~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands, except per share amounts)

(Unaudited)

Three months ended September 30,

Nine months ended September 30,


2017

2016

2017

2016

Revenue

$
359,036

$
312,796

$
1,050,742

$
930,311

Operating expenses

Cost of services (exclusive of depreciation and amortization presented separately below)

275,548

233,541

797,450

691,649

Selling, general and administrative

45,167

40,628

132,372

130,902

Depreciation and amortization

16,515

16,811

47,273

51,761

Restructuring and integration charges, net

6,006

3,688

9,768

3,890

Impairment losses

—

5,602

—

5,602

Total operating expenses

343,236

300,270

986,863

883,804

Income from operations

15,800

12,526

63,879

46,507

Other income (expense)

Interest income

899

397

2,020

826
��
Interest expense

(3,469)

(2,041)

(8,699)

(5,758)

Other income (expense), net

4,416

6,254

6,573

7,488

Loss on assets held for sale

—

(5,300)

(3,178)

(5,300)

Total other income (expense)

1,846

(690)

(3,284)

(2,744)

Income before income taxes

17,646

11,836

60,595

43,763

(Provision for) benefit from income taxes

(2,071)

813

(9,059)

(6,667)

Net income

15,575

12,649

51,536

37,096

Net income attributable to noncontrolling interest

(806)

(1,198)

(2,828)

(2,804)

Net income attributable to TeleTech stockholders

$
14,769

$
11,451

$
48,708

$
34,292

Other comprehensive income (loss)

Net income

$
15,575

$
12,649

$
51,536

$
37,096

Foreign currency translation adjustments

(1,153)

(8,541)

8,414

(8,069)

Derivative valuation, gross

3,221

(6,009)

24,713

(2,395)

Derivative valuation, tax effect

(1,288)

2,462

(10,117)

725

Other, net of tax

127

802

386

1,202

Total other comprehensive income (loss)

907

(11,286)

23,396

(8,537)

Total comprehensive income (loss)

16,482

1,363

74,932

28,559

Less: Comprehensive income attributable to noncontrolling interest

(899)

(1,202)

(3,153)

(2,734)

Comprehensive income (loss) attributable to TeleTech stockholders

$
15,583

$
161

$
71,779

$
25,825

Weighted average shares outstanding

Basic

45,838

47,081

45,816

47,771

Diluted

46,367

47,315

46,348

48,089

Net income per share attributable to TeleTech stockholders

Basic

$
0.32

$
0.24

$
1.06

$
0.72

Diluted

$
0.32

$
0.24

$
1.05

$
0.71

Dividends declared per share outstanding

$
0.25

$
0.20

$
0.47

$
0.385


	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Revenue	$	453,081	$	392,515	$	885,294	$	786,871

Operating expenses
Cost of services (exclusive of depreciation and amortization presented separately below)		337,306		299,237		658,863		592,571
Selling, general and administrative		47,360		50,864		97,194		100,584
Depreciation and amortization		18,660		17,050		37,532		33,793
Restructuring charges, net		793		428		1,331		1,389
Impairment losses		—		2,063		696		3,569
Total operating expenses		404,119		369,642		795,616		731,906

Income from operations		48,962		22,873		89,678		54,965

Other income (expense)
Interest income		491		429		855		769
Interest expense		(3,104)		(4,208)		(12,696)		(9,496)
Other income (expense), net		(1,761)		1,865		1,635		2,663
Total other income (expense)		(4,374)		(1,914)		(10,206)		(6,064)

Income before income taxes		44,588		20,959		79,472		48,901

Provision for income taxes		(11,039)		(7,345)		(21,238)		(14,811)

Net income		33,549		13,614		58,234		34,090

Net income attributable to noncontrolling interest		(2,224)		(1,816)		(5,375)		(3,290)

Net income attributable to TTEC stockholders	$	31,325	$	11,798	$	52,859	$	30,800

Other comprehensive income (loss)
Net income	$	33,549	$	13,614	$	58,234	$	34,090
Foreign currency translation adjustments		10,980		4,749		(18,834)		6,380
Derivative valuation, gross		5,101		6,082		(5,448)		10,262
Derivative valuation, tax effect		(1,317)		(1,630)		1,429		(2,749)
Other, net of tax		119		(38)		246		17
Total other comprehensive income (loss)		14,883		9,163		(22,607)		13,910
Total comprehensive income (loss)		48,432		22,777		35,627		48,000

Less: Comprehensive income attributable to noncontrolling interest		(1,867)		(1,787)		(3,567)		(3,290)

Comprehensive income attributable to TTEC stockholders	$	46,565	$	20,990	$	32,060	$	44,710

Weighted average shares outstanding
Basic		46,619		46,318		46,559		46,261
Diluted		46,861		46,684		46,838		46,636

Net income per share attributable to TTEC stockholders
Basic	$	0.67	$	0.25	$	1.14	$	0.67
Diluted	$	0.67	$	0.25	$	1.13	$	0.66

Dividends declared per share outstanding	$	—	$	—	$	0.34	$	0.30

The accompanying notes are an integral part of these consolidated financial statements.

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity and Mezzanine Equity

(Amounts in thousands)

(Unaudited)

Three months ended June 30, 2020 and 2019

Stockholders’ Equity of the Company


















Accumulated









Other

Preferred Stock

Common Stock

Treasury

Additional

Comprehensive

Retained

Noncontrolling

Shares

Amount

Shares

Amount

Stock

Paid-in Capital

Income (Loss)

Earnings

interest

Total Equity

Balance as of December 31, 2016

—

$
—

46,114

$
462

$
(603,262)

$
348,739

$
(126,964)

$
735,939

$
6,981

$
361,895

Net income

—

—

—

—

—

—

—

48,708

2,828

51,536

Dividends to shareholders ($0.47 per common share)

—

—

—

—

—

—

—

(21,531)

—

(21,531)

Dividends distributed to noncontrolling interest

—

—

—

—

—

—

—

—

(2,745)

(2,745)

Foreign currency translation adjustments

—

—

—

—

—

—

8,089

—

325

8,414

Derivatives valuation, net of tax

—

—

—

—

—

—

14,596

—

—

14,596

Vesting of restricted stock units

—

—

283

2

4,673

(9,612)

—

—

—

(4,937)

Exercise of stock options

—

—

60

—

994

1,156

—

—

—

2,150

Equity-based compensation expense

—

—

—

—

—

8,649

—

—

(291)

8,358

Purchases of common stock

—

—

(610)

(6)

(18,322)

—

—

—

—

(18,328)

Other, net of tax

—

—

—

—

—

—

386

—

—

386

Balance as of September 30, 2017

—

$
—

45,847

$
458

$
(615,917)

$
348,932

$
(103,893)

$
763,116

$
7,098

$
399,794


	Stockholders’ Equity of the Company
											Accumulated
											Other
	Preferred Stock			Common Stock			Treasury		Additional		Comprehensive		Retained		Noncontrolling				Mezzanine
	Shares	Amount		Shares	Amount		Stock		Paid-in Capital		Income (Loss)		Earnings		interest		Total Equity		Equity
Balance as of March 31, 2020	—	$	—	46,597	$	466	$	(603,531)	$	355,734	$	(143,208)	$	778,909	$	13,036	$	401,406	$	53,367
Net income	—		—	—		—		—		—		—		31,325		1,664		32,989		560
Dividends to shareholders ($0.00 per common share)	—		—	—		—		—		—		—		—		—		—		—
Acquisition of noncontrolling interest	—		—	—		—		—		—		—		—		—		—		99
Dividends distributed to noncontrolling interest	—		—	—		—		—		—		—		—		(3,000)		(3,000)		—
Foreign currency translation adjustments	—		—	—		—		—		—		10,777		—		203		10,980		—
Derivatives valuation, net of tax	—		—	—		—		—		—		3,784		—		—		3,784		—
Vesting of restricted stock units	—		—	85		1		1,414		(2,823)		—		—		—		(1,408)		—
Equity-based compensation expense	—		—	—		—		—		3,057		—		—		—		3,057		—
Other, net of tax	—		—	—		—		—		—		119		—		—		119		—
Balance as of June 30, 2020	—	$	—	46,682	$	467	$	(602,117)	$	355,968	$	(128,528)	$	810,234	$	11,903	$	447,927	$	54,026


	Stockholders’ Equity of the Company
									��		Accumulated
											Other
	Preferred Stock			Common Stock			Treasury		Additional		Comprehensive		Retained		Noncontrolling				Mezzanine
	Shares	Amount		Shares	Amount		Stock		Paid-in Capital		Income (Loss)		Earnings		interest		Total Equity		Equity
Balance as of March 31, 2019	—	$	—	46,297	$	463	$	(608,490)	$	353,639	$	(119,878)	$	729,930	$	9,610	$	365,274	$	—
Cumulative effect of adopting accounting standard updates	—		—	—		—		—		—		—		—		—		—		—
Net income	—		—	—		—		—		—		—		11,798		1,816		13,614		—
Dividends to shareholders ($0.00 per common share)	—		—	—		—		—		—		—		—		—		—		—
Capital contribution from noncontrolling interest	—		—	—		—		—		—		—		—		2,032		2,032
Dividends distributed to noncontrolling interest	—		—	—		—		—		—		—		—		(1,350)		(1,350)		—
Foreign currency translation adjustments	—		—	—		—		—		—		4,778		—		(29)		4,749		—
Derivatives valuation, net of tax	—		—	—		—		—		—		4,452		—		—		4,452		—
Vesting of restricted stock units	—		—	90		1		1,486		(2,937)		—		—		—		(1,450)		—
Equity-based compensation expense	—		—	—		—		—		3,366		—		—		—		3,366		—
Other, net of tax	—		—	—		—		—		—		(38)		—		—		(38)		—
Balance as of June 30, 2019	—	$	—	46,387	$	464	$	(607,004)	$	354,068	$	(110,686)	$	741,728	$	12,079	$	390,649	$	—

Six months ended June 30, 2020 and 2019


	Stockholders’ Equity of the Company
											Accumulated
											Other
	Preferred Stock			Common Stock			Treasury		Additional		Comprehensive		Retained		Noncontrolling				Mezzanine
	Shares	Amount		Shares	Amount		Stock		Paid-in Capital		Income (Loss)		Earnings		interest		Total Equity		Equity
Balance as of December 31, 2019	—	$	—	46,489	$	465	$	(605,314)	$	356,409	$	(106,234)	$	773,218	$	13,186	$	431,730	$	48,923
Net income	—		—	—		—		—		—		—		52,859		3,880		56,739		1,495
Dividends to shareholders ($0.34 per common share)	—		—	—		—		—		—		—		(15,843)		—		(15,843)		—
Acquisition of noncontrolling interest	—		—	—		—		—		—		—		—		—		—		3,849
Dividends distributed to noncontrolling interest	—		—	—		—		—		—		—		—		(4,850)		(4,850)		(241)
Foreign currency translation adjustments	—		—	—		—		—		—		(18,521)		—		(313)		(18,834)		—
Derivatives valuation, net of tax	—		—	—		—		—		—		(4,019)		—		—		(4,019)		—
Vesting of restricted stock units	—		—	193		2		3,197		(6,417)		—		—		—		(3,218)		—
Equity-based compensation expense	—		—	—		—		—		5,976		—		—		—		5,976		—
Other, net of tax	—		—	—		—		—		—		246		—		—		246		—
Balance as of June 30, 2020	—	$	—	46,682	$	467	$	(602,117)	$	355,968	$	(128,528)	$	810,234	$	11,903	$	447,927	$	54,026


	Stockholders’ Equity of the Company
											Accumulated
											Other
	Preferred Stock			Common Stock			Treasury		Additional		Comprehensive		Retained		Noncontrolling				Mezzanine
	Shares	Amount		Shares	Amount		Stock		Paid-in Capital		Income (Loss)		Earnings		interest		Total Equity		Equity
Balance as of December 31, 2018	—	$	—	46,195	$	462	$	(610,177)	$	353,932	$	(124,596)	$	725,551	$	7,677	$	352,849	$	—
Cumulative effect of adopting accounting standard updates	—		—	—		—		—		—		—		(759)		—		(759)		—
Net income	—		—	—		—		—		—		—		30,800		3,290		34,090		—
Dividends to shareholders ($0.30 per common share)	—		—	—		—		—		—		—		(13,864)		—		(13,864)		—
Capital contribution from noncontrolling interest	—		—	—		—		—		—		—		—		3,362		3,362
Dividends distributed to noncontrolling interest	—		—	—		—		—		—		—		—		(2,250)		(2,250)		—
Foreign currency translation adjustments	—		—	—		—		—		—		6,380		—		—		6,380		—
Derivatives valuation, net of tax	—		—	—		—		—		—		7,513		—		—		7,513		—
Vesting of restricted stock units	—		—	192		2		3,173		(6,398)		—		—		—		(3,223)		—
Equity-based compensation expense	—		—	—		—		—		6,534		—		—		—		6,534		—
Other, net of tax	—		—	—		—		—		—		17		—		—		17		—
Balance as of June 30, 2019	—	$	—	46,387	$	464	$	(607,004)	$	354,068	$	(110,686)	$	741,728	$	12,079	$	390,649	$	—

The accompanying notes are an integral part of these consolidated financial statements.

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

Nine Months Ended September 30,


2017

2016

Cash flows from operating activities

Net income

$
51,536

$
37,096

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

47,273

51,761

Amortization of contract acquisition costs

1,273

499

Amortization of debt issuance costs

521

582

Imputed interest expense and fair value adjustments to contingent consideration

39

(4,320)

Provision for doubtful accounts

380

542

(Gain) loss on disposal of assets

85

(65)

Gain on sale of business and dissolution of entity

(3,323)

—

Impairment losses

—

5,602

Loss on held for sale assets

3,178

5,300

Deferred income taxes

8,155

5,368

Excess tax benefit from equity-based awards

(1,970)

(539)

Equity-based compensation expense

8,358

7,278

Loss on foreign currency derivatives

829

4,649

Changes in assets and liabilities, net of acquisitions:

Accounts receivable

13,460

23,780

Prepaids and other assets

(26,814)

(12,652)

Accounts payable and accrued expenses

32,597

(9,347)

Deferred revenue and other liabilities

14,066

(4,696)

Net cash provided by operating activities

149,643

110,838

Cash flows from investing activities

Proceeds from sale of long-lived assets

31

93

Purchases of property, plant and equipment, net of acquisitions

(43,932)

(38,863)

Proceeds from sale of business

391

—

Investments in non-marketable equity investments

(1,384)

—

Acquisitions, net of cash acquired of zero and zero, respectively

(81,360)

(400)

Net cash used in investing activities

(126,254)

(39,170)

Cash flows from financing activities

Proceeds from line of credit

1,571,837

1,584,800

Payments on line of credit

(1,534,137)

(1,555,800)

Payments on other debt

(4,501)

(2,306)

Payments of contingent consideration and hold back payments to acquisitions

(674)

(9,467)

Dividends paid to shareholders

(10,069)

(8,922)

Payments to noncontrolling interest

(2,745)

(3,237)

Purchase of mandatorily redeemable noncontrolling interest

—

(4,105)

Proceeds from exercise of stock options

2,150

371

Tax payments related to issuance of restricted stock units

(4,937)

(3,692)

Excess tax benefit from equity-based awards

—

539

Payments of debt issuance costs

(38)

(1,888)

Purchase of treasury stock

(18,328)

(57,279)

Net cash used in financing activities

(1,442)

(60,986)

Effect of exchange rate changes on cash and cash equivalents

1,631

(9,678)

Increase in cash and cash equivalents

23,578

1,004

Cash and cash equivalents, beginning of period

55,264

60,304

Cash and cash equivalents, end of period

$
78,842

$
61,308

Supplemental disclosures

Cash paid for interest

$
8,138

$
4,976

Cash paid for income taxes

$
11,357

$
16,755

Non-cash operating, investing and financing activities

Acquisition of long-lived assets through capital leases

$
931

$
2,417

Acquisition of equipment through increase in accounts payable, net

$
405

$
(542)

Contract acquisition costs credited to accounts receivable

$
—

$
200

Dividend declared but not paid

$
11,462

$
9,342


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities
Net income	$	58,234	$	34,090
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		37,532		33,793
Amortization of contract acquisition costs		205		488
Amortization of debt issuance costs		366		735
Imputed interest expense and fair value adjustments to contingent consideration		1,941		(555)
Provision for credit losses		607		—
(Gain) loss on disposal of assets		17		34
Loss on dissolution of subsidiary		2,467		—
Impairment losses		696		3,569
Deferred income taxes		3,289		(2,724)
Excess tax benefit from equity-based awards		(403)		(557)
Equity-based compensation expense		5,976		6,534
(Gain) loss on foreign currency derivatives		114		(232)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		(26,007)		27,688
Prepaids and other assets		30,287		13,103
Accounts payable and accrued expenses		35,572		62,770
Deferred revenue and other liabilities		(45,615)		(57,470)
Net cash provided by operating activities		105,278		121,266

Cash flows from investing activities
Proceeds from sale of long-lived assets		16		327
Purchases of property, plant and equipment, net of acquisitions		(31,915)		(28,428)
Acquisitions, net of cash acquired of $3,123 and 0, respectively		(4,421)		—
Net cash used in investing activities		(36,320)		(28,101)

Cash flows from financing activities
Proceeds from line of credit		905,700		540,200
Payments on line of credit		(495,700)		(594,200)
Payments on other debt		(4,356)		(7,016)
Payments of contingent consideration and hold back payments to acquisitions		(48,686)		(5,902)
Dividends paid to shareholders		(15,843)		(13,864)
Payments to noncontrolling interest		(5,091)		(2,250)
Capital contribution from noncontrolling interest		—		3,362
Tax payments related to issuance of restricted stock units		(3,218)		(3,223)
Payments of debt issuance costs		(35)		(1,819)
Net cash provided by (used in) financing activities		332,771		(84,712)

Effect of exchange rate changes on cash, cash equivalents and restricted cash		(4,645)		239

Increase in cash, cash equivalents and restricted cash		397,084		8,692
Cash, cash equivalents and restricted cash, beginning of period		105,591		78,237
Cash, cash equivalents and restricted cash, end of period	$	502,675	$	86,929

Supplemental disclosures
Cash paid for interest	$	5,924	$	6,844
Cash paid for income taxes	$	10,605	$	19,445
Non-cash investing and financing activities
Acquisition of long-lived assets through finance leases	$	1,599	$	1,318
Acquisition of equipment through increase in accounts payable, net	$	(2,169)	$	221

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. On an ~~on-going~~ongoing basis, the Company evaluates its estimates including those related to derivatives and hedging activities, income taxes including the valuation allowance for deferred tax assets, self-insurance reserves, litigation reserves, restructuring reserves, allowance for ~~doubtful accounts,~~credit losses, contingent consideration, redeemable noncontrolling interest, and valuation of goodwill, long-lived and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash and highly liquid short-term investments, primarily held in interest-bearing investments which have original maturities of less than 90 days. Restricted cash includes cash whereby the Company’s ability to use the funds at any time is contractually limited or is generally designated for specific purposes arising out of certain contractual or other obligations.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets that sum to the amounts reported in the Condensed Consolidated Statement of Cash Flows (in thousands):


	June 30, 2020		December 31, 2019

Cash and cash equivalents	$	482,255	$	82,407
Restricted cash included in "Prepaid and other current assets"		20,416		23,172
Restricted cash included in "Other noncurrent assets"		4		12
Total	$	502,675	$	105,591

Concentration of Credit Risk

The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and derivative instruments. Historically, the losses related to credit risk have been immaterial. The Company regularly monitors its credit risk to mitigate the possibility of current and future exposures resulting in a loss. The Company evaluates the creditworthiness of its clients prior to entering into an agreement to provide services and as necessary through the life of the client relationship. The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative hedging activities, as the Company diversifies its activities across nine investment-grade financial institutions.

