TTEC Holdings Inc (TTEC) 2016 Q3 法說會逐字稿

Welcome to the TeleTech third-quarter 2016 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 Paul Miller, TeleTech's Senior Vice President, Treasurer and Head of Investor Relations. Thank you. Sir, you may begin.

Good morning, thank you for joining us today. TeleTech is hosting this call to discuss its third-quarter 2016 results ended September 30. Participating on today's call are Ken Tuchman, our Chairman and Chief Executive Officer; and Regina Paolillo, our Chief Financial and Administrative Officer.

Yesterday TeleTech issued a press release announcing it's preliminary financial results for the third-quarter 2016. While this call will reflect items discussed within those documents, we encourage all listeners to read our most recent Quarter Report on Form 10-Q.

Before we begin, I want to remind you that matters discussed in today's call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based on Management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call and we undertake no obligation to revise this information as a result of new information that may become available. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause our actual results to differ materially from those described.

Such factors include, but are not limited to, reliance on several large clients, the risk associated with lower profitability from or the loss of one or more significant clients, execution risks associated with ramping new business or integrating acquired businesses, the possibility of asset impairments and/or restructuring charges, and the potential impact to the financial results due to foreign exchange rate fluctuations. For a more detailed description of our risk factors, please review our 2015 Annual Report form on Form 10-K.

A replay of this conference call will be available on our website under the Investor Relations section. I will now turn the call over to Ken Tuchman, TeleTech's Chairman and Chief Executive Officer.

Thank you, Paul. Good morning all. Last quarter we shared two areas of focus. First, to align our organizational priorities to provide more consistent levels of profitability; and second, to accelerate and a deliver more predictable revenue growth. We've been quick in our execution, and are already seeing results. Let me share some highlights.

To immediately improve our profitability, we focused on key initiatives, simplify and streamline how we operate our business. The result of these activities are already evident in our improved capacity utilization and margins from second quarter to third quarter. On an annualized basis, these initiatives will provide an estimated additional 250 basis points of operating income margin. Regina will share more details shortly.

To strengthen our revenue growth, we are refining our go-to-market approach for both our segment specific and integrated solutions. We've been upgrading our sales talent and simplifying our sales organizational structure. In addition, we're now leveraging our customer strategy services consultants to lead account planning for integrated, multi-segment deals. We're already seeing larger, more complex solutions in the pipeline and we are confident that this shift in our go-to-market will accelerate growth in segment specific and integrated opportunities.

Additional focus has been placed on two areas where we are taking supplemental action. While the performance of our customer strategy services segment is improving, the operations in the Middle East region are unfortunately negatively impacting overall segment results. The headwinds in the region continue to create challenges.

In our customer growth services segment, we signed 14 new clients over the last 12 months, and continue to see increased market demand for our digitally enabled revenue generation capabilities. This quarter, however, it became clear that our variable pricing model was not meeting its margin potential. We've taken swift action to adjust the commercial terms with a handful of underperforming programs, and will begin to see the benefits of these new agreements in the first quarter. While Regina will provide additional insight, I'm highly confident that we will have this segment back on track with double-digit operating margin in the near term.

It is important to note that while we made these changes across our operations, we continue to improve the quality of our delivery. We measure client satisfaction using net promoter score, or NPS. The same scoring methodology that the majority of our clients use with their customers. We just completed our semi-annual survey and have received the best scores in our history. Our collective NPS for the entire solution portfolio has risen by 28% over the last six months.

We're focused and determined to improve the fundamentals of our business, and we are making decisions based on what our clients needs and where the market is heading. As a result, we plan to better align our business segments to make it easier for our clients and prospects to understand and realize the full value of our multi-threaded integrated solutions.

Let me provide more detail. It's clear that strategy and technology are converging in the design and delivery of the customer experience. Our CTS clients are asking for customer journey management strategies and our CSS clients are asking for guidance on technologies decisions. Our plan to more closely align these segments in 2017 will deliver more valuable outcomes for our clients, while improving operating efficiencies for our businesses.

