TTEC - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to TTEC's Third Quarter 2018 Earnings Conference Call. [Operator Instructions]. This call is being recorded at the request of TTEC. I would now like to turn the call over to Paul Miller, TTEC's Senior Vice President, Treasurer and Investor Relations officer. Thank you, sir, you may begin.

Paul Miller

you us thank and morning, for today. joining Good to third ended quarter is XX, hosting results its call this period TTEC financial discuss for XXXX. September the our Officer; Participating and Officer. Chief Ken call on Administrative Tuchman, today's Financial and Chief Regina and Executive Paolillo, our are Chairman issued TTEC release financial results. announcing Yesterday, its press a

report financial items you third the quarter, also encourage will While that for in this reflect call XX-Q. complete performance document, read on our quarterly to within discussed information Form about our we

want you remind I and discussed matters forward-looking call current related today's begin, which financial note operating beliefs reflect occur. in to forward-looking statements we obligation Before outlook, management's to that statements a of that include based business revise our goals this may on Please and and information the are of to these may performance, our undertake this that we new developments as no as assumptions. call, result opinions date of

factors uncertainties subject are those described statements Forward-looking differ today. materially results expected other to cause from or various risks, our actual to and that the could

the available risk our Ken detailed call a Tuchman, this our Chief please Officer. be review and call report Executive For to Investor Relations of will of on I now Form turn will replay description annual our under XX-K. more website section. over A conference factors, on the TTEC's Chairman

Kenneth Tuchman

deliver value investing transformational everyone. accomplish client to experiences. over in and to good this, appreciate deliberately our relationships participation been value call. that grow your morning, line and maximum enduring and clients. We to ago, deliver To increase has top bottom years XX and shareholder continuous founding change Thanks, our been the our innovation customer by we've Paul, company's building on today's strategy Since exceptional consistent,

more experience customer company, have care, and end-to-end growth consulting, and global services into leading a trust offering recently, and capabilities We across technology technology, transformed safety.

results as experience $XXX ever-expanding year. sale, pipeline over growing were XX.X% period. over evidenced bookings, In offerings up prior and last measurable bookings XX% for million and resonating to by bookings. held the in of excluding $XXX record same month the marketplace nine of delivering suite period increased integrated million, our quarter XXXX, an Year-to-date, level our is customer Our assets third the

signings Regina our segments. strong her trend business especially seeing New sequential and financial the continue and bottom momentum in will line CTS business context further were across that We're will provide in CMS XXXX. commentary. we top Shortly, a into improvement, anticipate positive with

acquisitions, taking seeking a creating was rapid a and partner enable on base. our We're North CRM were of optimize talent a field During included the also clients, fragmented knowledge-based training, systems better line to loyalty to the comprised to tied and platforms based client brand right complex our in an immediate our quarter, in Attracting enabling is our we're around customers. is growth. enable proactive achieve SaaS-based the and field CMS we the their insights strategic of wages with for approach with training services materials our brokers. and implementation which client Every sector. improving a of dialogue just American an number meaningful supported our we and providing modernizing curriculum, are service top is They that and platform our managed outdated-technology this and operations, to omni-channel experience ambassadors of client and infrastructure, wages helping recent price customer transformational good interaction their financial are and will business, their more improve to frontline team by increases our to to build made operations addressing brokers from clients, dynamic progress them leverage in to fair A one in education helping competitive this transformed education set digitized drive curate customer that and example associates. the innovate partnering retaining of creation customer relevant deeper of a engaging ongoing differentiated and our customer the analytics financial wages and win engagement With modern product services TTEC numbers of optimization day, advantage clients satisfied, to impact services with relationships. of broker By loyal agile complete. ways simplify real-time platform, and our connect growing platform, change content brand diversified customer value, insights. new This leading more and XXX,XXX

Additionally, and differentiated value clients. to It our improving further in is analytics that engagement for business and we're as our our methodology efficiency, well across experience increasing deep as one strategy, provides outcomes driving operations our technology, TTEC cost customer savings clients.

