# TTEC Holdings, Inc.: Form 10-K for the period ended Dec 31, 2021 - Company: [TTEC Holdings, Inc.](/companies/ttec.md) (CIK 1013880) - Form: 10-K - Filed: 2022-03-03 - Accepted by EDGAR: Mar 3, 2022, 16:10 ET - Period: 2021-12-31 - Accession: 0001558370-22-002795 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1013880/000155837022002795/ttec-20211231x10k.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1013880/000155837022002795/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2021-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2021-01-01 to 2021-12-31 | $2.27bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Selling, general and administrative | 12 months, 2021-01-01 to 2021-12-31 | $240.0m | us-gaap:SellingGeneralAndAdministrativeExpense | | Operating income | 12 months, 2021-01-01 to 2021-12-31 | $217.2m | us-gaap:OperatingIncomeLoss | | Interest expense | 12 months, 2021-01-01 to 2021-12-31 | $12.4m | us-gaap:InterestExpense | | Income tax | 12 months, 2021-01-01 to 2021-12-31 | $49.7m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2021-01-01 to 2021-12-31 | $141.0m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2021-01-01 to 2021-12-31 | $2.97 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2021-01-01 to 2021-12-31 | $3.01 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2021-01-01 to 2021-12-31 | 47,386,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2021-01-01 to 2021-12-31 | $251.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2021-01-01 to 2021-12-31 | $60.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 12 months, 2021-01-01 to 2021-12-31 | $42.2m | us-gaap:PaymentsOfDividendsCommonStock | | Cash and equivalents | at 2021-12-31 | $158.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2021-12-31 | $698.0m | us-gaap:AssetsCurrent | | Total assets | at 2021-12-31 | $2.00bn | us-gaap:Assets | | Current liabilities | at 2021-12-31 | $444.4m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2021-12-31 | $1.40bn | us-gaap:Liabilities | | Shareholders' equity | at 2021-12-31 | $538.0m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest | ## Business As filed, 44,005 characters. ### BUSINESS ### Our Business TTEC Holdings, Inc. (“TTEC”, “the Company”, “we”, “our” or “us”; pronounced “T-TEC”) is a leading global customer experience as a service (“CXaaS”) partner for many of the world’s most iconic and disruptive brands. TTEC designs, builds, orchestrates, and delivers seamless digitally enabled customer experiences that are designed to increase brand value, customer loyalty, revenue, and profitability through personalized, outcome-based interactions. We help clients improve their customer satisfaction while lowering their total cost to serve by combining innovative digital solutions with service capabilities that deliver a frictionless customer experience (“CX”) across different channels and phases of the customer lifecycle. The Company operates and reports its financial results of operations through two business segments: TTEC Digital and TTEC Engage. - **TTEC Digita**l is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting, and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of customer relationship management (“CRM”), data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes. - **TTEC Engage** provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including artificial intelligence (“AI”) operations, content moderation, and fraud management services. TTEC Digital and TTEC Engage strategically come together under our unified offering, Humanify® 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 CX offerings, including messaging, AI, machine learning (“ML”), robotic process automation (“RPA”), analytics, cybersecurity, CRM, knowledge management, journey orchestration, and traditional voice solutions. Our end-to-end CXaaS platform differentiates us from competitors by combining design, strategic consulting, technology, data analytics, process optimization, system integration, and operational excellence along with our decades of industry know-how. This unified offering is value-oriented, outcome-based and delivered to large enterprises, governments, and hypergrowth companies on a global scale. During 2021, the TTEC global operating platform delivered onshore, nearshore and offshore services in 20 countries on six continents -- the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and the United Kingdom – with the help of 65,000 consultants, technologists, and CX professionals. Our revenue for fiscal 2021 was $2.273 billion, approximately $414 million, or 18% which came from our TTEC Digital segment and $1.859 billion, or 82%, which came from our TTEC Engage segment. To improve our competitive position in a rapidly changing market and to lead our clients with emerging CX methodologies, we continue to invest in innovation and service offerings for both mainstream and high-growth disruptive businesses, diversifying and strengthening our core customer care services with technology-enabled, outcomes-focused services, data analytics, insights, and consulting. We also invest to broaden our product and service capabilities, increase our global client base and industry expertise, tailor our geographic footprint to the needs of our clients, and further scale our end-to-end integrated solutions platform. To this end we have been highly acquisitive in the last several years, including recently agreeing to acquire certain citizen experience assets of Faneuil, Inc. that include healthcare exchange and transportation services contracts, expected to close in the first quarter of 2022. This acquisition, once closed, will expand our capabilities in the growing public sector market deploying investments to achieve technology-enabled citizen engagement solutions. We also completed an acquisition early in the second quarter of 2021 of a provider of Genesys and Microsoft cloud contact center services, which followed an acquisition in the second half of 2020 of a preferred Amazon Connect cloud contact center service provider and an acquisition in the first quarter of 2020 of an autonomous customer experience and intelligent automation solutions provider. In the previous year, we completed an acquisition in the fourth quarter of 2019 of a provider of customer care, social media community management, content moderation, technical support, and business process solutions for rapidly growing businesses in early stages of their lifecycle. We have extensive expertise in the automotive, communications, financial services, national/federal and state and local government, healthcare, logistics, media and entertainment, e-tail/retail, technology, travel and transportation industries. We serve more than 750 diverse clients globally, including many of the world’s iconic brands, Fortune 1000 companies, government agencies, and disruptive hypergrowth companies. ### Cybersecurity Incident In September 2021, TTEC experienced a ransomware incident that temporarily disrupted the Engage business segment’s client support environment. Certain TTEC systems and data became encrypted and certain TTEC data was exfiltrated or destroyed. TTEC Digital business segment’s information systems and client environment were not involved in the attack. TTEC activated its incident response and business continuity protocols, notified law enforcement, took appropriate measures to restore its systems and was able to restore operations for many impacted clients within hours of the start of the incident, with all client-facing systems returning to operations within five days of the incident. We exercised reasonable efforts to identify data that may have been exfiltrated. We continue to monitor the situation, and we are not currently aware of evidence that exfiltrated data was publicly released. As of the date of this report, data involved in the incident has been analyzed for impact and notice obligations, and we provided appropriate regulatory and individual notices about the incident and its potential impacts. With support from outside forensic experts, TTEC completed its investigation of root causes and impacts of the cybersecurity incident and is working to harden the security of its information technology environment and is taking measures to move to a ‘zero trust’ environment to protect its systems and its data. The Company performed appropriate procedures to validate the accuracy and completeness of information involved in its financial reporting, and we have no indication that the accuracy and completeness of any financial information was impacted as a result of the incident. The temporary operational disruptions that occurred due to this incident did not have a long-term impact on our results of operations. We made additional investments in the hardening of our cybersecurity environment and the operational governance of our information technology systems during the fourth quarter of 2021 and expect to make further investments in 2022. While the total amount of likely investment has not yet been determined, we anticipate that it will be at least $6 million in 2022 and beyond. The incident and any failure or perceived failure by us to comply with applicable privacy laws in connection with this incident could result in government enforcement actions, regulatory investigations, fines, penalties, and private legal actions, which could impact our results of operations and expenses associated with the incident. In the first quarter of 2022, we have been served with certain lawsuits alleging data privacy failures, which are typical when cybersecurity incidents result in data exfiltration. Other actual and potential consequences of the incident may include negative publicity, loss of client trust, reputational damage, litigation, contractual claims, financial judgement or settlements in excess of insurance, and disputes with insurance carriers concerning coverage. See, Part I, Item 1A Risk Factors. ### COVID-19 Pandemic In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. Early in second quarter of 2020, we transitioned approximately 80% of our employee population to a work from home environment. Those employees who were considered essential and could not operate effectively while working remotely, continued to work in our brick-and-mortar sites consistent with the recommendations on health and safety from the World Health Organization, the U.S. and European Centers for Disease Control and Prevention, and local government regulations in jurisdictions where our customer experience centers are located. As of the time of this disclosure, most TTEC employees continue to work from home, and we continue to evaluate when and to what extent they will return to our offices and customer experience centers. During 2021, we also took pro-active steps to ensure that TTEC was prepared to comply with relevant vaccination mandates and other safety measures in jurisdictions where we do business. Our implementation of business continuity plans, rapid transition of employees to a work from home environment, and the geographic diversification of our customer experience delivery centers allowed us to mitigate potentially more severe impacts of COVID-19, positioned us to continue supporting our commercial and public sector clients without interruptions and provide them with additional support as they experienced surge volumes of customer, patient, and citizen COVID-19 related engagement. Through the period ended December 31, 2021 the COVID-19 pandemic has not had a material adverse impact on our operational or financial results. While we expect this positive trend to continue and some of our COVID-19 specific work has transitioned to more traditional business activities for the same clients, there continues to be uncertainty about our business as the pandemic continues around the globe, including the emergence of certain variant strains of the virus, and related business interruption; and as our clients plan for post-pandemic business realities including new ways of working, evolving use of technology, and inflationary pressures. We cannot accurately predict the severity of the economic and operational challenges of an on-going COVID-19 pandemic and post-pandemic changes on our clients’ businesses and their effect on the magnitude and timing of our clients’ buying decisions. Further, while to date we have been successful in managing service delivery from a highly disbursed employee population working remotely and our delivery sites that could not be replaced with work from home delivery, unpredictable business interruption decisions from government authorities in some jurisdictions where we do business, certain seasonal weather cycles and their potential impacts on power grid, and internet availability for our employees working from home may impact our delivery capability with little notice, thus potentially impacting our results of operations in the future. ### Capital and Financing Availability Our strong balance sheet, cash flow from operations and access to debt and capital markets have historically provided us the financial flexibility to effectively fund our organic growth, capital expenditures, strategic acquisitions, incremental investments, and capital distributions. We return capital to our shareholders through our dividend program. Given our cash flow generation and balance sheet strength, we believe cash dividends, in balance with our investments in product and service innovations, organic growth, and strategic acquisitions, align shareholder interests with the needs of the Company. After consideration of TTEC’s performance, cash flow from operations, capital needs and the overall liquidity of the Company, the Company’s Board of Directors adopted a dividend policy in 2015, with the intent to distribute a periodic cash dividend to stockholders of our common stock. Since inception in 2015, the Company has continued to pay a semi-annual dividend in October and April of each year in gradually increasing amounts from $0.18 per common share in 2015 to $0.47 per common share in October 2021. In December 2020, the Board of Directors authorized a special one-time dividend of $2.14 per common share. On February 24, 2022, the Board of Directors authorized a semi-annual dividend of $0.50 per common share, payable on April 20, 2022 to shareholders of record as of March 31, 2022. ### Our Industry – Key Emerging Themes - *Accelerated Digital and Virtual Transformation –* Before the onset of the COVID-19 pandemic, leading organizations were already transforming to a more digitized, virtualized future. The pandemic and related impacts on access to products and services and how organizations manage their customer interactions, exposed significant customer interaction technology and delivery deficiencies for many organizations across the world that were not digitized or agile enough to adequately support their customers. Organizations’ front-line operations and customer support infrastructure were too brick-and-mortar focused with limited non-voice digital customer interaction alternatives. Organizations are recognizing the growing importance of increased virtual delivery solutions and expanded and enhanced digital omnichannel capabilities. This development is expected to create accelerated demand for our demonstrated suite of CX product and service offerings to enable and support this transformation. - *Direct-to-Consumer (“DTC”) Revolution* - The DTC revolution has created a new generation of disruptive brands with few barriers to entry. These emerging brands thrive on emotional connection and authentic customer relationships relying on trusted influencers and personalized service to win the hearts and minds of a growing customer base, one that requires an on-demand, curated buying experience. We believe DTC can enhance the value we provide to our clients as we design, build and operate our clients’ digital customer experience. - *Evolution of Customer Behavior and CX Imperative* - Yesterday's customer service experience is being replaced by today's direct experience, where brands deliver a personalized end-to-end journey. As customers become more connected and share their experiences across a variety of social channels, the quality of the experience has a greater impact on brand loyalty and business performance. Customers are increasingly shaping their attitudes, behaviors, and willingness to recommend or stay with a brand based on the totality of their experience, including not only the superiority of the product or service, but also the quality of their ongoing service and support interactions. Given the strong correlation between high customer satisfaction and improved profitability, companies are increasingly focused on selecting partners who can deliver an integrated, insights-driven strategy, service, and technology solution that increases the lifetime value of a customer. - *CX Technology is Migrating to the Cloud* - Cloud investment is expected to continue to grow significantly. The adoption of cloud technology to deliver omnichannel and other customer experience technology is still in its infancy. Our clients are embracing cloud-based CX technology solutions in a manner similar to how they seek cost-effective architecture and rapid deployment across other parts of their operations. - *Enterprises are Consolidating Partners* - An increasing percentage of companies are consolidating their customer engagement wallet with a few select partners who can deliver measurable business outcomes by offering an integrated, technology-enabled solution. Companies will continue to consolidate their business partner relationships, favoring companies like TTEC, that have demonstrated expertise in increasing brand value by delivering holistic, integrated customer-centric solutions spanning the entire customer experience journey, instead of inefficiently linking together a series of multiple point solutions. - *Delivery Shifting from Brick-and-Mortar to Work From Home –* COVID-19 accelerated the shift of customer experience delivery from brick-and-mortar to work from home. While we expect a portion of work from home delivery to shift back to brick-and-mortar post-pandemic, a higher portion of delivery will remain in work from home locations than pre-pandemic. ### Our Strategy We aim to grow our revenue and profitability by focusing on our core customer engagement operational capabilities, linking them to higher margin, insights and technology-enabled platforms and managed services to drive a superior experience for our clients’ customers. To that end we continually strive to: - Build deeper, more strategic relationships with existing global clients to drive enduring, transformational change within their organizations; - Pursue new clients who lead their respective industries and who are committed to customer engagement as a differentiator; - Invest in our global sales and marketing leadership team at both the segment level to improve collaboration and speed-to-market, and consultative sales level to deliver more integrated, strategic, and transformational solutions; - Expand into new geographic markets that give us access to new customers, partners, and delivery center capabilities; - Execute strategic acquisitions that further complement and expand our integrated solutions; - Invest in technology-enabled platforms and innovation through technology advancements, broader and globally protected intellectual property, and process optimization; and - Work within our technology partner ecosystem to deliver best-in-class solutions with expanding intellectual property through value-add applications, integrations, services, and solutions. ### Our Integrated Service Offerings and Business Segments We provide strategic value and differentiation through our two business segments: TTEC Digital and TTEC Engage. **TTEC Digita**l is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of CRM, data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes. - Technology Services: Our technology services design, integrate, and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, 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 digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including AI operations, content moderation, and fraud management services. - Customer Acquisition, Growth, and Retention 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 we believe increase the quantity and quality of leads and customers. - Customer Care, Tech Support, and Order Fulfillment Services: Our customer care, technical support, and order fulfillment 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. - Digitally enabled back office and specialty services: Our digital AI operations, content moderation, and fraud detection and prevention services provide clients with data tagging and annotation capabilities to train and enable AI platforms, community content moderation, and compliance to meet client content standards, and proactive fraud solutions to assist our clients in the detection and prevention of fraud. Based on our clients’ preferences, we provide our services on an integrated cross-business segment and/or on a discrete basis. Additional information with respect to our segments and geographic footprint is included in Part II, Item 8. Financial Statements and Supplementary Data, Note 3 to the Consolidated Financial Statements. ### Our Competitive Strengths TTEC is an industry leader in CX by leveraging the following competitive strengths: - *Humanify® Technology Platform and Insights-Driven Technology Solutions -* Innovation has been a priority since our inception 40 years ago. Our dedication and investment in transforming our business has differentiated our solutions portfolio and increased the value we deliver to our clients across the CX continuum. Our Humanify® Technology Platform delivers an ecosystem of integrated CX applications, including omnichannel contact center platforms, the largest CRMs and ERPs, as well as innovative technology solutions that we fully integrate into our clients' broader technology systems. The platform is based on secure, scalable public and private data centers, in both pure cloud, on premise, and hybrid environments. This architecture enables us to centralize and standardize our global delivery capabilities, resulting in scalability and improved quality of delivery for our clients, as well as lowering capital and information technology operating costs. Fundamental to our platforms is our network of global data centers, which provide an integrated suite of voice and data routing, workforce management, quality monitoring, business analytics, storage, and infrastructure security and fault-tolerance capabilities, enabling seamless operations from locations around the globe. This ‘hub and spoke model’ enables us to provide services at a competitive cost while delivering scalability, reliability, regulatory compliance, and asset utilization across the full suite of our service offerings. It also provides effective redundancy for a timely response to system interruptions and outages due to natural disasters, grid downtime, and other conditions outside of our control. Importantly, this broad-based platform has accelerated our time to market foundation for new, innovative offerings such as TTEC's cloud based Humanify® Operations/Insights Platform, Humanify® @Home for remote omnichannel agents, and our suite of human capital solutions. Further, our Humanify® Technology Platforms leverage reference architectures for multiple solutions whether we are operating the platforms and the services, implementing customized platforms for clients, or providing advanced managed services and continuous and automated development environments. They also provide clients with compliant solutions for regional (e.g., the European Union General Data Protection Regulation (“GDPR”) or the California Consumer Protection Act (“CCPA”)), industry (e.g., the Payment Card Industry Data Security Standard (“PCI”), or the Health Insurance Portability and Accountability Act (“HITRUST”)), or client specific standards (e.g., FedRamp or FISMA). - *Innovative Human Capital Strategies –* Our global, highly trained employee base is crucial to the success of our business. We have made significant investments in proprietary technologies and management tools, methodologies, and training processes in the areas of virtual and non-virtual talent acquisition, learning services, knowledge management, workforce engagement and collaboration and performance optimization. These capabilities are the culmination of four decades of experience in managing a large, global workforce combined with the latest technology, innovation and strategies in the field of human capital management. This capability has enabled us to deliver a scalable and flexible workforce that is highly engaged in achieving and exceeding our clients' expectations. - *Robust Technology Partner Ecosystem -* Our strategic alliances with important digital channel partners enable our clients to deliver high-impact, personalized customer experiences more efficiently. We go to market with our Humanify® cloud offering with our key strategic partners including Cisco, LivePerson, Pega, Amazon and Genesys to continue to fuel AI-powered digital transformation. - *Globally Deployed Best Operating Practices -* Globally deployed operating best practices help us deliver a consistent, scalable, high-quality experience to our clients' customers from any of our 71 global customer delivery centers and geographically disbursed work from home associate base. Standardized processes include our approach to attracting, screening, hiring, training, scheduling, evaluating, coaching, and maximizing associate performance to meet our clients' needs. We also provide real-time reporting and analytics on performance across the globe to help ensure transparency and consistency of delivery. This information provides valuable insight into what is driving customer inquiries, enabling us to proactively recommend process changes that optimize the customer experience. ### Clients We develop long-term relationships with clients globally, including many of the worlds’ iconic brands, Fortune 1000 companies, government agencies, and hypergrowth companies. These organizations are in customer intensive industries or sectors, whose complexities and customer focus require a partner that can quickly design and build integrated technology and data-enabled services, often on a global scale. In 2021, our top five and 10 clients represented 38% and 49% of total revenue, respectively. In several of our offerings across TTEC Digital and TTEC Engage, we enter into long-term relationships that provide us with a more predictable recurring revenue stream. In our TTEC Digital segment, our CX cloud and managed services technology solution contracts have an average three-year term with penalties in the case a client terminates for convenience. In our TTEC Engage segment, most of our contracts can be terminated for convenience by either party, but our relationships with our top five clients have ranged from 15 to 22 years including multiple programs and contract renewals for several of these clients. In 2021, we had a 109% revenue retention rate for the TTEC Engage segment, versus 111% in 2020. Certain of our communications clients provide us with telecommunication services through arm’s length negotiated transactions. These clients currently represent approximately 6% of our total annual revenue. Expenditures under these supplier contracts represent less than 1% of our total operating costs. ### Competition We are a leading global customer experience technology and services partner for many of the world’s most iconic brands, Fortune 1000 companies, government agencies, and hypergrowth companies. Our competitors vary by geography and business segment, and range from large multinational corporations to smaller, narrowly focused enterprises. Across our lines of business, principal competitive factors include: client relationships, technology and process innovation, integrated solutions, digital and virtual delivery capabilities, operational performance and efficiencies, pricing, brand recognition, and financial strength. Our strategy in maintaining market leadership is to invest, innovate, and provide integrated value-driven services, all centered around customer engagement management. Today, we are executing on a more expansive, holistic strategy by transforming our business into higher-value offerings through organic investments and strategic acquisitions. As we execute, we are differentiating ourselves in the marketplace and entering new markets that introduce us to an expanded competitive landscape. In our TTEC Digital segment, we primarily compete with smaller pure-play technology and service providers and divisions of multinational companies, including Five9, LivePerson, InContact, Twilio, EPAM, Endava, Globant, GlobalLogic, Accenture, Cognizant, Infosys, among others. In our TTEC Engage segment, we primarily compete with in-house customer management operations as well as other companies that provide customer care services including: Teleperformance, Telus International, Concentrix, TaskUs, 24-7 Intouch, Webhelp, Accenture, Genpact, Exl, among others. ### Regulations Relevant to Our Business TTEC is subject to various domestic and international laws and regulations and permitting and licensing regimes (“Regulations”). These Regulations often change and require TTEC to devote resources and make investments to stay in consistent compliance. The narrative that follows summarizes some of the more important Regulations that impact our business; it is not intended as an all-inclusive list. In every jurisdiction where we do business, TTEC has processes in place to monitor regulatory requirements and take reasonable steps to assure compliance. Data Privacy. We are subject to data protection and privacy regulations in many of the countries where we operate, including the European General Data Protection Regulation ("GDPR"), the California Consumer Protection Act ("CCPA") and other similar U.S. state-level data protection legislation, the Philippine Data Privacy Act (“Republic Act No. 10173”). Certain of our customer experience centers and remote locations also require compliance with Health Information Trust Alliance (“HITRUST”) requirements, Health Insurance Portability and Accountability Act (“HIPAA”,) and with the Payment Card Industry Data Security Standard (PCI-DSS), and other similar requirements. TTEC maintains a cyber security and data privacy program designed to protect our clients’, their customers’, and our employees’ confidential personal and sensitive information. We have invested in our cyber security capabilities to identify, detect, respond to and recover from cyber threats and attacks. These investments help us reduce our vulnerabilities to cyber incidents and minimize their impacts on our operations. They also support compliance with our contractual obligations and the laws and regulations governing our activities. We engage independent auditors to conduct general controls and business process (SOC1 and SOC2) assessments for technology solutions we use in our banking, financial services, and insurance (“BFSI”) and healthcare verticals. We also engage third parties to conduct vulnerability assessment and penetration testing of our technology environments. See "Risk Factors — *Uncertainty and inconsistency in privacy and data protection laws that impact our business, failure to comply with contractual obligations related to privacy, and high cost of compliance may impact our ability to deliver services and our results of operations.”* Work From Home Regulations. The transition to remote work due to the COVID-19 pandemic gave rise to new Regulations specific to work from home, which vary among jurisdictions and range from requirements to reimburse costs associated with remote work, to special health and safety mandates, and special government reporting requirements. To comply with these Regulations, TTEC updated its payroll practices and adopted new ways of working, including the use of secure virtual private networks to access service delivery applications, and remote monitoring and coaching of employees. As we were not always able to replicate in the work from home environment the physical controls we have in place at our customer experience centers, we agreed with our clients to implement certain additional controls. Employees that work from home are required to attest to their understanding and compliance with these controls and with TTEC’s enhanced telecommuter policy that is designed to address new Regulations and the modified contractual requirements. TTEC works diligently with specialists to stay current on the rapidly changing regulatory environment, but the distributed nature of remote service delivery continues to represent heightened risks of security threats and compliance challenges and there can be no assurance that these risks can be fully contained. See "Risk Factors — *As our work from home delivery grows, our operations are subject to new untested risks.”* Other Regulations. TTEC is a labor-intensive business that is subject to complex labor and employment laws established by the U.S. Department of Labor, state and local regulatory bodies, and similar regulators in jurisdictions outside of the U.S. These Regulations govern working conditions, paid time off, workplace safety, wage and hour standards, and hiring and employment practices. Our global operations are subject to various domestic and foreign anti-corruption mandates, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws in other jurisdictions where we do business. As a U.S. company operating through non-U.S. subsidiaries, TTEC is subject to foreign exchange control, transfer pricing, cross-border tax Regulations, immigration and customs Regulations that prescribe how funds, goods, and people traverse between TTEC and our foreign subsidiaries. See "Risk Factors — *Risks Related to Our International Operations.”* We believe that our operations are in compliance with relevant Regulations; but our compliance with Regulations may cause us to make additional capital and operational expenditures, the cost of which we may not always be able to pass to our clients through our pricing structures, and such additional investments could be material to our results of operations, financial position, or cash flows. See "Risk Factors — *Our results of operations may be impacted by changes in laws, our failure to comply with laws and regulations relevant to our business.”* ### Research, Innovation, Intellectual Property and Proprietary Technology We recognize the value of innovation in our business and are committed to developing leading-edge technologies and proprietary solutions. Research and innovation have been a major factor in our success and we believe that they will continue to contribute to our growth in the future. We use our investment in research and development to create, commercialize, and deploy innovative business strategies and high-value technology solutions. We deliver value to our clients through, and our success in part depends on, certain proprietary technologies and methodologies. We leverage U.S. and foreign patent, trade secret, copyright, and trademark laws as well as confidentiality, proprietary information, non-disclosure agreements, and key staff non-competition agreements to protect our proprietary technology. As of December 31, 2021, we had 13 patent applications pending; and also hold 99 U.S. and non-U.S. patents in 11 jurisdictions that we leverage in our operations and as marketplace differentiation for our service offerings. Our trade name, logos, and names of our proprietary solution offerings are protected by their historic use and, in addition, by trademarks and service marks registered in 21 jurisdictions. ### Human Capital Resources *Headcount Information:* As of December 31, 2021, TTEC had 65,000 employees, approximately 2,600 of whom are CX professionals serving TTEC Digital clients and approximately 62,400 of whom serve TTEC Engage clients. Approximately 44% of our employees are based in the Asia-Pacific region, 45% in North America (with 43% in the United States), 8% in Central and South America, and 3% in the Europe, Middle East and Africa (EMEA) region. *Development and Training:* Our 2021 Human Experience (HX) people strategy is focused on the attraction, development and retention of our employees through meaningful engagement and purposeful development. To support advancement of our employees and prepare them for demands of rapidly changing workplace and client requirements we offer career development focused programs, technologies, and resources. In 2021 we made significant investments in learning technologies and courseware, including a new talent management platform, TTEC Talenttm, that provides a streamlined and enhanced career management experience by combining learning, performance management and talent development into one platform. TTEC Talenttm houses a library of more than 10,000 courses that cover topics on general business acumen ranging from business operations, professionalism, leadership, ethics, finance, negotiations, and project management to subject-matter specific professional and technical curriculum. TTEC development programs help identify top performers, improve employee performance, engagement, and retention, and create promotion-from-within opportunities in the Company with 70% of our open positions filled by internal candidates in 2021. Our Pay-for-Performance philosophy is fueled by ensuring employees receive ongoing regular coaching and development, and through TTEC Talenttm 95% of eligible employees completed check-ins with their manager focused on goals, priorities, and personal development on a quarterly basis. Talent planning for executive roles is accomplished through a talent review and succession planning process. We evaluate all mid-level managers and above roles, determine top talent and successors and invest in their development to meet our growth goals. In 2021, TTEC launched the second cohort of employees as part of our Talent Accelerator Program (“TAP”) and Leadership Development Internship program. The TAP program, originally launched in 2020, is designed to identify and attract new talent and prepare them for success within our organization. Each year the program recruits recently graduated candidates with diverse backgrounds in various fields relevant to TTEC ranging from technology to humanities who undergo a two-year rotational training through business functions and business segments. Our TAP program participants gain experience in finance, risk, human capital, IT, communications, marketing, sales, and operations, becoming fully immersed in the day-to-day operations of the Company. Once the program is completed, the TAP participants will be equipped with knowledge and experience necessary to progress as a manager in the Company. *Diversity & Inclusion:* TTEC believes that our culture of diversity and inclusion enables us to create, develop and leverage the strengths of our employee population to align with our client expectations and enable the Company’s growth objectives. To advance our diversity and inclusion objectives, TTEC formed the Diversity Council that combines representatives from different business segments and geographies who bring a diverse mix of backgrounds and perspectives. The Diversity Council includes special affinity groups such as Women in Leadership and Black Leadership Council to help unify us and make us stronger as one team. Our Diversity Council is a critical driver in fostering organizational change, establishing a dedicated focus on diversity, equity, and inclusion priorities identifying best practices and new opportunities, increasing awareness and education, providing leadership opportunities within TTEC to traditionally underrepresented employees, as well as holding the organization accountable in driving a culture that realizes TTEC’s vision of ‘bringing humanity to business’. The Company has adopted several metrics that focus on ensuring accountability for progress in diversity. The CEO, members of TTEC executive leadership team and other senior leaders have diversity and inclusion objectives embedded in their annual performance goals. As of December 31, 2021, 59% of the Company’s global workforce was female and 52% of employees in supervisory roles were female; 54% of the U.S. workforce were people of color and 37% of employees in supervisory roles were people of color. *Competitive Pay/Benefits and Pay-for-Performance Philosophy:* Our pay-for-performance philosophy aligns our compensation with TTEC’s performance and with the returns that our stockholders receive from their investment in the Company. TTEC compensation programs are designed to provide appropriate incentives to attract, retain and motivate employees to achieve desired outcomes for our clients and our shareholders. Further, TTEC provides employees with a comprehensive benefits program that includes health insurance and important wellness programs, including nicotine abatement and mental health initiatives, as well as other programs that support employees’ physical, emotional, and financial health. *Workplace Safety:* The health and safety of our employees is one of our top priorities. TTEC’s success depends on protecting our employees, visitors, clients and facilities, and our goal is to provide everyone that works for us and with us, a safe and healthy work environment. TTEC employees are required to complete health and safety training when they join the Company and are encouraged to report any concerns they have about health and safety in their work environment. In 2020 we had to change how we work to address the COVID-19 pandemic and we took measures to transition most of our employees to a work from home environment. This arrangement continued through 2021. For sites that provided essential services and had to remain operational during the pandemic, we enhanced sanitation and safety protocols including increased cleaning frequency, additional signage, workstation reconfiguration for social distancing, personal protective equipment, contact tracing, shuttle services, and automated health attestations. During 2021 we also took pro-active steps to ensure that TTEC was prepared to comply with relevant vaccination mandates in jurisdictions where we do business. *Retention and Turnover:* Since TTEC business is people intensive, retention and reduction in turnover is a priority important to the financial results of our operations. Our turnover reduction efforts focus on market pay, trained management teams, development programs, career mobility, communication and the work environment and company culture that make an employee feel engaged, rewarded, appreciated, informed, and fulfilled in the organization. *Employee