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

Recently ~~Issued~~Adopted Accounting Pronouncements

In ~~May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers~~”. ASU 2014-09 provides new guidance related to how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 specifies new accounting for costs associated with obtaining or fulfilling contracts with customers and expands the required disclosures related to revenue and cash flows from contracts with customers. While ASU-2014-09 was originally effective for fiscal years and interim periods within those years beginning after December 15, 2016, in August 2015, the FASB issued ASU 2015-14, “Deferral of Effective Date”, deferring the effective date by one year, to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. ASU 2014-09 can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption, with early application not permitted. In June 2017, FASB issued ASU 2017-10, “Service Concession Arrangements”, which will be adopted along with the ASU 2014-09 guidance. The Company has assigned a project manager and team, has selected an external consulting company to assist through the project, has completed the initial project assessment phase, and is finalizing its implementation approach. The Company has determined that it will adopt this new standard using the modified retrospective approach in which a cumulative adjustment to retained earnings will be recorded as of January ~~1, 2018. The Company is in the process of completing its assessment of the financial statement impact and as such, has not reached any conclusions regarding the potential impact to the financials.~~

~~In February~~ 2016, the FASB issued ASU ~~2016-02, “Leases~~”2016-13, “Financial Instruments – Credit Losses” (ASC 326), which amends the ~~existing accounting standards for lease accounting, including requiring lessees, to recognize most leases~~methodology of how and when companies measure credit losses on ~~their balance sheets related to~~financial instruments. The objective of the rights and obligations created by those leases and making targeted changes to lessor accounting. The ASU also requires new disclosures regarding the amounts, timing, and uncertainty of cash flows arising from leases. The ASU is ~~effective for interim and annual periods beginning~~to provide financial statement users more useful information regarding expected credit losses on or after December 15, 2018 and early adoption is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently assessing the impact on the consolidated financial ~~statements and related disclosures, evaluating software solutions~~instruments and other ~~tracking methods, and determining the implementation timeline.~~

commitments. In ~~March 2016,~~November 2018, the FASB issued ASU ~~2016-09, “Compensation – Stock Compensation:~~2018-19, “Codification Improvements to ~~Employee Share-Based Payment Accounting~~”,Topic 326, Financial Instruments - Credit Losses” which ~~amends~~clarifies the ~~existing accounting standards related to stock-based compensation. The~~scope of guidance in ASU simplifies several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The ASU is effective for interim and annual periods beginning on or after December 15, 2016. Beginning with the first quarter of 2017, the Company has adopted the new guidance as applicable and this adoption did not have a material impact on its financial position, results of operation or related disclosures.

2016-13. In ~~August 2016,~~May 2019, the FASB issued ASU No. ~~2016-15, “Statement of Cash Flows”. ASU 2016-15 is intended to reduce diversity in practice regarding how certain cash transactions are presented and classified in~~2019-05, “Financial Instruments—Credit Losses (Topic 326), Targeted Transition Relief” which amended the ~~Consolidated Statement of Cash Flows by providing~~transition guidance ~~on eight specific cash flow issues. The ASU is effective~~ for ~~interim and annual periods beginning on or after December 15, 2017 and early adoption is permitted. The Company is currently assessing~~ the ~~impact on the consolidated statements and related disclosures.~~

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~“Intangibles – Goodwill and Other: Simplifying the Accounting for Goodwill Impairment~~”. ASU 2017-04 removes the need to complete Step 2 of any goodwill impairment test that has failed Step 1. The goodwill impairment will now be calculated as the amount by which a reporting unit’s carrying value exceeds its fair value.new credit losses standard. The ASU is effective for interim and annual periods beginning on or after December 15, 2019 ~~and~~with early adoption ~~is permitted.~~permitted, using a modified retrospective approach. The Company ~~early~~ adopted ~~this standard as of~~the new guidance effective January 1, ~~2017.~~2020 and the adoption did not have a material effect on the financial statements. See Note 4 for additional disclosures.

In August ~~2017,~~2018, the FASB issued ASU ~~2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to~~2018-15 “Customer’s Accounting for ~~Hedging Activities”.~~ ~~ASU 2017-12 amends and simplifies existing guidance~~Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract” (“CCA”), which aligns the accounting for ~~derivatives and hedges~~ ~~including aligning accounting~~the costs of implementing CCA’s with ~~companies’ risk management strategies and increasing disclosure transparency regarding both~~ the ~~scope and results~~requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Once these costs have been capitalized, they should be amortized over the term of ~~hedging programs.~~ ~~The changes include designation and measurement guidance for qualifying hedging relationships and~~ the ~~presentation of hedge results.~~hosting arrangement. The ASU is effective for interim and annual periods beginning on or after December 15, ~~2018~~2019, using a prospective or retrospective transition approach. The Company adopted the new guidance effective January 1, 2020 using the prospective approach and the adoption did not have a material effect on the financial statements.

Other Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” (ASU 740), which is intended to simplify various aspects related to income tax accounting. The ASU is effective for interim and annual periods beginning on or after December 15, 2020, with early adoption is permitted. The Company is currently ~~assessing~~evaluating the ~~impact~~potential effects of adoption on ~~the~~its consolidated financial statements and related disclosures.

(2)ACQUISITIONS AND DIVESTITURES

~~Connextions~~Serendebyte

On ~~April 3, 2017,~~February 7, 2020, the Company acquired, ~~all~~through its subsidiary TTEC Digital, LLC (“TTEC Digital”), 70% of the outstanding shares of ~~Connextions,~~capital stock of Serendebyte Inc., a ~~health care~~Delaware corporation (“the Transaction”). Serendebyte is an autonomous customer ~~service~~experience and intelligent automation solutions provider ~~company, from OptumHealth Holdings, LLC. Connextions is being~~with 125 employees based in India, the United States, and Canada. The business has been integrated into the ~~health care vertical~~TTEC Digital segment and is being fully consolidated into the financial statements of ~~the Customer Management Services (“CMS”) segment of the Company. Connextions employed approximately 2,000 at several centers in the U.S.~~TTEC.

~~The total~~Total cash paid at acquisition, for 70% of the outstanding shares of capital stock, was ~~$80~~$9.0 million. The ~~purchase price~~Transaction is subject to customary representations and warranties, ~~indemnities,~~holdbacks, and a net working capital adjustment. In connection with the acquisition, the Company and OptumHealth (directly and through affiliates) also entered into long-term technology and customer services agreements, and into transition services agreements to facilitate the transfer of the business. The Company ~~was required to pay an additional $1.8 million for~~finalized the net working capital adjustment for $0.8 million during the second quarter of 2020 which was paid ~~during~~from Serendebyte to TTEC Digital in the ~~third~~second quarter of 2017. Additionally, fair value adjustments related to the transition services agreements are expected to reduce the purchase price by $4.1 million resulting in a net estimated purchase price of $77.7 million.

2020.

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~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

As of the closing of the Transaction, Serendebyte’s founder and certain members of its management will continue to hold the remaining 30% interest in Serendebyte, Inc. (“Remaining Interest”). Between January 31, 2023 and December 31, 2023, Serendebyte’s founder and the management team shall have an option to sell to TTEC Digital and TTEC Digital shall have an option to purchase the Remaining Interest at a purchase price equal to a multiple of Serendebyte’s adjusted trailing twelve month EBITDA for this particular acquisition. The noncontrolling interest was recorded at fair value on the date of acquisition. The fair value was based on significant inputs not observable in the market (Level 3 inputs) including forecasted earnings, discount rate of 35%, working capital requirements and applicable tax rates. The noncontrolling interest was valued at $3.8 million and is shown as Redeemable noncontrolling interest in the accompanying Consolidated Balance Sheets.

As a condition to closing, Serendebyte’s founder and certain members of the management team agreed to continue their affiliation with Serendebyte at least through 2023, and the founder agreed not to compete with TTEC for a period of four years after the disposition of the Remaining Interest.

The following summarizes the ~~preliminary~~ estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):


	Preliminary
	Estimate of
	Acquisition Date
	Fair Value

			Preliminary
			Estimate of
			Acquisition Date
			Fair Value
Cash	$	—	$	3,123
Accounts receivable, net		15,959		1,243
Prepaid expenses		241
Other current assets		51
Prepaid and other assets				1,327
Property, plant and equipment		7,594		14
Deferred tax assets				20
Tradename				400
Customer relationships		35,000		1,920
Goodwill		35,272		9,033
	$	94,117

			$	17,080

Accounts payable	$	1	$	120
Accrued employee compensation and benefits		346		1,025
Accrued income taxes				170
Accrued expenses		386		2,208
Deferred tax liabilities		15,273
Deferred revenue		399
	$	16,405

Deferred tax liabilities - long-term				629
			$	4,152

Total purchase price	$	77,712	$	12,928

The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending finalization of a valuation and tax returns, thus are subject to revisions that may result in adjustments to the values presented above.

At the date of the purchase, an additional $2.2 million of cash was retained in the entity that was withdrawn by the holders of the Remaining Interest during the second quarter of 2020.

The ~~Connextions~~Serendebyte customer relationships and tradename have been estimated based on the initial valuation and ~~are~~will be amortized over an estimated useful ~~life~~lives of ~~12 years.~~5 and 3 years, respectively. The goodwill recognized from the ~~Connextions~~Serendebyte acquisition is estimated to be attributable, but not limited to, the acquired ~~work force~~workforce and expected synergies with ~~CMS. None of the~~TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will not be deductible for income tax purposes. The acquired goodwill and ~~the~~intangibles and operating results of ~~Connextions~~Serendebyte are reported within the ~~CMS~~TTEC Digital segment from the date of acquisition.

~~Atelka~~8

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

First Call Resolution

On ~~November 9, 2016,~~October 26, 2019, the Company acquired, ~~all~~through its subsidiary TTEC Services Corporation (“TSC”), 70% of the outstanding ~~shares of Atelka Enterprise Inc.~~membership interest in First Call Resolution, LLC (“~~Atelka”~~FCR”), an Oregon limited liability company (“the Transaction”). FCR is a ~~Canadian~~ customer ~~contact center management~~care, social networking and business process ~~outsourcing services company that serves Canadian telecommunications, logistics,~~solutions service provider with approximately 2,000 employees based in the U.S. The business has been integrated into the TTEC Engage segment and ~~entertainment clients. This~~is being fully consolidated into the financial statements of TTEC.

Total cash paid at acquisition was $107.0 million, inclusive of $4.5 million related to cash balances, for the 70% membership interest in FCR. The Transaction was subject to customary representations and warranties, holdbacks, and a net working capital adjustment. The Transaction included a potential contingent payment with a maximum value of $10.9 million based on FCR’s 2020 EBITDA performance. The Company finalized the working capital adjustment for $0.7 million during the first quarter of 2020 which was paid from FCR to TSC in March 2020.

As of the closing of the Transaction, Ortana Holdings, LLC, an ~~addition~~Oregon limited liability company (“Ortana”), owned by the FCR founders, will continue to hold the ~~CMS segment. Atelka employed approximately 2,800~~remaining 30% membership interest in ~~Quebec, Ontario, New Brunswick~~FCR (“Remaining Interest”). Between January 31, 2023 and ~~Prince Edward Island.~~December 31, 2023, Ortana shall have an option to sell to TSC and TSC shall have an option to purchase from Ortana the Remaining Interest at a purchase price equal to a multiple of FCR’s adjusted trailing twelve month EBITDA for this particular acquisition, and not to compete with the Company for a period of four years after the disposition of the Remaining Interest. The noncontrolling interest was recorded at fair value on the date of acquisition. The fair value was based on significant inputs not observable in the market (Level 3 inputs) including forecasted earnings, discount rate of 19.6%, working capital requirements and applicable tax rates. The noncontrolling interest was valued at $48.3 million on the acquisition date and is shown as Redeemable noncontrolling interest in the accompanying Consolidated Balance Sheets.

The ~~total purchase price was $48.4 million ($65.0 CAD)~~fair value of the contingent consideration has been measured based on significant inputs not observable in the market (Level 3 inputs). Significant assumptions include a discount rate of 16.7%, ~~including certain working capital adjustments, and consisted~~expected forecast volatility of ~~$47.5 million in cash at closing~~20%, an equivalent metric risk premium of 15.1%, risk-free rate of 1.6% and a ~~$1.4~~credit spread of 1.8%. Based on these, a $6.5 million ~~hold-back~~expected future payment was calculated. As of the acquisition date, the present value of the contingent consideration was $6.1 million. During the first and second quarters of 2020, $3.3 million and $1.1 million of net benefits, respectively, were recorded related to fair value adjustments of the estimated contingent consideration based on revised actuals and estimates of EBITDA performance for ~~contingencies as defined~~2020. The benefits were included in Other income (expense) in the ~~sale~~Consolidated Statements of Comprehensive Income (Loss). As of June 30, 2020, the value of the contingent consideration was $1.8 million and ~~purchase agreement, which will be released to~~was included in Other current liabilities in the ~~seller in month 12 and month 24, post acquisition, if not used.~~

accompanying Consolidated Balance Sheets.

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):


	Acquisition Date
	Fair Value

			Acquisition Date
			Fair Value
Cash	$	2,655	$	5,225
Accounts receivable, net		18,449		10,659
Prepaid expenses		615		357
Property, plant and equipment		3,161
Deferred tax assets, net		638
Property and equipment				6,006
Other assets				224
Operating lease assets				5,127
Tradename				8,600
Customer relationships		10,500		38,540
Goodwill		20,275		96,739
	$	56,293

			$	171,477

Accounts payable	$	1,199	$	388
Operating lease liability - short-term				1,160
Accrued employee compensation and benefits		2,418		4,049
Accrued expenses		2,597		72
Other		1,678
	$	7,892

Operating lease liability - long-term				3,967
			$	9,636

Total purchase price	$	48,401	$	161,841

In the ~~third~~first quarter of ~~2017,~~2020, the Company finalized its valuation of ~~Atelka~~FCR for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.

As part of the purchase, an additional net $0.7 million of cash was retained in the entity to pay for certain Ortana liabilities that had been recorded prior to the acquisition.

The ~~Atelka~~FCR customer relationships ~~will be~~and tradename are being amortized over a useful ~~life~~lives of ~~12 years.~~10 and 4 years, respectively. The goodwill recognized from the ~~Atelka~~FCR acquisition is attributable, but not limited to, the acquired ~~work force~~workforce and expected synergies with ~~CMS. None of the~~Engage. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and ~~the~~intangibles and operating results of ~~Atelka~~FCR are reported within the ~~CMS~~TTEC Engage segment from the date of acquisition.

~~rogenSi~~Dissolutions

TeleTech Customer Management (Ghana) Limited

In the ~~third~~second quarter of ~~2014, as an addition~~2020, the Company dissolved TeleTech Customer Management (Ghana) Limited, a wholly owned subsidiary domiciled in Ghana. Upon the completed dissolution, a $2.5 million loss was included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss) during the quarter ended June 30, 2020. The majority of the loss related to the Customer Strategy Services (“CSS”) segment, the Company acquired substantially all operating assets of rogenSi Worldwide PTY, Ltd., a global leadership, change management, sales, performance training and consulting company.

The total potential purchase price was $34.4 million, subject to certain working capital adjustments, and consisted of $18.1 million in cash at closing and an estimated $14.5 million in three earn-out payments, contingent on the acquired companies and TeleTech’s CSS segment achieving certain agreed earnings before interest, taxes, depreciation and amortization (“EBITDA”) targets, as defined in the sale and purchase agreement. Additionally, the estimated purchase price included a $1.8 million hold-back for contingencies as defined in the sale and purchase agreement which was released to the sellers in the first quarter of 2016. The total contingent consideration possible per the sale and purchase agreement ranged from zero to $17.6 million and the earn-out payments were payable in early 2015, 2016 and 2017, based on July 1, 2014 through December 31, 2014, and full year 2015 and 2016 performance, respectively. As of December 31, 2016, the contingent consideration has been finalized and a total of $12.0 million was earned and paid.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~The fair value~~removal of the contingent consideration was measured by applying a probability weighted discounted cash flow model based on significant inputs not observable in the market (Level 3 inputs). Key assumptions include a discount rate of 4.6% and expected future value of payments of $15.3 million. The $15.3 million of expected future payments was calculated using a probability weighted EBITDA assessment with the highest probability associated with rogenSi achieving the targeted EBITDA for each earn-out year. As of the acquisition date, the fair value of the contingent consideration was approximately $14.5 million. During the fourth quarter of 2014, the third quarter of 2015, the fourth quarter of 2015, and the third quarter of 2016, the Company recorded fair value adjustments of the contingent consideration of $0.5 million, $0.8 million, $(0.3) million, and $(4.3) million, respectively, based on revised estimates noting higher or lower probability of exceeding the EBITDA targets (see Note 7). As of September 30, 2016, the fair value of the remaining contingent consideration was reduced from $4.3 million to zero given the remote possibility of achieving targeted EBITDA for 2016. As of December 31, 2016, the payment was finalized at a value of zero and thus no additional expense was required.Accumulated other comprehensive income (loss) balance.

Financial Impact of Acquired Businesses

The acquired businesses purchased in ~~2016~~2020 and ~~2017~~2019 noted above contributed revenues of ~~$43.6~~$52.2 million and ~~$101.9 million, and a~~ net ~~loss~~income of ~~$(4.1) million and $(6.3)~~$3.7 million, inclusive of ~~$0.9 million and $2.1~~$3.2 million of acquired intangible amortization, to the Company for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017, respectively.~~2020.

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The unaudited proforma financial results for the ~~third quarter~~six months ended June 30, 2020 and ~~first nine months of 2017 and 2016~~2019 combines the consolidated results of the Company, ~~Connextions~~FCR and ~~Atelka~~Serendebyte, assuming the ~~Connextions acquisition~~acquisitions had been completed on January 1, ~~2016 and the Atelka acquisition on January 1, 2015.~~2019. The reported revenue and net income of ~~$312.8~~$885.3 million and ~~$11.5~~$52.9 million would have been ~~$362.3~~$886.3 million and ~~$9.4~~$53.1 million for the ~~three~~six months ended ~~September~~June 30, 2016, respectively, on an unaudited proforma basis. The reported revenue and net income of $930.3 million and $34.3 million would have been $1,071.7 million and $27.8 million for the nine months ended September 30, 2016,2020, respectively, on an unaudited proforma basis.

