UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
For the quarterly period ended September 30, 20172021
OR
For the transition period from to
Commission File Number 001-11919
TeleTechTTEC Holdings, Inc.
(Exact name of registrant as specified in its charter)
| | |
Delaware | | 84-1291044 |
(State or other jurisdiction of | | (I.R.S. Employer |
incorporation or organization) | | Identification No.) |
9197 South Peoria Street
Englewood, Colorado80112
(Address of principal executive offices)
Registrant’s telephone number, including area code: (303) 397-8100
Securities registered pursuant to Section 12(b) of the Act:
| | |
Title of each Class | Trading Symbol | Name of each exchange on which registered |
Common stock of TTEC Holdings, Inc., | TTEC | NASDAQ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑þ No ☐◻
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☑ | Accelerated Filer ☐ | Non-accelerated Filer ☐ | Smaller Reporting Company ☐ | ||||
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|
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| ||||
| Emerging |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
As of October 31, 2017,November 3, 2021, there were 45,849,11446,989,197 shares of the registrant’s common stock outstanding.
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
SEPTEMBER 30, 20172021 FORM 10-Q
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| Consolidated Balance Sheets as of September 30, | 1 |
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| 2 | |
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| 3 | |
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| 4 | |
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| Notes to the | 5 |
| | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 36 | |
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45 | ||
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47 | ||
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48 | ||
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48 | ||
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50 | ||
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52 | ||
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PART I. FINANCIAL INFORMATION
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
(Amounts in thousands, except share amounts)
(unaudited)(Unaudited)
|
|
|
|
|
|
| |
|
| 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 |
|
| | | | | | | |
| | September 30, | | December 31, |
| ||
|
| 2021 |
| 2020 |
| ||
ASSETS | | | | | | | |
Current assets | | | | | | | |
Cash and cash equivalents | | $ | 148,853 | | $ | 132,914 | |
Accounts receivable, net of allowance of $6,046 and $5,067 | |
| 349,382 | |
| 378,397 | |
Prepaids and other current assets | |
| 180,574 | |
| 104,597 | |
Income and other tax receivables | |
| 55,159 | |
| 40,894 | |
Total current assets | |
| 733,968 | |
| 656,802 | |
| | | | | | | |
Long-term assets | | | | | | | |
Property, plant and equipment, net | |
| 171,508 | |
| 178,706 | |
Operating lease assets | | | 97,866 | | | 120,820 | |
Goodwill | |
| 736,398 | |
| 363,502 | |
Deferred tax assets, net | |
| 15,068 | |
| 15,081 | |
Other intangible assets, net | |
| 218,556 | |
| 112,059 | |
Other long-term assets | |
| 70,769 | |
| 69,438 | |
Total long-term assets | |
| 1,310,165 | |
| 859,606 | |
Total assets | | $ | 2,044,133 | | $ | 1,516,408 | |
| | | | | | | |
LIABILITIES, STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY | | | | | | | |
Current liabilities | | | | | | | |
Accounts payable | | $ | 84,464 | | $ | 66,658 | |
Accrued employee compensation and benefits | |
| 174,272 | |
| 163,658 | |
Other accrued expenses | |
| 81,268 | |
| 55,915 | |
Income tax payable | |
| 7,138 | |
| 19,709 | |
Deferred revenue | |
| 88,870 | |
| 39,956 | |
Current operating lease liabilities | | | 42,643 | | | 43,651 | |
Other current liabilities | |
| 5,488 | |
| 6,623 | |
Total current liabilities | |
| 484,143 | |
| 396,170 | |
| | | | | | | |
Long-term liabilities | | | | | | | |
Line of credit | |
| 805,000 | |
| 385,000 | |
Deferred tax liabilities, net | |
| 5,603 | |
| 7,747 | |
Non-current income tax payable | | | 19,141 | | | 22,291 | |
Non-current operating lease liabilities | | | 73,172 | | | 98,277 | |
Other long-term liabilities | |
| 96,919 | |
| 96,185 | |
Total long-term liabilities | |
| 999,835 | |
| 609,500 | |
Total liabilities | |
| 1,483,978 | |
| 1,005,670 | |
| | | | | | | |
Commitments and contingencies (Note 10) | | | | | | | |
| | | | | | | |
Redeemable noncontrolling interest | |
| 55,194 | |
| 52,976 | |
| | | | | | | |
Stockholders’ equity | | | | | | | |
Preferred stock; $0.01 par value; 10,000,000 shares authorized; 0 shares outstanding as of September 30, 2021 and December 31, 2020 | | | — | | | — | |
Common stock; $0.01 par value; 150,000,000 shares authorized; 46,988,762 and 46,737,033 shares outstanding as of September 30, 2021 and December 31, 2020, respectively | |
| 470 | |
| 467 | |
Additional paid-in capital | |
| 356,727 | |
| 360,293 | |
Treasury stock at cost; 35,063,491 and 35,315,220 shares as of September 30, 2021 and December 31, 2020, respectively | |
| (597,051) | |
| (601,214) | |
Accumulated other comprehensive income (loss) | |
| (98,423) | |
| (72,156) | |
Retained earnings | |
| 827,317 | |
| 757,312 | |
Noncontrolling interest | |
| 15,921 | |
| 13,060 | |
Total stockholders’ equity | |
| 504,961 | |
| 457,762 | |
Total liabilities, stockholders’ equity and mezzanine equity | | $ | 2,044,133 | | $ | 1,516,408 | |
The accompanying notes are an integral part of these consolidated financial statements.
1
TELETECHTTEC 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 September 30, | | Nine months ended September 30, |
| ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
Revenue | | $ | 566,734 | | $ | 492,980 | | $ | 1,660,747 | | $ | 1,378,274 | |
| | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | |
Cost of services (exclusive of depreciation and amortization presented separately below) | |
| 447,786 | |
| 368,405 | |
| 1,236,769 | |
| 1,027,268 | |
Selling, general and administrative | |
| 67,426 | |
| 49,473 | |
| 181,483 | |
| 146,667 | |
Depreciation and amortization | |
| 25,280 | |
| 19,522 | |
| 70,655 | |
| 57,054 | |
Restructuring charges, net | | | 485 | | | 1,233 | | | 2,612 | | | 2,564 | |
Impairment losses | |
| (268) | |
| 948 | |
| 3,949 | |
| 1,644 | |
Total operating expenses | |
| 540,709 | |
| 439,581 | |
| 1,495,468 | |
| 1,235,197 | |
| | | | | | | | | | | | | |
Income from operations | |
| 26,025 | |
| 53,399 | |
| 165,279 | |
| 143,077 | |
| | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | |
Interest income | |
| 171 | |
| 566 | |
| 580 | |
| 1,421 | |
Interest expense | |
| (3,504) | |
| (2,755) | |
| (8,687) | |
| (15,451) | |
Other income (expense), net | | | 3,288 | | | (18,663) | |
| 3,537 | |
| (17,028) | |
Total other income (expense) | |
| (45) | |
| (20,852) | |
| (4,570) | |
| (31,058) | |
| | | | | | | | | | | | | |
Income before income taxes | |
| 25,980 | |
| 32,547 | |
| 160,709 | |
| 112,019 | |
| | | | | | | | | | | | | |
Provision for income taxes | |
| (7,939) | |
| (8,415) | |
| (35,271) | |
| (29,653) | |
| | | | | | | | | | | | | |
Net income | |
| 18,041 | |
| 24,132 | |
| 125,438 | |
| 82,366 | |
| | | | | | | | | | | | | |
Net income attributable to noncontrolling interest | |
| (3,606) | |
| (2,766) | |
| (13,216) | |
| (8,141) | |
| | | | | | | | | | | | | |
Net income attributable to TTEC stockholders | | $ | 14,435 | | $ | 21,366 | | $ | 112,222 | | $ | 74,225 | |
| | | | | | | | | | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | | |
Net income | | $ | 18,041 | | $ | 24,132 | | $ | 125,438 | | $ | 82,366 | |
Foreign currency translation adjustments | |
| (14,186) | |
| 28,679 | |
| (17,676) | |
| 9,845 | |
Derivative valuation, gross | |
| (8,314) | |
| 5,350 | |
| (11,760) | |
| (98) | |
Derivative valuation, tax effect | |
| 2,164 | |
| (1,415) | |
| 3,056 | |
| 14 | |
Other, net of tax | |
| 23 | |
| 130 | |
| 35 | |
| 376 | |
Total other comprehensive income (loss) | |
| (20,313) | |
| 32,744 | |
| (26,345) | |
| 10,137 | |
Total comprehensive income (loss) | |
| (2,272) | |
| 56,876 | |
| 99,093 | |
| 92,503 | |
| | | | | | | | | | | | | |
Less: Comprehensive income attributable to noncontrolling interest | |
| (2,549) | |
| (2,749) | |
| (9,251) | |
| (6,316) | |
| | | | | | | | | | | | | |
Comprehensive income (loss) attributable to TTEC stockholders | | $ | (4,821) | | $ | 54,127 | | $ | 89,842 | | $ | 86,187 | |
| | | | | | | | | | | | | |
Weighted average shares outstanding | | | | | | | | | | | | | |
Basic | |
| 46,984 | |
| 46,732 | |
| 46,857 | |
| 46,617 | |
Diluted | | | 47,348 | |
| 47,031 | |
| 47,372 | |
| 46,885 | |
| | | | | | | | | | | | | |
Net income per share attributable to TTEC stockholders | | | | | | | | | | | | | |
Basic | | $ | 0.31 | | $ | 0.46 | | $ | 2.40 | | $ | 1.59 | |
Diluted | | $ | 0.30 | | $ | 0.45 | | $ | 2.37 | | $ | 1.58 | |
| | | | | | | | | | | | | |
Dividends declared and not paid per share outstanding | | $ | 0.47 | | $ | 0.40 | | $ | 0.47 | | $ | 0.40 | |
The accompanying notes are an integral part of these consolidated financial statements.
2
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders’ Equity and Mezzanine Equity
(Amounts in thousands)
(Unaudited)
Three months ended September 30, 2020 and 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 | | | | | | | | | | | | |
| |
| | Common Stock | | Treasury | | Additional | | Comprehensive | | Retained | | Noncontrolling | | | | | Mezzanine |
| |||||||||
| | Shares | | Amount | | Stock | | Paid-in Capital | | Income (Loss) | | Earnings | | interest | | Total Equity | | Equity |
| ||||||||
Balance as of June 30, 2020 |
| 46,682 | | $ | 467 | | $ | (602,117) | | $ | 355,968 | | $ | (128,528) | | $ | 810,234 | | $ | 11,903 | | $ | 447,927 | | $ | 54,026 | |
Net income |
| — | |
| — | |
| — | |
| — | |
| — | | | 21,366 | |
| 2,501 | |
| 23,867 | | | 265 | |
Dividends to shareholders ($0.40 per common share) | | — | |
| — | |
| — | |
| — | |
| — | | | (18,694) | | | — | | | (18,694) | | | — | |
Dividends distributed to noncontrolling interest |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (1,890) | |
| (1,890) | | | (1,287) | |
Foreign currency translation adjustments |
| — | |
| — | |
| — | |
| — | |
| 28,431 | |
| — | |
| 248 | |
| 28,679 | | | — | |
Derivatives valuation, net of tax |
| — | |
| — | |
| — | |
| — | |
| 3,935 | |
| — | |
| — | |
| 3,935 | | | — | |
Vesting of restricted stock units |
| 53 | |
| 1 | |
| 863 | |
| (2,102) | |
| — | |
| — | |
| — | |
| (1,238) | | | — | |
Equity-based compensation expense |
| — | |
| — | |
| — | |
| 3,495 | |
| — | |
| — | |
| — | |
| 3,495 | | | — | |
Other, net of tax |
| — | |
| — | |
| — | |
| — | |
| 130 | |
| — | |
| — | |
| 130 | | | — | |
Balance as of September 30, 2020 |
| 46,735 | | $ | 468 | | $ | (601,254) | | $ | 357,361 | | $ | (96,032) | | $ | 812,906 | | $ | 12,762 | | $ | 486,211 | | $ | 53,004 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Stockholders’ Equity of the Company | | | |
| |||||||||||||||||||||
|
|
|
|
| |
|
| |
|
| |
| Accumulated |
|
| |
|
| |
|
| | | | |
| |
| | | | | | | | | | | | | Other | | | | | | | | | | | | |
| |
| | Common Stock | | Treasury | | Additional | | Comprehensive | | Retained | | Noncontrolling | | | | | Mezzanine |
| |||||||||
| | Shares | | Amount | | Stock | | Paid-in Capital | | Income (Loss) | | Earnings | | interest | | Total Equity | | Equity |
| ||||||||
Balance as of June 30, 2021 |
| 46,893 | | $ | 469 | | $ | (598,627) | | $ | 358,423 | | $ | (78,328) | | $ | 834,967 | | $ | 15,397 | | $ | 532,301 | | $ | 54,800 | |
Net income |
| — | |
| — | |
| — | |
| — | |
| — | |
| 14,435 | |
| 2,767 | |
| 17,202 | | | 839 | |
Dividends to shareholders ($0.47 per common share) | | — | |
| — | |
| — | |
| — | |
| — | | | (22,085) | | | — | | | (22,085) | | | — | |
Acquisition of noncontrolling interest | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Dividends distributed to noncontrolling interest |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (2,025) | |
| (2,025) | | | (445) | |
Foreign currency translation adjustments |
| — | |
| — | |
| — | |
| — | |
| (13,968) | |
| — | |
| (218) | |
| (14,186) | | | — | |
Derivatives valuation, net of tax |
| — | |
| — | |
| — | |
| — | |
| (6,150) | |
| — | |
| — | |
| (6,150) | | | — | |
Vesting of restricted stock units |
| 95 | |
| 1 | |
| 1,576 | |
| (6,266) | |
| — | |
| — | |
| — | |
| (4,689) | | | — | |
Equity-based compensation expense |
| — | |
| — | |
| — | |
| 4,570 | |
| — | |
| — | |
| — | |
| 4,570 | | | — | |
Other, net of tax |
| — | |
| — | |
| — | |
| — | |
| 23 | |
| — | |
| — | |
| 23 | | | — | |
Balance as of September 30, 2021 |
| 46,988 | | $ | 470 | | $ | (597,051) | | $ | 356,727 | | $ | (98,423) | | $ | 827,317 | | $ | 15,921 | | $ | 504,961 | | $ | 55,194 | |
Nine months ended September 30, 2020 and 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Stockholders’ Equity of the Company | | | |
| |||||||||||||||||||||
|
|
|
|
| |
|
| |
|
| |
| Accumulated |
|
| |
|
| |
|
| | | | |
| |
| | | | | | | | | | | | | Other | | | | | | | | | | | | |
| |
| | Common Stock | | Treasury | | Additional | | Comprehensive | | Retained | | Noncontrolling | | | | | Mezzanine |
| |||||||||
| | 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 |
| — | |
| — | |
| — | |
| — | |
| — | | | 74,225 | |
| 6,381 | |
| 80,606 | | | 1,760 | |
Dividends to shareholders ($0.74 per common share) | | — | |
| — | |
| — | |
| — | |
| — | | | (34,537) | | | — | | | (34,537) | | | — | |
Acquisition of noncontrolling interest | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,849 | |
Dividends distributed to noncontrolling interest |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (6,740) | |
| (6,740) | | | (1,528) | |
Foreign currency translation adjustments |
| — | |
| — | |
| — | |
| — | |
| 9,910 | |
| — | |
| (65) | |
| 9,845 | | | — | |
Derivatives valuation, net of tax |
| — | |
| — | |
| — | |
| — | |
| (84) | |
| — | |
| — | |
| (84) | | | — | |
Vesting of restricted stock units |
| 246 | |
| 3 | |
| 4,060 | |
| (8,519) | |
| — | |
| — | |
| — | |
| (4,456) | | | — | |
Equity-based compensation expense |
| — | |
| — | |
| — | |
| 9,471 | |
| — | |
| — | |
| — | |
| 9,471 | | | — | |
Other, net of tax |
| — | |
| — | |
| — | |
| — | |
| 376 | |
| — | |
| — | |
| 376 | | | — | |
Balance as of September 30, 2020 |
| 46,735 | | $ | 468 | | $ | (601,254) | | $ | 357,361 | | $ | (96,032) | | $ | 812,906 | | $ | 12,762 | | $ | 486,211 | | $ | 53,004 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Stockholders’ Equity of the Company | | | |
| |||||||||||||||||||||
|
|
|
|
| |
|
| |
|
| |
| Accumulated |
|
| |
|
| |
|
| | | | |
| |
| | | | | | | | | | | | | Other | | | | | | | | | | | | |
| |
| | Common Stock | | Treasury | | Additional | | Comprehensive | | Retained | | Noncontrolling | | | | | Mezzanine |
| |||||||||
| | Shares | | Amount | | Stock | | Paid-in Capital | | Income (Loss) | | Earnings | | interest | | Total Equity | | Equity |
| ||||||||
Balance as of December 31, 2020 |
| 46,737 | | $ | 467 | | $ | (601,214) | | $ | 360,293 | | $ | (72,156) | | $ | 757,312 | | $ | 13,060 | | $ | 457,762 | | $ | 52,976 | |
Net income |
| — | |
| — | |
| — | |
| — | |
| — | |
| 112,222 | |
| 9,329 | |
| 121,551 | | | 3,887 | |
Dividends to shareholders ($0.90 per common share) | | — | |
| — | |
| — | |
| — | |
| — | | | (42,217) | | | — | | | (42,217) | | | — | |
Acquisition of noncontrolling interest | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Dividends distributed to noncontrolling interest |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (6,390) | |
| (6,390) | | | (1,669) | |
Foreign currency translation adjustments |
| — | |
| — | |
| — | |
| — | |
| (17,598) | |
| — | |
| (78) | |
| (17,676) | | | — | |
Derivatives valuation, net of tax |
| — | |
| — | |
| — | |
| — | |
| (8,704) | |
| — | |
| — | |
| (8,704) | | | — | |
Vesting of restricted stock units |
| 251 | |
| 3 | |
| 4,163 | |
| (15,535) | |
| — | |
| — | |
| — | |
| (11,369) | | | — | |
Equity-based compensation expense |
| — | |
| — | |
| — | |
| 11,969 | |
| — | |
| — | |
| — | |
| 11,969 | | | — | |
Other, net of tax |
| — | |
| — | |
| — | |
| — | |
| 35 | |
| — | |
| — | |
| 35 | | | — | |
Balance as of September 30, 2021 |
| 46,988 | | $ | 470 | | $ | (597,051) | | $ | 356,727 | | $ | (98,423) | | $ | 827,317 | | $ | 15,921 | | $ | 504,961 | | $ | 55,194 | |
The accompanying notes are an integral part of these consolidated financial statements.
