9197 South Peoria Street
Englewood, CO 80112-5833
+1 303 397-8100 or 1-800 835-3832
ttec.com
Financial Highlights
($ in millions, except per share data)
Revenue
Operating Income
Net Income Per Diluted Share
$1,509.2
$1,643.7
$1,477.4
$100.5
$92.1
$123.7
$1.65
$0.77
2017
2018
2019
2017
2018
2019
$0.16
2017
2018
2019
**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
2017
$ 1,477.4
$ 200.4
$ 100.5
2018
$ 1,509.2
$ 188.7
$ 92.1
2019
$ 1,643.7
$ 209.1
$ 123.7
6.8%
6.1%
7.5%
$ 99.8
$ 7.3
46.4
$ 0.16
$ 74.4
$ 361.3
$ 52.0
$ 80.4
$ 35.8
46.4
$ 0.77
$ 78.2
$ 304.5
$ 43.5
$ 127.6
$ 77.2
46.8
$ 1.65
$ 82.4
$ 307.5
$ 60.8
2019 Revenue by Geography
2019 Revenue by Segment
North America
Asia Pacific, Philippines
& India
Latin America
EMEA
4%
6%
26%
64%
TTEC Engage
TTEC Digital
19%
81%
Corporate Information
Directors
Kenneth D. Tuchman
Founder, Chairman of the Board
Steven J. Anenen
Tracy L. Bahl
Executive Officer, Uniprise
Gregory A. Conley
Officer, Odyssey Group, SA
Robert N. Frerichs
Director, DealerSocket; former Chief Executive Officer, CDK Global, Inc.; former President of
ADP Dealer Services; former Senior Vice President of North America Systems.
Former President and CEO, OneOncology; former Executive Vice President, Health Plans,
CVS Health; former Director, MedExpress; former Executive Chairman, Emdeon; former Chief
Director, Travelport; former Chief Executive Officer, Aha! Software; former Chief Executive
Director, Wedgewood Enterprises Corporation; former International Chairman, Accenture,
Inc.; former Director, Merkle, Inc.; former Chairman, Aricent Group; former Chairman, Avanade
Marc L. Holtzman
Chairman, CBZ Holdings Limited; 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, DBI, Inc.; Director, Huron Consulting Group; Director, Net 1 UEPS Technologies, Inc;
Director, Datatec Limited; 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
Judi A. Hand
Executive Vice President,
Chief Revenue Officer
Chandra Venkataramani
Senior Vice President,
Chief Information Officer
Jonathan Lerner
President, TTEC Digital
Steven C. Pollema
Chief Operating Officer, TTEC Digital
Margaret B. McLean
Senior Vice President, General Counsel
Michael Wellman
Senior Vice President, Chief People Officer
Nick Cerise
Senior Vice President,
Chief Marketing Officer
Martin F. DeGhetto
Executive Vice President; TTEC Engage
and Chief Risk Officer
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.
The Company delivers outcome-based customer engagement solutions through TTEC Digital, its digital
consultancy that designs and builds human centric, tech-enabled, insight-driven customer experience
solutions for clients and TTEC Engage, its delivery center of excellence, that operates customer acquisition,
care, fraud prevention and detection, and content moderation services.
Founded in 1982, the Company’s 49,500 employees operate on six continents across the globe and live by
a set of customer-focused values that guide relationships with clients, their customers, and each other. To
learn more about how TTEC is bringing humanity to the customer experience, visit www.ttec.com.
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
Website
ttec.com
2020 Annual Meeting of Stockholders
The Annual Meeting of Stockholders will be
held Wednesday, May 13, 2020, 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, teletech.com or by
contacting TTEC Investor Relations at:
1.800.835.3832
investor.relations@ttec.com
Independent Accountants
PricewaterhouseCoopers LLP
Denver, Colorado
Kenneth D. Tuchman
Founder, Chairman and
Chief Executive Officer
Dear Shareholders:
We are proud to report that 2019 was a record-setting year for TTEC. Our strategy of powering
the experience economy with end-to-end customer experience (CX) solutions has delivered
significant results.
Of note in our 2019 financial highlights, here are a few of our record-breaking achievements:
•
Revenue increased 9% to a record $1.644 billion, driven by highly recurring, organic
growth in our embedded base
• Our subscription-based CX cloud business grew 172%
•
•
•
Adjusted EBITDA increased 11% to a record $209 million
Non-GAAP EPS increased 27% to a record $1.89 per share
Cash flow from operations increased 41% to a record $238 million
We serve 6 of the top
10 healthcare payers,
and the top 5 largest
automotive brands
A combination of strategic partnerships and acquisitions, geographic expansion, the growth
of our digital-first integrated solutions, and our differentiated ‘CX as a service’ platform drove
top-line growth. With CX being a competitive differentiator in driving revenue for market
leaders, our customers are demanding an end-to-end solution that enables them to deliver
personalized CX faster.
Transforming Customer Experience
through Strong Fundamentals
Massive Addressable Market
TTEC serves the entire market with end-to-end CX technology and services at scale, including
born-digital disrupters, the Global 1000, and mega government agencies. We have invested
substantially in the last decade, building CX capabilities organically and through strategic
acquisitions. These investments have significantly expanded our addressable market by
almost 150 billion dollars per annum in the last 10 years.
With this expanded addressable market, our top line has benefited from the tailwinds
presented by digital transformation, the migration of CX technologies to the cloud, the rapid
adoption of Intelligent Automation, and the ever-increasing demand from customers for
personalized, frictionless, and differentiated experiences.
Differentiated CXaaS Platform
Our global leadership in CXaaS is demonstrated by our client list, which includes some of the
world’s most iconic and disruptive brands. For example, we serve 6 of the top 10 healthcare
payers, and the top 5 largest automotive brands. We are a trusted partner to our clients — a
partner they turn to for their most complex and challenging CX initiatives. These are clients for
whom only the highest of NPS and CSAT scores will suffice.
With our differentiated CXaaS platform, we’ve seen a continued increase in the total number
of client engagements with a unified “One TTEC” Digital & Engage solution. These holistic
engagements span the entire CX lifecycle, including consulting, technology and operations,
and enable “mission-critical outcomes” for our clients and their customers.
Building a Strong Foundation of Growth
Our track record for growth leveraging our existing client base, channel partners, and M&A was
especially prominent in 2019.
• Our hypergrowth sector, focused on born-digital, disruptive logos including fin-tech,
health-tech, and curated e-tail, in just four years is at run-rate of $300 million. New logo
wins, and the acquisition of FCR in 2019 solidified our position as a leader in serving the
brands of the future.
• We have aggressively expanded our geographic footprint into fast-growing regions. In
2019 alone, our EMEA region achieved a 73% increase in new business signings.
•
•
•
Through our Cisco channel partnership, TTEC is expanding its addressable market to
include Cisco’s millions of on-premises users. These on-premises users are eager to
migrate to the cloud, adopt more Intelligent Automation, and accelerate their digital
transformation with TTEC Digital. Overall, an estimated 10% of the market has moved to
the cloud globally, providing a runway of 20% growth per annum in this market for the
foreseeable future.
Both existing and future technology partnerships — such as Cisco, LivePerson, and
Pegasystems — keeps TTEC at the epicenter of a massive market opportunity, facilitating
large enterprise migration to cloud-based CX technology.
Since 2010, we’ve successfully executed strategic acquisitions that have delivered a set
of integrated capabilities allowing TTEC to power the experience economy. As recent
examples, we acquired FCR to give us significantly more scale with hypergrowth clients,
and we purchased Serendebyte to add more scale to our market-leading Intelligent
Automation solutions. Expect us to continue expansion through strategic acquisitions in
the years ahead.
With our differentiated
CXaaS platform, we’ve
seen a continued increase
in the total number of client
engagements with a unified
“One TTEC” Digital &
Engage solution
Our investments in
the last few years in
omnichannel interaction
hubs, at-home solutions,
Intelligent Automation, and
our Humanify™ platform
have proven prescient as
workforces have moved
to work from home to
contain the spread
Powering the Experience Economy Now and in the Future
The impact of COVID-19 is undeniable for all businesses. Although 2020 poses significant
challenges, we also believe that there is great opportunity. Over the past 37 years, we have
regularly supported first responder organizations and government entities with large-scale
disaster response efforts. Our disaster response experience has included terrorist events and
natural disasters such as 9/11, Hurricane Harvey, and worldwide illnesses, such as H1N1 and
Ebola. Moreover, nothing has accelerated the need for digital transformation of the contact
center faster than COVID-19. Never have people relied on the born-digital companies we have
targeted and partnered with more. Our investments in the last few years in omnichannel
interaction hubs, at-home solutions, Intelligent Automation, and our Humanify™ platform have
proven prescient as workforces have moved to work from home to contain the spread. Our
solutions are a strong market fit for today’s conditions and a world forever changed by the
need to live “digitally” like never before.
We are well-positioned to answer the call with our proven experience, robust CXaaS platform,
and “One TTEC” end-to-end approach. The strength of our 2019 results puts us in a strong
position to face the challenges of 2020 and emerge even stronger.
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 Income from Operations and Operating Margin (in millions)
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
2017
2018
2019
$ 100.5
$ 14.7
$ 5.3
-
-
-
$ 120.5
8.2%
$ 92.1
$ 6.1
$ 1.5
$ 2.7
$ 1.4
$ 1.0
$ 104.7
6.9%
$ 123.7
$ 1.7
$ 3.7
-
-
-
$ 129.2
7.9%
Reconciliation of Non-GAAP Net Income and Net Income per Diluted Share (in millions except per share data)
GAAP Net Income
Loss on asset held for sale reclassified to asset held and used
Asset restructuring and impairment charges
Interest charge related to future purchase of remaining 30% for Motif acquisition
Impairment of equity investment
Gain on dissolution of foreign subsidiary, net of related taxes
Changes in acquisition contingent consideration
Gain on sale of business units
Gain on sale of trademarks
Gain on recovery of receivable in connection with division in wind-down
Gain on bargain purchase of acquisition
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
US 2017 Tax Act
Changes in valuation allowance, return to provision adjustments and other, and
tax effects of items separately disclosed above
Non-GAAP Net Income
Average diluted shares outstanding
Non-GAAP Net Income per Diluted Share
Reconciliation of Free Cash Flow (in millions)
Net Cash Provided by Operating Activities
Purchases of property, plant, and equipment
Free Cash Flow
2017
2018
2019
$ 10.8
$ 2.6
$ 20.0
$ 1.2
-
$ (3.2)
$ 5.3
$ (0.4)
-
-
-
-
-
-
$ 39.8
$ 1.6
$ 7.6
$ 9.9
$ 15.6
-
$ (0.3)
$ (2.0)
-
-
$ (0.7)
$ 2.7
$ 1.4
$ 1.0
$ 62.4
-
$ 84.7
-
$ 5.5
$ 4.7
-
-
$ (2.4)
$ (1.4)
$ (0.7)
$ (1.4)
-
-
-
-
-
$ (11.5)
$ (7.4)
$ (0.6)
$ 87.1
46.4
$ 1.88
$ 69.3
46.4
$ 1.49
$ 88.4
46.8
$ 1.89
2017
2018
2019
$ 113.2
$ (52.0)
$ 61.2
$ 168.3
$ (43.5)
$ 124.9
$ 238.0
$ (60.8)
$ 177.2
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.
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, 2019
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)
Registrant’s telephone number, including area code:
(303) 397-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock of TTEC Holdings, Inc., $0.01 par value per share
TTEC
NASDAQ
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,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part 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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” 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, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, there were 46,386,727 shares of the registrant’s
common stock outstanding. The aggregate market value of the registrant’s voting and non-voting common stock that was held by non-affiliates on such date
was $667,442,842 based on the closing sale price of the registrant’s common stock on such date as reported on the NASDAQ Global Select Market.
As of February 28, 2020, there were 46,491,480 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required for Part III of this report is incorporated by reference to the proxy statement for the registrant’s 2020 annual meeting of
stockholders.
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
DECEMBER 31, 2019 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. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Item 6.
Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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
6
17
18
18
18
19
22
24
40
42
42
42
43
44
44
44
44
44
44
47
48
F-1
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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
those 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 in the
section of this report entitled “Risk Factors”. 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 Exchange Commission (“SEC”) and we undertake no obligation to update them, except as may be required
by applicable laws.
AVAILABILITY OF INFORMATION
TTEC Holdings, Inc.’s principal executive offices are located at 9197 South Peoria Street, Englewood, Colorado
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’s SEC filings are posted on
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.
You may also access any materials that we file with the SEC via the SEC’s public website at www.sec.gov.
ii
PART I
ITEM 1.
BUSINESS
Our Business
TTEC Holdings, Inc. (“TTEC”, “the Company”, “we”, “our” or “us”) is a leading global customer experience
technology and services company focused on the design, implementation and delivery of transformative
customer experience outcomes for many of the world’s most iconic and disruptive brands. Since our inception
in 1982, we have been helping clients deliver frictionless customer experiences, strengthen their customer
relationships, brand recognition and loyalty through personalized interactions, significantly improve their Net
Promoter Score ("NPS"), and lower their total cost to serve by enabling and delivering simplified, consistent
and seamless customer experience across channels and phases of the customer lifecycle.
Our customer experience thought leadership is substantiated, with innovative programs that differentiate our
clients from their competition.
In the fast expanding direct-to-customer ("DTC") channel where experiences are everything, enterprises must
become increasingly customer-centric and digitally enabled. Digital transformation has become a have-to-have
in winning and keeping customers. It is our mission to enable and accelerate our clients' path to digital
transformation. We are focused on improving the experience of our clients' customers by leveraging existing
and emerging technologies — artificial intelligence ("AI"), machine learning ("ML"), robotic process automation
("RPA"), cloud, analytics, omnichannel and real-time messaging.
Through the first quarter of 2019, the Company reported its financial results of operations across four segments:
Customer Strategy Services (“CSS”), Customer Technology Services (“CTS”), Customer Growth Services
(“CGS”) and Customer Management Services (“CMS”). Starting in the second quarter of 2019, the Company
changed its go-to-market strategy, how its clients evaluate and consume its services, how TTEC assesses its
operating performance and the leadership accountability for its segments. As a result, the Company now reports
its financial information based on two segments: TTEC Digital and TTEC Engage.
(cid:120) TTEC Digital designs, builds and delivers tech-enabled, insight-based and outcome-driven customer
experience solutions through our professional services and suite of technology offerings. These
solutions are critical to enabling and accelerating digital transformation for our clients. These services
were previously included in the CSS and CTS segments.
(cid:120) TTEC Engage provides the essential technologies, human resources, infrastructure and processes to
operate customer care, acquisition, and fraud detection and prevention services. These services were
previously included in the CGS and CMS segments.
TTEC Digital and TTEC Engage come together under our unified offering, Humanify™ Customer Experience
as a Service ("CXaas"), which drives measurable customer results for clients through the delivery of
personalized, omnichannel experiences. Our Humanify™ cloud platform provides a fully integrated ecosystem
of Customer Experience ("CX") offerings, including omnichannel, messaging, AI, ML, RPA, analytics,
cybersecurity, customer
journey
orchestration. Our end-to-end platform differentiates us from many competitors by combining design, strategic
consulting, best in class technology, data analytics, process optimization, system integration and operational
excellence. This unified offering is value-oriented, outcome-based and delivered to large enterprise and
governments on a global scale.
("CRM"), knowledge management and
relationship management
During fiscal 2019, the TTEC global operating platform delivered services in 22 countries -- the United States,
Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, Hong Kong, India, Ireland, Mexico,
the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, United Arab
Emirates, and the United Kingdom. We provide onshore, nearshore and offshore services on six continents to
accommodate client requirements. TTEC has 49,500 employees, approximately 1,400 of whom are CX
professionals serving TTEC Digital clients and approximately 48,100 of whom serve TTEC Engage clients.
1
Our revenue for fiscal 2019 was $1.644 billion, approximately $305 million, or 19%, which came from our TTEC
Digital segment and $1.338 billion, or 81%, which came from our TTEC Engage segment.
To improve our competitive position in a rapidly changing market and stay strategically relevant to our clients,
we continue to invest in innovation and service offerings for mainstream and high growth disruptive businesses,
diversifying and strengthening our core customer care services with consulting, data analytics, insights, and
technology-enabled, outcomes-focused services.
We also invest 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. To this
end we have been highly acquisitive in the last several years, including an acquisition in 2019 of a U.S.-based
provider of customer care, social media community management, content moderation, technical support and
business process solutions; an acquisition in 2018 of a U.K.-based systems integrator for multichannel contact
center platforms; an acquisition in 2017 of an India-based digital fraud prevention and detection and content
moderation services company; and an acquisition in 2017 of a U.S.-based healthcare services company
focused on improving the customer experience for healthcare plan providers and pharmacy benefits managers.
We have extensive expertise in the automotive, communications, financial services, government, healthcare,
logistics, media and entertainment, retail, technology, travel and transportation industries. We serve more than
300 diverse clients globally, including many iconic blue-chip brands, Fortune 1000 companies, and disruptive
growth companies.
Our strong balance sheet, cash flow 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. Given our cash flow generation
and balance sheet strength, we believe cash dividends, 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 factors, TTEC’s performance, cash flow from operations,
capital needs and the overall liquidity of the Company. Since inception in 2015, the Company has continued to
pay a semi-annual dividend in October and April of each year in gradually increasing amounts from $0.18 to
$0.32 per common share. On February 27, 2020, the Company’s Board of Directors authorized a semi-annual
dividend of $0.34 per common share, payable on April 16, 2020 to shareholders of record as of April 1, 2020.
Our Industry – Key Emerging Themes
(cid:120) Direct-to-Consumer Revolution - The DTC revolution has created a new generation of disruptive brands
with few barriers to entry. These emerging brands thrive on emotional connection and authentic
customer relationships relying on trusted influencers and personalized service to win the hearts and
minds of a growing customer base, one that requires an on-demand, curated buying experience. We
believe DTC can enhance the value we provide to our clients as we design, build and operate our
clients’ digital customer experience.
(cid:120) Evolution of Customer Behavior and CX Imperative - Yesterday's customer service experience is being
replaced by today's direct experience, where brands deliver a personalized end-to-end journey. As
customers become more connected and share their experiences across a variety of social 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 based on the totality of their experience, including not only the superiority of the
product or service, but also the quality of their ongoing service and support interactions. Given the
strong correlation between high customer satisfaction and improved profitability, companies are
increasingly focused on selecting partners who can deliver an integrated, insights-driven strategy,
service and technology solution that increases the lifetime value of a customer.
2
(cid:120) CX Technology is Migrating to the Cloud - Cloud investment is expected to continue to grow
significantly. We believe the adoption of cloud technology to deliver omnichannel and other customer
experience technology is still in its infancy. Our clients are embracing cloud-based CX technology
solutions in a manner similar to how they seek cost-effective architecture and rapid deployment across
other parts of their operations.
(cid:120) Enterprises are Consolidating Partners - An increasing percentage of companies are consolidating their
customer engagement wallet with a few select partners who can deliver measurable business
outcomes by offering an integrated, technology-enabled solution. We believe companies will continue
to consolidate with partners like TTEC that have demonstrated expertise in increasing brand value by
delivering holistic, integrated customer-centric solutions spanning the entire customer experience
journey, instead of inefficiently linking together a series of multiple point solutions.
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 experience for our clients’ customers. 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 innovation 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 and Business Segments
We provide strategic value and differentiation through our two business segments: TTEC Digital and
TTEC Engage.
TTEC Digital designs, builds and delivers tech-enabled, insights-based and outcome-driven customer
experience solutions through our professional services and suite of technology offerings. These solutions are
critical to enabling and accelerating digital transformation for our clients.
(cid:120) Technology Services: Our technology services design, integrate and operate highly scalable, digital
omnichannel technology solutions in the cloud, on premise, or hybrid, including journey orchestration,
automation and AI, knowledge management, and workforce productivity.
(cid:120) Professional Services: Our management consulting practices deliver customer experience strategy,
analytics, process optimization, and learning and performance services.
TTEC Engage provides the essential technologies, human resources, infrastructure and processes to operate
customer care, acquisition, and fraud detection and prevention services.
(cid:120) Customer Acquisition Services: Our customer growth and acquisition services optimize the buying
journeys for acquiring new customers by leveraging technology and analytics to deliver personal
experiences that increase the quantity and quality of leads and customers.
(cid:120) Customer Care Services: Our customer care services provide turnkey contact center solutions,
including digital omnichannel technologies, associate recruiting and training, facilities, and operational
expertise to create exceptional customer experiences across all touchpoints.
