TTEC (TTEC) - 2025 Q2 - Quarterly Report

Filing Information This section provides details on the Form 10-Q filing, including company identification and reporting status Form 10-Q Details This chapter details the company's Quarterly Report on Form 10-Q for Q2 2025, identifying TTEC Holdings, Inc. as a Delaware corporation and a Smaller Reporting Company - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - TTEC Holdings, Inc. is a Delaware corporation with common stock traded on NASDAQ (TTEC)[2] - The registrant is classified as a Smaller Reporting Company[3][4] PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Financial Statements This section presents the unaudited consolidated financial statements of TTEC Holdings, Inc. and its subsidiaries, including the Balance Sheets, Statements of Comprehensive Income (Loss), Statements of Stockholders' Equity, and Statements of Cash Flows, along with detailed notes explaining accounting policies, segment information, and other financial disclosures for the periods ended June 30, 2025 and December 31, 2024 Consolidated Balance Sheets Total assets and liabilities decreased, while total stockholders' equity increased from December 31, 2024, to June 30, 2025 Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :----- | :------- | | Total current assets | $627,713 | $652,296 | $(24,583) | -3.77% | | Total long-term assets | $1,067,317 | $1,101,084 | $(33,767) | -3.07% | | Total assets | $1,695,030| $1,753,380 | $(58,350)| -3.33%| | Total current liabilities | $355,289 | $353,936 | $1,353 | 0.38% | | Total long-term liabilities | $1,044,565 | $1,131,325 | $(86,760) | -7.67% | | Total liabilities | $1,399,854| $1,485,261 | $(85,407)| -5.75%| | Total stockholders' equity | $295,176 | $268,119 | $27,057| 10.10%| Consolidated Statements of Comprehensive Income (Loss) The company reported a reduced net loss for Q2 2025, driven by lower impairment losses, despite a slight revenue decrease Consolidated Statements of Comprehensive Income (Loss) Highlights (Amounts in thousands, except per share amounts) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change | % Change | | :------------------------------------ | :------------------------------- | :------------------------------- | :----- | :------- | | Revenue | $513,571 | $534,085 | $(20,514) | -3.84% | | Income (loss) from operations | $18,876 | $(224,413) | $243,289 | 108.41% | | Net income (loss) | $(6,724) | $(296,768) | $290,044 | 97.73% | | Net income (loss) attributable to TTEC stockholders | $(7,987) | $(299,539) | $291,552 | 97.33% | | Basic EPS | $(0.17) | $(6.30) | $6.13 | 97.30% | | Diluted EPS | $(0.17) | $(6.30) | $6.13 | 97.30% | | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :----- | :------- | | Revenue | $1,047,799 | $1,110,723 | $(62,924) | -5.66% | | Income (loss) from operations | $43,065 | $(201,702) | $244,767 | 121.35% | | Net income (loss) | $(3,478) | $(296,268) | $292,790 | 98.83% | | Net income (loss) attributable to TTEC stockholders | $(6,603) | $(301,844) | $295,241 | 97.81% | | Basic EPS | $(0.14) | $(6.35) | $6.21 | 97.79% | | Diluted EPS | $(0.14) | $(6.35) | $6.21 | 97.79% | - Impairment losses significantly decreased from $236,716 thousand in Q2 2024 to $764 thousand in Q2 2025, contributing to the improved operating income[12] Consolidated Statements of Stockholders' Equity Total stockholders' equity increased, primarily due to positive foreign currency translation adjustments and derivative valuation gains Changes in Stockholders' Equity (Six Months Ended June 30, 2025, Amounts in thousands) | Item | Amount | | :------------------------------------ | :----- | | Balance as of December 31, 2024 | $268,119 | | Net (loss) income | $(3,478) | | Payments distributed to noncontrolling interest | $(4,101) | | Foreign currency translation adjustments | $22,881 | | Derivatives valuation, net of tax | $5,221 | | Vesting of restricted stock units | $(1,038) | | Equity-based compensation expense | $7,301 | | Other, net of tax | $271 | | Balance as of June 30, 2025 | $295,176 | - Foreign currency translation adjustments contributed a gain of $22,881 thousand for the six months ended June 30, 2025, compared to a loss of $(11,218) thousand in the prior year[14] - Derivative valuation, net of tax, showed a gain of $5,221 thousand for the six months ended June 30, 2025, compared to a loss of $(6,785) thousand in the prior year[14] Consolidated Statements of Cash Flows Operating cash flow significantly increased, driven by improved net income and working capital, with reduced investing cash outflow Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, Amounts in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $114,301 | $33,645 | $80,656 | | Net cash used in investing activities | $(12,411) | $(27,566) | $15,155 | | Net cash (used in)/provided by financing activities | $(98,927) | $(75,702) | $(23,225) | | Decrease in cash, cash equivalents and restricted cash | $(2,432) | $(74,235) | $71,803 | | Cash, cash equivalents and restricted cash, end of period | $82,559 | $99,670 | $(17,111) | - The increase in operating cash flow was primarily due to a $68.6 million increase in net working capital and a $12.1 million increase in net cash income from operations[188] - Purchases of property, plant and equipment, net of acquisitions, decreased from $27,682 thousand in 2024 to $12,587 thousand in 2025[17] Notes to the Consolidated Financial Statements This section provides detailed disclosures on accounting policies, segment performance, goodwill, derivatives, taxes, and other financial commitments (1) OVERVIEW AND BASIS OF PRESENTATION TTEC is a global CX outsourcing partner operating through TTEC Digital and TTEC Engage segments, serving 690 clients across 22 countries - TTEC is a global CX outsourcing partner, designing, building, and operating technology-enabled customer experiences[19] - The company operates through two segments: TTEC Digital (CX technology, AI/Analytics) and TTEC Engage (CX operational and managed services)[20][23] - As of June 30, 2025, TTEC served approximately 690 clients across targeted industry verticals in 22 countries[19][21] - The company adopted ASU 2023-07, 'Segment Reporting - Improvements to Reportable Segment Disclosures,' effective December 31, 2024, retrospectively[31] (2) ACQUISITIONS AND DIVESTITURES This section details the Faneuil asset acquisition completion and the sale of former headquarters assets to reduce debt - The Faneuil asset acquisition, completed in April 2022, was fully consolidated into the TTEC Engage segment[34] - The contingent payment obligation for the Faneuil acquisition was completed in January 2025, with no final earn-out payment required[36] - In Q2 2024, $29.4 million in assets (former headquarters building) were reclassified to 'Assets held for sale' and subsequently sold in Q4 2024, with proceeds used to reduce debt[38] (3) SEGMENT INFORMATION Both TTEC Digital and TTEC Engage segments experienced revenue declines but significant operating income improvements due to reduced charges - TTEC Digital focuses on CX technology, cloud platforms (AWS, Cisco, Genesys, Google, Microsoft), and AI/Analytics, serving enterprise and SMB clients[23][40] - TTEC Engage provides digitally enabled CX operational and managed services, including customer support, tech support, revenue generation, fraud mitigation, AI operations, and back-office support[23][44] Segment Revenue and Operating Income (Three Months Ended June 30, Amounts in thousands) | Segment | 2025 Revenue | 2024 Revenue | % Change Revenue | 2025 Operating Income | 2024 Operating Income (Loss) | % Change Operating Income | | :------------ | :----------- | :----------- | :--------------- | :-------------------- | :--------------------------- | :------------------------ | | TTEC Engage | $399,825 | $417,717 | -4.3% | $7,467 | $(230,421) | 103.2% | | TTEC Digital | $113,746 | $116,368 | -2.3% | $11,409 | $6,008 | 89.9% | | Total | $513,571 | $534,085 | -3.8% | $18,876 | $(224,413) | 108.4% | Segment Revenue and Operating Income (Six Months Ended June 30, Amounts in thousands) | Segment | 2025 Revenue | 2024 Revenue | % Change Revenue | 2025 Operating Income | 2024 Operating Income (Loss) | % Change Operating Income | | :------------ | :----------- | :----------- | :--------------- | :-------------------- | :--------------------------- | :------------------------ | | TTEC Engage | $826,013 | $882,324 | -6.4% | $25,792 | $(210,998) | 112.2% | | TTEC Digital | $221,786 | $228,399 | -2.9% | $17,273 | $9,296 | 85.8% | | Total | $1,047,799 | $1,110,723 | -5.7% | $43,065 | $(201,702) | 121.3% | Capital Expenditures by Segment (Six Months Ended June 30, Amounts in thousands) | Segment | 2025 | 2024 | | :------------ | :----- | :----- | | TTEC Digital | $3,660 | $4,077 | | TTEC Engage | $8,927 | $23,605 | | Total | $12,587 | $27,682 | (4) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS One automotive client contributed over 10% of revenue, while the allowance for credit losses increased, and a factoring agreement was terminated - One automotive industry client contributed 10.7% of total revenue for the six months ended June 30, 2025, and 11.0% for the same period in 2024[57] - The allowance for credit losses increased to $5,000 thousand at June 30, 2025, from $4,757 thousand at June 30, 2024[59] - The Uncommitted Receivables Purchase Agreement with BMO Bank, N.A. was terminated in the third quarter of 2024[60] (5) GOODWILL Goodwill slightly increased due to foreign currency effects, with all reporting units at risk for future impairment, though no new indicators arose in Q2 2025 Goodwill by Segment (Amounts in thousands) | Segment | December 31, 2024 | June 30, 2025 | Change | Effect of Foreign Currency | | :---------------------- | :---------------- | :------------ | :----- | :------------------------- | | TTEC Digital | $498,213 | $500,369 | $2,156 | $2,156 | | TTEC Engage | $72,984 | $74,014 | $1,030 | $1,030 | | Total | $571,197 | $574,383 | $3,186 | $3,186 | - As of December 1, 2024, all three reporting units (Engage, Digital Recurring, Digital Professional Services) were identified as being at risk for future goodwill impairment[62] - The estimated fair value of the Engage reporting unit exceeded its carrying value by approximately 17% as of December 1, 2024[63] - No triggering events or impairment indicators were concluded during the second quarter of 2025[68] (6) DERIVATIVES The company uses foreign exchange derivatives to manage currency risk, with the total net fair value shifting from a liability to an asset - The company uses foreign exchange forward and option contracts to reduce exposure to foreign currency exchange rate fluctuations[70] Total Net Fair Value of Derivatives (Amounts in thousands) | Derivative Type | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Cash flow hedges | $1,853 | $(3,367) | | Fair value hedges | $161 | $(177) | | Total net derivatives | $2,014 | $(3,544) | Foreign Exchange Cash Flow Hedges Notional Amounts (Amounts in thousands) | Currency | June 30, 2025 (USD Notional) | December 31, 2024 (USD Notional) | | :--------------- | :--------------------------- | :------------------------------- | | Philippine Peso | $69,153 | $105,098 | | Mexican Peso | $17,427 | $26,682 | | Total | $86,580 | $131,780 | - Net gains of $488 thousand and $359 thousand from cash flow hedges were reclassified from Accumulated OCI to Net income (loss) for the three and six months ended June 30, 2025, respectively[81][128][130] (7) FAIR VALUE Assets and liabilities are measured at fair value using a three-level hierarchy, with derivatives classified as Level 2 and deferred compensation as Level 1 - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[87][88] - All derivative instruments are measured at fair value on a recurring basis using Level 2 inputs[92][93][95] Fair Value of Net Derivative Assets (Liabilities) (Amounts in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Cash flow hedges | $1,853 | $(3,367) | | Fair value hedges | $161 | $(177) | | Total net derivative asset (liability) | $2,014 | $(3,544) | - The deferred compensation plan asset, valued at $34,934 thousand at June 30, 2025, is classified as Level 1[96][97] (8) IMPAIRMENT OF ASSETS Impairment losses on assets significantly decreased for both the three and six months ended June 30, 2025, compared to the prior year Impairment Losses by Segment (Amounts in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------- | :------------------------------- | :------------------------------- | | TTEC Digital | $200 | $2,500 | | TTEC Engage | $600 | $700 | | Total | $800 | $3,200 | | Segment | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------- | :----------------------------- | :----------------------------- | | TTEC Digital | $200 | $2,500 | | TTEC Engage | $1,300 | $800 | | Total | $1,500 | $3,300 | - Impairment losses are recognized when anticipated undiscounted future cash flows are less than the asset group's carrying value, using Level 3 inputs in discounted cash flow analysis[101] (9) INCOME TAXES The effective tax rate was 121.6% for the six months ended June 30, 2025, influenced by low income and tax holidays, with no new valuation allowances - The effective tax rate for the six months ended June 30, 2025, was 121.6%, compared to (23.5)% for the comparable period of 2024[105][182] - No new valuation allowances were recorded in 2025, following $85.8 million in net valuation allowances recorded in 2024[108] Tax Holiday Benefits (Amounts in millions) | Period | Aggregate Benefit to Income Tax Expense | | :----------------------------- | :------------------------------------ | | Three months ended June 30, 2025 | $0.6 | | Three months ended June 30, 2024 | $0.6 | | Six months ended June 30, 2025 | $1.2 | | Six months ended June 30, 2024 | $1.3 | - The company is evaluating the recently signed One Big Beautiful Bill Act (OBBBA) and the OECD Pillar 2 framework, but neither is expected to have a material impact on consolidated financial statements or effective tax rate[104][107] (10) COMMITMENTS