3
TELETECHTTEC 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 |
|
| | | | | | | |
| | Nine Months Ended September 30, | | ||||
|
| 2021 |
| 2020 |
| ||
Cash flows from operating activities | | | | | | | |
Net income | | $ | 125,438 | | $ | 82,366 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
Depreciation and amortization | |
| 70,655 | |
| 57,054 | |
Amortization of contract acquisition costs | |
| 575 | |
| 332 | |
Amortization of debt issuance costs | |
| 719 | |
| 549 | |
Imputed interest expense and fair value adjustments to contingent consideration | |
| 1,046 | |
| 1,949 | |
Provision for credit losses | |
| (34) | |
| 563 | |
(Gain) loss on disposal of assets | | | 524 | | | 77 | |
Loss on dissolution of subsidiary | | | — | | | 19,905 | |
Impairment losses | |
| 3,949 | |
| 1,644 | |
Deferred income taxes | |
| 514 | |
| (1,153) | |
Excess tax benefit from equity-based awards | |
| (5,284) | |
| (708) | |
Equity-based compensation expense | |
| 11,969 | |
| 9,471 | |
(Gain) loss on foreign currency derivatives | |
| 134 | |
| (25) | |
Changes in assets and liabilities, net of acquisitions: | | | | | | | |
Accounts receivable | |
| 48,816 | |
| (5,450) | |
Prepaids and other assets | |
| (42,455) | |
| 14,333 | |
Accounts payable and accrued expenses | |
| 19,406 | |
| 70,441 | |
Deferred revenue and other liabilities | |
| (60,910) | |
| (64,564) | |
Net cash provided by operating activities | |
| 175,062 | |
| 186,784 | |
| | | | | | | |
Cash flows from investing activities | | | | | | | |
Proceeds from sale of long-lived assets | |
| 42 | |
| 16 | |
Purchases of property, plant and equipment, net of acquisitions | |
| (40,778) | |
| (47,827) | |
Acquisitions, net of cash acquired of $18,638 and $3,123, respectively | |
| (481,718) | |
| (38,739) | |
Net cash used in investing activities | |
| (522,454) | |
| (86,550) | |
| | | | | | | |
Cash flows from financing activities | | | | | | | |
Net proceeds (borrowings) from line of credit | |
| 420,000 | |
| 35,000 | |
Payments on other debt | |
| (5,288) | |
| (6,602) | |
Payments of contingent consideration and hold back payments to acquisitions | |
| (11,517) | |
| (48,686) | |
Dividends paid to shareholders | | | (20,132) | | | (15,843) | |
Payments to noncontrolling interest | |
| (8,059) | |
| (8,268) | |
Tax payments related to issuance of restricted stock units | | | (11,369) | | | (4,456) | |
Payments of debt issuance costs | |
| (1,102) | |
| (35) | |
Net cash provided by (used in) financing activities | |
| 362,533 | |
| (48,890) | |
| | | | | | | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | |
| (6,272) | |
| (104) | |
| | | | | | | |
Increase in cash, cash equivalents and restricted cash | |
| 8,869 | |
| 51,240 | |
Cash, cash equivalents and restricted cash, beginning of period | |
| 159,015 | |
| 105,591 | |
Cash, cash equivalents and restricted cash, end of period | | $ | 167,884 | | $ | 156,831 | |
| | | | | | | |
Supplemental disclosures | | | | | | | |
Cash paid for interest | | $ | 7,827 | | $ | 8,436 | |
Cash paid for income taxes | | $ | 64,999 | | $ | 33,793 | |
Non-cash investing and financing activities | | | | | | | |
Acquisition of long-lived assets through finance leases | | $ | 857 | | $ | 1,814 | |
Acquisition of equipment through increase in accounts payable, net | | $ | 130 | | $ | (2,515) | |
Dividend declared but not paid | | $ | 22,085 | | $ | 18,694 | |
The accompanying notes are an integral part of these consolidated financial statements.
4
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(1)OVERVIEW AND BASIS OF PRESENTATION
Summary of Business
TeleTechTTEC Holdings, Inc. and its subsidiaries (“TeleTech”TTEC”, or the “Company”“the Company”) is a leading global provider of technology enabled customer experience services. The Companyas a service (“CXaaS”) partner for many of the world’s iconic brands, Fortune 1000 companies, government agencies, and disruptive growth companies. TTEC helps leading brands improveits clients deliver frictionless customer experiences, strengthen customer relationships, brand recognition and operational effectivenessloyalty through a unique combination of technological innovationpersonalized interactions, improve their Net Promoter Score, customer satisfaction and operational expertise. The Company’s portfolio ofquality assurance, and lower their total cost to serve by combining innovative digital solutions includes consulting, technology, operations and analyticswith best-in-class service capabilities to enable aand deliver simplified, consistent and seamless customer experience across every interaction channelchannels and phasephases of the customer lifecycle. TeleTech’s 49,500TTEC’s 62,300 employees serve clients in the automotive, communication, financial services, government,national/federal and state and local governments, healthcare, logistics, media and entertainment, e-tail/retail, technology, travel and transportation and travel industries across all the segments and via operations in the U.S.,United States, Australia, Belgium, Brazil, Bulgaria, Canada, China, Costa Rica, Germany, Hong Kong,Greece, India, Ireland, Lebanon, Macedonia, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, Turkey, the United Arab Emirates, and the United Kingdom.
The Company reports its financial information based on two segments: TTEC Digital and TTEC Engage.
● | TTEC Digital provides the CX technology services and platforms to support the Company’s clients’ customer interaction delivery infrastructure. The segment designs, builds and operates the omnichannel ecosystem in a cloud, on premise, or hybrid environment, and fully integrates, orchestrates, and administers highly scalable, feature-rich CX technology applications. |
● | TTEC Engage provides the CX managed services to support the Company’s clients’ end-to-end customer interaction delivery by providing the essential CX omnichannel and application technologies, human resources, recruiting, training and production, at-home or facility-based delivery infrastructure on a global scale, and engagement processes. This segment provides full-service digital, omnichannel customer engagement, supporting customer care, customer acquisition, growth and retention, and fraud detection and prevention services. |
TTEC Digital and TTEC Engage strategically come together under the Company’s unified offering, Humanify® Customer Experience as a Service, which drives measurable customer results for clients through the delivery of personalized, omnichannel experiences. The Company’s Humanify® cloud platform provides a fully integrated ecosystem of CX offerings, including messaging, artificial intelligence, machine learning, robotic process automation, analytics, cybersecurity, customer relationship management, knowledge management, journey orchestration, and traditional voice solutions. The Company’s end-to-end platform differentiates the Company from many competitors by combining design, strategic consulting, best-in-class technology, data analytics, process optimization, system integration and operational excellence.
Basis of Presentation
The Consolidated Financial Statements are comprised of the accounts of TeleTech,TTEC, its wholly owned subsidiaries, and its 55% equity owned subsidiary Percepta, LLC.LLC, its 70% equity owned subsidiary First Call Resolution, LLC and its 70% equity owned subsidiary Serendebyte, Inc. (see Note 2). All intercompany balances and transactions have been eliminated in consolidation.
5
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The unaudited Consolidated Financial Statements do not include all of the disclosures required by accounting principles generally accepted in the U.S. (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company and the consolidated results of operations and comprehensive income (loss) and the consolidated cash flows of the Company. All such adjustments are of a normal, recurring nature. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
During the three months ended March 31, 2016, the Company recorded an additional tax expense of $1.1 million that should have been recorded in prior periods related to operations by an entity outside its country of incorporation. The total amount of $1.1 million should have been recorded as additional expense in the amount of $180 thousand in 2011, $123 thousand in 2012, $137 thousand in 2013, $358 thousand in 2014 and $301 thousand in 2015.
The Company has evaluated the impact of this adjustment and concluded that the adjustment was not material to the previously issued consolidated financial statements.2021.
These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.
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-goingongoing 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, primarily held in interest-bearing investments, and liquid short-term 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):
| | | | | | | | |
| | | September 30, 2021 |
| December 31, 2020 | | ||
| | | | | | | | |
Cash and cash equivalents | | | $ | 148,853 |
| $ | 132,914 | |
Restricted cash included in "Prepaid and other current assets" | | |
| 19,031 | |
| 26,101 | |
Restricted cash included in "Other noncurrent assets" | | |
| — | |
| — | |
Total | | | $ | 167,884 |
| $ | 159,015 | |
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 eight investment-grade financial institutions.
56
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
Recently IssuedAdopted 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 2015,2019, the FASB issued ASU 2015-14, “Deferral of Effective Date”, deferring2019-12, “Simplifying the effective date by one year, to be effectiveAccounting 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”Income Taxes” (ASC 740), 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 companyis intended 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”, which amends the existing accounting standards for lease accounting, including requiring lessees, to recognize most leases on their balance sheetssimplify various aspects related to the rights and obligations created by those leases and making targeted changes to lessorincome tax 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 on or after December 15, 2018 and2020, with early adoption is permitted. The Company adopted the new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after,guidance effective January 1, 2021 and the date of initial application, with an option to use certain transition relief. The Company is currently assessing the impactadoption had no effect on the consolidated financial statements andor related disclosures evaluating software solutions and other tracking methods, and determiningduring the implementation timeline.quarter.
Other Accounting Pronouncements
In March 2016,2020, the FASB issued ASU 2016-09, “Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting”2020-04, “Reference Rate Reform” (Topic 848), which amendsprovides optional expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform due to the existing accounting standards related to stock-based compensation. The ASU simplifies several aspectsanticipated cessation 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.London Interbank Offered Rate (”LIBOR”) on or before December 31, 2021. The ASU is effective from March 12, 2020, through December 31, 2022 and could impact the accounting for interim and annual periods beginning on or after December 15, 2016. Beginning withLIBOR provisions in the first quarterCompany’s credit facility agreement. In addition, in January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform – Scope,” which clarified the scope of 2017, theASC 848 relating to contract modifications. The Company has not yet adopted the newstandard but does not expect that the adoption of this guidance as applicable and this adoption did notwill have a material impact on itsthe Company’s financial position, results of operationoperations or related disclosures.cash flows.
In August 2016, 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 the Consolidated Statement of Cash Flows by providing 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.
6
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. The ASU is effective for interim and annual periods beginning on or after December 15, 2019 and early adoption is permitted. The Company early adopted this standard as of January 1, 2017.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. ASU 2017-12 amends and simplifies existing guidance for derivatives and hedges including aligning accounting with companies’ risk management strategies and increasing disclosure transparency regarding both the scope and results of hedging programs. The changes include designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The ASU is effective for interim and annual periods beginning after December 15, 2018 and early adoption is permitted. The Company is currently assessing the impact on the consolidated statements and related disclosures.
(2)ACQUISITIONS AND DIVESTITURES
ConnextionsAvtex
On April 3, 2017,8, 2021, the Company acquired, allthrough its subsidiary TTEC Digital, LLC, 100% of the outstanding sharesstock of Connextions, Inc., a health careAvtex Solutions Holdings, LLC (“Avtex”). Avtex is an end-to-end customer serviceexperience and CXaaS solutions provider company, from OptumHealth Holdings, LLC. Connextionswith offerings in Genesys and Microsoft cloud solutions. The business is operated as part of the TTEC Digital segment and is being integratedfully consolidated into the health care verticalfinancial 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 totalTotal cash paid at acquisition was $80 million.$500.0 million ($490.0 million base purchase price plus cash, less debt and working capital estimate). The purchase priceAvtex 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 requiredused cash from operations and drew down on its Credit Facility to pay an additional $1.8 million forfund the acquisition. The Company finalized the net working capital adjustment which was paidfor $0.1 million during the third quarter of 2017. Additionally, fair value adjustments related2021 which was paid by Avtex to the transition services agreements are expected to reduceCompany in the purchase price by $4.1 million resulting in a net estimated purchase pricethird quarter of $77.7 million.
2021.
7
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
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 |
| $ | — |
| | $ | 18,638 | |
Accounts receivable, net |
|
| 15,959 |
| |
| 22,727 | |
Prepaid expenses |
|
| 241 |
| |
| 26,357 | |
Other current assets |
|
| 51 |
| ||||
Property, plant and equipment |
|
| 7,594 |
| ||||
Current income tax receivables | | | 93 | | ||||
Net fixed assets | | | 3,162 | | ||||
Right of use assets | | | 3,614 | | ||||
Other Assets | | | 480 | | ||||
Tradename | | | 5,300 | | ||||
Intellectual property intangible | | | 770 | | ||||
Customer relationships |
|
| 35,000 |
| | | 124,660 | |
Goodwill |
|
| 35,272 |
| | | 375,669 | |
|
| $ | 94,117 |
| ||||
|
|
|
|
| ||||
| | $ | 581,470 | | ||||
| | | | | ||||
Accounts payable |
| $ | 1 |
| | $ | 20,962 | |
Accrued employee compensation and benefits |
|
| 346 |
| ||||
Accrued employee compensation | |
| 4,325 | | ||||
Accrued expenses |
|
| 386 |
| | | 250 | |
Deferred tax liabilities |
|
| 15,273 |
| ||||
Right of use liability - current | | | 678 | | ||||
Deferred revenue |
|
| 399 |
| |
| 52,031 | |
|
| $ | 16,405 |
| ||||
|
|
|
|
| ||||
Accrued income taxes | | | 332 | | ||||
Deferred tax liability | | | 11 | | ||||
Right of use liability - noncurrent | |
| 2,936 | | ||||
| | $ | 81,525 | | ||||
| | | | | ||||
Total purchase price |
| $ | 77,712 |
| | $ | 499,945 | |
The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending finalization of athe valuation and tax returns, thus are subject to revisions that may result in adjustments to the valuesvalue presented above.
The ConnextionsAvtex customer relationships, intellectual property intangible, and tradename have been estimated based on the initial valuation and arewill be amortized over an estimated useful lifelives of 12 years.9, 3, and 1 years, respectively. The goodwill recognized from the ConnextionsAvtex acquisition is estimated to be attributable, but not limited to, the acquired work forceworkforce and expected synergies with CMS. None of the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and theintangibles and operating results of ConnextionsAvtex are reported within the CMSTTEC Digital segment from the date of acquisition.
AtelkaVoiceFoundry
On November 9, 2016,August 5, 2020, TTEC Digital, LLC closed the Company acquired allfirst phase of the outstanding sharesacquisition of Atelka Enterprise Inc. (“Atelka”)the VoiceFoundry business by acquiring 100% of the business’s net assets in the U.S. and U.K., (the “VF US Transaction”). VoiceFoundry is a Canadian customerpreferred Amazon Connect cloud contact center managementservice and implementation partner. The business process outsourcing services company that serves Canadian telecommunications, logistics,has been integrated into the TTEC Digital segment and entertainment clients. This acquisition was an addition tois being fully consolidated into the CMS segment. Atelka employed approximately 2,800 in Quebec, Ontario, New Brunswick and Prince Edward Island.
The total purchase price was $48.4 million ($65.0 CAD), including certain working capital adjustments, and consistedfinancial statements of $47.5 million in cash at closing and a $1.4 million hold-back for contingencies as defined in the sale and purchase agreement, which will be released to the seller in month 12 and month 24, post acquisition, if not used.
TTEC.
8
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
Total cash paid at acquisition was $34.3 million. The VF US Transaction is subject to customary representations and warranties, holdbacks, and working capital adjustments. The VF US Transaction includes two contingent payments over the next two years with each payment having a maximum value of $7.4 million based on VF US’s EBITDA performance for 2020 and 2021. The Company finalized the net working capital adjustment for $0.3 million which was paid to VoiceFoundry during the first quarter of 2021.
The fair value of the contingent consideration has been estimated using a Monte Carlo model. The model was based on current expected EBITDA performance, a discount rate of 23.1%, a volatility rate of 47%, and an adjusted risk-free rate of 2.6%. Based on the model, a $10.9 million expected future payment was calculated and recorded as of the acquisition date. During the fourth quarter of 2020, the first quarter of 2021 and the second quarter of 2021, a $3.2 million expense, a $0.5 million expense and a $0.2 million expense, respectively, were recorded related to fair value adjustments of the estimated contingent consideration based on revised estimates of EBITDA performance for 2021. These expenses were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss). During the first quarter of 2021, the contingent payment related to 2020 was finalized at a value of $7.4 million and was paid in April 2021. As of September 30, 2021, the value of the accrual is $7.4 million and is included in Other accrued expenses in the accompanying Consolidated Balance Sheets.
A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible asset. The significant assumption utilized in calculating the fair value of the customer relationships intangible asset was the customer attrition rate.
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 |
| |
Cash |
| $ | 2,655 |
|
Accounts receivable, net |
|
| 18,449 |
|
Prepaid expenses |
|
| 615 |
|
Property, plant and equipment |
|
| 3,161 |
|
Deferred tax assets, net |
|
| 638 |
|
Customer relationships |
|
| 10,500 |
|
Goodwill |
|
| 20,275 |
|
|
| $ | 56,293 |
|
|
|
|
|
|
Accounts payable |
| $ | 1,199 |
|
Accrued employee compensation and benefits |
|
| 2,418 |
|
Accrued expenses |
|
| 2,597 |
|
Other |
|
| 1,678 |
|
|
| $ | 7,892 |
|
|
|
|
|
|
Total purchase price |
| $ | 48,401 |
|
| | | | |
| | Acquisition Date |
| |
| | Fair Value |
| |
Accounts receivable, net | | $ | 3,758 | |
Prepaid and other assets | |
| 345 | |
Tradename | | | 400 | |
Non-compete | | | 150 | |
Customer relationships | | | 6,550 | |
Goodwill | | | 35,881 | |
| | $ | 47,084 | |
| | | | |
Accounts payable | | $ | 289 | |
Accrued employee compensation | |
| 741 | |
Deferred revenue | |
| 170 | |
| | $ | 1,200 | |
| | | | |
Total purchase price | | $ | 45,884 | |
In the thirdfirst quarter of 2017,2021, the Company finalized itsthe valuation of AtelkaVF US for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.
The AtelkaVF US customer relationships will beand tradename are being amortized over a useful lifelives of 12 years.4 and 2 years, respectively. The goodwill recognized from the Atelka acquisitionVF US Transaction is attributable, but not limited to, the acquired work forceworkforce and expected synergies with CMS. None of the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and theintangibles and operating results of AtelkaVF US are reported within the CMSTTEC Digital segment from the date of acquisition.
rogenSi9
InTTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
VoiceFoundry ASEAN
On November 4, 2020, TTEC Europe BV, a subsidiary of the Company, closed the final phase of the acquisition of the VoiceFoundry business by acquiring 100% of the issued stock of Saasy Ventures Pty Ltd. (“the VF ASEAN Transaction”). The business has been integrated into the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC.
Total cash paid at acquisition was $15.2 million. The VF ASEAN Transaction is subject to customary representations and warranties, holdbacks, and working capital adjustments. The VF ASEAN Transaction includes 2 contingent payments over the next two years with each payment having a maximum value of $2.2 million based on VF ASEAN’s EBITDA performance for 2020 and 2021. The Company finalized the net working capital adjustment for $0.2 million which was paid from VoiceFoundry during the third quarter of 2014, as an addition 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.
9
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2021.
The fair value of the contingent consideration has been estimated using a Monte Carlo model. The model was measuredbased on current expected EBITDA performance, a discount rate of 18.4%, a volatility rate of 50%, and an adjusted risk-free rate of 1.6%. Based on the model, a $2.8 million expected future payment was calculated and recorded as of the acquisition date. During the fourth quarter of 2020, the first quarter of 2021 and the second quarter of 2021, a $1.2 million expense, a $0.4 million expense and a $0.1 million benefit, respectively, were recorded related to fair value adjustments of the estimated contingent consideration based on estimates of EBITDA performance for 2020 and 2021. These expenses/benefits were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss). During the first quarter of 2021, the contingent payment related to 2020 was finalized at a value of $2.2 million and was paid in April 2021. As of September 30, 2021, the value of the accrual is $2.1 million and is included in Other accrued expenses in the accompanying Consolidated Balance Sheets.
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 |
| |
Cash | | $ | 1,300 | |
Accounts receivable, net | | | 937 | |
Prepaid and other expenses | |
| 115 | |
Income tax receivable | | | 30 | |
Property, plant and equipment | | | 274 | |
Tradename | |
| 300 | |
Customer relationships | |
| 3,100 | |
Goodwill | | | 14,418 | |
| | $ | 20,474 | |
| | | | |
Accounts payable | | $ | 960 | |
Accrued employee compensation | |
| 113 | |
Deferred revenue | | | 236 | |
Deferred tax liability | | | 1,013 | |
Other accrued liabilities | |
| (78) | |
| | $ | 2,244 | |
| | | | |
Total purchase price | | $ | 18,230 | |
In the second quarter of 2021, the Company finalized the valuation for VF ASEAN for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.
10
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The VF ASEAN customer relationships and tradename are being amortized over useful lives of 4 and 2 years, respectively. The goodwill recognized from the VF ASEAN Transaction is attributable, but not limited to, the acquired workforce and expected synergies with 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 intangibles and operating results of VF ASEAN are reported within the TTEC Digital segment from the date of acquisition.
Serendebyte
On February 7, 2020, the Company acquired, through its subsidiary TTEC Digital, LLC, 70% of the outstanding shares of capital stock of Serendebyte Inc., a Delaware corporation (“the Serendebyte Transaction”). Serendebyte is an autonomous customer experience and intelligent automation solutions provider based in India, the United States, and Canada. The business has been integrated into the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC.
Total cash paid at acquisition, for 70% of the outstanding shares of capital stock, was $9.0 million. The Serendebyte Transaction is subject to customary representations and warranties, holdbacks, and a net working capital adjustment. The Company finalized the net working capital adjustment for $0.8 million during the second quarter of 2020 which was paid by applyingSerendebyte to the Company in the second quarter of 2020.