For ~~2017,~~2019, the reported revenue and net income of ~~$359.0~~$786.9 million and ~~$14.8~~$30.8 million would have been ~~$359.0~~$830.7 million and ~~$14.8~~$39.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2017, respectively. The reported revenue and net income of $1,050.7 million and $48.7 million would have been $1,090.0 million and $46.9 million for the nine months ended September 30, 2017,~~2019, respectively, on an unaudited proforma basis.

The unaudited ~~pro forma~~proforma consolidated results are not to be considered indicative of the results if these acquisitions occurred in the periods mentioned above, or indicative of future operations or results. Additionally, the ~~pro forma~~proforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisition.

~~Assets and Liabilities Held for Sale~~Subsequent Event

During the third quarter of 2016, the Company determined that one business unit from the Customer Growth Services (“CGS”) segment and one business unit from the Customer Strategy Services (“CSS”) segment would be divested from the Company’s operations. These business units continue to meet the criteria to be classified as held for sale. The Company had engaged a broker for both business units and is working with potential buyers for both business units. The Company anticipates the transactions will be finalized during the next three to six months. The Company has taken into consideration the discounted cash flow models, management input based on early discussions with brokers and potential buyers, and third-party evidence from similar transactions to complete the fair value analysis as there has not been a selling price determined at this point for either unit. For the two business units in CGS and CSS losses of $2.6 million and $2.7 million, respectively, were recorded as of September 30, 2016 in Loss on assets held for sale in the Consolidated Statements of Comprehensive Income (Loss). As of September 30, 2017, for the business unit in CSS, this loss continues to be the best estimate and no additional charge has been recorded. For the business unit in CGS, based on further discussion and initial offers, management determined that the estimated selling price assumed should be

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

revised. Based on this and further analysis, an additional $3.2 million loss was recorded as of June 30, 2017 and included in Loss on assets held for sale in the Consolidated Statements of Comprehensive Income (Loss). As of September 30, 2017, for the business unit in CGS, the aggregate loss continues to be the best estimate and no additional charge has been recorded.

~~The following table presents information related to the major components of assets and liabilities that were classified as held for sale in the Consolidated Balance Sheet as of September 30, 2017.~~

As of

September 30, 2017

Cash

$
—

Accounts receivable, net

8,240

Allowance for doubtful accounts

(51)

Other assets

589

Property, plant and equipment

1,229

Customer relationships

3,946

Goodwill

3,033

Other intangible assets

771

Allowance for reduction of assets held for sale

(8,478)

Total assets

$
9,279

Accounts payable

$
1,046

Accrued employee compensation and benefits

817

Accrued expenses

316

Other

312

Total liabilities

$
2,491

~~Investments~~

~~CaféX~~

In the first quarter of 2015, the Company invested $9.0 million in CafeX Communications, Inc. (“CaféX”) through the purchase of a portion of the Series B Preferred Stock of CaféX. CaféX is a provider of omni-channel web-based real time communication (WebRTC) solutions that enhance mobile applications and websites with in-app video communication and screen share technology to increase customer satisfaction and enterprise efficiency. TeleTech has deployed the CaféX technology as part of the TeleTech customer experience offerings within the CMS business segment and as part of its Humanify platform. At December 31, 2015, the Company owned 17.2% of the total equity of CaféX. During the fourth quarter of 2016, the Company invested an additional $4.3 million to purchase a portion of the Series C Preferred Stock; $3.2 million was paid in the fourth quarter of 2016 and $1.1 million was paid in the first quarter of 2017. At September 30, 2017, the Company owns 17.2% of the total equity of CaféX. The investment is accounted for under the cost method of accounting. The Company evaluates its investments for possible other-than-temporary impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company tested the investment in CaféX for impairment and concluded that the investment was not impaired at September 30, 2017 or December 31, 2016.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Divestitures~~

~~Technology Solutions Group (“TSG”)~~

~~Effective June 30, 2017, the Company sold the Technology Solutions Group to SKC Communication Products,~~On August 5, 2020, TTEC Digital, LLC (“~~SKC”~~TTEC Digital”) ~~for an upfront payment of $250 thousand and future contingent royalty payments over the next 3 years. TSG had been included in the CTS segment. During the second quarter of 2017,~~, a ~~$30 thousand gain, which included the write-off~~subsidiary of $0.7 million of goodwill, was recorded and included in the Consolidated Statements of Comprehensive Income (Loss). During the third quarter of 2017, a $141 thousand gain was recorded as a result of TSG delivering to SKC working capital in excess of the target set forth in the stock purchase agreement, and the gain was included in the Consolidated Statements of Comprehensive Income (Loss).

~~TeleTech Spain Holdings SL~~

In the third quarter of 2017, the Company dissolved TeleTech Spain Holdings SL, a fully owned foreign subsidiary domiciled in Spain. Upon complete liquidation, $3.2 million attributable to the accumulated translation adjustment component of equity has been removed from Accumulated other comprehensive income (loss) and recognized as part of the gain on liquidation. The $3.2 million gain is included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017.

~~Subsequent Event~~

~~On November 8, 2017,~~ the Company, agreed to acquire ~~all~~100% of ~~the outstanding shares~~VoiceFoundry, a preferred Amazon Connect cloud contact center services partner (the “VF Transaction”). The VF Transaction will close in Motif, Inc., a California corporation (“Motif”). Motif is a digital trust and safety services company serving eCommerce marketplaces, online retailers, travel agencies and financial services companies. Motif provides omni-channel community moderation services via voice, email and chat from delivery centers in India and the Philippines via approximately 2,800 employees. The acquisition will be implemented through two ~~separate transactions. In November 2017, the Company will complete~~phases, with the acquisition of ~~70%~~VoiceFoundry’s U.S. and European operations closing contemporaneously with the signing of ~~all outstanding shares~~the purchase agreement and the acquisition of the Australian and ASEAN operations closing as soon as practicable following clearance by the Australian Foreign Investment Review Board.

TTEC Digital agreed to pay up to $67.2 million, in ~~Motif from private equity~~aggregate, for the VF Transaction, including aggregate cash consideration at closing of $48.0 million and ~~certain individual investors for $46.9~~potential earn-out payments over the next two years with a maximum value of up to $19.2 million, based on VoiceFoundry’s post-closing performance against agreed 2020 and 2021 EBITDA targets. The VF Transaction is subject to customary representations and warranties, holdbacks, and working capital adjustments. The Company also agreed to purchase the remaining 30% interest in Motif from Motif’s founders (“founders’ shares”) by no later than May 2020 (“30% buyout period”). The Company agreed to pay for the founders’ shares at a purchase price contingent on Motif’s fiscal year 2020’s adjusted normalized EBITDA, and 30% of the excess cash present in the business at the time of the buyout; or if the buyout occurs prior to May 2020, the trailing twelve months EBITDA, calculated from the most recently completed full monthly period ending prior to the date of the buyout triggering event and 30% of the excess cash in the business at that point. As a condition to the acquisition, the Motif founders agreed to continue to stay as executives in the acquired business, at least through the 30% buyout period, as part of the Company’s CMS segment, and not to compete with the Company with respect to the acquired business.

(3)SEGMENT INFORMATION

The Company reports the following ~~four~~two segments:

●

~~the CMS segment includes the~~TTEC Digital designs, builds and delivers tech-enabled, insight-based and outcome-driven customer experience ~~delivery~~ solutions ~~which~~through our professional services and suite of technology offerings. These solutions are critical to enabling and accelerating digital transformation for our clients.

Technology Services: Our technology services design, integrate ~~innovative~~and operate highly scalable, digital omnichannel technology ~~with highly-trained~~solutions in the cloud, on premise, or hybrid, including journey orchestration, automation and AI, knowledge management, and workforce productivity.

Professional Services: Our management consulting practices deliver customer experience ~~professionals~~strategy, analytics, process optimization, and learning and performance services.

●	TTEC Engage provides the essential technologies, human resources, infrastructure and processes to operate customer care, acquisition, and fraud detection and prevention services.

Customer Acquisition Services: Our customer growth and acquisition services optimize the buying journeys for acquiring new customers by leveraging technology and analytics to deliver personal experiences that increase the quantity and quality of leads and customers.

Customer Care Services: Our customer ~~experience~~care services provide turnkey contract center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all ~~channels and all stages of the customer lifecycle from an onshore, offshore or work-from-home environment;~~

touchpoints.

the CGS segment provides technology-enabled sales and marketing solutions that support revenue generation across the customer lifecycle, including sales advisory, search engine optimization, digital demand generation, lead qualification, and acquisition sales, growth and retention services;

1211

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~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

~~the CTS segment includes system design consulting, customer experience technology product, implementation~~Fraud Prevention Services: Our digital fraud detection and ~~integration consulting~~prevention services proactively identify and ~~management of clients’ cloud~~prevent fraud and ~~on-premise solutions;~~provide community content moderation and

compliance.

~~the CSS segment provides professional services in customer experience strategy and operations, insights, system and operational process optimization, and culture development and knowledge management.~~

The Company allocates to each segment its portion of corporate operating expenses. All intercompany transactions between the reported segments for the periods presented have been eliminated.

The following tables present certain financial data by segment (in thousands):

Three Months Ended ~~September~~June 30, ~~2017~~2020


							Depreciation		Income
	Gross		Intersegment		Net		&		from
	Revenue		Sales		Revenue		Amortization		Operations
TTEC Digital	$	77,168	$	(25)	$	77,143	$	3,278	$	14,376
TTEC Engage		375,938		—		375,938		15,382		34,586
Total	$	453,106	$	(25)	$	453,081	$	18,660	$	48,962

Depreciation

Income

Gross

Intersegment

Net

&

(Loss) from

Revenue

Sales

Revenue

Amortization

Operations

Customer Management Services

$
277,373

$
—

$
277,373

$
13,455

$
9,133

Customer Growth Services

30,829

—

30,829

717

1,564

Customer Technology Services

34,658

(95)

34,563

1,772

4,158

Customer Strategy Services

16,271

—

16,271

571

945

Total

$
359,131

$
(95)

$
359,036

$
16,515

$
15,800

Three Months Ended ~~September~~June 30, ~~2016~~2019


							Depreciation		Income
	Gross		Intersegment		Net		&		from
	Revenue		Sales		Revenue		Amortization		Operations
TTEC Digital	$	78,580	$	(61)	$	78,519	$	3,235	$	7,709
TTEC Engage		313,996		—		313,996		13,815		15,164
Total	$	392,576	$	(61)	$	392,515	$	17,050	$	22,873

Depreciation

Income

Gross

Intersegment

Net

&

(Loss) from

Revenue

Sales

Revenue

Amortization

Operations

Customer Management Services

$
223,742

$
(78)

$
223,664

$
11,891

$
12,255

Customer Growth Services

35,301

—

35,301

1,561

161

Customer Technology Services

36,871

(291)

36,580

2,457

3,776

Customer Strategy Services

17,251

—

17,251

902

(3,666)

Total

$
313,165

$
(369)

$
312,796

$
16,811

$
12,526

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2020

Depreciation

Income

Gross

Intersegment

Net

&

(Loss) from

Revenue

Sales

Revenue

Amortization

Operations

Customer Management Services

$
798,527

$
(19)

$
798,508

$
37,843

$
43,804

Customer Growth Services

96,890

—

96,890

2,249

6,295

Customer Technology Services

105,337

(283)

105,054

5,377

11,034

Customer Strategy Services

50,290

—

50,290

1,804

2,746

Total

$
1,051,044

$
(302)

$
1,050,742

$
47,273

$
63,879


							Depreciation		Income
	Gross		Intersegment		Net		&		from
	Revenue		Sales		Revenue		Amortization		Operations
TTEC Digital	$	154,949	$	(250)	$	154,699	$	6,566	$	24,634
TTEC Engage		730,595		—		730,595		30,966		65,044
Total	$	885,544	$	(250)	$	885,294	$	37,532	$	89,678

Six Months Ended June 30, 2019


							Depreciation		Income
	Gross		Intersegment		Net		&		from
	Revenue		Sales		Revenue		Amortization		Operations
TTEC Digital	$	144,621	$	(249)	$	144,372	$	5,543	$	15,468
TTEC Engage		642,499		—		642,499		28,250		39,497
Total	$	787,120	$	(249)	$	786,871	$	33,793	$	54,965


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Capital Expenditures
TTEC Digital	$	2,888	$	5,655	$	5,326	$	9,396
TTEC Engage		12,214		9,573		26,589		19,032
Total	$	15,102	$	15,228	$	31,915	$	28,428

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~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)


	June 30, 2020		December 31, 2019
Total Assets
TTEC Digital	$	287,237	$	238,081
TTEC Engage		1,479,752		1,138,707
Total	$	1,766,989	$	1,376,788

	June 30, 2020		December 31, 2019
Goodwill
TTEC Digital	$	74,817	$	66,275
TTEC Engage		232,322		235,419
Total	$	307,139	$	301,694

~~Nine Months Ended September 30, 2016~~

Depreciation

Income

Gross

Intersegment

Net

&

(Loss) from

Revenue

Sales

Revenue

Amortization

Operations

Customer Management Services

$
664,647

$
(255)

$
664,392

$
36,024

$
36,189

Customer Growth Services

105,713

��

105,713

4,943

4,138

Customer Technology Services

109,720

(522)

109,198

8,187

9,932

Customer Strategy Services

51,008

—

51,008

2,607

(3,752)

Total

$
931,088

$
(777)

$
930,311

$
51,761

$
46,507

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Capital Expenditures

Customer Management Services

$
12,732

$
8,515

$
36,701

$
29,751

Customer Growth Services

346

375

708

3,546

Customer Technology Services

1,180

1,864

6,025

4,877

Customer Strategy Services

85

366

498

689

Total

$
14,343

$
11,120

$
43,932

$
38,863

September 30, 2017

December 31, 2016

Total Assets

Customer Management Services

$
713,377

$
585,679

Customer Growth Services

60,086

71,540

Customer Technology Services

106,372

115,537

Customer Strategy Services

69,683

73,548

Total

$
949,518

$
846,304

September 30, 2017

December 31, 2016

Goodwill

Customer Management Services

$
79,391

$
42,589

Customer Growth Services

24,439

24,439

Customer Technology Services

40,839

41,500

Customer Strategy Services

21,915

21,120

Total

$
166,584

$
129,648

The following table presents revenue based upon the geographic location where the services are provided (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016

									Three Months Ended June 30,				Six Months Ended June 30,
									2020		2019		2020		2019
Revenue
United States	$	197,664	$	166,993	$	570,305	$	507,819	$	312,310	$	235,733	$	589,988	$	472,700
Philippines		86,938		90,692		258,360		259,898		79,269		91,401		170,373		184,580
Latin America		31,361		30,832		96,301		90,154		23,352		25,054		48,450		49,190
Europe / Middle East / Africa										17,361		15,610		34,304		31,651
Asia Pacific / India										13,725		14,155		28,893		26,980
Canada		18,937		891		56,035		3,020		7,064		10,562		13,286		21,770
Europe / Middle East / Africa		14,892		15,604		45,555		49,100
Asia Pacific		9,244		7,784		24,186		20,320
Total	$	359,036	$	312,796	$	1,050,742	$	930,311	$	453,081	$	392,515	$	885,294	$	786,871

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

(4)SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS

The Company had no0 clients that contributed in excess of 10% of total revenue for the ~~nine~~six months ended ~~September~~June 30, 2017. The Company had one client that contributed in excess of 10% of total revenue for the nine months ended September 30, 2016. This client operates in the communications industry and is included in the CMS segment. This client contributed 9.5% and 10.4% of total revenue for the nine months ended September 30, 2017 and 2016, respectively.2020 or 2019. The Company does have ~~several other~~ clients with aggregate revenue exceeding $100 million annually and the loss of one or more of these clients could have a material adverse effect on the Company’s business, operating results, or financial condition. To mitigate this risk, the Company has multiple contracts with these larger clients, where each individual contract is for an amount below the $100 million aggregate.

To limit the Company’s credit risk with its clients, management performs periodic credit evaluations, maintains allowances for ~~uncollectible accounts~~credit losses and may require pre-payment for services from certain clients. Based on currently available information, management does not believe significant credit risk existed as of ~~September~~June 30, ~~2017.~~2020.

In connection with the implementation of ASC 326 as of January 1, 2020, the Company analyzed the prior history of credit losses on revenue for TTEC as a whole and separately for each of the two segments. Based on this evaluation, no modification to the allowance for credit losses balance was necessary as of the implementation date. At the end of each quarter beginning on March 31, 2020, an allowance for credit losses will be calculated based on the current quarterly revenue multiplied by the historical loss percentage of the prior three year period and recorded in the income statement. In addition to the evaluation of historical losses, the Company considers current and future economic conditions and events such as changes in customer credit quality and liquidity. The Company will write-off accounts receivable against this allowance when the Company determines a balance is uncollectible.

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Activity in the Company’s Allowance for credit losses consists of the following (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Balance, beginning of period	$	5,402	$	5,579	$	5,452	$	5,592
Provision for credit losses		445		—		607		—
Uncollectible receivables written-off		(107)		(82)		(285)		(97)
Effect of foreign currency		55		(2)		21		—
Balance, end of period	$	5,795	$	5,495	$	5,795	$	5,495

On October 15, 2018, Sears Holding Corporation (“Sears”) announced that it had filed a petition for bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. As of June 30, 2020 and December 31, 2019, TTEC had approximately $2.7 million in pre-petition accounts receivables exposure related to Sears; during the fourth quarter of 2018 a $2.7 million allowance for uncollectible accounts was recorded and included in Selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss). TTEC continues to provide post-petition services to Sears and has assessed these receivables for collection risk and has determined that these will be collectible.

Accounts Receivable Sales Agreement

On March 5, 2019, the Company entered into an Uncommitted Receivables Purchase Agreement (“Agreement”) with Bank of the West (“Bank”), whereby from time-to-time the Company may elect to sell, on a revolving basis, U.S. accounts receivables of certain clients at a discount to the Bank for cash on a limited recourse basis. The maximum amount of receivables that the Company may sell to the Bank at any given time shall not exceed $75 million. The sales of accounts receivable in accordance with the Agreement are reflected as a reduction of Accounts Receivable, net on the Consolidated Balance sheets. The Company has retained no interest in the sold receivables but retains all collection responsibilities on behalf of the Bank. The discount on the accounts receivable sold will be recorded within Other expense, net in the Consolidated Statements of Comprehensive Income (Loss). The cash proceeds from this agreement are included in the change in accounts receivable within the operating activities section of the Consolidated Statements of Cash Flows.

