TTEC Holdings, Inc. (NASDAQ: TTEC) is a leading global customer experience
technology and services company focused on the design, implementation and
delivery of transformative customer experience for many of the world’s most
iconic and disruptive brands.
TTEC delivers outcome-based customer engagement solutions through TTEC Digital
(Customer Strategy and Customer Technology Services business segments),
its digital
consultancy that designs and builds human centric, tech-enabled, insight-driven
customer
experience solutions and TTEC Engage (Customer Growth and Customer Management
Services business segments), its delivery center of excellence, that operates customer
acquisition, care, fraud prevention and detection, and content moderation services.
Founded in 1982, the company’s 52,400 employees operate on six continents
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.
9197 South Peoria Street
Englewood, CO 80112-5833
+1 303 397-8100 or 1-800 835-3832
ttec.com
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Financial Highlights
($ in millions, except per share data)
Revenue
Operating Income
Net Income Per Diluted Share
$1,509.2
$1,477.4
$1,275.3
$100.5
$92.1
$52.8
$0.71
Corporate Information
Directors
Kenneth D. Tuchman
Founder, Chairman of the Board
Steven J. Anenen
Director, DealerSocket; former Chief Executive Officer, CDK Global, Inc.; former President of
ADP Dealer Services; former Senior Vice President of North America Systems
$0.77
President and CEO, OneOncology; former Executive Vice President, Health Plans, CVS Health;
former Director, MedExpress; former Executive Chairman, Emdeon; former Chief Executive
Director, HaulHound.com; former Chief Executive Officer, Aha! Software; former Chief
Executive Officer, Odyssey Group, SA
2016
2017
2018
2016
2017
2018
2016
$0.16**
2017
2018
Director, Wedgewood Enterprises Corporation; former International Chairman, Accenture,
Inc.; former Director, Merkle, Inc.; former Chairman, Aricent Group; former Chairman, Avanade
$1,242.1*
*Non-GAAP
**Includes one-time impact from enactment of the U.S. Tax Cuts and Jobs Act
$1,501.4*
$1,457.3*
$94.9*
$122.5*
$106.1*
$1.40*
$1.88*
$1.49*
Revenue
Adjusted EBITDA
Operating income
Operating margin
EBIT
Net income attributable to TTEC stockholders
Average diluted shares outstanding
Net income per diluted share
Cash and cash equivalents
Debt
Capital expenditures
2016
$ 1,275.3
$ 172.4
$ 52.8
4.1%
$ 57.0
$ 33.7
47.7
$ 0.71
$ 55.3
$ 229.6
$ 50.8
2017
$ 1,477.4
$ 200.4
$ 100.5
6.8%
$ 99.8
$ 7.3
46.4
$ 0.16*
$ 74.4
$ 361.3
$ 52.0
2018
$ 1,509.2
$ 188.7
$ 92.1
6.1%
$ 80.4
$ 35.8
46.4
$ 0.77
$ 78.2
$ 304.5
$ 43.5
*Includes the one-time impact from enactment of the U.S. Tax Cuts and Jobs Act
2018 Revenue by Geography
2018 Revenue by Segment
5%
7%
North America
Asia Pacific/India
Customer Management Services
Customer Technology Services
11%
5%
9%
Latin America
27%
61%
Customer Growth Services
75%
EMEA
Customer Strategy Services
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Chairman, Bank of Kigali; Director, FAT Brands Inc.; former Chief Executive Officer of
Kazkommertsbank; former Director, FTI Consulting; former Chairman, Meridian Capital HK;
former Vice Chairman, Barclays Capital
Website
ttec.com
Director, DSW, Inc.; Director, Net 1 UEPS Technologies, Inc; former Deputy to the First Vice
The Annual Meeting of Stockholders will be
President, Chief Operating Officer Executive Office at the Federal Reserve Bank of New York;
former Partner, DecisionGPS LLC; former Global Client Services Partner, Ernst & Young
held Wednesday, May 22, 2019, beginning at
2019 Annual Meeting of Stockholders
Audit Committee
Gregory A. Conley, Chairman
Robert N. Frerichs
Ekta Singh-Bushell
Compensation Committee
Tracy L. Bahl, Chairman
Gregory A. Conley
Robert N. Frerichs
Nominating and Governance
Committee
Robert N. Frerichs, Chairman
Steven J. Anenen
Tracy L. Bahl
Ekta Singh-Bushell
Executive Committee
Kenneth D. Tuchman, Chairman
Tracy L. Bahl
Steven J. Anenen
NASDAQ Global Select Market
Stock Listing
Symbol: TTEC
10:00 a.m MDT at:
TTEC Holdings, Inc.
Global Headquarters
9197 South Peoria Street
Englewood, CO 80112-5833
Transfer Agent and Registrar
Broadridge Corporate Issuer Solutions, Inc.
1717 Arch Street, Suite 1300
Philadelphia, PA 19103
Telephone: 855.206.5002
Facsimile: 215.553.5402
Email: shareholder@broadridge.com
Investor Information
Investor information, including TTEC’s
Annual Report, press releases and filings
with the U.S. Securities and Exchange
Commission, may be obtained from
TTEC’s website, ttec.com or by contacting
TTEC Investor Relations at:
1.800.835.3832
investor.relations@ttec.com
Independent Accountants
PricewaterhouseCoopers LLP,
Denver, Colorado
Tracy L. Bahl
Officer, Uniprise
Gregory A. Conley
Robert N. Frerichs
Marc L. Holtzman
Ekta Singh-Bushell
Executive Officers
Kenneth D. Tuchman
Chief Executive Officer
Regina M. Paolillo
Martin F. DeGhetto
Executive Vice President,
David M. Anderson
Executive Vice President,
Steven C. Pollema
Executive Vice President,
Executive Vice President; Chief Administrative and Financial Officer
TTEC Engage (Customer Growth and Customer Management Services business segments)
Executive Vice President, Chief Revenue Officer
Judi A. Hand
Tony Y. Tsai
Executive Vice President, Chief Information and Innovation Officer
TTEC Digital (Customer Strategy and Customer Technology Services business segments)
TTEC Digital (Customer Strategy and Customer Technology Services business segments)
Margaret B. McLean
Senior Vice President, General Counsel and Chief Risk Officer
Michael Wellman
Senior Vice President, Chief People Officer, Human Resources
Dear Shareholders:
TTEC® achieved many significant milestones in 2018. Most noteworthy, we reported unprecedented
sales bookings of six hundred million dollars and record revenue of one and a half billion dollars. These
milestones demonstrate our differentiation as a customer experience technology and services partner,
focused on the design, implementation and delivery of solutions that transform the engagement
between our clients and their customers.
The increase in our new business signings is the result of a number of encouraging developments:
- an uptick in the number of client relationships in which we are providing end-to-end digital
transformation as our clients increasingly realize the importance that personalized and frictionless
customer experiences have in building brand loyalty and value,
- the acceleration of our market share in cloud-based omnichannel technology,
- an increase in the average deal size driven by mega deals,
Kenneth D. Tuchman
Founder, Chairman and
Chief Executive Officer
Our Customer Strategy
Services, Customer
Technology Services, and
Customer Growth Services
segments achieved new
levels of profit in 2018.
- continued growth in our existing client base as we take on increased volumes and new lines of
business, and
- geographic expansion into Europe and an intense focus on the disruptive, hypergrowth market.
Bookings growth in 2018 was further advanced by significant demand for our Customer Technology
Services’ SaaS-based cloud delivery and associated systems integration services. We continue to
increase the number of our subscription-based cloud contact center licenses supporting many of the
world’s most noteworthy enterprises and government agencies.
Our Customer Strategy Services, Customer Technology Services, and Customer Growth Services segments
achieved new levels of profit in 2018. While the profitability of our Customer Management Services
segment declined in 2018, we estimate profit to improve as we convert 2018 bookings to revenue.
Looking at 2019, we anticipate meaningful organic profitable revenue growth across our segments.
Our TTEC and Humanify®
assets, including strategic
consulting, cloud-based
omnichannel technology
and operational delivery,
have enabled us to uniquely
differentiate ourselves in
a market where customer
experience has never been
more important.
Investments in innovation and transformation
We continue to experience a growing demand for digitizing and automating the customer experience.
This is a market trend for which we have been preparing for more than a decade. In the last several
years, our investments have primarily been focused on positioning us to excel in today’s era of
digitization. Our investment in innovation is paying off with an increasing number of clients now
benefitting from our end-to-end digital transformation offerings.
Our TTEC and Humanify® assets, including strategic consulting, cloud-based omnichannel technology
and operational delivery, have enabled us to uniquely differentiate ourselves in a market where
customer experience has never been more important. The solution portfolio is strategically positioned
with digital capabilities, including omnichannel, AI, machine learning, customer experience analytics
and knowledge management, dedicated to serving our Global 1000 customer base.
We have established longstanding, trusted advisor relationships with a diverse portfolio of clients,
including iconic blue-chip brands. Many have partnered with us to become customer experience
leaders renowned for their market share and customer loyalty and are recognized by noteworthy
third-party organizations including JD Powers and the Forrester CX index. In addition, we are
attracting hypergrowth disruptors who share our obsession for customer experience excellence.
We have an ever-expanding global footprint. Our efforts to expand our selling base into Europe is yielding
increased bookings and top line across our segments. The diversity of our delivery footprint including
As a strategic partner to our clients we blend the right mix of innovative technology, award-winning
consulting services and operational excellence, to help them:
- Maximize customer acquisition, growth and retention
- Reduce customer friction and improve personalization
- Simplify, streamline and automate operations
- Detect and prevent fraud to ensure safe and reliable customer relationships
- Achieve leading Net Promoter Scores® and customer satisfaction ratings
Opportunities for growth in 2019 and beyond
Our opportunity for sustainable top line organic growth is not only bolstered by our reputation as a
customer experience and engagement innovator, but also the transformation we have completed,
the client outcomes we have accomplished, and favorable market trends. These trends include:
Proliferating customer touch points
Two forces are combining to accelerate the volume of interactions between brands and customers.
Customer channels are proliferating and the number of brands consumers do business with is
multiplying. In a digital world, interactions continue to expand to support the growing number of
connections necessary to execute the digital value chain.
It is our proven expertise
in anticipating and
proactively responding
to customer experience
trends, opportunities and
challenges that enable us
to work with the
world’s
most customer obsessed
brands.
Our platforms are built to support all modes of engagement: human-to-human, AI-to-human, human
augmented by AI and many other combinations across channels including social, in-app and web-based
chat, SMS, email, voice and video. We provide the omnichannel communication, analytics, knowledge
base and automation platforms, as well as the brand ambassadors and operational processes, to enable
and enhance every interaction - digital or otherwise.
Business model and market transformation – hypergrowth disruptors
Emerging business models and new markets, like ride-sharing, home-sharing, meal delivery, and
streaming services, are redefining customer expectations and challenging traditional norms. We serve
a growing number of these category disruptors, while also partnering with more established brands to
transform their technology, reinvent their knowledge platforms, modernize their operating processes,
recruit, train and manage their customer engagement talent, and leverage data rich insights, to more
effectively compete with companies born digital.
Hyper-personalization and digital curation are quickly enabling direct-to-consumer at scale across
industries. As more brands look to successfully expand their channels of operation, we are well
positioned to provide the strategy, technology and services necessary to advance our clients’
direct-to-consumer platforms.
Customers own their experience
Customer optionality is at an all-time high. The more choices a customer has, the more journeys a
brand must design, implement and maintain to ensure a consistent, frictionless and satisfying
experience. We are increasingly working with our clients to create and orchestrate this proliferation
of alternatives and preferences.
It is our proven expertise in anticipating and proactively responding to customer experience trends,
opportunities and challenges that enable us to work with the world’s' most customer obsessed brands.
’
Positioned and ready
This year, we look forward to growing our revenue, improving our profitability, increasing our digital
business mix, and expanding our market share in both Europe and the disruptive, hypergrowth
category. In addition to achieving our financial targets, we remain focused on growing our portfolio of
technology-rich CX solutions and expanding our third-party reseller channel partnerships. Through
these efforts, we aim to maximize shareholder value through continuous marketplace differentiation,
increased market share, strategic acquisitions, profitable growth, and capital distributions.
We have closed out 2018 on a high note. Our reputation, history of innovation, customer experience
assets, and market trends should allow us continued momentum in 2019 and beyond. On behalf of
our executive team, Board of Directors and global employee base, we thank you for your role in TTEC’s
evolution and appreciate your continued support.
Kenneth D. Tuchman
Founder, Chairman and Chief Executive Officer
Reconciliation of Non-GAAP Revenue (in millions)
Revenue
Writeoff of contract acquisition costs
Non-GAAP Revenue
2016
$ 1,275.3
$ (33.1)
-
$ 1,242.1
Reconciliation of Non-GAAP Income from Operations and Operating Margin (in millions)
2016
GAAP Income from Operations
Restructuring and integration charges, net
Impairment losses
Allowance for doubtful accounts receivable from customer in bankruptcy
Writeoff of contract acquisition costs
Writeoff of value added tax due to change in foreign tax law
Non-GAAP Operating Income
Non-GAAP Operating Margin
$ 52.8
$ 4.4
$ 32.0
$ 5.7
-
-
-
$ 94.9
7.6%
2017
$ 1,477.4
$ (20.1)
-
$ 1,457.3
2017
$ 100.5
$ 14.7
$ 5.3
$ 2.0
-
-
-
$ 122.5
8.4%
2018
$ 1,509.2
$ (9.2)
$ 1.4
$ 1,501.4
2018
$ 92.1
$ 6.1
$ 1.5
$ 1.4
$ 2.7
$ 1.4
$ 1.0
$ 106.1
7.1%
Reconciliation of Non-GAAP Net Income and Net Income per Diluted Share (in millions except per share data)
Net Income attributable to noncontrolling interest
Asset impairment and restructuring charges, net of related taxes
Estimated loss on assets held for sale, net of related taxes
Changes in acquisition contingent consideration, transition services agreement, net of related taxes
Interest charge related to future purchase of remaining 30% for Motif acquisition
Impairment of equity investment, net of related taxes
Gain on dissolution of foreign subsidiary, net of related taxes
Gain on sale of business unit
Gain on bargain purchase of acquisition
Loss on asset held for sale reclassified to assets held and used
Allowance for doubtful accounts receivable from customer in bankruptcy, net of related taxes
Writeoff of contract acquisition costs, net of related taxes
Writeoff of value added tax due to change in foreign tax law, net of related taxes
U.S. 2017 Tax Act
Changes in valuation allowance, returns on provision adjustments, and other
Non-GAAP Net Income
Average diluted shares outstanding
Non-GAAP Net Income per Diluted Share
Reconciliation of Free Cash Flow (in millions)
2016
2017
2018
$ 33.7
$ 3.8
$ 26.2
$ 4.2
$ (4.6)
-
$ 7.3
$ 3.6
$ 12.3
$ 1.5
$ 3.2
$ 1.2
-
-
-
$ (1.9)
-
$ (0.3)
-
-
-
-
-
-
-
-
-
-
-
$ 62.4
$ 3.6
$ 66.9
47.7
$ 1.40
$ (2.2)
$ 87.1
46.4
$ 1.88
$ 35.8
$ 3.9
$ 5.5
$ -
$ 9.9
$ 11.4
-
$ (1.4)
$ (0.5)
$ 1.6
$ 2.0
$ 1.0
$ 0.7
-
$ (0.4)
$ 69.3
46.4
$ 1.49
2016
2017
2018
Purchases of property, plant and equipment
Net cash provided by operating activities
$ 168.3
$ 43.5
$ 124.9
Free Cash Flow
Cautionary Note About Forward-Looking Statements This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995, relating to our operations, expected financial position,
results of operation, and other business matters that are based on our current expectations, assumptions, and projections with respect to the future, and are not a guarantee
of performance. In this report, when we use words such as “may,” “believe,” “plan,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “project,” “would,” “could,” “target,” or similar
expressions, or when we discuss our strategy, plans, goals initiatives, or objectives, we are making forward-looking statements.
We caution you not to rely unduly on any forward-looking statements. Actual results may differ materially from what is expressed in the forward-looking statements, and you
should review and consider carefully the risks, uncertainties and other factors that affect our business and may cause such differences as outlined but are not limited to factors
discussed in the section entitled “Risk Factors” of TTEC Annual Report on Form 10-K. Our forward looking statements speak only as of the date that this report is filed with the
United States Securities and Exchange Commission and we undertake no obligation to update them, except as may be required by applicable laws.
$ 111.8
$ 50.8
$ 61.0
$ 113.2
$ 52.0
$ 61.2
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(cid:95)(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
or
(cid:134) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-11919
TTEC Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
84-1291044
(I.R.S. Employer
Identification No.)
9197 South Peoria Street
Englewood, Colorado 80112
(Address of principal executive offices)
(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)telephone number, including area code:
(303) 397-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Name of each exchange on which registered
NASDAQ Global Select Market
Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities registered pursuant to Section 12(g) of the Act: None.
Yes (cid:134) No (cid:95)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes (cid:134) No (cid:95)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes (cid:95) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes(cid:95) No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained,
(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:72)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:78)(cid:81)(cid:82)(cid:90)(cid:79)(cid:72)(cid:71)(cid:74)(cid:72)(cid:15)(cid:3)(cid:76)(cid:81)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87) III of this Form 10-K or any amendment to
this Form 10-K. (cid:134)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company(cid:17)(cid:3)(cid:54)(cid:72)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:179)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:85)(cid:15)(cid:180)(cid:3)(cid:179)(cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:85),(cid:180)(cid:3)(cid:179)smaller reporting company(cid:180) (cid:68)(cid:81)(cid:71)(cid:3)(cid:179)emerging growth company(cid:180) in
Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:134)
Accelerated filer (cid:59)
Non-accelerated filer (cid:134)
Smaller reporting company (cid:134)
Emerging growth company (cid:134)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:134) No (cid:95)
As of June 30, 2018(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:68)(cid:86)(cid:87)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:71)(cid:68)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:72)(cid:70)(cid:82)(cid:81)(cid:71)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)46,033,516 (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)
(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:82)(cid:88)(cid:87)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:68)(cid:74)(cid:74)(cid:85)(cid:72)(cid:74)(cid:68)(cid:87)(cid:72)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:89)(cid:82)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:81)(cid:82)(cid:81)-voting common stock that was held by non-affiliates on such date
was $485,565,838 (cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:82)(cid:81)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:49)(cid:36)(cid:54)(cid:39)(cid:36)(cid:52)(cid:3)(cid:42)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:54)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:17)
As of February 28, 2019, there were 46,209,122 (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)mmon stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required for Part (cid:44)(cid:44)(cid:44)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:21)(cid:19)(cid:20)9 annual meeting of
stockholders.
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
DECEMBER 31, 2018 FORM 10-K
TABLE OF CONTENTS
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
AVAILABILITY OF INFORMATION
PART I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II.
Item 5. (cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)Stockholder Matters and Issuer Purchases
of Equity Securities
Item 6.
Selected Financial Data
Item 7. (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountants Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
SIGNATURES
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS OF TTEC HOLDINGS, INC.
i
Page No.
ii
ii
1
7
17
17
18
18
19
22
24
43
45
45
45
46
46
47
47
47
47
47
50
51
F-1
Table of Contents
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-(cid:46)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:179)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)-(cid:79)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)Section 27A of
the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities
Litigation Reform Act of 1995, relating to our operations, expected financial position, results of operation, and
other business matters that are based on our current expectations, assumptions, and projections with respect
(cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:81)(cid:82)(cid:87)(cid:3) (cid:68)(cid:3) (cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3) (cid:44)(cid:81)(cid:3) (cid:87)(cid:75)(cid:76)(cid:86)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:15)(cid:3) (cid:90)(cid:75)(cid:72)(cid:81)(cid:3) (cid:90)(cid:72)(cid:3) (cid:88)(cid:86)(cid:72)(cid:3) (cid:90)(cid:82)(cid:85)(cid:71)(cid:86)(cid:3) (cid:86)(cid:88)(cid:70)(cid:75)(cid:3) (cid:68)(cid:86)(cid:3) (cid:179)(cid:80)(cid:68)(cid:92)(cid:15)(cid:180)(cid:3)
(cid:179)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:83)(cid:79)(cid:68)(cid:81)(cid:15)(cid:180)(cid:3)(cid:179)(cid:90)(cid:76)(cid:79)(cid:79)(cid:15)(cid:180)(cid:3)(cid:179)(cid:68)(cid:81)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:15)(cid:180)(cid:3)(cid:179)(cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:71)(cid:15)(cid:180)(cid:3)(cid:179)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:15)(cid:180)(cid:3)(cid:179)(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:15)(cid:180)(cid:3)(cid:179)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:15)(cid:180)(cid:3)(cid:179)(cid:87)(cid:68)(cid:85)(cid:74)(cid:72)(cid:87)(cid:15)(cid:180)(cid:3)(cid:82)(cid:85)(cid:3)(cid:86)(cid:76)(cid:80)(cid:76)(cid:79)(cid:68)(cid:85)(cid:3)
expressions, or when we discuss our strategy, plans, goals, initiatives, or objectives, we are making forward-
looking statements.
We caution you not to rely unduly on any forward-looking statements. Actual results may differ materially from
what is expressed in the forward-looking statements, and you should review and consider carefully the risks,
uncertainties and other factors that affect our business and may cause such differences as outlined but are not
(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:79)(cid:72)(cid:71)(cid:3)(cid:179)(cid:53)(cid:76)(cid:86)(cid:78)(cid:3)(cid:41)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:180)(cid:17) Specifically, we would like for
you to focus on 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 risks and risks
inherent to our equity structure. Our forward-looking statements speak only as of the date that this report is filed
with the United States Securities and (cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:179)(cid:54)(cid:40)(cid:38)(cid:180)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:72)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:87)(cid:68)(cid:78)(cid:72)(cid:3)(cid:81)(cid:82)(cid:3)(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:88)(cid:83)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)
them, except as may be required by applicable laws.
AVAILABILITY OF INFORMATION
TTEC Holdings, (cid:44)(cid:81)(cid:70)(cid:17)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:68)(cid:79)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:87)(cid:3)(cid:28)(cid:20)(cid:28)(cid:26)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:51)(cid:72)(cid:82)(cid:85)(cid:76)(cid:68)(cid:3)(cid:54)(cid:87)(cid:85)(cid:72)(cid:72)(cid:87)(cid:15)(cid:3)(cid:40)(cid:81)(cid:74)(cid:79)(cid:72)(cid:90)(cid:82)(cid:82)(cid:71)(cid:15)(cid:3)(cid:38)(cid:82)(cid:79)(cid:82)rado
80112. Electronic copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, Proxy Statements and any amendments to these reports are available free of charge by
(i) visiting our website at http://www.ttec.com/investors/sec-filings/ or (ii) sending a written request to Investor
Relations at our corporate headquarters or to investor.relations@ttec.com. TTEC(cid:182)(cid:86)(cid:3)(cid:54)(cid:40)(cid:38)(cid:3)(cid:73)(cid:76)(cid:79)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:83)(cid:82)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)
our corporate website as soon as reasonably practical after we electronically file such materials with, or furnish
them to, the SEC. Information on our website is not incorporated by reference into this report.
(cid:60)(cid:82)(cid:88)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:90)(cid:72)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:40)(cid:38)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:51)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:53)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:53)(cid:82)(cid:82)(cid:80) at 100 F.
Street, N.E., Room 1580, Washington, D.C. 20549 (telephone number 1-800-SEC-(cid:19)(cid:22)(cid:22)(cid:19)(cid:12)(cid:30)(cid:3) (cid:82)(cid:85)(cid:3) (cid:89)(cid:76)(cid:68)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:54)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)
public website at www.sec.gov.
ii
Table of Contents
PART I
ITEM 1.
BUSINESS
Our Business
TTEC Holdings, (cid:44)(cid:81)(cid:70)(cid:17)(cid:3) (cid:11)(cid:179)(cid:55)(cid:55)(cid:40)(cid:38)(cid:180)(cid:15)(cid:3) (cid:179)(cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:15)(cid:3) (cid:179)(cid:90)(cid:72)(cid:180)(cid:15)(cid:3) (cid:179)(cid:82)(cid:88)(cid:85)(cid:180)(cid:3) (cid:82)(cid:85)(cid:3) (cid:179)(cid:88)(cid:86)(cid:180)) is a leading global customer experience
technology and services company focused on the design, implementation and delivery of transformative
(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:80)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:90)(cid:82)(cid:85)(cid:79)(cid:71)(cid:182)(cid:86)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)iconic and disruptive brands. We help large global companies increase
revenue and reduce costs by delivering personalized customer experiences across every interaction channel
and phase of the customer lifecycle as an end-to-end provider of customer engagement services, technologies,
insights and innovations. We are organized into two centers of excellence: TTEC Digital and TTEC Engage.
(cid:120) TTEC Digital designs and builds human centric, tech-enabled, insight-driven customer experience
solutions.
(cid:120) TTEC Engage is (cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)delivery center of excellence that operates turnkey customer
acquisition, care, revenue growth, digital fraud prevention and detection, and content moderation
services.
TTEC Digital and TTEC Engage come together under our unified offering, HumanifyTM Customer Engagement
as a Service, which drives measurable results for clients through the delivery of personalized omnichannel
interactions that are seamless and relevant. Our business is supported by 52,400 employees delivering services
in 23 countries from 85 customer engagement centers on six continents. Our end-to-end approach differentiates
the Company by combining service design, strategic consulting, data analytics, process optimization, system
integration, operational excellence, and technology solutions and services. This unified offering is value-
oriented, outcome-based, and delivered on a global scale across all four of our business segments, two of
which comprise TTEC Digital - Customer Strategy Services (cid:11)(cid:179)(cid:38)(cid:54)(cid:54)(cid:180)(cid:12) and Customer Technology Services
(cid:11)(cid:179)(cid:38)(cid:55)(cid:54)(cid:180)(cid:12); and two of which comprise TTEC Engage (cid:177) (cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3) (cid:42)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3) (cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3) (cid:11)(cid:179)(cid:38)(cid:42)(cid:54)(cid:180)(cid:12)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) Customer
(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:11)(cid:179)(cid:38)(cid:48)(cid:54)(cid:180)(cid:12).
Our revenue for fiscal 2018 was $1.509 billion, approximately 84% or $1.270 billion of which came from our
TTEC Engage center of excellence and $239 million, or 16%, came from our TTEC Digital center of excellence.
Since our establishment in 1982, we have helped clients strengthen their customer relationships, brand
recognition and loyalty by simplifying and personalizing interactions with their customers. We deliver thought
leadership, through innovation in programs that differentiate our clients from their competition.
To improve our competitive position in a rapidly changing market and stay strategically relevant to our clients,
we continue to invest in innovation and growth businesses, diversifying and strengthening our core customer
care services with consulting, data analytics and insights technologies, and technology-enabled, outcomes-
focused services.
We also invest in businesses that enable us to expand our geographic footprint, broaden our product and
service capabilities, increase our global client base and industry expertise, and further scale our end-to-end
integrated solutions platform. In 2018, we acquired Strategic Communications Services, a system integrator for
multichannel contact center platforms based in the United Kingdom. In 2017, we acquired Motif, Inc., a digital
fraud prevention and detection and content moderation services company based in India and the Philippines,
and Connextions, Inc., a U.S.-based health services company focused on improving customer relationships for
healthcare plan providers and pharmacy benefits managers.
We have developed tailored expertise in the automotive, communications, healthcare, financial services,
government, logistics, media and entertainment, retail, technology, travel and transportation industries. We
target customer-focused industry leaders in the Global 1000 and serve approximately 300 clients globally.
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Our strong balance sheet, cash flows from operations and access to debt and capital markets have historically
provided us the financial flexibility to effectively fund our organic growth, capital expenditures, strategic
acquisitions, incremental investments, and capital distributions.
We continue to return capital to our shareholders via semi-annual dividends and a stock repurchase program,
as directed by the Board of Directors from time to time. As of December 31, 2018, our cumulative authorized
share repurchase allowance was $762.3 million, of which we have repurchased 46.1 million shares for $735.8
million. Our remaining repurchase allowance is $26.6 million which may be increased from time to time by our
Board of Directors, in its discretion. For the period from January 1, 2019 through February 28, 2019, we have
not purchased any additional shares. Our stock repurchase program does not have an expiration date.
Given our cash flow generation and balance sheet strength, we believe cash dividends and early returns to
shareholders through share repurchases, in balance with our investments in innovation and strategic
acquisitions, align shareholder interests with the needs of the Company. In 2015, our Board of Directors adopted
a dividend policy, with the intent to distribute a periodic cash dividend to stockholders of our common stock,
after consideration of, among other things, TTEC(cid:182)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:86) from operations, capital needs and
liquidity factors. The Company paid the initial dividend in 2015 and has continued to pay a semi-annual dividend
in October and April of each year in amounts ranging between $0.18 and $0.28 per common share. On February
21, 2019, the (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)Board of Directors authorized a semi-annual dividend of $0.30 per common share,
payable on April 18, 2019 to shareholders of record as of March 28, 2019.
Our Market Opportunity
Our end-to-end customer experience approach is designed to drive retention, affinity, growth, and customer
protection, all with savings for our clients. Our transition from multichannel to true omnichannel service requires
(cid:68)(cid:74)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:83)(cid:72)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:55)(cid:55)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74) in strategic relevance because of the following
trends:
(cid:120)
(cid:120)
Increasing focus on customer engagement to sustain competitive advantage. (cid:178) The ability to sustain
a competitive advantage based on price or product differentiation has significantly narrowed given the
speed of technological innovation. As our clients(cid:182) customers become more connected and share their
experiences across a variety of social networking channels, the quality of the experience has a greater
impact on brand loyalty and business performance. We believe customers are increasingly shaping
their attitudes, behaviors and willingness to recommend or stay with a brand on the totality of their
experience, including not only the superiority of the product or service but more importantly on the
quality of their ongoing service interactions. Given the strong correlation between high customer
satisfaction and improved profitability, we believe more companies are increasingly focused on
selecting third-party partners, such as TTEC, that can deliver integrated insights-driven strategy,
service and technology solutions that increase the lifetime value of each customer relationship versus
merely reducing costs.
Increasing percentage of companies consolidating their customer engagement requirements with a
few select partners who can deliver measurable business outcomes by offering an integrated,
technology-rich solution. (cid:178) The proliferation of mobile communication technologies and devices along
(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:81)(cid:72)(cid:71) expectations are driving the need for
companies to implement enabling technologies that ensure customers have the best experience
across all devices and channels. These two-way interactions need to be received or delivered
seamlessly via the customer channel of choice and include voice, email, chat, SMS text, intelligent
self-serve, virtual agents and the social network. We believe companies will continue to consolidate to
third-party partners, like TTEC, who have demonstrated expertise in increasing brand value by
delivering a holistic, integrated customer-centric solution that spans the customer experience from
strategy through execution versus the time, expense and often failed returns resulting from linking
together a series of point solutions from different providers.
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(cid:120) Focus on speed-to-market by companies launching new products or entering new geographic
locations. (cid:178) As companies broaden their product offerings and enter new markets, they are looking
for partners that can provide speed-to-market while reducing their capital and operating risk. To
achieve these benefits, companies select us because of our extensive operating track record,
established global footprint, financial strength, commitment to innovation, and our ability to quickly
scale infrastructure and complex business processes around the globe in a short period of time while
assuring a high-quality experience for their customers.
Our Strategy
We aim to grow our revenue and profitability by focusing on our core customer engagement operational
capabilities linking them to higher margin, insights and technology-enabled platforms and managed services to
drive a superior customer experience (cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86). To that end we continually strive to:
(cid:120) Build deeper, more strategic relationships with existing global clients
to drive enduring,
transformational change within their organizations;
(cid:120) Pursue new clients who lead their respective industries and who are committed to customer
engagement as a differentiator;
(cid:120)
Invest in our sales leadership team at both the segment level to improve collaboration and speed-to-
market and consultative sales level to deliver more integrated, strategic, and transformational
solutions;
(cid:120) Execute strategic acquisitions that further complement and expand our integrated solutions;
(cid:120)
Invest in technology-enabled platforms and innovating through technology advancements, broader
and globally protected intellectual property, and process optimization, and
(cid:120) Work within our technology partner ecosystem to deliver best in class solutions with expanding
intellectual property through value-add applications, integrations, services and solutions.
Our Integrated Service Offerings, Centers of Excellence and Business Segments
We have two centers of excellence that encompass our four operating and reportable segments.
TTEC Digital houses our professional services and technology platforms. These solutions are critical to
enabling and accelerating digital transformation for our clients.
Customer Strategy Services Segment
Through our strategy and operations, analytics, and learning and performance consulting expertise, we help
our clients design, build and execute their customer engagement strategies. We help our clients to better
(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:71)(cid:76)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)behaviors and preferences along with their current and future economic
value. Using proprietary analytic models, we provide the insight clients need to build the business case for
customer centricity and to better optimize their investments in customer experience. This insight-based strategy
creates a roadmap for transformation. We build customer journey maps to inform service design across
automated, human and hybrid interaction and increasingly are developing and implementing strategies around
Interactive Virtual Assistants (chat bots). A key component of this segment involves instilling a high-
performance culture through management and leadership alignment and process optimization.
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Customer Technology Services Segment
In connection with the design of the customer engagement strategy, our ability to architect, deploy and host or
(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)experience environments becomes a key enabler to achieving and sustaining the
(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3) (cid:72)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3) (cid:42)(cid:76)(cid:89)(cid:72)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:83)(cid:85)(cid:82)(cid:79)(cid:76)(cid:73)(cid:72)(cid:85)ation of mobile communication technologies and
(cid:71)(cid:72)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:72)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:85)(cid:85)(cid:68)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:81)(cid:72)(cid:79)(cid:86)(cid:3)
including email, social networks, mobile, web, SMS text, voice and chat. We design, implement and manage
cloud, on-premise or hybrid customer experience environments to deliver a consistent and superior experience
across all touch points on a global scale that we believe result in higher quality, lower costs and reduced risk
for our clients. Through our (cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:76)(cid:73)(cid:92)(cid:140)(cid:3) Technology Platform, we also provide data-driven context aware
software-as-a-(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:11)(cid:179)SaaS(cid:180)(cid:12)(cid:3) based solutions that link customers seamlessly and directly to appropriate
resources, any time and across any channel.
TTEC Engage houses our end-to-end managed services operations for customer care, revenue growth, digital
fraud prevention and detection, and content moderation services.
Customer Growth Services Segment
We offer integrated sales and marketing solutions to help our clients boost revenue in new, fragmented or
underpenetrated business-to-consumer or business-to-business markets. We deliver or manage approximately
$4 billion in client revenue annually via the discovery, acquisition, growth and retention of customers through a
combination of our highly trained, client-dedicated sales professionals and proprietary analytics platform. This
platform continuously aggregates individual customer information across all channels into one holistic view so
as to ensure more relevant and personalized communications.
Customer Management Services Segment
(cid:58)(cid:72)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:73)(cid:85)(cid:82)(cid:81)(cid:87)-to-back office processes to deliver just-in-time, personalized, protected,
multi-channel interactions. Our front-office solutions seamlessly integrate voice, chat, email, e-commerce and
social media to optimize the customer experience for our clients. In addition, we manage certain client back-
office processes to enhance their customer-centric view of relationships and maximize operating efficiencies.
We also perform fraud prevention and content moderation services to protect our clients and their customers
from malevolent digital activities. Our delivery of integrated business processes via our onshore, offshore or
work-from-home associates reduces operating costs and allows customer needs to be met more quickly and
efficiently, resulting in higher satisfaction, brand loyalty and a stronger competitive position for our clients.
Based on our (cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)-business segment and on
a discrete basis.
Additional information with respect to our segments and geographic footprint is included in Part II, Item 8.
Financial Statements and Supplementary Data, Note 3 to the Consolidated Financial Statements.
Our Competitive Strengths
We believe that our differentiation lies in our integrated unified offering and our holistic approach to customer
experience and engagement as an end-to-end provider of customer engagement services, technologies,
insights and innovations. Humanify Customer Engagement as a Service includes customer strategy, technology
services, customer management, growth and protections services. We also believe that our insight-driven
technological solutions, innovative human capital strategies and globally scaled and deployed best practices in
operational excellence are key elements to our continued industry leadership.
As the complexity and pace of technological change required to deliver our omnichannel customer engagement
increases, the successful execution of our principal corporate strategies depends on our competitive strengths,
which are briefly described below:
(cid:120) Our industry reputation and leadership position reflecting more than three decades of delivering
integrated customer engagement solutions to our clients;
(cid:120) Omnichannel, multi-modal solutions that meet the rapidly changing profile of the customer and their
heightened expectations;
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(cid:120) Scalable technology and human capital infrastructure using globally deployed best practices to ensure
a consistent, high-quality service;
(cid:120) Tailored and optimized customer care delivery through the use of proprietary workforce hiring, award-
winning training and development programs, and performance optimization methodology and
tools; and
(cid:120) Commitment to continued investment and innovation that enhances the strategic capabilities of our
clients.
Technological Excellence
Our Humanify Technology Platforms are based on secure, cost effective infrastructure (cid:177) leveraging
private/public infrastructure. This architecture enables us to centralize and standardize our worldwide delivery
capabilities resulting in improved scalability and quality of delivery for our clients, as well as lower capital, and
(cid:79)(cid:82)(cid:90)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3)(cid:11)(cid:179)(cid:44)(cid:55)(cid:180)(cid:12)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:17)
The foundation of these platforms are our regionally-based, globally synched data centers located on five
continents. Our data centers provide a fully integrated suite of voice and data routing, workforce management,
quality monitoring, business analytics and storage capabilities, enabling seamless operations from any location
around the globe. This hub and spoke model enables us to provide our services at competitive cost while
increasing scalability, reliability, asset utilization and the diversity of our service offerings. It also provides an
effective redundancy for timely responses to system interruptions and outages due to natural disasters and
other conditions outside our control. We monitor and manage our data centers 24 x 7, 365 days per year from
several strategically located global command centers to ensure the availability of our redundant, fail-over
capabilities for each data center.
Importantly, this platform has (cid:69)(cid:72)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:82)(cid:88)(cid:81)(cid:71)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:81)(cid:72)(cid:90)(cid:15)(cid:3) (cid:76)(cid:81)(cid:81)(cid:82)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:82)(cid:73)(cid:73)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:55)(cid:55)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3) (cid:70)(cid:79)(cid:82)(cid:88)(cid:71)-
based offerings (e.g. Humanify Operations/Insights Platform), Humanify @Home for remote omnichannel
agents, and our suite of human capital solutions.
Further, our Humanify Technology Platforms leverage reference architectures for multiple scenarios whether
we are operating the platforms and the services, implementing customized platforms for clients, or providing
advanced managed services, continuous and automated development environments. We also provide clients
with highly secure/compliant solutions with respect to regional (e.g. GDPR) and/or specific industry standards
(e.g. PCI, HIPAA, etc.).
Innovative Human Capital Strategies
Our globally located, highly trained employees are a crucial component of the success of our business. We
have made significant investments in proprietary technologies, management tools, methodologies and training
processes in the areas of talent acquisition, learning services, knowledge management, workforce collaboration
and performance optimization. These capabilities are the culmination of more than three decades of experience
in managing large, global workforces combined with the latest technology, innovation and strategy in the field
of human capital management. This capability has enabled us to deliver a consistent, scalable and flexible
(cid:90)(cid:82)(cid:85)(cid:78)(cid:73)(cid:82)(cid:85)(cid:70)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:79)(cid:92)(cid:3)(cid:72)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:75)(cid:76)(cid:72)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:85)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:72)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:17)
Globally Deployed Best Operating Practices
Globally deployed best operating practices assure that we deliver a consistent, scalable, high-quality
(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3) 85 customer engagement centers and work from home
associates around the world. Standardized processes include our approach to attracting, screening, hiring,
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We provide real-time reporting and analytics on performance across the globe to ensure consistency of delivery.
This information provides valuable insight into what is driving customer inquiries, enabling us to proactively
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Our global operating model includes customer engagement centers in 15 countries on six continents that
operate 24 hours a day, 365 days a year. New customer engagement centers are established and existing
centers are expanded or scaled down to accommodate anticipated business demands or specific client needs.
We have significant capacity in the U.S., the Philippines, India, Mexico and Brazil to support customer demand
and deliver superior cost efficiencies. We continue to explore opportunities in North America, Central Europe
and Africa to diversify our client footprint enabling near-shore and off-shore locations that enable our multi-
lingual service offerings and provide superior client economics.
Of the 15 countries from which we provide customer management solutions, 10 provide some services for
onshore clients including the U.S., Australia, Brazil, Canada, China, Germany, Ireland, South Africa, Thailand,
and the United Kingdom. The total number of workstations in these countries is 19,275, or 45% of our total
delivery capacity. The other five countries from which we provide customer management solutions, partially or
entirely provide services for offshore clients including Bulgaria, India, Mexico, Poland, and the Philippines. The
total number of workstations in these countries is 23,725 or 55% of our total delivery capacity.
See Item 1A. Risk Factors for a description of the risks associated with our foreign operations.
Clients
We develop long-term relationships with Global 1000 companies in customer intensive industries, whose
business complexities and customer focus requires a partner that can quickly and globally scale integrated
technology and data-enabled services.
In 2018, our top five and ten clients represented 35% and 49% of total revenue, respectively; and one of our
clients, who is in the healthcare industry, represented 10.2% of our total annual revenue. In several of our
operating segments, we enter into long-term relationships that provide us with a more predictable revenue
stream. Although most of our contracts can be terminated for convenience by either party, our relationships
with our top five clients have ranged from 12 to 22 years including multiple contract renewals for several of
these clients. In 2018, we had a 90% client retention rate for the combined Customer Management Services
and Customer Growth Services segments.
(cid:38)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3) (cid:88)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:72)(cid:79)(cid:72)(cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3) (cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3) (cid:68)(cid:85)(cid:80)(cid:182)(cid:86)(cid:3) (cid:79)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:3)
negotiated transactions. These clients currently represent approximately 12% of our total annual revenue.
Expenditures under these supplier contracts represent less than one percent of our total operating costs.
Competition
We are a leading global customer experience technology and services company focused on the design,
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brands. Our competitors vary by geography and business segment, and range from large multinational
corporations to smaller, narrowly-focused enterprises. Across our lines of business, the principal competitive
factors include: client relationships, technology and process innovation, integrated solutions, operational
performance and efficiencies, pricing, brand recognition and financial strength.
Our strategy in maintaining market leadership is to prudently invest, innovate and provide integrated value-
driven services, all centered around customer engagement management. Today, we are executing on a more
expansive, holistic strategy by transforming our business into higher-value offerings through organic
investments and strategic acquisitions. As we execute, we are differentiating ourselves in the marketplace and
entering new markets that introduce us to an expanded competitive landscape.
In our Customer Management Services business, we primarily compete with in-house customer management
operations as well as other companies that provide customer care including: Alorica, Sitel, Sykes, Synnex and
Teleperformance, among others. As we expand our offerings into customer engagement consulting,
technology, and growth, we are competing with smaller specialized companies and divisions of multinational
companies, including Bain & Company, McKinsey & Company, Accenture, IBM, AT&T, Interactive Intelligence,
LiveOps, inContact, Five9, WPP, Publicis Groupe, Dentsu, and others.