Engagement:* We continuously assess employee engagement by gathering employees’ sentiment (from frequent pulse surveys to annual engagement and eNPS surveys) that allow us to measure employee satisfaction, loyalty and measure our employees rational and emotional engagement with the organization. In 2021, about 35,000 of our employees responded to our annual engagement surveys. Based on these surveys our employee engagement ratings exceed Gallup's best-in-class engagement scores. ## Risk factors As filed, 63,309 characters. In addition to the other information presented in this Annual Report on Form 10-K, you should carefully consider the risks and uncertainties discussed in this section when evaluating our business. If any of these risks or uncertainties actually occur, our business, financial condition, and results of operations (including revenue, profitability and cash flows) could be materially and adversely affected, and the market price of our stock could decline. ### RISK RELATED TO OUR BUSINESS OPERATIONS AND OUR STRATEGY ### If we are unsuccessful in implementing our business strategy, our long-term business and financial prospects could be affected Our growth strategy is based on continuous diversification of our business beyond contact center customer care outsourcing to an integrated CXaaS platform that unites innovative and disruptive technologies, CX consulting, data analytics, client growth solutions, and customer experience focused system design and integration enabled through industry focused client relationships, continuous technology innovation, scaled delivery footprint, CX partner ecosystem, and strategic M&A. Failure to successfully implement our business strategy and effectively respond to changes in market dynamics may impact our financial results of operations. Our investments in technologies and integrated solution development may not lead to increased revenue and profitability. If we are not successful in creating value from these investments, there could be a negative impact on our operating results and financial condition. ### Our markets are highly competitive, and we may not be able to compete effectively The markets where we offer our services are highly competitive. Our future performance is largely dependent on our ability to compete successfully in markets we currently serve, while expanding into new, profitable markets. We compete with large multinational service providers; offshore service providers from lower-cost jurisdictions that offer similar services, often at highly competitive prices and aggressive contract terms; niche solution providers that compete with us in specific geographic markets, industry segments or service areas; companies that utilize new, potentially disruptive technologies or delivery models, including AI powered solutions; and in-house functions of large companies that use their own resources, rather than outsourcing the customer care and customer experience services we provide. Some of our competitors have greater financial or marketing resources than we do and, therefore, may be better able to compete. Further, the continuing trend of consolidation among business process outsourcing competitors may result in new competitors with greater scale, a broader footprint, better technologies, or efficiencies that may be attractive to our clients and impact our business. If we are unable to compete successfully and provide our clients with superior service and solutions at competitive prices, we could lose market share and clients to competitors, which would materially adversely affect our business, financial condition, and results of operations. ***If we cannot adapt our service offerings to changes in technology and market expectations, our ability to grow and our results of operations may be affected*** Our growth and profitability will depend on our ability to develop and adopt new technologies that expand our existing offerings by leveraging new trends in technology and cost efficiencies in our operations, while meeting rapidly evolving client expectations. As technology evolves, more tasks currently performed by our agents may be replaced by automation, robotics, AI, chatbots and other technology solutions, which puts our lower-skill tier one customer care offerings at risk. These technology innovations could potentially reduce our business volumes and related revenues, unless we are successful in adapting and deploying technology profitably. We may not be successful in anticipating or responding to our client expectations and interests in adopting evolving technology solutions, and their integration in our offerings may not achieve the intended enhancements or cost reductions. Services and technologies offered by our competitors may make our service offerings not competitive, or even obsolete, and may negatively impact our clients’ interest in our offerings. Our failure to innovate, maintain technological advantages, or respond effectively and timely to transformational changes in technology could have a material adverse effect on our business, financial condition, and results of operations. ***While our business has not been materially adversely affected by the COVID-19 pandemic to date, it may be impacted in the future due to the resurgence of the virus in different variants, reluctance of employees to return to brick-and-mortar sites, or impact of the pandemic on our clients’ businesses*** 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. These restrictions eased during the summer of 2020 and continued to eb and flow thereafter as the rates of COVID-19 infections, the emergence of new variants of the virus, the vaccine roll-outs and adoption impacted populations and healthcare directives in many parts of the world where TTEC does business. While TTEC was able to adjust to the impacts of the pandemic without material adverse impacts to our business through the end of 2021 and to date, we are unable to accurately predict the full impact the COVID-19 pandemic, and measures being taken to respond to its effects, will have on our results of operations, financial condition, liquidity, and cash flows due to numerous uncertainties in the future. Sporadic travel and other business restrictions triggered by COVID-19 related news around the world, changes in consumer behavior due to the pandemic and related unemployment, and supply chain distortions due to COVID-19 labor market disruptions are likely to continue to affect certain of our clients and their business volumes in 2022. Although our revenue from these clients did not decrease during the height of the pandemic as clients invested in their customer relationships to adjust to the changing business realities, there can be no assurance that this revenue will not be impacted on a going forward basis. We may also experience payment defaults or bankruptcy of some of our clients whose business has been disproportionately impacted by the pandemic, which could also have a material adverse effect on our results of operation. The COVID-19 pandemic, global government-mandated restrictions on business adopted to contain it, and growing inflation due to pandemic related government subsidies may result in a 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 are lifted. ### As our work from home delivery grows, our operations are subject to new untested risks In connection with the COVID-19 pandemic, TTEC expanded its work from home environment and transitioned approximately 80% of our global workforce to work remotely; and most employees that we hired in 2020 and 2021 were hired to work from home. Although some of these employees will return to conventional delivery sites and offices, once the pandemic is under control, many of our employees may continue to work remotely for the foreseeable future. Certain jurisdictions where we do business have regulations specific to work from home, which add complexity and cost to our service delivery. Some of the services we provide are subject to stringent regulatory requirements, and our inability to continuously observe how our agents deliver services when working from home may impact our compliance. Service delivery from home, in certain of our lines of business, may also expose TTEC, our clients, and their customers to a heighten risk of fraud because our ability to detect inappropriate behavior early is impacted by limitation in our inability to continuously observe employees as they deliver services. Employees who work from home rely on residential communication networks and internet providers that may not be as resilient as commercial networks and providers and may be more susceptible to service interruptions and cyberattacks than commercial systems; which may also make our enterprise information technology systems, when interfacing with these residential environments, vulnerable. Our business continuity and disaster recovery plans, which have been historically developed and tested with focus on centralized delivery locations, may not work effectively in a distributed work from home delivery model, where weather impacts, network and power grid downtime may be difficult to manage and where system redundancies are not possible. Over the years, TTEC established strong operational and administrative controls over our business; and our controls, designed for brick-and-mortar environment, may not always provide effective safeguards for a large-scale work from home delivery model. We may not be effective in timely updating our existing controls nor implementing new controls, tailored to the work from home environment. For these and other reasons, our clients may be unwilling to continue to allow us to deliver our services remotely. If we are unable to manage our work from home environment effectively to address these and other risks unique to remote service delivery or if we cannot maintain client confidence in our work from home environment, our reputation and results of operations may be impacted. Remote work by majority of our employee population for an extended period of time may impact TTEC culture, and employee engagement with our company, which could affect productivity and our ability to retain employees who are critical to our operations. As the impacts of the COVID-19 pandemic recede, some of our clients may wish to return to more traditional brick and mortar service delivery models. Meanwhile, our employees, many of whom prefer the new remote work model, may be unwilling to return to brick and mortar customer experience centers, thus disrupting our ability to deliver services. As our employees, our clients and the economy transition to post COVID-19 realities, we may be unable to accurately predict full impact on our operations, timely adjust our costs and service delivery patterns and that may impact our financial results of operations. ### Inflation and changes in the cost or availability of labor, energy, and other operational necessities could adversely affect our results of operations We are currently experiencing inflationary pressures on our operating costs. Competition for labor in many jurisdictions where we operate is becoming more acute and we have experienced increased labor costs as a result. Inflation could also lead to material increases in our other critical operating costs, such as cost of energy, third-party software and systems, real estate and other necessary supplies and services. Many of our long-term contracts do not allow for escalation of fees as our operating costs increase; and those that do allow for such escalations do not always allow increases at rates comparable to increases that we are experiencing now and likely to experience in the future. There is no assurance that we will be able to fully offset any cost increases through cost management or price increases, especially given the current highly competitive business process outsourcing and technology environments. Our clients are also experiencing inflationary pressures and faced with price increases may elect to take-over the delivery of some of the services that we historically perform for them. If we are not able to increase our pricing or otherwise offset our increased costs while maintaining our market share, our operating results and profitability could be adversely affected. ### Our inability to forecast demand, staffing levels, sites and work from home delivery mix could impact our financial results of operations Predicting customer demand, making timely staffing level decisions, investments in our customer experience centers and our work from home technologies are important to our successful execution and profitability maximization. We can provide no assurance that we will continue to be able to achieve or maintain desired customer experience center site capacity utilization and work from home delivery mix, because quarterly variations in client volumes and client sentiment toward work from home delivery, can have a material adverse effect on our delivery platform and our utilization rates. The use of site utilization rate as a meaningful metric for business process outsourcing organizations is undergoing a review in light of the changes to the business introduced by the COVID-19 pandemic and transition of customer engagement center employees to work from home. If our utilization rates are below expectations and we are unable to right size our real estate commitments in the short term, our high fixed costs of operation, may cause our financial conditions and results of operations to be adversely affected. The social distancing rules and other government mandates that continue during the sustained pandemic impacted the structure and configuration of our large-scale facilities, where employees work in close proximity to each other. These new regulatory requirements forced 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. ***A large portion of our revenue is generated from a limited number of clients and the loss of one or more of these clients could adversely affect our business*** We rely on strategic, long-term relationships with large, global companies in targeted industries and certain agencies of the United States and state and local governments. As a result, we derive a substantial portion of our revenue from relatively few clients. Our five and ten largest clients collectively represented 38% and 49% of our revenue in 2021, with one client representing over 10% of our revenue. While we have multiple engagements with our largest clients and all contracts are unlikely to terminate at the same time, the contracts with our five largest clients expire between 2022 and 2023 and there can be no assurance that these contracts will continue to be renewed at all or be renewed on favorable terms. While our ongoing sales and marketing activities aim to add new opportunities with existing and new commercial and public sector clients, there can be no assurances that such additional work can be secured or that it would yield financial benefits comparable to expiring contracts. The loss of all or part of major clients’ business could have a material adverse effect on our business, financial condition, and results of operations, if the loss of revenue is not replaced with profitable business from other clients. We serve clients in industries that have historically experienced a significant level of consolidation. If one of our clients is acquired (including by another of our clients) our business volumes and revenue may materially decrease due to the termination or phase out of an existing client contract, volume discounts, or other contract concessions which could have an adverse effect on our business, financial condition, and results of operations. ***If we cannot recruit, hire, train, and retain qualified employees to respond to client demands at the right price point, our business will be adversely affected*** Our business is labor intensive and our ability to recruit and train employees with the right skills, at the right price point, and in the timeframe required by our client commitments is critical to achieving our growth objectives. Demand for qualified personnel with multi-language capabilities and fluency in English may exceed supply. While we invest in employee retention, our industry is known for high employee turnover and we are continuously recruiting and training replacement staff. We sign multi-year client contracts that are priced based on prevailing labor rates in jurisdictions where we deliver services. In the United States, however, our business is confronted with a patchwork of ever-changing minimum wage, mandatory time off, paid medical and pandemic quarantine leaves, and rest and meal break laws at the state and local levels. As these jurisdiction-specific laws change with little notice or grace period for transition, we often have no opportunity to adjust and change how we do business or pass cost increases to our clients. The United States and other governments in jurisdictions where we hire employees adopted income support measures aimed at supporting citizens who lost their jobs due to COVID-19 pandemic. Although most of these support measures terminated in 2021, prolonged unemployment provided potential TTEC employment prospects with an opportunity to consider self-employment, employment outside of customer experience industry, or caused them to reconsider employment altogether. These comprehensive changes in many labor markets critical for our business may make it more difficult for us to hire a sufficient number of employees to deliver our contractual commitments. Inflationary wage pressures in many jurisdictions where we hire may make it difficult for TTEC to meet our contractual commitments on multi-year client contracts that do not have wage escalation provisions or may make such contracts not profitable. The frequent changes in the laws, inconsistencies in laws across different jurisdictions, state and federal $15/hour+ wage and right to organize initiatives, supported by the Biden administration and many state governments, may result in higher costs, lower contract profitability, higher turnover, and reduced operational efficiencies, which could, in the aggregate, have material adverse impact on our results of operations. ***Our sales cycles for new client relationships, for new lines of business with existing clients, and for public sector clients can be long, which results in a long lead time before we receive revenue*** We often face a long selling cycle to secure contracts with new clients or contracts for new lines of business with existing clients. When we are successful in securing a new engagement, it is generally followed by a long implementation period when clients must give notice to incumbent service providers or transfer in-house operations to us. There may also be a long ramp up period before we commence our services, and for certain contracts we receive no revenue until we start performing the work. If we are not successful in obtaining contractual commitments after the initial prolonged sales cycle, or in maintaining the contractual relationship for a period of time necessary to offset new project investment costs and appropriate return on that investment, the investments may have a material adverse effect on our results of operations. Our growth strategy includes the expansion of our offerings to public sector clients by contracting with new clients and through acquisitions. The procurement process for government entities is often more challenging than contracting in the private sector and is different from our standard Engage and Digital business practices, including upfront investment to position for opportunities and respond to requests for proposal. If we are unable to manage our public sector business development effectively and are not successful in winning work, despite the investments we make, our public sector work can adversely impact our results of operations. ### Our growth of operations and geographic footprint expansion could strain our resources and negatively impact our business We plan to continue growing our business through the growth of clients’ wallet share, increasing sales efforts, geographic expansion, and strategic acquisitions, while maintaining tight controls on our expenses and overhead. Lean overhead functions combined with significant growth targets may place a strain on our management systems, infrastructure, and resources, resulting in internal control failures, missed opportunities, and staff attrition. If we fail to manage our growth effectively, our business, financial condition, and results of operations could be adversely affected. ***We routinely consider strategic transactions and may enter into such transactions any time and such transactions may negatively impact our business and create unanticipated risks*** We continuously analyze strategic opportunities that we believe could provide value for our stockholders, and have acquisitions, divestitures, and potential business combinations in various stages of active review. There can be no assurances, however, that we will be able to identify strategic transaction opportunities that complement our strategy and are available at valuation levels accretive to our business. Even if we are successful in identifying and executing these transactions, they may subject our business to risks that could impact our results of operation, including: - Inability to integrate acquired companies effectively and realize anticipated synergies and benefits