3
(cid:120) Fraud Prevention Services: Our digital fraud detection and prevention services proactively identify and
prevent fraud and provide community content moderation and compliance.
Based on our clients’ preference, we provide our services on an integrated cross-business segment and/or 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 have established ourselves as an industry leader in CX by leveraging the following competitive strengths:
(cid:120) Humanify™ Technology Platform and Insights-Driven Technology Solutions - Innovation has been a
priority since our inception almost 40 years ago. Our dedication and investment in transforming our
business has differentiated our solutions portfolio and increased the value we deliver to our clients
across the CX continuum. Our Humanify™ Technology Platform delivers an ecosystem of integrated
CX applications, including omnichannel contact center platforms, the largest CRMs and ERP’s as well
as innovative technology solutions that we fully integrate into our clients' broader technology systems.
The platform is based on secure, scalable public and private data centers, in both pure cloud and hybrid
environments. This architecture enables us to centralize and standardize our global delivery
capabilities, resulting in scalability and improved quality of delivery for our clients, as well as lowering
capital and information technology operating costs.
Fundamental to our platforms is our network of global data centers which provide an integrated suite
of voice and data routing, workforce management, quality monitoring, business analytics and storage
capabilities, enabling seamless operations from locations around the globe. This ‘hub and spoke model’
enables us to provide services at a competitive cost while delivering scalability, reliability, regulatory
compliance and asset utilization across the full suite of our service offerings. It also provides effective
redundancy for a timely response to system interruptions and outages due to natural disasters, grid
downtime, and other conditions outside of our control. Importantly, this broad-based platform has
accelerated our time to market foundation for new, innovative offerings such as TTEC's cloud based
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 solutions
whether we are operating the platforms and the services, implementing customized platforms for
clients, or providing advanced managed services and continuous and automated development
environments. They also provide clients with secure and compliant solutions for regional (e.g., the
European Union General Data Protection Regulation (“GDPR”), or the California Consumer Protection
Act (“CCPA”)), industry (e.g., the Payment Card Industry Data Security Standard (“PCI”), or the Health
Insurance Portability and Accountability Act (“HITRUST”)), or client specific standards (e.g. FedRamp
or FISMA).
(cid:120)
Innovative Human Capital Strategies - Our global, highly trained employee base is crucial to the
success of our business. We have made significant investments in proprietary technologies and
management tools, methodologies and training processes in the areas of talent acquisition, learning
services, knowledge management, workforce engagement and collaboration and performance
optimization. These capabilities are the culmination of almost four decades of experience in managing
a large, global workforce combined with the latest technology, innovation and strategies in the field of
human capital management. This capability has enabled us to deliver a scalable and flexible workforce
that is highly engaged in achieving and exceeding our clients' expectations.
(cid:120) Robust Technology Partner Ecosystem - Our strategic alliances with important digital channel partners
enable our clients to deliver high-impact, personalized customer experiences more efficiently. We go
to market with our Humanify™ cloud offering with our key strategic partners including Cisco, LivePerson
and Pega to continue to fuel AI-powered digital transformation.
4
(cid:120) Globally Deployed Best Operating Practices - Globally deployed best operating practices help us
deliver a consistent, scalable, high-quality experience to our clients' customers from any of our 89 global
customer engagement centers and geographically disbursed work-from-home associate base.
Standardized processes include our approach to attracting, screening, hiring, training, scheduling,
evaluating, coaching and maximizing associate performance to meet our clients' needs. We also
provide real-time reporting and analytics on performance across the globe to help ensure transparency
and consistency of delivery. This information provides valuable insight into what is driving customer
inquiries, enabling us to proactively recommend process changes that optimize the customer
experience.
New customer engagement centers are established and existing centers are expanded or scaled down
to accommodate anticipated business demands or specific client needs. As of December 31, 2019, we
had significant capacity in the United States, Brazil, Bulgaria, Canada, Greece, India, Mexico, the
Philippines, Poland and the United Kingdom to support customer demand and deliver superior cost
efficiencies. We continue to explore opportunities in North America, Central Europe, South America
and Africa to diversify our delivery footprint enabling near-shore and off-shore locations that support
our multi-lingual service offerings and provide attractive client economics.
See Item 1A. Risk Factors for a description of the risks associated with our foreign operations.
Clients
We develop long-term relationships with clients globally, including iconic blue-chip brands, Fortune 1000
companies, and disruptive growth companies. These companies are 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 2019, our top five and ten clients represented 37% and 50% of total
revenue, respectively.
In several of our offerings across TTEC Digital and TTEC Engage, we enter into long-term relationships that
provide us with a more predictable revenue stream. In our TTEC Digital segment, our CX cloud and managed
services technology solution contracts have an average three-year term with penalties in the case a client
terminates for convenience. In our TTEC Engage segment, most of our contracts can be terminated for
convenience by either party, but our relationships with our top five clients have ranged from 13 to 23 years
including multiple contract renewals for several of these clients. In 2019, we had a 102% revenue retention rate
for the TTEC Engage segment, versus 98% in 2018.
Certain of our communications clients provide us with telecommunication services through arm’s length
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,
implementation and delivery of transformative solutions for many of the world’s most iconic and disruptive
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 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.
5
In our TTEC Digital segment, we primarily compete with smaller specialized companies and divisions of
multinational companies, including Bain & Company, McKinsey & Company, 8X8, Accenture, IBM, AT&T,
Genpact, Interactive Intelligence, LiveOps, inContact, Five9, WPP, Publicis Groupe, Dentsu, and others. In our
TTEC Engage segment, we primarily compete with in-house customer management operations as well as other
companies
including: Alorica, Concentrix, Sitel, Sykes, and
Teleperformance, amongst others.
that provide customer care services
Employees
Our people are our most valuable asset. As of December 31, 2019, we had 49,500 employees in 22 countries
on six continents. Although a percentage of our TTEC Engage segment employees are hired seasonally to
address periodic higher business volumes in retail, healthcare and other seasonal industries, most remain
employed throughout the year. Approximately 67% 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, 2019, we had 2 patent applications pending; and hold 79 U.S. and non-U.S. patents in 8
jurisdictions that we leverage in our operations and as marketplace 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 22 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.
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.
6
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 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 the 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 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.
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 obsolete and may negatively impact our clients’ interest in our offerings. Our failure to
innovate, maintain technological advantages, 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.
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 could create pricing pressures
and excess capacity that would have an 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.
7
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-called “social engineering”
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.
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 resolving 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 and certain
agencies of the United States and state and local governments. As a result, we derive a substantial portion of
our revenue from relatively few clients. Our five and ten largest clients collectively represented 37% and 50%
of our revenue in 2019 with no one client over 10%.
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. While our
on-going sales and marketing activities aim to add new opportunities with existing and new commercial and
government clients, there can be no assurances that such additional work can be secured nor that it would yield
financial benefits comparable to expiring contracts. The loss of all or part of a major client’s business could
have a material adverse effect on our 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.
We also serve client industries that rely extensively on supply chain arrangements in the People’s Republic of
China and other parts of Asia. If these supply chain arrangements experience material disruption for any reason,
including large scale virus epidemics, these clients’ needs for our services may be impacted and our business
volumes and revenues may materially decrease, which could have an adverse effect on our business, financial
condition, and results of operations.
8
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.
We sign multi-year client contracts that are priced based on prevailing labor rates in jurisdictions where we
deliver services. In the United States, however, 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 nor pass cost increases to our clients. These 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.
Demand for qualified personnel with multiple language capabilities and fluency in English may exceed supply.
Employees with specific 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. 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 continuously changing and seasonal client demands could have a material
adverse effect on our business, financial condition, and results of operations.
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. Our customer engagement delivery capacity and our back-
office functions are concentrated in the United States, the Philippines, Mexico, India, and Bulgaria and our
technology solutions centers are concentrated in a few locations in the United States, India and the UK. Our
dependence on our customer engagement centers and enterprise support functions in the Philippines and
Mexico, which is subject to frequent severe weather, natural disasters, and occasional health and security
threats, represents a particular risk. 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.
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.
We routinely consider acquisitions, divestitures or other strategic transactions and may enter into such
transactions at any time
We are engaged in a regular review of our strategic opportunities, including acquisitions, divestitures or other
strategic transactions that we believe would provide value for our stockholders. We routinely have merger,
acquisition, and divestiture opportunities in various stages of active review, and we also routinely engage
consultants and advisors to assist us in analyzing opportunities. While at this time we are not actively engaged
in negotiations regarding a material merger, acquisition or divestiture transaction, we could do so at any time.
If such a transaction involves a sale of a part of the business, it would likely reduce the revenue and income of
the remaining business and may impact the Company’s stock price. While we consider these transactions to
improve our business and financial results over time, there can be no assurance that our goals will be realized.
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 existing
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.
9
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;
(cid:120) diversion of management’s attention to the integration of the acquired businesses at the expense of
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
other unforeseen challenges of operating the acquired business as part of TTEC’s operations;
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 or ethical issues 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.
Compliance with laws, including unexpected changes to such laws, could adversely affect our results
of operations
Our business is subject to extensive regulation by the United States 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.
As we provide services to clients’ customers residing in countries across the world, we are subject to numerous,
and sometimes conflicting, legal regimes on matters as diverse as data privacy, import/export controls,
communication content requirements, trade restrictions and sanctions, tariffs, taxation, labor regulations,
wages and severance, health care requirements, internal and disclosure control obligations, and immigration.
Violations of these laws and related regulations could impact our reputation and result in financial liability,
criminal prosecution, unfavorable publicity, restrictions on our ability to process information, financial penalties,
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.
10
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
During the last few years, there has been a significant increase in data protection and privacy regulations and
enforcement activity in many jurisdictions where we and our clients do business. These new regulations are
often complex and at times they impose conflicting requirements among different jurisdictions that we serve.
For example, GDPR, adopted by the European Union in 2018, imposed new data protection requirements for
controllers and processers of personally identifiable information collected in Europe, while the State of
California in the United States imposed similar regulations effective 2020 with a different reach. Several other
states in the United States are expected to adopt their own regulations in 2020. Failure to comply with all
privacy and data protection laws that are relevant to different parts of our business may result in legal claims,
significant fines, sanctions, or penalties, or may make it difficult for us to secure business or efficiently serve
our clients. Compliance with these evolving regulations may require significant investment which would impact
our results of operations.
Our cloud solutions are technology vendor dependent, which may impact our ability to grow our
business and our results of operations
Our current cloud service solutions are primarily based on a single vendor technology. If this vendor does not
continue to evolve the technology to stay competitive in the rapidly changing cloud computing services market,
our financial results of operations could be materially impacted. There also can be no assurance that TTEC
will be able to diversify its cloud service offerings quickly enough to offset any potential negative market trends
for the cloud technology vendor that we are currently partnering with, and our inability to diversify may have
impacts on our business and results of operations.
Our growth of operations and geographic footprint expansion could strain our
resources and cause our business to suffer
We plan to continue growing our business through the growth of clients’ wallet share, increasing sales efforts,
geographic expansion 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 our contact 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.
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.
11
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. Many of our contracts can be terminated for convenience
and our contracts do not guarantee a minimum revenue level or profitability. If a client terminates a contract or
materially reduces customer interaction volumes, this could have a material adverse effect on our results of
operations and makes it harder to make projections.
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 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.
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
considering changes to existing tax laws. For example, in December 2017, the Tax Cuts and Jobs Act (“2017
Tax Act”) was signed into law in the United States. 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 the Internal Revenue Service (“IRS”) could impact our
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.
12
There are no assurances that we will be able to implement effective tax planning strategies that are necessary
to optimize our tax position following changes in tax laws globally. If we are unable to implement a 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. During 2019, we derived approximately 40% 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;
(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;
(cid:120)
longer payment cycles 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:120)
the withdrawal of the UK from the European Union (known as “Brexit”) created substantial uncertainty
about the political and economic relationship between the UK and the EU, and the UK’s other trading
partners which could, depending on future trade term negotiations, impact our European operations
and our operations in the UK;
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;
infrastructure challenges and lack of sophisticated disaster and pandemic preparedness in some
countries where we do business, and
terrorist attacks or civil unrest 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 in a timely manner 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
in countries with stable wage rates and find new locations required by our clients
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.
13
Our clients often dictate where they wish for us to locate the delivery centers that serve their customers, such
as “near shore” jurisdictions located in close proximity to the United States or specific locations elsewhere in
the world. There is no assurance that we will be able to find and secure locations suitable for delivery center
operations in jurisdictions which meet our cost-effectiveness and security standards. Our inability to expand
our operations to such 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.
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.
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. The United States, Australia, Mexico, Philippines
and other transfer pricing regulations in other countries where we operate, require that cross-border
transactions between affiliates be on arm’s-length terms. We carefully consider the pricing among our
subsidiaries to assure that they are at arm’s-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.
14
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, 2019, we have approximately $301.7 million of goodwill
and $115.6 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.
Intellectual property infringement by us and by others may adversely impact our ability to innovate
and compete
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 operations.
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
registration agencies; and our “patent pending” intellectual property may not receive a patent or may be subject
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, the British pound 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 21% 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.
Legislation discouraging offshoring of service by United States 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 United States businesses to return offshored, including
outsourced and offshored, services to the United States could also impact our clients’ continuing interest in
using our services.
15
Legislation aimed to expand protections for United States 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 United States 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, transportation restrictions that could make it difficult for our employees to commute to
work, 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.
Our bylaws designate Delaware courts as the exclusive forum for most disputes with our
stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for their
disputes.
Our bylaws designate Delaware’s state courts as the exclusive forum for most disputes between us and our
stockholders, including federal claims and derivative actions. We believe that this provision may benefit us by
providing increased consistency in the application of Delaware law and federal securities laws by chancellors
and judges who are particularly experienced in resolving corporate disputes, efficient administration of cases
relative to other forums, and protection against the burdens of multi-forum litigation. This choice of forum
provision does not have the effect of causing our stockholders to waive our obligation to comply with the federal
securities laws. This bylaw forum selection provision is not uncommon for companies incorporated in the State
of Delaware, but it could limit our stockholders’ ability to select a more favorable judicial forum for disputes with
us, our directors, officers or other employees and may therefore discourage litigation. It is important to note,
however, that our choice of forum provision would (i) not be enforceable with respect to any suits brought to
enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, and (ii) have
uncertain enforceability with respect to claims under the Securities Act of 1933, as amended.
Delaware law and certain provisions in our restated certificate of incorporation and amended and
restated bylaws might discourage, delay or prevent a change of control of our company or changes in
our management and, therefore, depress the price of our common stock
Our restated certificate of incorporation and amended and restated bylaws contain provisions that could
depress the market price of our common stock by acting to discourage, delay or prevent a change in control of
our company or changes in our management that the stockholders of our company may deem advantageous.
These provisions, among other things:
(cid:120) authorize the issuance of "blank check" preferred stock that our board of directors could use to
implement a stockholder rights plan;
(cid:120) provide that special meetings of our stockholders may be called only by our Chairman, President or our
board of directors;
(cid:120) establish advance notice requirements for nominations for election to our board of directors or for
proposing matters that can be acted upon by stockholders at annual stockholder meetings;
(cid:120) permit the board of directors to establish the number of directors; and
(cid:120) provide that the board of directors is expressly authorized to make, alter or repeal our amended and
restated bylaws.
16
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change
in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and
other transactions between us and holders of 15% or more of our common stock. Further, as described below,
a majority of our stock is held by a single controlling stockholder, which means that a change in control of our
company or the composition of the Board of Directors will not occur without the approval of the controlling
stockholder.
Our Chairman and Chief Executive Officer controls a majority of our stock and has control over all
matters requiring action by our stockholders; and his interest may conflict with the interests of our
other stockholders
Kenneth D. Tuchman, our Chairman and Chief Executive Officer, directly and beneficially owns approximately
61% of TTEC’s common stock. As a result, Mr. Tuchman could and does exercise significant influence and
control over our business practices and strategy. As long as Mr. Tuchman continues to beneficially own more
than 50% of our common stock he will be able to elect all of the members of our Board of Directors, effect
stockholder actions by written consent in lieu of stockholder meetings, and determine the outcome of all
matters submitted to a vote of our stockholders, including matters involving mergers or other business
combinations, the acquisition or disposition of assets, the occurrence of indebtedness, the issuance of any
additional shares of common stock or other equity securities and the payment of dividends on our common
stock.
The interest of Mr. Tuchman may not always coincide with the interest of our other stockholders, and Mr.
Tuchman may seek to cause the Company to take actions that might involve risks to our business or adversely
affect us or our other stockholders. For example, Mr. Tuchman’s control of TTEC could delay or prevent a
change of control, merger, consolidation, or sale of all or substantially all of our assets that our other
stockholders support, or conversely, Mr. Tuchman’s control could result in the consummation of a transaction
that our other stockholders do not support. As a controlling stockholder, Mr. Tuchman is generally entitled to
vote his shares as he sees fit, which may not always be in the interest of our other stockholders. This
concentrated control could also discourage parties from acquiring our common stock or initiating potential
mergers, takeovers or other change of control transactions, which could depress the trading price of our
common stock.
Our status as a “controlled company” could make our common stock less attractive to some investors
or otherwise harm our stock price.
Because we qualify as a “controlled company” under the listing rules of the NASDAQ Stock Market, we are not
required to have a majority of our Board of Directors be independent, nor are we required to have an
independent compensation committee or an independent nominating committee of the Board. While the
Company has elected not to avail itself of these governance exceptions available to “controlled companies,” in
the future the Company may elect to do so. Accordingly, because of our “controlled company” status, the other
stockholders may not have the same protections afforded to stockholders of companies that are subject to all
of the corporate governance rules for NASDAQ-listed companies. Our status as a controlled company could
make our common stock less attractive to some investors or otherwise harm our stock price.
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 2019 fiscal year that remain unresolved.
17
ITEM 2. PROPERTIES
Our corporate headquarters are located in Englewood, Colorado. In addition to our headquarters and the
customer engagement centers used by our Engage segment discussed below, we also maintain sales and
consulting offices in several countries around the world which serve our Digital segment.
As of December 31, 2019 we operated 89 customer engagement centers that are classified as follows:
(cid:120) Multi-Client Center — We lease space for these centers and serve multiple clients in each facility;
(cid:120) Dedicated Center — We lease space for these centers and dedicate the entire facility to one client; and
(cid:120) Managed Center — 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.
As of December 31, 2019, our customer engagement centers were located in the following countries:
Australia
Brazil
Bulgaria
Canada
Greece
Germany
India
Ireland
Mexico
Philippines
Poland
South Africa
Thailand
United Kingdom
United States of America
Total
Centers
Centers
Total
Number of
Multi-Client Dedicated Managed Delivery
Centers
Centers
3
2
2
6
1
1
1
1
3
18
1
1
1
2
46
89
—
2
2
5
1
—
1
1
3
18
—
—
—
—
32
65
—
—
—
1
—
1
—
—
—
—
1
1
1
2
9
16
3
—
—
—
—
—
—
—
—
—
—
—
—
—
5
8
The leases for our customer engagement centers have remaining terms ranging from one to 13 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
in its financial statements, will not have a material adverse effect on the Company’s financial position, cash
flows or results of operations.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
18
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the NASDAQ Global Select Market under the symbol “TTEC.”
As of December 31, 2019, we had 282 holders of record of our common stock and during 2019 we declared
and paid a $0.30 per share dividend and a $0.32 per share dividend on our common stock. During 2018 we
declared and paid a $0.27 per share dividend and a $0.28 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’s performance, cash
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 $0.32 per
common share. On February 27, 2020, the Board of Directors authorized a $0.34 dividend per common share,
payable on April 16, 2020, to shareholders of record as of April 1, 2020. While it is our intention to continue to
pay semi-annual dividends in 2020 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 have the opportunity 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, 2019, the cumulative
authorized repurchase allowance was $762.3 million, of which we have used $735.8 million to purchase 46.1
million shares. During 2018 and 2019, we did not purchase any shares under the program, and we do not
currently have plans to make repurchases in 2020.
Issuer Purchases of Equity Securities During the Fourth Quarter of 2019
The following table provides information about our repurchases of equity securities during the quarter ended
December 31, 2019:
Period
September 30, 2019
October 1, 2019 - October 31, 2019
November 1, 2019 - November 30, 2019
December 1, 2019 - December 31, 2019
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)
— $
— $
— $
—
—
—
—
$
— $
— $
— $
—
26,580
26,580
26,580
26,580
From January 1, 2020 through February 28, 2020, we did not purchase 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.