Are we content with where we are? No. Are we keenly focused on what we need to do to achieve our vision? Yes. And most importantly, we're moving quickly across multiple fronts. Here are some examples.

We are leveraging strategic relationships with global channel partners to accelerate market penetration for our technology solutions. Through our newly announced partnership with Verizon, this quarter we closed our first joint-cloud deal. This mutually beneficial relationship provides Verizon with our world-class cloud offering, while providing us with access to their Fortune 500 client base.

In addition, this quarter we announced a new partnership with Verint to bring an end-to-end workforce management solution to the market. This cloud solution will be hosted within TeleTech's high availability data centers. We are enthusiastic about the increasing value -- our channel partners strategy and we expect to announce several new relationships and clients as a result of these partnerships in the future.

To expand the value of our platform, we've intensified our focus on acquisitions. As part of this strategy, we've announced the acquisition of a Canadian-based customer experience provider, Atelka, with headquarters in Montreal, Quebec, Atelka has approximately 2,800 employees in 4 provinces. The company serves leading Canadian-based clients in comms and media, logistics and entertainment with strong leadership, a dedicated employee base, and a long-term client relationships. We look forward to welcoming Atelka employees and clients to the TeleTech family.

Our M&A pipeline is robust. We're actively seeking additional assets to augment our vertical expertise, provide new capabilities and expand our client base and service delivery footprint. Now I'd like to provide some context on the dynamics in the customer experience marketplace.

We are living in a world where everything we want is just a button away. The rise of new channels, the merging of the physical and the digital and the 24/7 always-on access is fundamentally changing the way we live, work, and relate to one another. There's no going back.

Companies all over the globe are rethinking how they interact with their customers across every phase of the lifecycle. They are trying to understand and seamlessly choreograph their customers journeys, from the moment the customer starts doing research on the Web to when they make a purchase in the store. The more invisible the technology is, the better and more human the experience can be.

However, decades of complex systems, outdated technologies and convoluted processes are not able to integrate channels and simplify the experience. The old way is broken. It's not flexible, fluid, or customer focused. Companies need dramatically new ways to compete in this digital marketplace. Changes of this magnitude requires thoughtful planning, investment, and strong relationships with strategic partners.

Companies need ways to more costly contact centers into self-funding revenue hubs, turn single communication channels into omni-channel networks, and move static legacy systems into the cloud. They need partners who can help them solve their immediate contact management challenges today, while laying the foundation for digital transformation initiatives in the future. They need partners like us.

Over the past several years, we have been deliberate and methodical in building our customer experience interaction hub. We have created a scalable platform of people, processes, data and technology, that enables the full range of capabilities required to thrive in this always-on, always-connected, and always-engaged world. We've invested hundreds of millions of dollars to assemble the consulting, technology, analytics, digital, and operational assets essential to deliver what our clients need today and in the future.

We could've taken the easy route and built scale by investing in commodity services like many of our heritage peers. That strategy might have yielded better top-line growth and profits in the short term, but we knew it would not be sustainable. We listened to our clients and made the conscious decision to look out into the future and differentiate ourselves as a more outcome-based, value-oriented strategic partner.

Our transformational journey has not been straightforward. We have had to continually reinvent ourselves to be relevant for the long term. Our strategy has required that we make trade-offs to balance our growth ambition with our profitability targets. While we still have much more work to do, I'm proud to say that we have made the pivot from a tactical vendor to a strategic partner.

Cost conversations have turned into value discussions. It is indisputable when we provide clients with solutions that help them deliver simple, intuitive, and fluid experiences, their customers stay longer, spend more, and become advocates for their brands. Our holistic approach enables outcomes that our clients want and need.

