What changed in this filing

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Item 1. Financial Statements

2021-05-04 compared with 2020-11-04 · 285 added, 419 removed, 636 unchanged (53% of the section changed)

4 unchanged sentences

(Amounts in thousands, except share amounts)

September 30,

Current assets

Cash and cash equivalents

Accounts receivable, net of allowance of $ 5,057 and $ 5,452

Accounts receivable, net of allowance of $ 4,997 and $ 5,067 , respectively

Prepaids and other current assets

8 unchanged sentences

Total long-term assets

LIABILITIES, STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

Current liabilities

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10,000,000 shares authorized;

zero shares outstanding as of September 30, 2020 and December 31, 2019

zero shares outstanding as of March 31, 2021 and December 31, 2020

Common stock;

1 unchanged sentence

150,000,000 shares authorized;

46,734,704 and 46,488,938 shares outstanding as of September 30, 2020 and December 31, 2019, respectively

46,819,468 and 46,737,033 shares outstanding as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Treasury stock at cost:

35,317,549 and 35,563,315 shares as of September 30, 2020 and December 31, 2019, respectively

35,232,785 and 35,315,220 shares as of March 31, 2021 and December 31, 2020, respectively

Accumulated other comprehensive income (loss)

2 unchanged sentences

Total stockholders’ equity

Total liabilities, stockholders’ equity and mezzanine equity

Total liabilities and stockholders’ equity and mezzanine equity

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

(Amounts in thousands, except per share amounts)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Operating expenses

23 unchanged sentences

Comprehensive income attributable to noncontrolling interest

Comprehensive income attributable to TTEC stockholders

Comprehensive income (loss) attributable to TTEC stockholders

Weighted average shares outstanding

6 unchanged sentences

(Amounts in thousands)

Three months ended September 30, 2020 and 2019

Stockholders’ Equity of the Company

Preferred Stock

Comprehensive

Noncontrolling

Paid-in Capital

Income (Loss)

Balance as of June 30, 2020

Dividends to shareholders ($0.40 per common share)

Acquisition of noncontrolling interest

Dividends distributed to noncontrolling interest

Foreign currency translation adjustments

Derivatives valuation, net of tax

Vesting of restricted stock units

Equity-based compensation expense

Other, net of tax

Balance as of September 30, 2020

Stockholders’ Equity of the Company

Preferred Stock

Comprehensive

Noncontrolling

Paid-in Capital

Income (Loss)

Balance as of June 30, 2019

Dividends to shareholders ($ 0.32 per common share)

Dividends distributed to noncontrolling interest

Foreign currency translation adjustments

Derivatives valuation, net of tax

Vesting of restricted stock units

Equity-based compensation expense

Other, net of tax

Balance as of September 30, 2019

Nine months ended September 30, 2020 and 2019

Three months ended March 31, 2021 and 2020

Stockholders’ Equity of the Company

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Other, net of tax

Balance as of September 30, 2020

Balance as of March 31, 2020

Stockholders’ Equity of the Company

5 unchanged sentences

Balance as of December 31, 2020

Cumulative effect of adopting accounting standard updates

Dividends to shareholders ($ 0.43 per common share)

Capital contribution from noncontrolling interest

Dividends distributed to noncontrolling interest

4 unchanged sentences

Other, net of tax

Balance as of September 30, 2019

Balance as of March 31, 2021

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

(Amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

6 unchanged sentences

(Gain) loss on disposal of assets

Loss on dissolution of subsidiary

Impairment losses

12 unchanged sentences

Purchases of property, plant and equipment, net of acquisitions

Acquisitions, net of cash acquired of $ 3,123 and zero , respectively

Acquisitions, net of cash acquired of zero and $ 3,123 , respectively

Net cash used in investing activities

5 unchanged sentences

Payments to noncontrolling interest

Capital contribution from noncontrolling interest

Tax payments related to issuance of restricted stock units

Payments of debt issuance costs

Net cash used in financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

16 unchanged sentences

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”, “the Company”) is a leading global customer experience as a service (“CXaaS”) partner for many of the world’s iconic brands, Fortune 1000 companies, government agencies, and disruptive growth companies.

TTEC helps its clients deliver frictionless customer experiences, strengthen customer relationships, brand recognition and loyalty through personalized interactions, improve their Net Promoter Score, customer satisfaction and quality assurance, and lower their total cost to serve by combining innovative digital solutions with best-in-class service capabilities to enable and deliver simplified, consistent and seamless customer experience across channels and phases of the customer lifecycle.

TTEC’s 58,500 employees serve clients in the automotive, communication, financial services, national/federal and state and local governments, healthcare, logistics, media and entertainment, e-tail/retail, technology, travel and transportation industries via operations in the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and the United Kingdom.

The Company reports its financial information based on 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.

● TTEC Digital provides the CX technology services and platforms to support the Company’s clients’ customer interaction delivery infrastructure.

The segment designs, builds and operates the omnichannel ecosystem in a cloud, on premise, or hybrid environment, and fully integrates, orchestrates, and administers highly scalable, feature-rich CX technology applications.

● TTEC Engage provides the CX managed services to support the Company’s clients’ end-to-end customer interaction delivery, by providing the essential CX omnichannel and application technologies, human resources, recruiting, training and production, at-home or facility-based delivery infrastructure on a global scale, and engagement processes.

This segment provides full-service digital, omnichannel customer engagement, supporting customer care, customer acquisition, growth and retention, and fraud detection and prevention services.

TTEC Digital and TTEC Engage strategically come together under the Company’s unified offering, Humanify ® Customer Experience as a Service, which drives measurable customer results for clients through the delivery of personalized, omnichannel experiences.

The Company’s Humanify ® cloud platform provides a fully integrated ecosystem of CX offerings, including messaging, artificial intelligence, machine learning, robotic process automation, analytics, cybersecurity, customer relationship management, knowledge management, journey orchestration, and traditional voice solutions.

The Company’s end-to-end platform differentiates the Company from many competitors by combining design, strategic consulting, best-in-class technology, data analytics, process optimization, system integration and operational excellence.

Basis of Presentation

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All intercompany balances and transactions have been eliminated in consolidation.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The unaudited Consolidated Financial Statements do not include all of the disclosures required by accounting principles generally accepted in the U.S.

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The unaudited Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company and the consolidated results of operations and comprehensive income (loss) and the consolidated cash flows of the Company.

All such adjustments are of a normal, recurring nature.

Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

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, 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.

1 unchanged sentence

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.

Cash and cash equivalents consist of cash, primarily held in interest-bearing investments, and liquid short-term investments which have original maturities of less than 90 days.

Restricted cash includes cash whereby the Company’s ability to use the funds at any time is contractually limited or is generally designated for specific purposes arising out of certain contractual or other obligations.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets that sum to the amounts reported in the Condensed Consolidated Statement of Cash Flows (in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

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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.

The Company adopted the new guidance effective January 1, 2021 and the adoption had no effect on the financial statements or related disclosures during the quarter.

Other Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform” (Topic 848), which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform due to the anticipated cessation of LIBOR on or before December 31, 2021.

The ASU is effective from March 12, 2020, through December 31, 2022 and could impact the accounting for LIBOR provisions in the Company’s credit facility agreement.

In addition, in January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform – Scope,” which clarified the scope of ASC 848 relating to contract modifications.

The Company has not yet adopted the standard but does not expect that the adoption of this guidance will have a material impact on the Company’s financial position, results of operations or cash flows.

(2) ACQUISITIONS AND DIVESTITURES

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The VF US Transaction includes two contingent payments over the next two years with each payment having a maximum value of $ 7.4 million based on VF US’s EBITDA performance for 2020 and 2021.

The Company finalized the net working capital adjustment for $ 0.3 million which was paid to Voice Foundry during the first quarter of 2021.

The fair value of the contingent consideration has been estimated using a Monte Carlo model.

The model was based on current expected EBITDA performance, a discount rate of 23.1 %, a volatility rate of 47 %, and an adjusted risk-free rate of 2.6 %.

Based on the model, a $ 10.9 million expected future payment was calculated and recorded as of 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.

Based on the model, a $ 10.9 million expected future payment was calculated and recorded as of the acquisition date.

During the fourth quarter of 2020 and the first quarter of 2021, a $ 3.2 million expense and a $ 0.5 million expense, respectively, were recorded related to fair value adjustments of the estimated contingent consideration based on revised estimates of EBITDA performance for 2021.

These expenses were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

During the first quarter of 2021, the contingent payment related to 2020 was finalized at a value of $ 7.4 million and was paid in April 2021.

As of March 31, 2021, the value of the accrual is $ 14.6 million, with $ 7.4 million included in Other accrued expenses and $ 7.2 million included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible asset.

The significant assumption utilized in calculating the fair value of the customer relationships intangible asset was the customer attrition rate.