19
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, 2014 and ending on December 31, 2019. We have chosen the 2019 “Peer Group” composed of
8x8, Inc. (NASDAQ: EGHT), Five9 Inc. (NASDAQ: FIVN), Genpact (NASDAQ: G), Sykes Enterprises,
Incorporated (NASDAQ: SYKE) and Teleperformance (NYSE Euronext: RCF). We believe that the companies
in the 2019 Peer Group are relevant to our current business model, market capitalization and our two segments
Digital and Engage. The 2018 Peer Group included Sykes Enterprises, Incorporated (NASDAQ: SYKE) and
Teleperformance (NYSE Euronext: RCF), which were relevant to our Engage segment.
The graph assumes that $100 was invested on December 31, 2014 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 $0.55 during 2018 and $0.62 during 2019. 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
2018 Peer Group
2019 Peer Group
December 31,
2014
2015
2016
2017
2018
2019
$
$
$
$
$
100
100
100
100
100
$
$
$
$
$
120
107
96
126
130
$
$
$
$
$
132
116
116
146
143
$
$
$
$
$
177
151
133
201
192
$
$
$
$
$
128
147
118
217
206
$
$
$
$
$
180
200
148
335
309
20
21
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with Item 7. Management’s Discussion and
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).
2019
Year Ended December 31,
2017
2016
2018
2015
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
$ 1,643,704
(1,242,887)
(202,540)
(69,086)
$ 1,509,171
(1,157,927)
(182,428)
(69,179)
(5,482) (1)
123,709
(13,298) (2)
(25,677) (3)
(7,570)
(7,583) (5)
92,054
(35,816) (6)
(16,483) (7)
(3,938)
$ 1,477,365
(1,110,068)
(182,314)
(64,507)
(19,987) (8)
100,489
(11,602) (9)
(78,075) (10)
$ 1,275,258
(941,592)
(175,797)
(68,675)
(36,442) (12)
52,752
(2,454) (13)
(12,863) (14)
(3,556)
(3,757)
$ 1,286,755
(928,247)
(194,606)
(63,808)
(9,914) (16)
90,180
(4,291)
(20,004) (17)
(4,219)
$
77,164
$
35,817
$
7,256
$
33,678
$
61,666
46,373
46,758
46,064
46,385
45,826
46,382
47,423
47,736
48,370
49,011
Net income per share attributable to
TTEC stockholders
Basic
Diluted
$
$
Dividends issued per common share
$
1.66
1.65
0.62
$
$
$
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
$ 1,376,788 (4) $ 1,054,508
466,241
$
532,846 (4) $
$ 1,078,736 (11) $
514,113 (11) $
$
846,304 (15) $
304,380 (15) $
843,327
191,473
(1)
(2)
(3)
(4)
(5)
(6)
Includes $1.1 million related to reductions in force, $0.7 million of expense for facility exit and other charges,
a $2.6 million impairment of leasehold improvements and right to use lease assets, and a $1.1 million
impairment of internally developed software, customer relationship intangible assets and other long-term
assets.
Includes a $4.7 million charge related to the future purchase of the remaining 30% of the Motif acquisition (for
discussion regarding acquisition of Motif, see our Annual Report on Form 10-K for the year ended
December 31, 2017), a $2.4 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, a $1.4 million benefit
related to royalty payments in connection with the sale of two business units, a $1.4 million benefit related to
the recovery of receivables for a division in winddown, and a $0.7 million benefit related to the sale of
trademarks.
Includes a $1.7 million benefit related to return to provision adjustments, a $2.8 million benefit related to tax
rate changes, $0.7 million of expense related to changes in tax contingent liabilities, $4.5 million of expense
related to changes in valuation allowance, a $0.9 million benefit related to restructuring, and a $0.3 million
benefit related to other items.
The Company spent $107.0 million, net of cash acquired of $4.5 million in 2019 for the acquisition of FCR.
Upon acquisition of FCR, the Company acquired $171.7 million in assets and assumed $9.6 million in
liabilities ($4.0 million in long-term liabilities).
Includes $0.8 million related to reductions in force, $5.3 million of expense for facility exit charges and a
termination fee for a technology vendor contract, $1.1 million of 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
22
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
assets held and used as of December 31, 2018, a $2.0 million benefit related to royalty payments in
connection with the sale of a business unit, a $0.7 million benefit 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, $2.2 million of expense for facility exit charges,
$3.5 million of 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 (for
discussion regarding acquisition of Connextions, see our Annual Report on Form 10-K for the year ended
December 31, 2017), and a $5.3 million impairment charge related to two trade name intangible assets.
Includes $5.3 million of 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, a $1.9 million benefit related to impairments, a $2.2 million benefit related to stock
options, $0.6 million of expense related to changes in valuation allowances, a $5.8 million benefit related to
restructuring, a $0.6 million benefit related to return to provision adjustments and a $2.1 million 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 $36.3 million in liabilities ($27.4 million in long-term liabilities).
Includes $3.4 million expense related to reductions in force, $1.0 million of expense for 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 were 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, a $1.5 million benefit related to restructuring charges,
and a $9.8 million benefit related to impairments and loss on assets held for sale.
The Company spent $46.1 million, net of cash acquired of $2.7 million, in 2016 for the acquisition of Atelka
(for discussion regarding our acquisition of Atelka, see our Annual Report on Form 10-K for the year ended
December 31, 2016). 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, $0.4 million of expense related to the impairment
of property and equipment, and $7.7 million of expense related to the impairment of goodwill.
Includes a $0.7 million benefit related to restructuring charges, $1.2 million net 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, a $2.6 million benefit related to impairments, $1.3 million of expense
related to state net operating losses and credits, and a $0.4 million benefit related to other items.
23
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Executive Summary
TTEC Holdings, Inc. (“TTEC”, “the Company”, “we”, “our” or “us”) is a leading global customer experience
technology and services company focused on the design, implementation and delivery of transformative
customer experience outcomes for many of the world’s most iconic and disruptive brands. Since our inception
in 1982, we have been helping clients deliver frictionless customer experiences, strengthen their customer
relationships, brand recognition and loyalty through personalized interactions, significantly improve their Net
Promoter Score ("NPS"), and lower their total cost to serve by enabling and delivering simplified, consistent
and seamless customer experience across channels and phases of the customer lifecycle.
Our customer experience thought leadership is substantiated, with innovative programs that differentiate our
clients from their competition.
In the fast expanding direct-to-customer ("DTC") channel where experiences are everything, enterprises must
become increasingly customer-centric and digitally enabled. Digital transformation has become a have-to-have
in winning and keeping customers. It is our mission to enable and accelerate our clients' path to digital
transformation. We are focused on improving the experience of our clients' customers, by leveraging existing
and emerging technologies — artificial intelligence ("AI"), machine learning ("ML"), robotic process automation
("RPA"), cloud, analytics, omnichannel and real-time messaging.
Through the first quarter of 2019, the Company reported its financial results of operations across four segments:
Customer Strategy Services (“CSS”), Customer Technology Services (“CTS”), Customer Growth Services
(“CGS”) and Customer Management Services (“CMS”). Starting in the second quarter of 2019, the Company
changed its go-to-market strategy, how its clients evaluate and consume its services, how TTEC assesses its
operating performance and the leadership accountability for its segments. As a result, the Company now reports
its financial information based on two segments: TTEC Digital and TTEC Engage.
(cid:120) TTEC Digital designs, builds and delivers tech-enabled, insight-based and outcome-driven customer
experience solutions through our professional services and suite of technology offerings. These
solutions are critical to enabling and accelerating digital transformation for our clients. These services
were previously included in the CSS and CTS segments.
(cid:120) TTEC Engage provides the essential technologies, human resources, infrastructure and processes to
operate customer care, acquisition, and fraud detection and prevention services. These services were
previously included in the CGS and CMS segments.
TTEC Digital and TTEC Engage come together under our unified offering, Humanify™ Customer Experience
as a Service ("CXaas"), which drives measurable customer results for clients through the delivery of
personalized, omnichannel experiences. Our Humanify™ cloud platform provides a fully integrated ecosystem
of Customer Experience ("CX") offerings, including omnichannel, messaging, AI, ML, RPA, analytics,
cybersecurity, customer
journey
orchestration. Our end-to-end platform differentiates us from many competitors by combining design, strategic
consulting, best in class technology, data analytics, process optimization, system integration and operational
excellence. This unified offering is value-oriented, outcome-based and delivered to large enterprise and
governments on a global scale.
("CRM"), knowledge management and
relationship management
During fiscal 2019, the TTEC global operating platform delivered services in 22 countries -- the United States,
Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, Hong Kong, India, Ireland, Mexico,
the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, United Arab
Emirates, and the United Kingdom. We provide onshore, nearshore and offshore services on six continents to
accommodate client requirements. TTEC has 49,500 employees, approximately 1,400 of whom are CX
professionals serving TTEC Digital clients and approximately 48,100 of whom serve TTEC Engage clients.
Our revenue for fiscal 2019 was $1.644 billion, approximately $305 million, or 19%, which came from our TTEC
Digital segment and $1.338 billion, or 81%, which came from our TTEC Engage segment.
24
To improve our competitive position in a rapidly changing market and stay strategically relevant to our clients,
we continue to invest in innovation and service offerings for mainstream and high growth disruptive businesses,
diversifying and strengthening our core customer care services with consulting, data analytics, insights, and
technology-enabled, outcomes-focused services.
We also invest 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. To this
end we have been highly acquisitive in the last several years, including an acquisition in 2019 of a U.S.-based
provider of customer care, social media community management, content moderation, technical support and
business process solutions; an acquisition in 2018 of a U.K.-based systems integrator for multichannel contact
center platforms; an acquisition in 2017 of an India-based digital fraud prevention and detection and content
moderation services company; and an acquisition in 2017 of a U.S.-based healthcare services company
focused on improving the customer experience for healthcare plan providers and pharmacy benefits managers.
We have extensive expertise in the automotive, communications, financial services, government, healthcare,
logistics, media and entertainment, retail, technology, travel and transportation industries. We serve more than
300 diverse clients globally, including many iconic blue-chip brands, Fortune 1000 companies, and disruptive
growth companies.
Our Integrated Service Offerings and Business Segments
We provide strategic value and differentiation through our two business segments: TTEC Digital and
TTEC Engage.
TTEC Digital designs, builds and delivers tech-enabled, insights-based and outcome-driven customer
experience solutions through our professional services and suite of technology offerings. These solutions are
critical to enabling and accelerating digital transformation for our clients.
(cid:120) Technology Services: Our technology services design, integrate and operate highly scalable, digital
omnichannel technology solutions in the cloud, on premise, or hybrid, including journey orchestration,
automation and AI, knowledge management, and workforce productivity.
(cid:120) Professional Services: Our management consulting practices deliver customer experience strategy,
analytics, process optimization, and learning and performance services.
TTEC Engage provides the essential technologies, human resources, infrastructure and processes to operate
customer care, acquisition, and fraud detection and prevention services.
(cid:120) Customer Acquisition Services: Our customer growth and acquisition services optimize the buying
journeys for acquiring new customers by leveraging technology and analytics to deliver personal
experiences that increase the quantity and quality of leads and customers.
(cid:120) Customer Care Services: Our customer care services provide turnkey contact center solutions,
including digital omnichannel technologies, associate recruiting and training, facilities, and operational
expertise to create exceptional customer experiences across all touchpoints.
(cid:120) Fraud Prevention Services: Our digital fraud detection and prevention services proactively identify and
prevent fraud and provide community content moderation and compliance.
Based on our clients’ preference, we provide our services on an integrated cross-business segment and/or 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 2019 Financial Results
In 2019, our revenue increased 8.9% to $1,644 million over 2018, including an increase of 0.1% or $0.8 million
due to foreign currency fluctuations and a decrease of $17.9 million, or 1.2%, due to the initial adoption of ASC
606 for revenue in the first quarter of 2018. The increase in revenue was comprised of a $66.5 million, or 27.9%,
increase for TTEC Digital and a $68.0 million, or 5.4%, increase for TTEC Engage.
25
Our 2019 income from operations increased $31.7 million to $123.7 million or 7.5% of revenue, from $92.1
million or 6.1% of revenue for 2018. The change in operating income is attributable to a number of different
factors across the segments. The TTEC Digital operating income expanded with an 18%, or $5.9 million,
improvement over last year primarily on the growth of its higher margin cloud business and its system integration
business which provides services pre and post the buildout of each client’s cloud platform. The TTEC Engage
operating income increased 44%, or $25.8 million, compared to the prior year based on the increase in revenue
and a $6.8 million benefit related to foreign currency fluctuations which was offset by a $9.8 million decrease
related to the initial adoption of ASC 606 during the first quarter of 2018.
Income from operations in 2019 and 2018 included a total of $5.5 million and $7.6 million of restructuring 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 23,915 workstations representing 52% of our global delivery capabilities. Revenue for our
TTEC Engage segment provided in these offshore locations was $455 million and represented 34% of our 2019
revenue, as compared to $440 million and 35% of our 2018 revenue.
As of December 31, 2019, the total production workstations for our TTEC Engage segment was 45,611 and the
overall capacity utilization in our centers was 74%. The utilization is lower than the previous year as we expand
and shift capacity in certain countries to accommodate the volume and location related to client specific
customer engagement volume. The table below presents workstation data for all of our centers as of
December 31, 2019 and 2018. 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, 2019
December 31, 2018
Total
Total
Production
Workstations
In Use
% In
Use
Production
Workstations
In Use
% In
Use
40,140
5,471
45,611
29,749
3,870
33,619
74 %
71 %
74 %
42,687
309
42,996
34,017
231
34,248
80 %
75 %
80 %
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.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of our financial condition and results of operations are based upon our
Consolidated Financial Statements, which have been prepared in accordance with accounting principles
generally accepted in the U.S. (“GAAP”). The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well
as the disclosure of contingent assets and liabilities. 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.
26
Revenue Recognition – 2019 and 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, “Revenue from Contracts with Customers” and
all related amendments (“ASC 606”). A contract’s transaction price is allocated to 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
Company’s agents (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
performance obligations, the Company allocates the contract’s transaction price to each performance obligation
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 other client specific cost considerations. For these services, the point at which the
transfer of control occurs determines when revenue is recognized in a specific reporting period. Within our
Digital segment, where there are product sales, the attribution of revenue is recognized when the transfer of
control is completed and the products are delivered to the client’s location. 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
promised under the contract. The majority of the Company’s services are recognized over time using the input
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
input of consultants’ time. The progress is measured based on the hours expended 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.
27
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.
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
the Company’s service invoices. Payments to customers 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
the Company’s products or services, and therefore, are accounted for as a reduction of revenue when
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.
28
Some of the Company’s service 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
services performed. Additionally, the Company’s standard payment terms are less than one year. Given the
foregoing, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a
contract has a significant financing component. Pursuant to the Company’s election of the practical expedient
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 – 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
a selling price hierarchy of vendor specific objective evidence (“VSOE”), third-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.
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
“more-likely-than-not” criteria. In making this judgment, we consider all available evidence, both positive and
negative, in determining whether, based on the weight of that evidence, a valuation allowance is required.
29
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
In 2017, the United States enacted comprehensive tax reform legislation known as the Tax Cuts and Jobs Act
(the "2017 Tax Act") that, among other things, reduced the U.S. federal corporate income tax rate from 35% to
21% and implemented a territorial tax system, but imposed an alternative “base erosion and anti-abuse tax”
(“BEAT”), and an incremental tax on global intangible low taxed foreign income (“GILTI”) effective January 1,
2018. In addition, the law imposed 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 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
the Internal Revenue Service (“IRS”) or the results of an audit related to these items, could impact our recorded
amounts in future periods.
The Company’s selection of an accounting 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 2019 and 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.
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.
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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
not, or if a reporting unit’s fair value has historically been closer to its carrying value, we will proceed to Step 1
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
record an impairment equal to the amount by which a reporting unit’s carrying value exceeds its fair value.
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
would pay for use of that trade name. An impairment charge is recorded if the trade name’s carrying value
exceeds its estimated fair value.
Derivatives
We may 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 may
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 often accounted for as cash flow hedges under current
accounting standards. From time-to-time, we may also enter into foreign exchange forward contracts to hedge
our net investment in a foreign operation.
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
other comprehensive income (loss), a component of Stockholders’ Equity, to the extent they are deemed
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.
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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 experience services and
technology 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.
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.
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RESULTS OF OPERATIONS
Year Ended December 31, 2019 Compared to December 31, 2018
The tables included in the following sections are presented to facilitate an understanding of Management’s
Discussion and Analysis of Financial Condition and Results of Operations and present certain information by
segment for the years ended December 31, 2019 and 2018 (amounts in thousands). All inter-company
transactions between the reported segments for the periods presented have been eliminated.
TTEC Digital
Revenue
Operating Income
Operating Margin
Year Ended December 31,
2019
$ 305,346
38,927
2018
$ 238,799
33,054
$ Change % Change
27.9 %
17.8 %
$ 66,547
5,873
12.7 %
13.8 %
The increase in revenue for the TTEC Digital segment was related to significant increases in the cloud platform
and the systems integration practice including a large multi-year governmental contract and increases in the
digital learning and insights practices, offset by reductions in both the legacy facilitation based training and
lower volumes in the Middle East business, which the Company is in the process of winding down.
The operating income expansion is primarily attributable to the revenue growth, improved utilization of
technology and people assets as the business scales its cloud and system integration revenue. The operating
income increase was offset by investments in sales and marketing and a $2.0 million impairment of intangible
and other long-lived assets related to the facilitation component of this segment. The operating income as a
percentage of revenue decreased slightly to 12.7% in 2019 as compared to 13.8% in 2018. Included in the
operating income was amortization related to acquired intangibles of $2.6 million and $2.5 million for the years
ended December 31, 2019 and 2018, respectively.
TTEC Engage
Revenue
Operating Income
Operating Margin
Year Ended December 31,
2019
$ 1,338,358
84,782
2018
$ 1,270,372
59,000
$ Change % Change
5.4 %
43.7 %
$ 67,986
25,782
6.3 %
4.6 %
The increase in revenue for the TTEC Engage segment was due to a net increase of $172.2 million in client
programs including noteworthy increases in the customer growth, @home and fraud detection and prevention
offerings as well as our automotive and hypergrowth born digital sectors, our acquisition of FCR, and a $1.6
million increase due to foreign currency fluctuations. This increase was offset by decreases for program
completions of $88.0 million, a $17.9 million reduction due to the initial adoption of ASC 606 related to revenue
in 2018.
The operating income increased in line with the improved revenue, pricing increases related to rising wages,
lower healthcare costs, improved profitability in our customer growth, @home and fraud detection and
prevention offerings and our automotive and hypergrowth client portfolios, and a $6.4 million volume
commitment payment. Additionally, the operating income was positively affected by $6.7 million of foreign
currency fluctuations and negatively impacted by an $9.8 million decrease due to the initial adoption of ASC
606 in 2018. As a result, the operating income as a percentage of revenue increased to 6.3% in 2019 as
compared to 4.6% in the prior period. Included in the operating income was amortization expense related to
acquired intangibles of $9.0 million and $8.2 million for the years ended December 31, 2019 and 2018,
respectively.
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Interest Income (Expense)
Interest income decreased to $1.9 million in 2019 from $4.5 million in 2018 due to lower average cash balances.
Interest expense decreased to $19.1 million during 2019 from $28.7 million during 2018, primarily due to lower
utilization of the line of credit, and a $5.3 million reduction in the charge related to the future purchase of the
remaining 30% interest in Motif versus the prior year.
Other Income (Expense), Net
Included in the year ended December 31, 2019 was a $2.4 million benefit related to the fair value adjustment
of contingent consideration for an acquisition, a $1.4 million benefit on recovery of receivables in connection
with the consulting business that we are winding down, a $1.4 million benefit related to royalty payments in
connection with the sale of a business, and a $0.7 million benefit on the sale of trademarks.
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.
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 2019 was 23.3% as compared to 29.3% for 2018. The effective tax rate for
2019 was impacted by earnings in international jurisdictions currently under an income tax holiday, $0.7 million
of expense related to changes in tax contingent liabilities, a $1.7 million benefit related to provision to return
adjustments, a $2.8 million benefit related to tax rate changes, $4.5 million of expense related to changes in
valuation allowances, a $0.9 million benefit related to restructuring charges, and $0.3 million of other benefits.
Without these items our effective tax rate for the year ended December 31, 2019 would have been 22.9%.
For the year ended December 31, 2018, our effective tax rate was 29.3%. 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%.
Year Ended December 31, 2018 compared to December 31, 2017
For a discussion of our results of operations for the year ended December 31, 2018 compared to the year ended
December 31, 2017, please see our Annual Report on Form 10-K for the year ended December 31, 2018.
