What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-09 · 207 added, 332 removed, 544 unchanged (50% of the section changed)

4 unchanged sentences

(Amounts in thousands, except share amounts)

September 30,

Current assets

Cash and cash equivalents

Accounts receivable, net of allowance of $ 5,855 and $ 5,409

Accounts receivable, net of allowance of $ 5,078 and $ 3,524 , respectively

Prepaids and other current assets

8 unchanged sentences

Total long-term assets

LIABILITIES, STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY

Current liabilities

21 unchanged sentences

10,000,000 shares authorized;

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

zero shares outstanding as of March 31, 2023 and December 31, 2022

Common stock;

1 unchanged sentence

150,000,000 shares authorized;

47,213,561 and 46,990,031 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

47,253,110 and 47,224,074 shares outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Treasury stock at cost:

34,838,692 and 35,062,222 shares as of September 30, 2022 and December 31, 2021, respectively

34,799,143 and 34,828,179 shares as of March 31, 2023 and December 31, 2022, respectively

Accumulated other comprehensive income (loss)

2 unchanged sentences

Total stockholders’ equity

Total liabilities, stockholders’ equity and mezzanine equity

Total liabilities and stockholders’ equity and mezzanine equity

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

3 unchanged sentences

(Amounts in thousands, except per share amounts)

Three months ended

September 30,

Nine months ended

September 30,

Three months ended March 31,

Operating expenses

23 unchanged sentences

Comprehensive income attributable to noncontrolling interest

Comprehensive income (loss) attributable to TTEC stockholders

Comprehensive income attributable to TTEC stockholders

Weighted average shares outstanding

Net income per share attributable to TTEC stockholders

Dividends declared and not paid per share outstanding

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

1 unchanged sentence

AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity and Mezzanine Equity

Consolidated Statements of Stockholders’ Equity and Mezzanine Equity

(Amounts in thousands)

Three months ended September 30, 2021 and 2022

Stockholders’ Equity of the Company

Comprehensive

Noncontrolling

Paid-in Capital

Income (Loss)

Balance as of June 30, 2021

Dividends to shareholders ($ 0.47 per common share)

Dividends distributed to noncontrolling interest

Foreign currency translation adjustments

Derivatives valuation, net of tax

Vesting of restricted stock units

Equity-based compensation expense

Other, net of tax

Balance as of September 30, 2021

Stockholders’ Equity of the Company

Comprehensive

Noncontrolling

Paid-in Capital

Income (Loss)

Balance as of June 30, 2022

Dividends to shareholders ($ 0.52 per common share)

Dividends distributed to noncontrolling interest

Foreign currency translation adjustments

Derivatives valuation, net of tax

Vesting of restricted stock units

Equity-based compensation expense

Other, net of tax

Balance as of September 30, 2022

Nine months ended September 30, 2021 and 2022

Three months ended March 31, 2022 and 2023

Stockholders’ Equity of the Company

11 unchanged sentences

Other, net of tax

Balance as of September 30, 2021

Balance as of March 31, 2022

Stockholders’ Equity of the Company

4 unchanged sentences

Balance as of December 31, 2022

Noncontrolling interest adjustment due to buyout

Dividends to shareholders ($ 0.52 per common share)

Buyout of noncontrolling interest

Dividends distributed to noncontrolling interest

4 unchanged sentences

Other, net of tax

Balance as of September 30, 2022

Balance as of March 31, 2023

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

3 unchanged sentences

(Amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

7 unchanged sentences

Impairment losses

Loss on dissolution of subsidiary

Deferred income taxes

1 unchanged sentence

Equity-based compensation expense

Loss on foreign currency derivatives

(Gain) loss on foreign currency derivatives

Changes in assets and liabilities, net of acquisitions:

7 unchanged sentences

Purchases of property, plant and equipment, net of acquisitions

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

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

Net cash used in investing activities

6 unchanged sentences

Tax payments related to issuance of restricted stock units

Payments of debt issuance costs

Net cash provided by financing activities

Net cash used in financing activities

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

(Decrease)/increase in cash, cash equivalents and restricted cash

Decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

15 unchanged sentences

(“TTEC”, “the Company”;

pronounced “T-TEC”) is a leading global customer experience as a service (“CXaaS”) partner for many of the world’s most iconic and disruptive brands.

TTEC designs, builds, orchestrates, and delivers seamless digitally enabled customer experiences that are designed to increase brand value, customer loyalty, revenue and profitability through personalized, outcome-based interactions.

The Company helps clients improve their customer satisfaction while lowering their total cost to serve by combining innovative digital solutions with service capabilities that deliver a frictionless customer experience (“CX”) across different channels and phases of the customer lifecycle.

TTEC’s 62,700 employees serve clients in the automotive, communication, financial services, national/federal and state and local governments, healthcare, logistics, media and entertainment, e-tail/retail, technology, travel and transportation industries via operations in the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and the United Kingdom.

pronounced “T-TEC”) is a leading global customer experience (“CX”) as a service (“CXaaS”) partner for many of the world’s most iconic companies, disruptive hypergrowth brands, and large public sector agencies.

