Welcome to TeleTech’s Fourth Quarter and Full-Year 2016 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 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. And thank you for joining us today. TeleTech is hosting this call to discuss its fourth quarter and full-year financial results for the period ended December 31, 2016. 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 its financial results. While this call will reflect items discussed within those documents, our complete information about our financial performance in 2016, we encourage all listeners to read our annual report on Form 10-K when we file it with the SEC in the coming days. 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 upon 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 any new development that may become occur. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause our actual results to differ materially from those expected and described today. Such factors include, but are not limited to, reliance on several large clients, the risks 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 impairment and/or restructuring charges and the potential impact to the financial results due to foreign exchange related fluctuations and legislative developments in the United States or other countries where we do business. For a more detailed description of our risk factors, please review our annual report on Form 10-K. A replay of this conference call will be available on our website under the Investor Relations section. I’ll now turn the call over to Ken Tuchman, TeleTech’s Chairman and Chief Executive Officer.

Thank you, Paul and good morning to everyone. 2016 was an eventful year and one that tested our fortitude. We were challenged in the first half of the year with sales execution gaps and it unfortunately showed in our financial results. We responded swiftly with a set of strategic initiatives to better optimize or go to market investment and accelerate the pace at which our profits and cash flow will improve. Fundamentally, we needed to maximize growth from our existing client base, simplify our go to market organization, and processes and further optimize our operating cost and SG&A. We acted with speed, implementing new leadership in flattening our sales and marketing organization. We redirected sales investments to place more emphasis on growing our existing client base and streamlined our solution and groups to simplify and prioritize the sale of Integrated Solutions. Additionally, we put significant emphasis on improving utilization across our segment and optimizing our SG&A cost. Included in our actions we've taken to optimize or sales platform and improve our cost structure, we've started the process to exit a handful of non-strategic underperforming assets and investment. As a result, our 2016 financials include one-time primarily non-cash charges, the positive impact of these initiatives which are now behind us will be significant. In fact, you can observe the progress in our second half 2016 financial results with improvements in our fourth quarter bookings, the reduction in our SG&A as a percentage of revenue, the increased utilization of our facilities, technology and human capital, and of course the step up in the operating margin during the second half versus the first half of 2016. But the most important improvement is growing the quality of our sales pipeline, the number and scale of opportunities coming from our existing client base is impressive.…

Thank you, Ken, and good morning everyone. I’ll start with a review of our 2016 financial performance and then provide our current forecast for 2017. Before I discuss the financial results for 2016, I’d like to bring to the forefront a couple of noteworthy items that affected 2016’s performance. As previously discussed, we had a shortlist of factors that challenged our 2016 revenue growth rate. The continued strengthening of the USD eroded total company revenues of $21 million or 150 basis points versus prior year. In the last three years, the bolstering of the USD against our largest trading currency has cumulatively negated our topline growth by 112 million and our operating income by 15.3 million. We had three clients who experienced significant one-time events in their respective businesses resulting in reduced volumes in our CMS and CGS segments with an impact of 55 million or 400 basis points on total company revenue. Avaya’s financial challenges which have resulted in bankruptcy filing in early 2017 impacted the CTS segment by $11 million or 90 basis points on total company revenue. And last we experienced a significant gap in our sales execution in the first half of 2016 resulting in a decline of our bookings and requiring us to reevaluate certain sales and marketing investment. Collectively these events significantly impacted 2016’s topline growth and profitability and have led to series of decisions that we expect will improve our ability to deliver revenue growth with greater predictability and reliability and accelerate our profitability and cash flow. We narrowed our focused to those market solutions, clients and prospects with the greatest growth potential. We flatten the organization and reduced management layers to improve the level of engagement between our sales and operating teams. And we further streamlined our cost structure, improving utilization of…

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 lines.

[Operator Instructions] Our first question comes from Joan Tong of Sidoti and Company. Your line is open.

Good morning, Ken and Regina and everybody. I just have one question regarding the pipeline. Ken, you actually gave some comments regarding the sales opportunity as well as the number of opportunities in the pipeline. Can you just give us a little bit more color, I think, more importantly just want to get an idea of the portion of those opportunities actually involve multi business segments, especially in the analytics as well as sales outsourcing the cloud opportunity that you mentioned is highly strategic and in a high growth area, can you give us some color on that? Thank you.

Sure. Thank you. I would say that a significant percentage of our pipeline is involving an integrated solution, typically worth requiring two to three different divisions of ours, providing a singular - holistically singular integrated type of solution. So typically it’s our technology solutions group working with our consulting organization and then either working directly with CGS or directly with CMS. If I had to guess and I want to stress I'm guessing right now, offline, Regina, can try to get a little bit more refined with this. I’d say that solidly 45% to 50% of the deals that we're looking at have more than one of our divisions involved and are looking for a more of an integrated and an end to end type of a capability. And that's why in my script, what we mentioned was that our deals are - the size of the deals that are coming into the pipeline are larger than they've historically been and the complexity of the deals are more complex and we actually welcome the complexity. We've always prided ourselves on having very complex set of capabilities and we believe that when the offering is complex, it creates a much longer term in a stickier type of relationship, but more importantly, it delivers deeper value to the client.

Okay. Do we have to concern about the sales cycle just because all these complexity of the transactions typically would take longer to close and so I assume that you guys factor that into your revenue guidance for 2017?

Yeah. We definitely did and although I don't have a crystal ball going forward, what I would say is that we look at fourth quarter and how deals closed and we're looking now at first quarter and the speed at which deals are closing, we actually are seeing a compression in the time of getting these deals across the line. There's a definite sense of urgency on behalf of large corporations to get their act together from a customer experience and a customer engagement standpoint. And I think that we've spent the last 10 years banging the drum on how important experience engagement is and the truth of the matter is we don't have to bang that drum any more. These companies, at the senior most levels and at their board level, understand that customers are only going to do business with companies that are highly focused on delivering a low friction experience. So we think that that has a lot to do with why there is companies that are moving at a much faster pace because they're really trying to get their act together in 2017 so that they can compete more so with what I would call the new economy companies that were basically built off of an e-commerce type of a platform.

I would just add a couple of things, Ken. I think if you look at our top let’s say 25 kind of year to date clients across that, it’s year to date bookings. You’re going to see that they’ve got 50% of them are taking and consuming more than one capability. So this isn’t new for us, right. We’ve got a good pattern here for a couple of years now of being able to execute. The other thing I would just mention because I think you bring up the idea of the sensitivity of the timing to the achievability of the revenue is that last year, we went into the year with about 82% of our revenue for the year that we gave guidance on in backlog. This year, we have 90% and I’d also say that the net new revenue that we need to produce in here is this year 10% of our revenue versus last year, 18%. So we feel we get out of the gate with a much more achievable task within the year in terms of generating revenue.

Thank you. The next question comes from Frank Atkins of SunTrust. Your line is open.

Thank you for taking my question. I wanted to ask where you stand in terms of the go to market platform adjustment and your sales team. Do you feel that the majority of the changes are behind you? What are your initiatives for that going into the year?

I feel to be conservative that we have in fact made the majority of changes and that said, we're not done. We're still adding folks across the country, actually across the globe in various different positions. It's not slowing us down in any way and we feel very confident that we’ll be able to complete the execution of what we're trying to do in sales and in marketing. I think it's safe to say though that any well-run company, you're never done, you're always trimming the sales, you're always tweaking and you're always refining. I think that we've really learned a lot over the last few years of what it takes to sell in an integrated fashion. And I think that we feel with the highest of confidence that we've never seen our groups work more closely together in more of an integrated fashion. We think that we've got our compensation aligned far better, so that everybody is motivated to sell an integrated solution and to work with one another versus it just being a separate stovepipe for lack of a better term. And so we feel real good about it. That said, we can always use a few more sales people here and there. But what we're doing, we're making up for that while we're recruiting those people by having our senior people cover for where there might be a couple of voids. We also are very excited about new CMO and head of strategy that is going to be joining us very shortly with some incredible digital background, which is an area that all of our clients have focus on. So we're - we feel quite good about the team and how the team is performing and we think that the adjustments will set us right for 2017.

Okay, great. That's helpful. And then I wanted ask about the headcount mix on kind of offshore versus onshore. I guess, one, can you provide some transparency in terms of the numbers and then two, as you think about the US labor market and potential changes in the wage environment and then also changes in potentially client preferences given kind of the current political environment, where do you stand in terms of, it’s just the right mix of onshore versus offshore delivery?

I'll start with your last question, while Regina is right now looking at her Fact book so that she can give you an accurate answer on the mix. What I would say to you is that we are not feeling, at this point in time and I want to stress at this point in time, because this administration, I couldn't tell you what's going to happen five minutes from now, but we are not feeling at this point in time any pressure from any of our clients as it relates to offshore and I believe that's where your question is coming from. I think this administration is much more focused on the headlines of manufacturing jobs and I think that this administration is understanding the fact that with where unemployment is in this country and the number of available jobs that it would not be very realistic to try to have the service and support sector per se come back on shore. That said, I don't think anybody knows and I think anybody that says that they do know is guessing as I am. But what I will tell you is we are not, we do not, our clients are not in any way panicking. They are not making any significant changes other than what I would say clients that in certain sectors where they were working on this prior to us even knowing that the current administration would come into play. And so there was some financial services clients that we talked about, I don't know, three quarters ago or whatever that made some decisions to repatriate some positions to the United States. Other than that, we are not seeing anything. Now, what I will say in contrast to that and this is not in any way meant to…

Yes. So I mean we have really three countries where we say we have kind of onshore, Brazil, Canada and the US. And in total, it’s about those three countries collectively around 35% of our headcount. It does vary quarter-to-quarter and the US piece of that would be around 30%.

And know that the business in Canada is for Canada and though that our Philippine business, this is a stat that I don't think others are talking about is that just under 50% is US business. Everything else is countries other than the United States being served out of the Philippines.

Okay. Great. That's very helpful. Thank you for the color and I definitely understand the limits as to kind of the current environment forecasting. If I could speak one more quick numbers one and can you talk a little bit more about the $26 million impairment charge and where do we stand in terms of internal controls.

I think the first part of that, what was your question around the impairment charges

Just a little bit more color as to what drove that?

Yeah. So as we highlighted, in Q3 and now again in Q4, we have made a decision to exit certain kind of, let’s say, non-strategic underperforming assets and that has led to the reduction in certain types of assets on our balance sheet, intangibles, goodwill and certain fixed assets for just activities that we see a better way to do things in the future. That’s an important part of our cost structure. In terms of the material weaknesses, we have made good progress, it would be inappropriate for me to go into much detail before which time we have our K published, but we have continued to make progress and we’ll shortly see that update in our K.

Thank you. The next question comes from Mike Malouf of Craig-Hallum Capital Group. Your line is open.

Great. Thanks for taking my question. Good morning. Can we talk about wage pressure a little bit? Have you experienced wage pressure so far, are you expecting that, are you getting any kind of early indicators of that and then, and if so, maybe you can comment a little bit on where that's coming from and your ability to pass that through to the end customer. Thanks.

We talked about this last night just because we kind of knew this question was going to come up and I think the consensus amongst our leadership team is that we're not really seeing any significant wage pressure. We think that part of that is that we're kind of - where no one in the marketplace is really being the higher end provider. We believe that our salaries and our pay is on the higher side and is more competitive in the marketplace than maybe some other organizations. We, as you know, we are very focused on a fair price, so that we can make a fair return. And so I think that's probably why we don't feel like there is tremendous, like there's a threat of wage pressure. On the front line, majority of our deals have [indiscernible] increases. So should the wages shift dramatically, et cetera, we can take advantage and enact and adjust the pricing in that area. I’d say the only area where we see wage pressure that surprises us is Brazil and the good news about Brazil is, it's a very unique market in that automatically whatever adjusted wages that we have to adjust to, we instantly pass through and update the pricing plan to the client. And that's not unique to TeleTech, that's unique to the marketplace in Brazil. That's how it operates. And so that's good when you've got currencies that are kind of whacky and so on and so forth, it helps. On the management side, meaning what I'd say more onshore, et cetera, I think we feel pretty good about it. I think people are really excited about what's going on here, although this isn't related to your question, I would tell you that we have probably never seen a better foray of high quality senior management resumes in the 34 years that I've been running this business, which is interesting because it's contradictory to how low the unemployment is in the marketplace. And yet, we have management and executives reaching out to us from all over the world, wanting to be involved with us. So we feel, I guess I'm being long winded about this, we feel pretty good about where we are right now. Now, again, there's so many policies that are being changed and so much going on that could just futuristically, could there be some pressure. There could be, but I think that clients are beginning to become more understanding as they see healthcare costs going up, et cetera that we've been successful in being able to go back, demonstrate cost increases when they take place and pass them on.

Okay. Great. That's really helpful. Appreciate it. And then just a question, I know that a few years ago, you were pretty good about providing some long term margin targets, and I’m just wondering as we sit here, obviously, we had a tough 2016, but it looks like things are, at least on the visibility side turning around and I'm wondering as you look out over the next few years, if you could just comment a little bit on long term margin targets?

Regina, I’m going to leave that to you. I'll just get myself in trouble if I put out a long term margin target.

I think that’s a statement - I think that 2016 is a distinct year and we've talked about that. We don't take from that year that our long term view of the selective margin of this company has changed and I think it's going to take us a journey to get there, but we still believe and I think you'll see it, you see it in the guidance. We still believe that we will be as a company above 10% margins in the mid-term and longer term that with scale, it’s amazing that with the additional volumes due to the utilization of our technology and our CGS business, the utilization of our site capacity, the utilization of our SG&A, the utilization of our corporate overhead. And so we believe and I'm not saying this at any particular point, but I'm saying over the next couple of hundred million dollars of margin increase, if you look at the 6.4% that we have on a constant currency basis this year, right, and you look at the 8.1% to 8.3% on another $100 million of revenue, with another couple of hundred million dollars beyond that, we see ourselves above 10% and it is kind of low teens with scale.

Okay. Great. That’s helpful. And if I could just squeeze one more question in, on the acquisition of Atelka, can you just remind me what’s the impact in 2017 in the growth?

Yes. Sure. So it's probably going to be about 60% to 65% of the CMS growth and it's about 4% of the company growth. So it’s about 400 basis points of our growth for the company. So when we say on a constant currency basis, 7.5% to 8.3% growth, Atelka is 400 basis points of that. That's at the company level and on the CMS, it’s about 65% of the growth.

Thank you for your questions. That is all the time we have today. This concludes the TeleTech fourth quarter and full year 2016 earnings conference call. You may disconnect at this time.