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, 2019, we generated positive
operating cash flows of $238.0 million. We believe that our cash generated from operations, existing cash and
cash equivalents, and available credit will be sufficient to meet expected operating and capital expenditure
requirements for the next 12 months.
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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.
In 2018 and 2019, the Company paid dividends from its foreign operations to its U.S. parent in the amount of
$310 million and $39 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, 2019 and 2018,
we had borrowings of $290.0 million and $282.0 million, respectively, under our Credit Facility, and our average
daily utilization was $331.8 million and $514.7 million for the years ended December 31, 2019 and 2018,
respectively. After consideration for the current level of availability based on the covenant calculations, our
remaining borrowing capacity was approximately $530.0 million as of December 31, 2019. As of December 31,
2019, 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, 2019 and
2018.
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 $82.4 million and $78.2 million as of December 31, 2019 and 2018,
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, and to pay dividends.
Cash Flows from Operating Activities
For the years 2019 and 2018 we reported net cash flows provided by operating activities of $238.0 million and
$168.3 million, respectively. The increase of $69.6 million from 2018 to 2019 was primarily due to a $23.9 million
increase in net cash income from operations and a $45.7 million improvement in net working capital.
Cash Flows from Investing Activities
For the years 2019 and 2018, we reported net cash flows used in investing activities of $162.9 million and
$47.6 million, respectively. The net increase in cash used in investing activities from 2018 to 2019 was primarily
due to a $17.3 million increase in capital expenditures and a $98.3 million increase related to acquisitions.
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Cash Flows from Financing Activities
For the years 2019 and 2018, we reported net cash flows used in financing activities of $47.4 million and
$102.1 million, respectively. The change in net cash flows from 2018 to 2019 was primarily due to a $70.0
million paydown on the line of credit, a $4.6 million payment related to the hold-back for an acquisition, a $3.4
million increase in dividends paid to shareholders, and a $5.9 million of increased payments on other debt.
Free Cash Flow
Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) was
$177.2 million and $124.9 million for the years 2019 and 2018, respectively. The increase from 2018 to 2019
was primarily due to an increase in the net cash from operations offset by higher capital expenditures and higher
spending on acquisitions.
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
determined by GAAP and should not be considered a substitute for “income from operations,” “net income,”
“net cash provided by operating activities,” or any other measure determined in accordance with GAAP. We
believe this non-GAAP liquidity measure is useful, in addition to the most directly comparable GAAP measure
of “net cash provided by operating activities,” because free cash flow includes investments in operational assets.
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):
Net cash provided by operating activities
Less: Purchases of property, plant and equipment
Free cash flow
Obligations and Future Capital Requirements
Year Ended December 31,
2019
2018
$ 237,989 $ 168,345
43,450
$ 177,213 $ 124,895
60,776
Future maturities of our outstanding debt and contractual obligations as of December 31, 2019 are summarized
as follows (in thousands):
Less than
1 Year
1 to 3
Years
3 to 5
Years
Over 5
Years
Total
Credit Facility(1)
Equipment financing arrangements
Purchase obligations
Operating lease commitments undiscounted)
Transition tax related to US 2017 Tax Act
Other debt
Total
$
8,960 $ 17,921 $ 300,065 $
6,825
11,485
54,903
3,300
43,803
— $ 326,946
15,552
—
20,146
—
203,737
14,734
29,022
4,422
44,344
—
$ 129,276 $ 131,734 $ 359,581 $ 19,156 $ 639,747
1,414
813
42,618
14,600
71
7,313
7,848
91,482
6,700
470
(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, 2019.
36
(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 $6.8 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, for strategic acquisitions, to 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
contracts are negotiated on an arm’s-length basis and may be negotiated at different times and with different
legal entities.
Future Capital Requirements
We expect total capital expenditures in 2020 to be between 3.6% and 3.8% of revenue. 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 2020 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 venture. In addition, as of
December 31, 2019, we were authorized to purchase an additional $26.6 million of common stock under our
stock repurchase program (see Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities). Our stock repurchase program does not have an expiration date.
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 February 14, 2019, we entered into a Fourth Amendment to our Amended and Restated Credit Agreement
and Amended and Restated Security Agreement originally dated as of June 3, 2013 (collectively the “Credit
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 (the “Credit Facility”). The amended Credit
Agreement provides for a secured revolving Credit Facility that matures on February 14, 2024.
Other than the extension of the Credit Facility’s maturity 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
previously disclosed as part of our Annual Report on Form 10-K for the period ended December 31, 2015 (“2016
Credit Facility”).
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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 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, dividends, acquisitions, and
other strategic activities.
Base rate loans bear interest at a rate equal to the greatest of (i) Wells Fargo’s prime rate, (ii) one half of 1% in
excess of the federal funds effective rate, or (iii) 1.25% in excess of the one month London Interbank Offered
Rate (“LIBOR”), 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.
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, 2019 and 2018, we had borrowings of $290.0 million and $282.0 million, respectively,
under the Credit Facility. During 2019, 2018 and 2017, borrowings accrued interest at an average rate of
approximately 3.4%, 3.1%, and 2.2% per annum, respectively, excluding unused commitment fees. Our daily
average borrowings during 2019, 2018 and 2017 were $331.8 million, $514.7 million and $494.7 million,
respectively. As of December 31, 2019, and 2018, based on the current level of availability based on the
covenant calculations, the remaining borrowing capacity was approximately $530.0 million and $360.0 million,
respectively.
Off-Balance Sheet Arrangements
As of December 31, 2019, we had no transactions that met the definition of off-balance sheet arrangements
that may have a current or future material effect on our consolidated financial position or operating results.
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Client Concentration
During 2019, none of our clients represented more than 10% of our total annual revenue. Our five largest clients
accounted for 37%, 35% and 35% of our annual revenue for each of the three years ended December 31, 2019,
2018 and 2017, respectively. We have long-term relationships with our top five Engage clients, ranging from 13
to 23 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 if they terminated our
contract for convenience.
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 support for 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 the 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, theft of valuable information, or 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.
Changes in Accounting Principle
As discussed in Note 1, the Company changed its method of accounting for leases in 2019 due to the adoption
of Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842).
39
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, 2019, we had $290.0 million of outstanding borrowings under the Credit Agreement. Based upon
average daily outstanding borrowings during the years ended December 31, 2019 and 2018, interest accrued
at a rate of approximately 3.4% and 3.1% 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.
The Company’s interest rate swap arrangement 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, 2019, 2018
and 2017, revenue associated with this foreign exchange risk was 22%, 23% and 26% 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,
2017
2018
2019
4.5 %
3.5 %
3.8 %
(0.6) %
(2.0) %
4.0 %
(8.6) %
(5.1) %
0.2 %
(10.7) %
(4.7) %
5.0 %
6.6 %
(0.8) %
5.0 %
7.7 %
12.1 %
(9.2) %
40
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, 2019 and 2018 are summarized as follows (in
thousands). All hedging instruments are forward contracts, except as noted.
As of December 31, 2019
Philippine Peso
Mexican Peso
As of December 31, 2018
Philippine Peso
Mexican Peso
Local
Currency
Notional
Amount
7,715,000
1,299,500
U.S. Dollar
Notional
Amount
% Maturing
in the next
12 months
147,654 (1)
61,529
209,183
58.2 %
46.9 %
$
Contracts
Maturing
Through
December 2022
December 2022
Local
Currency
Notional
Amount
6,710,000
1,091,500
U.S. Dollar
Notional
Amount
130,957 (1)
57,708
188,665
$
(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, 2019 and December 31, 2018.
The fair value of our cash flow hedges at December 31, 2019 was an asset (in thousands):
Philippine Peso
Mexican Peso
Maturing in the
December 31, 2019 Next 12 Months
929
1,315
2,244
2,517
3,157
5,674 $
$
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 of our cash flow
hedges increased by $17.0 million from December 31, 2018 to December 31, 2019. The increase in fair value
from December 31, 2018 largely reflects a reduction in the total notional value of outstanding cash flow hedges
and an increase in average hedge exchange rates.
41
We recorded net losses of $4.2 million, $17.5 million, and $22.8 million for settled cash flow hedge contracts
for the years ended December 31, 2019, 2018, and 2017, 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 2019 and 2018, approximately 21% and 23%, respectively, of
revenue was derived from contracts denominated in currencies other than the U.S. Dollar. Our results of
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, 2019 or 2018.
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-K includes the certifications of our Chief Executive Officer (the “CEO”) and Chief Financial Officer
(the “CFO”) required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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, 2019, the
end of the period covered by this Form 10-K. Based on this evaluation, our CEO and CFO have concluded that
the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level.
42
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
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.
Management’s Report on Internal Control over Financial Reporting
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, 2019 based on the framework established in Internal Control
— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). As a result of that evaluation, our management concluded that the Company’s internal
control over financial reporting was effective as of December 31, 2019, the end of the period covered by this
Form 10-K.
We excluded First Call Resolution, LLC (“FCR”) from our assessment of internal control over financial reporting
as of December 31, 2019 because this company was acquired by the Company in a purchase business
combination in 2019. FCR’s total assets and total revenues represent 12.6% and 1.2%, respectively, of the
related consolidated financial amounts as of and for the year ended December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 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 were no changes 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
43
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information in our 2020 Definitive Proxy Statement on Schedule 14A, which will be filed no later than 120
days after December 31, 2019 (the “2020 Proxy Statement”) regarding our executive officers under the heading
“Information Regarding Executive Officers” is incorporated herein by reference. We have both the Ethics Code
for Senior Executive and Financial Officers and the Ethics Code defining rules of conduct for our employees,
partners and suppliers. Our Ethics Code for Senior Executive and Financial Officers applies to our Chief
Executive Officer, Chief Financial Officer, lead executives 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 Ethics Code defines conduct for all directors, officers, employees, partners
and suppliers (as applicable). Both the Ethics Code for Senior Executive and Financial Officers and the Ethics
Code 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 under the Ethics Code for Senior Executive and Financial Officers 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 2020 Proxy Statement.
The information in our 2020 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, Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities. Also the information in our 2020 Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information in our 2020 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
The information in our 2020 Proxy Statement is incorporated herein by reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(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.
44
3. Exhibits.
EXHIBIT INDEX
Exhibit
No.
Exhibit Description
3.01**
Restated Certificate of Incorporation of TeleTech Holdings, Inc. filed
with the State of Delaware on August 1, 1996
Incorporated Herein by Reference
Exhibit
Form
Filing Date
S-1/A
3.01
7/5/1996
3.03**
Certificate of Amendment of Incorporation of TTEC Holdings, Inc.
(reflecting name change) with an effective date of January 1, 2018
3.04**
Amended and Restated Bylaws of TTEC Holdings, Inc. (reflecting
name change)
8-K
8-K
3.03
1/9/2018
3.04
1/9/2018
4.01*
Description of Securities of TTEC Holdings, Inc. registered pursuant
to Section 12 of the Securities Act of 1934
10.06** TeleTech Holdings, Inc. 2010 Equity Incentive Plan
DEF 14A
A
4/12/2010
10.25**
Form of TTEC Holdings, Inc. Performance Restricted Stock Unit
Agreement (Executive Committee Members) effective July 5, 2019
10-Q
10.25
8/7/2019
10.29**
Form of TeleTech Holdings, Inc. Restricted Stock Unit Award
Agreement (non-executive employees) effective July 1, 2014
10-K
10.29
3/9/2015
10.30**
Form of TeleTech Holdings, Inc. Restricted Stock Unit Award
Agreement (Directors and Executive Committee Members) effective
July 1, 2014
10-K
10.30
3/9/2015
10.32**
Independent Director Compensation Arrangements (effective May
2019)
10-K
10.32
3/6/2019
10.33**
Form of Indemnification Agreement with Directors and Executive
Officers
10-Q
10.33
11/5/2019
10.40**
Employment Agreement between Kenneth D. Tuchman and
TeleTech Holdings, Inc. dated October 15, 2001
10-K
10.68
4/1/2002
10.41**
Amendment to Employment Agreement between Kenneth D.
Tuchman and TeleTech Holdings, Inc. dated December 31, 2008
10-K
10.17
2/23/2009
10.60**
Amended and Restated Executive Employment Agreement
between Regina M. Paolillo and TTEC Services Corporation
effective May 1, 2018
10.82**
Amended and Restated Executive Employment Agreement
between Judi A. Hand and TTEC Services Corporation effective
May 1, 2018
10.83**
Amended and Restated Executive Employment Agreement
between Martin F. DeGhetto and TTEC Services Corporation
effective May 1, 2018
10.86**
Amended and Restated Executive Employment Agreement
between Margaret B. McLean and TTEC Services Corporation
effective December 12, 2018
10-Q
10.60
5/10/2018
10-Q
10.82
5/10/2018
10-Q
10.83
5/10/2018
10-K
10.86
3/6/2019
10.88**
Executive Employment Agreement between Jonathan Lerner and
TTEC Services Corporation effective December 9, 2019
8-K
10.88
12/11/2019
45
8-K
10.1
6/7/2013
8-K
10.90
2/16/2016
8-K
10.32
2/26/2019
10-Q
10.97
11/8/2017
10-Q
10.98
11/8/2017
8-K
10.99
10/29/2019
10.90**
10.91**
10.94**
10.97**
10.98**
10.99**
Amended and Restated Credit Agreement, dated as of June 3,
2013, among TeleTech Holdings, Inc., the foreign borrowers party
thereto, the lenders party thereto, Wells Fargo Bank, National
Association, as Administrative Agent, Swing Line Lender and
Fronting Lender, KeyBank National Association, Bank of America,
N.A., BBVA Compass, and HSBC Bank USA, National Association,
each as Documentation Agent and Wells Fargo Securities, LLC,
KeyBank National Association, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, BBVA Compass and HSBC Bank USA,
National Association, as Joint Lead Arrangers
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.
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
Stock Purchase Agreement of November 8, 2017 by and among
TeleTech Services Corporation, Motif, Inc. (“Motif”), Kaushal Mehta
and Parul Mehta (referred to collectively as the “Founders”), the
shareholders of Motif (other than Founders, referred to as “Sellers”),
and Outforce LLC (the Seller’s Agent)
Shareholders’ 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
and Ishan Mehta
Membership Interest Purchase Agreement dated October 26, 2019,
by and among Ortana Holdings, LLC, an Oregon limited liability
company, First Call Resolution, LLC, an Oregon limited liability
company, John Stadter, Matthew Achak, and TTEC Services
Corporation, a Colorado corporation
21.1* 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*
*
Written Statement of Chief Executive Officer Pursuant
Section 906 of
Section 1350)
to
the Sarbanes-Oxley Act of 2002 (18 U.S.C.
32.2*
Written Statement of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
46
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, 2019 and 2018, (ii) Consolidated Statements of Comprehensive Income (Loss)
for the years ended December 31, 2019, 2018 and 2017, (iii) Consolidated Statements of Stockholders’ Equity for the years ended
December 31, 2019, 2018 and 2017, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and
2017, and (v) Notes to Consolidated Financial Statements.
None
ITEM 16. FORM 10-K SUMMARY
47
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 4,
2020.
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 4, 2020, 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
48
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS OF TTEC HOLDINGS, INC.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2019,
2018 and 2017
Consolidated Statements of Stockholders’ Equity and Mezzanine Equity for the Years Ended
December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Page No.
F-2
F-4
F-5
F-6
F-7
F-8
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders 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
(the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of
comprehensive income (loss), of stockholders’ equity and mezzanine equity, and of cash flows for each of the
three years in the period ended December 31, 2019, including the related notes (collectively referred to as the
“consolidated financial statements”). We also have audited the Company's internal control over financial
reporting as of December 31, 2019, 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, 2019 and 2018, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2019 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, 2019, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019 and 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. Our responsibility is to express opinions on the Company’s 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
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded
First Call Resolution, LLC (“FCR”) from its assessment of internal control over financial reporting as of
December 31, 2019 because it was acquired by the Company in purchase business combinations during 2019.
We have also excluded FCR from our audit of internal control over financial reporting. FCR is a majority owned
subsidiary, whose total assets and total revenues excluded from management’s assessment and our audit of
internal control over financial reporting represent 12.6% and 1.2%, respectively, of the related consolidated
financial statement amounts as of and for the year ended December 31, 2019.
Definition and Limitations of Internal Control over Financial Reporting
A company’s 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. A company’s internal control over financial
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 disposition of the company’s assets that could have a material effect on the financial
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 4, 2020
We have served as the Company’s auditor since 2007.
F-3
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 and other tax receivables
Total current assets
Long-term assets
Property, plant and equipment, net
Operating lease assets
Goodwill
Deferred tax assets, net
Other intangible assets, net
Other long-term assets
Total long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY AND MEZZANINE EQUITY
Current liabilities
Accounts payable
Accrued employee compensation and benefits
Other accrued expenses
Income tax payable
Deferred revenue
Current operating lease liabilities
Other current liabilities
Total current liabilities
Long-term liabilities
Line of credit
Deferred tax liabilities, net
Non-current income tax payable
Deferred rent
Non-current operating lease liabilities
Other long-term liabilities
Total long-term liabilities
Total liabilities
Commitments and contingencies (Note 13)
Redeemable noncontrolling interest
Stockholders’ equity
December 31, December 31,
2019
2018
$
$
82,407
331,096
96,287
40,035
549,825
78,237
350,962
61,808
35,470
526,477
$
$
176,633
150,808
301,694
13,263
115,596
68,969
826,963
1,376,788
64,440
114,165
79,171
11,307
39,447
45,218
9,541
363,289
290,000
10,602
25,208
—
127,395
79,641
532,846
896,135
$
$
161,523
—
204,633
15,523
80,911
65,441
528,031
1,054,508
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
48,923
—
Preferred stock; $0.01 par value; 10,000,000 shares authorized; zero shares outstanding as of
December 31, 2019 and December 31, 2018
Common stock; $0.01 par value; 150,000,000 shares authorized; 46,488,938 and 46,194,717
shares outstanding as of December 31, 2019 and December 31, 2018, respectively
Additional paid-in capital
Treasury stock at cost: 35,563,315 and 35,857,536 shares as of December 31, 2019 and
December 31, 2018, respectively
Accumulated other comprehensive income (loss)
Retained earnings
Noncontrolling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity and mezzanine equity
—
—
465
356,409
462
353,932
(605,314)
(106,234)
773,218
13,186
431,730
1,376,788
(610,177)
(124,596)
725,551
7,677
352,849
1,054,508
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
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,
2018
$ 1,643,704 $ 1,509,171 $ 1,477,365
2019
2017
1,242,887
202,540
69,086
1,747
3,735
1,519,995
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
123,709
92,054
100,489
1,913
(19,113)
3,902
—
(13,298)
4,476
(28,674)
(11,618)
—
(35,816)
2,841
(13,734)
1,869
(2,578)
(11,602)
110,411
56,238
88,887
(25,677)
(16,483)
(78,075)
84,734
39,755
10,812
Net income attributable to noncontrolling interest
(7,570)
(3,938)
(3,556)
Net income attributable to TTEC stockholders
$
77,164 $
35,817 $
7,256
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)
$
84,734 $
6,816
16,990
(4,530)
(786)
18,490
103,224
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
Less: Comprehensive income attributable to noncontrolling interest
(7,698)
(3,624)
(3,933)
Comprehensive income attributable to TTEC stockholders
$
95,526 $
13,525 $
31,916
Weighted average shares outstanding
Basic
Diluted
Net income per share attributable to TTEC stockholders
Basic
Diluted
46,373
46,758
46,064
46,385
45,826
46,382
$
$
1.66 $
1.65 $
0.78 $
0.77 $
0.16
0.16
The accompanying notes are an integral part of these consolidated financial statements.