TTEC designs, builds, orchestrates, and delivers seamless digitally-enabled customer experiences that increase brand value, customer loyalty, revenue and profitability through personalized, outcome-based interactions.

The Company helps clients improve their customer satisfaction while lowering their total cost to serve by combining innovative digital solutions with service capabilities that deliver a frictionless CX across numerous real-time digital and live interaction channels and different phases of the customer lifecycle.

TTEC’s 65,000 employees serve clients in the automotive, communication, financial services, national/federal and state and local governments, healthcare, logistics, media and entertainment, e-tail/retail, technology, and travel and transportation industries via operations in the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Colombia, Costa Rica, Germany, Greece, Honduras, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and the United Kingdom.

The Company operates and reports its financial results of operation through two business segments:

TTEC Digital and TTEC Engage.

● TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting, and transformation enabled by proprietary CX applications and technology partnerships.

● TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digitization, analytics, process optimization, system integration, cloud-based technology solutions, and transformation enabled by the Company’s proprietary CX applications and technology partnerships.

TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of customer relationship management (“CRM”), data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes.

● TTEC Engage provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale.

The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands.

TTEC Engage also delivers digitally enabled back office and industry specific specialty services including artificial intelligence (“AI”) operations, content moderation, and fraud management services.

TTEC Digital and TTEC Engage strategically come together under our unified offering, Humanify ® CXaaS, which drives measurable customer results for clients through the delivery of personalized, omnichannel experiences.

The segment delivers omnichannel customer care, technology support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands.

TTEC Engage also delivers digitally enabled back office and industry specific specialty services including artificial intelligence (“AI”) operations, and fraud management services.

Our Humanify ® cloud platform provides a fully integrated ecosystem of CX offerings including messaging, AI, machine learning, robotic process automation, analytics, cybersecurity, CRM, knowledge management, journey orchestration, and traditional voice solutions.

Our end-to-end CXaaS platform differentiates us from competitors by combining design, strategic consulting, technology, data analytics, process optimization, system integration, and operational excellence along with our decades of industry know-how.

This unified offering is value-oriented, outcome-based and delivered to large enterprises, governments, and hypergrowth companies on a global scale.

This unified offering is value-oriented, outcome-based and delivered to large enterprises, hypergrowth companies and public sector agencies on a global scale.

Basis of Presentation

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

(see Note 2).

All intercompany balances and transactions have been eliminated in consolidation.

8 unchanged sentences

These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates

6 unchanged sentences

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

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

September 30, 2022

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

March 31, 2023

December 31, 2022

1 unchanged sentence

Restricted cash included in "Prepaid and other current assets"

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Concentration of Credit Risk

4 unchanged sentences

The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative hedging activities, as the Company diversifies its activities across eight investment-grade financial institutions.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which now requires the acquirer to account for revenue contracts in accordance with Topic 606 as if it had acquired the contract, versus recording these assets and liabilities at fair value on acquisition date.

The ASU is effective for interim and annual periods beginning on or after December 15, 2022, with early adoption permitted.

The Company adopted the new guidance during the fourth quarter of 2021 which required application to all acquisitions completed during the adoption year.

See further discussion in Note 2.

Other Accounting Pronouncements

2 unchanged sentences

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

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

The Company has adopted the standard effective April 1, 2023 and does not expect that the adoption of this guidance will have a material impact on the Company’s financial position, results of operations or cash flows.

(2) ACQUISITIONS AND DIVESTITURES

7 unchanged sentences

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The fair value of the two contingent payments was 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 %.

2 unchanged sentences

During the third quarter of 2022, a $ 2.4 million net gain was recorded related to fair value adjustments for the estimated contingent payments based on the timing of cash flows and market interest rates which resulted in an updated discount factor for one contract and a complete reduction for the second contract as it was not awarded to the Company.

The benefit was included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

As of September 30, 2022, the contingent payment is accrued at $ 6.4 million and is included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the fourth quarter of 2022, a $ 0.5 million net gain was recorded related to a fair value adjustment for the estimated contingent payment based on changes in estimated EBITDA and the timing of cash flows.

During the first quarter of 2023, a $ 0.6 million net expense was recorded related to a fair value adjustment for the estimated contingent payment based on the timing of cash flows and market interest rate changes.

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

As of March 31, 2023, the contingent payment is accrued at $ 6.5 million and 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.

The fair value was unchanged as of September 30, 2022.

These call options were valued based on information including the call right and the exclusivity period and a $ 270 thousand asset was recorded as of the acquisition date which is included in Other long-term assets in the accompanying Consolidated Balance Sheets.

During the fourth quarter of 2022 and the first quarter of 2023, reductions in fair value of $ 52 thousand and $ 140 thousand, respectively, were recorded due to changes in estimated revenue, which were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

As of March 31, 2023, the fair value is $ 78 thousand and is included in Other long-term assets in the accompanying Consolidated Balance Sheets.

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

1 unchanged sentence

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.

During the third quarter of 2022, a reduction in the fair value was calculated and a $ 4.4 million expense was recorded related to a fair value adjustment for the receivable based on current information reflecting a better outcome with the contract negotiations.

The reduction in fair value related expense was included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

As of September 30, 2022, the fair value of the receivable is $ 0.5 million and is included in Other current assets in the accompanying Consolidated Balance Sheets.

During the third and fourth quarters of 2022 and the first quarter of 2023, reductions in the fair value were calculated and a $ 4.4 million expense, a $ 0.2 million expense and a $ 2.5 million expense, respectively, were recorded related to fair value adjustments for the receivable based on current information reflecting a better outcome with the contract negotiations and lower anticipated IT and facilities spending.

The reductions in fair value related expenses were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

As of March 31, 2023, the fair value of the receivable is $ 3.2 million and is included in Other current assets in the accompanying Consolidated Balance Sheets.

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

The significant assumptions utilized in calculating the fair value of the customer relationships intangible assets 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):

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Acquisition Date

11 unchanged sentences

Total purchase price

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

In the first quarter of 2023, the Company finalized the valuation of Faneuil for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.

The Faneuil customer relationships are being amortized over a useful life of 10 years .

The goodwill recognized from the Faneuil acquisition is attributable to, 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.

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 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).

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

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

The Company finalized the net working capital adjustment for $ 0.1 million during the third quarter of 2021 which was paid by Avtex to the Company in the third quarter of 2021.

During the fourth quarter of 2021, TTEC implemented ASU 2021-08 which required an accounting modification to the deferred revenue balance as of the acquisition date (see discussion above in Note 1).

The deferred revenue balance was evaluated as if TTEC had been the company securing the initial contracts and accounted for these contracts in accordance with ASC 606.

Based on this re-assessment, the $ 4.9 million reduction initially recorded to deferred revenue in connection with the purchase price accounting was eliminated and an offsetting increase to Goodwill was recorded as of the acquisition date.

In connection with this modification, revenue of $ 3.4 million was recorded in the fourth quarter of 2021 related to deferred revenue from the second and third quarters of 2021.

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Acquisition Date

Accounts receivable, net

Prepaid expenses

Current income tax receivables

Net fixed assets

Right of use lease assets

Intellectual property intangible

Customer relationships

Accounts payable

Accrued employee compensation

Accrued expenses

Right of use lease liability - current

Deferred revenue

Accrued income taxes

Deferred tax liability

Right of use lease liability - noncurrent

Total purchase price

In the first quarter of 2022, the Company finalized the valuation of Avtex for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.

The Avtex customer relationships, intellectual property intangible, and tradename are being amortized over useful lives of 9 , 3 , and 1 years , respectively.

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

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

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

Financial Impact of Acquired Businesses

The acquired businesses purchased in 2021 and 2022 noted above contributed revenues of $ 96.0 million and net income of $ 6.0 million to the Company for the three months ended September 30, 2022 and revenues of $ 243.6 million and net income $ 16.2 million to the Company for the nine months ended September 30, 2022.

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

The reported revenue and net income of $ 592.5 million and $ 22.2 million would have been $ 592.5 million and $ 22.2 million for the three months ended September 30, 2022, respectively, on an unaudited proforma basis.

The reported revenue and net income of $ 1,785.4 million and $ 80.9 million would have been $ 1,827.4 million and $ 85.4 million for the nine months ended September 30, 2022, respectively, on an unaudited proforma basis.

The acquired business purchased in 2022 noted above contributed revenues of $ 46.2 million and net income of $ 1.1 million to the Company for the three months ended March 31, 2023.

The unaudited proforma financial results for the three months ended March 31, 2022 combines the consolidated results of the Company and Faneuil assuming the acquisition had been completed on January 1, 2021.

The reported revenue and net income of $ 588.7 million and $ 33.4 million would have been $ 630.7 million and $ 36.8 million for the three months ended March 31, 2022, respectively, on an unaudited proforma basis.

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

These proforma amounts have been calculated after applying the Company’s accounting policies and adjusting the acquired business 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 the 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.

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 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 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.

Subsequent Event

Pursuant to the Membership Interest Purchase Agreement of October 26, 2019 between Ortana Holdings, Inc.

and TTEC Services Corporation for the acquisition by TTEC of 70 % interest in First Call Resolution, LLC (“FCR MIPA”), Ortana Holdings exercised its put rights in January 2023, which required TTEC to acquire Ortana Holdings’ remaining 30 % interest in First Call Resolution, LLC.

The purchase price for the remaining 30% interest was determined based on the express provisions of the FCR MIPA, was based on First Call Resolution’s performance during 2022, and was finalized at $22.4 million.

The final agreement was signed on April 4, 2023.

