UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended September 30, ~~2017~~2021


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

For the transition period from to

Commission File Number 001-11919

~~TeleTech~~TTEC 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., $0.01 par value per share	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 ☐
~~Large accelerated filer~~ ☐	~~Accelerated filer~~ ☑	~~Non-accelerated filer~~ ☐	~~Smaller reporting company~~ ☐
		(Do not check if a smaller reporting company)	Emerging ~~growth company~~ Growth Company ☐

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 ~~45,849,114~~46,989,197 shares of the registrant’s common stock outstanding.

Table of Contents

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

SEPTEMBER 30, ~~2017~~2021 FORM 10-Q

TABLE OF CONTENTS


		Page No.
		~~Page No.~~

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020 (unaudited)	1


	Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	2


	Consolidated ~~Statement~~Statements of Stockholders’ Equity and Mezzanine Equity as of and for the three and nine months ended September 30, ~~2017~~2021 and 2020 (unaudited)	3


	Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	4


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

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32 36

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41 45

Item 4.	Controls and Procedures	44 47

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	45 48

Item 1A.	Risk Factors	45 48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46 50

Item 5.	Other Information	46 50

Item 6.	Exhibits	47 50

SIGNATURES		48
		52

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

Consolidated Balance Sheets

(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.

Table of Contents

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

Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands, except per share amounts)

(Unaudited)

Three months ended September 30,

Nine months ended September 30,


2017

2016

2017

2016

Revenue

$
359,036

$
312,796

$
1,050,742

$
930,311

Operating expenses

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

275,548

233,541

797,450

691,649

Selling, general and administrative

45,167

40,628

132,372

130,902

Depreciation and amortization

16,515

16,811

47,273

51,761

Restructuring and integration charges, net

6,006

3,688

9,768

3,890

Impairment losses

—

5,602

—

5,602

Total operating expenses

343,236

300,270

986,863

883,804

Income from operations

15,800

12,526

63,879

46,507

Other income (expense)

Interest income

899

397

2,020

826
��
Interest expense

(3,469)

(2,041)

(8,699)

(5,758)

Other income (expense), net

4,416

6,254

6,573

7,488

Loss on assets held for sale

—

(5,300)

(3,178)

(5,300)

Total other income (expense)

1,846

(690)

(3,284)

(2,744)

Income before income taxes

17,646

11,836

60,595

43,763

(Provision for) benefit from income taxes

(2,071)

813

(9,059)

(6,667)

Net income

15,575

12,649

51,536

37,096

Net income attributable to noncontrolling interest

(806)

(1,198)

(2,828)

(2,804)

Net income attributable to TeleTech stockholders

$
14,769

$
11,451

$
48,708

$
34,292

Other comprehensive income (loss)

Net income

$
15,575

$
12,649

$
51,536

$
37,096

Foreign currency translation adjustments

(1,153)

(8,541)

8,414

(8,069)

Derivative valuation, gross

3,221

(6,009)

24,713

(2,395)

Derivative valuation, tax effect

(1,288)

2,462

(10,117)

725

Other, net of tax

127

802

386

1,202

Total other comprehensive income (loss)

907

(11,286)

23,396

(8,537)

Total comprehensive income (loss)

16,482

1,363

74,932

28,559

Less: Comprehensive income attributable to noncontrolling interest

(899)

(1,202)

(3,153)

(2,734)

Comprehensive income (loss) attributable to TeleTech stockholders

$
15,583

$
161

$
71,779

$
25,825

Weighted average shares outstanding

Basic

45,838

47,081

45,816

47,771

Diluted

46,367

47,315

46,348

48,089

Net income per share attributable to TeleTech stockholders

Basic

$
0.32

$
0.24

$
1.06

$
0.72

Diluted

$
0.32

$
0.24

$
1.05

$
0.71

Dividends declared per share outstanding

$
0.25

$
0.20

$
0.47

$
0.385


	Three months ended 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.

Table of Contents

~~TELETECH~~TTEC 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.

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

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

Nine Months Ended September 30,


2017

2016

Cash flows from operating activities

Net income

$
51,536

$
37,096

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

Depreciation and amortization

47,273

51,761

Amortization of contract acquisition costs

1,273

499

Amortization of debt issuance costs

521

582

Imputed interest expense and fair value adjustments to contingent consideration

39

(4,320)

Provision for doubtful accounts

380

542

(Gain) loss on disposal of assets

85

(65)

Gain on sale of business and dissolution of entity

(3,323)

—

Impairment losses

—

5,602

Loss on held for sale assets

3,178

5,300

Deferred income taxes

8,155

5,368

Excess tax benefit from equity-based awards

(1,970)

(539)

Equity-based compensation expense

8,358

7,278

Loss on foreign currency derivatives

829

4,649

Changes in assets and liabilities, net of acquisitions:

Accounts receivable

13,460

23,780

Prepaids and other assets

(26,814)

(12,652)

Accounts payable and accrued expenses

32,597

(9,347)

Deferred revenue and other liabilities

14,066

(4,696)

Net cash provided by operating activities

149,643

110,838

Cash flows from investing activities

Proceeds from sale of long-lived assets

31

93

Purchases of property, plant and equipment, net of acquisitions

(43,932)

(38,863)

Proceeds from sale of business

391

—

Investments in non-marketable equity investments

(1,384)

—

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

(81,360)

(400)

Net cash used in investing activities

(126,254)

(39,170)

Cash flows from financing activities

Proceeds from line of credit

1,571,837

1,584,800

Payments on line of credit

(1,534,137)

(1,555,800)

Payments on other debt

(4,501)

(2,306)

Payments of contingent consideration and hold back payments to acquisitions

(674)

(9,467)

Dividends paid to shareholders

(10,069)

(8,922)

Payments to noncontrolling interest

(2,745)

(3,237)

Purchase of mandatorily redeemable noncontrolling interest

—

(4,105)

Proceeds from exercise of stock options

2,150

371

Tax payments related to issuance of restricted stock units

(4,937)

(3,692)

Excess tax benefit from equity-based awards

—

539

Payments of debt issuance costs

(38)

(1,888)

Purchase of treasury stock

(18,328)

(57,279)

Net cash used in financing activities

(1,442)

(60,986)

Effect of exchange rate changes on cash and cash equivalents

1,631

(9,678)

Increase in cash and cash equivalents

23,578

1,004

Cash and cash equivalents, beginning of period

55,264

60,304

Cash and cash equivalents, end of period

$
78,842

$
61,308

Supplemental disclosures

Cash paid for interest

$
8,138

$
4,976

Cash paid for income taxes

$
11,357

$
16,755

Non-cash operating, investing and financing activities

Acquisition of long-lived assets through capital leases

$
931

$
2,417

Acquisition of equipment through increase in accounts payable, net

$
405

$
(542)

Contract acquisition costs credited to accounts receivable

$
—

$
200

Dividend declared but not paid

$
11,462

$
9,342


	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.

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

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

~~(UNAUDITED)~~(Unaudited)

(1)OVERVIEW AND BASIS OF PRESENTATION

Summary of Business

~~TeleTech~~TTEC Holdings, Inc. ~~and its subsidiaries~~ (“~~TeleTech”~~TTEC”, or ~~the “Company”~~“the Company”) is a leading global ~~provider of technology enabled~~ customer experience ~~services. The Company~~as 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 improve~~its clients deliver frictionless customer experiences, strengthen customer relationships, brand recognition and ~~operational effectiveness~~loyalty through ~~a unique combination of technological innovation~~personalized interactions, improve their Net Promoter Score, customer satisfaction and ~~operational expertise. The Company’s portfolio of~~quality assurance, and lower their total cost to serve by combining innovative digital solutions ~~includes consulting, technology, operations and analytics~~with best-in-class service capabilities to enable aand deliver simplified, consistent and seamless customer experience across ~~every interaction channel~~channels and ~~phase~~phases of the customer lifecycle. ~~TeleTech’s 49,500~~TTEC’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.

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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-going~~ongoing basis, the Company evaluates its estimates including those related to derivatives and hedging activities, income taxes including the valuation allowance for deferred tax assets, ~~self-insurance reserves,~~ litigation reserves, restructuring reserves, allowance for ~~doubtful accounts,~~credit losses, contingent consideration, redeemable noncontrolling interest, and valuation of goodwill, long-lived and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash, 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.

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

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

~~(UNAUDITED)~~(Unaudited)

Recently ~~Issued~~Adopted Accounting Pronouncements

In ~~May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers~~”. ASU 2014-09 provides new guidance related to how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 specifies new accounting for costs associated with obtaining or fulfilling contracts with customers and expands the required disclosures related to revenue and cash flows from contracts with customers. While ASU-2014-09 was originally effective for fiscal years and interim periods within those years beginning after December ~~15, 2016, in August 2015,~~2019, the FASB issued ASU ~~2015-14, “Deferral of Effective Date”, deferring~~2019-12, “Simplifying the ~~effective date by one year, to be effective~~Accounting 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 company~~is 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 sheets~~simplify various aspects related to ~~the rights and obligations created by those leases and making targeted changes to lessor~~income 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 and~~2020, 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 impact~~adoption had no effect on the ~~consolidated~~ financial statements ~~and~~or related disclosures ~~evaluating software solutions and other tracking methods, and determining~~during 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 ~~amends~~provides 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 aspects~~anticipated 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 with~~LIBOR provisions in the ~~first quarter~~Company’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, the~~ASC 848 relating to contract modifications. The Company has not yet adopted the ~~new~~standard but does not expect that the adoption of this guidance ~~as applicable and this adoption did not~~will have a material impact on ~~its~~the Company’s financial position, results of ~~operation~~operations 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.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~“Intangibles – Goodwill and Other: Simplifying the Accounting for Goodwill Impairment~~”. ASU 2017-04 removes the need to complete Step 2 of any goodwill impairment test that has failed Step 1. The goodwill impairment will now be calculated as the amount by which a reporting unit’s carrying value exceeds its fair value. 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

~~Connextions~~Avtex

On April ~~3, 2017,~~8, 2021, the Company acquired, ~~all~~through its subsidiary TTEC Digital, LLC, 100% of the outstanding ~~shares~~stock of ~~Connextions, Inc., a health care~~Avtex Solutions Holdings, LLC (“Avtex”). Avtex is an end-to-end customer ~~service~~experience and CXaaS solutions provider ~~company, from OptumHealth Holdings, LLC. Connextions~~with offerings in Genesys and Microsoft cloud solutions. The business is operated as part of the TTEC Digital segment and is being ~~integrated~~fully consolidated into the ~~health care vertical~~financial statements of ~~the Customer Management Services (“CMS”) segment of the Company. Connextions employed approximately 2,000 at several centers in the U.S.~~TTEC.

~~The total~~Total cash paid at acquisition was ~~$80 million.~~$500.0 million ($490.0 million base purchase price plus cash, less debt and working capital estimate). The ~~purchase price~~Avtex transaction is subject to customary representations and warranties, ~~indemnities,~~holdbacks, and a net working capital adjustment. In connection with the acquisition, the Company and OptumHealth (directly and through affiliates) also entered into long-term technology and customer services agreements, and into transition services agreements to facilitate the transfer of the business. The Company ~~was required~~used cash from operations and drew down on its Credit Facility to ~~pay an additional $1.8 million for~~fund the acquisition. The Company finalized the net working capital adjustment ~~which was paid~~for $0.1 million during the third quarter of ~~2017. Additionally, fair value adjustments related~~2021 which was paid by Avtex to the ~~transition services agreements are expected to reduce~~Company in the ~~purchase price by $4.1 million resulting in a net estimated purchase price~~third quarter of ~~$77.7 million.~~

2021.

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes 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 ~~values~~value presented above.

The ~~Connextions~~Avtex customer relationships, intellectual property intangible, and tradename have been estimated based on the initial valuation and ~~are~~will be amortized over an estimated useful ~~life~~lives of ~~12 years.~~9, 3, and 1 years, respectively. The goodwill recognized from the ~~Connextions~~Avtex acquisition is estimated to be attributable, but not limited to, the acquired ~~work force~~workforce and expected synergies with ~~CMS. None of~~ the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and ~~the~~intangibles and operating results of ~~Connextions~~Avtex are reported within the ~~CMS~~TTEC Digital segment from the date of acquisition.

~~Atelka~~VoiceFoundry

On ~~November 9, 2016,~~August 5, 2020, TTEC Digital, LLC closed the ~~Company acquired all~~first phase of the ~~outstanding shares~~acquisition 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 customer~~preferred Amazon Connect cloud contact center ~~management~~service 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 to~~is 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 consisted~~financial 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.

