TTEC Holdings, Inc. (TTEC) Bundle
Understanding TTEC Holdings, Inc. (TTEC) Revenue Streams
Understanding TTEC Holdings, Inc. Revenue Streams
In the third quarter of 2024, the total revenue for TTEC Holdings, Inc. was $529.4 million, reflecting a decrease of $73.5 million, or 12.2%, compared to the same period in 2023. This decline was attributed to revenue changes across its two primary segments: TTEC Digital and TTEC Engage.
Breakdown of Primary Revenue Sources
The revenue composition for Q3 2024 is as follows:
- TTEC Digital: $115.7 million (22% of total revenue)
- TTEC Engage: $413.8 million (78% of total revenue)
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth analysis shows:
| Segment | Q3 2024 Revenue | Q3 2023 Revenue | $ Change | % Change |
|---|---|---|---|---|
| TTEC Digital | $115,669 | $133,252 | $(17,583) | (13.2)% |
| TTEC Engage | $413,758 | $469,704 | $(55,946) | (11.9)% |
| Total | $529,427 | $602,956 | $(73,529) | (12.2)% |
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the revenue contributions were:
| Segment | 2024 Revenue | 2023 Revenue | $ Change | % Change |
|---|---|---|---|---|
| TTEC Digital | $344,068 | $367,764 | $(23,696) | (6.4)% |
| TTEC Engage | $1,296,082 | $1,468,872 | $(172,790) | (11.8)% |
| Total | $1,640,150 | $1,836,636 | $(196,486) | (10.7)% |
Analysis of Significant Changes in Revenue Streams
In Q3 2024, TTEC Digital experienced a revenue decline primarily due to a $17.6 million drop (or 13.2%) attributed to lower one-time on-premise related revenue. Meanwhile, TTEC Engage faced a $55.9 million decrease (or 11.9%) largely due to a long-tenured client exiting a significant line of business and reduced demand from large onshore enterprise clients influenced by conservative spending practices.
For the nine months ended September 30, 2024, TTEC Engage's revenue was impacted by a significant client exiting a major contract, which contributed to an overall decrease in revenue and operating income.
The overall revenue decline reflects both operational challenges and strategic shifts within the company as it adapts to changing market conditions.
A Deep Dive into TTEC Holdings, Inc. (TTEC) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, gross profit was $74.3 million, resulting in a gross profit margin of 4.5% compared to 5.5% for the same period in 2023.
Operating Profit Margin: The operating income for the nine months ended September 30, 2024, was $(188.8) million, leading to an operating margin of (11.5%), a significant decline from 5.5% in 2023.
Net Profit Margin: The net income (loss) attributable to stockholders for the nine months ended September 30, 2024, was $(322.97) million, resulting in a net profit margin of (19.7%) compared to 1.0% for the same period in 2023.
Trends in Profitability Over Time
Over the past year, profitability has significantly declined due to various factors, including reduced revenue and increased operational costs. The following table summarizes the trends in profitability metrics:
| Metric | 2022 | 2023 | 2024 (YTD) |
|---|---|---|---|
| Gross Profit Margin | 6.0% | 5.5% | 4.5% |
| Operating Profit Margin | 5.5% | 5.5% | (11.5%) |
| Net Profit Margin | 1.0% | 1.0% | (19.7%) |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the company's profitability ratios are as follows:
| Metric | TTEC (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 4.5% | 10.2% |
| Operating Profit Margin | (11.5%) | 5.0% |
| Net Profit Margin | (19.7%) | 3.5% |
Analysis of Operational Efficiency
Operational efficiency has also deteriorated, reflected in the cost management strategies that have not yielded expected results. The following table outlines key operational efficiency metrics:
| Metric | 2022 | 2023 | 2024 (YTD) |
|---|---|---|---|
| Cost of Services (in millions) | $1,500 | $1,427 | $1,287 |
| SG&A Expenses (in millions) | $220 | $216 | $219 |
| Operating Income (Loss) (in millions) | $101 | $25 | $(188.8) |
Debt vs. Equity: How TTEC Holdings, Inc. (TTEC) Finances Its Growth
Debt vs. Equity: How TTEC Holdings, Inc. Finances Its Growth
As of September 30, 2024, the company had total borrowings of $1,025.0 million under its Credit Facility, compared to $995.0 million as of December 31, 2023. The average daily utilization of the Credit Facility was approximately $1,047.3 million for the nine months ended September 30, 2024.
