 74 days, an increase from 72 days last quarter and a decrease from 77 days at year-end. The increase sequentially was driven by the consolidation of eLoyalty in the quarter, whereby we reflect only 1 month's worth of revenue, but the full amount of their receivables at quarter end.

Excluding eLoyalty and PRG, which has clients who customarily have longer payment terms, the second quarter DSOs were 70 days, up slightly from 69 days in the first quarter. Our second quarter capital expenditures were $8.5 million, compared to $5.7 million in the year-ago quarter.

We continue to invest in the maintenance and enhancement of our industry-leading infrastructure and proprietary suite of technology-enabled offerings. We also plan to expand capacity in countries where demand dictates. As a result, we continue to expect 2011 capital expenditures to approximate $40 million.

During the second quarter, we continued to actively repurchase our shares, buying 524,000 shares for approximately $9.9 million. As of June 30, we had approximately $51.6 million remaining for future share repurchases under our current Board authorization.

Turning now to our outlook. As Ken previously mentioned, we are increasing our full-year guidance to primarily reflect the remaining year impact of eLoyalty acquisition. Revenue for 2011 is estimated to grow approximately 9% to 10% over 2010.

This is up from our previous estimate of 5% to 6% growth. As we continue to broaden our suite of capabilities, we estimate our full-year 2011 operating margin will range between 8.7% and 9.5%, excluding unusual charges, if any.

In summary, our ability to bring strategy, technology and execution together to help our clients transform the customer experience continues to drive our year-over-year revenue growth, improved operating performance and solid new business wins.

Our financial performance and strength of balance sheet gives us the confidence and means to continue our investment in innovation and revenue diversification and to deliver positive returns for our clients, their customers, and our shareholders.

Thank you. And with that, I will now turn the call back over to Ken.

Thank you, John.

As companies intensify their focus on the customer experience, we are very encouraged about the growth momentum across our business. Our ability to serve as both an independent strategic advisor and experienced implementation partner to truly transform the customer experience uniquely positions us to capitalize on the growing market opportunity, and in turn, deliver strong returns to our shareholders. We look forward to sharing our progress with you in coming quarters.

Thank you.

Thank you. And as we open the call to your questions, we would ask that you limit them to one- t a time, so we have the opportunity to take everyone's inquiries.

Operator, you can now open the call to questions.

Thank you. (Operator Instructions)

Our first question today is from Mike Malouf with Craig-Hallum.

Great, thanks a lot. I had a question on the technology base. I know that you've been talking about 25% as a total of your revenue by 2014. I'm just curious, where do you think you're going to be at the end of the year, and are you still planning on breaking that out for us, so we have a good sense of where that is all coming from? Thanks.

Mike, it's John Troka. Relative to where that's going to be, I would tell you it would probably be between 10% and 15%, when we look at it for the year. In terms of when we are going to break it out, that's something that we continue to assess. And it is our intent to provide increased visibility as that part of our business continues to grow.

Okay, great. Thanks.

Thank you. Our next question is from Tobey Sommer with SunTrust.

Thank you. I was wondering if you could tell us what the organic rate of growth is that's assumed in guidance. Because I guess you tweaked it primarily on the acquisition of eLoyalty, at least on the revenue side. And I wanted to ask also on the margin, which you raised the lower end a bit, is that also a result of the eLoyalty acquisition, or does that reflect some kind of underlying change in the base business?

I think that we think the organic growth now has been increased to probably 6% to 7%.

And does the raising of the lower end of the range on the margin also reflect a change in the underlying business? Or is that the contribution from eLoyalty?

I think it's coming from the diversification of our overall business, from the technology component as well as the revenue generation component. And as we have stated before, our focus will be to get to 25% of our revenues or more that are in higher margin areas that are growing at 20% a year, and that have high-margin potential of 20%. So I think that you're going to see, as the quarters go by, that we will get some lift out of that diversification.

Thank you very much. I'll try to respect your wishes and get back in the queue.

Thank you. Our next question is from Ashwin Shirvaikar with Citi.

Hello. Good quarter there. My question is about the signing. You are signing a lot of deals, and so what I wanted to figure out is this new logos -- is it new deals with existing clients? Also if you could comment on the retention of existing clients. 1 of your competitors yesterday commented that the drop off that they witnessed from existing clients had gone down considerably. Is that an industry trend?

Hello, it's Ken. How are you? It sounds like there's multiple questions within a questions, so I will do the best I can to answer what I heard.

As far as the growth that we are seeing, I would say 50% of the organic growth is coming from net new clients that have never been on our books. And hence, it's why in our script we said that we added 9 new logos. And that is something that, frankly, is a trend that we have been seeing over the last probably 4 or 5 quarters, and we feel very good about that. Because we have a very intentional goal to add new high potential logos that have deep potential, deep opportunity. That said, these projects are clearly -- these clients, although they are multinational clients, they appear to be starting out a bit smaller than they historically have. But they have tremendous potential for growth, and since we are a Company that's always had a track record of growing our embedded base, we feel very good about that.