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes 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 ~~third~~first quarter of ~~2017,~~2021, the Company finalized ~~its~~the valuation of ~~Atelka~~VF US for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.

The ~~Atelka~~VF US customer relationships ~~will be~~and tradename are being amortized over a useful ~~life~~lives of ~~12 years.~~4 and 2 years, respectively. The goodwill recognized from the ~~Atelka acquisition~~VF US Transaction is attributable, but not limited to, the acquired ~~work force~~workforce and expected synergies with ~~CMS. None of~~ the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and ~~the~~intangibles and operating results of ~~Atelka~~VF US are reported within the ~~CMS~~TTEC Digital segment from the date of acquisition.

~~rogenSi~~9

Table of Contents

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.

~~Table of Contents~~

~~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 ~~measured~~based 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.

Table of Contents

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 ~~applying~~Serendebyte 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 model~~purchase price equal to a multiple of Serendebyte’s adjusted trailing twelve month EBITDA for this particular acquisition. The noncontrolling interest was recorded at fair value on the date of acquisition. The fair value was based on significant inputs not observable in the market (Level 3 inputs)~~. Key assumptions include a~~ including forecasted earnings, discount rate of ~~4.6%~~35%, working capital requirements and ~~expected future~~applicable 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 ~~payments~~the 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 was~~income 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 assessment~~and, if necessary, an adjustment is recorded to increase or decrease the noncontrolling interest account to reflect the appropriate balance, with the ~~highest probability associated~~corresponding 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 achieving~~Serendebyte at least through 2023, and the ~~targeted EBITDA~~founder agreed not to compete with TTEC for ~~each earn-out year. As~~a period of four years after the disposition of the Remaining Interest.

Table of Contents

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 ~~third~~Company 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 adjustments~~TTEC Digital segment. The tax basis of the ~~contingent consideration~~acquired 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 probability~~Serendebyte 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 ~~2016~~2021 and ~~2017~~2020 noted above contributed revenues of ~~$43.6~~$130.4 million and ~~$101.9 million, and a~~ net ~~loss~~income of ~~$(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 2017~~ended September 30, 2021 and ~~2016~~2020, combines the consolidated results of the Company, ~~Connextions~~Avtex, VoiceFoundry US, VoiceFoundry ASEAN and ~~Atelka~~Serendebyte assuming the ~~Connextions acquisition~~acquisitions 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 forma~~proforma consolidated results are not to be considered indicative of the results if these acquisitions occurred in the periods mentioned above, or indicative of future operations or results. Additionally, the ~~pro forma~~proforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisition.

~~Assets and Liabilities Held for Sale~~

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

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes 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~~

~~CaféX~~Dissolutions

In the ~~first quarter~~ordinary course of ~~2015,~~business, the Company ~~invested $9.0 million in CafeX Communications, Inc. (“CaféX”) through~~operates different legal entities around the ~~purchase of a portion~~globe 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 applications~~entities when they are no longer needed to operate its business, and ~~websites with in-app video communication and screen share technology~~also forms new entities to ~~increase customer satisfaction and enterprise efficiency. TeleTech has deployed~~support the ~~CaféX technology as part~~needs 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 assets~~time, and may ~~not be recoverable. The Company tested the investment~~also result in ~~CaféX for impairment and concluded that the investment was not impaired at September 30, 2017~~losses or ~~December 31, 2016.~~

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Divestitures~~

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

~~Effective June 30, 2017, the Company sold the Technology Solutions Group~~gains 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. During~~operations.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 ~~domiciled~~that resulted in ~~Spain. Upon complete liquidation, $3.2~~a 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) ~~for~~from the ~~three and nine months~~realization 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 all~~exited two foreign subsidiaries that ceased operations and were removed from the consolidated financial statements as of the ~~outstanding shares~~reporting 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 acquisition~~Consolidated 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 agreed~~majority 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 present~~Accumulated other comprehensive income (loss) balance which represents the currency translation adjustment of the investment in the ~~business at~~foreign subsidiaries. The operating income of these subsidiaries prior to dissolution was not material to the ~~time~~year-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 ~~four~~two segments:

●

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 ~~CMS segment includes the~~Company’s management consulting practices deliver customer experience ~~delivery solutions which integrate innovative technology with highly-trained~~strategy, analytics, process optimization, and learning and performance services.

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 ~~experience professionals to~~growth and acquisition services optimize the buying journeys for acquiring new customers by leveraging technology and analytics to deliver personal experiences that increase the quantity and quality of leads and customers.

●

Customer Care Services: the Company’s customer ~~experience~~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 ~~channels and all stages of the customer lifecycle from an onshore, offshore or work-from-home environment;~~

touchpoints.

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

1213

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

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

~~(UNAUDITED)~~(Unaudited)

●

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

compliance.

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

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

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

Three Months Ended September 30, ~~2017~~2021


							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, ~~2016~~2020


							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, ~~2017~~2021

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

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Nine Months Ended September 30, ~~2016~~2020


							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

Table of Contents

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

~~Table of Contents~~

~~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. This~~2021; this client operates in the ~~communications~~financial services industry and is included in the ~~CMS~~TTEC Engage segment. This client contributed ~~9.5%~~13.3% and ~~10.4%~~11.8% of total revenue for the nine months ended September 30, ~~2017~~2021 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 accounts~~credit losses and may require pre-payment for services from certain clients. Based on currently available information, management does not believe significant credit risk existed as of September 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.

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

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


	Three Months Ended 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

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company performs a goodwill impairment assessment on at least an annual basis. The Company conducts its annual goodwill impairment assessment during the fourth quarter, or more frequently, if indicators of impairment exist. During the quarter ended September 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.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

(6)DERIVATIVES

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~CSS – component held-for-sale~~

The Company calculated the fair value of the trade name using a relief from royalty method 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, ~~2017~~2021 and ~~2016~~2020 (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

~~Table of Contents~~

~~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, ~~2017~~2021 and December 31, ~~2016~~2020 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

Table of Contents

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)

⁽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, ~~2017~~2021 and December 31, ~~2016.~~

2020.