from the acquisitions; - Diversion of management’s attention to the integration of the acquired businesses at the expense of delivering results for the legacy business; - Inability to appropriately scale critical resources to support the business of the expanded enterprise and other unforeseen challenges of operating the acquired business as part of TTEC’s operations; - Inability to retain key employees of the acquired businesses and/or inability of such key employees to be effective as part of TTEC operations; - Impact of liabilities or ethical issues of the acquired businesses undiscovered or underestimated as part of the acquisition due diligence; - Failure to realize anticipated growth opportunities from a combined business, because existing and potential clients may be unwilling to consolidate business with a single service provider or to stay with the acquirer post acquisition; - Impacts of cash on hand and debt incurred to finance acquisitions, thus reducing liquidity for other significant strategic objectives; - Inadequate or ineffective internal controls, disclosure controls, corruption prevention policies, human resources and other key policies and practices of the acquired companies; and - Reduced revenue and income and resultant stock price impact due to divestiture transactions. While we consider these transactions to improve our business, financial results, and shareholder value over time, there can be no assurance that our goals will be realized. ### Increases in the cost of third-party communication and data services or significant interruptions in such services could adversely affect our business Our business is significantly dependent on internet, data, and telephone services provided by various domestic and foreign third-party communication companies. Any disruption of these services could adversely affect our business. We have taken steps to mitigate our exposure to service disruptions by investing in complex and multi-layered redundancies focused on our customer experience center locations, and we can transition service delivery among our different customer experience centers around the world. Despite these efforts, and especially in light of the recent transition of a large portion of our delivery to a work from home environment where conventional redundancies strategies are ineffective, there can be no assurance that the redundancies we have in place would be sufficient to maintain operations without disruption. Our inability to obtain third-party communication and data services at favorable rates could negatively affect our results of operations. Where possible, we have entered into long-term contracts with various providers to mitigate short term rate increases and fluctuations. There is no obligation, however, for the vendors to renew their contracts with us, or to offer the same or lower rates in the future, and such contracts may be subject to termination or modification for various reasons outside of our control. A significant increase in the cost of third-party communication services that is not recoverable through an increase in the price of our services could adversely affect our business. ***The current trend to outsource customer care may not continue and the prices that clients are willing to pay for the services may diminish, adversely affecting our business*** Our growth depends, in large part, on the willingness of our clients and potential clients to outsource customer care and management services to companies like TTEC. There can be no assurance that the customer care outsourcing trend will continue; and our clients and potential clients may elect to perform in-house customer care and management services that they currently outsource. Reduction in demand for our services and increased competition from other providers and in-house service alternatives could create pricing pressures and excess capacity that would have an adverse effect on our business, financial condition, and results of operations. ### Our profitability could suffer if our cost-management strategies are unsuccessful Our ability to improve or maintain our profitability is dependent on our ability to engage in continuous management of our costs. Our cost management strategies include optimizing the alignment between the demand for our services and our resource capacity, including our customer experience centers’ utilization; investment in our work from home environment; the costs of service delivery; the cost of sales and general and administrative costs as a percentage of revenues; and the use of process automation for standard operating tasks. Our ongoing cost management measures must be balanced against the need for investment to support our growth, technology transformation in our business, and increasing cybersecurity threats. The cost management measures are also being impacted by inflationary pressures in the economies where we run our business. If we are not effective in managing our operating and administrative costs in response to changes in demand and pricing for our services, if we manage our costs at the expense of investments necessary to grow and protect our business, or if we are unable to absorb or pass on to our clients the increases in our costs of operations, our results of operations could be materially adversely affected. ***Our profitability may be adversely affected if we are unable to expand and maintain service delivery in countries with stable wage rates and launch operations in new delivery locations required by our clients*** Our business is labor-intensive and therefore cost of wages, benefits, and related taxes constitute a large component of our operating expenses. As a result, our growth is dependent upon our ability to maintain and expand our operations in cost-effective locations, in and outside of the United States. Our clients often dictate locations from where they wish for us to serve their customers, such as “near shore” jurisdictions located in close proximity to the U.S., to a headquarter location of the client, or in specific locations elsewhere in the world. There is no assurance that we will be able to effectively launch operations in jurisdictions which meet our cost-effectiveness, labor availability, and security standards. Our inability to expand our operations to such locations, however, may impact our ability to secure new clients and additional business from existing clients, and could adversely affect our growth and results of operations. ### Intellectual property infringement may adversely impact our ability to innovate and compete Our intellectual property may not always receive favorable treatment from the United States Patent and Trademark Office, the European Patent Office, or similar foreign intellectual property adjudication and registration agencies; and our “patent pending” intellectual property may not receive a patent or may be subject to prior art limitations. The lack of an effective legal system in certain countries where we do business or lack of commitment to protection of intellectual property rights, may prevent us from being able to defend our intellectual property and related technology against infringement by others, leading to a material adverse effect on our business, results of operations and financial condition. As our reliance on advance technology for services that we provide increases, so is the risk of infringement or claims of infringement of intellectual property rights of others. If we are not successful in defending against such claims, our results of operations may be impacted. ### We have incurred and may in the future incur impairments to goodwill, long-lived assets or strategic investments As a result of past acquisitions, as of December 31, 2021, we have approximately $739.5 million of goodwill and $212.3 million of intangible assets included on our Consolidated Balance Sheet. We review our goodwill and intangible assets for impairment at least once annually, and more often when events or changes in circumstances indicate the carrying value may not be recoverable. We perform an assessment of qualitative and quantitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the goodwill or intangible asset is less than its carrying amount. In the event that the book value of goodwill or intangible asset is impaired, such impairment would be charged to earnings in the period when such impairment is determined. We have recorded goodwill and intangible impairments in the past, and there can be no assurance that we will not incur impairment charges in the future that could have material adverse effects on our financial condition or results of operations. ### RISKS RELATED TO OUR TECHNOLOGY ***Cyberattacks, cyber fraud, and unauthorized information disclosure could harm our reputation, and result in liability and service outages, any of which could adversely affect our business and results of operations*** Our business involves the use, storage, and transmission of information about our clients, their customers, and our employees. We also monitor and support information systems for certain clients through cloud-based and on-client-premises managed services model. While we believe that we take reasonable measures to protect the security of and unauthorized access to our systems and to our clients’ systems, and the privacy of personal and proprietary information that we access and store, our security controls over our systems have not prevented and in the future may not prevent improper access to these systems or disclosure of information stored on these systems. Such unauthorized access or disclosure could subject TTEC to significant liability under relevant law or our contracts and could harm our reputation, resulting in impacts on our results of operations, loss of future revenue and business opportunities. These risks may further increase as our business model now includes higher percentage of work from home delivery, in addition to our traditional delivery through customer experience centers. In recent years, there have been an increasing number of high-profile security breaches at companies and government agencies, and security experts have warned about the growing risks of hackers, cybercriminals and state actors launching a broad range of ransomware, data exfiltration, and other cyberattacks targeting information technology systems. Information security breaches, computer viruses, service interruption, loss of business data, DDoS (distributed denial of service) attacks, ransomware and other cyberattacks on any of our systems or on our clients’ systems that we manage have or in the future could disrupt the normal operations of our customer experience centers, our remote customer experience service delivery, our cloud platform digital offerings, our clients’ on-premise managed service offerings, and our enterprise services, impeding our ability to provide critical services to our clients. Techniques used by cyber criminals to obtain unauthorized access, disable or degrade services, or sabotage systems evolve frequently and may not immediately be detected, and we may be unable to implement adequate preventative measures. For example, on September 12, 2021, TTEC experienced a cybersecurity incident that involved our information systems. Certain TTEC systems and data became encrypted; and certain TTEC data was exfiltrated or destroyed. The incident resulted in a temporary disruption to the Engage business segment’s client support environment TTEC restored and rebuilt many of the systems and data impacted in the incident. TTEC recovered exfiltrated data from the unauthorized parties, and while we currently have no reasons to believe that such data was publicly released, no assurance can be made that it was not released or that it may not be released in the future. We provided notices to those whose data was involved in the incident and are providing customary credit and other support to individuals involved. We also provided appropriate regulatory notices in connection with the incident. As a result of the incident, some clients reduced or terminated services we are providing to them, while some opted to temporarily suspend our access to their networks as a security precaution until they were satisfied that the incident was contained (see Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding the security incident). As another example, on July 2, 2021, our subsidiary Avtex Solutions, LLC (“Avtex”) and some of its clients experienced a ransomware attack as part of a global supply chain compromise that impacted thousands of companies worldwide and is believed to have been orchestrated by a Russian-based REvil cybercriminal group. The attack exploited a vulnerability in a Kaseya VSA remote monitoring software that Avtex utilized in its managed services solution (“Kaseya REvil attack”). TTEC systems and TTEC’s client support environments, outside of Avtex, were not impacted by the Kaseya REvil attack. TTEC recovered Avtex’s operating environment and restored Avtex to full operating capacity by July 3, 2021, and supported its clients in their recovery While we believe that we have remediated the immediate consequences of these cybersecurity incidents, cybersecurity events may have cascading effects that unfold over time and result in additional costs, including costs associated with investigations, government enforcement actions, regulatory investigations, fines and penalties, contractual claims, performance penalties, litigation, financial judgement or settlements in excess of insurance, disputes with insurance carriers concerning coverage, loss of clients’ trust, future business cancelations and other losses. Any perception by existing and prospective clients that our systems or the information system environments that we support for our clients are not secure could result in a material loss of business and revenue and damage our reputation and competitiveness. As others in many industries, we are experiencing an increase in frequency of cybersecurity and cyber fraud attempts, including phishing attempts, and so-called “social engineering” attacks, which typically seek unauthorized access into the environment, money transfers or unauthorized information disclosure. We actively train our employees to recognize these attacks and have implemented proactive risk mitigation measures to curb them. There are no assurances, however, that these attacks, which are growing in sophistication and frequency, may not deceive our employees, resulting in a material loss and impacts to our operations and back-office environments. While we believe we have taken reasonable measures to protect our systems and processes from unauthorized intrusions and cyber-fraud, we cannot be certain that advances in cyber-criminal capabilities, discovery of new system vulnerabilities, and attempts to exploit such vulnerabilities will not compromise or breach the technology protecting our systems and the information that we manage and control, which could result in damage to our systems, our reputation, and our profitability. ***If our cloud platform experiences disruptions due to technology failures or cyberattacks and if we fail to correct such impacts promptly, our business will be materially impacted*** Our cloud platforms and third-party software and systems that we use to serve our clients are complex and may, from time to time have service interruptions, contain design defects, configuration or coding errors, and other vulnerabilities that may be difficult to detect or correct, and which may be outside of our control. Although our commercial agreements limit our exposure from such occurrences, they may not always effectively protect us against claims in all jurisdictions and against third-party claims. If our clients’ business is damaged, our reputation could suffer, we could be subject to contract termination and payments for damages, adversely affecting our business, our reputation, our results of operations and financial condition. ### RISKS RELATED TO OUR INTERNATIONAL OPERATIONS ### We face special risks associated with international operations An important component of our business strategy is service delivery outside of the United States and our continuing international expansion. During 2021, we derived approximately 33% of our revenue from operations outside of the U.S. Conducting business abroad is subject to a variety of risks, including: - inconsistent regulations, licensing requirements, prescriptive labor rule, corrupt business practices, restrictive export control and immigration laws may result in inadvertent violation of laws that we may not be able to immediately detect or correct; and may increase our cost of operations as we endeavor to comply with laws that differ from one country to another; - uncertainty of tax regulations in countries where we do business may affect our costs of operation; - longer payment cycles could impact our cash flows and results of operations; - political and economic instability and unexpected changes in regulatory regimes could adversely affect our ability to deliver services overseas and our ability to repatriate cash; - the withdrawal of the United Kingdom from the European Union (known as “Brexit”) added complexity and cost to provision of services and movement of people across UK, Ireland and continental members of the European Union, which could impact our European operations and our operations in the UK; - currency exchange rate fluctuations, restrictions on currency movement, and impact of international tax laws could adversely affect our results of operations, if we are forced to maintain assets in currencies other than U.S. dollars, while our financial results are reported in U.S. dollars; - infrastructure challenges and lack of sophisticated disaster and pandemic preparedness in some countries where we do business may impact our service delivery; and - terrorist attacks or civil unrest in some of the regions where we do business, and the resulting need for enhanced security measures may impact our ability to deliver services, threaten the safety of our employees, and increase our costs of operations. While we monitor and endeavor to mitigate in a timely manner the relevant regulatory, geopolitical, and other risks related to our operations outside of the United States, we cannot assess with certainty what impact such risks are likely to have over time on our business, and we can provide no assurance that we will always be able to mitigate these risks successfully and avoid adverse impact on our business and results of operations. ### Our delivery model involves geographic concentration outside of the United States exposing us to significant operational risks Our customer engagement delivery and our back-office functions are concentrated in the Philippines, Mexico, India, and Bulgaria. Our business model is dependent on our ability to locate at least some of our customer engagement service delivery and enterprise support functions in low-cost jurisdictions around the globe. Our dependence on our customer engagement centers and enterprise support functions in the Philippines and Mexico, which are subject to frequent severe weather, natural disasters, health and security threats, and arbitrary government actions represents a particular risk. Natural disasters (floods, winds, and earthquakes), terrorist attacks, pandemics, large-scale utilities outages, telecommunication and transportation disruptions, labor or political unrest, and restriction on repatriation of funds at some of these locations may interrupt or limit our ability to operate or may increase our costs. Our business continuity and disaster recovery plans, while extensive, may not be effective, particularly if catastrophic events occur. For these and other reasons, our geographic concentration in locations outside of the United States could result in a material adverse effect on our business, financial condition and results of operations. Although we procure business interruption insurance to cover some of these exposures, adequate insurance may not be available on an ongoing basis for a reasonable price. ### We may face new risks as we expand our operations into countries where we have no prior experience At times, our clients ask us to establish new operations quickly in countries where we previously have not done business. New market entry is fraught with operational, security, regulatory compliance, safety, and corruption risks, and these risks are exacerbated when new operations are launched quickly. TTEC has extensive experience in new market entry around the globe, but there can no assurances that new operations in new countries would not result in financial loses and operational instability. If we elect not to follow our clients to markets where they wish to have services, we may lose lucrative contracts, including contracts in multiple jurisdictions where we have experience, to competitors who are already established in the markets new to us, which would impact our financial results of operations. ### Our financial results may be adversely impacted by foreign currency exchange rate risk Many contracts that we service from customer engagement centers or employees working from home based outside of the United States are typically priced, invoiced, and paid in U.S. and Australian dollars, the British pound or Euros, while the costs incurred to deliver these services are incurred in the functional currencies of the country of operations. The