TTEC (TTEC)2024-11-09 17:58Financial Data and Key Metrics - Revenue for Q3 2024 was 50 million, or 9.5% of revenue, down from 46 million (8.7% of revenue) in the prior quarter [38] - EPS was 0.48 in the prior year and 100 million, primarily due to the discontinuation of the accounts receivable factoring facility, which impacted cash flow by 116 million, down 13.2% YoY, primarily due to a large one-time on-premise product sale in the prior year [42] - Recurring managed services revenue increased 12.9% YoY and 4.2% sequentially, representing 65% of total Digital revenue [44] - Professional services revenue declined 6.4% YoY and 5.1% sequentially due to delayed client decision-making on larger deals [45] - Operating income was 19 million (14.5% of revenue) in the prior year [46] TTEC Engage - Revenue was 20 million, or 4.8% of revenue, up 35% sequentially with a 130 basis point improvement in profitability [48] - Last 12-month revenue retention rate was 85%, down from 96% YoY, primarily due to declines in financial services and healthcare volumes [51] Market and Geographic Performance - Offshore headcount in new geographies scaled 43% from Q2 to Q3 2024 [18] - Over 60% of the annual contract value from new client wins in Q3 will be delivered offshore [19] - Clients are increasingly leveraging offshore resources, particularly in Latin America and Africa, for cost savings and operational efficiency [85] Strategic Direction and Industry Competition - The company is focused on four priorities: winning new clients, diversifying its portfolio of AI-enabled CX solutions, improving operational agility, and strengthening financial performance [9] - Clients are prioritizing cost savings and delaying new program investments, but the company expects demand to normalize over the next six months [10][11] - AI-enabled solutions are a key focus, with 45% of the top 100 clients deploying well-defined AI projects, yielding positive results [30] Management Commentary on Operating Environment and Future Outlook - The macroeconomic environment, including election uncertainties and Fed monetary policies, has created headwinds, leading to delayed client decision-making [10] - The company expects revenue and profitability to be at the lower end of the full-year 2024 guidance range, with Digital revenue forecasted at 1.752 billion [60][61] - Management remains confident in the long-term demand for CX technology and services, with a focus on returning to organic growth and increased profitability [63] Other Important Information - The company suspended its semiannual dividend to prioritize debt reduction, with a net debt-to-EBITDA ratio of 4.49x as of Q3 2024 [58] - Capital expenditures were 22 million (3.6% of revenue) in the prior year, reflecting reduced investment in geographic expansion [53] Q&A Session Summary Question: Confidence in Q4 Digital Business Acceleration - Management is confident in closing deals delayed from Q3, with a strong pipeline and backlog supporting growth in Q4 and beyond [65][66] - The company expects a positive trajectory in 2025 as clients shift focus from cost savings to launching larger projects [69][70] Question: Healthcare Payer Client Trends - Healthcare payer clients continue to face cost pressures, leading to reduced seasonal volumes and increased interest in offshore resources and technology solutions [72][73] Question: Cost-Saving Initiatives - The company expects 30 million annualized savings in 2025 from cost optimization initiatives [74] Question: Offshore Investment and Demand Dynamics - Offshore investments are meeting client demand, with no significant changes in the cadence of scaling smaller offshore deals [82][84] - Existing onshore clients are exploring offshore options, but offshore work is currently complementary to onshore operations [88][89] Question: Debt Reduction Plans - The company is focused on debt reduction through improved profitability, free cash flow, and asset sales, with a commitment to reducing leverage ratios [90]