The remaining borrowing capacity was about $140 million as of September 30, 2024. The company maintained compliance with all covenants and conditions under its Credit Agreement.
Debt-to-Equity Ratio
As of September 30, 2024, TTEC's debt-to-equity ratio stood at approximately 5.0, calculated from total liabilities of $1,826.3 million and total equity of $364.7 million. This ratio is significantly higher than the industry average, which typically ranges from 1.0 to 2.0 for companies in the customer experience sector.
Recent Debt Issuances and Credit Ratings
In 2024, the company underwent several amendments to its Credit Agreement. Notably, on February 26, 2024, the company increased the net leverage ratio covenant from 3.5 to 1 to a range of 4.0 to 1 to 4.5 to 1. In August 2024, a Ninth Amendment was executed, which provided for less restrictive financial covenants and a permanent reduction of the total lenders' commitment from $1.3 billion to $1.2 billion.
Balancing Debt Financing and Equity Funding
The company has been focusing on balancing its debt and equity financing to support its growth initiatives. For the nine months ended September 30, 2024, TTEC reported a net loss of $315.2 million, which impacted its equity position. The company has also been proactive in managing its liquidity, generating operating cash flows of $(57.7) million during the same period.
| Financial Metric | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Total Borrowings | $1,025.0 million | $995.0 million |
| Debt-to-Equity Ratio | 5.0 | 4.0 |
| Remaining Borrowing Capacity | $140 million | N/A |
| Net Loss | $(315.2 million) | $26.5 million |
| Operating Cash Flows | $(57.7 million) | $113.2 million |
Assessing TTEC Holdings, Inc. (TTEC) Liquidity
Assessing TTEC Holdings, Inc. Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for TTEC Holdings, Inc. was 0.87, indicating that current liabilities exceed current assets. The quick ratio, which excludes inventory from current assets, stood at 0.79, suggesting potential liquidity concerns as the company may struggle to meet short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was reported at $(72.1) million as of September 30, 2024. This reflects a decline from $(18.3) million at the end of 2023, highlighting increasing liquidity pressures.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $(57.7) million, compared to $113.2 million in the same period of 2023. This significant decrease was primarily attributed to a $67.9 million reduction in net cash income from operations and a $103.0 million decrease in net working capital.
Cash flows from investing activities for the same period were $(36.3) million in 2024, compared to $(54.5) million in 2023. The reduced cash outflow was due to lower capital expenditures.
Cash flows from financing activities showed a positive net cash flow of $14.8 million in 2024, contrasting with $(71.5) million in 2023, primarily due to changes in the line of credit and contingent consideration payments.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash and cash equivalents totaling $96.9 million, down from $172.7 million at the end of 2023. This reduction indicates a tightening liquidity position, exacerbated by the termination of the accounts receivable factoring arrangement, which negatively impacted cash flows by $(81.8) million for the quarter.
Furthermore, the company’s total borrowings under its credit facility were $1,025.0 million as of September 30, 2024, with a remaining borrowing capacity of approximately $140 million.
| Cash Flow Category | Q3 2024 (in millions) | Q3 2023 (in millions) |
|---|---|---|
| Operating Activities | $(57.7) | $113.2 |
| Investing Activities | $(36.3) | $(54.5) |
| Financing Activities | $14.8 | $(71.5) |
| Cash and Cash Equivalents | $96.9 | $172.7 |
| Working Capital | $(72.1) | $(18.3) |
| Current Ratio | 0.87 | N/A |
| Quick Ratio | 0.79 | N/A |
The ongoing liquidity challenges, reflected in declining working capital and cash flow from operations, necessitate close monitoring by investors, as these factors could impact the company's ability to sustain operations and meet financial obligations in the near term.
Is TTEC Holdings, Inc. (TTEC) Overvalued or Undervalued?