As of the closing of the Serendebyte Transaction, Serendebyte’s founder and certain members of its management continued 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, LLC and TTEC Digital, LLC shall have an option to purchase the Remaining Interest at a probability weighted discounted cash flow modelpurchase 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). Key assumptions include a including forecasted earnings, discount rate of 4.6%35%, working capital requirements and expected futureapplicable tax rates. The noncontrolling interest was valued at $3.8 million at the acquisition date and is shown as Redeemable noncontrolling interest in the accompanying Consolidated Balance Sheets. The Company recognizes changes in the redemption value of paymentsthe Redeemable noncontrolling interest immediately as they occur but does not reduce the carrying value below the carrying value determined in accordance with ASC 810 (that amount being determined based on the allocation of $15.3 million. The $15.3 million of expected future payments wasincome or loss to the noncontrolling interest as adjusted for distributions). At each subsequent reporting date, the current redeemable value is calculated using a probability weighted EBITDA assessmentand, if necessary, an adjustment is recorded to increase or decrease the noncontrolling interest account to reflect the appropriate balance, with the highest probability associatedcorresponding adjustment to retained earnings. As of September 30, 2021, no adjustments have been recorded related to changes in the estimated redemption value.
As a condition to closing, Serendebyte’s founder and certain members of the management team agreed to continue their affiliation with rogenSi achievingSerendebyte at least through 2023, and the targeted EBITDAfounder agreed not to compete with TTEC for each earn-out year. Asa period of four years after the disposition of the Remaining Interest.
11
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date the fair value of the contingent consideration was approximately $14.5 million. During(in thousands):
| | | | |
| | Acquisition Date |
| |
| | Fair Value |
| |
Cash | | $ | 3,123 | |
Accounts receivable, net | |
| 1,243 | |
Prepaid and other assets | |
| 1,327 | |
Property, plant and equipment | | | 20 | |
Deferred tax assets | | | 14 | |
Tradename | | | 400 | |
Customer relationships | | | 1,920 | |
Goodwill | | | 9,033 | |
| | $ | 17,080 | |
| | | | |
Accounts payable | | $ | 120 | |
Accrued employee compensation and benefits | |
| 1,025 | |
Accrued income taxes | |
| 170 | |
Accrued expenses | | | 2,208 | |
Deferred tax liabilities - long-term | |
| 629 | |
| | $ | 4,152 | |
| | | | |
Total purchase price | | $ | 12,928 | |
In the fourth quarter of 2014,2020, the thirdCompany finalized the valuation of Serendebyte for the acquisition date assets acquired and liabilities assumed and determined no material adjustments to any of the balances were required.
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 2015,2020.
The Serendebyte customer relationships and tradename are being amortized over useful lives of 5 and 3 years, respectively. The goodwill recognized from the fourth quarter of 2015,Serendebyte acquisition is attributable, but not limited to, the acquired workforce and expected synergies with the third quarter of 2016, the Company recorded fair value adjustmentsTTEC Digital segment. The tax basis of the contingent considerationacquired intangibles and goodwill will not be deductible for income tax purposes. The acquired goodwill and intangibles and operating results of $0.5 million, $0.8 million, $(0.3) million, and $(4.3) million, respectively, based on revised estimates noting higher or lower probabilitySerendebyte are reported within the TTEC Digital segment from the date 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.acquisition.
Financial Impact of Acquired Businesses
The acquired businesses purchased in 20162021 and 20172020 noted above contributed revenues of $43.6$130.4 million and $101.9 million, and a net lossincome of $(4.1) million and $(6.3)$9.9 million, inclusive of $0.9 million and $2.1$11.8 million of acquired intangible amortization, to the Company for the three and nine months ended September 30, 2017, respectively.2021.
The unaudited proforma financial results for the third quarter and first nine months of 2017ended September 30, 2021 and 20162020, combines the consolidated results of the Company, ConnextionsAvtex, VoiceFoundry US, VoiceFoundry ASEAN and AtelkaSerendebyte assuming the Connextions acquisitionacquisitions had been completed on January 1, 2016 and the Atelka acquisition on January 1, 2015.2020. The reported revenue and net income of $312.8$1,660.7 million and $11.5$112.2 million would have been $362.3$1,707.8 million and $9.4 million for the three months ended September 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$115.0 million for the nine months ended September 30, 2016,2021, respectively, on an unaudited proforma basis.
For 2017,2020, the reported revenue and net income of $359.0$1,378.3 million and $14.8$74.2 million would have been $359.0$1,516.3 million and $14.8 million for the three months ended September 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$83.7 million for the nine months ended September 30, 2017,2020, respectively, on an unaudited proforma basis.
The unaudited pro formaproforma 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 formaproforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisition.
Assets and Liabilities Held for Sale
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
1012
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(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
CaféXDissolutions
In the first quarterordinary course of 2015,business, the Company invested $9.0 million in CafeX Communications, Inc. (“CaféX”) throughoperates different legal entities around the purchase of a portionglobe that have functional currencies other than USD. From time to time, the Company liquidates some 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 applicationsentities when they are no longer needed to operate its business, and websites with in-app video communication and screen share technologyalso forms new entities to increase customer satisfaction and enterprise efficiency. TeleTech has deployedsupport the CaféX technology as partneeds 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.business. 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 carryingliquidation proceedings may take different forms, take considerable amount of such assetstime, and may not be recoverable. The Company tested the investmentalso result in CaféX for impairment and concluded that the investment was not impaired at September 30, 2017losses or December 31, 2016.
11
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 Groupgains unrelated to SKC Communication Products, LLC (“SKC”) 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. Duringoperations.In the second quarter of 2017, a $30 thousand gain, which included the write-off 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,ended June 30, 2020, the Company dissolved TeleTech Spain Holdings SL,exited a fully owned foreign subsidiary domiciledthat resulted in Spain. Upon complete liquidation, $3.2a non-cash $2.5 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 isloss included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss) forfrom the three and nine monthsrealization of the Accumulated other comprehensive income (loss), which represents the currency translation adjustment of the investment in the foreign subsidiary. Similarly, in the third quarter ended September 30, 2017.
Subsequent Event
On November 8, 2017,2020, the Company agreed to acquire allexited two foreign subsidiaries that ceased operations and were removed from the consolidated financial statements as of the outstanding sharesreporting period ended September 30, 2020. As a result of the deconsolidation, a non-cash $17.4 million loss was included in Motif, Inc.Other income (expense), 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 centersnet 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 the acquisitionConsolidated Statement of 70% of all outstanding shares in Motif from private equity and certain individual investors for $46.9 million, subject to customary representations and warranties, 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”)Comprehensive Income (Loss). The Company agreedmajority of this loss related to pay for the founders’ shares at a purchase price contingent on Motif’s fiscal year 2020’s adjusted normalized EBITDA, and 30%realization of the excess cash presentAccumulated other comprehensive income (loss) balance which represents the currency translation adjustment of the investment in the business atforeign subsidiaries. The operating income of these subsidiaries prior to dissolution was not material to the timeyear-to-date consolidated results 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.Company.
(3)SEGMENT INFORMATION
The Company reports the following fourtwo segments:
TTEC Digital provides the CX technology services and platforms to support the Company’s clients’ customer interaction delivery infrastructure. The segment designs, builds and operates the omnichannel ecosystem in a cloud, on premise, or hybrid environment, and fully integrates, orchestrates, and administers highly scalable, feature-rich CX technology applications. These solutions are critical to enabling and accelerating digital transformation for the Company’s clients.
| Technology Services: the Company’s technology services design, integrate and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, including journey orchestration, automation and AI, knowledge management, and workforce productivity. |
● | Professional Services: the |
TTEC Engage delivers the CX managed services to support the Company’s clients’ end-to-end customer interaction delivery, by providing the essential CX omnichannel and application technologies, human resources, recruiting, training and production, at-home or facility-based delivery infrastructure on a global scale, and engagement processes. This segment provides full-service digital, omnichannel customer engagement, supporting customer care, customer acquisition, growth and retention, and fraud detection and prevention services.
● | Customer Acquisition Services: the Company’s customer |
● | Customer Care Services: the Company’s customer |
|
|
1213
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
| Fraud Prevention Services: the |
|
|
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 30, 20172021
| | | | | | | | | | | | | | | | |
|
| | |
| | |
| | |
| Depreciation |
| Income |
| ||
| | Gross | | Intersegment | | Net | | & | | from |
| |||||
| | Revenue | | Sales | | Revenue | | Amortization | | Operations |
| |||||
TTEC Digital | | $ | 124,086 | | $ | — | | $ | 124,086 | | $ | 8,936 | | $ | 8,670 | |
TTEC Engage | |
| 442,655 | |
| (7) | |
| 442,648 | |
| 16,344 | |
| 17,355 | |
Total | | $ | 566,741 | | $ | (7) | | $ | 566,734 | | $ | 25,280 | | $ | 26,025 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 30, 20162020
| | | | | | | | | | | | | | | | |
|
| | |
| | |
| | |
| Depreciation |
| Income |
| ||
| | Gross | | Intersegment | | Net | | & | | from |
| |||||
| | Revenue | | Sales | | Revenue | | Amortization | | Operations |
| |||||
TTEC Digital | | $ | 76,571 | | $ | — | | $ | 76,571 | | $ | 3,537 | | $ | 13,043 | |
TTEC Engage | |
| 416,409 | |
| — | |
| 416,409 | |
| 15,985 | |
| 40,356 | |
Total | | $ | 492,980 | | $ | — | | $ | 492,980 | | $ | 19,522 | | $ | 53,399 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 Months Ended September 30, 20172021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 | | $ | 295,712 | | $ | (44) | | $ | 295,668 | | $ | 21,312 | | $ | 22,438 | |
TTEC Engage | |
| 1,365,086 | |
| (7) | |
| 1,365,079 | |
| 49,343 | |
| 142,841 | |
Total | | $ | 1,660,798 | | $ | (51) | | $ | 1,660,747 | | $ | 70,655 | | $ | 165,279 | |
13
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Nine Months Ended September 30, 20162020
| | | | | | | | | | | | | | | | |
|
| | |
| | |
| | |
| Depreciation |
| Income |
| ||
| | Gross | | Intersegment | | Net | | & | | from |
| |||||
| | Revenue | | Sales | | Revenue | | Amortization | | Operations |
| |||||
TTEC Digital | | $ | 231,520 | | $ | (250) | | $ | 231,270 | | $ | 10,103 | | $ | 37,677 | |
TTEC Engage | |
| 1,147,004 | | | — | |
| 1,147,004 | |
| 46,951 | |
| 105,400 | |
Total | | $ | 1,378,524 | | $ | (250) | | $ | 1,378,274 | | $ | 57,054 | | $ | 143,077 | |
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
| | 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
Capital Expenditures | | | | | | | | | | | | | |
TTEC Digital | | $ | 1,599 |
| $ | 1,635 |
| $ | 5,029 |
| $ | 6,961 | |
TTEC Engage | |
| 15,586 | |
| 14,277 | |
| 35,749 | |
| 40,866 | |
Total | | $ | 17,185 |
| $ | 15,912 |
| $ | 40,778 |
| $ | 47,827 | |
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
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 |
| ||||
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, 2021 |
| December 31, 2020 | | ||
Total Assets | | | | | | | | |
TTEC Digital | | | $ | 849,980 |
| $ | 277,365 | |
TTEC Engage | | |
| 1,194,153 | |
| 1,239,043 | |
Total | | | $ | 2,044,133 |
| $ | 1,516,408 | |
| | | | | | | | |
| | | September 30, 2021 |
| December 31, 2020 | | ||
Goodwill | | | | | | | | |
TTEC Digital | | | $ | 501,965 |
| $ | 128,211 | |
TTEC Engage | | |
| 234,433 | |
| 235,291 | |
Total | | | $ | 736,398 |
| $ | 363,502 | |
| | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
| 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 September 30, | | Nine Months Ended September 30, | | |||||||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | | |||||||||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | ||
United States |
| $ | 197,664 |
| $ | 166,993 |
| $ | 570,305 |
| $ | 507,819 |
| | $ | 377,211 | | $ | 346,095 |
| $ | 1,108,390 | | $ | 936,079 | |
Philippines |
|
| 86,938 |
|
| 90,692 |
|
| 258,360 |
|
| 259,898 |
| |
| 100,531 | |
| 82,147 | |
| 305,255 | |
| 252,520 | |
Latin America |
|
| 31,361 |
|
| 30,832 |
|
| 96,301 |
|
| 90,154 |
| |
| 28,737 | |
| 23,550 | |
| 85,529 | |
| 72,002 | |
Europe / Middle East / Africa | | | 28,891 | |
| 20,772 | |
| 82,447 | |
| 55,077 | | |||||||||||||
Asia Pacific / India | |
| 16,989 | |
| 14,483 | |
| 49,560 | |
| 43,377 | | |||||||||||||
Canada |
|
| 18,937 |
|
| 891 |
|
| 56,035 |
|
| 3,020 |
| |
| 14,375 | |
| 5,933 | |
| 29,566 | |
| 19,219 | |
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 |
| | $ | 566,734 |
| $ | 492,980 | | $ | 1,660,747 | | $ | 1,378,274 | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| | | | | | | | | | | | |
14
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(4)SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS
The Company had no clients that contributed in excess of 10% of total revenue for the nine months ended September 30, 2017. The Company had one client that contributed in excess of 10% of total revenue for the nine months ended September 30, 2016. This2021; this client operates in the communicationsfinancial services industry and is included in the CMSTTEC Engage segment. This client contributed 9.5%13.3% and 10.4%11.8% of total revenue for the nine months ended September 30, 20172021 and 2016,2020, respectively. 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 accountscredit 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 30, 2017.2021.
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 with 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.
15
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 September 30, | | Nine Months Ended September 30, |
| ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
Balance, beginning of period | | $ | 5,940 | | $ | 5,795 | | $ | 5,067 | | $ | 5,452 | |
Provision for credit losses | |
| (189) | |
| 44 | |
| (34) | | | 563 | |
Uncollectible receivables written-off | |
| 302 | |
| (806) | |
| 41 | | | (939) | |
Effect of foreign currency | | | (7) | | | 24 | | | (16) | | | (19) | |
Acquisition | |
| — | |
| — | |
| 988 | | | — | |
Balance, end of period | | $ | 6,046 | | $ | 5,057 | | $ | 6,046 | | $ | 5,057 | |
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 September 30, 2021 and December 31, 2020, TTEC had approximately $2.7 million in pre-petition accounts receivables outstanding 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).
Accounts Receivable Sales Agreement
The Company is party to 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 Flow.
As of September 30, 2021, the Company had factored $74.5 million of accounts receivable; under the Agreement discounts on these receivables were not material during the quarter. As of September 30, 2021, the Company had collected $19.0 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 September 30, 2021 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 | | September 30, |
| ||||
| | 2020 | | Adjustments | | Impairments | | Currency | | 2021 |
| |||||
| | | | | | | | | | | | | | | | |
TTEC Digital | | $ | 128,211 | | $ | 375,679 | | $ | — | | $ | (1,925) | | $ | 501,965 | |
TTEC Engage | |
| 235,291 | |
| — | | | — | | | (858) | |
| 234,433 | |
Total | | $ | 363,502 | | $ | 375,679 | | $ | — | | $ | (2,783) | | $ | 736,398 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
16
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 30, 2017,2021, the Company assessed whether any such indicators of impairment existed and concluded there were none.
During the quarter ended September 30, 2016, 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, estimation of the long-term growth rates for the businesses, the useful lives over which the cash flows will occur and determination of appropriate discount rates (based in part 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.
15
CSS – component held-for-sale
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 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, the Company recorded impairment expense of $3.3 million in the three months ended September 30, 2016 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 of the CTS segment an interim impairment analysis was completed during 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 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 specific to the trade name of 19.0%, 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 $0.4 million, the Company recorded 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).
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
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 30, 2017,2021, 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 months ended September 30, 20172021 and 20162020 (in thousands and net of tax):
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
| | 2021 |
| 2020 |
| 2021 |
| 2020 | | ||||
| | | | | | | | | | | | | |
Aggregate unrealized net gain/(loss) at beginning of period | | $ | 5,877 | | $ | 163 | | $ | 8,431 | | $ | 4,182 | |
Add: Net gain/(loss) from change in fair value of cash flow hedges | | | (6,850) | | | 3,420 | | | (11,817) | | | (767) | |
Less: Net (gain)/loss reclassified to earnings from effective hedges | | | 700 | | | 515 | | | 3,113 | | | 683 | |
Aggregate unrealized net gain/(loss) at end of period | | $ | (273) | | $ | 4,098 | | $ | (273) | | $ | 4,098 | |
16
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 30, 20172021 and December 31, 20162020 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts.
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Local |
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Currency |
| U.S. Dollar |
|
| % Maturing |
|
| Contracts |
| |||||||||||||
|
| Notional |
| Notional |
|
| in the next |
|
| Maturing |
| |||||||||||||
As of September 30, 2017 |
| Amount |
| Amount |
|
| 12 months |
|
| Through |
| |||||||||||||
| | | | | | | | | | | | | ||||||||||||
|
| Local |
| | |
| | |
| | |
| ||||||||||||
| | Currency | | U.S. Dollar | | | % Maturing | | | Contracts |
| |||||||||||||
| | Notional | | Notional | | | in the next | | | Maturing |
| |||||||||||||
As of September 30, 2021 | | Amount | | Amount | | | 12 months | | | Through |
| |||||||||||||
Canadian Dollar |
| 4,500 | | $ | 3,533 | | | 100.0 | % | | June 2022 | | ||||||||||||
Philippine Peso |
| 10,490,000 |
|
| 218,413 | (1) |
| 53.2 | % |
| August 2021 |
|
| 7,841,000 | |
| 152,318 | (1) | | 52.8 | % | | September 2024 | |
Mexican Peso |
| 1,774,000 |
|
| 104,652 |
|
| 37.2 | % |
| May 2021 |
|
| 1,313,500 | |
| 58,641 | | | 42.9 | % | | December 2024 | |
|
|
|
| $ | 323,065 |
|
|
|
|
|
|
| ||||||||||||
| | | | $ | 214,492 | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | | |
|
| Local |
| | |
| | |
| | | |
| | Currency | | U.S. Dollar | | | | | |
| | |
| | Notional | | Notional |
| |
|
| | | | |
As of December 31, 2020 | | Amount | | Amount |
| | | | | | | |
Canadian Dollar |
| 2,450 | | $ | 1,853 | | | | | | | |
Philippine Peso |
| 6,725,000 | |
| 130,468 | (1) | | | | | | |
Mexican Peso |
| 1,159,500 | |
| 52,398 | | | | | | | |
| | | | $ | 184,719 | | | | | | | |
| | | | | | | | | | | | |
(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 30, |
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:
|
| |||||||||||
|
|
|
|
| ||||||||
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
| |||||
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 30, 20172021 and December 31, 20162020 the total notional amounts of the Company’s forward contracts used as fair value hedges were $167.1$28.3 million and $227.8$35.5 million, respectively.
17
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Derivative Valuation and Settlements
The Company’s derivatives as of September 30, 20172021 and December 31, 20162020 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| September 30, 2017 |
| ||||||||||||||
|
| Designated |
| Not Designated |
| ||||||||||||
|
| as Hedging |
| as Hedging |
| ||||||||||||
| | | | | | | | ||||||||||
| | September 30, 2021 |
| ||||||||||||||
| | 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 |
| | $ | 2,481 | | $ | 59 | |
Other long-term assets |
|
| 594 |
|
| — |
|
| — |
| |
| 678 | |
| — | |
Other current liabilities |
|
| (17,071) |
|
| — |
|
| (447) |
| |
| (1,585) | |
| (209) | |
Other long-term liabilities |
|
| (13,051) |
|
| — |
|
| — |
| |
| (1,943) | |
| — | |
Total fair value of derivatives, net |
| $ | (29,473) |
| $ | — |
| $ | (92) |
| | $ | (369) | | $ | (150) | |
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2016 |
| |||||||
|
| Designated |
| Not Designated |
| |||||
|
| as Hedging |
| as Hedging |
| |||||
Designation: |
| Instruments |
| Instruments |
| |||||
|
| Foreign |
| Interest |
| Foreign |
| |||
Derivative contract type: |
| Exchange |
| Rate |
| Exchange |
| |||
Derivative classification: |
| Cash Flow |
| Cash Flow |
| Fair Value |
| |||
|
|
|
|
|
|
|
|
|
|
|
Fair value and location of derivative in the Consolidated Balance Sheet: |
|
|
|
|
|
|
|
|
|
|
Prepaids and other current assets |
| $ | 1,178 |
| $ | — |
| $ | 1,606 |
|
Other long-term assets |
|
| — |
|
| — |
|
| — |
|
Other current liabilities |
|
| (23,503) |
|
| (147) |
|
| (866) |
|
Other long-term liabilities |
|
| (31,714) |
|
| — |
|
| — |
|
Total fair value of derivatives, net |
| $ | (54,039) |
| $ | (147) |
| $ | 740 |
|
18
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
| | | | | | | |
| | December 31, 2020 |
| ||||
| | Designated | Not Designated |
| |||
| | as Hedging | as Hedging | | |||
Designation: | | Instruments | Instruments |
| |||
|
| Foreign |
| Foreign |
| ||
Derivative contract type: | | Exchange | | Exchange |
| ||
Derivative classification: | | Cash Flow | | Fair Value | | ||
| | | | | | | |
Fair value and location of derivative in the Consolidated Balance Sheet: | | | | | | | |
Prepaids and other current assets | | $ | 6,939 | | $ | 103 | |
Other long-term assets | |
| 4,528 | |
| — | |
Other current liabilities | |
| (73) | |
| (118) | |
Other long-term liabilities | |
| (4) | |
| — | |
Total fair value of derivatives, net | | $ | 11,390 | | $ | (15) | |
The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 20172021 and 20162020 were as follows (in thousands):
| | | | | | | | |||||||||||||
| | Three Months Ended September 30, |
| |||||||||||||||||
| | 2021 | | 2020 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| 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) |
| | $ | 700 | | $ | 515 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| | | | | | | | |||||||||||||
Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion: |
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
Revenue |
| $ | (5,812) |
| $ | — |
| $ | (7,103) |
| $ | — |
| | $ | 947 | | $ | 706 | |
Interest expense |
|
| — |
|
| — |
|
| — |
|
| (104) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| Three Months Ended September 30, |
| |||||||||||||||||
| | | | | | | | |||||||||||||
| | Three Months Ended September 30, |
| |||||||||||||||||
| | 2021 | | 2020 |
| |||||||||||||||
|
| 2017 |
| 2016 |
| |||||||||||||||
Designation: |
| Not Designated as |
| Not Designated as |
|
| Not Designated as Hedging Instruments | | ||||||||||||
Derivative contract type: |
| Foreign Exchange |
| Foreign Exchange |
|
| Foreign Exchange | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Derivative classification: |
| Forward Contracts |
| Fair Value |
| Forward Contracts |
| Fair Value |
|
| 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) |
|
| $ | (80) |
| $ | 305 | |
19
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 20172021 and 20162020 were as follows (in thousands):
| | | | | | | | |||||||||||||
| | Nine Months Ended September 30, | | |||||||||||||||||
| | 2021 | | 2020 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| Nine 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 |
| $ | (10,625) |
| $ | (69) |
| $ | (10,939) |
| $ | (252) |
| | $ | 3,113 | | $ | 683 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| | | | | | | | |||||||||||||
Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion: |
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
Revenue |
| $ | (17,709) |
| $ | — |
| $ | (18,860) |
| $ | — |
| | $ | 4,207 | | $ | 936 | |
Interest expense |
|
| — |
|
| (115) |
|
| — |
|
| (435) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Nine Months Ended September 30, |
| |||||||||||||||||||
| | | | | | | | |||||||||||||||
| | Nine Months Ended September 30, | | |||||||||||||||||||
| | 2021 | | 2020 | | |||||||||||||||||
|
| 2017 |
| 2016 |
| |||||||||||||||||
Designation: |
| Not Designated as |
| Not Designated as |
|
| Not Designated as Hedging Instruments | | ||||||||||||||
Derivative contract type: |
| Foreign Exchange |
| Foreign Exchange |
|
| Foreign Exchange | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Derivative classification: |
| Forward Contracts |
| Fair Value |
| Forward Contracts |
| Fair Value |
|
| 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 |
| $ | — |
| $ | (1,545) |
| $ | — |
| $ | (3,616) |
|
| $ | (42) |
| $ | (38) | |
(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.
20
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following presents information as of September 30, 20172021 and December 31, 20162020 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.
20
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
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 30, 2017,2021, the investment in CaféX Communication, Inc., which consistsconsisted of the Company’s first quarter 2015 $9.0 million investment, the fourth quarter 2016 $3.2 million investment and the first quarter 2017 $1.1total $15.6 million investment, is recorded at $13.3 million which approximates fair value.fully impaired to zero.
Debt - The Company’s debt consists primarily of the Company’s Credit Agreement,Facility, which permits floating-rate borrowings based upon the current Prime Rate or LIBOR plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement). As of September 30, 20172021 and December 31, 2016,2020, the Company had $255.0$805.0 million and $217.3$385.0 million, respectively, of borrowings outstanding under the Credit Agreement.Facility. During the third quarter of 20172021 outstanding borrowings accrued interest at an average rate of 2.3%1.3% 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 30, 2017,2021, 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 30, 20172021 and December 31, 20162020 (in thousands):
As of September 30, 20172021
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| 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) |
| | $ | 0 | | $ | (369) | | $ | 0 | | $ | (369) | |
Interest rate swaps |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||||||||||
Fair value hedges |
|
| — |
|
| (92) |
|
| — |
|
| (92) |
| |
| 0 | |
| (150) | |
| 0 | |
| (150) | |
Total net derivative asset (liability) |
| $ | — |
| $ | (29,565) |
| $ | — |
| $ | (29,565) |
| | $ | 0 | | $ | (519) | | $ | 0 | | $ | (519) | |
21
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of December 31, 20162020
| | | | | | | | | | | | | |
| | 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 | | $ | 0 | | $ | 11,390 | | $ | 0 | | $ | 11,390 | |
Fair value hedges | |
| 0 | |
| (15) | |
| 0 | |
| (15) | |
Total net derivative asset (liability) | | $ | 0 | | $ | 11,375 | | $ | 0 | | $ | 11,375 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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) |
|
Interest rate swaps |
|
| — |
|
| (147) |
|
| — |
|
| (147) |
|
Fair value hedges |
|
| — |
|
| 740 |
|
| — |
|
| 740 |
|
Total net derivative asset (liability) |
| $ | — |
| $ | (53,446) |
| $ | — |
| $ | (53,446) |
|
21
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following is a summary of the Company’s fair value measurements as of September 30, 20172021 and December 31, 20162020 (in thousands):
As of September 30, 20172021
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| 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 |
| $ | — |
| $ | — |
| $ | — |
| | $ | 0 | | $ | 0 | | $ | 0 | |
Total assets |
| $ | — |
| $ | — |
| $ | — |
| | $ | 0 | | $ | 0 | | $ | 0 | |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| | | | | | | | | | | ||||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
| | | | | | | | | | |
Deferred compensation plan liability |
| $ | — |
| $ | (12,624) |
| $ | — |
| | $ | 0 | | $ | (28,221) | | $ | 0 | |
Derivative instruments, net |
|
| — |
|
| (29,565) |
|
| — |
| | | 0 | | | (519) | | | 0 | |
Contingent consideration |
|
| — |
|
| — |
|
| (1,178) |
| |
| 0 | |
| 0 | |
| (9,478) | |
Total liabilities |
| $ | — |
| $ | (42,189) |
| $ | (1,178) |
| | $ | 0 | | $ | (28,740) | | $ | (9,478) | |
| | | | | | | | | | | ||||||||||
Redeemable noncontrolling interest | | $ | 0 | | $ | 0 | | $ | (55,194) | |
As of December 31, 20162020
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| 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 |
| $ | — |
| $ | — |
| $ | — |
| | $ | — | | $ | 11,375 | | $ | — | |
Total assets |
| $ | — |
| $ | — |
| $ | — |
| | $ | — | | $ | 11,375 | | $ | — | |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| | | | | | | | | | | ||||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
| | | | | | | | | | |
Deferred compensation plan liability |
| $ | — |
| $ | (10,841) |
| $ | — |
| | $ | — | | $ | (23,858) | | $ | — | |
Derivative instruments, net |
|
| — |
|
| (53,446) |
|
| — |
| |
| — | |
| — | |
| — | |
Contingent consideration |
|
| — |
|
| — |
|
| (1,808) |
| |
| — | |
| — | |
| (18,032) | |
Total liabilities |
| $ | — |
| $ | (64,287) |
| $ | (1,808) |
| | $ | — | | $ | (23,858) | | $ | (18,032) | |
| | | | | | | | | | | ||||||||||
Redeemable noncontrolling interest | | $ | — | | $ | — | | $ | (52,976) | |
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.
22
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
Contingent Consideration — - The Company recorded contingent consideration related to the acquisitions of rogenSiVF US and Atelka. TheseVF ASEAN. The contingent payables were recognized at fair valuepayable for VF US was calculated using a discounted cash flow approach andMonte Carlo simulation including a discount rate of 4.6% and 0%, respectively.23.1%. The contingent payable for VF ASEAN was calculated using a Monte Carlo simulation including a discount rates vary dependent on the specific risksrate of each acquisition including the country of operation, the nature of services and complexity of the acquired business, and other similar factors. These18.4%. The measurements were based on significant inputs not observable in the market. The Company recordedwill record interest expense each periodquarter using the effective interest method until the future value of these contingent payables reached theirpayments reaches the expected total future value. Interest expense related
During the first, second and fourth quarters of 2020, the Company recorded fair value adjustments to allthe contingent consideration associated with the acquisition of FCR LLC based on decreased estimates of EBITDA which caused the estimated payable to decrease. Accordingly, a $3.3 million decrease, a $1.1 million decrease and a $1.8 million decrease to the payable were recorded contingent payables isas of March 31, 2020, June 30, 2020 and December 31, 2020, respectively, and were included in Interest expenseOther income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).
The Company recorded As of December 31, 2020, the final calculated contingent consideration related to a revenue servicing agreement with Welltok infor FCR was zero.
During the fourth quarter of 2016, in which a maximum2020, the first quarter of $1.25 million will be paid over eight quarters2021 and the second quarter of 2021, the Company recorded fair value adjustments to the contingent consideration associated with the VF US and VF ASEAN acquisitions based on increased actual results and estimates of EBITDA for 2021 which caused the dollar value of revenue earned bypayables to increase. Accordingly, a combined $4.3 million increase, $0.9 million increase and $0.2 million increase, to the Company. The contingent payable was recognized at fair value of $1.25 millionpayables were recorded as of December 31, 2016.2020, March 31, 2021 and June 30, 2021, respectively, and were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss). As required,of September 30, 2021, the first payment of $435 thousand was completed duringexpected future contingent consideration for the second quarter of 2017. As required, the second payment of $239 thousand was completed during the third quarter of 2017.VF US and VF ASEAN acquisitions is $9.5 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 / | | September 30, |
| |||
| | 2020 | | Acquisitions | | Payments | | Adjustments | | 2021 |
| |||||
| | | | | | | | | | | | | | | | |
VF US | | $ | 14,085 | | $ | 0 | | $ | (7,414) | | $ | 719 | | $ | 7,390 | |
VF ASEAN | | | 3,947 | | | 0 | | | (2,186) | | | 327 | | | 2,088 | |
Total | | $ | 18,032 | | $ | 0 | | $ | (9,600) | | $ | 1,046 | | $ | 9,478 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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.
In accordance The Company’s selection of an accounting policy with ASC 740,respect to both the Company recorded a liability duringglobal intangible low taxed foreign income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) rules is to compute the first quarter of 2016 of $1.1 million, inclusive of penalties and interest, for uncertain tax positions. See Note 1 for further information on this item.
Duringrelated taxes in the second quarter of 2016, $0.3 million of liability was released dueperiod the entity becomes subject to the closing of 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.either GILTI or BEAT.
As of September 30, 2017,2021, the Company had $31.0$15.1 million of gross deferred tax assets (after a $10.5$26.3 million valuation allowance) and a net deferred tax assetsasset of $9.5 million (after deferred tax liabilities)liabilities of $30.8 million$5.6 million) related to the U.S.United States and international tax jurisdictions whose recoverability is dependent upon future profitability.
23
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(Unaudited)
In accordance with ASC 740, during the third quarter of 2020 the Company recorded a liability of $1.7 million related to an uncertain tax position.
The effective tax rate for the three and nine months ended September 30, 20172021 was 11.7%30.6% and 15.0%21.9%, respectively. The effective tax rate for the three and nine months ended September 30, 20162020 was (6.9)%25.9% and 15.2%26.5%, respectively.
The Company’s U.S. income tax returns filed for the tax years ending December 31, 20142017 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 Canada for tax years 2009 and 2010, the state of Michigan in the United States for tax years 2012 through 2015, foryear 2017 and 2018, the Philippines branch for tax year 2015, for Belgium for tax years 20142017, 2018 and 2015, and for eLoyalty in2020, Ireland for 2018 through 2020, the state of California for tax year 2016.years 2017 through 2018, New York City for tax years 2017 through 2019, and the state of Florida for tax years 2017 through 2019. 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 thirdrecovery of deferred tax assets in future periods, a valuation allowance is recorded into earnings during the quarter in which the change in judgment occurred. In the first quarter of 2017,2020, changes to the Company closedvaluation allowance were recorded in the audit in Hong Kongamounts of $0.3 million, for 2014 with no changes. Additionally, duringdeferred tax assets that did not meet the “more-likely-than-not” standard. In the second quarter of 2016,2020, changes to the Company successfully closed the auditvaluation allowance were recorded in the U.S.amount of $0.9 million for assets that were redetermined to meet the acquired entity Technology Solutions Group for“more-likely-than-not” standard. In the tax year 2012 (priorfirst and third quarters of 2021, changes to acquisition) with no changes. The Company also closedthe valuation allowance were recorded in the fourth quarteramount of 2016$2.4 million and $6.4 million, respectively, for assets that did not 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 20112021 and 2020.2022. The aggregate effect on income tax expense for the three months ended September 30, 20172021 and 20162020 was approximately $2.8$0.5 million benefit and $2.0$1.1 million benefit, respectively, which had a favorablean impact on diluted net income per share of $0.06$0.01 and $0.04,$0.02, respectively. The aggregate effect on income tax expense for the nine months ended September 30, 20172021 and 20162020 was approximately $8.9$4.2 million and $4.5$2.2 million benefit, respectively, which had a favorablean impact on diluted net income per share of $0.19$0.09 and $0.10,$0.05, respectively.
(9)RESTRUCTURING CHARGES, INTEGRATION CHARGES AND IMPAIRMENT LOSSES
Restructuring Charges
During the three2021 and nine months ended September 30, 2017 and 2016,2020, the Company continued restructuring activities primarily associated with reductions in the Company’s capacity, the workforce in certain locations, and related management in several of theboth segments to better align the capacity and workforce with current business needs.
During the three and nine months ended September 30, 2017, TTEC determined it would close several restructuring activities were completed regarding the purchase of Connextions (see Note 2). Several of the delivery centers thatservicing the Engage segment and the expenses related to early termination fees and cease use lease accruals were recorded. This expense was 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 includedRestructuring charges, net 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.
.
24
TELETECHTTEC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements
(UNAUDITED)(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 months ended September 30, 20172021 and 2016,2020, respectively, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
| | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | | ||||||||
| | September 30, | | September 30, | | | ||||||||
| | 2021 |
| 2020 |
| 2021 |
| 2020 | |
| ||||
| | | | | | | | | | | | |
|
|
Reduction in force | | | | | | | | | | | | | | |
TTEC Digital | | $ | — |
| $ | 347 |
| $ | 858 | | $ | 668 | | |
TTEC Engage | |
| — | |
| — | |
| (58) | |
| 239 | | |
Total | | $ | — |
| $ | 347 |
| $ | 800 | | $ | 907 | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
| | | | | | | | | | | | | | |
Facility exit and other charges | | | | | | | | | | | | | | |
TTEC Digital | | $ | 2 |
| $ | 90 |
| $ | 10 | | $ | 90 | | |
TTEC Engage | |
| 483 | |
| 796 | |
| 1,802 | |
| 1,567 | | |
Total | | $ | 485 |
| $ | 886 |
| $ | 1,812 | | $ | 1,657 | | |
A rollforward of the activity in the Company’s restructuring accrualsaccrual 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, 2020 | | $ | 156 |
| $ | 543 |
| $ | 699 | | ||||||||||
Expense |
|
| 2,384 |
|
| 747 |
|
| 3,131 |
| |
| 884 | | | 1,812 | |
| 2,696 | |
Payments |
|
| (987) |
|
| (841) |
|
| (1,828) |
| |
| (402) | | | (1,934) | |
| (2,336) | |
Change due to foreign currency |
|
| (23) |
|
| — |
|
| (23) |
| | | — | | | 1 | | | 1 | |
Change in estimates |
|
| (730) |
|
| — |
|
| (730) |
| |
| (84) | | | — | |
| (84) | |
Balance as of September 30, 2017 |
| $ | 2,112 |
| $ | 4 |
| $ | 2,116 |
| ||||||||||
Balance as of September 30, 2021 | | $ | 554 |
| $ | 422 |
| $ | 976 | |
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.
IntegrationSeverance Charges
In the normal course of business, the Company will pay severance to terminated employees related to programs that are ending when such employees are no longer needed and cannot be repurposed to a new program.
During the second quarter of 2020, a $3.0 million accrual was recorded with the expense included in Cost of services during the quarter ended June 30, 2020. During the third and fourth quarters of 2020, a total of $1.6 million was paid and a $0.3 million reduction in expense was recorded. During the first, second and third quarters of 2021, a total of $0.5 million was paid and a $0.6 million reduction in expense was recorded. The accrual is expected to be paid or extinguished during the next three months and thus is classified as current liabilities within Other accrued expenses in the Consolidated Balance Sheets.
25
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Impairment Losses
During each of the periods presented, the Company evaluated the 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 nine months ended September 30, 2017, as a result of2021 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 expensesrecognized impairment losses, net related to leasehold improvement assets and right of use lease assets of $(0.3) million and $0.4 million, respectively, across the integrationTTEC Digital and TTEC Engage segments. During the three and nine months ended September 30, 2020 the Company recognized impairment losses, net related to leasehold improvement assets and right of use lease assets of $0.9 million and $1.6 million, respectively, across the IT systemsTTEC Digital and has paid duplicative software costs and facilities expenses for several areas during the transition period.TTEC Engage segments.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(10)COMMITMENTS AND CONTINGENCIES
Credit Facility
On February 11, 2016,March 25, 2021, the Company entered into a FirstFifth Amendment to its June 3, 2013 Amended and Restated Credit Agreement and Amended (the “Credit Agreement”) and Restated Security Agreement originally dated as of June 3, 2013, (collectively, the “Credit Agreement”Facility”) for ato increase the total commitments by $300 million to $1.2 billion by exercising the accordion feature that was included in the senior secured revolving credit facility (the “Credit Facility”) with a syndicate of lenders led by Wells Fargo Bank, National Association.Association, as agent, swingline and fronting lender. The Credit Agreement provides for a secured revolving credit facility thatFacility matures on February 11, 202114, 2024. The $300 million increase is in the form of a term loan, which can be prepaid anytime and will become due February 14, 2024, contemporaneously with an initialthe expiration of the revolving line of credit.
The maximum aggregate commitment of $900.0 million, and an accordion feature of up tounder the Credit Facility is $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 exercisedlenders in an amount equal to the Credit Facility’s accordion feature to increase the total commitment underunused portion of the Credit Facility multiplied by a rate per annum as determined by reference to $1.2 billion. All other material termsthe 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”);LIBOR; plus in each case a margin of 0% to 0.75%0.875% based on the Company’s net leverage ratio. Eurodollar loans bear interest at LIBOR plus a margin of 1.0% to 1.75%1.875% 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 payable26
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes 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.Consolidated Financial Statements
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.(Unaudited)
The Company primarily utilizes its Credit AgreementFacility to fund working capital, general operations, stock repurchases, dividends and other strategic activities, such as the acquisitions described in Note 2. As of September 30, 20172021 and December 31, 2016,2020, the Company had borrowings of $255.0$805.0 million and $217.3$385.0 million, respectively, under its Credit Agreement,Facility, and its average daily utilization was $474.3$747.9 million and $359.5$597.9 million for the nine months ended September 30, 20172021 and 2016,2020, respectively. The Company had increased borrowings under the Credit Facility from late March 2020 through late September 2020, related to precautionary measures taken to proactively strengthen the Company’s cash reserves and financial flexibility in response to COVID-19 related uncertainties. As of September 30, 2020, those additional borrowings had been repaid. During early April 2021, the Company increased borrowings by approximately $500 million in connection with the acquisition of Avtex (see Note 2). Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $390.0$390 million as of September 30, 2017.2021. As of September 30, 2017,2021, the Company was in compliance with all covenants and conditions under its Credit Agreement.
Letters of Credit
As of September 30, 2017,2021, outstanding letters of credit under the Credit AgreementFacility totaled $3.9$2.6 million and primarily guaranteed workers’ compensation and other insurance related obligations. As of September 30, 2017,2021, 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.
26
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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
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 that 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.
27
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
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. Lease 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 nine months ended September 30, 2021 and 2020 are as follows (in thousands):
| | | | | | | | | |
| | Location in Statements of | | Three Months Ended September 30, | | ||||
Description | | Comprehensive Income (Loss) |
| 2021 |
| 2020 |
| ||
Amortization of ROU assets - finance leases | | Depreciation and amortization | | $ | 1,617 | | $ | 1,933 | |
Interest on lease liabilities - finance leases | | Interest expense | | | 32 | | | 49 |
|
Operating lease cost (cost resulting from lease payments) | | Cost of services | |
| 9,511 | |
| 11,446 | |
Operating lease cost (cost resulting from lease payments) | | Selling, general and administrative | | | 730 | | | 530 | |
Operating lease cost (cost resulting from lease payments) | | Restructuring | | | 428 | | | 261 | |
Operating lease cost | | Impairment | | | 141 | | | 948 | |
Operating lease cost (cost resulting from lease payments) | | Other income (expense), net | | | 310 | | | 310 | |
Short-term lease cost | | Cost of services | |
| 1,186 | |
| 1,029 | |
Variable lease cost (cost excluded from lease payments) | | Cost of services | | | 306 | | | (1) | |
Less: Sublease income | | Selling, general and administrative | | | (183) | | | (220) | |
Less: Sublease income | | Other income (expense), net | |
| (636) | |
| (676) | |
Total lease cost | | | | $ | 13,442 |
| $ | 15,609 | |
| | | | | | | | | |
| | Location in Statements of | | Nine Months Ended September 30, | | ||||
Description | | Comprehensive Income (Loss) |
| 2021 |
| 2020 | | ||
Amortization of ROU assets - finance leases | | Depreciation and amortization | | $ | 5,131 | | $ | 5,777 | |
Interest on lease liabilities - finance leases | | Interest expense | | | 108 | | | 157 | |
Operating lease cost (cost resulting from lease payments) | | Cost of services | |
| 30,051 | |
| 35,126 | |
Operating lease cost (cost resulting from lease payments) | | Selling, general and administrative | | | 2,057 | | | 1,493 | |
Operating lease cost (cost resulting from lease payments) | | Restructuring | | | 1,069 | | | 697 | |
Operating lease cost | | Impairment | | | 2,061 | | | 1,456 | |
Operating lease cost (cost resulting from lease payments) | | Other income (expense), net | | | 930 | | | 839 | |
Short-term lease cost | | Cost of services | |
| 3,153 | |
| 2,909 | |
Variable lease cost (cost excluded from lease payments) | | Cost of services | | | 943 | | | (285) | |
Less: Sublease income | | Selling, general and administrative | | | (625) | | | (614) | |
Less: Sublease income | | Other income (expense), net | |
| (1,948) | |
| (1,788) | |
Total lease cost | | | | $ | 42,930 |
| $ | 45,767 | |
28
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Other supplementary information for the three and nine months ended September 30, 2021 and 2020 are as follows (dollar values in thousands):
| | | | | | | |
| | Three Months Ended September 30, | | ||||
|
| 2021 |
| 2020 |
| ||
Finance lease - operating cash flows | | $ | 10 | | $ | 17 | |
Finance lease - financing cash flows | | $ | 1,709 | | $ | 2,143 | |
Operating lease - operating cash flows (fixed payments) | | $ | 12,777 | | $ | 13,824 | |
New ROU assets - operating leases | | $ | 682 | | $ | - | |
Modified ROU assets - operating leases | | $ | 2,655 | | $ | 111 | |
New ROU assets - finance leases | | $ | — | | $ | 1,464 | |
| | | | | | | |
| | Nine Months Ended September 30, | | ||||
|
| 2021 |
| 2020 |
| ||
Finance lease - operating cash flows | | $ | 36 | | $ | 53 | |
Finance lease - financing cash flows | | $ | 5,097 | | $ | 6,010 | |
Operating lease - operating cash flows (fixed payments) | | $ | 39,451 | | $ | 41,241 | |
New ROU assets - operating leases | | $ | 8,499 | | $ | 6,795 | |
Modified ROU assets - operating leases | | $ | 2,837 | | $ | 6,332 | |
New ROU assets - finance leases | | $ | 583 | | $ | 2,292 | |
| | | | | | | |
| | September 30, 2021 | | December 31, 2020 | | ||
Weighted average remaining lease term - finance leases | | | 2.24 years | | | 2.46 years | |
Weighted average remaining lease term - operating leases | | | 3.40 years | | | 3.73 years | |
Weighted average discount rate - finance leases | | | 1.85% | | | 1.64% | |
Weighted average discount rate - operating leases | | | 6.56% | | | 6.95% | |
Operating and financing lease right-of-use assets and lease liabilities within the Consolidated Balance Sheet as of September 30, 2021 and December 31, 2020 are as follows (in thousands):
| | | | | | | | |
Description | Location in Balance Sheet | | September 30, 2021 | | December 31, 2020 |
| ||
Assets | | | | | | | | |
Operating lease assets | Operating lease assets | | $ | 97,866 | | $ | 120,820 | |
Finance lease assets | Property, plant and equipment, net | |
| 8,103 | |
| 12,659 | |
Total leased assets | | | $ | 105,969 | | $ | 133,479 | |
| | | | | | | | |
Liabilities | | | | | | | | |
Current | | | | | | | | |
Operating | Current operating lease liabilities | | $ | 42,643 | | $ | 43,651 | |
Finance | Other current liabilities | | | 3,669 | | | 6,193 | |
Non-current | | | | | | | | |
Operating | Non-current operating lease liabilities | | | 73,172 | | | 98,277 | |
Finance | Other long-term liabilities | | | 2,999 | | | 4,763 | |
Total lease liabilities | | | $ | 122,483 | | $ | 152,884 | |
29
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The future minimum operating lease and finance lease payments required under non-cancelable leases as of September 30, 2021 and December 31, 2020 are as follows (in thousands):
September 30, 2021
| | | | | | | | | | |
|
| Operating |
| Sub-lease |
| Finance |
| |||
| | Leases | | Income | | Leases |
| |||
Year 1 | | $ | 48,051 | | $ | (3,459) | | $ | 3,700 | |
Year 2 | |
| 38,078 | |
| (3,295) | |
| 1,997 | |
Year 3 | |
| 21,233 | |
| (2,852) | |
| 1,000 | |
Year 4 | |
| 11,934 | |
| (2,940) | |
| 102 | |
Year 5 | |
| 3,829 | |
| (1,225) | |
| — | |
Thereafter | |
| 7,082 | |
| — | |
| — | |
Total minimum lease payments | | $ | 130,207 | | $ | (13,771) | | $ | 6,799 | |
Less imputed interest | | | (14,392) | | | | | | (131) | |
Total lease liability | | $ | 115,815 | | | | | $ | 6,668 | |
December 31, 2020
| | | | | | | | | | |
|
| Operating |
| Sub-lease |
| Finance |
| |||
| | Leases | | Income | | Leases |
| |||
Year 1 | | $ | 51,120 | | $ | (3,500) | | $ | 6,237 | |
Year 2 | |
| 46,913 | |
| (3,489) | |
| 2,740 | |
Year 3 | |
| 31,085 | |
| (3,123) | |
| 1,631 | |
Year 4 | |
| 17,338 | |
| (2,905) | |
| 579 | |
Year 5 | |
| 8,288 | |
| (2,940) | |
| — | |
Thereafter | |
| 8,397 | |
| (490) | |
| — | |
Total minimum lease payments | | $ | 163,141 | | $ | (16,447) | | $ | 11,187 | |
Less imputed interest | | | (21,213) | | | | | | (231) | |
Total lease liability | | $ | 141,928 | | | | | $ | 10,956 | |
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 ended on 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 September 30, 2021 and December 31, 2020 are as follows (in thousands):
| | | | | | | | |
| | | September 30, 2021 |
| December 31, 2020 | | ||
| | | | | | | | |
Deferred revenue | | | $ | 21,158 |
| $ | 17,434 | |
Deferred compensation plan | | | | 28,221 | | | 23,858 | |
Deferred social security taxes | | | | 16,983 | | | 15,986 | |
Other | | |
| 30,557 | |
| 38,907 | |
Total | | | $ | 96,919 |
| $ | 96,185 | |
30
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(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 |
| |||||||||
| | | | | | | | |||||||
| | Nine Months Ended September 30, |
| |||||||||||
|
| 2021 |
| 2020 |
| |||||||||
Noncontrolling interest, January 1 |
| $ | 6,981 |
| $ | 7,201 |
|
| $ | 13,060 |
| $ | 13,186 | |
Net income attributable to noncontrolling interest |
|
| 2,828 |
|
| 2,804 |
| |
| 9,329 | |
| 6,381 | |
Dividends distributed to noncontrolling interest |
|
| (2,745) |
|
| (2,745) |
| |
| (6,390) | |
| (6,740) | |
Foreign currency translation adjustments |
|
| 325 |
|
| (70) |
| |
| (78) | |
| (65) | |
Equity-based compensation expense |
|
| (291) |
|
| 96 |
| |||||||
Other |
|
| — |
|
| 10 |
| |||||||
Noncontrolling interest, September 30 |
| $ | 7,098 |
| $ | 7,296 |
|
| $ | 15,921 |
| $ | 12,762 | |
(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 |
| $ | — |
| $ | — |
|
27
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(13)(14)ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents changes in the accumulated balance for each component of otherOther 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, 2019 | | $ | (107,480) |
| $ | 4,182 |
| $ | (2,936) |
| $ | (106,234) | |
| | | | | | | | | | | | | |
Other comprehensive income (loss) before reclassifications | |
| (9,709) | |
| (767) | |
| 772 | |
| (9,704) | |
Amounts reclassified from accumulated other comprehensive income (loss) | |
| 19,619 | |
| 683 | |
| (396) | |
| 19,906 | |
Net current period other comprehensive income (loss) | |
| 9,910 | |
| (84) | |
| 376 | |
| 10,202 | |
| | | | | | | | | | | | | |
Accumulated other comprehensive income (loss) at September 30, 2020 | | $ | (97,570) |
| $ | 4,098 |
| $ | (2,560) |
| $ | (96,032) | |
| | | | | | | | | | | | | |
Accumulated other comprehensive income (loss) at December 31, 2020 | | $ | (78,139) |
| $ | 8,431 |
| $ | (2,448) |
| $ | (72,156) | |
| | | | | | | | | | | | | |
Other comprehensive income (loss) before reclassifications | |
| (17,598) | | | (11,817) | | | 251 | |
| (29,164) | |
Amounts reclassified from accumulated other comprehensive income (loss) | |
| — | | | 3,113 | | | (216) | |
| 2,897 | |
Net current period other comprehensive income (loss) | |
| (17,598) | |
| (8,704) | |
| 35 | |
| (26,267) | |
| | | | | | | | | | | | | |
Accumulated other comprehensive income (loss) at September 30, 2021 | | $ | (95,737) |
| $ | (273) |
| $ | (2,413) |
| $ | (98,423) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications |
|
| (7,999) |
|
| 9,519 |
|
| 2,330 |
|
| 3,850 |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| — |
|
| (11,189) |
|
| (1,128) |
|
| (12,317) |
|
Net current period other comprehensive income (loss) |
|
| (7,999) |
|
| (1,670) |
|
| 1,202 |
|
| (8,467) |
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications |
|
| 8,089 |
|
| 25,290 |
|
| 738 |
|
| 34,117 |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| — |
|
| (10,694) |
|
| (352) |
|
| (11,046) |
|
Net current period other comprehensive income (loss) |
|
| 8,089 |
|
| 14,596 |
|
| 386 |
|
| 23,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) at September 30, 2017 |
| $ | (83,919) |
| $ | (17,797) |
| $ | (2,177) |
| $ | (103,893) |
|
31
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents the classification and amount of the reclassifications from Accumulated other comprehensive income (loss) to the statementStatement of comprehensive income (loss)Comprehensive Income (Loss) (in thousands):
| | | | | | | | | |
| | | | | | | | Statement of | |
| | For the Three Months Ended September 30, | | Comprehensive Income | | ||||
|
| 2021 |
| 2020 |
| (Loss) Classification | | ||
| | | | | | | | | |
Derivative valuation | | | | | | | | | |
Gain on foreign currency forward exchange contracts | | $ | 947 | | $ | 706 |
| Revenue | |
Tax effect | |
| (247) | |
| (191) |
| Provision for income taxes | |
| | $ | 700 | | $ | 515 |
| Net income (loss) | |
| | | | | | | | | |
Other | | | | | | | | | |
Actuarial loss on defined benefit plan | | $ | (80) | | $ | (147) |
| Cost of services | |
Tax effect | |
| 8 | |
| 15 |
| Provision for income taxes | |
| | $ | (72) | | $ | (132) |
| Net income (loss) | |
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| Statement of |
| |||||||||
|
| For the Three Months Ended September 30, |
| Comprehensive Income |
| |||||||||||||
|
| 2017 |
| 2016 |
| (Loss) Classification |
| |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
| | | | | | | | | | |||||||||
| | | | | | | | Statement of |
| |||||||||
| | For the Nine Months Ended September 30, | | Comprehensive Income |
| |||||||||||||
|
| 2021 |
| 2020 |
| (Loss) Classification |
| |||||||||||
| | | | | | | | | | |||||||||
Derivative valuation |
|
|
|
|
|
|
|
|
| | | | | | | | | |
Loss on foreign currency forwards |
| $ | (5,812) |
| $ | (7,103) |
| Revenue |
| |||||||||
Loss on interest rate swaps |
|
| — |
|
| (104) |
| Interest expense |
| |||||||||
Gain on foreign currency forward exchange contracts | | $ | 4,207 | | $ | 936 |
| Revenue | | |||||||||
Tax effect |
|
| 2,325 |
|
| 3,028 |
| Provision for income taxes |
| |
| (1,094) | |
| (253) |
| Provision for income taxes | |
|
| $ | (3,487) |
| $ | (4,179) |
| Net income (loss) |
| |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
| | $ | 3,113 | | $ | 683 |
| Net income (loss) | | |||||||||
| | | | | | | | | | |||||||||
Other |
|
|
|
|
|
|
|
|
| | | | | | | | | |
Actuarial loss on defined benefit plan |
| $ | (130) |
| $ | (804) |
| Cost of services |
| | $ | (240) | | $ | (441) |
| Cost of services | |
Tax effect |
|
| 13 |
|
| 80 |
| Provision for income taxes |
| |
| 24 | |
| 45 |
| Provision for income taxes | |
|
| $ | (117) |
| $ | (724) |
| Net income (loss) |
| |||||||||
| | $ | (216) | | $ | (396) |
| Net income (loss) | |
28
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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) |
|
(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 September 30, | | Nine Months Ended September 30, | ||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| | | | | | | | |
Shares used in basic earnings per share calculation | | 46,984 |
| 46,732 |
| 46,857 |
| 46,617 |
Effect of dilutive securities: | | | | | | | | |
Restricted stock units | | 364 |
| 299 |
| 515 |
| 268 |
Performance-based restricted stock units | | — |
| — |
| — |
| — |
Total effects of dilutive securities | | 364 |
| 299 |
| 515 |
| 268 |
Shares used in dilutive earnings per share calculation | | 47,348 |
| 47,031 |
| 47,372 |
| 46,885 |
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||
|
| 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 |
32
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
For the three months ended September 30, 20172021 and 2016, options to purchase 0.0 million and 0.1 million shares of common stock, respectively,2020, 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 unitsRestricted Stock Units (“RSUs”) of 0.0 million4 thousand and 0.1 million,0, respectively, outstanding which were outstanding, but not included inexcluded from the computation of diluted net income per share because the effect would have been anti-dilutive. For the nine months ended September 30, 20172021 and 2016,2020, there were RSUs of 0.0 million78 thousand and 0.1 million,167 thousand, respectively, outstanding which were outstanding, but not included inexcluded from the computation of diluted net income per share because the effect would have been anti-dilutive.
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 months ended September 30, 20172021 and 2016,2020, the Company recognized total equity-based compensation expense of $4.6 million and $12.0 million and $3.5 million and $8.4 million and $2.7 million and $7.3$9.5 million, respectively. Of thethis total compensation expense, $1.4expenses, $2.0 million and $2.9$4.4 million waswere recognized in Cost of services and $2.1$2.6 million and $5.5$7.6 million waswere recognized in Selling, general and administrative during the three and nine months ended September 30, 2017.2021, respectively. During the three and nine months ended September 30, 2016,2020, the Company recognized compensation expense of $1.0$1.3 million and $2.3$3.4 million in Cost of services and $1.7$2.2 million and $5.0$6.1 million in Selling, general and administrative, respectively.
Restricted Stock Unit Grants
During the nine months ended September 30, 20172021 and 2016,2020, the Company granted 724,951219,883 and 443,875539,697 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$4.1 million and $8.7$10.0 million for the three and nine months ended September 30, 2017,2021, respectively. The Company recognized compensation expense related to RSUs of $2.6$3.1 million and $7.2$8.5 million for the three and nine months ended September 30, 2016,2020, respectively. As of September 30, 2017,2021, there was approximately $25.0$37.3 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 OptionsUnit 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 and 2021. Each fiscal year’s adjusted operating income will determine the award amount. The Company recognized compensation expense related to subsidiary performance optionsPRSUs of zero$0.3 million and $(0.3)$0.8 million, respectively, for the three and nine months ended September 30, 2017, respectively.2021. The option benefitCompany recognized compensation expense related to PRSUs of $0.4 million and $1.1 million, respectively, for 2017 resulted fromthe three and nine months ended September 30, 2020.
During 2020, the Company concludingawarded PRSUs that are subject to service and performance vesting conditions. If defined minimum targets are met, the performance targetsannual value of the subsidiaryPRSUs issued will be between $0.2 million and $2.0 million and vest immediately. If the defined minimum targets are not met, then no shares will be achieved.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. The Company recognized compensation expense related to PRSUs of $0.2 million and $1.2 million, respectively, for the three and nine months ended September 30, 2021.
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
(16)Notes to Consolidated Financial Statements
(Unaudited)
During 2021, the Company awarded 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 $1.2 million and $4.9 million and vest immediately. If the 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 year 2023. Fiscal year’s 2023 revenue and adjusted operating income will determine the award amount. Expense for these awards will begin at the start of the requisite service period, beginning January 1, 2023.
(17)RELATED PARTY TRANSACTIONS
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 directan indirect 100% beneficial ownership interest in Avion and Airmax. During the nine months ended September 30, 20172021 and 2016,2020, the Company expensed $0.6$0.5 million and $0.7$0.3 million, respectively, to Avion and Airmax for services provided to the Company. There was $114$50 thousand in payments due and outstanding to Avion and Airmax as of September 30, 2017.2021.
During 2014, the Company entered into a vendor contract with Convercent Inc. to provide learning managementMs. Regina M. Paolillo, Chief Financial 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 ExecutiveAdministrative Officer of the Company.Company, is a member of the board of directors of Welltok, Inc., a consumer health SaaS company. Welltok, Inc. is a partner with the Company in a joint venture Welltok TTEC Communications, LLC. During the nine months ended September 30, 20172021 and 2016,2020, the Company paid $55 thousandrecorded revenue of $1.2 million and $75 thousand, respectively.$2.4 million, respectively, in connection with work performed through the joint venture.
During 2015, the Company entered into a contract to purchase software from CaféX, whichMs. Regina M. Paolillo is a company that TeleTech holdsmember of the board of directors of Unisys, a 17.2% equity investment in.global information technology company. During the three and nine months ended September 30, 2017,2021, the Company purchased $0.0recorded revenue of $0.4 million and $0.1 million, respectively, of software from CaféX. See Note 2in connection with services performed for further information regarding this investment.Unisys.
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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 throughoutIn 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. Whenexpressions, 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 isthose 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 but not limited to factors discussed in the “Risk Factors” sectionPart II, Item 1A. Risk Factors of this report and in Item 1A. Risk Factors in our 2016 Annual Report on Form 10-K. The risk10-K for the year ended December 31, 2020. Important factors we wish for youthat could cause our actual results to be aware ofdiffer materially from those indicated in particularthe forward looking statements include, butamong others, the risks related to our business operations and strategy, including the risks related to our strategy execution in a competitive market; our ability to innovate and introduce technologies that are not limitedsufficiently disruptive to the riskallow us to maintain and grow our market share; risks inherent in the volatile and uncertain economic conditions, the fact that a large portionreliability 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 risktechnology systems; risks related to our international footprint, how our foreign currency exchange riskinformation technology infrastructure’s cybersecurity in general, and criminal activity such as ransomware, other malware and data exfiltration or destruction in particular, which can adversely impact our results of operations, the risk of changes in law that impact our business and our ability to comply with all the laws that relate to our operations, the risk related to the reliability of the information infrastructure that we use and our ability toconsistently deliver uninterrupted service to our clients, the risk of not being ableclients; our dependence on third parties for our cloud solutions; risks inherent in our transition to forecast demand for services accurately and the related impact on capacity utilization,a work from home environment; our inabilityability to attract and retain qualified and skilled personnel impact of changing technologies onat a price point that we can afford and our services and solutions, the restrictive covenants contained in our credit facility that may impact our abilityclients 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 topay; our M&A activity, andincluding our ability to identify, acquire and properly integrate acquired businesses in accordance with our strategy,strategy; the risk related to our international operations; the risks related to legal and regulatory impact on our operations, including rapidly changing laws that regulate our and our clients’ business, such as data privacy and data protection laws, regulatory changes impacting our healthcare businesses, financial and public sector specific regulations, our ability to comply with these laws timely and cost effectively; and the cost of wage and hour litigation in the United States; the impact of the COVID-19 pandemic and post-pandemic economic and regulatory realities on our business and our clients’ business; and risks inherent in our equity structure including our controlling shareholder risk, and the volatilityDelaware choice of our stock price that may result in loss of investment. dispute resolution risks.
TheOur forward-looking statements are based on information availablespeak only as of the date that this Form 10-Qreport 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 thesethat our forward-looking statements are reasonable, they depend on many factors outside of our control and we cannot assure youcan provide no assurance that they will turn outprove to be correct.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Executive Summary
TeleTechTTEC Holdings, Inc. (“TeleTech”TTEC”, “the Company”, “we”, “our” or “us”) is a leading global provider of technology enabled customer experience services. We help leadingas a service (“CXaaS”) partner for many of the world’s iconic brands, improveFortune 1000 companies, government agencies, and disruptive growth companies. TTEC helps its clients deliver frictionless customer experiences, and operational effectiveness through a unique combination of technological innovation and operational expertise. Our portfolio of solutions includes consulting, technology, operations and analytics to enable a seamless customer experience across every interaction channel and phase 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.
Since our establishment in 1982, we have helped clients strengthen their customer relationships, brand recognition and loyalty through personalized interactions, improve their Net Promoter Score, customer satisfaction and quality assurance, and lower their total cost to serve by simplifyingcombining innovative digital solutions with best-in-class service capabilities to enable and personalizing interactions with their customers. We deliver thought leadership, technologysimplified, consistent and innovation that createseamless customer strategies designed toexperience across channels and phases of the customer lifecycle.
Our CXaaS solutions enhance our clients’ customers experience and help differentiate our clients from their competition; datacompetition.
In the fast expanding direct-to-customer ("DTC") channel where experiences are everything, enterprises must become increasingly more customer-centric, virtualized and digitally enabled to acquire, grow and maintain customers. Our mission is to enable and accelerate our clients' path to virtual and digital transformation. We are focused on improving the experience of our clients' customers by leveraging existing and emerging technologies — cloud, omnichannel, analytics, that personalize interactionsartificial intelligence ("AI"), machine learning ("ML"), robotic process automation ("RPA"), and increasereal-time conversational messaging.
The Company reports its financial information based on two segments: TTEC Digital and TTEC Engage.
● | TTEC Digital provides the CX technology services and platforms to support our clients’ customer interaction delivery infrastructure. The segment designs, builds and operates the omnichannel ecosystem in a cloud, on premise, or hybrid environment, inclusive of fully integrating, orchestrating, and administrating highly scalable, feature-rich CX technology applications. |
● | TTEC Engage provides the CX managed services to support our clients’ end-to-end customer interaction delivery, by providing the essential CX omnichannel and application technologies, human resources, recruiting, training and production, at-home or facility-based delivery infrastructure on a global scale, and engagement processes. This segment provides full-service digital, omnichannel customer engagement, supporting customer care, customer acquisition, growth and retention, and fraud detection and prevention services. |
TTEC Digital and TTEC Engage strategically come together under our unified offering, Humanify® Customer Experience as a Service, which drives measurable customer value; and integration services that connect clients’results for clients through the delivery of personalized, omnichannel experiences. Our Humanify® cloud platform provides a fully integrated ecosystem of CX offerings, including messaging, AI, ML, RPA, analytics, cybersecurity, customer relationship management (“CRM”("CRM") system to a cloud-based collaboration platform, leading to customer interactions that are seamless, knowledge management, journey orchestration and relevant.
traditional voice solutions. Our services are value-oriented, outcome-based, and delivered on a global scale across all of our business segments: Customer Management Services (“CMS”), Customer Growth Services (“CGS”), Customer Technology Services (“CTS”) and Customer Strategy Services (“CSS”). Our integrated customer experience managed servicesend-to-end platform differentiates the Companyus from many competitors by combining design, strategic consulting, best-in-class technology, data analytics, process optimization, system designintegration and integration, operational excellence,excellence. This unified offering is value-oriented, outcome-based and technology solutionsdelivered to large enterprises, governments and services.disruptive growth companies on a global scale.
We have developed tailored expertiseDuring 2021, the TTEC global operating platform delivered onshore, nearshore, and offshore services in 20 countries on six continents -- the automotive, communications, financial services, government, healthcare, logistics, mediaUnited States, Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and entertainment, retail, technology, travelthe United Kingdom with the help of 62,300 consultants, technologists, and transportation industries. We target customer-focused industry leaders in the Global 1000CX professionals.
Our revenue for third quarter 2021 was $566.7 million, approximately $124.1 million, or 21.9% which came from our TTEC Digital segment and serve approximately 300 global clients.$442.6 million, or 78.1%, which came from our TTEC Engage segment.
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To improve our competitive position in a rapidly changing market and stay strategically relevant to our clients, we continue to invest in innovation and service offerings for both mainstream and high growth disruptive businesses, diversifying and strengthening our heritage business process outsourcingcore customer care services of our CMS segment into higher-valuewith consulting, data analytics, digital marketinginsights, and technology-enabled, outcomes-focused services. Of
We also invest to broaden our product and service capabilities, increase our global client base and industry expertise, tailor our geographic footprint to the $359.0 million in revenueneeds of our clients, and further scale our end-to-end integrated solutions platform. To this end we reportedhave been highly acquisitive in the current period, approximately 23%last several years, including an acquisition early in the second quarter of 2021 of a provider of Genesys and Microsoft cloud contact center services, an acquisition in the second half of 2020 of a preferred Amazon Connect cloud contact center service provider, an acquisition in the first quarter of 2020 of an autonomous customer experience and intelligent automation solutions provider and an acquisition in the fourth quarter of 2019 of a provider of customer care, social media community management, content moderation, technical support and business process solutions for rapidly growing businesses in early stages of their lifecycle.
We have extensive expertise in the automotive, communications, financial services, national/federal and state and local government, healthcare, logistics, media and entertainment, e-tail/retail, technology, travel and transportation industries. We serve more than 725 diverse clients globally, including many of the world’s iconic brands, Fortune 1000 companies, government agencies, and disruptive growth companies.
Cybersecurity Incident
On September 12, 2021, TTEC experienced a ransomware incident that temporarily disrupted the Engage business segment’s client support environment. Certain TTEC systems and data became encrypted and certain TTEC data was exfiltrated or $81.7 million camedestroyed. TTEC Digital business segment’s information systems and client environment were not involved in the attack. TTEC activated its incident response and business continuity protocols, notified law enforcement, took all appropriate measures to restore its systems and was able to restore operations for many impacted clients within 72 hours of the start of the incident, and by September 17, 2021, all client facing systems were fully operational. Most clients maintained connectivity, allowing us to restart our services once we restored operations, but some clients opted to suspend our access to their networks as a security precaution until they were satisfied that the incident was contained. As of the date of this disclosure, we have returned to services with all our clients.
We recovered exfiltrated data from the CGS, CTSunauthorized parties, and CSS segments, focused on customer-centric strategy, growth and technology-based services, with the remainder of our revenue coming from the heritage business process outsourcing focused CMS segment.
Our strong balance sheet, cash flows from operations and access to debt and capital markets have historically provided us the financial flexibility to effectively fund our organic growth, capital expenditures, strategic acquisitions and incremental investments. Additionally,while we continue to return capital to our shareholders via an ongoing stock repurchase program and regular semi-annual dividends.monitor the situation, we are not currently aware of evidence that exfiltrated data was publicly released. As of September 30, 2017,the date of this disclosure, data involved in the incident has been analyzed for impact and notice obligations, appropriate regulatory notices have been made, and notices to individuals who may be impacted are in process of being delivered, consistent with the timelines prescribed by relevant jurisdictions.
With support from outside forensic experts, TTEC completed its investigation of root causes and impacts of the cybersecurity incident and is working to harden the security of its information technology environment and is taking measures to move to a ‘zero trust’ environment to protect its systems and its data. TTEC also continues to work on the restoration of certain data and systems destroyed in the incident.
The Company performed appropriate procedures to validate the accuracy and completeness of information involved in its financial reporting, and we have no indication that the accuracy and completeness of any financial information was impacted as a result of the incident.
We do not expect the temporary operational disruptions that occurred due to this incident to have a long-term impact on our cumulative authorized repurchase allowance was $762.3 million,operating results. We will make additional investments in the hardening of our cybersecurity environment and the operational governance of our information technology systems during Q4 2021 and through Q2 2022 but are not yet able to provide a reasonable estimate of the investments to be made. The incident and any failure or perceived failure by us to comply with applicable privacy laws in connection with this incident, could result in government enforcement actions, regulatory investigations, fines and penalties, which we repurchased 46.1 million shares for $735.8 million. Forcould impact our results of operations and expenses associated with the period from September 30, 2017 through October 31, 2017, we did not repurchase any additional shares. The stock repurchase program does not have an expiration date.
incident. Other actual and potential consequences of the incident may include negative publicity, loss of client trust, reputational damage, litigation, contractual claims, financial judgement or settlements in excess of insurance, and disputes with insurance carriers concerning coverage. See, Part II, Item 1A Risk Factors.
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COVID-19 Pandemic
On February 24, 2015,In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. Early in second quarter of 2020, we transitioned approximately 80% of our Boardemployee population to a work from home environment. Those employees who were considered essential and could not operate effectively while remote work in our brick-and-mortar sites, but most continue to work from home. For those sites that continue to stay opened during the pandemic, we have taken extensive measures to protect the health and safety of Directors adopted a dividend policy,our employees, in accordance with the intentrecommendations 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 experienced some impacts of COVID-19 in the first half of 2020, our implementation of business continuity plans, rapid transition of employees to distribute a periodic cash dividend to stockholderswork from home environment, and the geographic diversification of our common stock, after considerationdelivery centers allowed us to mitigate potentially more severe impacts and positioned us to continue supporting our commercial and public sector clients without interruptions and provide them with additional support as they experienced surge volumes of among other things, TeleTech’s performance, cash flows, capital needscustomer, patient and liquidity factors. Givencitizen COVID-19 related engagement. Through the period ended September 30, 2021 the COVID-19 pandemic has not had a material adverse impact on our cash flow generationoperational or financial results. While we expect this positive trend to continue and balance sheet strength,some of our COVID-19 specific work has transitioned to more traditional business activities for the same clients, there continues to be uncertainty about our COVID-19 and non-COVID-19 related business as the pandemic continues around the globe, and some locations where we believe cash dividends and early returns to shareholders through share repurchases, in balance with our investments in innovation and strategic acquisitions, align shareholder interests withdeliver business are experiencing ongoing COVID-19 infection surges, including as the needsresult of the Company. The initial dividendemergence of $0.18 per common share was paidcertain variant strains of the virus, related lockdown and business interruption. We cannot accurately predict the severity of the economic and operational challenges of a pro-longed COVID-19 pandemic on March 16, 2015our clients’ businesses and its effect on the magnitude and timing of their buying decisions. Further, while to shareholdersdate we have been successful in managing service delivery from a highly disbursed employee population working remotely and our delivery sites that could not be replaced with work from home delivery, unpredictable lockdown decisions in some jurisdictions where we do business, certain seasonal weather cycles and their potential impacts on power grid and internet availability for our employees working from home may impact our delivery capability with little notice, thus potentially impacting our results of record as of March 6, 2015. Thereafter,operations in the Company has been paying a semi-annual dividend in October and April of each year in amount ranging between $0.18 and $0.22 per common share. On September 21, 2017, the Board of Directors authorized a dividend of $0.25 per common share, which was paid on October 17, 2017 to shareholders of record as of October 5, 2017.future.
Our Integrated Service Offerings and Business Segments
We have four operatingprovide strategic value and reportable segments, which provide an integrated set ofdifferentiation through our two business segments: TTEC Digital and TTEC Engage.
TTEC Digital provides the CX technology services including:
Customer Strategy Services
We typically begin by engaging our clients at a strategic level. Through our strategy and operations, analytics, learning and performance, change management and consulting expertise, we help our clients design, build and execute their customer engagement strategies. We help our clientsplatforms to better understand and predict their customers’ behaviors and preferences along with their current and future economic value. Using proprietary analytic models, we provide the insight clients need to build the business case for customer centricity, to better optimize their marketing spend and then work alongside them to help implement our recommendations. A key component of this segment involves instilling a high performance culture through management and leadership alignment and process optimization.
Customer Technology Services
Once the design of the customer engagement is completed, our ability to architect, deploy and host or manage the client’s customer management environment becomes a key enabler to achieving and sustaining the client’s customer engagement vision. Given the proliferation of mobile communication technologies and devices, we enablesupport our clients’ operations to interact with their customers acrosscustomer interaction delivery infrastructure. The segment designs, builds and operates the growing array of channels including email, social networks, mobile, web, SMS text, voice and chat. We design, implement and manageomnichannel ecosystem in a cloud, on-premiseon premise, or hybrid environment, and fully integrates, orchestrates, and administers highly scalable, feature-rich CX technology applications. These solutions are critical to enabling and accelerating digital transformation for our clients.
● | Technology Services: Our technology services design, integrate and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, including journey orchestration, automation and AI, knowledge management, and workforce productivity. |
● | Professional Services: Our management consulting practices deliver customer experience strategy, analytics, process optimization, and learning and performance services. |
TTEC Engage delivers the CX managed services to support our clients’ end-to-end customer management environments to deliver a consistentinteraction delivery, by providing the essential CX omnichannel and superior experience across all touch pointsapplication technologies, human resources, recruiting, training and production, at-home or facility-based delivery infrastructure on a global scale, that we believe result in higher quality, lower costs and reduced risk for our clients. Through our Humanify™ platform, we also provide data-driven context aware software-as-a-service (“SaaS”) based solutions that link customers seamlessly and directly to appropriate resources, any time and across any channel.
Customer Management Services
We design and manage clients’ front-to-back office processes to deliver just-in-time, personalized, multi-channel interactions. Our front-office solutions seamlessly integrate voice, chat, email, e-commerce and social media to optimize theengagement processes. This segment provides full-service digital, omnichannel customer experience for our clients. In addition, we manage certain client back-office processes to enhance their customer-centric view of relationships and maximize operating efficiencies. Our delivery of integrated business processes via our onshore, offshore or work-from-home associates reduces operating costs and allowsengagement, supporting customer needs to be met more quickly and efficiently, resulting in higher satisfaction, brand loyalty and a stronger competitive position for our clients.
Customer Growth Services
We offer integrated sales and marketing solutions to help our clients boost revenue in new, fragmented or underpenetrated business-to-consumer or business-to-business markets. We deliver approximately $3 billion in client revenue annually via the discovery,care, customer acquisition, growth and retention, 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. |
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● | Customer Care Services: Our customer care services provide turnkey contact center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all touchpoints. |
● | Fraud Prevention Services: Our digital fraud detection and prevention services proactively identify and prevent fraud and provide community content moderation and compliance. |
Based on our clients’ requirements,preference, we provide our services on an integrated cross-business segment andand/or on a discrete basis.
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Additional information with respect to our segments and geographic footprint is included in Part I, Item 1. Financial Statements, Note 3 to the Consolidated Financial Statements.
Financial Highlights
In the third quarter of 2017,2021, our revenue increased 14.8%$73.8 million, or 15.0%, to $359.0$566.7 million over the same period in 20162020 including an increase of 0.5%$3.1 million, or $1.7 million0.8%, due to foreign currency fluctuations. ThisThe increase in revenue iswas comprised of an increase from the Atelka and Connextions acquisitions and organic growth in the CMS and CTS segments. Revenue, adjusted for the $1.7 million increase related to foreign exchange, increased by $44.5a $26.2 million, or 14.2%6.3%, over the prior year.increase for TTEC Engage and a $47.5 million, or 62.1%, increase for TTEC Digital.
Our third quarter 20172021 income from operations increased 26.1% to $15.8decreased $27.3 million, or 4.4%51.1%, to $26.1 million or 4.6% of revenue, from $12.5compared to $53.4 million or 4.0%10.8% of revenue in the third quarter of 2016. This increase2020. The change in operating income is comprised of a number of factors across the segments. The TTEC Engage operating income decreased with a 56.8% decline over the same period last year primarily related to the cybersecurity incident during September 2021 which caused outages in operations for several of our Engage clients. The TTEC Digital operating income decreased 33.5% due to increasesa reduction in CMS organica large multi-year government contract and inorganic volumes, a $3.8 million increase due to foreign currency fluctuations and a deprioritizationincreased amortization of certain non-essential businesses and activities,acquisition related intangible assets, partially offset by investments to build out, hirethe 2021 and train for2020 acquisitions which accelerated growth in the increased fourth quarter 2017 seasonal volumes, which increased third quarter 2017 CMS costs. In addition, incomecloud revenue platform.
Income from operations in the third quarter of 20172021 and 20162020 included $6.0$0.2 million ($5.6and $2.2 million of which related to the planned integration of the Connextions acquisition) and $9.3 million of restructuring and integration charges and asset impairments, respectively.
Our offshore customer engagement centers spanning six countries, serve clients based in the U.S. and in other countries and spans five countries with 23,00023,200 workstations, representing 56%58% of our global delivery capability. Revenue for our CMS and CGS segments that isTTEC Engage segment provided infrom these offshore locations was $111 million and represented 36%31% of our revenue for the third quarter of 2017,2021, as compared to $111 million and 43%26% of our revenue for 2016.the corresponding period in 2020.
Our cash flow from operations and available credit allowed us to finance a significant portion of our capital needs through internally generated cash flows. As of September 30, 2017, we had $78.8 million of cash and cash equivalents, total debt of $270.8 million, and a total debt to total capitalization ratio of 40.4%.
We internally target capacityseat utilization in our customer engagement centers at 80% to 90% of our available workstations. As of September 30, 2017, the overall capacity utilization in our centers was 78%, up from 71%, in the prior period. The table below presents workstation data for all of our centers as of September 30, 2017 and 2016. Our utilization percentage is defined as the total number of utilized production workstations compared to the total number of available production workstations. As of September 30, 2021, the total production workstations for our TTEC Engage segment was 39,900 and the overall capacity utilization in our centers was 62% versus 58% in the prior year period. The utilization is higher than the previous year, however continues to be relatively low primarily due to COVID-19 protocols requiring the distancing of associates which has reduced the available seat capacity. Adjusted for social distancing protocols, which reduced the available workstations to approximately 21,000, and accounting for all client paid seats as utilized, whether through actual usage or contractual commitments to hold the seats, current utilization is in excess of 117%.
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| September 30, 2017 |
| September 30, 2016 |
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| Total |
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| Production |
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| % In |
| Production |
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| % In |
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| Workstations |
| In Use |
| Use |
| Workstations |
| In Use |
| Use |
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Total centers |
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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 | % |
WhilePost COVID-19 we expect our clients to leverage a more diversified geographic footprint and an increased mix of work from home vs. brick and mortar delivery centers. We will continue to see demand from all geographic regions to utilizerefine our offshore delivery capabilitiessite strategy and expect this trend to continuecapacity as we finalize plans with our clients someand prospects.
Some of our clients havemay be subject to regulatory pressures to bring the services onshore to the United States. In light of these trends weserve clients onshore. We plan to continue to selectively retain and grow capacity and expand into new offshore markets, while maintaining appropriate capacity in the United States.onshore. As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuations increases, we will continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility.
Recently Issued Accounting Pronouncements
Refer to Part I, Item I, Financial Statements, Note 1 to the Consolidated Financial Statements for a discussion of recently adopted and issued accounting pronouncements.
3439
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of our financial conditionFinancial Condition and resultsResults of operations areOperations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as the disclosure of contingent assets and liabilities. We regularly review our estimates and assumptions. These estimates and assumptions, which are based upon historical experience and on various other factors believed to be reasonable under the circumstances, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Reported amounts and disclosures may have been different had management used different estimates and assumptions or if different conditions had occurred in the periods presented. For further information, please refer to the discussion of all critical accounting policies in Note 1 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Results of Operations
Three months ended September 30, 20172021 compared to three months ended September 30, 20162020
The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the three months ended September 30, 20172021 and 20162020 (amounts in thousands). All inter-company transactions between the reported segments for the periods presented have been eliminated.
Customer Management ServicesTTEC Digital
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | |
| | ||||
|
| 2021 |
| 2020 |
| $ Change |
| % Change |
| | |||
Revenue | | $ | 124,086 | | $ | 76,571 | | $ | 47,515 |
| 62.1 | % | |
Operating Income | |
| 8,670 | |
| 13,043 | |
| (4,373) |
| (33.5) | % | |
Operating Margin | |
| 7.0 | % |
| 17.0 | % | | | | | | |
|
|
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|
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|
| Three Months Ended September 30, |
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|
|
|
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| ||||
|
| 2017 |
| 2016 |
| $ Change |
| % Change |
| |||
Revenue |
| $ | 277,373 |
| $ | 223,664 |
| $ | 53,709 |
| 24.0 | % |
Operating Income |
|
| 9,133 |
|
| 12,255 |
|
| (3,122) |
| (25.5) | % |
Operating Margin |
|
| 3.3 | % |
| 5.5 | % |
|
|
|
|
|
The increase in revenue for the Customer Management ServicesTTEC Digital segment was attributable to a $55.3 million net increasedriven by increases in organicthe cloud platform and inorganic client programsthe systems integration practice, including the Atelkaacquisitions of Avtex and Connextions acquisitions and a $1.4 million increase due to foreign currency fluctuations,VoiceFoundry, offset by program completions of $3.0 million. reductions in a large multi-year government contract. Excluding this large multi-year government contract, the TTEC Digital revenue has increased 126% year over year.
The operating income decrease is primarily attributable to the reduction in a large multi-year government contract, and additional amortization of acquisition related intangible assets, partially offset by the acquisitions of Avtex and VoiceFoundry which drove increases in the cloud platform and system integration practice. Operating income as a percentage of revenue decreased to 3.3%7.0% in the third quarter of 20172021 as compared to 5.5%17.0% in the prior period. The operating margin decreased due to $5.6 million of planned restructuring and integration charges for the Connextions acquisition related to severance, center closure costs, the hiring, training and licensing of employees in new delivery centers and the integration of the IT systems, as well as investments to buildout, hire, and train for the increased fourth quarter 2017 seasonal volumes, which necessitated increased third quarter 2017 costs. These were partially offset by higher revenue, a $3.7 million benefit due to improved foreign exchange trends, increased capacity utilization, and efficiencies realized from the expense rationalization activities completed during the second half of 2016. Included in the operating income was amortization expense related to acquired intangibles of $1.2$6.0 million and $0.2$0.8 million for the quarters ended September 30, 20172021 and 2016,2020, respectively.
Customer Growth ServicesTTEC Engage
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | | |
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|
| 2021 |
| 2020 |
| $ Change |
| % Change |
| | |||
Revenue | | $ | 442,648 | | $ | 416,409 | | $ | 26,239 |
| 6.3 | % | |
Operating Income | |
| 17,355 | |
| 40,356 | |
| (23,001) |
| (57.0) | % | |
Operating Margin | |
| 3.9 | % |
| 9.7 | % | | | | | | |
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| Three Months Ended September 30, |
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|
| 2017 |
| 2016 |
| $ Change |
| % Change |
| |||
Revenue |
| $ | 30,829 |
| $ | 35,301 |
| $ | (4,472) |
| (12.7) | % |
Operating Income |
|
| 1,564 |
|
| 161 |
|
| 1,403 |
| 871.4 | % |
Operating Margin |
|
| 5.1 | % |
| 0.5 | % |
|
|
|
|
|
The decreaseincrease in revenue for the Customer Growth ServicesTTEC Engage segment was due to a $1.6net increase of $45.3 million increase in client programs and a $2.7 million increase due to foreign currency fluctuations, offset by a decrease for program completions of $6.1$21.8 million.
3540
The operating income decreased primarily due to the cybersecurity incident during September 2021 which caused outages in operations for several of our Engage clients; total cybersecurity incident-related costs were $19.3 million. This decrease was partially offset by growth in revenue and increased profitability in several offerings. As a result, operating income as a percentage of revenue increaseddecreased to 5.1%3.9% in the third quarter of 20172021 as compared to 0.5%9.7% in the prior period. This increase in margin is related to pricing improvements and other profit optimization actions, along with a reduction in the operating losses for the Digital Marketing unit which we are holding for sale. Included in the operating income was amortization expense related to acquired intangibles of zero$3.3 million and $0.5$3.3 million for the quarters ended September 30, 20172021 and 2016,2020, respectively.
Customer Technology Services
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| Three Months Ended September 30, |
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|
| 2017 |
| 2016 |
| $ Change |
| % Change |
| |||
Revenue |
| $ | 34,563 |
| $ | 36,580 |
| $ | (2,017) |
| (5.5) | % |
Operating Income |
|
| 4,158 |
|
| 3,776 |
|
| 382 |
| 10.1 | % |
Operating Margin |
|
| 12.0 | % |
| 10.3 | % |
|
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|
|
|
The decrease in revenue for the Customer Technology Services segment was driven by a decrease in the Avaya offerings as we wound down and then sold the business unit in the second quarter of 2017, offset by revenue increases in the CISCO offerings.
The operating income as a percentage of revenue increased to 12.0% in the third quarter of 2017 as compared to 10.3% in the prior period. This increase is primarily due to a decrease in amortization. Included in the operating income was amortization expense related to acquired intangibles of $0.3 million and $1.2 million for the quarters ended September 30, 2017 and 2016, respectively.
Customer Strategy Services
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| Three Months Ended September 30, |
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| ||||
|
| 2017 |
| 2016 |
| $ Change |
| % Change |
| |||
Revenue |
| $ | 16,271 |
| $ | 17,251 |
| $ | (980) |
| (5.7) | % |
Operating Income |
|
| 945 |
|
| (3,666) |
|
| 4,611 |
| 125.8 | % |
Operating Margin |
|
| 5.8 | % |
| (21.3) | % |
|
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|
|
The decrease in revenue for the Customer Strategy Services segment was related to growth in the Content and Collaboration practice offset by decreases in the Mindset and Sales Transformation and Customer Insights practices across multiple delivery regions.
The operating income as a percentage of revenue increased to 5.8% in the third quarter of 2017 as compared to an operating loss of (21.3)% in the prior period. The increase is primarily related to the $4.5 million charge for the impairment of two trade name intangibles recorded during the third quarter of 2016. Included in the operating income was amortization expense of $0.5 million and $0.8 million for the quarters ended September 30, 2017 and 2016, respectively.
Interest Income (Expense)
For the three months ended September 30, 20172021 interest income increaseddecreased to $0.9$0.2 million from $0.4$0.6 million in the same period in 2016.2020. Interest expense increased to $3.5 million during 20172021 from $2.0$2.8 million during 20162020 due to larger outstanding balances onhigher utilization of the line of credit primarily due to acquisitions, and higher interest rates.credit.
Other Income (Expense)
For the three months ended September 30, 2021 Other income (expense), net increased to net income of $3.3 million from net expense of $18.7 million during the prior year quarter.
Included in the three months ended September 30, 20172020 was a $3.2$17.4 million gainexpense related to dissolutionthe deconsolidation of a foreign entitytwo subsidiaries and a releasethe removal of its cumulativethe related currency translation adjustment.
Included in the three months ended September 30, 2016 was a $4.3 million benefit related to a fair value adjustment of contingent consideration for one of our acquisitions (see Part I. Item 1. Financial Statements, Note 72 to the Consolidated Financial Statements).
36
Income Taxes
The effective tax rate for the three months ended September 30, 20172021 was 11.7%30.6%. This compares to an effective tax rate of (6.9)%25.9% for the comparable period of 2016.2020. The effective tax rate for the three months ended September 30, 20172021 was influenced by earnings in international jurisdictions currently under an income tax holiday, and the distribution of income between the U.S. and international tax jurisdictions.jurisdictions and the associated U.S. tax impacts of foreign earnings. Without a $1.0$5.0 million benefit related to excess taxes onthe cybersecurity incident, a $3.1 million benefit related to equity compensation, $0.2a $2.4 million benefit related to the amortization of purchased intangibles, $6.4 million of expense related to return to provision adjustments, $2.4changes in valuation allowances, and $0.4 million of benefit from restructuring expenses, and $0.1 million ofexpense related to other items, the Company’s effectivenormalized tax rate for the third quarter of 2017 would have been 22.1%2021 was 19.6%.
Results of Operations
Nine months ended September 30, 20172021 compared to nine months ended September 30, 20162020
The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the nine months ended September 30, 20172021 and 20162020 (in thousands). All intercompany transactions between the reported segments for the periods presented have been eliminated.
Customer Management ServicesTTEC Digital
| | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | | |
| | ||||
|
| 2021 |
| 2020 |
| $ Change |
| % Change |
| | |||
Revenue | | $ | 295,668 | | $ | 231,270 | | $ | 64,398 |
| 27.8 | % | |
Operating Income | |
| 22,438 | |
| 37,677 | |
| (15,239) |
| (40.4) | % | |
Operating Margin | |
| 7.6 | % |
| 16.3 | % | | | | | | |
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| Nine Months Ended September 30, |
|
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| ||||
|
| 2017 |
| 2016 |
| $ Change |
| % Change |
| |||
Revenue |
| $ | 798,508 |
| $ | 664,392 |
| $ | 134,116 |
| 20.2 | % |
Operating Income |
|
| 43,804 |
|
| 36,189 |
|
| 7,615 |
| 21.0 | % |
Operating Margin |
|
| 5.5 | % |
| 5.4 | % |
|
|
|
|
|
41
The increase in revenue for the Customer Management ServicesTTEC Digital segment was attributable to a $145.9 million net increasedriven by significant increases in organicthe cloud platform and inorganic client programsthe systems integration practice including Atelkaacquisitions of Avtex and ConnextionsVoiceFoundry, offset by program completionsreductions in a large multi-year government contract, and the legacy facility based training business and Middle East consulting practice, both of $12.1 million. Revenue was further impacted by a $0.3 million increase due to foreign currency fluctuations.which the Company has exited. Excluding this large multi-year government contract, the TTEC Digital revenue has increased 86% year over year.
The operating income reduction is primarily attributable to the reduction in a large multi-year government contract and increased amortization of acquisition related intangible assets, partially offset by the increased revenue due to the acquisitions and other revenue increases as well as the exit of the less profitable facilities based training and Middle East consulting practices. Operating income as a percentage of revenue increaseddecreased to 5.5%7.6% for the nine months ended September 30, 20172021 as compared to 5.4%16.3% in the prior period. The operating margin increased due to higher revenue, a $10.6 million benefit due to improved foreign exchange trends, increased capacity utilization, and efficiencies realized from the expense rationalization activities completed during the second half of 2016. These increases were partially offset by $9.0 million of restructuring and integration charges for the Connextions acquisition related to severance, center closure costs, the hiring, training and licensing of employees in new delivery centers and the integration of the IT systems, as well as investments to buildout, hire and train for the increased fourth quarter 2017 seasonal volumes. Included in the operating income was amortization expense related to acquired intangibles of $3.0$12.8 million and $0.6$1.9 million for the nine months ended September 30, 20172021 and 2016,2020, respectively.
Customer Growth ServicesTTEC Engage
| | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | | |
| | ||||
|
| 2021 |
| 2020 |
| $ Change |
| % Change |
| | |||
Revenue | | $ | 1,365,079 | | $ | 1,147,004 | | $ | 218,075 |
| 19.0 | % | |
Operating Income | |
| 142,842 | |
| 105,400 | |
| 37,442 |
| 35.5 | % | |
Operating Margin | |
| 10.5 | % |
| 9.2 | % | | | | | | |
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| Nine Months Ended September 30, |
|
|
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| ||||
|
| 2017 |
| 2016 |
| $ Change |
| % Change |
| |||
Revenue |
| $ | 96,890 |
| $ | 105,713 |
| $ | (8,823) |
| (8.3) | % |
Operating Income |
|
| 6,295 |
|
| 4,138 |
|
| 2,157 |
| 52.1 | % |
Operating Margin |
|
| 6.5 | % |
| 3.9 | % |
|
|
|
|
|
The decreaseincrease in revenue for the Customer Growth ServicesTTEC Engage segment was due to a $10.2net increase of $262.7 million increase in client programs including certain COVID-19 pandemic related programs for several clients, and a $18.4 million increase due to foreign currency fluctuations offset by a decrease for program completions of $19.0$63.0 million.
37
The operating income as$19.3 million related to the cybersecurity incident during September 2021 which caused outages in operations for several Engage clients, and a percentage of revenue increasednet $6.1 million in restructuring and impairment charges related to 6.5% for the nine months ended September 30, 2017 as compared to 3.9%several facilities in the prior period. This was attributableU.S. (see Part I. Item 1, Financial Statements, Note 9 to pricing improvements and other profit optimization actions, along with reductions in amortization expenses andthe Consolidated Financial Statements). As a reduction in the operating loss for the Digital Marketing unit which we are holding for sale. Included in the operating income was amortization expense related to acquired intangibles of zero and $1.8 million for the nine months ended September 30, 2017 and 2016, respectively.
Customer Technology Services
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| Nine Months Ended September 30, |
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| ||||
|
| 2017 |
| 2016 |
| $ Change |
| % Change |
| |||
Revenue |
| $ | 105,054 |
| $ | 109,198 |
| $ | (4,144) |
| (3.8) | % |
Operating Income |
|
| 11,034 |
|
| 9,932 |
|
| 1,102 |
| 11.1 | % |
Operating Margin |
|
| 10.5 | % |
| 9.1 | % |
|
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|
The decrease in revenue for the Customer Technology Services segment was driven by an increase for the CISCO offerings offset by a decrease in the Avaya offerings as we wound down and then sold the business unit in the second quarter of 2017.
Theresult, operating income as a percentage of revenue increased to 10.5% for the nine months ended September 30, 20172021 as compared to 9.1%9.2% in the prior period. The increase is due to increased profitability in the CISCO offerings and a reduction in amortization. Included in the operating income was amortization expense related to acquired intangibles of $0.8$9.9 million and $3.4$9.9 million for the nine months ended September 30, 20172021 and 2016,2020, respectively.
Customer Strategy Services
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| Nine Months Ended September 30, |
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| ||||
|
| 2017 |
| 2016 |
| $ Change |
| % Change |
| |||
Revenue |
| $ | 50,290 |
| $ | 51,008 |
| $ | (718) |
| (1.4) | % |
Operating Income (Loss) |
|
| 2,746 |
|
| (3,752) |
|
| 6,498 |
| 173.2 | % |
Operating Margin |
|
| 5.5 | % |
| (7.4) | % |
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|
The decrease in revenue for the Customer Strategy Services segment was related to growth in the Content and Collaboration and Service Optimization practices offset by decreases in the Mindset and Sales Transformation and Customer Insights practices across multiple delivery regions.
The operating income as a percentage of revenue was 5.5% for the nine months ended September 30, 2017 as compared to a loss of (7.4)% in the prior period. The operating income increased primarily due to the $4.5 million charge for the impairment of two trade name intangibles recorded during the third quarter of 2016, as well as expense rationalization, decreased amortization and reduced losses for the PRG Middle East unit which we are holding for sale. Included in the operating income was amortization expense of $1.5 million and $2.3 million for the nine months ended September 30, 2017 and 2016, respectively.
Interest Income (Expense)
For the nine months ended September 30, 20172021 interest income increaseddecreased to $2.0$0.6 million from $0.8$1.4 million in the same period in 2016.2020. Interest expense increaseddecreased to $8.7 million during 20172021 from $5.8$15.5 million during 20162020 due to larger outstanding balances onhigher utilization of the line of credit primarily dueoffset by lower interest rates, and a $6.3 million decrease period over period in the charge related to the acquisitions, and higher averagefuture purchase of the remaining 30% interest rates.in Motif, which was finalized during the second quarter of 2020.
Other Income (Expense)
For the nine months ended September 30, 2021 Other income (expense), Netnet increased to net income of $3.5 million from net expense of $17.0 million during the prior year period.
Included in the nine months ended September 30, 20172021 was a $3.2$0.7 million gainexpense related to dissolutionthe fair value adjustments of a foreign entity and a release of its cumulative translation adjustment.contingent consideration for two acquisitions.
Included in the nine months ended September 30, 20172020 was $3.2a $4.4 million of estimated lossesbenefit related to the fair value adjustments of contingent consideration for an acquisition, offset by a business unit which has been classified as assets held for sale (see$19.9 million expense related to the deconsolidation of three subsidiaries and the related removal of the Accumulated other comprehensive income (loss).
See Part I. Item 1. Financial Statements, Note 2 to the Consolidated Financial Statements).
Statements.
3842
Included in the nine months ended September 30, 2016 was a $4.3 million benefit related to a fair value adjustment of contingent consideration for one of our acquisitions (see Part I. Item 1. Financial Statements, Note 7 to the Consolidated Financial Statements for further details).
Income Taxes
The effective tax rate for the nine months ended September 30, 20172021 was 15.0%21.9%. This comparescompared to an effective tax rate of 15.2%26.5% for the comparable period of 2016.2020. The effective tax rate for the nine months ended September 30, 20172021 was influenced by earnings in international jurisdictions currently under an income tax holiday, and the distribution of income between the U.S. and international tax jurisdictions.jurisdictions and associated U.S. tax impacts of foreign earnings. Without a $2.0$1.6 million benefit from restructuring expenses, a $5.0 million benefit related to excess taxes on equity compensation, $0.2the cybersecurity incident, $8.8 million of expense related to changes in valuation allowances, a $5.9 million benefit related to return to provision, $3.9the amortization of purchased intangibles, a $8.4 million benefit related to restructuring expensesequity-based compensation, and $1.3$0.7 million benefitof expense related to businesses held for sale,other items, the Company’s effectivenormalized tax rate for the nine months ended September 30, 2017 would have been 22.3%2021 was 21.8%.
