What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-03 · 85 added, 70 removed, 162 unchanged (49% of the section changed)

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During 2021, the TTEC global operating platform delivered onshore, nearshore, and offshore services in 20 countries on six continents -- 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 with the help of 62,300 consultants, technologists, and CX professionals.

Our revenue for second quarter 2021 was $554.8 million, approximately $108.0 million, or 19.5% which came from our TTEC Digital segment and $446.8 million, or 80.5%, which came from our TTEC Engage segment.

Our revenue for third quarter 2021 was $566.7 million, approximately $124.1 million, or 21.9% which came from our TTEC Digital segment and $442.6 million, or 78.1%, which came from our TTEC Engage segment.

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

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We serve more than 725 diverse clients globally, including many of the world’s iconic brands, Fortune 1000 companies, government agencies, and disruptive growth companies.

Cybersecurity Incident

On September 12, 2021, TTEC experienced a ransomware incident that temporarily disrupted the Engage business segment’s client support environment.

Certain TTEC systems and data became encrypted and certain TTEC data was exfiltrated or destroyed.

TTEC Digital business segment’s information systems and client environment were not involved in the attack.

TTEC activated its incident response and business continuity protocols, notified law enforcement, took all appropriate measures to restore its systems and was able to restore operations for many impacted clients within 72 hours of the start of the incident, and by September 17, 2021, all client facing systems were fully operational.

Most clients maintained connectivity, allowing us to restart our services once we restored operations, but some clients opted to suspend our access to their networks as a security precaution until they were satisfied that the incident was contained.

As of the date of this disclosure, we have returned to services with all our clients.

We recovered exfiltrated data from the unauthorized parties, and while we continue to monitor the situation, we are not currently aware of evidence that exfiltrated data was publicly released.

As of the date of this disclosure, data involved in the incident has been analyzed for impact and notice obligations, appropriate regulatory notices have been made, and notices to individuals who may be impacted are in process of being delivered, consistent with the timelines prescribed by relevant jurisdictions.

With support from outside forensic experts, TTEC completed its investigation of root causes and impacts of the cybersecurity incident and is working to harden the security of its information technology environment and is taking measures to move to a ‘zero trust’ environment to protect its systems and its data.

TTEC also continues to work on the restoration of certain data and systems destroyed in the incident.

The Company performed appropriate procedures to validate the accuracy and completeness of information involved in its financial reporting, and we have no indication that the accuracy and completeness of any financial information was impacted as a result of the incident.

We do not expect the temporary operational disruptions that occurred due to this incident to have a long-term impact on our operating results.

We will make additional investments in the hardening of our cybersecurity environment and the operational governance of our information technology systems during Q4 2021 and through Q2 2022 but are not yet able to provide a reasonable estimate of the investments to be made.

The incident and any failure or perceived failure by us to comply with applicable privacy laws in connection with this incident, could result in government enforcement actions, regulatory investigations, fines and penalties, which could impact our results of operations and expenses associated with the incident.

Other actual and potential consequences of the incident may include negative publicity, loss of client trust, reputational damage, litigation, contractual claims, financial judgement or settlements in excess of insurance, and disputes with insurance carriers concerning coverage.

See, Part II, Item 1A Risk Factors.

COVID-19 Pandemic

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Although our business experienced some impacts of COVID-19 in the first half of 2020, our implementation of business continuity plans, rapid transition of employees to a work from home environment, and the geographic diversification of our delivery centers allowed us to mitigate potentially more severe impacts and positioned us to continue supporting our commercial and public sector clients without interruptions and provide them with additional support as they experienced surge volumes of customer, patient and citizen COVID-19 related engagement.

Through the period ended June 30, 2021 the COVID-19 pandemic has not had a material adverse impact on our operational or financial results.

While we expect this positive trend to continue and some of our COVID-19 specific work has transitioned to more traditional business activities for the same clients, there continues to be uncertainty about our COVID-19 and non-COVID-19 related business as the pandemic continues around the globe, and some locations where we deliver business are experiencing ongoing COVID-19 infection surges, related lockdown and business interruption.

Through the period ended September 30, 2021 the COVID-19 pandemic has not had a material adverse impact on our operational or financial results.