As of June 30, 2020, the Company had factored $40.0 million of accounts receivable; under the Agreement discounts on these receivables were not material during the quarter. As of June 30, 2020, the Company had collected $20.4 million of cash from customers which had not been remitted to the Bank. The unremitted cash is Restricted Cash and is included within Prepaid and Other Current Assets with the corresponding liability included in Accrued Expenses on the Consolidated Balance Sheet. The Company has not recorded any servicing assets or liabilities as of June 30, 2020 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

(5)GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill consisted of the following (in thousands):


							Effect of
	December 31,		Acquisitions /				Foreign		June 30,
	2019		Adjustments		Impairments		Currency		2020

TTEC Digital	$	66,275	$	9,033		—		(491)	$	74,817
TTEC Engage		235,419		(254)		—		(2,843)		232,322
Total	$	301,694	$	8,779	$	—	$	(3,334)	$	307,139

Effect of


December 31,

Acquisitions /

Foreign

September 30,

2016

Adjustments

Impairments

Currency

2017

Customer Management Services

$
42,589

$
34,662

$
—

$
2,140

$
79,391

Customer Growth Services

24,439

—

—

—

24,439

Customer Technology Services

41,500

(661)

—

—

40,839

Customer Strategy Services

21,120

—

—

795

21,915

Total

$
129,648

$
34,001

$
—
��
$
2,935

$
166,584

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company performs a goodwill impairment assessment on at least an annual basis. The Company conducts its annual goodwill impairment assessment during the fourth quarter, or more frequently, if indicators of impairment exist. During the quarter ended ~~September~~June 30, ~~2017,~~2020, the Company assessed whether any such indicators of impairment existed and concluded there were none.

During the Company’s annual impairment testing as of December 1, 2019, the Company identified triggering events that could lead to impairment of goodwill for the Digital Consulting reporting unit, including lower revenues and profits than had been anticipated over the past two years. The carrying value of Digital Consulting was $39.7 million at December 1, 2019, including approximately $24.3 million of goodwill. Based on the Company’s assessment, the estimated fair value of the Digital Consulting reporting unit exceeded its carrying value by approximately 26%, but based on additional sensitivity analysis, the amount of cushion could fall to 0% or below if the performance of the business does not improve as expected. The estimate of fair value was based on generally accepted valuation techniques and information available at the date of the assessment, which incorporated management’s assumptions about expected revenues and future cash flows and available market information for comparable companies. During the first six months of 2020, the reporting unit has delivered actual results slightly better than the estimate included in the analysis above.

Other Intangible Assets

During the second quarter ~~ended September 30, 2016,~~of 2019, the Company identified negative indicators such as lower financial performance ~~and the reversal of contingent consideration~~ for the CSS reporting unit and thus the Company updated its quantitative assessment for the CSS reporting unit fair value using an income based approach. The determination of fair value requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimationrogenSi component of the ~~long-term growth rates~~TTEC Digital segment, thus an interim impairment analysis was completed. The long-lived assets reviewed for impairment consisted of the ~~businesses, the useful lives over which the cash flows will occur~~customer relationship intangible, intellectual property, and ~~determination~~right of ~~appropriate discount rates (based in part~~use assets. The Company completed an asset group recoverability evaluation based on the Company’s weighted average cost of capital). Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. At September 30, 2016, the fair value for the CSS reporting unit exceeded the carrying value, and thus no impairment was required.

The Company has also determined that effective September 30, 2016 the assets of one of the business units within the CSS reporting unit will be held for sale (see discussion in Note 2). Therefore the CSS reporting unit was separated into the component that will be held for sale and the components that will be held for use and two separate fair value analyses were completed. At September 30, 2016 the fair value for the CSS held for use component exceeded the carrying value and thus no impairment was required. The fair value for the CSS held for sale component also exceeded the carrying value, and thus no impairment was required.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~CSS – component held-for-sale~~

~~The Company calculated the fair value of the trade name using a relief from royalty method~~current estimated cash flow based on forecasted revenues ~~sold under the trade name~~and operating income using significant inputs not observable in the market (Level 3 inputs). ~~The valuation assumptions included an estimated royalty rate of 3.75%, a discount rate specific to the trade name of 19.2% and a perpetuity growth rate of 3.0%.~~ Based on ~~the calculated fair value of $2.0 million,~~this calculation, the Company recorded an impairment expense of ~~$3.3~~$2.0 million in the three months ended ~~September~~June 30, ~~2016~~2019, which was included in Impairment losses in the Consolidated Statements of Comprehensive Income (Loss).

~~Other Intangible Assets~~

~~In connection with reduced profitability for the Avaya component~~ As part of the ~~CTS segment an interim~~$2.0 million impairment ~~analysis~~$0.4 million was ~~completed during~~assigned to the ~~third quarter of 2016. The Company will modify the sales focus of the Avaya component away from premise product and services towards cloud solutions. The indefinite-lived~~customer relationship intangible asset evaluated for impairment consisted of the TSG trade name. The Company calculated the fair value of the trade name using a relief from royalty method based on forecasted revenues sold under the trade name using significant inputs not observable in the market (Level 3 inputs). The valuation assumptions included an estimated royalty rate of 0.5%, a discount rate specificand $0.2 million to the ~~trade name of 19.0%, which is equal to the reporting unit’s equity risk premium adjusted for its size~~IP intangible asset. At December 31, 2019 and ~~company specific risk factors, and a perpetuity growth rate of 3.0%. Based on the calculated fair value of $0.4 million,~~June 30, 2020, the Company ~~recorded~~reviewed the evaluation completed as of June 30, 2019, and noted no material changes, thus no additional impairment ~~expense of $0.7 million in the three months ended September 30, 2016 which~~ was ~~included in Impairment losses in the Consolidated Statements of Comprehensive Income (Loss).~~required.

In connection with reduced profitability of the rogenSi component of the CSS segment, an interim impairment analysis was completed during the third quarter of 2016. The indefinite-lived intangible asset evaluated for impairment consisted of the trade name. The Company calculated the fair value of the trade name using a relief from royalty method based on forecasted revenues sold under the trade name using significant inputs not observable in the market (Level 3 inputs). The valuation assumptions included an estimated royalty rate of 2.0%, a discount rate specific to the trade name of 18.2%, which is equal to the reporting unit’s equity risk premium adjusted for its size and company specific risk factors. and a perpetuity growth rate of 3.0%. Based on the calculated fair value of $3.1 million, the Company recorded impairment expense of $1.2 million in the three months ended September 30, 2016 which was included in Impairment losses in the Consolidated Statements of Comprehensive Income (Loss).

(6)DERIVATIVES

~~(6)DERIVATIVES~~

Cash Flow Hedges

The Company enters into foreign exchange ~~and interest rate~~ related derivatives. Foreign exchange derivatives entered into consist of forward and option contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations that are associated with forecasted revenue earned in foreign locations. ~~Interest rate derivatives consist of interest rate swaps to reduce the Company’s exposure to interest rate fluctuations associated with its variable rate debt.~~ Upon proper qualification, these contracts are designated as cash flow hedges. It is the Company’s policy to only enter into derivative contracts with investment grade counterparty financial institutions, and correspondingly, the fair value of derivative assets ~~consider,~~considers, among other factors, the creditworthiness of these counterparties. Conversely, the fair value of derivative liabilities reflects the Company’s creditworthiness. As of ~~September~~June 30, ~~2017,~~2020, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults. The following table summarizes the aggregate unrealized net gain or loss in Accumulated other comprehensive income (loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (in thousands and net of tax):

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~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

Aggregate unrealized net gain/(loss) at beginning of period	$	(3,621)	$	(5,217)	$	4,182	$	(8,278)
Add: Net gain/(loss) from change in fair value of cash flow hedges		3,726		5,190		(4,187)		10,096
Less: Net (gain)/loss reclassified to earnings from effective hedges		58		(738)		168		(2,583)
Aggregate unrealized net gain/(loss) at end of period	$	163	$	(765)	$	163	$	(765)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Aggregate unrealized net gain/(loss) at beginning of period

$
(19,730)

$
(25,007)

$
(32,393)

$
(26,885)

Add: Net gain/(loss) from change in fair value of cash flow hedges

5,420

631

25,290

9,519

Less: Net (gain)/loss reclassified to earnings from effective hedges

(3,487)

(4,179)

(10,694)

(11,189)

Aggregate unrealized net gain/(loss) at end of period

$
(17,797)

$
(28,555)

$
(17,797)

$
(28,555)

The Company’s foreign exchange cash flow hedging instruments as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts.

Local

Currency

U.S. Dollar

% Maturing

Contracts

Notional

in the next

Maturing

As of June 30, 2020

Amount

12 months

Through

Philippine Peso

6,955,000

132,470

⁽¹⁾

59.9

April 2023

Mexican Peso

1,221,000

56,033

52.7

December 2022

188,503

Local

Currency

U.S. Dollar

Notional

As of December 31, 2019

Amount

Philippine Peso

7,715,000

147,654

⁽¹⁾

Mexican Peso

1,299,500

61,529

209,183

Local






Currency

U.S. Dollar

% Maturing

Contracts

Notional

Notional

in the next

Maturing

As of September 30, 2017

Amount

Amount

12 months

Through

Philippine Peso

10,490,000

218,413
(1)

53.2
%

August 2021

Mexican Peso

1,774,000

104,652

37.2
%

May 2021

$
323,065

Local






Currency

U.S. Dollar



Notional

Notional



As of December 31, 2016

Amount

Amount

Philippine Peso

14,315,000

301,134
(1)

Mexican Peso

2,089,000

129,375

$
430,509

(1)

⁽¹⁾

Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S. dollars on ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016.~~

2019.

~~The Company’s interest rate swap arrangement expired as of May 31, 2017 and no additional swaps have been entered into. As of December 31, 2016, the outstanding interest rate swap was as follows:~~

~~Contract~~

~~Notional~~

~~Variable Rate~~

~~Fixed Rate~~

~~Commencement~~

~~Maturity~~

~~December 31, 2016~~

~~Amount~~

~~Received~~

~~Paid~~

~~Date~~

~~Swap~~

~~15 million~~

~~1 - month LIBOR~~

~~3.14~~

~~May 2012~~

~~May 2017~~

Fair Value Hedges

The Company enters into foreign exchange forward contracts to economically hedge against foreign currency exchange gains and losses on certain receivables and payables of the Company’s foreign operations. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 the total notional amounts of the Company’s forward contracts used as fair value hedges were ~~$167.1~~$7.4 million and ~~$227.8~~$64.5 million, respectively.

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~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

Derivative Valuation and Settlements

The Company’s derivatives as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 were as follows (in thousands):


	September 30, 2017
	Designated					Not Designated
	as Hedging					as Hedging

								June 30, 2020
								Designated		Not Designated
								as Hedging		as Hedging
Designation:	Instruments					Instruments		Instruments		Instruments
	Foreign			Interest		Foreign
								Foreign		Foreign
Derivative contract type:	Exchange			Rate		Exchange		Exchange		Exchange
Derivative classification:	Cash Flow			Cash Flow		Fair Value		Cash Flow		Fair Value
			��

Fair value and location of derivative in the Consolidated Balance Sheet:
Prepaids and other current assets	$	55		$	—	$	355	$	2,962	$	—
Other long-term assets		594			—		—		2,296		—
Other current liabilities		(17,071)			—		(447)		(2,845)		(21)
Other long-term liabilities		(13,051)			—		—		(2,188)		—
Total fair value of derivatives, net	$	(29,473)		$	—	$	(92)	$	225	$	(21)


	December 31, 2016
	Designated				Not Designated
	as Hedging				as Hedging

							December 31, 2019
							Designated		Not Designated
							as Hedging		as Hedging
Designation:	Instruments				Instruments		Instruments		Instruments
	Foreign		Interest		Foreign
							Foreign		Foreign
Derivative contract type:	Exchange		Rate		Exchange		Exchange		Exchange
Derivative classification:	Cash Flow		Cash Flow		Fair Value		Cash Flow		Fair Value


Fair value and location of derivative in the Consolidated Balance Sheet:
Prepaids and other current assets	$	1,178	$	—	$	1,606	$	3,467	$	205
Other long-term assets		—		—		—		3,525		—
Other current liabilities		(23,503)		(147)		(866)		(1,223)		(107)
Other long-term liabilities		(31,714)		—		—		(95)		—
Total fair value of derivatives, net	$	(54,039)	$	(147)	$	740	$	5,674	$	98

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 were as follows (in thousands):


									Three Months Ended June 30,
									2020		2019

	Three Months Ended September 30,
	2017				2016
	Designated as Hedging				Designated as Hedging
									Designated as Hedging
Designation:	Instruments				Instruments				Instruments
	Foreign		Interest		Foreign		Interest
Derivative contract type:	Exchange		Rate		Exchange		Rate		Foreign Exchange
Derivative classification:	Cash Flow		Cash Flow		Cash Flow		Cash Flow		Cash Flow


Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax	$	(3,487)	$	—	$	(4,119)	$	(60)	$	58	$	(738)


Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:
Revenue	$	(5,812)	$	—	$	(7,103)	$	—	$	79	$	(1,011)
Interest expense		—		—		—		(104)

Three Months Ended September 30,

2017

2016

Designation:

Not Designated as
Hedging Instruments

Not Designated as
Hedging Instruments

Derivative contract type:

Foreign Exchange

Foreign Exchange









Derivative classification:

Forward Contracts

Fair Value

Forward Contracts

Fair Value

Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss):

Costs of services

$
—

$
—

$
—

$
—

Other income (expense), net

$
—

$
(1,186)

$
—

$
(3,674)

1917

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)


	Three Months Ended June 30,
	2020		2019

Designation:	Not Designated as Hedging Instruments
Derivative contract type:	Foreign Exchange
Derivative classification:	Fair Value

Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss):
Other income (expense), net	$	(14)	$	(1,465)

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 were as follows (in thousands):

Nine Months Ended September 30,

2017

2016

Designated as Hedging

Designated as Hedging

Designation:

Instruments

Instruments


Foreign

Interest

Foreign

Interest

Derivative contract type:

Exchange

Rate

Exchange

Rate

Derivative classification:

Cash Flow

Cash Flow

Cash Flow

Cash Flow

Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax

$
(10,625)

$
(69)

$
(10,939)

$
(252)

Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:

Revenue

$
(17,709)

$
—

$
(18,860)

$
—

Interest expense

—

(115)

—

(435)


										Six Months Ended June 30,
										2020		2019

	Nine Months Ended September 30,
	2017				2016
										Designated as Hedging
Designation:	Not Designated as Hedging Instruments				Not Designated as Hedging Instruments				Instruments
Derivative contract type:	Foreign Exchange				Foreign Exchange				Foreign Exchange

Derivative classification:	Forward Contracts		Fair Value		Forward Contracts		Fair Value			Cash Flow

Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss):
Costs of services	$	—	$	—	$	—	$	—
Other income (expense), net	$	—	$	(1,545)	$	—	$	(3,616)

Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax										$	168	$	(2,583)

Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:
Revenue										$	230	$	(3,538)


	Six Months Ended June 30,
	2020		2019

Designation:	Not Designated as Hedging Instruments
Derivative contract type:	Foreign Exchange
Derivative classification:	Fair Value

Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss):
Other income (expense), net	$	(343)	$	(1,217)

(7)FAIR VALUE

The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

2018

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

The following presents information as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 for the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.

Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature.

Investments – The Company measures investments, including cost and equity method investments, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. The fair values of these investments are determined based on valuation techniques using the best information available, and may include market observable inputs, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary. As of ~~September~~June 30, ~~2017,~~2020, the investment in CaféX Communication, Inc., which ~~consists~~consisted of the Company’s ~~first quarter 2015 $9.0 million investment, the fourth quarter 2016 $3.2 million investment and the first quarter 2017 $1.1~~total $15.6 million investment, is ~~recorded at $13.3 million which approximates fair value.~~fully impaired to 0.

Debt - The Company’s debt consists primarily of the Company’s Credit Agreement, which permits floating-rate borrowings based upon the current Prime Rate or ~~LIBOR~~the London Interbank Offered Rate (“LIBOR”) plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement). As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company had ~~$255.0~~$700.0 million and ~~$217.3~~$290.0 million, respectively, of borrowings outstanding under the Credit Agreement. During the ~~third~~second quarter of ~~2017~~2020 outstanding borrowings accrued interest at an average rate of ~~2.3%~~1.6% per annum, excluding unused commitment fees. The amounts recorded in the accompanying Balance Sheets approximate fair value due to the variable nature of the debt based on Level 2 inputs.

Derivatives - Net derivative assets (liabilities) are measured at fair value on a recurring basis. The portfolio is valued using models based on market observable inputs, including both forward and spot foreign exchange rates, interest rates, implied volatility, and counterparty credit risk, including the ability of each party to execute its obligations under the contract. As of ~~September~~June 30, ~~2017,~~2020, credit risk did not materially change the fair value of the Company’s derivative contracts.

The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 (in thousands):

As of ~~September~~June 30, ~~2017~~2020


	Fair Value Measurements Using
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		At Fair Value

									Fair Value Measurements Using
									Quoted Prices in		Significant
									Active Markets		Other		Significant
									for Identical		Observable		Unobservable
									Assets		Inputs		Inputs
									(Level 1)		(Level 2)		(Level 3)		At Fair Value
Cash flow hedges	$	—	$	(29,473)	$	—	$	(29,473)	$	—	$	225	$	—	$	225
Interest rate swaps		—		—		—		—
Fair value hedges		—		(92)		—		(92)		—		(21)		—		(21)
Total net derivative asset (liability)	$	—	$	(29,565)	$	—	$	(29,565)	$	—	$	204	$	—	$	204

2119

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

As of December 31, ~~2016~~2019


	Fair Value Measurements Using
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		At Fair Value

									Fair Value Measurements Using
									Quoted Prices in		Significant
									Active Markets		Other		Significant
									for Identical		Observable		Unobservable
									Assets		Inputs		Inputs
									(Level 1)		(Level 2)		(Level 3)		At Fair Value
Cash flow hedges	$	—	$	(54,039)	$	—	$	(54,039)	$	—	$	5,674	$	—	$	5,674
Interest rate swaps		—		(147)		—		(147)
Fair value hedges		—		740		—		740		—		98		—		98
Total net derivative asset (liability)	$	—	$	(53,446)	$	—	$	(53,446)	$	—	$	5,772	$	—	$	5,772

The following is a summary of the Company’s fair value measurements as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 (in thousands):

As of ~~September~~June 30, ~~2017~~2020


	Fair Value Measurements Using
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)

							Fair Value Measurements Using
							Quoted Prices in				Significant
							Active Markets for		Significant Other		Unobservable
							Identical Assets		Observable Inputs		Inputs
							(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments, net	$	—	$	—	$	—	$	—	$	204	$	—
Total assets	$	—	$	—	$	—	$	—	$	204	$	—


Liabilities
Deferred compensation plan liability	$	—	$	(12,624)	$	—	$	—	$	(20,801)	$	—
Derivative instruments, net		—		(29,565)		—		—		—		—
Contingent consideration		—		—		(1,178)		—		—		(1,785)
Total liabilities	$	—	$	(42,189)	$	(1,178)	$	—	$	(20,801)	$	(1,785)

As of December 31, ~~2016~~2019


	Fair Value Measurements Using
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)

							Fair Value Measurements Using
							Quoted Prices in				Significant
							Active Markets for		Significant Other		Unobservable
							Identical Assets		Observable Inputs		Inputs
							(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments, net	$	—	$	—	$	—	$	—	$	5,772	$	—
Total assets	$	—	$	—	$	—	$	—	$	5,772	$	—


Liabilities
Deferred compensation plan liability	$	—	$	(10,841)	$	—	$	—	$	(20,370)	$	—
Derivative instruments, net		—		(53,446)		—		—		—		—
Contingent consideration		—		—		(1,808)		—		—		(6,134)
Total liabilities	$	—	$	(64,287)	$	(1,808)	$	—	$	(20,370)	$	(6,134)

Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees. Participants in the deferred compensation plan select from a menu of phantom investment options for their deferral dollars offered by the Company each year, which are based upon changes in value of complementary, defined market investments. The deferred compensation liability represents the combined values of market investments against which participant accounts are tracked.