The other 50%, to answer your question, is coming from our embedded base giving us new projects and new business. And so I think for now, it's about a 50-50 split.

Just to your earlier point, what we have discussed before, Ken, are these more complex deals that take a long time to ramp, is that what you're saying? Given your differentiation vis-a-vis your competitors and the nature of contracts, do you see what other people see?

I would say the only thing that is adding length to the ramp is when clients are starting out on the strategic consulting side, and they are doing a 90 to 180 day consulting project that then has the opportunity to then convert to and operate and execute model. Outside of that, I would say that our ramps feel pretty typical to what they have been running, and that although we are very focused on really only looking for business that in fact is complex, we have made it very loud and clear to our sales force that we are really interested in only working with clients who truly believe that service is a differentiator to their brand. And the clients who in fact are focused on service being just simply a commoditized expense, we think there's probably other places they best go.

Okay. Good deal. Thank you.

Thank you.

Thank you. Our next question is from Manish Hemrajani with Oppenheimer.

Good morning, guys. Good quarter. Can you comment on the pricing environment you're seeing out there? What kind of competitive pressure are you seeing, especially in the new client wins?

I think that what we're seeing on new clients is that for -- where we truly are able to demonstrate a unique outcome, we are in fact finding that the environment is fairly reasonable. I think when our people are having to deal with a procurement department that is not focused on the business outcome that the business division is focused on, then I think sometimes it gets competitive, but for the wrong reasons. And so, it is our job to escalate that, and to basically demonstrate that we are providing a differentiated outcome. And what we are basically starting to show our clients is, you need to measure us off of your desired outcome and the total cost of that desired outcome versus measuring us off of a traditional procurement unit of hourly or a price per minute, et cetera.

And we are finding that there is so much business that has gone into the marketplace, historically, that we never took, that was done solely on price, that is now boomeranging out from a defect standpoint, because the clients' net promoter scores are sinking, or their CSAT scores are sinking, or their DSAT -- dissatisfaction scores are going up, that's it's actually creating a very significant opportunity for us.

So again, we are always going to tilt towards the higher end, the quality side of the marketplace, and we are going to stay away from this kind of less for mess, lift and shift type market. So that's not to say that we are not seeing some areas where it gets crazy competitive on pricing. And frankly, if it doesn't meet our margin standards, then we know when to put our guns down and move on down the road and let someone else benefit from accepting that type of pricing.

Okay, got it.

I think the most important thing, though, that you should know about this is, there is plenty of business out there right now. And so, we can be very picky on what business that we choose to bring on. Instead of just trying to win every single deal, we want to win the deals that we know we can make a difference, we know we can have an impact on, and that, frankly, that's a good fit with us and that's going to stay with us. And that's why most of our clients have been with us over a decade.

Got it. With Judy moving on to a larger role within the Company, what is your longer-term plan for direct lines? Is she going to continue to handle direct lines longer-term, or are you looking to back fill someone in that role, either internally or externally?

I think it's too early to say. It's safe to say that Judy is a seasoned sales executive. She has been in sales and marketing her entire life. We are very impressed with what she has been able to do, in her 4 years, or 4-and-a-half years, with us. I am very confident that she can handle this responsibility. And we are doing all the necessary appropriate things to provide her with a staff and capabilities so that she is not distracted and so that she can in fact handle this job and accomplish the mission, which is to really focus solely on growth and client diversification -- profitable growth and client diversification. So we are very, very comfortable. We are very excited. I'm very close to Judy, and I think the overall team is very energized that she has taken this role.

Okay. Also, can you break out the contribution of [red lines] and on-demand in the quarter?

You know what, we have multiple other people that are waiting to ask a question, so if you wouldn't mind just getting back into the queue, because we need to honor -- thank you.

Thank you. Our next question is from Shlomo Rosenbaum with Stifel Nicolaus.

Hello. This is [Steven Shu], in for Shlomo. How much revenue did eLoyalty contribute in the quarter, and were any of the bookings this quarter from eLoyalty?

Yes, this is John. Relative to eLoyalty's contribution, it is about $6 million for the quarter. And in terms of the signings, we did not include their signings in what we've talked about at this point in time, just because, again, it's one month of activity.

Okay. Thank you.

Thank you. Our next question is from Matt McCormack with BGB Securities.

Hello, good morning. The offshore contribution, the actual dollar amount, seems to have been pretty stable over the last few quarters. And I guess, how are you incorporating offshore into this strategy of high-quality services? Is it integrated into it or is that type of delivery location more along the lines of the competitive pricing and not necessarily integrated into the technology and the high-quality?

Absolutely, without a doubt, our goal is for all of our capability in all of our functionality to operate in every single country that we deliver out of. The technology platforms are identical, the processes are identical, there is a huge focus on a golden thread of sales and upselling and cross-selling. There is a huge focus on data analytics, it's being taken advantage of across the globe.

And so to answer your question, no, it is not in any way, shape, or form about offering a down market or price -- you know, some type of a blue-light special type service. That's exactly what we are running away from and don't want to participate in.