AND CONTINGENCIES The Credit Agreement was amended to adjust covenants and commitment, with $882.5 million outstanding and $270 million borrowing capacity as of June 30, 2025 - The Ninth Amendment to the Credit Agreement (August 8, 2024) adjusted financial covenants, reduced commitment to $1.2 billion, and increased pricing[112] - As of June 30, 2025, borrowings under the Credit Facility were $882.5 million, with $270 million remaining borrowing capacity[119] - The company was in compliance with all Credit Agreement covenants as of June 30, 2025, and is discussing extending the term through at least November 2027[119][112] - The company believes the resolution of current legal proceedings will not have a material adverse effect on its financial position[123] (11) DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS Revenue recognized from deferred balances decreased, with total Remaining Performance Obligations at $396.9 million as of June 30, 2025 Revenue Recognized from Deferred Revenue (Six Months Ended June 30, Amounts in millions) | Period | Revenue Recognized | | :----------------------------- | :----------------- | | 2025 | $50.4 | | 2024 | $60.1 | - Remaining Performance Obligations (RPO) as of June 30, 2025, totaled $396.9 million[126] - Approximately 63% of RPO is expected to be recognized in the next 12 months, and 22% in the subsequent 13 to 24 months[126] (12) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income improved, driven by positive foreign currency translation adjustments and derivative valuation gains Changes in Accumulated Other Comprehensive Income (Loss) (Six Months Ended June 30, 2025, Amounts in thousands) | Component | Balance Dec 31, 2024 | Net Current Period OCI (Loss) | Balance Jun 30, 2025 | | :------------------------------------ | :------------------- | :---------------------------- | :------------------- | | Foreign Currency Translation Adjustment | $(123,821) | $22,480 | $(101,341) | | Derivative Valuation, Net of Tax | $(5,583) | $5,221 | $(362) | | Other, Net of Tax | $(2,717) | $271 | $(2,446) | | Totals | $(132,121) | $27,972 | $(104,149) | - Foreign currency translation adjustments contributed $22,480 thousand in net current period other comprehensive income for the six months ended June 30, 2025[128] - Derivative valuation, net of tax, contributed $5,221 thousand in net current period other comprehensive income for the six months ended June 30, 2025[128] (13) WEIGHTED AVERAGE SHARE COUNTS Basic and diluted weighted average shares outstanding are detailed, with anti-dilutive RSUs excluded from diluted EPS calculations Weighted Average Shares Outstanding (in thousands) | Period | Basic Shares (2025) | Basic Shares (2024) | Diluted Shares (2025) | Diluted Shares (2024) | | :----------------------------- | :------------------ | :------------------ | :-------------------- | :-------------------- | | Three Months Ended June 30 | 48,064 | 47,564 | 48,064 | 47,564 | | Six Months Ended June 30 | 47,918 | 47,498 | 47,918 | 47,498 | - 3.3 million outstanding RSUs were excluded from diluted net income per share computation for the three and six months ended June 30, 2025, due to their anti-dilutive effect[131] (14) EQUITY-BASED COMPENSATION PLANS Equity-based compensation expense decreased, and no expense was recognized for PRSUs as performance targets were not deemed probable Equity-Based Compensation Expense (Amounts in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Cost of services | $1,523 | $1,991 | | Selling, general and administrative | $2,528 | $3,113 | | Total | $4,051 | $5,104 | | Period | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Cost of services | $2,651 | $4,235 | | Selling, general and administrative | $4,650 | $6,681 | | Total | $7,301 | $10,916 | - As of June 30, 2025, there was approximately $21.7 million of total unrecognized compensation cost related to RSUs[135] - No compensation expense was recognized for performance-based RSUs (PRSUs) in 2025 because defined minimum targets were not deemed probable of being achieved[136][137] (15) NON-QUALIFIED DEFERRED COMPENSATION PLAN The company maintains a non-qualified deferred compensation plan, with additional deferrals suspended for 2025 and until further notice - The NQ Deferred Compensation Plan allows executive officers and eligible employees to defer a portion of their compensation on a pretax basis[140] - All deferred amounts are unfunded, unsecured obligations and are recorded within Other long-term liabilities[140] - Additional deferrals into the plan were suspended for 2025 and until further notice[140] (16) RELATED PARTY TRANSACTIONS This section details expenses for aviation flight services from entities