TTEC (US:TTEC)2021-11-09 21:39Revenue Performance - TTEC's revenue for Q3 2021 was $566.7 million, a 15.0% increase from the same period in 2020, with TTEC Digital contributing $124.1 million (21.9%) and TTEC Engage contributing $442.6 million (78.1%) to the total revenue[177]. - TTEC Digital segment revenue increased by 62.1% to $124.1 million in Q3 2021, driven by cloud platform growth and acquisitions[206]. - TTEC Engage segment revenue rose by 6.3% to $442.6 million, attributed to a net increase of $45.3 million in client programs[208]. - TTEC Engage segment revenue for the nine months increased by 19.0% to $1.4 billion, with operating income rising by 35.5% to $105.4 million[217]. Operating Income and Margins - TTEC Engage's operating income decreased by 56.8% year-over-year, primarily due to a cybersecurity incident that caused operational outages for several clients[197]. - TTEC Digital's operating income decreased by 33.5% due to a reduction in a large multi-year government contract and increased amortization of acquisition-related intangible assets[197]. - Operating income for TTEC Digital decreased by 33.5% to $8.7 million, with an operating margin of 7.0% compared to 17.0% in Q3 2020[207]. - Operating income for TTEC Engage fell by 57.0% to $17.4 million, with an operating margin of 3.9% compared to 9.7% in the prior year, impacted by a cybersecurity incident costing $19.3 million[209]. Cash Flow and Financial Position - Cash and cash equivalents totaled $148.9 million as of September 30, 2021, up from $132.9 million at the end of 2020[229]. - Net cash flows from operating activities for the nine months ended September 30, 2021 were $175.1 million, down from $186.8 million in the prior year[231]. - Free cash flow decreased slightly to $134.3 million for the nine months ended September 30, 2021, from $139.0 million in 2020, attributed to a decrease in working capital and lower capital expenditures[234]. - The company drew down approximately $500 million from its Credit Facility in April 2021 to fund the acquisition of Avtex Solutions, Holdings LLC[226]. Client and Market Dynamics - TTEC serves over 725 clients globally, including Fortune 1000 companies and government agencies, across various industries such as automotive, healthcare, and technology[180]. - The five largest clients accounted for 36.2% of consolidated revenue for the three months ended September 30, 2021, down from 42.6% in 2020, and 38.1% for the nine months ended September 30, 2021, compared to 39.1% in 2020[240]. - The company has long-term relationships with its top five clients, ranging from 15 to 22 years, which mitigates the risk of client concentration[240]. Operational Capacity and Strategy - As of September 30, 2021, TTEC Engage's total production workstations were 39,900, with overall capacity utilization at 62%, an increase from 58% in the prior year[200]. - Adjusted for COVID-19 social distancing protocols, current utilization exceeds 117%, indicating strong demand despite reduced available workstations[200]. - TTEC plans to continue expanding its offshore delivery capabilities while managing foreign currency risk through a multi-currency hedging program[202]. - The company expects to refine its site strategy and capacity post-COVID-19, balancing work-from-home and brick-and-mortar delivery centers[201]. Tax and Interest - The effective tax rate for Q3 2021 was 30.6%, up from 25.9% in Q3 2020, influenced by international earnings and various tax benefits[212]. - Interest income decreased to $0.2 million in Q3 2021 from $0.6 million in Q3 2020, while interest expense increased to $3.5 million from $2.8 million[210]. Future Outlook and Investments - The company expects future capital requirements to depend on investments in infrastructure and may require additional capital through debt or equity financing[239]. - Total capital expenditures in 2021 are expected to be between 2.8% and 3.0% of revenue, with approximately 70% allocated for business growth and 30% for maintenance of existing assets[238].