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

~~Contract~~

~~Notional~~

~~Variable Rate~~

~~Fixed Rate~~

~~Commencement~~

~~Maturity~~

~~December 31, 2016~~

~~Amount~~

~~Received~~

~~Paid~~

~~Date~~

~~Swap~~

~~15 million~~

~~1 - month LIBOR~~

~~3.14~~

~~May 2012~~

~~May 2017~~

Fair Value Hedges

The Company enters into foreign exchange forward contracts to economically hedge against foreign currency exchange gains and losses on certain receivables and payables of the Company’s foreign operations. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net. As of September 30, ~~2017~~2021 and December 31, ~~2016~~2020 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.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Derivative Valuation and Settlements

The Company’s derivatives as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020 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

Table of Contents

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes 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, ~~2017~~2021 and ~~2016~~2020 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 Hedging Instruments				Not Designated as Hedging Instruments				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

Table of Contents

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes 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, ~~2017~~2021 and ~~2016~~2020 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 Hedging Instruments				Not Designated as Hedging Instruments				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.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The following presents information as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020 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.

Table of Contents

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 ~~consists~~consisted of the Company’s ~~first quarter 2015 $9.0 million investment, the fourth quarter 2016 $3.2 million investment and the first quarter 2017 $1.1~~total $15.6 million investment, is ~~recorded at $13.3 million which approximates fair value.~~fully impaired to 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, ~~2017~~2021 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 ~~2017~~2021 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, ~~2017~~2021 and December 31, ~~2016~~2020 (in thousands):

As of September 30, ~~2017~~2021


	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)

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

As of December 31, ~~2016~~2020


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

Table of Contents

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, ~~2017~~2021 and December 31, ~~2016~~2020 (in thousands):

As of September 30, ~~2017~~2021


	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, ~~2016~~2020


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

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

Table of Contents

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

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

~~(UNAUDITED)~~(Unaudited)

Contingent Consideration — - The Company recorded contingent consideration related to the acquisitions of ~~rogenSi~~VF US and ~~Atelka. These~~VF ASEAN. The contingent ~~payables were recognized at fair value~~payable for VF US was calculated using a ~~discounted cash flow approach and~~Monte 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 risks~~rate of ~~each acquisition including the country of operation, the nature of services and complexity of the acquired business, and other similar factors. These~~18.4%. The measurements were based on significant inputs not observable in the market. The Company ~~recorded~~will record interest expense each ~~period~~quarter using the effective interest method until the future value of these contingent ~~payables reached their~~payments 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 ~~all~~the 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 is~~as of March 31, 2020, June 30, 2020 and December 31, 2020, respectively, and were included in ~~Interest expense~~Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

~~The Company recorded~~ As of December 31, 2020, the final calculated contingent consideration ~~related to a revenue servicing agreement with Welltok in~~for FCR was zero.

During the fourth quarter of ~~2016, in which a maximum~~2020, the first quarter of ~~$1.25 million will be paid over eight quarters~~2021 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 by~~payables 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 million~~payables 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 during~~expected 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 during~~global 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.~~

~~During~~related taxes in the ~~second quarter of 2016, $0.3 million of liability was released due~~period 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 ~~assets~~asset 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.

Table of Contents

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes 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, ~~2017~~2021 was ~~11.7%~~30.6% and ~~15.0%~~21.9%, respectively. The effective tax rate for the three and nine months ended September 30, ~~2016~~2020 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, ~~2014~~2017 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, for~~year 2017 and 2018, the Philippines ~~branch for tax year 2015, for Belgium~~ for tax years ~~2014~~2017, 2018 and ~~2015, and for eLoyalty in~~2020, 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 ~~third~~recovery 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 closed~~valuation allowance were recorded in the ~~audit in Hong Kong~~amounts of $0.3 million, for ~~2014 with no changes. Additionally, during~~deferred 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 audit~~valuation 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 (prior~~first and third quarters of 2021, changes to ~~acquisition) with no changes. The Company also closed~~the valuation allowance were recorded in the ~~fourth quarter~~amount 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 ~~2011~~2021 and ~~2020.~~2022. The aggregate effect on income tax expense for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 was approximately ~~$2.8~~$0.5 million benefit and ~~$2.0~~$1.1 million benefit, respectively, which had ~~a favorable~~an 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, ~~2017~~2021 and ~~2016~~2020 was approximately ~~$8.9~~$4.2 million and ~~$4.5~~$2.2 million benefit, respectively, which had ~~a favorable~~an 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 three~~2021 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 the~~both 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 ~~that~~servicing 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 included~~Restructuring 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.

Table of Contents

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

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes 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, ~~2017~~2021 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 ~~accruals~~accrual is as follows (in thousands):


	Reduction		Facility Exit and
	in Force		Other Charges		Total

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

							Reduction		Facility Exit and
							in Force		Other Charges		Total

Balance as of December 31, 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.

~~Integration~~Severance 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.

Table of Contents

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 of~~2021 the Connextions acquisition, certain integration activities were completed and $5.6 million of additional expenses were incurred and paid. These integration activities included the hiring, training and licensing of a group of employees at new delivery centers as one of the acquired centers was closed during the third quarter of 2017 and one of the acquired centers will be closed during the fourth quarter of 2017. The Company ~~has also incurred significant expenses~~recognized impairment losses, net related to leasehold improvement assets and right of use lease assets of $(0.3) million and $0.4 million, respectively, across the ~~integration~~TTEC 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 systems~~TTEC Digital and ~~has paid duplicative software costs and facilities expenses for several areas during the transition period.~~TTEC Engage segments.

~~Table of Contents~~

~~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 ~~First~~Fifth 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 a~~to 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 that~~Facility matures on February ~~11, 2021~~14, 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 initial~~the expiration of the revolving line of credit.

The maximum ~~aggregate~~ commitment ~~of $900.0 million, and an accordion feature of up to~~under 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 exercised~~lenders in an amount equal to the ~~Credit Facility’s accordion feature to increase the total commitment under~~unused portion of the Credit Facility multiplied by a rate per annum as determined by reference to ~~$1.2 billion. All other material terms~~the Company’s net leverage ratio. The Credit Agreement contains customary affirmative, negative, and financial covenants, which remained unchanged from the 2016 Credit Facility, except that the Company is now obligated to maintain a maximum net leverage ratio of 3.50 to 1.00, and a minimum interest coverage ratio of 2.50 to 1.00. The Credit Agreement permits accounts receivable factoring up to the greater of $75 million or 25 percent of the ~~Credit Agreement remained unchanged.~~average book value of all accounts receivable over the most recent twelve-month period.

Base rate loans bear interest at a rate equal to the greatest of (i) Wells Fargo’s prime rate, (ii) one half of 1% in excess of the federal funds effective rate, and (iii) 1.25% in excess of the one month ~~London Interbank Offered Rate (“LIBOR”);~~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 payable~~26

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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 ~~Agreement~~Facility 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, ~~2017~~2021 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, ~~2017~~2021 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 ~~Agreement~~Facility 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.

~~Table of Contents~~

~~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.

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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

Table of Contents

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

Table of Contents

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

Table of Contents

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

$
—

$
—

~~Table of Contents~~

~~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 ~~other~~Other comprehensive income (loss), including current period other comprehensive income (loss) and reclassifications out of accumulated other comprehensive income (loss) (in thousands):


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

Accumulated other comprehensive income (loss) at December 31, 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)

Table of Contents

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 ~~statement~~Statement 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)

~~Table of Contents~~

~~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
September 30,

Nine Months Ended
September 30,


2017

2016

2017

2016

Shares used in basic earnings per share calculation

45,838

47,081

45,816

47,771
Effect of dilutive securities:

Stock options

10

6

9

11
Restricted stock units

517

214

513

292
Performance-based restricted stock units

2

14

10

15
Total effects of dilutive securities

529

234

532

318
Shares used in dilutive earnings per share calculation

46,367

47,315

46,348

48,089

Table of Contents

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

For the three months ended September 30, ~~2017~~2021 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 million~~4 thousand and ~~0.1 million,~~0, respectively, outstanding which were ~~outstanding, but not included in~~excluded from the computation of diluted net income per share because the effect would have been anti-dilutive. For the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, there were RSUs of ~~0.0 million~~78 thousand and ~~0.1 million,~~167 thousand, respectively, outstanding which were ~~outstanding, but not included in~~excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.

~~Table of Contents~~

~~TELETECH HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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

All equity-based awards to employees are recognized in the Consolidated Statements of Comprehensive Income (Loss) at the fair value of the award on the grant date. During the three and nine months ended September 30, ~~2017~~2021 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 ~~the~~this total compensation ~~expense, $1.4~~expenses, $2.0 million and ~~$2.9~~$4.4 million ~~was~~were recognized in Cost of services and ~~$2.1~~$2.6 million and ~~$5.5~~$7.6 million ~~was~~were 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, ~~2017~~2021 and ~~2016,~~2020, the Company granted ~~724,951~~219,883 and ~~443,875~~539,697 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 ~~Options~~Unit Grants

During 2019, the Company awarded performance restricted stock units (“PRSUs”) that are subject to service and performance vesting conditions. If defined minimum targets are met, the annual value of the PRSUs issued will be between $0.4 million and $1.4 million and vest immediately. If the defined minimum targets are not met, then no shares will be issued. The award amounts are based on the Company’s annual adjusted operating income for the fiscal years 2019, 2020 and 2021. Each fiscal year’s adjusted operating income will determine the award amount. The Company recognized compensation expense related to ~~subsidiary performance options~~PRSUs of ~~zero~~$0.3 million and ~~$(0.3)~~$0.8 million, respectively, for the three and nine months ended September 30, ~~2017, respectively.~~2021. The ~~option benefit~~Company recognized compensation expense related to PRSUs of $0.4 million and $1.1 million, respectively, for ~~2017 resulted from~~the three and nine months ended September 30, 2020.

During 2020, the Company ~~concluding~~awarded PRSUs that are subject to service and performance vesting conditions. If defined minimum targets are met, the ~~performance targets~~annual value of the ~~subsidiary~~PRSUs 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.

Table of Contents

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 direct~~an indirect 100% beneficial ownership interest in Avion and Airmax. During the nine months ended September 30, ~~2017~~2021 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 management~~Ms. 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, ~~2017~~2021 and ~~2016,~~2020, the Company ~~paid $55 thousand~~recorded 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, which~~Ms. Regina M. Paolillo is a ~~company that TeleTech holds~~member 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 $0.0~~recorded revenue of $0.4 million ~~and $0.1 million, respectively, of software from CaféX. See Note 2~~in connection with services performed for ~~further information regarding this investment.~~Unisys.

3034

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

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

We caution you not to rely unduly on any forward-looking statements. Actual results may differ materially from ~~what is~~those 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” section~~Part II, Item 1A. Risk Factors of this report and in Item 1A. Risk Factors in our ~~2016~~ Annual Report on Form ~~10-K. The risk~~10-K for the year ended December 31, 2020. Important factors ~~we wish for you~~that could cause our actual results to ~~be aware of~~differ materially from those indicated in ~~particular~~the forward looking statements include, ~~but~~among 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 limited~~sufficiently disruptive to ~~the risk~~allow us to maintain and grow our market share; risks inherent in the ~~volatile and uncertain economic conditions, the fact that a large portion~~reliability 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 risk~~information 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 to~~consistently deliver uninterrupted service to our ~~clients, the risk of not being able~~clients; 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 ~~inability~~ability to attract and retain qualified and skilled personnel ~~impact of changing technologies on~~at a price point that we can afford and our ~~services and solutions, the restrictive covenants contained in our credit facility that may impact our ability~~clients are willing to ~~execute our strategy and operate our business, the supply chain disruption related risk, the risk to innovation due to unforeseen intellectual property infringement, the risk related to~~pay; our M&A activity, ~~and~~including our ability to identify, acquire and properly integrate acquired businesses in accordance with our ~~strategy,~~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 volatility~~Delaware choice of ~~our stock price that may result in loss of investment.~~ dispute resolution risks.

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

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

RESULTS OF OPERATIONS

Executive Summary

~~TeleTech~~TTEC Holdings, Inc. (“~~TeleTech”~~TTEC”, “the Company”, “we”, “our” or “us”) is a leading global ~~provider of technology enabled~~ customer experience ~~services. We help leading~~as a service (“CXaaS”) partner for many of the world’s iconic brands, ~~improve~~Fortune 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 ~~simplifying~~combining innovative digital solutions with best-in-class service capabilities to enable and ~~personalizing interactions with their customers. We~~ deliver ~~thought leadership, technology~~simplified, consistent and ~~innovation that create~~seamless customer ~~strategies designed to~~experience across channels and phases of the customer lifecycle.

Our CXaaS solutions enhance our clients’ customers experience and help differentiate our clients from their ~~competition; data~~competition.

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 interactions~~artificial intelligence ("AI"), machine learning ("ML"), robotic process automation ("RPA"), and ~~increase~~real-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 Company~~us from many competitors by combining design, strategic consulting, best-in-class technology, data analytics, process optimization, system ~~design~~integration and ~~integration,~~ operational ~~excellence,~~excellence. This unified offering is value-oriented, outcome-based and ~~technology solutions~~delivered to large enterprises, governments and ~~services.~~disruptive growth companies on a global scale.

~~We have developed tailored expertise~~During 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, media~~United 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, travel~~the United Kingdom with the help of 62,300 consultants, technologists, and ~~transportation industries. We target customer-focused industry leaders in the Global 1000~~CX 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 outsourcing~~core customer care services ~~of our CMS segment into higher-value~~with consulting, data analytics, ~~digital marketing~~insights, 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 revenue~~needs of our clients, and further scale our end-to-end integrated solutions platform. To this end we ~~reported~~have 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 came~~destroyed. 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, CTS~~unauthorized 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. For~~could 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 ~~Board~~employee 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 ~~intent~~recommendations and guidelines provided by the World Health Organization, the U.S. and European Centers for Disease Control and Prevention, the U.S. Occupational Safety Association, and local governments in jurisdictions where our customer experience centers are located.

Although our business 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 stockholders~~work from home environment, and the geographic diversification of our ~~common stock, after consideration~~delivery 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 needs~~customer, patient and ~~liquidity factors. Given~~citizen 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 generation~~operational 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 with~~deliver business are experiencing ongoing COVID-19 infection surges, including as the ~~needs~~result of the ~~Company. The initial dividend~~emergence of ~~$0.18 per common share was paid~~certain 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, 2015~~our clients’ businesses and its effect on the magnitude and timing of their buying decisions. Further, while to ~~shareholders~~date 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 operating~~provide strategic value and ~~reportable segments, which provide an integrated set of~~differentiation 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 clients~~platforms 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 across~~customer 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 manage~~omnichannel ecosystem in a cloud, ~~on-premise~~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 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 consistent~~interaction delivery, by providing the essential CX omnichannel and ~~superior experience across all touch points~~application 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.

Table of ~~customers through a combination of our highly trained, client-dedicated sales professionals and our proprietary Revana Analytic Multichannel Platform~~TM~~. This platform continuously aggregates individual customer information across all channels into one holistic view so as to ensure more relevant and personalized communications.~~Contents

●

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 ~~and~~and/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 ~~2016~~2020 including an increase of ~~0.5%~~$3.1 million, or ~~$1.7 million~~0.8%, due to foreign currency fluctuations. ~~This~~The 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 $44.5~~a $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 ~~2017~~2021 income from operations ~~increased 26.1% to $15.8~~decreased $27.3 million, or ~~4.4%~~51.1%, to $26.1 million or 4.6% of revenue, ~~from $12.5~~compared to $53.4 million or ~~4.0%~~10.8% of revenue in the third quarter of ~~2016. This increase~~2020. 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 ~~increases~~a reduction in ~~CMS organic~~a large multi-year government contract and ~~inorganic volumes, a $3.8 million increase due to foreign currency fluctuations and a deprioritization~~increased amortization of ~~certain non-essential businesses and activities,~~acquisition related intangible assets, partially offset by ~~investments to build out, hire~~the 2021 and ~~train for~~2020 acquisitions which accelerated growth in the ~~increased fourth quarter 2017 seasonal volumes, which increased third quarter 2017 CMS costs. In addition, income~~cloud revenue platform.

Income from operations in the third quarter of ~~2017~~2021 and ~~2016~~2020 included ~~$6.0~~$0.2 million ~~($5.6~~and $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 ~~23,000~~23,200 workstations, representing ~~56%~~58% of our global delivery capability. Revenue for our ~~CMS and CGS segments that is~~TTEC 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 capacity~~seat 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%.

September 30, 2017

September 30, 2016


Total





Total




Production

% In

Production

% In

Workstations

In Use

Use

Workstations

In Use

Use

Total centers

Sites open >1 year

39,856

30,916

78
%
34,538

24,284

70
%
Sites open <1 year

969

949

98
%
1,104

967

88
%
Total workstations

40,825

31,865

78
%
35,642

25,251

71
%

~~While~~Post 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 utilize~~refine our ~~offshore delivery capabilities~~site strategy and ~~expect this trend to continue~~capacity as we finalize plans with our clients ~~some~~and prospects.

Some of our clients ~~have~~may be subject to regulatory pressures to ~~bring the services onshore to the United States. In light of these trends we~~serve 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.

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Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of our ~~financial condition~~Financial Condition and ~~results~~Results of ~~operations are~~Operations 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, ~~2017~~2021 compared to three months ended September 30, ~~2016~~2020

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, ~~2017~~2021 and ~~2016~~2020 (amounts in thousands). All inter-company transactions between the reported segments for the periods presented have been eliminated.

~~Customer Management Services~~TTEC 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	%

Three Months Ended September 30,


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 Services~~TTEC Digital segment was ~~attributable to a $55.3 million net increase~~driven by increases in ~~organic~~the cloud platform and ~~inorganic client programs~~the systems integration practice, including the ~~Atelka~~acquisitions 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 ~~2017~~2021 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, ~~2017~~2021 and ~~2016,~~2020, respectively.

~~Customer Growth Services~~TTEC Engage


	Three Months Ended September 30,
	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	%

Three Months Ended September 30,


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 ~~decrease~~increase in revenue for the ~~Customer Growth Services~~TTEC Engage segment was due to a ~~$1.6~~net 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.

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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 ~~increased~~decreased to ~~5.1%~~3.9% in the third quarter of ~~2017~~2021 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, ~~2017~~2021 and ~~2016,~~2020, respectively.

~~Customer Technology Services~~

Three Months Ended September 30,


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
%

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~~

Three Months Ended September 30,


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)
%

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, ~~2017~~2021 interest income ~~increased~~decreased 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 ~~2017~~2021 from ~~$2.0~~$2.8 million during ~~2016~~2020 due to ~~larger outstanding balances on~~higher 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, ~~2017~~2020 was a ~~$3.2~~$17.4 million ~~gain~~expense related to ~~dissolution~~the deconsolidation of ~~a foreign entity~~two subsidiaries and ~~a release~~the removal of ~~its cumulative~~the 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).

~~Table of Contents~~

Income Taxes

The effective tax rate for the three months ended September 30, ~~2017~~2021 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, ~~2017~~2021 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 on~~the cybersecurity incident, a $3.1 million benefit related to equity compensation, ~~$0.2~~a $2.4 million benefit related to the amortization of purchased intangibles, $6.4 million of expense related to ~~return to provision adjustments, $2.4~~changes in valuation allowances, and $0.4 million of ~~benefit from restructuring expenses, and $0.1 million of~~expense related to other items, the Company’s ~~effective~~normalized 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, ~~2017~~2021 compared to nine months ended September 30, ~~2016~~2020

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, ~~2017~~2021 and ~~2016~~2020 (in thousands). All intercompany transactions between the reported segments for the periods presented have been eliminated.

~~Customer Management Services~~TTEC 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	%

Nine Months Ended September 30,


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
%

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The increase in revenue for the ~~Customer Management Services~~TTEC Digital segment was ~~attributable to a $145.9 million net increase~~driven by significant increases in ~~organic~~the cloud platform and ~~inorganic client programs~~the systems integration practice including ~~Atelka~~acquisitions of Avtex and ~~Connextions~~VoiceFoundry, offset by ~~program completions~~reductions 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 ~~increased~~decreased to ~~5.5%~~7.6% for the nine months ended September 30, ~~2017~~2021 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, ~~2017~~2021 and ~~2016,~~2020, respectively.

~~Customer Growth Services~~TTEC 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	%

Nine Months Ended September 30,


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 ~~decrease~~increase in revenue for the ~~Customer Growth Services~~TTEC Engage segment was due to a ~~$10.2~~net 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.

~~Table~~Operating income increased due to growth in revenue, revenue mix, and increased profitability in several offerings and an $8.0 million increase due to grants received related to COVID-19 relief. Partially offsetting these increases were costs of ~~Contents~~

~~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 increased~~net $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 attributable~~U.S. (see Part I. Item 1, Financial Statements, Note 9 to ~~pricing improvements and other profit optimization actions, along with reductions in amortization expenses and~~the 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~~

Nine Months Ended September 30,


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
%

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.

~~The~~result, operating income as a percentage of revenue increased to 10.5% for the nine months ended September 30, ~~2017~~2021 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, ~~2017~~2021 and ~~2016,~~2020, respectively.

~~Customer Strategy Services~~

Nine Months Ended September 30,


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)
%

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, ~~2017~~2021 interest income ~~increased~~decreased to ~~$2.0~~$0.6 million from ~~$0.8~~$1.4 million in the same period in ~~2016.~~2020. Interest expense ~~increased~~decreased to $8.7 million during ~~2017~~2021 from ~~$5.8~~$15.5 million during ~~2016~~2020 due to ~~larger outstanding balances on~~higher utilization of the line of credit ~~primarily due~~offset by lower interest rates, and a $6.3 million decrease period over period in the charge related to the ~~acquisitions, and higher average~~future 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), ~~Net~~net 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, ~~2017~~2021 was a ~~$3.2~~$0.7 million ~~gain~~expense related to ~~dissolution~~the 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, ~~2017~~2020 was ~~$3.2~~a $4.4 million ~~of estimated losses~~benefit 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).~~

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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, ~~2017~~2021 was ~~15.0%~~21.9%. This ~~compares~~compared 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, ~~2017~~2021 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, $0.2~~the cybersecurity incident, $8.8 million of expense related to changes in valuation allowances, a $5.9 million benefit related to ~~return to provision, $3.9~~the amortization of purchased intangibles, a $8.4 million benefit related to ~~restructuring expenses~~equity-based compensation, and ~~$1.3~~$0.7 million ~~benefit~~of expense related to ~~businesses held for sale,~~other items, the Company’s ~~effective~~normalized 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 ~~concentrating~~safeguarding and ~~safeguarding~~optimizing the use of our global cash and cash equivalents. ~~While the majority of our~~Our cash is held ~~outside~~in the U.S.~~, we prefer to hold~~ in U.S. ~~Dollars~~dollars, and outside of the U.S. in ~~addition to the local currencies of our~~U.S. dollars and foreign ~~subsidiaries.~~currencies. We expect to use our ~~offshore~~ cash to ~~support~~fund 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 ~~high~~bank 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, ~~2017~~2021 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, ~~2017~~2021 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.

Table of Contents

Cash Flows from Operating Activities

For the nine months ended September 30, ~~2017~~2021 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 was~~decrease 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 ~~decrease~~reduction in ~~cash collected from accounts receivable.~~net working capital.

Cash Flows from Investing Activities

For the nine months ended September 30, ~~2017~~2021 and ~~2016, we reported~~2020, net cash flows used in investing activities ~~of $126.3~~was $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.

~~Table of Contents~~

Cash Flows from Financing Activities

For the nine months ended September 30, ~~2017~~2021 and ~~2016, we reported~~2020, net cash flows ~~used in~~provided by (used in) financing activities ~~of $1.4~~was $362.5 million and ~~$61.0~~$(48.9) million, respectively. The change in net cash flows from ~~2016~~2020 to ~~2017~~2021 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 payments~~shareholder 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) ~~increased~~decreased slightly for the nine months ended September 30, ~~2017~~2021 compared to the nine months ended September 30, ~~2016~~2020 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, ~~2017~~2021 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):


	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
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 maturities~~There 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 as~~2020 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

⁽¹⁾

~~Includes estimated interest payments based on the weighted-average interest rate, unused commitment fees, current interest rate swap arrangements, and outstanding debt as of September 30, 2017.~~

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~~Contractual obligations to be paid in a foreign currency are translated at the period end exchange rate.~~

Purchase obligations primarily consist of outstanding purchase orders for goods or services not yet received, which are not recognized as liabilities in our Consolidated Balance Sheets until such goods and/or services are received.

~~The contractual obligation table excludes our liabilities of $4.0 million related to uncertain tax positions because we cannot reliably estimate the timing of cash payments.~~

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 ~~2017~~2021 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 ~~2017~~2021 capital expenditures is primarily driven by new client contracts and the corresponding requirements for additional ~~delivery~~customer 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, ~~2017~~2021 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, ~~2017~~2021 and ~~2016,~~2020, respectively. We have ~~experienced~~had long-term relationships with our top five TTEC Engage clients, ranging from 1015 to 2122 years, with ~~the majority~~all 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.

~~The~~Some contracts with our five largest clients expire between ~~2018~~2021 and ~~2020. Additionally, a particular client may~~2023, 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

~~Table of Contents~~

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.

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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, or~~and 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:

~~Contract~~

~~Notional~~

~~Variable Rate~~

~~Fixed Rate~~

~~Commencement~~

~~Maturity~~

~~December 31, 2016~~

~~Amount~~

~~Received~~

~~Paid~~

~~Date~~

~~Swap~~

~~15 million~~

~~1 - month LIBOR~~

~~3.14~~

~~May 2012~~

~~May 2017~~

Foreign Currency Risk

Our subsidiaries in ~~Bulgaria, Costa Rica, Mexico, Poland, and~~ the Philippines, Mexico, India, Bulgaria and Poland use the local currency as their functional currency for paying labor and other operating costs. Conversely, revenue for these foreign subsidiaries is derived principally from client contracts that are invoiced and collected in U.S. dollars or other foreign currencies. As a result, we may experience foreign currency gains or losses, which may positively or negatively affect our results of operations attributed to these subsidiaries. For the nine months ended September 30, ~~2017~~2021 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.

~~Table of Contents~~

Our cash flow hedging instruments as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020 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

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	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)

⁽¹⁾

2020.

The fair value of our cash flow hedges atas of September 30, ~~2017~~2021 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 ~~increase~~decrease in fair value from December 31, ~~2016 largely~~2020 reflects ~~a broad weakening~~changes in the currency translation between the U.S. ~~dollar.~~dollar and Mexican Peso and U.S. dollar and Philippine pesos.

We recorded net ~~losses~~gains 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, ~~2017~~2021 and ~~2016,~~2020, respectively. These ~~losses~~gains 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, ~~2017~~2021 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, ~~2017~~2021 or December 31, ~~2016.~~2020.

~~Table of Contents~~

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.

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Disclosure Controls and Procedures

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

~~Management of~~We carried out an evaluation under the ~~Company,~~supervision and with the participation of ~~its~~management, including the CEO and CFO, ~~evaluated~~of the effectiveness of ~~the Company’s~~our disclosure controls and procedures, as of ~~September~~June 30, ~~2017. Based on that evaluation, as of~~2021, the end of the period covered by this Form ~~10-Q, the Company’s~~10-Q. Based on this evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were ~~not~~ effective ~~to provide~~at the reasonable assurance ~~because 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.

~~Table of Contents~~

~~Remediation of Prior Material Weakness~~

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

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

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

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

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

Changes in Internal Control over Financial Reporting

There ~~have been~~were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2017~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

~~There were no material changes~~In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A, Risk factors, in our 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 described~~identified in our 2020 Annual Report, ~~on Form 10-K for~~please consider the ~~year ended December 31, 2016.~~

following revised risk factor.

4548

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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.

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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 is~~In November 2001, our Board of Directors (“Board”) authorized a stock repurchase program with the ~~detail~~objective of increasing stockholder returns. The Board periodically authorizes additional increases to the program. The most recent Board authorization to purchase additional common stock occurred in February 2017, whereby the Board increased the program allowance by $25.0 million. Since inception of the ~~issuer purchases made~~program 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 ~~quarter~~three months ended September 30, ~~2017:~~

Total Number of

Approximate Dollar

Shares

Value of Shares that

Purchased as

May Yet Be

Part of Publicly

Purchased Under

Total Number

Announced

the Plans or

of Shares

Average Price

Plans or

Programs (In

Period

Purchased

Paid per Share

Programs

thousands)(1)

June 30, 2017

$
26,580

July 1, 2017 - July 31, 2017

—

$
—

—

$
26,580

August 1, 2017 - August 31, 2017

—

$
—

—

$
26,580

September 1, 2017 - September 30, 2017

—

$
—

—

$
26,580

Total

—

—

⁽¹⁾

In November 2001, our Board of Directors (“Board”) authorized a stock repurchase program with the objective of increasing stockholder returns. The Board periodically authorizes additional increases to the program. The most recent Board authorization to purchase additional common stock occurred in February 2017, whereby the Board increased the program allowance by $25.0 million. Since inception of the program through September 30, 2017, the Board has authorized the repurchase of shares up to a total value of $762.3 million, of which we have purchased 46.1 million shares on the open market for $735.8 million. As of September 30, 20172021. As of September 30, 2021 the remaining amount authorized for repurchases under the program was approximately $26.6 million. The stock repurchase program does not have an expiration date.

ITEM 5. OTHER INFORMATION

None

~~Table of Contents~~

ITEM 6. EXHIBITS


Exhibit		Incorporated Herein by Reference
No.
Exhibit ~~No.~~Description	~~Exhibit Description~~
Form
10.85*Exhibit	~~Employment Agreement between Anthony Y. Tsai and TeleTech Services Corporation effective as of September 5, 2017.~~
	Filing Date
~~10.92~~	Third Amendment to Amended and Restated Credit Agreement and Incremental Increase Agreement for a senior secured revolving credit facility with a syndicate of lenders, led by Wells Fargo Bank, National Association, as agent, swing line and fronting lender, effective as of October 31, 2017 (incorporated by reference as Exhibit 10.92 to TeleTech’s Current Report on Form 8-K filed on November 1, 2017).

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

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

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

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

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

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

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

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

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

101.DEF		XBRL Taxonomy Extension Definition Linkbase

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

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

104		The cover page from TTEC Holdings, Inc’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL

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



	*	Filed or furnished herewith.

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

4751

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SIGNATURES

~~SIGNATURES~~

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


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


Date: November ~~8, 2017~~9, 2021	By:	/s/ Kenneth D. Tuchman
		Kenneth D. Tuchman
		Chairman and Chief Executive Officer

Date: November ~~8, 2017~~9, 2021	By:	/s/ Regina M. Paolillo
		Regina M. Paolillo
		Chief Financial Officer

4852


	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


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


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

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


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


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


	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


								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


							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


	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)


					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)


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

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


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

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


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