Okay. Thank you.

Thank you.

Thank you. Our next question if from Tobey Sommer with SunTrust.

Thanks. Wanted to ask you a question about a couple of catalysts, or at least potential catalysts in the marketplace. A large wireless carrier here in the states decided to kind of break apart its all-you-can-eat data and maybe make buying decisions a little bit more complex. If that gets adopted to an industry phenomenon and pricing schemes increase as opposed to decrease, can that be a catalyst for the space?

And then, I was wondering if the telecom changes in Australia with the asset sale and the government kind of playing a bigger role, can be a catalyst for more work for you as well?

What I would just tell you is that we are working on multiple strategies that create the growth that we are putting out there. Not just in the common media market, but in virtually every market we serve. We have very unique strategies for both healthcare, financial services, government, et cetera. In every case, we are focused on helping our clients manage either an entire segment of their customer base or an entire product offering, end-to-end, so that we can take absolute responsibility and can demonstrate to them the impact that we are having on retention, on growth, on NPS, on CSAT.

And so what I would just say to you, as far as the changes that some of these telecom companies have made to mitigate the high demands for bandwidth, my personal opinion is, of course it's going to create a fair amount of activity, but at the end of the day, I really believe that it's somewhat temporary. And I say that only because I think these are just temporary measures to throttle the network back until they can build out the new capacity. And so I think that by 2013, they're going to have a fair bit more capacity, all the 4G networks will be fully built out, and I think they're going to have no choice but to go back to some form of a more of an unlimited type plan.

But you are you are correct when you say that yes, there is naturally going to be a lot more people that are going to be interacting and questioning their data usage plans. And frankly, it's going to cause a lot of switching as well. Especially with the iPhone device becoming more ubiquitous across more networks. That in itself is now going to take customers that historically were locked into 1 brand and couldn't leave because of their iPhone, now they have more than 1 choice.

So I think that this sector is certainly seeing all kinds of change. And at the end of the day, we are very excited by a lot of the future offerings that we see and how we can capitalize off of them.

Thanks, Ken.

Thank you.

Thank you. Our final question today is from Josh Vogel with Sidoti and Company.

Good morning. Thank you. I just had a question about the signing of business from new clients. I was wondering if you could talk a little bit about the dialogue you're having with these clients. Are they coming to you for the more traditional work, or is it being driven by the addition of the new services you've added into the mix, or maybe it's pricing?

I think that it's safe to say that we have a pretty significant group of people that are coming to us for something different than what they currently have. And I think that we are really focusing on that segment of clients kind of have had this -- for lack of a better term, a bit of an epiphany on that trying to just do this in a mess for less environment does not drive customer engagement. And what we are doing is we are showing them, in a quantifiable, empirical way, that if you treat the customer and if you design a capability where the products and the services are in fact designed around the customer's needs and the household needs, that at the end of the day, you're going to have a much stickier customer that ultimately is going to spend more of the household with the company. And so we have just a ton of projects that are focused around that. And we think that that is the future.

And so our goal is not about how many new sites can we build in a third world country, but instead, it's really about how do we maximize the revenue for our clients as it relates to the customers? And then ultimately, how do we maximize the revenue per our own employees? And I think you're going to see, over time, that our revenue per employee is going to start to show signs of growth. And we think that that's ultimately how we will benefit from the margin, from margin growth, because frankly, our clients are only willing to pay us more if we are delivering more, and therefore, we need to be able to demonstrate that on a daily basis.

Okay. Thank you.

Thank you. And I do have 1 final question from Ashwin Shirvaikar with Citi Bank.

Hello, Ashwin. Ashwin?

Sir, please check your mute button.

Hello. Sorry about that, I did have my mute on. Ken, so just following up on the question that I had asked, are there -- with the signing of these new deals, are there start up costs involved that could temporarily maybe hurt the margin ramp that you might otherwise see from higher utilization?

And then, a related question to that is on CapEx. As your CapEx sort of ramps into the second half of the year, is there anything unusual in that CapEx? Is it the normal stuff or is it more IP type stuff?

Ashwin, it's John. Relative to the impact from margin. Obviously as we have looked at our growth and indicated what it's going to be, we've taken into consideration what we would see as any margin impact from those particular ramps. So we are not seeing that there would be anything unusual, from a cost perspective, that would hit our results as a function of those ramps.

In terms of CapEx. Again, as we look towards the latter half of the year, that CapEx again will be a combination of both capacity as well as IP. We continue to invest heavily in the technology offerings that we are bringing to the market, not only in the near term but also down the road, to make sure that we have the right technology to maintain our competitiveness.

Okay, great. Thank you.

Thank you very much.

Thank you. I'd like to turn the call back over to the speakers for any closing comments.

Thank you. We don't have any closing comments, but we appreciate everyone joining today's call and we will be available for questions afterward. Thank you.

Thank you. This concludes the TeleTech second-quarter 2011 earnings conference call. You may disconnect at this time.