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Employees
Our people are our most valuable asset. As of December 31, 2018, we had 52,400 employees in 23 countries
on six continents. Although a percentage of our Customer Management Services segment employees are hired
seasonally to address the fourth quarter and first quarter higher business volumes in retail, healthcare and other
seasonal industries, most remain employed throughout the year and work at 85 locations and through our
@home environment. Approximately 66% of our employees are located outside of the U.S. Approximately 10%
of our employees are covered by collective bargaining agreements, most of which are mandated under national
labor laws outside of the United States. These agreements are subject to periodic renegotiations and we
anticipate that they will be renewed in the ordinary course of business without material impact to our business
or in a manner materially different from other companies covered by such industry-wide agreements.
Research, Innovation, Intellectual Property and Proprietary Technology
We recognize the value of innovation in our business and are committed to developing leading-edge
technologies and proprietary solutions. Research and innovation have been a major factor in our success and
we believe that they will continue to contribute to our growth in the future. We use our investment in research
and development to create, commercialize and deploy innovative business strategies and high-value
technology solutions.
We deliver value to our clients through, and our success in part depends on, certain proprietary technologies
and methodologies. We leverage U.S. and foreign patent, trade secret, copyright and trademark laws as well
as confidentiality, proprietary information non-disclosure agreements, and key staff non-competition
agreements to protect our proprietary technology.
As of December 31, 2018 we had 2 patent applications pending in 8 jurisdictions; and own 82 U.S. and non-
U.S. patents that we leverage in our operations and as market place differentiation for our service offerings.
Our trade name, logos and names of our proprietary solution offerings are protected by their historic use and
by trademarks and service marks registered in 29 countries.
ITEM 1A. RISK FACTORS
In addition to the other information presented in this Annual Report on Form 10-K, you should carefully consider
the risks and uncertainties discussed in this section when evaluating our business. If any of these risks or
uncertainties actually occur, our business, financial condition, and results of operations (including revenue,
profitability and cash flows) could be materially and adversely affected and the market price of our stock could
decline.
Our markets are highly competitive, and we might not be able to compete effectively
The markets where we offer our services are highly competitive. Our future performance is largely dependent
on our ability to compete successfully in markets we currently serve, while expanding into new, profitable
markets. We compete with large multinational service providers; offshore service providers from lower-cost
jurisdictions that offer similar services, often at highly competitive prices and more aggressive contract terms;
niche solution providers that compete with us in specific geographic markets, industry segments or service
areas; companies that utilize new, potentially disruptive technologies or delivery models, including artificial
intelligence powered solutions; and in-house functions of large companies that use their own resources, rather
than outsourcing customer care and customer experience services we provide. Some of our competitors have
greater financial or marketing resources than we do and, therefore, may be better able to compete.
Further, the continuing trend of consolidation in the technology sector and among business process outsourcing
competitors in various geographies where we have operations may result in new competitors with greater scale,
a broader footprint, better technologies, or price efficiencies that may be attractive to our clients. If we are
unable to compete successfully and provide our clients with superior service and solutions at competitive prices,
we could lose market share and clients to competitors, which would materially adversely affect our business,
financial condition, and results of operations.
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If we are unsuccessful in implementing our business strategy, our long-term financial prospects could
be adversely affected
Our growth strategy is based on continuous diversification of our business beyond contact center customer
care outsourcing to an integrated customer experience platform that unites innovative and disruptive
technologies, strategic consulting, data analytics, client growth solutions, and customer experience focused
system design and integration. These investments in technologies and integrated solution development,
however, may not lead to increased revenue and profitability. If we are not successful in creating value from
these investments, there could be a negative impact on our operating results and financial condition.
Our results of operations and ability to grow could be materially affected if we cannot adapt our service
offerings to changes in technology and customer expectations
Our growth and profitability will depend on our ability to develop and adopt new technologies that expand our
existing offerings by leveraging new technological trends and cost efficiencies in our operations, while meeting
rapidly evolving client expectations. As technology evolves, more tasks currently performed by our agents may
be replaced by automation, robotics, artificial intelligence, chatbots and other technological advances, which
puts our lower-skill, tier one, customer care offerings at risk. These technology innovations could potentially
reduce our business volumes and related revenues, unless we are successful in adapting and deploying them
profitably.
We may not be successful in anticipating or responding to our client expectations and interests in adopting
evolving technology solutions, and their integration in our offerings may not achieve the intended enhancements
or cost reductions. Services and technologies offered by our competitors may make our service offerings not
competitive or even (cid:82)(cid:69)(cid:86)(cid:82)(cid:79)(cid:72)(cid:87)(cid:72)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:80)(cid:68)(cid:92)(cid:3) (cid:81)(cid:72)(cid:74)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3) (cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3) (cid:76)(cid:81)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:82)(cid:73)(cid:73)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:86)(cid:17)(cid:3) (cid:50)(cid:88)(cid:85)(cid:3) (cid:73)(cid:68)(cid:76)(cid:79)(cid:88)(cid:85)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3)
innovate, maintain technological advantage, or respond effectively and timely to transformational changes in
technology could have a material adverse effect on our business, financial condition, and results of operations.
Cyber-attacks, cyber-fraud, and unauthorized information disclosure could harm our reputation, cause
liability, result in service outages and losses, any of which could adversely affect our business and
results of operations
Our business involves the use, storage, and transmission of information about our clients, customers of our
clients, and our employees. While we take reasonable measures to protect the security of and unauthorized
access to our systems and the privacy of personal and proprietary information that we access and store, our
security controls over our systems may not prevent the improper access to or disclosure of this information.
Such unauthorized access or disclosure could subject us to liability under relevant law or our contracts and
could harm our reputation resulting in loss of revenue and loss of business opportunities.
In recent years, there have been an increasing number of high profile security breaches at companies and
government agencies, and security experts have warned about the growing risks of hackers and cyber criminals
launching a broad range of attacks targeting information technology systems. Our business is dependent on
information technology systems. Information security breaches, computer viruses, interruption or loss of
business data, DDoS (distributed denial of service) attacks, and other cyber-attacks on any of these systems
could disrupt the normal operations of our contact centers, our cloud platform offerings, and our enterprise
services, impeding our ability to provide critical services to our clients.
We are experiencing an increase in frequency of cyber-fraud attempts, such as so-(cid:70)(cid:68)(cid:79)(cid:79)(cid:72)(cid:71)(cid:3)(cid:179)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:72)(cid:81)(cid:74)(cid:76)(cid:81)(cid:72)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:180)(cid:3)
attacks and phishing scams, which typically seek unauthorized money transfers or information disclosure. We
actively train our employees to recognize these attacks and have implemented proactive risk mitigation
measures to curb them. There are no assurances, however, that these attacks, which are also growing in
sophistication, may not deceive our employees, resulting in a material loss.
While we have taken reasonable measures to protect our systems and processes from intrusion and cyber-
fraud, we cannot be certain that advances in cyber-criminal capabilities, discovery of new system vulnerabilities,
and attempts to exploit such vulnerabilities will not compromise or breach the technology protecting our systems
and the information that we manage and control, which could result in damage to our systems, our reputation
and our profitability.
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Our need for consistent improvements in cybersecurity may force us to expend significant additional resources
to respond to system disruptions and security breaches, including additional investments in repairing systems
damaged by such attacks, reconfiguring and rerouting systems to reduce vulnerabilities, and resolution of legal
claims that may arise from data breaches. A significant cyber security breach could materially harm our
business, financial condition, and operating results.
A large portion of our revenue is generated from a limited number of clients and the loss of one or more
of our clients could adversely affect our business
We rely on strategic, long-term relationships with large, global companies in targeted industries. As a result, we
derive a substantial portion of our revenue from relatively few clients. Our five and ten largest clients collectively
represented 35% and 49% of our revenue in 2018 while the largest client represented 10.2% of our revenue in
2018.
Although we have multiple engagements with all of our largest clients and all contracts are unlikely to terminate
at the same time, the contracts with our five largest clients expire between 2020 and 2023 and there can be no
assurance that these contracts will continue to be renewed at all or be renewed on favorable terms. The loss
(cid:82)(cid:73)(cid:3) (cid:68)(cid:79)(cid:79)(cid:3) (cid:82)(cid:85)(cid:3) (cid:83)(cid:68)(cid:85)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:3) (cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3) (cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3) (cid:75)(cid:68)(cid:89)(cid:72)(cid:3) (cid:68)(cid:3) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:3) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3) (cid:82)(cid:81)(cid:3) (cid:82)(cid:88)r business, financial
condition, and results of operations, if the loss of revenue was not replaced with profitable business from other
clients.
We serve clients in industries that have historically experienced a significant level of consolidation. If one of our
clients is acquired (including by another of our clients) our business volume and revenue may materially
decrease due to the termination or phase out of an existing client contract, volume discounts or other contract
concessions which could have an adverse effect on our business, financial condition, and results of operations.
If we cannot recruit, hire, train, and retain qualified employees to respond to client demands, our
business will be adversely affected
Our business is labor intensive and our ability to recruit and train employees with the right skills, at the right
price point, and in the timeframe required by our client commitments is critical to achieving our growth objective.
Demand for qualified personnel with multiple language capabilities and fluency in English may exceed supply.
Employees with specific backgrounds and skills may also be required to keep pace with evolving technologies
and client demands. While we invest in employee retention, we continue to experience high employee turnover
and are continuously recruiting and training replacement staff. Some of our facilities are located in geographies
with low unemployment, which makes it costly to hire personnel, and in several jurisdictions, jurisdiction-specific
wage regulations are changing rapidly making it difficult to recruit new employees at price points acceptable for
our business model. Our inability to attract and retain qualified personnel at costs acceptable under our
contracts, our costs associated with attracting, training, and retaining employees, and the challenge of
managing the continuously changing and seasonal client demands could have a material adverse effect on our
business, financial condition, and results of operations.
Uncertainty related to cost of labor across various jurisdictions in the United States could adversely
affect our results of operating
As a labor intensive business, we sign multi-year client contracts that are priced based on prevailing labor costs
in jurisdictions where we deliver services. Yet, in the United States, our business is confronted with a patchwork
of ever changing minimum wage, mandatory time off, and rest and meal break laws at the state and local levels.
As these jurisdiction-specific laws change with little notice or grace period for transition, we often have no
opportunity to adjust and change how we do business and pass cost increases to our clients. The frequent
changes in the law and inconsistencies in laws across different jurisdictions in the United States, may result in
higher costs, lower contract profitability, higher turnover, and reduced operational efficiencies, which could in
the aggregate have material adverse impact on our results of operations.
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Our delivery model involves geographic concentration exposing us to significant operational risks
Our business model is dependent on our customer engagement centers and enterprise support functions being
located in low cost jurisdictions around the globe. We have on the ground presence in 23 countries, but our
customer care and experience management delivery capacity and our back-office functions are concentrated
in the Philippines, Mexico, India, and Bulgaria and our technology solutions centers are concentrated in a few
locations in the United States. Natural disasters (floods, winds, and earthquakes), terrorist attacks, pandemics,
large-scale utilities outages, telecommunication and transportation disruptions, labor or political unrest, and
restriction on repatriation of funds at some of these locations may interrupt or limit our ability to operate or may
increase our costs. Our business continuity and disaster recovery plans, while extensive, may not be effective,
particularly if catastrophic events occur.
Our dependence on our customer engagement centers and enterprise services support functions in the
Philippines, which is subject to frequent severe weather, natural disasters, and occasional security threats,
represents a particular risk. For these and other reasons, our geographic concentration could result in a material
adverse effect on our business, financial condition and results of operations. Although we procure business
interruption insurance to cover some of these exposures, adequate insurance may not be available on an
ongoing basis for a reasonable price.
Compliance with laws, including unexpected changes to such laws, could adversely affect our results
of operations
Our business is subject to extensive regulation by U.S. and foreign national, state and provincial authorities
relating to confidential client and customer data, customer communications, telemarketing practices, and
licensed healthcare and financial services activities, among other areas. Costs and complexity of compliance
with existing and future regulations could adversely affect our profitability. If we fail to comply with regulations
relevant to our business, we could be subject to civil or criminal liability, monetary damages and fines. Private
lawsuits and enforcement actions by regulatory agencies could also materially increase our costs of operations
and impact our ability to serve our clients.
(cid:36)(cid:86)(cid:3)(cid:90)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:90)(cid:82)(cid:85)(cid:79)(cid:71)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:81)(cid:88)(cid:80)(cid:72)(cid:85)(cid:82)(cid:88)(cid:86)(cid:15)(cid:3)
and sometimes conflicting, legal regimes on matters as diverse as import/export controls, communication
content requirements, trade restrictions and sanctions, tariffs, taxation, data privacy, labor relations, wages and
severance, health care requirements, internal and disclosure control obligations, and immigration. Violations of
these regulations could impact our reputation and result in financial liability, criminal prosecution, unfavorable
publicity, restrictions on our ability to process information and breach of our contractual commitments.
Adverse changes in laws or regulations that impact our business may negatively affect the sale of our services,
slow the growth of our operations, or mandate changes to how we deliver our services, including our ability to
use offshore resources. These changes could threaten our ability to continue to serve certain markets.
Our growth of operations could strain our resources and cause our business to suffer
We plan to continue growing our business organically through expansion, sales efforts, and strategic
acquisitions, while maintaining tight controls on our expenses and overhead. Lean overhead functions
combined with focused growth may place a strain on our management systems, infrastructure and resources,
resulting in internal control failures, missed opportunities, and staff attrition which could impact our business
and results of operations.
Our profitability could suffer if our cost-management strategies are unsuccessful
Our ability to improve or maintain our profitability is dependent on our ability to engage in continuous
management of our costs. Our cost management strategies include optimizing the alignment between the
demand for our services and our resource capacity, including engagement center utilization; the costs of service
delivery; the cost of sales and general and administrative costs as a percentage of revenues, and the use of
process automation for standard operating tasks. If we are not effective in managing our operating and
administrative costs in response to changes in demand and pricing for our services, or if we are unable to
absorb or pass on to our clients the increases in our costs of operations, our results of operations could be
materially adversely affected.
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Uncertainty and inconsistency in privacy and data protection laws that impact our business and high
cost of compliance with such laws may impact our ability to deliver services and our results of
operations
Recently, there has been a significant increase in data protection and privacy laws and enforcement in many
jurisdictions where we and our clients do business. Some of these laws are complex and at times they impose
conflicting regulatory requirements. For example, the recently enacted General Data Protection Regulation
(GDPR) expands the European Union(cid:182)(cid:86)(cid:3)(cid:68)(cid:88)(cid:87)(cid:75)(cid:82)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:68)(cid:3)(cid:83)(cid:85)(cid:82)(cid:87)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:79)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
personally identifiable information collected in Europe; while the State of California in the U.S. imposed similar
regulations with a different reach. Failure to comply with all relevant privacy and data protection laws may result
in legal claims, significant fines, sanctions, or penalties, or may make it difficult for us to secure business.
Compliance with these evolving regulations may require significant investment which would impact our results
of operations.
Our financial results depend on our capacity utilization and our ability to forecast demand and make
timely decisions about staffing levels, investments, and operating expenses
Our ability to meet our strategic growth and profitability objectives depends on how effectively we manage our
customer engagement center capacity against the fluctuating and seasonal client demands. Predicting
customer demand and making timely staffing level decisions, investments, and other operating expenditure
commitments in each of our delivery center locations is key to our successful execution and profitability
maximization. We can provide no assurance that we will continue to be able to achieve or maintain desired
delivery center capacity utilization, because quarterly variations in client volumes, many of which are outside
our control, can have a material adverse effect on our utilization rates. If our utilization rates are below
expectations, because of our high fixed costs of operation, our financial conditions and results of operations
could be adversely affected.
Our sales cycles for new client relationships and new lines of business with existing clients can be
long, which results in a long lead time before we receive revenues
We often face a long selling cycle to secure contracts with new clients or contracts for new lines of business
with existing clients. When we are successful in securing a new engagement, it is generally followed by a long
implementation period when clients must give notice to incumbent service providers or transfer in-house
operations to us. There may also be a long ramp up period before we commence our services, and for certain
contracts we receive no revenue until we start performing the work. If we are not successful in obtaining
contractual commitments after the initial prolonged sales cycle or in maintaining the contractual relationship for
a period of time necessary to offset new project investment costs and appropriate return on that investment,
the investments may have a material adverse effect on our results of operations.
Contract terms typical in our industry can lead to volatility in our revenue and our margins
Our contracts do not have guaranteed revenue levels. Most of our contracts require clients to provide monthly
forecasts of volumes, but no guaranteed or minimum volume levels. Such forecasts vary from month to month,
which can impact our staff utilizations, our cost structure, and our profitability.
Many of our contracts have termination for convenience clauses with short notice periods, which could have a
material adverse effect on our results of operation. Although many of our contracts can be terminated for
convenience, our relationships with our top five clients have ranged from 12 to 22 years with the majority of
these clients having completed multiple contract renewals with us. Yet, our contracts do not guarantee a
minimum revenue level or profitability, and clients may terminate them or materially reduce customer interaction
volumes, which would reduce our earning potential. This could have a material adverse effect on our results of
operations and makes it harder to make projections.
Many of our contracts utilize performance pricing that link some of our fees to the attainment of performance
criteria, which could increase the variability of our revenue and operating margin. These performance criteria
can be complex, and at times they are not entirely within our control. If we fail to satisfy our contract performance
metrics, our revenue under the contracts and our operating margin are reduced.
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We may not always offset increased costs with increased fees under long-term contracts. The pricing and other
terms of our client contracts, particularly on our long-term contact center agreements, are based on estimates
and assumptions we make at the time we enter into these contracts. These estimates reflect our best judgments
regarding the nature of the engagement and our expected costs to provide the contracted services but these
judgments could differ from actual results. Not all our larger long-term contracts allow for escalation of fees as
our cost of operations increase. Moreover, those that do allow for such escalations, do not always allow
increases at rates comparable to increases that we experience due to rising minimum wage costs and related
payroll cost increases. If and to the extent we do not negotiate long-term contract terms that provide for fee
adjustments to reflect increases in our cost of service delivery, our business, financial conditions, and results
of operation could be materially impacted.
Our pricing depends on effectiveness of our level of effort forecasts. Pricing of our services in our technology
and strategic consulting businesses is contingent on our ability to accurately forecast the level of effort and cost
necessary to deliver our services, which is data dependent and can be inaccurate. The errors in level of effort
estimations could yield lower profit margins or cause projects to become unprofitable, resulting in adverse
impacts on our results of operations.
Our contracts seldom address the impacts of currency fluctuation on our costs of delivery. As we continue to
leverage our global delivery model, more of our expenses may be incurred in currencies other than those in
which we bill for services. An increase in the value of certain currencies, such as U.S. or Australian dollar
against the Philippine peso and India rupee, could increase costs for our delivery at offshore sites by increasing
our labor and other costs that are denominated in local currencies. Our contractual provisions, cost
management efforts, and currency hedging activities may not be sufficient to offset the currency fluctuation
impact, resulting in the decrease of the profitability of our contracts.
Increases in income tax rates, changes in income tax laws or disagreements with tax authorities
could adversely affect our business, financial condition or results of operations
We are subject to income taxes in the United States and in certain foreign jurisdictions in which we operate.
Increases in income tax rates or other changes in income tax laws in any particular jurisdiction could reduce
our after-tax income from such jurisdictions and could adversely affect our business, financial condition or
results of operations. Our operations outside the United States generate a significant portion of our income and
many of the other countries in which we have significant operations, have recently made or are actively
(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:79)(cid:68)(cid:90)(cid:86)(cid:17)(cid:3)(cid:41)(cid:82)(cid:85)(cid:3)(cid:72)(cid:91)(cid:68)(cid:80)(cid:83)(cid:79)(cid:72)(cid:15)(cid:3)(cid:76)(cid:81)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:55)(cid:68)(cid:91)(cid:3)(cid:38)(cid:88)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:45)(cid:82)(cid:69)(cid:86)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:11)(cid:179)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)
(cid:55)(cid:68)(cid:91)(cid:3)(cid:36)(cid:70)(cid:87)(cid:180)(cid:12)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:82)(cid:3)(cid:79)(cid:68)(cid:90)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:81)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:17)(cid:3)(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)impact of the 2017
Tax Act is deemed to be complete, these amounts are based on prevailing regulations and currently available
(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3) (cid:74)(cid:88)(cid:76)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:76)(cid:86)(cid:86)(cid:88)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3) (cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3) (cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:11)(cid:179)(cid:44)(cid:53)(cid:54)(cid:180)(cid:12)(cid:3) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3) (cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3)
recorded amounts in future periods.
Additional changes in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign
earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect our
business, financial condition or results of operations.
There are no assurances that we will be able to implement effective contracting structures that are necessary
to optimize our tax position under the 2017 Tax Act. If we are unable to implement cost effective contracting
structure, our effective tax rate and our results of operations would be impacted.
We face special risks associated with our business outside of the United States
An important component of our business strategy is service delivery outside of the United States and our
continuing international expansion. In 2018 we derived approximately 43% of our revenue from operations
outside of the United States. Conducting business abroad is subject to a variety of risks, including:
(cid:120)
inconsistent regulations, licensing and legal requirements may increase our cost of operations as we
endeavor to comply with multiple, complex laws that differ from one country to another;
(cid:120) uncertainty of tax regulations in countries where we do business may affect our costs of operation;
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(cid:120)
(cid:120)
special challenges in managing risks inherent in international operations, such as unique and
prescriptive labor rules, corrupt business environments, restrictive immigration and export control laws
may cause an inadvertent violation of laws that we may not be able to immediately detect or correct;
longer payment cycles and/or difficulties in accounts receivable collections particular to operations
outside of the United States could impact our cash flows and results of operations;
(cid:120) political and economic instability and unexpected changes in regulatory regimes could adversely affect
our ability to deliver services overseas and our ability to repatriate cash;
(cid:120)
(cid:120)
(cid:120)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:71)(cid:85)(cid:68)(cid:90)(cid:68)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:46)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:40)(cid:88)(cid:85)(cid:82)(cid:83)(cid:72)(cid:68)(cid:81)(cid:3)(cid:56)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:78)(cid:81)(cid:82)(cid:90)(cid:81)(cid:3)(cid:68)(cid:86)(cid:3)(cid:179)(cid:37)(cid:85)(cid:72)(cid:91)(cid:76)(cid:87)(cid:180)(cid:12)(cid:3)(cid:70)(cid:85)(cid:72)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:68)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:88)(cid:81)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:87)(cid:92)(cid:3)
(cid:68)(cid:69)(cid:82)(cid:88)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:70)(cid:82)(cid:81)(cid:82)(cid:80)(cid:76)(cid:70)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:69)(cid:72)(cid:87)(cid:90)(cid:72)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:46)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:40)(cid:56)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:46)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)
partners which could, depending on future trade term negotiations, impact our European operations;
currency exchange rate fluctuations, restrictions on currency movement, and impact of international tax
laws could adversely affect our results of operations, if we are forced to maintain assets in currencies
other than U.S. dollars, while our financial results are reported in U.S. dollars; and
terrorist attacks or civil unrests in some of the regions where we do business (e.g. the Middle East,
Latin America, the Philippines, and in Europe), and the resulting need for enhanced security measures
may impact our ability to deliver services, threaten the safety of our employees, and increase our costs
of operations.
While we monitor and endeavor to mitigate timely the relevant regulatory, geopolitical, and other risks related
to our operations outside of the United States, we cannot assess with certainty what impact such risks are likely
to have over time on our business, and we can provide no assurance that we will always be able to mitigate
these risks successfully and avoid adverse impact on our business and results of operations.
Our profitability may be adversely affected if we are unable to expand and maintain our delivery centers
(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:86)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:90)(cid:68)(cid:74)(cid:72)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:76)(cid:81)(cid:71)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:179)(cid:81)(cid:72)(cid:68)(cid:85)(cid:3)(cid:86)(cid:75)(cid:82)(cid:85)(cid:72)(cid:180)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)
Our business is labor-intensive and therefore cost of wages, benefits and related taxes constitute a large
component of our operating expenses. As a result, expansion of our business is dependent upon our ability to
maintain and expand our operations in cost-effective locations, in and outside of the United States. Most of our
customer engagement centers are located in jurisdictions subject to minimum wage regulations, which may
result in increased wages in the future, thus impacting our profitability.
Our clients often dictate where they wish for us to locate the delivery centers that serve their customers, such
(cid:68)(cid:86)(cid:3) (cid:179)near shore(cid:180) jurisdictions located in close proximity to the United States, that have grown in popularity
recently. There is no assurance that we will be able to find and secure locations suitable for delivery center
operations in (cid:179)near shore(cid:180) jurisdictions which meet our cost-effectiveness and security standards. Our inability
to expand our operations to such (cid:179)near shore(cid:180) locations, however, may impact our ability to secure new and
additional business from clients, and could adversely affect our growth and results of operations.
Increases in the cost of communication and data services or significant interruptions in such services
could adversely affect our business
Our business is significantly dependent on telephone, internet and data service provided by various domestic
and foreign communication companies. Any disruption of these services could adversely affect our business.
We have taken steps to mitigate our exposure to service disruptions by investing in complex and multi-layered
redundancies, and we can transition services among our different customer engagement centers around the
world. Despite these efforts, there can be no assurance, that the redundancies we have in place would be
sufficient to maintain operations without disruption.
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Our inability to obtain communication and data services at favorable rates could negatively affect our results of
operations. Where possible, we have entered into long-term contracts with various providers to mitigate short
term rate increases and fluctuations. There is no obligation, however, for the vendors to renew their contracts
with us, or to offer the same or lower rates in the future, and such contracts may be subject to termination or
modification for various reasons outside of our control. A significant increase in the cost of communication
services that is not recoverable through an increase in the price of our services could adversely affect our
business.
Defects or errors in software utilized in our service offerings could adversely affect our business.
The third-party software and systems that we use to conduct our business and serve our clients are highly
complex and may, from time to time, contain design defects, coding errors or other software errors that may be
difficult to detect or correct, and which are outside of our control. Although our commercial agreements contain
provisions designed to limit our exposure to potential claims and liabilities, these provisions may not always
effectively protect us against claims in all jurisdictions. As a result, problems with software and systems that we
use may result in damages to our clients for which we are held responsible, causing damage to our reputation,
adversely affecting our business, our results of operations, and financial condition.
Restrictions on mobility of people across borders may affect our ability to compete for and provide
services to clients
Our business depends on the ability of some of our employees to obtain the necessary visas and entry permits
to do business in the countries where our clients and contact centers are located. In recent years, in response
to terrorist attacks and global unrest, immigration authorities generally, and those in the United States in
particular, have increased the level of scrutiny in granting such visas, and even imposed bans on immigration
and commercial travel for citizens of certain countries. If further terrorist attacks occur or global unrest
intensifies, these restrictions are likely to further increase. Furthermore, immigration laws in most countries
where we do business are subject to legislative change and varying standards of application and enforcement
due to political forces, economic conditions or other events unrelated to our operations. If we are unable to
obtain the necessary visas for our personnel with need to travel to or from the United States in a timely manner,
we may not be able to continue to provide services on a timely and cost-effective basis, receive revenues as
early as expected or manage our customer engagement centers efficiently. Any of these developments could
have a material adverse effect on our business, results of operations and financial condition.
If the transfer pricing arrangements we have among our subsidiaries are determined to be
inappropriate, our tax liability may increase
We have transfer pricing arrangements among our subsidiaries in relation to various aspects of our business,
including operations, marketing, sales, and delivery functions. U.S., Australia, Mexico, Philippines and other
transfer pricing regulations in other countries where we operate, require that cross-border transactions between
affiliates be o(cid:81)(cid:3)(cid:68)(cid:85)(cid:80)(cid:182)(cid:86)-length terms. We carefully consider the pricing among our subsidiaries to assure that they
(cid:68)(cid:85)(cid:72)(cid:3)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:80)(cid:182)(cid:86)-length. If tax authorities were to determine that the transfer prices and terms we have applied are
not appropriate, we may incur increased tax liability, including accrued interest and penalties, which would
cause material increase in our tax liability, thereby impacting our profitability and cash flows, and potentially
resulting in a material adverse effect on our operations, effective tax rate and financial condition.
Our strategy of growing through acquisitions may impact our business in unexpected ways
Our growth strategy involves acquisitions that help us expand our service offerings and diversify our geographic
footprint. We continuously evaluate acquisition opportunities, but there are no assurances that we will be able
to identify acquisition targets that complement our strategy and are available at valuation levels accretive to our
business.
Even if we are successful in making acquisitions, the acquired businesses may subject our business to risks
that may impact our results of operation; including:
(cid:120)
inability to integrate acquired companies effectively and realize anticipated synergies and benefits from
the acquisitions;
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(cid:120) d(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:87)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)
delivering results for the legacy business;
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
inability to appropriately scale critical resources to support the business of the expanded enterprise and
(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:88)(cid:81)(cid:73)(cid:82)(cid:85)(cid:72)(cid:86)(cid:72)(cid:72)(cid:81)(cid:3)(cid:70)(cid:75)(cid:68)(cid:79)(cid:79)(cid:72)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:55)(cid:55)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:30)
inability to retain key employees of the acquired businesses and/or inability of such key employees to
be effective as part of TTEC operations;
impact of liabilities of the acquired businesses undiscovered or underestimated as part of the acquisition
due diligence;
failure to realize anticipated growth opportunities from a combined business, because existing and
potential clients may be unwilling to consolidate business with a single supplier or to stay with the
acquirer post acquisition;
impacts of cash on hand and debt incurred to finance acquisitions, thus reducing liquidity for other
significant strategic objectives; and
internal controls, disclosure controls, corruption prevention policies, human resources and other key
policies and practices of the acquired companies may be inadequate or ineffective.
We have incurred and may in the future incur impairments to goodwill, long-lived assets or strategic
investments
As a result of past acquisitions, as of December 31, 2018, we have approximately $204.6 million of goodwill
and $80.9 million of intangible assets included on our Consolidated Balance Sheet. We review our goodwill and
intangible assets for impairment at least once annually, and more often when events or changes in
circumstances indicate the carrying value may not be recoverable. We perform an assessment of qualitative
and quantitative factors to determine whether the existence of events or circumstances leads to a determination
that it is more likely than not that the fair value of the goodwill or intangible asset is less than its carrying amount.
In the event that the book value of goodwill or intangible asset is impaired, such impairment would be charged
to earnings in the period when such impairment is determined. We have recorded goodwill and intangible
impairments in the past, and there can be no assurance that we will not incur impairment charges in the future
that could have material adverse effects on our financial condition or results of operations.
If we are unable to attract and retain talented and experienced executives for key positions in our
business, our business and our strategy execution could be adversely impacted
Our business success depends on contributions of senior management and key personnel. Our ability to attract,
motivate and retain key senior management staff is conditioned on our ability to pay adequate compensation
and incentives. We compete for top senior management candidates with other, often larger, companies that at
times have access to greater resources. Our ability to attract qualified individuals for our senior management
team is also impacted by our requirement that members of senior management sign non-compete agreements
as a condition to joining TTEC. If we are not able to attract and retain talented and experienced executives, we
would be unable to compete effectively, and our growth may be limited, which could have a material adverse
effect on our business, results of operations, and prospects.
Intellectual property infringement by us and by others may adversely impact our ability to innovate
and compete
Our solutions could infringe intellectual property of others impacting our ability to deploy them with clients. From
time to time, we and members of our supply chain receive assertions that our service offerings or technologies
infringe on the patents or other intellectual property rights of third parties. While to date we have been successful
in defending such claims and many of these claims are without basis, the claims could require us to cease
activities, incur expensive licensing costs, or engage in costly litigation, which could adversely affect our
business and results of operation.
15
Table of Contents
Our intellectual property may not always receive favorable treatment from the United States Patent and
Trademark Office, the European Patent Office or similar foreign intellectual property adjudication and
registrat(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:74)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86)(cid:30)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:179)(cid:83)(cid:68)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:72)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:180)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3)(cid:83)(cid:68)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:85)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)
to prior art limitations.
The lack of an effective legal system in certain countries where we do business or lack of commitment to
protection of intellectual property rights, may prevent us from being able to defend our intellectual property and
related technology against infringement by others, leading to a material adverse effect on our business, results
of operations and financial condition.
Our financial results may be adversely impacted by foreign currency exchange rate risk
Many contracts that we service from customer engagement centers based outside of the United States are
typically priced, invoiced, and paid in U.S. and Australian dollars or Euros, while the costs incurred to deliver
the services and operate are incurred in the functional currencies of the applicable operating subsidiary. The
fluctuations between the currencies of the contract and operating currencies present foreign currency exchange
risks. Furthermore, because our financial statements are denominated in U.S. dollars, but approximately 23%
of our revenue is derived from contracts denominated in other currencies, our results of operations could be
adversely affected if the U.S. dollar strengthens significantly against foreign currencies.
While we hedge at various levels against the effect of exchange rate fluctuations, we can provide no assurance
that we will be able to continue to successfully manage this foreign currency exchange risk and avoid adverse
impacts on our business, financial condition, and results of operations.
The current trend to outsource customer care may not continue and the prices that clients are willing
to pay for the services may diminish, adversely affecting our business
Our growth depends, in large part, on the willingness of our clients and potential clients to outsource customer
care and management services to companies like TTEC. There can be no assurance that the customer care
outsourcing trend will continue; and our clients and potential clients may elect to perform in-house customer
care and management services that they currently outsource. Reduction in demand for our services and
increased competition from other providers and in-house service alternatives would create pricing pressures
and excess capacity that could have an adverse effect on our business, financial condition, and results of
operations.
Legislation discouraging offshoring of service by U.S. companies or making such offshoring difficult
could significantly affect our business
A perceived association between offshore service providers and the loss of jobs in the United States has been
a focus of political debate in recent years. As a result, current and prospective clients may be reluctant to hire
offshore service providers like TTEC to avoid negative perceptions and regulatory scrutiny. If they seek
customer care and management capacity onshore that was previously available to them through outsourcers
outside of the United States, they may elect to perform these services in-house instead of outsourcing the
services onshore. Possible tax incentives for U.S. businesses to return offshored, including outsourced and
(cid:82)(cid:73)(cid:73)(cid:86)(cid:75)(cid:82)(cid:85)(cid:72)(cid:71)(cid:15)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:17)
Legislation aimed to expand protections for U.S. based customers from having their personal data accessible
outside of the United States could also impact offshore outsourcing opportunities by requiring notice and
consent as a condition for sharing personal identifiable information with service providers based outside of the
United States. Any material changes in current trends among U.S. based clients to use services outsourced
and delivered offshore would materially impact our business and results of operations.
Health epidemics could disrupt our business and adversely affect our financial results
Our customer engagement centers typically seat hundreds of employees in one location. Accordingly, an
outbreak of a contagious infection in one or more of the locations in which we do business may result in
significant worker absenteeism, lower capacity utilization rates, voluntary or mandatory closure of our customer
engagement centers, travel restrictions on our employees, and other disruptions to our business. Any prolonged
or widespread health epidemic could severely disrupt our business operations and have a material adverse
effect on our business, its financial condition and results of operations.
16
Table of Contents
The volatility of our stock price may result in loss of investment
Our share price has been and may continue to be subject to substantial fluctuation. We believe that market
prices for securities of companies that provide outsourced customer care management services have
experienced volatility in recent years and such volatility may affect our stock price as well. As we continue to
diversify our service offerings to include growth, technology and strategic consulting, our stock price volatility
may stabilize, or it may be further impacted by stock price fluctuations in these new industries. In addition to
fluctuations specific to our industry and service offerings, we believe that various other factors such as general
economic conditions, changes or volatility in the financial markets, and changing market condition for our clients
could impact the valuation of our stock. The quarterly variations in our financial results, acquisition and
divestiture announcements by us or our competitors, strategic partnerships and new service offering, our failure
to meet our growth objectives or exceed (cid:82)(cid:88)(cid:85)(cid:3)(cid:87)(cid:68)(cid:85)(cid:74)(cid:72)(cid:87)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:87)(cid:86)(cid:182)(cid:3)(cid:83)(cid:72)(cid:85)(cid:70)(cid:72)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:69)(cid:82)(cid:88)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)
could cause the market price of our shares to fluctuate substantially in the future.
Our Chairman and Chief Executive Officer controls a majority of our stock and has control over all
matters requiring action by our stockholders
Kenneth D. Tuchman, our Chairman and Chief Executive Officer, directly and beneficially owns approximately
68% of TTEC(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:17)(cid:3) As a result, Mr. Tuchman could and does exercise significant influence and
control over our business practices and strategy, including the direction of our business and our dividend policy,
and all matters requiring action by our stockholders, including the election of our entire Board of Directors and
our capital structure. Further, a change in control of our company or significant capital transactions could not
be a(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:48)(cid:85)(cid:17)(cid:3)(cid:55)(cid:88)(cid:70)(cid:75)(cid:80)(cid:68)(cid:81)(cid:182)(cid:86)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:68)(cid:79)(cid:15)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:3)(cid:76)(cid:73)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:68)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:85)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)
benefit our other stockholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We have not received written comments regarding our periodic or current reports from the staff of the SEC that
were issued 180 days or more preceding the end of our 2018 fiscal year that remain unresolved.
ITEM 2. PROPERTIES
Our corporate headquarters are located in Englewood, Colorado, which consists of approximately
264,000 square feet of owned office space. In addition to our headquarters and the customer engagement
centers used by our Customer Management Services and Customer Growth Services segments discussed
below, we also maintain sales and consulting offices in several countries around the world which serve our
Customer Technology Services and Customer Strategy Services segments.
As of December 31, 2018 we operated 85 customer engagement centers that are classified as follows:
(cid:120) Multi-Client Center (cid:178) We lease space for these centers and serve multiple clients in each facility;
(cid:120) Dedicated Center (cid:178) We lease space for these centers and dedicate the entire facility to one client; and
(cid:120) Managed Center (cid:178) These facilities are leased or owned by our clients and we staff and manage these
sites on behalf of our clients in accordance with facility management contracts.
17
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As of December 31, 2018, our customer engagement centers were located in the following countries:
Total
Australia
Brazil
Bulgaria
Canada
China
Germany
India
Ireland
Mexico
Philippines
Poland
South Africa
Thailand
United Kingdom
United States of America
Total
Centers
Number of
Multi-Client Dedicated Managed Delivery
Centers
Centers
3
2
2
8
1
1
2
1
3
19
1
1
1
2
38
85
Centers
3
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
2
(cid:178)
(cid:178)
(cid:178)
(cid:178)
6
11
(cid:178)
2
2
7
(cid:178)
(cid:178)
2
1
3
17
(cid:178)
(cid:178)
(cid:178)
(cid:178)
23
57
(cid:178)
(cid:178)
(cid:178)
1
1
1
(cid:178)
(cid:178)
(cid:178)
(cid:178)
1
1
1
2
9
17
The leases for our customer engagement centers have remaining terms ranging from one to 15 years and
generally contain renewal options. We believe that our existing customer engagement centers are suitable and
adequate for our current operations, and we have plans to build additional centers to accommodate future
business.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company has been involved in legal actions, both as plaintiff and defendant, which arise
in the ordinary course of business. The Company accrues for exposures associated with such legal actions to
the extent that losses are deemed both probable and reasonably estimable. To the extent specific reserves
have not been made for certain legal proceedings, their ultimate outcome, and consequently, an estimate of
possible loss, if any, cannot reasonably be determined at this time.
Based on currently available information and advice received from counsel, the Company believes that the
disposition or ultimate resolution of any current legal proceedings, except as otherwise specifically reserved for
(cid:76)(cid:81)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3) (cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)
flows or results of operations.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
18
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PART II
ITEM 5. (cid:48)(cid:36)(cid:53)(cid:46)(cid:40)(cid:55)(cid:3)(cid:41)(cid:50)(cid:53)(cid:3)(cid:53)(cid:40)(cid:42)(cid:44)(cid:54)(cid:55)(cid:53)(cid:36)(cid:49)(cid:55)(cid:182)(cid:54)(cid:3)(cid:38)(cid:50)(cid:48)(cid:48)(cid:50)(cid:49)(cid:3)(cid:40)(cid:52)(cid:56)(cid:44)(cid:55)(cid:60)(cid:15)(cid:3)(cid:53)(cid:40)(cid:47)(cid:36)(cid:55)(cid:40)(cid:39)(cid:3)(cid:54)(cid:55)(cid:50)(cid:38)(cid:46)(cid:43)(cid:50)(cid:47)(cid:39)(cid:40)(cid:53)
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(cid:50)(cid:88)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:49)(cid:36)(cid:54)(cid:39)(cid:36)(cid:52)(cid:3)(cid:42)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:54)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:92)(cid:80)(cid:69)(cid:82)(cid:79)(cid:3)(cid:179)(cid:55)(cid:55)(cid:40)(cid:38)(cid:17)(cid:180)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)
table sets forth the range of the high and low sales prices per share of the common stock for the quarters
indicated as reported on the NASDAQ Global Select Market:
Fourth Quarter 2018
Third Quarter 2018
Second Quarter 2018
First Quarter 2018
Fourth Quarter 2017
Third Quarter 2017
Second Quarter 2017
First Quarter 2017
Low
High
$ 29.66 $ 23.79
$ 36.20 $ 23.95
$ 37.40 $ 30.20
$ 41.80 $ 30.70
$ 43.35 $ 37.85
$ 42.15 $ 38.60
$ 42.60 $ 28.85
$ 31.30 $ 29.10
As of December 31, 2018, we had 265 holders of record of our common stock and during 2018 we declared
and paid a $0.27 per share dividend and a $0.28 per share dividend on our common stock. During 2017 we
declared and paid a $0.22 per share dividend and a $0.25 per share dividend on our common stock as
discussed below.
In 2015, our Board of Directors adopted a dividend policy, with the intent to distribute a periodic cash dividend
to stockholders of our common stock, after consideration of, among other things, TTEC(cid:182)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)
flows, capital needs and liquidity factors. The Company paid the initial dividend in 2015 and has continued to
pay a semi-annual dividend in October and April of each year in amounts ranging between $0.18 and $0.28 per
common share. On February 21, 2019, the Board of Directors authorized a $0.30 dividend per common share,
payable on April 18, 2019, to shareholders of record as of March 28, 2019. While it is our intention to continue
to pay semi-annual dividends in 2019 and beyond, any decision to pay future cash dividends will be made by
our Board of Directors. In addition, our credit facility restricts our ability to pay dividends in the event we are in
default or do not satisfy certain covenants.
Stock Repurchase Program
We continue to return capital to our shareholders via an ongoing stock repurchase program (originally
authorized by the Board of Directors in 2001). As of December 31, 2018, the cumulative authorized repurchase
allowance was $762.3 million, of which we have purchased 46.1 million shares for $735.8 million.
19
Table of Contents
Issuer Purchases of Equity Securities During the Fourth Quarter of 2018
The following table provides information about our repurchases of equity securities during the quarter ended
December 31, 2018:
Period
September 30, 2018
October 1, 2018 - October 31, 2018
November 1, 2018 - November 30, 2018
December 1, 2018 - December 31, 2018
Total
Shares
Total Number of Approximate Dollar
Value of Shares that
May Yet Be
Purchased as
Part of Publicly Purchased Under
Announced
Total Number
of Shares
Purchased
Average Price
Paid per Share
Plans or
Programs
the Plans or
Programs (In
thousands)
(cid:178) $
(cid:178) $
(cid:178) $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
$
(cid:178) $
(cid:178) $
(cid:178) $
(cid:178)
26,580
26,580
26,580
26,580
From January 1, 2019 through February 28, 2019, we have not purchased any additional shares. The stock
repurchase program does not have an expiration date and the Board authorizes additional stock repurchases
under the program from time to time.
Stock Performance Graph
The graph depicted below compares the performance of TTEC common stock with the performance of the
NASDAQ Composite Index; the Russell 2000 Index; and customized peer group over the period beginning on
December 31, 2012 and ending on December 31, 2018(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:70)(cid:75)(cid:82)(cid:86)(cid:72)(cid:81)(cid:3)(cid:68)(cid:3)(cid:179)(cid:51)(cid:72)(cid:72)(cid:85)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:180)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)Sykes
Enterprises, Incorporated (NASDAQ: SYKE) and Teleperformance (NYSE Euronext: RCF). We believe that the
companies in the Peer Group are relevant to our current business model, market capitalization and position in
the overall (cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:51)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:50)(cid:88)(cid:87)(cid:86)(cid:82)(cid:88)(cid:85)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:11)(cid:179)BPO(cid:180)(cid:12) industry.
The graph assumes that $100 was invested on December 31, 2013 in our common stock and in each
comparison index, and that all dividends were reinvested. We declared per share dividends on our common
stock of $0.47 during 2017 and $0.55 during 2018. Stock price performance shown on the graph below is not
necessarily indicative of future price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among TTEC Holdings, Inc., The NASDAQ Composite Index,
The Russell 2000 Index, And A Peer Group
TTEC Holdings, Inc.
NASDAQ Composite
Russell 2000
Peer Group
2013
2014
2015
2016
2017
2018
$
$
$
$
100 $
100 $
100 $
100 $
99 $
115 $
105 $
113 $
118 $
123 $
100 $
142 $
131 $
133 $
122 $
164 $
175 $
172 $
139 $
226 $
127
166
124
245
December 31,
20
Table of Contents
21
Table of Contents
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with Item 7. (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
Analysis of Financial Condition and Results of Operations, the Consolidated Financial Statements and the
related notes appearing elsewhere in this Form 10-K (amounts in thousands except per share amounts).
2018
Year Ended December 31,
2016
2015
2017
2014
Statement of Operations Data
Revenue
Cost of services
Selling, general and administrative
Depreciation and amortization
Other operating expenses
Income from operations
Other income (expense)
Provision for income taxes
Noncontrolling interest
Net income attributable to TTEC
stockholders
Weighted average shares outstanding
Basic
Diluted
$ 1,509,171
(1,157,927)
(182,428)
(69,179)
$ 1,477,365
(1,110,068)
(182,314)
(64,507)
(19,987) (4)
100,489
(11,602) (5)
(78,075) (6)
(3,556)
$ 1,275,258
(941,592)
(175,797)
(68,675)
(36,442) (8)
52,752
(2,454) (9)
(12,863) (10)
(3,757)
$ 1,286,755
(928,247)
(194,606)
(63,808)
$ 1,241,781
(886,492)
(198,553)
(56,538)
(9,914) (12)
90,180
(4,291)
(20,004) (13)
(4,219)
(3,723) (14)
96,475
3,984 (15)
(23,042) (16)
(5,124)
(7,583) (1)
92,054
(35,816) (2)
(16,483) (3)
(3,938)
$
35,817
$
7,256
$
33,678
$
61,666
$
72,293
46,064
46,385
45,826
46,382
47,423
47,736
48,370
49,011
49,297
50,102
Net income per share attributable to
TTEC stockholders
Basic
Diluted
$
$
Dividends issued per common share
$
0.78
0.77
0.55
$
$
$
0.16
0.16
0.47
$
$
$
0.71
0.71
0.385
$
$
$
1.27
1.26
0.36
Balance Sheet Data
Total assets
Total long-term liabilities
$ 1,054,508
466,241
$
$ 1,078,736 (7) $
514,113 (7) $
$
846,304 (11) $
304,380 (11) $
843,327
191,473
$
$
$
$
$
1.47
1.44
(cid:178)
852,475 (17)
187,780 (17)
(1)
(2)
(3)
(4)
Includes $0.8 million related to reductions in force, a $5.3 million expense due to facility exit charges
and a termination fee for a technology vendor contract, a $1.1 million expense related to the impairment
of property and equipment and a $0.3 million impairment charge related to internally developed software.
Includes a $15.6 million impairment of the full value of an equity investment and a related bridge loan,
a $9.9 million charge related to the future purchase of the remaining 30% of the Motif acquisition, a $1.6
million net loss related to a business unit which was classified as assets held for sale and subsequently
reclassified to assets held and used as of December 31, 2018, a $2.0 million gain related to royalty
payments in connection with the sale of a business unit, a $0.7 million gain related to the bargain
purchase of an acquisition closed in March 2018, and a $0.3 million benefit related to a fair value
adjustment of the contingent consideration based on revised estimates of performance against targets
for one or our acquisitions.
Includes a $4.2 million benefit related to the impairment of an equity investment, a $3.4 million benefit
related to return to provision adjustments, $0.5 million of expense related to the disposition of assets, a
$0.7 million benefit related to stock options, $1.6 million of expense related to changes in tax contingent
liabilities, $1.5 million of expense related to changes in valuation allowance, a $2.1 million benefit related
to restructuring, and a $0.5 million benefit related to other items.
Includes $1.2 million expense related to reductions in force, a $2.2 million expense due to facility exit
charges, a $3.5 million expense due to write-off of leasehold improvements and other fixed assets in
connection with the facilities we exited, $7.8 million expense related to integration charges for the
Connextions acquisition, and a $5.3 million impairment charge related to two trade name intangible
assets.
22
Table of Contents
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
Includes a $5.3 million expense related to the finalization of the transition services agreement for
Connextions, a net $2.6 million loss related to a held for sale business unit that was sold in December
2017 and a $1.2 million charge to interest expense related to the future purchase of the remaining 30%
of the Motif acquisition offset by a $3.2 million benefit related to the release of the currency translation
adjustment in equity in connection with the dissolution of a foreign entity.
Includes $62.4 million of expense related to the US 2017 Tax Act, $0.4 million of expense related to the
disposition of assets, $1.9 million of benefit related to impairments, $2.2 million of benefit related to stock
options, $0.6 million of expense related to changes in valuation allowances, $5.8 million of benefit
related to restructuring, $0.6 million of benefit related to return to provision adjustments and $2.1 million
of benefit related to changes to a transition service agreement.
The Company spent $116.7 million, net of cash acquired of $6.0 million, in 2017 for the acquisitions of
Connextions and Motif. Upon acquisitions of Connextions and Motif, the Company acquired $40.8 million
in assets and assumed $21.1 million in liabilities ($12.1 million in long-term liabilities).
Includes $3.4 million expense related to reductions in force, a $1.0 million expense due to facility exit
and other charges, a $1.3 million impairment of fixed assets, a $1.4 million impairment of goodwill, an
$11.1 million impairment of internally developed software, and $18.2 million of impairment charges
related to several trade name, customer relationship and non-compete intangible assets.
Includes a $5.3 million estimated loss related to two business units which have been classified as assets
held for sale offset by a $4.8 million benefit related to fair value adjustments to the contingent
consideration based on revised estimates of performance against targets for two of our acquisitions.
Includes $1.7 million of expense related to return to provision adjustments, $1.1 million of expense
related to a transfer pricing adjustment for a prior period, $0.5 million of expense related to tax rate
changes, $0.5 million of expense related to changes in valuation allowances, $1.5 million of benefit
related to restructuring charges, and $9.8 million of benefits related to impairments and loss on assets
held for sales.
The Company spent $46.1 million, net of cash acquired of $2.7 million, in 2016 for the acquisition of
Atelka. Upon acquisition of Atelka, the Company acquired $25.1 million in assets and assumed $7.7
million in liabilities ($1.4 million in long-term liabilities).
Includes $1.8 million expense related to reductions in force, a $0.4 million expense related to the
impairment of property and equipment, and a $7.7 million expense related to the impairment of goodwill.
Includes a $0.7 million benefit related to restructuring charges, $1.2 million net of expense related to
changes in valuation allowance and a related release of a deferred tax liability, $1.5 million of expense
related to provisions for uncertain tax positions, $2.6 million of benefit related to impairments, $1.3 million
of expense related to state net operating losses and credits, and $0.4 million of benefit related to other
discrete items.
Includes $3.3 million expense related to reductions in force and $0.4 million expense related to the
impairment of property and equipment.
Includes a net $6.7 million benefit related to fair value adjustments to the contingent consideration based
on revised estimates of performance against targets for four of our acquisitions.
Includes a $1.3 million benefit related to restructuring charges, a $0.4 million benefit related to a
valuation allowance for equity compensation, a $1.2 million benefit related to the closing of statute of
limitations in Canada, $3.8 million of expense related to future contingent payments, $1.3 million of
expense related to the resolution of an audit in the Netherlands, and $0.2 million of expense related to
other discrete items.
The Company spent $23.8 million net of cash acquired of $3.5 million in 2014 for the acquisitions of
Sofica and rogenSi. Upon the acquisitions of Sofica and rogenSi, the Company acquired $59.5 million
in assets and assumed $11.1 million in liabilities ($5.4 million in long-term liabilities).
23
Table of Contents
ITEM 7. (cid:48)(cid:36)(cid:49)(cid:36)(cid:42)(cid:40)(cid:48)(cid:40)(cid:49)(cid:55)(cid:182)(cid:54)(cid:3)(cid:39)(cid:44)(cid:54)(cid:38)(cid:56)(cid:54)(cid:54)(cid:44)(cid:50)(cid:49)(cid:3)(cid:36)(cid:49)(cid:39)(cid:3)(cid:36)(cid:49)(cid:36)(cid:47)(cid:60)(cid:54)(cid:44)(cid:54)(cid:3)(cid:50)(cid:41)(cid:3)(cid:41)(cid:44)(cid:49)(cid:36)(cid:49)(cid:38)(cid:44)(cid:36)(cid:47)(cid:3)(cid:38)(cid:50)(cid:49)(cid:39)(cid:44)(cid:55)(cid:44)(cid:50)(cid:49)(cid:3)(cid:36)(cid:49)(cid:39)(cid:3)(cid:53)(cid:40)(cid:54)(cid:56)(cid:47)(cid:55)(cid:54)(cid:3)
OF OPERATIONS
Executive Summary
TTEC Holdings, (cid:44)(cid:81)(cid:70)(cid:17)(cid:3) (cid:11)(cid:179)(cid:55)(cid:55)(cid:40)(cid:38)(cid:180)(cid:15)(cid:3) (cid:179)(cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:15)(cid:3) (cid:179)(cid:90)(cid:72)(cid:180)(cid:15)(cid:3) (cid:179)(cid:82)(cid:88)(cid:85)(cid:180)(cid:3) (cid:82)(cid:85)(cid:3) (cid:179)(cid:88)(cid:86)(cid:180)) is a leading global customer experience
technology and services company focused on the design, implementation and delivery of transformative
(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:80)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:90)(cid:82)(cid:85)(cid:79)(cid:71)(cid:182)(cid:86)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:76)(cid:70)(cid:82)(cid:81)(cid:76)(cid:70)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:76)(cid:86)(cid:85)(cid:88)(cid:83)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:69)(cid:85)(cid:68)(cid:81)(cid:71)(cid:86). We help large global companies increase
revenue and reduce costs by delivering personalized customer experiences across every interaction channel
and phase of the customer lifecycle as an end-to-end provider of customer engagement services, technologies,
insights and innovations. We are organized into two centers of excellence: TTEC Digital and TTEC Engage.
(cid:120) TTEC Digital designs and builds human centric, tech-enabled, insight-driven customer experience
solutions.
(cid:120) (cid:55)(cid:55)(cid:40)(cid:38)(cid:3)(cid:40)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)delivery center of excellence that operates turnkey customer
acquisition, care, revenue growth, digital fraud prevention and detection, and content moderation
services.
TTEC Digital and TTEC Engage come together under our unified offering, HumanifyTM Customer Engagement
as a Service, which drives measurable results for clients through the delivery of personalized omnichannel
interactions that are seamless and relevant. Our offering is supported by 52,400 employees delivering services
in 23 countries from 85 customer engagement centers on six continents. Our end-to-end approach differentiates
the Company by combining service design, strategic consulting, data analytics, process optimization, system
integration, operational excellence, and technology solutions and services. This unified offering is value-
oriented, outcome-based, and delivered on a global scale across four business segments: two of which
comprise TTEC Digital - (cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)(cid:54)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:92)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:11)(cid:179)(cid:38)(cid:54)(cid:54)(cid:180)(cid:12) and (cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)(cid:55)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:11)(cid:179)(cid:38)(cid:55)(cid:54)(cid:180)(cid:12); and
two of which comprise TTEC Engage - (cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3) (cid:42)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3) (cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3) (cid:11)(cid:179)(cid:38)(cid:42)(cid:54)(cid:180)(cid:12) and Customer Management
(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:11)(cid:179)(cid:38)(cid:48)(cid:54)(cid:180)(cid:12).
Our revenue for fiscal 2018 was $1.509 billion, approximately 84% or $1.270 billion of which came from our
TTEC Engage center of excellence and $239 million, or 16%, came from our TTEC Digital center of excellence.
Since our establishment in 1982, we have helped clients strengthen their customer relationships, brand
recognition and loyalty by simplifying and personalizing interactions with their customers. We deliver thought
leadership, through innovation in programs that differentiate our clients from their competition.
To improve our competitive position in a rapidly changing market and stay strategically relevant to our clients,
we continue to invest in innovation and growth businesses, diversifying and strengthening our core customer
care services with consulting, data analytics and insights technologies, and technology-enabled, outcomes-
focused services.
We also invest in businesses that enable us to expand our geographic footprint, broaden our product and
service capabilities, increase our global client base and industry expertise, and further scale our end-to-end
integrated solutions platform. In 2018, we acquired Strategic Communications Services, a system integrator for
multichannel contact center platforms based in the United Kingdom. In 2017, we acquired Motif, Inc., a digital
fraud prevention and detection and content moderation services company based in India and the Philippines,
and Connextions, Inc., a U.S.-based health services company focused on improving customer relationships for
healthcare plan providers and pharmacy benefits managers.
We have developed tailored expertise in the automotive, communications, healthcare, financial services,
government, logistics, media and entertainment, retail, technology, travel and transportation industries. We
target customer-focused industry leaders in the Global 1000 and serve approximately 300 clients globally.
Our Integrated Service Offerings, Centers of Excellence and Business Segments
We have two centers of excellence that encompass our four operating and reportable segments.
TTEC Digital houses our professional services and technology platforms. These solutions are critical to
enabling and accelerating digital transformation for our clients.
24
Table of Contents
Customer Strategy Services Segment
Through our strategy and operations, analytics, and learning and performance consulting expertise, we help
our clients design, build and execute their customer engagement strategies. We help our clients to better
(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:71)(cid:76)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:89)(cid:76)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:79)(cid:82)(cid:81)(cid:74)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:72)(cid:70)(cid:82)(cid:81)(cid:82)(cid:80)(cid:76)(cid:70)(cid:3)
value. Using proprietary analytic models, we provide the insight clients need to build the business case for
customer centricity and to better optimize their investments in customer experience. This insight-based strategy
creates a roadmap for transformation. We build customer journey maps to inform service design across
automated, human and hybrid interactions and increasingly are developing and implementing strategies around
Interactive Virtual Assistants (chat bots). A key component of this segment involves instilling a high-
performance culture through management and leadership alignment and process optimization.
Customer Technology Services Segment
In connection with the design of the customer engagement strategy, our ability to architect, deploy and host or
manage the client(cid:182)(cid:86)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:72)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:69)(cid:72)(cid:70)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:68)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:72)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:70)(cid:75)(cid:76)(cid:72)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:88)(cid:86)(cid:87)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3) (cid:72)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3) (cid:42)(cid:76)(cid:89)(cid:72)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:83)(cid:85)(cid:82)(cid:79)(cid:76)(cid:73)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:80)(cid:82)(cid:69)(cid:76)(cid:79)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:87)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:76)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
(cid:71)(cid:72)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:72)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)r customers across the growing array of channels
including email, social networks, mobile, web, SMS text, voice and chat. We design, implement and manage
cloud, on-premise or hybrid customer experience environments to deliver a consistent and superior experience
across all touch points on a global scale that we believe result in higher quality, lower costs and reduced risk
(cid:73)(cid:82)(cid:85)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3) (cid:55)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:76)(cid:73)(cid:92)(cid:140)(cid:3) Technology Platform, we also provide data-driven context aware
software-as-a-(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:11)(cid:179)(cid:54)(cid:68)(cid:68)(cid:54)(cid:180)(cid:12)(cid:3) (cid:69)(cid:68)(cid:86)ed solutions that link customers seamlessly and directly to appropriate
resources, any time and across any channel.
TTEC Engage houses our end-to-end managed services operations for customer care, revenue growth, digital
fraud prevention and detection, and content moderation services.
Customer Growth Services Segment
We offer integrated sales and marketing solutions to help our clients boost revenue in new, fragmented or
underpenetrated business-to-consumer or business-to-business markets. We deliver or manage approximately
$4 billion in client revenue annually via the discovery, acquisition, growth and retention of customers through a
combination of our highly trained, client-dedicated sales professionals and proprietary analytics platform. This
platform continuously aggregates individual customer information across all channels into one holistic view so
as to ensure more relevant and personalized communications.
Customer Management Services Segment
(cid:58)(cid:72)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:73)(cid:85)(cid:82)(cid:81)(cid:87)-to-back office processes to deliver just-in-time, personalized, protected,
multi-channel interactions. Our front-office solutions seamlessly integrate voice, chat, email, e-commerce and
social media to optimize the customer experience for our clients. In addition, we manage certain client back-
office processes to enhance their customer-centric view of relationships and maximize operating efficiencies.
We also perform fraud prevention and content moderation services to protect our clients and their customers
from malevolent digital activities. Our delivery of integrated business processes via our onshore, offshore or
work-from-home associates reduces operating costs and allows customer needs to be met more quickly and
efficiently, resulting in higher satisfaction, brand loyalty and a stronger competitive position for our clients.
(cid:37)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:70)(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:85)(cid:82)(cid:86)(cid:86)-business segment and on
a discrete basis.
Additional information with respect to our segments and geographic footprint is included in Part II, Item 8.
Financial Statements and Supplementary Data, Note 3 to the Consolidated Financial Statements.
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Table of Contents
Our 2018 Financial Results
In 2018, our revenue increased 2.2% to $1,509 million over the same period in 2017, including a decrease of
0.5% or $8.0 million due to foreign currency fluctuations. The increase in revenue is primarily related to a $31.6
million revenue increase for CTS and a $12.6 million revenue increase for CGS offset by a $12.7 million net
revenue decrease for CMS, which includes a $7.5 million decrease related to foreign exchange fluctuations
offset by a $9.0 million net increase related to the adoption of ASC 606 for revenue.
Our 2018 income from operations decreased $8.4 million to $92.1 million or 6.1% of revenue, from $100.5
million or 6.8% of revenue for 2017. The change in operating income is attributable to a number of different
factors across the segments. The decline in income from operations relates exclusively to CMS, with all other
(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)(cid:3)(cid:38)(cid:48)(cid:54)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:71)(cid:72)(cid:70)(cid:79)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)
labor costs related to wage and healthcare benefits within our U.S. business. This increased cost is tied to
macroeconomic factors including a lower unemployment rate and rising wages. Additionally, an increase in
business ramps associated with a higher volume of new business signings during the second and third quarters
led to a spike in launch costs in the second half of 2018. Launch costs are incurred in transitioning new business
from our clients to TTEC and historically are not specifically compensated for by our clients.
The CTS operating income expanded significantly with a 121% improvement over the prior year primarily on
the growth of its higher margin recurring cloud business and its system integration business which provides
services pre and post buildout of each client cloud platform, the write-off of a trade name in the prior year, and
large second half of the year product sales. The CSS operating income improved 164% due primarily to the
write-off of a trade name in the prior year and the rationalization of certain practice areas as they were
integrated. The CGS operating income increased due to new business adds during the year.
Income from operations in 2018 and 2017 included a total of $7.6 million and $20.0 million of restructuring and
integration charges and asset impairments, respectively.
Our offshore customer engagement centers serve clients based in the U.S. and in other countries and span
five countries with 23,725 workstations representing 55% of our global delivery capabilities. Revenue for our
CMS and CGS segments provided in these offshore locations was $438 million and represented 35% of our
2018 revenue, as compared to $450 million and 35% of our 2017 revenue.
As of December 31, 2018, the overall capacity utilization in our centers was 80%. The table below presents
workstation data for all of our centers as of December 31, 2018 and 2017. Our utilization percentage is defined
as the total number of utilized production workstations compared to the total number of available production
workstations.
Total centers
Sites open >1 year
Sites open <1 year
Total workstations
December 31, 2018
December 31, 2017
Total
Total
Production
Workstations
In Use
% In
Use
Production
Workstations
In Use
% In
Use
42,687
309
42,996
34,017
231
34,248
80 %
75 %
80 %
42,033
2,404
44,437
34,409
2,392
36,801
82 %
100 %
83 %
We continue to see demand from all geographic regions to utilize our offshore delivery capabilities and expect
this trend to continue. On the other hand, some of our clients may be subject to regulatory pressures to bring
more services onshore to the United States. In light of these trends, we plan to continue to selectively retain
and grow capacity in and expand into new offshore markets, while maintaining appropriate capacity in the
United States. As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuations
increases, we continue to actively manage this risk via a multi-currency hedging program designed to minimize
operating margin volatility.
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Table of Contents
Critical Accounting Policies and Estimates
(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
Consolidated Financial Statements, which have been prepared in accordance with accounting principles
(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:83)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:11)(cid:179)(cid:42)(cid:36)(cid:36)(cid:51)(cid:180)(cid:12)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:86)(cid:3)(cid:88)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:3)
estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well
as the disclosure of contingent assets and liabilities. We regularly review our estimates and assumptions. These
estimates and assumptions, which are based upon historical experience and on various other factors believed
to be reasonable under the circumstances, form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Reported amounts and disclosures may
have been different had management used different estimates and assumptions or if different conditions had
occurred in the periods presented. Below is a discussion of the policies that we believe may involve a high
degree of judgment and complexity.
Revenue Recognition (cid:177) 2018 Revenue
The Company recognizes revenue from contracts and programs when control of the promised goods or services
is transferred to the customers, in an amount that reflects the consideration it expects to be entitled to in
exchange for those goods or services. Revenue is recognized when or as performance obligations are satisfied
by transferring control of a promised good or service to a customer. A performance obligation is a promise in a
contract to transfer a distinct good or service to the customer. Performance obligation is the unit of accounting
for revenue recognition under the provisions of ASC Topic 606(cid:15)(cid:3)(cid:179)(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:68)(cid:79)(cid:79)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:11)(cid:179)(cid:36)(cid:54)(cid:38)(cid:3)(cid:25)(cid:19)(cid:25)(cid:180)(cid:12)(cid:17)(cid:3)(cid:36)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:182)(cid:86)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3) each distinct performance
obligation in recognizing revenue.
The BPO inbound and outbound service fees are based on either a per minute, per hour, per FTE, per
transaction or per call basis, which represents the majority of our contracts. These contracts have a single
performance obligation as the promise to transfer the individual goods or services is not separately identifiable
from other promises in the contracts and, therefore, not distinct. For example, services for the training of the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:74)(cid:72)(cid:81)(cid:87)s (which are separately billable to the customer) are a separate promise in our BPO contracts,
but they are not distinct from the primary service obligations to transfer services to the customers. The
performance of the customer service by the agents is highly dependent on the initial, growth, and seasonal
training services provided to the agents during the life of a program. The training itself is not considered to have
value to the customer on a standalone basis, and therefore, training on a standalone basis cannot be considered
a separate unit of accounting. The Company therefore defers revenue from certain training services that are
rendered mainly upon commencement of a new client contract or program, including seasonal programs.
Revenue is also deferred when there is significant growth training in an existing program. Accordingly,
recognition of initial, growth, and seasonal training revenues and associated costs (consisting primarily of labor
and related expenses) are deferred and amortized over the period of economic benefit. With the exception of
training which is typically billed upfront and deferred, the remainder of revenue is invoiced on a monthly or
quarterly basis as services are performed and does not create a contract asset or liability.
In addition to revenue from BPO services, revenue also consists of fees from services for program launch,
professional consulting, fully-hosted or managed technology and learning innovation services. The contracts
containing these service offerings may contain multiple performance obligations. For contracts with multiple
(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:182)(cid:86)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
using the best estimate of the standalone selling price of each distinct good or service in the contract. The
primary method used to estimate standalone selling price is the expected cost plus a margin approach, under
which the Company forecasts its expected costs of satisfying a performance obligation and then adds an
appropriate margin for that distinct good or service. The Company forecasts its expected cost based on
historical data, current prevailing wages, other direct and indirect costs incurred in recently completed contracts,
market conditions, and client specific other cost considerations. For these services, the point at which the
transfer of control occurs determines when revenue is recognized in a specific reporting period. Where there
are product sales, the attribution of revenue is made when FOB-destination delivery occurs (control transfers),
which is the standard shipment terms, and therefore at a point in time. Where services are rendered to a
customer, the attribution is aligned with the progress of work and is recognized over time (i.e. based on
measuring the progress toward complete satisfaction of a performance obligation using an output method or an
27
Table of Contents
input method). Where output method is used, revenue is recognized on the basis of direct measurements of
the value to the customer of the goods or services transferred relative to the remaining goods or services
(cid:83)(cid:85)(cid:82)(cid:80)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:83)(cid:88)(cid:87)(cid:3)
method in which revenue is recognized on the basis of efforts or inputs toward satisfying a performance
obligation (for example, resources consumed, labor hours expended, costs incurred, or time elapsed) relative
to the total expected inputs to satisfy the performance obligation. The measures used provide faithful depiction
of the transfer of goods or services to the customers. For example, revenue is recognized on certain consulting
contracts based on labor hours expended as a measurement of progress where the consulting work involves
(cid:76)(cid:81)(cid:83)(cid:88)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:88)(cid:79)(cid:87)(cid:68)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3) (cid:76)(cid:86)(cid:3) (cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:75)(cid:82)(cid:88)(cid:85)(cid:86)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)ded over total number of
estimated hours included in the contract multiplied by the total contract consideration. The contract
consideration can be a fixed price or an hourly rate, and in either case, the use of labor hours expended as an
input measure provides a faithful depiction of the transfer of services to the customers. Deferred revenues for
these services represent amounts collected from, or invoiced to, customers in excess of revenues recognized.
This results primarily from i) receipt of license fees that are deferred due to one or more of the revenue
recognition criteria not being met, and ii) the billing of annual customer support agreements, annual managed
service agreements, and billings for other professional services that have not yet been performed by the
Company. The Company records amounts billed and received, but not earned, as deferred revenue. These
amounts are recorded in Deferred revenue or Other long-term liabilities, as applicable, in the accompanying
Consolidated Balance Sheets based on the period over which the Company expects to render services. Costs
directly associated with revenue deferred, consisting primarily of labor and related expenses, are also deferred
and recognized in proportion to the expected future revenue from the contract.
Variable consideration exists in contracts for certain client programs that provide for adjustments to monthly
billings based upon whether the Company achieves, exceeds or fails certain performance criteria. Adjustments
to monthly billings consist of contractual bonuses/penalties, holdbacks and other performance based
conditions. Variable consideration is estimated at contract inception at its most likely value and updated at the
end of each reporting period as additional performance data becomes available. Revenue related to such
variable consideration is recognized only to the extent that a significant reversal of any incremental revenue is
not considered probable.
Contract modifications are routine in the performance of the customer contracts. Contracts are often modified
to account for customer mandated changes in the contract specifications or requirements, including service
level changes. In most instances, contract modifications relate to goods or services that are incremental and
distinctly identifiable, and, therefore, are accounted for prospectively.
Direct and incremental costs to obtain or fulfill a contract are capitalized, and the capitalized costs are amortized
over the corresponding period of benefit, determined on a contract by contract basis. The Company recognizes
an asset for the incremental costs of obtaining a contract with a customer if it expects to recover those costs.
The incremental costs of obtaining a contract are those costs that the Company incurs to obtain a customer
contract that it would not have incurred if the contract had not been obtained. Contract acquisition costs consist
primarily of payment of commissions to sales personnel and are incurred when customer contracts are signed.
The deferred sales commission amounts are amortized based on the expected period of economic benefit and
are classified as current or non-current based on the timing of when they are expected to be recognized as an
expense. Costs to obtain a contract that would have been incurred regardless of whether the contract was
obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the
customer regardless of whether the contract is obtained. Sales commissions are paid for obtaining new clients
only and are not paid for contract renewals or contract modifications. Capitalized costs of obtaining contracts
are periodically reviewed for impairment.
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In certain cases, the Company negotiates an upfront payment to a customer in conjunction with the execution
of a contract. Such upfront payments are critical to acquisition of new business and are often used as an
incentive to negotiate favorable rates from the clients and are accounted for as upfront discounts for future
services. Such payments are either made in cash at the time of execution of a contract or are netted against
(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:89)(cid:82)(cid:76)(cid:70)(cid:72)(cid:86)(cid:17)(cid:3)(cid:51)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)
amortized in proportion to the expected future revenue from the contract, which in most cases results in straight-
line amortization over the life of the contract. Such payments are considered a reduction of the selling prices of
(cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:3) (cid:82)(cid:85)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:15)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:68)(cid:86)(cid:3) (cid:68)(cid:3) (cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3) (cid:90)(cid:75)(cid:72)(cid:81)(cid:3)
amortized. Such capitalized contract acquisition costs are periodically reviewed for impairment taking into
consideration ongoing future cash flows expected from the contract and estimated remaining useful life of the
contract.
(cid:54)(cid:82)(cid:80)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)contracts are short-term in nature with a contract term of one year or less. For
those contracts, the Company has utilized the practical expedient in ASC 606-10-50-14 exempting the
Company from disclosure of the transaction price allocated to remaining performance obligations if the
performance obligation is part of a contract that has an original expected duration of one year or less. Also in
alignment with ASC 606-10-50-14, the Company does not disclose the value of unsatisfied performance
obligations for contracts for which it recognizes revenue at the amount to which it has the right to invoice for
(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:72)(cid:71)(cid:17)(cid:3)(cid:36)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:79)(cid:92)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)(cid:3)(cid:42)(cid:76)(cid:89)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
foregoing, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a
(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:82)(cid:81)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3)(cid:51)(cid:88)(cid:85)(cid:86)(cid:88)(cid:68)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:68)(cid:70)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:71)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3)
under ASC 606-10-32-2A, sales, value add, and other taxes that are collected from customers concurrent with
revenue-producing activities, which the Company has an obligation to remit to the governmental authorities,
are excluded from revenue.
Revenue Recognition (cid:177) 2017 and prior years
We recognize revenue when evidence of an arrangement exists, the delivery of service has occurred, the fee
is fixed or determinable and collection is reasonably assured. The BPO inbound and outbound service fees are
based on either a per minute, per hour, per full-time employee, per transaction or per call basis. Certain client
programs provide for adjustments to monthly billings based upon whether we achieve, exceed or fail certain
performance criteria. Adjustments to monthly billings consist of contractual bonuses/penalties, holdbacks and
other performance based contingencies. Revenue recognition is limited to the amount that is not contingent
upon delivery of future services or meeting other specified performance conditions.
Revenue also consists of services for agent training, program launch, professional consulting, fully-hosted or
managed technology and learning innovation. These service offerings may contain multiple element
arrangements whereby we determine if those service offerings represent separate units of accounting. A
deliverable constitutes a separate unit of accounting when it has standalone value and delivery or performance
of the undelivered items is considered probable and substantially within our control. If those deliverables are
determined to be separate units of accounting, revenue is recognized as services are provided. If those
deliverables are not determined to be separate units of accounting, revenue for the delivered services are
bundled into one unit of accounting and recognized over the life of the arrangement or at the time all services
and deliverables have been delivered and satisfied. We allocate revenue to each of the deliverables based on
(cid:68)(cid:3) (cid:86)(cid:72)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3) (cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3) (cid:75)(cid:76)(cid:72)(cid:85)(cid:68)(cid:85)(cid:70)(cid:75)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:89)(cid:72)(cid:81)(cid:71)(cid:82)(cid:85)(cid:3) (cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:70)(cid:3) (cid:82)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:72)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3) (cid:11)(cid:179)(cid:57)(cid:54)(cid:50)(cid:40)(cid:180)(cid:12)(cid:15)(cid:3) (cid:87)(cid:75)(cid:76)(cid:85)(cid:71)-party evidence, and then
estimated selling price. VSOE is based on the price charged when the deliverable is sold separately. Third-
party evidence is based on largely interchangeable competitor services in standalone sales to similarly situated
customers. Estimated selling price is based on our best estimate of what the selling prices of deliverables would
be if they were sold regularly on a standalone basis. Estimated selling price is established considering multiple
factors including, but not limited to, pricing practices in different geographies, service offerings, and customer
classifications. Once we allocate revenue to each deliverable, we recognize revenue when all revenue
recognition criteria are met.
Periodically, we will make certain expenditures related to acquiring contracts or provide up-front discounts for
future services. These expenditures are capitalized as contract acquisition costs and amortized in proportion to
the expected future revenue from the contract, which in most cases results in straight-line amortization over the
life of the contract. Amortization of these contract acquisition costs is recorded as a reduction to revenue.
29
Table of Contents
Income Taxes
Accounting for income taxes requires recognition of deferred tax assets and liabilities for the expected future
income tax consequences of transactions that have been included in the Consolidated Financial Statements or
tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in
which the differences are expected to reverse. When circumstances warrant, we assess the likelihood that our
net deferred tax assets will more likely than not be recovered from future projected taxable income.
We continually review the likelihood that deferred tax assets will be realized in future tax periods under the
(cid:179)(cid:80)(cid:82)(cid:85)(cid:72)-likely-than-(cid:81)(cid:82)(cid:87)(cid:180)(cid:3)(cid:70)(cid:85)(cid:76)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:80)(cid:68)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:77)(cid:88)(cid:71)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:72)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:69)(cid:82)(cid:87)(cid:75)(cid:3)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
negative, in determining whether, based on the weight of that evidence, a valuation allowance is required.
We follow a two-step approach to recognizing and measuring uncertain tax positions. The first step is to
determine if the weight of available evidence indicates that it is more likely than not that the tax position will be
sustained on audit. The second step is to estimate and measure the tax benefit as the amount that has a greater
than 50% likelihood of being realized upon ultimate settlement with the tax authority. We evaluate these
uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors
including changes in facts or circumstances, changes in applicable tax law, and settlement of issues under
audit.
Interest and penalties relating to income taxes and uncertain tax positions are accrued net of tax in the Provision
for income taxes in the accompanying Consolidated Statements of Comprehensive Income (Loss).
In the future, our effective tax rate could be adversely affected by several factors, many of which are outside
our control. Our effective tax rate is affected by the proportion of revenue and income before taxes in the various
domestic and international jurisdictions in which we operate. Further, we are subject to changing tax laws,
regulations and interpretations in multiple jurisdictions in which we operate, as well as the requirements,
pronouncements and rulings of certain tax, regulatory and accounting organizations. We estimate our annual
effective tax rate each quarter based on a combination of actual and forecasted results of subsequent quarters.
Consequently, significant changes in our actual quarterly or forecasted results may impact the effective tax rate
for the current or future periods.
Tax Reform
The United States recently enacted comprehensive tax reform legislation known as the Tax Cuts and Jobs Act
(the "2017 Tax Act") that, among other things, reduces the U.S. federal corporate income tax rate from 35% to
(cid:21)(cid:20)(cid:8)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:76)(cid:80)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:68)(cid:3) (cid:87)(cid:72)(cid:85)(cid:85)(cid:76)(cid:87)(cid:82)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3) (cid:87)(cid:68)(cid:91)(cid:3) (cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:15)(cid:3) (cid:69)(cid:88)(cid:87)(cid:3) (cid:76)(cid:80)(cid:83)(cid:82)(cid:86)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:3) (cid:68)(cid:79)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:179)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3) (cid:72)(cid:85)(cid:82)(cid:86)(cid:76)on and anti-(cid:68)(cid:69)(cid:88)(cid:86)(cid:72)(cid:3) (cid:87)(cid:68)(cid:91)(cid:180)(cid:3)
(cid:11)(cid:179)(cid:37)(cid:40)(cid:36)(cid:55)(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:82)(cid:81)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:79)(cid:82)(cid:90)(cid:3)(cid:87)(cid:68)(cid:91)(cid:72)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:179)(cid:42)(cid:44)(cid:47)(cid:55)(cid:44)(cid:180)(cid:12)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:45)(cid:68)(cid:81)(cid:88)(cid:68)(cid:85)(cid:92)(cid:3)(cid:20)(cid:15)(cid:3)
2018. In addition, the law imposes a one-time mandatory repatriation tax on accumulated post-1986 foreign
earnings on domestic corporations effective for the 2017 tax year. As of December 31, 2018, we have
completed our accounting for the tax effects of the 2017 Tax Act and no material adjustment was recorded to
the 2017 estimate.
While our accounting for the recorded impact of the 2017 Tax Act is deemed to be complete, these amounts
are based on prevailing regulations and currently available information, and any additional guidance issued by
(cid:87)(cid:75)(cid:72)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:11)(cid:179)(cid:44)(cid:53)(cid:54)(cid:180)(cid:12)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)t our recorded amounts in future periods.
(cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:81)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:82)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:81)(cid:72)(cid:90)(cid:3) (cid:42)(cid:44)(cid:47)(cid:55)(cid:44)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:37)(cid:40)(cid:36)(cid:55)(cid:3) (cid:85)(cid:88)(cid:79)(cid:72)(cid:86)(cid:3) (cid:76)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3)
compute the related taxes in the period the entity becomes subject to either. A reasonable estimate of the
effects of these provisions has been included in the 2018 annual financial statements.
Impairment of Long-Lived Assets
We evaluate the carrying value of property, plant and equipment and definite-lived intangible assets for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An asset is considered to be impaired when the forecasted undiscounted cash flows of an asset
group are estimated to be less than its carrying value. The amount of impairment recognized is the difference
between the carrying value of the asset group and its fair value. Fair value estimates are based on assumptions
concerning the amount and timing of estimated future cash flows and assumed discount rates.
30
Table of Contents
Goodwill and Indefinite-Lived Intangible Assets
We evaluate goodwill and indefinite-lived intangible assets for possible impairment at least annually or
whenever events or changes in circumstances indicate that the carrying amount of such assets may not be
recoverable.
We use a two step process to assess the realizability of goodwill. The first step, Step 0, is a qualitative
assessment that analyzes current economic indicators associated with a particular reporting unit. For example,
we analyze changes in economic, market and industry conditions, business strategy, cost factors, and financial
performance, among others, to determine if there would be a significant decline to the fair value of a particular
reporting unit. A qualitative assessment also includes analyzing the excess fair value of a reporting unit over its
carrying value from impairment assessments performed in previous years. If the qualitative assessment
indicates a stable or improved fair value, no further testing is required.
If a qualitative assessment indicates that a significant decline to fair value of a reporting unit is more likely than
(cid:81)(cid:82)(cid:87)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:73)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:76)(cid:87)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:75)(cid:76)(cid:86)(cid:87)(cid:82)(cid:85)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:54)(cid:87)(cid:72)(cid:83)(cid:3)(cid:20)(cid:3)
testing where we calculate the fair value of a reporting unit based on discounted future probability-weighted
cash flows. If Step 1 indicates that the carrying value of a reporting unit is in excess of its fair value, we will
(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:84)(cid:88)(cid:68)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:69)(cid:92)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:76)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:72)(cid:71)(cid:86)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:17)
We estimate fair value using discounted cash flows of the reporting units. The most significant assumptions
used in these analyses are those made in estimating future cash flows. In estimating future cash flows, we use
financial assumptions in our internal forecasting model such as projected capacity utilization, projected changes
in the prices we charge for our services, projected labor costs, as well as contract negotiation status. The
financial and credit market volatility directly impacts our fair value measurement through our weighted average
cost of capital that we use to determine our discount rate. We use a discount rate we consider appropriate for
the country where the business unit is providing services.
Similar to goodwill, the Company may first use a qualitative analysis to assess the realizability of its indefinite-
lived intangible assets. The qualitative analysis will include a review of changes in economic, market and
industry conditions, business strategy, cost factors, and financial performance, among others, to determine if
there would be a significant decline to the fair value of an indefinite-lived intangible asset. If a quantitative
analysis is completed, an indefinite-lived intangible asset (such as a trade name) is evaluated for possible
impairment by comparing the fair value of the asset with its carrying value. Fair value is estimated as the
discounted value of future revenues arising from a trade name using a royalty rate that a market participant
(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3) (cid:83)(cid:68)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:72)(cid:3) (cid:81)(cid:68)(cid:80)(cid:72)(cid:17)(cid:3)(cid:36)(cid:81)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:72)(cid:3) (cid:81)(cid:68)(cid:80)(cid:72)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3) (cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)
exceeds its estimated fair value.
Restructuring and Liability
We routinely assess the profitability and utilization of our customer engagement centers and existing markets.
In some cases, we have chosen to close under-performing customer engagement centers and complete
reductions in workforce to enhance future profitability. Severance payments that occur from reductions in
workforce are made in accordance with postemployment plans and/or statutory requirements that are
communicated to all employees upon hire date; therefore, we recognize severance liabilities when they are
determined to be probable and reasonably estimable. Other liabilities for costs associated with an exit or
disposal activity, (i.e. lease termination penalties), are recognized when the liability is incurred, rather than upon
commitment to a plan.
Derivatives
We enter into foreign exchange forward and option contracts to reduce our exposure to foreign currency
exchange rate fluctuations that are associated with forecasted revenue earned in foreign locations. We enter
into interest rate swaps to reduce our exposure to interest rate fluctuations associated with our variable rate
debt. Upon proper qualification, these contracts are accounted for as cash flow hedges under current
accounting standards. From time-to-time, we also enter into foreign exchange forward contracts to hedge our
net investment in a foreign operation.
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All derivative financial instruments are reported in the accompanying Consolidated Balance Sheets at fair value.
Changes in fair value of derivative instruments designated as cash flow hedges are recorded in Accumulated
(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3) (cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3) (cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)(cid:15)(cid:3) (cid:68)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:82)(cid:81)(cid:72)(cid:81)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3) (cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:92)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:71)(cid:72)(cid:72)(cid:80)(cid:72)(cid:71)(cid:3)
effective. Based on the criteria established by current accounting standards, all of our cash flow hedge contracts
are deemed to be highly effective. Changes in fair value of any net investment hedge are recorded as
cumulative translation adjustment in Accumulated other comprehensive income (loss) in the accompanying
Consolidated Balance Sheets offsetting the change in cumulative translation adjustment attributable to the
hedged portion of our net investment in the foreign operation. Any realized gains or losses resulting from the
foreign currency cash flow hedges are recognized together with the hedged transactions within Revenue. Any
realized gains or losses resulting from the interest rate swaps are recognized in Interest expense. Gains and
losses from the settlements of our net investment hedges remain in Accumulated other comprehensive income
(loss) until partial or complete liquidation of the applicable net investment.
We also enter into fair value derivative contracts to reduce our exposure to foreign currency exchange rate
fluctuations associated with changes in asset and liability balances. Changes in the fair value of derivative
instruments designated as fair value hedges affect the carrying value of the asset or liability hedged, with
changes in both the derivative instrument and the hedged asset or liability being recognized in Other income
(expense), net in the accompanying Consolidated Statements of Comprehensive Income (Loss).
While we expect that our derivative instruments will continue to be highly effective and in compliance with
applicable accounting standards, if our hedges did not qualify as highly effective or if we determine that
forecasted transactions will not occur, the changes in the fair value of the derivatives used as hedges would be
reflected currently in earnings.
Contingencies
We record a liability for pending litigation and claims where losses are both probable and reasonably estimable.
Each quarter, management reviews all litigation and claims on a case-by-case basis and assigns probability of
loss and range of loss.
Explanation of Key Metrics and Other Items
Cost of Services
Cost of services principally include costs incurred in connection with our customer management services,
including direct labor and related taxes and benefits, telecommunications, technology costs, sales and use tax
and certain fixed costs associated with the customer engagement centers. In addition, cost of services includes
income related to grants we may receive from local or state governments as an incentive to locate customer
engagement centers in their jurisdictions which reduce the cost of services for those facilities.
Selling, General and Administrative
Selling, general and administrative expenses primarily include costs associated with administrative services
such as sales, marketing, product development, legal, information systems (including core technology and
telephony infrastructure), accounting and finance. It also includes outside professional fees (i.e., legal and
accounting services), building expense for non-engagement center facilities and other items associated with
general business administration.
Restructuring and Integration Charges, Net
Restructuring charges, net primarily include costs incurred in conjunction with reductions in force or decisions
to exit facilities, including termination benefits and lease liabilities, net of expected sublease rentals. Integration
charges represent the activities related to the re-hiring and retraining of the agents, the consolidation of facilities,
the transfer of IT systems and other duplicative expenses incurred as the acquisitions are fully integrated.
Interest Expense
Interest expense includes interest expense, amortization of debt issuance costs associated with our Credit
Facility, and the accretion of deferred payments associated with our acquisitions.
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Other Income
The main components of other income are miscellaneous income not directly related to our operating activities,
such as foreign exchange gains and reductions in our contingent consideration.
Other Expenses
The main components of other expenses are expenditures not directly related to our operating activities, such
as foreign exchange losses and increases in our contingent consideration.
RESULTS OF OPERATIONS
Year Ended December 31, 2018 Compared to December 31, 2017
(cid:55)(cid:75)(cid:72)(cid:3) (cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3) (cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3) (cid:68)(cid:81)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:73)(cid:3) (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)
Discussion and Analysis of Financial Condition and Results of Operations and present certain information by
segment for the years ended December 31, 2018 and 2017 (amounts in thousands). All inter-company
transactions between the reported segments for the periods presented have been eliminated.
Customer Management Services
Revenue
Operating Income
Operating Margin
Year Ended December 31,
2018
$ 1,129,048
49,161
2017
$ 1,141,760
78,206
$ Change % Change
(1.1) %
(37.1) %
$ (12,712)
(29,045)
4.4 %
6.8 %
The decrease in revenue for the Customer Management Services segment was attributable to a $101.5 million
net increase in organic and inorganic client programs including the Connextions and Motif acquisitions, a $9.0
million increase related to the adoption of ASC 606 for revenue recognition, offset by a $7.5 million decrease
due to foreign currency fluctuations and by program completions of $115.7 million.
The operating income as a percentage of revenue decreased to 4.4% in 2018 as compared to 6.8% in 2017.
The operating margin declined primarily due to an increase in U.S. related labor costs and increased launch
costs associated with the higher new business volumes and a $3.6 million increase in amortization related to
acquisitions. Investments in strategy, rebranding, product development, marketing programs and incremental
sales resources also negatively affected operating income as similar expenses were not as high during 2017.
These were offset by the acquisitions, a $4.4 million increase related to the adoption of ASC 606 and a $5.8
million positive benefit due to foreign currency fluctuations. Included in the operating income was amortization
related to acquired intangibles of $8.2 million and $4.6 million for the years ended December 31, 2018 and
2017, respectively.
Customer Growth Services
Revenue
Operating Income
Operating Margin
Year Ended December 31,
2018
$ 141,324
9,839
2017
$ 128,698
7,803
$ Change % Change
9.8 %
26.1 %
$ 12,626
2,036
7.0 %
6.1 %
The increase in revenue for the Customer Growth Services segment was due to several client adds in 2018
leading to a $21.4 million increase in client programs offset by program completions of $8.8 million.
The operating income as a percentage of revenue increased to 7.0% in 2018 as compared to 6.1% in 2017.
This was attributable to the increased revenue as noted above offset by a $1.7 million cease use lease expense
for a center that was exited as of March 31, 2018.
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Customer Technology Services
Revenue
Operating Income
Operating Margin
Year Ended December 31,
2018
$ 170,214
26,634
2017
$ 138,581
12,047
$ Change % Change
22.8 %
121.1 %
$ 31,633
14,587
15.6 %
8.7 %
The increase in revenue for the Customer Technology Services segment was driven by significant increases in
the cloud platform and the systems integration practice as well as large product sales during 2018, offset by
decreases in the Avaya offerings as we wound down and then sold a business unit in the second quarter of
2017.
The operating income as a percentage of revenue increased to 15.6% in 2018 as compared to 8.7% in 2017.
This increase is primarily due to significant (cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)er margin recurring cloud platform and
the systems integration practice and consolidation and modernization of the information technology functions
of the Company. In addition, 2017 included a $3.3 million impairment of a trade name intangible asset (see Part
II. Item 8. Financial Statements and Supplementary Data, Note 7 to the Consolidated Financial Statements).
Included in the operating income was amortization related to acquired intangibles of $1.3 million and $1.1 million
for the years ended December 31, 2018 and 2017, respectively.
Customer Strategy Services
Revenue
Operating Income
Operating Margin
Year Ended December 31,
$
2018
68,585
6,420
$
2017
68,326
2,433
$ Change % Change
0.4 %
163.9 %
259
3,987
$
9.4 %
3.6 %
The revenue for the Customer Strategy Services segment remained flat year over year.
The operating income as a percentage of revenue increased to 9.4% in 2018 as compared to 3.6% in 2017.
The increase is primarily related to the 2018 rationalization of certain practice areas as they were integrated
together and a $2.0 million impairment of a trade name intangible asset recorded in 2017 (see Part II. Item 8.
Financial Statements and Supplementary Data, Note 7 to the Consolidated Financial Statements). Included in
the operating income was amortization expense related to acquired intangibles of $1.3 million and $1.8 million
for the years ended December 31, 2018 and 2017, respectively.
Interest Income (Expense)
Interest income increased to $4.5 million in 2018 from $2.8 million in 2017 primarily due to increased cash
balances. Interest expense increased to $28.7 million during 2018 from $13.7 million during 2017, primarily due
to larger utilization of the line of credit related to acquisitions, higher interest rates, the upsizing of the credit
facility completed in October 2017, and a $9.9 million charge related to the future purchase of the remaining
30% of the Motif acquisition.
Other Income (Expense), Net
Included in the year ended December 31, 2018 was a $15.6 million impairment of the full value of an equity
investment and a related bridge loan, a net $1.6 million loss related to a business unit which was classified as
assets held for sale but was reclassified to assets held and used at December 31, 2018, a $2.0 million gain
related to royalty payments in connection with the sale of a business unit, a $0.7 million gain related to the
bargain purchase for the Percepta acquisition closed on March 31, 2018, and a $0.3 million benefit related to a
fair value adjustment of the contingent consideration based on revised estimates of performance against targets
for one of our acquisitions.
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Included in the year ended December 31, 2017 was a net $2.6 million loss related to a business unit which was
sold effective December 22, 2017, a $5.3 million expense related to the Connextions acquisition and the
finalization of the transition services agreement offset by a $3.2 million gain related to dissolution of a foreign
entity and a release of its cumulative translation adjustment.
For further information on the above items, see Part II. Item 8. Financial Statements, Note 2 to the Consolidated
Financial Statements.
Income Taxes
The reported effective tax rate for 2018 was 29.3% as compared to 87.8% for 2017. The effective tax rate for
2018 was impacted by earnings in international jurisdictions currently under an income tax holiday, $1.6 million
of expense related to changes in tax contingent liabilities, a $3.4 million benefit related to provision to return
adjustments, a $4.2 million benefit related to the impairment of an equity investment, $0.5 million of expense
related to the disposition of assets, $1.5 million of expense related to changes in valuation allowances, a $0.7
million benefit related to excess taxes on equity compensation, a $2.1 million benefit related to restructuring
charges, and $0.5 million of other benefits. Without these items our effective tax rate for the year ended
December 31, 2018 would have been 25.6%.
For the year ended December 31, 2017, our effective tax rate was 87.8%. The effective tax rate for 2017 was
impacted by earnings in international jurisdictions currently under an income tax holiday, $62.4 million of
expense related to the US 2017 Tax Act, $0.6 million of benefit related to provision to return adjustments, a
$1.9 million benefit related to impairments, $0.4 million of expense related to the disposition of assets, $0.6
million of expense related to changes in valuation allowances, a $2.2 million benefit related to excess taxes on
equity compensation, a $5.8 million benefit related to restructuring charges, and a $2.1 million benefit related
to the finalization of a transition service. Without these items our effective tax rate for the year ended
December 31, 2017 would have been 24.4%.
Year Ended December 31, 2017 Compared to 2016
(cid:55)(cid:75)(cid:72)(cid:3) (cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3) (cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3) (cid:68)(cid:81)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:73)(cid:3) (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)
Discussion and Analysis of Financial Condition and Results of Operations and present certain information by
segment for the years ended December 31, 2017 and 2016 (amounts in thousands). All inter-company
transactions between the reported segments for the periods presented have been eliminated.
Customer Management Services
Revenue
Operating Income
Operating Margin
Year Ended December 31,
2017
$ 1,141,760
78,206
2016
$ 924,325
50,541
$ Change % Change
23.5 %
54.7 %
$ 217,435
27,665
6.8 %
5.5 %
The increase in revenue for the Customer Management Services segment was attributable to a $246.0 million
net increase in organic and inorganic client programs including the Atelka, Connextions and Motif acquisitions
and a $2.3 million increase due to foreign currency fluctuations, offset by program completions of $30.9 million.
The operating income as a percentage of revenue increased to 6.8% in 2017 as compared to 5.5% in 2016.
The operating margin increased due to higher revenue, a $12.1 million benefit due to improved foreign
exchange trends, increased capacity utilization, and efficiencies realized from the expense rationalization
activities completed during the second half of 2016. This increase was offset by $13.6 million of 2017 planned
restructuring and integration charges for the Connextions acquisition related to severance, center closure costs,
the hiring, training and licensing of employees in new delivery centers and the integration of the IT systems
(see Part II. Item 8. Financial Statements and Supplementary Data, Note 2 to the Consolidated Financial
Statements) and an increase of $9.3 million for variable incentive compensation. The increase was also due to
the 2016 $11.1 million impairment for internally developed software and technology assets and a $1.4 million
impairment of goodwill (see Part II. Item 8. Financial Statements and Supplementary Data, Note 6 to the
Consolidated Financial Statements). Included in the operating income was amortization related to acquired
intangibles of $4.6 million and $0.9 million for the years ended December 31, 2017 and 2016, respectively.
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Customer Growth Services
Revenue
Operating Income
Operating Margin
Year Ended December 31,
2017
$ 128,698
7,803
2016
$ 141,005
6,969
$ Change % Change
(8.7) %
12.0 %
$ (12,307)
834
6.1 %
4.9 %
The decrease in revenue for the Customer Growth Services segment was due to a $9.0 million increase in
client programs and a decrease for program completions of $21.3 million.
The operating income as a percentage of revenue increased to 6.1% in 2017 as compared to 4.9% in 2016.
This was attributable to pricing improvements and other profit optimization actions, along with reductions in
amortization expense and a reduction in the operating loss for the Digital Marketing unit, which was sold
effective December 22, 2017 (see Part II. Item 8. Financial Statements and Supplementary Data, Note 2 to the
Consolidated Financial Statements). Included in the operating income was amortization related to acquired
intangibles of zero and $1.8 million for the years ended December 31, 2017 and 2016, respectively.
Customer Technology Services
Revenue
Operating Income
Operating Margin
Year Ended December 31,
2017
$ 138,581
12,047
2016
$ 141,254
933
0.7 %
$ Change % Change
(1.9) %
1,191.2 %
$ (2,673)
11,114
8.7 %
The decrease in revenue for the Customer Technology Services segment was driven by an increase in the
CISCO offerings offset by a decrease in the Avaya offerings as we wound down and then sold the business
unit in the second quarter of 2017.
The operating income as a percentage of revenue increased to 8.7% in 2017 as compared to 0.7% in 2016.
This increase was primarily due to a $12.1 million charge recorded in 2016 related to the impairment of customer
relationships, trade name, non-compete intangible assets and technology fixed assets due to the lower financial
performance of the Avaya business unit offset by the 2017 $3.3 million impairment of a trade name intangible
asset (see Part II. Item 8. Financial Statements and Supplementary Data, Note 7 to the Consolidated Financial
Statements). Included in the operating income was amortization related to acquired intangibles of $1.1 million
and $4.6 million for the years ended December 31, 2017 and 2016, respectively.
Customer Strategy Services
Revenue
Operating Income
Operating Margin
Year Ended December 31,
$
2017
68,326
2,433
$
2016
68,674
(5,691)
$ Change % Change
(0.5) %
142.8 %
(348)
8,124
$
3.6 %
(8.3) %
The decrease in revenue for the Customer Strategy Services segment was related to growth in the Content and
Collaboration and Service Optimization practices offset by decreases in the Mindset and Sales Transformation
and Customer Insights practices across multiple delivery regions.
The operating income as a percentage of revenue was 3.6% in 2017 as compared to an operating loss of (8.3)%
in 2016. The increase is primarily related to the 2016 $7.5 million charge for the impairment of two trade name
intangibles offset by the 2017 $2.0 million impairment of one trade name intangible asset (see Part II. Item 8.
Financial Statements and Supplementary Data, Note 7 to the Consolidated Financial Statements). Included in
the operating income was amortization expense related to acquired intangibles of $1.8 million and $2.9 million
for the years ended December 31, 2017 and 2016, respectively.
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Interest Income (Expense)
Interest income increased to $2.8 million in 2017 from $1.2 million in 2016. Interest expense increased to $13.7
million during 2017 from $7.9 million for the comparable period in 2016, primarily due to larger utilization of the
line of credit primarily related to the acquisitions, higher average interest rates, the upsizing of the credit facility
completed in October 2017, and a $1.2 million charge related to the future purchase of the remaining 30% of
the Motif acquisition.
Other Income (Expense), Net
Included in the year ended December 31, 2017 was a net $2.6 million loss related to a business unit which was
sold effective December 22, 2017 and a $3.2 million gain related to dissolution of a foreign entity and a release
of its cumulative translation adjustment (see Part II. Item 8. Financial Statements and Supplementary Data,
Note 2 to the Consolidated Financial Statements).
Included in the year ended December 31, 2017 was a $5.3 million expense related to the Connextions
acquisition and the finalization of the transition services agreement.
Included in the year ended December 31, 2016 was a total of $5.3 million of estimated losses related to two
business units which had been classified as assets held for sale (see Part II. Item 8. Financial Statements and
Supplementary Data, Note 2 to the Consolidated Financial Statements).
Included in the year ended December 31, 2016, was a $4.8 million benefit related to fair value adjustments of
the contingent consideration based on revised estimates of performance against targets for two of our
acquisitions (see Part II, Item 8. Financial Statements and Supplementary Data, Note 9 to the Consolidated
Financial Statements).
Income Taxes
The reported effective tax rate for 2017 was 87.8% as compared to 25.6% for 2016. The effective tax rate for
2017 was impacted by earnings in international jurisdictions currently under an income tax holiday, $62.4 million
of expense related to the US 2017 Tax Act, $0.6 million of benefit related to provision to return adjustments, a
$1.9 million benefit related to impairments, $0.4 million of expense related to the disposition of assets, $0.6
million of expense related to changes in valuation allowances, a $2.2 million benefit related to excess taxes on
equity compensation, a $5.8 million benefit related to restructuring charges, and a $2.1 million benefit related
to the finalization of a transition service agreement. Without these items our effective tax rate for the year ended
December 31, 2017 would have been 24.4%.
For the year ended December 31, 2016, our effective tax rate was 25.6%. The effective tax rate for 2016 was
impacted by earnings in international jurisdictions currently under an income tax holiday, $1.7 million of expense
related to return to provision adjustments, $1.1 million of expense related to a transfer pricing adjustment for a
prior period, $0.5 million of expense related to tax rate changes, $0.5 million of expense related to changes in
valuation allowances, $1.5 million benefit related to restructuring expenses, and a $9.8 million benefit related
to impairments and assets held for sale. Without these items our effective tax rate for the year ended December
31, 2016 would have been 23.3%.
Liquidity and Capital Resources
Our principal sources of liquidity are our cash generated from operations, our cash and cash equivalents, and
borrowings under our Credit Facility. During the year ended December 31, 2018, we generated positive
operating cash flows of $168.3 million. We believe that our cash generated from operations, existing cash and
cash equivalents, and available credit will be sufficient to meet expected operating and capital expenditure
requirements for the next 12 months.
We manage a centralized global treasury function in the United States with a focus on concentrating and
safeguarding our global cash and cash equivalents. While the majority of our cash is held outside the U.S., we
prefer to hold U.S. Dollars in addition to the local currencies of our foreign subsidiaries. We expect to use our
offshore cash to support working capital and growth of our foreign operations. While there are no assurances,
we believe our global cash is protected given our cash management practices, banking partners and utilization
of diversified, high quality investments.
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In October 2018 and December 2018, the Company paid dividends from its foreign operations to its U.S. parent
in the amount of $280 million and $30 million, respectively, which were used to pay down portions of the Credit
Facility.
We have global operations that expose us to foreign currency exchange rate fluctuations that may positively or
negatively impact our liquidity. We are also exposed to higher interest rates associated with our variable rate
debt. To mitigate these risks, we enter into foreign exchange forward and option contracts through our cash
flow hedging program. Please refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk,
Foreign Currency Risk, for further discussion.
We primarily utilize our Credit Facility to fund working capital, general operations, stock repurchases, dividends,
and other strategic activities, such as the acquisitions described in Part II. Item 8. Financial Statements and
Supplementary Data, Note 2 to the Consolidated Financial Statements. As of December 31, 2018 and 2017,
we had borrowings of $282.0 million and $344.0 million, respectively, under our Credit Facility, and our average
daily utilization was $514.7 million and $494.7 million for the years ended December 31, 2018 and 2017,
respectively. After consideration for the current level of availability based on the covenant calculations, our
remaining borrowing capacity was approximately $360.0 million as of December 31, 2018. As of December 31,
2018, we were in compliance with all covenants and conditions under our Credit Facility.
The amount of capital required over the next 12 months will depend on our levels of investment in infrastructure
necessary to maintain, upgrade or replace existing assets. Our working capital and capital expenditure
requirements could also increase materially in the event of acquisitions or joint ventures, among other factors.
These factors could require that we raise additional capital through future debt or equity financing. We can
provide no assurance that we will be able to raise additional capital with commercially reasonable terms
acceptable to us.
The following discussion highlights our cash flow activities during the years ended December 31, 2018, 2017,
and 2016.
Cash and Cash Equivalents
We consider all liquid investments purchased within 90 days of their original maturity to be cash equivalents.
Our cash and cash equivalents totaled $78.2 million and $74.4 million as of December 31, 2018 and 2017,
respectively. We diversify the holdings of such cash and cash equivalents considering the financial condition
and stability of the counterparty institutions.
We reinvest our cash flows to grow our client base, expand our infrastructure, for investment in research and
development, for strategic acquisitions, for the purchase of our outstanding stock and to pay dividends.
Cash Flows from Operating Activities
For the years 2018, 2017 and 2016 we reported net cash flows provided by operating activities of $168.3 million,
$113.2 million and $111.8 million, respectively. The increase of $55.2 million from 2017 to 2018 was primarily
due to an $89.3 million increase in cash collected from accounts receivable and an increase in net cash income
from operations of $37.9 million offset by a $53.6 million decrease in deferred revenue and other liabilities and
a $11.2 million decrease in prepaid assets. The increase of $1.3 million from 2016 to 2017 was primarily due
to a $110.6 million decrease in payments made for operating expenses offset by a $51.4 million decrease in
cash collected from accounts receivable, a decrease in net cash income from operations of $38.6 million, and
an $19.2 million decrease in prepaid assets.
Cash Flows from Investing Activities
For the years 2018, 2017 and 2016, we reported net cash flows used in investing activities of $47.6 million,
$169.0 million and $100.4 million, respectively. The net decrease in cash used in investing activities from 2017
to 2018 was primarily due to decreased spending on acquisitions of $113.6 million and a decrease in purchases
of fixed assets of $8.5 million. The net increase in cash used in investing activities from 2016 to 2017 was
primarily due to increased spending on acquisitions of $69.9 million.
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Cash Flows from Financing Activities
For the years 2018, 2017 and 2016, we reported net cash flows (used in) provided by financing activities of
$(102.1) million, $71.6 million and $(1.6) million, respectively. The change in net cash flows from 2017 to 2018
was primarily due to a $188.7 million decrease in borrowing on the Credit Facility, offset by a $18.3 million
decrease in purchases of our outstanding common stock. The change in net cash flows from 2016 to 2017 was
primarily due to a $9.4 million increase in borrowing on the Credit Facility, a decrease in the contingent
consideration and hold-back payments of $8.1 million, offset by a $56.4 million decrease in purchases of our
outstanding common stock and a $4.1 million payment to purchase a non-controlling interest.
Free Cash Flow
(cid:41)(cid:85)(cid:72)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:3)(cid:11)(cid:86)(cid:72)(cid:72)(cid:3)(cid:179)(cid:51)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:81)-GAAP (cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:85)(cid:72)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:12)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)
$124.9 million, $61.2 million and $61.0 million for the years 2018, 2017 and 2016, respectively. The increase
from 2017 to 2018 was primarily due to the increase in cash flows provided by operating activities. The increase
from 2016 to 2017 was primarily due to the increase in cash flows provided by operating activities.
Presentation of Non-GAAP Measurements
Free Cash Flow
Free cash flow is a non-GAAP liquidity measurement. We believe that free cash flow is useful to our investors
because it measures, during a given period, the amount of cash generated that is available for debt obligations
and investments other than purchases of property, plant and equipment. Free cash flow is not a measure
(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:179)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:180)(cid:3)(cid:179)(cid:81)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:15)(cid:180)(cid:3)
(cid:179)(cid:81)(cid:72)(cid:87)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15)(cid:180)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)nce with GAAP. We
believe this non-GAAP liquidity measure is useful, in addition to the most directly comparable GAAP measure
(cid:82)(cid:73)(cid:3)(cid:179)(cid:81)(cid:72)(cid:87)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15)(cid:180)(cid:3)(cid:69)(cid:72)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:73)(cid:85)(cid:72)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:17)(cid:3)
Free cash flow does not represent residual cash available for discretionary expenditures, since it includes cash
required for debt service. Free cash flow also includes cash that may be necessary for acquisitions, investments
and other needs that may arise.
The following table reconciles net cash provided by operating activities to free cash flow for our consolidated
results (in thousands):
Year Ended December 31,
2018
2017
2016
$ 168,345 $ 113,152 $ 111,830
50,832
60,998
51,958
$ 124,895 $ 61,194 $
43,450
Net cash provided by operating activities
Less: Purchases of property, plant and equipment
Free cash flow
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Table of Contents
Obligations and Future Capital Requirements
Future maturities of our outstanding debt and contractual obligations as of December 31, 2018 are summarized
as follows (in thousands):
Less than 1 to 3
Years
1 Year
3 to 5
Years
Over 5
Years
Total
Credit Facility(1)
Equipment financing arrangements
Contingent consideration
Purchase obligations
Operating lease commitments
Transition tax related to US 2017 Tax Act
Other debt
Total
(cid:178) $
$ 11,641 $ 295,581 $
(cid:178) $ 307,222
18,605
(cid:178)
2,553
(cid:178)
23,480
(cid:178)
183,274
25,362
33,918
9,318
41,646
(cid:178)
$ 87,137 $ 427,742 $ 61,139 $ 34,680 $ 610,698
1,648
(cid:178)
1,064
43,810
14,600
17
8,035
(cid:178)
14,446
47,379
3,300
2,336
8,922
2,553
7,970
66,723
6,700
39,293
(1)
Includes estimated interest payments based on the weighted-average interest rate, unused commitment
fees, current interest rate swap arrangements, and outstanding debt as of December 31, 2018.
(cid:120) Contractual obligations to be paid in a foreign currency are translated at the period end exchange rate.
(cid:120) Purchase obligations primarily consist of outstanding purchase orders for goods or services not yet
received, which are not recognized as liabilities in our Consolidated Balance Sheets until such goods and/or
services are received.
(cid:120) The contractual obligation table excludes our liabilities of $6.2 million related to uncertain tax positions
because we cannot reliably estimate the timing of future cash payments. See Part II, Item 8. Financial
Statements and Supplementary Data, Note 10 to the Consolidated Financial Statements for further
discussion.
Our outstanding debt is primarily associated with the use of funds under our Credit Agreement to fund working
capital, repurchase our common stock, pay dividends and for other cash flow needs across our global
operations.
Purchase Obligations
Occasionally we contract with certain of our communications clients to provide us with telecommunication
services. These clients currently represent approximately 12% of our total annual revenue. We believe these
(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:72)(cid:74)(cid:82)(cid:87)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:85)(cid:80)(cid:182)(cid:86)-length basis and may be negotiated at different times and with different
legal entities.
Future Capital Requirements
We expect total capital expenditures in 2019 to be between $60 and $65 million. Approximately 65% of these
expected capital expenditures are to support growth in our business and 35% relate to the maintenance of
existing assets. The anticipated level of 2019 capital expenditures is primarily driven by new client contracts
and the corresponding requirements for additional customer engagement center capacity as well as
enhancements to our technological infrastructure.
We may consider restructurings, dispositions, mergers, acquisitions and other similar transactions. Such
transactions could include the transfer, sale or acquisition of significant assets, businesses or interests,
including joint ventures or the incurrence, assumption, or refinancing of indebtedness and could be material to
the consolidated financial condition and consolidated results of our operations. Our capital expenditures
requirements could also increase materially in the event of an acquisition or joint ventures. In addition, as of
December 31, 2018, we were authorized to purchase an additional $26.6 million of common stock under our
(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:85)(cid:72)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:68)(cid:80)(cid:3)(cid:11)(cid:86)(cid:72)(cid:72)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:24)(cid:17)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)
and Issuer Purchases of Equity Securities). Our stock repurchase program does not have an expiration date.
40
Table of Contents
The launch of large client contracts may result in short-term negative working capital because of the time period
between incurring the costs for training and launching the program and the beginning of the accounts receivable
collection process. As a result, we may sometimes generate negative cash flows from operating activities.
Debt Instruments and Related Covenants
On October 30, 2017, we entered into a Third Amendment to our June 3, 2013 Amended and Restated Credit
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:11)(cid:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:3)(cid:86)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)
(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3) (cid:85)(cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3) (cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3) (cid:11)(cid:87)(cid:75)(cid:72)(cid:3) (cid:179)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:180)(cid:12)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:68)(cid:3) (cid:86)(cid:92)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:79)(cid:72)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3) (cid:79)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92) Wells Fargo Bank,
National Association, as agent, swing line and fronting lender. The Company (cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)
accordion feature to increase the total commitment under the Credit Facility to $1.2 billion. All other material
terms of the Credit Agreement remained unchanged.
On February 14, 2019, we entered into a Fourth Amendment to our Amended and Restated Credit Agreement
(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:85)(cid:76)(cid:74)(cid:76)(cid:81)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:45)(cid:88)(cid:81)(cid:72)(cid:3)(cid:22)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:22)(cid:3)(cid:11)(cid:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)r a senior secured revolving credit facility with a syndicate of lenders led by Wells Fargo Bank,
(cid:49)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3) (cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:68)(cid:86)(cid:3) (cid:68)(cid:74)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3) (cid:86)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3) (cid:79)(cid:76)(cid:81)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:73)(cid:85)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:79)(cid:72)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:11)(cid:87)(cid:75)(cid:72)(cid:3) (cid:179)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:180)(cid:12)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)
Agreement provides for a secured revolving Credit Facility that matures on February 14, 2024.
(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:68)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3) (cid:80)(cid:68)(cid:87)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3) (cid:71)(cid:68)(cid:87)(cid:72)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:68)(cid:3) (cid:73)(cid:72)(cid:90)(cid:3) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3) (cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3) (cid:82)(cid:88)(cid:87)(cid:79)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:69)(cid:72)(cid:79)(cid:82)(cid:90)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
material terms of the Credit Facility, including pricing and collateral, are substantially the same as those
previously disclosed as part of our Annual Report on Form 10-(cid:46)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:11)(cid:179)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)
(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:180)(cid:12)(cid:17)
The maximum commitment under the Credit Facility is $900.0 million, with an accordion feature of up to $1.2
billion in the aggregate, if certain conditions are satisfied. The Credit Facility commitment fees are payable to
the lenders in an amount equal to the unused portion of the Credit Facility multiplied by 0.150% per annum from
the Credit Facility inception date until a compliance certificate is provided by us in connection with our quarterly
financial statements for the quarter ended March 31, 2019, and thereafter as previously disclosed and as
determined by reference to our net leverage ratio. The Credit Agreement contains customary affirmative,
negative, and financial covenants, which remained unchanged from the 2016 Credit Facility, except that we are
now obligated to maintain a maximum net leverage ratio of 3.50 to 1.00, and a minimum Interest Coverage
Ratio of 2.50 to 1.00. The Credit Agreement permits accounts receivable factoring up to the greater of $75
million or 25 percent of the average book value of all accounts receivable over the most recent twelve month
period.
We primarily utilize our Credit Facility to fund working capital, general operations, stock repurchases, dividends,
acquisitions, and other strategic activities.
(cid:37)(cid:68)(cid:86)(cid:72)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:79)(cid:82)(cid:68)(cid:81)(cid:86)(cid:3)(cid:69)(cid:72)(cid:68)(cid:85)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:68)(cid:87)(cid:3)(cid:68)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:72)(cid:84)(cid:88)(cid:68)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:85)(cid:72)(cid:68)(cid:87)(cid:72)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:11)(cid:76)(cid:12)(cid:3)(cid:58)(cid:72)(cid:79)(cid:79)(cid:86)(cid:3)(cid:41)(cid:68)(cid:85)(cid:74)(cid:82)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:80)(cid:72)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:15)(cid:3)(cid:11)(cid:76)(cid:76)(cid:12)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)(cid:73)(cid:3)(cid:20)(cid:8)(cid:3)(cid:76)(cid:81)(cid:3)
excess of the federal funds effective rate, or (iii) 1.25% in excess of the one month London Interbank Offered
(cid:53)(cid:68)(cid:87)(cid:72)(cid:3)(cid:11)(cid:179)(cid:47)(cid:44)(cid:37)(cid:50)(cid:53)(cid:180)(cid:12), plus in each case a margin of 0% to 0.75% based on our net leverage ratio. Eurodollar loans
bear interest at LIBOR plus a margin of 1.0% to 1.75% based on our net leverage ratio. Alternate currency
loans bear interest at rates applicable to their respective currencies.
Letter of credit fees are one eighth of 1% of the stated amount of the letter of credit on the date of issuance,
renewal or amendment, plus an annual fee equal to the borrowing margin for Eurodollar loans.
Indebtedness under the Credit Agreement is guaranteed by certain of our domestic subsidiaries and is secured
by security interests (subject to permitted liens) in the U.S. accounts receivable and cash of our Company and
certain of its domestic subsidiaries. The indebtedness may also be secured by tangible assets of our Company
and its domestic subsidiaries, if borrowings by foreign subsidiaries exceed $100.0 million and the total net
leverage ratio is greater than 3.00 to 1.00. We also pledged 65% of the voting stock and all of the non-voting
stock, if any, of certain of our material foreign subsidiaries.
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The Credit Facility also contains certain customary information and reporting requirements, and events of
default, including without limitation events of default based on payment obligations, material inaccuracies of
representations and warranties, covenant defaults, cross defaults to certain other debt, certain ERISA events,
changes in control, monetary judgments, and insolvency proceedings. Upon the occurrence of an event of
default, the lenders may accelerate the maturity of all amounts outstanding under the Credit Facility.
As of December 31, 2018 and 2017, we had borrowings of $282.0 million and $344.0 million, respectively,
under the Credit Facility. During 2018, 2017 and 2016, borrowings accrued interest at an average rate of
approximately 3.1%, 2.2%, and 1.5% per annum, respectively, excluding unused commitment fees. Our daily
average borrowings during 2018, 2017 and 2016 were $514.7 million, $494.7 million and $375.3 million,
respectively. As of December 31, 2018, and 2017, based on the current level of availability based on the
covenant calculations, the remaining borrowing capacity was approximately $360.0 million and $350.0 million,
respectively.
Client Concentration
During 2018, one of our clients represented 10.2% of our total annual revenue. Our five largest clients
accounted for 35% of our annual revenue for each of the three years ended December 31, 2018, 2017 and
2016, respectively. We have long-term relationships with our top five clients, ranging from 12 to 22 years, with
the majority of these clients having completed multiple contract renewals with us. The relative contribution of
any single client to consolidated earnings is not always proportional to the relative revenue contribution on a
consolidated basis and varies greatly based upon specific contract terms. In addition, clients may adjust
business volumes served by us based on their business requirements. We believe the risk of this concentration
is mitigated, in part, by the long-term contracts we have with our largest clients. Although certain client contracts
may be terminated for convenience by either party, we believe this risk is mitigated, in part, by the service level
disruptions and transition/migration costs that would arise for our clients.
The contracts with our five largest clients expire between 2020 and 2023. Additionally, a particular client may
have multiple contracts with different expiration dates. We have historically renewed most of our contracts with
our largest clients, but there can be no assurance that future contracts will be renewed or, if renewed, will be
on terms as favorable as the existing contracts.
Cybersecurity
We have made and continue to make significant financial investments in technologies and processes to mitigate
cyber risks. We have a number of complex information systems used for a variety of functions ranging from
services we deliver to our customers to how we support our operations. We depend on the proper functioning
of these information systems. Like any information system, they are susceptible to cyber-attack. Any cyber-
attack could impact the availability, reliability, speed, accuracy, or other proper functioning of these systems or
result in confidential data being compromised which could have a significant impact on our reputation, results
of operations, and financial condition. Our information systems are protected through physical and technological
safeguards as well as backup systems considered appropriate by management. We also provide employee
awareness training about phishing, malware, social engineering, and other cyber risks. Further, we have formed
a cybersecurity specific risk management steering committee that meets periodically to fully coordinate all
enterprise level cybersecurity issues. Our Board of Directors and executive leadership team are updated at
least quarterly on progress and status of our cybersecurity priorities. We continuously monitor and develop our
information technology networks and infrastructure to prevent, detect, address, and mitigate the risk of
unauthorized access, distributed denial of service attacks, malware attacks, computer viruses, cyber fraud, and
other events intended to disrupt information systems, wrongfully obtain valuable information, or cause other
types of malicious events that result in harm to our business. Our investment in cybersecurity is not expected
to decrease in the foreseeable future, and despite our on-going efforts to improve our cybersecurity, there can
be no assurance that a sophisticated cyber-attack could be detected or thwarted.
Recently Issued Accounting Pronouncements
We discuss the potential impact of recent accounting pronouncements in Part II, Item 8. Financial Statements
and Supplementary Data, Note 1 to the Consolidated Financial Statements.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our consolidated financial position, consolidated results
of operations, or consolidated cash flows due to adverse changes in financial and commodity market prices
and rates. Market risk also includes credit and non-performance risk by counterparties to our various financial
instruments. We are exposed to market risks due to changes in interest rates and foreign currency exchange
rates (as measured against the U.S. dollar); as well as credit risk associated with potential non-performance of
our counterparty banks. These exposures are directly related to our normal operating and funding activities.
We enter into derivative instruments to manage and reduce the impact of currency exchange rate changes,
primarily between the U.S. dollar/Philippine peso, the U.S. dollar/Mexican peso, and the Australian
dollar/Philippine peso. We enter into interest rate derivative instruments to reduce our exposure to interest rate
fluctuations associated with our variable rate debt. To mitigate against credit and non-performance risk, it is our
policy to only enter into derivative contracts and other financial instruments with investment grade counterparty
financial institutions and, correspondingly, our derivative valuations reflect the creditworthiness of our
counterparties. As of the date of this report, we have not experienced, nor do we anticipate, any issue related
to derivative counterparty defaults.
Interest Rate Risk
We have previously entered into interest rate derivative instruments to reduce our exposure to interest rate
fluctuations associated with our variable rate debt. The interest rate on our Credit Agreement is variable based
upon the Prime Rate and LIBOR and, therefore, is affected by changes in market interest rates. As of
December 31, 2018, we had $282.0 million of outstanding borrowings under the Credit Agreement. Based upon
average daily outstanding borrowings during the years ended December 31, 2018 and 2017, interest accrued
at a rate of approximately 3.1% and 2.2% per annum, respectively. If the Prime Rate or LIBOR increased by
100 basis points, there would be $1.0 million of additional interest expense per $100.0 million of outstanding
borrowing under the Credit Agreement.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:86)(cid:90)(cid:68)(cid:83)(cid:3)(cid:68)(cid:85)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) expired as of May 31, 2017 and no additional swaps have been
entered into since that time.
Foreign Currency Risk
Our subsidiaries in the Philippines, Mexico, India, Bulgaria and Poland use the local currency as their functional
currency for paying labor and other operating costs. Conversely, revenue for these foreign subsidiaries is
derived principally from client contracts that are invoiced and collected in U.S. dollars or other foreign
currencies. As a result, we may experience foreign currency gains or losses, which may positively or negatively
affect our results of operations attributed to these subsidiaries. For the years ended December 31, 2018, 2017
and 2016, revenue associated with this foreign exchange risk was 23%, 26% and 32% of our consolidated
revenue, respectively.
The following summarizes relative (weakening) strengthening of local currencies that are relevant to our
business:
Canadian Dollar vs. U.S. Dollar
Philippine Peso vs. U.S. Dollar
Mexican Peso vs. U.S. Dollar
Australian Dollar vs. U.S. Dollar
Euro vs. U.S. Dollar
Philippine Peso vs. Australian Dollar
Year Ended December 31,
2016
2017
2018
(8.6) %
(5.1) %
0.2 %
(10.7) %
(4.7) %
5.0 %
6.6 %
(0.8) %
5.0 %
7.7 %
12.1 %
(9.2) %
3.1 %
(5.9) %
(19.5) %
(1.3) %
(3.6) %
(4.5) %
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In order to mitigate the risk of these non-functional foreign currencies weakening against the functional
currencies of the servicing subsidiaries, which thereby decreases the economic benefit of performing work in
these countries, we may hedge a portion, though not 100%, of the projected foreign currency exposure related
to client programs served from these foreign countries through our cash flow hedging program. While our
hedging strategy can protect us from adverse changes in foreign currency rates in the short term, an overall
weakening of the non-functional revenue foreign currencies would adversely impact margins in the segments
of the servicing subsidiary over the long term.
Cash Flow Hedging Program
To reduce our exposure to foreign currency exchange rate fluctuations associated with forecasted revenue in
non-functional currencies, we purchase forward and/or option contracts to acquire the functional currency of
the foreign subsidiary at a fixed exchange rate at specific dates in the future. We have designated and account
for these derivative instruments as cash flow hedges for forecasted revenue in non-functional currencies.
While we have implemented certain strategies to mitigate risks related to the impact of fluctuations in currency
exchange rates, we cannot ensure that we will not recognize gains or losses from international transactions, as
this is part of transacting business in an international environment. Not every exposure is or can be hedged
and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts
for which actual results may differ from the original estimate. Failure to successfully hedge or anticipate currency
risks properly could adversely affect our consolidated operating results.
Our cash flow hedging instruments as of December 31, 2018 and 2017 are summarized as follows (in
thousands). All hedging instruments are forward contracts, except as noted.
As of December 31, 2018
Philippine Peso
Mexican Peso
As of December 31, 2017
Philippine Peso
Mexican Peso
Local
Currency
Notional
Amount
6,710,000
1,091,500
U.S. Dollar
Notional
Amount
% Maturing
in the next
12 months
130,957 (1)
57,708
188,665
60.7 %
53.0 %
$
Contracts
Maturing
Through
December 2021
December 2021
Local
Currency
Notional
Amount
10,685,000
1,609,000
U.S. Dollar
Notional
Amount
219,917 (1)
93,589
313,506
$
(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 December 31, 2018 and December 31, 2017.
The fair value of our cash flow hedges at December 31, 2018 was a liability (in thousands):
Philippine Peso
Mexican Peso
Maturing in the
December 31, 2018 Next 12 Months
(3,570)
(4,477)
(8,047)
(5,856)
(5,460)
(11,316) $
$
Our cash flow hedges are valued using models based on market observable inputs, including both forward and
spot foreign exchange rates, implied volatility, and counterparty credit risk. The fair value liability of our cash
flow hedges decreased by $14.9 million from December 31, 2017 to December 31, 2018. The decrease in fair
value liability from December 31, 2017 largely reflects a reduction in the total notional value of outstanding cash
flow hedges and an increase in average hedge exchange rates.
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We recorded net losses of $17.5 million, $22.8 million, and $28.0 million for settled cash flow hedge contracts
for the years ended December 31, 2018, 2017, and 2016, respectively. These losses were reflected in Revenue
in the accompanying Consolidated Statements of Comprehensive Income (Loss). If the exchange rates
between our various currency pairs were to increase or decrease by 10% from current period-end levels, we
would incur a material gain or loss on the contracts. However, any gain or loss would be mitigated by
corresponding increases or decreases in our underlying exposures.
Other than the transactions hedged as discussed above and in Part II. Item 8. Financial Statements and
Supplementary Data, Note 8 to the Consolidated Financial Statements, the majority of the transactions of our
U.S. and foreign operations are denominated in their respective local currency. However, transactions are
denominated in other currencies from time-to-time. We do not currently engage in hedging activities related to
these types of foreign currency risks because we believe them to be insignificant as we endeavor to settle these
accounts on a timely basis. For the years ended 2018 and 2017, approximately 23% and 24%, respectively, of
revenue was derived from contracts denominated in currencies other than the U.S. Dollar. Our results from
operations and revenue could be adversely affected if the U.S. Dollar strengthens significantly against foreign
currencies.
Fair Value of Debt and Equity Securities
We did not have any investments in marketable debt or equity securities as of December 31, 2018 or 2017.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are located beginning on page F-1 of this report and incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
This Form 10-(cid:46)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:40)(cid:50)(cid:180)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)
(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:41)(cid:50)(cid:180)(cid:12)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:53)(cid:88)(cid:79)(cid:72) 13a-14 of the Securities Exchange Act of 1934, as amended (cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:36)(cid:70)(cid:87)(cid:180)(cid:12).
See Exhibits 31.1 and 31.2. This Item 9A includes information concerning the controls and control evaluations
referred to in those certifications.
Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are
designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted
under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in
SEC rules and forms and that such information is accumulated and communicated to management, including
our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation under the supervision and with the participation of management, including the
CEO and CFO, of the effectiveness of our disclosure controls and procedures, as of December 31, 2018, the
end of the period covered by this Form 10-K. Based on this evaluation, our CEO and CFO have concluded that
(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:11)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3)(cid:53)(cid:88)(cid:79)(cid:72)(cid:86)(cid:3)(cid:20)(cid:22)(cid:68)-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level.
Inherent Limitations of Internal Controls
Our management, including the CEO and CFO, believes that any disclosure controls and procedures or internal
control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of internal controls are met. Further, the design of internal controls must
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consider the benefits of controls relative to their costs. Inherent limitations within internal controls include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion
of two or more people, or by unauthorized override of the control. Over time, control may become inadequate
because of changes in conditions or deterioration in the degree of compliance with associated policies or
procedures. While the objective of the design of any system of controls is to provide reasonable assurance of
the effectiveness of controls, such design is also based in part upon certain assumptions about the likelihood
of future events, and such assumptions, while reasonable, may not take into account all potential future
conditions. Thus, even effective internal control over financial reporting can only provide reasonable assurance
of achieving their objectives. Therefore, because of the inherent limitations in cost effective internal controls,
misstatements due to error or fraud may occur and may not be prevented or detected.
Managem(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)
Management is responsible for establishing and maintaining adequate internal control over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Internal control over financial reporting includes those policies and procedures which (a) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of assets, (b) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, (c) provide
reasonable assurance that receipts and expenditures are being made only in accordance with appropriate
authorization of management and the Board of Directors, and (d) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material
effect on the financial statements.
In connection with the preparation of this Annual Report on Form 10-K, our management, under the supervision
and with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of our internal
control over financial reporting as of December 31, 2018 based on the framework established in Internal Control
(cid:178) Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:179)(cid:38)(cid:50)(cid:54)(cid:50)(cid:180)(cid:12)(cid:17)(cid:3)(cid:36)(cid:86)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)
control over financial reporting was effective as of December 31, 2018, the end of the period covered by this
Form 10-K.
The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by
PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report,
which is included herein.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the most recent quarter that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None.
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information in our 2019 Definitive Proxy Statement on Schedule 14A, which will be filed no later than 120
days after December 31, 2018 (cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:21)(cid:19)(cid:20)9 (cid:51)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:12)(cid:3)(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:179)(cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:53)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:180)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:69)(cid:82)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:38)(cid:82)(cid:71)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:40)(cid:87)(cid:75)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)
Conduct for Executive and Financial Managers and a Code of Conduct. The Code of Ethical Conduct for
46
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Executive and Financial Officers applies to our Chief Executive Officer, Chief Financial Officer, presidents of
our business segments, Controller, Treasurer, the General Counsel, Chief Audit executive, senior financial
officers of each operating segment and other persons performing similar functions. The Code of Conduct
applies to all directors, officers, employees and members of our supply chain (as applicable). Both the Code of
Ethical Conduct for Executive and Financial Officers and the Code of Conduct are posted on our website at
www.ttec.com on the Corporate Governance page. We will post on our website any amendments to or waivers
of the Code of Ethical Conduct for Executive and Financial Officers and our Code of Conduct, in accordance
with applicable laws and regulations.
There have been no material changes to the procedures by which stockholders may recommend nominees to
the board of directors. The remaining information called for by this Item 10 is incorporated by reference herein
from our 2019 Proxy Statement.
The information in our 2019 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information regarding these matters is included in Part II, (cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:24)(cid:17)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)
Related Stockholder Matters and Issuer Purchases of Equity Securities. Also the information in our 2019 Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information in our 2019 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
The information in our 2019 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements.
The Index to Consolidated Financial Statements is set forth on page F-1 of this report.
2. Financial Statement Schedules.
All schedules for TTEC have been omitted since the required information is not present or not present
in amounts sufficient to require submission of the schedule, or because the information is included in
the respective Consolidated Financial Statements or notes thereto.
3. Exhibits.
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EXHIBIT INDEX
Exhibit No.
Description
3.01**
3.03**
Restated Certificate of Incorporation of TeleTech Holdings, Inc. filed with the State of Delaware
on August 1, 1996 (incorporated by reference to Exhibit (cid:22)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:49)(cid:82)(cid:17) 2
to Form S-1 Registration Statement (Registration No. 333-04097) filed on July 5, 1996)
Certificate of Amendment of Restated Certificate of Incorporation of TTEC Holdings, Inc.
(reflecting name change) with an effective date of January 1, 2018 (incorporated by reference
as Exhibit 3.03 to Form 8-K filed on January 9, 2018)
3.04**
Amended and Restated Bylaws of TTEC Holdings, Inc. (reflecting name change) (incorporated
by reference as Exhibit 3.04 to Form 8-K filed on January 9, 2018)
10.06**
10.27**
10.28**
10.29**
10.30**
TeleTech Holdings, Inc. 2010 Equity Incentive Plan (incorporated by reference as Appendix A
(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)(cid:39)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:36)(cid:83)(cid:85)(cid:76)(cid:79) 12, 2010)
Form of Global Restricted Stock Unit Agreement
(Operating Committee Member)
(incorporated by reference to Exhibit (cid:20)(cid:19)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)Quarterly Report on Form 10-Q filed
on May 1, 2013)
Form of Global Restricted Stock Unit Agreement (Non-Operating Committee Member)
(incorporated by reference as Exhibit (cid:20)(cid:19)(cid:17)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)Quarterly Report on Form 10-Q filed
on May 1, 2013)
Form of TeleTech Holdings, Inc. Restricted Stock Unit Award Agreement (non-executive
employees) effective July 1, 2014 (incorporated by reference as Exhibit (cid:20)(cid:19)(cid:17)(cid:21)(cid:28)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)
Annual Report on Form 10-K for the year ended December 31, 2014)
Form of TeleTech Holdings, Inc. Restricted Stock Unit Award Agreement (Directors and
Executive Committee Members) effective July 1, 2014 (incorporated by reference as
Exhibit (cid:20)(cid:19)(cid:17)(cid:22)(cid:19)(cid:3) (cid:87)(cid:82)(cid:3) (cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86) Annual Report on Form 10-K for the year ended December 31,
2014)
10.32*
Independent Director Compensation Arrangements (effective January 1, 2019)
10.33**
10.40**
10.41**
10.60**
10.82**
Form of Indemnification Agreement with Directors (incorporated by reference as Exhibit 10.1
(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)(cid:38)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80) 8-K filed on February 22, 2010)
Employment Agreement between Kenneth D. Tuchman and TeleTech dated October 15, 2001
(incorporated by reference as Exhibit (cid:20)(cid:19)(cid:17)(cid:25)(cid:27)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80) 10-K for the
year ended December 31, 2001)
Amendment to Employment Agreement between Kenneth D. Tuchman and TeleTech dated
December 31, 2008 (incorporated by reference as Exhibit (cid:20)(cid:19)(cid:17)(cid:20)(cid:26)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)
on Form 10-K for the year ended December 31, 2008)
Amended and Restated Executive Employment Agreement between Regina M. Paolillo and
TTEC Services Corporation effective May 1, 2018 (incorporated by reference as Exhibit 10.60
(cid:87)(cid:82)(cid:3)(cid:55)(cid:55)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:52)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q for the quarter ended March 31, 2018)
Amended and Restated Executive Employment Agreement between Judi A. Hand and TTEC
Services Corporation effective May 1, 2018 (incorporated by reference as Exhibit 10.82 to
T(cid:55)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:52)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q for the quarter ended March 31, 2018)
48
Table of Contents
Exhibit No.
Description
10.83**
10.84*
10.85*
10.86*
10.87**
10.90**
10.94**
10.95**
10.96**
10.97**
10.98**
Amended and Restated Executive Employment Agreement between Martin F. DeGhetto and
TTEC Services Corporation effective May 1, 2018 (incorporated by reference as Exhibit 10.83
(cid:87)(cid:82)(cid:3)(cid:55)(cid:55)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:52)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q for the quarter ended March 31, 2018)
Restated Executive Employment Agreement between Steven C. Pollema and TTEC Digital
LLC, effective January 1, 2019
Amended and Restated Executive Employment Agreement between Anthony Y. Tsai and
TTEC Services Corporation effective January 1, 2019
Amended and Restated Executive Employment Agreement between Margaret B. McLean and
TTEC Services Corporation effective December 12, 2018
Summary of employment arrangements between David M. Anderson and TTEC Services
Corporation effective as of April 16, 2018. While Mr. Anderson joined TTEC in April 2018, he
only recently has been appointed as an Executive Officer whose compensation is subject to
(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:11)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:27)(cid:26)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:55)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:52)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-
Q for the quarter ended September 30, 2018)
First Amendment to Amended and Restated Credit Agreement and First Amendment to
Amended and Restated Security Agreement for the senior secured revolving credit facility with
a syndicate of lenders led by Wells Fargo Bank, National Association, as agent, swing line and
fronting lender (i(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3) (cid:20)(cid:19)(cid:17)(cid:28)(cid:19)(cid:3) (cid:87)(cid:82)(cid:3) (cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3) (cid:41)(cid:82)(cid:85)(cid:80)(cid:3) (cid:27)-K filed on
February 16, 2016)
Fourth Amendment to Amended and Restated Credit Agreement and Restated Security
Agreement for a senior secured revolving credit facility with a syndicate of lenders led by Wells
Fargo Bank, National Association, as agent, swing line and fronting lender (incorporated by
(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:22)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:55)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on February 26, 2019)
Share Purchase Agreement between TeleTech Europe BV and TeleTech Canada and Kilmer
Capital Fund II L.P., 8169306 Canada Inc. Bank of Montreal, doing business as BMO Capital
Partners, and certain management shareholders of November 9, 2016 (incorporated by
(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)(cid:52)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q for the quarter ended
September 30, 2016)
Purchase Agreement dated as of April 3, 2017 by and among OptumHealth Holdings, LLC,
Connextions, Inc., and TeleTech Healthcare Solutions, Inc. (incorporated by reference as
(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:28)(cid:25)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)(cid:52)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q for the quarter ended March 31,
2017)
Stock Purchase Agreement of November 8, 2017 by and among TeleTech Services
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:48)(cid:82)(cid:87)(cid:76)(cid:73)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:179)(cid:48)(cid:82)(cid:87)(cid:76)(cid:73)(cid:180)(cid:12)(cid:15)(cid:3)(cid:46)(cid:68)(cid:88)(cid:86)(cid:75)(cid:68)(cid:79)(cid:3)(cid:48)(cid:72)(cid:75)(cid:87)(cid:68)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:68)(cid:85)(cid:88)(cid:79)(cid:3)(cid:48)(cid:72)(cid:75)(cid:87)(cid:68)(cid:3)(cid:11)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3)(cid:68)(cid:86)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:41)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:180)(cid:12)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:82)(cid:87)(cid:76)(cid:73)(cid:3)(cid:11)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:41)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:3)(cid:179)(cid:54)(cid:72)(cid:79)(cid:79)(cid:72)(cid:85)(cid:86)(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:50)(cid:88)(cid:87)(cid:73)(cid:82)(cid:85)(cid:70)(cid:72)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:72)(cid:79)(cid:79)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:36)(cid:74)(cid:72)(cid:81)(cid:87)(cid:12)(cid:3)(cid:11)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:28)(cid:26)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)
Quarterly Report on Form 10-Q for the quarter ended September 30, 2017)
Share Purchase Agreement of November 8, 2017 by and among TeleTech Services
Corporation, the Founders, the Anishi Mehta Irrevocable Trust, the Ishan Mehta Irrevocable
Trust, Anishi Mehta (cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:86)(cid:75)(cid:68)(cid:81)(cid:3)(cid:48)(cid:72)(cid:75)(cid:87)(cid:68)(cid:3)(cid:11)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:28)(cid:27)(cid:3)(cid:87)(cid:82)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:55)(cid:72)(cid:70)(cid:75)(cid:182)(cid:86)(cid:3)
Quarterly Report on Form 10-Q for the quarter ended September 30, 2017)
49
Table of Contents
Exhibit No.
21.1*
Description
List of subsidiaries
23.1*
Consent of Independent Registered Public Accounting Firm
24.1*
Power of Attorney
31.1*
Rule 13a-14(a) Certification of CEO of TTEC
31.2*
Rule 13a-14(a) Certification of CFO of TTEC
32.1*
32.2*
Written Statement of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350)
Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350)
101.INS*** XBRL Instance Document
101.SCH*** XBRL Taxonomy Extension Schema Document
101.CAL*** XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*** XBRL Taxonomy Extension Label Linkbase Document
101.PRE*** XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*** XBRL Taxonomy Extension Definition Linkbase Document
* Filed or furnished herewith.
** Identifies exhibit that consists of or includes a management contract or compensatory plan or arrangement.
*** Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business
Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2018 and 2017,
(ii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018,
2017 and 2016, (iii) (cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) 31,
2018, 2017 and 2016, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2018,
2017 and 2016, and (v) Notes to Consolidated Financial Statements.
None
ITEM 16. FORM 10-K SUMMARY
50
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized on March 6,
2019.
SIGNATURES
TTEC HOLDINGS, INC.
By:
/s/ KENNETH D. TUCHMAN
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on
March 6, 2019, by the following persons on behalf of the registrant and in the capacities indicated:
Signature
Title
/s/ KENNETH D. TUCHMAN
Kenneth D. Tuchman
PRINCIPAL EXECUTIVE OFFICER
Chief Executive Officer and Chairman of the Board
/s/ REGINA M. PAOLILLO
Regina M. Paolillo
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
Chief Financial Officer
*
Steven J. Anenen
*
Tracy L. Bahl
*
Gregory A. Conley
*
Robert N. Frerichs
*
Marc L. Holtzman
*
Ekta Singh-Bushell
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
* By /s/ Regina M. Paolillo under Power of Attorney as attached hereto as Exhibit 24.1
51
Table of Contents
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS OF TTEC HOLDINGS, INC.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2018 and 2017
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2018,
2017 and 2016
(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:60)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:40)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) 31, 2018, 2017
and 2016
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016
Notes to the Consolidated Financial Statements
Page No.
F-2
F-4
F-5
F-6
F-7
F-8
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of TTEC Holdings, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of TTEC Holdings, Inc. and its subsidiaries
(cid:11)(cid:87)(cid:75)(cid:72)(cid:3) (cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12)(cid:3) (cid:68)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3) (cid:22)(cid:20)(cid:15)(cid:3) (cid:21)(cid:19)(cid:20)(cid:27) and 2017, and the related consolidated statements of
(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)(cid:15)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)for each of the three years in the period
(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:27)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72)(cid:86)(cid:3)(cid:11)(cid:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:70)(cid:82)(cid:81)solidated financial
(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:12)(cid:17) We also have audited the Company's internal control over financial reporting as of December 31,
2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2018 based on criteria
established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it
accounts for revenues from contracts with customers in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in Management's Report on Internal Control over Financial Reporting
appearing under Item 9A. (cid:50)(cid:88)(cid:85)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) consolidated financial
statements and on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
F-2
Table of Contents
Definition and Limitations of Internal Control over Financial Reporting
(cid:36)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in a(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3) (cid:68)(cid:70)(cid:70)(cid:72)(cid:83)(cid:87)(cid:72)(cid:71)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:79)(cid:72)(cid:86)(cid:17)(cid:3) (cid:36)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3) (cid:82)(cid:89)(cid:72)(cid:85)(cid:3) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or (cid:71)(cid:76)(cid:86)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) (cid:87)(cid:75)(cid:68)(cid:87)(cid:3) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3) (cid:75)(cid:68)(cid:89)(cid:72)(cid:3) (cid:68)(cid:3) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/PricewaterhouseCoopers LLP
Denver, Colorado
March 6, 2019
(cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:3)(cid:86)(cid:76)(cid:81)(cid:70)(cid:72)(cid:3)(cid:21)(cid:19)(cid:19)(cid:26)(cid:17)
F-3
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except share amounts)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
Prepaids and other current assets
Income tax receivable
Total current assets
Long-term assets
Property, plant and equipment, net
Goodwill
Deferred tax assets, net
Other intangible assets, net
Other long-term assets
Total long-term assets
Total assets
(cid:47)(cid:44)(cid:36)(cid:37)(cid:44)(cid:47)(cid:44)(cid:55)(cid:44)(cid:40)(cid:54)(cid:3)(cid:36)(cid:49)(cid:39)(cid:3)(cid:54)(cid:55)(cid:50)(cid:38)(cid:46)(cid:43)(cid:50)(cid:47)(cid:39)(cid:40)(cid:53)(cid:54)(cid:182)(cid:3)(cid:40)(cid:52)(cid:56)(cid:44)(cid:55)(cid:60)
Current liabilities
Accounts payable
Accrued employee compensation and benefits
Other accrued expenses
Income tax payable
Deferred revenue
Other current liabilities
Total current liabilities
Long-term liabilities
Line of credit
Deferred tax liabilities, net
Non-current income tax payable
Deferred rent
Other long-term liabilities
Total long-term liabilities
Total liabilities
Commitments and contingencies (Note 14)
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
December 31, December 31,
2018
2017
$
78,237 $
350,962
88,487
8,791
526,477
74,437
391,902
63,971
11,099
541,409
$
$
161,523
204,633
15,523
80,911
65,441
528,031
1,054,508 $
163,346
209,727
12,012
93,085
59,157
537,327
1,078,736
59,447 $
83,437
15,963
12,325
44,926
19,320
235,418
282,000
10,371
30,754
16,584
126,532
466,241
701,659
46,442
84,830
19,047
7,497
21,650
22,312
201,778
344,000
11,285
47,871
15,714
95,243
514,113
715,891
Preferred stock; $0.01 par value; 10,000,000 shares authorized; zero shares outstanding as of
December 31, 2018 and December 31, 2017
Common stock; $0.01 par value; 150,000,000 shares authorized; 46,194,717 and 45,861,959
shares outstanding as of December 31, 2018 and December 31, 2017, respectively
Additional paid-in capital
Treasury stock at cost: 35,857,536 and 36,190,294 shares as of December 31, 2018 and
December 31, 2017, respectively
Accumulated other comprehensive income (loss)
Retained earnings
Noncontrolling interest
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
(cid:178)
(cid:178)
462
353,932
459
351,725
(610,177)
(124,596)
725,551
7,677
352,849
1,054,508 $
(615,677)
(102,304)
721,664
6,978
362,845
1,078,736
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(Amounts in thousands, except per share amounts)
Revenue
Operating expenses
Cost of services (exclusive of depreciation and amortization presented
separately below)
Selling, general and administrative
Depreciation and amortization
Restructuring and integration charges, net
Impairment losses
Total operating expenses
Income from operations
Other income (expense)
Interest income
Interest expense
Other income (expense), net
Loss on asset held for sale
Total other income (expense)
Income before income taxes
Provision for income taxes
Net income
Year Ended December 31,
2017
$ 1,509,171 $ 1,477,365 $ 1,275,258
2016
2018
1,157,927
182,428
69,179
6,131
1,452
1,417,117
1,110,068
182,314
64,507
14,665
5,322
1,376,876
941,592
175,797
68,675
4,392
32,050
1,222,506
92,054
100,489
52,752
4,476
(28,674)
(11,618)
(cid:178)
(35,816)
2,841
(13,734)
1,869
(2,578)
(11,602)
1,234
(7,943)
6,855
(2,600)
(2,454)
56,238
88,887
50,298
(16,483)
(78,075)
(12,863)
39,755
10,812
37,435
Net income attributable to noncontrolling interest
(3,938)
(3,556)
(3,757)
Net income attributable to TTEC stockholders
$
35,817 $
7,256 $
33,678
Other comprehensive income (loss)
Net income
Foreign currency translation adjustments
Derivative valuation, gross
Derivative valuation, tax effect
Other, net of tax
Total other comprehensive income (loss)
Total comprehensive income (loss)
$
39,755 $
(30,382)
11,526
(4,058)
308
(22,606)
17,149
10,812 $
8,285
27,931
(11,284)
105
25,037
35,849
37,435
(21,055)
(7,838)
2,330
721
(25,842)
11,593
Less: Comprehensive income attributable to noncontrolling interest
(3,624)
(3,933)
(3,514)
Comprehensive income (loss) attributable to TTEC stockholders
$
13,525 $
31,916 $
8,079
Weighted average shares outstanding
Basic
Diluted
Net income per share attributable to TTEC stockholders
Basic
Diluted
46,064
46,385
45,826
46,382
47,423
47,736
$
$
0.78 $
0.77 $
0.16 $
0.16 $
0.71
0.71
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
(Amounts in thousands)
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182) Equity of the Company
Accumulated
Other
Balance as of December 31, 2015
Net income
Dividends to shareholders ($0.385 per common
share)
Dividends distributed to noncontrolling interest
Adjustments to redemption value of mandatorily
redeemable noncontrolling interest
Foreign currency translation adjustments
Derivatives valuation, net of tax
Vesting of restricted stock units
Exercise of stock options
Excess tax benefit from equity-based awards
Equity-based compensation expense
Purchases of common stock
Other, net of tax
Balance as of December 31, 2016
Net income
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
Exercise of stock options
Equity-based compensation expense
Purchases of common stock
Other, net of tax
Balance as of December 31, 2017
Cumulative effect of adopting accounting
standard updates
Net income
Dividends to shareholders ($0.55 per common
share)
Dividends distributed to noncontrolling interest
Foreign currency translation adjustments
Derivatives valuation, net of tax
Vesting of restricted stock units
Exercise of stock options
Equity-based compensation expense
Purchases of common stock
Other, net of tax
Balance as of December 31, 2018
Preferred Stock
Shares
Amount
Common Stock
Shares
Amount
(cid:178) $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178) $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178) $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178) $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
48,481 $
(cid:178)
485 $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
297
29
(cid:178)
(cid:178)
(2,693)
(cid:178)
46,114 $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
298
60
(cid:178)
(610)
(cid:178)
45,862 $
(cid:178)
(cid:178)
(cid:178)
3
(cid:178)
(cid:178)
(cid:178)
(26)
(cid:178)
462 $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
3
(cid:178)
(cid:178)
(6)
(cid:178)
459 $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
318
15
(cid:178)
(cid:178)
(cid:178)
46,195 $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
3
(cid:178)
(cid:178)
(cid:178)
(cid:178)
462 $
Treasury
Stock
(533,744) $
Additional
Paid-in Capital
Comprehensive Retained
Earnings
Income (Loss)
Noncontrolling
interest
Total Equity
7,201 $
3,757
440,817
37,435
347,251 $
(101,365) $
720,989 $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
4,681
458
(cid:178)
(cid:178)
(74,657)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(8,614)
(82)
557
9,627
(cid:178)
(cid:178)
(603,262) $
348,739 $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
4,913
994
(cid:178)
(18,322)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(10,313)
1,156
12,143
(cid:178)
(cid:178)
(615,677) $
351,725 $
(cid:178)
(cid:178)
(cid:178)
33,678
(18,262)
(cid:178)
(cid:178)
(20,812)
(5,508)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
721
(126,964) $
(cid:178)
(cid:178)
(cid:178)
7,908
16,647
(cid:178)
(cid:178)
(cid:178)
(cid:178)
105
(102,304) $
(466)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
735,939 $
7,256
(21,531)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
721,664 $
(cid:178)
(3,825)
(cid:178)
(243)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
81
(cid:178)
10
6,981 $
3,556
(cid:178)
(3,645)
377
(cid:178)
(cid:178)
(cid:178)
(291)
(cid:178)
(cid:178)
6,978 $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
5,252
248
(cid:178)
(cid:178)
(cid:178)
(610,177) $
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(6,584)
35,817
(cid:178)
3,938
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(9,898)
(40)
12,145
(cid:178)
(cid:178)
353,932 $
(cid:178)
(cid:178)
(30,068)
7,468
(cid:178)
(cid:178)
(cid:178)
(cid:178)
308
(124,596) $
(25,346)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
725,551 $
(cid:178)
(2,925)
(314)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
7,677 $
(18,262)
(3,825)
(466)
(21,055)
(5,508)
(3,930)
376
557
9,708
(74,683)
731
361,895
10,812
(21,531)
(3,645)
8,285
16,647
(5,397)
2,150
11,852
(18,328)
105
362,845
(6,584)
39,755
(25,346)
(2,925)
(30,382)
7,468
(4,643)
208
12,145
(cid:178)
308
352,849
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
Year Ended December 31,
2017
2016
2018
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of contract acquisition costs
Amortization of debt issuance costs
Imputed interest expense and fair value adjustments to contingent consideration
Provision for doubtful accounts
(Gain) loss on disposal of assets
Gain on sale of businesses and dissolution of entity
Impairment losses
Impairment on equity investment
Gain (adjustment) on bargain purchase of a business
Non-cash loss on assets held for sale reclassified to held and used
Non-cash loss on held for sale assets
Deferred income taxes
Excess tax benefit from equity-based awards
Equity-based compensation expense
(Gain) loss on foreign currency derivatives
Changes in assets and liabilities, net of acquisitions:
Accounts receivable
Prepaids and other assets
Accounts payable and accrued expenses
Deferred revenue and other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from sale of long-lived assets
Purchases of property, plant and equipment, net of acquisitions
Proceeds from sale of business
Investments in non-marketable equity investments
Acquisitions, net of cash acquired of $4,530, $5,997, and $2,655, respectively
Net cash used in investing activities
Cash flows from financing activities
Proceeds from line of credit
Payments on line of credit
Payments on other debt
Payments of contingent consideration and hold-back payments to acquisitions
Dividends paid to shareholders
Payments to noncontrolling interest
Purchase of mandatorily redeemable noncontrolling interest
Proceeds from exercise of stock options
Tax payments related to issuance of restricted stock units
Excess tax benefit from equity-based awards
Payments of debt issuance costs
Purchase of treasury stock
Net cash provided by (used in) financing activities
$
39,755 $
10,812 $
37,435
69,179
3,015
992
10,217
3,679
111
(cid:178)
1,452
15,632
(685)
1,616
(cid:178)
(7,975)
(635)
12,145
1,524
29,985
(30,438)
11,713
7,063
168,345
34
(43,450)
(cid:178)
(2,119)
(2,027)
(47,562)
64,507
1,678
745
51
458
3,694
(908)
5,322
(cid:178)
(cid:178)
(cid:178)
(cid:178)
16,777
(2,192)
11,852
(681)
(59,284)
(19,266)
18,968
60,619
113,152
39
(51,958)
636
(1,384)
(116,320)
(168,987)
68,675
659
753
(4,523)
1,164
(44)
(cid:178)
32,050
(cid:178)
(cid:178)
2,700
2,600
(1,583)
(601)
9,773
1,710
(7,858)
(92)
(19,141)
(11,847)
111,830
114
(50,832)
(cid:178)
(3,179)
(46,460)
(100,357)
2,162,400
(2,224,400)
(5,989)
(1,349)
(25,346)
(2,925)
(cid:178)
208
(4,643)
(cid:178)
(35)
(cid:178)
(102,079)
2,293,587
(2,166,887)
(6,041)
(1,409)
(21,531)
(3,645)
(cid:178)
2,150
(5,397)
(cid:178)
(918)
(18,328)
71,581
2,093,500
(1,976,200)
(3,222)
(9,467)
(18,262)
(4,317)
(4,105)
371
(3,933)
601
(1,888)
(74,683)
(1,605)
Effect of exchange rate changes on cash and cash equivalents
(14,904)
3,427
(14,908)
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosures
Cash paid for interest
Cash paid for income taxes
Non-cash investing and financing activities
Acquisition of long-lived assets through capital leases
Acquisition of equipment through increase in accounts payable, net
3,800
74,437
78,237 $
19,173
55,264
74,437 $
(5,040)
60,304
55,264
17,456 $
39,984 $
11,727 $
18,813 $
6,976
19,741
15,018 $
339 $
9,836
97 $
584
(681)
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(1)
OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Overview
TTEC Holdings, (cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:179)(cid:55)(cid:55)(cid:40)(cid:38)(cid:180)(cid:15)(cid:3)(cid:179)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12) is a leading global customer experience technology and services
(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:73)(cid:82)(cid:70)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:15)(cid:3)(cid:76)(cid:80)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:80)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:90)(cid:82)(cid:85)(cid:79)(cid:71)(cid:182)(cid:86)(cid:3)
most iconic and disruptive brands. The Company helps large global companies increase revenue and reduce
costs by delivering personalized customer experiences across every interactional channel and phase of the
customer lifecycle as an end-to-end provider of customer engagement services, technologies, insights and
innovations. TTEC(cid:182)(cid:86)(cid:3) 52,400 employees serve clients in the automotive, communication, financial services,
government, healthcare, logistics, media and entertainment, retail, technology, transportation and travel
industries via operations in the U.S., Australia, Belgium, Brazil, Bulgaria, Canada, China, Costa Rica, Germany,
Hong Kong, India, Ireland, Lebanon, Mexico, New Zealand, the Philippines, Poland, Singapore, South Africa,
Thailand, Turkey, the United Arab Emirates, and the United Kingdom.
We are organized into two centers of excellence: TTEC Digital and TTEC Engage.
(cid:120) TTEC Digital designs and builds human centric, tech-enabled, insight-driven customer experience
solutions.
(cid:120) (cid:55)(cid:55)(cid:40)(cid:38)(cid:3)(cid:40)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)delivery center of excellence that provides turnkey customer
acquisition, care, revenue growth, digital fraud prevention and detection, and content moderation
services.
TTEC Digital and TTEC Engage come together under our unified offering, HumanifyTM Customer Engagement
as a Service, which drives measurable results for clients through delivery of personalized omnichannel
interactions that are seamless and relevant. This unified offering is value-oriented, outcome-based, and
delivered on a global scale across four business segments: two of which comprise TTEC Digital - Customer
Strategy (cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3) (cid:11)(cid:179)(cid:38)S(cid:54)(cid:180)(cid:12)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3) Technology (cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3) (cid:11)(cid:179)(cid:38)T(cid:54)(cid:180)(cid:12); and two of which comprise TTEC
Engage (cid:177) Customer Growth Services (cid:11)(cid:179)(cid:38)(cid:42)(cid:54)(cid:180)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:11)(cid:179)(cid:38)(cid:48)(cid:54)(cid:180)(cid:12).
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, and its 100% interest in Motif, Inc. (see Note 2). All
intercompany balances and transactions have been eliminated in consolidation.
As of December 31, 2018, one business unit in the CSS segment classified as assets and liabilities held for
sale as of September 30, 2016, was reclassified as held and used as of December 31, 2018 and 2017. The
assets and liabilities of the business unit are no longer separately identified as held for sale as of December
31, 2018 and 2017 (see Note 2).
During the three months ended March 31, 2016, the Company recorded an additional tax expense of $1.1
million that should have been recorded in prior periods related to operations by an entity outside its country of
incorporation. The total amount of $1.1 million should have been recorded as additional expense in the amount
of $180 thousand in 2011, $123 thousand in 2012, $137 thousand in 2013, $358 thousand in 2014 and $301
thousand in 2015.
The Company has evaluated the impact of this adjustment and concluded that it was not material to the
previously issued or current period Consolidated Financial Statements.
F-8
Table of Contents
Use of Estimates
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The preparation of the Consolidated Financial Statements in conformity with accounting principles generally
accepted in the U.S. (cid:11)(cid:179)(cid:42)(cid:36)(cid:36)(cid:51)(cid:180)(cid:12)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the Consolidated
Financial Statements and the reported amounts of revenue and expenses during the reporting period. On an
on-going basis, the Company evaluates its estimates including those related to derivatives and hedging
activities, income taxes including the valuation allowance for deferred tax assets, self-insurance reserves,
litigation reserves, restructuring reserves, allowance for doubtful accounts, contingent consideration, and
valuation of goodwill, long-lived and intangible assets. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable, the results of which form the
basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially
from these estimates under different assumptions or conditions.
Concentration of Credit Risk
The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable
and derivative instruments. Historically, the losses related to credit risk have been immaterial. The Company
regularly monitors its credit risk to mitigate the possibility of current and future exposures resulting in a loss.
The Company evaluates the creditworthiness of its clients prior to entering into an agreement to provide
services and as necessary through the life of the client relationship. 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 seven investment-grade financial institutions.
Fair Value of Financial Instruments
Fair values of cash equivalents, accounts receivable and payable and debt approximate the carrying amounts
because of their short-term nature.
Cash and Cash Equivalents
The Company considers all cash and highly liquid short-term investments with an original maturity of 90 days
or less to be cash equivalents. The Company manages a centralized global treasury function in the United
States with a focus on concentrating and safeguarding its global cash and cash equivalents. While the majority
(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:75)(cid:72)(cid:79)(cid:71)(cid:3)(cid:82)(cid:88)(cid:87)(cid:86)(cid:76)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:83)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:75)(cid:82)(cid:79)(cid:71)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:39)(cid:82)(cid:79)(cid:79)(cid:68)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
local currencies of the foreign subsidiaries. The Company believes that it has effectively mitigated and managed
its risk relating to its global cash through its cash management practices, banking partners, and utilization of
diversified, high quality investments. However, the Company can provide no assurances that it will not sustain
losses.
Accounts Receivable
(cid:36)(cid:81)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:71)(cid:82)(cid:88)(cid:69)(cid:87)(cid:73)(cid:88)(cid:79)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:68)(cid:69)(cid:79)(cid:72)(cid:15)(cid:3)
historical experience, client financial condition, and management judgment. The Company writes off accounts
receivable against the allowance when the Company determines a balance is uncollectible.
Derivatives
The Company enters into foreign exchange forward and option contracts to reduce its exposure to foreign
currency exchange rate fluctuations that are associated with forecasted revenue earned in foreign locations.
The Company also enters into interest rate derivatives which consist of interest rate swaps to reduce the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)est rate fluctuations associated with its variable rate debt. Upon proper
qualification, these contracts are designated as cash flow hedges. The Company formally documents at the
inception of the hedge all relationships between hedging instruments and hedged items as well as its risk
management objective and strategy for undertaking various hedging activities.
F-9
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
All derivative financial instruments are reported at fair value and recorded in Prepaids and other current assets,
Other long-term assets, Other current liabilities, and Other long-term liabilities in the accompanying
Consolidated Balance Sheets as applicable for each period end. Changes in fair value of derivative instruments
designated as cash flow hedges are recorded in Accumulated other comprehensive income (loss), a component
(cid:82)(cid:73)(cid:3) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3) (cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3) (cid:87)(cid:82)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:92)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:71)(cid:72)(cid:72)(cid:80)(cid:72)(cid:71)(cid:3) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:17)(cid:3) (cid:44)(cid:81)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:76)(cid:86)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
change in fair value of the forward contracts and the fair value of the hypothetical derivatives with terms that
match the critical terms of the risk being hedged. Based on the criteria established by current accounting
(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:3)(cid:75)(cid:72)(cid:71)(cid:74)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:71)(cid:72)(cid:72)(cid:80)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:79)(cid:92)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:17)(cid:3)(cid:36)(cid:81)(cid:92)(cid:3)(cid:85)(cid:72)(cid:68)(cid:79)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)
losses resulting from the foreign currency cash flow hedges are recognized together with the hedged transaction
within Revenue. Any realized gains or losses from the interest rate swaps are recognized in Interest expense.
(cid:42)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:75)(cid:72)(cid:71)(cid:74)(cid:72)(cid:86)(cid:3)(cid:85)(cid:72)(cid:80)ain in Accumulated other
comprehensive income (loss) until partial or complete liquidation of the applicable net investment.
The Company also enters into fair value derivative contracts that hedge against foreign currency exchange
gains and losses primarily associated with short-term payables and receivables. Changes in the fair value of
derivative instruments designated as fair value hedges affect the carrying value of the asset or liability hedged,
with changes in both the derivative instrument and the hedged asset or liability being recognized in Other
income (expense), net in the accompanying Consolidated Statements of Comprehensive Income (Loss).
Property, Plant and Equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and amortization.
Maintenance, repairs and minor renewals are expensed as incurred.
Depreciation and amortization are computed on the straight-line method based on the following estimated
useful lives:
Building
Computer equipment and software
Telephone equipment
Furniture and fixtures
Leasehold improvements
Other
30 years
3 to 7 years
4 to 7 years
5 years
Lesser of economic useful life (typically 10 years) or original lease term
3 to 7 years
The Company evaluates the carrying value of property, plant and equipment for impairment whenever events
or changes in circumstances indicate that the carrying amounts may not be recoverable. An asset is considered
to be impaired when the forecasted undiscounted cash flows of an asset group are estimated to be less than
its carrying value. The amount of impairment recognized is the difference between the carrying value of the
asset group and its fair value. Fair value estimates are based on assumptions concerning the amount and
timing of forecasted future cash flows.
Software Development Costs
The Company capitalizes costs incurred to acquire or develop software for internal use. Capitalized software
development costs are amortized using the straight-line method over the estimated useful life equal to the lesser
of the license term or 4 or 7 years depending on the software type. The amortization expense is recorded in
Depreciation and amortization in the accompanying Consolidated Statements of Comprehensive Income
(Loss).
F-10
Table of Contents
Goodwill
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company evaluates goodwill for possible impairment at least annually on December 1, and whenever
events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
The Company uses a two step process to assess the realizability of goodwill. The first step, Step 0, is a
qualitative assessment that analyzes current economic indicators associated with a particular reporting unit.
For example, the Company analyzes changes in economic, market and industry conditions, business strategy,
cost factors, and financial performance, among others, to determine if there would be a significant decline to
the fair value of a particular reporting unit. A qualitative assessment also includes analyzing the excess fair
value of a reporting unit over its carrying value from impairment assessments performed in previous years. If
the qualitative assessment indicates a stable or improved fair value, no further testing is required.
If a qualitative assessment indicates that a significant decline to fair value of a reporting unit is more likely than
(cid:81)(cid:82)(cid:87)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:73)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:76)(cid:87)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:75)(cid:76)(cid:86)(cid:87)(cid:82)(cid:85)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:72)(cid:71)(cid:3)
to Step 1 testing where the Company calculates the fair value of a reporting unit. If Step 1 indicates that the
carrying value of a reporting unit is in excess of its fair value, the Company will record an impairment equal to
(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:69)(cid:92)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:76)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:72)(cid:71)(cid:86)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72).
Other Intangible Assets
The Company has other intangible assets that include customer relationships (definite-lived), trade names
(definite-lived) and non-compete agreements (definite-lived). Definite-lived intangible assets are amortized on
a straight-line basis over their estimated useful lives, which range from 3 to 12 years. The Company evaluates
the carrying value of its definite-lived intangible assets whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. A definite-lived intangible asset is considered to be impaired
when the forecasted undiscounted cash flows of its asset group are estimated to be less than its carrying value.
The Company evaluates indefinite-lived intangible assets for possible impairment at least annually or whenever
events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Similar to goodwill, the Company may first use a qualitative analysis to assess the realizability of its indefinite-
lived intangible assets. The qualitative analysis will include a review of changes in economic, market and
industry conditions, business strategy, cost factors, and financial performance, among others, to determine if
there would be a significant decline to the fair value of an indefinite-lived intangible asset. If a quantitative
analysis is completed, an indefinite-lived intangible asset (i.e. trade name) is evaluated for possible impairment
by comparing the fair value of the asset with its carrying value. Fair value is estimated as the discounted value
of future revenues arising from a trade name using a royalty rate that a market participant would pay for use of
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value.
Self Insurance Liabilities
The Company self-(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:3)(cid:75)(cid:72)(cid:68)(cid:79)(cid:87)(cid:75)(cid:15)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:15)(cid:3)(cid:70)(cid:92)(cid:69)(cid:72)(cid:85)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:86)(cid:15)(cid:3)
and general liability insurance. The Company records estimated liabilities for these insurance lines based upon
analyses of historical claims experience. The most significant assumption the Company makes in estimating
these liabilities is that future claims experience will emerge in a similar pattern with historical claims experience.
The liabilities re(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:90)(cid:82)(cid:85)(cid:78)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:3) (cid:75)(cid:72)(cid:68)(cid:79)(cid:87)(cid:75)(cid:3) (cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:36)(cid:70)(cid:70)(cid:85)(cid:88)(cid:72)(cid:71)(cid:3)
employee compensation and benefits in the accompanying Consolidated Balance Sheets. The liability for other
general liability insurance is included in Other accrued expenses in the accompanying Consolidated Balance
Sheets.
F-11
Table of Contents
Restructuring Liabilities
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company routinely assesses the profitability and utilization of its customer engagement centers and
existing markets. In some cases, the Company has chosen to close under-performing customer engagement
centers and complete reductions in workforce to enhance future profitability. Severance payments that occur
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requirements that are communicated to all employees upon hire date; therefore, severance liabilities are
recognized when they are determined to be probable and reasonably estimable. Other liabilities for costs
associated with an exit or disposal activity are recognized when the liability is incurred, rather than upon
commitment to a plan.
Asset Retirement Obligations
Asset retirement obligations relate to legal obligations associated with the retirement of long-lived assets
resulting from the acquisition, construction, development and/or normal use of the underlying assets.
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obligations primarily relate to clauses in its customer engagement center operating leases which require the
Company to return the leased premises to its original condition. The associated asset retirement obligations
are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful
life of the asset. The liability, reported within Other long-term liabilities, is accreted through charges to operating
expenses. If the asset retirement obligation is settled for an amount other than the carrying amount of the
liability, the Company recognizes a gain or loss on settlement in operating expenses.
Income Taxes
Accounting for income taxes requires recognition of deferred tax assets and liabilities for the expected future
income tax consequences of transactions that have been included in the Consolidated Financial Statements or
tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. Gross deferred tax assets may then be reduced by a
valuation allowance for amounts that do not satisfy the realization criteria established by current accounting
standards.
The Company accounts for uncertain tax positions using a two-step approach to recognizing and measuring
uncertain tax positions. The first step is to determine if the weight of available evidence indicates that it is more
likely than not that the tax position will be sustained on audit. The second step is to estimate and measure the
tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with
the tax authority. The Company evaluates these uncertain tax positions on a quarterly basis. This evaluation is
based on the consideration of several factors including changes in facts or circumstances, changes in applicable
tax law, and settlement of issues under audit. The Company recognizes interest and penalties related to
uncertain tax positions as a part of the Provision for income taxes in the accompanying Consolidated
Statements of Comprehensive Income (Loss).
No changes in indefinite reinvestment assertion were made during 2018. The Company has completed its
analysis in regard to the full tax impact related to prior changes in indefinite reinvestment reassertion and any
related taxes have been recorded. No additional income taxes have been provided for any remaining outside
basis difference inherent in our foreign subsidiaries as these amounts continue to be indefinitely reinvested in
foreign operations. Determination of any unrecognized deferred tax liability related to the outside basis
difference in investments in foreign subsidiaries is not practicable due to the inherent complexity of the multi-
national tax environment in which we operate.