fluctuations between the currencies of the contract and operating currencies present foreign currency exchange risks. Furthermore, because our financial statements are denominated in U.S. dollars, but approximately 14% of our revenue is derived from contracts denominated in other currencies, our results of operations could be adversely affected if the U.S. dollar strengthens significantly against foreign currencies. While we hedge at various levels against the effect of exchange rate fluctuations, we can provide no assurance that we will be able to continue to successfully manage this foreign currency exchange risk and avoid adverse impacts on our business, financial condition, and results of operations. ### RISKS RELATED TO LEGAL, COMPLIANCE, REGULATORY MATTERS AND CONTRACTING PRACTICES ### Our results of operations may be impacted by changes in laws, our failure to comply with laws and regulations relevant to our business Our business is subject to extensive, and at times conflicting, regulations by the United States, state, local, foreign national, and provincial authorities relating to confidential client and customer data, data privacy, customer communications, telemarketing practices, licensed healthcare, financial services, collections, and gaming/gambling support activities, trade restrictions and sanctions, tariffs, import/export controls, taxation, labor regulations, wages and severance, health care requirements, disclosure obligations, and immigration among other areas. As we provide services to clients’ customers residing in countries where we do not have operations on the ground, we may also be subject to laws and regulations of these countries. Costs and complexity of compliance with existing and future regulations that could apply to our business may adversely affect our profitability; and if we fail to comply with these mandates, we could be subject to contractual, civil and criminal liability, monetary damages and fines. Enforcement actions by regulatory agencies could also materially increase our costs of operations and impact our ability to serve our clients. Adverse changes in laws or regulations that impact our business may negatively affect the sale of our services, slow the growth of our operations, or mandate changes to how we deliver our services, including our ability to use offshore resources. These changes could threaten our ability to continue to serve certain markets. ***Uncertainty and inconsistency in privacy and data protection laws that impact our business, failure to comply with contractual obligations related to privacy, and high cost of compliance may impact our ability to deliver services and our results of operations*** During the last several years, there has been a significant increase in data protection and privacy regulations and enforcement activity in many jurisdictions where we and our clients do business. These new regulations are often complex and at times they impose conflicting requirements among different jurisdictions that we serve. For example, the European Union’s General Data Protection Regulation (GDPR) imposes data protection requirements for controllers and processers of personally identifiable information collected in Europe, while the California Consumer Privacy Protection Act (CCPA), and other similar acts in Illinois, and New York, and Massachusetts in the United States imposed similar regulations protecting state residents with a different reach. Well-publicized security breaches have led to enhanced government and regulatory scrutiny of the measures being taken by companies to protect against cyberattacks and may in the future result in heightened cybersecurity requirements, including additional regulatory expectations for oversight of vendors and service providers. Unauthorized disclosure of sensitive or confidential client and their customers data, whether through breach of our systems or otherwise, could expose us to costly litigation and cause us to lose clients. For example, the U.S. government may impose new federal data privacy and regulation mandates as part of Biden Administration agenda in 2022. Failure to comply with all privacy and data protection laws that are relevant to different parts of our business may result in legal claims, significant fines, sanctions, or penalties, or may make it difficult for us to secure business or efficiently serve our clients. Compliance with these evolving regulations may require significant investment which would impact our results of operations. ### Wage and hour class action lawsuits targeting our business can expose us to costly litigation and damage our reputation The contact center industry in the United States is a target of plaintiffs’ law firms that specialize in wage and hour class action lawsuits against large employers by soliciting potential plaintiffs including current and former employees, with billboard and social media advertising. The plaintiff law firms seek large settlements based entirely on the number of potential plaintiffs in a class, whether or not there is any basis for the claims that they make on behalf of their clients, most of whom do not believe themselves to be aggrieved nor seek recourse until solicited. The cost of defending litigation for these large class action lawsuits has been and will continue to be significant. Because TTEC hires large numbers of employees in the United States and our industry has large turnover, the potential size of plaintiffs’ classes in these wage and hour lawsuits can be considerable, creating a material impact on the cost of operations. As we continue to hire more employees in the United States, and expand our operations to California, where the number of wage and hour class action lawsuits is larger than in many other states combined and where verdicts in these lawsuits are very large, our results of operations may be material impacted by these lawsuits. ### Legislation discouraging offshoring of service by United States companies or making such offshoring difficult could significantly affect our business A perceived association between offshore service providers and the loss of jobs in the United States has been a focus of political debate in recent years. As a result, current and prospective clients may be reluctant to hire offshore service providers like TTEC to avoid negative perceptions and regulatory scrutiny. If they seek customer care and management capacity onshore that was previously available to them through outsourcers outside of the United States, they may elect to perform these services in-house instead of outsourcing the services onshore. Possible tax incentives for U.S. businesses to return offshored services to the United States could also impact our clients’ continuing interest in using our services. Legislation aimed to expand protections for U.S. and European based customers from having their personal data accessible outside of their home jurisdictions, could also impact offshored outsourcing opportunities by requiring notice and consent as a condition for sharing personal identifiable information with foreign service delivery personnel. Further, the U.S. government’s reputation for use of individuals’ personal information for national security purposes without individuals’ consent, caused restrictions on transfer to the United States for processing of customers and customers’ data in several countries (e.g., Canada). Any material changes in current trends among our clients to use services outsourced and delivered offshore or to transfer information outside of the home country for processing would materially impact our business and results of operations. ***Increases in income tax rates, changes in income tax laws or disagreements with tax authorities could adversely affect our business, financial condition or results of operations*** We are subject to income taxes in the United States and in certain foreign jurisdictions in which we operate. Increases in income tax rates or other changes in income tax laws in any particular jurisdiction could reduce our after-tax income from such jurisdictions and could adversely affect our business, financial condition or results of operations. Our operations outside the U.S. generate a significant portion of our income and many of the other countries in which we have significant operations, have recently made or are actively considering changes to existing tax laws that could significantly impact how U.S. multinational corporations are taxed on foreign earnings. The Biden administration has called for changes to fiscal and tax policies, which may include comprehensive tax reform. Many of these proposed and enacted changes to the taxation of our activities could increase our effective tax rate or adversely affect our business, financial condition, or results of operations. There are no assurances that we will be able to implement effective tax planning strategies that are necessary to optimize our tax position following changes in tax laws globally. If we are unable to implement a cost-effective contracting structure, our effective tax rate and our results of operations would be impacted. Our ability to use our net operating losses or federal tax credits to offset future taxable income may be subject to certain limitations. ### If the transfer pricing arrangements we have among our subsidiaries are determined to be inappropriate, our tax liability may increase We have transfer pricing arrangements among our subsidiaries in relation to various aspects of our business, including operations, marketing, sales, and delivery functions. The United States, Australia, Mexico, India, Philippines and other transfer pricing regulations in other countries where we operate, require that cross-border transactions between affiliates be on arm’s-length terms. We carefully consider the pricing among our subsidiaries to assure that they are at arm’s-length. If tax authorities were to determine that the transfer prices and terms we have applied are not appropriate, we may incur increased tax liability, including accrued interest and penalties, which would cause material increase in our tax liability, thereby impacting our profitability and cash flows, and potentially resulting in a material adverse effect on our operations, effective tax rate and financial condition. ### Contract terms typical in our industry can lead to volatility in our revenue and in our margins Many of our TTEC Engage contracts require clients to provide monthly forecasts of volumes, but no guaranteed or minimum volume or revenue levels. Such forecasts vary from month to month, which can impact our staff and space utilizations, our cost structure, and our profitability. Many of our contracts have termination for convenience clauses with short notice periods and no guarantees of minimum revenue levels or profitability, which could have a material adverse effect on our results of operation. If a client terminates a contract or materially reduces customer interaction volumes, it could have a material adverse effect on our results of operations and makes it harder to make projections. We may not always offset increased costs with increased fees under long-term contracts. The pricing and other terms of our client contracts, particularly on our long-term service agreements, are based on estimates and assumptions we make at contact inception. These estimates reflect our best judgments regarding the nature of the engagement and our expected costs to provide the contracted services, but these judgments could differ from actual results, especially as economies where we do business go through post-COVID-19 pandemic adjustments and inflationary pressures. Not all our contracts allow for escalation of fees as our cost of operations increase. Moreover, those that do allow for such escalations do not always allow increases at rates comparable to increases that we experience due to rising minimum wage costs, related payroll cost increases, and increased costs of work from home environment, not offset by reduction in physical footprint due to long term lease commitments. If and to the extent we do not negotiate long-term contract terms that provide for fee adjustments to reflect increases in our cost-of-service delivery, our business, financial conditions, and results of operation could be materially impacted. We provide service level commitments to certain customers. If we do not meet these contractual commitments, we could be obligated to provide credits or refunds or face contract terminations, which could adversely affect our revenue and harm our reputation. Our pricing depends on effectiveness of our level of effort forecasts. Pricing of our services in our digital business is contingent on our ability to accurately forecast the level of effort and cost necessary to deliver our services, which is data dependent and can be inaccurate. The errors in level of effort estimations could yield lower profit margins or cause projects to become unprofitable, resulting in adverse impacts on our results of operations. ### RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK ***Exclusive forum for dispute resolution provisions in our bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for their disputes*** Our bylaws designate Delaware’s state courts as the exclusive forum for most disputes between us and our stockholders, including federal claims and derivative actions. We believe that this provision may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges who are particularly experienced in resolving corporate disputes, efficient administration of cases relative to other forums, and protection against the burdens of multi-forum litigation. This choice of forum provision does not have the effect of causing our stockholders to waive our obligation to comply with the federal securities laws. This bylaw forum selection provision is not uncommon for companies incorporated in the State of Delaware, but it could limit our stockholders’ ability to select a more favorable judicial forum for disputes with us, our directors, officers or other employees and may therefore discourage litigation. It is important to note, however, that our choice of forum provision would (i) not be enforceable with respect to any suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, and (ii) have uncertain enforceability with respect to claims under the Securities Act of 1933, as amended. ***Delaware law and certain provisions in our certificate of incorporation and bylaws might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the price of our common stock*** Our restated certificate of incorporation and amended and restated bylaws contain provisions that could depress the market price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions, among other things: - authorize the issuance of "blank check" preferred stock that our board of directors could use to implement a stockholder rights plan; - provide that special meetings of our stockholders may be called only by our Chairman, President or our board of directors; - establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; - permit the board of directors to establish the number of directors; and - provide that the board of directors is expressly authorized to make, alter or repeal our amended and restated bylaws. In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock. Further, as described below, a majority of our stock is held by a single controlling stockholder, which means that a change in control of our company or the composition of the Board of Directors will not occur without the approval of the controlling stockholder. ***Our Chairman and Chief Executive Officer controls a majority of our stock and has control over all matters requiring action by our stockholders; and his interest may conflict with the interests of our other stockholders*** Kenneth D. Tuchman, our Chairman and Chief Executive Officer, directly and beneficially owns approximately 59% of TTEC’s common stock. As a result, Mr. Tuchman could and does exercise significant influence and control over our business practices and strategy. As long as Mr. Tuchman continues to beneficially own more than 50% of our common stock he will be able to elect all of the members of our Board of Directors, effect stockholder actions by written consent in lieu of stockholder meetings, and determine the outcome of all matters submitted to a vote of our stockholders, including matters involving mergers or other business combinations, the acquisition or disposition of assets, the occurrence of indebtedness, the issuance of any additional shares of common stock or other equity securities and the payment of dividends on our common stock. The interest of Mr. Tuchman may not always coincide with the interest of our other stockholders, and Mr. Tuchman may seek to cause the company to take actions that might involve risks to our business or adversely affect us or our other stockholders. For example, Mr. Tuchman’s control of TTEC could delay or prevent a change of control, merger, consolidation, or sale of all or substantially all our assets that our other stockholders support, or conversely, Mr. Tuchman’s control could result in the consummation of a transaction that our other stockholders do not support. As a controlling stockholder, Mr. Tuchman is generally entitled to vote his shares as he sees fit, which may not always be in the interest of our other stockholders. This concentrated control could also discourage parties from acquiring our common stock or initiating potential mergers, takeovers or other change of control transactions, which could depress the trading price of our common stock. ### Our status as a “controlled company” could make our common stock less attractive to some investors or otherwise harm our stock price Because we qualify as a “controlled company” under the listing rules of the NASDAQ Stock Market, we are not required to have a majority of our Board of Directors be independent, nor are we required to have an independent compensation committee or an independent nominating committee of the Board. While the Company has elected not to avail itself of these governance exceptions available to “controlled companies,” in the future the Company may elect to do so. Accordingly, because of our “controlled company” status, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for NASDAQ-listed companies. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price. ## Properties As filed, 2,183 characters. Our corporate headquarters are located in Englewood, Colorado. In addition to our headquarters and the customer engagement centers used by our Engage segment discussed below, we also maintain sales and consulting offices in several countries around the world which serve our Digital segment. As of December 31, 2021 we operated 71 customer engagement centers that are classified as follows: - *Multi-Client Center —* We lease space for these centers and serve multiple clients in each facility; - *Dedicated Center —* We lease space for these centers and dedicate the entire facility to one client; and - *Managed Center —* These facilities are leased or owned by our clients and we staff and manage these sites on behalf of our clients in accordance with facility management contracts. As of December 31, 2021, our customer engagement centers were located in the following countries: | ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ Multi-Client Centers | ​ ​ ​ ​ | ​ ​ ​ Dedicated Centers | ​ ​ ​ ​ | ​ ​ ​ Managed Centers | ​ ​ ​ ​ | ​ Total Number of Delivery Centers | ​ | | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | | Australia | | — | ​ | 3 | ​ | — | | 3 | ​ | | Brazil | | 2 | ​ | — | ​ | — | | 2 | ​ | | Bulgaria | | 2 | ​ | — | ​ | — | | 2 | ​ | | Canada | | 2 | ​ | — | ​ | 1 | | 3 | ​ | | Greece | ​ | 1 | ​ | — | ​ | — | ​ | 1 | ​ | | Germany | | — | ​ | — | ​ | 1 | | 1 | ​ | | India | | 1 | ​ | — | ​ | — | | 1 | ​ | | Mexico | | 3 | ​ | — | ​ | — | | 3 | ​ | | Philippines | | 15 | ​ | — | ​ | — | | 15 | ​ | | Poland | ​ | 1 | ​ | — | ​ | — | ​ | 1 | ​ | | South Africa | | — | ​ | — | ​ | 1 | | 1 | ​ | | Thailand | ​ | — | ​ | — | ​ | 1 | ​ | 1 | ​ | | United Kingdom | | 1 | ​ | — | ​ | 2 | | 3 | ​ | | United States of America | | 20 | ​ | 5 | ​ | 9 | | 34 | ​ | | Total | | 48 | | 8 | | 15 | | 71 | ​ | The leases for our customer engagement centers have remaining terms ranging from one to 12 years and generally contain renewal options. We believe that our existing customer engagement centers are suitable and adequate for our current operations, and we have plans to build additional centers to accommodate future business. ## Legal proceedings As filed, 865 characters. From time to time, the Company has been involved in legal actions, both as plaintiff and defendant, which arise in the ordinary course of business. The Company accrues for exposures associated with such legal actions to the extent that losses are deemed both probable and reasonably estimable. To the extent specific reserves have not been made for certain legal proceedings, their ultimate outcome, and consequently, an estimate of possible loss, if any, cannot reasonably be determined at this time. Based on currently available information and advice received from counsel, the Company believes that the disposition or ultimate resolution of any current legal proceedings, except as otherwise specifically reserved for in its financial statements, will not have a material adverse effect on the Company’s financial position, cash flows or results of operations. ## Management's discussion and analysis As filed, 61,189 characters. ### Executive Summary TTEC Holdings, Inc. (“TTEC”, “the Company”, “we”, “our” or “us”; pronounced “T-TEC”) is a leading global customer experience as a service (“CXaaS”) partner for many of the world’s most iconic and disruptive brands. TTEC designs, builds, orchestrates, and delivers seamless digitally enabled customer experiences that are designed to increase brand value, customer loyalty, revenue, and profitability through personalized, outcome-based interactions. We help clients improve their customer satisfaction while lowering their total cost to serve by combining innovative digital solutions with service capabilities that deliver a frictionless customer experience (“CX”) across different channels and phases of the customer lifecycle. The Company operates and reports its financial results of operation through two business segments: TTEC Digital and TTEC Engage. - **TTEC Digita**l is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting, and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of customer relationship management (“CRM”), data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes. - **TTEC Engage** provides the digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including artificial intelligence (“AI”) operations, content moderation, and fraud management services. TTEC Digital and TTEC Engage strategically come together under our unified offering, Humanify® 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 CX offerings, including messaging, AI, machine learning (“ML”), robotic process automation (“RPA”), analytics, cybersecurity, CRM, knowledge management, journey orchestration, and traditional voice solutions. Our end-to-end CXaaS platform differentiates us from competitors by combining design, strategic consulting, technology, data analytics, process optimization, system integration, and operational excellence along with our decades of industry know-how. This unified offering is value-oriented, outcome-based and delivered to large enterprises, governments, and hypergrowth companies on a global scale. During 2021, the TTEC global operating platform delivered onshore, nearshore, and offshore services in 20 countries on six continents -- the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Costa Rica, Germany, Greece, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, Singapore, South Africa, Thailand, and the United Kingdom with the help of 65,000 consultants, technologists, and CX professionals. Our revenue for fiscal 2021 was $2.273 billion, approximately $414 million, or 18% which came from our TTEC Digital segment and $1.859 billion, or 82%, which came from our TTEC Engage segment. To improve our competitive position in a rapidly changing market and to lead our clients with emerging CX methodologies, we continue to invest in innovation and service offerings for both mainstream and high-growth disruptive businesses, diversifying and strengthening our core customer care services with technology-enabled, outcomes-focused services, data analytics, insights, and consulting. We also invest to broaden our product and service capabilities, increase our global client base and industry expertise, tailor our geographic footprint to the needs of our clients, and further scale our end-to-end integrated solutions platform. To this end we have been highly acquisitive in the last several years, including recently agreeing to acquire certain citizen experience assets of Faneuil, Inc. that include healthcare exchange and transportation services contracts, expected to close in the first quarter of 2022. This acquisition, once closed, will expand our capabilities in the growing public sector market deploying investments to achieve technology-enabled citizen engagement solutions. We also completed an acquisition early in the second quarter of 2021 of a provider of Genesys and Microsoft cloud contact center services, which followed an acquisition in the second half of 2020 of a preferred Amazon Connect cloud contact center service provider and an acquisition in the first quarter of 2020 of an autonomous customer experience and intelligent automation solutions provider. In the previous year, we completed an acquisition in the fourth quarter of 2019 of a provider of customer care, social media community management, content moderation, technical support, and business process solutions for rapidly growing businesses in early stages of their lifecycle. We have extensive expertise in the automotive, communications, financial services, national/federal and state and local government, healthcare, logistics, media and entertainment, e-tail/retail, technology, travel and transportation industries. We serve more than 750 diverse clients globally, including many of the world’s iconic brands, Fortune 1000 companies, government agencies, and disruptive hypergrowth companies. ### Cybersecurity Incident In September 2021, TTEC experienced a ransomware incident that temporarily disrupted the Engage business segment’s client support environment. Certain TTEC systems and data became encrypted and certain TTEC data was exfiltrated or destroyed. TTEC Digital business segment’s information systems and client environment were not involved in the attack. TTEC activated its incident response and business continuity protocols, notified law enforcement, took appropriate measures to restore its systems and was able to restore operations for many impacted clients within hours of the start of the incident, with all client-facing systems returning to operations within five days of the incident. We exercised reasonable efforts to identify data that may have been exfiltrated. We continue to monitor the situation, and we are not currently aware of evidence that exfiltrated data was publicly released. As of the date of this report, data involved in the incident has been analyzed for impact and notice obligations, and we provided appropriate regulatory and individual notices about the incident and its potential impacts. With support from outside forensic experts, TTEC completed its investigation of root causes and impacts of the cybersecurity incident and is working to harden the security of its information technology environment and is taking measures to move to a ‘zero trust’ environment to protect its systems and its data. The Company performed appropriate procedures to validate the accuracy and completeness of information involved in its financial reporting, and we have no indication that the accuracy and completeness of any financial information was impacted as a result of the incident. The temporary operational disruptions that occurred due to this incident did not have a long-term impact on our results of operations. We made additional investments in the hardening of our cybersecurity environment and the operational governance of our information technology systems during the fourth quarter of 2021 and expect to make further investments in 2022. While the total amount of likely investment has not yet been determined, we anticipate that it will be at least $6 million in 2022 and beyond. The incident and any failure or perceived failure by us to comply with applicable privacy laws in connection with this incident could result in government enforcement actions, regulatory investigations, fines, penalties, and private legal actions, which could impact our results of operations and expenses associated with the incident. In the first quarter of 2022, we have been served with certain lawsuits alleging data privacy failures, which are typical when cybersecurity incidents result in data exfiltration. Other actual and potential consequences of the incident may include negative publicity, loss of client trust, reputational damage, litigation, contractual claims, financial judgement or settlements in excess of insurance, and disputes with insurance carriers concerning coverage. See, Part I, Item 1A Risk Factors. ### COVID-19 Pandemic In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. Early in second quarter of 2020, we transitioned approximately 80% of our employee population to a work from home environment. Those employees who were considered essential and could not operate effectively while working remotely, continued to work in our brick-and-mortar sites consistent with the recommendations on health and safety from the World Health Organization, the U.S. and European Centers for Disease Control and Prevention, and local government regulations in jurisdictions where our customer experience centers are located. As of the time of this disclosure, most TTEC employees continue to work from home, and we continue to evaluate when and to what extent they will return to our offices and customer experience centers. During 2021, we also took pro-active steps to ensure that TTEC was prepared to comply with relevant vaccination mandates and other safety measures in jurisdictions where we do business. Our implementation of business continuity plans, rapid transition of employees to a work from home environment, and the geographic diversification of our customer experience delivery centers allowed us to mitigate potentially more severe impacts of COVID-19, positioned us to continue supporting our commercial and public sector clients without interruptions and provide them with additional support as they experienced surge volumes of customer, patient, and citizen COVID-19 related engagement. Through the period ended December 31, 2021 the COVID-19 pandemic has not had a material adverse impact on our operational or financial results. While we expect this positive trend to continue and some of our COVID-19 specific work has transitioned to more traditional business activities for the same clients, there continues to be uncertainty about our business as the pandemic continues around the globe, including the emergence of certain variant strains of the virus, and related business interruption; and as our clients plan for post-pandemic business realities including new ways of working, evolving use of technology, and inflationary pressures. We cannot accurately predict the severity of the economic and operational challenges of an ongoing COVID-19 pandemic and post-pandemic changes on our clients’ businesses and their effect on the magnitude and timing of our clients’ buying decisions. Further, while to date we have been successful in managing service delivery from a highly disbursed employee population working remotely and our delivery sites that could not be replaced with work from home delivery, unpredictable business interruption decisions from government authorities in some jurisdictions where we do business, certain seasonal weather cycles and their potential impacts on power grid, and internet availability for our employees working from home may impact our delivery capability with little notice, thus potentially impacting our results of operations in the future. ### Capital and Financing Availability Our strong balance sheet, cash flow from operations and access to debt and capital markets have historically provided us the financial flexibility to effectively fund our organic growth, capital expenditures, strategic acquisitions, incremental investments, and capital distributions. We return capital to our shareholders through our dividend program. Given our cash flow generation and balance sheet strength, we believe cash dividends, in balance with our investments in product and service innovations, organic growth, and strategic acquisitions, align shareholder interests with the needs of the Company. After consideration of TTEC’s performance, cash flow from operations, capital needs and the overall liquidity of the Company, the Company’s Board of Directors adopted a dividend policy in 2015, with the intent to distribute a periodic cash dividend to stockholders of our common stock. Since inception in 2015, the Company has continued to pay a semi-annual dividend in October and April of each year in gradually increasing amounts from $0.18 per common share in 2015 to $0.47 per common share in October 2021. In December 2020, the Board of Directors authorized a special one-time dividend of $2.14 per common share. On February 24, 2022, the Board of Directors authorized a semi-annual dividend of $0.50 per common share, payable on April 20, 2022 to shareholders of record as of March 31, 2022. ### Our Integrated Service Offerings and Business Segments We provide strategic value and differentiation through our two business segments: TTEC Digital and TTEC Engage. **TTEC Digita**l is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting and transformation enabled by proprietary CX applications and technology partnerships. TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of CRM, data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes. - Technology Services: Our technology services design, integrate, and operate highly scalable, digital omnichannel technology solutions in the cloud, on premise, or hybrid environment, 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 digitally enabled CX managed services to support our clients’ end-to-end customer interaction delivery at scale. The segment delivers omnichannel customer care, tech support, order fulfillment, customer acquisition, growth, and retention services with industry specialization and distinctive CX capabilities for hypergrowth brands. TTEC Engage also delivers digitally enabled back office and industry specific specialty services including AI operations, content moderation, and fraud management services. - Customer Acquisition, Growth, and Retention 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 we believe increase the quantity and quality of leads and customers. - Customer Care, Tech Support, and Order Fulfillment Services: Our customer care, technical support, and order fulfillment 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. - Digitally enabled back office and specialty services: Our digital AI operations, content moderation, and fraud detection and prevention services provide clients with data tagging and annotation capabilities to train and enable AI platforms, community content moderation, and compliance to meet client content standards, and proactive fraud solutions to assist our clients in the detection and prevention of fraud. Based on our clients’ preferences, we provide our services on an integrated cross-business segment and/or on a discrete basis. Additional information with respect to our segments and geographic footprint is included in Part II, Item 8. Financial Statements and Supplementary Data, Note 3 to the Consolidated Financial Statements. ### Our 2021 Financial Results In 2021, our revenue increased 16.6% to $2,273 million over 2020, including an increase of 1.0% or $18.7 million due to foreign currency fluctuations. The increase in revenue was comprised of a $107.1 million, or 34.9%, increase for TTEC Digital and a $216.7 million, or 13.2%, increase for TTEC Engage. Our 2021 income from operations increased $12.5 million to $217.2 million or 9.6% of revenue, from $204.7 million which was 10.5% of revenue for 2020. The change in operating income is attributable to a number of different factors across the segments. The TTEC Digital operating income declined with an 21.8%, or $9.9 million, decrease over last year primarily due to a reduction in a large multi-year government contract and increased amortization of acquisition related intangible assets, partially offset by the 2021 and 2020 acquisitions which accelerated growth in the cloud revenue platform. The TTEC Engage operating income increased 14.0%, or $22.4 million, compared to the prior year primarily related to the increase in revenue offset partially by expenses related to the cybersecurity incident during September 2021 which caused outages for several of our Engage clients. Income from operations in 2021 and 2020 included a total of $15.1 million and $9.1 million of restructuring and asset impairments, respectively. Our offshore customer experience centers spanning six countries serve clients based in the U.S. and in other countries with 23,200 workstations representing 58% of our global delivery capabilities. Revenue for our TTEC Engage segment provided in these offshore locations represented 29% of our 2021 revenue, as compared to 29% of our 2020 revenue. Our seat utilization is defined as the total number of utilized workstations compared to the total number of available production workstations. As of December 31, 2021, the total production workstations for our TTEC Engage segment was 39,750 and the overall capacity utilization in our centers was 63% versus 57% in the prior year period. The utilization continues to be lower than in previous years primarily due to COVID-19 protocols requiring the distancing of employees which has reduced the available seat capacity. Adjusted for social distancing protocols, which reduced the available workstations to approximately 18,500 and accounting for all client paid seats as utilized, whether through actual usage or contractual commitments to hold the seats, current utilization is in excess of 135%. Post COVID-19 we expect our clients to leverage a more diversified geographic footprint and an increased mix of work from home versus 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 fluctuation increases, we will continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility. ### Critical Accounting Policies and Estimates Management’s Discussion and Analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. We regularly review our estimates and assumptions. These estimates and assumptions, which are based upon historical experience and on various other factors believed to be reasonable under the circumstances, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Reported amounts and disclosures may have been different had management used different estimates and assumptions or if different conditions had occurred in the periods presented. Below is a discussion of the policies that we believe may involve a high degree of judgment and complexity. #### Revenue Recognition The Company recognizes revenue from contracts and programs when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. Revenue is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Performance obligation is the unit of accounting for revenue recognition under the provisions of ASC Topic 606, “Revenue from Contracts with Customers” and all related amendments (“ASC 606”). A contract’s transaction price is allocated to each distinct performance obligation in recognizing revenue. The BPO inbound and outbound service fees are based on either a per minute, per hour, per FTE, per transaction or per call basis, which represents the majority of our contracts. These contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. With the exception of training, which is not considered to have value to the customer on a stand-alone basis, and is typically billed upfront and deferred, the remainder of revenue is invoiced on a monthly or quarterly basis as services are performed and does not create a contract asset or liability. In addition to revenue from BPO services, revenue also consists of fees from services for program launch, professional consulting, fully-hosted or managed technology and learning innovation services. The contracts containing these service offerings may contain multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. For these services, the point at which the transfer of control occurs determines when revenue is recognized in a specific reporting period. The majority of the Company’s services are recognized over time using the input method in which revenue is recognized on the basis of efforts or inputs toward satisfying a performance obligation (for example, resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to satisfy the performance obligation. Deferred revenues for these services represent amounts collected from, or invoiced to, customers in excess of revenues recognized. The Company records amounts billed and received, but not earned, as deferred revenue. Costs directly associated with revenue deferred, consisting primarily of labor and related expenses, are also deferred and recognized in proportion to the expected future revenue from the contract. Variable consideration exists in contracts for certain client programs that provide for adjustments to monthly billings based upon whether the Company achieves, exceeds or fails certain performance criteria. Adjustments to monthly billings consist of contractual bonuses/penalties, holdbacks and other performance based conditions. Variable consideration is estimated at contract inception at its most likely value and updated at the end of each reporting period as additional performance data becomes available. Revenue related to such variable consideration is recognized only to the extent that a significant reversal of any incremental revenue is not considered probable. Contract modifications are routine in the performance of the customer contracts. Contracts are often modified to account for customer mandated changes in the contract specifications or requirements, including service level changes. In most instances, contract modifications relate to goods or services that are incremental and distinctly identifiable, and, therefore, are accounted for prospectively. Direct and incremental costs to obtain or fulfill a contract are capitalized, and the capitalized costs are amortized over the corresponding period of benefit, determined on a contract by contract basis. The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects to recover those costs. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained. In certain cases, the Company negotiates an upfront payment to a customer in conjunction with the execution of a contract. Such upfront payments are critical to acquisition of new business and are often used as an incentive to negotiate favorable rates from the clients and are accounted for as upfront discounts for future services. Payments to customers are capitalized as contract acquisition costs and are amortized as a reduction to revenue in proportion to the expected future revenue from the contract, which in most cases results in straight-line amortization over the life of the contract. Such capitalized contract acquisition costs are periodically reviewed for impairment taking into consideration ongoing future cash flows expected from the contract and estimated remaining useful life of the contract. #### Income Taxes Accounting for income taxes requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the Consolidated Financial Statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. When circumstances warrant, we assess the likelihood that our net deferred tax assets will more likely than not be recovered from future projected taxable income. We continually review the likelihood that deferred tax assets will be realized in future tax periods under the “more-likely-than-not” criteria. In making this judgment, we consider all available evidence, both positive and negative, in determining whether, based on the weight of that evidence, a valuation allowance is required. We follow a two-step approach to recognizing and measuring uncertain tax positions. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. We evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors including changes in facts or circumstances, changes in applicable tax law, and settlement of issues under audit. Interest and penalties relating to income taxes and uncertain tax positions are accrued net of tax in the Provision for income taxes in the accompanying Consolidated Statements of Comprehensive Income (Loss). In the future, our effective tax rate could be adversely affected by several factors, many of which are outside our control. Our effective tax rate is affected by the proportion of revenue and income before taxes in the various domestic and international jurisdictions in which we operate. Further, we are subject to changing tax laws, regulations and interpretations in multiple jurisdictions in which we operate, as well as the requirements, pronouncements and rulings of certain tax, regulatory and accounting organizations. We estimate our annual effective tax rate each quarter based on a combination of actual and forecasted results of subsequent quarters. Consequently, significant changes in our actual quarterly or forecasted results may impact the effective tax rate for the current or future periods. #### Business Combinations We account for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration we paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition. The excess of the fair value of the purchase price over the fair values of these identifiable assets, intangible assets and liabilities is recorded as goodwill. Purchased intangibles other than goodwill are initially recognized at fair value and amortized over their useful lives unless those lives are determined to be indefinite. The valuation of acquired assets will impact future operating results. The fair value of identifiable intangible assets is determined using an income approach on an individual asset basis. Specifically, we use the multi-period excess earnings method to determine the fair value of customer relationships and the relief-from-royalty approach to determine the fair value of the trade name. Determining the fair value of acquired intangibles involves significant estimates and assumptions, including forecasted revenue growth rates, EBITDA margins, percentage of revenue attributable to the trade name, contributory asset charges, customer attrition rate, market-participant discount rates and the assumed royalty rates. The determination of the useful life of an intangible asset other than goodwill is based on factors including historical tradename performance with respect to consumer name recognition, geographic market presence, market share, plans for ongoing trade name support and promotion, customer attrition rate, and other relevant factors. #### Goodwill and Indefinite-Lived Intangible Assets We evaluate goodwill and indefinite-lived intangible assets for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We use a two-step process to assess the realizability of goodwill. The first step, Step 0, is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, we analyze changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there would be a significant decline to the fair value of a particular reporting unit. A qualitative assessment also includes analyzing the excess fair value of a reporting unit over its carrying value from impairment assessments performed in previous years. If the qualitative assessment indicates the fair value of the reporting unit is in excess of its carrying value, no further testing is required. If a qualitative assessment indicates that a significant decline to fair value of a reporting unit is more likely than not, or if a reporting unit’s fair value has historically been closer to its carrying value, we will proceed to Step 1 testing where we calculate the fair value of a reporting unit based on discounted future probability-weighted cash flows. If Step 1 indicates that the carrying value of a reporting unit is in excess of its fair value, we will record an impairment equal to the amount by which a reporting unit’s carrying value exceeds its fair value. We estimate fair value using discounted cash flows of the reporting units. The most significant assumptions used in these analyses are those made in estimating future cash flows. In estimating future cash flows, we use financial assumptions in our internal forecasting model such as projected capacity utilization, projected changes in the prices we charge for our services, projected labor costs, as well as contract negotiation status. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate. We use a discount rate we consider appropriate for the country where the business unit is providing services. #### Contingencies We record a liability for pending litigation and claims where losses are both probable and reasonably estimable. Each quarter, management reviews all litigation and claims on a case-by-case basis and assigns probability of loss and range of loss. ### Other Components of Results of Operations #### Cost of Services Cost of services principally include costs incurred in connection with our customer experience services and technology services, including direct labor and related taxes and benefits, telecommunications, technology costs, sales and use tax and certain fixed costs associated with the customer engagement centers. In addition, cost of services includes income related to grants we may receive from local or state governments as an incentive to locate customer engagement centers in their jurisdictions which reduce the cost of services for those facilities. #### Selling, General and Administrative Selling, general and administrative expenses primarily include costs associated with administrative services such as sales, marketing, product development, legal, information systems (including core technology and telephony infrastructure), accounting and finance. It also includes outside professional fees (i.e., legal and accounting services), building expense for non-engagement center facilities and other items associated with general business administration. #### Restructuring Charges, Net Restructuring charges, net primarily include costs incurred in conjunction with reductions in force or decisions to exit facilities, including termination benefits and lease liabilities, net of expected sublease rentals. #### Interest Expense Interest expense includes interest expense, amortization of debt issuance costs associated with our Credit Facility, and the accretion of deferred payments associated with our acquisitions. #### Other Income The main components of other income are miscellaneous income not directly related to our operating activities, such as foreign exchange gains and reductions in our contingent consideration. #### Other Expenses The main components of other expenses are expenditures not directly related to our operating activities, such as foreign exchange losses and increases in our contingent consideration. ### RESULTS OF OPERATIONS ### Year Ended December 31, 2021 Compared to December 31, 2020 The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the years ended December 31, 2021 and 2020 (amounts in thousands). All inter-company transactions between the reported segments for the periods presented have been eliminated. #### TTEC Digital | ​ ​ ​ | ​ ​ | ​ ​ ​ Year Ended December 31, 2021 | ​ ​ ​ ​ 2020 | ​ ​ ​ ​ $ Change | ​ ​ | ​ ​ ​ % Change | ​ ​ ​ | | --- | --- | ---: | ---: | ---: | --- | ---: | --- | | Revenue | ​ | $414,104 ​ | $306,985 ​ | $107,119 | | 34.9% | ​ | | Operating Income | ​ | 35,437 ​ | 45,315 ​ | (9,878) | | (21.8)% | ​ | | Operating Margin | ​ | 8.6% | 14.8% | ​ ​ | ​ | ​ ​ | ​ | The increase in revenue for the TTEC Digital segment was related to significant increases in the cloud platform and the systems integration practice including acquisitions of Avtex and VoiceFoundry, offset by reductions in a large multi-year governmental contract and the legacy facility based training business and Middle East consulting practice, both of which the Company has exited. Excluding this large multi-year government contract, the TTEC Digital revenue has increased 88% year over year. The operating income reduction is primarily attributable to the reduction in a large multi-year government contract and increased amortization of acquisition related intangible assets, partially offset by the increased revenue due to the acquisitions and other revenue increases as well as the exit of the less profitable facilities based training and Middle East consulting practices. The operating income as a percentage of revenue decreased to 8.6% in 2021 as compared to 14.8% in 2020. Included in the operating income was amortization related to acquired intangibles of $18.8 million and $3.0 million for the years ended December 31, 2021 and 2020, respectively. #### TTEC Engage | ​ ​ ​ | ​ ​ | ​ ​ ​ Year Ended December 31, 2021 | ​ ​ ​ ​ 2020 | ​ ​ ​ ​ $ Change | ​ ​ | ​ ​ ​ % Change | ​ ​ ​ | | --- | --- | ---: | ---: | ---: | --- | ---: | --- | | Revenue | ​ | $1,858,958 ​ | $1,642,263 ​ | $216,695 | | 13.2% | ​ | | Operating Income | ​ | 181,755 ​ | 159,377 ​ | 22,378 | | 14.0% | ​ | | Operating Margin | ​ | 9.8% | 9.7% | ​ ​ | ​ | ​ ​ | ​ | The increase in revenue for the TTEC Engage segment was due to a net increase of $316.3 million in client programs including certain COVID-19 pandemic related programs for several clients and a $16.4 million increase due to foreign currency fluctuations offset by a decrease for program completions of $116.0 million. The operating income increased slightly due to growth in revenue, revenue mix, and increased profitability in several offerings and an $8.1 million increase due to grants received related to COVID-19 relief. Partially offsetting these increases were costs of $13.4 million, net related to the cybersecurity incident during September 2021 which caused outages in operations for several Engage clients, and a net $14.6 million in restructuring and impairment charges related to several facilities in the U.S. (see Part II, Item 8. Financial Statements and Supplementary Data, Note 11 to the Consolidated Financial Statements). As a result, the operating income as a percentage of revenue increased slightly to 9.8% in 2021 as compared to 9.7% in the prior period. Included in the operating income was amortization expense related to acquired intangibles of $13.2 million and $13.2 million for the years ended December 31, 2021 and 2020, respectively. #### Interest Income (Expense) Interest income decreased to $0.8 million in 2021 from $1.7 million in 2020 due to lower interest rates. Interest expense decreased to $12.4 million during 2021 from $17.5 million during 2020, primarily due to higher utilization of the line of credit offset by lower interest rates, and a $6.3 million decrease year over year 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), Net For the year ended December 31, 2021 Other income (expense), net increased to net income of $2.3 million from net expense of $18.6 million during the prior year. Included in the year ended December 31, 2021 was a net $1.2 million expense related to the fair value adjustments of contingent consideration for two acquisitions. Included in the year ended December 31, 2020 was a net $1.8 million benefit related to the fair value adjustments of contingent consideration for three acquisitions, offset by a $19.9 million expense related to the deconsolidation of three subsidiaries and the related removal of the Currency Translation Adjustments (see Part II, Item 8. Financial Statements and Supplementary Data, Notes 2 and 9 to the Consolidated Financial Statements). #### Income Taxes The reported effective tax rate for 2021 was 23.9% as compared to 24.0% for 2020. The effective tax rate for 2021 was impacted by earnings in international jurisdictions currently under an income tax holiday, a $0.8 million benefit related to changes in tax contingent liabilities, a $1.3 million benefit related to provision to return adjustments, a $3.5 million benefit related to the cybersecurity incident, $13.9 million of expense related to changes in valuation allowances, a $3.8 million benefit related to restructuring charges, $4.1 million of expense related to international legal entity reorganization; a $9.6 million benefit related to equity based compensation, a $8.3 million benefit related to the amortization of purchased intangibles, and $0.1 million of other benefits. Without these items our effective tax rate for the year ended December 31, 2021 would have been 21.3%. For the year ended December 31, 2020, our effective tax rate was 24.0%. The effective tax rate for 2020 was impacted by earnings in international jurisdictions currently under an income tax holiday, $2.9 million of expense related to changes in tax contingent liabilities, a $1.8 million benefit related to provision to return adjustments, a $3.0 million benefit related to losses on dissolutions of subsidiaries, $0.4 million of expense related to changes in valuation allowances, a $2.0 million benefit related to restructuring charges, $0.8 million of expense for earnouts related to acquisitions, a $4.0 million benefit related to equity based compensation, a $4.2 million benefit related to the amortization of purchased intangibles, and $0.1 million of other benefits. Without these items our effective tax rate for the year ended December 31, 2020 would have been 22.5%. ### Year Ended December 31, 2020 compared to December 31, 2019 For a discussion of our results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019, please see Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020. ### 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 (as defined below). During the year ended December 31, 2021, we generated positive operating cash flows of $251.3 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, however, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted. We manage a centralized global treasury function in the United States with a focus on safeguarding and optimizing the use of our global cash and cash equivalents. Our cash is held in the U.S. in U.S. dollars, and outside of the U.S. in U.S. dollars and foreign currencies. We expect to use our cash to fund working capital, global operations, dividends, acquisitions, and other strategic activities. While there are no assurances, we believe our global cash is well protected given our cash management practices, banking partners and utilization of diversified bank deposit accounts and other 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 7A. Quantitative and Qualitative Disclosures About Market Risk, Foreign Currency Risk, for further discussion. In early April 2021, we drew down approximately $500 million on the Credit Facility in order to provide funding for the acquisition of Avtex Solutions, Holdings LLC. During the first quarter 2020, we borrowed $350 million under our Credit Facility as a precautionary measure to provide additional liquidity during the global economic uncertainty and financial market conditions cause by the COVID-19 pandemic. During September 2020, this additional borrowing was repaid. We primarily utilize our Credit Facility to fund working capital, general operations, dividends, and other strategic activities, such as the acquisitions described in Part II. Item 8. Financial Statements and Supplementary Data, Note 2 to the Consolidated Financial Statements. During the fourth quarter of 2021, the Credit Facility was amended including an increase to $1.5 billion of total commitments (see discussion below in the Debt Instruments and Related Covenants). As of December 31, 2021 and 2020, we had borrowings of $791.0 million and $385.0 million, respectively, under our Credit Facility, and our average daily utilization was $797.2 million and $550.9 million for the years ended December 31, 2021 and 2020, respectively. After consideration for the current level of availability based on the covenant calculations, our remaining borrowing capacity was approximately $565 million as of December 31, 2021. As of December 31, 2021, we were in compliance with all covenants and conditions under our Credit Facility. The amount of capital required over the next 12 months will depend on our levels of investment in infrastructure necessary to maintain, upgrade or replace existing assets. Our working capital and capital expenditure requirements could also increase materially in the event of acquisitions or joint ventures, among other factors. These factors could require that we raise additional capital through future debt or equity financing. We can provide no assurance that we will be able to raise additional capital with commercially reasonable terms acceptable to us. The following discussion highlights our cash flow activities during the years ended December 31, 2021 and 2020. #### 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 $158.2 million and $132.9 million as of December 31, 2021 and 2020, respectively. We diversify the holdings of such cash and cash equivalents considering the financial condition and stability of the counterparty institutions. We reinvest our cash flows to grow our client base, expand our infrastructure, for investment in research and development, for strategic acquisitions, and to pay dividends. #### Cash Flows from Operating Activities For the years 2021 and 2020 we reported net cash flows provided by operating activities of $251.3 million and $271.9 million, respectively. The decrease of $20.6 million from 2020 to 2021 was primarily due to a $34.4 million increase in net cash income from operations offset by a $55.0 million reduction in net working capital. #### Cash Flows from Investing Activities For the years 2021 and 2020, we reported net cash flows used in investing activities of $542.0 million and $112.4 million, respectively. The net increase in cash used in investing activities from 2020 to 2021 was due to an increase in acquisitions of $429.0 million. #### Cash Flows from Financing Activities For the years 2021 and 2020, we reported net cash flows provided by (used in) financing activities of $319.6 million and ($112.2) million, respectively. The change in net cash flows from 2020 to 2021 was primarily due to a $311.0 million net increase in the line of credit, a $37.2 million decrease in payments of contingent consideration and a $92.3 decrease in shareholder dividends offset by a $6.9 million increase in tax payments related to restricted stock units and $3.6 million of payments for debt issuance costs. #### Free Cash Flow Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) was $190.9 million and $212.1 million for the years 2021 and 2020, respectively. The decrease from 2020 to 2021 was primarily due to an increase in the net cash from operations offset by a decrease in working capital. ### 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): | ​ ​ ​ | ​ ​ | ​ ​ | ​ ​ Year Ended December 31, 2021 | ​ | ​ ​ 2020 | ​ ​ | | --- | --- | --- | ---: | --- | ---: | --- | | Net cash provided by operating activities | ​ | ​ | $251,296 | ​ | $271,920 | ​ | | Less: Purchases of property, plant and equipment | ​ | ​ | 60,358 | ​ | 59,772 | ​ | | Free cash flow | ​ | ​ | $190,938 | ​ | $212,148 | ​ | ### Obligations and Future Capital Requirements At December 31, 2021, our future contractual obligations were related primarily to debt, leases and income taxes. See the following footnotes in Part II. Item 8. Financial Statements and Supplementary Data: Note 10 Income Taxes, Note 12 Indebtedness, Note 13 Commitments and Contingencies and Note 15 Leases for a discussion of the obligation and timing of required payments. #### Purchase Obligations Occasionally we contract with certain of our communications clients to provide us with telecommunication services. These clients currently represent approximately 6% of our total annual revenue. We believe these contracts are negotiated on an arm’s-length basis and may be negotiated at different times and with different legal entities. #### Future Capital Requirements We expect total capital expenditures in 2022 to be between 2.9% and 3.1% of revenue. Approximately 65% of these expected capital expenditures are to support growth in our business and 35% relate to the maintenance of existing assets. The anticipated level of 2022 capital expenditures is primarily driven by new client contracts and the corresponding requirements for additional customer engagement center capacity as well as enhancements to our technological infrastructure. We may consider restructurings, dispositions, mergers, acquisitions and other similar transactions. Such transactions could include the transfer, sale or acquisition of significant assets, businesses or interests, including joint ventures or the incurrence, assumption, or refinancing of indebtedness and could be material to the consolidated financial condition and consolidated results of our operations. Our capital expenditures requirements could also increase materially in the event of an acquisition or joint venture. In addition, as of December 31, 2021, we were authorized to purchase an additional $26.6 million of common stock under our stock repurchase program (see Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities). Our stock repurchase program does not have an expiration date. The launch of large client contracts may result in short-term negative working capital because of the time period between incurring the costs for training and launching the program and the beginning of the accounts receivable collection process. As a result, we may sometimes generate negative cash flows from operating activities. ### Debt Instruments and Related Covenants On November 23, 2021, we entered into a Sixth Amendment to our Amended and Restated Credit Agreement and Amendment (“the Credit Agreement”) and Restated Security Agreement originally dated June 3, 2013, (collectively, the “Credit Facility”) to increase the total commitments by $300 million to $1.5 billion within the senior secured revolving Credit Facility with a syndicate of lenders led by Wells Fargo, National Association, as agent, swingline and fronting lender. The Credit Facility matures on November 23, 2026. We primarily use our Credit Facility to fund working capital, general operations, dividends, acquisitions and other strategic activities. The maximum commitment under the Credit Facility is $1.5 billion in the aggregate, if certain conditions are satisfied. The Credit Facility commitment fees are payable to the lenders as previously disclosed and as determined by reference to our net leverage ratio. The Credit Agreement contains customary affirmative, negative, and financial covenants, which primarily remained unchanged from the 2019 Credit Facility. The Credit Agreement permits accounts receivable factoring up to the greater of $100 million or 25 percent of the average book value of all accounts receivable over the most recent twelve month period. Base rate loans bear interest at a rate equal to the greatest of (i) Wells Fargo’s prime rate, (ii) one half of 1% in excess of the federal funds effective rate, or (iii) 1.25% in excess of the one month London Interbank Offered Rate (“LIBOR”), plus in each case a margin of 0% to 0.75% based on our net leverage ratio. Eurodollar loans bear interest at LIBOR plus a margin of 1.0% to 1.75% based on our net leverage ratio. Alternate currency loans bear interest at rates applicable to their respective currencies. Letter of credit fees are one eighth of 1% of the stated amount of the letter of credit on the date of issuance, renewal or amendment, plus an annual fee equal to the borrowing margin for Eurodollar loans. Indebtedness under the Credit Agreement is guaranteed by certain of our domestic subsidiaries and is secured by security interests (subject to permitted liens) in the U.S. accounts receivable and cash of our Company and certain of its domestic subsidiaries. The indebtedness may also be secured by tangible assets of our Company and its domestic subsidiaries, if borrowings by foreign subsidiaries exceed 7.5% of our Company’s consolidated total assets and the total net leverage ratio is greater than 3.25 to 1.00. We also pledged 65% of the voting stock and all of the non-voting stock, if any, of certain of our material foreign subsidiaries. The Credit Facility also contains certain customary information and reporting requirements, and events of default, including without limitation events of default based on payment obligations, material inaccuracies of representations and warranties, covenant defaults, cross defaults to certain other debt, certain ERISA events, changes in control, monetary judgments, and insolvency proceedings. Upon the occurrence of an event of default, the lenders may accelerate the maturity of all amounts outstanding under the Credit Facility. As of December 31, 2021 and 2020, we had borrowings of $791.0 million and $385.0 million, respectively, under the Credit Facility. During 2021, 2020 and 2019, borrowings accrued interest at an average rate of approximately 1.3%, 1.6%, and 3.4% per annum, respectively, excluding unused commitment fees. Our daily average borrowings during 2021, 2020 and 2019 were $797.2 million, $550.9 million and $331.8 million, respectively. As of December 31, 2021, and 2020, based on the current level of availability based on the covenant calculations, the remaining borrowing capacity was approximately $565 million and $510 million, respectively. ### Client Concentration During 2021, only one of our clients represented more than 10% of our total annual revenue. Our five largest clients accounted for 38% and 40% of our annual revenue for each of the two years ended December 31, 2021 and 2020, respectively. We have long-term relationships with our top five Engage clients, ranging from 15 to 22 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 of the contracts with our five largest clients expire between 2022 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. ### Cybersecurity We have made and continue to make significant financial investments in technologies and processes to mitigate cyber risks. We have a number of complex information systems used for a variety of functions ranging from services we deliver to our clients and their customers to support for our operations. The effective operation of our business depends on the proper functioning of these information systems. Like any information system, our systems are susceptible to cyber-attack. Any cyber-attack could impact the availability, reliability, speed, accuracy, or other proper functioning of these systems or result in our data, our employees’ data and our clients’ data that we retain for the provision of our services being compromised, which could have a significant impact on our reputation, results of operations, and financial condition. Our information systems are protected through physical and technological safeguards as well as backup systems and protocols considered appropriate by management. We also provide role-based employee cybersecurity risk awareness training about phishing, malware, social engineering, data protection, and other cyber risks. Further, several years ago we formed a cybersecurity risk management steering committee that is comprised of technology leaders and management from each of our business segments, leaders from our information technology and information security organizations; representatives from our regulatory and risk oversight functions and our internal audit group. This steering committee meets regularly to coordinate cybersecurity risk management issues and set proactive priorities to secure the business. Our executive leadership team and the Audit Committee of our Board of Directors, which has the delegated authority from the Board to oversee TTEC cybersecurity risk management, are updated at least quarterly on the progress and status of our cybersecurity priorities. We continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address, and mitigate the risk of unauthorized access, distributed denial of service attacks, malware attacks, computer viruses, cyber fraud, and other events intended to disrupt information systems, unauthorized access to confidential information, or other types of malicious events that may result in harm to our business. Our investment in cybersecurity is not expected to decrease in the foreseeable future, and despite our on-going efforts to improve our cybersecurity, there can be no assurance that a sophisticated cyber-attack could timely be detected or thwarted. ### Recently Issued Accounting Pronouncements We discuss the potential impact of recent accounting pronouncements in Part II, Item 8. Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements. ### Changes in Accounting Principle See discussion of adopted accounting standards in Part II, Item 8. Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements. ## Market risk As filed, 9,651 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 risks due to changes in interest rates and foreign currency exchange rates (as measured against the U.S. dollar), as well as credit risk associated with potential non-performance of our counterparty banks. These exposures are directly related to our normal operating and funding activities. We enter into derivative instruments to manage and reduce the impact of currency exchange rate changes, primarily between the U.S. dollar/Philippine peso, the U.S. dollar/Mexican peso, and the Australian dollar/Philippine peso. We enter into interest rate derivative instruments to reduce our exposure to interest rate fluctuations associated with our variable rate debt. To mitigate against credit and non-performance risk, it is our policy to only enter into derivative contracts and other financial instruments with investment grade counterparty financial institutions and, correspondingly, our derivative valuations reflect the creditworthiness of our counterparties. As of the date of this report, we have not experienced, nor do we anticipate, any issue related to derivative counterparty defaults. ### Interest Rate Risk We have previously entered into interest rate derivative instruments to reduce our exposure to interest rate fluctuations associated with our variable rate debt. The interest rate on our Credit Agreement is variable based upon the Prime Rate and LIBOR and, therefore, is affected by changes in market interest rates. As of December 31, 2021, we had $791.0 million of outstanding borrowings under the Credit Agreement. Based upon average daily outstanding borrowings during the years ended December 31, 2021 and 2020, interest accrued at a rate of approximately 1.3% and 1.6% per annum, respectively. If the Prime Rate or LIBOR increased by 100 basis points, there would be $1.0 million of additional interest expense per $100.0 million of outstanding borrowing under the Credit Agreement. The Company’s interest rate swap arrangement expired as of May 31, 2017 and no additional swaps have been entered into since that time. ### Foreign Currency Risk Our subsidiaries in the Philippines, Mexico, India, Bulgaria and Poland use the local currency as their functional currency for paying labor and other operating costs. Conversely, revenue for these foreign subsidiaries is derived principally from client contracts that are invoiced and collected in U.S. dollars or other foreign currencies. As a result, we may experience foreign currency gains or losses, which may positively or negatively affect our results of operations attributed to these subsidiaries. For the years ended December 31, 2021, 2020 and 2019, revenue associated with this foreign exchange risk was 17%, 17% and 22% of our consolidated revenue, respectively. The following summarizes relative (weakening) strengthening of local currencies that are relevant to our business: | ​ ​ ​ | ​ ​ | ​ ​ Year Ended December 31, 2021 | ​ ​ 2020 | ​ ​ 2019 | | --- | --- | ---: | ---: | ---: | | Canadian Dollar vs. U.S. Dollar | | 0.3% | 2.1% | 4.5% | | Philippine Peso vs. U.S. Dollar | | (6.4)% | 5.2% | 3.5% | | Mexican Peso vs. U.S. Dollar | | (2.9)% | (5.2)% | 3.8% | | Australian Dollar vs. U.S. Dollar | | (6.1)% | 9.0% | (0.6)% | | Euro vs. U.S. Dollar | | (8.1)% | 8.6% | (2.0)% | | Indian Rupee vs. U.S. Dollar | ​ | (1.8)% | (2.5)% | (2.5)% | | Philippine Peso vs. Australian Dollar | | (0.2)% | (4.2)% | 4.0% | In order to mitigate the risk of these non-functional foreign currencies weakening against the functional currencies of the servicing subsidiaries, which thereby decreases the economic benefit of performing work in these countries, we may hedge a portion, though not 100%, of the projected foreign currency exposure related to client programs served from these foreign countries through our cash flow hedging program. While our hedging strategy can protect us from adverse changes in foreign currency rates in the short term, an overall weakening of the non-functional revenue foreign currencies would adversely impact margins in the segments of the servicing subsidiary over the long term. #### Cash Flow Hedging Program To reduce our exposure to foreign currency exchange rate fluctuations associated with forecasted revenue in non-functional currencies, we purchase forward and/or option contracts to acquire the functional currency of the foreign subsidiary at a fixed exchange rate at specific dates in the future. We have designated and account for these derivative instruments as cash flow hedges for forecasted revenue in non-functional currencies. While we have implemented certain strategies to mitigate risks related to the impact of fluctuations in currency exchange rates, we cannot ensure that we will not recognize gains or losses from international transactions, as this is part of transacting business in an international environment. Not every exposure is or can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts for which actual results may differ from the original estimate. Failure to successfully hedge or anticipate currency risks properly could adversely affect our consolidated operating results. Our cash flow hedging instruments as of December 31, 2021 and 2020 are summarized as follows (in thousands). All hedging instruments are forward contracts, except as noted. | ​ ​ ​ ​ As of December 31, 2021 | ​ ​ ​ ​ | ​ Local Currency Notional Amount | ​ ​ ​ ​ | ​ ​ ​ ​ U.S. Dollar Notional Amount | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ % Maturing ​ in the next ​ 12 months ​ | ​ ​ ​ ​ | ​ ​ Contracts Maturing Through | ​ | | --- | --- | ---: | --- | ---: | --- | --- | ---: | --- | --- | --- | | Canadian Dollar | | 9,000 | ​ | $7,022 | ​ | ​ | 100.0% | ​ | June 2022 | ​ | | Philippine Peso | | 8,472,000 | ​ | 164,295 | (1) ​ | ​ | 51.7% | ​ | December 2024 | ​ | | Mexican Peso | | 1,422,500 | ​ | 63,002 | ​ | ​ | 43.2% | ​ | December 2024 | ​ | | ​ | ​ | ​ | ​ | $234,319 | ​ | ​ | ​ ​ | ​ | ​ | ​ | | ​ ​ ​ ​ As of December 31, 2020 | ​ ​ ​ ​ | ​ Local Currency Notional Amount | ​ ​ ​ ​ | ​ ​ ​ ​ U.S. Dollar Notional Amount | ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | | --- | --- | ---: | --- | ---: | --- | --- | --- | --- | --- | --- | --- | | Canadian Dollar | | 2,450 | ​ | $1,853 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | | Philippine Peso | | 6,725,000 | ​ | ​ 130,468 | (1)​ | ​ | ​ | ​ | ​ | ​ | ​ | | Mexican Peso | | 1,159,500 | ​ | 52,398 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | | ​ | ​ | ​ | ​ | $184,719 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (1) Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S. dollars on December 31, 2021 and December 31, 2020. The fair value of our cash flow hedges at December 31, 2021 was an asset (in thousands): | ​ ​ ​ | ​ ​ | ​ ​ ​ ​ December 31, 2021 | ​ ​ | ​ ​ Maturing in the Next 12 Months | ​ ​ | | --- | --- | ---: | --- | ---: | --- | | Canadian Dollar | ​ | $96 | ​ | $96 | ​ | | Philippine Peso | ​ | (1,102) | ​ | (324) | ​ | | Mexican Peso | ​ | 944 | ​ | 973 | ​ | | ​ | ​ | $(62) | ​ | $745 | ​ | Our cash flow hedges are valued using models based on market observable inputs, including both forward and spot foreign exchange rates, implied volatility, and counterparty credit risk. The fair value of our cash flow hedges decreased by $11.5 million from December 31, 2020 to December 31, 2021. The decrease in fair value from December 31, 2020 primarily reflects changes in the currency translation between the U.S. dollar and Mexican Peso and U.S. dollar and Philippines Peso. We recorded net gains (losses) of $4.9 million, $2.6 million, and $(4.2) million for settled cash flow hedge contracts for the years ended December 31, 2021, 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 II. Item 8. Financial Statements and Supplementary Data, Note 8 to the Consolidated Financial Statements, the majority of the transactions of our U.S. and foreign operations are denominated in their respective local currency. However, transactions are denominated in other currencies from time-to-time. We do not currently engage in hedging activities related to these types of foreign currency risks because we believe them to be insignificant as we endeavor to settle these accounts on a timely basis. For the years ended 2021 and 2020, approximately 14% and 14%, respectively, of revenue was derived from contracts denominated in currencies other than the U.S. Dollar. Our results of operations and revenue could be adversely affected if the U.S. Dollar strengthens significantly against foreign currencies. ### Fair Value of Debt and Equity Securities We did not have any investments in marketable debt or equity securities as of December 31, 2021 or 2020. ## Controls and procedures As filed, 5,885 characters. This Form 10-K includes the certifications of our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”) required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 9A includes information concerning the controls and control evaluations referred to in those certifications. ### Disclosure Controls and Procedures Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation under the supervision and with the participation of management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures, as of December 31, 2021, the end of the period covered by this Form 10-K. Based on this evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level. ### Inherent Limitations of Internal Controls Our management, including the CEO and CFO, believes that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal controls are met. Further, the design of internal controls must consider the benefits of controls relative to their costs. Inherent limitations within internal controls include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. Over time, control may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. While the objective of the design of any system of controls is to provide reasonable assurance of the effectiveness of controls, such design is also based in part upon certain assumptions about the likelihood of future events, and such assumptions, while reasonable, may not take into account all potential future conditions. Thus, even effective internal control over financial reporting can only provide reasonable assurance of achieving their objectives. Therefore, because of the inherent limitations in cost effective internal controls, misstatements due to error or fraud may occur and may not be prevented or detected. ### Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures which (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets, (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, (c) provide reasonable assurance that receipts and expenditures are being made only in accordance with appropriate authorization of management and the Board of Directors, and (d) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements. In connection with the preparation of this Annual Report on Form 10-K, our management, under the supervision and with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 based on the framework established in *Internal Control — Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that evaluation, our management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2021, the end of the period covered by this Form 10-K. We excluded Avtex from our assessment of internal control over financial reporting as of December 31, 2021 because this company was acquired by the Company in a purchase business combination in 2021. Avtex’s total assets and total revenues represent 2.7% and 6.7%, respectively, of the related consolidated financial amounts as of and for the year ended December 31, 2021. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report, which is included herein. ### Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the most recent quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Filed Mar 3, 2022. Source: SEC EDGAR, the filing index for accession 0001558370-22-002795. Last ingested by Listed: Nov 10, 2026, 04:26 ET. No prices; not investment advice.