enterprises. year. Fortune SaaS XX% quarter impact As the technology work record the partner, and was Services to which their of growth digitize now the are want contributing their of rate stronger over government cross growth doing business that revenue the a the measurable design, a in also year XXXX XXXX $X.X reoccurring in segment, the rate the at million, section Supported increasing enterprise I a increasing period. $XX the prior XX%, transformation. over cloud go-to third of customer are XX% bookings there's epicenter the digital nine guide Customers partner prior and from highlight accelerating for Operating third broad prior trusted over experiences. subscriptions, reported which million, period, increased strength by solutions Today, we their we is CTS in performance, of the our higher a and month to income we record deliver to quarter XXX CX revenue build Technology operate year-to-date of XX%

modern of chat, voice, video, seamless third-party Through noteworthy touch customers. box supporting differentiator and driving value We are interaction than companies their CX text, for TTEC the digital systems. variety extending and inclusive technology, which including deliver applications XX,XXX our for and to supporting connections traditional a and SaaS-based more with a is technology licenses, between e-mail, omni-channel integration in providing We XXX,XXX design hubs digital This facilitates AI proposition approximately clients, our is the core large points, reoccurring enterprises, of TTEC associates. SMS clients. a

we flexible build-to-enterprise Machine clients. providing all partner advanced seamless customers As solutions touch scale, for solutions enabling technologies, our to with analytics clients clients, on we experiences priorities, provide create are AI these continue our address introduce focused embedded to across and and solutions. Extensible, our advantages and their transactions points. learning significant highest go-forward to in that new frictionless

innovate, proprietary including market. solutions, of number these capabilities and recently brought continue iterate a improve to to We

in proficiency insights, Simulated For then to prospect example, a learning is the silos using machine interact both time training analyzing that data associates our of for RealPlay determine improving allows a engagement. This modeling and customer Learning bot integrating Humanify capability engagement intelligence speed training and across artificial predictive Insights increases Platform. With real experience. better uses results improved with and this data driving capture associates, outcomes prescribe and actions solution, conduct real-time scenarios. to and disparate to to TTEC next-best we and

turnkey empowers best their interaction increase an surfacing augmenting in provides analytics time. to our that inquiries is service the responses real to leveraging sell every and real-time assist opportunity principles and It to process through recommend solution, customer to offers and revenue, and on AI built by and And associates efficiency is growth. customer personalization, customer technology for the increasing loyalty accuracy cross upsell supporting Associate associates, a rapidly sales retention.

of and and strategic aligned continued been we experience. $XXX portfolio On its with this turn all projected subscription-based brands the of XX% the with business model We've rate EBITDA to and has value. of modern experience cash solutions of deliberate we now annualized margin CTS the today's In call has thank of Our over customer around in has adjusted growth for revenue technology attractive focus you innovative our support, TTEC -- percent flow, With worldwide. of current advisors of and XX%. million shareholder behalf revered significant world, an reached to evolution Regina. trusted your I'll and revenue the add for a with XX-plus customer its potential believe business run CX customer the employees rate, ourselves scale closing, most single the

Regina Paolillo

our growth continued strategic to advancing CTS. year-over-year XXXX financial quarter earnings segments. execute call. CTS and above year. CMS and third or targets with last morning. new Thanks, business in our an to start Good I'll our we tailwind, bookings with quarter, CGS third at In regard the with was Most on in related XX% levels the noteworthy progress prior to consistent tailwinds update Ken. With both in our and these the CSS, signings, a for XX% highlighted the continued momentum growing headwinds versus the

with Excluding target an CGS' about assets above above CTS' in for revenue sale, XX%. its its XX% approximately adjusted margin grew EBITDA high the XX% at held grew revenue teens at target growth, with at teens XX%, And XX%. at adjusted returned adjusted X.X% the near EBITDA to approximately the increasing high double-digit revenue now XX%. EBITDA approximately CSS' approaching mid-teens with at

restated in experienced million year million. second last and quarter, approximately our against operating sequential overperformed guidance. headwinds against is headwinds CMS last these $X overperformance quarter's evidenced CMS' the the Regarding -- and $X improvement progress by Revenue income by

