TTEC (US:TTEC)2024-08-08 20:19Financial Performance - In Q2 2024, TTEC reported revenue of $534.1 million, a decrease of $66.3 million or 11% compared to Q2 2023, with TTEC Digital contributing $116.4 million (22%) and TTEC Engage $417.7 million (78%) to total revenue [87]. - TTEC Digital's revenue decreased by $1.2 million (1.0%) year-over-year, while TTEC Engage's revenue fell by $65.1 million (13.5%) due to client exits and lower demand [91][92]. - Operating income for TTEC Digital decreased by 16% to $6.0 million, resulting in an operating margin of 5.2%, down from 6.1% in the prior year [91]. - TTEC Engage experienced an operating loss of $230.4 million, a decline of 1,054.4%, with an operating margin of (55.2)%, compared to 5.0% in the previous year [92]. - For the first half of 2024, TTEC Digital revenue was $228.4 million, down 2.6% from $234.5 million in the same period of 2023, while operating income increased to $9.3 million [98]. - TTEC Engage's revenue for the first half of 2024 was $882.3 million, a decrease of 11.7% from $999.2 million in the prior year, with an operating loss of $211.0 million [99]. Tax and Interest - The effective tax rate for Q2 2024 was (22.3)%, significantly lower than 61.9% in Q2 2023, influenced by income distribution and impairment charges [96]. - The effective tax rate for the six months ended June 30, 2024, was (23.5)%, significantly lower than 36.2% in 2023, influenced by income distribution and tax holidays in international jurisdictions [102]. - Interest income decreased to $1.4 million for the six months ended June 30, 2024, down from $2.3 million in the same period in 2023, while interest expense increased to $41.5 million from $36.4 million due to higher interest rates [100]. Cash Flow and Capital Expenditures - Operating cash flows were positive at $33.6 million for the six months ended June 30, 2024, a decrease from $144.9 million in the same period in 2023, primarily due to a $48.4 million drop in net cash income [106]. - Cash and cash equivalents totaled $79.8 million as of June 30, 2024, down from $172.7 million at the end of 2023, attributed to changes in cash repatriation policies [104]. - Free cash flow decreased to $6.0 million for the six months ended June 30, 2024, compared to $112.0 million in the same period in 2023, reflecting lower net cash from operations [109]. - Net cash flows used in financing activities were $75.7 million for the six months ended June 30, 2024, down from $115.0 million in 2023, mainly due to a $20.0 million net change in the line of credit [108]. - Total capital expenditures in 2024 are expected to be between 2.5% and 2.7% of revenue, with 60% allocated for business growth and 40% for maintenance of existing assets [113]. Client Concentration and Relationships - Client concentration remains significant, with the five largest clients accounting for 31.7% of revenue in Q2 2024, down from 36.3% in Q2 2023 [114]. - The five largest clients accounted for 31.7% of consolidated revenue for the three months ended June 30, 2024, down from 36.3% in the same period of 2023 [114]. - For the six months ended June 30, 2024, the five largest clients represented 33.8% of consolidated revenue, compared to 35.4% in 2023 [114]. - Long-term relationships with top five clients range from 7 to 24 years, with multiple contract renewals completed [114]. - Contracts with the five largest clients expire between 2025 and 2027, but many have multiple contracts with different expiration dates [114]. - The risk of client concentration is mitigated by long-term contracts, although some contracts can be terminated for convenience [114]. - Historical contract renewals with largest clients have been successful, but future renewals are not guaranteed [114]. Strategic Plans - TTEC plans to continue investing in innovation and service offerings to enhance competitive positioning and expand its global client base [87]. - The company aims to selectively retain and grow capacity while expanding into new offshore markets, managing foreign currency risks through a multi-currency hedging program [87]. - The company expects capital requirements over the next 12 months to depend on investment levels in infrastructure for maintaining or upgrading existing assets [113]. - The company may need to raise additional capital through debt or equity financing due to potential acquisitions or joint ventures [113]. - The anticipated capital expenditures in 2024 are driven by site expansions, new builds in emerging geographies, and technological enhancements [113].