TTEC Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS ​ TTEC HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Amounts in thousands, except share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2020 2019 ASSETS ​ ​ ​ ​ ​ ​ ​ Current assets ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 135,317 ​ $ 82,407 ​ Accounts receivable, net of allowance of $ 5,057 and $ 5,452 ​ 338,263 ​ 331,096 ​ Prepaids and other current assets ​ 121,964 ​ 96,287 ​ Income and other tax receivables ​ 36,830 ​ 40,035 ​ Total current assets ​ 632,374 ​ 549,825 ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term assets ​ ​ ​ ​ ​ ​ ​ Property, plant and equipment, net ​ 178,941 ​ 176,633 ​ Operating lease assets ​ ​ 132,571 ​ ​ 150,808 ​ Goodwill ​ 345,119 ​ 301,694 ​ Deferred tax assets, net ​ 14,587 ​ 13,263 ​ Other intangible assets, net ​ 112,038 ​ 115,596 ​ Other long-term assets ​ 61,390 ​ 68,969 ​ Total long-term assets ​ 844,646 ​ 826,963 ​ Total assets ​ $ 1,477,020 ​ $ 1,376,788 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES, STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 65,531 ​ $ 64,440 ​ Accrued employee compensation and benefits ​ 164,548 ​ 114,165 ​ Other accrued expenses ​ 66,131 ​ 79,171 ​ Income tax payable ​ 20,010 ​ 11,307 ​ Deferred revenue ​ 35,408 ​ 39,447 ​ Current operating lease liabilities ​ ​ 44,181 ​ ​ 45,218 ​ Other current liabilities ​ 8,303 ​ 9,541 ​ Total current liabilities ​ 404,112 ​ 363,289 ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term liabilities ​ ​ ​ ​ ​ ​ ​ Line of credit ​ 325,000 ​ 290,000 ​ Deferred tax liabilities, net ​ 9,302 ​ 10,602 ​ Non-current income tax payable ​ ​ 22,278 ​ ​ 25,208 ​ Non-current operating lease liabilities ​ ​ 106,921 ​ ​ 127,395 ​ Other long-term liabilities ​ 70,192 ​ 79,641 ​ Total long-term liabilities ​ 533,693 ​ 532,846 ​ Total liabilities ​ 937,805 ​ 896,135 ​ ​ ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 10) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Redeemable noncontrolling interest ​ 53,004 ​ 48,923 ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ ​ ​ ​ ​ ​ ​ Preferred stock; $ 0.01 par value; 10,000,000 shares authorized; zero shares outstanding as of September 30, 2020 and December 31, 2019 ​ — ​ — ​ Common stock; $ 0.01 par value; 150,000,000 shares authorized; 46,734,704 and 46,488,938 shares outstanding as of September 30, 2020 and December 31, 2019, respectively ​ 468 ​ 465 ​ Additional paid-in capital ​ 357,361 ​ 356,409 ​ Treasury stock at cost; 35,317,549 and 35,563,315 shares as of September 30, 2020 and December 31, 2019, respectively ​ ( 601,254 ) ​ ( 605,314 ) ​ Accumulated other comprehensive income (loss) ​ ( 96,032 ) ​ ( 106,234 ) ​ Retained earnings ​ 812,906 ​ 773,218 ​ Noncontrolling interest ​ 12,762 ​ 13,186 ​ Total stockholders’ equity ​ 486,211 ​ 431,730 ​ Total liabilities, stockholders’ equity and mezzanine equity ​ $ 1,477,020 ​ $ 1,376,788 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 1 Table of Contents 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, ​ 2020 2019 2020 2019 Revenue ​ $ 492,980 ​ $ 395,507 ​ $ 1,378,274 ​ $ 1,182,378 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of services (exclusive of depreciation and amortization presented separately below) ​ 368,405 ​ 304,622 ​ 1,027,268 ​ 897,193 ​ Selling, general and administrative ​ 49,473 ​ 48,062 ​ 146,667 ​ 148,646 ​ Depreciation and amortization ​ 19,522 ​ 16,659 ​ 57,054 ​ 50,452 ​ Restructuring charges, net ​ ​ 1,233 ​ ​ 183 ​ ​ 2,564 ​ ​ 1,572 ​ Impairment losses ​ 948 ​ — ​ 1,644 ​ 3,569 ​ Total operating expenses ​ 439,581 ​ 369,526 ​ 1,235,197 ​ 1,101,432 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 53,399 ​ 25,981 ​ 143,077 ​ 80,946 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ 566 ​ 522 ​ 1,421 ​ 1,291 ​ Interest expense ​ ( 2,755 ) ​ ( 4,041 ) ​ ( 15,451 ) ​ ( 13,537 ) ​ Other income (expense), net ​ ​ ( 18,663 ) ​ ​ 2,713 ​ ( 17,028 ) ​ 5,376 ​ Total other income (expense) ​ ( 20,852 ) ​ ( 806 ) ​ ( 31,058 ) ​ ( 6,870 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 32,547 ​ 25,175 ​ 112,019 ​ 74,076 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for income taxes ​ ( 8,415 ) ​ ( 5,196 ) ​ ( 29,653 ) ​ ( 20,007 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ 24,132 ​ 19,979 ​ 82,366 ​ 54,069 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income attributable to noncontrolling interest ​ ( 2,766 ) ​ ( 1,878 ) ​ ( 8,141 ) ​ ( 5,168 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income attributable to TTEC stockholders ​ $ 21,366 ​ $ 18,101 ​ $ 74,225 ​ $ 48,901 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 24,132 ​ $ 19,979 ​ $ 82,366 ​ $ 54,069 ​ Foreign currency translation adjustments ​ 28,679 ​ ( 9,138 ) ​ 9,845 ​ ( 2,758 ) ​ Derivative valuation, gross ​ 5,350 ​ 1,255 ​ ( 98 ) ​ 11,517 ​ Derivative valuation, tax effect ​ ( 1,415 ) ​ ( 353 ) ​ 14 ​ ( 3,102 ) ​ Other, net of tax ​ 130 ​ 37 ​ 376 ​ 54 ​ Total other comprehensive income (loss) ​ 32,744 ​ ( 8,199 ) ​ 10,137 ​ 5,711 ​ Total comprehensive income (loss) ​ 56,876 ​ 11,780 ​ 92,503 ​ 59,780 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less: Comprehensive income attributable to noncontrolling interest ​ ( 2,749 ) ​ ( 1,693 ) ​ ( 6,316 ) ​ ( 4,983 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive income attributable to TTEC stockholders ​ $ 54,127 ​ $ 10,087 ​ $ 86,187 ​ $ 54,797 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 46,732 ​ 46,481 ​ 46,617 ​ 46,335 ​ Diluted ​ ​ 47,031 ​ 46,768 ​ 46,885 ​ 46,693 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per share attributable to TTEC stockholders ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.46 ​ $ 0.39 ​ $ 1.59 ​ $ 1.06 ​ Diluted ​ $ 0.45 ​ $ 0.39 ​ $ 1.58 ​ $ 1.05 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividends declared and not paid per share outstanding ​ $ 0.40 ​ $ 0.32 ​ $ 0.40 ​ $ 0.32 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 2 Table of Contents ​ TTEC HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statement of Stockholders’ Equity and Mezzanine Equity (Amounts in thousands) (Unaudited) Three months ended September 30, 2020 and 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ Equity of the Company ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ Treasury ​ Additional ​ Comprehensive ​ Retained ​ Noncontrolling ​ ​ ​ ​ Mezzanine ​ ​ Shares ​ Amount ​ Shares ​ Amount ​ Stock ​ Paid-in Capital ​ Income (Loss) ​ Earnings ​ interest ​ Total Equity ​ Equity Balance as of 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 ) ​ ​ — ​ Acquisition of noncontrolling interest ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ Treasury ​ Additional ​ Comprehensive ​ Retained ​ Noncontrolling ​ ​ ​ ​ Mezzanine ​ ​ Shares ​ Amount ​ Shares ​ Amount ​ Stock ​ Paid-in Capital ​ Income (Loss) ​ Earnings ​ interest ​ Total Equity ​ Equity Balance as of June 30, 2019 — ​ $ — 46,387 ​ $ 464 ​ $ ( 607,004 ) ​ $ 354,068 ​ $ ( 110,686 ) ​ $ 741,728 ​ $ 12,079 ​ $ 390,649 ​ $ — ​ Net income — ​ — — ​ — ​ — ​ — ​ — ​ ​ 18,101 ​ 1,878 ​ 19,979 ​ ​ — ​ Dividends to shareholders ($ 0.32 per common share) ​ — ​ — — ​ — ​ — ​ — ​ — ​ ​ ( 14,875 ) ​ ​ — ​ ​ ( 14,875 ) ​ ​ — ​ Dividends distributed to noncontrolling interest — ​ — — ​ — ​ — ​ — ​ — ​ — ​ ( 1,350 ) ​ ( 1,350 ) ​ ​ — ​ Foreign currency translation adjustments — ​ — — ​ — ​ — ​ — ​ ( 8,953 ) ​ — ​ ( 185 ) ​ ( 9,138 ) ​ ​ — ​ Derivatives valuation, net of tax — ​ — — ​ — ​ — ​ — ​ 902 ​ — ​ — ​ 902 ​ ​ — ​ Vesting of restricted stock units — ​ — 99 ​ 1 ​ 1,634 ​ ( 3,825 ) ​ — ​ — ​ — ​ ( 2,190 ) ​ ​ — ​ Equity-based compensation expense — ​ — — ​ — ​ — ​ 3,129 ​ — ​ — ​ — ​ 3,129 ​ ​ — ​ Other, net of tax — ​ — — ​ — ​ — ​ — ​ 37 ​ — ​ — ​ 37 ​ ​ — ​ Balance as of September 30, 2019 — ​ $ — 46,486 ​ $ 465 ​ $ ( 605,370 ) ​ $ 353,372 ​ $ ( 118,700 ) ​ $ 744,954 ​ $ 12,422 ​ $ 387,143 ​ $ — ​ ​ Nine months ended September 30, 2020 and 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ Equity of the Company ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ Treasury ​ Additional ​ Comprehensive ​ Retained ​ Noncontrolling ​ ​ ​ ​ Mezzanine ​ ​ Shares ​ Amount ​ Shares ​ Amount ​ Stock ​ Paid-in Capital ​ Income (Loss) ​ Earnings ​ interest ​ Total Equity ​ Equity Balance as of December 31, 2019 — ​ $ — 46,489 ​ $ 465 ​ $ ( 605,314 ) ​ $ 356,409 ​ $ ( 106,234 ) ​ $ 773,218 ​ $ 13,186 ​ $ 431,730 ​ $ 48,923 ​ Net income — ​ — — ​ — ​ — ​ — ​ — ​ 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Stock ​ Common Stock ​ Treasury ​ Additional ​ Comprehensive ​ Retained ​ Noncontrolling ​ ​ ​ ​ Mezzanine ​ ​ Shares ​ Amount ​ Shares ​ Amount ​ Stock ​ Paid-in Capital ​ Income (Loss) ​ Earnings ​ interest ​ Total Equity ​ Equity Balance as of December 31, 2018 — ​ $ — 46,195 ​ $ 462 ​ $ ( 610,177 ) ​ $ 353,932 ​ $ ( 124,596 ) ​ $ 725,551 ​ $ 7,677 ​ $ 352,849 ​ $ — ​ Cumulative effect of adopting accounting standard updates ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 759 ) ​ ​ — ​ ​ ( 759 ) ​ ​ — ​ Net income — ​ — — ​ — ​ — ​ — ​ — ​ ​ 48,901 ​ 5,168 ​ 54,069 ​ ​ — ​ Dividends to shareholders ($ 0.62 per common share) ​ — ​ — — ​ — ​ — ​ — ​ — ​ ​ ( 28,739 ) ​ ​ — ​ ​ ( 28,739 ) ​ ​ — ​ Capital contribution from noncontrolling interest ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,362 ​ ​ 3,362 ​ ​ ​ ​ Dividends distributed to noncontrolling interest — ​ — — ​ — ​ — ​ — ​ — ​ — ​ ( 3,600 ) ​ ( 3,600 ) ​ ​ — ​ Foreign currency translation adjustments — ​ — — ​ — ​ — ​ — ​ ( 2,573 ) ​ — ​ ( 185 ) ​ ( 2,758 ) ​ ​ — ​ Derivatives valuation, net of tax — ​ — — ​ — ​ — ​ — ​ 8,415 ​ — ​ — ​ 8,415 ​ ​ — ​ Vesting of restricted stock units — ​ — 291 ​ 3 ​ 4,807 ​ ( 10,223 ) ​ — ​ — ​ — ​ ( 5,413 ) ​ ​ — ​ Equity-based compensation expense — ​ — — ​ — ​ — ​ 9,663 ​ — ​ — ​ — ​ 9,663 ​ ​ — ​ Other, net of tax — ​ — — ​ — ​ — ​ — ​ 54 ​ — ​ — ​ 54 ​ ​ — ​ Balance as of September 30, 2019 — ​ $ — 46,486 ​ $ 465 ​ $ ( 605,370 ) ​ $ 353,372 ​ $ ( 118,700 ) ​ $ 744,954 ​ $ 12,422 ​ $ 387,143 ​ $ — ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 3 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2020 2019 Cash flows from operating activities ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 82,366 ​ $ 54,069 ​ Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 57,054 ​ 50,452 ​ Amortization of contract acquisition costs ​ 332 ​ 751 ​ Amortization of debt issuance costs ​ 549 ​ 909 ​ Imputed interest expense and fair value adjustments to contingent consideration ​ 1,949 ​ 207 ​ Provision for credit losses ​ 563 ​ — ​ (Gain) loss on disposal of assets ​ ​ 77 ​ ​ 182 ​ Loss on dissolution of subsidiary ​ ​ 19,905 ​ ​ — ​ Impairment losses ​ 1,644 ​ 3,569 ​ Deferred income taxes ​ ( 1,153 ) ​ ( 1,354 ) ​ Excess tax benefit from equity-based awards ​ ( 708 ) ​ ( 1,242 ) ​ Equity-based compensation expense ​ 9,471 ​ 9,663 ​ (Gain) loss on foreign currency derivatives ​ ( 25 ) ​ ( 155 ) ​ Changes in assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 5,450 ) ​ 36,705 ​ Prepaids and other assets ​ 14,333 ​ 21,425 ​ Accounts payable and accrued expenses ​ 70,441 ​ 83,986 ​ Deferred revenue and other liabilities ​ ( 64,564 ) ​ ( 74,770 ) ​ Net cash provided by operating activities ​ 186,784 ​ 184,397 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ ​ ​ ​ ​ ​ Proceeds from sale of long-lived assets ​ 16 ​ 355 ​ Purchases of property, plant and equipment, net of acquisitions ​ ( 47,827 ) ​ ( 44,438 ) ​ Acquisitions, net of cash acquired of $ 3,123 and zero , respectively ​ ( 38,739 ) ​ — ​ Net cash used in investing activities ​ ( 86,550 ) ​ ( 44,083 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ Net proceeds (borrowings) from line of credit ​ 35,000 ​ ( 83,000 ) ​ Payments on other debt ​ ( 6,602 ) ​ ( 9,367 ) ​ Payments of contingent consideration and hold back payments to acquisitions ​ ( 48,686 ) ​ ( 5,902 ) ​ Dividends paid to shareholders ​ ​ ( 15,843 ) ​ ​ ( 13,864 ) ​ Payments to noncontrolling interest ​ ( 8,268 ) ​ ( 3,600 ) ​ Capital contribution from noncontrolling interest ​ ​ — ​ ​ 3,362 ​ Tax payments related to issuance of restricted stock units ​ ​ ( 4,456 ) ​ ​ ( 5,413 ) ​ Payments of debt issuance costs ​ ( 35 ) ​ ( 1,819 ) ​ Net cash used in financing activities ​ ( 48,890 ) ​ ( 119,603 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash, cash equivalents and restricted cash ​ ( 104 ) ​ ( 3,151 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase in cash, cash equivalents and restricted cash ​ 51,240 ​ 17,560 ​ Cash, cash equivalents and restricted cash, beginning of period ​ 105,591 ​ 78,237 ​ Cash, cash equivalents and restricted cash, end of period ​ $ 156,831 ​ $ 95,797 ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosures ​ ​ ​ ​ ​ ​ ​ Cash paid for interest ​ $ 8,436 ​ $ 9,901 ​ Cash paid for income taxes ​ $ 33,793 ​ $ 25,076 ​ Non-cash investing and financing activities ​ ​ ​ ​ ​ ​ ​ Acquisition of long-lived assets through finance leases ​ $ 1,814 ​ $ 3,172 ​ Acquisition of equipment through increase in accounts payable, net ​ $ ( 2,515 ) ​ $ ( 493 ) ​ Dividend declared but not paid ​ $ 18,694 ​ $ 14,875 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 4 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (1) OVERVIEW AND BASIS OF PRESENTATION Summary of Business TTEC Holdings, Inc. (“TTEC”, “the Company”) is a leading global customer experience technology and services company focused on the design, implementation and delivery of transformative customer experience outcomes for many of the world’s most iconic and disruptive brands. Since its inception in 1982, the Company has been helping clients deliver frictionless customer experiences, strengthen their customer relationships, brand recognition and loyalty through personalized interactions, significantly improve their Net Promoter Score, and lower their total cost to serve by enabling and delivering simplified, consistent and seamless customer experience across channels and phases of the customer lifecycle. TTEC’s 56,200 employees serve clients in the automotive, communication, financial services, government, healthcare, logistics, media and entertainment, retail, technology, transportation and travel industries via operations in the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, Hong Kong, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and the United Kingdom. The Company reports its financial information based on the following two segments: TTEC Digital and TTEC Engage. ● TTEC Digital designs, builds and delivers tech-enabled, insight-based and outcome-driven customer experience solutions through our professional services and suite of technology offerings. These solutions are critical to enabling and accelerating digital transformation for our clients. ● TTEC Engage provides the essential technologies, human resources, infrastructure and processes to operate customer care, acquisition, and fraud detection and prevention services. TTEC Digital and TTEC Engage come together under our unified offering, Humanify ® Customer Experience as a Service (“CXaas”), which drives measurable customer results for clients through the delivery of personalized, omnichannel experiences. Our Humanify ® cloud platform provides a fully integrated ecosystem of Customer Experience (“CX”) offerings, including omnichannel, messaging, artificial intelligence, machine learning, robotic process automation, analytics, cybersecurity, customer relationship management (“CRM”), knowledge management and journey orchestration. Basis of Presentation The Consolidated Financial Statements are comprised of the accounts of TTEC, its wholly owned subsidiaries, its 55 % equity owned subsidiary Percepta, 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. 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. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. 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, 2019. 5 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Reclassifications The Company has elected to modify the presentation of the proceeds and borrowings on the line of credit within the financing section of the Cash Flow Statement from a two-line presentation to a one-line net presentation. Prior period presentation has been modified to ensure consistency. 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 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 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 investment accounts, 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, 2020 December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ $ 135,317 $ 82,407 ​ Restricted cash included in "Prepaid and other current assets" ​ ​ 21,510 ​ 23,172 ​ Restricted cash included in "Other noncurrent assets" ​ ​ 4 ​ 12 ​ Total ​ ​ $ 156,831 $ 105,591 ​ ​ Concentration of Credit Risk The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and derivative instruments. Historically, the losses related to credit risk have been immaterial. The Company regularly monitors its credit risk to mitigate the possibility of current and future exposures resulting in a loss. The Company evaluates the creditworthiness of its clients prior to entering into an agreement to provide services and as necessary through the life of the client relationship. The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative hedging activities, as the Company diversifies its activities across eight investment-grade financial institutions. 6 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Recently Adopted Accounting Pronouncements In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments – Credit Losses” (ASC 326), which amends the methodology of how and when companies measure credit losses on financial instruments. The objective of the ASU is to provide financial statement users more useful information regarding expected credit losses on financial instruments and other commitments. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” which clarifies the scope of guidance in ASU 2016-13. In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments—Credit Losses (Topic 326), Targeted Transition Relief” which amended the transition guidance for the new credit losses standard. The ASU is effective for interim and annual periods beginning on or after December 15, 2019 with early adoption permitted, using a modified retrospective approach. The Company adopted the new guidance effective January 1, 2020 and the adoption did not have a material effect on the financial statements. See Note 4 for additional disclosures. In August 2018, the FASB issued ASU 2018-15 “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract” (“CCA”), which aligns the accounting for the costs of implementing CCA’s with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Once these costs have been capitalized, they should be amortized over the term of the hosting arrangement. The ASU is effective for interim and annual periods beginning on or after December 15, 2019, using a prospective or retrospective transition approach. The Company adopted the new guidance effective January 1, 2020 using the prospective approach and the adoption did not have a material effect on the financial statements. Other Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” (ASU 740), which is intended to simplify various aspects related to income tax accounting. The ASU is effective for interim and annual periods beginning on or after December 15, 2020, with early adoption permitted. The Company is currently evaluating the potential effects of adoption on its consolidated financial statements and related disclosures. ​ ​ ​ ​ ​ ​ (2) ACQUISITIONS AND DIVESTITURES Voice Foundry On August 5, 2020 , TTEC Digital, LLC, a subsidiary of the Company, closed the first phase of the acquisition of the Voice Foundry business by acquiring 100 % of the business’s net assets in the U.S. and U.K., (the “VF US Transaction”). Voice Foundry is a preferred Amazon Connect cloud contact center service and implementation partner with approximately 60 employees in the U.S. and U.K. 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 $ 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 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 September 30, 2020, with $ 7.4 million included in Other accrued expenses and $ 3.5 million included in Other long-term liabilities in the accompanying Consolidated Balance Sheets. 7 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) The following summarizes the 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 Accounts receivable, net ​ $ 3,758 ​ Prepaid and other assets ​ 345 ​ Tradename ​ ​ 400 ​ Non-compete ​ ​ 150 ​ Customer relationships ​ ​ 6,550 ​ Goodwill ​ ​ 35,891 ​ ​ ​ $ 47,094 ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 289 ​ Accrued employee compensation ​ 741 ​ Deferred revenue ​ 170 ​ ​ ​ $ 1,200 ​ ​ ​ ​ ​ ​ Total purchase price ​ $ 45,894 ​ ​ The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending finalization of the valuation and tax returns, thus are subject to revisions that may result in adjustments to the values presented above. The VF US customer relationships and tradename have been estimated based on the initial valuation and will be amortized over estimated useful lives of 4 and 2 years , respectively. The goodwill recognized from the VF US acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies with TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and intangibles and operating results of VF US are reported within the TTEC Digital segment from the date of acquisition. A second phase of the Voice Foundry acquisition involves acquiring the Voice Foundry Australian and ASEAN businesses. The acquisition was cleared by the Australian Foreign Investment Review Board and is expected to close in early November 2020. TTEC Digital LLC expects to pay approximately $ 13.0 million at closing for the Australian and ASEAN business and up to an additional $ 4.4 million in contingent consideration over the next two years. 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 with 125 employees 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 Serendebyte to TTEC Digital LLC in the second quarter of 2020. 8 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) 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 purchase price equal to a multiple of Serendebyte’s adjusted trailing twelve month EBITDA for this particular acquisition. The noncontrolling interest was recorded at fair value on the date of acquisition. The fair value was based on significant inputs not observable in the market (Level 3 inputs) including forecasted earnings, discount rate of 35% , working capital requirements and applicable tax rates. The noncontrolling interest was valued at $ 3.8 million and is shown as Redeemable noncontrolling interest in the accompanying Consolidated Balance Sheets. As a condition to closing, Serendebyte’s founder and certain members of the management team agreed to continue their affiliation with Serendebyte at least through 2023, and the founder agreed not to compete with TTEC for a period of four years after the disposition of the Remaining Interest. The following summarizes the 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 Cash ​ $ 3,123 ​ Accounts receivable, net ​ 1,243 ​ Prepaid and other assets ​ 1,327 ​ Property, plant and equipment ​ ​ 14 ​ Deferred tax assets ​ ​ 20 ​ 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 ​ ​ The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending finalization of a valuation and tax returns, thus are subject to revisions that may result in adjustments to the values presented above. At the date of the purchase, an additional $ 2.2 million of cash was retained in the entity that was withdrawn by the holders of the Remaining Interest during the second quarter of 2020. The Serendebyte customer relationships and tradename have been estimated based on the initial valuation and will be amortized over estimated useful lives of 5 and 3 years , respectively. The goodwill recognized from the Serendebyte acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies with 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 Serendebyte are reported within the TTEC Digital segment from the date of acquisition. 9 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) First Call Resolution On October 26, 2019 , the Company acquired, through its subsidiary TTEC Services Corporation (“TSC”), 70 % of the outstanding membership interest in First Call Resolution, LLC (“FCR”), an Oregon limited liability company (“the FCR Transaction”). FCR is a customer care, social networking and business process solutions service provider with approximately 2,000 employees based in the U.S . The business has been integrated into the TTEC Engage segment and is being fully consolidated into the financial statements of TTEC. Total cash paid at acquisition was $ 107.0 million, inclusive of $ 4.5 million related to cash balances, for the 70 % membership interest in FCR. The FCR Transaction was subject to customary representations and warranties, holdbacks, and a net working capital adjustment. The FCR Transaction included a contingent payment with a maximum value of $ 10.9 million based on FCR’s 2020 EBITDA performance. The Company finalized the working capital adjustment for $ 0.7 million during the first quarter of 2020 which was paid by FCR to TSC in March 2020. As of the closing of the FCR Transaction, Ortana Holdings, LLC, an Oregon limited liability company (“Ortana”), owned by the FCR founders, continued to hold the remaining 30 % membership interest in FCR (“Remaining Interest”). Between January 31, 2023 and December 31, 2023, Ortana shall have an option to sell to TSC and TSC shall have an option to purchase from Ortana the Remaining Interest at a purchase price equal to a multiple of FCR’s adjusted trailing twelve month EBITDA for this particular acquisition, and not to compete with the Company for a period of four years after the disposition of the Remaining Interest. The noncontrolling interest was recorded at fair value on the date of acquisition. The fair value was based on significant inputs not observable in the market (Level 3 inputs) including forecasted earnings, discount rate of 19.6% , working capital requirements and applicable tax rates. The noncontrolling interest was valued at $ 48.3 million on the acquisition date and is shown as Redeemable noncontrolling interest in the accompanying Consolidated Balance Sheets. The fair value of the contingent consideration has been measured based on significant inputs not observable in the market (Level 3 inputs). Significant assumptions include a discount rate of 16.7%, expected forecast volatility of 20%, an equivalent metric risk premium of 15.1%, risk-free rate of 1.6% and a credit spread of 1.8%. Based on these, a $ 6.5 million expected future payment was calculated. As of the acquisition date, the present value of the contingent consideration was $ 6.1 million. During the first and second quarters of 2020, $ 3.3 million and $ 1.1 million of net benefits, respectively, were recorded related to fair value adjustments of the estimated contingent consideration based on revised actuals and estimates of EBITDA performance for 2020. The benefits were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss). As of September 30, 2020, the value of the contingent consideration was $ 1.8 million and was included in Other current liabilities in the accompanying Consolidated Balance Sheets. 10 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 (in thousands): ​ ​ ​ ​ ​ ​ ​ Acquisition Date ​ ​ Fair Value Cash ​ $ 5,225 ​ Accounts receivable, net ​ 10,659 ​ Prepaid expenses ​ 357 ​ Property and equipment ​ ​ 6,006 ​ Other assets ​ ​ 224 ​ Operating lease assets ​ ​ 5,127 ​ Tradename ​ ​ 8,600 ​ Customer relationships ​ ​ 38,540 ​ Goodwill ​ ​ 96,739 ​ ​ ​ $ 171,477 ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 388 ​ Operating lease liability - short-term ​ 1,160 ​ Accrued employee compensation and benefits ​ 4,049 ​ Accrued expenses ​ ​ 72 ​ Operating lease liability - long-term ​ 3,967 ​ ​ ​ $ 9,636 ​ ​ ​ ​ ​ ​ Total purchase price ​ $ 161,841 ​ ​ In the first quarter of 2020, the Company finalized its valuation of FCR for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required. As part of the purchase, an additional net $ 0.7 million of cash was retained in the entity to pay for certain Ortana liabilities that had been recorded prior to the acquisition. The FCR customer relationships and tradename are being amortized over useful lives of 10 and 4 years , respectively. The goodwill recognized from the FCR acquisition is attributable, but not limited to, the acquired workforce and expected synergies with Engage. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and intangibles and operating results of FCR are reported within the TTEC Engage segment from the date of acquisition. Financial Impact of Acquired Businesses The acquired businesses purchased in 2020 and 2019 noted above contributed revenues of $ 82.2 million and net income of $ 5.1 million, inclusive of $ 5.2 million of acquired intangible amortization, to the Company for the 2020. The unaudited proforma financial results for the nine months ended September 30, 2020 and 2019 combines the consolidated results of the Company, FCR, Serendebyte and Voice Foundry, assuming the acquisitions had been completed on January 1, 2019. The reported revenue and net income of $ 1,378.3 million and $ 74.2 million would have been $ 1,386.6 million and $ 76.7 million for the nine months ended September 30, 2020, respectively, on an unaudited proforma basis. For 2019, the reported revenue and net income of $ 1,182.4 million and $ 48.9 million would have been $ 1,255.2 million and $ 62.1 million for the nine months ended September 30, 2019, respectively, on an unaudited proforma basis. 11 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) The unaudited 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 proforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisition. Dissolutions In the ordinary course of business, the Company operates different legal entities around the globe that have functional currencies other than USD. From time to time, the Company liquidates some of the entities when they are no longer needed to operate its business, and also forms new entities to support the needs of the business. The liquidation proceedings may take different forms, take considerable amount of time, and may also result in losses or gains unrelated to operations. In the second quarter ended June 30, 2020, the Company exited a foreign subsidiary that resulted in a $ 2.5 million loss included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss) from the 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, 2020, the Company exited two foreign subsidiaries that have ceased operations and therefore will be removed from the consolidated financial statements as of the reporting period ended September 30, 2020. As a result of the deconsolidation, a $ 17.4 million loss was included in Other income (expense), net in the Consolidated Statement of Comprehensive Income (Loss). The majority of this loss related to the realization of the Accumulated Other Comprehensive Income (Loss) balance which represents the Currency Translation Adjustment of the investment in the foreign subsidiaries. The operating income of these subsidiaries prior to dissolution was not material to the year-to-date consolidated results of the Company. ​ ​ ​ (3) SEGMENT INFORMATION The Company reports the following two segments: ● TTEC Digital designs, builds and delivers tech-enabled, insight-based and outcome-driven customer experience solutions through our professional services and suite of technology offerings. These solutions are critical to enabling and accelerating digital transformation for our clients. o Technology Services: Our technology services design, integrate and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid, including journey orchestration, automation and AI, knowledge management, and workforce productivity. o Professional Services: Our management consulting practices deliver customer experience strategy, analytics, process optimization, and learning and performance services. ● TTEC Engage provides the essential technologies, human resources, infrastructure and processes to operate customer care, acquisition, and fraud detection and prevention services. o 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. o Customer Care Services: Our customer care services provide turnkey contract center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all touchpoints. o Fraud Prevention Services: Our digital fraud detection and prevention services proactively identify and prevent fraud and provide community content moderation and compliance. 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. 12 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) The following tables present certain financial data by segment (in thousands): Three Months Ended September 30, 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 ​ ​ Three Months Ended September 30, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation Income ​ ​ Gross ​ Intersegment ​ Net ​ & ​ from ​ ​ Revenue ​ Sales ​ Revenue ​ Amortization ​ Operations TTEC Digital ​ $ 78,577 ​ $ 43 ​ $ 78,620 ​ $ 2,512 ​ $ 11,704 ​ TTEC Engage ​ 316,887 ​ — ​ 316,887 ​ 14,147 ​ 14,277 ​ Total ​ $ 395,464 ​ $ 43 ​ $ 395,507 ​ $ 16,659 ​ $ 25,981 ​ ​ Nine Months Ended September 30, 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 ​ ​ Nine Months Ended September 30, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation Income ​ ​ Gross ​ Intersegment ​ Net ​ & ​ from ​ ​ ​ Revenue ​ Sales ​ Revenue ​ Amortization ​ Operations ​ TTEC Digital ​ $ 223,198 ​ $ ( 206 ) ​ $ 222,992 ​ $ 8,055 ​ $ 27,172 ​ TTEC Engage ​ 959,386 ​ ​ — ​ 959,386 ​ 42,397 ​ 53,774 ​ Total ​ $ 1,182,584 ​ $ ( 206 ) ​ $ 1,182,378 ​ $ 50,452 ​ $ 80,946 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ ​ 2020 2019 2020 2019 Capital Expenditures ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TTEC Digital ​ $ 1,635 $ 318 $ 6,961 $ 9,714 ​ TTEC Engage ​ 14,277 ​ 15,692 ​ 40,866 ​ 34,724 ​ Total ​ $ 15,912 $ 16,010 $ 47,827 $ 44,438 ​ ​ 13 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 December 31, 2019 ​ Total Assets ​ ​ ​ ​ ​ ​ ​ ​ TTEC Digital ​ ​ $ 283,792 $ 238,081 ​ TTEC Engage ​ ​ 1,193,228 ​ 1,138,707 ​ Total ​ ​ $ 1,477,020 $ 1,376,788 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 December 31, 2019 ​ Goodwill ​ ​ ​ ​ ​ ​ ​ ​ TTEC Digital ​ ​ $ 111,382 $ 66,275 ​ TTEC Engage ​ ​ 233,737 ​ 235,419 ​ Total ​ ​ $ 345,119 $ 301,694 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, ​ ​ 2020 2019 2020 2019 ​ Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 346,095 ​ $ 240,863 $ 936,079 ​ $ 713,561 ​ Philippines ​ 82,147 ​ 89,876 ​ 252,520 ​ 274,456 ​ Latin America ​ 23,550 ​ 24,454 ​ 72,002 ​ 73,645 ​ Europe / Middle East / Africa ​ ​ 20,772 ​ 15,187 ​ 55,077 ​ 46,838 ​ Asia Pacific / India ​ 14,483 ​ 14,733 ​ 43,377 ​ 41,713 ​ Canada ​ 5,933 ​ 10,394 ​ 19,219 ​ 32,165 ​ Total ​ $ 492,980 $ 395,507 ​ $ 1,378,274 ​ $ 1,182,378 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (4) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS The Company had one client that contributed in excess of 10% of total revenue for the nine months ended September 30, 2020. This client operates in the financial services industry and is included in the TTEC Engage segment. This client contributed 11.8 % and 3.4 % of total revenue for the nine months ended September 30, 2020 and 2019, respectively. The Company had no clients that contributed in excess of 10% of total revenue for the nine months ended September 30, 2019. The Company does have 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 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, 2020. In connection with the implementation of ASC 326 as of January 1, 2020, the Company analyzed the prior history of credit losses on revenue for TTEC as a whole and separately for each of the two segments. Based on this evaluation, no modification to the allowance for credit losses balance was necessary as of the implementation date. At the end of each quarter beginning 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. 14 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, ​ 2020 2019 2020 2019 Balance, beginning of period ​ $ 5,795 ​ $ 5,495 ​ $ 5,452 ​ $ 5,592 ​ Provision for credit losses ​ 44 ​ — ​ 563 ​ ​ — ​ Uncollectible receivables written-off ​ ( 806 ) ​ ( 1,701 ) ​ ( 939 ) ​ ​ ( 1,716 ) ​ Effect of foreign currency ​ 24 ​ ( 13 ) ​ ( 19 ) ​ ​ ( 95 ) ​ Balance, end of period ​ $ 5,057 ​ $ 3,781 ​ $ 5,057 ​ $ 3,781 ​ ​ 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, 2020 and December 31, 2019, TTEC had approximately $ 2.7 million in pre-petition accounts receivables exposure related to Sears; during the fourth quarter of 2018 a $ 2.7 million allowance for uncollectible accounts was recorded and included in Selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss). TTEC continues to provide post-petition services to Sears and has assessed these receivables for collection risk and has determined that these will be collectible. Accounts Receivable Sales Agreement On March 5, 2019, the Company entered into an Uncommitted Receivables Purchase Agreement (“Agreement”) with Bank of the West (“Bank”), whereby from time-to-time the Company may elect to sell, on a revolving basis, U.S. accounts receivables of certain clients at a discount to the Bank for cash on a limited recourse basis. The maximum amount of receivables that the Company may sell to the Bank at any given time shall not exceed $ 75 million. The sales of accounts receivable in accordance with the Agreement are reflected as a reduction of Accounts Receivable, net on the Consolidated Balance sheets. The Company has retained no interest in the sold receivables but retains all collection responsibilities on behalf of the Bank. The discount on the accounts receivable sold will be recorded within Other expense, net in the Consolidated Statements of Comprehensive Income (Loss). The cash proceeds from this agreement are included in the change in accounts receivable within the operating activities section of the Consolidated Statements of Cash Flows. As of September 30, 2020, the Company had factored $ 51.5 million of accounts receivable; under the Agreement discounts on these receivables were not material during the quarter. As of September 30, 2020, the Company had collected $ 21.5 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, 2020 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements. ​ (5) GOODWILL AND OTHER INTANGIBLE ASSETS ​ Goodwill consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of ​ ​ ​ ​ December 31, ​ Acquisitions / ​ ​ ​ ​ Foreign ​ September 30, ​ ​ 2019 ​ Adjustments ​ Impairments ​ Currency ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TTEC Digital ​ $ 66,275 ​ $ 44,924 ​ ​ — ​ ​ 183 ​ $ 111,382 ​ TTEC Engage ​ 235,419 ​ ( 254 ) ​ ​ — ​ ​ ( 1,428 ) ​ 233,737 ​ Total ​ $ 301,694 ​ $ 44,670 ​ $ — ​ $ ( 1,245 ) ​ $ 345,119 ​ ​ 15 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, 2020, the Company assessed whether any such indicators of impairment existed and concluded there were none. During the third quarter of 2020, the Company reassessed the reporting units within the TTEC Digital segment based on a reorganization of the reporting structure within this segment. The Company has changed how it views the components within the segment as the business has evolved and multiple recent acquisitions have been incorporated. After evaluation, the Company will maintain two reporting units within TTEC Digital but these include different components than previously included. Given the change in reporting units, the Company conducted an impairment test before and after the change, and it was concluded that the fair value of the reporting units exceeded the carrying value on both testing dates. With the change in reporting units, the Company performed a relative fair value valuation calculation to allocate the Company’s historical goodwill between the two reporting units based on the shift in components. The resulting reallocation of goodwill was not material. Other Intangible Assets During the second quarter of 2019, the Company identified negative indicators such as lower financial performance for the rogenSi component of the TTEC Digital segment, thus an interim impairment analysis was completed. The long-lived assets reviewed for impairment consisted of the customer relationship intangible, intellectual property, and right of use assets. The Company completed an asset group recoverability evaluation based on the current estimated cash flow based on forecasted revenues and operating income using significant inputs not observable in the market (Level 3 inputs). Based on this calculation, the Company recorded an impairment expense of $ 2.0 million in the three months ended June 30, 2019, which was included in Impairment losses in the Consolidated Statements of Comprehensive Income (Loss). As part of the $ 2.0 million impairment $ 0.4 million was assigned to the customer relationship intangible asset and $ 0.2 million to the IP intangible asset. At December 31, 2019 and September 30, 2020, the Company reviewed the evaluation completed as of June 30, 2019, and noted no material changes, thus no additional impairment was required. ​ ​ ​ (6) DERIVATIVES Cash Flow Hedges The Company enters into foreign exchange 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. 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 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, 2020, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults. The following table summarizes the aggregate unrealized net gain or loss in Accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019 (in thousands and net of tax): 16 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ ​ 2020 2019 2020 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Aggregate unrealized net gain/(loss) at beginning of period ​ $ 163 ​ $ ( 765 ) ​ $ 4,182 ​ $ ( 8,278 ) ​ Add: Net gain/(loss) from change in fair value of cash flow hedges ​ ​ 3,420 ​ ​ 1,695 ​ ​ ( 767 ) ​ ​ 11,791 ​ Less: Net (gain)/loss reclassified to earnings from effective hedges ​ ​ 515 ​ ​ ( 793 ) ​ ​ 683 ​ ​ ( 3,376 ) ​ Aggregate unrealized net gain/(loss) at end of period ​ $ 4,098 ​ $ 137 ​ $ 4,098 ​ $ 137 ​ ​ The Company’s foreign exchange cash flow hedging instruments as of September 30, 2020 and December 31, 2019 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, 2020 ​ Amount ​ Amount ​ ​ 12 months ​ ​ Through Canadian Dollar 3,500 ​ $ 2,646 ​ ​ 100.0 % ​ July 2021 ​ Philippine Peso 6,565,000 ​ 125,887 (1) ​ 56.8 % ​ July 2023 ​ Mexican Peso 1,115,500 ​ 50,441 ​ ​ 53.0 % ​ July 2023 ​ ​ ​ ​ ​ $ 178,974 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Local ​ ​ ​ ​ ​ ​ ​ ​ ​ Currency ​ U.S. Dollar ​ ​ ​ ​ ​ ​ ​ ​ Notional ​ Notional ​ ​ ​ ​ As of December 31, 2019 ​ Amount ​ Amount ​ ​ ​ ​ ​ ​ Philippine Peso 7,715,000 ​ 147,654 (1) ​ ​ ​ ​ ​ ​ Mexican Peso 1,299,500 ​ 61,529 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 209,183 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (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, 2020 and December 31, 2019. ​ 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, 2020 and December 31, 2019 the total notional amounts of the Company’s forward contracts used as fair value hedges were $ 32.8 million and $ 64.5 million, respectively. 17 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Derivative Valuation and Settlements ​ The Company’s derivatives as of September 30, 2020 and December 31, 2019 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 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 ​ $ 4,500 ​ $ 132 ​ Other long-term assets ​ 3,279 ​ — ​ Other current liabilities ​ ( 1,230 ) ​ ( 15 ) ​ Other long-term liabilities ​ ( 974 ) ​ — ​ Total fair value of derivatives, net ​ $ 5,575 ​ $ 117 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ ​ 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 ​ $ 3,467 ​ $ 205 ​ Other long-term assets ​ 3,525 ​ — ​ Other current liabilities ​ ( 1,223 ) ​ ( 107 ) ​ Other long-term liabilities ​ ( 95 ) ​ — ​ Total fair value of derivatives, net ​ $ 5,674 ​ $ 98 ​ ​ The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2020 and 2019 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2020 ​ 2019 ​ ​ Designated as Hedging Designation: ​ Instruments Derivative contract type: ​ Foreign Exchange Derivative classification: Cash Flow ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax ​ $ 515 ​ $ ( 793 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion: ​ ​ ​ ​ ​ ​ ​ Revenue ​ $ 706 ​ $ ( 1,087 ) ​ ​ 18 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2020 ​ 2019 Designation: Not Designated as Hedging Instruments ​ Derivative contract type: Foreign Exchange ​ Derivative classification: Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss): ​ ​ ​ ​ ​ ​ ​ Other income (expense), net $ 305 $ 57 ​ ​ The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2020 and 2019 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ ​ 2020 ​ 2019 ​ ​ ​ Designated as Hedging ​ Designation: ​ Instruments ​ Derivative contract type: ​ Foreign Exchange ​ Derivative classification: Cash Flow ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax ​ $ 683 ​ $ ( 3,376 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion: ​ ​ ​ ​ ​ ​ ​ Revenue ​ $ 936 ​ $ ( 4,625 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ ​ 2020 ​ 2019 ​ Designation: Not Designated as Hedging Instruments ​ Derivative contract type: Foreign Exchange ​ Derivative classification: Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss): ​ ​ ​ ​ ​ ​ ​ Other income (expense), net $ ( 38 ) $ ( 1,160 ) ​ ​ ​ ​ (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. 19 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) The following presents information as of September 30, 2020 and December 31, 2019 for the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value. Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature. Investments – The Company measures investments, including cost and equity method investments, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. The fair values of these investments are determined based on valuation techniques using the best information available, and may include market observable inputs, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary. As of September 30, 2020, the investment in CaféX Communication, Inc., which consisted of the Company’s total $ 15.6 million investment, is fully impaired to zero . Debt - The Company’s debt consists primarily of the Company’s Credit Agreement, which permits floating-rate borrowings based upon the current Prime Rate or the London Interbank Offered Rate (“LIBOR”) plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement). As of September 30, 2020 and December 31, 2019, the Company had $ 325.0 million and $ 290.0 million, respectively, of borrowings outstanding under the Credit Agreement. During the third quarter of 2020 outstanding borrowings accrued interest at an average rate of 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, 2020, credit risk did not materially change the fair value of the Company’s derivative contracts. The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of September 30, 2020 and December 31, 2019 (in thousands): As of September 30, 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 ​ $ — ​ $ 5,575 ​ $ — ​ $ 5,575 ​ Fair value hedges ​ — ​ 117 ​ — ​ 117 ​ Total net derivative asset (liability) ​ $ — ​ $ 5,692 ​ $ — ​ $ 5,692 ​ ​ 20 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) As of December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ ​ ​ Quoted Prices in Significant ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ ​ ​ ​ Assets ​ Inputs ​ Inputs ​ ​ ​ ​ ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ At Fair Value Cash flow hedges ​ $ — ​ $ 5,674 ​ $ — ​ $ 5,674 ​ Fair value hedges ​ — ​ 98 ​ — ​ 98 ​ Total net derivative asset (liability) ​ $ — ​ $ 5,772 ​ $ — ​ $ 5,772 ​ ​ The following is a summary of the Company’s fair value measurements as of September 30, 2020 and December 31, 2019 (in thousands): ​ As of September 30, 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) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative instruments, net ​ $ — ​ $ 5,692 ​ $ — ​ Total assets ​ $ — ​ $ 5,692 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred compensation plan liability ​ $ — ​ $ ( 21,166 ) ​ $ — ​ Derivative instruments, net ​ ​ — ​ ​ — ​ ​ — ​ Contingent consideration ​ — ​ — ​ ( 12,728 ) ​ Total liabilities ​ $ — ​ $ ( 21,166 ) ​ $ ( 12,728 ) ​ ​ As of December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ Quoted Prices in ​ ​ Significant ​ ​ Active Markets for ​ Significant Other ​ Unobservable ​ ​ Identical Assets ​ Observable Inputs ​ Inputs ​ ​ (Level 1) ​ (Level 2) ​ (Level 3) Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative instruments, net ​ $ — ​ $ 5,772 ​ $ — ​ Total assets ​ $ — ​ $ 5,772 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred compensation plan liability ​ $ — ​ $ ( 20,370 ) ​ $ — ​ Derivative instruments, net ​ — ​ — ​ — ​ Contingent consideration ​ — ​ — ​ ( 6,134 ) ​ Total liabilities ​ $ — ​ $ ( 20,370 ) ​ $ ( 6,134 ) ​ ​ Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees. Participants in the deferred compensation plan select from a menu of phantom investment options for their deferral dollars offered by the Company each year, which are based upon changes in value of complementary, defined market investments. The deferred compensation liability represents the combined values of market investments against which participant accounts are tracked. 21 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Contingent Consideration - The Company recorded contingent consideration related to the acquisition of FCR and VF US. The contingent payable for FCR was recognized at fair value using a discounted cash flow approach and a discount rate of 16.7 %. The contingent payable for VF US was calculated using a Monte Carlo simulation including a discount rate of 23.1 %. The measurements were based on significant inputs not observable in the market. The Company will record interest expense each quarter using the effective interest method until the future value of these contingent payments reaches the expected total future value. During the first and second quarters of 2020, the Company recorded fair value adjustments to the contingent consideration associated with the FCR acquisition based on decreased estimates of EBITDA which caused the estimated payable to decrease. Accordingly, a $ 3.3 million decrease and a $ 1.1 million decrease to the payable were recorded as of March 31, 2020 and June 30, 2020, respectively, and were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss). As of September 30, 2020, the expected future contingent consideration for FCR is $ 1.8 million. A rollforward of the activity in the Company’s fair value of the contingent consideration payable is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Imputed ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ ​ Interest / ​ September 30, ​ ​ 2019 ​ Acquisitions ​ Payments ​ Adjustments ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ FCR ​ $ 6,134 ​ $ — ​ $ — ​ $ ( 4,349 ) ​ $ 1,785 ​ VF US ​ ​ — ​ ​ 10,943 ​ ​ — ​ ​ — ​ ​ 10,943 ​ Total ​ $ 6,134 ​ $ 10,943 ​ $ — ​ $ ( 4,349 ) ​ $ 12,728 ​ ​ ​ ​ ​ ​ (8) INCOME TAXES The Company accounts for income taxes in accordance with the accounting literature for income taxes, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the Consolidated Financial Statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. Quarterly, the Company assesses the likelihood that its net deferred tax assets will be recovered. Based on the weight of all available evidence, both positive and negative, the Company records a valuation allowance against deferred tax assets when it is more-likely-than-not that a future tax benefit will not be realized. The Company’s selection of an accounting policy with respect to both the global intangible low taxed foreign income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) rules is to compute the related taxes in the period the entity becomes subject to either GILTI or BEAT. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law. The CARES Act includes various provisions designed to support corporations and reduce the impact of COVID-19 pandemic on their liquidity including provisions relating to payroll tax credits, deferment of employer side social security payments, modifications to the net interest deduction limitations, allowing companies to carryback certain Net Operating Losses (“NOLs”) and increasing the amount of NOLs that corporations can use to offset income. The CARES Act did not materially affect our third quarter income tax provision, deferred tax assets and liabilities, or related taxes payable. We are continuing to assess the future implications of these provisions within the CARES Act but do not expect there to be a material impact on our financial statements at this time. As of September 30, 2020, the Company had $ 14.6 million of gross deferred tax assets (after a $ 17.2 million valuation allowance) and a net deferred tax asset of $ 5.3 million (after deferred tax liabilities of $ 9.3 million) related to the United States and international tax jurisdictions whose recoverability is dependent upon future profitability. 22 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (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, 2020 was 25.9 % and 26.5 %, respectively. The effective tax rate for the three and nine months ended September 30, 2019 was 20.6 % and 27.0 %, respectively. The Company’s U.S. income tax returns filed for the tax years ending December 31, 2016 to present, remain open tax years . The Company has been notified of the intent to audit or is currently under audit of income taxes for the United States for tax year 2017 and 2018 , Canada for tax years 2009, 2010 and 2018 , the Philippines for tax year 2018, and the state of New York for tax years 2015 through 2017 . Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company’s Consolidated Financial Statements. When there is a change in judgment concerning the 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 second quarter of 2019 and the first quarter of 2020, changes to the valuation allowance were recorded in the amounts of $ 2.3 million and $ 0.3 million, respectively, for deferred tax assets that did not meet the “more-likely-than-not” standard. In the second quarter of 2020, changes to the valuation allowance were recorded in the amount of $ 0.9 million for assets that were redetermined to meet the “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 2020 and 2022 . The aggregate effect on income tax expense for the three months ended September 30, 2020 and 2019 was approximately $ 1.1 million and $ 2.4 million benefit, respectively, which had an impact on diluted net income per share of $ 0.02 and $ 0.05 , respectively. The aggregate effect on income tax expense for the nine months ended September 30, 2020 and 2019 was approximately $ 2.2 million and $ 6.4 million, respectively, which had a favorable impact on diluted net income per share of $ 0.05 and $ 0.14 , respectively. ​ (9) RESTRUCTURING CHARGES AND IMPAIRMENT LOSSES Restructuring Charges During 2020 and 2019, the Company continued restructuring activities primarily associated with reductions in the Company’s capacity, workforce and related management in both segments to better align the capacity and workforce with current business needs. A summary of the expenses recorded in Restructuring charges, net in the accompanying Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019, respectively, is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ ​ September 30, ​ September 30, ​ ​ ​ ​ 2020 2019 2020 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reduction in force ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TTEC Digital ​ $ 347 $ 90 $ 668 ​ $ 90 ​ ​ TTEC Engage ​ — ​ — ​ 239 ​ 770 ​ ​ Total ​ $ 347 $ 90 $ 907 ​ $ 860 ​ ​ ​ 23 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ ​ ​ ​ 2020 2019 2020 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Facility exit and other charges ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TTEC Digital ​ $ 90 $ 8 $ 90 ​ $ 8 ​ ​ TTEC Engage ​ 796 ​ 85 ​ 1,567 ​ 704 ​ ​ Total ​ $ 886 $ 93 $ 1,657 ​ $ 712 ​ ​ ​ A rollforward of the activity in the Company’s restructuring accrual is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reduction Facility Exit and ​ ​ in Force Other Charges Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2019 ​ $ 251 $ 74 $ 325 ​ Expense ​ 907 ​ ​ 1,657 ​ 2,564 ​ Payments ​ ( 1,066 ) ​ ​ ( 1,147 ) ​ ( 2,213 ) ​ Change due to foreign currency ​ ​ ( 14 ) ​ ​ ( 5 ) ​ ​ ( 19 ) ​ Change in estimates ​ ( 78 ) ​ ​ — ​ ( 78 ) ​ Balance as of September 30, 2020 ​ $ — $ 579 $ 579 ​ ​ 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. Severance Charges In the normal course of business, the Company will pay severance to terminated employees related to programs that are ending who are no longer needed and cannot be repurposed to a new program. During the second quarter of 2020, a $ 2.9 million accrual was recorded with the expense included in Cost of services during the quarter ended June 30, 2020. During the third quarter, $ 0.5 million was paid and $ 0.1 million of additional expense was recorded. The accrual is expected to be paid or extinguished during the next six months and thus is classified as current liabilities within Other accrued expenses in the Consolidated Balance Sheets. Impairment Losses During each of the periods presented, the Company evaluated the annual recoverability of its leasehold improvement assets at certain customer engagement centers. An asset is considered to be impaired when the anticipated undiscounted future cash flows of its asset group are estimated to be less than the asset group’s carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. To determine fair value, the Company used Level 3 inputs in its discounted cash flows analysis. Assumptions included the amount and timing of estimated future cash flows and assumed discount rates. During the three and 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, for the TTEC Digital segment. During the three and nine months ended September 30, 2019, the Company recognized impairment losses related to leasehold improvement assets and right of use lease assets of zero and $ 2.6 million, respectively, across the TTEC Digital and TTEC Engage segments. ​ 24 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (10) COMMITMENTS AND CONTINGENCIES Credit Facility On February 14, 2019, the Company entered into a Fourth Amendment to its Amended and Restated Credit Agreement and Amended and Restated Security Agreement originally dated as of June 3, 2013 (collectively the “Credit Agreement”) for a senior secured revolving credit facility with a syndicate of lenders led by Wells Fargo Bank, National Association, as agent, swing line and fronting lender which matures on February 14, 2024 (the “Credit Facility”). The maximum commitment under the Credit Facility is $ 900.0 million, with an accordion feature of up to $ 1.2 billion in the aggregate, if certain conditions are satisfied. The Credit Facility commitment fees are payable to the lenders in an amount equal to the unused portion of the Credit Facility multiplied by a rate per annum as determined by reference to 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 average book value of all accounts receivable over the most recent twelve-month period. Base rate loans bear interest at a rate equal to the greatest of (i) Wells Fargo’s prime rate, (ii) one half of 1% in excess of the federal funds effective rate, and (iii) 1.25 % in excess of the one month London Interbank Offered Rate (“LIBOR”); plus in each case a margin of 0 % to 0.75 % based on the Company’s net leverage ratio. Eurodollar loans bear interest at LIBOR plus a margin of 1.0 % to 1.75 % based on the Company’s net leverage ratio. Alternate currency loans bear interest at rates applicable to their respective currencies. Letter of credit fees are one eighth of 1% of the stated amount of the letter of credit on the date of issuance, renewal or amendment, plus an annual fee equal to the borrowing margin for Eurodollar loans. The Company primarily utilizes its Credit Agreement to fund working capital, general operations, dividends and other strategic activities, such as the acquisitions described in Note 2. As of September 30, 2020 and December 31, 2019, the Company had borrowings of $325.0 million and $290.0 million, respectively, under its Credit Agreement, and its average daily utilization was $ 597.9 million and $ 314.9 million for the nine months ended September 30, 2020 and 2019, respectively. The Company had increased borrowings under the Credit Agreement from March 30, 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 have been repaid. Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $ 570 million as of September 30, 2020. As of September 30, 2020, the Company was in compliance with all covenants and conditions under its Credit Agreement. Letters of Credit As of September 30, 2020, outstanding letters of credit under the Credit Agreement totaled $ 2.6 million and primarily guaranteed workers’ compensation and other insurance related obligations. As of September 30, 2020, letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $ 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. 25 Table of Contents TTEC 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 which require lease payments over the lease term. The Company determines the value of each lease by computing the present value of each lease payment using the interest rate implicit in the lease, if available; otherwise the Company estimates its incremental borrowing rate over the lease term. The Company determines its incremental borrowing rate based on its estimated credit risk with adjustments for each individual leases’ geographical risk and lease term. Operating lease assets also include prepaid rent and initial direct costs less any tenant improvements. The Company’s real estate portfolio typically includes one or more options to renew , with renewal terms that generally can extend the lease term from one to 10 years . The exercise of these lease renewal options is at the Company’s discretion and is included in the lease term only if the Company is reasonably certain to exercise. The Company also has service arrangements whereby it controls specific space provided by a third-party service provider. These arrangements meet the definition of a lease and are accounted for under ASC 842. Rent expense for operating leases is recognized on a straight-line basis over the lease term and is included in the Consolidated Statements of Comprehensive Income (Loss). The Company’s lease agreements do not contain any material residual value guarantees or restrictive guarantees. The components of lease expense for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location in Statements of ​ Three Months Ended September 30, ​ Description ​ Comprehensive Income (Loss) 2020 2019 Amortization of ROU assets - finance leases ​ Depreciation and amortization ​ $ 1,933 ​ $ 1,855 ​ Interest on lease liabilities - finance leases ​ Interest expense ​ ​ 49 ​ ​ 43 Operating lease cost (cost resulting from lease payments) ​ Cost of services ​ 11,446 ​ 10,910 ​ Operating lease cost (cost resulting from lease payments) ​ Selling, general and administrative ​ ​ 530 ​ ​ 551 ​ Operating lease cost (cost resulting from lease payments) ​ Restructuring ​ ​ 261 ​ ​ — ​ Operating lease cost ​ Impairment ​ ​ 948 ​ ​ — ​ Operating lease cost (cost resulting from lease payments) ​ Other income (expense), net ​ ​ 310 ​ ​ 242 ​ Short-term lease cost ​ Cost of services ​ 1,029 ​ 1,107 ​ Variable lease cost (cost excluded from lease payments) ​ Cost of services ​ ​ ( 1 ) ​ ​ — ​ Less: Sublease income ​ Selling, general and administrative ​ ​ ( 220 ) ​ ​ ( 126 ) ​ Less: Sublease income ​ Other income (expense), net ​ ( 676 ) ​ ( 496 ) ​ Total lease cost ​ ​ ​ $ 15,609 $ 14,086 ​ ​ 26 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location in Statements of ​ Nine Months Ended September 30, ​ Description ​ Comprehensive Income (Loss) 2020 2019 ​ Amortization of ROU assets - finance leases ​ Depreciation and amortization ​ $ 5,777 ​ $ 5,260 ​ Interest on lease liabilities - finance leases ​ Interest expense ​ ​ 157 ​ ​ 83 ​ Operating lease cost (cost resulting from lease payments) ​ Cost of services ​ 35,126 ​ 34,256 ​ Operating lease cost (cost resulting from lease payments) ​ Selling, general and administrative ​ ​ 1,493 ​ ​ 3,181 ​ Operating lease cost (cost resulting from lease payments) ​ Restructuring ​ ​ 697 ​ ​ — ​ Operating lease cost ​ Impairment ​ ​ 1,456 ​ ​ — ​ Operating lease cost (cost resulting from lease payments) ​ Other income (expense), net ​ ​ 839 ​ ​ 726 ​ Short-term lease cost ​ Cost of services ​ 2,909 ​ 3,419 ​ Variable lease cost (cost excluded from lease payments) ​ Cost of services ​ ​ ( 285 ) ​ ​ — ​ Less: Sublease income ​ Selling, general and administrative ​ ​ ( 614 ) ​ ​ ( 319 ) ​ Less: Sublease income ​ Other income (expense), net ​ ( 1,788 ) ​ ( 1,488 ) ​ Total lease cost ​ ​ ​ $ 45,767 $ 45,118 ​ ​ Other supplementary information for the three and nine months ended September 30, 2020 and 2019, are as follows (dollar values in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2020 2019 Finance lease - operating cash flows ​ $ 17 ​ $ 43 ​ Finance lease - financing cash flows ​ $ 2,143 ​ $ 2,111 ​ Operating lease - operating cash flows (fixed payments) ​ $ 13,824 ​ $ 12,185 ​ New ROU assets - operating leases ​ $ — ​ $ 1,301 ​ Modified ROU assets - operating leases ​ $ 111 ​ $ 18,807 ​ New ROU assets - finance leases ​ $ 1,464 ​ $ 1,886 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2020 2019 Finance lease - operating cash flows ​ $ 53 ​ $ 83 ​ Finance lease - financing cash flows ​ $ 6,010 ​ $ 8,096 ​ Operating lease - operating cash flows (fixed payments) ​ $ 41,241 ​ $ 38,260 ​ New ROU assets - operating leases ​ $ 6,795 ​ $ 8,358 ​ Modified ROU assets - operating leases ​ $ 6,332 ​ $ 42,008 ​ New ROU assets - finance leases ​ $ 2,292 ​ $ 6,133 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 ​ December 31, 2019 ​ Weighted average remaining lease term - finance leases ​ ​ 2.62 years ​ ​ 2.91 years ​ Weighted average remaining lease term - operating leases ​ ​ 3.86 years ​ ​ 4.27 years ​ Weighted average discount rate - finance leases ​ ​ 1.57 % ​ ​ 1.43 % ​ Weighted average discount rate - operating leases ​ ​ 6.97 % ​ ​ 7.22 % ​ ​ 27 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Operating and financing lease right-of-use assets and lease liabilities within the Consolidated Balance Sheet as of September 30, 2020 and December 31, 2019 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Description Location in Balance Sheet ​ September 30, 2020 ​ December 31, 2019 Assets ​ ​ ​ ​ ​ ​ ​ ​ Operating lease assets Operating lease assets ​ $ 132,571 ​ $ 150,808 ​ Finance lease assets Property, plant and equipment, net ​ 14,530 ​ 18,016 ​ Total leased assets ​ ​ $ 147,101 ​ $ 168,824 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ ​ ​ Current ​ ​ ​ ​ ​ ​ ​ ​ Operating Current operating lease liabilities ​ $ 44,181 ​ $ 45,218 ​ Finance Other current liabilities ​ ​ 6,757 ​ ​ 7,470 ​ Non-current ​ ​ ​ ​ ​ ​ ​ ​ Operating Non-current operating lease liabilities ​ ​ 106,921 ​ ​ 127,395 ​ Finance Other long-term liabilities ​ ​ 6,040 ​ ​ 8,896 ​ Total lease liabilities ​ ​ $ 163,899 ​ $ 188,979 ​ ​ The future minimum operating lease and finance lease payments required under non-cancelable leases as of September 30, 2020 and December 31, 2019 are as follows (in thousands): September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Sub-lease Finance ​ ​ Leases ​ Income ​ Leases Year 1 ​ $ 51,934 ​ $ ( 3,443 ) ​ $ 6,808 ​ Year 2 ​ 46,728 ​ ( 3,455 ) ​ 3,552 ​ Year 3 ​ 36,717 ​ ( 3,293 ) ​ 1,849 ​ Year 4 ​ 19,229 ​ ( 2,852 ) ​ 852 ​ Year 5 ​ 10,247 ​ ( 2,940 ) ​ 13 ​ Thereafter ​ 9,362 ​ ( 1,225 ) ​ — ​ Total minimum lease payments ​ $ 174,217 ​ $ ( 17,208 ) ​ $ 13,074 ​ Less imputed interest ​ ​ ( 23,115 ) ​ ​ ​ ​ ​ ( 277 ) ​ Total lease liability ​ $ 151,102 ​ ​ ​ ​ $ 12,797 ​ ​ December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Sub-lease Finance ​ ​ Leases ​ Income ​ Leases Year 1 ​ $ 54,903 ​ $ ( 2,976 ) ​ $ 7,594 ​ Year 2 ​ 47,892 ​ ( 621 ) ​ 5,587 ​ Year 3 ​ 43,590 ​ ( 345 ) ​ 2,139 ​ Year 4 ​ 28,124 ​ ( 201 ) ​ 1,109 ​ Year 5 ​ 14,494 ​ — ​ 331 ​ Thereafter ​ 14,734 ​ — ​ — ​ Total minimum lease payments ​ $ 203,737 ​ $ ( 4,143 ) ​ $ 16,760 ​ Less imputed interest ​ ​ ( 31,124 ) ​ ​ ​ ​ ​ ( 394 ) ​ Total lease liability ​ $ 172,613 ​ ​ ​ ​ $ 16,366 ​ ​ 28 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) In 2008, the Company sub-leased one of its customer delivery centers to a third party for the remaining term of the lease. The sub-lease began on January 1, 2009 and rental income will be recognized on a straight-line basis over the term of the sub-lease through 2026 . In 2017, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on November 6, 2017 and ends May 31, 2021 . In 2019, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on March 1, 2019 and ends July 31, 2023 . In 2020, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on February 6, 2020 and ends June 14, 2023 . ​ ​ ​ ​ ​ ​ (12) OTHER LONG-TERM LIABILITIES ​ The components of Other long-term liabilities as of September 30, 2020 and December 31, 2019 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred revenue ​ ​ $ 15,359 $ 23,142 ​ Deferred compensation plan ​ ​ ​ 21,166 ​ ​ 20,370 ​ Other ​ ​ 33,667 ​ 36,129 ​ Total ​ ​ $ 70,192 $ 79,641 ​ ​ ​ ​ (13) NONCONTROLLING INTEREST ​ The following table reconciles equity attributable to noncontrolling interest in the Company’s subsidiary (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2020 2019 Noncontrolling interest, January 1 $ 13,186 $ 7,677 ​ Net income attributable to noncontrolling interest ​ 6,381 ​ 5,168 ​ Dividends distributed to noncontrolling interest ​ ( 6,740 ) ​ ( 3,600 ) ​ Equity contribution ​ — ​ 3,362 ​ Foreign currency translation adjustments ​ ( 65 ) ​ ( 185 ) ​ Noncontrolling interest, September 30 $ 12,762 $ 12,422 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 29 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (14) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ​ The following table presents changes in the accumulated balance for each component of other comprehensive income (loss), including current period other comprehensive income (loss) and reclassifications out of accumulated other comprehensive income (loss) (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ ​ ​ ​ ​ ​ ​ ​ Currency ​ Derivative ​ ​ ​ ​ ​ ​ ​ ​ Translation ​ Valuation, Net ​ Other, Net ​ ​ ​ ​ ​ Adjustment ​ of Tax ​ of Tax ​ Totals ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated other comprehensive income (loss) at December 31, 2018 ​ $ ( 114,168 ) $ ( 8,278 ) $ ( 2,150 ) $ ( 124,596 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) before reclassifications ​ ( 2,573 ) ​ 11,791 ​ 201 ​ 9,419 ​ Amounts reclassified from accumulated other comprehensive income (loss) ​ — ​ ( 3,376 ) ​ ( 147 ) ​ ( 3,523 ) ​ Net current period other comprehensive income (loss) ​ ( 2,573 ) ​ 8,415 ​ 54 ​ 5,896 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated other comprehensive income (loss) at September 30, 2019 ​ $ ( 116,741 ) $ 137 $ ( 2,096 ) $ ( 118,700 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ) ​ ​ The following table presents the classification and amount of the reclassifications from Accumulated other comprehensive income (loss) to the statement of comprehensive income (loss) (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Statement of ​ ​ ​ For the Three Months Ended September 30, ​ Comprehensive Income ​ ​ 2020 2019 (Loss) Classification ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative valuation ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on foreign currency forward exchange contracts ​ $ 706 ​ $ ( 1,087 ) Revenue ​ Tax effect ​ ( 191 ) ​ 294 Provision for income taxes ​ ​ ​ $ 515 ​ $ ( 793 ) Net income (loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ Actuarial loss on defined benefit plan ​ $ ( 147 ) ​ $ ( 55 ) Cost of services ​ Tax effect ​ 15 ​ 6 Provision for income taxes ​ ​ ​ $ ( 132 ) ​ $ ( 49 ) Net income (loss) ​ ​ 30 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Statement of ​ ​ For the Nine Months Ended September 30, ​ Comprehensive Income ​ 2020 2019 (Loss) Classification ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative valuation ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (loss) on foreign currency forward exchange contracts ​ $ 936 ​ $ ( 4,625 ) Revenue ​ Tax effect ​ ( 253 ) ​ 1,249 Provision for income taxes ​ ​ ​ $ 683 ​ $ ( 3,376 ) Net income (loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ Actuarial loss on defined benefit plan ​ $ ( 441 ) ​ $ ( 165 ) Cost of services ​ Tax effect ​ 45 ​ 18 Provision for income taxes ​ ​ ​ $ ( 396 ) ​ $ ( 147 ) Net income (loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (15) WEIGHTED AVERAGE SHARE COUNTS ​ 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, ​ 2020 2019 2020 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares used in basic earnings per share calculation ​ 46,732 46,481 46,617 46,335 Effect of dilutive securities: ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock units ​ 299 287 268 358 Performance-based restricted stock units ​ — — — — Total effects of dilutive securities ​ 299 287 268 358 Shares used in dilutive earnings per share calculation ​ 47,031 46,768 46,885 46,693 ​ For the three months ended September 30, 2020 and 2019, there were no restricted stock units (“RSUs”) outstanding which were 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, 2020 and 2019, there were RSUs of 167 thousand and 20 thousand, respectively, outstanding which were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive. ​ ​ (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, 2020 and 2019, the Company recognized total equity-based compensation expense of $ 3.5 million and $ 9.5 million and $ 3.1 million and $ 9.7 million, respectively. Of this total compensation expense, $ 1.3 million and $ 3.4 million were recognized in Cost of services and $ 2.2 million and $ 6.1 million were recognized in Selling, general and administrative during the three and nine months ended September 30, 2020, respectively. During the three and nine months ended September 30, 2019, the Company recognized compensation expense of $ 1.0 million and $ 3.7 million in Cost of services and $ 2.1 million and $ 6.0 million in Selling, general and administrative, respectively. 31 Table of Contents TTEC HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Restricted Stock Unit Grants During the nine months ended September 30, 2020 and 2019, the Company granted 539,697 and 101,909 RSUs, respectively, to new and existing employees, which vest over four to five years . The Company recognized compensation expense related to RSUs of $ 3.1 million and $ 8.5 million for the three and nine months ended September 30, 2020, respectively. The Company recognized compensation expense related to RSUs of $ 2.5 million and $ 8.9 million for the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, there was approximately $ 26.7 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 Unit Grants During 2019, the Company awarded performance restricted stock units (“PRSUs”) that are subject to service and performance vesting conditions. If defined minimum targets are met, the annual value of the PRSUs issued will be between $0.4 million and $1.4 million and vest immediately. If the defined minimum targets are not met, then no shares will be issued. The award amounts are based on the Company’s annual adjusted operating income for the fiscal years 2019, 2020, 2021. Each fiscal year’s adjusted operating income will determine the award amount. The Company recognized compensation expense related to PRSUs of $ 0.4 million and $ 1.1 million for the three and nine months ended September 30, 2020. The Company recognized compensation expense related to PRSUs of $0.6 million and $0.8 million for the three and nine months ended September 30, 2019, respectively. During 2020, the Company awarded PRSUs that are subject to service and performance vesting conditions. If defined minimum targets are met, Company shares will be issued that vest immediately. If the defined minimum targets are not met, then no shares will be issued. The number of shares awarded are based on the Company’s annual revenue and adjusted operating income for the fiscal years 2021 and 2022. Each fiscal year’s revenue and adjusted operating income will determine the award amount. Expense for these awards will begin at the start of the requisite service period, beginning January 1, 2021. ​ (17) RELATED PARTY The Company entered into an agreement under which Avion, LLC (“Avion”) and Airmax LLC (“Airmax”) provide certain aviation flight services as requested by the Company. Such services include the use of an aircraft and flight crew. Kenneth D. Tuchman, Chairman and Chief Executive Officer of the Company, has an indirect 100% beneficial ownership interest in Avion and Airmax. During the nine months ended September 30, 2020 and 2019, the Company expensed $ 0.3 million and $ 0.8 million, respectively, to Avion and Airmax for services provided to the Company. There were $ 50 thousand in payments due and outstanding to Avion and Airmax as of September 30, 2020. During 2015, the Company entered into a contract to purchase software from CaféX, in which the Company holds a 17.8 % equity investment. During the nine months ended September 30, 2020 and 2019, the Company purchased zero and $ 50 thousand, respectively, of software from CaféX. Ms. Regina M. Paolillo, Chief Financial and Administrative Officer of the Company, is a member of the board of directors of Welltok, Inc., a consumer health SaaS company, and partner of the Company in a joint venture. During the nine months ended September 30, 2020 and 2019, the Company recorded revenue of $ 2.4 million and $ 4.0 million, respectively, in connection with work performed through the joint venture. ​ ​ ​ 32 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, relating to our operations, expected financial position, results of operation, and other business matters that are based on our current expectations, assumptions, and projections with respect to the future, and are not a guarantee of performance. In this report, when we use words such as “may,” “believe,” “plan,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “project,” “would,” “could,” “target,” or similar expressions, or when we discuss our strategy, plans, goals, initiatives, or objectives, we are making forward-looking statements. We caution you not to rely unduly on any forward-looking statements. Actual results may differ materially from 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, including but not limited to factors discussed in the “Risk Factors” section found in Item 1A. Risk Factors in this Report on Form 10-Q and in the Report on Form 10-K for the year ended December 31, 2019. Specifically, we believe you should note the risks related to the COVID-19 global pandemic and the various government mandates designed to contain the pandemic, and how these risks may impact our business in the short and longer term; the risks related to our strategy execution; our ability to innovate and introduce technologies that are sufficiently disruptive to allow us to maintain and grow our market share; cybersecurity; consolidation activities undertaken by our clients; geographic concentration of our brick and mortar delivery platform and our global footprint; changes in laws that impact our business and our ability to comply with those and other laws governing our operations; the reliability of our information technology infrastructure and our ability to consistently deliver uninterrupted service to our clients; the need to forecast demand for services accurately and the impact of such forecasts on our capacity utilization; our ability to attract and retain qualified and skilled personnel at a price point that we can afford and our clients are willing to pay; our M&A activity, including our ability to identify, acquire and properly integrate acquired businesses in accordance with our strategy; and our equity structure including our controlling shareholder risk, the limited market float of our stock, and the potential volatility of our stock price resulting therefrom. Our forward-looking statements are based on information available as of the date that this Report on Form 10-Q is filed with the United States Securities and Exchange Commission (“SEC”). We undertake no obligation to update them, except as may be required by applicable law. Although we believe that our forward-looking statements are reasonable, they depend on many factors outside of our control and we can provide no assurance that they will prove to be correct. ​ ​ ​ 33 Table of Contents