We good set North American progress CMS wages. to our clients market-based with working are making

clients especially have the effective. Our to with we associates. X,XXX labor are summits tailored, market-specific, client To date, reprice collaborated

quarter positively reported year financial prior third new and bookings pipeline XXXX's higher down There's ramp further On conversion quarter. basis, continued which a -- XXXX. erosion the GAAP Diluted will revenue in revenue the the net to no improved and prior this continue $XXX.X margins. Operating share million, head period. per in and compared highlight as of healthier XXXX, wage-based over year. $X.XX, the price year-to-date X% into up Additionally, was in impact based quarter, we quarter in increases performance, X.X% of We've of we expect anticipated a first contained nearshore on was we delayed to profit XXXX and revenue with timing the mix, of $XX.X offshore last I'll to earnings our cost the revenue to fourth the company year half been impact $X.XX and expect onshore, same the income result lower-than-expected tied X.X% to we've from profit now of of million, bookings. results. the together

was XXXX impacted million $X.X in by charges. restructuring quarter Third

X.X% The basis, and amounts year. non-GAAP to adjusted Non-GAAP impairment revenue increased increased are a GAAP Non-GAAP press XX% a of from X%, asset held to $XXX prior $XX.X our the and period. CMS last EBITDA million revenue my of impacted operating attached of had ASC On year operating constant X.X% operating impacted revenue a and last excludes negatively segment. sale the million primarily on the a revenue of XX.X%, exchange from for in revenue, of and $XX.X organic XXX, charges. Inorganic revenue in impacted in or or adoption remainder XXX for over was The a ASC release. growth, are income. by basis to impact period income On GAAP quarter. X.X% year-ago which decrease adjusted $XX.X reconciliation same million non-GAAP $X.XX on year. basis, negative million and $X.XX was FX our million. and $X.X the was comments million quarter compared X.X%, restructuring by Foreign $X.X million period on same A tables of currency Restructuring, $X.X including XXX growth. positively income decrease in EPS X.X% the ASC third a contributed

income Our adjusted was EPS X.X% margin XX.X%, operating was $X.XX. and margin was EBITDA

Third with the of income guidance. expense Other expense $X our continued includes in Motif's EBITDA million line with was and expense interest net of XX% overperformance. in in safety the noncash adjusted remaining third trust and line a were and Motif, This margins and in acquisition. our quarter buyout quarter, which the revenue $X restated is million associated operating minority a estimated with

changes and third rate year relates XX.X% our lower in tax the period. taxable distribution reported certain The the versus the charges Our XXXX rate year. was the higher tax prior quarter rate to global jurisdictions tax in prior income, in to XX.X% compared restructuring of

XXXX prior in was third the rate quarter quarter third over quarter. was The the normalized XX.X%. Capacity of tax XXXX, utilization down year XX% XX% from

operating also the million Net a down third to were quarter the Our $XXX.X quarter non-GAAP days was I'll in primarily to third which of strong, to or $XX quarter results, in million $XX compared quarter growth DSO last days over versus was a decreased quarter flow in now quarter working of CMS' the flow cash of prior is million or segment period XXXX, year. year million Net to million down $X.X December at XX, was $XX debt the revenue from are versus compared on to X.X% the the Inorganic the a million in of XXXX income the cash sequentially. generation since increase was $XXX.X year prior prior million period. year basis. Capital in debt million X end third days expenditures X.X% quarter. totaling $XXX $XXX.X cover and $XX.X to third year is quarter X.X%. million flow This same second and CMS' the over end was XXXX Year-to-date, year revenue third the period. period. X.X% in million revenue including prior from prior compared operations in year. million improved compared capital, X function the XXX% $XX.X million XXXX $XX.X $XXX.X especially XXXX. operations XX third prior reduction the in quarter million $XX.X the our down in cash

million of and ASC million XXX of an income ASC $X.X exchange and operating of over million. had Foreign our million impact a impacted and with quarter FX revenue income $X.X $XX.X and with revenue of midpoint margin XXX, operating the on negatively income. impacted guidance revenue The increased on million CMS $X by X.X%. million. quarter $X third over third for overperformed operating positively X.X% CMS revenue income $X operating Adjusted adoption negative by

to bookings, levels. CMS revenue in a nearshore organic across XXXX healthcare and XXXX increases, the top The to in CMS reduced strong X.X% historical as improved CGS sequential fourth expenses margins. year. largely into with revenue income returning due increased onshore, year. million offshore is improvement move client our business of prior XX.X% $XX.X are We bottom with X.X% line XX.X% full operating and quarter third balance price higher -- establishing Looking production. healthier additions. in Operating anticipate the improvement increased margins programs and compared top to more revenue American or business North to of a over growth anticipate an million the line profit forward, CGS' $X.X renewed several quarter operating and to backlight last We

third compared $X.X XX.X% income increased to Our $XX quarter CTS segment XXXX. reported Revenue in revenue and increased of record million of income revenue XX.X%. XX.X% year-over-year, and the or operating to to million operating XX.X%

prior As our grew are growth Ken with mentioned, especially pleased the we accelerating in versus the XX% in which period. the SaaS-based cloud quarter year offering,

period. $X.X over from $XX.X the in quarter fourth CSS' income million showcase We guidance year Operating wins exceeded customers' design, expect XX.X% in revenue platform. the year. continue top third in that quarter prior confidence was to down and was in implement up bottom same XXXX, X.X% third our have a line governments have expertise We enterprises experience modern to that the quarter. the slightly revenue, the million prior and the and manage the of or large and

our the transformation, are focus new digital with we consulting talent. resources business in select reallocating and we align investing on As

and weighed year anticipate realignment this margins we line quarter income on While full operating slightly with third margins, guidance. in revenue

a bookings. I growing provide third results. Before X takeaways to pipeline of -- we of tail to continue a to X I execute consecutive comments, summarize few from quarter's want last quarters last closing upon Related extremes, our year's key with record quarter

CTS our and with CTS. overperformance CSS, at or Our performing CGS in above targets significant financial are businesses

XXXX, organic, and cash XXX. the wage-related overall include which business $XX benefit and in for improvement by debt we in was Our notable ASC we rate year-over-year of X.X% the XXXX. is improve of growth believe Other reduced strong reported in the revenue expected for go-to-market renewed when third year-to-date our sequential third quarter a integrated X.X% XXXX. bookings customer closing, generation continued continue. exchange and the is Stronger our demand and adjusted In portfolio pleased and solutions in We're to of to our as Market the in price of sequential our with realize fourth bookings quarter. differentiate platform with million improvement, level income. December foreign growth for anticipated an CMS highlights begin improvement since quarter the offerings will engagement catalyst third flow increases, our our and in accelerating also second quarter net strategy operating suite has XXXX, balances XXXX organic record XX, of

during profitable strong delivering we our CMS guidance year-end, Maximizing quarter performance the the with into remain in business earnings. bookings challenges we As keenly our second we our volumes revenue. focused fourth provided on and peak, impacting converting approach quarter our remediating line

We and renewed operating now year to margins are turn setting I'll revenue higher full Paul. on back growth. for organic call XXXX up well anticipate the

Paul Miller

[Operator may Thanks, Instructions]. the line. open Regina. Operator, you now

Operator

Instructions]. [Operator

question from Craig-Hallum. comes Sutton first from Our George

George Sutton

outstanding, want your is start. of through of a I if much walk where is win funnel? I'm of rate? you is that They Bookings -- much that wondering and to remain larger driven how could to that How relates how by much

Kenneth Tuchman

it's both. think I a little

dramatically Our the XXXX. multiple down We pipeline factors, which least of XXXX go-to-market tie was significantly. it strategy to in have believe we our that that bigger in is, not we is than truly

sophisticated sales have across know of a how the people force group enterprise. our to We much rebuilt sell more that with

because is rebuilt we strong. think then, better. pipeline are the sales And closing I because rates more marketing, our quite and have in sales the force So we've sophistication and in

it clearly I with behind that to wind that now. all right a a sails so our is quite hurt strong it's little think of doesn't combination And also, And that. have economy an

Regina Paolillo

focus which base, embedded I'd a quarter-to-quarter, rates about while of were above. there. we're talking win in And and XX% the bookings the varies from from and we've made our bodes quarter Yes, the well bulk we're seeing embedded it that base, when say with the the

the quarter, win So is that to our in and would almost deal I going base. in hold growing entire the in significantly, I'd that pretty not embedded also the size across increase XX% but future, in average a say in seeing size. year, of this particular, we're rates terms deal this the the average say, is into bookings of

well healthcare, top And services, X travel mega to in the -- were of last what successful we we growth have another mix. million, are, mix the showing kind many converting what a would which retail, in saw that we're or disruptors terms $XX our hyper least, on say, grow us. in with are be And quarter very very that new on not on. couple deals and those logos that in vertical we're I a new focused us obviously to focused for are continue of, have more year, logos of, but demonstrates on, growth Our financial we we and dramatically. logos call, more and transportation is growing that verticals chance Hyper economy deals

George Sutton

of I does getting that of Given the factors? curious, CTS, might realignment, growth towards Regina, it think, believe segment, is amount require gating funding? size grow I'm to curious was capital, you an group. just your it the the that But plans have just I'm in-ordinate I of about mentioned it much

Regina Paolillo

digital. it's was digital business, on -- as business, that's part of the comment can margin that you interestingly, obviously orienting towards consulting My business and It No. the we're But from expansion... see CTS. alongside this our is CSS

Kenneth Tuchman

years. over investment last significant few very a made already We the

Regina Paolillo

Yes.

expansion, years, have, purchases we laid make. we conversion margin I was ability to our this in-ordinate payments from out enjoying finance EBITDA we're and that what business, technology from of our and investment say, not coming clients the advanced would to only earlier cash X the So and in in our both margin expansion,

Kenneth Tuchman

business large with them helping entire the annualized guys significant critical think that, mass also side clients They're offering. digitize us transform what to and revenue platform in business are just our institutional every these of their $XXX clients their Obviously the And in journey that with starting on on CTS then an that's provide is our scale. cloud point on basis. giving the a one last and do. and million reach that's the technology entire the to I is SaaS-based to business

Operator

The next SunTrust. Frank comes question Atkins from from

Francis Atkins

ask of highlight first business. going drivers to the margin on wanted you Can XXXX? I CMS some the into

Regina Paolillo

Yes.

So QX, you will first business, enormous QX to expand volume. an to of has all, opportunity that with see margins as this

$XX but the in We expenses have with and we've in $XX us come million and margin. will million, amount of the next $XX state that of million, those It revenue, the get QX, starting these on $XX into scale first to in again. and down year that that from to to they to [indiscernible] materialized of will see million, good only get begin happen sales get half to cost SG&A fixed happen are and revenue past enable dramatically steady and expand will are every -- bookings and that will ramped

to The not by market-competitive you'll second of the for QX, and is some thing that we've time, priced impact in you're in very things. seeing it wages. end the Everything priced of QX, the is in but the get X see year, that, of you next XXXX

that business we've also priced clients, that -- And just right is as increases these target And -- scale, margins. second, our us we then for pricing well. will that in lay beside it from help got so those will

seeing recently between offshore. and that point -- of much of that, balance our I Ken, in the to to we're versus is bookings we QX healthier highlight certainly add? One onshore in getting are and anything mix would nearshore, a

Kenneth Tuchman

No, that's you. Thank good.

Francis Atkins

are could very -- other with any the And you're well seeing, client offerings, had Okay, there the you fit a investments that and of you've success in great. SaaS demand have that that helpful. places at ecosystem you're there? with cloud or the then That's areas looking particularly of lot

Kenneth Tuchman

that we're and as past standpoint, an to to continue have in Well, just in folks I going relates think more M&A global it that going to we're invest you that add footprint to geographies. we from told continue the to

mimics today so the are said, very fact, goal across now signing in on that and we're globe our across clients all that footprint That services is is CTS in and So multinationals, that with our we're global to Europe, with servicing entire solutions. place we are CTS what's providing globe, there, capabilities. the of SaaS its our happy expand taking their

now really of build more capture out the However, cetera, we're in sales we out regions, et capabilities can now more to of America, of in India, resources and focused our then the is deployment where starting other focus, North more to offshore Europe right accounts. multinational have and

strategy I not So taking more would And also strategy likely et is think set expand. that's globe. a of focused on that we're you looking in really set, products. to, We have more than is continuing expand in not where see looking geographies expansion front few our got staying are our on the make clients focus us sense probably think the that solution we and We're bottom for, CMS, we've in then so to top significantly overall, are add But more line and us that us. to that cetera. the and across really clients

Operator

Warmington from Bill Fargo. comes from question Wells next The

William Warmington

the backlog. question on for a you So

confidence us how an Just that wanted is to to going -- flow And a about in the has developing? sense from how backlog coming give to get the to Why actually you have of confidence your improvement that's through growth? been organic that's going for XXXX? revenue you where terms in --

Kenneth Tuchman

a with quarter. that Well, slow I'd that openly guess, I we admitted we start the first had start in out fact

Second was strong quarter bookings.

was feel we Third And bookings. good fourth strong quarter quarter about bookings.

place, of that bookings year fully the say, flow, depending flows growth want third out good works take you say months aspect through that up a quarter, you're have business that just these et a large to XX cases, it's client, multiple that some If we're cetera, time, recent engaged if is their if size our in we've deal. us at, to it occasions, at internal months. the business and pointed to X that exceeding months a the multinationals. client, XX next as suffice And said, cetera. fourth in the us is, So where operations. all are uncommon confidence it clients that's implementations, to to because XX it's deploy take Regina's up stressed to and come the our second, what to way gives CMS large-scale one the to always will cases for them take X we will that takes be, available And a it's provide the that what on know our on things bookings, in that because the you not the of That to for CGS, could let's where I of revenues highest a countries look it's almost et typically meaning, upon of us overall they you digital doing we're on think quality

cetera, you And that these contracts level, consequently, -- only able is to them, so we there we can are not be -- want roll to et only because so fast. to stick quality these out, hire people, train

these contracts other And to like that's it's any from, therefore, months. we out obviously, where have we I anywhere funnel. say, mean of overall, And X like does then which take I X roll pace the confidence. But so our

how that and previous is that of does rate we obviously, starting pipeline we're overall pipeline showing quarter that conversion the that you're it to we're to continuing pipeline tremendous of, consistency like look trends conversion our grow. overall see. and that and month, year. compared of pipeline at and the through, of off the, see rate flows You how look to to kind you Then at your consistently overall vetting that seeing previous amount through previous look goes And the measuring your your

of size, to that sales it's deal of the some that because push much different they spanning to of cetera, entities, SoWs would our that there these get takes contract the physically they're another that et Now is fact into of you, signed, love quarter. I complexity, the the sometimes -- because across of we're and the as matter the it that as fact that said, is tell signed, exact making because of precision. longer all The

this hope want I you a the like get I everybody cetera. think because deal want quarter, example give of the little that every where lastly, gives insight. going that I bit only I don't people didn't of X So is sale, to last -- a et software single days an to done,

much is As our you with there pretty lot place all can that of of takes all imagine, of a our implementation capabilities offerings. and

William Warmington

There's follow-up M&A a a of you. in I to about the wanted So space. activity the lot for environment. been ask

Although, valuation. we complaints are hearing about

your You curious, do the stock M&A shopping this flow, at you're environment? of you environment as do be cash can point? stock have great maybe given you sheet, you just the guys Or strong think? balance good have best the I'm finding market, may a is if What gyrations the

Kenneth Tuchman

What there everybody it's based the lot I said, extremely ourselves, market other one of where no through that about to a at would say toppy. it's that I our is hey needle. That looking think question find is prices, that on stock than for

so some we what more per say is industry. difference this M&A competitors you are the market. we still se, that done to, we're consolidate in optimistic of to this I between The and would cautiously our traditional trying not that And can M&A get is, other

rationalization lead in are that more a we're more becoming that's more much is it of so technology very as we speak. consolidation responsibly that happy play, as far better to sophisticated people place taking to the and have industry pricing goal the pricing you will Our with believe

to say to pull I that have realized now. what levers kind would really, So we we X you of, right is that

strategic it highest can is accretive. and Our where be priority M&A,

we've keep fact due asked have stock the that to many in if we note a available on as to other a far we flow. our to stock thus of the a And second far people. to time then bit And out. And to we the keep it investors of take purchasing to the each much there won't left to the to us pay would spot I that then, We're our dividend a to is be tough able be make for purchase is third of like stock pay Our as advantage a increasing paid little dividend. people want because stock, of purchasing stock back. dividend,

maximize you different that with looking So we're I with but are what we value. going to to at board that, we can discussing assure balance do you to sheet and that try say everything the is various would to our shareholder can our options, we're I

Operator

questions. Thank TTEC's earnings today. This quarter third time That have all the you for call. we your XXXX is conference concludes

time. this at disconnect may You

TTEC (TTEC) 10 Nov 182018 Q3 Earnings call transcript