owned by the CEO and consulting services from a firm with a former board member - The company expensed $0.3 million to Avion, LLC and Airmax LLC for aviation flight services during the six months ended June 30, 2025[141] - Kenneth D. Tuchman, Chairman and CEO, has indirect 100% beneficial ownership in Avion and Airmax[141] - The company expensed $1.5 million to Willis (WTW) for consulting and insurance services during the six months ended June 30, 2024, while former President Michelle Swanback was a board member[142] (17) SUBSEQUENT EVENTS Kenneth Tuchman, Chairman and CEO, withdrew his proposal to take the company private on July 31, 2025, citing market conditions - Kenneth Tuchman withdrew his non-binding proposal to take the company private on July 31, 2025, due to market conditions[143] - Mr. Tuchman beneficially owns approximately 58% of the company's common stock[143] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial performance, highlighting revenue decrease, significant operating income improvement, liquidity, and market risks Executive Summary TTEC is a global CX outsourcing partner, serving 690 clients across 22 countries through its Digital and Engage segments, investing in innovation and expansion - TTEC is a global customer experience (CX) outsourcing partner for marquee and disruptive brands and public sector clients[150] - The company operates through two segments: TTEC Digital (CX technology, AI/Analytics) and TTEC Engage (CX operational and managed services)[151][156] - TTEC continues to invest in innovation, technology-enabled services, data analytics, and global expansion[154][155] Financial Highlights Q2 2025 revenue decreased by 3.8%, but operating income significantly increased due to the absence of a large goodwill impairment charge Q2 2025 Revenue and Operating Income Highlights (Amounts in millions) | Metric | Q2 2025 | Q2 2024 | Change | % Change | | :-------------------- | :------ | :------ | :----- | :------- | | Total Revenue | $513.6 | $534.1 | $(20.5) | -3.8% | | TTEC Digital Revenue | $113.7 | $116.4 | $(2.6) | -2.3% | | TTEC Engage Revenue | $399.8 | $417.7 | $(17.9) | -4.3% | | Income (loss) from operations | $18.9 | $(224.4) | $243.3 | 108.4% | - The increase in operating income margin is due to the Q2 2024 goodwill impairment of $233.5 million and other factors[158] - Offshore locations contributed 37% of TTEC Engage's revenue in Q2 2025, up from 33% in Q2 2024[160] - Overall capacity utilization for TTEC Engage was 71% as of June 30, 2025, down from 72% in the prior year, due to reduced client forecasts and seat reductions in the U.S. and Philippines[161] Recent Developments Kenneth Tuchman, TTEC's Chairman and CEO, withdrew his non-binding proposal to take the company private on July 31, 2025, citing market conditions - Kenneth Tuchman withdrew his non-binding proposal to take the company private on July 31, 2025[163] - The decision was made due to market conditions[163] - Mr. Tuchman beneficially owns approximately 58% of the company's common stock[163] Smaller Reporting Company Status TTEC, a 'smaller reporting company,' elected not to use scaled disclosures in this Form 10-Q, maintaining prior disclosure levels - TTEC is a 'smaller reporting company' as defined in Item 10(f)(1) of Regulation S-K[164] - The company elected not to avail itself of scaled disclosures in this Form 10-Q[164] Recently Issued Accounting Pronouncements Details on recently adopted and issued accounting pronouncements are provided in Note 1 to the Consolidated Financial Statements - Refer to Part I, Item I. Financial Statements, Note 1 for details on recently adopted and issued accounting pronouncements[165] Critical Accounting Policies and Estimates Financial statement preparation requires management estimates and assumptions, regularly reviewed and detailed in the 2024 Annual Report on Form 10-K - The preparation of financial statements requires management to make estimates and assumptions in conformity with GAAP[166] - Estimates are based on historical experience and various other reasonable assumptions[166] - Further information on critical accounting policies is in Note 1 of the 2024 Annual Report on Form 10-K[166] Results of Operations This section details the financial performance of TTEC Digital and Engage segments, along with consolidated interest, other income/expense, and income taxes Three months ended June 30, 2025 compared to three months ended June 30, 2024 Q2 2025 saw revenue declines for both segments, but significant operating income improvements, alongside increased interest income and a high effective tax rate Segment Performance (Three Months Ended June 30, Amounts in thousands) | Segment | 2025 Revenue | 2024 Revenue | % Change Revenue | 2025 Operating Income | 2024 Operating Income (Loss) | % Change Operating Income | | :------------ | :----------- | :----------- | :--------------- | :-------------------- | :--------------------------- | :------------------------ | | TTEC Digital | $113,746 | $116,368 | -2.3% | $11,409 | $6,008 | 89.9% | | TTEC Engage | $399,825 | $417,717 | -4.3% | $7,467 | $(230,421) | 103.2% | - TTEC Digital's operating income increase was primarily due to software sales, lower employee-related costs, improved utilization, and lower impairment expenses[169] - TTEC Engage's operating income increase was primarily attributable to the Q2 2024 goodwill impairment of $233.5 million and lower restructuring expenses[171] - Interest income increased to $3.2 million from $0.4 million, mainly due to $3.0 million interest on an aged VAT receivable[172] - The effective tax rate for Q2 2025 was 288.7%, driven by income distribution, tax holidays, foreign currency, and valuation allowances[174] Six months ended June 30, 2025 compared to six months ended June 30, 2024 For the six months ended June 30, 2025, both segments experienced revenue declines but significant operating income improvements, with increased interest income and a 121.6% effective tax rate Segment Performance (Six Months Ended June 30, Amounts in thousands) | Segment | 2025 Revenue | 2024 Revenue | % Change Revenue | 2025 Operating Income | 2024 Operating Income (Loss) | % Change Operating Income | | :------------ | :----------- | :----------- | :--------------- | :-------------------- | :--------------------------- | :------------------------ | | TTEC Digital | $221,786 | $228,399 | -2.9% | $17,273 | $9,296 | 85.8% | | TTEC Engage | $826,013 | $882,324 | -6.4% | $25,792 | $(210,998) | 112.2% | - TTEC Digital's operating income increase was primarily due to software sales, lower employee-related costs, improved utilization, and lower impairment expenses[177] - TTEC Engage's revenue decrease was due to a long-tenured client exiting a large line of business and lower demand from large onshore enterprise clients[178] - Interest income increased to $7.8 million from $1.4 million, mainly due to $7.3 million interest on an aged VAT receivable[180] - The effective tax rate for the six months ended June 30, 2025, was 121.6%, compared to (23.5)% in the prior year[182] Liquidity and Capital Resources TTEC's liquidity is driven by operating cash flow, which significantly increased, alongside substantial free cash flow and planned capital expenditures - Principal liquidity sources are cash from operations, cash and cash equivalents, and borrowings under the Credit Facility[183] - Net cash provided by operating activities increased to $114.3 million for the six months ended June 30, 2025, from $33.6 million in 2024[188] Free Cash Flow (Six Months Ended June 30, Amounts in thousands) | Metric | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Net cash provided by operating activities | $114,301 | $33,645 | | Less: Purchases of property, plant and equipment | $12,587 | $27,682 | | Free cash flow | $101,714 | $5,963 | - Expected total capital expenditures in 2025 are between 1.7% and 1.9% of revenue, with 53% for growth and 47% for maintenance[195] - The five largest clients accounted for 31.3% of consolidated revenue for the six months ended June 30, 2025[197] Item 3. Quantitative and Qualitative Disclosures about Market Risk TTEC faces market risks from interest rate fluctuations and foreign currency exchange rates, mitigated by a cash flow hedging program, with no marketable securities held Interest Rate Risk The company's variable-rate Credit Agreement exposes it to interest rate risk, with $882.5 million outstanding at an average 7.0% rate - The interest rate on the Credit Agreement is variable, based on Prime Rate and SOFR[200] - As of June 30, 2025, $882.5 million was outstanding under the Credit Agreement, with an average interest rate of 7.0% per annum[200] - A 100 basis point increase in interest rates would lead to an annualized $1.0 million additional interest expense per $100.0 million of outstanding borrowing[200] Foreign Currency Risk TTEC faces foreign currency risk from international operations, with 23% of revenue exposed, partially mitigated by a cash flow hedging program - Foreign subsidiaries use local currencies for costs but derive revenue in U.S. dollars or other foreign currencies, creating foreign currency risk[201] - Revenue associated with foreign exchange risk was 23% of consolidated revenue for the six months ended June 30, 2025[201] - The company uses a cash flow hedging program to mitigate this risk, but not all exposures are hedged[202][203][204] Cash Flow Hedging Program The cash flow hedging program uses forward and option contracts to hedge foreign currency exposure, with $86.6 million notional amount as of June 30, 2025 - The cash flow hedging program uses forward and/or option contracts to acquire functional currency at fixed exchange rates[203] Cash Flow Hedges Notional Amounts (As of June 30, 2025, Amounts in thousands) | Currency | U.S. Dollar Notional | | :--------------- | :------------------- | | Philippine Peso | $69,153 | | Mexican Peso | $17,427 | | Total | $86,580 | - Net gains of $0.5 million were recorded for settled cash flow hedge contracts for the six months ended June 30, 2025[209] Fair Value of Debt and Equity Securities The company held no investments in marketable debt or equity securities as of June 30, 2025, or December 31, 2024 - The company did not have any investments in marketable debt or equity securities as of June 30, 2025, or December 31, 2024[211] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures, acknowledges inherent limitations, and reports no material changes in internal control Disclosure Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025 - Disclosure controls and procedures are designed to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[214] - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[215] Inherent Limitations of Internal Controls Management acknowledges that internal controls provide reasonable, not absolute, assurance due to inherent limitations like faulty judgments and errors - Internal controls can provide only reasonable, not absolute, assurance that objectives are met[216] - Inherent limitations include faulty judgments, simple errors, circumvention by individuals or collusion, and deterioration over time[216] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[217] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, and exhibits for the reporting period Item 1. Legal Proceedings Information on legal proceedings is incorporated by reference from Note 10 to the Consolidated Financial Statements - Information on legal proceedings is incorporated by reference from Note 10 to the Consolidated Financial Statements[219] Item 1A. Risk Factors No material changes to the Risk Factors were reported compared to the 2024 Annual Report on Form 10-K - No material changes to the Risk Factors were reported compared to the Annual Report on Form 10-K for the year ended December 31, 2024[221] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has a stock repurchase program, but no repurchases have been authorized since 2017, with no current plans for 2025 - The company has a stock repurchase program launched in 2001[222] - The Board has not authorized stock repurchases since 2017 and has no current plans for additional repurchases in 2025[222] Item 5. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during Q2 2025[224] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including management incentive agreements, CEO/CFO certifications, and XBRL documents - Exhibits include the Management Incentive Program Agreement for 2025 PRSU value equivalent award (10.32)[226] - Certifications of the CEO and CFO (31.1, 31.2, 32.1, 32.2) are filed or furnished herewith[226] - XBRL Instance Document, Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbases are included (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[226] CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This section provides a cautionary note regarding forward-looking statements, advising against undue reliance due to inherent risks and uncertainties Forward-Looking Statements Disclosure This disclosure cautions against undue reliance on forward-looking statements, which are subject to risks and uncertainties detailed in SEC filings - The report contains 'forward-looking statements' regarding operations, financial condition, strategy, and other business matters[144] - Readers are cautioned not to rely unduly on forward-looking statements, as actual results may differ materially due to various risks and uncertainties[146] - Important factors that could cause actual results to differ are outlined in Part II, Item 1A. Risk Factors of this report and the Annual Report on Form 10-K[146] SIGNATURES This section contains the official signatures for the report, confirming its submission in accordance with the Securities Exchange Act of 1934 Report Signatures The report was duly signed on August 7, 2025, by the Chairman and CEO, and the Chief Financial Officer - The report was signed on August 7, 2025[229] - Signatories include Kenneth D. Tuchman, Chairman and Chief Executive Officer, and Kenneth R. Wagers, III, Chief Financial Officer[229][230]