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TTEC Announces Third Quarter 2019 Financial Results

Signs Bookings of $114 Million
Revenue was $395.5 Million
Operating Income was $26.0 Million or 6.6 Percent of Revenue ($26.2 Million or 6.6 Percent Non-GAAP)
Net Income was $20.0 Million ($18.6 Million Non-GAAP)
Adjusted EBITDA was $46.2 Million or 11.7 Percent of Revenue
Fully Diluted EPS was $0.43 ($0.40 Non-GAAP)
Maintain Outlook for Full Year 2019 Revenue, Adjusted Operating Income and Adjusted EBITDA

DENVER, Nov. 5, 2019 /PRNewswire/ -- TTEC Holdings, Inc.(NASDAQ: TTEC), a leading digital 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, today announced financial results for the third quarter ended September 30, 2019.

"We continued to overperform against our key financial objectives in the third quarter, and 2019 is setting up to be a record year for revenue and profitability," commented Ken Tuchman, chairman and chief executive officer of TTEC. "We are making significant progress executing upon our vision to continuously deliver exceptional customer experience and engagement, especially in today's disruptive digital world. The strategic interplay between our Digital and Engage solutions is a marketplace differentiator that creates a virtuous cycle with the power to further enhance our organic revenue growth and margin expansion. We are also fortifying our integrated offering through a strong pipeline of accretive strategic acquisitions and meaningful new digital channel partnerships to deliver a truly differentiated customer experience for our clients."

THIRD QUARTER 2019 FINANCIAL HIGHLIGHTS                     

Revenue        

  • Third quarter 2019 GAAP revenue increased 8.4 percent to $395.5 million compared to $364.9 million in the prior year period.
  • Foreign exchange had a $2.2 million positive impact on revenue in the third quarter 2019.

Income from Operations

  • Third quarter 2019 GAAP income from operations was $26.0 million, or 6.6 percent of revenue, compared to $14.7 million, or 4.0 percent of revenue in the prior year period.
  • Non-GAAP income from operations, excluding $0.2 million in restructuring and impairment charges, was $26.2 million or 6.6 percent of revenue versus 4.8 percent for the prior year period.
  • Foreign exchange had a $2.1 million positive impact on income from operations in the third quarter 2019.

Adjusted EBITDA        

  • Third quarter 2019 Non-GAAP Adjusted EBITDA was $46.2 million, or 11.7 percent of revenue, compared to $38.2 million, or 10.5 percent of revenue in the prior year period.

Earnings Per Share

  • Third quarter 2019 GAAP fully diluted earnings per share was $0.43 compared to $0.15 for the same period last year.
  • Non-GAAP fully diluted earnings per share was $0.40 compared to $0.22 in the prior year period.

Bookings

  • During the third quarter 2019, TTEC signed an estimated $114 million in annualized contract value. Third quarter bookings mix was diversified across segments, verticals, and geographies.

STRONG BALANCE SHEET AND CASH FLOWS CONTINUE TO FUND INVESTMENTS AND DIVIDENDS

  • As of September 30, 2019, TTEC had cash and cash equivalents of $85.5 million and debt of $218.9 million, resulting in a net debt position of $133.4 million. This compares to a net debt position of $202.3 million for the same period 2018.
  • As of September 30, 2019, TTEC had approximately $575 million of additional borrowing capacity available under its revolving credit facility compared to $405 million for the same period 2018.
  • Cash flow from operations in the third quarter 2019 was $63.1 million compared to $61.4 million for the third quarter 2018.
  • Capital expenditures in the third quarter 2019 were $16.0 million compared to $15.0 million for the third quarter 2018.
  • Paid a 32 cent per share, or $14.9 million, semi-annual dividend on October 17, 2019, an approximate 14.3 percent increase over the dividend paid in October 2018 and a 6.7 percent increase over the April 2019 dividend.