F-12
Table of Contents
Tax Reform
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The United States recently enacted comprehensive tax reform legislation known as the Tax Cuts and Jobs Act
(the "2017 Tax Act") that, among other things, reduces the U.S. federal corporate income tax rate from 35% to
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(cid:11)(cid:179)(cid:37)(cid:40)(cid:36)(cid:55)(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:82)(cid:81)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:79)(cid:82)(cid:90)(cid:3)(cid:87)(cid:68)(cid:91)(cid:72)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:179)(cid:42)(cid:44)(cid:47)(cid:55)(cid:44)(cid:180)(cid:12)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:45)(cid:68)(cid:81)(cid:88)(cid:68)(cid:85)(cid:92)(cid:3)(cid:20)(cid:15)(cid:3)
2018. In addition, the law imposes a one-time mandatory repatriation tax on accumulated post-1986 foreign
earnings on domestic corporations effective for the 2017 tax year. As of December 31, 2018, the Company has
completed the accounting for the tax effects of the 2017 Tax Act and no material adjustment was recorded to
the 2017 estimate.
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amounts are based on prevailing regulations and current information, and any additional guidance issued by
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(cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:81)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:82)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:81)(cid:72)(cid:90)(cid:3) (cid:42)(cid:44)(cid:47)(cid:55)(cid:44)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:37)(cid:40)(cid:36)(cid:55)(cid:3) (cid:85)(cid:88)(cid:79)(cid:72)(cid:86)(cid:3) (cid:76)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3)
compute the related taxes in the period the entity becomes subject to either. A reasonable estimate of the
effects of these provisions has been included in the 2018 annual financial statements.
Revenue Recognition
2018 Revenue
The Company recognizes revenue from contracts and programs when control of the promised goods or services
is transferred to the customers, in an amount that reflects the consideration it expects to be entitled to in
exchange for those goods or services. Revenue is recognized when or as performance obligations are satisfied
by transferring control of a promised good or service to a customer. A performance obligation is a promise in a
contract to transfer a distinct good or service to the customer. Performance obligation is the unit of accounting
for revenue recognition under the provisions of ASC Topic 606(cid:15)(cid:3)(cid:179)(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
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obligation in recognizing revenue.
The B(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:51)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3) (cid:50)(cid:88)(cid:87)(cid:86)(cid:82)(cid:88)(cid:85)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3) (cid:11)(cid:179)(cid:37)(cid:51)(cid:50)(cid:180)(cid:12)(cid:3) (cid:76)(cid:81)(cid:69)(cid:82)(cid:88)(cid:81)(cid:71)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:82)(cid:88)(cid:87)(cid:69)(cid:82)(cid:88)(cid:81)(cid:71)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3) (cid:73)(cid:72)(cid:72)(cid:86)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:72)(cid:76)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:68)(cid:3) (cid:83)(cid:72)(cid:85)(cid:3)
minute, per hour, per FTE, per transaction or per call basis, which represents the majority of our contracts.
These contracts have a single performance obligation as the promise to transfer the individual goods or services
is not separately identifiable from other promises in the contracts and, therefore, not distinct. For example,
(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:74)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:11)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92)(cid:3)(cid:69)(cid:76)(cid:79)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)o the customer) are a separate
promise in the BPO contracts, but they are not distinct from the primary service obligations to transfer services
to the customers. The performance of the customer service by the agents is highly dependent on the initial,
growth, and seasonal training services provided to the agents during the life of a program. The training itself is
not considered to have value to the customer on a standalone basis, and therefore, training on a standalone
basis cannot be considered a separate unit of accounting. The Company therefore defers revenue from certain
training services that are rendered mainly upon commencement of a new client contract or program, including
seasonal programs. Revenue is also deferred when there is significant growth training in an existing program.
Accordingly, recognition of initial, growth, and seasonal training revenues and associated costs (consisting
primarily of labor and related expenses) are deferred and amortized over the period of economic benefit. With
the exception of training which is typically billed upfront and deferred, the remainder of revenue is invoiced on
a monthly or quarterly basis as services are performed and does not create a contract asset or liability.
In addition to revenue from BPO services, revenue also consists of fees from services for program launch,
professional consulting, fully-hosted or managed technology and learning innovation services. The contracts
containing these service offerings may contain multiple performance obligations. For contracts with multiple
(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:182)(cid:86)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
using the best estimate of the standalone selling price of each distinct good or service in the contract. The
primary method used to estimate standalone selling price is the expected cost plus a margin approach, under
which the Company forecasts its expected costs of satisfying a performance obligation and then adds an
appropriate margin for that distinct good or service. The Company forecasts its expected cost based on
F-13
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
historical data, current prevailing wages, other direct and indirect costs incurred in recently completed contracts,
market conditions, and client specific other cost considerations. For these services, the point at which the
transfer of control occurs determines when revenue is recognized in a specific reporting period. Where there
are product sales, the attribution of revenue is made when FOB-destination delivery occurs (control transfers),
which is the standard shipment terms, and therefore at a point in time. Where services are rendered to a
customer, the attribution is aligned with the progress of work and is recognized over time (i.e. based on
measuring the progress toward complete satisfaction of a performance obligation using an output method or an
input method). Where output method is used, revenue is recognized on the basis of direct measurements of
the value to the customer of the goods or services transferred relative to the remaining goods or services
pro(cid:80)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:83)(cid:88)(cid:87)(cid:3)
method in which revenue is recognized on the basis of efforts or inputs toward satisfying a performance
obligation (for example, resources consumed, labor hours expended, costs incurred, or time elapsed) relative
to the total expected inputs to satisfy the performance obligation. The measures used provide faithful depiction
of the transfer of goods or services to the customers. For example, revenue is recognized on certain consulting
contracts based on labor hours expended as a measurement of progress where the consulting work involves
(cid:76)(cid:81)(cid:83)(cid:88)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:88)(cid:79)(cid:87)(cid:68)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3) (cid:87)(cid:76)(cid:80)(cid:72)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3) (cid:76)(cid:86)(cid:3) (cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:75)(cid:82)(cid:88)(cid:85)(cid:86)(cid:3) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:82)(cid:89)(cid:72)(cid:85)(cid:3) (cid:87)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3) (cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3) (cid:82)(cid:73)(cid:3)
estimated hours included in the contract multiplied by the total contract consideration. The contract
consideration can be a fixed price or an hourly rate, and in either case, the use of labor hours expended as an
input measure provides a faithful depiction of the transfer of services to the customers. Deferred revenues for
these services represent amounts collected from, or invoiced to, customers in excess of revenues recognized.
This results primarily from i) receipt of license fees that are deferred due to one or more of the revenue
recognition criteria not being met, and ii) the billing of annual customer support agreements, annual managed
service agreements, and billings for other professional services that have not yet been performed by the
Company. The Company records amounts billed and received, but not earned, as deferred revenue. These
amounts are recorded in either Deferred revenue or Other long-term liabilities, as applicable, in the
accompanying Consolidated Balance Sheets based on the period over which the Company expects to render
services. Costs directly associated with revenue deferred, consisting primarily of labor and related expenses,
are also deferred and recognized in proportion to the expected future revenue from the contract.
Variable consideration exists in contracts for certain client programs that provide for adjustments to monthly
billings based upon whether the Company achieves, exceeds or fails certain performance criteria. Adjustments
to monthly billings consist of contractual bonuses/penalties, holdbacks and other performance based
conditions. Variable consideration is estimated at contract inception at its most likely value and updated at the
end of each reporting period as additional performance data becomes available. Revenue related to such
variable consideration is recognized only to the extent that a significant reversal of any incremental revenue is
not considered probable.
Contract modifications are routine in the performance of the customer contracts. Contracts are often modified
to account for customer mandated changes in the contract specifications or requirements, including service
level changes. In most instances, contract modifications relate to goods or services that are incremental and
distinctly identifiable, and, therefore, are accounted for prospectively.
Incremental Costs to Obtain a Contract
Direct and incremental costs to obtain or fulfill a contract are capitalized, and the capitalized costs are amortized
over the corresponding period of benefit, determined on a contract by contract basis. The Company recognizes
an asset for the incremental costs of obtaining a contract with a customer if it expects to recover those costs.
The incremental costs of obtaining a contract are those costs that the Company incurs to obtain a customer
contract that it would not have incurred if the contract had not been obtained. Contract acquisition costs consist
primarily of payment of commissions to sales personnel and are incurred when customer contracts are signed.
The deferred sales commission amounts are amortized based on the expected period of economic benefit and
are classified as current or non-current based on the timing of when they are expected to be recognized as an
expense. Costs to obtain a contract that would have been incurred regardless of whether the contract was
obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the
customer regardless of whether the contract is obtained. Sales commissions are paid for obtaining new clients
F-14
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
only and are not paid for contract renewals or contract modifications. Capitalized costs of obtaining contracts
are periodically reviewed for impairment. As of December 31, 2018, the Company has a deferred asset of $8.2
million related to the sales commissions.
In certain cases, the Company negotiates an upfront payment to a customer in conjunction with the execution
of a contract. Such upfront payments are critical to acquisition of new business and are often used as an
incentive to negotiate favorable rates from the clients and are accounted for as upfront discounts for future
services. Such payments are either made in cash at the time of execution of a contract or are netted against
(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:89)(cid:82)(cid:76)(cid:70)(cid:72)(cid:86)(cid:17)(cid:3)(cid:51)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86) are capitalized as contract acquisition costs and are
amortized in proportion to the expected future revenue from the contract, which in most cases results in straight-
line amortization over the life of the contract. Such payments are considered a reduction of the selling prices of
(cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:3) (cid:82)(cid:85)(cid:3) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:15)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:68)(cid:86)(cid:3) (cid:68)(cid:3) (cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3) (cid:90)(cid:75)(cid:72)(cid:81)(cid:3)
amortized. Such capitalized contract acquisition costs are periodically reviewed for impairment taking into
consideration ongoing future cash flows expected from the contract and estimated remaining useful life of the
contract.
Practical Expedients and Exemptions
(cid:54)(cid:82)(cid:80)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:75)(cid:82)(cid:85)(cid:87)-term in nature with a contract term of one year or less. For
those contracts, the Company has utilized the practical expedient in ASC 606-10-50-14 exempting the
Company from disclosure of the transaction price allocated to remaining performance obligations if the
performance obligation is part of a contract that has an original expected duration of one year or less. Also in
alignment with ASC 606-10-50-14, the Company does not disclose the value of unsatisfied performance
obligations for contracts for which it recognizes revenue at the amount to which it has the right to invoice for
(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:72)(cid:71)(cid:17)(cid:3)(cid:36)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:79)(cid:92)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3) one year. Given the
foregoing, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a
contract (cid:75)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:82)(cid:81)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3)(cid:51)(cid:88)(cid:85)(cid:86)(cid:88)(cid:68)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:68)(cid:70)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:71)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3)
under ASC 606-10-32-2A, sales, value add, and other taxes that are collected from customers concurrent with
revenue-producing activities, which the Company has an obligation to remit to the governmental authorities,
are excluded from revenue.
2017 and Prior Revenue
The Company recognizes revenue when evidence of an arrangement exists, the delivery of service has
occurred, the fee is fixed or determinable and collection is reasonably assured. The BPO inbound and outbound
service fees are based on either a per minute, per hour, per full-time employee, per transaction or per call basis.
Certain client programs provide for adjustments to monthly billings based upon whether the Company achieves,
exceeds or fails certain performance criteria. Adjustments to monthly billings consist of contractual
bonuses/penalties, holdbacks and other performance based contingencies. Revenue recognition is limited to
the amount that is not contingent upon delivery of future services or meeting other specified performance
conditions.
Revenue also consists of services for agent training, program launch, professional consulting, fully-hosted or
managed technology and learning innovation. These service offerings may contain multiple element
arrangements whereby the Company determines if those service offerings represent separate units of
accounting. A deliverable constitutes a separate unit of accounting when it has standalone value and delivery
(cid:82)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:69)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:68)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:17)(cid:3)
If those deliverables are determined to be separate units of accounting, revenue is recognized as services are
provided. If those deliverables are not determined to be separate units of accounting, revenue for the delivered
services are bundled into one unit of accounting and recognized over the life of the arrangement or at the time
all services and deliverables have been delivered and satisfied. The Company allocates revenue to each of the
(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:68)(cid:3) (cid:86)(cid:72)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3) (cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3) (cid:75)(cid:76)(cid:72)(cid:85)(cid:68)(cid:85)(cid:70)(cid:75)(cid:92)(cid:3) (cid:82)(cid:73)(cid:3) (cid:89)(cid:72)(cid:81)(cid:71)(cid:82)(cid:85)(cid:3) (cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:70)(cid:3) (cid:82)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:72)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3) (cid:11)(cid:179)(cid:57)(cid:54)(cid:50)(cid:40)(cid:180)(cid:12)(cid:15)(cid:3) (cid:87)(cid:75)(cid:76)(cid:85)(cid:71)-party
evidence, and then estimated selling price. VSOE is based on the price charged when the deliverable is sold
separately. Third-party evidence is based on largely interchangeable competitor services in standalone sales
to similarly situated customers. Estimated selling price is based on its best estimate of what the selling prices
of deliverables would be if they were sold regularly on a standalone basis. Estimated selling price is established
F-15
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
considering multiple factors including, but not limited to, pricing practices in different geographies, service
offerings, and customer classifications. Once the Company allocates revenue to each deliverable, it recognizes
revenue when all revenue recognition criteria are met.
Periodically, the Company will make certain expenditures related to acquiring contracts or provide up-front
discounts for future services. These expenditures are capitalized as contract acquisition costs and amortized in
proportion to the expected future revenue from the contract, which in most cases results in straight-line
amortization over the life of the contract. Amortization of these contract acquisition costs is recorded as a
reduction to revenue.
Rent Expense
The Company has negotiated certain rent holidays, landlord/tenant incentives and escalations in the base price
of rent payments over the initial term of its operating leases. The (cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:69)(cid:88)(cid:76)(cid:79)(cid:71)-(cid:82)(cid:88)(cid:87)(cid:180)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)
of leases, where no rent payments are typically due. The Company recognizes rent holidays and rent
escalations on a straight-line basis to rent expense over the lease term. The landlord/tenant incentives are
recorded as an increase to deferred rent liabilities and amortized on a straight line basis to rent expense over
the initial lease term.
Equity-Based Compensation Expense
Equity-based compensation expense for all share-based payment awards granted is determined based on the
grant-date fair value net of an estimated forfeiture rate on a straight-line basis over the requisite service period
of the award, which is typically the vesting term of the share-based payment award. The Company estimates
the forfeiture rate annually based on its historical experience of forfeited awards.
Foreign Currency Translation
(cid:55)(cid:75)(cid:72)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3) (cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:15)(cid:3) (cid:90)(cid:75)(cid:82)(cid:86)(cid:72)(cid:3) (cid:73)(cid:88)(cid:81)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3) (cid:76)(cid:86)(cid:3) (cid:81)(cid:82)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
U.S. Dollar, are translated at the exchange rates in effect on the last day of the period and income and expenses
are translated using the monthly average exchange rates in effect for the period in which the items occur.
Foreign currency translation gains and losses are recorded in Accumulated other comprehensive income (loss)
(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3) (cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3) (cid:41)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3) (cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:79)(cid:82)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)
(expense), net in the accompanying Consolidated Statements of Comprehensive Income (Loss).
Recently Adopted Accounting Pronouncements
On January 1, 2018, the Company adopted ASC 606, using the modified retrospective method. The adoption
of ASC 606 resulted in the deferral of certain fees that had already been recognized in prior periods. The
Company recorded a net reduction to opening retained earnings of $10.0 million, net of tax, as of January 1,
2018 due to the cumulative impact of adopting ASC 606, summarized as follows (in thousands):
Balance Sheet
Assets
Prepaids and other current assets
Deferred tax assets
Liabilities
Deferred revenue
Equity
Retained earnings
December 31, Adjustments Due to January 1,
2017
ASU 2014-09
2018
$
63,971 $
12,012
10,797 $
4,006
74,768
16,018
$
21,650 $
24,785 $
46,435
$
721,664 $
(9,982) $ 711,682
F-16
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The ASC 606 adjustments pertain to the timing of revenue recognition associated with upfront training fees on
certain contracts. Revenues and associated costs for reporting periods beginning after January 1, 2018 are
recognized and presented in compliance with the provisions of ASC 606. Consistent with the modified
retrospective method of adoption, the Company has not adjusted prior period amounts which continue to be
reported in accordance with the (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86) historic revenue accounting policy and principles.
In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on the
C(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86) consolidated income statement and balance sheet was as follows (in thousands):
Year Ended December 31, 2018
Balances
Without
Adoption of Effect of Change
Higher/(Lower)
As reported ASC 606
Statements of Comprehensive Income
Revenue
Cost of services
Provision for income taxes
Net income
Balance Sheet
Assets
Prepaids and other current assets
Deferred tax assets
Liabilities
Deferred revenue
Equity
Retained earnings
$ 1,509,171 $ 1,500,171 $
1,157,927
16,483
39,755 $
1,153,299
15,215
36,651 $
$
9,000
4,628
1,268
3,104
As of December 31, 2018
Balances
Without
Adoption of Effect of Change
Higher/(Lower)
As reported ASC 606
$
88,487 $
15,523
82,319 $
12,708
6,168
2,815
$
44,926 $
29,140 $
15,786
$ 725,551 $ 732,354 $
(6,803)
Other Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, (cid:179)Leases(cid:180)(cid:15) which amends the existing accounting standards
for lease accounting, including requiring lessees to recognize most leases on their balance sheets related to
the rights and obligations created by those leases and making targeted changes to lessor accounting. The ASU
also requires new disclosures regarding the amounts, timing, and uncertainty of cash flows arising from leases.
The ASU is effective for interim and annual periods beginning on or after December 15, 2018 and early adoption
is permitted. The Company assigned a project manager, completed the assessment phase, has selected a
software solution and other tracking methods, loaded and validated all data into the tool, and has finalized its
implementation approach.
The Company has evaluated the adoption impact of the accounting guidance on its Consolidated Financial
Statements. The new guidance will primarily impact the balance sheet by establishing a right to use asset and
corresponding lease liability in our consolidated balance sheet for those leases that were previously classified
as operating leases.
F-17
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The new leasing standard requires a modified retrospective transition approach for all leases existing at, or
entered into after, the date of initial application, with an option to use certain transition relief. The Company has
elected the following in its transition and implementation approach:
1. As a result of the targeted improvements issued in July 2018, the Company has elected the effective
date as the date of initial application (i.e. January 1, 2019). The election allows the Company to
recognize the effects of the implementation of ASC 842 as a cumulative effect adjustment to the
opening balance of retained earnings (or other components of equity or net assets, as appropriate), in
the period of adoption. There is no restatement of comparative periods under this approach.
2. The Company has elected the package of practical expedients that allows the Company not to reassess
(a) whether any expired or existing contracts are leases or contain leases, (b) the lease classification
for any expired or existing leases, and (c) initial direct costs.
3. The Company will not use hindsight during transition in determining the lease term and assessing
(cid:76)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)-of-use assets.
4. The Company will elect to not separate non-lease components from the lease components for certain
asset classes, while separating in other asset classes.
5. The Company will not apply the recognition requirements in ASC 842 for leases with a term of 12
months or less.
The Company is in the process of implementing procedures with our new lease accounting system and finalizing
related internal controls to meet the requirements of ASU 2016-02. The Company does expect ASU 2016-02 to
have a material impact on our consolidated balance sheet, as we expect to record significant right-of-use assets
and corresponding lease liabilities. However, the Company does not expect the adoption of ASU 2016-02 to
have a material impact on our consolidated statement of comprehensive income or cash flows. The Company
will be in a position to report under this new standard in the first quarter of 2019.
In August 2016, the FASB issued ASU No. 2016-15, (cid:179)Statement of Cash Flows(cid:180)(cid:17) ASU 2016-15 is intended to
reduce diversity in practice regarding how certain cash transactions are presented and classified in the
Consolidated Statement of Cash Flows by providing guidance on eight specific cash flow issues. The ASU is
effective for interim and annual periods beginning on or after December 15, 2017. The Company has adopted
the new guidance effective January 1, 2018 and this adoption did not have a material impact on its cash flow
or related disclosures.
In August 2017, the FASB issued ASU 2017-12, (cid:179)Derivatives and Hedging (Topic 815): Targeted Improvements
(cid:87)(cid:82)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:43)(cid:72)(cid:71)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:36)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:180)(cid:17)(cid:3)ASU 2017-12 amends and simplifies existing guidance for derivatives and
hedges (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:79)(cid:76)(cid:74)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:182)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)
transparency regarding both the scope and results of hedging programs. The changes include designation and
measurement guidance for qualifying hedging relationships and the presentation of hedge results. The ASU is
effective for interim and annual periods beginning after December 15, 2018 and early adoption is permitted.
The Company has assessed the impact on the consolidated statements and related disclosures and notes there
will be no material impacts when adopted on January 1, 2019.
In February 2018, the FASB issued ASU 2018-(cid:19)(cid:21)(cid:15)(cid:3) (cid:179)Income Statement - Reporting Comprehensive Income
(Topic 220), Reclassification of Certain Tax Effects fro(cid:80)(cid:3) (cid:36)(cid:70)(cid:70)(cid:88)(cid:80)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3) (cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:180). ASU
2018-02 allows companies the option to reclassify stranded tax effects from Accumulated other comprehensive
income (loss) (AOCI) to retained earnings resulting from the newly enacted corporate tax rate in the Tax Cuts
and Jobs Act. If adopted, the ASU is effective in years beginning after December 15, 2018, and early adoption
is permitted. The Company early adopted the new standard effective January 1, 2018 and the adoption did not
have a material impact on its financial position.
F-18
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(2)
ACQUISITIONS AND DIVESTITURES
Strategic Communications Services
On April 30, 2018, the Company acquired all of the outstanding equity securities of Strategic Communications
(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3)(cid:47)(cid:87)(cid:71)(cid:3)(cid:11)(cid:179)(cid:54)(cid:38)(cid:54)(cid:180)(cid:12)(cid:17)(cid:3)(cid:54)(cid:38)(cid:54)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:82)(cid:85)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:80)(cid:88)(cid:79)(cid:87)(cid:76)(cid:70)(cid:75)(cid:68)(cid:81)(cid:81)(cid:72)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:70)(cid:87)(cid:3)(cid:70)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:3)(cid:83)(cid:79)(cid:68)(cid:87)(cid:73)(cid:82)(cid:85)(cid:80)(cid:86)(cid:15)(cid:3)
including CISCO. The Company offers
information,
communications and contact center services to leading brands throughout Europe. This business has been
(cid:76)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:38)(cid:55)(cid:54)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)
in-house, managed and outsourced network,
Total cash paid at acquisition was £4.4 million ($6.1 million USD) (inclusive of $4.5 million related to cash
balances). The purchase price was subject to customary representations and warranties, indemnities, and a
net working capital adjustment. The agreement includes potential earn-out payments over the next three years
with a maximum value of £3.0 million ($4.1 million USD) contingent on EBITDA performance over the next three
years. The Company finalized the working capital adjustment for an additional $210 thousand during the third
quarter of 2018 which was paid in October 2018.
The fair value of the contingent consideration has been measured based on significant inputs not observable
in the market (Level 3 inputs). Key assumptions include a discount rate of 4.7% and expected future value of
payments of $2.9 million. The $2.9 million of expected future payments was calculated using probability
weighted EBITDA assessment with the highest probability associated with SCS achieving the targeted EBITDA
for each earn-out year. As of the acquisition date, the fair value of the contingent consideration was $2.7 million.
During the fourth quarter of 2018, a $0.3 million net benefit was recorded related to a fair value adjustment of
the estimated contingent consideration based on revised actuals and estimates of EBITDA performance for
2018, 2019 and 2020. The benefit was included in Other Income (Expense) in the Consolidated Statements of
Comprehensive Income (Loss). As of December 31, 2018, the fair value of the contingent consideration was
$2.4 million, of which zero and $2.4 million were included in Other accrued expenses and Other long-term
liabilities in the accompanying Consolidated Balance Sheets, respectively.
The following summarizes the preliminary estimated fair values of the identifiable assets acquired and liabilities
assumed as of the acquisition date (in thousands):
Cash
Accounts receivable, net
Prepaid expenses
Customer relationships
Goodwill
Accounts payable
Accrued employee compensation and benefits
Accrued expenses
Deferred tax liabilities
Preliminary
Estimate of
Acquisition Date
Fair Value
$
$
$
$
4,530
985
39
3,619
1,231
10,404
216
27
21
629
893
Total purchase price
$
9,511
F-19
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending
finalization of a valuation and tax returns, thus are subject to revisions that may result in adjustments to the
values presented above.
The SCS 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 SCS acquisition is estimated to be
attributable, but not limited to, the acquired workforce and expected synergies with CTS. None of the tax basis
of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and
intangibles and operating results of SCS are reported within the CTS segment from the date of acquisition.
Berkshire Hathaway Specialty Concierge
On March 31, 2018, the Company, through its subsidiary Percepta, acquired certain assets from Berkshire
(cid:43)(cid:68)(cid:87)(cid:75)(cid:68)(cid:90)(cid:68)(cid:92)(cid:3)(cid:54)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79)(cid:87)(cid:92)(cid:3)(cid:38)(cid:82)(cid:81)(cid:70)(cid:76)(cid:72)(cid:85)(cid:74)(cid:72)(cid:15)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:179)(cid:37)(cid:43)(cid:180)(cid:12)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)(cid:72)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:3)
contracts. This acquisition is being accounted for as a business combination. These assets will be integrated
(cid:76)(cid:81)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:38)(cid:48)(cid:54)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)
The total cash paid was $1. In connection with the purchase, Percepta assumed the lease for the customer
engagement center and entered into a transitional services agreement with BH to facilitate the transfer of the
employees and business. Fair values were assigned to each purchased asset including $257 thousand for
customer relationships, $330 thousand as a lease subsidy and $98 thousand for fixed assets. Based on the $1
purchase price, a gain on purchase of $685 thousand was recorded in the quarter ended March 31, 2018 and
was included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).
Motif
On November 8, 2017, the Company agreed to acquire all of the outstanding shares in Motif, Inc., a California
(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:179)(cid:48)(cid:82)(cid:87)(cid:76)(cid:73)(cid:180)(cid:12)(cid:17)(cid:3)(cid:48)(cid:82)(cid:87)(cid:76)(cid:73)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:71)(cid:76)(cid:74)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3)fraud prevention and detection, and content moderation services company
serving eCommerce marketplaces, online retailers, travel agencies and financial services companies. Motif
provides omni-channel community moderation services via voice, email and chat from delivery centers in India
and the Philippines via approximately 2,700 employees. Motif has been integrated into the CMS segment.
The acquisition will be implemented through two separate transactions. In November 2017, the Company
completed the acquisition of 70% of all outstanding shares in Motif from private equity and certain individual
investors for $46.8 million, subject to customary representations and warranties, and working capital
adjustments. The Company also agreed to purchase the remaining 30% interest (cid:76)(cid:81)(cid:3)(cid:48)(cid:82)(cid:87)(cid:76)(cid:73)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:48)(cid:82)(cid:87)(cid:76)(cid:73)(cid:182)(cid:86)(cid:3)(cid:73)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)
(cid:11)(cid:179)(cid:41)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:180)(cid:12)(cid:3) (cid:81)(cid:82)(cid:3) (cid:79)(cid:68)(cid:87)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:68)(cid:81)(cid:3) (cid:48)(cid:68)(cid:92)(cid:3) (cid:21)(cid:19)(cid:21)(cid:19)(cid:3) (cid:11)(cid:179)(cid:22)(cid:19)(cid:8)(cid:3) (cid:69)(cid:88)(cid:92)(cid:82)(cid:88)(cid:87)(cid:3) (cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:180)(cid:12)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:83)(cid:68)(cid:92)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)
(cid:41)(cid:82)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3) (cid:68)(cid:87)(cid:3) (cid:68)(cid:3) (cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3) (cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:69)(cid:72)(cid:3) (cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:48)(cid:82)(cid:87)(cid:76)(cid:73)(cid:182)(cid:86)(cid:3) (cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3) (cid:92)(cid:72)(cid:68)(cid:85)(cid:3) (cid:21)(cid:19)(cid:21)(cid:19)(cid:182)(cid:86)(cid:3) (cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3) (cid:81)(cid:82)(cid:85)(cid:80)(cid:68)(cid:79)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)
EBITDA, $5.0 million in cash, and 30% of the excess cash present in the business at the time of the buyout; or
if the buyout occurs prior to May 2020, based on the trailing twelve months EBITDA, calculated from the most
recently completed full monthly period ending prior to the date of the buyout triggering event, $5.0 million in
cash, and 30% of the excess cash in the business at that point. In connection with this mandatory buyout, the
Company has recorded a $37.8 million liability as of December 31, 2018 which is included in Other long-term
liabilities in the Consolidated Balance Sheet. As a part of the transition, the Motif founders agreed to continue
to stay as executives in the acquired business, at least through the 30% buyout period, and not to compete with
the Company with respect to the acquired business.
F-20
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the
acquisition date. (in thousands):
Cash
Accounts receivable, net
Prepaid expenses
Other current assets
Property, plant and equipment
Income tax receivable
Customer relationships
Goodwill
Accounts payable
Accrued employee compensation and benefits
Accrued expenses
Deferred tax liability
Other
Total purchase price
Acquisition Date
Fair Value
$
$
$
$
$
5,997
5,187
1,248
670
2,182
1,691
37,200
39,147
93,322
2,789
5,249
104
11,402
340
19,884
73,438
In the fourth quarter of 2018, the Company finalized its valuation of Motif for the acquisition date assets acquired
and liabilities assumed and determined that no material adjustments to any of the balances were required.
The Motif customer relationships are being amortized over a useful life of 11 years. The goodwill recognized
from the Motif acquisition is attributable, but not limited to, the acquired workforce and expected synergies with
CMS. None of the tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes.
The acquired goodwill and intangibles, and operating results of Motif are reported within the CMS segment from
the date of acquisition.
Connextions
On April 3, 2017, the Company acquired all of the outstanding shares of Connextions, Inc., a health care
customer service provider company, from OptumHealth Holdings, LLC. Connextions has been integrated into
the health care vertical of the CMS segment of the Company. Connextions employed approximately 2,000 at
several centers in the U.S.
The total cash paid at acquisition was $80 million. The purchase price is subject to customary representations
and warranties, indemnities, and net working capital adjustment. In connection with the acquisition, the
Company and OptumHealth (directly and through affiliates) also entered into long-term technology and
customer services agreements, and into transition services agreements to facilitate the transfer of the business.
The Company subsequently paid an additional $1.8 million for the working capital adjustment, which was paid
during the third quarter of 2017. Additionally, fair value adjustments related to the transition services agreements
reduced the purchase price by $4.1 million resulting in a net purchase price of $77.7 million.
F-21
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the
acquisition date (in thousands):
Cash
Accounts receivable, net
Prepaid expenses
Other current assets
Property, plant and equipment
Customer relationships
Goodwill
Accounts payable
Accrued employee compensation and benefits
Accrued expenses
Deferred tax liabilities
Deferred revenue
Total purchase price
Acquisition Date
Fair Value
$
$
$
$
$
(cid:178)
15,959
241
51
7,594
35,000
35,272
94,117
1
346
386
15,273
399
16,405
77,712
In the fourth quarter of 2017, the Company finalized its valuation of Connextions for the acquisition date assets
acquired and liabilities assumed and determined that no material adjustments to any of the balances were
required.
The Connextions customer relationships are being amortized over a useful life of 12 years. The goodwill
recognized from the Connextions acquisition is attributable, but not limited to, the acquired work force and
expected synergies with CMS. None of the tax basis of the acquired intangibles and goodwill will be deductible
for income tax purposes. The acquired goodwill and the operating results of Connextions are reported within
the CMS segment from the date of acquisition.
Financial Impact of Acquired Businesses
The acquired businesses purchased in 2018 and 2017 noted above contributed revenues of $190.1 million and
$100.3 million, and a net income (loss) of $5.0 million and $(4.2) million, inclusive of $6.5 million and $2.6 million
of acquired intangible amortization, to the Company for the years ended December 31, 2018 and 2017,
respectively.
The unaudited proforma financial results for the twelve months ended 2018 and 2017 combines the
consolidated results of the Company, SCS, BH, Motif, and Connextions assuming the acquisitions had been
completed on January 1, 2017. The reported revenue and net income of $1,477.4 million and $7.3 million would
have been $1,560.1 million and $13.6 million for the twelve months ended December 31, 2017, respectively,
on an unaudited proforma basis.
For 2018, the reported revenue and net income of $1,509.2 million and $35.8 million would have been $1,513.2
million and $36.3 million for the year ended December 31, 2018, respectively, on an unaudited proforma basis.
The unaudited pro forma 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 pro forma consolidated results do not reflect any anticipated synergies expected as a result of the
acquisition.
F-22
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Assets and Liabilities Held for Sale
During the third quarter of 2016, the Company determined that one business unit from the CGS segment and
(cid:82)(cid:81)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:88)(cid:81)(cid:76)(cid:87)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:54)(cid:54)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:69)(cid:72)(cid:3)(cid:71)(cid:76)(cid:89)(cid:72)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)
units met the criteria to be classified as held for sale. The Company took into consideration the discounted cash
flow models, management input based on early discussions with brokers and potential buyers, and third-party
evidence from similar transactions to complete the fair value analysis as there had not been a selling price
determined at this point for either unit. For the two business units in CGS and CSS losses of $2.6 million and
$2.7 million, respectively, were recorded as of December 31, 2016 in Loss on assets held for sale in the
Consolidated Statements of Comprehensive Income (Loss).
For the business unit in CGS, based on further discussion and initial offers, management determined that the
estimated selling price assumed should be revised and an additional $3.2 million loss was recorded as of June
30, 2017 and included in Loss on assets held for sale in the Consolidated Statements of Comprehensive Income
(Loss). Effective December 22, 2017, the business unit was sold to T(cid:75)(cid:72)(cid:3)(cid:54)(cid:72)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:36)(cid:74)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:11)(cid:179)(cid:55)(cid:54)(cid:36)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:3)(cid:88)(cid:83)-front
payment of $245 thousand and future contingent earnout on the one year anniversary of the closing date.
During the fourth quarter of 2017, a net $0.6 million gain was recorded in Loss on assets held for sale in the
Consolidated Statements of Comprehensive Income (Loss).
For the business unit in CSS, based on further discussions and the offer at that time, management determined
that the estimated selling price assumed should be revised and an additional $2.0 million loss was recorded
during the quarter ended June 30, 2018 and included in Loss on assets held for sale in the Consolidated
Statements of Comprehensive Income (Loss).
As of December 31, 2018, management determined that the business unit in CSS should be reclassified from
assets held for sale to assets held and used. At this point, a fair value assessment of this specific balance sheet
was completed and a $0.4 million gain was recorded during the quarter ended December 31, 2018. This gain
in addition to the $2.0 million loss recorded earlier in 2018 were reclassified to Other Income (Expense), net in
the Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2018. The
assets and liabilities of the business are no longer separately identified as held for sale on the Consolidated
Balance Sheets as of December 31, 2018 and 2017 and the estimated loss on sale recorded during 2016 has
been reclassified to Other income (expense), net in the Consolidated Statements of Comprehensive Income
(Loss).
Investments
CaféX
In (cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:7)(cid:28)(cid:17)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:38)(cid:68)(cid:73)(cid:72)(cid:59)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:179)(cid:38)(cid:68)(cid:73)(cid:112)(cid:59)(cid:180)(cid:12)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)
the purchase of a portion of its outstanding Series B Preferred Stock of CaféX. CaféX is a provider of omni-
channel web-based real time communication (WebRTC) solutions that enhance mobile applications and
websites with in-app video communication and screen share technology to increase customer satisfaction and
enterprise efficiency. At December 31, 2015, the Company owned 17.2% of the total equity of CaféX. During
the fourth quarter of 2016, the Company invested an additional $4.3 million to purchase a portion of the Series
C Preferred Stock of CaféX; of which $3.2 million was paid in the fourth quarter of 2016 and $1.1 million was
paid in the first quarter of 2017. At December 31, 2018, the Company owns 17.2% of the total equity of CaféX.
The investment is accounted for under the cost method of accounting. The Company evaluates its investments
for possible other-than-temporary impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.
During the first quarter of 2018, the Company provided a $2.1 million bridge loan which accrues interest at a
rate of 12% per year until maturity or conversion, which will be no later than June 30, 2020. Based on
subsequent events, the Company believes that the loan could convert into Series D preferred stock.
F-23
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
As of March 31, 2018, the Company evaluated the investment in CaféX for impairment due to a large anticipated
sale of IP not being completed as planned during the first quarter, a shift in the strategy of the company, an
ongoing default by CaféX of its loan agreement with its bank, and a lack of potential additional funding options
as of March 31, 2018. Based on this evaluation, the Company determined that the fair value of its investment
was zero and thus the investment was impaired as of March 31, 2018. The Company recorded a $15.6 million
write-off of the equity investment and the bridge loan which was included in Other income (expense) in the
Consolidated Statements of Comprehensive Income (Loss).
Divestitures
(cid:55)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3)(cid:54)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:11)(cid:179)(cid:55)(cid:54)(cid:42)(cid:180)(cid:12)
Effective June 30, 2017, the Company sold the Technology Solutions Group (cid:11)(cid:179)(cid:55)(cid:54)(cid:42)(cid:180)(cid:12) to SKC Communication
(cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:15)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:179)(cid:54)(cid:46)(cid:38)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:3)(cid:88)(cid:83)(cid:73)(cid:85)(cid:82)(cid:81)(cid:87)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)$250 thousand and future contingent royalty payments over
the next 3 years. TSG had been included in the CTS segment. During the second quarter of 2017, a $30
thousand gain, which included the write-off of $0.7 million of goodwill, was recorded and included in the
Consolidated Statements of Comprehensive Income (Loss). During the third quarter of 2017, a $141 thousand
gain was recorded as a result of TSG delivering to SKC working capital in excess of the target set forth in the
stock purchase agreement, and the gain was included in the Consolidated Statements of Comprehensive
Income (Loss). In the aggregate, TTEC received $0.3 million and $2.0 million for the fourth quarter and year
ended December 31, 2018, respectively, related to quarterly royalty payments which were included in Other
Income (expense) in the Consolidated Statements of Comprehensive Income (Loss).
TeleTech Spain Holdings SL
In the third quarter of 2017, the Company dissolved TeleTech Spain Holdings SL, a fully owned foreign
subsidiary domiciled in Spain. Upon complete liquidation, $3.2 million attributable to the accumulated translation
adjustment component of equity has been removed from Accumulated other comprehensive income (loss) and
recognized as part of the gain on liquidation. The $3.2 million gain was included in Other income (expense),
net in the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended
September 30, 2017.
(3)
SEGMENT INFORMATION
The Company reports the following four segments:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the CMS segment includes the customer experience delivery solutions which integrate innovative
technology with highly-trained customer experience professionals to optimize the customer experience
across all channels and all stages of the customer lifecycle from an onshore, offshore or work-from-
home environment;
the CGS segment provides technology-enabled sales and marketing solutions that support revenue
generation across the customer lifecycle, including sales advisory, search engine optimization, digital
demand generation, lead qualification, and acquisition sales, growth and retention services;
the CTS segment includes system design consulting, customer experience technology product,
implementation and integration consulting services, and management of c(cid:79)(cid:76)(cid:72)(cid:81)(cid:87)(cid:86)(cid:182)(cid:3)(cid:70)(cid:79)(cid:82)(cid:88)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:81)-premise
solutions; and
the CSS segment provides professional services in customer experience strategy and operations,
insights, system and operational process optimization, and culture development and knowledge
management.
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.
F-24
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The following tables present certain financial data by segment (in thousands):
Year Ended December 31, 2018
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
$ 1,129,048 $
141,324
170,559
68,585
$ 1,509,516 $
Year Ended December 31, 2017
Gross
Revenue
Intersegment
Sales
Net
Revenue
(cid:178) $ 1,129,048 $
(cid:178)
(345)
(cid:178)
141,324
170,214
68,585
(345) $ 1,509,171 $
Depreciation
&
Income
(Loss) from
Amortization Operations
49,161
9,839
26,634
6,420
92,054
2,501
7,002
1,812
57,864 $
69,179 $
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
$ 1,141,779 $
128,698
138,918
68,326
$ 1,477,721 $
Year Ended December 31, 2016
Gross
Revenue
Intersegment
Sales
Net
Revenue
(19) $ 1,141,760 $
(cid:178)
(337)
(cid:178)
128,698
138,581
68,326
(356) $ 1,477,365 $
Depreciation
&
Income
(Loss) from
Amortization Operations
78,206
7,803
12,047
2,433
100,489
52,193 $
2,959
7,092
2,263
64,507 $
Gross
Revenue
Intersegment
Sales
Net
Revenue
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
$
924,654 $
141,005
141,865
68,674
$ 1,276,198 $
(329) $
(cid:178)
(611)
(cid:178)
924,325 $
141,005
141,254
68,674
(940) $ 1,275,258 $
Depreciation
&
Income
(Loss) from
Amortization Operations
50,541
6,969
933
(5,691)
52,752
5,905
10,645
3,355
68,675 $
48,770 $
Capital Expenditures
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
Total Assets
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
For the Year Ended December 31,
2017
2016
2018
$
$
38,617 $
(cid:178)
3,957
876
43,450 $
48,069 $
871
2,308
710
51,958 $
40,321
4,185
5,217
1,109
50,832
2018
December 31,
2017
2016
$
$
788,550 $
42,981
162,222
60,755
1,054,508 $
869,594 $
41,036
100,351
67,755
1,078,736 $
585,679
71,540
115,537
73,548
846,304
F-25
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Goodwill
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
2018
December 31,
2017
2016
$
$
114,036 $
119,497 $
24,439
41,979
24,179
24,439
40,839
24,952
204,633 $
209,727 $
42,589
24,439
41,500
24,153
132,681
The following tables present certain financial data based upon the geographic location where the services are
provided (in thousands):
As of and for the
Year Ended December 31,
2017
2016
2018
Revenue
United States
Philippines
Latin America
Europe / Middle East / Africa
Canada
Asia Pacific / India
Total
Property, plant and equipment, gross
United States
Philippines
Latin America
Europe / Middle East / Africa
Canada
Asia Pacific / India
Total
Other long-term assets
United States
Philippines
Latin America
Europe / Middle East / Africa
Canada
Asia Pacific / India
Total
$ 862,026 $
351,829
109,104
67,163
61,071
57,978
820,597 $
353,122
130,082
62,597
74,252
36,715
693,023
351,853
122,347
65,866
13,950
28,219
$
1,509,171 $
1,477,365 $
1,275,258
$ 508,202 $
130,176
44,065
10,499
15,193
19,874
$ 728,009 $
490,110 $
137,683
51,451
10,280
15,912
24,592
730,028 $
441,222
133,214
50,605
8,805
19,988
23,484
677,318
$
56,459 $
46,029 $
5,188
1,329
544
241
1,680
7,753
1,475
(750)
324
4,326
$
65,441 $
59,157 $
36,442
8,194
1,161
1,099
514
110
47,520
(4)
ACCOUNTS RECEIVABLE AND SIGNIFICANT CLIENTS
Accounts receivable, net in the accompanying Consolidated Balance Sheets consists of the following (in
thousands):
Accounts receivable
Less: Allowance for doubtful accounts
Accounts receivable, net
December 31,
2018
2017
$ 355,107 $ 392,823
(921)
$ 350,962 $ 391,902
(4,145)
F-26
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(cid:36)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:36)(cid:79)(cid:79)(cid:82)(cid:90)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:71)(cid:82)(cid:88)(cid:69)(cid:87)(cid:73)(cid:88)(cid:79)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:11)(cid:76)(cid:81)(cid:3)thousands):
Balance, beginning of year
Provision for doubtful accounts
Uncollectible receivables written-off
Effect of foreign currency and other
Balance, end of year
December 31,
2017
2016
2018
$
921 $
3,679
(429)
(26)
$ 4,145 $
662 $ 2,176
1,164
458
(2,670)
(180)
(8)
(19)
662
921 $
(cid:50)(cid:81)(cid:3)(cid:50)(cid:70)(cid:87)(cid:82)(cid:69)(cid:72)(cid:85)(cid:3)(cid:20)(cid:24)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:27)(cid:15)(cid:3)(cid:54)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:43)(cid:82)(cid:79)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:179)(cid:54)(cid:72)(cid:68)(cid:85)(cid:86)(cid:180)(cid:12)(cid:3)(cid:68)(cid:81)(cid:81)(cid:82)(cid:88)(cid:81)(cid:70)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:87)(cid:3)(cid:75)(cid:68)d filed a petition for bankruptcy
protection in the United States Bankruptcy Court for the Southern District of New York. As of December 31,
2018, TTEC had approximately $2.7 million in pre-petition accounts receivables outstanding related to Sears
and during the fourth quarter of 2018 a $2.7 million allowance for uncollectible accounts was recorded and
included in Selling, general and administrative expenses in the Consolidated Statements of Comprehensive
Income (Loss). TTEC continues to provide services to Sears and has received assurances that the cost of its
post-petition services will be covered by funds that Sears has available to satisfy its obligations to its current
service providers through debtor in possession financing.
Significant Clients
The Company had one client that contributed in excess of 10% of total revenue for the year ended
December 31, 2018. This client operates in the healthcare industry and is included in the CMS segment. The
Company had a different client that contributed 10% of total revenue in the year ended 2016. This client
operates in the communications industry and is included in the CMS segment. The revenue from these clients
as a percentage of total revenue was as follows:
2018
Year Ended December 31,
2017
2016
Healthcare client
Telecommunications client
10 %
7 %
7 %
9 %
4 %
10 %
Accounts receivable from these clients was as follows (in thousands):
Year Ended December 31,
2017
2016
2018
Healthcare client
Telecommunications client
$
$
49,245
19,329
$
$
56,802
27,111
$
$
22,414
28,080
The loss of one or more of its significant clients could have a (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:3) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)
business, operating results, or financial condition. The Company does not require collateral from its clients. To
(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:85)(cid:76)(cid:86)(cid:78) with its clients, management performs periodic credit evaluations, maintains
allowances for uncollectible accounts and may require pre-payment for services from certain clients. Based on
currently available information, management does not believe significant credit risk exists as of December 31,
2018.
Accounts Receivable Factoring Agreement
On March 5, 2019, the Company entered into an Uncommitted Receivables Purchase Agreement with a third-
(cid:83)(cid:68)(cid:85)(cid:87)(cid:92)(cid:3)(cid:69)(cid:68)(cid:81)(cid:78)(cid:3)(cid:11)(cid:179)(cid:37)(cid:68)(cid:81)(cid:78)(cid:180)(cid:12)(cid:15)(cid:3)(cid:90)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)-to-time the Company may elect to sell U.S. accounts receivables of
certain clients at a discount to the bank for cash on a limited recourse basis. The maximum amount of
receivables sold by the Company and purchased by the Bank at any given time shall not exceed $75
million. The discount on the accounts receivable sold will be recorded within Other expense, net in the
Consolidated Statements of Comprehensive Income (Loss).
F-27
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(5)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
Land and buildings
Computer equipment and software
Telephone equipment
Furniture and fixtures
Leasehold improvements
Motor vehicles
Construction-in-progress and other
Property, plant and equipment, gross
Less: Accumulated depreciation and amortization
Property, plant and equipment, net
December 31,
2018
33,286 $
$
411,653
45,351
74,538
161,960
90
1,131
728,009
(566,486)
$
161,523 $
2017
38,858
390,944
46,521
76,860
176,467
158
220
730,028
(566,682)
163,346
Depreciation and amortization expense for property, plant and equipment was $58.4 million, $57.0 million and
$59.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.
Included in the computer equipment and software is internally developed software of $11.2 million net and $8.5
million net as of December 31, 2018 and 2017, respectively.
(6)
GOODWILL
Goodwill consisted of the following (in thousands):
Effect of
December 31, Acquisitions /
Foreign
2017
Adjustments Impairments Currency
December 31,
2018
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
$
119,497 $
24,439
40,839
24,952
Total
$
209,727 $
(125) $
(cid:178)
1,232
(cid:178)
1,107 $
(cid:178) $ (5,336) $
(cid:178)
(cid:178)
(cid:178)
(cid:178) $ (6,201) $
(cid:178)
(92)
(773)
114,036
24,439
41,979
24,179
204,633
Effect of
December 31, Acquisitions /
Foreign
2016
Adjustments Impairments Currency
December 31,
2017
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
Impairment
$
42,589 $
24,439
41,500
24,153
$
132,681 $
73,934 $
(cid:178)
(661)
(cid:178)
73,273 $
(cid:178) $ 2,974 $
(cid:178)
(cid:178)
(cid:178)
(cid:178) $ 3,773 $
(cid:178)
(cid:178)
799
119,497
24,439
40,839
24,952
209,727
The Company has four reporting units with goodwill and performs a goodwill impairment test on at least an
annual basis. The Company conducts its annual goodwill impairment test during the fourth quarter, or more
frequently, if indicators of impairment exist.
F-28
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the annual goodwill impairment analysis, the Company elected to perform a Step 1 evaluation for all of its
(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:88)(cid:81)(cid:76)(cid:87)(cid:86)(cid:15)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3) (cid:68)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:88)(cid:81)(cid:76)(cid:87)(cid:182)(cid:86)(cid:3) (cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:73)(cid:68)(cid:76)(cid:85)(cid:3) (cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3) (cid:87)(cid:82)(cid:3) (cid:76)(cid:87)(cid:86)(cid:3) (cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3) (cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3)
determination of fair value requires significant judgments including estimation of future cash flows, which is
dependent on internal forecasts, estimation of the long-term growth rates for the businesses, the useful lives
over which the cash flows will occur and determination of appropriate discount rates (based in part on the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:90)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:12)(cid:17)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)
affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. As of
December 1, 2018, the date of the annual impairment testing, the Company concluded that for all four of the
reporting units the fair values were in excess of their respective carrying values and the goodwill for those
reporting units was not impaired.
The process of evaluating the fair value of the reporting units is highly subjective and requires significant
judgment and estimates as the reporting units operate in a number of markets and geographical regions. The
Company used a market approach and an income approach to determine our best estimates of fair value which
incorporated the following significant assumptions:
(cid:120) Revenue projections, including revenue growth during the forecast periods ranging from (23.9)% to
32.2%;
(cid:120) EBITDA margin projections held relatively flat over the forecast periods ranging from 10.5% to 20.0%;
(cid:120) Estimated income tax rates of 26.0% to 27.6%;
(cid:120) Estimated capital expenditures ranging from $0.8 million to $47.5 million; and
(cid:120) Discount rates ranging from 10% to 14.5% based on various inputs, including the risks associated with
the specific reporting units, the country of operations as well as their revenue growth and EBITDA
margin assumptions.
CMS - Humanify reporting unit
As of December 1, 2016, the calculated fair value for the Humanify reporting unit was below the carrying value
which necessitated an impairment analysis. The Company tested all of the assets of the reporting unit for
impairment.
Definite-lived long-lived assets consisted of internally developed software and purchased IP. Based on a
decision to change the strategy of this business unit in December 2016 which will not use these assets on a go
forward basis, the Company has determined that there is no value associated with these assets and recorded
a $10.8 million impairment in the three months ended December 31, 2016, which was included in Impairment
losses in the Consolidated Statements of Comprehensive Income (Loss).
For the goodwill impairment analysis, the Company calculated the fair value of the Humanify reporting unit and
compared that to the updated carrying value and determined that the fair value was not in excess of its carrying
value. Key assumptions used in the fair value calculation for goodwill impairment testing include, but are not
limited to, revenue growth of approximately $300 thousand to $1 million per year through 2027, a perpetual
growth rate of 3%, a discount rate of 16.75%, and negative EBITDA through 2020 growing to a 15.6% EBITDA
for the terminal year(cid:17)(cid:3)(cid:40)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:75)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)
internal business plan adjusted as appropriate for the Compa(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)
The fair value of the Humanify reporting unit was determined to be zero. Upon completing this assessment, the
Company determined that the implied fair value of goodwill was below the carrying value and the entire goodwill
balance of $1.4 million was impaired and expensed in the three months ended December 31, 2016 which is
included in Impairment losses in the Consolidated Statements of Comprehensive Income (Loss).
F-29
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(7)
OTHER INTANGIBLE ASSETS
Other intangible assets which are included in Other long-term assets in the accompanying Consolidated
Balance Sheets consisted of the following (in thousands):
Acquisitions Effect of
Customer relationships, gross
Customer relationships - accumulated
amortization
Other intangible assets, gross
Other intangible assets - accumulated
amortization
Other intangible assets, net
$
December 31,
2017
127,431 $
$
Amortization Impairments Adjustments Currency
(cid:178) $
1,956 $ (5,860) $
(cid:178) $
and
Foreign
December 31,
2018
123,527
(35,217)
4,784
(10,546)
(cid:178)
(cid:178)
(cid:178)
1,203
(cid:178)
1,337
(209)
(43,223)
4,575
(3,913)
93,085 $
(212)
(10,758) $
(cid:178)
(cid:178) $
(cid:178)
157
3,159 $ (4,575) $
(3,968)
80,911
Acquisitions Effect of
December 31,
2016
$
53,402 $
(cid:178) $
(6,120) $
78,320 $ 1,829 $
Amortization Impairments Adjustments Currency
and
Foreign
December 31,
2017
127,431
(27,810)
4,589
(3,978)
5,665
(7,213)
(cid:178)
3,230
(3,701)
(254)
(cid:178)
(7,467) $
2,930
(5,322)
(8,983) $
(3,230)
3,852
(2,929)
(cid:178)
(194)
44
318
(343)
76,013 $ 1,654 $
(35,217)
4,784
(3,913)
(cid:178)
93,085
Customer relationships, gross
Customer relationships - accumulated
amortization
Other intangible assets, gross
Other intangible assets - accumulated
amortization
Trade name - indefinite life
Other intangible assets, net
$
31,868 $
The acquisitions and adjustments recorded during 2018 relate to the purchase of SCS (see Note 2 for further
information) and the fair value of the CSS-PRG balance sheet (see below).
The acquisitions and adjustments recorded during 2017 relate to the purchase of Connextions and Motif (see
Note 2 for further information) and the impairment of intangible assets during the fourth quarter of 2017 (see
below).
CTS - eLoyalty
During the fourth quarter of 2017 in connection with the rebranding of the consolidated company, management
determined that it would no longer be using the name of eLoyalty and would be transitioning to TTEC Digital.
Based on this change in branding strategy, an evaluation of the indefinite-lived trade name was completed and
it was determined that the fair value of the asset was zero. The Company recorded an impairment expense of
$3.3 million in the three months ended December 31, 2017 which was included in Impairment losses in the
Consolidated Statements of Comprehensive Income (Loss).
CSS - PRG
During the fourth quarter of 2017 in connection with the rebranding of the consolidated company and the full
integration of the CSS segment, management determined that it will no longer be using the name of PRG and
would be transitioning all CSS entities to TTEC Consulting. Based on this change in branding strategy, an
evaluation of the indefinite-lived trade name was completed and it was determined that the fair value of the
asset was zero. The Company recorded impairment expense of $2.0 million in the three months ended
December 31, 2017 which was included in Impairment losses in the Consolidated Statements of
Comprehensive Income (Loss).
As of December 31, 2018, in connection with reclassifying a business unit from assets held for sale to assets
held and used, a fair value assessment was completed and it was determined that due to continuing estimated
losses, the fair value of the customer relationship balance was zero. The Company recorded a $0.7 million fair
value adjustment during the fourth quarter of 2018 which was included in Other income (expense), net in the
Consolidated Statements of Comprehensive Income (Loss).
F-30
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Customer relationships are being amortized over the remaining weighted average useful life of 8.2 years and
other intangible assets are being amortized over the remaining weighted average useful life of 4.6 years.
Amortization expense related to intangible assets was $10.8 million, $7.5 million and $9.5 million for the years
ended December 31, 2018, 2017 and 2016, respectively.
Expected future amortization of other intangible assets as of December 31, 2018 is as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
Total
(8)
DERIVATIVES
Cash Flow Hedges
$
10,557
9,341
8,840
8,156
7,619
36,398
80,911
$
The Company enters into foreign exchange related derivatives. Foreign exchange derivatives entered into
(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)
fluctuations that are associated with forecasted revenue earned in foreign locations. Upon proper qualification,
(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:3)(cid:75)(cid:72)(cid:71)(cid:74)(cid:72)(cid:86)(cid:17)(cid:3)(cid:44)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:82)(cid:81)(cid:79)(cid:92)(cid:3)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:87)(cid:82)(cid:3)(cid:71)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)
contracts with investment grade counterparty financial institutions, and correspondingly, the fair value of
derivative assets consider, among other factors, the creditworthiness of these counterparties. Conversely, the
(cid:73)(cid:68)(cid:76)(cid:85)(cid:3) (cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:71)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:85)(cid:72)(cid:73)(cid:79)(cid:72)(cid:70)(cid:87)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:90)(cid:82)(cid:85)(cid:87)(cid:75)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)(cid:3) (cid:36)(cid:86)(cid:3) (cid:82)(cid:73) December 31, 2018, the
Company had 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 years ended December 31, 2018, 2017 and 2016 (in thousands and net of tax):
Year Ended December 31,
2017
2016
2018
Aggregate unrealized net gain/(loss) at beginning of period
Add: Net gain/(loss) from change in fair value of cash flow hedges
Less: Net (gain)/loss reclassified to earnings from effective hedges
Aggregate unrealized net gain/(loss) at end of period
$
(15,746) $
20,278
(12,810)
$
(8,278) $
(32,393) $
31,053
(14,406)
(15,746) $
(26,885)
11,242
(16,750)
(32,393)
(cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3) (cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3) (cid:70)(cid:68)(cid:86)(cid:75)(cid:3) (cid:73)(cid:79)(cid:82)(cid:90)(cid:3) (cid:75)(cid:72)(cid:71)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3) (cid:76)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:68)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) December 31, 2018 and 2017 are
summarized as follows (in thousands). All hedging instruments are forward contracts.
As of December 31, 2018
Philippine Peso
Mexican Peso
Local
Currency
Notional
Amount
6,710,000
1,091,500
U.S. Dollar
Notional
Amount
% Maturing
in the next
12 months
Contracts
Maturing
Through
130,957 (1)
57,708
188,665
60.7 % December 2021
53.0 % December 2021
$
F-31
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
As of December 31, 2017
Philippine Peso
Mexican Peso
Local
Currency
Notional
Amount
10,685,000
1,609,000
U.S. Dollar
Notional
Amount
219,917 (1)
93,589
313,506
$
(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 December 31, 2018 and December 31, 2017.
Fair Value Hedges
The Company enters into foreign exchange forward contracts to economically hedge against foreign currency
(cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:68)(cid:92)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)
in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other
income (expense), net. As of December 31, 2018 and 2017(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:81)(cid:82)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)
contracts used as fair value hedges was $70.4 million and $176.2 million, respectively.
Derivative Valuation and Settlements
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)December 31, 2018 and 2017 were as follows (in thousands):
Designation:
Derivative contract type:
Derivative classification:
Fair value and location of derivative in the Consolidated Balance
Sheet:
Prepaids and other current assets
Other long-term assets
Other current liabilities
Other long-term liabilities
Total fair value of derivatives, net
Designation:
Derivative contract type:
Derivative classification:
Fair value and location of derivative in the Consolidated Balance
Sheet:
Prepaids and other current assets
Other long-term assets
Other current liabilities
Other long-term liabilities
Total fair value of derivatives, net
F-32
December 31, 2018
Designated
as Hedging
Instruments
Foreign
Exchange
Cash Flow
Interest
Rate
Cash Flow
Not Designated
as Hedging
Instruments
Foreign
Exchange
Fair Value
$
814 $
215
(8,861)
(3,484)
$
(11,316) $
(cid:178) $
(cid:178)
(cid:178)
(cid:178)
(cid:178) $
60
(cid:178)
(104)
(cid:178)
(44)
December 31, 2017
Designated
as Hedging
Instruments
Foreign
Exchange
Cash Flow
Interest
Rate
Cash Flow
Not Designated
as Hedging
Instruments
Foreign
Exchange
Fair Value
$
$
220 $
393
(15,603)
(11,266)
(26,256) $
(cid:178) $
(cid:178)
(cid:178)
(cid:178)
(cid:178) $
1,603
(cid:178)
(133)
(cid:178)
1,470
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The effect of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the
years ended December 31, 2018 and 2017 were as follows (in thousands):
Designation:
Derivative contract type:
Derivative classification:
Year Ended December 31,
2018
2017
Designated as Hedging Designated as Hedging
Instruments
Instruments
Foreign Interest Foreign
Exchange
Cash Flow Cash Flow Cash Flow Cash Flow
Exchange
Rate
Interest
Rate
Amount of gain or (loss) recognized in Other comprehensive
income (loss) - effective portion, net of tax
$ (12,810) $
(cid:178) $ (14,336) $
(70)
Amount and location of net gain or (loss) reclassified from
Accumulated OCI to income - effective portion:
Revenue
Interest expense
Designation:
Derivative contract type:
Derivative classification:
$ (17,548) $
(cid:178)
(cid:178) $ (22,792) $
(cid:178)
(cid:178)
(cid:178)
(115)
Year Ended December 31,
2018
Not Designated as
Hedging Instruments
Foreign Exchange
2017
Not Designated as
Hedging Instruments
Foreign Exchange
Forward
Contracts
Forward
Fair Value Contracts
Fair Value
Amount and location of net gain or (loss) recognized in the
Consolidated Statement of Comprehensive Income (Loss):
Cost of services
Other income (expense), net
$
(cid:178) $
(cid:178)
(cid:178) $
(7,436)
(cid:178) $
(cid:178)
(cid:178)
1,350
(9)
FAIR VALUE
The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that
prioritizes the inputs used to measure fair value. This hierarchy requires that the Company maximize the use
of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure
fair value are as follows:
Level 1 (cid:178) Quoted prices in active markets for identical assets or liabilities.
Level 2 (cid:178) Observable inputs other than quoted prices included in Level 1, such as quoted prices for
similar assets and liabilities in active markets, similar assets and liabilities in markets that
are not active or can be corroborated by observable market data.
Level 3 (cid:178) Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the assets or liabilities. This includes certain pricing models, discounted
cash flow methodologies and similar techniques that use significant unobservable inputs.
F-33
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The following presents information as of December 31, 2018 and 2017 (cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)
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.
Investments (cid:177) 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. The fair values of these
investments are determined based on valuation techniques using the best information available, and may
include market observable inputs and discounted cash flow projections. An impairment charge is recorded when
the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary.
As of December 31, 2018, the investment in CaféX Communications, Inc.(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)
total $15.6 million investment was fully impaired to zero (see Note 2).
Debt - (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:80)(cid:68)(cid:85)(cid:76)(cid:79)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:83)(cid:72)(cid:85)(cid:80)(cid:76)(cid:87)(cid:86)(cid:3)(cid:73)(cid:79)(cid:82)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)-rate
borrowings based upon the current Prime Rate or LIBOR plus a credit spread (cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)
leverage ratio calculation (as defined in the Credit Agreement). As of December 31, 2018 and 2017, the
Company had $282.0 million and $344.0 million, respectively, of borrowings outstanding under the Credit
Agreement. During 2018 and 2017, borrowings accrued interest at an average rate of 3.1% and 2.2% per
annum, respectively, 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.
Derivatives - Net derivative assets (liabilities) are measured at fair value on a recurring basis. The portfolio is
valued using models based on market observable inputs, including both forward and spot foreign exchange
rates, interest rates, implied volatility, and counterparty credit risk, including the ability of each party to execute
its obligations under the contract. As of December 31, 2018, credit risk did not materially change the fair value
(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:17)
(cid:55)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)its net derivative assets (liabilities)
as of December 31, 2018 and 2017 (in thousands):
As of December 31, 2018
Fair Value Measurements Using
Quoted Prices in Significant
Active Markets
for Identical
Assets
(Level 1)
Other
Significant
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Cash flow hedges
Fair value hedges
Total net derivative asset (liability)
$
$
(cid:178) $
(cid:178)
(cid:178) $
(11,316) $
(44)
(11,360) $
As of December 31, 2017
Fair Value Measurements Using
Quoted Prices in Significant
Active Markets
for Identical
Assets
(Level 1)
Other
Significant
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
At Fair Value
(11,316)
(44)
(11,360)
(cid:178) $
(cid:178)
(cid:178) $
At Fair Value
(26,256)
1,470
(24,786)
(cid:178) $
(cid:178)
(cid:178) $
Cash flow hedges
Fair value hedges
Total net derivative asset (liability)
$
$
(cid:178) $
(cid:178)
(cid:178) $
(26,256) $
1,470
(24,786) $
F-34
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(cid:55)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)December 31, 2018 and 2017 (in
thousands):
As of December 31, 2018
Fair Value Measurements Using
Quoted Prices in
Active Markets for Significant Other
Identical Assets
(Level 1)
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Derivative instruments, net
Total assets
Liabilities
Deferred compensation plan liability
Derivative instruments, net
Contingent consideration
Total liabilities
As of December 31, 2017
$
$
$
$
(cid:178) $
(cid:178) $
(cid:178) $
(cid:178)
(cid:178)
(cid:178) $
(cid:178) $
(cid:178) $
(cid:178)
(cid:178)
(14,836) $
(11,360)
(cid:178)
(26,196) $
(cid:178)
(cid:178)
(2,363)
(2,363)
Fair Value Measurements Using
Quoted Prices in
Active Markets for Significant Other
Identical Assets
(Level 1)
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Derivative instruments, net
Total assets
Liabilities
Deferred compensation plan liability
Derivative instruments, net
Contingent consideration
Total liabilities
$
$
$
$
(cid:178) $
(cid:178) $
(cid:178) $
(cid:178)
(cid:178)
(cid:178) $
(cid:178) $
(cid:178) $
(cid:178)
(cid:178)
(13,219) $
(24,786)
(cid:178)
(38,005) $
(cid:178)
(cid:178)
(399)
(399)
Deferred Compensation Plan - The Company maintains a non-qualified deferred compensation plan structured
as a Rabbi trust for certain eligible employees. Participants in the deferred compensation plan select from a
menu of phantom investment options for their deferral dollars offered by the Company each year, which are
based upon changes in value of complementary, defined market investments. The deferred compensation
liability represents the combined values of market investments against which participant accounts are tracked.
Contingent Consideration (cid:178) The Company recorded contingent consideration related to the acquisition of SCS.
This contingent payable was recognized at fair value using a discounted cash flow approach and a discount
rate of 4.7%. The measurements were based on significant inputs not observable in the market. The Company
recorded interest expense each period using the effective interest method until the future value of these
contingent payables reached their expected future value. Interest expense related to all recorded contingent
payables is included in Interest expense in the Consolidated Statements of Comprehensive Income (Loss).
The Company recorded contingent consideration related to a revenue servicing agreement with Welltok in the
fourth quarter of 2016, in which a maximum of $1.25 million would be paid over eight quarters based on the
dollar value of revenue earned by the Company. The contingent payable was recognized at fair value of $1.25
million as of December 31, 2016. Payments totaling $851 thousand were completed during 2017 and the final
payment of $399 thousand was made during the first quarter of 2018.
F-35
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(cid:36)(cid:3) (cid:85)(cid:82)(cid:79)(cid:79)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:92)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:73)(cid:68)(cid:76)(cid:85)(cid:3) (cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:76)(cid:86)(cid:3) (cid:68)(cid:86)(cid:3) (cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)
(in thousands):
Welltok
SCS
Total
Welltok
Atelka
Total
December 31,
2017
Acquisitions Payments Adjustments
Imputed
Interest /
December 31,
2018
$
$
399 $
(cid:178)
399 $
(cid:178) $
2,731
2,731 $
(399) $
(cid:178)
(399) $
(cid:178) $
(368)
(368) $
(cid:178)
2,363
2,363
December 31,
2016
Acquisitions Payments Adjustments
Imputed
Interest /
December 31,
2017
$
$
1,250 $
558
1,808 $
(cid:178) $
(cid:178)
(cid:178) $ (1,433) $
(851) $
(582)
(cid:178) $
24
24 $
399
(cid:178)
399
(10)
INCOME TAXES
The sources of pre-tax operating income are as follows (in thousands):
Domestic
Foreign
Total
Year Ended December 31,
2018
2017
$ (13,926) $ 10,909 $
70,164
56,238 $ 88,887 $
77,978
$
2016
(6,216)
56,514
50,298
The United States recently enacted comprehensive tax reform legislation known as the Tax Cuts and Jobs Act
(the "2017 Tax Act") that, among other things, reduces the U.S. federal corporate income tax rate from 35% to
21% (cid:68)(cid:81)(cid:71)(cid:3) (cid:76)(cid:80)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:68)(cid:3) (cid:87)(cid:72)(cid:85)(cid:85)(cid:76)(cid:87)(cid:82)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3) (cid:87)(cid:68)(cid:91)(cid:3) (cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:15)(cid:3) (cid:69)(cid:88)(cid:87)(cid:3) (cid:76)(cid:80)(cid:83)(cid:82)(cid:86)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:3) (cid:68)(cid:79)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3) (cid:179)(cid:69)(cid:68)(cid:86)(cid:72)(cid:3) (cid:72)(cid:85)(cid:82)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:68)(cid:81)(cid:87)(cid:76)-(cid:68)(cid:69)(cid:88)(cid:86)(cid:72)(cid:3) (cid:87)(cid:68)(cid:91)(cid:180)(cid:3)
(cid:11)(cid:179)(cid:37)(cid:40)(cid:36)(cid:55)(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:82)(cid:81)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:79)(cid:82)(cid:90)(cid:3)(cid:87)(cid:68)(cid:91)(cid:72)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:179)(cid:42)(cid:44)(cid:47)(cid:55)(cid:44)(cid:180)(cid:12)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:45)(cid:68)(cid:81)(cid:88)(cid:68)(cid:85)(cid:92)(cid:3)(cid:20)(cid:15)(cid:3)
2018. In addition, the law imposes a one-time mandatory repatriation tax on accumulated post-1986 foreign
earnings on domestic corporations effective for the 2017 tax year. As of December 31, 2018, the Company has
completed its analysis of the impacts of the 2017 Tax Act within the measurement period in accordance with
SAB 118, and no material adjustment was recorded to the 2017 estimate.
The significant components of this expense include (i) the remeasurement of net deferred tax assets at the
lower enacted U.S. federal corporate tax rate, (ii) the deemed repatriation tax on unremitted non-U.S. earnings
and profits that were previously tax deferred and (iii) other miscellaneous tax impacts.
(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)(cid:55)(cid:68)(cid:91)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:72)(cid:80)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:72)(cid:87)(cid:72)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)
amounts are based on prevailing regulations and currently available information, and any additional guidance
(cid:76)(cid:86)(cid:86)(cid:88)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:54)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:3)(cid:11)(cid:179)(cid:44)(cid:53)(cid:54)(cid:180)(cid:12)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:86).
(cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:68)(cid:81)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) policy with respect to both the new GILTI and BEAT rules is to
compute the related taxes in the period the entity becomes subject to either. A reasonable estimate of the
effects of these provisions has been included in the 2018 annual financial statements.
F-36
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
No changes in indefinite reinvestment assertion were made during the year. The Company has completed its
analysis in regard to the full tax impact related to prior changes in indefinite reinvestment reassertion and any
related taxes have been recorded. No additional income taxes have been provided for any remaining outside
basis difference inherent in (cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86) foreign subsidiaries as these amounts continue to be indefinitely
reinvested in foreign operations. Determination of any unrecognized deferred tax liability related to the outside
basis difference in investments in foreign subsidiaries is not practicable due to the inherent complexity of the
multi-national tax environment in which the Company operates.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:82)(cid:81)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:51)(cid:85)(cid:82)(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)r (benefit from) income taxes are as follows (in thousands):
Year Ended December 31,
2018
2017
2016
Current provision for (benefit from)
Federal
State
Foreign
Total current provision for (benefit from)
Deferred provision for (benefit from)
Federal
State
Foreign
Total deferred provision for (benefit from)
Total provision for (benefit from) income taxes
$
2,771 $ 48,556 $
2,754
18,933
24,458
99
12,643
61,298
(373)
372
14,447
14,446
(943)
(138)
(6,894)
(7,975)
(2,390)
103
704
(1,583)
$ 16,483 $ 78,075 $ 12,863
14,441
707
1,629
16,777
(cid:55)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:88)(cid:87)(cid:82)(cid:85)(cid:92)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:11)(cid:76)(cid:81) thousands):
2017
Year Ended December 31,
2016
2018
$ 11,810 $ 31,110 $ 17,605
(158)
(129)
(10,206)
590
2,474
104
(133)
388
(635)
(1,128)
(4,646)
443
100
3,673
2,554
(cid:178)
(cid:178)
1,967
$ 16,483 $ 78,075 $ 12,863
460
(924)
(14,417)
323
1,098
647
1,607
142
(824)
(1,030)
(4,798)
1,101
207
3,143
(865)
(cid:178)
61,569
(474)
2,003
2,191
(3,758)
785
(68)
615
1,105
136
475
(594)
(1,748)
(1,944)
19
3,976
(1,659)
2,110
(cid:178)
1,029
Income tax per U.S. federal statutory rate (21%, 35%, 35%)
State income taxes, net of federal deduction
Change in valuation allowances
Foreign income taxes at different rates than the U.S.
Foreign withholding taxes
Losses in international markets without tax benefits
Nondeductible compensation under Section 162(m)
Liabilities for uncertain tax positions
Permanent difference related to foreign exchange gains
(Income) losses of foreign branch operations
Non-taxable earnings of noncontrolling interest
Foreign dividend less foreign tax credits
Decrease (increase) to deferred tax asset - change in tax rate
State income tax credits
Foreign earnings taxed currently in U.S.
Taxes related to prior year filings
Taxes related to acquisition accounting
Transition tax
Other
Income tax per effective tax rate
F-37
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:11)(cid:76)(cid:81) thousands):
Deferred tax assets, gross
Accrued workers compensation, deferred compensation and employee benefits
Allowance for doubtful accounts, insurance and other accruals
Amortization of deferred rent liabilities
Net operating losses
Equity compensation
Customer acquisition and deferred revenue accruals
Federal and state tax credits, net
Unrealized losses on derivatives
Impairment of equity investment
Other
Total deferred tax assets, gross
Valuation allowances
Total deferred tax assets, net
Deferred tax liabilities
Depreciation and amortization
Contract acquisition costs
Intangible assets
Other
Total deferred tax liabilities
Net deferred tax assets
Year Ended December 31,
2018
2017
$
8,724
3,301
2,614
18,475
1,348
13,894
549
2,035
4,221
1,001
56,162
(10,867)
45,295
$
8,597
2,197
2,352
17,887
1,481
7,026
50
3,137
(cid:178)
1,557
44,284
(9,526)
34,758
(15,547)
(8,519)
(15,890)
(187)
(40,143)
5,152
$
(12,850)
(5,331)
(15,405)
(446)
(34,032)
726
$
Quarterly, the Company assesses the likelihood by jurisdiction that its net deferred tax assets will be recovered.
Based on the weight of all available evidence, both positive and negative, the Company records a valuation
allowance against deferred tax assets when it is more-likely-than-not that a future tax benefit will not be realized.
As of December 31, 2018 the Company had approximately $3.0 million of net deferred tax assets in the
U.S. and $2.2 million of net deferred tax assets related to certain international locations whose recoverability is
dependent upon their future profitability. As of December 31, 2018 the deferred tax valuation allowance was
$10.9 million and related primarily to tax lo(cid:86)(cid:86)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:77)(cid:88)(cid:85)(cid:76)(cid:86)(cid:71)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:71)(cid:82)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:80)(cid:72)(cid:72)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:80)(cid:82)(cid:85)(cid:72)-likely-than-
(cid:81)(cid:82)(cid:87)(cid:180)(cid:3)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:74)(cid:88)(cid:76)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3)
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 2018, the
Company made adjustments to its deferred tax assets and corresponding valuation allowances. The net change
to the valuation allowance consisted of the following: a $1.6 million increase related to capital loss carry forwards
and other credit carry forwards not expected to be utilized, a $1.4 million increase in valuation allowance in the
United Kingdom, Ireland, Canada, Luxembourg, Turkey and Australia for deferred tax assets that do not meet
(cid:87)(cid:75)(cid:72)(cid:3) (cid:179)(cid:80)(cid:82)(cid:85)(cid:72)-likely-than-(cid:81)(cid:82)(cid:87)(cid:180)(cid:3) (cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:68)(cid:3) $1.6 million release of valuation allowance in Argentina, New
Zealand, Belgium, and the United States and various other jurisdictions related to the utilization or write-off of
deferred tax assets.
(cid:36)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:11)(cid:76)(cid:81) thousands):
Year Ended December 31,
Beginning balance
Additions of deferred income tax expense
Reductions of deferred income tax expense
Ending balance
F-38
2017
2016
2018
$
9,526 $
2,913
(1,572)
$ 10,867 $
9,949 $ 10,139
1,914
2,044
(2,104)
(2,467)
9,949
9,526 $
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
As of December 31, 2018, after consideration of all tax loss and tax credit carry back opportunities, the
Company had tax affected tax loss carry forwards worldwide expiring as follows (in thousands):
2019
2020
2021
2022
After 2022
No expiration
Total
$
86
146
91
(cid:178)
12,361
5,791
$ 18,475
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:179)(cid:55)(cid:68)(cid:91)(cid:3)(cid:43)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:92)(cid:86)(cid:180)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)
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 four years and additional periods for varying years, expiring at
various times between 2019 and 2020. The aggregate benefit to income tax expense for the years ended
December 31, 2018, 2017 and 2016 was approximately $8.2 million, $11.9 million and $12.4 million,
respectively, which had a favorable impact on diluted net income per share of $0.18, $0.26 and $0.27,
respectively.
Accounting for Uncertainty in Income Taxes
In accordance with ASC 740, the Company has recorded a reserve for uncertain tax positions. The total amount
of interest and penalties recognized in the accompanying Consolidated Balance Sheets and Consolidated
Statements of Comprehensive Income (Loss) as of December 31, 2018, 2017 and 2016 was approximately
$1.4 million, $1.8 million and $693 thousand, respectively.
The Company had a reserve for uncertain tax benefits, on a net basis, of $4.8 million and $3.3 million for the
years ended December 31, 2018 and 2017, respectively. The liability for uncertain tax positions was decreased
by $2.1 million during 2018 for the release of uncertain tax positions related to the closing of statues of limitations
and increased by $3.6 million relating to new positions.
The tabular reconciliation of the reserve for uncertain tax benefits on a gross basis without interest for the three
years ended December 31, 2018 is presented below (in thousands):
Balance as of December 31, 2015
Additions for current year tax positions
Reductions in prior year tax positions
Balance as of December 31, 2016
Additions for current year tax positions
Reductions in prior year tax positions
Balance as of December 31, 2017
Additions for current year tax positions
Reductions in prior year tax positions
Balance as of December 31, 2018
$
$
2,709
826
(1,153)
2,382
916
(cid:178)
3,298
3,600
(2,114)
4,784
At December 31, 2018, the amount of uncertain tax benefits including interest, that, if recognized, would reduce
tax expense was $6.2 million. Within the next 12 months, it is expected that the amount of unrecognized tax
benefits may be reduced by $2.5 million as a result of the expiration of various statutes of limitation or other
confirmations of tax positions.
In accordance with ASC 740, during the second quarter of 2018, $1.1 million of liability was released due to the
closing of statues of limitations. During the third quarter of 2018, $2.0 million of liability was released due to the
closing of statutes of limitations and changes calculated as allowed under SAB 118 related to the 2017 Tax Act.
F-39
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
During the fourth quarter of 2018, the Company recorded liabilities of $3.6 million related to new uncertain tax
positions.
During the second quarter of 2016, $0.3 million of liability was released due to the closing of a statute of
limitations.
During the third quarter of 2016, $0.8 million of liability was released due to the favorable outcome of
communications with a revenue authority related to site compliance for locations with tax advantaged status.
During the third quarter of 2016, $0.5 million of liability was released due to the closing of a statute of limitations.
The Company and its domestic and foreign subsidiaries (including Percepta LLC and its domestic and foreign
subsidiaries) file income tax returns as required in the U.S. federal jurisdiction and various state and foreign
jurisdictions. The following table presents the major tax jurisdictions and tax years that are open as of
December 31, 2018 and subject to examination by the respective tax authorities:
Tax Jurisdiction
United States
Australia
Brazil
Canada
Mexico
Philippines
Tax Year Ended
2015 to present
2014 to present
2013 to present
2010 to present
2013 to present
2015 to present
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17) income tax returns filed for the tax years ending December 31, 2015 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 Canada for tax years 2009 and 2010, the Philippines for tax year 2015, Belgium for tax years 2016
and 2017, the state of New York for tax years 2015 through 2017, and the state of Minnesota in the United
States for tax years 2014 through 2016. The Company received a report of initial deficiency tax findings from
(cid:87)(cid:75)(cid:72)(cid:3)(cid:51)(cid:75)(cid:76)(cid:79)(cid:76)(cid:83)(cid:83)(cid:76)(cid:81)(cid:72)(cid:86)(cid:3)(cid:37)(cid:88)(cid:85)(cid:72)(cid:68)(cid:88)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:11)(cid:179)(cid:37)(cid:44)(cid:53)(cid:180)(cid:12)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:71)(cid:82)(cid:72)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:3)
with the amount in question and is working closely with the BIR to clarify and resolve the outstanding
discrepancies. Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion
(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)
Financial Statements.
(11)
RESTRUCTURING CHARGES, INTEGRATION CHARGES AND IMPAIRMENT LOSSES
Restructuring Charges
During the years ended December 31, 2018, 2017 and 2016, the Company continued restructuring activities
(cid:83)(cid:85)(cid:76)(cid:80)(cid:68)(cid:85)(cid:76)(cid:79)(cid:92)(cid:3)(cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:83)(cid:68)(cid:70)(cid:76)(cid:87)(cid:92), workforce and related management in all of its
segments to better align the capacity and workforce with current business needs.
During 2017, several restructuring activities were completed related to the purchase of Connextions (see Note
2) including the closure of two delivery centers that came with the acquisition. During 2017, a net $0.4 million
severance accrual was recorded in relation to these closures. In conjunction with closing these two delivery
centers, a $0.6 million termination fee and a $1.4 million net lease liability and applicable expenses were
recorded as of December 31, 2017. These net charges were included in the Consolidated Statements of
Comprehensive Income (Loss) during the year ended December 31, 2017. During 2018, in connection with one
of these delivery centers, an early termination option was exercised and a $1.9 million fee was expensed and
recorded in Restructuring, net in the Consolidated Statements of Comprehensive Income (Loss).
During 2018, TTEC determined it would close several other delivery centers and a net $1.1 million and $1.8
million in the CMS and CGS segments, respectively, were expensed related to early termination fees and cease
use lease accruals. These expenses are included in the Restructuring and integration charges, net in the
Consolidated Statements of Comprehensive Income (Loss) as of December 31, 2018.
F-40
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
A summary of the expenses recorded for restructuring and included in Restructuring and integration charges,
net in the accompanying Consolidated Statements of Comprehensive Income (Loss) for the years ended
December 31, 2018, 2017 and 2016, respectively, is as follows (in thousands):
Reduction in force
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
Facility exit and other charges
Customer Management Services
Customer Growth Services
Customer Technology Services
Customer Strategy Services
Total
2018
Year Ended December 31,
2017
2016
694
(cid:178)
(cid:178)
133
827
$
$
1,012
(cid:178)
94
55
1,161
$
$
2,837
147
324
92
3,400
2018
Year Ended December 31,
2017
2016
3,550
1,754
(cid:178)
(cid:178)
5,304
$
$
2,050
(cid:178)
84
85
2,219
$
$
959
(cid:178)
33
(cid:178)
992
$
$
$
$
(cid:36)(cid:3)(cid:85)(cid:82)(cid:79)(cid:79)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:70)(cid:70)(cid:85)(cid:88)(cid:68)(cid:79)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) December 31, 2018
and 2017, respectively, is as follows (in thousands):
Balance as of December 31, 2016
Expense
Payments
Changes due to foreign currency
Changes in estimates
Balance as of December 31, 2017
Expense
Payments
Changes due to foreign currency
Changes in estimates
Balance as of December 31, 2018
Reduction
in Force
Facility Exit and
Other Charges
Total
$
$
1,468
1,316
(1,892)
(43)
(155)
694
1,021
(937)
(169)
(193)
416
$
$
98
2,219
(908)
(cid:178)
(cid:178)
1,409
5,303
(3,480)
(6)
(cid:178)
3,226
$
$
1,566
3,535
(2,800)
(43)
(155)
2,103
6,324
(4,417)
(175)
(193)
3,642
The remaining restructuring accruals are expected to be paid or extinguished during 2019 and are all classified
as current liabilities within Other accrued expenses in the Consolidated Balance Sheets.
Integration Charges
During the third and fourth quarters of 2017, as a result of the Connextions acquisition, certain integration
activities were completed and $5.6 million and $3.9 million of additional expenses were incurred and paid,
respectively. These integration activities included the hiring, training and licensing of a group of employees at
new delivery centers as one of the acquired centers was closed during the third quarter of 2017 and one of the
acquired centers was closed during the fourth quarter of 2017. In connection with these center closures,
leasehold improvements of $3.5 million were written off as a related integration expense. The Company has
also incurred significant expenses related to the integration of the IT systems and has paid duplicative software
costs and facilities expenses for several areas during the transition period.
F-41
Table of Contents
Impairment Losses
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
During each of the periods presented, the Company evaluated the recoverability of its leasehold improvement
assets at certain customer engagement centers. An asset is considered to be impaired when the anticipated
(cid:88)(cid:81)(cid:71)(cid:76)(cid:86)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74) value.
The amount of impairment recognized is the difference between the carrying value of the asset group and its
fair value. To determine fair value, the Company used Level 3 inputs in its discounted cash flows analysis.
Assumptions included the amount and timing of estimated future cash flows and assumed discount rates.
During 2018, 2017 and 2016, the Company recognized impairment losses related to leasehold improvement
assets of $1.1 million, zero and zero, respectively, in its CMS segment.
(12)
INDEBTEDNESS
Credit Facility
On October 30, 2017, the Company entered into a Third Amendment to the June 3, 2013 Amended and
(cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:11)(cid:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:179)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)
(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:3)(cid:86)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:180)(cid:12)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:86)(cid:92)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:72)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:79)(cid:72)(cid:71)(cid:3)
by Wells Fargo Bank, National Association. The Credit Agreement provides for a secured revolving credit facility
that matures on February 11, 2021 with a maximum aggregate commitment of $1.2 billion.
On February 14, 2019, the Company entered into a Fourth Amendment to its Amended and Restated Credit
Agreement and Amended and Restated Security Agreement originally dated as of June 3, 2013 (collectively
(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:3)(cid:86)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:86)(cid:92)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:72)(cid:81)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:79)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:58)(cid:72)(cid:79)(cid:79)(cid:86)(cid:3)
Fargo Bank, (cid:49)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:74)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:86)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:79)(cid:72)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:180)(cid:12)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)
Credit Agreement provides for a secured revolving Credit Facility that matures on February 14, 2024.
(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:68)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3) (cid:80)(cid:68)(cid:87)(cid:88)(cid:85)ity date and a few material terms outlined below, the
material terms of the Credit Facility, including pricing and collateral, are substantially the same as those
(cid:83)(cid:85)(cid:72)(cid:89)(cid:76)(cid:82)(cid:88)(cid:86)(cid:79)(cid:92)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K for the period ended December
(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:11)(cid:179)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:180)(cid:12)(cid:17)
The maximum commitment under the Credit Facility is $900.0 million, with an accordion feature of up to $1.2
billion in the aggregate, if certain conditions are satisfied. The Credit Facility commitment fees are payable to
the lenders in an amount equal to the unused portion of the Credit Facility multiplied by 0.150% per annum from
the Credit Facility inception date until a compliance certificate is provided by the Company in connection with
its quarterly financial statements for the quarter ended March 31, 2019, and thereafter as previously disclosed
(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)(cid:3)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:68)(cid:85)(cid:92)(cid:3)
affirmative, negative, and financial covenants, which remained unchanged from the 2016 Credit Facility, except
that the Company is now obligated to maintain a maximum net leverage ratio of 3.50 to 1.00, and a minimum
Interest Coverage Ratio of 2.50 to 1.00. The Credit Agreement permits accounts receivable factoring up to the
greater of $75 million or 25 percent of the average book value of all accounts receivable over the most recent
twelve month period.
(cid:37)(cid:68)(cid:86)(cid:72)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:79)(cid:82)(cid:68)(cid:81)(cid:86)(cid:3)(cid:69)(cid:72)(cid:68)(cid:85)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:68)(cid:87)(cid:3)(cid:68)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:72)(cid:84)(cid:88)(cid:68)(cid:79)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:85)(cid:72)(cid:68)(cid:87)(cid:72)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:11)(cid:76)(cid:12)(cid:3)(cid:58)(cid:72)(cid:79)(cid:79)(cid:86)(cid:3)(cid:41)(cid:68)(cid:85)(cid:74)(cid:82)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:80)(cid:72)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:15)(cid:3)(cid:11)(cid:76)(cid:76)(cid:12)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:75)(cid:68)(cid:79)(cid:73)(cid:3)(cid:82)f 1% in
excess of the federal funds effective rate, and (iii) 1.25% in excess of the one month London Interbank Offered
(cid:53)(cid:68)(cid:87)(cid:72)(cid:3) (cid:11)(cid:179)(cid:47)(cid:44)(cid:37)(cid:50)(cid:53)(cid:180)(cid:12)(cid:30)(cid:3) (cid:83)(cid:79)(cid:88)(cid:86)(cid:3) (cid:76)(cid:81)(cid:3) (cid:72)(cid:68)(cid:70)(cid:75)(cid:3) (cid:70)(cid:68)(cid:86)(cid:72)(cid:3) (cid:68)(cid:3) (cid:80)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:19)(cid:8)(cid:3) (cid:87)(cid:82)(cid:3) (cid:19)(cid:17)(cid:26)(cid:24)% based on (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86) net leverage ratio.
Eurodollar loans bear interest at LIBOR plus a margin of 1.0% to 1.75% based on (cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86) net leverage
ratio. Alternate currency loans bear interest at rates applicable to their respective currencies.
Letter of credit fees are one eighth of 1% of the stated amount of the letter of credit on the date of issuance,
renewal or amendment, plus an annual fee equal to the borrowing margin for Eurodollar loans.
F-42
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company primarily utilizes its Credit Agreement to fund working capital, general operations, stock
repurchases, dividends, and other strategic activities, such as the acquisitions described in Note 2. As of
December 31, 2018, and 2017, the Company had borrowings of $282.0 million and $344.0 million, respectively,
under its Credit Agreement, and its average daily utilization was $514.7 million and $494.7 million for the years
ended December 31, 2018 and 2017, respectively. Based on the current level of availability based on the
covenant calculations, (cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:69)(cid:82)(cid:85)(cid:85)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:68)(cid:83)(cid:68)(cid:70)(cid:76)(cid:87)(cid:92)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3) approximately $360.0 million as of
December 31, 2018. As of December 31, 2018, the Company was in compliance with all covenants and
conditions under its Credit Agreement.
(13)
DEFERRED REVENUE AND COSTS
Deferred revenue in the accompanying Consolidated Balance Sheets consist of the following (in thousands):
December 31,
Deferred Revenue - Current
Deferred Revenue - Long-term
Total Deferred Revenue
2017
2018
$ 44,926 $ 21,650
9,632
$ 78,173 $ 31,282
33,247
Deferred costs in the accompanying Consolidated Balance Sheets consist of the following (in thousands):
December 31,
Deferred Costs - Current
Deferred Costs - Long-term
Total Deferred Costs
2017
2018
$ 23,539 $ 13,649
9,654
$ 57,581 $ 23,303
34,042
(cid:36)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:11)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:82)(cid:88)(cid:86)(cid:68)(cid:81)(cid:71)(cid:86)(cid:12)(cid:29)
Balance as of December 31, 2017
Additions
Amortization
Balance as of December 31, 2018
(14)
COMMITMENTS AND CONTINGENCIES
Letters of Credit
$
31,282
155,096
(108,205)
78,173
$
As of December 31, 2018, outstanding letters of credit under the Credit Agreement totaled $3.1 million and
(cid:83)(cid:85)(cid:76)(cid:80)(cid:68)(cid:85)(cid:76)(cid:79)(cid:92)(cid:3)(cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:71)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:36)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)December 31, 2018,
letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $0.6
million.
Guarantees
(cid:44)(cid:81)(cid:71)(cid:72)(cid:69)(cid:87)(cid:72)(cid:71)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:76)(cid:86)(cid:3) (cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)
domestic subsidiaries.
Legal Proceedings
From time to time, the Company has been involved in legal actions, both as plaintiff and defendant, which arise
in the ordinary course of business. The Company accrues for exposures associated with such legal actions to
the extent that losses are deemed both probable and reasonably estimable. To the extent specific reserves
have not been made for certain legal proceedings, their ultimate outcome, and consequently, an estimate of
possible loss, if any, cannot reasonably be determined at this time.
F-43
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Based on currently available information and advice received from counsel, the Company believes that the
disposition or ultimate resolution of any current legal proceedings, except as otherwise specifically reserved for
(cid:76)(cid:81)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3) (cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)osition, cash
flows or results of operations.
(15)
LEASES
The Company has various operating leases primarily for customer engagement centers, equipment, and office
space, which generally contain renewal options. Rent expense under operating leases was approximately
$43.7 million, $46.3 million and $39.5 million for the years ended December 31, 2018, 2017 and 2016,
respectively.
In 2008, the Company sub-leased one of its customer engagement centers to a third party for the remaining
term of the original lease. The sub-lease began on January 1, 2009 and rental income is recognized on a
straight-line basis over the term of the sub-lease through 2021. In 2017, the Company sub-leased one of its
office spaces for the remaining term of the original lease. The sub-lease began on November 6, 2017 and ends
May 31, 2021.
The future minimum rental payments and receipts required under non-cancelable operating leases as of
December 31, 2018 are as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
Total
Operating Sub-Lease
Leases
Income
$
47,379 $
36,045
30,678
26,584
17,226
25,362
$ 183,274 $
(2,624)
(2,631)
(276)
(cid:178)
(cid:178)
(cid:178)
(5,531)
The Company records operating lease expense on a straight-line basis over the life of the lease as described
in Note 1. The deferred lease liability as of December 31, 2018 and 2017 was $16.6 million and $15.7 million,
respectively.
Asset Retirement Obligations
(cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:86)(cid:3) (cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:3) (cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:11)(cid:179)(cid:36)(cid:53)(cid:50)(cid:180)(cid:12)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3) (cid:82)(cid:73)(cid:3) (cid:76)(cid:87)(cid:86)(cid:3) customer engagement center
(cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)(cid:17)(cid:3) (cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3) (cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:36)(cid:53)(cid:50)(cid:182)(cid:86)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3) (cid:79)(cid:82)(cid:81)(cid:74)-term assets in the accompanying
Consolidated Balance Sheets while the ARO liability is included in Other long-term liabilities in the
accompanying Consolidated Balance Sheets. Following is a summary of the amounts recorded (in thousands):
ARO liability total
$
1,938 $
1,153 $
14 $
(623) $
2,482
Balance at
December 31, Additions and
2017
Modifications Accretion Settlements
Balance at
December 31, Additions and
2016
Modifications Accretion Settlements
Balance at
December 31,
2018
Balance at
December 31,
2017
ARO liability total
$
1,861 $
317 $
7 $
(247) $
1,938
Increases to ARO result from a new lease agreement or modifications on an ARO from a preexisting lease
agreement. Modifications to ARO liabilities and accumulated accretion occur when lease agreements are
F-44
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
amended or when assumptions change, such as the rate of inflation. Modifications are accounted for
prospectively as changes in estimates. Settlements occur when leased premises are vacated and the actual
cost of restoration is paid. Differences between the actual costs of restoration and the balance recorded as
ARO liabilities are recognized as gains or losses in the accompanying Consolidated Statements of
Comprehensive Income (Loss).
(16)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents changes in the accumulated balance for each component of Other comprehensive
income (loss), including current period other comprehensive income (loss) and reclassifications out of
accumulated other comprehensive income (loss) (in thousands):
Foreign
Currency
Translation
Adjustment
Derivative
Valuation, Net
of Tax
Other, Net
of Tax
Totals
Accumulated other comprehensive income (loss) at
December 31, 2015
$
(71,196) $
(26,885) $
(3,284) $ (101,365)
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income (loss)
Net current period other comprehensive (income) loss
(20,812)
11,242
1,902
(7,668)
(cid:178)
(20,812)
(16,750)
(5,508)
(1,181)
721
(17,931)
(25,599)
Accumulated other comprehensive income (loss) at
December 31, 2016
Accumulated other comprehensive income (loss) at
December 31, 2016
$
(92,008) $
(32,393) $
(2,563) $ (126,964)
$
(92,008) $
(32,393) $
(2,563) $ (126,964)
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income (loss)
Net current period other comprehensive income (loss)
7,908
(cid:178)
7,908
31,053
575
39,536
(14,406)
16,647
(470)
105
(14,876)
24,660
Accumulated other comprehensive income (loss) at
December 31, 2017
Accumulated other comprehensive income (loss) at
December 31, 2017
$
(84,100) $
(15,746) $
(2,458) $ (102,304)
$
(84,100) $
(15,746) $
(2,458) $ (102,304)
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income (loss)
Net current period other comprehensive income (loss)
(30,068)
20,278
712
(9,078)
(cid:178)
(30,068)
(12,810)
7,468
(404)
308
(13,214)
(22,292)
Accumulated other comprehensive income (loss) at
December 31, 2018
$
(114,168) $
(8,278) $
(2,150) $ (124,596)
F-45
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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 Year Ended December 31, Comprehensive Income
2018
2017
2016
(Loss) Classification
Statement of
$ (17,548) $ (22,792) $ (28,025) Revenue
(cid:178)
4,738
(115)
8,501
(534)
Interest expense
11,809 Provision for income taxes
$ (12,810) $ (14,406) $ (16,750) Net income (loss)
$
$
(446) $
42
(404) $
(522) $ (1,310) Cost of services
52
129 Provision for income taxes
(470) $ (1,181) Net income (loss)
Derivative valuation
Loss on foreign currency forward exchange
contracts
Loss on interest rate swaps
Tax effect
Other
Actuarial loss on defined benefit plan
Tax effect
(17)
NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted shares for the periods indicated
(in thousands):
Year Ended December 31,
2018
2017
2016
Shares used in basic earnings per share calculation
46,064
45,826
47,423
Effect of dilutive securities:
Stock options
Restricted stock units
Performance-based restricted stock units
Total effects of dilutive securities
Shares used in dilutive earnings per share calculation
6
314
1
321
46,385
10
536
10
556
46,382
10
286
17
313
47,736
For the years ended December 31, 2018, 2017 and 2016, there were zero, zero and 60 thousand options to
purchase shares of common stock or performance-based restricted stock that were outstanding but not included
in the computation of diluted net income per share because the exercise price exceeded the value of the shares
and the effect would have been anti-dilutive. For the years ended December 31, 2018, 2017 and 2016, restricted
stock units of 212 thousand, 21 thousand, and 71 thousand, respectively, were outstanding but not included in
the computation of diluted net income per share because the effect would have been anti-dilutive.
(18)
EMPLOYEE COMPENSATION PLANS
Employee Benefit Plan
The Company currently has a 401(k) profit-sharing plan that allows participation by U.S. employees who have
completed six months of service, as defined, and are 21 years of age or older. Participants may defer up to
75% of their gross pay, up to a maximum limit determined by U.S. federal law. Participants are also eligible for
(cid:68)(cid:3)(cid:80)(cid:68)(cid:87)(cid:70)(cid:75)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:15)(cid:3)(cid:68)(cid:87)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:85)(cid:72)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:3)(cid:68)(cid:3)(cid:179)(cid:80)(cid:68)(cid:87)(cid:70)(cid:75)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:3)
based on the amount and rate of the elective deferrals. The Company determines how much, if any, it will
contribute for each dollar of elective deferrals. Participants vest in matching contributions over a three-year
period. Company matching contributions to the 401(k) plan(s) totaled $5.2 million, $5.7 million and $5.1 million
for the years ended December 31, 2018, 2017 and 2016, respectively.
F-46
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Equity Compensation Plans
In May 2010, the Company adopted the TeleTech Holdings, Inc. (cid:21)(cid:19)(cid:20)(cid:19)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:21)(cid:19)(cid:20)(cid:19)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:180)(cid:12)(cid:17)(cid:3)
An aggregate of 4.0 million shares of common stock has been reserved for issuance under the 2010 Plan,
which permits the award of incentive stock options, non-qualified stock options, stock appreciation rights, shares
of restricted common stock and RSUs. The 2010 Plan also provides for annual equity-based compensation
(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:17)(cid:3)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:89)(cid:72)(cid:86)(cid:87)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)
four to five years and have a contractual life of ten years. Options issued to Directors vest over one year and
have a contractual life of ten years. As of December 31, 2018, a total of 4.0 million shares were authorized and
1.0 million shares were available for issuance under the 2010 Plan.
For the years ended December 31, 2018, 2017, and 2016, the Company recorded total equity-based
compensation expense under all equity-based arrangements (stock options and RSUs) of $12.1 million,
$11.9 million and $9.8 million, respectively. For 2018, 2017 and 2016, of the total compensation expense, $4.7
million, $4.1 million and $3.1 million was recognized in Cost of services and $7.4 million, $7.8 million and $6.7
million, was recognized in Selling, general and administrative in the Consolidated Statements of
Comprehensive Income (Loss), respectively. For the years ended December 31, 2018, 2017, and 2016, the
Company recognized a tax benefit under all equity-based arrangements (stock options and RSUs) of
$3.7 million, $6.8 million and $5.0 million, respectively.
Restricted Stock Units
2016, 2017 and 2018 RSU Awards: The Company granted RSUs in 2016, 2017 and 2018 to new and existing
employees that vest over four or five years. The Company also granted RSUs in 2016, 2017 and 2018 to
members of the Board of Directors that vest over one year.
During 2015, the Company granted performance-based RSUs to an executive the amount of which is
determinable based on a reporting segment of the Company achieving incremental operating income for each
year from 2015-2017. During 2015 and 2016, based on operating income performance for reporting segment
of the Company, approximately $0.4 million and $0.1 million of RSUs were earned. These RSUs were granted
in March 2016 and March 2017, respectively, and will vest 12 months from the grant date. During 2017, the
Company cancelled the 2017 performance grant.
Summary of RSUs: (cid:54)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:53)(cid:54)(cid:56)(cid:86)(cid:3) (cid:86)(cid:75)(cid:68)(cid:79)(cid:79)(cid:3) (cid:69)(cid:72)(cid:3) (cid:80)(cid:68)(cid:71)(cid:72)(cid:3) (cid:76)(cid:81)(cid:3) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3) (cid:69)(cid:92)(cid:3)
delivery of one share of common stock for each RSU then being settled. The Company calculates the fair value
(cid:73)(cid:82)(cid:85)(cid:3)(cid:53)(cid:54)(cid:56)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
expense over the vesting period using a straight-line method. The Company factors an estimated forfeiture rate
in calculating compensation expense on RSUs and adjusts for actual forfeitures upon the vesting of each
tranche of RSUs. The Company also factors in the present value of the estimated dividend payments that will
have accrued as these RSUs are vesting.
The weighted average grant-date fair value of RSUs, including performance-based RSUs, granted during the
years ended December 31, 2018, 2017, and 2016 was $35.15, $29.56, and $26.60, respectively. The total
intrinsic value and fair value of RSUs vested during the years ended December 31, 2018, 2017, and 2016 was
$12.5 million, $10.6 million, and $10.8 million, respectively.
F-47
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(cid:36)(cid:3)(cid:86)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:88)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:81)(cid:82)(cid:81)-vested RSUs and performance-based RSUs and activity for the
year ended December 31, 2018 is as follows:
Unvested as of December 31, 2017
Granted
Vested
Cancellations/expirations
Unvested as of December 31, 2018
Weighted
Average
Grant Date
Fair Value
Shares
1,290,427 $
482,398 $
(458,444) $
(172,943) $
1,141,438 $
27.87
35.15
27.35
30.38
30.78
All RSUs vested during the year ended December 31, 2018 were issued out of treasury stock. As of
December 31, 2018, there was approximately $23.1 million of total unrecognized compensation expense and
approximately $32.6 million in total intrinsic value related to non-vested RSU grants. The unrecognized
compensation expense will be recognized over the remaining weighted-average vesting period of 1.4 years
using the straight-line method.
Stock Options
There were no stock options granted during 2018, 2017 or 2016. The total intrinsic value of options exercised
during the years ended December 31, 2018, 2017 and 2016 was $156 thousand, $194 thousand and
$400 thousand, respectively. The total fair value of stock options vested during the years ended December 31,
2018, 2017 and 2016 was zero, respectively.
Cash received from option exercises under the Plans for the years ended December 31, 2018, 2017 and 2016
was $0.2 million, $2.1 million and $0.4 million, respectively. The recognized tax benefit from option exercises
for the years ended December 31, 2018, 2017 and 2016 was $0.0 million, $0.0 million and $0.2 million,
respectively. Shares issued for options exercised during the year ended December 31, 2018 were issued out
of treasury stock.
(19)
STOCK REPURCHASE PROGRAM
Stock Repurchase Program
(cid:55)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:75)(cid:68)(cid:86)(cid:3) (cid:68)(cid:3) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3) (cid:85)(cid:72)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3) (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:68)(cid:80)(cid:15)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:90)(cid:68)(cid:86)(cid:3) (cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3) (cid:68)(cid:88)(cid:87)(cid:75)(cid:82)(cid:85)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3) (cid:69)(cid:92)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3) (cid:82)(cid:73)(cid:3)
Directors in November 2001. As of December 31, 2018, the cumulative authorized repurchase allowance was
$762.3 million. During the year ended December 31, 2018, the Company purchased no additional shares. Since
inception of the program, the Company has purchased 46.1 million shares for $735.8 million. As of
December 31, 2018, the remaining allowance under the program was approximately $26.6 million. For the
period from January 1, 2019 through February 28, 2019, the Company did not purchase additional shares. The
stock repurchase program does not have an expiration date.
(20)
RELATED PARTY TRANSACTIONS
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:36)(cid:89)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:179)(cid:36)(cid:89)(cid:76)(cid:82)(cid:81)(cid:180)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:76)(cid:85)(cid:80)(cid:68)(cid:91)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:179)(cid:36)(cid:76)(cid:85)(cid:80)(cid:68)(cid:91)(cid:180)(cid:12)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)
certain aviation flight services as requested by the Company. Such services include the use of an aircraft and
flight crew. Kenneth D. Tuchman, Chairman and Chief Executive Officer of the Company, has a direct 100%
beneficial ownership interest in Avion and Airmax. During 2018, 2017 and 2016, the Company expensed
$1.1 million, $1.1 million and $1.0 million, respectively, to Avion and Airmax for services provided to the
Company. There was $122 thousand in payments due and outstanding to Avion and Airmax as of December 31,
2018.
F-48
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
During 2014, the Company entered into a vendor contract with Convercent Inc. to provide learning management
and web and telephony based global helpline solutions. This contract was renewed, after an arms-length market
pricing review, in the fourth quarter of 2016. The majority owner of Convercent is a company which is owned
and controlled by Kenneth D. Tuchman, Chairman and Chief Executive Officer of the Company. During 2018,
2017 and 2016, the Company expensed $60 thousand, $70 thousand and $100 thousand, respectively, to
Convercent.
During 2015, the Company entered into a contract to purchase software from CaféX, which is a company that
TTEC holds a 17.2% equity investment in. During 2018, 2017 and 2016, the Company purchased $44 thousand,
$72 thousand and $405 thousand, respectively, of software from CaféX. See Note 2 for further information
regarding this investment.
During 2017, in connection with the Motif acquisition, the Company became a party to a real estate lease for a
building that is owned by one of the Motif Founders. The lease expires in 2019 and has future payments of
approximately $8 thousand.
Ms. Regina M. Paolillo, Chief Financial and Administrative Officer of the Company, is a member of the board of
directors of Welltok, Inc., a consumer health SaaS company, and partner of the Company in Welltok TTEC
Communications joint venture. During the years ended December 31, 2018 and 2017, the Company recorded
revenue of $5.7 million and $5.5 million, respectively, in connection with work performed through the joint
venture.
(21)
OTHER FINANCIAL INFORMATION
Self-insurance liabilities of the Company which are included in Accrued employee compensation and benefits
and Other accrued expenses in the accompanying Consolidated Balance Sheets were as follows
(in thousands):
December 31,
2017
2018
$ 3,987 $ 5,312
1,631
$ 5,789 $ 6,943
1,802
Employee health and dental insurance
Workers compensation
Total self-insurance liabilities
F-49
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(22)
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables present certain quarterly financial data for the year ended December 31, 2018
(in thousands except per share amounts).
First
Second Third
Fourth
Quarter
Quarter
Quarter
Quarter
Revenue
Cost of services
Selling, general and administrative
Depreciation and amortization
Restructuring and integration charges, net
Impairment losses
Income from operations
Other income (expense)
Provision for income taxes
Non-controlling interest
Net income attributable to TTEC stockholders
Weighted average shares outstanding
Basic
Diluted
$ 375,249 $ 349,853 $ 364,936 $ 419,133
313,372
47,817
17,127
1,532
332
38,953
(6,336)
(11,835)
(449)
20,333
286,925
43,321
17,317
2,716
(cid:178)
14,657
(6,020)
(1,893)
(1,369)
5,375 $
283,370
47,045
17,924
849
1,120
24,941
(16,907)
(2,102)
(1,341)
4,591 $
274,260
44,245
16,811
1,034
(cid:178)
13,503
(6,553)
(653)
(779)
5,518 $
$
45,871
46,452
46,016
46,401
46,172
46,316
46,193
46,390
Net income per share attributable to TTEC stockholders
Basic
Diluted
$
$
0.10 $
0.10 $
0.12 $
0.12 $
0.12 $
0.12 $
0.44
0.44
Included in Other income (expense) in the first quarter is a $15.6 million expense related to the impairment of
the full value of an equity investment and related bridge loan. Also included is a $0.7 million gain on the purchase
of an acquisition.
Included in Other income (expense) in the second quarter and fourth quarter was a $2.0 million loss and a $0.4
million gain, respectively, related to a business unit which was classified as assets held for sale but
subsequently reclassified to assets held and used.
Included in Other Income (expense) for each of the quarters is an interest expense charge related to the future
purchase for the remaining 30% of the Motif acquisition - $1.9 million, $3.1 million, $3.0 million and $1.9 million
in the first, second, third and fourth quarters, respectively.
Included in the Provision for Income Taxes is a $3.6 million expense in the fourth quarter, a $1.1 million benefit
in the third quarter, a $1.0 million benefit in the second quarter related to changes in tax contingent liabilities, a
$3.0 million benefit in the fourth quarter, a $0.2 million expense in the third quarter, a $0.5 million benefit in the
second quarter related to return to provision adjustments, a $4.2 million benefit in the first quarter related to
impairment of an equity investment, a $0.2 million expense in the first quarter, $0.1 million of expense in the
second quarter, $0.1 million of expense in the third quarter and $0.1 million of expense in the fourth quarter
related to the disposition of assets, a $1.5 million expense in the fourth quarter related to changes in valuation
allowances, a $0.1 million benefit in the first quarter, a $0.2 million benefit in the second quarter and a $0.4
million benefit in the third quarter related to excess taxes on equity compensation, a $0.5 million benefit in the
fourth quarter, a $0.7 million benefit in the third quarter, a $0.2 million benefit in the second quarter, a $0.6
million benefit in the first quarter related to restructuring charges, a $0.9 million benefit in the fourth quarter,
$0.1 million of expense in the third quarter and a $0.2 million expense in the first quarter of other items. Without
these items our effective tax rate for the year ended December 31, 2018 would have been 25.6%.
F-50
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The following tables present certain quarterly financial data for the year ended December 31, 2017
(in thousands except per share amounts).
First
Second Third
Fourth
Quarter
Quarter
Quarter
Quarter
Revenue
Cost of services
Selling, general and administrative
Depreciation and amortization
Restructuring and integration charges, net
Impairment losses
Income from operations
Other income (expense)
Provision for income taxes
Non-controlling interest
Net income (loss) attributable to TTEC stockholders
Weighted average shares outstanding
Basic
Diluted
$ 338,277 $ 353,429 $ 359,036 $ 426,623
312,618
49,942
17,234
4,897
5,322
36,610
(8,318)
(69,016)
(728)
14,769 $ (41,452)
268,004
43,985
16,258
3,593
(cid:178)
21,589
(4,198)
(1,597)
(1,100)
14,694 $
253,898
43,220
14,500
169
(cid:178)
26,490
(932)
(5,391)
(922)
19,245 $
275,548
45,167
16,515
6,006
(cid:178)
15,800
1,846
(2,071)
(806)
$
45,950
46,315
45,662
46,150
45,838
46,367
45,856
46,461
Net income per share attributable to TTEC stockholders
Basic
Diluted
$
$
0.42 $
0.42 $
0.32 $
0.32 $
0.32 $
0.32 $
(0.90)
(0.89)
Included in Other income (expense) in the second quarter is a $3.2 million expense related to additional
estimated loss on one of the units being reported as Assets Held for Sale. In the fourth quarter, we sold this
unit and a net $0.6 million gain was recorded.
Included in Other income (expense) in the third quarter, was a $3.2 million gain related to dissolution of a foreign
entity and a release of its cumulative translation adjustment.
Included in Other income (expense) in the fourth quarter is a $5.25 million expense related to finalization of the
transition services agreement for the Connextions acquisition, and a $1.2 million interest charge related to the
future purchase for the remaining 30% of the Motif acquisition.
Included in the Provision for Income Taxes is $62.4 million of expense in the fourth quarter related to the US
2017 Tax Act, $0.4 million of expense in the fourth quarter, $1.3 million of expense in the third quarter and $1.3
million of benefit in the second quarter related to the disposition of assets, $1.9 million of benefit in the fourth
quarter related to impairments, a $1.9 million benefit in the fourth quarter, and a $2.4 million benefit in the third
quarter and a $1.5 million benefit in the second quarter related to restructuring charges. Also included is $0.6
million of expense in the fourth quarter related to changes in valuation allowances. Additionally, $0.3 million of
benefit was recorded in the fourth quarter, $0.2 million of expense was recorded in the third quarter, $0.7 million
of benefit recorded in the second quarter, and $0.3 million of expense was recorded in the first quarter related
to return to provision adjustments. Also included in the fourth quarter was $2.1 million of benefit related to
transition service agreement. Finally, a $0.2 million benefit was recorded in the fourth quarter, a $1.0 million
benefit was recorded in the third quarter, a $0.7 million benefit was recorded in the second quarter and a $0.3
million benefit was recorded in the first quarter related to stock options.
F-51
Table of Contents
List of Subsidiaries
Exhibit 21.1
Subsidiary
TTEC Canada Solutions, Inc.
TTEC Digital, LLC (fka TTEC Technology, LLC)
Percepta, LLC
TTEC Consulting Pty Ltd (Australia) (f/k/a rogenSi Pty Ltd.)
TTEC Consulting (UK) Limited (fka rogenSi Limited)
TTEC Eastern Europe EAD (f/k/a TeleTech Eastern Europe EAD)
TTEC Brasil Servicos Ltda. (f/k/a TeleTech Brasil Servicos Ltda.)
TeleTech Customer Care Management Philippines, Inc.
TTEC Europe B.V. (f/k/a TeleTech Europe B.V.)
TTEC Financial Services Management, LLC (fka TeleTech Financial Services
Jurisdiction
Canada
Colorado, USA
Delaware, USA
Australia
England
Bulgaria
Brazil
Philippines
Netherlands
Delaware, USA
Management, LLC)
Colorado, USA
Delaware, USA
NSW, Australia
TTEC Government Solutions, LLC (fka TeleTech Government Solutions, LLC)
TTEC Healthcare Solutions, Inc. (fka TeleTech Healthcare Solutions, Inc.)
TTEC International Pty Ltd (fka TeleTech International Pty Ltd)
TTEC CX Solutions Mexico, S.A. de C.V. (f/k/aTeleTech Mexico, S.A. de C.V.) Mexico
Mexico
Servicios y Administraciones del Bajio, S. de R.L. de C.V.
New Zealand
TTEC Solutions New Zealand (f/k/a TeleTech New Zealand)
TTEC Services Corporation (fka TeleTech Services Corporation)
Colorado, USA
Motif India Infotech Private Limited
TTEC B.V.
TTEC (UK) Solutions Limited
TTEC Technology Ireland, Limited
TTEC Customer Care Management (Ireland) Limited
Aegean TTEC Solutions Single Member IKE
Peppers and Rogers Group Pazarlama Hizmetleri Ticaret A.S.
Peppers and Rogers Group (Middle East) FZ-LLC
Ireland
Ireland
Greece
Turkey
Dubai
Netherlands
United Kingdom
India
Table of Contents
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-167300) of
TTEC Holdings, Inc. of our report dated March 6, 2019 relating to the consolidated financial statements and the
effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
March 6, 2019
Table of Contents
POWER OF ATTORNEY
Exhibit 24.1
Each person whose signature appears below does hereby make, constitute and appoint each of Kenneth D. Tuchman,
Regina M. Paolillo and (cid:48)(cid:68)(cid:85)(cid:74)(cid:68)(cid:85)(cid:72)(cid:87)(cid:3)(cid:37)(cid:17)(cid:3)(cid:48)(cid:70)(cid:47)(cid:72)(cid:68)(cid:81)(cid:15)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:88)(cid:68)(cid:79)(cid:79)(cid:92)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:87)(cid:85)(cid:88)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:68)(cid:90)(cid:73)(cid:88)(cid:79)(cid:3)(cid:68)(cid:87)(cid:87)(cid:82)(cid:85)(cid:81)(cid:72)(cid:92)-in-fact and agent,
with full power of substitution, resubstitution and revocation to execute, deliver and file with the U.S. Securities and
Exchange Commission, and the securities regulatory agency in each other country where a registration or filing may be
(cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3) (cid:82)(cid:85)(cid:3) (cid:68)(cid:71)(cid:89)(cid:76)(cid:86)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:70)(cid:82)(cid:81)(cid:81)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:68)(cid:81)(cid:92)(cid:3) (cid:82)(cid:73)(cid:73)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3) (cid:69)(cid:88)(cid:87)(cid:3) (cid:81)(cid:82)(cid:87)(cid:3) (cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:82)(cid:29)(cid:3) (cid:37)(cid:85)(cid:68)(cid:93)(cid:76)(cid:79)(cid:15)(cid:3)
Bulgaria, Canada, India, Ireland, Mexico, the Philippines, Singapore, the United Arab Emirates, and the United Kingdom,
(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:69)(cid:72)(cid:75)(cid:68)(cid:79)(cid:73)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:70)(cid:68)(cid:83)(cid:68)(cid:70)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15)
1. The Annual Report on Form 10-K of TTEC Holdings, Inc. for the year ended December 31, 2018, any and all
amendments (including post-effective amendments) thereto with all exhibits thereto and other documents in connection
therewith, or foreign jurisdiction equivalent reports and statements;
2. A Prospectus for use in the member nations of the European Union pursuant to the EU Prospectus Directions and any
and all amendments thereto with all exhibits and other documents in connection therewith; and
3. Such annual or other periodic reports on business, prospects, financial and results of operations as may be required
in any such other country granting unto each of said attorneys-in fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or such
(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:72)(cid:3)(cid:82)(cid:85)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:76)(cid:87)(cid:88)(cid:87)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:79)(cid:68)(cid:90)(cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3)(cid:71)(cid:82)(cid:3)(cid:82)(cid:85)(cid:3)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:71)(cid:82)(cid:81)(cid:72)(cid:3)(cid:69)(cid:92)(cid:3)virtue hereof.
/s/ Kenneth D. Tuchman
Feb. 20, 2019
/s/ Steven J. Anenen
Feb. 20, 2019
Kenneth D. Tuchman
Steven J. Anenen
/s/ Tracy L. Bahl
Tracy L. Bahl
Feb. 20, 2019
/s/ Gregory A. Conley
Feb. 20, 2019
Gregory A. Conley
/s/ Robert N. Frerichs
Feb. 20, 2019
/s/ Marc L. Holtzman
Feb. 20, 2019
Robert N. Frerichs
Marc L. Holtzman
/s/ Ekta Singh-Bushell
Feb. 20, 2019
Ekta Singh-Bushell
Table of Contents
Exhibit 31. 1
I, Kenneth D. Tuchman, certify that:
1.
I have reviewed this Annual Report on Form 10-K of TTEC Holdings, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:11)(cid:86)(cid:12) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c. (cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. (cid:39)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)g that occurred during
(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:73)(cid:82)(cid:88)(cid:85)(cid:87)(cid:75)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:12)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)
(cid:75)(cid:68)(cid:86)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)inancial
reporting; and
5.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:11)(cid:86)(cid:12) and I have disclosed, based on our most recent evaluation of internal control
(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3) of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86) ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)
By:
/s/ Kenneth D. Tuchman
Kenneth D. Tuchman
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: March 6, 2019
Table of Contents
Exhibit 31.2
I, Regina M. Paolillo, certify that:
1.
I have reviewed this Annual Report on Form 10-K of TTEC Holdings, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:11)(cid:86)(cid:12) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c. (cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. (cid:39)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)that occurred during
(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:73)(cid:82)(cid:88)(cid:85)(cid:87)(cid:75)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:12)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)
(cid:75)(cid:68)(cid:86)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)ancial
reporting; and
5.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:11)(cid:86)(cid:12) and I have disclosed, based on our most recent evaluation of internal control
(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73) directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)bility to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)
By:
/s/ Regina M. Paolillo
Regina M. Paolillo
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 6, 2019
Table of Contents
Written Statement of Chief Executive Officer
Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
Exhibit 32.1
The undersigned, the Chief Executive Officer of TTEC Holdings, (cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12)(cid:15)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:78)(cid:81)(cid:82)(cid:90)(cid:79)(cid:72)(cid:71)(cid:74)(cid:72)(cid:3)
on the date hereof:
a.
b.
The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 filed on the date hereof
(cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:11)(cid:87)(cid:75)(cid:72)(cid:3) (cid:179)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:180)(cid:12)(cid:3) (cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3)
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
By:
/s/ Kenneth D. Tuchman
Kenneth D. Tuchman
Chief Executive Officer
Date: March 6, 2019
Table of Contents
Written Statement of Chief Financial Officer
Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
Exhibit 32.2
The undersigned, the Chief Financial Officer of TTEC Holdings, (cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12)(cid:15)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:75)(cid:76)(cid:86)(cid:3)(cid:78)(cid:81)(cid:82)(cid:90)(cid:79)(cid:72)(cid:71)(cid:74)(cid:72)(cid:3)
on the date hereof:
a.
b.
The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 filed on the date hereof
(cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3) (cid:11)(cid:87)(cid:75)(cid:72)(cid:3) (cid:179)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:180)(cid:12)(cid:3) (cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3)
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
By:
/s/ Regina M. Paolillo
Regina M. Paolillo
Chief Financial Officer
Date: March 6, 2019
Financial Highlights
($ in millions, except per share data)
Revenue
Operating Income
Net Income Per Diluted Share
$1,509.2
$1,477.4
$1,275.3
$100.5
$92.1
$52.8
$0.71
$0.77
2016
2017
2018
2016
2017
2018
2016
2018
$1,242.1*
$1,457.3*
$1,501.4*
$94.9*
$122.5*
$106.1*
$1.40*
$1.88*
$1.49*
*Non-GAAP
**Includes one-time impact from enactment of the U.S. Tax Cuts and Jobs Act
Revenue
Adjusted EBITDA
Operating income
Operating margin
EBIT
Net income attributable to TTEC stockholders
Average diluted shares outstanding
Net income per diluted share
Cash and cash equivalents
Debt
Capital expenditures
2016
$ 1,275.3
$ 172.4
$ 52.8
4.1%
$ 57.0
$ 33.7
47.7
$ 0.71
$ 55.3
$ 229.6
$ 50.8
2017
$ 1,477.4
$ 200.4
$ 100.5
6.8%
$ 99.8
$ 7.3
46.4
$ 0.16*
$ 74.4
$ 361.3
$ 52.0
*Includes the one-time impact from enactment of the U.S. Tax Cuts and Jobs Act
2018 Revenue by Geography
2018 Revenue by Segment
$0.16**
2017
2018
$ 1,509.2
$ 188.7
$ 92.1
6.1%
$ 80.4
$ 35.8
46.4
$ 0.77
$ 78.2
$ 304.5
$ 43.5
5%
7%
North America
Asia Pacific/India
Customer Management Services
Customer Technology Services
11%
5%
9%
Latin America
27%
61%
Customer Growth Services
75%
EMEA
Customer Strategy Services
Corporate Information
Directors
Kenneth D. Tuchman
Founder, Chairman of the Board
Steven J. Anenen
Director, DealerSocket; former Chief Executive Officer, CDK Global, Inc.; former President of
ADP Dealer Services; former Senior Vice President of North America Systems
Tracy L. Bahl
President and CEO, OneOncology; former Executive Vice President, Health Plans, CVS Health;
former Director, MedExpress; former Executive Chairman, Emdeon; former Chief Executive
Officer, Uniprise
Gregory A. Conley
Director, HaulHound.com; former Chief Executive Officer, Aha! Software; former Chief
Executive Officer, Odyssey Group, SA
Robert N. Frerichs
Director, Wedgewood Enterprises Corporation; former International Chairman, Accenture,
Inc.; former Director, Merkle, Inc.; former Chairman, Aricent Group; former Chairman, Avanade
Marc L. Holtzman
Chairman, Bank of Kigali; Director, FAT Brands Inc.; former Chief Executive Officer of
Kazkommertsbank; former Director, FTI Consulting; former Chairman, Meridian Capital HK;
former Vice Chairman, Barclays Capital
Ekta Singh-Bushell
Director, DSW, Inc.; Director, Net 1 UEPS Technologies, Inc; former Deputy to the First Vice
President, Chief Operating Officer Executive Office at the Federal Reserve Bank of New York;
former Partner, DecisionGPS LLC; former Global Client Services Partner, Ernst & Young
Executive Officers
Kenneth D. Tuchman
Chief Executive Officer
Regina M. Paolillo
Executive Vice President; Chief Administrative and Financial Officer
Martin F. DeGhetto
Executive Vice President,
TTEC Engage (Customer Growth and Customer Management Services business segments)
Judi A. Hand
Executive Vice President, Chief Revenue Officer
Tony Y. Tsai
Executive Vice President, Chief Information and Innovation Officer
David M. Anderson
Executive Vice President,
TTEC Digital (Customer Strategy and Customer Technology Services business segments)
Steven C. Pollema
Executive Vice President,
TTEC Digital (Customer Strategy and Customer Technology Services business segments)
Margaret B. McLean
Senior Vice President, General Counsel and Chief Risk Officer
Michael Wellman
Senior Vice President, Chief People Officer, Human Resources
Audit Committee
Gregory A. Conley, Chairman
Robert N. Frerichs
Ekta Singh-Bushell
Compensation Committee
Tracy L. Bahl, Chairman
Gregory A. Conley
Robert N. Frerichs
Nominating and Governance
Committee
Robert N. Frerichs, Chairman
Steven J. Anenen
Tracy L. Bahl
Ekta Singh-Bushell
Executive Committee
Kenneth D. Tuchman, Chairman
Tracy L. Bahl
Steven J. Anenen
Stock Listing
NASDAQ Global Select Market
Symbol: TTEC
Website
ttec.com
2019 Annual Meeting of Stockholders
The Annual Meeting of Stockholders will be
held Wednesday, May 22, 2019, beginning at
10:00 a.m MDT at:
TTEC Holdings, Inc.
Global Headquarters
9197 South Peoria Street
Englewood, CO 80112-5833
Transfer Agent and Registrar
Broadridge Corporate Issuer Solutions, Inc.
1717 Arch Street, Suite 1300
Philadelphia, PA 19103
Telephone: 855.206.5002
Facsimile: 215.553.5402
Email: shareholder@broadridge.com
Investor Information
Investor information, including TTEC’s
Annual Report, press releases and filings
with the U.S. Securities and Exchange
Commission, may be obtained from
TTEC’s website, ttec.com or by contacting
TTEC Investor Relations at:
1.800.835.3832
investor.relations@ttec.com
Independent Accountants
PricewaterhouseCoopers LLP,
Denver, Colorado
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TTEC Holdings, Inc. (NASDAQ: TTEC) is a leading global customer experience
technology and services company focused on the design, implementation and
delivery of transformative customer experience for many of the world’s most
iconic and disruptive brands.
TTEC delivers outcome-based customer engagement solutions through TTEC Digital
(Customer Strategy and Customer Technology Services business segments),
consultancy that designs and builds human centric, tech-enabled, insight-driven
experience solutions and TTEC Engage (Customer Growth and Customer Management
Services business segments), its delivery center of excellence, that operates customer
acquisition, care, fraud prevention and detection, and content moderation services.
its digital
customer
Founded in 1982, the company’s 52,400 employees operate on six continents
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.
9197 South Peoria Street
Englewood, CO 80112-5833
+1 303 397-8100 or 1-800 835-3832
ttec.com
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