Liquidity and Capital Resources
Our principal sources of liquidity are our cash generated from operations, our cash and cash equivalents, and borrowings under our Credit Facility. During the nine months ended September 30, 2017,2021, we generated positive operating cash flows of $149.6$175.1 million. We believe that our cash generated from operations, existing cash and cash equivalents, and available credit will be sufficient to meet expected operating and capital expenditure requirements for the next 12 months.
We manage a centralized global treasury function in the United States with a focus on concentratingsafeguarding and safeguardingoptimizing the use of our global cash and cash equivalents. While the majority of ourOur cash is held outsidein the U.S., we prefer to hold in U.S. Dollarsdollars, and outside of the U.S. in addition to the local currencies of ourU.S. dollars and foreign subsidiaries.currencies. We expect to use our offshore cash to supportfund working capital, global operations, dividends, acquisitions, and growth of our foreign operations.other strategic activities. While there are no assurances, we believe our global cash is well protected given our cash management practices, banking partners and utilization of diversified highbank deposit accounts and other quality investments.
We have global operations that expose us to foreign currency exchange rate fluctuations that may positively or negatively impact our liquidity. We are also exposed to higher interest rates associated with our variable rate debt. To mitigate these risks, we enter into foreign exchange forward and option contracts and interest rate swaps through our cash flow hedging program. Please refer to Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk, Foreign Currency Risk, for further discussion.
In early April 2021, we drew down approximately $500 million of the availability on the Credit Facility in order to provide funding for the acquisition of Avtex Solutions, Holdings LLC.
During the first quarter 2020, we borrowed $350 million under our revolving credit facility as a precautionary measure to provide additional liquidity during the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic. During September 2020, this additional borrowing was repaid.
Although we expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.
The following discussion highlights our cash flow activities during the nine months ended September 30, 20172021 and 2016.2020.
Cash and Cash Equivalents
We consider all liquid investments purchased within 90 days of their original maturity to be cash equivalents. Our cash and cash equivalents totaled $78.8$148.9 million and $55.3$132.9 million as of September 30, 20172021 and December 31, 2016,2020, respectively. We diversify the holdings of such cash and cash equivalents considering the financial condition and stability of the counterparty institutions.
We reinvest our cash flows to grow our client base, expand our infrastructure, for investment in research and development, for strategic acquisitions for the purchase of our outstanding stock and to pay dividends.
43
Cash Flows from Operating Activities
For the nine months ended September 30, 20172021 and 2016,2020, net cash flows provided by operating activities was $149.6$175.1 million and $110.8$186.8 million, respectively. The increase wasdecrease is primarily due to a $41.9 million decrease in payments made for operating expenses, an $18.8$38.2 million increase in collections for deferred revenue,net cash income from operations offset by a $10.3$49.9 million decreasereduction in cash collected from accounts receivable.net working capital.
Cash Flows from Investing Activities
For the nine months ended September 30, 20172021 and 2016, we reported2020, net cash flows used in investing activities of $126.3was $522.5 million and $39.2$86.6 million, respectively. The increase was due to a $5.1$443.0 million increase related to acquisitions offset by a $7.0 million decrease in capital expenditures and an additional $81.7 million related to funding for an acquisition.expenditures.
39
Cash Flows from Financing Activities
For the nine months ended September 30, 20172021 and 2016, we reported2020, net cash flows used inprovided by (used in) financing activities of $1.4was $362.5 million and $61.0$(48.9) million, respectively. The change in net cash flows from 20162020 to 20172021 was primarily due to a $8.7$385.0 million net increase in the line of credit and a $37.2 million decrease in payments of contingent consideration offset by a $4.3 million increase in the Credit Facility, a $39.0 million decrease in purchases of our outstanding common stock, a $12.9 million decrease in contingent consideration and purchase of non-controlling interest paymentsshareholder dividends and a decrease of $1.9$6.9 million increase in tax payments related to the 2016 payment of debt issuance costs.restricted stock units.
Free Cash Flow
Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) increaseddecreased slightly for the nine months ended September 30, 20172021 compared to the nine months ended September 30, 20162020 primarily due to an increase in net cash flow from operations offset by a decrease in working capital.capital and lower capital expenditures. Free cash flow was $105.7$134.3 million and $72.0$139.0 million for the nine months ended September 30, 20172021 and 2016,2020, respectively.
Presentation of Non-GAAP Measurements
Free Cash Flow
Free cash flow is a non-GAAP liquidity measurement. We believe that free cash flow is useful to our investors because it measures, during a given period, the amount of cash generated that is available for debt obligations and investments other than purchases of property, plant and equipment. Free cash flow is not a measure determined by GAAP and should not be considered a substitute for “income from operations,” “net income,” “net cash provided by operating activities,” or any other measure determined in accordance with GAAP. We believe this non-GAAP liquidity measure is useful, in addition to the most directly comparable GAAP measure of “net cash provided by operating activities,” because free cash flow includes investments in operational assets. Free cash flow does not represent residual cash available for discretionary expenditures, since it includes cash required for debt service. Free cash flow also includes cash that may be necessary for acquisitions, investments and other needs that may arise.
The following table reconciles net cash provided by operating activities to free cash flow for our consolidated results (in thousands):
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| 2017 |
| 2016 |
| 2017 |
| 2016 |
| |||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | | |||||||||||||||||
Net cash provided by operating activities |
| $ | 24,188 |
| $ | 55,793 |
| $ | 149,643 |
| $ | 110,838 |
| | $ | 42,223 | | $ | 81,506 | | $ | 175,062 | | $ | 186,784 | |
Less: Purchases of property, plant and equipment |
|
| 14,343 |
|
| 11,120 |
|
| 43,932 |
|
| 38,863 |
| |
| 17,185 | |
| 15,912 | |
| 40,778 | |
| 47,827 | |
Free cash flow |
| $ | 9,845 |
| $ | 44,673 |
| $ | 105,711 |
| $ | 71,975 |
| | $ | 25,038 | | $ | 65,594 | | $ | 134,284 | | $ | 138,957 | |
Obligations and Future Capital Requirements
Future maturitiesThere were no material changes to the Company’s contractual obligations and future capital requirements outside the normal course of business from the date of our outstanding debt and contractual obligations as2020 Form 10-K filing on March 1, 2021 through the filing of September 30, 2017 are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
|
this report.
4044
|
|
|
|
|
|
Our outstanding debt is primarily associated with the use of funds under our Credit Agreement to fund working capital, repurchase our common stock, pay dividends, and for other cash flow needs across our global operations.
Future Capital Requirements
We expect total capital expenditures in 20172021 to be approximately 4.4%between 2.8% and 3.0% of revenue. Approximately 70% of these expected capital expenditures are to support growth in our business and 30% relate to the maintenance for existing assets. The anticipated level of 20172021 capital expenditures is primarily driven by new client contracts and the corresponding requirements for additional deliverycustomer engagement center capacity as well as enhancements to our technological infrastructure.
The amount of capital required over the next 12 months will depend on our levels of investment in infrastructure necessary to maintain, upgrade or replace existing assets. Our working capital and capital expenditure requirements could also increase materially in the event of acquisitions or joint ventures, among other factors. These factors could require that we raise additional capital through future debt or equity financing. We can provide no assurance that we will be able to raise additional capital upon commercially reasonable terms acceptable to us.
Client Concentration
During the nine months ended September 30, 2017,2021, one of our clients represented 9.5%more than 10% of our total revenue. Our five largest clients, collectively, accounted for 35.2%36.2% and 36.4%42.6% of our consolidated revenue for the three months ended September 30, 20172021 and 2016, respectively. Our five largest clients, collectively, accounted for 34.3%2020, respectively and 35.8%38.1% and 39.1% of our consolidated revenue for the nine months ended September 30, 20172021 and 2016,2020, respectively. We have experiencedhad long-term relationships with our top five TTEC Engage clients, ranging from 1015 to 2122 years, with the majorityall of these clients having completed multiple contract renewals with us. The relative contribution of any single client to consolidated earnings is not always proportional to the relative revenue contribution on a consolidated basis and varies greatly based upon specific contract terms. In addition, clients may adjust business volumes served by us based on their business requirements. We believe the risk of this concentration is mitigated, in part, by the long-term contracts we have with our largest clients. Although certain client contracts may be terminated for convenience by either party, we believe this risk is mitigated, in part, by the service level disruptions and transition/migration costs that would arise for our clients.clients if they terminated our contract for convenience.
TheSome contracts with our five largest clients expire between 20182021 and 2020. Additionally, a particular client may2023, but most of our largest clients have multiple contracts with us with different expiration dates.dates for different lines of work. We have historically renewed most of our contracts with our largest clients. However,clients, but there iscan be no assurance that future contracts will be renewed or, if renewed, will be on terms as favorable as the existing contracts.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our consolidated financial position, consolidated results of operations, or consolidated cash flows due to adverse changes in financial and commodity market prices and rates. Market risk also includes credit and non-performance risk by counterparties to our various financial instruments. We are exposed to market risk due to changes in interest rates and foreign currency exchange rates (as measured against the U.S. dollar); as well as credit risk associated with potential non-performance of our counterparty banks. These exposures are directly related to our normal operating and funding activities. We enter into derivative instruments to manage and reduce the impact of currency exchange rate changes, primarily between the U.S. dollar/Philippine peso, the U.S. dollar/Mexican peso, and the Australian dollar/Philippine peso. We enter into interest rate derivative instruments to reduce our exposure to interest rate
41
fluctuations associated with our variable rate debt. To mitigate against credit and non-performance risk, it is our policy to only enter into derivative contracts and other financial instruments with investment grade counterparty financial institutions and, correspondingly, our derivative valuations reflect the creditworthiness of our counterparties. As of the date of this report, we have not experienced, nor do we anticipate, any issues related to derivative counterparty defaults.
45
Interest Rate Risk
We have previously entered into interest rate derivative instruments to reduce our exposure to interest rate fluctuations associated with our variable rate debt. The interest rate on our Credit Agreement is variable based upon the Prime Rate the Federal Funds rate, orand LIBOR and, therefore, is affected by changes in market interest rates. As of September 30, 2017,2021, we had $255.0$805.0 million of outstanding borrowings under the Credit Agreement. Based upon average outstanding borrowings during the three and nine months ended September 30, 2017,2021, interest accrued at a rate of approximately 2.3% and 2.1%1.3% per annum, respectively. If the Prime Rate or LIBOR increased by 100 basis points, during the quarter, there would be aan annualized $1.0 million of additional interest expense per $100.0 million of outstanding borrowing under the Credit Agreement.
The Company’s interest rate swap arrangement has 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:
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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 months ended September 30, 20172021 and 2016,2020, revenue associated with this foreign exchange risk was 27%17% and 33%18% 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.
42
Our cash flow hedging instruments as of September 30, 20172021 and December 31, 20162020 are summarized as follows (in thousands). All hedging instruments are forward contracts, except as noted.
| | | | | | | | | | | | |
|
| Local |
| | |
|
| |
|
| |
|
| | Currency | | U.S. Dollar | | | % Maturing | | | Contracts |
| |
| | Notional | | Notional | | | in the next | | | Maturing |
| |
As of September 30, 2021 | | Amount | | Amount | | | 12 months | | | Through |
| |
Canadian Dollar |
| 4,500 | | $ | 3,533 | | | 100.0 | % | | June 2022 | |
Philippine Peso |
| 7,841,000 | |
| 152,318 | (1) | | 52.8 | % | | September 2024 | |
Mexican Peso |
| 1,313,500 | |
| 58,641 | | | 42.9 | % | | December 2024 | |
| | | | $ | 214,492 | | | | | | | |
46
| | | | | | | | | | | | |
|
| Local |
| | |
|
| | |
| | |
| | Currency | | U.S. Dollar |
| | | | | | | |
| | Notional | | Notional |
| | | | | | | |
As of December 31, 2020 | | Amount | | Amount |
| | | | | | | |
Canadian Dollar |
| 2,450 | | $ | 1,853 | | | | | | | |
Philippine Peso |
| 6,725,000 | |
| 130,468 | (1) | | | | | | |
Mexican Peso |
| 1,159,500 | |
| 52,398 | | | | | | | |
| | | | $ | 184,719 | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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) |
| 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 30, |
The fair value of our cash flow hedges atas of September 30, 20172021 was assets/(liabilities) (in thousands):
|
|
|
|
|
|
|
| |||||||
|
|
|
|
| Maturing in the |
| ||||||||
|
| September 30, 2017 |
| Next 12 Months |
| |||||||||
| | | | | | | | |||||||
| | | | | Maturing in the | | ||||||||
|
| September 30, 2021 |
| Next 12 Months |
| |||||||||
Canadian Dollar | | $ | 16 | | $ | 16 | | |||||||
Philippine Peso |
|
| (15,688) |
|
| (9,399) |
| | | 582 | | | 898 | |
Mexican Peso |
|
| (13,785) |
|
| (7,617) |
| |
| (967) | |
| (19) | |
|
| $ | (29,473) |
| $ | (17,016) |
| |||||||
| | $ | (369) | | $ | 895 | |
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 increasedecrease in fair value from December 31, 2016 largely2020 reflects a broad weakeningchanges in the currency translation between the U.S. dollar.dollar and Mexican Peso and U.S. dollar and Philippine pesos.
We recorded net lossesgains of approximately $17.7$4.2 million and $18.9$0.9 million for settled cash flow hedge contracts and the related premiums for the nine months ended September 30, 20172021 and 2016,2020, respectively. These lossesgains 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 months ended September 30, 20172021 and 2016,2020, approximately 25%14% and 22%14%, 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 30, 20172021 or December 31, 2016.2020.
43
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.
47
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 ofWe carried out an evaluation under the Company,supervision and with the participation of itsmanagement, including the CEO and CFO, evaluatedof the effectiveness of the Company’sour disclosure controls and procedures, as of SeptemberJune 30, 2017. Based on that evaluation, as of2021, the end of the period covered by this Form 10-Q, the Company’s10-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 provideat the reasonable assurance because of the material weaknesses in our internal control over financial reporting.level.
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.
44
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 beenwere no changes in our internal control over financial reporting during the quarter ended September 30, 20172021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
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 changesIn addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A, Risk factors, in our 2020 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. In addition to the risk factors described in Item 1A. Risk Factors describedidentified in our 2020 Annual Report, on Form 10-K forplease consider the year ended December 31, 2016.
following revised risk factor.
4548
Cyberattacks, cyber fraud, and unauthorized information disclosure could harm our reputation, and result in liability and service outages, any of which could adversely affect our business and results of operations
Our business involves the use, storage, and transmission of information about our clients, their customers, and our employees. We also monitor and support information systems for certain clients through cloud-based and on-client-premises managed services model. While we believe that we take reasonable measures to protect the security of and unauthorized access to our systems and to our clients’ systems, and the privacy of personal and proprietary information that we access and store, our security controls over our systems have not prevented and in the future may not prevent improper access to these systems or disclosure of information stored on these systems. Such unauthorized access or disclosure could subject TTEC to significant liability under relevant law or our contracts and could harm our reputation, resulting in impacts on our results of operations, loss of future revenue and business opportunities. These risks may further increase as our business model now includes higher percentage of work from home delivery, in addition to our traditional delivery through customer experience centers.
In recent years, there have been an increasing number of high-profile security breaches at companies and government agencies, and security experts have warned about the growing risks of hackers, cybercriminals and state actors launching a broad range of ransomware, data exfiltration, and other cyberattacks targeting information technology systems. Information security breaches, computer viruses, service interruption, loss of business data, DDoS (distributed denial of service) attacks, ransomware and other cyberattacks on any of our systems or on our clients’ systems that we manage have or in the future could disrupt the normal operations of our customer experience centers, our remote customer experience service delivery, our cloud platform digital offerings, our clients’ on-premise managed service offerings, and our enterprise services, impeding our ability to provide critical services to our clients. Techniques used by cyber criminals to obtain unauthorized access, disable or degrade services, or sabotage systems evolve frequently and may not immediately be detected, and we may be unable to implement adequate preventative measures
For example, on September 12, 2021, TTEC experienced a cybersecurity incident that involved our information systems. Certain TTEC systems and data became encrypted; and certain TTEC data was exfiltrated or destroyed The incident resulted in a temporary disruption to the Engage business segment’s client support environment (see Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding the security incident). TTEC restored and continues to rebuild many of the systems and data impacted in the incident. TTEC recovered exfiltrated data from the unauthorized parties, and while we currently have no reasons to believe that such data was publicly released, no assurance can be made that it was not released or that it may not be released in the future. In addition, as a result of the incident, some clients opted to suspend our access to their networks as a security precaution until they were satisfied that the incident was contained. As of the date of this disclosure, we have returned to services with all our clients.
As another example, on July 2, 2021, our subsidiary Avtex Solutions, LLC (“Avtex”) and some of its clients experienced a ransomware attack as part of a global supply chain compromise that impacted thousands of companies worldwide and is believed to have been orchestrated by a Russian-based REvil cybercriminal group. The attack exploited a vulnerability in a Kaseya VSA remote monitoring software that Avtex utilized in its managed services solution (“Kaseya REvil attack”). TTEC systems and TTEC’s client support environments, outside of Avtex, were not impacted by the Kaseya REvil attack. Utilizing its standard cyber incident response protocols, TTEC recovered Avtex’s operating environment within hours of the attack and restored Avtex to full operating capacity by July 3, 2021. Over the course of the following weeks, the Company assisted Avtex’s affected clients in restoring their systems to full operations.
49
While we believe that we have remediated the immediate consequences of these cybersecurity incidents, cybersecurity events may have cascading effects that unfold over time and result in additional costs, including costs associated with investigations, government enforcement actions, regulatory investigations, fines and penalties, contractual claims, performance penalties, litigation, financial judgement or settlements in excess of insurance, disputes with insurance carriers concerning coverage, loss of clients’ trust, future business cancelations and other losses. Any perception by existing and prospective clients that our systems or the information system environments that we support for our clients are not secure could result in a material loss of business and revenue and damage our reputation and competitiveness.
As others in many industries, we are experiencing an increase in frequency of cybersecurity and cyber fraud attempts, including phishing attempts, and so-called “social engineering” attacks, which typically seek unauthorized access into the environment, money transfers or unauthorized information disclosure. We actively train our employees to recognize these attacks and have implemented proactive risk mitigation measures to curb them. There are no assurances, however, that these attacks, which are growing in sophistication and frequency, may not deceive our employees, resulting in a material loss and impacts to our operations and back-office environments.
While believe we have taken reasonable measures to protect our systems and processes from unauthorized intrusions and cyber-fraud, we cannot be certain that advances in cyber-criminal capabilities, discovery of new system vulnerabilities, and attempts to exploit such vulnerabilities will not compromise or breach the technology protecting our systems and the information that we manage and control, which could result in damage to our systems, our reputation, and our profitability.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Following isIn November 2001, our Board of Directors (“Board”) authorized a stock repurchase program with the detailobjective 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 issuer purchases madeprogram through September 30, 2021, 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. The Company did not repurchase any of its shares during the quarterthree months ended September 30, 2017:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
| — |
|
|
|
| — |
|
|
|
|
|
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None
46
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Exhibit | | | | Incorporated Herein by Reference | ||||
No. |
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Exhibit | |
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Form | | |||||||
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Filing Date | ||||||||
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31.1* | | | | | | | | |
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31.2* | | | | | | | | |
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32.1* | | | | | | | | |
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32.2* | | | | | | | | |
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50
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) | | | | | | |
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| | XBRL Taxonomy Extension Schema | | | | | | |
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| | XBRL Taxonomy Extension Calculation Linkbase | | | | | | |
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101.DEF | | XBRL Taxonomy Extension Definition Linkbase | | | | | | |
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| | XBRL Taxonomy Extension Label Linkbase | | | | | | |
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| | XBRL Taxonomy Extension Presentation Linkbase | | | | | | |
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104 | | The cover page from TTEC Holdings, Inc’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL | | | | | | |
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| * | Filed or furnished herewith. | ||||||
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4751
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.
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| | TTEC HOLDINGS, INC. | |
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| (Registrant) | ||
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Date: November | By: | /s/ Kenneth D. Tuchman | |
| | Kenneth D. Tuchman | |
| | Chairman and Chief Executive Officer | |
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Date: November | By: | /s/ Regina M. Paolillo | |
| | Regina M. Paolillo | |
| | Chief Financial Officer | |
4852