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

The following summarizes the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):

The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):

Acquisition Date

Accounts receivable, net

Prepaid and other assets

Prepaid and other expenses

Customer relationships

3 unchanged sentences

Total purchase price

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.

In the first quarter of 2021, the Company finalized the valuation of VF US for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.

The VF US customer relationships and tradename are being amortized over useful lives of 4 and 2 years , respectively.

The goodwill recognized from the VF US acquisition is attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Digital segment.

The tax basis of the acquired intangibles and goodwill will 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.

Voice Foundry ASEAN

On November 4, 2020 , TTEC Europe BV, a subsidiary of the Company, closed the final phase of the acquisition of the Voice Foundry business by acquiring 100 % of the issued stock of Saasy Ventures Pty Ltd.

(“VF ASEAN”).

The business has been integrated into the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC.

Total cash paid at acquisition was $ 15.2 million.

The VF ASEAN Transaction is subject to customary representations and warranties, holdbacks, and working capital adjustments.

The VF ASEAN Transaction includes two contingent payments over the next two years with each payment having a maximum value of $ 2.2 million based on VF ASEAN’s EBITDA performance for 2020 and 2021.

The 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 18.4 %, a volatility rate of 50 %, and an adjusted risk-free rate of 1.6 %.

Based on the model, a $ 2.8 million expected future payment was calculated and recorded as of the acquisition date.

During the fourth quarter of 2020 and the first quarter of 2021, a $ 1.2 million expense and a $ 0.4 million expense, respectively, were recorded related to fair value adjustments of the estimated contingent consideration based on estimates of EBITDA performance for 2020 and 2021.

These expenses were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

During the first quarter of 2021, the contingent payment related to 2020 was finalized at a value of $ 2.2 million and was paid in April 2021.

As of March 31, 2021, the value of the accrual is $ 4.3 million, with $ 2.2 million included in Other accrued expenses and $ 2.1 million included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible asset.

The significant assumption utilized in calculating the fair value of the customer relationships intangible asset was the customer attrition rate.

The following summarizes the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):

Acquisition Date

Accounts receivable, net

Prepaid and other expenses

Income tax receivable

Property, plant and equipment

Customer relationships

Accounts payable

Accrued employee compensation

Deferred revenue

Deferred tax liability

Other accrued liabilities

Total purchase price

The VF ASEAN 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 ASEAN acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Digital segment.

The tax basis of the acquired intangibles and goodwill will not be deductible for income tax purposes.

The acquired goodwill and intangibles and operating results of VF ASEAN are reported within the TTEC Digital segment from the date of acquisition.

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”).

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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.

The Company finalized the net working capital adjustment for $ 0.8 million during the second quarter of 2020 which was paid by Serendebyte to the Company in the second quarter of 2020.

TTEC HOLDINGS, INC.

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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):

The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):

Acquisition Date

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Total purchase price

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.

In the fourth quarter of 2020, the Company finalized the valuation of Serendebyte for the acquisition date assets acquired and liabilities assumed and determined no material adjustments to any of the balances were required.

At the date of the purchase, an additional $ 2.2 million of cash was retained in the entity that was withdrawn by the holders of the Remaining Interest during the second quarter of 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 Serendebyte customer relationships and tradename are being amortized over useful lives of 5 and 3 years , respectively.

The goodwill recognized from the Serendebyte acquisition is attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Digital segment.

The tax basis of the acquired intangibles and goodwill will not be deductible for income tax purposes.

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Notes to Consolidated Financial Statements

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):

Acquisition Date

Accounts receivable, net

Prepaid expenses

Property and equipment

Operating lease assets

Customer relationships

Accounts payable

Operating lease liability - short-term

Accrued employee compensation and benefits

Accrued expenses

Operating lease liability - long-term

Total purchase price

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The acquired businesses purchased in 2020 noted above contributed revenues of $ 11.6 million and net income of $ 1.0 million, inclusive of $ 0.8 million of acquired intangible amortization, to the Company for the quarter ended March 31, 2021.

The unaudited proforma financial results for the three months ended March 31, 2020 combines the consolidated results of the Company, Voice Foundry US, Voice Foundry ASEAN and Serendebyte assuming the acquisitions had been completed on January 1, 2020.

The reported revenue and net income of $ 432.2 million and $ 21.5 million would have been $ 438.0 million and $ 23.0 million for the three months ended March 31, 2020, respectively, on an unaudited proforma basis.

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.

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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).

In the second quarter ended June 30, 2020, the Company exited a foreign subsidiary that resulted in a non-cash $ 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 ceased operations and were removed from the consolidated financial statements as of the reporting period ended September 30, 2020.

As a result of the deconsolidation, a non-cash $ 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.

Subsequent Event

On April 8, 2021 , the Company acquired, through its subsidiary TTEC Digital, LLC, 100 % of the outstanding stock of Avtex Solutions, Holdings LLC (“Avtex”).

Avtex is an end-to-end customer experience and CXaaS solutions provider with offerings in Genesys and Microsoft cloud solutions .

The business will be integrated into the TTEC Digital segment and will be fully consolidated into the financial statements of TTEC.

Total cash paid at acquisition was $ 490.0 million, less customary amounts held in escrow for sellers’ indemnity obligations.

The Avtex Transaction is subject to customary representations and warranties, holdbacks, and a net working capital adjustment.

The Company used cash from operations and drew down on its Credit Facility to fund the acquisition.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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.

TTEC Digital provides the CX technology services and platforms to support the Company’s clients’ customer interaction delivery infrastructure.

These solutions are critical to enabling and accelerating digital transformation for the Company’s clients.

● Technology Services:

the Company’s technology services design, integrate and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, including journey orchestration, automation and AI, knowledge management, and workforce productivity.

● Professional Services:

the Company’s management consulting practices deliver customer experience strategy, analytics, process optimization, and learning and performance services.

TTEC Engage delivers the CX managed services to support the Company’s clients’ end-to-end customer interaction delivery, by providing the essential CX omnichannel and application technologies, human resources, recruiting, training and production, at-home or facility-based delivery infrastructure on a global scale, and engagement processes.

This segment provides full-service digital, omnichannel customer engagement, supporting customer care, customer acquisition, growth and retention, and fraud detection and prevention services.

● Customer Acquisition Services:

the Company’s customer growth and acquisition services optimize the buying journeys for acquiring new customers by leveraging technology and analytics to deliver personal experiences that increase the quantity and quality of leads and customers.

● Customer Care Services:

the Company’s customer care services provide turnkey contact center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all touchpoints.

● Fraud Prevention Services:

the Company’s 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.

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

Three Months Ended March 31, 2021

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

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

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Three Months Ended

Nine Months Ended

September 30,

Capital Expenditures

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2020

March 31, 2021

December 31, 2020

September 30, 2020

March 31, 2021

December 31, 2020

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,

Three Months Ended March 31,

United States

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Asia Pacific / India

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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.

The Company had one client that contributed in excess of 10% of total revenue for the three months ended March 31, 2021;

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.

This client contributed 15.7 % and 2.9 % of total revenue for the three months ended March 31, 2021 and 2020, respectively.

The Company had no clients that contributed in excess of 10% of total revenue for the three months ended March 31, 2020.

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.

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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.

Based on currently available information, management does not believe significant credit risk existed as of March 31, 2021.

In connection with the implementation of ASC 326 as of January 1, 2020, the Company analyzed the prior history of credit losses on revenue for TTEC as a whole and separately for each of the two segments.

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The Company will write-off accounts receivable against this allowance when the Company determines a balance is uncollectible.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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,

Balance, beginning of period

Three Months Ended March 31,

Balance, beginning of year

Provision for credit losses

1 unchanged sentence

Effect of foreign currency

Balance, end of period

Balance, end of year

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;

As of March 31, 2021 and December 31, 2020, TTEC had approximately $ 2.7 million in pre-petition accounts receivables outstanding related to Sears;

during the fourth quarter of 2018 a $ 2.7 million allowance for uncollectible accounts was recorded and included in Selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss).

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

The Company is party to an Uncommitted Receivables Purchase Agreement (“Agreement”) with Bank of the West (“Bank”), whereby from time-to-time the Company may elect to sell, on a revolving basis, U.S.

accounts receivables of certain clients at a discount to the Bank for cash on a limited recourse basis.

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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;

The cash proceeds from this Agreement are included in the change in accounts receivable within the operating activities section of the Consolidated Statements of Cash Flow.

As of March 31, 2021, the Company had factored $ 72.0 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.

As of March 31, 2021, the Company had collected $ 16.0 million of cash from customers which had not been remitted to the Bank.

The unremitted cash is restricted cash and is included within Prepaid and other current assets with the corresponding liability included in Accrued expenses on the Consolidated Balance Sheet.

The Company has not recorded any servicing assets or liabilities as of September 30, 2020 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

The Company has not recorded any servicing assets or liabilities as of March 31, 2021 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

(5) GOODWILL AND OTHER INTANGIBLE ASSETS

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Acquisitions /

September 30,

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

During the quarter ended March 31, 2021, the Company assessed whether any such indicators of impairment existed and concluded there were none.

(6) DERIVATIVES

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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):

As of March 31, 2021, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults.

The following table summarizes the aggregate unrealized net gain or loss in Accumulated other comprehensive income (loss) for the three months ended March 31, 2021 and 2020 (in thousands and net of tax):

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

Aggregate unrealized net gain/(loss) at beginning of period

2 unchanged sentences

Aggregate unrealized net gain/(loss) at end of period

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).

The Company’s foreign exchange cash flow hedging instruments as of March 31, 2021 and December 31, 2020 are summarized as follows (amounts in thousands).

All hedging instruments are forward contracts.

As of September 30, 2020

As of March 31, 2021

Canadian Dollar

Philippine Peso

December 2023

As of December 31, 2020

Canadian Dollar

Philippine Peso

(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.

dollars on March 31, 2021 and December 31, 2020.

Fair Value Hedges

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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.

As of March 31, 2021 and December 31, 2020 the total notional amounts of the Company’s forward contracts used as fair value hedges were $ 27.8 million and $ 35.5 million, respectively.

TTEC HOLDINGS, INC.

2 unchanged sentences

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

The Company’s derivatives as of March 31, 2021 and December 31, 2020 were as follows (in thousands):

March 31, 2021

Not Designated

17 unchanged sentences

Total fair value of derivatives, net

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,

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 were as follows (in thousands):

Three Months Ended March 31,

Designated as Hedging

7 unchanged sentences

Notes to Consolidated Financial Statements

Three Months Ended September 30,

Not Designated as Hedging Instruments

Derivative contract type:

Foreign Exchange

Derivative classification:

Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss):

Other income (expense), net

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,

Designated as Hedging

Derivative contract type:

Foreign Exchange

Derivative classification:

Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax

Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:

Nine Months Ended September 30,

Three Months Ended March 31,

Not Designated as Hedging Instruments

12 unchanged sentences

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

The following presents information as of March 31, 2021 and December 31, 2020 for the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.

Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature.

2 unchanged sentences

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.

As of March 31, 2021, 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 Facility, 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 March 31, 2021 and December 31, 2020, the Company had $ 339.0 million and $ 385.0 million, respectively, of borrowings outstanding under the Credit Facility.

During the first quarter of 2021 outstanding borrowings accrued interest at an average rate of 1.1 % 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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

As of March 31, 2021, credit risk did not materially change the fair value of the Company’s derivative contracts.

The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of March 31, 2021 and December 31, 2020 (in thousands):

As of March 31, 2021

Fair Value Measurements Using

6 unchanged sentences

Total net derivative asset (liability)

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of December 31, 2020

7 unchanged sentences

Total net derivative asset (liability)

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

The following is a summary of the Company’s fair value measurements as of March 31, 2021 and December 31, 2020 (in thousands):

As of March 31, 2021

Fair Value Measurements Using

9 unchanged sentences

Total liabilities

Redeemable noncontrolling interest

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of December 31, 2020

10 unchanged sentences

Total liabilities

Redeemable noncontrolling interest

Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees.

1 unchanged sentence

The deferred compensation liability represents the combined values of market investments against which participant accounts are tracked.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 %.

Contingent Consideration - The Company recorded contingent consideration related to the acquisitions of VF US and VF ASEAN.

The contingent payable for VF US was calculated using a Monte Carlo simulation including a discount rate of 23.1 %.

The contingent payable for VF ASEAN was calculated using a Monte Carlo simulation including a discount rate of 18.4 %.

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.

During the first, second and fourth quarters of 2020, the Company recorded fair value adjustments to the contingent consideration associated with the acquisition of FCR LLC based on decreased estimates of EBITDA which caused the estimated payable to decrease.

Accordingly, a $ 3.3 million decrease, a $ 1.1 million decrease and a $1.8 million decrease to the payable were recorded as of March 31, 2020, June 30, 2020 and December 31, 2020, respectively, and were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

As of December 31, 2020, the final calculated contingent consideration for FCR was zero.

During the fourth quarter of 2020 and the first quarter of 2021, the Company recorded fair value adjustments to the contingent consideration associated with the VF US and VF ASEAN acquisitions based on increased actual results and estimates of EBITDA for 2021 which caused the payables to increase.

Accordingly, a combined $ 4.3 million increase and $ 0.9 million increase, to the payables were recorded as of December 31, 2020 and March 31, 2021, respectively, and were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

As of March 31, 2021, the expected future contingent consideration for the VF US and VF ASEAN acquisitions is $ 18.9 million.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

A rollforward of the activity in the Company’s fair value of the contingent consideration payable is as follows (in thousands):

September 30,

(8) INCOME TAXES

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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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of March 31, 2021, the Company had $ 15.5 million of gross deferred tax assets (after a $ 20.3 million valuation allowance) and a net deferred tax asset of $ 9.1 million (after deferred tax liabilities of $ 6.4 million) related to the United States and international tax jurisdictions whose recoverability is dependent upon future profitability.

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 effective tax rate for the three months ended March 31, 2021 and 2020 was 22.5 % and 29.2 %, respectively.

The Company’s U.S.

income tax returns filed for the tax years ending December 31, 2017 to present, remain open tax years .

The Company has been notified of the intent to audit or is currently under audit of income taxes for 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 .

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 , and the Philippines for tax years 2017 and 2018 .

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 first quarter of 2020, changes to the valuation allowance were recorded in the amounts of $ 0.3 million, 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.

In the first quarter of 2021, a change to the valuation allowance was recorded in the amount of $ 2.4 million for assets that did not meet the “more-likely-than-not” standard.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the government of the Philippines.

1 unchanged sentence

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 2021 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.

The aggregate effect on income tax expense for the three months ended March 31, 2021 and 2020 was approximately $ 1.1 million and $ 1.4 million benefit, respectively, which had an impact on diluted net income per share of $ 0.02 and $ 0.03 , respectively.

(9) RESTRUCTURING CHARGES AND IMPAIRMENT LOSSES

1 unchanged sentence

During 2021 and 2020, 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,

TTEC determined it would close several delivery centers servicing the Engage segment and the expenses related to early termination fees and cease use lease accruals were recorded.

This expense was included in the Restructuring charges, net in the Consolidated Statements of Comprehensive Income (Loss).

A summary of the expenses recorded in Restructuring charges, net in the accompanying Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020, respectively, is as follows (in thousands):

Three Months Ended March 31,

Reduction in force

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

Facility exit and other charges

5 unchanged sentences

Change in estimates

Balance as of September 30, 2020

Balance as of March 31, 2021

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Severance Charges

1 unchanged sentence

During the second quarter of 2020, a $ 3.0 million accrual was recorded with the expense included in Cost of services during the quarter ended June 30, 2020.

During the third quarter, $ 0.5 million was paid and $ 0.1 million of additional expense was recorded.

During the third and fourth quarters of 2020, a total of $ 1.6 million was paid and a $ 0.3 million reduction in expense was recorded.

During the first quarter of 2021, a total of $ 0.3 million was paid and a $ 0.1 million reduction in 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.

During each of the periods presented, the Company evaluated the recoverability of its leasehold improvement assets at certain customer engagement centers.

An asset is considered to be impaired when the anticipated undiscounted future cash flows of its asset group are estimated to be less than the asset group’s carrying value.

2 unchanged sentences

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the three months ended March 31, 2021 and 2020, the Company recognized impairment losses, net related to leasehold improvement assets and right of use lease assets of $ 2.4 million and $ 0.7 million, respectively, across the TTEC Digital and TTEC Engage segments.

(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.

On March 25, 2021, the Company entered into a Fifth Amendment to its Amended and Restated Credit Agreement and Amended and Restated Security Agreement originally dated as of June 3, 2013, (collectively, the “Credit Facility”) to increase the total commitments by $ 300 million to $ 1.2 billion by exercising the accordion feature that was included in the senior secured revolving credit facility with a syndicate of lenders led by Wells Fargo Bank, National Association, as agent, swingline and fronting lender.

The Credit Facility matures on February 14, 2024 .

The $300 million increase is in the form of a term loan, which can be prepaid anytime and will become due February 14, 2024, contemporaneously with the expiration of the revolving line of credit.

The maximum commitment under the Credit Facility is $ 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.

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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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company primarily utilizes its Credit Facility to fund working capital, general operations, dividends and other strategic activities, such as the acquisitions described in Note 2.

As of March 31, 2021 and December 31, 2020, the Company had borrowings of $ 339.0 million and $ 385.0 million, respectively, under its Credit Facility, and its average daily utilization was $ 446.1 million and $ 397.7 million for the three months ended March 31, 2021 and 2020, respectively.

The Company had increased borrowings under the Credit Facility from late March 2020 through late September 2020, related to precautionary measures taken to proactively strengthen the Company’s cash reserves and financial flexibility in response to COVID-19 related uncertainties.

As of September 30, 2020, those additional borrowings had been repaid.

Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $ 855 million as of March 31, 2021.

As of March 31, 2021, the Company was in compliance with all covenants and conditions under its Credit Agreement.

In early April 2021, the Company drew down approximately $ 500 million of the availability on the Credit Facility in order to provide funding for the Company’s acquisition of Avtex Solutions, Holdings LLC.

(See Note 2).

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.

As of March 31, 2021, outstanding letters of credit under the Credit Facility totaled $ 2.8 million and primarily guaranteed workers’ compensation and other insurance related obligations.

As of March 31, 2021, letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $ 0.5 million.

Legal Proceedings

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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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

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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 primarily leases real estate and equipment under various arrangements that provide the Company the right of use for the underlying asset that require lease payments over the lease term.

The Company determines the value of each lease by computing the present value of each lease payment using the interest rate implicit in the lease, if available;

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Operating lease assets also include prepaid rent and initial direct costs less any tenant improvements.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 .

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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).

Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included in the Consolidated Statements of Comprehensive Income (Loss).

The Company’s lease agreements do not contain any material residual value guarantees or restrictive guarantees.

The components of lease expense for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands):

The components of lease expense for the three months ended March 31, 2021 and 2020 are as follows (in thousands):

Location in Statements of

Three Months Ended September 30,

Three Months Ended March 31,

Comprehensive Income (Loss)

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Restructuring

Operating lease cost

Operating lease cost (cost resulting from lease payments)

Other income (expense), net

Short-term lease cost

Cost of services

Variable lease cost (cost excluded from lease payments)

Cost of services

Sublease income

Selling, general and administrative

Sublease income

Other income (expense), net

Total lease cost

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Location in Statements of

Nine Months Ended September 30,

Comprehensive Income (Loss)

Amortization of ROU assets - finance leases

Depreciation and amortization

Interest on lease liabilities - finance leases

Interest expense

Operating lease cost (cost resulting from lease payments)

Cost of services

Operating lease cost (cost resulting from lease payments)

Selling, general and administrative

Operating lease cost (cost resulting from lease payments)

Restructuring

Operating lease cost

Operating lease cost (cost resulting from lease payments)

Other income (expense), net

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Total lease cost

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,

Finance lease - operating cash flows

Finance lease - financing cash flows

Operating lease - operating cash flows (fixed payments)

New ROU assets - operating leases

Modified ROU assets - operating leases

New ROU assets - finance leases

Nine Months Ended September 30,

Other supplementary information for the three months ended March 31, 2021 and 2020 are as follows (dollar values in thousands):

Three Months Ended March 31,

Finance lease - operating cash flows

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New ROU assets - finance leases

September 30, 2020

March 31, 2021

December 31, 2020

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Notes to Consolidated Financial Statements

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):

Operating and financing lease right-of-use assets and lease liabilities within the Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020 are as follows (in thousands):

Location in Balance Sheet

September 30, 2020

March 31, 2021

December 31, 2020

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Total lease liabilities

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

The future minimum operating lease and finance lease payments required under non-cancelable leases as of March 31, 2021 and December 31, 2020 are as follows (in thousands):

March 31, 2021

Total minimum lease payments

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Notes to Consolidated Financial Statements

In 2008, the Company sub-leased one of its customer delivery centers to a third party for the remaining term of the lease.

In 2008, the Company sub-leased one of its customer engagement centers to a third party for the remaining term of the lease.

The sub-lease began on January 1, 2009 and rental income will be recognized on a straight-line basis over the term of the sub-lease through 2026 .

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(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

The components of Other long-term liabilities as of March 31, 2021 and December 31, 2020 are as follows (in thousands):

March 31, 2021

December 31, 2020

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The following table reconciles equity attributable to noncontrolling interest in the Company’s subsidiary (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Noncontrolling interest, January 1

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Dividends distributed to noncontrolling interest

Equity contribution

Foreign currency translation adjustments

Noncontrolling interest, September 30

Noncontrolling interest, March 31

TTEC HOLDINGS, INC.

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Net current period other comprehensive income (loss)

Accumulated other comprehensive income (loss) at September 30, 2019

Accumulated other comprehensive income (loss) at March 31, 2020

Accumulated other comprehensive income (loss) at December 31, 2020

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Net current period other comprehensive income (loss)

Accumulated other comprehensive income (loss) at September 30, 2020

Accumulated other comprehensive income (loss) at March 31, 2021

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):

For the Three Months Ended September 30,

For the Three Months Ended

Comprehensive Income

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Notes to Consolidated Financial Statements

For the Nine Months Ended September 30,

Comprehensive Income

(Loss) Classification

Derivative valuation

Gain (loss) on foreign currency forward exchange contracts

Provision for income taxes

Net income (loss)

Actuarial loss on defined benefit plan

Cost of services

Provision for income taxes

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,

Three Months Ended March 31,

Shares used in basic earnings per share calculation

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Shares used in dilutive earnings per share calculation

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.

For the three months ended March 31, 2021 and 2020, there were Restricted Stock Units (“RSUs“) of zero and 66 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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the three months ended March 31, 2021 and 2020, the Company recognized total equity-based compensation expense of $ 4.0 million and $ 2.9 million, respectively.

Of this total compensation expense, $ 1.3 million and $ 1.0 million were recognized in Cost of services and $ 2.7 million and $ 1.9 million were recognized in Selling, general and administrative during the three months ended March 31, 2021 and 2020, respectively.

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.

During the three months ended March 31, 2021 and 2020, the Company granted 44,471 and 112,915 RSUs, respectively, to new and existing employees, which vest over four to five years .

The Company recognized compensation expense related to RSUs of $ 3.3 million and $ 2.6 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was approximately $ 28.5 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

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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.

The award amounts are based on the Company’s annual adjusted operating income for the fiscal years 2019, 2020 and 2021.

Each fiscal year’s adjusted operating income will determine the award amount.

The Company recognized compensation expense related to 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.

The Company recognized compensation expense related to PRSUs of $ 0.3 million and $ 0.4 million, respectively, for the three months ended March 31, 2021 and 2020.

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 defined minimum targets are met, the annual value of the PRSUs issued will be between $ 0.2 million and $ 2.0 million and vest immediately.

If the defined minimum targets are not met, then no shares will be issued.

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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 recognized compensation expense related to PRSUs of $ 0.5 million for the three months ended March 31, 2021.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(17) RELATED PARTY TRANSACTIONS

The Company entered into an agreement under which Avion, LLC (“Avion”) and Airmax LLC (“Airmax”) provide certain aviation flight services as requested by the Company.

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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.

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.

During the three months ended March 31, 2021 and 2020, the Company expensed $ 0.3 million and $ 0.1 million, respectively, to Avion and Airmax for services provided to the Company.

There was $ 255 thousand in payments due and outstanding to Avion and Airmax as of March 31, 2021.

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.

Welltok, Inc.

is a partner with the Company in a joint venture Welltok TTEC Communications, LLC.

During the three months ended March 31, 2021 and 2020, the Company recorded revenue of $ 0.5 million and $ 0.9 million, respectively, in connection with work performed through the joint venture.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

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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;

Actual results may differ materially from those expressed in the forward-looking statements, and you should review and consider carefully the risks, uncertainties and other factors that affect our business and may cause such differences as outlined in Item 1A.

Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.

Important factors that could cause our actual results to differ materially from those indicated in the forward looking statements include, among others, are the risks related to our business operations and strategy, including the risks related to our strategy execution in a competitive market;

our ability to innovate and introduce technologies that are 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 dependance on 3 rd parties for our cloud solutions, the impact of COVID-19 on our business and our clients’ business, risks inherent in our rapid transition to a work from home environment;

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”).

the risks related to our technology, including cybersecurity, the reliability of our information technology infrastructure and our ability to consistently deliver uninterrupted service to our clients;

the risk related to our international operations;

the risks related to legal impact on our operations, including rapidly changing laws that regulate our and our clients’ business, such as data privacy and data protection laws and healthcare, financial and public sector specific regulations, our ability to comply with these laws timely, and cost of wage and hour litigation in the United States;

and risks inherent in our equity structure including our controlling shareholder risk, and Delaware choice of dispute resolution risks.

Our forward-looking statements speak only as of the date that this report 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.

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

What changed 10-Q

Item 1. Financial Statements