TeleTech Reports Second Quarter 2005 Financial Results

DENVER – TeleTech Holdings, Inc. (Nasdaq: TTEC), a global provider of customer management and transaction-based business process outsourcing (BPO) services, today announced second quarter 2005 financial results. The Company also filed its Quarterly Report on Form 10-Q with the Securities and Exchange Commission for the quarter ended June 30, 2005.

REVENUE
Second quarter 2005 revenue was $253.9 million compared to $265.5 million during the year ago quarter resulting from lower revenue in North America.

During the past sixty days, the Company signed agreements with several new and existing clients, including one of the largest global airlines, a major U.S. healthcare company, a U.S. cable company, a digital entertainment company, and a leading U.S. wireless company, among others. These contracts represent approximately $50 million of annualized revenue once fully ramped. This future revenue will be offset, in part, by a client with excess internal capacity that is moving work back in-house during the third quarter 2005.

OPERATING INCOME
Second quarter 2005 income from operations of $4.5 million was $10.5 million less than the year ago quarter due to, among other items described in the 2005 second quarter Form 10-Q, a $7.5 million decline in Newgen’s operating results and, as anticipated, a $2.7 million reduction in minimum commitments from a large client. Additional information regarding comparability to the prior year quarter is included in the Company’s June 2005 Quarterly Report on Form 10-Q.

The second quarter 2005 benefited by $3.4 million related to a one-time reduction in TeleTech’s self insurance liability and a litigation settlement. These benefits were offset, in part, by a $2.5 million charge for the planned closure of TeleTech’s Glasgow, Scotland facility disclosed in the Company’s Business Update press release dated July 19, 2005. TeleTech believes the decision to exit the Glasgow facility is in the best interest of its shareholders as it positions the Company to return to profitability in the United Kingdom during the latter half of 2006.

COST IMPROVEMENT INITIATIVES
During the past two years, TeleTech implemented and successfully achieved two cost improvement plans totaling $60 million. In January 2005, TeleTech announced the third phase of its cost improvement plan of $20 million annually and is on target to fully realize these improvements during 2006.

Today, TeleTech announced the fourth phase of its cost improvement initiatives, which is expected to further improve the Company’s future cost structure by an additional $20 million annually. The major cost improvement initiatives in Phase IV include efficiencies gained from modifying the way TeleTech hires, trains, and retains employees, as well as savings associated with exiting higher-cost global facilities.

When TeleTech completes the Phase IV plan, the Company will have achieved $100 million in cost improvements since the multi-phase plan was originally announced in August 2003.

EXECUTIVE COMMENTARY
Ken Tuchman, Chairman and Chief Executive Officer said, “While I am disappointed that Newgen did not reduce its operating loss as anticipated, we continue to take the necessary steps to return them to profitability. During the quarter, Newgen made progress in completing its technology migration to a new platform and in consolidating its operational and back office functions within core TeleTech. Additionally, we are nearing completion of our search for a proven, experienced professional to lead Newgen, and believe that individual will be on board during the fourth quarter.”

“On an annualized run-rate basis, TeleTech has been incurring at least $15 million in higher selling, general and administrative expenses to deploy and market new innovative offerings such as TeleTech On Demand™ and TeleTech In Culture™, to expand the sales organization, and to streamline and standardize operational processes. I am confident that these investments will pay off in the future. Our primary focus remains continuing to close new business, sell higher-margin offerings, and invest in our sales organization to drive long-term profitable growth. Since the beginning of 2005, we have repurchased 3.3 million shares for a total of nearly $32 million and going forward, management is committed to continuing the share repurchase program.”

Dennis Lacey, Executive Vice President and Chief Financial Officer, said, “As a result of our profitability and cost improvement initiatives, our net cash position grew $45 million from the year ago period, after repurchasing $32 million of treasury stock during that period of time. We continue to pursue ongoing cost improvement initiatives and today we are announcing Phase IV of our multi-phase cost improvement plan.”

INTEREST EXPENSE
Interest expense in the second quarter 2005 was $0.7 million, lower by $1.9 million from the $2.6 million reported for the second quarter of 2004. Second quarter 2005 interest expense was higher than for the first quarter of 2005 as a result of utilizing the revolving credit facility to repurchase the Company’s common stock.

BALANCE SHEET
TeleTech ended the second quarter 2005 in a strong financial position with $82.9 million in cash and cash equivalents and net cash of $52.7 million after $30.2 million in total debt. DSOs were 56 days at the end of June and within the Company’s targeted DSO range of 50 to 60 days.

Capital expenditures for the second quarter 2005 were $9.2 million versus $8.5 million during the year ago quarter.

LIQUIDITY AND FREE CASH FLOW
TeleTech generated $11.0 million of free cash flow during the second quarter of 2005, which improved from the year ago quarter primarily due to a decrease in accounts receivable.

During the second quarter of 2005, TeleTech continued its share repurchase program and purchased 1.9 million shares for $15 million, leaving approximately $13 million authorized to be repurchased under the Company’s current share buy-back program. Going forward, management of the Company is committed to continuing its share repurchase program.

THIRD QUARTER 2005 OUTLOOK
TeleTech believes third quarter revenue will be comparable to the second quarter revenue as the summer is seasonally slower in certain international regions and revenue from new business wins are expected to begin ramping primarily in the fourth quarter 2005 and continue ramping during 2006. The Company believes its Newgen subsidiary will operate at a profit, excluding corporate allocations, during the fourth quarter of 2005.

ABOUT TELETECH
TeleTech is a global business services company that provides a full range of front- to back-office outsourced solutions including customer management, BPO, and database marketing services to measurably enhance clients’ core customer management processes. TeleTech’s ability to create innovative strategies, combined with its global technology platform and delivery infrastructure, helps clients increase revenue, lower costs, and retain their customers around the world. TeleTech’s products and services, standardized processes, and recognized capabilities to implement complex global projects make the Company a valued partner for clients that include Global 1000 businesses and governments. TeleTech partners with clients to offer 150 languages, through its more than 32,000 employees, in 17 countries. For additional information, visit www.TeleTech.com.