F-5
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity and Mezzanine Equity
(Amounts in thousands)
Stockholders’ Equity of the Company
Accumulated
Other
Preferred Stock
Shares Amount Shares
Common Stock
Amount
Stock
Treasury
Additional
Paid-in Capital
Comprehensive Retained
Earnings
Income (Loss)
Noncontrolling
interest
Total Equity
Mezzanine
Equity
— $ —
—
—
46,114 $
—
—
462 $ (603,262) $
348,739 $
(126,964) $ 735,939 $
—
7,256
6,981 $
3,556
361,895 $
10,812
—
—
—
—
—
(21,531)
—
(21,531)
459 $ (615,677) $
351,725 $
(102,304) $ 721,664 $
—
—
—
—
—
4,913
994
—
(18,322)
—
—
—
—
—
—
(10,313)
1,156
12,143
—
—
—
—
—
—
—
—
5,252
248
—
—
—
—
—
—
—
—
(9,898)
(40)
12,145
—
—
7,908
16,647
—
—
—
—
105
—
—
—
—
—
—
—
—
(3,645)
377
—
—
—
(291)
—
—
6,978 $
(3,645)
8,285
16,647
(5,397)
2,150
11,852
(18,328)
105
362,845 $
—
—
(6,584)
35,817
—
3,938
(6,584)
39,755
—
(25,346)
—
(25,346)
—
(30,068)
7,468
—
—
—
308
—
—
—
—
—
—
—
(2,925)
(314)
—
—
—
—
—
7,677 $
(2,925)
(30,382)
7,468
(4,643)
208
12,145
308
352,849 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
462 $ (610,177) $
353,932 $
(124,596) $ 725,551 $
—
—
—
—
—
—
—
—
294
—
—
46,489 $
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
—
—
—
—
4,863
—
—
465 $ (605,314) $
—
—
—
—
—
—
—
—
—
—
(758)
—
77,164
(28,739)
—
—
—
—
(10,337)
12,814
—
356,409 $
—
6,688
12,460
—
—
(786)
—
—
—
—
—
—
(106,234) $ 773,218 $
—
—
6,969
—
3,362
(758)
—
84,133
(28,739)
3,362
—
48,322
601
—
—
(4,950)
128
—
—
—
—
13,186 $
(4,950)
6,816
12,460
(5,471)
12,814
(786)
431,730 $
—
—
—
—
—
—
48,923
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
298
60
—
(610)
—
45,862 $
—
—
—
3
—
—
(6)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
318
15
—
—
46,195 $
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $ —
—
—
—
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
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
Other, net of tax
Balance as of December 31, 2018
Cumulative effect of adopting accounting
standard updates
Acquisition of noncontrolling interest
Net income
Dividends to shareholders ($0.62 per
common share)
Contribution from noncontrolling interest
Dividends distributed to noncontrolling
interest
Foreign currency translation adjustments
Derivatives valuation, net of tax
Vesting of restricted stock units
Equity-based compensation expense
Other, net of tax
Balance as of December 31, 2019
The accompanying notes are an integral part of these consolidated financial statements.
F-6
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
Year Ended December 31,
2018
2017
2019
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
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 $4,547, $4,530, and $5,997, 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
Capital contribution from noncontrolling interest
Proceeds from exercise of stock options
Tax payments related to issuance of restricted stock units
Payments of debt issuance costs
Purchase of treasury stock
Net cash (used in) provided by financing activities
$
84,734 $
39,755 $
10,812
69,086
1,002
1,083
2,339
1,711
189
—
3,735
—
—
—
(1,376)
(1,231)
12,814
(140)
29,608
27,413
97,268
(90,246)
237,989
382
(60,776)
—
—
(102,457)
(162,851)
69,179
3,015
992
10,217
3,679
111
—
1,452
15,632
(685)
1,616
(7,975)
(635)
12,145
1,524
29,985
(30,438)
11,713
7,063
168,345
34
(43,450)
—
(2,119)
(2,027)
(47,562)
64,507
1,678
745
51
458
3,694
(908)
5,322
—
—
—
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)
1,152,750
(1,144,750)
(11,855)
(5,902)
(28,739)
(4,950)
3,362
—
(5,471)
(1,819)
—
(47,374)
2,162,400
(2,224,400)
(5,989)
(1,349)
(25,346)
(2,925)
—
208
(4,643)
(35)
—
(102,079)
2,293,587
(2,166,887)
(6,041)
(1,409)
(21,531)
(3,645)
—
2,150
(5,397)
(918)
(18,328)
71,581
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(410)
(14,904)
3,427
Increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
27,354
78,237
$
105,591 $
3,800
74,437
78,237 $
19,173
55,264
74,437
Supplemental disclosures
Cash paid for interest
Cash paid for income taxes
Non-cash investing and financing activities
Acquisition of long-lived assets through finance leases
Acquisition of equipment through increase in accounts payable, net
$
$
$
$
13,108 $
36,316 $
17,456 $
39,984 $
11,727
18,813
3,731 $
881 $
15,018
339 $
9,836
97
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, Inc. (“TTEC”, “the Company”) is a leading global customer experience technology and services
company focused on the design, implementation and delivery of transformative customer experience outcomes
for many of the world’s most iconic and disruptive brands. Since inception in 1982, the Company has been
helping clients deliver frictionless customer experiences, strengthen their customer relationships, brand
recognition and loyalty through personalized interactions, significantly improve their Net Promoter Score
("NPS"), and lower their total cost to serve by enabling and delivering simplified, consistent and seamless
customer experience across channels and phases of the customer lifecycle. TTEC’s 49,500 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 United States,
Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, Hong Kong, India, Ireland, Mexico,
the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, the United Arab
Emirates, and the United Kingdom.
Through the first quarter of 2019, the Company reported its financial results of operations across four segments:
Customer Strategy Services (“CSS”), Customer Technology Services (‘CTS”), Customer Growth Services
(“CGS’) and Customer Management Services (“CMS”). Starting in the second quarter of 2019, the Company
changed its go-to-market strategy, how its clients evaluate and consume its services, how TTEC assesses its
operating performance and the leadership accountability for its segments. As a result, the Company now reports
its financial information based on two segments: TTEC Digital and TTEC Engage.
(cid:120) TTEC Digital designs, builds and delivers tech-enabled, insight-based and outcome-driven customer
experience solutions through our professional services and suite of technology offerings. These
solutions are critical to enabling and accelerating digital transformation for our clients. These services
were previously included in the CSS and CTS segments.
(cid:120) TTEC Engage provides the essential technologies, human resources, infrastructure and processes to
operate customer care, acquisition, and fraud detection and prevention services. These services were
previously included in the CGS and CMS segments.
TTEC Digital and TTEC Engage come together under our unified offering, Humanify™ Customer Experience
as a Service ("CXaas"), which drives measurable customer results for clients through the delivery of
personalized, omnichannel experiences. Our Humanify™ cloud platform provides a fully integrated ecosystem
of Customer Experience ("CX") offerings, including omnichannel, messaging, AI, ML, RPA, analytics,
journey
cybersecurity, customer
orchestration.
("CRM"), knowledge management and
relationship management
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 70% equity owned subsidiary First Call Resolution, LLC
(see Note 2). All intercompany balances and transactions have been eliminated in consolidation.
As of December 31, 2018, one business unit in the Digital 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).
Reclassifications
Current prior year amounts have been reclassified to conform to the current year presentation.
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. (“GAAP”) requires management to make estimates and assumptions in determining the
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 nine 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, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of cash and highly liquid short-term investments, primarily held in interest-
bearing investments which have original maturities of less than 90 days. Restricted cash includes cash whereby
the Company’s ability to use the funds at any time is contractually limited or is generally designed for specific
purposes arising out of certain contractual or other obligations.
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 of the Company’s cash is held outside
the U.S., the Company prefers to hold U.S. Dollars in addition to the 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.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the
Consolidated Balance Sheets that sum to the amounts reported in the Consolidated Statement of Cash Flows
(in thousands):
December 31, 2019 December 31, 2018 December 31, 2017
Cash and cash equivalents
Restricted cash included in "Prepaid and other current assets"
Restricted cash included in "Other noncurrent assets"
Total
$
$
82,407 $
23,172
12
105,591 $
78,237 $
—
—
78,237 $
74,437
—
—
74,437
Accounts Receivable
An allowance for doubtful accounts is determined based on the aging of the Company’s accounts receivable,
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.
F-9
Table of Contents
Derivatives
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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
Company’s exposure to interest 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.
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
of Stockholders’ Equity, to the extent they are deemed effective. Ineffectiveness is measured based on the
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
standards, the Company’s cash flow hedge contracts are deemed to be highly effective. Any realized gains or
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.
Gains and losses from the settlements of the Company’s net investment hedges remain 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
not, or if a reporting unit’s fair value has historically been closer to its carrying value, the Company will proceed
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
the amount by which a reporting unit’s carrying value exceeds its fair value.
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
that trade name. An impairment charge is recorded if the trade name’s carrying value exceeds its estimated fair
value.
Self Insurance Liabilities
The Company self-insures for certain levels of workers’ compensation and employee health 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 related to
workers’ compensation and employee health insurance are included in Accrued 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.
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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
from reductions in workforce are in accordance with the Company’s postemployment plans and/or statutory
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.
The Company records all asset retirement obligations at estimated fair value. The Company’s asset retirement
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 2019. 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.
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Tax Reform
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
In 2017, the United States enacted comprehensive tax reform legislation known as the Tax Cuts and Jobs Act
(the "2017 Tax Act") that, among other things, reduced the U.S. federal corporate income tax rate from 35% to
21% and implemented a territorial tax system, but imposed an alternative “base erosion and anti-abuse tax”
(“BEAT”), and an incremental tax on global intangible low taxed foreign income (“GILTI”) effective January 1,
2018. In addition, the law imposed 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 had
completed the accounting for the tax effects of the 2017 Tax Act and no material adjustment was recorded to
the 2017 estimate.
While the Company’s accounting for the recorded impact of the 2017 Tax Act is deemed to be complete, these
amounts are based on prevailing regulations and current information, and any additional guidance issued by
the Internal Revenue Service (“IRS”) or the results of an audit related to these items, could impact the
Company’s recorded amounts in future periods.
The Company’s selection of an accounting 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 2019 and 2018 annual financial statements.
Revenue Recognition
2019 and 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, “Revenue from Contracts with Customers” and
all related amendments (“ASC 606”). A contract’s transaction price is allocated to each distinct performance
obligation in recognizing revenue.
The Business Process Outsourcing (“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 Company’s agents (which are separately billable to 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
performance obligations, the Company allocates the contract’s transaction price to each performance obligation
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
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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 other client specific cost considerations. For these services, the point at which the
transfer of control occurs determines when revenue is recognized in a specific reporting period. Within our
Digital segment, where there are product sales, the attribution of revenue is recognized when the transfer of
control is completed and the products are delivered to the client’s location. 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
promised under the contract. The majority of the Company’s services are recognized over time using the input
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
input of consultants’ time. The progress is measured based on the hours expended 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 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
only and are not paid for contract renewals or contract modifications. Capitalized costs of obtaining contracts
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
are periodically reviewed for impairment. As of December 31, 2019, the Company has a deferred asset of $7.0
million related to 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
the Company’s service invoices. Payments to customers 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
the Company’s products or services, and therefore, are accounted for as a reduction of revenue when
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
Some of the Company’s service 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
services performed. Additionally, the Company’s standard payment terms are less than one year from transfer
of goods or services, as such, the election could apply. Given the foregoing, the Company has elected the
practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing
component. Pursuant to the Company’s election of the practical expedient 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
or performance of the undelivered items is considered probable and substantially within the Company’s 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. The Company allocates revenue to each of the
deliverables based on a selling price hierarchy of vendor specific objective evidence (“VSOE”), third-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
considering multiple factors including, but not limited to, pricing practices in different geographies, service
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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.
Lease Expense
The Company has negotiated certain rent holidays, landlord/tenant incentives and escalations in the base price
of lease payments over the initial term of its operating leases. The initial term could include the “build-out” period
of leases, where no lease payments are typically due. The Company recognizes rent holidays and rent
escalations on a straight-line basis to lease expense over the lease term. The landlord/tenant incentives are
recorded as a reduction to the right of use asset and depreciated on a straight line basis over the remaining
lease term once the assets are placed in service.
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
The assets and liabilities of the Company’s foreign subsidiaries, whose functional currency is not the
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)
within Stockholders’ Equity. Foreign currency transaction gains and losses are included in Other income
(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. The ASC 606 adjustments pertain to the timing of
revenue recognition associated with upfront training fees on certain contracts. 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 Company’s historic revenue accounting policy and principles.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2016-02, “Leases”, 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 FASB also issued ASU 2018-
10, Codification Improvements to Topic 842 Leases, and ASU 2018-11, Targeted Improvements to Topic 842
Leases, which allows the new lease standard to be applied as of the adoption date with a cumulative-effect
adjustment to the opening balance of retained earnings rather than a retroactive restatement of all periods
presented.
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company adopted Accounting Standards Codification (“ASC”) 842 as of January 1, 2019 using the effective
date as the date of initial application. The election allowed the Company to recognize the effects of the
implementation of ASC 842 as a cumulative effect adjustment to the opening balance of retained earnings in
the period of adoption. The Company also made certain assumptions in judgements when applying ASC 842.
The most significant judgements are as follows:
1. The Company elected the package of practical expedients that allowed 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.
2. The Company did not use hindsight during transition in determining the lease term and assessing
impairment of the entity’s right-of-use assets.
3. The Company elected to not separate non-lease components (which include common area
maintenance, taxes, and insurance) from the lease components for gross payment real estate leases.
For net payment real estate leases and IT equipment leases, the non-lease components are not
included in the lease right of use asset and lease liability and instead are reflected as an expense in
the period incurred.
4. The Company did not apply the recognition requirements in ASC 842 for leases with a term of 12
months or less for all asset classes.
The Company determines if an arrangement is a lease at contract inception. The key specifics in determining
if a leasing arrangement exists are as follows:
1. Does the arrangement convey the right to control the use of an identified asset in exchange for
consideration over a period of time.
2. Does the Company obtain the right to substantially all of the asset’s economic benefits.
The Company predominantly acts as a lessee and is required under the new standard to apply a dual approach,
classifying leases as either finance or operating leases based on whether or not the lease is effectively a
financed purchase. The determination of the lease type is largely similar to the process the Company utilized
under ASC 840. This classification determines whether lease expense is recognized based on an effective
interest method or on a straight-line basis over the term of the lease. ASC 842 also requires lessees to record
a right of use asset and a lease liability for all leases with a term of greater than one year regardless of
classification.
The adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of
$129.9 million and $148.3 million, respectively, as of January 1, 2019. The operating lease assets are lower
than the operating lease liabilities primarily due to deferred rent balances at the transition date being reclassed
into the right of use operating assets. On January 1, 2019 the Company recognized a reduction of $0.8 million,
net of tax, in its retained earnings as a result of recognizing previously impaired right of use assets recorded at
transition. The standard did not impact our consolidated net earnings or cash flows. See Note 15 for additional
lease disclosures.
Other Recently Issued Accounting Pronouncements
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements
to Accounting for Hedging Activities”. ASU 2017-12 amends and simplifies existing guidance for derivatives and
hedges including aligning accounting with companies’ risk management strategies and increasing disclosure
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 adopted the new guidance effective January 1, 2019 and the adoption did not have a material
impact on the consolidated statements or related disclosures.
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
In January 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (ASC 326), which
amends the methodology of how and when companies measure credit losses on financial instruments. The
objective of the ASU is to provide financial statement users more useful information regarding expected credit
losses on financial instruments and other commitments. In November 2018, the FASB issued ASU 2018-19,
“Codification Improvements to Topic 326, Financial Instruments – Credit Losses” which clarifies the scope of
guidance in ASU 2016-13. In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments – Credit
Losses (Topic 326), Targeted Transition Relief”, which amended the transition guidance for the new credit
losses standard (ASC 326). The ASU is effective for interim and annual periods beginning on or after December
15, 2019 with early adoption permitted, using a modified retrospective approach. The Company is finalizing the
evaluation of effects of adoption on its consolidated financial statements and related disclosures with particular
emphasis on accounts receivable as this will be the most impacted financial line item.
In December 2019, the FASB issues ASU 2019-12, “Simplifying the Accounting for Income Taxes” (ASU 740),
which is intended to simplify various aspects related to income tax accounting. The ASU is effective for interim
and annual periods beginning on or after December 15, 2020 with early adoption permitted. The Company is
currently evaluating the potential effects of adoption on its consolidated financial statements and related
disclosures.
(2)
ACQUISITIONS
First Call Resolution
On October 26, 2019, the Company acquired, through its subsidiary TTEC Services Corporation (“TSC”), 70%
of the outstanding membership interest in First Call Resolution, LLC (“FCR”), an Oregon limited liability
company (“the Transaction”). FCR is a customer care, social networking and business process solutions service
provider with approximately 2,000 employees based in the U.S. The business has been integrated into the
Engage segment and is being fully consolidated into the financial statements of TTEC.
Total cash paid at acquisition was $107.0 million, inclusive of $4.5 million related to cash balances, for the 70%
membership interest in FCR. The Transaction was subject to customary representations and warranties,
holdbacks, and a net working capital adjustment. The Transaction included a potential contingent payment with
a maximum value of $10.9 million based on FCR’s 2020 EBITDA performance. The Company finalized the
working capital adjustment for $0.4 million during the first quarter of 2020 which will be paid from FCR to TSC
in March 2020.
As of the closing of the Transaction, Ortana Holdings, LLC, an Oregon limited liability company (“Ortana”),
owned by the FCR founders, will continue to hold the remaining 30% membership interest in FCR (“Remaining
Interest”). Between January 31, and December 31, 2023, Ortana shall have an option to sell to TSC and TSC
shall have an option to purchase from Ortana the Remaining Interest at a purchase price equal to a multiple of
FCR’s adjusted trailing twelve month EBITDA for this particular acquisition and not to compete with the
Company for a period of four years after the disposition of the Remaining Interest. The noncontrolling interest
was recorded at fair value on the date of acquisition. The fair value was based on significant inputs not
observable in the market (Level 3 inputs) including forecasted earnings, discount rate of 19.6%, working capital
requirements and applicable tax rates. The noncontrolling interest was valued at $48.3 million and is shown as
Redeemable noncontrolling interest in the accompanying Consolidated Balance Sheets.
The fair value of the contingent consideration has been measured based on significant inputs not observable
in the market (Level 3 inputs). Significant assumptions include a discount rate of 16.7% expected forecast
volatility of 20%, an equivalent metric risk premium of 15.1%, risk-free rate of 1.6% and a credit spread of 1.8%.
Based on these, a $6.5 million expected future payment was calculated. As of the acquisition date, the present
value of the contingent consideration was $6.1 million. As of December 31, 2019, the value of the contingent
consideration was $6.1 million and was included in Other long-term liabilities in the accompanying Consolidated
Balance Sheets.
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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
Property and equipment
Other assets
Operating lease assets
Tradename
Customer relationships
Goodwill
Accounts payable
Operating lease liability - short-term
Accrued employee compensation and benefits
Accrued expenses
Operating lease liability - long-term
Total purchase price
Preliminary
Estimate of
Acquisition Date
Fair Value
$
$
$
$
$
5,225
10,659
357
6,006
224
5,127
8,600
38,540
96,993
171,731
388
1,160
4,049
72
3,967
9,636
162,095
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.
As part of the purchase, an additional net $0.7 million of cash was retained in the entity to pay for certain Ortana
liabilities that had been recorded prior to the acquisition.
The FCR customer relationships and tradename have been estimated based on the initial valuation and will be
amortized over an estimated useful life of 10 and 4 years, respectively. The goodwill recognized from the FCR
acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies
with Engage. 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 FCR are reported within the Engage segment
from the date of acquisition.
Strategic Communications Services
On April 30, 2018, the Company acquired all of the outstanding equity securities of Strategic Communications
Services, Ltd (“SCS”). SCS provides services as a system integrator for multichannel contact center platforms,
including CISCO. The Company offers
information,
communications and contact center services to leading brands throughout Europe. This business has been
integrated into the Company’s Digital segment.
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 contingent payments over the next three
years with a maximum value of £3.0 million ($4.1 million USD) based 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.
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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 and the second quarter of 2019, $0.3 million and $2.4 million in net benefits,
respectively, were recorded related to fair value adjustments of the estimated contingent consideration based
on revised actuals and estimates of EBITDA performance for 2018, 2019 and 2020. The benefits were included
in Other Income (Expense) in the Consolidated Statements of Comprehensive Income (Loss) in the applicable
quarters. As of December 31, 2019, the fair value of the contingent consideration was zero.
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
Customer relationships
Goodwill
Accounts payable
Accrued employee compensation and benefits
Accrued expenses
Deferred tax liabilities
Total purchase price
Acquisition Date
Fair Value
$
$
$
$
$
4,530
985
39
3,619
1,231
10,404
216
27
21
629
893
9,511
In the first quarter of 2019, the Company finalized its valuation of SCS for the acquisition date assets acquired
and liabilities assumed and determined that no material adjustments to any of the balances were required.
The SCS customer relationships are being amortized over a useful life of 10 years. The goodwill recognized
from the SCS acquisition is attributable, but not limited to, the acquired workforce and expected synergies with
Digital. 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 Digital 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
Hathaway Specialty Concierge, LLC (“BH”) related to a customer engagement center and the related customer
contracts. This acquisition is being accounted for as a business combination. These assets will be integrated
into the Company’s Engage segment.
