Operating Income was $22.9 Million or 5.8 Percent of Revenue ($25.4 Million or 6.5 Percent Non-GAAP)

TTEC Holdings, Inc., 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, announced financial results for the second quarter ended June 30, 2019.

“We had a standout first half of the year on a number of fronts,” commented Ken Tuchman, chairman and chief executive officer of TTEC. “We delivered record year-to-date top line growth and profit with revenue increasing 8.5 percent to $787 million and non-GAAP operating income increasing 44.6 percent to $60 million. Our bookings and pipeline are healthy. We are winning market share across the board, highlighted by both our expansion in Europe and hypergrowth born-digital client focus. We progressed our strategic initiatives, including growing our customer experience (CX) cloud-based technology platform 188 percent. We are proud of our client and employee Net Promoter Scores. They are a testament to our focus on building the culture necessary to bring humanity to business at scale. Our first half performance, in combination with our new business pipeline and revenue backlog, have led us to raise our full year 2019 guidance.”

Tuchman continued, “CX is the last frontier for competitive advantage and the market is demanding cutting-edge digital experiences. Having anticipated this trend, we were deliberate in shaping TTEC with the CX technology and services that enable clients to create digital-first experiences with our Humanify Cloud. We are changing the game by leveraging the speed and power of AI and RPA across the customer lifecycle, with solutions including Associate Assist and our managed services RPA offering.”

SECOND QUARTER 2019 FINANCIAL HIGHLIGHTS               

Revenue        

• Second quarter 2019 GAAP revenue increased 12.2 percent to $392.5 million compared to $349.9 million in the prior year period.
• Foreign exchange had a $1.1 million negative impact on revenue in the second quarter 2019.

Income from Operations

• Second quarter 2019 GAAP income from operations was $22.9 million, or 5.8 percent of revenue, compared to $13.5 million, or 3.9 percent of revenue in the prior year period.
• Non-GAAP income from operations, excluding $2.5 million in restructuring and impairment charges, was $25.4 million or 6.5 percent of revenue versus 4.2 percent for the prior year period.
• Foreign exchange had a $1.2 million positive impact on income from operations in the second quarter 2019.

Adjusted EBITDA        

• Second quarter 2019 Non-GAAP Adjusted EBITDA was $44.8 million, or 11.4 percent of revenue, compared to $35.4 million, or 10.1 percent of revenue in the prior year period

Earnings Per Share

• Second quarter 2019 GAAP fully diluted earnings per share was $0.29 compared to $0.14 for the same period last year.
• Non-GAAP fully diluted earnings per share was $0.34 compared to $0.22 in the prior year period.

Bookings

• During the second quarter 2019, TTEC signed an estimated $122 million in annualized contract value. Second quarter bookings mix was diversified across segments, verticals, and geographies.

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

• As of June 30, 2019, TTEC had cash and cash equivalents of $75.5 million and debt of $248.3 million, resulting in a net debt position of $172.8 million. This compares to a net debt position of $238.1 million for the same period 2018.
• As of June 30, 2019, TTEC had approximately $510 million of additional borrowing capacity available under its revolving credit facility compared to $395 million for the same period 2018.
• Cash flow from operations in the second quarter 2019 was $41.3 million compared to $37.3 million for the second quarter 2018.
• Capital expenditures in the second quarter 2019 were $15.2 million compared to $9.4 million for the second quarter 2018.
• Paid a 30 cent per share, or $13.9 million, semi-annual dividend on April 18, 2019, an approximate 7 percent increase over the distribution paid in October 2018 and an 11 percent increase over the distribution paid in April 2018.

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

• Digital second quarter 2019 GAAP revenue increased 49.6 percent to $78.5 million from $52.5 million for the year ago quarter. Income from operations was $7.7 million or 9.8 percent of revenue compared to operating income of $6.8 million or 12.9 percent of revenue for the prior year period.
• Non-GAAP income from operations was $9.7 million, or 12.4 percent of revenue compared to operating income of $6.8 million or 12.9 percent of revenue in the prior year period.

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

• Engage second quarter 2019 GAAP revenue increased 5.6 percent to $314.0 million from $297.4 million for the year ago quarter. Income from operations was $15.2 million or 4.8 percent of revenue compared to operating income of $6.7 million or 2.3 percent of revenue for the prior year period.
• Non-GAAP income from operations was $15.7 million, or 5.0 percent of revenue compared to operating income of $7.8 million or 2.6 percent of revenue in the prior year period.
• Foreign exchange had a negative $0.8 million impact on revenue and positive $1.1 million 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.

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BUSINESS OUTLOOK

“We are delighted with the financial performance and business execution underlying another strong quarter and first half of the year,” commented Regina Paolillo, chief financial and administrative officer. “Our years of dedication and investment in transforming the company have differentiated our solutions portfolio, increased the value that we deliver to our clients across the CX continuum, and allowed us to build loyal and tenured relationships with many of the world’s most noteworthy brands.”

Paolillo continued, “We are pleased to launch our updated segments, TTEC Digital and TTEC Engage. We believe this consolidation aligns our management, go-to-market platform, operational and financial reporting structures, and provides our investors a more meaningful view of the now integrated Customer Technology and Strategy Services business (TTEC Digital) and the Customer Growth and Management Services business (TTEC Engage). Looking ahead, we anticipate our first half momentum to continue and expect to deliver significant organic revenue growth alongside improved profitability and cash flow generation this year. As a result, we are raising our full year 2019 revenue and profitability outlook.”

Our updated 2019 estimated full-year guidance, which excludes restructuring charges, impairment charges and PRG Middle East, is as follows:

Revenue between $1.622 and $1.630 billion, versus $1.614 and $1.630 billion.

• Using the mid-point of our full-year guidance, we estimate TTEC Digital to comprise 18 percent of revenue and TTEC Engage 82 percent of revenue.

Operating income margins between 7.8 and 8.0 percent, versus 7.4 and 7.6 percent.

• Using the mid-point of our full-year guidance, we estimate TTEC Digital’s margin of 13.4 percent of revenue and TTEC Engage 6.6 percent of revenue.

Adjusted EBITDA margins between 12.8 and 13.0 percent, versus 12.6 and 12.8 percent.

• Using the mid-point of our full-year guidance, we estimate TTEC Digital’s margin of 18.5 percent of revenue and TTEC Engage 11.7 percent of revenue.

Using the midpoint of our full-year guidance, we expect approximately 28 percent of our revenue, 37 percent of our operating income and 32 percent of our adjusted EBITDA to be recognized in the fourth quarter, our peak seasonal period.

Capital expenditures are estimated to remain unchanged between 3.8 and 4.0 percent of revenue, of which 65 percent is growth oriented.

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

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