What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 61 added, 67 removed, 117 unchanged (52% of the section changed)

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The Company designs, builds, and operates technology-enabled customer experiences across live interaction channels and provides data-driven digital solutions to help clients improve customer satisfaction and loyalty, increase customer revenue and profitability, and optimize overall cost to serve.

As of June 30, 2025, TTEC served approximately 690 clients across targeted industry verticals including financial services, healthcare, public sector, communications, technology, media, entertainment, travel and hospitality, automotive and retail.

As of September 30, 2025, TTEC served approximately 660 clients across targeted industry verticals including financial services, healthcare, public sector, communications, technology, media, entertainment, travel and hospitality, automotive and retail.

TTEC operates and reports its financial results of operations through two business segments:

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During 2025, the TTEC global operating platform delivered onshore, nearshore, and offshore services in 22 countries on six continents -- the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Colombia, Costa Rica, Egypt, Germany, Greece, Honduras, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, South Africa, Thailand, and the United Kingdom with contributions from approximately 52,000 customer care associates, consultants, technologists, and CX professionals.

Our revenue for second quarter 2025 was $513.6 million, of which approximately $113.7 million, or 22% was generated from our TTEC Digital segment and $399.8 million, or 78%, was generated from our TTEC Engage segment.

Our revenue for third quarter 2025 was $519.1 million, of which approximately $121.9 million, or 23% was generated from our TTEC Digital segment and $397.2 million, or 77%, was generated from our TTEC Engage segment.

To advance our competitive position in a rapidly changing market and to provide our clients with modernized CX technology and service solutions, we continue to invest in innovation and service offerings for both mainstream and high-growth disruptive businesses, diversifying and strengthening our core customer care services with technology-enabled, outcomes-focused services, data analytics, insights, and consulting.

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Financial Highlights

In the second quarter of 2025, our revenue decreased $20.5 million, or 3.8%, to $513.6 million over the same period in 2024 including an increase of $2.4 million, or 0.4%, due to foreign currency fluctuations.

The decrease in revenue was comprised of a $2.6 million, or 2.3%, decrease for TTEC Digital and a decrease of $17.9 million, or 4.3%, for TTEC Engage.

Our second quarter 2025 income (loss) from operations increased $243.3 million to $18.9 million or 3.7% of revenue, compared to $(224.4) million or (42.0)% of revenue in the second quarter of 2024.

The increase in operating income margin is due to the Q2 2024 goodwill impairment of $233.5 million and other factors across both segments.

The TTEC Digital operating margin increased 4.8% over the same period last year primarily due to the sale of software, lower employee-related costs and improved utilization.

The TTEC Engage operating margin increased 57.1% over the same period last year due to lower impairment and restructuring expenses.

Income (loss) from operations in the second quarter of 2025 and 2024 included $1.9 million and $241.8 million of restructuring charges and asset impairments, respectively.

In the third quarter of 2025, our revenue decreased $10.3 million, or 1.9%, to $519.1 million over the same period in 2024 including an increase of $2.2 million, or 0.4%, due to foreign currency fluctuations.

The decrease in revenue was comprised of a $6.2 million, or 5.4%, increase for TTEC Digital and a decrease of $16.5 million, or 4.0%, for TTEC Engage.

Our third quarter 2025 income (loss) from operations decreased $0.6 million to $12.3 million or 2.4% of revenue, compared to $12.9 million or 2.4% of revenue in the third quarter of 2024.

The TTEC Digital operating margin decreased 2.5% over the same period last year primarily due to lower margins in our recurring business and higher one-time on-premise revenue that yields lower margins.

The TTEC Engage operating margin increased 0.6% over the same period last year due to lower impairment expenses.

Income (loss) from operations in the third quarter of 2025 and 2024 included $2.2 million and $5.7 million of restructuring charges and asset impairments, respectively.

Our offshore customer experience centers spanning 15 countries serve clients based in the U.S.

and in other countries with 22,000 workstations, representing 82% of our global delivery capability.

Revenue for our TTEC Engage segment provided in these offshore locations represented 37% of our revenue for the second quarter of 2025, as compared to 33% of our revenue for the corresponding period in 2024.

Revenue for our TTEC Engage segment provided in these offshore locations represented 39% of our revenue for the third quarter of 2025, as compared to 35% of our revenue for the corresponding period in 2024.

Our seat utilization is defined as the total number of utilized workstations compared to the total number of available production workstations.

As of June 30, 2025, the total production workstations for our TTEC Engage segment was 27,700, a net decrease of 3,300 workstations over the same period last year, with an overall capacity utilization 71% versus 72% in the prior year period, The slight decline was due to reduced client forecasts and ramp up of production seats in offshore geographies, partially offset by seat reductions in the U.S.

and Philippines.