SEGMENT REPORTING & COMMENTARY
Effective June 30, 2019, TTEC reports financial results for the following two business segments:

  1. TTEC Digital (Digital) - Previously TTEC's Customer Strategy Services and Customer Technology Services segments.
  2. TTEC Engage (Engage) – Previously TTEC's Customer Growth Services and Customer Management Services segments.

Financial highlights for the two segments are provided below.

TTEC Digital – Design, build and operate tech-enabled, insight-driven CX solutions

  • Third quarter 2019 GAAP revenue for TTEC Digital increased 17.9 percent to $78.6 million from $66.7 million for the year ago period. Income from operations was $11.7 million or 14.9 percent of revenue compared to operating income of $8.5 million or 12.7 percent of revenue for the prior year period.
  • Non-GAAP income from operations was $11.8 million, or 15.0 percent of revenue compared to operating income of $8.6 million or 12.8 percent of revenue in the prior year period.

TTEC Engage – Digitally-enabled customer care, acquisition, and fraud prevention services

  • Third quarter 2019 GAAP revenue for TTEC Engage increased 6.2 percent to $316.9 million from $298.3 million for the year ago period. Income from operations was $14.3 million or 4.5 percent of revenue compared to operating income of $6.2 million or 2.1 percent of revenue for the prior year period.
  • Non-GAAP income from operations was $14.4 million, or 4.5 percent of revenue compared to operating income of $8.8 million or 3.0 percent of revenue in the prior year period.
  • Foreign exchange had a $2.4 million positive impact on revenue and $2.1 million positive impact on income from operations.

NON-GAAP FINANCIAL MEASURES

This press release contains a discussion of certain non-GAAP financial measures that the Company includes to allow investors and analysts to measure, analyze and compare its financial condition and results of operations in a meaningful and consistent manner. A reconciliation of these non-GAAP financial measures can be found in the tables accompanying this press release.

  • GAAP metrics are presented in accordance with Generally Accepted Accounting Principles.
  • Non-GAAP - As reflected in the attached reconciliation table, the definition of Non-GAAP may exclude from operating income, EBITDA, net income and earnings per share restructuring and impairment charges, among other items.

BUSINESS OUTLOOK

"We are executing against our strategic priorities in both our TTEC Digital and TTEC Engage segments," commented Regina Paolillo, chief financial and administrative officer. "Year-to-date, we significantly increased our revenue, profitability and cash flow generation, grew the number of concurrent licensed users on our CX subscription-based cloud platform, expanded our geographic and vertical market share, and more recently completed a strategic acquisition and entered into new and expanded channel partner arrangements."

Paolillo continued, "We expect these positive developments alongside the size and diversity of our revenue backlog and sales pipeline to enable top line growth and margin expansion in 2020, similar to that of 2019."

We estimate full-year 2019 guidance, which includes PRG Middle East and our recent acquisition of FCR, but excludes restructuring and impairment charges, as follows:

Revenue between $1.622 and $1.630 billion

  • With approximately 18.5 percent for TTEC Digital and 81.5 percent for TTEC Engage

Operating Income margins between 7.8 and 8.0 percent.

  • Margins of approximately 13.7 percent for TTEC Digital and 6.7 percent for TTEC Engage

Adjusted EBITDA margins between 12.8 and 13.0 percent.

  • Margins of approximately 18.0 percent for TTEC Digital and 11.8 percent for TTEC Engage

Capital expenditures are estimated to between 3.8 and 4.0 percent of revenue.

Effective tax rate for the full year is estimated between 25 and 27 percent.

About TTEC 

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 48,500 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

FORWARD-LOOKING STATEMENTS

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of TTEC Holding, Inc.'s management and are subject to significant risks and uncertainties. Specifically, we would like for you to focus on risks related to 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 risk and risks inherent to our equity structure. Actual results may differ from what is expressed in the forward-looking statements. Risk Factors that could cause TTEC's results to differ materially from those described in the forward-looking statements can be found in TTEC's Quarterly Report on Form 10-Q for the quarter ended on September 30, 2019 and Annual Report on Form 10-K for the year ended December 31, 2018, which has been filed with the U.S. Securities and Exchange Commission (the "SEC") and is available on TTEC's website www.ttec.com, and on the SEC's public website at . TTEC Holdings, Inc. does not undertake to update any forward-looking statements.

 

                   

TTEC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

                   
                   
   

Three months ended

 

Nine months ended

 
   

 September 30,

 

 September 30,

 
   

2019

 

2018

 

2019

 

2018

 
                   

Revenue

$395,507

 

$364,936

 

$1,182,378

 

$1,090,038

 
                   

Operating Expenses:

               
 

Cost of services

304,622

 

286,925

 

897,193

 

844,555

 
 

Selling, general and administrative

48,062

 

43,321

 

148,646

 

134,611

 
 

Depreciation and amortization

16,659

 

17,317

 

50,452

 

52,052

 
 

Restructuring and integration charges, net

183

 

2,716

 

1,572

 

4,599

 
 

Impairment losses

-

 

-

 

3,569

 

1,120

 
 

Total operating expenses

369,526

 

350,279

 

1,101,432

 

1,036,937

 
                   

Income From Operations

25,981

 

14,657

 

80,946

 

53,101

 
                   
 

Other income (expense), net

(806)

 

(6,020)

 

(6,870)

 

(29,480)

 
                   

Income Before Income Taxes

25,175

 

8,637

 

74,076

 

23,621

 
                   
 

Provision for income taxes

(5,196)

 

(1,893)

 

(20,007)

 

(4,648)

 
                   

Net Income

19,979

 

6,744

 

54,069

 

18,973

 
                   
 

Net income attributable to noncontrolling interest

(1,878)

 

(1,369)

 

(5,168)

 

(3,489)

 
                   

Net Income Attributable to TTEC Stockholders

$  18,101

 

$    5,375

 

$     48,901

 

$     15,484

 
                   
                   

Net Income Per Share

               
                   
 

Basic

$     0.43

 

$     0.15

 

$        1.17

 

$        0.41

 
                   
 

Diluted

$     0.43

 

$     0.15

 

$        1.16

 

$        0.41

 
                   

Net Income Per Share Attributable to TTEC Stockholders

               
                   
 

Basic

$     0.39

 

$     0.12

 

$        1.06

 

$        0.34

 
                   
 

Diluted

$     0.39

 

$     0.12

 

$        1.05

 

$        0.33

 
                   
                   

Income From Operations Margin

6.6%

 

4.0%

 

6.8%

 

4.9%

 

Net Income Margin

5.1%

 

1.8%

 

4.6%

 

1.7%

 

Net Income Attributable to TTEC Stockholders Margin

4.6%

 

1.5%

 

4.1%

 

1.4%

 

Effective Tax Rate

20.6%

 

21.9%

 

27.0%

 

19.7%

 
                   
                   

Weighted Average Shares Outstanding

               

  Basic

46,481

 

46,172

 

46,335

 

46,021

 

  Diluted

46,768

 

46,316

 

46,693

 

46,390

 
                   

 

 

 

TTEC HOLDINGS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION

(In thousands, except per share data)

(unaudited)

                 
   

Three months ended

 

Nine months ended

   

September 30,

 

 

September 30,

   

2019

 

2018

 

2019

 

2018

                 

Revenue

 

$395,507

 

$364,936

 

$1,182,378

 

$1,090,038

                 
                 

Reconciliation of Adjusted EBITDA:

               
                 

Net Income

 

$  19,979

 

$    6,744

 

$     54,069

 

$     18,973

   Interest income

 

(522)

 

(1,401)

 

(1,291)

 

(3,940)

   Interest expense

 

4,041

 

8,410

 

13,537

 

22,634

   Provision for income taxes

 

5,196

 

1,893

 

20,007

 

4,648

   Depreciation and amortization

 

16,659

 

17,317

 

50,452

 

52,052

   Asset impairment, restructuring and integration charges

 

183

 

2,716

 

5,141

 

5,719

   Impairment of equity investment

 

-

 

-

 

-

 

15,632

   Gain on sale of business units

 

(391)

 

(588)

 

(1,141)

 

(1,653)

   Gain on sale of trademarks

 

(700)

 

-

 

(700)

 

-

   Gain on recovery of receivables in connection with division in winddown

 

(1,416)

 

-

 

(1,416)

 

-

   Changes in acquisition contingent consideration

 

-

 

-

 

(2,424)

 

-

   Loss on asset held for sale reclassified to asset held and used

 

-

 

-

 

-

 

2,000

   Gain on bargain purchase of acquisition

 

-

 

-

 

-

 

(685)

   Equity-based compensation expenses

 

3,129

 

3,109

 

9,663

 

9,292

                 

 Adjusted EBITDA

 

$  46,158

 

$  38,200

 

$   145,897

 

$   124,672

                 
                 

Reconciliation of Free Cash Flow:

               
                 

Cash Flow From Operating Activities:

               

   Net income

 

$  19,979

 

$    6,744

 

$     54,069

 

$     18,973

   Adjustments to reconcile net income to net cash provided by operating activities:

               

          Depreciation and amortization

 

16,659

 

17,317

 

50,452

 

52,052

          Other

 

26,493

 

37,342

 

79,876

 

95,084

   Net cash provided by operating activities

 

63,131

 

61,403

 

184,397

 

166,109

                 

Less - Total Cash Capital Expenditures

 

16,010

 

14,958

 

44,438

 

31,841

                 

Free Cash Flow

 

$  47,121

 

$  46,445

 

$   139,959

 

$   134,268

                 
                 

Reconciliation of Non-GAAP Income from Operations:

               
                 

Income from Operations

 

$  25,981

 

$  14,657

 

$     80,946

 

$     53,101

Restructuring charges, net

 

183

 

2,716

 

1,572

 

4,599

Impairment losses

 

-

 

-

 

3,569

 

1,120

                 

Non-GAAP Income from Operations

 

$  26,164

 

$  17,373

 

$     86,087

 

$     58,820

                 

Non-GAAP Income from Operations Margin

 

6.6%

 

4.8%

 

7.3%

 

5.4%

                 
                 

Reconciliation of Non-GAAP EPS:

               
                 

Net Income

 

$  19,979

 

$    6,744

 

$     54,069

 

$     18,973

Add:  Asset restructuring and impairment charges

 

183

 

2,716

 

5,141

 

5,719

Add:  Loss on asset held for sale reclassified to asset held and used

 

-

 

-

 

-

 

2,000

Add:  Interest charge related to future purchase of remaining 30% for Motif acquisition

 

757

 

3,002

 

2,533

 

7,989

Add:  Impairment of equity investment

 

-

 

-

 

-

 

15,632

Less:  Changes in acquisition contingent consideration

 

-

 

-

 

(2,424)

 

-

Less:  Gain on sale of business units

 

(391)

 

(588)

 

(1,141)

 

(1,653)

Less:  Gain on sale of trademarks

 

(700)

 

-

 

(700)

 

-

Less:  Gain on recovery of receivable in connection with division in winddown

 

(1,416)

 

-

 

(1,416)

 

-

Less:  Gain on bargain purchase of acquisition

 

-

 

-

 

-

 

(685)

Add:  Changes in valuation allowance, return to provision adjustments and other, and tax effects of items separately disclosed above

 

212

 

(1,800)

 

2,046

 

(8,146)

                 

 Non-GAAP Net Income

 

$  18,624

 

$  10,074

 

$     58,108

 

$     39,829

                 

    Diluted shares outstanding

 

46,768

 

46,316

 

46,693

 

46,390

                 

 Non-GAAP EPS

 

$0.40

 

$0.22

 

$1.24

 

$0.86