2220

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

Contingent Consideration — - The Company recorded contingent consideration related to the ~~acquisitions~~acquisition of ~~rogenSi and Atelka. These~~FCR. This contingent ~~payables were~~payable was recognized at fair value using a discounted cash flow approach and a discount rate of ~~4.6% and 0%, respectively.~~16.7%. The discount rates vary dependent on the specific risks of each acquisition including the country of operation, the nature of services and complexity of the acquired business, and other similar factors. These measurements were based on significant inputs not observable in the market. The Company ~~recorded~~will record interest expense each ~~period~~quarter using the effective interest method until the future value of ~~these~~this contingent ~~payables reached their~~payment reaches the expected total future value. ~~Interest expense related~~

During the first and second quarters of 2020, the Company recorded fair value adjustments to ~~all~~the contingent consideration associated with the FCR acquisition based on decreased estimates of EBITDA which caused the estimated payable to decrease. Accordingly, a $3.3 million decrease and a $1.1 million decrease to the payable were recorded ~~contingent payables is~~as of March 31, 2020 and June 30, 2020, respectively, and were included in ~~Interest expense~~Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

~~The Company recorded~~ As of June 30, 2020, the expected future contingent consideration related to a revenue servicing agreement with Welltok in the fourth quarter of 2016, in which a maximum of $1.25 million will be paid over eight quarters based on the dollar value of revenue earned by the Company. The contingent payable was recognized at fair value of $1.25 million as of December 31, 2016. As required, the first payment of $435 thousand was completed during the second quarter of 2017. As required, the second payment of $239 thousand was completed during the third quarter of 2017.is $1.8 million.

A rollforward of the activity in the Company’s fair value of the contingent consideration payable is as follows (in thousands):


							Imputed
	December 31,						Interest /		June 30,
	2019		Acquisitions		Payments		Adjustments		2020

FCR	$	6,134	$	—	$	—	$	(4,349)	$	1,785
Total	$	6,134	$	—	$	—	$	(4,349)	$	1,785

Imputed


December 31,

Interest /

September 30,

2016

Acquisitions

Payments

Adjustments

2017

Welltok

$
1,250

$
—

$
(674)

$
—

$
576

Atelka

558

—

—

44

602

Total

$
1,808

$
—

$
(674)

$
44

$
1,178

(8)INCOME TAXES

The Company accounts for income taxes in accordance with the accounting literature for income taxes, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the Consolidated Financial Statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. Quarterly, the Company assesses the likelihood that its net deferred tax assets will be recovered. Based on the weight of all available evidence, both positive and negative, the Company records a valuation allowance against deferred tax assets when it is more-likely-than-not that a future tax benefit will not be realized. The Company’s selection of an accounting policy with respect to both the global intangible low taxed foreign income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) rules is to compute the related taxes in the period the entity becomes subject to either GILTI or BEAT.

~~In accordance with ASC 740,~~On March 27, 2020, the ~~Company recorded a liability during~~Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law. The CARES Act includes various provisions designed to support corporations and reduce the ~~first quarter~~impact of ~~2016~~COVID-19 pandemic on their liquidity including provisions relating to payroll tax credits, deferment of ~~$1.1 million, inclusive~~employer side social security payments, modifications to the net interest deduction limitations, allowing companies to carryback certain Net Operating Losses (“NOLs”) and increasing the amount of ~~penalties and interest, for uncertain tax positions. See Note 1 for further information on this item.~~

~~During the~~NOLs that corporations can use to offset income. The CARES Act did not materially affect our second quarter income tax provision, deferred tax assets and liabilities, or related taxes payable. We are continuing to assess the future implications of ~~2016, $0.3 million of liability was released due~~these provisions within the CARES Act but do not expect there to ~~the closing of~~be a ~~statute of limitations.~~

During the third quarter of 2016, $0.8 million of liability was released due to the favorable outcome of communications with a revenue authority related to site compliance for locations with tax advantaged status.

~~During the third quarter of 2016, $0.5 million of liability was released due to the closing of a statute of limitations.~~material impact on our financial statements at this time.

As of ~~September~~June 30, ~~2017,~~2020, the Company had ~~$31.0~~$10.5 million of gross deferred tax assets (after a ~~$10.5~~$17.0 million valuation allowance) and a net deferred tax ~~assets~~asset of $0.5 million (after deferred tax ~~liabilities)~~liabilities of ~~$30.8 million~~$10.0 million) related to the ~~U.S.~~United States and international tax jurisdictions whose recoverability is dependent upon future profitability.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~11.7%~~24.8% and ~~15.0%~~26.7%, respectively. The effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2019 was ~~(6.9)%~~35.0% and ~~15.2%~~30.3%, respectively.

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company’s U.S. income tax returns filed for the tax years ending December 31, ~~2014~~2016 to present, remain open tax years. The Company has been notified of the intent to audit or is currently under audit of income taxes for the United States for tax year 2017, Canada for tax years 2009, 2010 and ~~2010,~~2018, the Philippines for tax year 2018; and the state of ~~Michigan in the United States~~New York for tax years ~~2012~~2015 through ~~2015, for the Philippines branch for tax year 2015, for Belgium for tax years 2014 and 2015, and for eLoyalty in Ireland for tax year 2016.~~2017. Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company’s Consolidated Financial Statements. ~~During~~

When there is a change in judgment concerning the ~~third~~recovery of deferred tax assets in future periods, a valuation allowance is recorded into earnings during the quarter ~~of 2017,~~in which the ~~Company closed the audit~~change in ~~Hong Kong for 2014 with no changes. Additionally, during~~judgment occurred. In the second quarter of ~~2016,~~2019 and the ~~Company successfully closed~~first quarter of 2020, changes to the ~~audit~~valuation allowance were recorded in the ~~U.S.~~amounts of $2.3 million and $0.3 million, respectively, for deferred tax assets that did not meet the ~~acquired entity Technology Solutions Group for~~“more-likely-than-not” standard. In the ~~tax year 2012 (prior~~second quarter of 2020, changes to ~~acquisition) with no changes. The Company also closed~~the valuation allowance were recorded in the ~~fourth quarter~~amount of ~~2016~~$0.9 million for assets that were redetermined to meet the ~~audit in New Zealand for tax years 2013 and 2014 with no changes.~~“more-likely-than-not” standard.

The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the government of the Philippines. Generally, a Tax Holiday is an agreement between the Company and a foreign government under which the Company receives certain tax benefits in that country, such as exemption from taxation on profits derived from export-related activities. In the Philippines, the Company has been granted multiple agreements with an initial period of four years and additional periods for varying years, expiring at various times between ~~2011~~2019 and ~~2020.~~2022. The aggregate effect on income tax expense for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 was approximately ~~$2.8~~$(0.3) million expense and $1.9 million benefit, respectively, which had an impact on diluted net income per share of $(0.01) and $0.04, respectively. The aggregate effect on income tax expense for the six months ended June 30, 2020 and 2019 was approximately $1.2 million and ~~$2.0~~$4.0 million, respectively, which had a favorable impact on diluted net income per share of ~~$0.06~~$0.02 and $0.04, respectively. The aggregate effect on income tax expense for the nine months ended September 30, 2017 and 2016 was approximately $8.9 million and $4.5 million, respectively, which had a favorable impact on diluted net income per share of $0.19 and $0.10,$0.09, respectively.

(9)RESTRUCTURING ~~CHARGES, INTEGRATION~~ CHARGES AND IMPAIRMENT LOSSES

Restructuring Charges

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, the Company continued restructuring activities primarily associated with reductions in the Company’s capacity, workforce and related management in ~~several of the~~both segments to better align the capacity and workforce with current business needs.

During the three and nine months ended September 30, 2017, several restructuring activities were completed regarding the purchase of Connextions (see Note 2). Several of the delivery centers that were included in the purchase will be closed over the next few quarters. During the second quarter of 2017, a $1.7 million severance accrual was recorded in relation to these closures and included in the Consolidated Statements of Comprehensive Income (Loss) for the quarter ended June 30, 2017. In conjunction with closing one delivery center, a $0.6 million termination fee was recorded in the third quarter of 2017. During the third quarter of 2017, the severance accrual was reviewed and a reversal of $0.7 million was recorded as of September 30, 2017. These charges and reversals were included in the Consolidated Statements of Comprehensive Income (Loss) during the quarter ended September 30, 2017.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

A summary of the expenses recorded in Restructuring ~~and integration~~ charges, net in the accompanying Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively, is as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

Reduction in force
TTEC Digital	$	114	$	—	$	321	$	—
TTEC Engage		3		308		239		770
Total	$	117	$	308	$	560	$	770

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016


Reduction in force

Customer Management Services

$
(213)

$
2,485

$
1,548

$
2,482

Customer Growth Services

—

108

—

108

Customer Technology Services

—

314

93

324

Customer Strategy Services

13

82

13

92

Total

$
(200)

$
2,989

$
1,654

$
3,006

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016


Facility exit and other charges

Customer Management Services

$
600

$
699

$
642

$
852

Customer Growth Services

—

—

—

—

Customer Technology Services

—

—

84

33

Customer Strategy Services

21

—

21

—

Total

$
621

$
699

$
747

$
885


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

Facility exit and other charges
TTEC Digital	$	—	$	—	$	—	$	—
TTEC Engage		676		120		771		619
Total	$	676	$	120	$	771	$	619

A rollforward of the activity in the Company’s restructuring ~~accruals~~accrual is as follows (in thousands):


	Reduction		Facility Exit and
	in Force		Other Charges		Total

Balance as of December 31, 2016	$	1,468	$	98	$	1,566

							Reduction		Facility Exit and
							in Force		Other Charges		Total

Balance as of December 31, 2019							$	251	$	74	$	325
Expense		2,384		747		3,131		560		771		1,331
Payments		(987)		(841)		(1,828)		(719)		(807)		(1,526)
Change due to foreign currency		(23)		—		(23)		(14)		(5)		(19)
Change in estimates		(730)		—		(730)		—		—		—
Balance as of September 30, 2017	$	2,112	$	4	$	2,116
Balance as of June 30, 2020							$	78	$	33	$	111

The remaining restructuring and other accruals are expected to be paid or extinguished during the next twelve months and are all classified as current liabilities within Other accrued expenses in the Consolidated Balance Sheets.

~~Integration~~Severance Charges

In the normal course of business, the Company will pay severance to terminated employees related to programs that are ending who are no longer needed and cannot be repurposed to a new program.

During the second quarter of 2020, a $2.9 million accrual was recorded with the expense included in Cost of services during the quarter ended June 30, 2020. The accrual is expected to be paid or extinguished during the next six months and thus is classified as current liabilities within Other accrued expenses in the Consolidated Balance Sheets.

Impairment Losses

During each of the periods presented, the Company evaluated the annual recoverability of its leasehold improvement assets at certain customer engagement centers. An asset is considered to be impaired when the anticipated undiscounted future cash flows of its asset group are estimated to be less than the asset group’s carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. To determine fair value, the Company used Level 3 inputs in its discounted cash flows analysis. Assumptions included the amount and timing of estimated future cash flows and assumed discount rates. During the three and six months ended ~~September~~June 30, ~~2017, as a result of~~2020, the Connextions acquisition, certain integration activities were completed and $5.6 million of additional expenses were incurred and paid. These integration activities included the hiring, training and licensing of a group of employees at new delivery centers as one of the acquired centers was closed during the third quarter of 2017 and one of the acquired centers will be closed during the fourth quarter of 2017. The Company ~~has also incurred significant expenses~~recognized impairment losses related to leasehold improvement assets and right of use lease assets of 0 and $0.7 million, respectively, for the ~~integration~~TTEC Digital segment. During the three and six months ended June 30, 2019, the Company recognized impairment losses related to leasehold improvement assets and right of use lease assets of $1.1 million and $2.6 million, respectively, across the ~~IT systems~~TTEC Digital and ~~has paid duplicative software costs and facilities expenses for several areas during the transition period.~~TTEC Engage segments.

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~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

(10)COMMITMENTS AND CONTINGENCIES

Credit Facility

On February ~~11, 2016,~~14, 2019, the Company entered into a ~~First~~Fourth Amendment to its ~~June 3, 2013~~ Amended and Restated Credit Agreement and Amended and Restated Security Agreement originally dated as of June 3, 2013 (collectively the “Credit Agreement”) for a senior secured revolving credit facility ~~(the “Credit Facility”)~~ with a syndicate of lenders led by Wells Fargo Bank, National ~~Association. The Credit Agreement provides for a secured revolving credit facility that~~Association, as agent, swing line and fronting lender which matures on February ~~11, 2021 with an initial~~14, 2024 (the “Credit Facility”).

The maximum ~~aggregate~~ commitment ofunder the Credit Facility is $900.0 million, ~~and~~with an accordion feature of up to $1.2 billion in the aggregate, if certain conditions are satisfied.

~~On October 30, 2017, the Company entered into a Third Amendment~~ The Credit Facility commitment fees are payable to the ~~Credit Agreement and exercised~~lenders in an amount equal to the ~~Credit Facility’s accordion feature to increase the total commitment under~~unused portion of the Credit Facility multiplied by a rate per annum as determined by reference to ~~$1.2 billion. All other material terms~~the Company’s net leverage ratio. The Credit Agreement contains customary affirmative, negative, and financial covenants, which remained unchanged from the 2016 Credit Facility, except that the Company is now obligated to maintain a maximum net leverage ratio of 3.50 to 1.00, and a minimum Interest coverage Ratio of 2.50 to 1.00. The Credit Agreement permits accounts receivable factoring up to the greater of $75 million or 25 percent of the ~~Credit Agreement remained unchanged.~~average book value of all accounts receivable over the most recent twelve-month period.

Base rate loans bear interest at a rate equal to the greatest of (i) Wells Fargo’s prime rate, (ii) one half of 1% in excess of the federal funds effective rate, and (iii) 1.25% in excess of the one month London Interbank Offered Rate (“LIBOR”); plus in each case a margin of 0% to 0.75% based on the Company’s net leverage ratio. Eurodollar loans bear interest at LIBOR plus a margin of 1.0% to 1.75% based on the Company’s net leverage ratio. Alternate currency loans bear interest at rates applicable to their respective currencies.

Letter of credit fees are one eighth of 1% of the stated amount of the letter of credit on the date of issuance, renewal or amendment, plus an annual fee equal to the borrowing margin for Eurodollar loans.

The ~~Credit Facility commitment fees are payable to the lenders in an amount equal to the unused portion of the Credit Facility at a rate of 0.125% to 0.250% based on the Company’s net leverage ratio.~~

~~The Company is obligated to maintain a maximum net leverage ratio of 3.25 to 1.00, and a minimum interest coverage ratio of 2.50 to 1.00.~~

~~The~~ Company primarily utilizes its Credit Agreement to fund working capital, general operations, ~~stock repurchases,~~ dividends and other strategic activities, such as the acquisitions described in Note 2. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company had borrowings of ~~$255.0~~$700.0 million and ~~$217.3~~$290.0 million, respectively, under its Credit Agreement, and its average daily utilization was ~~$474.3~~$548.8 million and ~~$359.5~~$324.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively. The increased borrowings under the Credit Agreement at June 30, 2020 relate to precautionary measures taken to proactively strengthen the Company’s cash reserves and financial flexibility in response to COVID-19 related uncertainties. Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately ~~$390.0~~$195 million as of ~~September~~June 30, ~~2017.~~2020. As of ~~September~~June 30, ~~2017,~~2020, the Company was in compliance with all covenants and conditions under its Credit Agreement.

Letters of Credit

As of ~~September~~June 30, ~~2017,~~2020, outstanding letters of credit under the Credit Agreement totaled ~~$3.9~~$2.6 million and primarily guaranteed workers’ compensation and other insurance related obligations. As of ~~September~~June 30, ~~2017,~~2020, letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled ~~$7.6~~$0.4 million.

Legal Proceedings

From time to time, the Company has been involved in legal actions, both as plaintiff and defendant, which arise in the ordinary course of business. The Company accrues for exposures associated with such legal actions to the extent that losses are deemed both probable and reasonably estimable. To the extent specific reserves have not been made for certain legal proceedings, their ultimate outcome, and consequently, an estimate of possible loss, if any, cannot reasonably be determined at this time.

2624

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~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

Based on currently available information and advice received from counsel, the Company believes that the disposition or ultimate resolution of any current legal proceedings, except as otherwise specifically reserved for in its financial statements, will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.

(11)LEASES

~~(11)~~

Operating leases are included in the Consolidated Balance Sheet as Operating lease assets, Current operating lease liabilities and Non-current operating lease liabilities. Finance leases are included in Property, plant and equipment, Other current liabilities and Other long-term liabilities in the Consolidated Balance Sheet. The Company primarily leases real estate and equipment under various arrangements that provide the Company the right of use for the underlying asset which require lease payments over the lease term. The Company determines the value of each lease by computing the present value of each lease payment using the interest rate implicit in the lease, if available; otherwise the Company estimates its incremental borrowing rate over the lease term. The Company determines its incremental borrowing rate based on its estimated credit risk with adjustments for each individual leases’ geographical risk and lease term. Operating lease assets also include prepaid rent and initial direct costs less any tenant improvements.

The Company’s real estate portfolio typically includes one or more options to renew, with renewal terms that generally can extend the lease term from one to 10 years. The exercise of these lease renewal options is at the Company’s discretion and is included in the lease term only if the Company is reasonably certain to exercise. The Company also has service arrangements whereby it controls specific space provided by a third-party service provider. These arrangements meet the definition of a lease and are accounted for under ASC 842. Rent expense for operating leases is recognized on a straight-line basis over the lease term and is included in the Consolidated Statements of Comprehensive Income (Loss). The Company’s lease agreements do not contain any material residual value guarantees or restrictive guarantees.

The components of lease expense for the three and six months ended June 30, 2020 and 2019 are as follows (in thousands):


	Location in Statements of	Three Months Ended June 30,
Description	Comprehensive Income (Loss)	2020		2019
Amortization of ROU assets - finance leases	Depreciation and amortization	$	1,928	$	1,798
Interest on lease liabilities - finance leases	Interest expense		52		32
Operating lease cost (cost resulting from lease payments)	Cost of services		11,642		12,647
Operating lease cost (cost resulting from lease payments)	Selling, general and administrative		858		1,363
Operating lease cost (cost resulting from lease payments)	Other income (expense), net		287		242
Short-term lease cost	Cost of services		883		1,247
Variable lease cost (cost excluded from lease payments)	Cost of services		(284)		—
Less: Sublease income	Selling, general and administrative		(212)		(126)
Less: Sublease income	Other income (expense), net		(616)		(496)
Total lease cost		$	14,538	$	16,707

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)


	Location in Statements of	Six Months Ended June 30,
Description	Comprehensive Income (Loss)	2020		2019
Amortization of ROU assets - finance leases	Depreciation and amortization	$	3,844	$	3,405
Interest on lease liabilities - finance leases	Interest expense		108		40
Operating lease cost (cost resulting from lease payments)	Cost of services		23,680		23,346
Operating lease cost (cost resulting from lease payments)	Selling, general and administrative		1,400		2,630
Operating lease cost (cost resulting from lease payments)	Other income (expense), net		529		484
Short-term lease cost	Cost of services		1,880		2,312
Variable lease cost (cost excluded from lease payments)	Cost of services		(284)		—
Less: Sublease income	Selling, general and administrative		(394)		(193)
Less: Sublease income	Other income (expense), net		(1,112)		(992)
Total lease cost		$	29,651	$	31,032

Other supplementary information for the three and six months ended June 30, 2020 and 2019 are as follows (dollar values in thousands):


	Three Months Ended June 30,
	2020		2019
Finance lease - operating cash flows	$	17	$	32
Finance lease - financing cash flows	$	1,735	$	2,202
Operating lease - operating cash flows (fixed payments)	$	13,280	$	13,741
New ROU assets - operating leases	$	247	$	5,368
Modified ROU assets - operating leases	$	6,221	$	10,202
New ROU assets - finance leases	$	320	$	1,657


	Six Months Ended June 30,
	2020		2019
Finance lease - operating cash flows	$	36	$	40
Finance lease - financing cash flows	$	3,867	$	5,985
Operating lease - operating cash flows (fixed payments)	$	27,417	$	26,075
New ROU assets - operating leases	$	6,795	$	7,057
Modified ROU assets - operating leases	$	6,221	$	23,201
New ROU assets - finance leases	$	828	$	4,247


	June 30, 2020		December 31, 2019
Weighted average remaining lease term - finance leases		2.63 years		2.91 years
Weighted average remaining lease term - operating leases		4.02 years		4.27 years
Weighted average discount rate - finance leases		1.60%		1.43%
Weighted average discount rate - operating leases		6.90%		7.22%

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Operating and financing lease right-of-use assets and lease liabilities within the Consolidated Balance Sheet as of June 30, 2020 and December 31, 2019 are as follows (in thousands):


Description	Location in Balance Sheet	June 30, 2020		December 31, 2019
Assets
Operating lease assets	Operating lease assets	$	142,701	$	150,808
Finance lease assets	Property, plant and equipment, net		14,989		18,016
Total leased assets		$	157,690	$	168,824

Liabilities
Current
Operating	Current operating lease liabilities	$	45,121	$	45,218
Finance	Other current liabilities		6,987		7,470
Non-current
Operating	Non-current operating lease liabilities		116,558		127,395
Finance	Other long-term liabilities		6,423		8,896
Total lease liabilities		$	175,089	$	188,979

The future minimum operating lease and finance lease payments required under non-cancelable leases as of June 30, 2020 and December 31, 2019 are as follows (in thousands):

June 30, 2020


	Operating		Sub-lease		Finance
	Leases		Income		Leases
Year 1	$	54,344	$	(3,401)	$	6,829
Year 2		47,643		(3,437)		4,149
Year 3		41,159		(3,433)		1,609
Year 4		21,523		(2,828)		817
Year 5		13,215		(2,940)		104
Thereafter		10,230		(1,960)		—
Total minimum lease payments	$	188,114	$	(17,999)	$	13,508
Less imputed interest		(26,435)				(98)
Total lease liability	$	161,679			$	13,410

December 31, 2019


	Operating		Sub-lease		Finance
	Leases		Income		Leases
Year 1	$	54,903	$	(2,976)	$	7,594
Year 2		47,892		(621)		5,587
Year 3		43,590		(345)		2,139
Year 4		28,124		(201)		1,109
Year 5		14,494		—		331
Thereafter		14,734		—		—
Total minimum lease payments	$	203,737	$	(4,143)	$	16,760
Less imputed interest		(31,124)				(394)
Total lease liability	$	172,613			$	16,366

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

In 2008, the Company sub-leased one of its customer engagement centers to a third party for the remaining term of the lease. The sub-lease began on January 1, 2009 and rental income will be recognized on a straight-line basis over the term of the sub-lease through 2026. In 2017, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on November 6, 2017 and ends May 31, 2021. In 2019, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on March 1, 2019 and ends July 31, 2023. In 2020, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on February 6, 2020 and ends June 14, 2023.

(12)OTHER LONG-TERM LIABILITIES

The components of Other long-term liabilities as of June 30, 2020 and December 31, 2019 are as follows (in thousands):


	June 30, 2020		December 31, 2019

Deferred revenue	$	17,353	$	23,142
Deferred compensation plan		20,801		20,370
Other		30,318		36,129
Total	$	68,472	$	79,641

(13)NONCONTROLLING INTEREST

The following table reconciles equity attributable to noncontrolling interest in the Company’s subsidiary (in thousands):


	Nine Months Ended September 30,
	2017		2016

					Six Months Ended June 30,
					2020		2019
Noncontrolling interest, January 1	$	6,981	$	7,201	$	13,186	$	7,677
Net income attributable to noncontrolling interest		2,828		2,804		3,880		3,290
Dividends distributed to noncontrolling interest		(2,745)		(2,745)		(4,850)		(2,250)
Equity contribution						—		3,362
Foreign currency translation adjustments		325		(70)		(313)		—
Equity-based compensation expense		(291)		96
Other		—		10
Noncontrolling interest, September 30	$	7,098	$	7,296
Noncontrolling interest, June 30					$	11,903	$	12,079

~~(12)MANDATORILY REDEEMABLE NONCONTROLLING INTEREST~~

The Company held an 80% interest in iKnowtion until January 1, 2016 when the additional 20% was purchased. In the event iKnowtion met certain EBITDA targets for calendar year 2015, the purchase and sale agreement required TeleTech to purchase the remaining 20% interest in iKnowtion in 2016 for an amount equal to a multiple of iKnowtion’s 2015 EBITDA as defined in the purchase and sale agreement. These terms represented a contingent redemption feature which the Company determined was probable of being achieved.

~~Based on final EBITDA for 2015, the payment for the remaining 20% was completed in April 2016 for the value shown in the table below in accordance with the purchase and sale agreement.~~

The Company recorded the mandatorily redeemable noncontrolling interest at the redemption value based on the corresponding EBITDA multiples as prescribed in the purchase and sale agreement at the end of each reporting period. At the end of each reporting period the changes in the redemption value were recorded in retained earnings. Since the EBITDA multiples as defined in the purchase and sale agreement were below the current market multiple, the Company determined that there was no preferential treatment to the noncontrolling interest shareholders resulting in no impact to earnings per share.

~~A rollforward of the mandatorily redeemable noncontrolling interest is included in the table below (in thousands).~~

Nine Months Ended September 30,

2017

2016

Mandatorily redeemable noncontrolling interest, January 1

$
—

$
4,131

Net income attributable to mandatorily redeemable noncontrolling interest

—

—

Working capital distributed to mandatorily redeemable noncontrolling interest

—

(492)

Change in redemption value

—

466

Purchase of mandatorily redeemable noncontrolling interest

—

(4,105)

Mandatorily redeemable noncontrolling interest, September 30

$
—

$
—

2728

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

~~(13)~~(14)ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents changes in the accumulated balance for each component of other comprehensive income (loss), including current period other comprehensive income (loss) and reclassifications out of accumulated other comprehensive income (loss) (in thousands):


	Foreign
	Currency		Derivative
	Translation		Valuation, Net		Other, Net
	Adjustment		of Tax		of Tax		Totals

Accumulated other comprehensive income (loss) at December 31, 2015	$	(71,196)	$	(26,885)	$	(3,284)	$	(101,365)


									Foreign
									Currency		Derivative
									Translation		Valuation, Net		Other, Net
									Adjustment		of Tax		of Tax		Totals

Accumulated other comprehensive income (loss) at December 31, 2018									$	(114,168)	$	(8,278)	$	(2,150)	$	(124,596)

Other comprehensive income (loss) before reclassifications		(7,999)		9,519		2,330		3,850		6,380		10,096		116		16,592
Amounts reclassified from accumulated other comprehensive income (loss)		—		(11,189)		(1,128)		(12,317)		—		(2,583)		(99)		(2,682)
Net current period other comprehensive income (loss)		(7,999)		(1,670)		1,202		(8,467)		6,380		7,513		17		13,910
		��
Accumulated other comprehensive income (loss) at September 30, 2016	$	(79,195)	$	(28,555)	$	(2,082)	$	(109,832)

Accumulated other comprehensive income (loss) at December 31, 2016	$	(92,008)	$	(32,393)	$	(2,563)	$	(126,964)


Accumulated other comprehensive income (loss) at June 30, 2019									$	(107,788)	$	(765)	$	(2,133)	$	(110,686)

Accumulated other comprehensive income (loss) at December 31, 2019									$	(107,480)	$	4,182	$	(2,936)	$	(106,234)

Other comprehensive income (loss) before reclassifications		8,089		25,290		738		34,117		(18,521)		(4,187)		510		(22,198)
Amounts reclassified from accumulated other comprehensive income (loss)		—		(10,694)		(352)		(11,046)		—		168		(264)		(96)
Net current period other comprehensive income (loss)		8,089		14,596		386		23,071		(18,521)		(4,019)		246		(22,294)

Accumulated other comprehensive income (loss) at September 30, 2017	$	(83,919)	$	(17,797)	$	(2,177)	$	(103,893)

Accumulated other comprehensive income (loss) at June 30, 2020									$	(126,001)	$	163	$	(2,690)	$	(128,528)

The following table presents the classification and amount of the reclassifications from Accumulated other comprehensive income (loss) to the statement of comprehensive income (loss) (in thousands):


					Statement of
	For the Three Months Ended June 30,				Comprehensive Income
	2020		2019		(Loss) Classification

Derivative valuation
Gain (loss) on foreign currency forward exchange contracts	$	79	$	(1,011)	Revenue
Tax effect		(21)		273	Provision for income taxes
	$	58	$	(738)	Net income (loss)

Other
Actuarial loss on defined benefit plan	$	(147)	$	(55)	Cost of services
Tax effect		15		6	Provision for income taxes
	$	(132)	$	(49)	Net income (loss)

Statement of

For the Three Months Ended September 30,

Comprehensive Income


2017

2016

(Loss) Classification

Derivative valuation

Loss on foreign currency forwards

$
(5,812)

$
(7,103)

Revenue

Loss on interest rate swaps

—

(104)

Interest expense

Tax effect

2,325

3,028

Provision for income taxes

$
(3,487)

$
(4,179)

Net income (loss)

Other

Actuarial loss on defined benefit plan

$
(130)

$
(804)

Cost of services

Tax effect

13

80

Provision for income taxes

$
(117)

$
(724)

Net income (loss)

2829

Table of Contents

~~TELETECH~~TTEC HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements

~~(UNAUDITED)~~(Unaudited)

Statement of

For the Nine Months Ended September 30,

Comprehensive Income


2017

2016

(Loss) Classification

Derivative valuation

Loss on foreign currency forwards

$
(17,709)

$
(18,860)

Revenue

Loss on interest rate swaps

(115)

(435)

Interest expense

Tax effect

7,130

8,106

Provision for income taxes

$
(10,694)

$
(11,189)

Net income (loss)

Other

Actuarial loss on defined benefit plan

$
(391)

$
(1,252)

Cost of services

Tax effect

39

124

Provision for income taxes

$
(352)

$
(1,128)

Net income (loss)


					Statement of
	For the Six Months Ended June 30,				Comprehensive Income
	2020		2019		(Loss) Classification

Derivative valuation
Gain (loss) on foreign currency forward exchange contracts	$	230	$	(3,538)	Revenue
Tax effect		(62)		955	Provision for income taxes
	$	168	$	(2,583)	Net income (loss)

Other
Actuarial loss on defined benefit plan	$	(294)	$	(110)	Cost of services
Tax effect		30		11	Provision for income taxes
	$	(264)	$	(99)	Net income (loss)

(15)WEIGHTED AVERAGE SHARE COUNTS

~~(14)NET INCOME PER SHARE~~

The following table sets forth the computation of basic and diluted shares for the periods indicated (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2020	2019	2020	2019

Shares used in basic earnings per share calculation	46,619	46,318	46,559	46,261
Effect of dilutive securities:
Restricted stock units	242	366	279	375
Performance-based restricted stock units	—	—	—	—
Total effects of dilutive securities	242	366	279	375
Shares used in dilutive earnings per share calculation	46,861	46,684	46,838	46,636

Three Months Ended
September 30,

Nine Months Ended
September 30,


2017

2016

2017

2016

Shares used in basic earnings per share calculation

45,838

47,081

45,816

47,771
Effect of dilutive securities:

Stock options

10

6

9

11
Restricted stock units

517

214

513

292
Performance-based restricted stock units

2

14

10

15
Total effects of dilutive securities

529

234

532

318
Shares used in dilutive earnings per share calculation

46,367

47,315

46,348

48,089

For the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016, options to purchase 0.0 million and 0.1 million shares of common stock, respectively,~~2019, there were outstanding, but not included in the computation of diluted net income per share because the exercise price exceeded the value of the shares and the effect would have been anti-dilutive. For the nine months ended September 30, 2017 and 2016, options to purchase 0.0 million and 0.1 million shares of common stock, respectively, were outstanding, but not included in the computation of diluted net income per share because the exercise price exceeded the value of the shares and the effect would have been anti-dilutive. For the three months ended September 30, 2017 and 2016, restricted stock units (“RSUs”) of ~~0.0 million~~64 thousand and ~~0.1 million,~~10 thousand, respectively, outstanding which were ~~outstanding, but not included in~~excluded from the computation of diluted net income per share because the effect would have been anti-dilutive. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, there were RSUs of ~~0.0 million~~64 thousand and ~~0.1 million,~~20 thousand, respectively, outstanding which were ~~outstanding, but not included in~~excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~(15)~~(16)EQUITY-BASED COMPENSATION PLANS

All equity-based awards to employees are recognized in the Consolidated Statements of Comprehensive Income (Loss) at the fair value of the award on the grant date. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, the Company recognized total equity-based compensation expense of ~~$3.5~~$3.1 million and ~~$8.4~~$6.0 million and ~~$2.7~~$3.3 million and ~~$7.3~~$6.5 million, respectively. Of ~~the~~this total compensation expense, ~~$1.4~~$1.1 million and ~~$2.9~~$2.0 million ~~was~~were recognized in Cost of services and ~~$2.1~~$2.0 million and ~~$5.5~~$4.0 million ~~was~~were recognized in Selling, general and administrative during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2020, respectively. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, the Company recognized compensation expense of ~~$1.0~~$1.4 million and ~~$2.3~~$2.6 million in Cost of services and ~~$1.7~~$1.9 million and ~~$5.0~~$3.9 million in Selling, general and administrative, respectively.

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TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Restricted Stock Unit Grants

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, the Company granted ~~724,951~~130,885 and ~~443,875~~40,246 RSUs, respectively, to new and existing employees, which vest ~~in equal installments~~ over four or to five years. The Company recognized compensation expense related to RSUs of ~~$3.5~~$2.7 million and ~~$8.7~~$5.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, respectively. The Company recognized compensation expense related to RSUs of ~~$2.6~~$3.1 million and ~~$7.2~~$6.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, respectively. As of ~~September~~June 30, ~~2017,~~2020, there was approximately ~~$25.0~~$13.9 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.

Performance Based Restricted Stock ~~Options~~Unit Grants

During 2019, the Company awarded performance restricted stock units (“PRSUs”) that are subject to service and performance vesting conditions. If defined minimum targets are met, the annual value of the PRSUs issued will be between $0.4 million and $1.4 million and vest immediately. If the defined minimum targets are not met, then no shares will be issued. The award amounts are based on the Company’s annual adjusted operating income for the fiscal years 2019, 2020, 2021. Each fiscal year’s adjusted operating income will determine the award amount. The Company recognized compensation expense related to ~~subsidiary performance options~~PRSUs of ~~zero~~$0.35 million and ~~$(0.3)~~$0.70 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively. The option benefit for 2017 resulted from~~2020.

During 2020, the Company ~~concluding~~awarded PRSUs that are subject to service and performance vesting conditions. If defined minimum targets are met, Company shares will be issued that vest immediately. If the ~~performance~~defined minimum targets are not met, then no shares will be issued. The number of shares awarded are based on the Company’s annual revenue and adjusted operating income for the fiscal years 2021 and 2022. Each fiscal year’s revenue and adjusted operating income will determine the award amount. Expense for these awards will begin at the start of the ~~subsidiary will not be achieved.~~requisite service period, beginning January 1, 2021.

~~(16)~~(17)RELATED PARTY

The Company entered into an agreement under which Avion, LLC (“Avion”) and Airmax LLC (“Airmax”) provide certain aviation flight services as requested by the Company. Such services include the use of an aircraft and flight crew. Kenneth D. Tuchman, Chairman and Chief Executive Officer of the Company, has ~~a direct~~an indirect 100% beneficial ownership interest in Avion and Airmax. During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, the Company expensed ~~$0.6~~$0.2 million and ~~$0.7~~$0.6 million, respectively, to Avion and Airmax for services provided to the Company. There ~~was $114~~were $50 thousand in payments due and outstanding to Avion and Airmax as of ~~September~~June 30, ~~2017.~~

During 2014, the Company entered into a vendor contract with Convercent Inc. to provide learning management and web and telephony based global helpline solutions. This contract was renewed, after an arms-length market pricing review, in the fourth quarter of 2016. The majority owner of Convercent is a company which is owned and controlled by Kenneth D. Tuchman, Chairman and Chief Executive Officer of the Company. During the nine months ended September 30, 2017 and 2016, the Company paid $55 thousand and $75 thousand, respectively.2020.

During 2015, the Company entered into a contract to purchase software from CaféX, in which ~~is a company that TeleTech~~the Company holds a ~~17.2%~~17.8% equity ~~investment in.~~investment. During the ~~three and nine~~six months ended ~~September~~June 30, ~~2017,~~2020 and 2019, the Company purchased ~~$0.0 million~~0 and ~~$0.1 million,~~$33 thousand, respectively, of software from CaféX. ~~See Note 2 for further information regarding this investment.~~

Ms. Regina M. Paolillo, Chief Financial and Administrative Officer of the Company, is a member of the board of directors of Welltok, Inc., a consumer health SaaS company, and partner of the Company in a joint venture. During the six months ended June 30, 2020 and 2019, the Company recorded revenue of $1.8 million and $2.8 million, respectively, in connection with work performed through the joint venture.

