TTEC (US:TTEC)2024-11-06 21:36Financial Performance - In Q3 2024, TTEC reported revenue of $529.4 million, a decrease of $73.5 million or 12.2% compared to Q3 2023, with TTEC Digital contributing $115.7 million (22%) and TTEC Engage $413.8 million (78%) to total revenue[94]. - TTEC Digital segment revenue decreased by $17.6 million or 13.2% year-over-year, while TTEC Engage revenue decreased by $55.9 million or 11.9%[94]. - Operating income for Q3 2024 was $12.9 million, down $12.5 million or 49.2% from $25.4 million in Q3 2023, with an operating margin of 2.4% compared to 4.2%[94]. - TTEC Engage's nine-month revenue for 2024 was $1.3 billion, down $172.8 million or 11.8% from $1.5 billion in 2023, with an operating loss of $205.6 million compared to a profit of $81.2 million in the prior year[107]. - TTEC Digital's nine-month revenue for 2024 was $344.1 million, a decrease of $23.7 million or 6.4% from $367.8 million in 2023, with a recurring revenue increase of 8.7% partially offsetting the decline[106]. Tax and Income - The effective tax rate for Q3 2024 was (98.1)%, significantly lower than 74.7% in Q3 2023, influenced by income distribution across jurisdictions and tax holidays[104]. - The effective tax rate for the nine months ended September 30, 2024, was (26.4)%, significantly lower than 42.2% for the same period in 2023, primarily due to income distribution between U.S. and international jurisdictions[111]. Cash Flow and Liquidity - Operating cash flows were $(57.7) million for the nine months ended September 30, 2024, a decrease from $113.2 million in the prior year, largely due to a $67.9 million decrease in net cash income from operations[115]. - Cash and cash equivalents totaled $96.9 million as of September 30, 2024, down from $172.7 million at the end of 2023, attributed to the repatriation of international cash[114]. - Free cash flow decreased to $(94.2) million for the nine months ended September 30, 2024, compared to $58.5 million in the same period in 2023, primarily due to reduced net cash from operations[118]. - The termination of the AR factoring arrangement negatively impacted cash flows by $(81.8) million for the three months ended September 30, 2024[115]. - Net cash flows from operating activities for the nine months ended September 30, 2024, were $(57.7) million, a decrease of $170.9 million compared to $113.2 million for the same period in 2023[115]. Capital Expenditures - Total capital expenditures in 2024 are expected to be between 2.1% and 2.3% of revenue, with 80% allocated for business growth and 20% for maintenance of existing assets[122]. - The company expects total capital expenditures in 2024 to be between 2.1% and 2.3% of revenue, with 80% allocated for business growth and 20% for maintenance[122]. Client and Revenue Concentration - Client concentration remains significant, with the five largest clients accounting for 31.5% of consolidated revenue for the three months ended September 30, 2024, down from 34.5% in the prior year[123]. - Revenue from foreign subsidiaries in the Philippines, Mexico, India, Bulgaria, Colombia, South Africa, and Poland accounted for 21% of consolidated revenue for the nine months ended September 30, 2024, compared to 19% for the same period in 2023[126]. - Revenue from foreign subsidiaries, invoiced in U.S. dollars, represented 21% of consolidated revenue for the nine months ended September 30, 2024, compared to 19% in 2023[124]. Strategic Initiatives - TTEC plans to continue investing in innovation and service offerings to enhance competitive positioning and expand its global client base[94]. - A special committee has been established to evaluate a proposal from TTEC's CEO to take the company private at a price of $6.85 per share[95]. Financial Instruments and Hedging - The company recorded net gains of $2.7 million for settled cash flow hedge contracts for the nine months ended September 30, 2024, which were reflected in revenue[127]. - The fair value of cash flow hedges decreased due to currency translation changes, with net gains of $2.7 million recorded for settled cash flow hedge contracts for the nine months ended September 30, 2024[127]. - As of September 30, 2024, the fair value of cash flow hedges was $2,376,000, with $2,100,000 related to the Philippine Peso and $276,000 related to the Mexican Peso[127]. - The company has not experienced any issues related to counterparty defaults and only enters into derivative contracts with investment-grade counterparties[125]. Debt and Borrowings - As of September 30, 2024, the company had $1,025.0 million of outstanding borrowings under the Credit Agreement, with an average interest rate of approximately 7.8% per annum[126]. - Interest income decreased to $1.7 million for the nine months ended September 30, 2024, down from $3.6 million in the same period in 2023, while interest expense increased to $63.2 million from $56.7 million due to higher interest rates[109]. Internal Controls and Reporting - There were no changes in internal control over financial reporting during the quarter ended September 30, 2024, that materially affected the company's internal control[132]. - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024[130].