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).
F-20
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Financial Impact of Acquired Businesses
The acquired businesses purchased in 2019 and 2018 noted above contributed revenues of $21.5 million and
$3.1 million, and a net income of $0.2 million and $0.4 million, inclusive of $1.4 million and $0.2 million of
acquired intangible amortization, to the Company for the years ended December 31, 2019 and 2018,
respectively.
The unaudited proforma financial results for the twelve months ended 2019 and 2018 combines the
consolidated results of the Company, FCR, SCS, and BH, assuming the acquisitions had been completed on
January 1, 2018. The reported revenue and net income of $1,509.2 million and $35.8 million would have been
$1,585.0 million and $48.2 million for the twelve months ended December 31, 2018, respectively, on an
unaudited proforma basis.
For 2019, the reported revenue and net income of $1,643.7 million and $77.7 million would have been $1,716.9
million and $88.3 million for the year ended December 31, 2019, 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.
Assets and Liabilities Held for Sale
During the third quarter of 2016, the Company determined that one business unit from the Engage segment
and one business unit from the Digital segment would be divested from the Company’s operations. These
business 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 Engage and Digital 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 Engage, 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 The Search Agency (“TSA”) for an
up-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 Digital, 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 Digital 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).
F-21
Table of Contents
Investments
CaféX
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
In 2015, the Company invested $9.0 million in CaféX Communications, Inc. (“CaféX”), a provider of omni-
channel web-based real time communication (WebRTC) solutions, through the purchase of a portion of its
outstanding Series B Preferred Stock. 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. During the first quarter of 2019, the
Company purchased a portion of the common shares of CaféX from another investor for $1. At December 31,
2019, the Company owns 17.8% 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 to CaféX which accrues
interest at a rate of 12% per year until maturity or conversion, which will be no later than June 30, 2020.
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, 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. 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).
Subsequent Event
On February 7, 2020, the Company acquired, through its subsidiary TTEC Digital, LLC (“TTEC Digital”), 70%
of the outstanding shares of capital stock of Serendebyte Inc., a Delaware corporation (“the Transaction”).
Serendebyte is an autonomous customer experience and intelligent automation solutions provider with 125
employees based in India, the United States, and Canada. The business has been integrated into the Digital
segment.
Total cash paid at acquisition was $9.0 million. The Transaction is subject to customary representations and
warranties, holdbacks, and a net working capital adjustment.
As of the closing of the Transaction, Serendebyte’s founder and certain members of its management will
continue to hold the remaining 30% interest in Serendebyte, Inc. (“Remaining Interest”). Between January 31,
2023 and December 31, 2023, Serendebyte’s founder and the management team shall have an option to sell
to TTEC Digital and TTEC Digital shall have an option to purchase the Remaining Interest at a purchase price
equal to a multiple of Serendebyte’s adjusted trailing twelve month EBITDA for this particular acquisition.
As a condition to closing, Serendebyte’s founder and certain members of the management team agreed to
continue their affiliation with Serendebyte at least through 2023, and the founder agreed not to compete with
TTEC for a period of four years after the disposition of the Remaining Interest.
(3)
SEGMENT INFORMATION
During the second quarter of 2019, the Company finalized changes to the Company’s operating strategy and
the way in which the Company assesses performance. In accordance with this change, the Company adjusted
certain reporting relationships between the Chief Operating Decision Maker (“CODM”) and other members of
management, updated the compensation metrics for senior management, and modified the internal financial
reporting provided to the CODM and his direct reports consistent with this revised management and
measurement structure. Accordingly, during the second quarter of 2019, the Company reevaluated the
definition of the operating segments, reportable segments, and reporting units which resulted in a change to
the reportable segments. Effective June 30, 2019, the segment information was reported consistent with these
updated reportable segments comprised of TTEC Digital and TTEC Engage.
F-22
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company reports the following two segments:
(cid:120) TTEC Digital designs, builds and delivers tech-enabled, insight-based and outcome-driven customer
experience solutions through our professional services and suite of technology offerings. These solutions
are critical to enabling and accelerating digital transformation for our clients.
o Technology Services: Our technology services design, integrate and operate highly scalable, digital
omnichannel technology solutions in the cloud, on premise, or hybrid, including journey orchestration,
automation and AI, knowledge management, and workforce productivity.
o Professional Services: Our management consulting practices deliver customer experience strategy,
analytics, process optimization, and learning and performance services.
(cid:120) TTEC Engage provides the essential technologies, human resources, infrastructure and processes to
operate customer care, acquisition, and fraud detection and prevention services.
o Customer Acquisition Services: Our customer growth and acquisition services optimize the buying
journeys for acquiring new customers by leveraging technology and analytics to deliver personal
experiences that increase the quantity and quality of leads and customers.
o Customer Care Services: Our customer care services provide turnkey contract center solutions,
including digital omnichannel technologies, associate recruiting and training, facilities, and operational
expertise to create exceptional customer experiences across all touchpoints.
o Fraud Prevention Services: Our digital fraud detection and prevention services proactively identify and
prevent fraud and provide community content moderation and compliance.
The Company allocates to each segment its portion of corporate operating expenses. All intercompany
transactions between the reported segments for the periods presented have been eliminated.
The following tables present certain financial data by segment (in thousands):
Year Ended December 31, 2019
TTEC Digital
TTEC Engage
Total
$
305,595 $
1,338,358
$ 1,643,953 $
Year Ended December 31, 2018
Gross
Revenue
Intersegment
Sales
Net
Revenue
Depreciation
&
Income
(Loss) from
Amortization Operations
38,927
11,216 $
57,870
84,782
69,086 $ 123,709
(249) $
—
305,346 $
1,338,358
(249) $ 1,643,704 $
TTEC Digital
TTEC Engage
Total
$
239,144 $
1,270,372
$ 1,509,516 $
Year Ended December 31, 2017
Gross
Revenue
Intersegment
Sales
Net
Revenue
Depreciation
&
Income
(Loss) from
Amortization Operations
33,054
59,000
92,054
60,365
69,179 $
8,814 $
(345) $
—
238,799 $
1,270,372
(345) $ 1,509,171 $
Gross
Revenue
Intersegment
Sales
Net
Revenue
Depreciation
&
Income
(Loss) from
Amortization Operations
14,480
55,152
86,009
64,507 $ 100,489
9,355 $
(337) $
206,907 $
(19)
1,270,458
(356) $ 1,477,365 $
TTEC Digital
TTEC Engage
Total
$
207,244 $
1,270,477
$ 1,477,721 $
F-23
Table of Contents
Capital Expenditures
TTEC Digital
TTEC Engage
Total
Total Assets
TTEC Digital
TTEC Engage
Total
Goodwill
TTEC Digital
TTEC Engage
Total
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the Year Ended December 31,
2018
2017
2019
$
$
14,397 $
46,379
60,776 $
4,833 $
38,617
43,450 $
3,018
48,940
51,958
2019
December 31,
2018
2017
238,081 $
1,138,707
1,376,788 $
222,977 $
831,531
1,054,508 $
168,106
910,630
1,078,736
2019
December 31,
2018
2017
66,275 $
235,419
301,694 $
66,158 $
138,475
204,633 $
65,791
143,936
209,727
$
$
$
$
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,
2018
2017
2019
Revenue
United States
Philippines
Latin America
Europe / Middle East / Africa
Asia Pacific / India
Canada
Total
Property, plant and equipment, gross
United States
Philippines
Latin America
Europe / Middle East / Africa
Asia Pacific / India
Canada
Total
Other long-term assets
United States
Philippines
Latin America
Europe / Middle East / Africa
Asia Pacific / India
Canada
Total
$ 1,002,524 $
370,395
100,117
70,613
55,554
44,501
820,597
353,122
130,082
62,597
36,715
74,252
$ 1,643,704 $ 1,509,171 $ 1,477,365
862,026 $
351,829
109,104
67,163
57,978
61,071
$
559,326 $
144,213
45,743
14,823
21,562
15,516
508,202 $
130,176
44,065
10,499
19,874
15,193
$
801,183 $
728,009 $
490,110
137,683
51,451
10,280
24,592
15,912
730,028
$
$
57,417 $
7,892
993
993
1,422
252
68,969 $
56,459 $
5,188
1,329
544
1,680
241
65,441 $
46,029
7,753
1,475
(750)
4,326
324
59,157
F-24
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(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,
2019
2018
$ 336,548 $ 356,554
(5,592)
$ 331,096 $ 350,962
(5,452)
Activity in the Company’s Allowance for doubtful accounts consists of the following (in 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,
2018
2017
2019
$ 5,592 $
1,711
(1,311)
(540)
3,679
(429)
1,421
921 $
$ 5,452 $ 5,592 $
662
458
(180)
(19)
921
On October 15, 2018, Sears Holding Corporation (“Sears”) announced that it had filed a petition for bankruptcy
protection in the United States Bankruptcy Court for the Southern District of New York. As of December 31,
2019 and 2018, TTEC had approximately $2.7 million in pre-petition accounts receivables outstanding related
to Sears; 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 post-petition services to Sears and has assessed these receivables
for collection risk and has determined that these will be collectible.
Significant Clients
The Company had no clients that contributed in excess of 10% of total revenue for the year ended
December 31, 2019. The Company has 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 Engage
segment. The revenue from this client as a percentage of total revenue was as follows:
2019
Year Ended December 31,
2018
2017
Healthcare client
8 %
10 %
7 %
Accounts receivable from this client was as follows (in thousands):
Year Ended December 31,
2018
2017
2019
Healthcare client
$
18,385
$
49,245
$
56,802
F-25
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company does have clients with aggregate revenue exceeding $100 million annually and the loss of one
or more of these significant clients could have a material adverse effect on the Company’s business, operating
results, or financial condition. To mitigate this risk, the Company has multiple contracts with these larger clients,
where each individual contract is for an amount below the $100 million aggregate. To limit the Company’s credit
risk 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, 2019.
Accounts Receivable Factoring Agreement
On March 5, 2019, the Company entered into an Uncommitted Receivables Purchase Agreement
(“Agreement”) with Bank of the West (“Bank”), whereby from time-to-time the Company may elect to sell, on a
revolving basis, U.S. accounts receivables of certain clients at a discount to the bank for cash on a limited
recourse basis. The maximum amount of receivables that the Company may sell to the Bank at any given time
shall not exceed $75 million. The sales of accounts receivable in accordance with the Agreement are reflected
as a reduction of Accounts Receivable, net on the Consolidated Balance sheets. The Company has retained
no interest in the sold receivables but retains all collection responsibilities on behalf of the Bank. The discount
on the accounts receivable sold will be recorded within Other expense, net in the Consolidated Statements of
Comprehensive Income (Loss). The cash proceeds from this Agreement are included in the change in accounts
receivable within the operating activities section of the Consolidated Statements of Cash Flows.
As of December 31, 2019, the Company had factored $52.0 million of accounts receivable; under the
Agreement discounts on these receivables were not material during the quarter. As of December 31, 2019, the
Company had collected $23.2 million of cash from customers which had not been remitted to the Bank. The
unremitted cash is Restricted Cash and is included within Prepaid and Other Current Assets with the
corresponding liability included in Accrued Expenses on the Consolidated Balance Sheet. The Company has
not recorded any servicing assets or liabilities as of December 31, 2019 as the fair value of the servicing
arrangement as well as the fees earned were not material to the 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,
2019
32,942 $
$
447,260
49,447
85,191
186,083
260
-
801,183
(624,550)
$
176,633 $
2018
33,286
411,653
45,351
74,538
161,960
90
1,131
728,009
(566,486)
161,523
Depreciation and amortization expense for property, plant and equipment was $57.5 million, $58.4 million and
$57.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Included in the computer equipment and software is internally developed software of $15.3 million net and $11.2
million net as of December 31, 2019 and 2018, respectively.
F-26
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(6)
GOODWILL
Goodwill consisted of the following (in thousands):
Effect of
December 31, Acquisitions /
Foreign
2018
Adjustments Impairments Currency
December 31,
2019
TTEC Digital
TTEC Engage
Total
$
$
66,158 $
138,475
204,633 $
— $
96,993
96,993 $
— $
—
— $
117 $
(49)
68 $
66,275
235,419
301,694
Effect of
December 31, Acquisitions /
Foreign
2017
Adjustments Impairments Currency
December 31,
2018
TTEC Digital
TTEC Engage
Total
Impairment
$
$
65,791 $
143,936
209,727 $
1,232 $
(125)
1,107 $
(865) $
— $
—
— $ (6,201) $
(5,336)
66,158
138,475
204,633
The Company has three 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.
For the annual goodwill impairment analysis, the Company elected to perform a Step 1 evaluation for all of its
reporting units, which includes comparing a reporting unit’s estimated fair value to its carrying value. The
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
Company’s weighted average cost of capital). Changes in these estimates and assumptions could materially
affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. As of
December 1, 2019, the date of the annual impairment testing, the Company concluded that for all three 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 (19.0)% to
10.0%;
(cid:120) EBITDA margin projections held relatively flat over the forecast periods ranging from zero to 21.0%;
(cid:120) Estimated income tax rates of 24.9% to 27.5%;
(cid:120) Estimated capital expenditures ranging from $0.9 million to $47.0 million; and
(cid:120) Discount rates ranging from 10% to 14% 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.
F-27
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
During the Company’s annual impairment testing as of December 1, 2019, the Company identified triggering
events that could lead to impairment of goodwill for the Digital Consulting reporting unit, including lower
revenues and profits than had been anticipated over the past two years. The carrying value of Digital Consulting
was $39.7 million at December 1, 2019, including approximately $24.3 million of goodwill. Based on the
Company’s assessment, the estimated fair value of the Digital Consulting reporting unit exceeded its carrying
value by approximately 26%, but based on additional sensitivity analysis, the amount of cushion could fall to
0% or below if the performance of the business does not improve as expected. The estimate of fair value was
based on generally accepted valuation techniques and information available at the date of the assessment,
which incorporated management’s assumptions about expected revenues and future cash flows and available
market information for comparable companies.
(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
$
Customer relationships, gross
Customer relationships - accumulated
amortization
Other intangible assets, gross
Other intangible assets - accumulated
amortization
Other intangible assets, net
$
December 31,
2018
123,527 $
$
Amortization Impairments Adjustments Currency
— $
38,540 $
— $
(311) $
and
Foreign
December 31,
2019
161,756
(43,223)
4,575
(11,055)
—
(423)
—
—
8,600
48
(13)
(54,653)
13,162
(3,968)
80,911 $
(541)
(11,596) $
(170)
(593) $
—
47,140 $
10
(266) $
(4,669)
115,596
Acquisitions Effect of
December 31,
2017
127,431 $
$
Amortization Impairments Adjustments Currency
— $
1,956 $ (5,860) $
— $
and
Foreign
December 31,
2018
123,527
(35,217)
4,784
(10,546)
—
—
—
1,203
—
1,337
(209)
(43,223)
4,575
(3,913)
93,085 $
(212)
(10,758) $
—
— $
—
157
3,159 $ (4,575) $
(3,968)
80,911
The acquisitions recorded during 2019 relate to the purchase of FCR (see Note 2 for further information). The
impairments recorded during 2019 relate to rogenSi intangible assets (see below)
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 Digital-PRG balance sheet (see below).
Digital - PRG
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
expense related to a 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-28
Table of Contents
Digital - rogenSi
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
In connection with reduced profitability of the rogenSi component of the TTEC Digital segment, an interim
impairment analysis was completed during the second quarter of 2019. The long-lived assets reviewed for
impairment consisted of the customer relationship intangible, intellectual property, and right of use assets. The
Company completed an asset group recoverability evaluation based on the current estimated cash flow based
on forecasted revenues and operating income using significant inputs not observable in the market (Level 3
inputs). Based on this calculation, the Company recorded an impairment expense of $2.0 million in the three
months ended June 30, 2019, which was included in Impairment losses in the Consolidated Statements of
Comprehensive Income (Loss). As part of the $2.0 million impairment $0.4 million was assigned to the customer
relationship intangible asset and $0.2 million to the IP intangible asset. At December 31, 2019, the Company
reviewed the evaluation completed as of June 30, 2019, and noted no material changes, thus no additional
impairment is required.
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 5.5 years.
Amortization expense related to intangible assets was $10.5 million, $10.8 million and $7.5 million for the years
ended December 31, 2019, 2018 and 2017, respectively.
Expected future amortization of other intangible assets as of December 31, 2019 is as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
(8)
DERIVATIVES
Cash Flow Hedges
$
14,942
14,686
14,066
13,204
11,122
47,576
$ 115,596
The Company enters into foreign exchange related derivatives. Foreign exchange derivatives entered into
consist of forward and option contracts to reduce the Company’s exposure to foreign currency exchange rate
fluctuations that are associated with forecasted revenue earned in foreign locations. Upon proper qualification,
these contracts are designated as cash flow hedges. It is the Company’s policy to only enter into derivative
contracts with investment grade counterparty financial institutions, and correspondingly, the fair value of
derivative assets considers, among other factors, the creditworthiness of these counterparties. Conversely, the
fair value of derivative liabilities reflects the Company’s creditworthiness. As of December 31, 2019, 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, 2019, 2018 and 2017 (in thousands and net of tax):
Year Ended December 31,
2018
2017
2019
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
$
$
(8,278) $
15,545
(3,085)
4,182 $
(15,746) $
20,278
(12,810)
(8,278) $
(32,393)
31,053
(14,406)
(15,746)
F-29
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company’s foreign exchange cash flow hedging instruments as of December 31, 2019 and 2018 are
summarized as follows (in thousands). All hedging instruments are forward contracts.
As of December 31, 2019
Philippine Peso
Mexican Peso
Local
Currency
Notional
Amount
7,715,000
1,299,500
U.S. Dollar
Notional
Amount
% Maturing
in the next
12 months
Contracts
Maturing
Through
147,654 (1)
61,529
209,183
58.2 % December 2022
46.9 % December 2022
$
As of December 31, 2018
Philippine Peso
Mexican Peso
Local
Currency
Notional
Amount
6,710,000
1,091,500
U.S. Dollar
Notional
Amount
130,957 (1)
57,708
188,665
$
(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, 2019 and December 31, 2018.
Fair Value Hedges
The Company enters into foreign exchange forward contracts to economically hedge against foreign currency
exchange gains and losses on certain receivables and payables of the Company’s foreign operations. Changes
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, 2019 and 2018, the total notional amount of the Company’s forward
contracts used as fair value hedges was $64.5 million and $70.4 million, respectively.
Derivative Valuation and Settlements
The Company’s derivatives as of December 31, 2019 and 2018 were as follows (in thousands):
Designation:
Derivative contract type:
Derivative classification:
December 31, 2019
Designated
as Hedging
Instruments
Foreign
Exchange
Cash Flow
Not Designated
as Hedging
Instruments
Foreign
Exchange
Fair Value
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
$
$
3,467 $
3,525
(1,223)
(95)
5,674 $
205
—
(107)
—
98
F-30
Table of Contents
Designation:
Derivative contract type:
Derivative classification:
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2018
Designated
as Hedging
Instruments
Foreign
Exchange
Cash Flow
Not Designated
as Hedging
Instruments
Foreign
Exchange
Fair Value
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
$
814 $
215
(8,861)
(3,484)
Total fair value of derivatives, net
$
(11,316) $
60
—
(104)
—
(44)
The effect of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the
years ended December 31, 2019 and 2018 were as follows (in thousands):
Designation:
Derivative contract type:
Derivative classification:
Year Ended December 31,
2019
2018
Designated as Hedging
Instruments
Foreign Exchange
Cash Flow
Amount of gain or (loss) recognized in Other comprehensive income (loss) -
effective portion, net of tax
$
(3,085) $
(12,810)
Amount and location of net gain or (loss) reclassified from Accumulated OCI
to income - effective portion:
Revenue
$
(4,228) $
(17,548)
Designation:
Derivative contract type:
Derivative classification:
Year Ended December 31,
2018
2019
Not Designated as Hedging Instruments
Foreign Exchange
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
$
—
1,773
$
—
(7,436)
F-31
Table of Contents
(9)
FAIR VALUE
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for
similar assets and liabilities in active markets, similar assets and liabilities in markets that
are not active or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the assets or liabilities. This includes certain pricing models, discounted
cash flow methodologies and similar techniques that use significant unobservable inputs.
The following presents information as of December 31, 2019 and 2018 of the Company’s assets and liabilities
required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine
their fair value.
Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate
fair value because of their short-term nature.
Investments – The Company measures investments, including cost and equity method investments, at fair value
on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. 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, 2019, the investment in CaféX Communications, Inc., which consists of the Company’s
total $15.6 million investment, was fully impaired to zero (see Note 2).
Debt - The Company’s debt consists primarily of the Company’s Credit Agreement, which permits floating-rate
borrowings based upon the current Prime Rate or LIBOR plus a credit spread as determined by the Company’s
leverage ratio calculation (as defined in the Credit Agreement). As of December 31, 2019 and 2018, the
Company had $290.0 million and $282.0 million, respectively, of borrowings outstanding under the Credit
Agreement. During 2019 and 2018, borrowings accrued interest at an average rate of 3.4% and 3.1% 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, 2019, credit risk did not materially change the fair value
of the Company’s derivative contracts.
F-32
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities)
as of December 31, 2019 and 2018 (in thousands):
As of December 31, 2019
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
5,674
98
5,772
— $
—
— $
Cash flow hedges
Fair value hedges
Total net derivative asset (liability)
$
$
— $
—
— $
5,674 $
98
5,772 $
As of December 31, 2018
Fair Value Measurements Using
Quoted Prices in Significant
Cash flow hedges
Fair value hedges
Total net derivative asset (liability)
$
$
— $
—
— $
(11,316) $
(44)
(11,360) $
At Fair Value
(11,316)
(44)
(11,360)
— $
—
— $
Active Markets
for Identical
Assets
(Level 1)
Other
Significant
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
The following is a summary of the Company’s fair value measurements as of December 31, 2019 and 2018 (in
thousands):
As of December 31, 2019
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
— $
— $
— $
—
—
— $
5,772 $
5,772 $
—
—
(20,370) $
—
—
(20,370) $
—
—
(6,134)
(6,134)
$
$
$
$
F-33
Table of Contents
As of December 31, 2018
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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
$
$
$
$
— $
— $
— $
—
—
— $
— $
— $
—
—
(14,836) $
(11,360)
—
(26,196) $
—
—
(2,363)
(2,363)
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 — The Company recorded contingent consideration related to the acquisitions of
SCS and FCR. This contingent payable was recognized at fair value using either a discounted cash flow
approach or an option valuation model and a discount rate of 4.7% and 16.7%, respectively. The measurements
were based on significant inputs not observable in the market. The Company records interest expense each
period using the effective interest method until the future value of these contingent payables reaches 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).
During the fourth quarter of 2018 and the second quarter of 2019, the Company recorded fair value adjustments
to the contingent consideration associated with the SCS acquisition based on decreased estimates of EBITDA
which caused the estimated payable to be zero for both future payments. Accordingly, a $0.3 million and a $2.5
million decrease to the payable were recorded as of December 31, 2018 and June 30, 2019, respectively, and
were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income
(Loss). As of December 31, 2019, the expected future EBITDA is still below the target, thus the contingent
consideration remains at zero.
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.
A rollforward of the activity in the Company’s fair value of the contingent consideration is as follows
(in thousands):
December 31,
2018
Acquisitions Payments Adjustments
Imputed
Interest /
December 31,
2019
Welltok
SCS
FCR
Total
$
$
— $
2,363
—
2,363 $
— $
—
6,134
6,134 $
— $
—
—
— $
— $
(2,363)
—
(2,363) $
—
—
6,134
6,134
F-34
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31,
2017
Acquisitions Payments Adjustments
Imputed
Interest /
December 31,
2018
Welltok
SCS
Total
$
$
399 $
—
399 $
— $
2,731
2,731 $
(399) $
—
(399) $
— $
(368)
(368) $
—
2,363
2,363
(10)
INCOME TAXES
The sources of pre-tax operating income are as follows (in thousands):
Domestic
Foreign
Total
Year Ended December 31,
$
2019
2018
39,864 $ (13,926) $
70,547
70,164
$ 110,411 $ 56,238 $
2017
10,909
77,978
88,887
In 2017, the United States 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% and implements a territorial tax system, but imposes an alternative “base erosion and anti-abuse tax”
(“BEAT”), and an incremental tax on global intangible low taxed foreign income (“GILTI”) effective January 1,
2018. In addition, the law imposed 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 had
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.
While the Company’s 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 the Internal Revenue Service (“IRS”) or the results of an audit related to these items, could impact
the Company’s recorded amounts in future periods.
The Company’s selection of an accounting 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 2019 and 2018 annual 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 the Company’s 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.
F-35
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The components of the Company’s Provision for (benefit from) income taxes are as follows (in thousands):
Year Ended December 31,
2019
2018
2017
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
$
5,289 $
2,826
18,938
27,053
2,771 $ 48,556
99
2,754
12,643
18,933
61,298
24,458
2,515
118
(4,009)
(1,376)
14,441
707
1,629
16,777
$ 25,677 $ 16,483 $ 78,075
(943)
(138)
(6,894)
(7,975)
The following reconciles the Company’s effective tax rate to the federal statutory rate (in thousands):
2018
Year Ended December 31,
2017
2019
$ 23,186 $ 11,810 $ 31,110
460
(924)
(14,417)
323
1,098
647
1,607
142
(824)
(1,030)
(4,798)
1,101
207
3,143
(865)
—
61,569
(474)
$ 25,677 $ 16,483 $ 78,075
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
—
1,029
3,144
9,832
(3,356)
600
(2,651)
668
661
36
55
(1,294)
(1,681)
(2,848)
(1,176)
2,172
(1,643)
978
—
(1,006)
23.30%
29.30%
87.80%
Income tax per U.S. federal statutory rate (21%, 21%, 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
Effective tax rate percentage
F-36
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company’s deferred income tax assets and liabilities are summarized as follows (in thousands):
Deferred tax assets, gross
Accrued workers compensation, deferred compensation and employee benefits
Allowance for doubtful accounts, insurance and other accruals
Amortization of deferred lease 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
Partnership Investment
Other
Total deferred tax assets, gross
Valuation allowances
Total deferred tax assets, net
Deferred tax liabilities
Depreciation and amortization
Unrealized gain on derivatives
Contract acquisition costs
Intangible assets
Operating lease assets
Other
Total deferred tax liabilities
Net deferred tax assets
Year Ended December 31,
2019
2018
$
7,999
3,393
25,757
19,222
1,442
9,047
1,263
1,421
4,142
2,435
1,322
77,443
(17,051)
60,392
(6,095)
(1,491)
(5,740)
(22,585)
(21,413)
(407)
(57,731)
2,661
$
$
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
(15,547)
—
(8,519)
(15,890)
—
(187)
(40,143)
5,152
$
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, 2019 the Company had approximately $3.9 million of net deferred tax liabilities in the
U.S. and $6.6 million of net deferred tax assets related to certain international locations whose recoverability is
dependent upon their future profitability. As of December 31, 2019 the deferred tax valuation allowance was
$17.1 million and related primarily to tax losses in foreign jurisdictions which do not meet the “more-likely-than-
not” standard under current accounting guidance.
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 2019, 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 $4.6 million increase related to capital loss carry forwards
and other credit carry forwards not expected to be utilized in Brazil and Canada, a $2.7 million increase in
valuation allowance in the United Kingdom, Ireland, Canada, Luxembourg, Turkey, the United States and
Australia for deferred tax assets that do not meet the “more-likely-than-not” standard, and a $1.1 million release
of valuation allowance in Argentina, New Zealand, and the Netherlands and various other jurisdictions related
to the utilization or write-off of deferred tax assets.
Activity in the Company’s valuation allowance accounts consists of the following (in thousands):
Year Ended December 31,
Beginning balance
Additions of deferred income tax expense
Reductions of deferred income tax expense
Ending balance
2019
$ 10,867 $
7,373
(1,189)
2018
2017
9,526 $
2,913
(1,572)
9,949
2,044
(2,467)
9,526
$ 17,051 $ 10,867 $
F-37
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
As of December 31, 2019, 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):
2020
2021
2022
2023
After 2023
No expiration
Total
$
1,151
5
3
1,105
9,298
7,660
$ 19,222
The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the governments
of the Philippines and Costa Rica. Generally, a Tax Holiday is an agreement between the Company and a
foreign government under which the Company receives certain tax benefits in that country, such as exemption
from taxation on profits derived from export-related activities. In the Philippines, the Company has been granted
multiple agreements, with an initial period of four years and additional periods for varying years, expiring at
various times between 2020 and 2022. The aggregate benefit to income tax expense for the years ended
December 31, 2019, 2018 and 2017 was approximately $8.4 million, $8.2 million and $11.9 million,
respectively, which had a favorable impact on diluted net income per share of $0.18, $0.18 and $0.26,
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, 2019, 2018 and 2017 was approximately
$2.1 million, $1.4 million and $1.8 million, respectively.
The Company had a reserve for uncertain tax benefits, on a net basis, of $4.8 million and $4.8 million for the
years ended December 31, 2019 and 2018, respectively. The liability for uncertain tax positions was unchanged
during 2019.
The tabular reconciliation of the reserve for uncertain tax benefits on a gross basis without interest for the three
years ended December 31, 2019 is presented below (in thousands):
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
Additions for current year tax positions
Reductions in prior year tax positions
Balance as of December 31, 2019
$
$
2,382
916
—
3,298
3,600
(2,114)
4,784
—
—
4,784
At December 31, 2019, the amount of uncertain tax benefits including interest, that, if recognized, would reduce
tax expense was $6.8 million. Within the next 12 months, it is expected that the amount of unrecognized tax
benefits may be reduced by $1.4 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.
During the fourth quarter of 2018, the Company recorded liabilities of $3.6 million related to new uncertain tax
positions.
F-38
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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, 2019 and subject to examination by the respective tax authorities:
Tax Jurisdiction
United States
Australia
Brazil
Canada
Mexico
Philippines
Tax Year Ended
2016 to present
2015 to present
2014 to present
2011 to present
2014 to present
2016 to present
The Company’s U.S. income tax returns filed for the tax years ending December 31, 2016 to present, remain
open tax years. The Company has been notified of the intent to audit, or is currently under audit of, income
taxes for the United States for tax year 2017, Canada for tax years 2009 and 2010, and the state of New York
for tax years 2015 through 2017. Although the outcome of examinations by taxing authorities are always
uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on
the Company’s Consolidated Financial Statements.
(11)
RESTRUCTURING CHARGES, INTEGRATION CHARGES AND IMPAIRMENT LOSSES
Restructuring Charges
During the years ended December 31, 2019, 2018 and 2017, the Company continued restructuring activities
primarily associated with reductions in the Company’s capacity, workforce and related management in both
segments to better align the capacity and workforce with current business needs.
During 2017, several restructuring activities were completed related to an acquisition 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 in the Engage segment and a net
$2.9 million was 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.
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, 2019, 2018 and 2017, respectively, is as follows (in thousands):
Reduction in force
TTEC Digital
TTEC Engage
Total
Year Ended December 31,
2019
2018
2017
$
$
141
894
1,035
$
$
133
694
827
$
$
149
1,012
1,161
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Table of Contents
Facility exit and other charges
TTEC Digital
TTEC Engage
Total
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Year Ended December 31,
2019
2018
2017
$
$
41
671
712
$
$
—
5,304
5,304
$
$
169
2,050
2,219
A rollforward of the activity in the Company’s restructuring accruals for the years ended December 31, 2019
and 2018, respectively, is as follows (in thousands):
Balance as of December 31, 2017
Expense
Payments
Changes due to foreign currency
Changes in estimates
Balance as of December 31, 2018
Expense
Payments
Changes due to foreign currency
Changes in estimates
Reclassifications due to ASU 842 implementation
Balance as of December 31, 2019
Reduction
in Force
Facility Exit and
Other Charges
Total
$
$
694
1,021
(937)
(169)
(193)
416
1,039
(1,145)
(55)
(4)
—
251
$
$
1,409
5,303
(3,480)
(6)
—
3,226
712
(962)
15
—
(2,917)
74
$
$
2,103
6,324
(4,417)
(175)
(193)
3,642
1,751
(2,107)
(40)
(4)
(2,917)
325
The remaining restructuring accruals are expected to be paid or extinguished during 2020 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.
Impairment Losses
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
undiscounted future cash flows of its asset group are estimated to be less than the asset group’s carrying value.
The amount of impairment recognized is the difference between the carrying value of the asset group and its
fair value. To determine fair value, the Company used Level 3 inputs in its discounted cash flows analysis.
Assumptions included the amount and timing of estimated future cash flows and assumed discount rates.
During 2019, 2018 and 2017, the Company recognized impairment losses related to leasehold improvement
assets of zero, $1.1 million and zero, respectively, in its Engage segment.
F-40
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(12)
INDEBTEDNESS
Credit Facility
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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
the “Credit 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 (the “Credit Facility”). The amended
Credit Agreement provides for a secured revolving Credit Facility that matures on February 14, 2024.
Other than the extension of the Credit Facility’s maturity 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
previously disclosed as part of the Company’s Annual Report on Form 10-K for the period ended December
31, 2015 (“2016 Credit Facility”).
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 a rate per annum as
determined by reference to the Company’s net leverage ratio. The Credit Agreement contains customary
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.
Base rate loans bear interest at a rate equal to the greatest of (i) Wells Fargo’s prime rate, (ii) one half of 1% in
excess of the federal funds effective rate, and (iii) 1.25% in excess of the one month London Interbank Offered
Rate (“LIBOR”); plus in each case a margin of 0% to 0.75% based on the Company’s net leverage ratio.
Eurodollar loans bear interest at LIBOR plus a margin of 1.0% to 1.75% based on the Company’s 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.
The Company primarily utilizes its Credit Agreement to fund working capital, general operations, dividends, and
other strategic activities, such as the acquisitions described in Note 2. As of December 31, 2019, and 2018, the
Company had borrowings of $290.0 million and $282.0 million, respectively, under its Credit Agreement, and
its average daily utilization was $331.8 million and $514.7 million for the years ended December 31, 2019 and
2018, respectively. Based on the current level of availability based on the covenant calculations, the Company’s
remaining borrowing capacity was approximately $530.0 million as of December 31, 2019. As of December 31,
2019, the Company was in compliance with all covenants and conditions under its Credit Agreement.
(13)
COMMITMENTS AND CONTINGENCIES
Letters of Credit
As of December 31, 2019, outstanding letters of credit under the Credit Agreement totaled $3.1 million and
primarily guaranteed workers’ compensation and other insurance related obligations. As of December 31, 2019,
letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $0.5
million.
Guarantees
Indebtedness under the Credit Agreement is guaranteed by certain of the Company’s present and future
domestic subsidiaries.
F-41
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Legal Proceedings
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
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
in its financial statements, will not have a material adverse effect on the Company’s financial position, cash
flows or results of operations.
(14)
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 (included in Other long-term liabilities)
Total Deferred Revenue
2018
2019
$ 39,447 $ 44,926
33,247
$ 62,589 $ 78,173
23,142
Deferred costs in the accompanying Consolidated Balance Sheets consist of the following (in thousands):
December 31,
Deferred Costs - Current (included in Prepaids and other current assets)
Deferred Costs - Long-term (included in Other long-term assets)
Total Deferred Costs
2018
2019
$ 26,092 $ 23,539
34,042
$ 51,528 $ 57,581
25,436
Activity in the Company’s Deferred revenue accounts consists of the following (in thousands):
Balance as of December 31, 2018
Additions
Amortization
Balance as of December 31, 2019
(15)
LEASES
$
78,173
139,021
(154,605)
62,589
$
The Company adopted ASU 842, Leases, as of January 1, 2019 using the effective date as the date of initial
application. As a result, prior year financials were not recast under the new standard and therefore, those
amounts are not presented.
Operating leases are included in our Consolidated Balance Sheet as Operating lease assets, Current operating
lease liabilities and Non-current operating lease liabilities. Finance leases are included in Property, plant and
equipment, Other current liabilities and Other long-term liabilities in our Consolidated Balance Sheet. The
Company primarily leases real estate and equipment under various arrangements that provide the Company
the right-of-use for the underlying asset that require lease payments over the lease term. The Company
determines the value of each lease by computing the present value of each lease payment using the interest
rate implicit in the lease, if available; otherwise the Company estimates its incremental borrowing rate over the
lease term. The Company determines its incremental borrowing rate based on its estimated credit risk with
adjustments for each individual leases’ geographical risk and lease term. Operating lease assets also include
prepaid rent, initial direct costs less any tenant improvements.
F-42
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The Company’s real estate portfolio typically includes one or more options to renew, with renewal terms that
generally can extend the lease term from one to 10 years. The exercise of these lease renewal options is at the
Company’s discretion and is included in the lease term only if the Company is reasonably certain to exercise.
The Company also has service arrangements whereby it controls specific space provided by a third-party
service provider. These arrangements meet the definition of a lease and are accounted for under ASC 842.
Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included
in the Consolidated Statements of Comprehensive Income (Loss). The Company’s lease agreements do not
contain any material residual value guarantees or restrictive guarantees.
The components of lease expense for the year ended December 31, 2019 are as follows (in thousands):
Description
Amortization of ROU assets - finance leases
Interest on lease liabilities - finance leases
Operating lease cost (cost resulting from
lease payments)
Operating lease cost (cost resulting from
lease payments)
Operating lease cost (cost resulting from
lease payments)
Short-term lease cost
Less: Sublease income
Less: Sublease income
Total lease cost
Location in Statements of
Comprehensive Income (Loss)
Depreciation and amortization
Interest expense
Year Ended
December 31, 2019
$
7,157
141
Cost of services
Selling, general and administrative
Other income (expense), net
Cost of services
Selling, general and administrative
Other income (expense), net
47,269
3,731
968
4,338
(445)
(1,984)
61,175
$
Other supplementary information for the year ended December 31, 2019 are as follows (dollar values in
thousands):
Finance lease - operating cash flows
Finance lease - financing cash flows
Operating lease - operating cash flows (fixed payments)
New ROU assets - operating leases
Modified ROU assets - operating leases
New ROU assets - finance leases
Weighted average remaining lease term - finance leases
Weighted average remaining lease term - operating leases
Weighted average discount rate - finance leases
Weighted average discount rate - operating leases
Year Ended
December 31, 2019
$
$
$
$
$
$
103
10,251
51,898
15,494
46,543
6,133
December 31, 2019
2.91 yrs
4.27 yrs
1.43%
7.22%
F-43
Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Operating and financing lease right-of-use assets and lease liabilities within our Consolidated Balance Sheet
as of December 31, 2019 and January 1, 2019 (date of adoption of ASU 842) are as follows (in thousands):
Description
Location in Balance Sheet
January 1, 2019
December 31, 2019 (date of adoption)
Assets
Operating lease assets
Finance lease assets
Total leased assets
Liabilities
Current
Operating
Finance
Non-current
Operating
Finance
Total lease liabilities
Operating lease assets
Property, plant and equipment, net
Current operating lease liabilities
Other current liabilities
Non-current operating lease liabilities
Other long-term liabilities
$
$
$
$
150,808 $
18,016
168,824 $
129,894
18,261
148,155
45,218 $
7,470
127,395
8,896
188,979 $
35,535
8,770
112,754
10,765
167,824
The future minimum operating lease and finance lease payments required under non-cancelable leases as of
December 31, 2019 are as follows (in thousands):
Year 1
Year 2
Year 3
Year 4
Year 5
Thereafter
Total minimum lease payments
Less imputed interest
Total lease liability
Income
Leases
Operating Sub-lease Finance
Leases
$ 54,903 $ (2,976) $ 7,594
5,587
2,139
1,109
331
—
$ 203,737 $ (4,143) $ 16,760
(394)
$ 16,366
47,892
43,590
28,124
14,494
14,734
(621)
(345)
(201)
—
—
(31,124)
$ 172,613
The future minimum rental and capital lease payments under non-cancelable leases as of December 31, 2018
are as follows (in thousands):
Year 1
Year 2
Year 3
Year 4
Year 5
Thereafter
Total minimum lease payments
Less imputed interest
Total lease liability
Income
Leases
Operating Sub-lease Capital
Leases
$ 47,379 $ (2,624) $ 8,770
5,548
3,798
1,005
414
—
$ 183,274 $ (5,531) $ 19,535
—
$ 19,535
(2,631)
(276)
—
—
—
36,045
30,678
26,584
17,226
25,362
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. In 2019, the Company sub-leased one of its office spaces for the remaining term of the original
lease. The sub-lease began on March 1, 2019 and ends July 31, 2023.
F-44
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Asset Retirement Obligations
The Company records asset retirement obligations (“ARO”) for several of its customer engagement center
leases. Capitalized costs related to ARO’s are included in Other long-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
$
2,482 $
788 $
26 $
(292) $
3,004
Balance at
December 31, Additions and
2018
Modifications Accretion Settlements
Balance at
December 31, Additions and
2017
Modifications Accretion Settlements
Balance at
December 31,
2019
Balance at
December 31,
2018
ARO liability total
$
1,938 $
1,153 $
14 $
(623) $
2,482
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
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) OTHER LONG-TERM LIABILITIES
The components of Other long-term liabilities as of December 31, 2019 and 2018 are as follows (in
thousands):
Deferred revenue
Deferred compensation plan
Payable for remaining portion of acquisition
Other
Total
December 31, 2019 December 31, 2018
$
$
23,142 $
20,370
—
36,129
79,641 $
33,247
14,836
37,756
40,693
126,532
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Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(17)
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, 2016
$
(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
—
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)
—
(30,068)
20,278
(
12,810)
7,468
712
(9,078)
(404)
308
(13,214)
(22,292)
Accumulated other comprehensive income (loss) at
December 31, 2018
Accumulated other comprehensive income (loss) at
December 31, 2018
$
(114,168) $
(8,278) $
(2,150) $ (124,596)
$
(114,168) $
(8,278) $
(2,150) $ (124,596)
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income (loss)
Net current period other comprehensive income (loss)
6,688
—
6,688
15,545
(588)
21,645
(3,085)
12,460
(198)
(786)
(3,283)
18,362
Accumulated other comprehensive income (loss) at
December 31, 2019
$
(107,480) $
4,182 $
(2,936) $ (106,234)
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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
2019
2018
2017
(Loss) Classification
Statement of
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
(18)
NET INCOME PER SHARE
$ (4,228) $ (17,548) $ (22,792) Revenue
—
4,738
(115)
Interest expense
8,501 Provision for income taxes
—
1,143
$ (3,085) $ (12,810) $ (14,406) Net income (loss)
$
$
(221) $
23
(198) $
(446) $
42
(404) $
(522) Cost of services
52 Provision for income taxes
(470) Net income (loss)
The following table sets forth the computation of basic and diluted shares for the periods indicated
(in thousands):
Year Ended December 31,
2019
2018
2017
Shares used in basic earnings per share calculation
46,373
46,064
45,826
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
—
349
36
385
46,758
6
314
1
321
46,385
10
536
10
556
46,382
For the years ended December 31, 2019, 2018 and 2017, there were no 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, 2019, 2018 and 2017, restricted stock units of
28 thousand, 212 thousand, and 21 thousand, respectively, were outstanding but not included in the
computation of diluted net income per share because the effect would have been anti-dilutive.
(19)
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
a matching contribution. The Company may from time to time, at its discretion, make a “matching contribution”
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 $6.7 million, $5.2 million and $5.7 million
for the years ended December 31, 2019, 2018 and 2017, respectively.
F-47
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. 2010 Equity Incentive Plan, renamed TTEC
Holdings, Inc. 2010 Incentive Plan in 2018 (the “2010 Plan”). 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 grants to members of the Company’s Board of
Directors. Options granted to employees generally vest over 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, 2019, a total of 4.0 million shares were authorized and 1.1 million shares were available for
issuance under the 2010 Plan. The 2010 Plan expires in 2020 and additional shares cannot be issued under
the plan starting March 30, 2020.
In February 2020, the Company adopted the TTEC Holdings, Inc., 2020 Equity Incentive Plan (the “2020 Plan”),
which permits awards of incentive stock options, non-qualified stock options, stock appreciation rights, shares
of restricted common stock, performance stock units and restricted stock units. The 2020 Plan will also provide
for annual equity-based compensation grants to members of the Company’s Board of Directors. Options
granted to employees under the 2020 Plan generally vest over three 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 part of the
2020 Annual Stockholder Meeting, the Company plans to seek shareholder approval for the 2020 Plan,
including 4.0 million shares of common stock to be reserved for issuance under the Plan.
For the years ended December 31, 2019, 2018, and 2017, the Company recorded total equity-based
compensation expense under all equity-based arrangements (stock options and RSUs) of $12.8 million,
$12.1 million and $11.9 million, respectively. For 2019, 2018 and 2017, of the total compensation expense, $4.7
million, $4.7 million and $4.1 million was recognized in Cost of services and $8.1 million, $7.4 million and $7.8
million, was recognized in Selling, general and administrative in the Consolidated Statements of
Comprehensive Income (Loss), respectively. For the years ended December 31, 2019, 2018, and 2017, the
Company recognized a tax benefit under all equity-based arrangements (stock options and RSUs) of
$4.2 million, $3.7 million and $6.8 million, respectively.
Restricted Stock Units
2017, 2018 and 2019 RSU Awards: The Company granted RSUs in 2017, 2018 and 2019 to new and existing
employees that vest over four or five years. The Company also granted RSUs in 2017, 2018 and 2019 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: Settlement of the RSUs shall be made in shares of the Company’s common stock by
delivery of one share of common stock for each RSU then being settled. The Company calculates the fair value
for RSUs based on the closing price of the Company’s stock on the date of grant and records compensation
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, 2019, 2018, and 2017 was $40.10, $35.15, and $29.56, respectively. The total
intrinsic value and fair value of RSUs vested during the years ended December 31, 2019, 2018, and 2017 was
$12.5 million, $12.5 million, and $10.6 million, respectively.
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Table of Contents
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Performance Based Restricted Stock Unit Grants
During the quarter ended June 30, 2019, the Company awarded performance restricted stock units (“PRSUs”)
that are subject to service and performance vesting conditions. If defined minimum targets are met, the annual
value of the PRSUs issued will be between $0.4 million and $1.4 million and vest immediately. If the defined
minimum targets are not met, then no shares will be issued. The award amounts are based on the Company’s
annual adjusted operating income for the fiscal years 2019, 2020 and 2021. Each fiscal year’s adjusted
operating income will determine the award amount. The Company recognized compensation expense related
to PRSUs of $1.4 million for the year ended December 31, 2019.
A summary of the status of the Company’s non-vested RSUs and performance-based RSUs and activity for the
year ended December 31, 2019 is as follows:
Unvested as of December 31, 2018
Granted
Vested
Cancellations/expirations
Unvested as of December 31, 2019
Weighted
Average
Grant Date
Fair Value
Shares
1,141,438 $
150,070 $
(425,456) $
(97,580) $
768,472 $
30.78
40.10
29.41
32.72
33.11
All RSUs vested during the year ended December 31, 2019 were issued out of treasury stock. As of
December 31, 2019, there was approximately $16.5 million of total unrecognized compensation expense and
approximately $30.4 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 1.3 years
using the straight-line method.
Stock Options
There were no stock options granted during 2019, 2018 or 2017. The total intrinsic value of options exercised
during the years ended December 31, 2019, 2018 and 2017 was zero, $156 thousand and $194 thousand,
respectively. The total fair value of stock options vested during the years ended December 31, 2019, 2018 and
2017 was zero, respectively.
Cash received from option exercises under the Plans for the years ended December 31, 2019, 2018 and 2017
was zero, $0.2 million and $2.1 million, respectively. The recognized tax benefit from option exercises for the
years ended December 31, 2019, 2018 and 2017 was zero, $0.0 million and $0.0 million, respectively.
(20)
STOCK REPURCHASE PROGRAM
Stock Repurchase Program
The Company has a stock repurchase program, which was initially authorized by the Company’s Board of
Directors in November 2001. As of December 31, 2019, the cumulative authorized repurchase allowance was
$762.3 million. During the year ended December 31, 2019, 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, 2019, the remaining allowance under the program was approximately $26.6 million. For the
period from January 1, 2019 through February 28, 2020, the Company did not purchase additional shares. The
stock repurchase program does not have an expiration date.
F-49
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(21)
RELATED PARTY TRANSACTIONS
The Company entered into an agreement under which Avion, LLC (“Avion”) and Airmax LLC (“Airmax”) provide
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 2019, 2018 and 2017, the Company expensed
$1.1 million, $1.1 million and $1.1 million, respectively, to Avion and Airmax for services provided to the
Company. There was $200 thousand in payments due and outstanding to Avion and Airmax as of December 31,
2019.
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 2019. A minority owner of Convercent is a company which is owned and
controlled by Kenneth D. Tuchman, Chairman and Chief Executive Officer of the Company. During 2019, 2018
and 2017, the Company expensed $60 thousand, $60 thousand and $70 thousand, respectively, to Convercent.
During 2015, the Company entered into a contract to purchase software from CaféX, in which the Company
holds a 17.8% equity investment. During 2019, 2018 and 2017, the Company purchased $50 thousand, $61
thousand and $72 thousand, respectively, of software from CaféX. See Note 2 for further information regarding
this investment.
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 a joint venture.
During the years ended December 31, 2019, 2018 and 2017, the Company recorded revenue of $5.3 million,
$5.7 million and $5.5 million, respectively, in connection with work performed through the joint venture.
(22)
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,
2018
2019
$ 5,871 $ 3,987
1,802
$ 7,662 $ 5,789
1,791
Employee health and dental insurance
Workers compensation
Total self-insurance liabilities
F-50
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TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(23)
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables present certain quarterly financial data for the year ended December 31, 2019
(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
$ 394,356 $ 392,515 $ 395,507 $ 461,326
345,694
53,894
18,634
175
166
42,763
(6,428)
(5,670)
(2,402)
28,263
293,334
49,720
16,743
961
1,506
32,092
(4,150)
(7,466)
(1,474)
19,002 $
304,622
48,062
16,659
183
—
25,981
(806)
(5,196)
(1,878)
18,101 $
299,237
50,864
17,050
428
2,063
22,873
(1,914)
(7,345)
(1,816)
11,798 $
$
46,203
46,590
46,318
46,684
46,481
46,768
46,487
46,831
Net income per share attributable to TTEC stockholders
Basic
Diluted
$
$
0.41 $
0.41 $
0.25 $
0.25 $
0.39 $
0.39 $
0.61
0.60
Included in Other income (expense) in the second quarter is a $2.4 million benefit related to the fair value
adjustment of contingent consideration for an acquisition.
Included in Other income (expense) in the third quarter is a $1.4 million benefit on recovery of receivables in
connection with the consulting business that is being wound down and a $0.7 million benefit on the sale of
trademarks.
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 - $1.3 million, $0.5 million, $0.8 million and $2.1 million
in the first, second, third and fourth quarters, respectively.
Included in the Provision for Income Taxes is: a $0.2 million expense in the fourth quarter, a $0.2 million expense
in the third quarter, a $0.1 million expense in the second quarter, and a $0.2 million expense in the first quarter
related to changes in tax contingent liabilities; a $1.6 million benefit in the fourth quarter, a $0.2 million benefit
in the third quarter, a $0.1 million benefit in the second quarter and a $0.1 million expense in the first quarter
related to return to provision adjustments; a $2.8 million benefit in the fourth quarter related to tax rate changes;
a $2.2 million expense in the fourth quarter, and a $2.3 million expense in the second quarter related to changes
in valuation allowances; a $0.2 million benefit in the second quarter and a $0.7 million benefit in the first quarter
related to restructuring charges; and a $0.1 million benefit in the fourth quarter, a $0.2 million expense in the
third quarter, a $0.1 million expense in the second quarter, and a $0.1 million expense in the first quarter of
other items. Without these items our effective tax rate for the year ended December 31, 2019 would have been
22.9%.
F-51
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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, 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 (loss) 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
—
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
—
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-52
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Exhibit 4.01
DESCRIPTION OF SECURITIES
The following is a description of TTEC Holdings, Inc. (the “Company,” “TTEC”) securities that are registered
under Section 12 of the Securities Exchange Act of 1934, as amended, and does not purport to be
complete. For a complete description of the terms and provisions of such securities, refer to our restated
certificate of incorporation, as amended (the “Certificate of Incorporation”), and our amended and restated
bylaws (the “Bylaws”), each of which is included as an exhibit to the Annual Report on Form 10-K of which
this exhibit is a part. This summary is qualified in its entirety by reference to these documents.
General
Under the Certificate of Incorporation, we are authorized to issue up to 150,000,000 shares of common
stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. As
of December 31, 2019 there were 46,488,938 shares of common stock outstanding and no shares of
preferred stock outstanding.
Common Stock
The holders of our common stock are entitled to one vote per share on all matters to be voted upon by the
stockholders. Stockholders may not cumulate their votes in the election of directors. Subject to preferences
that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out
of funds legally available, therefore. 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’s performance, cash flows 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 the event of liquidation, dissolution or winding up of TTEC, the holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of
preferred stock, if any, then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
Our Board of Directors has the authority to issue our preferred stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of
shares constituting any series or the designation of such series, without further vote or action by the
stockholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a
change in control of TTEC without further action by the stockholders and may adversely affect the voting
and other rights of the holders of common stock. Holders of preferred stock may be entitled to receive
dividends (other than dividends of common stock) before any dividends are payable to holders of common
stock.
Anti-Takeover Effects of Delaware General Corporation Law and Our Certificate of Incorporation
and Bylaws
Delaware Law. TTEC is subject to the “business combination” provisions of Section 203 of the Delaware
General Corporation Law. In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various “business combination” transactions with any interested stockholder for a period of
three years after the date of the transaction in which the person became an interested stockholder, unless:
(cid:120)
the business combination transaction or the transaction which resulted in the stockholder becoming
an interested stockholder is approved by the Board of Directors prior to the date the interested
stockholder obtained such status;
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(cid:120) upon consummation of the transaction which resulted in the stockholder becoming an interested
stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced, excluding for the purpose of determining the number of
shares outstanding those shares owned by the corporation’s officers and directors and by
employee stock plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer;
or
(cid:120) on or subsequent to such date the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders by the affirmative vote of at least 662/3%
of the outstanding voting stock which is not owned by the interested stockholder.
A “business combination” is defined to include mergers, asset sales and other transactions resulting in
financial benefit to a stockholder. In general, an “interested stockholder” is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of a corporation’s voting stock.
The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to
TTEC and, accordingly, may discourage attempts to acquire TTEC even though such a transaction may
offer TTEC’s stockholders the opportunity to sell their stock at a price above the prevailing market price.
Certificate of Incorporation and Bylaws. Various provisions contained in the Certificate of Incorporation
and the Bylaws could delay or discourage stockholder actions with respect to transactions involving an
actual or potential change of control of us or a change in our management and may limit the ability of our
stockholders to remove current management or approve transactions that our stockholders may deem to
be in their best interests. Among other things, these provisions:
(cid:120) provide that special meetings of stockholders may be called only by the Board of Directors, the
Chairman of the Board of Directors or by the Chief Executive Officer of TTEC and not by the
stockholders;
(cid:120) provide that any stockholder wishing to nominate persons for election as directors at, or bring other
business before, an annual meeting must deliver to our secretary advance written notice of the
stockholder’s intention to do so;
(cid:120) establish that state courts located within the State of Delaware (or, if no state court located within
the State of Delaware has jurisdiction, the federal district court for the District of Delaware) are the
sole and exclusive forum for certain disputes;
(cid:120) provide that the Board of Directors may, by resolution adopted by a majority of the directors,
increase or decrease the number of directors on the Board so long as the number of directors is
not less than two nor more than eleven;
(cid:120) do not permit cumulative voting for directors; and
(cid:120) provide that vacancies in our Board of Directors may be filled only by the affirmative vote of a
majority of the remaining directors.
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List of Subsidiaries
Exhibit 21.1
Subsidiary
TTEC Services Corporation
TTEC Government Solutions, LLC
TTEC Digital, LLC
TTEC Healthcare Solutions, Inc.
TTEC@Home, LLC
TTEC Financial Services Management, LLC
Percepta, LLC
First Call Resolution, LLC
Serendebyte Inc.
TTEC Canada Solutions, Inc.
TTEC Europe B.V.
TTEC CX Solutions Mexico, S.A. de C.V.
TTEC India Customer Solutions Private Limited
TTEC Brasil Servicos Ltda.
TTEC Eastern Europe EAD
TTEC International Pty Ltd
TeleTech Customer Care Management Philippines, Inc.
TTEC Consulting (UK) Limited
TTEC Customer Care Management (Ireland) Limited
TeleTech Offshore Investments B.V. – Philippine Branch
Jurisdiction
Colorado, USA
Colorado, USA
Colorado, USA
Delaware, USA
Colorado, USA
Delaware, USA
Delaware, USA
Colorado, USA
Delaware, USA
Canada
Netherlands
Mexico
India
Brazil
Bulgaria
NSW, Australia
Philippines
United Kingdom
Ireland
Philippines
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Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-232756) and
Form S-8 (No. 333-167300) of TTEC Holdings, Inc. of our report dated March 4, 2020 relating to the financial statements
and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
March 4, 2020
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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 Margaret B. McLean, acting individually, as such person’s true and lawful attorney-in-fact and agent,
with full power of substitution, re-substitution 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
necessary or advised in connection with any offering of the Company’s securities, including but not limited to: Brazil,
Bulgaria, Canada, India, Ireland, Mexico, the Philippines, Singapore, the United Arab Emirates, and the United Kingdom,
for and on such person’s behalf, and in any and all capacities,
1. The Annual Report on Form 10-K of TTEC Holdings, Inc. for the year ended December 31, 2019, 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
person’s substitute or substitutes may lawfully do or cause to be done by virtue hereof.
/s/ Kenneth D. Tuchman
Feb. 27, 2020
/s/ Steven J. Anenen
Feb. 27, 2020
Kenneth D. Tuchman
Steven J. Anenen
/s/ Tracy L. Bahl
Tracy L. Bahl
Feb. 27, 2020
/s/ Gregory A. Conley
Feb. 27, 2020
Gregory A. Conley
/s/ Robert N. Frerichs
Feb. 27, 2020
/s/ Marc L. Holtzman
Feb. 27, 2020
Robert N. Frerichs
Marc L. Holtzman
/s/ Ekta Singh-Bushell
Feb. 27, 2020
Ekta Singh-Bushell
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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.
The registrant’s other certifying officer(s) 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. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
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. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board 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
reporting which are reasonably likely to adversely affect the registrant’s 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
the registrant’s internal control over financial reporting.
By:
/s/ Kenneth D. Tuchman
Kenneth D. Tuchman
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: March 4, 2020
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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.
The registrant’s other certifying officer(s) 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. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
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. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board 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
reporting which are reasonably likely to adversely affect the registrant’s 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
the registrant’s internal control over financial reporting.
By:
/s/ Regina M. Paolillo
Regina M. Paolillo
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 4, 2020
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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, Inc. (the “Company”), hereby certifies that, to his knowledge
on the date hereof:
a.
b.
The Annual Report on Form 10-K of the Company for the year ended December 31, 2019 filed on the date hereof
with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of
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 4, 2020
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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, Inc. (the “Company”), hereby certifies that, to his knowledge
on the date hereof:
a.
b.
The Annual Report on Form 10-K of the Company for the year ended December 31, 2019 filed on the date hereof
with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of
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 4, 2020
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
Former 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, Travelport; 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, CBZ Holdings Limited; 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, DBI, Inc.; Director, Huron Consulting Group; Director, Net 1 UEPS Technologies, Inc;
Director, Datatec Limited; 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
Jonathan Lerner
President, TTEC Digital
Regina M. Paolillo
Executive Vice President; Chief
Administrative and Financial Officer
Martin F. DeGhetto
Executive Vice President; TTEC Engage
Steven C. Pollema
Chief Operating Officer, TTEC Digital
Margaret B. McLean
Senior Vice President, General Counsel
and Chief Risk Officer
Judi A. Hand
Executive Vice President,
Chief Revenue Officer
Chandra Venkataramani
Senior Vice President,
Chief Information Officer
Michael Wellman
Senior Vice President, Chief People Officer
Nick Cerise
Senior Vice President,
Chief Marketing Officer
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.
The Company delivers outcome-based customer engagement solutions through TTEC Digital, its digital
consultancy that designs and builds human centric, tech-enabled, insight-driven customer experience
solutions for clients and TTEC Engage, its delivery center of excellence, that operates customer acquisition,
care, fraud prevention and detection, and content moderation services.
Founded in 1982, the Company’s 49,500 employees operate on six continents across the globe and live by
a set of customer-focused values that guide relationships with clients, their customers, and each other. To
learn more about how TTEC is bringing humanity to the customer experience, visit www.ttec.com.
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
2020 Annual Meeting of Stockholders
The Annual Meeting of Stockholders will be
held Wednesday, May 13, 2020, 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, teletech.com or by
contacting TTEC Investor Relations at:
1.800.835.3832
investor.relations@ttec.com
Independent Accountants
PricewaterhouseCoopers LLP
Denver, Colorado
9197 South Peoria Street
Englewood, CO 80112-5833
+1 303 397-8100 or 1-800 835-3832
ttec.com