TTEC (US:TTEC)2023-02-28 21:24Cybersecurity - TTEC experienced two significant cybersecurity incidents in 2021, including a global supply chain compromise and a ransomware attack, but these did not materially impact operations[114]. - The company has made significant investments to enhance its information technology environment following the cybersecurity incidents, although future incidents may still have material impacts[114]. - Cybersecurity events can lead to additional costs such as investigations, regulatory actions, and loss of client trust, potentially resulting in material revenue loss[115]. - The company expects to continue significant investments in cybersecurity to mitigate risks, with ongoing efforts to enhance technology and data protection[281]. AI Integration - TTEC is integrating AI into its solutions, which is crucial for future offerings, but risks include data sourcing issues and potential inaccuracies in AI outputs that could harm the brand[120]. Regulatory Compliance - The company faces risks related to compliance with extensive regulations across various jurisdictions, which could adversely affect profitability and operational capabilities[121]. - The company is subject to evolving data protection regulations, which may impose conflicting requirements and increase compliance costs, impacting service delivery[124]. - TTEC's ability to maintain necessary licenses for regulated services is critical, as failure to comply with licensing requirements could lead to significant business losses[138]. Financial Risks - Changes in income tax laws and potential increases in tax rates could negatively impact after-tax income and overall financial condition[140]. - Wage and hour class action lawsuits pose a significant risk due to the high turnover in the customer care outsourcing industry, potentially leading to substantial litigation costs[128]. - Many contracts have termination for convenience clauses, which could adversely affect revenue and operational projections if clients reduce volumes or terminate contracts[130]. International Operations - Approximately 32% of the company's revenue in 2022 was derived from international operations[145]. - The company faces risks related to inconsistent regulations and longer payment cycles in international markets, which could impact cash flows[145]. - Approximately 14% of the company's revenue is derived from contracts denominated in currencies other than U.S. dollars, exposing it to foreign currency exchange risks[151]. Debt and Financing - As of December 31, 2022, the company had borrowings of $960 million under its Credit Facility, with an average daily utilization of $1,037.4 million for the year[256]. - The remaining borrowing capacity under the Credit Facility was approximately $335 million as of December 31, 2022[256]. - The company drew down approximately $500 million on the Credit Facility in early April 2021 for the acquisition of Avtex Solutions[255]. - The company is in compliance with all covenants and conditions under its Credit Facility as of December 31, 2022[256]. - The company may need to raise additional capital through future debt or equity financing depending on its investment levels in infrastructure and potential acquisitions[257]. Operational Risks - The company's delivery model is geographically concentrated in the Philippines, Mexico, India, and Bulgaria, exposing it to operational risks[148]. - The company has extensive business continuity and disaster recovery plans, but their effectiveness may be limited in catastrophic events[148]. Cash Flow and Expenditures - Cash and cash equivalents totaled $153.4 million as of December 31, 2022, down from $158.2 million in 2021[259]. - Net cash flows from operating activities decreased by $114.2 million from $251.3 million in 2021 to $137.0 million in 2022[261]. - Net cash flows used in investing activities decreased from $542.0 million in 2021 to $226.2 million in 2022, primarily due to a $339.3 million decrease related to acquisitions[262]. - Free cash flow dropped from $190.9 million in 2021 to $53.0 million in 2022, attributed to reduced net cash from operations and increased capital expenditures[264]. - Future capital expenditures for 2023 are expected to be between 3.3% and 3.5% of revenue, with 65% allocated for business growth and 35% for maintenance[269]. Client Concentration - The five largest clients accounted for 35% of total annual revenue in 2022, down from 38% in 2021[279]. Stock Repurchase - The company has $26.6 million authorized for stock repurchase under its program, which has no expiration date[270]. Strategic Transactions - The company may consider mergers, acquisitions, and other strategic transactions that could materially impact its financial condition[270].