# TTEC Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2020

- Company: [TTEC Holdings, Inc.](/companies/ttec.md) (CIK 1013880)
- Form: 10-Q
- Filed: 2020-08-05
- Accepted by EDGAR: Aug 5, 2020, 16:45 ET
- Period: 2020-06-30
- Accession: 0001558370-20-009422
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1013880/000155837020009422/ttec-20200630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1013880/000155837020009422/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-04-01 to 2020-06-30 | $453.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2020-01-01 to 2020-06-30 | $885.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2020-04-01 to 2020-06-30 | $47.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2020-01-01 to 2020-06-30 | $97.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2020-04-01 to 2020-06-30 | $49.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2020-01-01 to 2020-06-30 | $89.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2020-04-01 to 2020-06-30 | $3.1m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2020-01-01 to 2020-06-30 | $12.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2020-04-01 to 2020-06-30 | $11.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2020-01-01 to 2020-06-30 | $21.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-04-01 to 2020-06-30 | $31.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2020-01-01 to 2020-06-30 | $52.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-04-01 to 2020-06-30 | $0.67 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2020-01-01 to 2020-06-30 | $1.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-04-01 to 2020-06-30 | $0.67 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2020-01-01 to 2020-06-30 | $1.14 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-04-01 to 2020-06-30 | 46,861,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2020-01-01 to 2020-06-30 | 46,838,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2020-01-01 to 2020-06-30 | $105.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2020-04-01 to 2020-06-30 | $15.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 6 months, 2020-01-01 to 2020-06-30 | $31.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2020-01-01 to 2020-06-30 | $15.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2020-06-30 | $482.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-06-30 | $958.9m | us-gaap:AssetsCurrent |
| Total assets | at 2020-06-30 | $1.77bn | us-gaap:Assets |
| Current liabilities | at 2020-06-30 | $344.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-06-30 | $1.27bn | us-gaap:Liabilities |
| Shareholders' equity | at 2020-06-30 | $447.9m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 38,424 characters.

### 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 offers innovative programs that differentiate our clients from their competition.

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. Within weeks of this announcement, travel bans, the state of emergency, quarantines, lockdowns, “shelter in place” orders, and business restrictions and shutdowns were issued in most countries where TTEC does business. The need to comply with these measures, which came into effect with little notice, has impacted our day-to-day operations and disrupted our business. Although we activated our business continuity plans, we have experienced temporary suspension of operations in some of our TTEC Engage customer experience delivery sites; and some of our employees were not able to get to work because their mobility was restricted by government restrictions. While some of our operations were deemed essential and could have continued operating, to support the health and well-being of our employees and communities and to provide a stable service delivery platform to our clients, we made a business decision to transition as many employees as was reasonably possible to a work from home environment.

Between mid-March and mid-April 2020, we transitioned over 43,000 employees, or 80%, to our work from home environment. With the easing of some of the government restrictions, some of those employees returned to our brick and mortar sites by the end of the second quarter of 2020, but most continue to work from home.

For those sites that continued to operate and those that re-opened since the lockdown and “shelter-in-place” restrictions eased beginning in June 2020, we have taken extensive measures to protect the health and safety of our employees, in accordance with the recommendations and guidelines provided by the World Health Organization, the U.S. and European Centers for Disease Control and Prevention, the U.S. Occupational Safety Association, and local governments in jurisdictions where our customer experience centers are located.

Although our business began to experience the effects of COVID-19 at the end of the first quarter 2020, our rapid implementation of business continuity plans and our geographic diversification of delivery centers allowed us to mitigate potentially more severe impacts. Through the period ended June 30, 2020 the COVID-19 pandemic has not had a material adverse impact on our operational or financial results. While approximately 20% of our business is comprised of clients in industries that have been negatively impacted by the COVID-19 pandemic, significant surge volumes from commercial and public sector clients who have realized spikes in customer, patient and citizen engagement have contributed to a12.5% increase in revenue when comparing the six months ended June 30, 2020 to the six months ended June 30, 2019. While we expect this positive trend to continue for the remainder of 2020, there is uncertainty about our COVID-19 surge volumes and our non-COVID-19 related business beyond 2020. Additionally, we cannot accurately predict the severity of the economic and operational challenges of a pro-longed COVID-19 pandemic on our clients’ businesses and its effect on the magnitude and timing of their buying decisions. Further, while to date we have been successful in managing service delivery from those of our delivery sites that could not be replaced with work from home delivery, arbitrary lockdown decisions in some jurisdictions where we do business may impact our offshore delivery capability with little notice, thus potentially impacting our results of operations in the future.