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995, ~~(“Litigation Reform Act”),~~ relating to our ~~future~~ operations, expected financial ~~condition and prospects,~~position, results of operation, ~~continuation of client relationships,~~ and other business matters that are based on our current expectations, assumptions, ~~business strategy,~~ and projections with respect to the future, and are not a guarantee of performance. ~~Forward-looking statements may appear throughout~~In this report, including without limitation, the following sections: Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A, “Risk Factors.” Forward-looking statements generally can be identified bywhen we use words such as ~~“anticipates,~~“may,” ~~“believes,~~“believe,” ~~“estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,~~“plan,” “will, ~~be,~~” ~~“will continue,~~“anticipate,” ~~“will likely result,~~“estimate,” ~~and~~“expect,” “intend,” “project,” “would,” “could,” “target,” or similar ~~expressions. When~~expressions, or when we discuss our strategy, plans, goals, initiatives, or objectives, we are making forward-looking statements. ~~For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Litigation Reform Act.~~

We caution you not to rely unduly on any forward-looking statements. Actual results may differ materially from ~~what is expressed in~~ the forward-looking statements, and you should review and consider carefully the risks, uncertainties and other factors that affect our business and may cause such differences, ~~as outlined~~including but not limited to factors discussed in the “Risk Factors” section ~~of our 2016 Annual~~found in Item 1A. Risk Factors in this Report on Form ~~10-K. The risk factors~~10-Q and in the Report on Form 10-K for the year ended December 31, 2019. Specifically, we ~~wish for~~believe you ~~to be aware of in particular include but are not limited~~should note the risks related to the ~~risk inherent~~COVID-19 global pandemic and the various government mandates designed to contain the pandemic, and how these risks may impact our business in the ~~volatile~~short and ~~uncertain economic conditions,~~longer term; the fact that a large portion of our revenue is generated from a limited number of clients and the loss of one or more of these clients or a large portion of one client’s business could adversely affect our results of operations, the risk of client consolidation, the possibility that the current trend among clients to outsource their customer care may not continue, the competitiveness of our markets, the risk of information systems breach and the related impact on our clients and their data, our geographic concentration, the risk inherent in the terms of our contracts that we do not always have the opportunity to negotiate, the riskrisks related to our ~~international footprint, how~~strategy execution; our ~~foreign currency exchange risk can adversely impact~~ability to innovate and introduce technologies that are sufficiently disruptive to allow us to maintain and grow our ~~results~~market share; cybersecurity; consolidation activities undertaken by our clients; geographic concentration of ~~operations, the risk of~~our brick and mortar delivery platform and our global footprint; changes in ~~law~~laws that impact our business and our ability to comply with ~~all the~~those and other laws ~~that relate to~~governing our ~~operations, the risk related to~~operations; the reliability of ~~the~~our information technology infrastructure ~~that we use~~ and our ability to consistently deliver uninterrupted service to our ~~clients,~~clients; the ~~risk of not being able~~need to forecast demand for services accurately and the ~~related~~ impact of such forecasts on our capacity ~~utilization,~~utilization; our ~~inability~~ability to attract and retain qualified and skilled personnel ~~impact of changing technologies on~~at a price point that we can afford and our ~~services and solutions, the restrictive covenants contained in our credit facility that may impact our ability~~clients are willing to ~~execute our strategy and operate our business, the supply chain disruption related risk, the risk to innovation due to unforeseen intellectual property infringement, the risk related to~~pay; our M&A activity, ~~and~~including our ability to identify, acquire and properly integrate acquired businesses in accordance with our ~~strategy, the~~strategy; and our equity structure including our controlling shareholder risk, the limited market float of our stock, and the potential volatility of our stock price ~~that may result in loss of investment.~~ resulting therefrom.

~~The~~Our forward-looking statements are based on information available as of the date that this Report on Form 10-Q is filed with the United States Securities and Exchange Commission (“SEC”) ~~and we~~. We undertake no obligation to update them, except as may be required by applicable ~~laws. They are based on numerous assumptions and developments that are not within our control.~~law. Although we believe ~~these~~that our forward-looking statements are reasonable, they depend on many factors outside of our control and we ~~cannot assure you~~can provide no assurance that they will ~~turn out~~prove to be correct.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Executive Summary

~~TeleTech~~TTEC Holdings, Inc. (“~~TeleTech”~~TTEC”, “the Company”, “we”, “our” or “us”) is a leading global ~~provider of technology enabled~~ customer experience ~~services. We help leading brands improve customer experiences~~technology and ~~operational effectiveness through a unique combination~~services company focused on the design, implementation and delivery of ~~technological innovation and operational expertise. Our portfolio of solutions includes consulting, technology, operations and analytics to enable a seamless~~transformative customer experience ~~across every interaction channel and phase~~outcomes for many of the customer lifecycle. Our solutions are supported by 49,500 employees delivering services in 23 countries from 92 customer engagement centers on six continents. Our revenue for the quarter ended September 30, 2017 was $359.0 million.

world’s most iconic and disruptive brands. Since our ~~establishment~~inception in 1982, we have ~~helped~~been helping clients deliver frictionless customer experiences, strengthen their customer relationships, brand recognition and loyalty through personalized interactions, significantly improve their Net Promoter Score ("NPS"), and lower their total cost to serve by ~~simplifying~~enabling and ~~personalizing interactions with their customers. We deliver~~delivering simplified, consistent and seamless customer experience across channels and phases of the customer lifecycle.

Our customer experience thought leadership ~~technology and innovation~~offers innovative programs that ~~create customer strategies designed to~~ differentiate our clients from their ~~competition; data~~competition.

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. Within weeks of this announcement, travel bans, the state of emergency, quarantines, lockdowns, “shelter in place” orders, and business restrictions and shutdowns were issued in most countries where TTEC does business. The need to comply with these measures, which came into effect with little notice, has impacted our day-to-day operations and disrupted our business. Although we activated our business continuity plans, we have experienced temporary suspension of operations in some of our TTEC Engage customer experience delivery sites; and some of our employees were not able to get to work because their mobility was restricted by government restrictions. While some of our operations were deemed essential and could have continued operating, to support the health and well-being of our employees and communities and to provide a stable service delivery platform to our clients, we made a business decision to transition as many employees as was reasonably possible to a work from home environment.

Between mid-March and mid-April 2020, we transitioned over 43,000 employees, or 80%, to our work from home environment. With the easing of some of the government restrictions, some of those employees returned to our brick and mortar sites by the end of the second quarter of 2020, but most continue to work from home.

For those sites that continued to operate and those that re-opened since the lockdown and “shelter-in-place” restrictions eased beginning in June 2020, we have taken extensive measures to protect the health and safety of our employees, in accordance with the recommendations and guidelines provided by the World Health Organization, the U.S. and European Centers for Disease Control and Prevention, the U.S. Occupational Safety Association, and local governments in jurisdictions where our customer experience centers are located.

Although our business began to experience the effects of COVID-19 at the end of the first quarter 2020, our rapid implementation of business continuity plans and our geographic diversification of delivery centers allowed us to mitigate potentially more severe impacts. Through the period ended June 30, 2020 the COVID-19 pandemic has not had a material adverse impact on our operational or financial results. While approximately 20% of our business is comprised of clients in industries that have been negatively impacted by the COVID-19 pandemic, significant surge volumes from commercial and public sector clients who have realized spikes in customer, patient and citizen engagement have contributed to a12.5% increase in revenue when comparing the six months ended June 30, 2020 to the six months ended June 30, 2019. While we expect this positive trend to continue for the remainder of 2020, there is uncertainty about our COVID-19 surge volumes and our non-COVID-19 related business beyond 2020. Additionally, we cannot accurately predict the severity of the economic and operational challenges of a pro-longed COVID-19 pandemic on our clients’ businesses and its effect on the magnitude and timing of their buying decisions. Further, while to date we have been successful in managing service delivery from those of our delivery sites that could not be replaced with work from home delivery, arbitrary lockdown decisions in some jurisdictions where we do business may impact our offshore delivery capability with little notice, thus potentially impacting our results of operations in the future.

Table of ~~May 31, 2017 and no additional swaps have been entered into. As of December 31, 2016 the outstanding interest rate swap was as follows:~~Contents

~~Contract~~

~~Notional~~

~~Variable Rate~~

~~Fixed Rate~~

~~Commencement~~

~~Maturity~~

~~December 31, 2016~~

~~Amount~~

~~Received~~

~~Paid~~

~~Date~~

~~Swap~~

~~15 million~~

~~1 - month LIBOR~~

~~3.14~~

~~May 2012~~

~~May 2017~~

Foreign Currency Risk

Our subsidiaries in ~~Bulgaria, Costa Rica, Mexico, Poland, and~~ the Philippines, Mexico, India, Bulgaria and Poland use the local currency as their functional currency for paying labor and other operating costs. Conversely, revenue for these foreign subsidiaries is derived principally from client contracts that are invoiced and collected in U.S. dollars or other foreign currencies. As a result, we may experience foreign currency gains or losses, which may positively or negatively affect our results of operations attributed to these subsidiaries. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, revenue associated with this foreign exchange risk was ~~27%~~19% and ~~33%~~22% of our consolidated revenue, respectively.

In order to mitigate the risk of these non-functional foreign currencies weakening against the functional currencies of the servicing subsidiaries, which thereby decreases the economic benefit of performing work in these countries, we may hedge a portion, though not 100%, of the projected foreign currency exposure related to client programs served from these foreign countries through our cash flow hedging program. While our hedging strategy can protect us from adverse changes in foreign currency rates in the short term, an overall weakening of the non-functional foreign currencies would adversely impact margins in the segments of the servicing subsidiary over the long term.

Cash Flow Hedging Program

To reduce our exposure to foreign currency exchange rate fluctuations associated with forecasted revenue in non-functional currencies, we purchase forward and/or option contracts to acquire the functional currency of the foreign subsidiary at a fixed exchange rate at specific dates in the future. We have designated and account for these derivative instruments as cash flow hedges for forecasted revenue in non-functional currencies.

While we have implemented certain strategies to mitigate risks related to the impact of fluctuations in currency exchange rates, we cannot ensure that we will not recognize gains or losses from international transactions, as this is part of transacting business in an international environment. Not every exposure is or can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts for which actual results may differ from the original estimate. Failure to successfully hedge or anticipate currency risks properly could adversely affect our consolidated operating results.

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Our cash flow hedging instruments as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 are summarized as follows (in thousands). All hedging instruments are forward contracts, except as noted.

Local

Currency

U.S. Dollar

% Maturing

Contracts

Notional

in the next

Maturing

As of June 30, 2020

Amount

12 months

Through

Philippine Peso

6,955,000

132,470

⁽¹⁾

59.9

April 2023

Mexican Peso

1,221,000

56,033

52.7

December 2022

188,503

Local

Currency

U.S. Dollar

Notional

As of December 31, 2019

Amount

Philippine Peso

7,715,000

147,654

⁽¹⁾

Mexican Peso

1,299,500

61,529

209,183

Local








Currency

U.S. Dollar

% Maturing

Contracts

Notional

Notional

in the next

Maturing

As of September 30, 2017

Amount

Amount

12 months

Through

Philippine Peso

10,490,000

218,413
(1)

53.2
%

August 2021

Mexican Peso

1,774,000

104,652

37.2
%

May 2021

$
323,065

Local






Currency

U.S. Dollar

Notional

Notional

As of December 31, 2016

Amount

Amount

Philippine Peso

14,315,000

301,134
(1)

Mexican Peso

2,089,000

129,375

$
430,509

(1)

⁽¹⁾

2019.

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The fair value of our cash flow hedges at ~~September~~June 30, ~~2017~~2020 was assets/(liabilities) (in thousands):


			Maturing in the
	September 30, 2017		Next 12 Months

							Maturing in the
					June 30, 2020		Next 12 Months
Philippine Peso		(15,688)		(9,399)	$	5,199	$	2,902
Mexican Peso		(13,785)		(7,617)		(4,974)		(2,785)
	$	(29,473)	$	(17,016)
					$	225	$	117

Our cash flow hedges are valued using models based on market observable inputs, including both forward and spot foreign exchange rates, implied volatility, and counterparty credit risk. The ~~increase~~decrease in fair value from December 31, ~~2016 largely~~2019 reflects ~~a broad weakening~~changes in the ~~U.S. dollar.~~currency translation between the U.S dollar and Mexican Peso.

We recorded net ~~losses~~gains (losses) of ~~approximately $17.7~~$0.2 million and ~~$18.9~~($3.5) million for settled cash flow hedge contracts and the related premiums for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively. These ~~losses~~gains (losses) were reflected in Revenue in the accompanying Consolidated Statements of Comprehensive Income (Loss). If the exchange rates between our various currency pairs were to increase or decrease by 10% from current period-end levels, we would incur a material gain or loss on the contracts. However, any gain or loss would be mitigated by corresponding increases or decreases in our underlying exposures.

Other than the transactions hedged as discussed above and in Part I, Item 1. Financial Statements, Note 6 to the Consolidated Financial Statements, the majority of the transactions of our U.S. and foreign operations are denominated in their respective local currency. However, transactions are denominated in other currencies from time-to-time. We do not currently engage in hedging activities related to these types of foreign currency risks because we believe them to be insignificant as we endeavor to settle these accounts on a timely basis. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, approximately ~~25%~~15% and ~~22%~~21%, respectively, of revenue was derived from contracts denominated in currencies other than the U.S. Dollar. Our results from operations and revenue could be adversely affected if the U.S. Dollar strengthens significantly against foreign currencies.

Fair Value of Debt and Equity Securities

We did not have any investments in marketable debt or equity securities as of ~~September~~June 30, ~~2017~~2020 or December 31, ~~2016.~~2019.

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ITEM 4. CONTROLS AND PROCEDURES

This report includes the certifications of our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”) required by Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange ~~Act, as amended)~~Act) are designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required ~~disclosures.~~disclosure.

~~Management of~~We carried out an evaluation under the ~~Company,~~supervision and with the participation of ~~its~~management, including the CEO and CFO, ~~evaluated~~of the effectiveness of ~~the Company’s~~our disclosure controls and procedures, as of ~~September~~June 30, ~~2017. Based on that evaluation, as of~~2020, the end of the period covered by this Form ~~10-Q, the Company’s~~10-Q. Based on this evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were ~~not~~ effective ~~to provide~~at the reasonable assurance ~~because~~level.

Table of ~~the material weaknesses in our internal control over financial reporting.~~Contents

At the year ended December 31, 2016, material weaknesses existed in the Company’s internal control over financial reporting. Certain material weaknesses that existed at the year ended December 31, 2016 continued to exist as of September 30, 2017. These material weaknesses are fully described in our Annual Report on Form 10-K for the year ended December 31, 2016.

While these material weaknesses did not result in errors that were material to our annual or interim financial statements, they could result in misstatements of our consolidated financial statements and disclosures which would result in material misstatement of our consolidated financial statements and disclosures which would not be prevented or detected.

Notwithstanding such material weaknesses in internal control over financial reporting, our CEO and CFO have concluded that our consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Inherent Limitations of Internal Controls

Our management, including the CEO and CFO, believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control are met. Further, the design of internal controls must consider the benefits of controls relative to their costs. Inherent limitations within internal controls include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of controls. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. While the objective of the design of any system of controls is to provide reasonable assurance of the effectiveness of controls, such design is also based in part upon certain assumptions about the likelihood of future events, and such assumptions, while reasonable, may not take into account all potential future conditions. Thus, even effective internal control over financial reporting can only provide reasonable assurance of achieving their objectives. Therefore, because of the inherent limitations in cost effective internal controls, misstatements due to error or fraud may occur and may not be prevented or detected.

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~~Remediation of Prior Material Weakness~~

~~The following captures the progress made by management related to the revenue material weakness that has been remediated.~~

~~Revenue~~: Management previously identified a material weakness in the design and operating effectiveness of controls over the revenue process. During 2016, management took the necessary steps to redesign the control framework, including the implementation of (i) a revenue quality assurance organization, (ii) standardized contract and invoice review and approval templates, and (iii) a document storage system for improved organization and evidence of review. Additionally, management established a quarterly control owner certification process and invested in employee training. Management completed the design and implementation of this control framework in the quarter ended December 31, 2016. Based on the results of our testing, management has concluded that the controls are adequately designed and have operated effectively for a sufficient period of time during 2017. Accordingly, the revenue material weakness is remediated.

~~Remediation Efforts and Status of Remaining Material Weaknesses~~

~~Impairments~~: During 2016, management has taken the necessary steps to redesign the control framework, including implementation of specific preparation and review procedures to (i) ensure the accuracy of the valuation models used to calculate fair market values, (ii) validate the source of the financial forecasts, and (iii) evidence the assessment of the models for reasonableness. In addition, TeleTech has engaged a third-party valuation expert to assist management with the underlying valuation models supporting the goodwill and intangible impairment assessments. Management has completed the design and implementation of the control framework and has tested the impairment controls in the quarter ending December 31, 2016. Management will continue to test the controls for impairment in 2017 to ensure they have operated for a sufficient period of time before concluding on remediation.

~~Control Environment:~~ During 2016 TeleTech invested significantly in the quality of our accounting talent including management, technical, process improvement and financial system roles. Additionally, we implemented a number of programs to: improve our talent acquisition and retention platforms; enhance technical, transactional and control knowledge of our accounting teams; create a culture of accountability and control. These programs have significantly improved the stability of our global accounting organization. In order to consider this material weakness to be fully remediated, we believe additional time is needed to demonstrate sustainability as it relates to our internal control over financial reporting and improvements made to our complement of resources.

Changes in Internal Control over Financial Reporting

There ~~have been~~were no changes in our internal control over financial reporting ~~during the quarter ended September 30, 2017~~ that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Part I, Item 1. Financial Statements, Note 10 to the Consolidated Financial Statements of this Form 10-Q is hereby incorporated by reference.

ITEM 1A. RISK FACTORS

~~There were no material changes~~In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A, Risk Factors, in our 2019 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. In addition to the risk factors identified in our 2019 Annual Report, please consider the following additional Risk Factors.

Our business is adversely affected by the COVID-19 pandemic and it may result in material adverse impact on our operations and financial condition.

We have experienced temporary suspension of operations in some of our TTEC Engage customer experience delivery sites as a result of COVID-19 pandemic and related government-mandated restrictions. To support the health and well-being of our employees and communities and to provide a stable service delivery platform to our clients, we made a business decision to transition as many employees as was reasonably possible to our work from home environment between March and April 2020. Such large-scale rapid transition resulted in certain inefficiencies, additional costs unlikely to be recouped from our clients, and heightened cybersecurity, regulatory compliance, and fraud risks. Our inability to manage these risk and costs effectively could have a material adverse effect on our business, financial condition and results of operations.

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The social distancing rules and other government mandates that continue during the sustained pandemic are likely to impact the structure and configuration of large-scale facilities, like our customer experience delivery centers, where employees work in close proximity. These new regulatory requirements are forcing TTEC to make investments to reconfigure our existing customer experience centers and to accept lower capacity utilization than the utilization priced under our multi-year contracts. If we are unable to renegotiate our contracts to recoup these additional costs, manage these costs by continuing to maintain a large work at home delivery platform, or adjust our cost structure to absorb them, our margins and profitability will be impacted and will result in adverse impact on our results of operations.

The COVID-19 pandemic and government-mandated restrictions on business adopted to contain it, is resulting in what is likely to be an extended global economic downturn, which could affect demand for our services and impact our results of operations and financial condition, even after the pandemic is contained and the business restrictions and “shelter in place” orders are lifted.

Although COVID-19 pandemic disruptions did not have a material adverse impact on our financial results for the first two quarters of fiscal 2020, there can be no assurances that we will not experience such impacts through the end of 2020 and beyond. Due to the evolving and highly uncertain nature of the global response to the COVID-19 pandemic, we cannot predict at this time the full extent to which the pandemic will adversely impact our business, results of operations and financial condition, which will depend on many factors that are not known at this time.

