Welcome to the fourth quarter and yearend 2013 earnings conference call. (Operator Instructions) I would now like to turn the conference call over to Mr. Paul Miller, TeleTech's Senior Vice President and Corporate Treasurer. Thank you, sir, you may begin.

Good morning and thank you for joining us today. TeleTech is hosting this call to discuss its fourth quarter and full year 2013 results ended December 31. Participating on today's call are Ken Tuchman, our Chairman and Chief Executive Officer; and Regina Paolillo, our Chief Financial Officer. Yesterday, TeleTech issued a press release announcing its financial results for the fourth quarter and full year 2013. While this call will reflect items discussed within the press release, we encourage all listeners to read our most recent annual and quarterly reports filed with the SEC. Before we begin, I want to remind you that most matters discussed on 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 opinions 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; risks associated with lower profitability from or loss of one or more significant clients; execution risks associated with ramping new business or integrating acquired businesses; the possibility of assets impairment and/or restructuring charges; and the potential impact to the financial result due to foreign exchange rate fluctuations. For a more detailed description of our risk factors, please review our most recent Annual Report on Form 10-K. A replay of this conference call will be available on our website through our Investor Relations section. I will now turn the call over to Ken Tuchman, our Chairman and Chief Executive Officer.

Thank you, Paul, and good morning to everyone. We had a strong fourth quarter to finish 2013. These solid results demonstrate that our holistic customer experience strategy is taking hold and our ability to execute is accelerating. Our focus on partnering with clients to build meaningful and profitable relationships with their customers continues to deliver value and is increasingly differentiating us in the marketplace. Now, for a few financial highlights. Our non-GAAP revenue grew over 11% to $326 million on a constant-currency basis in fourth quarter over the same period last year. Our non-GAAP operating margin improved to 10.9% from 9.5% in the year-ago period. We had $80 million in new bookings in the fourth quarter, resulting in 2013's full total bookings of $365 million or 20% increase year-over-year. Our revenue mix continues to diversify. In fourth quarter, our strategy, technology and growth services segments represented 27.5% of total revenue, a 46% increase over the same period last year. For the full year 2013, more than 25% of our revenue came from the emerging businesses, up from 21% in 2012. Since 2012, 42 clients have purchased services from multiple business segments, up 75% from 24 clients in 2012. This progress demonstrates that we're successfully executing against our four strategic themes. First, deliver profitable growth with a holistic portfolio of high-value, strategically relevant customer engagement solutions. Second, increase market presence by accelerating investments in vertical markets, expanding into new geographies and developing key new client relationships. Third, accelerate innovation with new proprietary intellectual capital across all aspects of our business. And fourth, execute strategic and accretive acquisitions to add quality companies that broaden the depth, breadth and reach of our customer engagement capabilities. In 2013, we delivered on every facet of our growth strategy. Our topline grew 5.8% and our operating…

Thank you, Ken, and good morning, everyone. I'll start with the review of our 2013 full year results, segue into a discussion on Q4 '13, including segment results and end with our 2014 outlook. Our GAAP revenue was $1.193 billion, an increase of 2.6% from $1.163 billion in the year-ago period. On a constant-currency basis and adjusting for $37.6 million in exited business from Spain, our adjusted 2013 revenue was approximately $1.2 billion, representing a 5.8% year-over-year growth rate. Revenue from acquired companies in 2013, during their first 12 months, was $57 million. Our emerging segments, including CSS, CTS and CGS increased to 25% of total revenue in 2013, up from 21% in 2012. We anticipate this trend to continue, as we accelerate our investment in the emerging businesses, including the build-out of an integrated vertically focused sales platform. This is particularly evident in our fourth quarter 2013 revenue mix, whereby 27.5% of total revenue was derived from emerging segments. Our GAAP operating margin was 8.5%, up from 6.8% in the prior year. On a constant-currency basis and adjusting for restructure costs, operating margin for the full year 2013 was 9.4% compared to 9% in 2012. Operating income in 2013 from acquired companies, which were in their first 12 months, was $6.8 million. With fourth quarter's $80 million in bookings, our full year bookings were $365 million, up 20% over the prior year. The strong bookings growth was matched by a positive mix with contribution across all verticals, 90% from existing clients, 64% in recurring revenue, 50% from emerging businesses and 27% in international clients. Let me now review our fourth quarter, including bridging our GAAP to non-GAAP numbers. Fourth quarter GAAP revenue was $318.1 million compared to $295.3 million in the fourth quarter of 2012, up 7.7%. On a…

Thank you, Regina. As we open the call, we ask that you limit your questions to one at a time. Operator, you may now open the call.