In March 2020, we launched multiple cost reduction, optimization, and liquidity preservation initiatives to align our expenses with anticipated changes in revenue and increased costs related to COVID-19 pandemic and government mandated restriction measures. These initiatives included freezes on hiring, cuts in non-essential spending, reduction and deferral in spend on third-party service providers and vendors, suspension of merit increases, contributions to tax deferred saving plans and other retirement plans, where permitted by law, suspension of some incentive programs, staff reductions and furloughs in markets where that option is available. We also intensified our cash flow discipline, including working capital management, deferral of capital expenditures, where possible, and engaged in negotiations for rent abatement and deferral for those facilities that we are unable to use during the government restrictions related to the COVID-19 pandemic. We have also taken steps to strengthen our financial position during this period of heightened uncertainty including a proactive draw down on our line of credit in late March 2020. Our results of operations for the first two quarters of 2020 is permitting us to reverse some of these decisions, and we are resuming strategic hiring on a limited basis, returning furloughed employees to work where it is possible, and reinstating certain incentive plans. In light of the continued COVID-19 related uncertainties, however, we remain vigilant in our cost management. With the greater adoption of our work at home solution during the COVID-19 pandemic, we are also reviewing our global footprint model and working to balance our commitments to physical facilities around the globe against evolving client preferences with respect to traditional physical delivery centers and work from home delivery mix.

For further discussion of this matter, refer “Item 1A. Risk Factors” in Part II of this Form 10-Q.

The Company reports its financial information based on two segments: TTEC Digital and TTEC Engage.

- **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.
- **TTEC Engage** provides the essential technologies, human resources, infrastructure and processes to operate customer care, acquisition, and fraud detection and prevention services.

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, artificial intelligence (“AI”), machine learning (“ML”), robotic process automation (“RPA”), analytics, cybersecurity, customer relationship management ("CRM"), knowledge management and 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.

Our revenue for the three months ended June 30, 2020 was $453.1 million. Approximately $376 million, or 83%, came from our TTEC Engage segment and $77 million, or 17%, came from our TTEC Digital 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, outcome-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 the first quarter of 2020 of a U.S. based autonomous customer experience and intelligent automation solutions provider and an acquisition in the fourth quarter of 2019 of a U.S. based provider of customer care, social media community management, content moderation, technical support and business process solutions.

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, 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.

- 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.
- 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.

- 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.
- 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.
- 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 I. Item 1. Financial Statements, Note 3 to the Consolidated Financial Statements.

### Financial Highlights

In the second quarter of 2020, our revenue increased $60.6, or 15.4%, to $453.1 million over the same period in 2019 including a decrease of $3.5 million, or 0.9%, due to foreign currency fluctuations. The increase in revenue was comprised of a $61.9 million, or 19.7%, increase for TTEC Engage offset by a $1.4 million, or 1.8%, decrease for TTEC Digital.

Our second quarter 2020 income from operations increased $26.1 million, or 114.1%, to $ 49.0 million or 10.8% of revenue, compared to $22.9 million or 5.8% of revenue in the second quarter of 2019. The change in operating income is comprised of a number of factors across the segments. The TTEC Digital operating income expanded with an 86.5% improvement over the same period last year primarily on the growth of its higher margin cloud business. The TTEC Engage operating income increased 128.1% compared to the prior year quarter based on the increase in revenue including, but not limited to, the acquisition of FCR and significant surge volumes in our commercial and public sector clients experiencing spikes in customer interactions related to COVID-19.

Income from operations in the second quarter of 2020 and 2019 included $0.8 million and $2.5 million of restructuring and integration charges and asset impairments, respectively.

Our offshore customer engagement centers serve clients based in the U.S. and in other countries spanning six countries with 24,600 workstations, representing 57% of our global delivery capability. Revenue for our TTEC Engage segment provided from these offshore locations represented 29% of our revenue for the second quarter of 2020, as compared to 38% of our revenue for the corresponding period in 2019.

