TTEC Announces Record Second Quarter 2020 Financial Results
DENVER, Aug. 5, 2020 /PRNewswire/ -- TTEC Holdings, Inc. (NASDAQ: TTEC), a leading global Customer Experience as a Service (CXaaS) partner for many of the world's most iconic and disruptive brands, today announced financial results for the second quarter and six months ended June 30, 2020.
"Our record financial results for the second quarter reflect heightened demand for digitized and virtualized CX solutions," commented Ken Tuchman, chairman and chief executive officer of TTEC. "Our ability to rapidly enable clients to substitute person-to-person engagement with an authentic digitized and virtualized customer experience has never been more essential. Our business performance underscores the agility and market differentiation in our technology rich customer experience-as-a-service (CXaaS) offerings."
Tuchman continued, "TTEC provides everything it takes for large commercial enterprise and government organizations to operate virtually, automate processes, and successfully enable digital customer experience. We expect our topline momentum to continue to benefit from current market trends including a growing demand for digitization and virtualization, an increasingly compressed time to digital adoption and a shift toward ubiquitous engagement for businesses and consumers."
"I'm also thrilled about TTEC Digital's strategic acquisition of VoiceFoundry, a leading global Amazon Connect partner. VoiceFoundry provides additional speed, agility, and optionality to our Humanify(TM) Cloud platform, expanding our CX Ecosystem with Amazon's cloud-first, best-of-breed solutions that will accelerate digital CX transformation for our clients," concluded Tuchman.
SECOND QUARTER 2020 FINANCIAL HIGHLIGHTS
Revenue
-- Second quarter 2020 GAAP revenue increased 15.4 percent to $453.1
million compared to $392.5 million in the prior year period, or 16.3
percent growth in constant currencies.
-- Foreign exchange had a $3.5 million negative impact on revenue in the
second quarter 2020.
Income from Operations
-- Second quarter 2020 GAAP income from operations was $49.0 million, or
10.8 percent of revenue, compared to $22.9 million, or 5.8 percent of
revenue in the prior year period.
-- Second quarter 2020 Non-GAAP income from operations, excluding $0.8
million in restructuring charges, was $49.8 million or 11.0 percent of
revenue versus 6.5 percent for the prior year period.
-- Foreign exchange had a $0.5 million positive impact on income from
operations in the second quarter 2020.
Adjusted EBITDA
-- Second quarter 2020 Non-GAAP Adjusted EBITDA was $71.0 million, or 15.7
percent of revenue, compared to $44.8 million, or 11.4 percent of
revenue in the prior year period.
Earnings Per Share
-- Second quarter 2020 GAAP fully diluted earnings per share was $0.67
compared to $0.25 for the same period last year.
-- Second quarter 2020 Non-GAAP fully diluted earnings per share was $0.75
compared to $0.34 in the prior year period.
Bookings
-- During the second quarter 2020, TTEC signed an estimated $214 million in
annualized contract value. Bookings were diversified across segments,
verticals, and geographies and included programs related to pandemic
relief and support efforts.
STRONG CASH FLOW AND BALANCE SHEET FUND INVESTMENTS AND DIVIDENDS
-- Cash flow from operations in the second quarter 2020 was $43.1 million
compared to $41.3 million for the second quarter 2019.
-- Capital expenditures in the second quarter 2020 were $15.1 million
compared to $15.2 million for the second quarter 2019.
-- As of June 30, 2020, TTEC had cash and cash equivalents of $482.3
million and debt of $714.0 million, resulting in a net debt position of
$231.7 million. This compares to a net debt position of $172.8 million
for the same period 2019. The increased cash and debt at June 30, 2020
was primarily related to precautionary measures, taken late in the first
quarter in response to potential COVID-19 risks, to proactively increase
liquidity by drawing down a portion of the revolving credit facility.
-- As of June 30, 2020, TTEC had approximately $195.0 million of additional
borrowing capacity available under its revolving credit facility
compared to $510.0 million for the same period 2019.
-- Paid a 34 cent per share, or $15.8 million, semi-annual dividend on
April 16, 2020, an approximate 6.3 percent increase over the dividend
paid in October 2019 and a 13.3 percent increase over the April 2019
dividend.
SEGMENT REPORTING & COMMENTARY
TTEC reports financial results for the following two segments: TTEC Digital (Digital) and TTEC Engage (Engage). Financial highlights for the segments are provided below.
TTEC Digital - Design, build and operate tech-enabled, insight-driven CX solutions
-- Second quarter 2020 GAAP revenue for TTEC Digital was $77.1 million,
compared to $78.5 million for the year ago period. Revenue in the cloud
and related systems integration collectively grew 31.8 percent over the
year ago period. The slight decline in total revenue is attributable to
the exit of certain non-core consulting practices and reduction in
product and managed service volumes as clients increasingly pivot to
Digital's cloud-based offerings.
-- Income from operations was $14.4 million or 18.6 percent of revenue
compared to operating income of $7.7 million or 9.8 percent of revenue
for the prior year period.
-- Second quarter 2020 Non-GAAP income from operations was $14.5 million,
or 18.8 percent of revenue compared to operating income of $9.7 million
or 12.4 percent of revenue in the prior year period.
-- Second quarter 2020 Non-GAAP Adjusted EBITDA was $18.7 million, or 24.2
percent of revenue, compared to $13.9 million, or 17.7 percent of
revenue in the prior year period.
TTEC Engage - Digitally-enabled customer care, acquisition, and fraud prevention services
-- Second quarter 2020 GAAP revenue for TTEC Engage increased 19.7 percent
to $375.9 million from $314.0 million for the year ago period. Revenue
growth was 20.8 percent in constant currencies. Income from operations
was $34.6 million or 9.2 percent of revenue compared to operating income
of $15.2 million or 4.8 percent of revenue for the prior year period.
-- Second quarter 2020 Non-GAAP income from operations was $35.3 million,
or 9.4 percent of revenue compared to operating income of $15.7 million
or 5.0 percent of revenue in the prior year period.
-- Second quarter 2020 Non-GAAP Adjusted EBITDA was $52.3 million, or 13.9
percent of revenue, compared to $30.9 million, or 9.8 percent of revenue
in the prior year period.
-- Foreign exchange had a $3.3 million negative impact on revenue and $0.5
million positive impact on income from operations in the second quarter
2020.
BUSINESS OUTLOOK
"We remain intensely focused on the health and safety of our people and partners, our clients' success as they navigate the macro challenges inherent in COVID-19, and managing our near and long-term priorities to deliver sustainable long-term profitable growth," commented Regina Paolillo, chief financial and administrative officer of TTEC. "We could not be more satisfied with our first half results, with the strength of our client relationships, and the relevancy of CX cloud, omnichannel, intelligent automation and virtual and digital technologies. With a strong revenue backlog, new business pipeline, and solid balance sheet in hand for 2020, we are restoring and increasing our original outlook and can now turn our attention to 2021 and beyond, including both organic and inorganic investments that will enable continued high single-digit topline and double-digit profit growth."
Our reinstated full-year 2020 outlook, which includes a modest contribution from the VoiceFoundry acquisition and excludes restructuring and impairment charges, is as follows:
Revenue between $1.766 and $1.784 billion, an increase of 7.4 and 8.5 percent over the prior year.
Operating Income margins between 9.1 and 9.2 percent.
-- Margins of approximately 13.8 percent for TTEC Digital and 8.2 percent
for TTEC Engage
Adjusted EBITDA margins between 14.2 and 14.3 percent.
-- Margins of approximately 19.7 percent for TTEC Digital and 13.2 percent
for TTEC Engage
Earnings Per Share between $2.37 and $2.43.
Capital expenditures are estimated to be between 3.1 and 3.3 percent of revenue, of which approximately 70 percent is growth oriented.
Effective tax rate for the full year is estimated between 23 and 27 percent.
Diluted share count for the full year is estimated between 46.9 and 47.1 million.
We estimate the second half total company 2020 mix as follows:
-- Revenue: 51 percent third quarter, 49 percent fourth quarter
-- Operating Income: 52 percent third quarter, 48 percent fourth quarter
-- Adjusted EBITDA: 51 percent third quarter, 49 percent fourth quarter
-- Earnings Per Share: 53 percent third quarter, 47 percent fourth quarter
We estimate the Digital - Engage segment 2020 mix as follows:
-- Revenue: 17 percent Digital, 83 percent Engage, of which 24 percent of
Digital and 25 percent of Engage in the fourth quarter, respectively.
-- Operating Income: 26 percent Digital, 74 percent Engage, of which 19
percent of Digital and 21 percent of Engage in the fourth quarter,
respectively.
-- Adjusted EBITDA: 23 percent Digital, 77 percent Engage, of which 21
percent of Digital and 24 percent of Engage in the fourth quarter,
respectively.
NON-GAAP FINANCIAL MEASURES
This press release contains a discussion of certain Non-GAAP financial measures that TTEC includes to allow investors and analysts to measure, analyze and compare its financial condition and results of operations in a meaningful and consistent manner. A reconciliation of these Non-GAAP financial measures can be found in the tables accompanying this press release.
-- GAAP metrics are presented in accordance with Generally Accepted
Accounting Principles.
-- Non-GAAP - As reflected in the attached reconciliation table, the
definition of Non-GAAP may exclude from operating income, EBITDA, net
income and earnings per share restructuring and impairment charges,
among other items.
About TTEC
TTEC Holdings, Inc. (NASDAQ: TTEC) is a leading digital customer experience (CX) technology and services company focused on the design, implementation, and delivery of transformative solutions for many of the world's most iconic and disruptive brands and government agencies. The Company delivers outcome-based customer engagement solutions through TTEC Digital, its digital consultancy that designs and builds human centric, tech-enabled, insight-driven customer experience solutions for clients and TTEC Engage, its delivery center of excellence, that operates customer acquisition, care, fraud prevention and detection, and content moderation services. Founded in 1982, the Company's 51,700 employees operate on six continents across the globe and live by a set of customer-focused values that guide relationships with clients, their customers, and each other. To learn more about how TTEC is bringing humanity to the customer experience, visit www.ttec.com
FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of TTEC Holding, Inc.'s management and are subject to significant risks and uncertainties. Specifically, we would like for you to focus on risks related to COVID-19 global pandemic and the various government mandates designed to contain the pandemic, and how these risks may impact our business in the short and longer term; the risks related to our strategy execution; our ability to innovate and introduce technologies that are sufficiently disruptive to allow us to maintain and grow our market share; cybersecurity; consolidation activities undertaken by our clients; geographic concentration of our brick and mortar delivery platform and our global footprint; changes in laws that impact our business and our ability to comply with those and other laws governing our operations; the reliability of our information technology infrastructure and our ability to consistently deliver uninterrupted service to our clients; the need to forecast demand for services accurately and the impact of such forecasts on our capacity utilization; our ability to attract and retain qualified and skilled personnel at a price point that we can afford and our clients are willing to pay; our M&A activity, including our ability to identify, acquire and properly integrate acquired businesses in accordance with our strategy; and our equity structure including our controlling shareholder risk, the limited market float of our stock, and the potential volatility of our stock price resulting therefrom. Risk Factors that could cause TTEC's results to differ materially from those described in the forward-looking statements can be found in TTEC's Quarterly Report on Form 10-Q for the quarter ended on June 30, 2020 and Annual Report on Form 10-K for the year ended December 31, 2019, which has been filed with the U.S. Securities and Exchange Commission (the "SEC") and is available on TTEC's website www.ttec.com, and on the SEC's public website at www.sec.gov. TTEC Holdings, Inc. does not undertake to update any forward-looking statements.
Investor Relations Contact
Public Relations Contact
Address
Contact
Paul Miller
Nick Cerise
9197 South Peoria Street
ttec.com
+1.303.397.8641
+1.303.397.8331
Englewood, CO 80112
+1.800.835.3832
TTEC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
2020 2019 2020 2019
Revenue $453,081 $392,515 $885,294 $786,871
Operating Expenses:
Cost of services 337,306 299,237 658,863 592,571
Selling, general and administrative 47,360 50,864 97,194 100,584
Depreciation and amortization 18,660 17,050 37,532 33,793
Restructuring and integration charges, net 793 428 1,331 1,389
Impairment losses 2,063 696 3,569
Total operating expenses 404,119 369,642 795,616 731,906
---
Income From Operations 48,962 22,873 89,678 54,965
Other income (expense), net (4,374) (1,914) (10,206) (6,064)
Income Before Income Taxes 44,588 20,959 79,472 48,901
Provision for income taxes (11,039) (7,345) (21,238) (14,811)
Net Income 33,549 13,614 58,234 34,090
Net income attributable to noncontrolling interest (2,224) (1,816) (5,375) (3,290)
Net Income Attributable to TTEC Stockholders $31,325 $11,798 $52,859 $30,800
Net Income Per Share
Basic $0.72 $0.29 $1.25 $0.74
Diluted $0.72 $0.29 $1.24 $0.73
Net Income Per Share Attributable to TTEC Stockholders
Basic $0.67 $0.25 $1.14 $0.67
Diluted $0.67 $0.25 $1.13 $0.66
Income From Operations Margin 10.8% 5.8% 10.1% 7.0%
Net Income Margin 7.4% 3.5% 6.6% 4.3%
Net Income Attributable to TTEC Stockholders Margin 6.9% 3.0% 6.0% 3.9%
Effective Tax Rate 24.8% 35.0% 26.7% 30.3%
Weighted Average Shares Outstanding
Basic 46,619 46,318 46,559 46,261
Diluted 46,861 46,684 46,838 46,636
TTEC HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(In thousands)
(unaudited)
Three months ended Six months ended
June 30, June 30,
2020 2019 2020 2019
Revenue:
TTEC Digital $77,143 $78,519 $154,699 $144,372
TTEC Engage 375,938 313,996 730,595 642,499
Total $453,081 $392,515 $885,294 $786,871
Income From Operations:
TTEC Digital $14,376 $7,709 $24,634 $15,468
TTEC Engage 34,586 15,164 65,044 39,497
Total $48,962 $22,873 $89,678 $54,965
TTEC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
June 30,
December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $482,255 $82,407
Accounts receivable, net 353,289 331,096
Other current assets 123,308 136,322
Total current assets 958,852 549,825
Property and equipment, net 177,099 176,633
Other assets 631,038 650,330
Total assets $1,766,989 $1,376,788
LIABILITIES AND EQUITY
Total current liabilities $344,790 $363,289
Other long-term liabilities 920,246 532,846
Redeemable noncontrolling interest 54,026 48,923
Total equity 447,927 431,730
Total liabilities and equity $1,766,989 $1,376,788
TTEC HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
2020 2019 2020 2019
Revenue $453,081 $392,515 $885,294 $786,871
Reconciliation of Adjusted EBITDA:
Net Income $33,549 $13,614 $58,234 $34,090
Interest income (491) (429) (855) (769)
Interest expense 3,104 4,208 12,696 9,496
Provision for income taxes 11,039 7,345 21,238 14,811
Depreciation and amortization 18,660 17,050 37,532 33,793
Asset impairment, restructuring and integration charges 793 2,491 2,027 4,958
Gain on sale of business units (142) (442) (388) (750)
Changes in acquisition contingent consideration (1,084) (2,424) (4,349) (2,424)
Loss on dissolution of subsidiary 2,467 2,467
Equity-based compensation expenses 3,057 3,366 5,976 6,534
Adjusted EBITDA $70,952 $44,779 $134,578 $99,739
Reconciliation of Free Cash Flow:
Cash Flow From Operating Activities:
Net income $33,549 $13,614 $58,234 $34,090
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,660 17,050 37,532 33,793
Other (9,096) 10,639 9,512 53,383
Net cash provided by operating activities 43,113 41,303 105,278 121,266
Less - Total Cash Capital Expenditures 15,102 15,228 31,915 28,428
Free Cash Flow $28,011 $26,075 $73,363 $92,838
Reconciliation of Non-GAAP Income from Operations:
Income from Operations $48,962 $22,873 $89,678 $54,965
Restructuring charges, net 793 428 1,331 1,389
Impairment losses - 2,063 696 3,569
Non-GAAP Income from Operations $49,755 $25,364 $91,705 $59,923
Non-GAAP Income from Operations Margin 11.0% 6.5% 10.4% 7.6%
Reconciliation of Non-GAAP EPS:
Net Income $33,549 $13,614 $58,234 $34,090
Add: Asset restructuring and impairment charges 793 2,491 2,027 4,958
Add: Interest charge related to future purchase of remaining (204) 469 6,273 1,776
30% for Motif acquisition
Less: Changes in acquisition contingent consideration (1,084) (2,424) (4,349) (2,424)
Less: Gain on sale of business units (142) (442) (388) (750)
Add: Loss on dissolution of subsidiary 2,467 2,467
Add: Changes in valuation allowance, return to provision (192) 2,134 941 1,834
adjustments and other, and tax effects of items separately
disclosed above
Non-GAAP Net Income $35,187 $15,842 $65,205 $39,484
Diluted shares outstanding 46,861 46,684 46,838 46,636
Non-GAAP EPS $0.75 $0.34 $1.39 $0.85
Reconciliation of Adjusted EBITDA by Segment :
TTEC Engage TTEC Digital
TTEC Engage TTEC Digital
---
Q2 20
Q2 19
Q2 20
Q2 19
YTD 20
YTD 19
YTD 20
YTD 19
Earnings before Income Taxes $30,190 $13,166 $14,398 $7,793 $54,772 $33,299 $24,700 $15,605
Interest income / expense, net 2,635 3,769 (22) 9 11,909 8,719 (67) 6
Depreciation and amortization 15,382 13,814 3,278 3,235 30,966 28,249 6,566 5,543
Asset impairment, restructuring and integration charges 679 489 114 2,003 1,010 2,608 1,016 2,350
Gain on sale of business units (142) (442) (388) (750)
Changes in acquisition contingent consideration (1,084) (2,424) (4,349) (2,424)
Loss on dissolution of subsidiary 2,467 2,467 -
Equity-based compensation expenses 2,128 2,515 929 852 4,198 4,872 1,778 1,663
---
Adjusted EBITDA $52,255 $30,887 $18,697 $13,892 $100,585 $74,573 $33,993 $25,167
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SOURCE TTEC Holdings, Inc.