The operations of some of our clients are adversely impacted by COVID-19 pandemic and it may have a material adverse impact on our business.

The operations of some of our clients, especially our clients in travel, hospitality, retail and automotive industries, have been materially impacted by the COVID-19 pandemic and government restrictions on travel and people’s mobility around the globe. Approximately 20% of our revenue for the fiscal year ended December 31, 2019 was generated from the clients in these affected industries. On-going travel restrictions and large-scale unemployment that resulted from government-mandated restrictions on businesses around the globe is likely to continue to affect certain of our clients and their business volumes through the end of 2020 and beyond. While we are unable to predict the magnitude of such impact on our operations at this time and to what extent this impact may be offset by other business that we are able to secure due to a shift in our clients’ and their consumers’ buying preferences during and in the aftermath of COVID-19 pandemic, the loss of the business from the impacted clients may materially impair our operating results and financial condition. We may also experience payment defaults or bankruptcy of some of our clients, which could also have a material adverse effect our financial condition and results of operation.

Our ability to recruit, hire, and retain qualified employees at a price point acceptable to our clients may be impacted by the COVID-19 pandemic and by the US government pandemic recovery measures such as enhanced unemployment benefits.

Our business is labor intensive and our ability to recruit and hire employees with the right skills, at the right price point is critical to meeting our contractual commitments and attaining our growth objective. We sign multi-year client contracts that are priced based on prevailing labor rates in jurisdictions where we deliver services. The inability of some of our employees in some parts of the world to work from home resulted in the need to transition some of our service delivery to other jurisdictions where work from home is easier to facilitate, which further increases our need to rapidly hire qualified employees. The recent adoption of various pandemic recovery measures by the U.S. and other governments in jurisdictions where we hire employees is aimed at supporting citizens who lost their jobs due to COVID-19 pandemic. Such individuals may be attractive employment prospects for TTEC, but COVID-19 enhanced unemployment benefits in some jurisdictions where we hire may exceed local prevailing wages and may make it more difficult for us to hire a sufficient number of employees to support our contractual commitments or may result in higher costs, lower contract profitability, higher turnover and reduced operational efficiencies, which could, in the aggregate, have a material adverse impact on our results of operations.

.* * *

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To the extent the COVID-19 pandemic or any worsening of the global business and economic environment as a result of the pandemic or government actions to contain it adversely affects our business and financial results, it may also have the effect of heightening or exacerbating many of the other risks described in Part I, Item ~~1A. Risk~~1A, “Risk Factors, ~~described~~” in our Annual Report on Form 10-K for ~~the~~our fiscal year ended December 31, ~~2016.~~2019, such as the risk factors relating to our strategy execution, cyber security of our information systems, consolidation activities being undertaken by our clients, geographic concentration of our operations in jurisdictions ill prepared to manage large scale health crisis and pandemics, our ability to comply with laws and regulations that impact our business, the reliability of our information technology infrastructure and our ability to delivery uninterrupted service to our clients; our clients’ ability to forecast demand for our services accurately; our ability to expand and maintain our customer experience delivery centers in offshore jurisdictions with stable wage rates, risks generally associated with international business operations, and the impact of the limited market float of our stock and potential volatility of our stock price resulting therefrom.

~~Table of Contents~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Following is the detail of the issuer purchases made during the quarter ended ~~September~~June 30, ~~2017:~~2020:


				Total Number of	Approximate Dollar
				Shares	Value of Shares that
				Purchased as	May Yet Be
				Part of Publicly	Purchased Under
	Total Number			Announced	the Plans or
	of Shares	Average Price		Plans or	Programs (In
Period	Purchased	Paid per Share		Programs	thousands)⁽1)
March 31, 2020					$	26,580
April 1, 2020 - April 30, 2020	—	$	—	—	$	26,580
May 1, 2020 - May 31, 2020	—	$	—	—	$	26,580
June 1, 2020 - June 30, 2020	—	$	—	—	$	26,580
Total	—			—

Total Number of

Approximate Dollar

Shares

Value of Shares that

Purchased as

May Yet Be

Part of Publicly

Purchased Under

Total Number

Announced

the Plans or

of Shares

Average Price

Plans or

Programs (In

Period

Purchased

Paid per Share

Programs

thousands)(1)

June 30, 2017

$
26,580

July 1, 2017 - July 31, 2017

—

$
—

—

$
26,580

August 1, 2017 - August 31, 2017

—

$
—

—

$
26,580

September 1, 2017 - September 30, 2017

—

$
—

—

$
26,580

Total

—

—

(1)In November 2001, our Board of Directors (“Board”) authorized a stock repurchase program with the objective of increasing stockholder returns. The Board periodically authorizes additional increases to the program. The most recent Board authorization to purchase additional common stock occurred in February 2017, whereby the Board increased the program allowance by $25.0 million. Since inception of the program through June 30, 2020, the Board has authorized the repurchase of shares up to a total value of $762.3 million, of which we have purchased 46.1 million shares on the open market for $735.8 million. As of June 30, 2020 the remaining amount authorized for repurchases under the program was approximately $26.6 million. The stock repurchase program does not have an expiration date.

⁽¹⁾

In November 2001, our Board of Directors (“Board”) authorized a stock repurchase program with the objective of increasing stockholder returns. The Board periodically authorizes additional increases to the program. The most recent Board authorization to purchase additional common stock occurred in February 2017, whereby the Board increased the program allowance by $25.0 million. Since inception of the program through September 30, 2017, the Board has authorized the repurchase of shares up to a total value of $762.3 million, of which we have purchased 46.1 million shares on the open market for $735.8 million. As of September 30, 2017 the remaining amount authorized for repurchases under the program was approximately $26.6 million. The stock repurchase program does not have an expiration date.

ITEM 5. OTHER INFORMATION

None

~~Table of Contents~~

ITEM 6. EXHIBITS


Exhibit		Incorporated Herein by Reference
No.	Exhibit Description	Form	Exhibit	Filing Date

10.31*	Independent Director Restricted Stock Unit Award Agreement (effective May 14, 2020)
~~Exhibit No.~~	~~Exhibit Description~~

10.85*	~~Employment Agreement between Anthony Y. Tsai and TeleTech Services Corporation effective as of September 5, 2017.~~

~~10.92~~	Third Amendment to Amended and Restated Credit Agreement and Incremental Increase Agreement for a senior secured revolving credit facility with a syndicate of lenders, led by Wells Fargo Bank, National Association, as agent, swing line and fronting lender, effective as of October 31, 2017 (incorporated by reference as Exhibit 10.92 to TeleTech’s Current Report on Form 8-K filed on November 1, 2017).

10.97*	Stock Purchase Agreement of November 8, 2017 by and among TeleTech Services Corporation, Motif, Inc. (“Motif”), Kaushal Mehta and Parul Mehta (referred to collectively as the “Founders”), the shareholders of Motif (other than Founders, referred to as “Sellers”), and Outforce LLC (the Sellers’ Agent).

10.98*	Share Purchase Agreement of November 8, 2017 by and among TeleTech Services Corporation, the Founders, The Anishi Mehta Irrevocable Trust, The Ishan Mehta Irrevocable Trust, Anishi Mehta, and Ishan Mehta.

31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

Table of Contents


32.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

101.INS**101.INS		XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH**101.SCH		XBRL Taxonomy Extension Schema ~~Document~~

101.CAL**101.CAL		XBRL Taxonomy Extension Calculation Linkbase ~~Document~~

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB**101.LAB		XBRL Taxonomy Extension Label Linkbase ~~Document~~

101.PRE**101.PRE		XBRL Taxonomy Extension Presentation Linkbase ~~Document~~

104		The cover page from TTEC Holdings, Inc’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL

101.DEF**		~~XBRL Taxonomy Extension Definition Linkbase Document~~



	*	Filed or furnished herewith.

**		Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Notes to the Consolidated Financial Statements, (ii) Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 (unaudited), (iii) Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and 2016 (unaudited), (iv) Consolidated Statements of Stockholders’ Equity as of and for the nine months ended September 30, 2017 (unaudited), and (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (unaudited).
		��

4748

Table of Contents

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		TTEC HOLDINGS, INC.
		~~TELETECH HOLDINGS, INC.~~
		(Registrant)


Date: ~~November 8, 2017~~August 5, 2020	By:	/s/ Kenneth D. Tuchman
		Kenneth D. Tuchman
		Chairman and Chief Executive Officer

Date: ~~November 8, 2017~~August 5, 2020	By:	/s/ Regina M. Paolillo
		Regina M. Paolillo
		Chief Financial Officer

4849


Delaware		84-1291044
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


Title of each Class	Trading Symbol	Name of each exchange on which registered
Common stock of TTEC Holdings, Inc., $0.01 par value per share	TTEC	NASDAQ


Large Accelerated Filer ☐	Accelerated Filer ☑	Non-accelerated Filer ☐	Smaller Reporting Company ☐
~~Large accelerated filer~~ ☐	~~Accelerated filer~~ ☑	~~Non-accelerated filer~~ ☐	~~Smaller reporting company~~ ☐
		(Do not check if a smaller reporting company)	Emerging ~~growth company~~ Growth Company ☐


		Page No.
		~~Page No.~~

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 (unaudited)	1


	Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	2


	Consolidated ~~Statement~~Statements of Stockholders’ Equity and Mezzanine Equity as of and for the ~~nine~~three and six months ended ~~September~~ June 30, ~~2017~~2020 and 2019 (unaudited)	3


	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~ June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	4


	Notes to the ~~Unaudited~~ Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32 33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41 42

Item 4.	Controls and Procedures	44

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46 47

Item 5.	Other Information	46 47

Item 6.	Exhibits	47

SIGNATURES		48
		49


	September 30,		December 31,
	2017		2016
ASSETS
Current assets
Cash and cash equivalents	$	78,842	$	55,264
Accounts receivable, net		304,493		300,808
Prepaids and other current assets		67,516		59,905
Income tax receivable		8,078		7,035
Assets held for sale		9,279		10,715
Total current assets		468,208		433,727

Long-term assets
Property, plant and equipment, net		162,361		151,037
Goodwill		166,584		129,648
Deferred tax assets, net		30,953		53,585
Other intangible assets, net		61,784		30,787
Other long-term assets		59,628		47,520
Total long-term assets		481,310		412,577
Total assets	$	949,518	$	846,304

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	45,155	$	38,197
Accrued employee compensation and benefits		85,820		66,133
Other accrued expenses		29,405		14,830
Income tax payable		10,194		7,040
Deferred revenue		23,416		23,318
Other current liabilities		23,497		29,154
Liabilities held for sale		2,491		1,357
Total current liabilities		219,978		180,029

Long-term liabilities
Line of credit		255,000		217,300
Deferred tax liabilities, net		155		160
Deferred rent		16,023		15,256
Other long-term liabilities		58,568		71,664
Total long-term liabilities		329,746		304,380
Total liabilities		549,724		484,409

Commitments and contingencies (Note 10)

Mandatorily redeemable noncontrolling interest		—		—

Stockholders’ equity
Preferred stock; $0.01 par value; 10,000,000 shares authorized; zero shares outstanding as of September 30, 2017 and December 31, 2016		—		—
Common stock; $0.01 par value; 150,000,000 shares authorized; 45,847,389 and 46,113,693 shares outstanding as of September 30, 2017 and December 31, 2016, respectively		458		462
Additional paid-in capital		348,932		348,739
Treasury stock at cost: 36,204,864 and 35,938,560 shares as of September 30, 2017 and December 31, 2016, respectively		(615,917)		(603,262)
Accumulated other comprehensive income (loss)		(103,893)		(126,964)
Retained earnings		763,116		735,939
Noncontrolling interest		7,098		6,981
Total stockholders’ equity		399,794		361,895
Total liabilities and stockholders’ equity	$	949,518	$	846,304


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Stockholders’ Equity of the Company
											Accumulated
											Other
	Preferred Stock			Common Stock			Treasury		Additional		Comprehensive		Retained		Noncontrolling
	Shares	Amount		Shares	Amount		Stock		Paid-in Capital		Income (Loss)		Earnings		interest		Total Equity
Balance as of December 31, 2016	—	$	—	46,114	$	462	$	(603,262)	$	348,739	$	(126,964)	$	735,939	$	6,981	$	361,895
Net income	—		—	—		—		—		—		—		48,708		2,828		51,536
Dividends to shareholders ($0.47 per common share)	—		—	—		—		—		—		—		(21,531)		—		(21,531)
Dividends distributed to noncontrolling interest	—		—	—		—		—		—		—		—		(2,745)		(2,745)
Foreign currency translation adjustments	—		—	—		—		—		—		8,089		—		325		8,414
Derivatives valuation, net of tax	—		—	—		—		—		—		14,596		—		—		14,596
Vesting of restricted stock units	—		—	283		2		4,673		(9,612)		—		—		—		(4,937)
Exercise of stock options	—		—	60		—		994		1,156		—		—		—		2,150
Equity-based compensation expense	—		—	—		—		—		8,649		—		—		(291)		8,358
Purchases of common stock	—		—	(610)		(6)		(18,322)		—		—		—		—		(18,328)
Other, net of tax	—		—	—		—		—		—		386		—		—		386
Balance as of September 30, 2017	—	$	—	45,847	$	458	$	(615,917)	$	348,932	$	(103,893)	$	763,116	$	7,098	$	399,794


	As of
	September 30, 2017
Cash	$	—
Accounts receivable, net		8,240
Allowance for doubtful accounts		(51)
Other assets		589
Property, plant and equipment		1,229
Customer relationships		3,946
Goodwill		3,033
Other intangible assets		771
Allowance for reduction of assets held for sale		(8,478)
Total assets	$	9,279

Accounts payable	$	1,046
Accrued employee compensation and benefits		817
Accrued expenses		316
Other		312
Total liabilities	$	2,491


							Depreciation		Income
	Gross		Intersegment		Net		&		(Loss) from
	Revenue		Sales		Revenue		Amortization		Operations
Customer Management Services	$	277,373	$	—	$	277,373	$	13,455	$	9,133
Customer Growth Services		30,829		—		30,829		717		1,564
Customer Technology Services		34,658		(95)		34,563		1,772		4,158
Customer Strategy Services		16,271		—		16,271		571		945
Total	$	359,131	$	(95)	$	359,036	$	16,515	$	15,800


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Capital Expenditures
Customer Management Services	$	12,732	$	8,515	$	36,701	$	29,751
Customer Growth Services		346		375		708		3,546
Customer Technology Services		1,180		1,864		6,025		4,877
Customer Strategy Services		85		366		498		689
Total	$	14,343	$	11,120	$	43,932	$	38,863


								Effect of
	December 31,		Acquisitions /					Foreign		September 30,
	2016		Adjustments		Impairments			Currency		2017

Customer Management Services	$	42,589	$	34,662	$	—		$	2,140	$	79,391
Customer Growth Services		24,439		—		—			—		24,439
Customer Technology Services		41,500		(661)		—			—		40,839
Customer Strategy Services		21,120		—		—			795		21,915
Total	$	129,648	$	34,001	$	—	��	$	2,935	$	166,584


	Local
	Currency	U.S. Dollar
	Notional	Notional
As of December 31, 2016	Amount	Amount
Philippine Peso	14,315,000		301,134	(1)
Mexican Peso	2,089,000		129,375
		$	430,509


							Imputed
	December 31,						Interest /		September 30,
	2016		Acquisitions		Payments		Adjustments		2017

Welltok	$	1,250	$	—	$	(674)	$	—	$	576
Atelka		558		—		—		44		602
Total	$	1,808	$	—	$	(674)	$	44	$	1,178


					Statement of
	For the Three Months Ended September 30,				Comprehensive Income
	2017		2016		(Loss) Classification

Derivative valuation
Loss on foreign currency forwards	$	(5,812)	$	(7,103)	Revenue
Loss on interest rate swaps		—		(104)	Interest expense
Tax effect		2,325		3,028	Provision for income taxes
	$	(3,487)	$	(4,179)	Net income (loss)

Other
Actuarial loss on defined benefit plan	$	(130)	$	(804)	Cost of services
Tax effect		13		80	Provision for income taxes
	$	(117)	$	(724)	Net income (loss)


					Statement of
	For the Nine Months Ended September 30,				Comprehensive Income
	2017		2016		(Loss) Classification

Derivative valuation
Loss on foreign currency forwards	$	(17,709)	$	(18,860)	Revenue
Loss on interest rate swaps		(115)		(435)	Interest expense
Tax effect		7,130		8,106	Provision for income taxes
	$	(10,694)	$	(11,189)	Net income (loss)

Other
Actuarial loss on defined benefit plan	$	(391)	$	(1,252)	Cost of services
Tax effect		39		124	Provision for income taxes
	$	(352)	$	(1,128)	Net income (loss)


	Three Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016

Shares used in basic earnings per share calculation	45,838	47,081	45,816	47,771
Effect of dilutive securities:
Stock options	10	6	9	11
Restricted stock units	517	214	513	292
Performance-based restricted stock units	2	14	10	15
Total effects of dilutive securities	529	234	532	318
Shares used in dilutive earnings per share calculation	46,367	47,315	46,348	48,089


	June 30, 2020				June 30, 2019
	Total				Total
	Production		% In		Production		% In
	Workstations	In Use	Use		Workstations	In Use	Use

Total centers
Sites open >1 year	40,470	26,783	66	%	40,493	29,144	72	%
Sites open <1 year	2,962	2,534	86	%	2,560	1,704	67	%
Total workstations	43,432	29,317	68	%	43,053	30,848	72	%


	September 30, 2017				September 30, 2016
	Total				Total
	Production		% In		Production		% In
	Workstations	In Use	Use		Workstations	In Use	Use

Total centers
Sites open >1 year	39,856	30,916	78	%	34,538	24,284	70	%
Sites open <1 year	969	949	98	%	1,104	967	88	%
Total workstations	40,825	31,865	78	%	35,642	25,251	71	%


	Less than		1 to 3		3 to 5		Over 5
	1 Year		Years		Years		Years		Total

Credit Facility(1)	$	6,702		13,405		257,793		—	$	277,900
Equipment financing arrangements		3,216		4,675		1,378		—		9,269
Contingent consideration		1,178		—		—		—		1,178
Purchase obligations		10,761		8,589		1,007		—		20,357
Operating lease commitments		44,438		59,522		36,894		25,661		166,515
Other debt		2,763		3,388		387		—		6,538
Total	$	69,058	$	89,579	$	297,459	$	25,661	$	481,757


				Total Number of	Approximate Dollar
				Shares	Value of Shares that
				Purchased as	May Yet Be
				Part of Publicly	Purchased Under
	Total Number			Announced	the Plans or
	of Shares	Average Price		Plans or	Programs (In
Period	Purchased	Paid per Share		Programs	thousands)(1)
June 30, 2017					$	26,580
July 1, 2017 - July 31, 2017	—	$	—	—	$	26,580
August 1, 2017 - August 31, 2017	—	$	—	—	$	26,580
September 1, 2017 - September 30, 2017	—	$	—	—	$	26,580
Total	—			—