As of June 30, 2020, the total production workstations for our TTEC Engage segment was 43,432 and the overall capacity utilization in our centers was 68%. The utilization is lower than the previous year due to decreases in the Company’s seasonal healthcare in combination with an increase in seats at sites that are less than one year old, both of which are in the process of being optimized. During COVID-19 utilized seats include all seats currently generating revenue either through actual usage or contractually committed to clients who plan, at some level, to return to brick and mortar sites. The table below presents workstation data for all of our centers as of June 30, 2020 and 2019. Our utilization percentage is defined as the total number of utilized production workstations compared to the total number of available production workstations.

| ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total centers ​ | ​ ​ June 30, 2020 Total Production ​ Workstations ​ ​ ​ ​ ​ | ​ ​ ​ In Use ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ % In ​ Use ​ ​ ​ ​ ​ | ​ ​ June 30, 2019 Total Production ​ Workstations ​ ​ ​ ​ ​ | ​ ​ ​ In Use ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ % In Use ​ ​ ​ ​ |
| --- | ---: | ---: | --- | ---: | ---: | ---: | --- | ---: |
| Sites open \>1 year | 40,470 | 26,783 | ​ | 66% | 40,493 | 29,144 | ​ | 72% |
| Sites open \<1 year | 2,962 | 2,534 | ​ | 86% | 2,560 | 1,704 | ​ | 67% |
| Total workstations | 43,432 | 29,317 | ​ | 68% | 43,053 | 30,848 | ​ | 72% |

Post COVID-19 we expect our clients to leverage a more diversified geographic footprint and an increased mix of work from home vs. brick and mortar seats. We will continue to refine our site strategy and capacity as we finalize plans with our clients and prospects.

Some of our clients may be subject to regulatory pressures to serve clients onshore. We plan to continue to selectively retain and grow capacity and expand into new offshore markets, while maintaining appropriate capacity onshore. As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuations increases, we will continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility.

### Recently Issued Accounting Pronouncements

Refer to Part I, Item I, Financial Statements, Note 1 to the Consolidated Financial Statements for a discussion of recently adopted and issued accounting pronouncements.

### 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 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. For further information, please refer to the discussion of all critical accounting policies in Note 1 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019.

### Results of Operations

### Three months ended June 30, 2020 compared to three months ended June 30, 2019

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 three months ended June 30, 2020 and 2019 (amounts in thousands). All inter-company transactions between the reported segments for the periods presented have been eliminated.

#### TTEC Digital

| ​ ​ ​ | ​ ​ | ​ ​ ​ Three Months Ended June 30, 2020 | ​ ​ ​ ​ 2019 | ​ ​ ​ ​ $ Change | ​ ​ | ​ ​ ​ % Change | ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | --- |
| Revenue | ​ | $77,143 ​ | $78,519 ​ | $(1,376) |  | (1.8)% | ​ |
| Operating Income | ​ | 14,376 ​ | 7,709 ​ | 6,667 |  | 86.5% | ​ |
| Operating Margin | ​ | 18.6% | 9.8% | ​ ​ | ​ | ​ ​ | ​ |

The decrease in revenue for the TTEC Digital segment was related to significant increases in the cloud platform and the acquisition of Serendebyte, offset by reductions in the legacy facility based training business and the middle east consulting practice, both of which the Company has exited. Within the core Digital business and excluding a large multi-year term government contract, for the quarters ended June 30, 2020 and 2019 revenue from the cloud offering represented $19.5 million and $13.9 million, respectively, and the systems integration offering represented $11.2 million and $13.0 million, respectively.

The operating income expansion is primarily attributable to the continued improved utilization of technology and people assets as the business scales its cloud and system integration revenue as well as the exit of the less profitable facilities based training and middle east consulting practices. Also the second quarter of 2019 included a $2.0 million impairment of intangible and other long-lived assets (See Part I. Item 1. Financial Statements, Notes 5 and 9 to the Consolidated Financial Statements). The operating income as a percentage of revenue increased to 18.6% in the second quarter of 2020 as compared to 9.8% in the prior period. Included in the operating income was amortization expense related to acquired intangibles of $0.6 million and $0.6 million for the quarters ended June 30, 2020 and 2019, respectively.

#### TTEC Engage

| ​ ​ ​ | ​ ​ | ​ ​ ​ Three Months Ended June 30, 2020 | ​ ​ ​ ​ 2019 | ​ ​ ​ ​ $ Change | ​ ​ | ​ ​ ​ % Change | ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | --- |
| Revenue | ​ | $375,938 ​ | $313,996 ​ | $61,942 |  | 19.7% | ​ |
| Operating Income | ​ | 34,586 ​ | 15,164 ​ | 19,422 |  | 128.1% | ​ |
| Operating Margin | ​ | 9.2% | 4.8% | ​ ​ | ​ | ​ ​ | ​ |

The increase in revenue for the TTEC Engage segment was due to a net increase of $85.2 million in client programs including the acquisition of FCR in the fourth quarter of 2019 and certain surge programs for several clients in connection with the COVID-19 pandemic, offset by a decrease for program completions of $20.0 million and a $3.3 million decrease due to foreign currency fluctuations.

The operating income increased in line with improved revenue including the acquisition of FCR as well as continued improved profitability in our @Home, fraud prevention and detection and customer acquisition offerings and auto and hypergrowth portfolios, offset by increases in amortization for acquired intangibles. As a result, the operating income as a percentage of revenue increased to 9.2% in the second quarter of 2020 as compared to 4.8% in the prior period. Included in the operating income was amortization expense related to acquired intangibles of $3.3 million and $2.0 million for the quarters ended June 30, 2020 and 2019, respectively.

#### Interest Income (Expense)

For the three months ended June 30, 2020 interest income increased to $0.5 million from $0.4 million in the same period in 2019. Interest expense decreased to $3.1 million during 2020 from $4.2 million during 2019 due to higher utilization of the line of credit, offset by lower interest rates and a $0.7 million decrease in the charge related to the future purchase of the remaining 30% interest in Motif versus the prior year period, which was finalized during the second quarter of 2020.

#### Other Income (Expense)

For the three months ended June 30, 2020 Other income (expense), net decreased to net expense of $1.8 million from net income of $1.9 million during the prior year quarter.

Included in the three months ended June 30, 2020 was a $1.1 million benefit related to the fair value adjustment of contingent consideration for an acquisition (see Part I. Item 1. Financial Statements, Notes 2 and 7 to the Consolidated Financial Statements), offset by a $2.5 million expense related to the dissolution of a subsidiary.

Included in the three months ended June 30, 2019 was a $2.4 million benefit related to a fair value adjustment of contingent consideration for an acquisition.

#### Income Taxes

The effective tax rate for the three months ended June 30, 2020 was 24.8%. This compares to an effective tax rate of 35.0% for the comparable period of 2019. The effective tax rate for the three months ended June 30, 2020 was influenced by earnings in international jurisdictions currently under an income tax holiday, the distribution of income between the U.S. and international tax jurisdictions and the associated U.S. tax impacts of increased foreign earnings. Without $0.3 million of expense related to adjustments to contingent consideration, a $0.2 million benefit related to restructuring, a $0.9 million benefit related to changes in valuation allowances, $0.4 million of expense related to provision to return adjustments, and $0.2 million of other expense, the Company’s effective tax rate for the second quarter of 2020 would have been 24.2%.

### Results of Operations

### Six months ended June 30, 2020 compared to six months ended June 30, 2019

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 six months ended June 30, 2020 and 2019 (in thousands). All intercompany transactions between the reported segments for the periods presented have been eliminated.

#### TTEC Digital

| ​ ​ ​ | ​ ​ | ​ ​ ​ Six Months Ended June 30, 2020 | ​ ​ ​ ​ 2019 | ​ ​ ​ ​ $ Change | ​ ​ | ​ ​ ​ % Change | ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | --- |
| Revenue | ​ | $154,699 ​ | $144,372 ​ | $10,327 |  | 7.2% | ​ |
| Operating Income | ​ | 24,634 ​ | 15,468 ​ | 9,166 |  | 59.3% | ​ |
| Operating Margin | ​ | 15.9% | 10.7% | ​ ​ | ​ | ​ ​ | ​ |

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 the acquisition of Serendebyte, offset by reductions in the legacy facility based training business and the middle east consulting practice, both of which the Company has exited. Within the core Digital business and excluding the large multi-year government contract, for the six months ended June 30, 2020 and 2019, revenue from the cloud offering represented $38.4 million and $26.9 million, respectively, and the systems integration offering represented $24.2 million and $25.8 million, respectively.

The operating income expansion is primarily attributable to the increased revenue and continued improved utilization of technology and people assets as the business scales its cloud and system integration revenue, as well as the exit of the less profitable facilities based training and middle east consulting practices. The operating income increase was offset by a $2.0 million impairment of intangible and other long-lived assets for one of the consulting components in this segment (See Part I. Item 1. Financial Statements, Notes 5 and 9 to the Consolidated Financial Statements) recorded during 2019. The operating income as a percentage of revenue increased to 15.9% for the six months ended June 30, 2020 as compared to 10.7% in the prior period. Included in the operating income was amortization expense related to acquired intangibles of $1.1 million and $1.3 million for the six months ended June 30, 2020 and 2019, respectively.

#### TTEC Engage

| ​ ​ ​ | ​ ​ | ​ ​ ​ Six Months Ended June 30, 2020 | ​ ​ ​ ​ 2019 | ​ ​ ​ ​ $ Change | ​ ​ | ​ ​ ​ % Change | ​ ​ ​ |
| --- | --- | ---: | ---: | ---: | --- | ---: | --- |
| Revenue | ​ | $730,595 ​ | $642,499 ​ | $88,096 |  | 13.7% | ​ |
| Operating Income | ​ | 65,044 ​ | 39,497 ​ | 25,547 |  | 64.7% | ​ |
| Operating Margin | ​ | 8.9% | 6.1% | ​ ​ | ​ | ​ ​ | ​ |

The increase in revenue for the TTEC Engage segment was due to a net increase of $135.2 million in client programs including the acquisition of FCR in the fourth quarter of 2019 and certain surge programs for several clients in connection with the COVID-19 pandemic, offset by a decrease for program completions of $42.6 million and a $4.5 million decrease due to foreign currency fluctuations.

The operating income increased in line with improved revenue including the acquisition of FCR as well as continued improved profitability in our @Home, fraud prevention and detection and customer acquisition offerings and auto and hypergrowth portfolios, offset by increases in amortization for acquired intangibles. As a result, the operating income as a percentage of revenue increased to 8.9% for the six months ended June 30, 2020 as compared to 6.1% in the prior period. Included in the operating income was amortization expense related to acquired intangibles of $6.6 million and $4.0 million for the six months ended June 30, 2020 and 2019, respectively.

#### Interest Income (Expense)

For the six months ended June 30, 2020 interest income increased to $0.9 million from $0.8 million in the same period in 2019. Interest expense increased to $12.7 million during 2020 from $9.5 million during 2019 due to higher utilization of the line of credit offset by lower interest rates and a $4.5 million period over period increase in the charge related to the future purchase of the remaining 30% interest in Motif, which was finalized during the second quarter of 2020.

#### Other Income (Expense)

For the six months ended June 30, 2020 Other income (expense), net decreased to net income of $1.6 million from net income of $2.7 million during the prior year quarter.

Included in the six months ended June 30, 2020 was a $4.3 million benefit related to the fair value adjustments of contingent consideration for an acquisition (see Part I. Item 1. Financial Statements, Notes 2 and 7 to the Consolidated Financial Statements), offset by a $2.5 million expense related to the dissolution of a subsidiary.

Included in the six months ended June 30, 2019 was a $2.4 million benefit related to the fair value adjustment of contingent consideration for an acquisition.

Income Taxes

The effective tax rate for the six months ended June 30, 2020 was 26.7%. This compared to an effective tax rate of 30.3% for the comparable period of 2019. The effective tax rate for the six months ended June 30, 2020 was influenced by earnings in international jurisdictions currently under an income tax holiday, the distribution of income between the U.S. and international tax jurisdictions and associated U.S. tax impacts of increased foreign earnings. Without a $0.5 million benefit from restructuring expenses, $0.5 million of expense related to provision to return adjustments, a $0.6 million benefit related to changes in valuation allowances, $1.2 million of expense related to changes to contingent consideration and $0.4 million other expense, the Company’s effective tax rate for the six months ended June 30, 2020 would have been 23.7%.

### 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 six months ended June 30, 2020, we generated positive operating cash flows of $105.3 million. We believe that our cash generated from operations, existing cash and cash equivalents, and available credit will be sufficient to meet expected operating and capital expenditure requirements for the next 12 months.

We manage a centralized global treasury function in the United States with a focus on concentrating and safeguarding our global cash and cash equivalents. The majority of our cash is in U.S. dollars, primarily held in the U.S and to a lesser extent outside of the U.S., in addition to cash held in local currencies of our foreign subsidiaries. We expect to use our cash to support working capital, global operations and strategic investments. 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.