We cannot accurately predict the severity of the economic and operational challenges of a pro-longed COVID-19 pandemic on our clients’ businesses and its effect on the magnitude and timing of their buying decisions.

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Financial Highlights

In the second quarter of 2021, our revenue increased $101.7 million, or 22.4%, to $554.8 million over the same period in 2020 including an increase of $10.4 million, or 2.3%, due to foreign currency fluctuations.

In the third quarter of 2021, our revenue increased $73.8 million, or 15.0%, to $566.7 million over the same period in 2020 including an increase of $3.1 million, or 0.8%, due to foreign currency fluctuations.

The increase in revenue was comprised of a $26.2 million, or 6.3%, increase for TTEC Engage and a $47.5 million, or 62.1%, increase for TTEC Digital.

Our second quarter 2021 income from operations increased $16.9 million, or 34.5%, to $65.8 million or 11.9% of revenue, compared to $49.0 million or 10.8% of revenue in the second quarter of 2020.

Our third quarter 2021 income from operations decreased $27.3 million, or 51.1%, to $26.1 million or 4.6% of revenue, compared to $53.4 million or 10.8% of revenue in the third quarter of 2020.

The change in operating income is comprised of a number of factors across the segments.

The TTEC Engage operating income expanded with a 62.7% improvement over the same period last year primarily based on the increase in revenue including volumes in our financial services, commercial and public sector clients experiencing spikes in customer interactions including COVID-19 specific volumes, a reduction in healthcare expenses, and grant income received to offset salaries and rent expenses.

The TTEC Digital operating income decreased 33.5% due to a reduction in the large multi-year government contract and increased amortization of acquisition related intangible assets, partially offset by the 2021 and 2020 acquisitions which accelerated growth in the cloud revenue platform.

Income from operations in the second quarter of 2021 and 2020 included $2.4 million and $0.8 million of restructuring charges and asset impairments, respectively.

The TTEC Engage operating income decreased with a 56.8% decline over the same period last year primarily related to the cybersecurity incident during September 2021 which caused outages in operations for several of our Engage clients.

The TTEC Digital operating income decreased 33.5% due to a reduction in a large multi-year government contract and increased amortization of acquisition related intangible assets, partially offset by the 2021 and 2020 acquisitions which accelerated growth in the cloud revenue platform.

Income from operations in the third quarter of 2021 and 2020 included $0.2 million and $2.2 million of restructuring charges and asset impairments, respectively.

Our offshore customer engagement centers spanning six countries, serve clients based in the U.S.

and in other countries with 23,200 workstations, representing 58% of our global delivery capability.

Revenue for our TTEC Engage segment provided from these offshore locations represented 30% of our revenue for the second quarter of 2021, as compared to 29% of our revenue for the corresponding period in 2020.

Revenue for our TTEC Engage segment provided from these offshore locations represented 31% of our revenue for the third quarter of 2021, as compared to 26% of our revenue for the corresponding period in 2020.

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

As of June 30, 2021, the total production workstations for our TTEC Engage segment was 40,300 and the overall capacity utilization in our centers was 62% versus 68% in the prior year period.

The utilization is lower than the previous year primarily due to COVID-19 protocols requiring the distancing of associates which has reduced the available seat capacity.

As of September 30, 2021, the total production workstations for our TTEC Engage segment was 39,900 and the overall capacity utilization in our centers was 62% versus 58% in the prior year period.

The utilization is higher than the previous year, however continues to be relatively low primarily due to COVID-19 protocols requiring the distancing of associates which has reduced the available seat capacity.

Adjusted for social distancing protocols, which reduced the available workstations to approximately 21,000, and accounting for all client paid seats as utilized, whether through actual usage or contractual commitments to hold the seats, current utilization is in excess of 117%.

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Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP.

Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as the disclosure of contingent assets and liabilities.

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Results of Operations

Three months ended June 30, 2021 compared to three months ended June 30, 2020

The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the three months ended June 30, 2021 and 2020 (amounts in thousands).

Three months ended September 30, 2021 compared to three months ended September 30, 2020

All inter-company transactions between the reported segments for the periods presented have been eliminated.

Three Months Ended June 30,

Three Months Ended September 30,

Operating Income

Operating Margin

The increase in revenue for the TTEC Digital segment was driven by increases in the cloud platform and the systems integration practice, including the acquisitions of Avtex and Voice Foundry, offset by reductions in the large multi-year government contract.

Excluding the large multi-year government contract, the TTEC Digital revenue has increased 107% year over year.

The operating income decrease is primarily attributable to a reduction in the large multi-year government contract, additional amortization of acquisition related intangible assets and $0.9 million of restructuring charges, partially offset by the acquisitions of Avtex and Voice Foundry, increases in the cloud platform and system integration practice.

The operating income as a percentage of revenue decreased to 8.9% in the second quarter of 2021 as compared to 18.6% in the prior period.

Included in the operating income was amortization expense related to acquired intangibles of $5.7 million and $0.6 million for the quarters ended June 30, 2021 and 2020, respectively.

Three Months Ended June 30,

The increase in revenue for the TTEC Digital segment was driven by increases in the cloud platform and the systems integration practice, including the acquisitions of Avtex and VoiceFoundry, offset by reductions in a large multi-year government contract.

Excluding this large multi-year government contract, the TTEC Digital revenue has increased 126% year over year.

The operating income decrease is primarily attributable to the reduction in a large multi-year government contract, and additional amortization of acquisition related intangible assets, partially offset by the acquisitions of Avtex and VoiceFoundry which drove increases in the cloud platform and system integration practice.

Operating income as a percentage of revenue decreased to 7.0% in the third quarter of 2021 as compared to 17.0% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $6.0 million and $0.8 million for the quarters ended September 30, 2021 and 2020, respectively.

Three Months Ended September 30,

Operating Income

Operating Margin

The increase in revenue for the TTEC Engage segment was due to a net increase of $75.0 million in client programs including certain COVID-19 pandemic related programs for several clients and a $9.2 million increase due to foreign currency fluctuations, offset by a decrease for program completions of $13.3 million.

The operating income increased primarily due to the growth in revenue, revenue mix, and increased profitability in several offerings.

Included in the second quarter of 2021 is a $2.0 million increase to operating income due to grants received related to COVID-19 relief and a $5.3 million reduction in healthcare expenses, which was offset by $1.6 million of restructuring and impairment charges related to several facilities in the U.S.

Financial Statements, Note 9 to the Consolidated Financial Statements).

As a result, the operating income as a percentage of revenue increased to 12.6% in the second quarter of 2021 as compared to 9.2% in the prior period.

Included in the operating income was amortization expense related to acquired intangibles of $3.3 million and $3.3 million for the quarters ended June 30, 2021 and 2020, respectively.

The increase in revenue for the TTEC Engage segment was due to a net increase of $45.3 million in client programs and a $2.7 million increase due to foreign currency fluctuations, offset by a decrease for program completions of $21.8 million.

The operating income decreased primarily due to the cybersecurity incident during September 2021 which caused outages in operations for several of our Engage clients;

total cybersecurity incident-related costs were $19.3 million.

This decrease was partially offset by growth in revenue and increased profitability in several offerings.

As a result, operating income as a percentage of revenue decreased to 3.9% in the third quarter of 2021 as compared to 9.7% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $3.3 million and $3.3 million for the quarters ended September 30, 2021 and 2020, respectively.

Interest Income (Expense)

For the three months ended June 30, 2021 interest income decreased to $0.2 million from $0.5 million in the same period in 2020.

For the three months ended September 30, 2021 interest income decreased to $0.2 million from $0.6 million in the same period in 2020.

Interest expense increased to $3.5 million during 2021 from $2.8 million during 2020 due to higher utilization of the line of credit.

Other Income (Expense)

For the three months ended June 30, 2021 Other income (expense), net increased to net income of $1.0 million from net expense of $1.8 million during the prior year quarter.

Included in the three months ended June 30, 2021 and 2020 were a $0.2 million expense and a $1.1 million benefit, respectively, related to the fair value adjustment of contingent consideration for two acquisitions.

Included in the three months ended June 30, 2020 was a $2.5 million expense related to the dissolution of a subsidiary, and the related removal of the Accumulated other comprehensive income (loss).

For the three months ended September 30, 2021 Other income (expense), net increased to net income of $3.3 million from net expense of $18.7 million during the prior year quarter.

Included in the three months ended September 30, 2020 was a $17.4 million expense related to the deconsolidation of two subsidiaries and the removal of the related currency translation adjustment (see Part I.

Financial Statements, Note 2 to the Consolidated Financial Statements).

The effective tax rate for the three months ended June 30, 2021 was 17.8%.

The effective tax rate for the three months ended September 30, 2021 was 30.6%.

This compares to an effective tax rate of 25.9% for the comparable period of 2020.

The effective tax rate for the three months ended June 30, 2021 was influenced by earnings in international jurisdictions currently under an income tax holiday, the distribution of income between the U.S.

The effective tax rate for the three months ended September 30, 2021 was influenced by earnings in international jurisdictions currently under an income tax holiday, the distribution of income between the U.S.

and international tax jurisdictions and the associated U.S.

tax impacts of foreign earnings.

Without a $0.5 million benefit related to restructuring, a $2.4 million benefit related to equity compensation, a $2.3 million benefit related to the amortization of purchased intangibles and $0.2 million of expense related to other items, the Company’s normalized tax rate for the second quarter of 2021 was 21.4%.

Without a $5.0 million benefit related to the cybersecurity incident, a $3.1 million benefit related to equity compensation, a $2.4 million benefit related to the amortization of purchased intangibles, $6.4 million of expense related to changes in valuation allowances, and $0.4 million of expense related to other items, the Company’s normalized tax rate for the third quarter of 2021 was 19.6%.

Results of Operations

Six months ended June 30, 2021 compared to six months ended June 30, 2020

The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the six months ended June 30, 2021 and 2020 (in thousands).

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020

The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the nine months ended September 30, 2021 and 2020 (in thousands).

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

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Income

Operating Margin

The increase in revenue for the TTEC Digital segment was driven by significant increases in the cloud platform and the systems integration practice including acquisitions of Avtex and Voice Foundry, offset by reductions in the large multi-year governmental contract, and the legacy facility based training business and the middle east consulting practice, both of which the Company has exited.

Excluding the large multi-year government contract, the TTEC Digital revenue has increased 64% year over year.

The operating income reduction is primarily attributable to a reduction in the large multi-year governmental contract and increased amortization of acquisition related intangible assets partially offset by the increased revenue due to the acquisitions and other revenue increases as well as the exit of the less profitable facilities based training and middle east consulting practices.

The operating income as a percentage of revenue decreased to 8.0% for the six months ended June 30, 2021 as compared to 15.9% in the prior period.

Included in the operating income was amortization expense related to acquired intangibles of $6.9 million and $1.1 million for the six months ended June 30, 2021 and 2020, respectively.

Six Months Ended June 30,

The increase in revenue for the TTEC Digital segment was driven by significant increases in the cloud platform and the systems integration practice including acquisitions of Avtex and VoiceFoundry, offset by reductions in a large multi-year government contract, and the legacy facility based training business and Middle East consulting practice, both of which the Company has exited.

Excluding this large multi-year government contract, the TTEC Digital revenue has increased 86% year over year.

The operating income reduction is primarily attributable to the reduction in a large multi-year government contract and increased amortization of acquisition related intangible assets, partially offset by the increased revenue due to the acquisitions and other revenue increases as well as the exit of the less profitable facilities based training and Middle East consulting practices.

Operating income as a percentage of revenue decreased to 7.6% for the nine months ended September 30, 2021 as compared to 16.3% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $12.8 million and $1.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Nine Months Ended September 30,

Operating Income

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The increase in revenue for the TTEC Engage segment was due to a net increase of $262.7 million in client programs including certain COVID-19 pandemic related programs for several clients, and a $18.4 million increase due to foreign currency fluctuations offset by a decrease for program completions of $63.0 million.

The operating income increased in line with improved revenue including growth in revenue, revenue mix, and increased profitability in several offerings.

Included in 2021 is a $8.0 million increase to operating income due to grants received related to COVID-19 relief.

Partially offsetting these increases was a net $5.5 million in restructuring and impairment charges related to several facilities in the U.S.

Operating income increased due to growth in revenue, revenue mix, and increased profitability in several offerings and an $8.0 million increase due to grants received related to COVID-19 relief.

Partially offsetting these increases were costs of $19.3 million related to the cybersecurity incident during September 2021 which caused outages in operations for several Engage clients, and a net $6.1 million in restructuring and impairment charges related to several facilities in the U.S.

Item 1, Financial Statements, Note 9 to the Consolidated Financial Statements).

As a result, the operating income as a percentage of revenue increased to 13.6% for the six months ended June 30, 2021 as compared to 8.9% in the prior period.

Included in the operating income was amortization expense related to acquired intangibles of $6.6 million and $6.6 million for the six months ended June 30, 2021 and 2020, respectively.

As a result, operating income as a percentage of revenue increased to 10.5% for the nine months ended September 30, 2021 as compared to 9.2% in the prior period.

Included in operating income was amortization expense related to acquired intangibles of $9.9 million and $9.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Interest Income (Expense)

For the six months ended June 30, 2021 interest income decreased to $0.4 million from $0.9 million in the same period in 2020.

For the nine months ended September 30, 2021 interest income decreased to $0.6 million from $1.4 million in the same period in 2020.

Interest expense decreased to $8.7 million during 2021 from $15.5 million during 2020 due to higher utilization of the line of credit offset by lower interest rates, and a $6.3 million decrease period over period in the charge related to the future purchase of the remaining 30% interest in Motif, which was finalized during the second quarter of 2020.

Other Income (Expense)

For the six months ended June 30, 2021 Other income (expense), net decreased to net income of $0.2 million from net income of $1.6 million during the prior year period.

Included in the six months ended June 30, 2021 was a $0.7 million expense related to the fair value adjustments of contingent consideration for two acquisitions.

Included in the six months ended June 30, 2020 was a $4.3 million benefit related to the fair value adjustments of contingent consideration for an acquisition, offset by a $2.5 million expense related to the deconsolidation of three subsidiaries and the related removal of the Accumulated other comprehensive income (loss).

For the nine months ended September 30, 2021 Other income (expense), net increased to net income of $3.5 million from net expense of $17.0 million during the prior year period.

Included in the nine months ended September 30, 2021 was a $0.7 million expense related to the fair value adjustments of contingent consideration for two acquisitions.

Included in the nine months ended September 30, 2020 was a $4.4 million benefit related to the fair value adjustments of contingent consideration for an acquisition, offset by a $19.9 million expense related to the deconsolidation of three subsidiaries and the related removal of the Accumulated other comprehensive income (loss).

Financial Statements, Note 2 to the Consolidated Financial Statements.

The effective tax rate for the six months ended June 30, 2021 was 20.3%.

The effective tax rate for the nine months ended September 30, 2021 was 21.9%.

This compared to an effective tax rate of 26.5% for the comparable period of 2020.

The effective tax rate for the six months ended June 30, 2021 was influenced by earnings in international jurisdictions currently under an income tax holiday, the distribution of income between the U.S.

The effective tax rate for the nine months ended September 30, 2021 was influenced by earnings in international jurisdictions currently under an income tax holiday, the distribution of income between the U.S.

and international tax jurisdictions and associated U.S.

tax impacts of foreign earnings.

Without a $1.6 million benefit from restructuring expenses, $2.4 million of expense related to changes in valuation allowances, a $3.5 million benefit related to the amortization of purchased intangibles, a $5.3 million benefit related to equity-based compensation, and $0.2 million of expense related to other items, the Company’s normalized tax rate for 2021 was 22.6%.

Without a $1.6 million benefit from restructuring expenses, a $5.0 million benefit related to the cybersecurity incident, $8.8 million of expense related to changes in valuation allowances, a $5.9 million benefit related to the amortization of purchased intangibles, a $8.4 million benefit related to equity-based compensation, and $0.7 million of expense related to other items, the Company’s normalized tax rate for 2021 was 21.8%.

Liquidity and Capital Resources

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

During the six months ended June 30, 2021, we generated positive operating cash flows of $132.8 million.

During the nine months ended September 30, 2021, we generated positive operating cash flows of $175.1 million.