As of September 30, 2025, the total production workstations for our TTEC Engage segment was 26,600, a net decrease of 3,600 workstations over the same period last year, with an overall capacity utilization 73% versus 70% in the prior year period, The increase was due to seat reductions in the U.S.

and Philippines, partially offset by reduced client forecasts.

We plan to continue to selectively retain and grow capacity and expand into new offshore markets, while maintaining appropriate capacity onshore.

As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuation increases, we will continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility.

Recent Developments

As previously disclosed in the Company’s press release of September 30, 2024, TTEC founder, Chairman and Chief Executive Officer, Kenneth Tuchman sent to the Company’s Board of Directors (the “Board”) the unsolicited, preliminary, non-binding proposal to take the Company private at a proposed purchase price of $6.85 per share, subject to various conditions (“Non-Binding Proposal”).

The Board established a special committee consisting of independent directors to evaluate the Non-Binding Proposal.

On July 31, 2025, the Board received a letter from Mr.

Tuchman, advising that due to market conditions, he has decided not to pursue the Non-Binding Proposal.

Tuchman beneficially owns approximately 58% of the Company’s common stock, as set forth in Amendment No.

4 to Schedule 13D filed with the SEC by Mr.

Tuchman and certain entities affiliated with Mr.

Tuchman on August 1, 2025.

Smaller Reporting Company Status

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Results of Operations

Three months ended June 30, 2025 compared to three months ended June 30, 2024

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 June 30, 2025 and 2024 (amounts in thousands).

Three months ended September 30, 2025 compared to three months ended September 30, 2024

All intercompany transactions between the reported segments for the periods presented have been eliminated.

Three Months Ended June 30,

Three Months Ended September 30,

Operating Income

Operating Margin

The decrease in revenue for the TTEC Digital segment was driven by a slight decrease in both recurring and non-recurring revenue.

The operating income increase was primarily related to the sale of software, lower employee related costs, improved utilization and lower impairment expenses.

Operating income as a percentage of revenue increased to 10.0% in the second quarter of 2025 as compared to 5.2% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $3.7 million and $4.3 million for the quarters ended June 30, 2025 and 2024, respectively.

Three Months Ended June 30,

The increase in revenue for the TTEC Digital segment was driven by higher one-time on-premise related revenue.

The operating income decrease was primarily related to lower margins in our recurring business and higher one-time on-premise revenue that yields lower margins.

Operating income as a percentage of revenue decreased to 4.0% in the third quarter of 2025 as compared to 6.5% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $3.7 million and $4.1 million for the quarters ended September 30, 2025 and 2024, respectively.

Three Months Ended September 30,

Operating Income (loss)

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The decrease in revenue for the TTEC Engage segment is explained by lower demand from select large onshore enterprise clients due to clients’ continued conservative cost management by moderating the level of customer support to address cost pressures.

The operating income increase was primarily attributable to the Q2 2024 goodwill impairment of $233.5 million and lower restructuring expenses.

Operating income as a percentage of revenue increased to 1.9% in the second quarter of 2025 as compared to (55.2)% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $4.1 million and $4.1 million for the quarters ended June 30, 2025 and 2024, respectively.

The operating income increase was primarily attributable to lower impairment expenses.

Operating income as a percentage of revenue increased to 1.9% in the third quarter of 2025 as compared to 1.3% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $4.1 million and $4.1 million for the quarters ended September 30, 2025 and 2024, respectively.

Interest Income (Expense)

For the three months ended June 30, 2025 interest income increased to $3.2 million from $0.4 million in the same period in 2024 due to $3.0 million of interest income on an aged VAT receivable.

Interest expense decreased to $18.0 million during 2025 from $20.4 million during 2024 due to the termination of the factoring agreement, lower utilization and lower rates.

For the three months ended September 30, 2025 interest income increased to $0.5 million from $0.3 million in the same period in 2024 due to $0.3 million of interest income on an aged VAT receivable.

Interest expense decreased to $16.6 million during 2025 from $21.7 million during 2024 due to lower utilization and lower rates.

Other Income (Expense)

For the three months ended June 30, 2025 Other income (expense), net decreased to income of $0.3 million from income of $1.8 million during the prior year quarter.

Included in the three months ended June 30, 2025 was a $2.7 million gain related to a recovery of an aged VAT receivable.

Included in the three months ended June 30, 2024 was a $0.8 million gain related to recovery of a social security tax credit related to 2008-2012.

The effective tax rate for the three months ended June 30, 2025 was 288.7%.

For the three months ended September 30, 2025 Other income (expense), net increased to income of $3.8 million from expense of $1.0 million during the prior year quarter.

Included in the three months ended September 30, 2025 was a $1.7 million gain related to a recovery of an aged VAT receivable.

Included in the three months ended September 30, 2024 was a $0.5 million gain related to the fair value adjustment of a contingent consideration accrual.

The effective tax rate for the three months ended September 30, 2025 was 21,930.3%.

This compares to an effective tax rate of (98.1)% for the comparable period of 2024.

The effective tax rate for the three months ended June 30, 2025 is primarily driven by the distribution of income between the U.S.

The effective tax rate for the three months ended September 30, 2025 is primarily driven by the distribution of income between the U.S.

and international tax jurisdictions, earnings in international jurisdictions currently under an income tax holiday, foreign currency gains and losses, and the impact of valuation allowances in the United States and several other jurisdictions.

Six months ended June 30, 2025 compared to six months ended June 30, 2024

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 six months ended June 30, 2025 and 2024 (in thousands).

Nine months ended September 30, 2025 compared to nine months ended September 30, 2024

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, 2025 and 2024 (in thousands).

All intercompany transactions between the reported segments for the periods presented have been eliminated.

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Income

Operating Margin

The decrease in revenue for the TTEC Digital segment was driven by lower one-time on-premise related revenue.

The slight decrease in revenue for the TTEC Digital segment was driven by lower recurring revenue offset by higher one-time on-premise related revenue.

The operating income increase is primarily attributable to the sale of software, lower employee related costs, improved utilization, and lower impairment expenses.

Operating income as a percentage of revenue increased to 7.8% for the six months ended June 30, 2025 as compared to 4.1% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $7.3 million and $8.7 million for the six months ended June 30, 2025 and 2024, respectively.

Six Months Ended June 30,

Operating income as a percentage of revenue increased to 6.4% for the nine months ended September 30, 2025 as compared to 4.9% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $11.0 million and $12.7 million for the nine months ended September 30, 2025 and 2024, respectively.

Nine Months Ended September 30,

Operating Income (loss)

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The decrease in revenue for the TTEC Engage segment is explained by a long tenured client exiting a large line of business supported by TTEC and lower demand from select large onshore enterprise clients due to clients’ continued conservative cost management by moderating the level of customer support to address cost pressures.

The operating income (loss) change was primarily attributable to the Q2 2024 goodwill impairment of $233.5 million and lower restructuring expenses.

As a result, operating income (loss) as a percentage of revenue increased to 3.1% for the six months ended June 30, 2025 as compared to (23.9)% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $8.1 million and $8.2 million for the six months ended June 30, 2025 and 2024, respectively.

The operating income (loss) change was primarily attributable to the Q2 2024 goodwill impairment of $233.5 million and lower impairment expenses.

As a result, operating income (loss) as a percentage of revenue increased to 2.7% for the nine months ended September 30, 2025 as compared to (15.9)% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $12.2 million and $12.3 million for the nine months ended September 30, 2025 and 2024, respectively.

Interest Income (Expense)

For the six months ended June 30, 2025 interest income increased to $7.8 million from $1.4 million in the same period in 2024 due to $7.3 million of interest income on an aged VAT receivable.

For the nine months ended September 30, 2025 interest income increased to $8.3 million from $1.7 million in the same period in 2024 due to $7.6 million of interest income on an aged VAT receivable.

Interest expense decreased to $54.7 million during 2025 from $63.2 million during 2024 due to the termination of the factoring agreement, lower utilization and lower rates.

Other Income (Expense)

For the six months ended June 30, 2025 Other income (expense), net increased to net income of $3.3 million from net income of $2.0 million during the prior year period.

Included in the six months ended June 30, 2025 was a $6.6 million gain related to a recovery of an aged VAT receivable.

Included in the six months ended June 30, 2024 was a $1.0 million gain related to the fair value adjustment of a contingent consideration accrual.

The effective tax rate for the six months ended June 30, 2025 was 121.6%.

For the nine months ended September 30, 2025 Other income (expense), net increased to net income of $7.1 million from net income of $1.0 million during the prior year period.

Included in the nine months ended September 30, 2025 was a $8.3 million gain related to a recovery of an aged VAT receivable.

Included in the nine months ended September 30, 2024 was a $1.5 million gain related to the fair value adjustment of a contingent consideration accrual.

The effective tax rate for the nine months ended September 30, 2025 was 189.9%.

This compared to an effective tax rate of (26.4)% for the comparable period of 2024.

The effective tax rate for the six months ended June 30, 2025 is primarily driven by the distribution of income between the U.S.

The effective tax rate for the nine months ended September 30, 2025 is primarily driven by the distribution of income between the U.S.

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Our principal sources of liquidity are our cash generated from operations, our cash and cash equivalents, and borrowings under our Credit Facility.

During the six months ended June 30, 2025, we generated operating cash flows of $114.3 million.

During the nine months ended September 30, 2025, we generated operating cash flows of $118.5 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.

However, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.

The Company believes that the Tenth Amendment to the Credit Facility provides additional liquidity and flexibility to support ongoing operations in the short term.

The increased pricing, reduced size of the Credit Facility, and more restrictive covenants may limit the Company’s ability to pursue certain strategic initiatives, including acquisitions.

Management expects to continue to monitor the credit markets and, starting in 2026, to actively seek alternative credit arrangements designed to provide the Company with greater flexibility.

Pending any refinancing of the Credit Facility, management will continue to evaluate the impact of these changes on the Company’s financial position and results of operations.

We manage a centralized global treasury function in the United States with a focus on safeguarding and optimizing the use of our global cash and cash equivalents.

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We are also exposed to interest rate fluctuations associated with our variable rate debt.

The following discussion highlights our cash flow activities during the six months ended June 30, 2025 and 2024.

The following discussion highlights our cash flow activities during the nine months ended September 30, 2025 and 2024.

Cash and Cash Equivalents

We consider all liquid investments purchased within three months of their original maturity to be cash equivalents.

Our cash and cash equivalents totaled $82.6 million and $85.0 million as of June 30, 2025 and December 31, 2024, respectively.

Our cash and cash equivalents totaled $73.5 million and $85.0 million as of September 30, 2025 and December 31, 2024, respectively.

We reinvest our cash flows to grow our client base, expand our infrastructure, invest in research and development, make strategic acquisitions and to pay dividends.

Cash Flows from Operating Activities

For the six months ended June 30, 2025 and 2024, net cash flows provided by operating activities was $114.3 million and $33.6 million, respectively.

For the nine months ended September 30, 2025 and 2024, net cash flows provided by/(used in) operating activities was $118.5 million and $ (57.7) million, respectively.

The increase is primarily due to a $171.8 million increase in net working capital and a $4.4 million increase in net cash income from operations.

Cash Flows from Investing Activities

For the six months ended June 30, 2025 and 2024, net cash flows used in investing activities was $12.4 million and $27.6 million, respectively.

For the nine months ended September 30, 2025 and 2024, net cash flows used in investing activities was $21.9 million and $36.3 million, respectively.

The decrease was due to a $10.1 million decrease in capital expenditures as we rephased our timing of capital expenditures.

Cash Flows from Financing Activities

For the six months ended June 30, 2025 and 2024, net cash flows used in financing activities was $98.9 million and $75.7 million, respectively.

For the nine months ended September 30, 2025 and 2024, net cash flows provided by/(used in) financing activities was $(102.9) million and $14.8 million, respectively.

The change in net cash flows from 2024 to 2025 was primarily due to a $(122.5) million net change in the line of credit.

Free Cash Flow

Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) increased for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily due to an increase in net working capital and cash from operations.

Free cash flow was $101.7 million and $6.0 million for the six months ended June 30, 2025 and 2024, respectively.

Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) increased for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily due to an increase in net working capital and cash from operations.

Free cash flow was $92.1 million and ($94.2) million for the nine months ended September 30, 2025 and 2024, respectively.

Presentation of Non-GAAP Measurements

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The following table reconciles net cash provided by operating activities to free cash flow for our consolidated results (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net cash provided by operating activities

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Client Concentration

During the six months ended June 30, 2025 and 2024, one of our clients represented more than 10% of our total revenue.

Our five largest clients, collectively, accounted for 32.2% and 31.7% of our consolidated revenue for the three months ended June 30, 2025 and 2024, respectively and 31.3% and 33.8% of our consolidated revenue for the six months ended June 30, 2025 and 2024, respectively.

During the nine months ended September 30, 2025 and 2024, one of our clients represented more than 10% of our total revenue.

Our five largest clients, collectively, accounted for 31.8% and 31.5% of our consolidated revenue for the three months ended September 30, 2025 and 2024, respectively and 31.0% and 32.6% of our consolidated revenue for the nine months ended September 30, 2025 and 2024, respectively.

We have had long-term relationships with our top five TTEC Engage clients, ranging from 6 to 23 years, with all of these clients having completed multiple contract renewals with us.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis