• Revenue: $529 million, a decrease of 12.2% over the prior year period.
• Adjusted EBITDA: $50 million, or 9.5% of revenue, down from $64 million or 10.6% of revenue in the prior year period.
• Earnings Per Share (EPS): $0.11 compared to $0.48 in the prior year period.
• Digital Segment Revenue: $116 million, down 13.2% over the prior year period.
• Engage Segment Revenue: $414 million, down 11.9% over the prior year period.
• Free Cash Flow: Negative $100 million, impacted by the discontinuation of accounts receivable factoring facility.
• Capital Expenditures: $9 million or 1.7% of revenue.
• Net Debt: $1.028 billion, with a net debt to EBITDA ratio of 4.49 times.
• Tax Rate: 58.3% in the third quarter of 2024.

• Warning! GuruFocus has detected 8 Warning Signs with TTEC.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• TTEC Holdings Inc (NASDAQ:TTEC) reported a sequential increase in adjusted EBITDA from $46 million to $50 million, indicating improved profitability.
• The company is on track to establish a dozen new meaningful client relationships by year-end, diversifying across industries such as financial services, healthcare, and retail.
• TTEC Holdings Inc (NASDAQ:TTEC) is experiencing growth in offshore operations, with a 43% increase in headcount in new geographies from the second to third quarter.
• The company is making progress in selling AI-enabled solutions, which are expected to drive operational efficiencies and revenue growth.
• TTEC Holdings Inc (NASDAQ:TTEC) is seeing strong demand for its recurring managed services offerings, which increased by 12.9% year over year.

Negative Points

• TTEC Holdings Inc (NASDAQ:TTEC) reported a 12.2% decrease in revenue compared to the prior year period, reflecting challenges in the current market environment.
• The company's digital professional services revenue was negatively impacted by delayed decision-making by clients on larger deals.
• The engage segment's last 12-month revenue retention rate declined to 85% from 96% in the prior year, primarily due to reductions from a large financial services client.
• Free cash flow was negatively impacted by the discontinuation of the accounts receivable factoring facility, resulting in a negative $100 million for the quarter.
• The company suspended its semiannual dividend to prioritize debt reduction, indicating financial constraints.

Q & A Highlights

Q: Your guidance implies a potential acceleration in the digital business for the fourth quarter. What gives you confidence in this growth? A: Michelle Swanback, President and CEO of TTEC Engage, expressed confidence in the digital business due to deals that were delayed from Q3 expected to close in Q4 or Q1. The company is optimistic about the trajectory over the next 2 to 3 quarters based on current bookings and backlog. Kenneth Wagers, CFO, added that diversifying the business with new partners and AI projects, along with a healthy pipeline, supports this positive outlook.

Q: Regarding healthcare payer clients, which were a weak spot last quarter, what are you seeing in this client cohort now? A: Michelle Swanback noted that healthcare payer clients continue to face cost pressures, leading to decisions to save money and staff differently for seasonal ramps. However, there are ongoing conversations about using offshore talent and technology, which could lead to proof of concepts in the coming quarters.

Q: Are the cost-saving initiatives still expected to provide $30 million in savings in 2025? A: Kenneth Wagers confirmed that the company expects to achieve $30 million in annualized savings in 2025 from the cost-saving initiatives, with $10 million in savings already realized in 2024.

Q: Can you elaborate on the select client delay projects and implementations? Are you expecting a longer ramp-up period for these? A: Michelle Swanback explained that on the engage side, new client relationships are starting small but are expected to scale. On the digital side, delays are in starting projects, not in ramping them. The focus is on closing deals in Q4 to start projects by the end of the year or early next year.

Q: Can you provide more color on the velocity of debt reduction expected in the coming quarters? A: Kenneth Wagers stated that the company is committed to debt reduction, driven by increased profitability, free cash flow from operations, asset sales, and the suspension of dividends. These efforts are aimed at improving the capital structure over the coming quarters.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.