We believe that our cash generated from operations, existing cash and cash equivalents, and available credit will be sufficient to meet expected operating and capital expenditure requirements for the next 12 months.

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To mitigate these risks, we enter into foreign exchange forward and option contracts through our cash flow hedging program.

Please refer to Item 3.

Please refer to Part I.

Quantitative and Qualitative Disclosures About Market Risk, Foreign Currency Risk, for further discussion.

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Although we expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.

The following discussion highlights our cash flow activities during the six months ended June 30, 2021 and 2020.

The following discussion highlights our cash flow activities during the nine months ended September 30, 2021 and 2020.

Cash and Cash Equivalents

We consider all liquid investments purchased within 90 days of their original maturity to be cash equivalents.

Our cash and cash equivalents totaled $174.7 million and $132.9 million as of June 30, 2021 and December 31, 2020, respectively.

Our cash and cash equivalents totaled $148.9 million and $132.9 million as of September 30, 2021 and December 31, 2020, respectively.

We diversify the holdings of such cash and cash equivalents considering the financial condition and stability of the counterparty institutions.

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Cash Flows from Operating Activities

For the six months ended June 30, 2021 and 2020, net cash flows provided by operating activities was $132.8 million and $105.3 million, respectively.

The increase is primarily due to a $46.9 million increase in net cash income from operations offset by a $19.3 million reduction in net working capital.

For the nine months ended September 30, 2021 and 2020, net cash flows provided by operating activities was $175.1 million and $186.8 million, respectively.

The decrease is primarily due to a $38.2 million increase in net cash income from operations offset by a $49.9 million reduction in net working capital.

Cash Flows from Investing Activities

For the six months ended June 30, 2021 and 2020, net cash flows used in investing activities was $505.3 million and $36.3 million, respectively.

For the nine months ended September 30, 2021 and 2020, net cash flows used in investing activities was $522.5 million and $86.6 million, respectively.

The increase was due to a $443.0 million increase related to acquisitions offset by a $7.0 million decrease in capital expenditures.

Cash Flows from Financing Activities

For the six months ended June 30, 2021 and 2020, net cash flows (used in) provided by financing activities was $400.5 million and $332.8 million, respectively.

The change in net cash flows from 2020 to 2021 was primarily due to a $39.0 million net million increase in the line of credit and a $37.2 million decrease in payments of contingent consideration offset by a $4.3 million increase in shareholder dividends.

For the nine months ended September 30, 2021 and 2020, net cash flows provided by (used in) financing activities was $362.5 million and $(48.9) million, respectively.

The change in net cash flows from 2020 to 2021 was primarily due to a $385.0 million net increase in the line of credit and a $37.2 million decrease in payments of contingent consideration offset by a $4.3 million increase in shareholder dividends and a $6.9 million increase in tax payments related to restricted stock units.

Free Cash Flow

Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) increased slightly for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to an increase in net cash from operations offset by a decrease in working capital and lower capital expenditures.

Free cash flow was $109.2 million and $73.4 million for the six months ended June 30, 2021 and 2020, respectively.

Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) decreased slightly for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to an increase in net cash from operations offset by a decrease in working capital and lower capital expenditures.

Free cash flow was $134.3 million and $139.0 million for the nine months ended September 30, 2021 and 2020, respectively.

Presentation of Non-GAAP Measurements

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net cash provided by operating activities

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Client Concentration

During the six months ended June 30, 2021, one of our clients represented more than 10% of our total revenue.

Our five largest clients, collectively, accounted for 36.4% and 39.9% of our consolidated revenue for the three months ended June 30, 2021 and 2020, respectively and 39.0% and 37.1% of our consolidated revenue for the six months ended June 30, 2021 and 2020, respectively.

During the nine months ended September 30, 2021, one of our clients represented more than 10% of our total revenue.

Our five largest clients, collectively, accounted for 36.2% and 42.6% of our consolidated revenue for the three months ended September 30, 2021 and 2020, respectively and 38.1% and 39.1% of our consolidated revenue for the nine months ended September 30, 2021 and 2020, respectively.

We have had long-term relationships with our top five TTEC Engage clients, ranging from 15 to 22 years, with all of these clients having completed multiple contract renewals with us.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis