What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-05 · 273 added, 149 removed, 572 unchanged (42% of the section changed)

6 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance of $ 5,032 and $ 5,409 , respectively

Accounts receivable, net of allowance of $ 5,406 and $ 5,409

Prepaids and other current assets

8 unchanged sentences

Total long-term assets

LIABILITIES AND STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

LIABILITIES, STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

Current liabilities

21 unchanged sentences

10,000,000 shares authorized;

zero shares outstanding as of March 31, 2022 and December 31, 2021

zero shares outstanding as of June 30, 2022 and December 31, 2021

Common stock;

1 unchanged sentence

150,000,000 shares authorized;

47,035,634 and 46,990,031 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

47,092,968 and 46,990,031 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

Treasury stock at cost;

35,016,619 and 35,062,222 shares as of March 31, 2022 and December 31, 2021, respectively

34,959,285 and 35,062,222 shares as of June 30, 2022 and December 31, 2021, respectively

Accumulated other comprehensive income (loss)

2 unchanged sentences

Total stockholders’ equity

Total liabilities and stockholders’ equity and mezzanine equity

Total liabilities, 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 March 31,

Three months ended June 30,

Six months ended June 30,

Operating expenses

32 unchanged sentences

(Amounts in thousands)

Three months ended March 31, 2021 and 2022

Three months ended June 30, 2021 and 2022

Stockholders’ Equity of the Company

3 unchanged sentences

Income (Loss)

Balance as of December 31, 2020

Balance as of March 31, 2021

Dividends to shareholders ($ 0.00 per common share)

5 unchanged sentences

Other, net of tax

Balance as of June 30, 2021

Stockholders’ Equity of the Company

Comprehensive

Noncontrolling

Paid-in Capital

Income (Loss)

Balance as of March 31, 2022

Dividends to shareholders ($ 0.00 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 June 30, 2022

Six months ended June 30, 2021 and 2022

Stockholders’ Equity of the Company

11 unchanged sentences

Other, net of tax

Balance as of March 31, 2022

Balance as of June 30, 2021

Stockholders’ Equity of the Company

Comprehensive

Noncontrolling

Paid-in Capital

Income (Loss)

Balance as of December 31, 2021

Dividends to shareholders ($ 0.50 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 June 30, 2022

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

3 unchanged sentences

(Amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

20 unchanged sentences

Purchases of property, plant and equipment, net of acquisitions

Acquisitions, net of cash acquired of zero and zero , respectively

Acquisitions, net of cash acquired of zero and $ 18,638 , respectively

Net cash used in investing activities

7 unchanged sentences

Payments of debt issuance costs

Net cash used in financing activities

Net cash provided by (used in) financing activities

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

8 unchanged sentences

Acquisition of equipment through increase in accounts payable, net

Dividend declared but not paid

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

23 unchanged sentences

The Consolidated Financial Statements are comprised of the accounts of TTEC, its wholly owned subsidiaries, its 55 % equity owned subsidiary Percepta, LLC, its 70 % equity owned subsidiary First Call Resolution, LLC and its 70 % equity owned subsidiary Serendebyte, Inc.

(see Note 2).

All intercompany balances and transactions have been eliminated in consolidation.

17 unchanged sentences

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):

March 31, 2022

June 30, 2022

December 31, 2021

21 unchanged sentences

(2) ACQUISITIONS AND DIVESTITURES

Certain Assets of Faneuil

On April 1, 2022 , the Company completed an asset acquisition through its subsidiary TTEC Government Solutions LLC, of certain public sector citizen experience contracts in the transportation infrastructure and healthcare exchange industries from Faneuil, Inc., a subsidiary of ALJ Regional Holdings, Inc.

(“the Faneuil Transaction”).

The business is operated as part of the TTEC Engage segment and was fully consolidated into the financial statements of TTEC.

The Faneuil Transaction was recorded as a business combination under ASC 805, Business Combinations, with identifiable assets acquired and liabilities assumed recorded at their estimated fair values as of the acquisition date.

Total cash paid at acquisition was $ 142.3 million.

In addition, Faneuil granted to TTEC Government Solutions LLC a three-year call right and right of first offer to purchase certain other assets of Faneuil in its utilities and commercial healthcare verticals as well as certain proprietary technology.