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 3. Quantitative and Qualitative Disclosures About Market Risk, Foreign Currency Risk, for further discussion.

During the first quarter 2020, we borrowed $350.0 million under our revolving credit facility as a precautionary measure to provide additional liquidity during the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic. Although we expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.

The following discussion highlights our cash flow activities during the six months ended June 30, 2020 and 2019.

#### 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 $482.3 million and $82.4 million as of June 30, 2020 and December 31, 2019, 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 six months ended June 30, 2020 and 2019, net cash flows provided by operating activities was $105.3 million and $121.3 million, respectively. The decrease is primarily due to a $35.9 million increase in net cash income from operations offset by a $51.9 million reduction in net working capital.

#### Cash Flows from Investing Activities

For the six months ended June 30, 2020 and 2019, net cash flows used in investing activities was $36.3 million and $28.1 million, respectively. The increase was due to a $3.5 million increase in capital expenditures and a $4.4 million increase related to acquisitions.

#### Cash Flows from Financing Activities

For the six months ended June 30, 2020 and 2019, net cash flows provided by (used in) financing activities was $332.8 million and ($84.7) million, respectively. The change in net cash flows from 2019 to 2020 was primarily due to a $464.0 million net million additional draw on the line of credit, which included the $350 million discussed above, offset by a $42.8 million increase related to payments of contingent consideration and hold-back payments related to several acquisitions.

#### Free Cash Flow

Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) decreased for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in net cash from operations offset by a decrease in working capital and higher outflow related to acquisitions including payments of contingent consideration. Free cash flow was $73.4 million and $92.8 million for the six months ended June 30, 2020 and 2019, respectively.

### 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):

| ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended June 30, 2020 | ​ | ​ ​ 2019 | ​ ​ | ​ ​ Six Months Ended June 30, 2020 | ​ | ​ ​ 2019 | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Net cash provided by operating activities | ​ | $43,113 | ​ | $41,303 | ​ | $105,278 | ​ | $121,266 | ​ |
| Less: Purchases of property, plant and equipment | ​ | 15,102 | ​ | 15,228 | ​ | 31,915 | ​ | 28,428 | ​ |
| Free cash flow | ​ | $28,011 | ​ | $26,075 | ​ | $73,363 | ​ | $92,838 | ​ |

### Obligations and Future Capital Requirements

There were no material changes to the Company’s contractual obligations and future capital requirements outside the normal course of business from the date of our 2019 Form 10-K filing on March 4, 2020 through the filing of this report.

#### Future Capital Requirements

We currently expect total capital expenditures in 2020 to be between $55 million and $59 million. Approximately 70% of these expected capital expenditures are to support growth in our business and 30% relate to the maintenance for existing assets. The anticipated level of 2020 capital expenditures is primarily driven by new client contracts and the corresponding requirements for additional delivery center capacity as well as enhancements to our technological infrastructure.

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 upon commercially reasonable terms acceptable to us.

### Client Concentration

During the six months ended June 30, 2020 and 2019, none of our clients represented more than 10% of our total revenue. Our five largest clients, collectively, accounted for 39.9% and 37.4% of our consolidated revenue for the three months ended June 30, 2020 and 2019, respectively and 37.1% and 36.7% of our consolidated revenue for the six months ended June 30, 2020 and 2019, respectively. We have had long-term relationships with our top five Engage clients, ranging from 14 to 24 years, with all 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.

Some contracts with our five largest clients expire between 2020 and 2023, but most of our largest clients may have multiple contracts with us with different expiration dates for different lines of work. 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.

## Market risk

As filed, 8,482 characters.

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 risk 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 issues 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 June 30, 2020, we had $700.0 million of outstanding borrowings under the Credit Agreement. Based upon average outstanding borrowings during the three months ended June 30, 2020, interest accrued at a rate of approximately 1.6% per annum, respectively. If the Prime Rate or LIBOR increased by 100 basis points, there would be an annualized $1.0 million of additional interest expense per $100.0 million of outstanding borrowing under the Credit Agreement.

### 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 six months ended June 30, 2020 and 2019, revenue associated with this foreign exchange risk was 19% and 22% of our consolidated revenue, respectively.

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 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 June 30, 2020 and December 31, 2019 are summarized as follows (in thousands). All hedging instruments are forward contracts, except as noted.

| ​ ​ ​ ​ As of June 30, 2020 | ​ ​ ​ ​ | ​ Local Currency Notional Amount | ​ ​ ​ ​ | ​ ​ ​ ​ U.S. Dollar Notional Amount | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ % Maturing ​ in the next ​ 12 months ​ | ​ ​ ​ ​ | ​ ​ Contracts Maturing Through | ​ |
| --- | --- | ---: | --- | ---: | --- | --- | ---: | --- | --- | --- |
| Philippine Peso |  | 6,955,000 | ​ | 132,470 | (1) ​ | ​ | 59.9% | ​ | April 2023 | ​ |
| Mexican Peso |  | 1,221,000 | ​ | 56,033 | ​ | ​ | 52.7% | ​ | December 2022 | ​ |
| ​ | ​ | ​ | ​ | $188,503 | ​ | ​ | ​ ​ | ​ | ​ | ​ |

| ​ ​ ​ ​ As of December 31, 2019 | ​ ​ ​ ​ | ​ Local Currency Notional Amount | ​ ​ ​ ​ | ​ ​ ​ ​ U.S. Dollar Notional Amount | ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | --- | --- | --- | --- | --- | --- |
| Philippine Peso |  | 7,715,000 | ​ | 147,654 | (1) ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| Mexican Peso |  | 1,299,500 | ​ | 61,529 | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| ​ | ​ | ​ | ​ | $209,183 | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

(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 June 30, 2020 and December 31, 2019.

The fair value of our cash flow hedges at June 30, 2020 was assets/(liabilities) (in thousands):

| ​ ​ ​ | ​ ​ | ​ ​ ​ ​ June 30, 2020 | ​ ​ | ​ ​ Maturing in the Next 12 Months | ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Philippine Peso | ​ | $5,199 | ​ | $2,902 | ​ |
| Mexican Peso | ​ | (4,974) | ​ | (2,785) | ​ |
| ​ | ​ | $225 | ​ | $117 | ​ |

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 decrease in fair value from December 31, 2019 reflects changes in the currency translation between the U.S dollar and Mexican Peso.

We recorded net gains (losses) of $0.2 million and ($3.5) million for settled cash flow hedge contracts and the related premiums for the six months ended June 30, 2020 and 2019, respectively. These gains (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 I, Item 1. Financial Statements, Note 6 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 six months ended June 30, 2020 and 2019, approximately 15% and 21%, respectively, of revenue was derived from contracts denominated in currencies other than the U.S. Dollar. Our results from operations and revenue could be adversely affected if the U.S. Dollar strengthens significantly against foreign currencies.

### Fair Value of Debt and Equity Securities

We did not have any investments in marketable debt or equity securities as of June 30, 2020 or December 31, 2019.

## Controls and procedures

As filed, 3,244 characters.

This report 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 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 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 June 30, 2020, the end of the period covered by this Form 10-Q. 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.

### Inherent Limitations of Internal Controls

Our management, including the CEO and CFO, believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control 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 errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of controls. Over time, controls 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.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 8,144 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A, Risk Factors, in our 2019 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. In addition to the risk factors identified in our 2019 Annual Report, please consider the following additional Risk Factors.

***Our business is adversely affected by the COVID-19 pandemic and it may result in material adverse impact on our operations and financial condition.***

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. Within weeks of this announcement, travel bans, the state of emergency, quarantines, lockdowns, “shelter in place” orders, and business restrictions and shutdowns were issued in most countries where TTEC does business. While we are unable to accurately predict the full impact that COVID-19 pandemic will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and its containment measures, our compliance with these measures has impacted our day-to-day operations and disrupted our business.

We have experienced temporary suspension of operations in some of our TTEC Engage customer experience delivery sites as a result of COVID-19 pandemic and related government-mandated restrictions. To support the health and well-being of our employees and communities and to provide a stable service delivery platform to our clients, we made a business decision to transition as many employees as was reasonably possible to our work from home environment between March and April 2020. Such large-scale rapid transition resulted in certain inefficiencies, additional costs unlikely to be recouped from our clients, and heightened cybersecurity, regulatory compliance, and fraud risks. Our inability to manage these risk and costs effectively could have a material adverse effect on our business, financial condition and results of operations.