In connection with the triggering of the option, as of March 31, 2023, the $ 22.4 million purchase price was reclassified from Redeemable noncontrolling interest to Accrued expenses and the remaining balance of $ 20.5 million was reclassified to Additional paid in capital.

In February 2023, a $ 9.2 million payment related to excess cash distribution was completed and in April 2023 the final payment of $ 22.4 million was completed.

(3) SEGMENT INFORMATION

The Company reports the following two segments:

TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting and transformation enabled by proprietary CX applications and technology partnerships.

TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digitization, analytics, process optimization, systems integration, cloud-based technology solutions, and transformation enabled by the Company’s proprietary CX applications and technology partnerships.

TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of CRM, data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes.

● Technology Services:

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

The technology services design, build, and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, including journey orchestration, automation and AI, knowledge management, and workforce productivity, among others.

● Professional Services:

Our management consulting practices deliver customer experience strategy, analytics, process optimization, and learning and performance services.

The management consulting practices deliver customer experience strategy, analytics, process optimization, and system integration, among others.

TTEC Engage provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale.

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

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

● Customer Acquisition, Growth, and Retention Services:

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

● Customer Care, Tech Support, and Order Fulfillment Services:

Our customer care, technical support, and order fulfillment services provide turnkey contact center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all touchpoints.

● Digitally Enabled Back Office and Specialty Services:

Our digital AI operations, content moderation, and fraud detection and prevention services provide clients with data tagging and annotation capabilities to train and enable AI platforms, community content moderation, and compliance to meet client content standards, and proactive fraud solutions to assist our clients in the detection and prevention of fraud.

The Company allocates to each segment its portion of corporate operating expenses.

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

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

● Customer Care, Technology Support, and Order Fulfillment Services:

The customer care, technology support, and order fulfillment services provide turnkey contact center solutions, including digital omnichannel technologies, associate recruiting and training, facilities, and operational expertise to create exceptional customer experiences across all touchpoints.

TTEC HOLDINGS, INC.

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Notes to Consolidated Financial Statements

● Digitally Enabled Back Office and Specialty Services:

The digital AI operations and fraud detection and prevention services provide clients with data tagging and annotation capabilities to train and enable AI platforms, community content moderation, and compliance to meet client content standards, and proactive fraud solutions to assist our clients in the detection and prevention of fraud.

The Company allocates to each segment its portion of corporate operating expenses.

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

Effective January 1, 2023, the Company completed a small reorganization of the internal reporting structure and one component from the TTEC Digital segment was reclassified and will now be included in the TTEC Engage segment.

All balances have been recast for 2022 to conform to the updated segment presentation.

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

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2022

Nine Month Ended September 30, 2021

Three Months Ended March 31, 2023

Three Months Ended March 31, 2022

Three Months Ended

Nine Months Ended

September 30,

Capital Expenditures

September 30, 2022

March 31, 2023

December 31, 2022

2 unchanged sentences

Notes to Consolidated Financial Statements

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

United States

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

Three Months Ended March 31,

United States / Canada

Philippines / Asia Pacific / India

Europe / Middle East / Africa

Latin America

Asia Pacific / India

(4) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS

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

The Company had one client that contributed in excess of 10% of total revenue for the three months ended March 31, 2023 and 2022;

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

This client contributed 10.5 % and 9.1 % of total revenue for the nine months ended September 30, 2022 and 2021, respectively.

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

this client operates in the financial services sector.

This client contributed 7.4 % and 13.3 % of total revenue for the nine months ended September 30, 2022 and 2021, respectively.

This client contributed 10.0 % and 10.4 % of total revenue for the three months ended March 31, 2023 and 2022, 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 September 30, 2022.

Based on currently available information, management does not believe significant credit risk existed as of March 31, 2023.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Balance, beginning of period

Three Months Ended March 31,

Balance, beginning of year

Provision for credit losses

1 unchanged sentence

Effect of foreign currency

Balance, end of period

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Accounts Receivable Sales Agreement

Balance, end of year

Accounts Receivable Factoring Agreement

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

5 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.

As of September 30, 2022 and December 31, 2021, the Company had factored $ 85.6 million and $ 97.7 million, respectively, of accounts receivable;

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

As of September 30, 2022, the Company had collected $ 10.0 million of cash from customers which had not been remitted to the Bank.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The balances related to the Agreement are as follows (in thousands):

March 31, 2023

December 31, 2022

Total accounts receivable factored

Total amounts collected from clients not yet remitted to Bank

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

The Company has not recorded any servicing assets or liabilities as of September 30, 2022 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

Effective November 1, 2022, the Company amended the arrangement to modify the list of eligible clients who may be sold pursuant to the Agreement, and to memorialize the transition from LIBOR to SOFR for discount calculation purposes.

The Company has not recorded any servicing assets or liabilities as of March 31, 2023 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

Effective November 1, 2022, the Company amended the arrangement to modify the list of eligible clients whose accounts receivable may be sold pursuant to the Agreement, and to memorialize the transition from LIBOR to SOFR for discount calculation purposes.

Goodwill consisted of the following (in thousands):

Acquisitions /

September 30,

The Company performs a goodwill impairment assessment on at least an annual basis.

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

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

During the quarter ended March 31, 2023, the Company assessed whether any such indicators of impairment existed and concluded there were none.

Given the modification in reporting units, the Company conducted an impairment test before and after the change, and it was concluded that the fair value of the reporting units exceeded the carrying value on both testing dates.

With the change in reporting units, the Company performed a relative fair value valuation calculation to allocate a portion of the Company’s historical goodwill to this specific component, which was then reallocated from the TTEC Digital segment to the TTEC Engage segment.

TTEC HOLDINGS, INC.

8 unchanged sentences

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

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

Three Months Ended

Nine Months Ended

September 30,

As of March 31, 2023, 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, 2023 and 2022 (in thousands and net of tax):

Three Months Ended March 31,

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

2 unchanged sentences

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

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

The Company’s foreign exchange cash flow hedging instruments as of March 31, 2023 and December 31, 2022 are summarized as follows (amounts in thousands).

All hedging instruments are forward contracts.

As of September 30, 2022

As of March 31, 2023

Canadian Dollar

5 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 September 30, 2022 and December 31, 2021.

dollars on March 31, 2023 and December 31, 2022.

TTEC HOLDINGS, INC.

4 unchanged sentences

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

As of September 30, 2022 and December 31, 2021 the total notional amounts of the Company’s forward contracts used as fair value hedges were $ 54.3 million and $ 32.9 million, respectively.

As of March 31, 2023 and December 31, 2022 the total notional amounts of the Company’s forward contracts used as fair value hedges were $ 92.5 million and $ 80.8 million, respectively.

Derivative Valuation and Settlements

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

September 30, 2022

The Company’s derivatives as of March 31, 2023 and December 31, 2022 were as follows (in thousands):

March 31, 2023

Not Designated

20 unchanged sentences

Notes to Consolidated Financial Statements

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

Three Months Ended September 30,

Designated as Hedging

Derivative contract type:

Foreign Exchange

Derivative classification:

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

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

Three Months Ended September 30,

Not Designated as Hedging Instruments

Derivative contract type:

Foreign Exchange

Derivative classification:

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

Other income (expense), net

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

Nine Months Ended September 30,

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

Three Months Ended March 31,

Designated as Hedging

4 unchanged sentences

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

Nine Months Ended September 30,

Three Months Ended March 31,

Not Designated as Hedging Instruments

4 unchanged sentences

Other income (expense), net

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) FAIR VALUE

6 unchanged sentences

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

The following presents information as of September 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.

The following presents information as of March 31, 2023 and December 31, 2022 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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Investments – The Company measures investments, including cost and equity method investments, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired.

2 unchanged sentences

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 September 30, 2022 and December 31, 2021, the Company had $ 955.0 million and $ 791.0 million, respectively, of borrowings outstanding under the Credit Facility.

During the third quarter of 2022 outstanding borrowings accrued interest at an average rate of 3.5 % per annum, excluding unused commitment fees.

As of March 31, 2023 and December 31, 2022, the Company had $ 930.0 million and $ 960.0 million, respectively, of borrowings outstanding under the Credit Facility.

During the first quarter of 2023 outstanding borrowings accrued interest at an average rate of 6.0 % 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 September 30, 2022, credit risk did not materially change the fair value of the Company’s derivative contracts.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of September 30, 2022 and December 31, 2021 (in thousands):

As of September 30, 2022

As of March 31, 2023, 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, 2023 and December 31, 2022 (in thousands):

As of March 31, 2023

Fair Value Measurements Using

15 unchanged sentences

Total net derivative asset (liability)

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

As of September 30, 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 March 31, 2023 and December 31, 2022 (in thousands):

As of March 31, 2023

Fair Value Measurements Using

11 unchanged sentences

Redeemable noncontrolling interest

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of December 31, 2022

7 unchanged sentences

Deferred compensation plan asset

Contingent consideration

Derivative instruments, net

2 unchanged sentences

Redeemable noncontrolling interest

The table above has been updated from the amounts included as of December 31, 2021 presented in the Annual Report on Form 10-K filed with the SEC on March 3, 2022 to include the fair value of the investments maintained as an asset for the deferred compensation plan.

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 asset represents the combined fair value of all the funds based on quoted values and market observable inputs.

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 %.

Contingent Consideration - The Company recorded contingent consideration payable related to the acquisition of Faneuil that closed in 2022.

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

1 unchanged sentence

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).

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

During the third quarter of 2022, a fair value adjustment of $ 2.4 million net benefit was recorded related to fair value adjustments of the estimated contingent payments associated with the Faneuil acquisition based on updated discount factor for one contract and a complete reduction for the second contract as it was not awarded to the Company.

The fair value adjustment benefit was included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

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

During the third quarter of 2022, the Company recorded a fair value adjustment for the receivable based on current information which caused the receivable to decrease, and a $ 4.4 million expense was included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

During the third and fourth quarters of 2022, and the first quarter of 2023, fair value adjustments of a $ 2.4 million benefit, a $ 0.5 million benefit, and a $ 0.6 million expense, respectively, were recorded related to fair value adjustments of the estimated contingent payments associated with the Faneuil acquisition based on updated discount factors, the passage of time, and EBITDA estimates for one contract and a complete reduction for the second contract as it was not awarded to the Company.

The fair value adjustment benefits(expenses) were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

Contingent Receivables – The Company recorded a contingent receivable related to the Faneuil acquisition.

During the third and fourth quarters of 2022, and the first quarter of 2023, the Company recorded fair value adjustments for the receivable based on current information which caused the receivable to decrease, and a $ 4.4 million expense, a $ 0.2 million expense, and a $ 2.5 million expense, respectively, were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

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

September 30,

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

September 30,

(8) IMPAIRMENT OF ASSETS

4 unchanged sentences

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

During the three and nine months ended September 30, 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 $ 2.9 million and $ 13.3 million, respectively, across the TTEC Digital and TTEC Engage segments.

During the three months ended March 31, 2023 and 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 $ 4.3 million and $ 1.1 million, respectively, across the TTEC Digital and TTEC Engage segments.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(9) INCOME TAXES

4 unchanged sentences

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.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of September 30, 2022, the Company had $ 19.5 million of net deferred tax assets (after a $ 25.0 million valuation allowance) and a net deferred tax asset of $ 15.2 million (after deferred tax liabilities of $ 4.3 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 nine months ended September 30, 2022 was 15.2 % and 17.7 %, respectively.

The effective tax rate for the three and nine months ended September 30, 2021 was 30.6 % and 21.9 %, respectively.

As of March 31, 2023, the Company had $ 21.4 million of net deferred tax assets (after a $ 27.2 million valuation allowance) and a net deferred tax asset of $ 17.7 million (after deferred tax liabilities of $ 3.7 million) related to the United States and international tax jurisdictions whose recoverability is dependent upon future profitability.

The effective tax rate for the three months ended March 31, 2023 and 2022 was 27.5 % and 17.5 %, 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 , the state of Missouri for tax years 2019 and 2020 , and India for tax years 2017 through 2019.

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 in the United States for tax years 2017 and 2018 , and India for tax years 2017 through 2020 .

Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company’s Consolidated Financial Statements.

When there is a change in judgment concerning the recovery of deferred tax assets in future periods, a valuation allowance is recorded into earnings during the quarter in which the change in judgment occurred.

In the 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, second and third quarters of 2022, $ 1.3 million, $ 0.6 million and $ 2.5 million, respectively, were 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.

During the first quarter of 2023, a $ 1.3 million valuation was recorded for assets that are not expected to be recovered in future periods.

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

Generally, a Tax Holiday is an agreement between the Company and a foreign government under which the Company receives certain tax benefits in that country, such as exemption from taxation on profits derived from export-related activities.

In the Philippines, the Company has been granted multiple agreements with an initial period of 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 September 30, 2022 and 2021 was approximately $ 0.3 million and $ 0.5 million, respectively, which had an impact on diluted net income per share of $ 0.01 and $ 0.01 , respectively.

The aggregate effect on income tax expense for the nine months ended September 30, 2022 and 2021, was approximately $ 1.3 million and $ 4.2 million benefit, respectively, which had an impact on diluted net income per share of $ 0.03 and $ 0.09 , respectively.

In the Philippines, the Company has been granted multiple agreements under local laws which result in an overall reduced tax rate.

These incentives have varying benefit year over year and expire at various times beginning in 2030.

The aggregate benefit to income tax expense for the three months ended March 31, 2023 and 2022 was approximately $ 0.7 million and $ 0.9 million, respectively, which had an impact on diluted net income per share of $ 0.01 and $ 0.02 , respectively.

(10) COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

The Credit Facility matures on November 23, 2026.

We primarily use our Credit Facility to fund working capital, general operations, dividends, acquisitions and other strategic activities.

On March 25, 2021, the Company entered into a Fifth Amendment to its Credit Agreement and Credit Facility to increase the total commitments by $ 300 million to $ 1.2 billion by exercising the accordion feature that was included in the senior secured revolving credit facility.

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

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

On April 3, 2023, the Company entered into a Seventh Amendment to the Credit Agreement which replaces the use of LIBOR with Spread Adjusted SOFR as of the date of the amendment, thus will affect the interest rates paid for a portion of the Credit Facility starting in the second quarter of 2023.

The maximum commitment under the Credit Facility is $ 1.5 billion in the aggregate, if certain conditions are satisfied.

3 unchanged sentences

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.

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;

Base rate loans bear interest at a rate equal to the greatest of (i) prime rate, (ii) the federal funds rate plus 0.50% , and (iii) 1.00 % in excess of the one month LIBOR;

plus in each case a margin of 0 % to 0.875 % based on the Company’s net leverage ratio.

3 unchanged sentences

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 September 30, 2022 and December 31, 2021, the Company had borrowings of $ 955.0 million and $ 791.0 million, respectively, under its Credit Facility, and its average daily utilization was $ 1,023.6 million and $ 747.9 million for the nine months ended September 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 $ 370 million as of September 30, 2022.

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

As of March 31, 2023 and December 31, 2022, the Company had borrowings of $ 930.0 million and $ 960.0 million, respectively, under its Credit Facility, and its average daily utilization was $ 1,061.9 million and $ 917.8 million for the three months ended March 31, 2023 and 2022, respectively.

Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $ 335 million as of March 31, 2023.

As of March 31, 2023, the Company was in compliance with all covenants and conditions under its Credit Agreement.

Letters of Credit

As of September 30, 2022, outstanding letters of credit under the Credit Facility totaled $ 2.6 million and primarily guaranteed workers’ compensation and other insurance related obligations.

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

As of March 31, 2023, outstanding letters of credit under the Credit Facility totaled $ 0.2 million and primarily guaranteed workers’ compensation and other insurance related obligations.

As of March 31, 2023, 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.

8 unchanged sentences

(11) DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS

Revenue recognized for the nine months ended September 30, 2022 from amounts included in deferred revenue as of December 31, 2021 was $ 196.5 million.

Revenue recognized for the nine months ended September 30, 2021 from amounts included in deferred revenue as of December 31, 2020 was $ 126.0 million.

Revenue recognized for the three months ended March 31, 2023 from amounts included in deferred revenue as of December 31, 2022 was $ 76.2 million.

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.

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 September 30, 2022, the Company’s RPO was $ 293.8 million, which will be delivered and recognized within the next three year s.

As of March 31, 2023, the Company’s RPO was $ 301.5 million, which will be delivered and recognized within the next five 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.

6 unchanged sentences

Net current period other comprehensive income (loss)

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

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

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

2 unchanged sentences

Net current period other comprehensive income (loss)

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

Accumulated other comprehensive income (loss) at March 31, 2023

TTEC HOLDINGS, INC.

2 unchanged sentences

The following table presents the classification and amount of the reclassifications from Accumulated other comprehensive income (loss) to the Statement of Comprehensive Income (Loss) (in thousands):

For the Three Months Ended September 30,

Comprehensive Income

(Loss) Classification

Derivative valuation

(Loss)/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)

For the Nine Months Ended September 30,

For the Three Months Ended

Comprehensive Income

10 unchanged sentences

The following table sets forth the computation of basic and diluted shares for the periods indicated (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Shares used in basic earnings per share calculation

4 unchanged sentences

Shares used in dilutive earnings per share calculation

For the three months ended September 30, 2022 and 2021, there were Restricted Stock Units (“RSUs”) of 542 thousand and four 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 nine months ended September 30, 2022 and 2021, there were RSUs of 377 thousand and 78 thousand, respectively, outstanding which were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.

For the three months ended March 31, 2023 and 2022, there were Restricted Stock Units (“RSUs”) of 463 thousand and 193 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.

The following table presents the total equity-based compensation expense (stock options and RSUs) for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Equity-based compensation expense recognized in Cost of services

Equity-based compensation expense recognized in Selling, general and administrative

Total equity-based compensation expense

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

(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 and nine months ended September 30, 2022 and 2021, the Company recognized total equity-based compensation expense of $ 5.4 million and $ 13.2 million and $ 4.6 million and $ 12.0 million, respectively.

Of the total compensation expenses, $ 2.2 million and $ 5.4 million were recognized in Cost of services and $ 3.2 million and $ 7.8 million were recognized in Selling, general and administrative during the three and nine months ended September 30, 2022, respectively.

During the three and nine months ended September 30, 2021, the Company recognized compensation expense of $ 2.0 million and $ 4.4 million in Cost of services and $ 2.6 million and $ 7.6 million in Selling, general and administrative, respectively.

Restricted Stock Unit Grants

During the nine months ended September 30, 2022 and 2021, the Company granted 365,515 and 219,883 RSUs, respectively, to new and existing employees, which vest over four to five years .

The Company recognized compensation expense related to RSUs of $ 5.0 million and $ 12.4 million for the three and nine months ended September 30, 2022, respectively.

The Company recognized compensation expense related to RSUs of $ 4.1 million and $ 10.0 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, there was approximately $ 45.2 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.

During the three months ended March 31, 2023 and 2022, the Company granted 93,772 and 20,643 RSUs, respectively, to new and existing employees, which vest over four to five years .

The Company recognized compensation expense related to RSUs of $ 3.9 million and $3.6 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, there was approximately $ 39.7 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.

Performance Based Restricted Stock Unit Grants

4 unchanged sentences

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 $0.8 million for the three and nine months ended September 30, 2021, respectively.

The Company recognized compensation expense related to the 2019 PRSUs of zero for the three months ended March 31, 2022.

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

3 unchanged sentences

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

The Company recognized compensation expense related to the 2020 PRSUs of $ 0.3 million and $0.8 million, respectively, for the three and nine months ended September 30, 2022.

The Company recognized compensation expense related to the 2020 PRSUs of $0.2 million and $1.2 million, respectively, for the three and nine months ended September 30, 2021.

The Company recognized compensation expense related to the 2020 PRSUs of $ 0.1 million and $0.4 million, respectively, for the three months ended March 31, 2023 and 2022

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

2 unchanged sentences

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.

Expense for these awards will begin at the start of the requisite service period, beginning January 1, 2023.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company recognized compensation expense related to the 2021 PRSUs of $ 0.2 million for the three months ended March 31, 2023.

During 2022, the Company made awards of two different PRSU programs that are subject to service and performance vesting conditions:

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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.

During 2023, the Company awarded 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 zero and $8.9 million and vest immediately.

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

The number of shares that will be awarded will be based on the Company’s annual revenue and adjusted EBITDA for the fiscal year 2025.

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

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 nine months ended September 30, 2022 and 2021, the Company expensed $ 0.4 million and $ 0.5 million, respectively, to Avion and Airmax for services provided to the Company.

There was $ 72 thousand in payments due and outstanding to Avion and Airmax as of September 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 nine months ended September 30, 2022 and 2021, the Company recorded revenue of $ 0.5 million and $ 1.2 million, respectively, in connection with work performed through the joint venture.

As of December 2021, Ms.

Paolillo is no longer a member of the board of directors of Welltok, Inc.

and the joint venture has been wound down, but TTEC continues to service revenue for Welltok, Inc.

Paolillo is a member of the board of directors of Unisys (NYSE:

UIS), a global information technology company.

During the nine months ended September 30, 2022 and 2021, the Company recorded revenue of $ 0.1 million and $ 0.4 million, respectively, in connection with services performed for Unisys.

Paolillo is a member of the board of directors of Alight (NYSE:

ALIT), a provider of digital human capital and business solutions.

Starting in November 2022, the Company engaged Alight to provide certain benefit communication and enrollment services.

During the nine months ended September 30, 2022, the Company did not have any expenses for these services.

Michelle Swanback, Chief Executive Officer of TTEC Engage, is a member of the board of directors of WTW (NYSE:

During the three months ended March 31, 2023 and 2022, the Company expensed $ 0.3 million and $ 0.1 million, respectively, to Avion and Airmax for services provided to the Company.

There was $ 143 thousand in payments due and outstanding to Avion and Airmax as of March 31, 2023.

Michelle Swanback, President of the Company, is a member of the board of directors of WTW (NYSE:

WTW) (fka “Willis Towers Watson”), that provides compensation consulting and insurance brokerage services to the Company.

During the nine months ended September 30, 2022, the Company expensed $ 0.9 million for these services.

During the three months ended March 31, 2023 and 2022, the Company expensed $ 0.8 million and $ 0.8 million, respectively, for these services.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

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

our ability to innovate and introduce technologies that are sufficiently disruptive to allow us to maintain and grow our market share;

risks inherent in the reliability of our information technology systems;

risks related to our information technology infrastructure’s cybersecurity in general, and criminal activity such as ransomware, other malware and data exfiltration or destruction in particular, which can impact our ability to consistently deliver uninterrupted service to our clients and may result in government enforcement actions, regulatory investigations, fines, penalties, and private legal actions;

our dependence on third parties for our cloud solutions;

risks inherent in our transition to a work from home environment;

our ability to innovate and introduce technologies that are sufficiently disruptive to allow us to maintain and grow our market share, including the effective adoption of artificial intelligence into our solutions;

risks that may arise in connection with events outside of our control, such as macroeconomic conditions, geopolitical tensions, and outbreaks of infectious diseases;

risks inherent in a disruption of our information technology systems, our technology infrastructure’s cybersecurity in general, and cyber-related criminal activity such as ransomware, other malware and data breach in particular, which can impact our ability to consistently deliver uninterrupted service to our clients and may result in government enforcement actions, regulatory investigations, fines, penalties, and private legal actions;

risks inherent in the delivery of client services by employees working from home;

our ability to attract and retain qualified and skilled personnel at a price point that we can afford and our clients are willing to pay;

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

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 businesses 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, cyber security regulations, regulatory changes impacting our healthcare businesses, financial and public sector specific regulations, our ability to comply with these laws timely and cost effectively;

the cost of wage and hour litigation in the United States;

the impact of the post COVID-19 pandemic economic recovery and regulatory realities on our business and our clients’ business;

our reliance on a relatively small number of clients to generate the majority of our revenue and our reliance on technology partners to generate a large portion of TTEC Digital’s revenue;

the risks related to legal and regulatory impact on our operations, including rapidly changing and at times inconsistent 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;

the cost of wage and hour litigation and other class action litigation in the United States;

the risk related to our international operations including the stress that geographic expansion may have on our business and the impacts if we are unable to expand geographically to meet our clients’ demand;

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

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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