The Faneuil Transaction includes two contingent payments anticipated to be paid in early 2024 which are based on the revenue and EBITDA performance of one contract and one potential contract.

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

The model was based on current expected EBITDA performance for the two specific client programs, a discount rate of 7.6 % related to revenue and a discount rate of 19.3 % related to EBITDA, a volatility rate of 20 %, and an adjusted risk-free rate of 1.7 %.

The potential payments range from a minimum of zero to an unlimited maximum.

Based on the model, a combined $ 8.8 million expected future payment was calculated and recorded as of the acquisition date, which is included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

The Faneuil Transaction included a call option providing the right but not the obligation to purchase additional assets in the utilities and commercial healthcare verticals based on trailing twelve-month revenue plus an additional earn-out payment based on newly added contracts.

A second call option provided the right to purchase a software intangible asset and related support functions based on trailing twelve-month revenue.

These call options were valued based on information including the call right and the exclusivity period and a $ 0.3 million asset was recorded as of the acquisition date which is included in Other long-term assets in the accompanying Consolidated Balance Sheets.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Faneuil Transaction included an indemnity escrow which was disbursed as a holdback payment on the acquisition date.

The indemnity payments relate to real estate and technology funds that will be spent post-close related to various IT upgrades and real estate expenses, and indemnity related to potential future employee wage increases.

The indemnity payments were valued based on a weighted average of several current scenarios and a receivable of $ 10.4 million was recorded as of the acquisition date which is included in Other current assets in the accompanying 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 assumptions utilized in calculating the fair value of the customer relationships intangible asset were the customer attrition rate, revenue growth rates, forecasted EBITDA, contributory asset charge, and the discount 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 assets

Net fixed assets

Right of use lease assets

Customer relationships

Accrued employee compensation

Accrued expenses

Right of use lease liability - current

Right of use lease liability - non-current

Deferred income

Other liabilities

Total purchase price

The estimates of fair value of identifiable assets and liabilities assumed are preliminary, pending finalization of the valuation, lease evaluation, and tax returns, thus are subject to revisions that may result in adjustments to the values presented above.

The Faneuil customer relationships have been estimated based on the initial valuation and will be amortized over an estimated useful life of 10 years .

The goodwill recognized from the Faneuil acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Engage segment.

The tax basis of the acquired intangibles and goodwill will be materially deductible for income tax purposes.

The acquired goodwill and intangibles and operating results of Faneuil are reported within the TTEC Engage segment from the date of acquisition.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 is operated as part of the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC.

The business is operated as part of the TTEC Digital segment and was fully consolidated into the financial statements of TTEC.

Total cash paid at acquisition was $ 499.946 million ($ 490.0 million base purchase price plus cash, less debt and working capital estimate).

17 unchanged sentences

Net fixed assets

Right of use assets

Right of use lease assets

Intellectual property intangible

3 unchanged sentences

Accrued expenses

Right of use liability - current

Right of use lease liability - current

Deferred revenue

1 unchanged sentence

Deferred tax liability

Right of use liability - noncurrent

Right of use lease liability - noncurrent

Total purchase price

5 unchanged sentences

Financial Impact of Acquired Businesses

The acquired business purchased in 2021 noted above contributed revenues of $ 53.4 million and net income $ 2.8 million, to the Company for the quarter ended March 31, 2022.

The unaudited proforma financial results for the three months ended March 31, 2021, combines the consolidated results of the Company and Avtex assuming the acquisition had been completed on January 1, 2020.

The reported revenue and net income of $ 539.2 million and $ 50.4 million would have been $ 586.2 million and $ 53.6 million for the three months ended March 31, 2021, respectively, on an unaudited proforma basis.

The acquired businesses purchased in 2021 and 2022 noted above contributed revenues of $ 90.6 million and net income of $ 21.1 million, to the Company for the three months ended June 30, 2022 and revenues of $ 143.9 million and net income $ 38.9 million, to the Company for the six months ended June 30, 2022, respectively.

The unaudited proforma financial results for the three and six months ended June 30, 2022 combines the consolidated results of the Company, Avtex and Faneuil assuming the acquisition had been completed on January 1, 2021.

The reported revenue and net income of $ 604.3 million and $ 25.2 million would have been $ 604.3 million and $ 25.3 million for the three months ended June 30, 2022, respectively, on an unaudited proforma basis.

The reported revenue and net income of $ 1,193.0 million and $ 58.6 million would have been $ 1,235.0 million and $ 63.1 million for the six months ended June 30, 2022, respectively, on an unaudited proforma basis.

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

The Company did not have any material, nonrecurring proforma adjustments directly attributable to the business combination included in the reported proforma revenue earnings.

The Company did not have any material, nonrecurring proforma adjustments directly attributable to the business combinations included in the reported proforma revenue earnings.

These proforma amounts have been calculated after applying the Company’s accounting policies and adjusting the respective acquired businesses’ results to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment, and intangible assets had been applied from the date indicated, with the consequential tax effects.

The unaudited proforma consolidated results are not to be considered indicative of the results if this acquisition occurred in the periods mentioned above, or indicative of future operations or results.

Additionally, the proforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisition.

Subsequent Event

Certain Assets of Faneuil

The business will operate as part of the TTEC Engage segment and will be fully consolidated into the financial statements of TTEC.

The Faneuil acquisition will be recorded as a business combination under ASC 805, Business Combinations, with identifiable assets acquired and liabilities assumed recorded at their estimated fair values as of the acquisition date.

Total cash paid at acquisition was $ 142.3 million less customary hold-backs related to representations and warranties, plus certain future contingent payments and customary adjustments.

In addition, Faneuil agreed to grant to TTEC Government Solutions LLC a three-year call right and right of first offer to purchase certain other assets of Faneuil in its utilities and commercial healthcare verticals, and certain proprietary technology.

The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time since the acquisition date and the ongoing status of the valuation.

Therefore, it is impracticable for the Company to provide the major classes of assets acquired and liabilities assumed or proforma revenue and earnings.

The unaudited proforma consolidated results are not to be considered indicative of the results if these acquisitions occurred in the periods mentioned above, or indicative of future operations or results.

Additionally, the proforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisitions.

(3) SEGMENT INFORMATION

9 unchanged sentences

TTEC Engage also delivers digitally enabled back office and industry specific specialty services including AI operations, content moderation, and fraud management services.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

● Customer Acquisition, Growth, and Retention Services:

6 unchanged sentences

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

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Three Months Ended March 31, 2022

Three Months Ended March 31, 2021

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Six Months Ended June 30, 2022

Six Month Ended June 30, 2021

Three Months Ended

Six Months Ended

Capital Expenditures

March 31, 2022

June 30, 2022

December 31, 2021

2 unchanged sentences

Notes to Consolidated Financial Statements

The following table presents revenue based upon the geographic location where the services are provided (in thousands):

Three Months Ended March 31,

The following table presents the Company revenue based upon the geographic location where the services are provided (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

United States

3 unchanged sentences

(4) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS

The Company had one client that contributed in excess of 10% of total revenue for the three months ended March 31, 2022;

The Company had one client that contributed in excess of 10% of total revenue for the six months ended June 30, 2022;

this client operates in the automotive industry and is included in the TTEC Engage segment.

This client contributed 10.4 % and 8.8 % of total revenue for the three months ended March 31, 2022 and 2021, respectively.

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

This client contributed 10.5 % and 9.0 % of total revenue for the six months ended June 30, 2022 and 2021, respectively.

The Company had one client that contributed in excess of 10% of total revenue for the six months ended June 30, 2021;

this client operates in the financial services sector.

This client contributed 7.3 % and 15.7 % of total revenue for the three months ended March 31, 2022 and 2021, respectively.

This client contributed 7.4 % and 14.2 % of total revenue for the six months ended June 30, 2022 and 2021, respectively.

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.

1 unchanged sentence

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 March 31, 2022.

Based on currently available information, management does not believe significant credit risk existed as of June 30, 2022.

Activity in the Company’s Allowance for credit losses consists of the following (in thousands):

Three Months Ended March 31,

Balance, beginning of year

Three Months Ended June 30,

Six Months Ended June 30,

Balance, beginning of period

Provision for credit losses

1 unchanged sentence

Effect of foreign currency

Balance, end of year

Balance, end of period

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Accounts Receivable Sales Agreement

6 unchanged sentences

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of March 31, 2022 and December 31, 2021, the Company had factored $ 88.7 million and $ 97.7 million, respectively, of accounts receivable;

As of June 30, 2022 and December 31, 2021, the Company had factored $ 95.1 million and $ 97.7 million, respectively, of accounts receivable;

under the Agreement discounts on these receivables were not material during the quarter.

As of March 31, 2022, the Company had collected $ 15.4 million of cash from customers which had not been remitted to the Bank.

As of June 30, 2022, the Company had collected $ 11.8 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 March 31, 2022 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 June 30, 2022 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

Goodwill consisted of the following (in thousands):

2 unchanged sentences

The Company conducts its annual goodwill impairment assessment during the fourth quarter, or more frequently, if indicators of impairment exist.

During the quarter ended March 31, 2022, the Company assessed whether any such indicators of impairment existed and concluded there were none.

During the quarter ended June 30, 2022, the Company assessed whether any such indicators of impairment existed and concluded there were none.

(6) DERIVATIVES

5 unchanged sentences

Conversely, the fair value of derivative liabilities reflects the Company’s creditworthiness.

As of March 31, 2022, 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, 2022 and 2021 (in thousands and net of tax):

Three Months Ended March 31,

As of June 30, 2022, 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 six months ended June 30, 2022 and 2021 (in thousands and net of tax):

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Three Months Ended

Six Months Ended

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

2 unchanged sentences

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

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company’s foreign exchange cash flow hedging instruments as of March 31, 2022 and December 31, 2021 are summarized as follows (amounts in thousands).

The Company’s foreign exchange cash flow hedging instruments as of June 30, 2022 and December 31, 2021 are summarized as follows (amounts in thousands).

All hedging instruments are forward contracts.

As of March 31, 2022

As of June 30, 2022

Canadian Dollar

1 unchanged sentence

Philippine Peso

December 2024

As of December 31, 2021

2 unchanged sentences

(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 March 31, 2022 and December 31, 2021.

dollars on June 30, 2022 and December 31, 2021.

Fair Value Hedges

1 unchanged sentence

Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net.

As of March 31, 2022 and December 31, 2021 the total notional amounts of the Company’s forward contracts used as fair value hedges were $ 41.7 million and $ 32.9 million, respectively.

As of June 30, 2022 and December 31, 2021 the total notional amounts of the Company’s forward contracts used as fair value hedges were $ 46.6 million and $ 32.9 million, respectively.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Derivative Valuation and Settlements

The Company’s derivatives as of March 31, 2022 and December 31, 2021 were as follows (in thousands):

March 31, 2022

The Company’s derivatives as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30, 2022

Not Designated

7 unchanged sentences

Total fair value of derivatives, net

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2021

8 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 March 31, 2022 and 2021 were as follows (in thousands):

Three Months Ended March 31,

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2022 and 2021 were as follows (in thousands):

Three Months Ended June 30,

Designated as Hedging

4 unchanged sentences

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

Three Months Ended March 31,

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Three Months Ended June 30,

Not Designated as Hedging Instruments

4 unchanged sentences

Other income (expense), net

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2022 and 2021 were as follows (in thousands):

Six Months Ended June 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:

Six Months Ended June 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

(7) FAIR VALUE

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Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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

The following presents information as of March 31, 2022 and December 31, 2021 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 June 30, 2022 and December 31, 2021 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 March 31, 2022, the investment in CaféX Communication, Inc., which consisted of the Company’s total $ 15.6 million investment, is fully impaired to zero.

As of March 31, 2018, the investment in CaféX Communication, Inc., which consisted of the Company’s total $ 15.6 million investment, was 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 LIBOR plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement).

As of March 31, 2022 and December 31, 2021, the Company had $ 803.0 million and $ 791.0 million, respectively, of borrowings outstanding under the Credit Facility.

During the first quarter of 2022 outstanding borrowings accrued interest at an average rate of 1.3 % per annum, excluding unused commitment fees.

As of June 30, 2022 and December 31, 2021, the Company had $ 930.0 million and $ 791.0 million, respectively, of borrowings outstanding under the Credit Facility.

During the second quarter of 2022 outstanding borrowings accrued interest at an average rate of 2.0 % 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.

1 unchanged sentence

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 March 31, 2022, 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, 2022 and December 31, 2021 (in thousands):

As of March 31, 2022

As of June 30, 2022, 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 June 30, 2022 and December 31, 2021 (in thousands):

As of June 30, 2022

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, 2021

7 unchanged sentences

Total net derivative asset (liability)

The following is a summary of the Company’s fair value measurements as of March 31, 2022 and December 31, 2021 (in thousands):

As of March 31, 2022

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following is a summary of the Company’s fair value measurements as of June 30, 2022 and December 31, 2021 (in thousands):

As of June 30, 2022

Fair Value Measurements Using

5 unchanged sentences

Derivative instruments, net

Contingent consideration

Deferred compensation plan liability

16 unchanged sentences

Redeemable noncontrolling interest

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

Contingent Consideration - The Company recorded contingent consideration related to the acquisitions of VF US and VF ASEAN that closed during 2020.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Contingent Consideration - The Company recorded contingent consideration payable related to the acquisitions of the U.S.

assets of VoiceFoundry (“VFUS”) and the remaining VoiceFoundry business (“VF ASEAN”) that closed during 2020, and Faneuil that closed in 2022.

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 contingent payables for Faneuil were calculated using a Monte Carlo simulation including a discount rate of 19.3 %.

The measurements were based on significant inputs not observable in the market.

The Company recorded interest expense each period using the effective interest method until the future value of these contingent payments reached the expected total future value.

The Company records interest expense each period using the effective interest method until the future value of these contingent payments reaches the expected total future value.

During the fourth quarter of 2020, the first quarter of 2021, the second quarter of 2021 and the fourth 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, $ 0.9 million increase, $ 0.2 million increase and a $ 0.1 million increase to the payables were recorded as of December 31, 2020, March 31, 2021, June 30, 2021 and December 31, 2021, respectively, and were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

As of March 31, 2022, the expected future contingent consideration for the VF US and VF ASEAN acquisitions were finalized at $ 9.6 million and were paid in March 2022.

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

The future contingent consideration for the VF US and VF ASEAN acquisitions were finalized at $ 9.6 million and were paid during March 2022.

Contingent receivables – The Company recorded a contingent receivable related to the acquisition of Faneuil that closed in 2022.

The contingent receivable was valued based on a weighted average of several current scenarios and a receivable of $ 10.4 million was recorded as of the acquisition date.

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

Faneuil receivable

(8) IMPAIRMENT OF ASSETS

During each of the periods presented, the Company evaluated the recoverability of its leasehold improvement assets at certain customer engagement centers as well as all internally developed software projects.

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

The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value.

To determine fair value, the Company used Level 3 inputs in its discounted cash flows analysis.

Assumptions included the amount and timing of estimated future cash flows and assumed discount rates.

During the three and six months ended June 30, 2022, the Company recognized impairment losses, net related to leasehold improvements assets, right of use lease assets, internally developed software and certain computer equipment of $ 9.2 million and $ 10.4 million, respectively, across the TTEC Digital and TTEC Engage segments.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(9) 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.

As of March 31, 2022, the Company had $ 15.1 million of net deferred tax assets (after a $ 29.4 million valuation allowance) and a net deferred tax asset of $ 10.2 million (after deferred tax liabilities of $ 5.0 million) related to the United States and international tax jurisdictions whose recoverability is dependent upon future profitability.

The effective tax rate for the three months ended March 31, 2022 and 2021 was 17.6 % and 22.5 %, respectively.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of June 30, 2022, the Company had $ 21.4 million of net deferred tax assets (after a $ 28.1 million valuation allowance) and a net deferred tax asset of $ 16.7 million (after deferred tax liabilities of $ 4.7 million) related to the United States and international tax jurisdictions whose recoverability is dependent upon future profitability.

The effective tax rate for the three and six months ended June 30, 2022 was 20.2 % and 18.7 %, respectively.

The effective tax rate for the three and six months ended June 30, 2021 was 17.8 % and 20.3 %, 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 , the Philippines for tax year 2020 , the state of California for tax years 2017 through 2018 , the state of Washington for tax years 2017 through 2019 , and India for tax years 2017 through 2019.

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.

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In the first, third and fourth quarters of 2021, changes to the valuation allowance were recorded in the amount of $ 2.4 million, $ 6.4 million and $ 5.1 million, respectively, for assets that did not meet the “more-likely-than-not” standard.

In the first quarter of 2022, $ 1.3 million was released from the valuation allowance for assets that are expected to be recognized in the future.

In the first quarter of 2022, $ 1.3 million, and in the second quarter of 2022, $ 0.6 million was released from the valuation allowance for assets that are expected to be recognized in the future.

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

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In the Philippines, the Company has been granted multiple agreements with an initial period of tax at 0% for four years, which will be fully expired in 2022 and additional periods at a reduced tax rate, expiring at various times beginning in 2030.

The aggregate benefit to income tax expense for the three months ended March 31, 2022 and 2021 was approximately $ 0.9 million and $ 1.1 million, respectively, which had an impact on diluted net income per share of $ 0.02 and $ 0.02 , respectively.

The aggregate benefit to income tax expense for the three months ended June 30, 2022 and 2021 was approximately $ 0.0 million and $ 2.6 million, respectively, which had an impact on diluted net income per share of $ 0.00 and $ 0.05 , respectively.

The aggregate effect on income tax expense for the six months ended June 30, 2022 and 2021, was approximately $ 1.0 million and $ 3.7 million benefit, respectively, which had an impact on diluted net income per share of $ 0.02 and $ 0.08 , respectively.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(10) COMMITMENTS AND CONTINGENCIES

Credit Facility

On November 23, 2021 , the Company entered into a Sixth Amendment to the Amended and Restated Credit Agreement and Amendment (“the Credit Agreement”) and Restated Security Agreement originally dated June 3, 2013, (collectively, the “Credit Facility”) to convert the $300 million term loan included in the total Credit Facility commitments, that was previously agreed on March 25, 2021 as part of the Fifth Amendment to the Credit Agreement, into a $ 1.5 billion senior secured revolving Credit Facility with a syndicate of lenders led by Wells Fargo, National Association, as agent, swingline and fronting lender.

On November 23, 2021 , the Company entered into a Sixth Amendment to the Amended and Restated Credit Agreement (“the Credit Agreement”) originally dated June 3, 2013, (collectively, the “Credit Facility”) to convert the $300 million term loan included in the total Credit Facility commitments, that was previously agreed on March 25, 2021 as part of the Fifth Amendment to the Credit Agreement, into a $ 1.5 billion senior secured revolving Credit Facility with a syndicate of lenders led by Wells Fargo, National Association, as agent, swingline and fronting lender.

The Credit Facility matures on November 23, 2026.

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The Credit Agreement also permits the utilization of up to $100 million of limits within the Credit Facility for letters of credit to be used in the business.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Base rate loans bear interest at a rate equal to the greatest of (i) Wells Fargo’s prime rate, (ii) one half of 1% in excess of the federal funds effective rate, and (iii) 1.25 % in excess of the one month LIBOR;

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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, 2022 and December 31, 2021, the Company had borrowings of $ 803.0 million and $ 791.0 million, respectively, under its Credit Facility, and its average daily utilization was $ 917.8 million and $ 446.1 million for the three months ended March 31, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, the Company had borrowings of $ 930.0 million and $ 791.0 million, respectively, under its Credit Facility, and its average daily utilization was $ 966.3 million and $ 662.8 million for the six months ended June 30, 2022 and 2021, respectively.

During early April 2021, the Company increased borrowings by approximately $ 500 million in connection with the acquisition of Avtex (see Note 2).

Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $ 525 million as of March 31, 2022.

As of March 31, 2022, the Company was in compliance with all covenants and conditions under its Credit Agreement.

Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $ 425 million as of June 30, 2022.

As of June 30, 2022, the Company was in compliance with all covenants and conditions under its Credit Agreement.

Letters of Credit

As of March 31, 2022, outstanding letters of credit under the Credit Facility totaled $ 12.6 million and primarily guaranteed workers’ compensation and other insurance related obligations.

As of March 31, 2022, letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $ 0.4 million.

As of June 30, 2022, outstanding letters of credit under the Credit Facility totaled $ 12.6 million and primarily guaranteed workers’ compensation and other insurance related obligations.

As of June 30, 2022, letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $ 0.3 million.

Indebtedness under the Credit Agreement is guaranteed by certain of the Company’s present and future domestic subsidiaries.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Legal Proceedings

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(11) DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS

Revenue recognized for the three months ended March 31, 2022 from amounts included in deferred revenue as of December 31, 2021 was $ 78.2 million.

Revenue recognized for the three months ended March 31, 2021 from amounts included in deferred revenue as of December 31, 2020 was $ 36.3 million.

Revenue recognized for the six months ended June 30, 2022 from amounts included in deferred revenue as of December 31, 2021 was $ 134.8 million.

Revenue recognized for the six months ended June 30, 2021 from amounts included in deferred revenue as of December 31, 2020 was $ 67.4 million.

Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods.

The Company’s RPO excludes performance obligations from on-demand arrangements as there are no minimum purchase commitments associated with these arrangements, and certain time and materials contracts that are billed in arrears.

As of June 30, 2022, the Company’s RPO was $ 288.2 million, which will be delivered and recognized within the next three year s.

However, the amount and timing of revenue recognition are generally driven by customer consumption, which can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.

TTEC HOLDINGS, INC.

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Notes to Consolidated Financial Statements

As of March 31, 2022, the Company’s RPO was $ 310.0 million, which will be delivered and recognized within the next three year s.

(12) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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Net current period other comprehensive income (loss)

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

Accumulated other comprehensive income (loss) at June 30, 2021

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

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Net current period other comprehensive income (loss)

Accumulated other comprehensive income (loss) at March 31, 2022

Accumulated other comprehensive income (loss) at June 30, 2022

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

For the Three Months Ended June 30,

Comprehensive Income

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Derivative valuation

Gain on foreign currency forward exchange contracts

(Loss)/gain on foreign currency forward exchange contracts

Provision for income taxes

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Notes to Consolidated Financial Statements

For the Six Months Ended June 30,

Comprehensive Income

(Loss) Classification

Derivative valuation

Gain 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)

(13) 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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 March 31, 2022 and 2021, there were Restricted Stock Units (“RSUs”) of 193 thousand and zero , 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 June 30, 2022 and 2021, there were Restricted Stock Units (“RSUs”) of 281 thousand and one 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 six months ended June 30, 2022 and 2021, there were RSUs of 239 thousand and two thousand, respectively, outstanding which were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.

(14) 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 months ended March 31, 2022 and 2021, the Company recognized total equity-based compensation expense of $ 3.7 million and $ 4.0 million, respectively.

Of this total compensation expenses, $ 1.6 million and $ 1.3 million were recognized in Cost of services and $ 2.1 million and $ 2.7 million were recognized in Selling, general and administrative during the three months ended March 31, 2022 and 2021, respectively.

During the three and six months ended June 30, 2022 and 2021, the Company recognized total equity-based compensation expense of $ 4.1 million and $ 7.9 million and $ 3.3 million and $ 7.4 million, respectively.

Of the total compensation expenses, $ 1.6 million and $ 3.2 million were recognized in Cost of services and $ 2.5 million and $ 4.7 million were recognized in Selling, general and administrative during the three and six months ended June 30, 2022, respectively.

During the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 1.1 million and $ 2.5 million in Cost of services and $ 2.2 million and $ 4.9 million in Selling, general and administrative, respectively.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Restricted Stock Unit Grants

During the three months ended March 31, 2022 and 2021, the Company granted 20,643 and 44,471 RSUs, respectively, to new and existing employees, which vest over four to five years .

The Company recognized compensation expense related to RSUs of $ 3.6 million and $ 3.3 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, there was approximately $ 35.3 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.

During the six months ended June 30, 2022 and 2021, the Company granted 155,897 and 11,656 RSUs, respectively, to new and existing employees, which vest over four to five years .

The Company recognized compensation expense related to RSUs of $ 3.8 million and $ 7.4 million for the three and six months ended June 30, 2022, respectively.

The Company recognized compensation expense related to RSUs of $ 2.6 million and $ 5.9 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, there was approximately $ 56.2 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.

Performance Based Restricted Stock Unit Grants

During 2019, the Company awarded performance restricted stock units (“PRSUs”) that are subject to service and performance vesting conditions.

If defined minimum targets are met, the annual value of the PRSUs issued will be between $ 0.4 million and $ 1.4 million and vest immediately.

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

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

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

The Company recognized compensation expense related to PRSUs of zero and $ 0.3 million, respectively, for the three months ended March 31, 2022 and 2021.

During 2019, the Company awarded performance restricted stock units (“PRSUs”) that were subject to service and performance vesting conditions.

If defined minimum targets were met, the annual value of the PRSUs issued would be between $ 0.4 million and $ 1.4 million and vest immediately.

If the defined minimum targets were not met, then no shares would be issued.

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

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

The Company recognized compensation expense related to the 2019 PRSUs of $0.3 million and $0.7 million for the three and six months ended June 30, 2021, respectively.

During 2020, the Company awarded PRSUs that are subject to service and performance vesting conditions.

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

The Company recognized compensation expense related to PRSUs of $ 0.4 million and $ 0.5 million, respectively, for the three months ended March 31, 2022 and 2021.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company recognized compensation expense related to the 2020 PRSUs of $ 0.4 million and $0.5 million, respectively, for the three and six months ended June 30, 2022.

The Company recognized compensation expense related to the 2020 PRSUs of $0.5 million and $1.0 million, respectively, for the three and six months ended June 30, 2021.

During 2021, the Company awarded PRSUs that are subject to service and performance vesting conditions.

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The number of shares that will be awarded will be based on the Company’s annual revenue and adjusted operating income for the fiscal year 2023.

Fiscal year’s 2023 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, 2023.

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The number of shares that will be awarded will be based on the Company’s annual revenue and adjusted EBITDA for the fiscal year 2024.

Fiscal year’s 2024 revenue and adjusted EBITDA will determine the award amount.

The one-time stretch financial goals PRSUs, if defined minimum targets at TTEC Engage and TTEC Digital business segments’ levels, are met, the value of the PRSUs issued will be between 0.0 million shares and 0.5 million shares and will vest immediately in March 2026.

F or the one-time stretch financial goals PRSUs, if defined minimum targets at TTEC Engage and TTEC Digital business segments’ levels are met, the number of shares of PRSUs issued will be between 0.0 million shares and 0.5 million shares and will vest immediately in March 2026.

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

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Expense for these awards will begin at the start of the requisite service period, beginning January 1, 2024 and January 1, 2025, respectively.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(15) RELATED PARTY TRANSACTIONS

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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 three months ended March 31, 2022 and 2021, the Company expensed $ 0.1 million and $ 0.3 million, respectively, to Avion and Airmax for services provided to the Company.

There was $ 88 thousand in payments due and outstanding to Avion and Airmax as of March 31, 2022.

During the six months ended June 30, 2022 and 2021, the Company expensed $ 0.3 million and $ 0.5 million, respectively, to Avion and Airmax for services provided to the Company.

There was $ 139 thousand in payments due and outstanding to Avion and Airmax as of June 30, 2022.

Paolillo, Global Chief Operating Officer of the Company, was a member of the board of directors of Welltok, Inc., a consumer health SaaS company, and partner of the Company in the TTEC Welltok joint venture.

During the three months ended March 31, 2022 and 2021, the Company recorded revenue of $ 0.4 million and $ 0.5 million, respectively, in connection with work performed through the joint venture.

During the six months ended June 30, 2022 and 2021, the Company recorded revenue of $ 0.5 million and $ 0.9 million, respectively, in connection with work performed through the joint venture.

As of December 2021, Ms.

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Paolillo is a member of the board of directors of Unisys, a global information technology company.

During the three months ended March 31, 2022 and 2021, the Company recorded revenue of $ 32 thousand and $ 0.2 million, respectively, in connection with services performed for Unisys.

During the six months ended June 30, 2022 and 2021, the Company recorded revenue of $ 0.1 million and $ 0.3 million, respectively, in connection with services performed for Unisys.

Michelle Swanback, Chief Executive Officer of TTEC Engage, is a member of the board of directors of Willis Towers Watson, who provides compensation consulting and insurance services to the Company.

During the six month ended June 30, 2022, the Company expenses $ 0.8 million.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

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our M&A activity, including our ability to identify, acquire and properly integrate acquired businesses in accordance with our strategy;

the risk related to our international operations including risks associated with the Russian invasion of Ukraine in the first quarter of 2022 and impacts it may have on our clients’ European based business and the Company’s business;

the risks related to legal and regulatory impact on our operations, including rapidly changing laws that regulate our and our clients’ business, such as data privacy and data protection laws, regulatory changes impacting our healthcare businesses, financial and public sector specific regulations, our ability to comply with these laws timely and cost effectively;

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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