(Operator Instructions) And our first question comes from Mike Malouf, Craig-Hallum Capital Group.

Question about the guidance. If I could just get a little bit of clarification, you're going to spend about $12 million to $14 million extra this year on sales and marketing and R&D. And I am wondering if you could just give us a little bit of color, is that a sustained number as we look out over the next few years of just a new level or is this a temporary rise in spending specifically targeted somewhere? Just wondering if you could just give us a little help on that?

What I would say is, is it's not a one-time expense. We are in the process of building our vertically oriented front-end to the business, which we call Global Markets and Industries. In this year, we put in place head of that group, Keith Gallacher, and had in place by the end of the year four CBU heads, Client Business Unit heads across financial services, healthcare, media, technology and diversified, which includes auto, retail and a couple of others. That organization largely got put in place in the second half of the year and some of it into Q4. So there is an annualization of that. In addition, we're building out an organization under them to ensure that we have a continue healthy penetration for additional business within our existing clients, so client executives who will be fully dedicated to clients, who are capable of being $50 million, a $100 million, a $150 million. And then second to that, sales executives. The other piece I called out is the investment in our go-to-market integrated solutions and the organization that supports that. Our ability to work with clients, not on specific capability, but their problems and challenges and to be able to engage those clients in our end-to-end capability, including each of our segments oriented and in the context of our clients in their vertical, in their processes, with consulting technology services, BPO and customer acquisition, BPO and customer care. So the bulk of that investment is a rise in our sales and end-marketing. And our view is that it's not so much that that step-up from our sales and marketing from what today is around $22 million to $34 million, that rise is not necessarily something that goes away, but the return is seen, first step, in terms of a continued growth in our bookings, and then second step, that we do see organically high-single digit into the low-double digit over the next 18 to 24 months. So let me stop there.

And our next question comes from Tobey Sommer, SunTrust.

In terms of the emerging businesses, which ones do you think are performing better than your expectations and which aspects are taking longer to develop?

I think that we're feeling actually really good about all of the segments. I think that CSS is growing at a nice clip and expanding. We're in a definitive hiring mode across the globe, adding consultants all over the world. I think our CTS business is very stable and also growing and meeting and exceeding our expectations, and have some really exciting opportunities in front of them, as it relates to what we're doing in the cloud. I think that our growth business is the one business that clearly was disappointing, as it relates to the organic growth. That said, we have stepped it up and we're seeing margins expand dramatically and we're seeing the topline growing as well and we feel really comfortable about us achieving our internal budgets that we have on our CGS unit on Revana. So all-in-all, I think we feel very good. And then CMS is showing some great growth. Also all these units have very strong pipelines. And the truth is, is that you're asking the question in a quarter where we feel really positive, across all the business units and how they're operating, and how customers are reacting and taking down their capabilities, let alone the fact, that we're seeing many of our clients taking advantage across multiple of our capabilities, which is obviously what the intention is of our strategy. So I don't actually have one that I think is per se concerning or lagging behind.

If I may just slip in a numbers question. I'm not sure I caught the breakdown, Regina, of the implied organic versus acquired growth in your guidance. Could you repeat that for me?

So on a constant-currency basis, our growth estimate is 6% to 8%. Of that, 600 basis points to 800 basis points, right, we believe 400 basis points to 550 basis points is organic. The balance would be inorganic and not that it is planned inorganic. As we define inorganic and include inorganic, these acquired companies for the first 12 months, it would include WebMetro and Sofica. So WebMetro was purchased in August, so it will have nine months, let's say, eight months of inorganic into 2014. And Sofica just being purchased at the end of this month's closing will be about 10 months of inorganic in this.

Our next question comes from Kevin McVeigh, Macquarie.

Again, Regina, as you think about kind of the backlog, you've seen real nice success selling that, if I heard the numbers right, $365 million in '14 with $80 million in the Q4. How should we think about that as it layers into the 2014 topline, just in terms of the progression as that comes in?

I mean there is a couple of things. In general, what I would say is, of that $365 million, when you separate the recurring versus the non-recurring, most of the non-recurring is in the year, there is some that will spillover from Q4. But that non-recurring typically has a 90-day cycle. The recurring piece, we typically get about 40% of that in a year, based on the way bookings lay out. So I mean collectively, I would say, there is probably about half of it or so that is moving into the next calendar year.

And then just along those lines, as the emerging businesses are taking a greater percentage of revenue. Are you seeing better retention among your existing clients as those services start to gain some traction?

Absolutely. I'd say that we don't want to jinx anything or ever declare a victory as it relates to the future. But what I would tell you is we're seeing some of the retention we've seen in years. So a lot of that is just attributable to that we're delivering on our promise and that we're executing and exceeding our client's expectations, but a lot of it is also that we're delivering a capability that they're not finding elsewhere in the marketplace, so no question that we're seeing better retention. And I think we're always cautiously optimistic. It's just the nature of how conservative I've been and my team is. And I think it's safe to say that we're very optimistic right now and we feel very good about 2014. And we really like what we're seeing, but what our clients are, how they're acting, what they're doing, we're liking the fact that we're seeing deal sizes expanding and we're seeing in many cases contract terms expanding. And so we view that as a positive reflection on many areas. One, how we're performing, but also two, that the economy is firming up and strengthening in certain areas and we're benefiting from that as well.

And our next question comes from Bill Warmington, Wells Fargo.

A question for you on Q4. Site utilization seemed very strong at 83%, and just wanted to ask, what was behind that strength? How sustainable it is? And now that we're about two-thirds through Q1, if you could comment on how revenue and expenses are trending there?

We're very focused on our utilization. And we'll never our take our eye off of that. I think that utilization will probably be in the 80% range. And the reason for that is we're bringing on more capacity, just because of the demand that we are seeing in the marketplace. We tend to not build on speck, so it's safe to say that when we're building out capacity, there is a client behind that capacity or there is demand behind that capacity. That said, as much as we would like to flip a switch and have every one of our work stations being occupied, there is ramp time to that. So I think you'll see it in the hover, in the 80% and upward. And I think that we're going to continue to strive to drive higher and higher utilizations.

And then your thoughts on Q1?

As far as?

We're about two-thirds of the way through, so how revenue and expenses are trending so far this quarter?

Well, I'm going to let my CFO answer that just because as you know we don't give quarterly guidance. So I'll see how she wants to put that.

In reality, I'll just repeat what said, we don't give quarterly guidance.

I mean, I think in general hopefully from the tone of the call, we feel very good about the year. And how the year is shaping up and we look forward to reporting positive results in our next quarter.

How are the volumes coming in versus the customer projections? It sounds like they're coming in pretty strong?

I think volumes are coming in where we estimated them to be. I would hate to go on record and say that they're coming in hot and then you make a wrong assumption. But what I would say is, is that the guidance that we put out there, we're very comfortable with. I think you can see, we tend to always be conservative with our guidance and our hope is to obviously be able to beat our guidance. So stay tuned.

And our next question comes from Steven Shui, Stifel.

Ken, this question is for you. Why did you decided to buy a call center company in Bulgaria? Our impression was that TeleTech has been looking to expand outside of the core call center business. Was there a particular client that asked you to go that region?

First of all, I wouldn't exactly classify this company as a call center. They are a company that is doing some pretty complex ITO work and BPO work. And the truth of the matter is, is that we just don't have enough strength in that region. And what we're trying to do is to make sure that we have a presence across the globe, regardless of how that presence starts, so that we can then carryover all of our other capabilities. We selected this company for a myriad of reasons. One is that it adds between 18 and 19 languages, and for the last five years, we have consistently been asked to speak these languages and we've been able to deliver on many of them, but we've had to do it frankly in a non-cost effective way. And this gives us a cost effective way to service all of the European languages. So we are very excited about that. And by the way, the deal is just about to close. And we've already moved over a client that has made a commitment to taking advantage of this language skill set. So number one, they're rich in languages. Number two, they have a very strong management team and we need presence in the marketplace. And number three, we see it as a very logical place for us to expand in our other areas, i.e. our Customer Growth Services, so we do have clients that are asking us to provide capabilities throughout Europe that carry Revana into the region. And so that had a lot to do with it as well. But I would not classify this acquisition as a classic contact center type of a transaction. It doesn't look like one, when you visit them. It doesn't feel like one. They do a fair bit of hosting of software and technology, which is very important to us, because that's something that we're very focused on as well. So please do not take this as a departure from our strategy of revenue diversification. I can assure you that you will see that we are very focused on diversifying our revenues and very focused on going up market and being far more strategically relevant to our clients and trying to reduce the amount of labor that is tied to our revenue numbers.

And just a very quick follow-up question. What's the annual run rate in revenue for that business?

Are we commenting on that at this point in time?

We don't give individual segment guidance, but I think you can take Q4. So we don't give guidance on each of the segments. The guidance that we've given is that collectively, they will be around 28%. What I would suggest over time, our framework for growth is that the emerging businesses are mid-teen growers and that our CMS business is growing in 3% to 6% range on an annual basis.

Thank you. And I do not see any questions at this time.

Thank you. Operator, you may close the call.

Thank you. That concludes the fourth quarter and yearend 2013 earnings conference call. You may disconnect at this time.