The social distancing rules and other government mandates that continue during the sustained pandemic are likely to impact the structure and configuration of large-scale facilities, like our customer experience delivery centers, where employees work in close proximity. These new regulatory requirements are forcing TTEC to make investments to reconfigure our existing customer experience centers and to accept lower capacity utilization than the utilization priced under our multi-year contracts. If we are unable to renegotiate our contracts to recoup these additional costs, manage these costs by continuing to maintain a large work at home delivery platform, or adjust our cost structure to absorb them, our margins and profitability will be impacted and will result in adverse impact on our results of operations.

The COVID-19 pandemic and government-mandated restrictions on business adopted to contain it, is resulting in what is likely to be an extended global economic downturn, which could affect demand for our services and impact our results of operations and financial condition, even after the pandemic is contained and the business restrictions and “shelter in place” orders are lifted.

Although COVID-19 pandemic disruptions did not have a material adverse impact on our financial results for the first two quarters of fiscal 2020, there can be no assurances that we will not experience such impacts through the end of 2020 and beyond. Due to the evolving and highly uncertain nature of the global response to the COVID-19 pandemic, we cannot predict at this time the full extent to which the pandemic will adversely impact our business, results of operations and financial condition, which will depend on many factors that are not known at this time.

***The operations of some of our clients are adversely impacted by COVID-19 pandemic and it may have a material adverse impact on our business.***

The operations of some of our clients, especially our clients in travel, hospitality, retail and automotive industries, have been materially impacted by the COVID-19 pandemic and government restrictions on travel and people’s mobility around the globe. Approximately 20% of our revenue for the fiscal year ended December 31, 2019 was generated from the clients in these affected industries. On-going travel restrictions and large-scale unemployment that resulted from government-mandated restrictions on businesses around the globe is likely to continue to affect certain of our clients and their business volumes through the end of 2020 and beyond. While we are unable to predict the magnitude of such impact on our operations at this time and to what extent this impact may be offset by other business that we are able to secure due to a shift in our clients’ and their consumers’ buying preferences during and in the aftermath of COVID-19 pandemic, the loss of the business from the impacted clients may materially impair our operating results and financial condition. We may also experience payment defaults or bankruptcy of some of our clients, which could also have a material adverse effect our financial condition and results of operation.

***Our ability to recruit, hire, and retain qualified employees at a price point acceptable to our clients may be impacted by the COVID-19 pandemic and by the US government pandemic recovery measures such as enhanced unemployment benefits.***

Our business is labor intensive and our ability to recruit and hire employees with the right skills, at the right price point is critical to meeting our contractual commitments and attaining our growth objective. We sign multi-year client contracts that are priced based on prevailing labor rates in jurisdictions where we deliver services. The inability of some of our employees in some parts of the world to work from home resulted in the need to transition some of our service delivery to other jurisdictions where work from home is easier to facilitate, which further increases our need to rapidly hire qualified employees. The recent adoption of various pandemic recovery measures by the U.S. and other governments in jurisdictions where we hire employees is aimed at supporting citizens who lost their jobs due to COVID-19 pandemic. Such individuals may be attractive employment prospects for TTEC, but COVID-19 enhanced unemployment benefits in some jurisdictions where we hire may exceed local prevailing wages and may make it more difficult for us to hire a sufficient number of employees to support our contractual commitments or may result in higher costs, lower contract profitability, higher turnover and reduced operational efficiencies, which could, in the aggregate, have a material adverse impact on our results of operations.

To the extent the COVID-19 pandemic or any worsening of the global business and economic environment as a result of the pandemic or government actions to contain it adversely affects our business and financial results, it may also have the effect of heightening or exacerbating many of the other risks described in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2019, such as the risk factors relating to our strategy execution, cyber security of our information systems, consolidation activities being undertaken by our clients, geographic concentration of our operations in jurisdictions ill prepared to manage large scale health crisis and pandemics, our ability to comply with laws and regulations that impact our business, the reliability of our information technology infrastructure and our ability to delivery uninterrupted service to our clients; our clients’ ability to forecast demand for our services accurately; our ability to expand and maintain our customer experience delivery centers in offshore jurisdictions with stable wage rates, risks generally associated with international business operations, and the impact of the limited market float of our stock and potential volatility of our stock price resulting therefrom.

Filed Aug 5, 2020.
Source: SEC EDGAR, the filing index for accession 0001558370-20-009422. Last ingested by Listed: Nov 10, 2026, 04:26 ET. No prices; not investment advice.