We are a Company with staying power. For 34 years we have consistently invested in our business to return benefit to our clients, employees, and shareholders. We've continue to maximize the strength of our balance sheet while repurchasing stock, increasing our semi-annual dividend and investing in organic innovations and M&A.

We remain confident in the strength and value of our platform, and the talent and dedication of our global employee base. We appreciate your continued support, and I will now turn the call over to Regina.

Good morning. There's three topics that I will address in my comments this morning. [I'd like to] third-quarter 2016 financial performance, the restructure activities we have initiated, and our updated guidance.

On a GAAP basis, the Company reported revenue of $312.8 million, up 1.2% over the prior year. Operating income was $12.3 million, a 3.9% operating margin versus 5.1% in the same quarter last year. Operating income was adversely impacted by $9.5 million of one-time restructure and impairment charges related to the Company's realignment and profitability initiatives. Excluding these charges, the operating income margin is 7%.

During the third quarter we initiated a significant profitability improvement program. The program provided approximately $4 million of operating income improvement in the quarter. Had the program been in place for the full quarter, the benefit would have been approximately $8 million, and the operating margin would've been 8.4%.

Diluted earnings per share was $0.24, up $0.23 in the prior year period. Excluding one-time restructure and impairment charges, losses on assets held-for-sale and other income related to the release of acquisition-based contingent liabilities, EPS was $0.39 per share. New business signings in the third quarter of 2016 were $87 million, compared to $133 million in the prior-year quarter and $113 million, sequentially. The lower bookings volume was anticipated in the near term as we refine our sales and marketing platform.

In the quarter, we did sign 12 new client relationships, including a major healthcare payer, a top-3 property and casualty insurance provider, and a fast-growing digital on-demand delivery service. Additionally, we extended our relationships with a large auto brand in the Mexican market. Our existing client relationships continued to be a highly reliable source of growth. We have a number of noteworthy examples of growth within the quarter bookings.

Two of our top comm media clients adding volume equaling $11 million and $7 million, respectively, and a leading human resource software and services client added nearly $10 million of new volume. The effective tax rate was a negative 7.4% in the third quarter of 2016 versus a positive 8.7% in the prior-year period. Normalized, the tax rate was 11% down from 15.3% in the prior year.

Cash flow from operations was $54.1 million in the third quarter of 2016, compared to $30.7 million in the year-ago period. DSO was 77 days in the third quarter, unchanged over the prior year, sequentially DSO improved by one day. Capital expenditures were $11.1 million compared to $19.7 million in the prior-year period. We expect full-year 2016 CapEx to approximate 4.2% of revenue.

Capacity utilization in the third-quarter 2016 was 71%, unchanged over the prior-year period and up 1%, sequentially. We now expect our utilization to be above 80% in the fourth quarter of 2016. During the third-quarter 2016, TeleTech repurchased approximately 742,000 shares of common stock for a total cost of $21.2 million. We also announced, yesterday, that TeleTech's Board of Directors approved an additional share repurchase authorization of $25 million.

Regarding dividends, TeleTech declared a semi-annual dividend of $0.20 per share on the third quarter, an 8% increase over the prior-dividend payment. Cash and total debt at quarter end was $61.3 million and $140.9 million, respectively, resulting in a net debt position of $79.6 million. This compares to a net debt position of $36.7 million in the prior-year period and $90.9 million last quarter.

Over the past 12 months through September 30, we returned $75.6 million to shareholders through share repurchases and dividends, spent $56 million in CapEx of which approximately two-thirds is growth oriented, and invested an additional $17.2 million in acquisition-related activities. This was offset by positive cash flow from operations.

Moving now to a review of our segments, my comments will reference the non-GAAP constant currency results. Customer management services revenue was $223.8 million in the third quarter of 2016, up 5.2% over the prior-year period. CMS's operating income in the third quarter was $13 million or 5.8%, compared to 4.4% of revenue in the year-ago quarter.

The improved revenue growth rate and operating income margin in CMS is reassuring. It confirms our view that the first half growth in margin challenges were short term, and primarily related to lower exchange volumes in healthcare, and repatriation of offshore jobs with a large financial services client. Excluding the $10 million impact of the repatriation of jobs, CMS's third-quarter revenue growth was approximately 10%.

We anticipate sequential top-line growth third quarter to fourth quarter of approximately 15%, including Atelka, and operating margin of approximately 9%. The margin expansion is in line with the increase in volumes, inclusive of seasonal work, increased capacity utilization, and the benefit of the restructure initiative.

Customer growth services third-quarter 2016 revenue was $35.3 million, up 4.2% over the year-ago period. Operating income was $0.2 million or 0.6% of revenue, compared to $2.8 million or 8.3% in the prior year. Year to date, CGS reported year-over-year revenue growth of 18.4% and operating margin of 4.3%.

CGS's top-line growth and profitability is short of our original expectations for 2016. There are two specific and manageable issues causing the gap. The first issue relates to the lost client we discussed in our last earnings call, which is having a $10 million impact on revenue in the second half. This client, despite healthy returns, decided to take their go-to-market in a different direction.

As Ken mentioned, market adoption or outcome-based inside-sales solution, continues to be strong with new and existing clients. However, our growth rate in CGS will be flat third to fourth quarter due to this client loss.

The second issue relates to an imbalance in the economics of CGS's revenue versus client benefit. We're delivering the client committed returns, but we're not seeing the expected CGS margins.

As part of this quarter's restructure activities, we initiated a handful of actions aligning client delivery and outcome with CGS's profitability. Collectively, these changes will improve CGS's margin from 0.6% to approximately 6% third to fourth quarter, with continued improvement into 2017. Customer technology services third-quarter 2016 revenue was $36.6 million, down 13.2% from $42.1 million in the prior-year period.

Operating income was $4.8 million or 13.1% of revenue in the third quarter, up from 9% or $3.8 million in the same period last year. Revenue was down primarily due to a reduction in volumes related to the Avaya platform and Cisco product in the markets increasing adoption of cloud solutions. The positive movement in the operating margin is due to improved utilization of our cloud and managed services platform and rationalization of the Avaya cost structure in line with our go-forward strategy.

We expect our CTS revenue and operating income margin to sequentially decline third to fourth quarter with revenue in the range of $30 million to $32 million and operating income in the a 8.5% to 9% range.

Customer strategy services third-quarter revenue was $17.4 million, down 15.1% from $20.5 million in the year-ago period. The segment's operating margin was $0.9 million or 5.3% of revenue in the third quarter of 2016 versus $3.3 million or 15.9% revenue in the prior-year period. The revenue decline is related to the continued decline in the Middle East business. Based on the third-quarter and early fourth-quarter bookings, we expect this part of the CSS business to show further improvement in the fourth quarter.

Overall, the business is estimated to grow revenue approximately 5% sequentially, with operating income estimated at 10% to 12% on improved utilization. As indicated in our second-quarter earnings call, we've initiated a number of activities supporting the improvement in our profitability.

Across the Company we've seen significant a sense of urgency to make the necessary changes sooner rather than later. The annualized impact on the actions we have taken in the third quarter is $32 million.

Based on our 2016 revenue guidance, this represents a 250 basis point improvement in our operating margin and includes the following: Integration of our sales resources into the segments and rationalizing sales and marketing activities to maximize our focus on those demand generations and conversion activity driving the highest returns; outsourcing and/or deprioritizing certain non-essential activities; exiting certain assets, which have modest strategic contribution and are dilutive to our operating margins; and remediating CGS's client profitability debt.

While we are pleased with our progress on the profitability front, the impact of top-line initiatives will require more time. As a result, we are updating our guidance. We now estimate full-year revenue in the range of a $1.265 billion to $1.270 billion and full-year operating margin in the range of 7% to 7.2%. Full-year CapEx is unchanged at 4.2% of revenue. While the Atelka acquisition is relatively small, the updated guidance does include its [in]-year contribution.

Go-forwards for the full-year impact of a $32 million of profitability improvement, 2016's operating income would be 9.3%. We look forward to sharing the details and progress against our plans during our fourth-quarter earnings conference call.

A quick comment regarding our progress to remediate the material weaknesses in our internal control system, we're advancing the actions we outlined in our 2015 Form 10-K, and continue to work toward the goal of having these weaknesses remediated by the filing of our 2016 10-K.

We've extended the time to file our Form 10-Q to allow our internal and external accountant sufficient time to ensure the adequacy and completeness of our accounting regarding the restructure, impairment, and losses on assets held-for-sale. We expect to file the 10-Q by November 14 in compliance with the extended deadline. I will now turn the call back over to Paul.

Thanks, Regina. As we open up the call, we ask that you limit your questions to one or two at a time. Operator, you may now open the line.

At this time we will begin the Q&A session.

(Operator Instructions)

First question is from Mike Malouf, Craig-Hallum Capital Group. Your line is now open.

Great, thanks for taking my questions.

Hello.

Could we just focus a little bit on the CGS side, going from 10% operating margins to flat and then, obviously bounce back a little bit. Can you just talk -- give us a little bit more color on specifically what you are doing with regards to profitability in that section? Thanks.

Sure. So, CGS, as you know, is in the business of basically providing demand generation of leads that we create digitally, and then those leads then get converted to actual sales, and we are responsible for not only delivering the leads but then converting and delivering the sales. And in some cases, with a handful of clients, we have a high variable component to the pricing model, which is something that actually we don't mind having.

Unfortunately, on, like I said, a handful of clients, let's just say four-ish, five, type clients, frankly, we got the models wrong. That yielded dramatically lower profitability than what we modeled and what was expected. We learned a lot from that, and we took swift action because we were delivering high-quality, large quantity of net new revenue to these clients. We went back to the clients, we showed them what the problem was, and where we made some assumptions that were not accurate, some of which was based on client feedback, and we adjusted the contracts, of which go into effect no later than January 1.

So, we're very confident that this will have the impact that we need it to have, and will bring us back to the double-digit margins that we expected. So, it's something that we're not proud of. We are embarrassed of it, and, frankly, it's something that we should've caught earlier on. But the good news is it's behind us, and thankfully, our clients have been very cooperative with the action that was needed to be taken. And so I think it will be back on track and you'll start seeing those results in the first-quarter time frame.

Okay, great. That's very helpful. And then just a follow-up. You know, your comments about M&A, I think is a little bit new. Obviously, a big focus there for you, it sounds like.

Can you talk a little bit about the pipeline? Are we talking about a lot of smaller-type opportunities like the Atelka that you just announced, or are there some larger opportunities in there? Thanks.

Our strategy has always been too never bet the Company on a large -- on a very large deal. We think that, that typically enters too much risk and we are pretty conservative. What I would say to you is that the pipeline that we're looking at and that we are working right now would fall under the category of tuck-ins.

Some might be larger than the Atelka, and some may be slightly smaller but I would say in that range, in general. And the truth of the matter is when you say that it hasn't been the focus, it's actually been the focus. We look at a large amount of M&A deals every single month. We have a dedicated M&A department, and when we think something is -- when we don't see the quality that we are looking for, or something that we believe is going to be accretive, we pass.

And so, what I would say to you is, is that we are now entering a phase where we are starting to see some interesting assets, and we're hopeful that we can convert more of what we see in the pipeline. So, we've always been focused on increasing shareholder value, and as I mentioned in the script, our levers have been M&A, and have been dividend and have been share repurchase, and we really have no intentions of changing that strategy.

Okay, great. Thanks for the help.

Thanks, Mike.

Thank you. Next is Bill Warmington of Wells Fargo.

Good morning, everyone.

Good morning.

First question for you, I wanted to ask about Atelka to see if we can get some details there. Revenue, growth, margins, how much has contributed to the fourth-quarter guidance. Back of the envelope it looks like, assuming the same revenue per employee as TeleTech, it would imply about $8 million of revenue, and the rationale for it?

On the one hand you're talking about not investing in commodity services business, but this would seem like pretty much plain vanilla call center company with a big Telecom concentration. So, I'm trying to understand that dichotomy there.

Yes, how about if I answer the last part of the question, and then we will have Regina answer the first part of your question. So, Canada is a market that we've admired for quite some time, and based on what we're seeing going on in the world right now, we think it's one of the most stable countries in the world. And so, we're very interested in being active in the Canadian market.

And what we have learned over the years is that, it's one thing to operate in Canada and to provide a near shore capability. It's another thing to operate in Canada and provide in-country services. Our focus is in-country services. We wanted to acquire a company with a Canadian management team that had access to the unique Canadian market that we think is, like I said, very interesting, very stable.

And that was really our main decision behind this and that we felt that we needed a platform in Canada. And we've said all along to our investors that geographic expansion is important to us, and that we're going to be very careful in making sure that where we bet that geographic expansion is going to be areas where we believe we can find stability and that we can find growth. The economy in Canada could not be any better right now. And so, consequently, this is our way of putting our toe into the water.

As far as commodity services, what I would say to you is the following. What we are finding right now is that our richest source of revenue is our embedded base. And that when we take on embedded base clients and we show them how we can dramatically change their business through all of our other offerings, we are having tremendous success.

We met with all the key Atelka teleco clients, and we are very confident that they have a significant need for the capabilities that we have that can make them easier to do business with, and can allow them to be more fruitful in their net new customer acquisition, as well as lower their cost to serve in a more frictionless way. So, what I would say to you is, is that I think you should stay tuned.

I think you'll see that we'll do just fine with this asset and we will not only expand the embedded base, but we will also expand within several new clients that we already have a beat on in Canada that, frankly, we were not really qualified to provide services to because we did not have Canadian assets from a delivery standpoint. I'm going to stop there and let Regina take on your other question.

Yes, this is -- this acquisition will represent about 6% of CMS's current revenue. From a EPS point of view, it's a very slight accretive. It will not add materially in the quarter to our operating income, meaning Q4 or EPS, just in the sense that we had acquisition costs that will be expensed in quarter as well. But I would think of it as, the size of it about 6% of our current CMS business.

Good, thank you. For my second question, the commentary around the new business sounds very positive, and you are getting a lot of opportunities for cross-sell and upsell. But the new business signings of $87 million, that's the first time the new business signings have been down below $100 million since I think fourth quarter of 2012. Again, seems and there's a disconnect there. Maybe it's a timing issue but that seems like an important question to ask.

Yes, it is a timing issue. We made the decision a couple of quarters ago that we needed to do things very differently to take advantage of all the capabilities that we have. And in the process of making some organizational changes and in the process of inserting sales into the individual business units, and then bringing forth our consulting to provide strategic solutions on an integrated offering across all of the different business units, there's no question that, that slowed us down as we went through that shift in that change.

We're not in any way apologizing for it. We're going to always do what's right for the business over the long-term. And based on what we're already seeing and the types of deals that we're now seeing in the pipeline, we are pleased that we made these decisions and that the deals are far less tactical, and the conversations are much more strategic.

So, I do agree with you. We would like to see the bookings where they were, historically, but we're confident that over time that we'll get them back, and that the bookings will be higher quality bookings that yield better margins.

Thank you for the insight.

And, lastly, and most importantly, that more of the deals that we will be seeing will be deals that are looking for an overall integrated solution that starts with strategic consulting or technology, and then goes through the other divisions.

All right, thank you for the insight.

Thank you, Bill.

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

Good morning. Thank you for taking my questions. What are the non-strategic assets that were sold? What's the impact -- what has been the impact of those assets through the balance of the year and in the quarter, what's going on there?

Based on a couple of things, the assets held-for-sale are within the CGS and CSS segments. The primary focus there is shift in strategy, tightening geographic focus and adjust prioritization around outcome-based sales outsourcing. They're small in total. They'll represent about $15 million to $16 million. They are not sold yet.

They are, once you make a decision to sell, you are required from an accounting point of view to hold them for sell. And you are putting yourself in a position as if you sold them, and so you are seeing in the accounting and you will see it in more detail when the Q is filed. You know, the write-off of not only the loss, which is sitting in Other Income and Expense, of collectively between those two assets about $5.3 million, but you will also see that it impacted other intangibles.

So, small from a revenue point of view. A drag on our revenue. We don't view these components critical to a go-forward, and obviously from a market point of view we're going to be very careful about, obviously identifying the specific assets at this point.

Okay, and is there -- can you just comment a little bit -- you had good growth in the CMS business. It's actually, basically, in line to what I would expect in a regular basis or probably ahead of what I would expect, 5% growth from this area.

What drives the growth better -- excuse me, the margin better? The growth seems like it's there and there some ramp costs that happened in the quarter or some seasonal issues that I have to make sure that are more focused on?

So, look, -- so first of all, I want to make the comment again because this is critically important, we're getting through now our last quarter of the impact of this repatriation of business from the Philippines to the US for this Financial Services client. So, that was a $10 million impact in Q3, it will be slightly less in Q4, but once we get through Q4, we're done. That has been a major shift for us.

If you pro forma last year as if that volume was not there and do an apples-to-apples today, the CMS business would have grown in the quarter 10%. The margin came up very nicely in CMS from the kind of 5% in Q1 and Q2 to its 7% in Q3.

We have, as you know, a restructure these profitability improvements. We only had a piece of that, the bulk of that restructure, right, will benefit the CMS business.

So we're, we're very confident. I made a comment -- and going from Q3 to Q4, we're very confident, you'll see that -- that margin at 9%, and improving from there.

Can I squeeze in one more?

Go ahead.

I'm just trying -- is there a difference in definition between income from operations and EBIT? Income from operations is $12.267 million and when I go to the EBIT on the reconciliation between EBIT and EBITDA, it's $12.023 million and I am wondering if there is a definitional different there?

Just give us a second.

Between EBIT and what?

Income from operations. Take the P&L income from operations and then the next page will have a reconciliation of EBIT and EBITDA, and there the EBIT number is $12.023 million. There's like $2.44 million missing, I'm wondering if there's a definitional difference?

Yes, it's going to be, it's going to be FX. I mean, so, let me just say this, I think what you were doing is you're kind of doing two things. When you look on the top of that schedule, right, it's really from a GAAP point of view, it's reconciling EBITDA to EBIT. So that's a GAAP basis.

When you're looking down below and you're seeing kind of the non-GAAP income from operations of $21.6 million. It's non-GAAP. It's not going to have restructure and impairment, and those two types of things.

I'm just trying to figure out if I start from $11.232 million and add back the numbers, you get $12.023 million. I'm wondering --

The difference between the $12.023 million and $12.267 million? It's going to be FX.

So, there's an FX headwind embedded in -- or there's a tailwind in the P&L and it's removed in the schedule?

Yes. This is when we translate our balance sheet at the end of the month and at the end of the quarter, we're going to have some FX. And that's going to be the difference. It's not -- it doesn't have anything to do with the hedging we do relative to our contracts. Okay. I'll get more detail, I'll follow up with Paul. Thanks.

Thank you.

Thank you for your questions and that is all the time you have today.

Thank you all.

This concludes the TeleTech's third-quarter 2016 earnings conference call. You may now disconnect at this time.