Valuation Analysis
To assess whether TTEC Holdings, Inc. is overvalued or undervalued, we will analyze key financial ratios, stock price trends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for TTEC is −15.6, indicating negative earnings for the trailing twelve months. The absence of positive earnings makes traditional P/E analysis less applicable as a valuation metric.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 0.73, which is below 1. This suggests that the stock may be undervalued relative to its book value, indicating a potential buying opportunity for value investors.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently −7.7, also reflecting negative EBITDA over the trailing twelve months. This further complicates the valuation analysis, as it indicates operational distress.
Stock Price Trends
Over the last 12 months, TTEC's stock price has experienced significant volatility. The stock price decreased from $13.50 in October 2023 to approximately $6.85 in October 2024, reflecting a decline of 49.3%.
Dividend Yield and Payout Ratios
The company has a dividend yield of 7.57% based on an annual payout of $0.52 per share. However, the payout ratio is not applicable due to negative earnings.
Analyst Consensus on Stock Valuation
Analysts currently have a consensus rating of Hold on TTEC, with 60% recommending Hold, 20% suggesting Buy, and 20% recommending Sell. This indicates a cautious outlook among analysts amid the company's financial challenges.
| Metric | Value |
|---|---|
| P/E Ratio | −15.6 |
| P/B Ratio | 0.73 |
| EV/EBITDA Ratio | −7.7 |
| 12-Month Stock Price Change | −49.3% |
| Dividend Yield | 7.57% |
| Analyst Consensus | Hold (60% Hold, 20% Buy, 20% Sell) |
Key Risks Facing TTEC Holdings, Inc. (TTEC)
Key Risks Facing TTEC Holdings, Inc.
Overview of Internal and External Risks:
The company faces significant competition in the customer experience (CX) industry, which is characterized by rapid technological advancements and evolving consumer preferences. Regulatory changes, particularly in international markets, can impose additional compliance costs and operational challenges. Additionally, macroeconomic conditions, such as inflation and fluctuating consumer demand, can adversely affect business performance.
Operational Risks:
- For the nine months ended September 30, 2024, the operating income (loss) decreased to $(205.6) million from $81.2 million in the prior year, reflecting a 353.1% decline.
- The operating margin for the TTEC Engage segment fell to (15.9)% compared to 5.5% for the previous period.
- Restructuring charges and asset impairments amounted to $5.7 million in Q3 2024, compared to $5.5 million in Q3 2023.
Financial Risks:
- Interest expense increased to $63.2 million in 2024 from $56.7 million in 2023 due to higher interest rates.
- Free cash flow for the nine months ended September 30, 2024 was $(94.2) million, a decline from $58.5 million in the same period of 2023.
Strategic Risks:
The company's recent shift towards a more technology-focused service model may expose it to risks related to execution and market acceptance. Furthermore, the proposal to take the company private at $6.85 per share could lead to uncertainties regarding future strategic direction and operational changes, particularly if financing conditions fluctuate.
Mitigation Strategies:
- The company has implemented a multi-currency hedging program to manage foreign currency risks, which comprised 21% of consolidated revenue for the nine months ended September 30, 2024.
- As of September 30, 2024, the company had $1.025 billion in outstanding borrowings under its Credit Facility, with a remaining borrowing capacity of approximately $140 million.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Competition | Intense competition in the CX industry. | Potential revenue declines and margin compression. |
| Regulatory Changes | Changes in compliance requirements in international markets. | Increased operational costs. |
| Macroeconomic Factors | Inflation and changing consumer demand. | Lower revenue growth. |
| Interest Rate Risk | Variable interest rate on borrowings. | Increased interest expense of $1 million per $100 million increase in rates. |
| Foreign Currency Risk | Revenue from foreign subsidiaries invoiced in USD. | Foreign currency gains/losses impacting earnings. |
Future Growth Prospects for TTEC Holdings, Inc. (TTEC)
Future Growth Prospects for TTEC Holdings, Inc.
Analysis of Key Growth Drivers
The company continues to enhance its competitive position through strategic investments in innovation and service offerings. This includes diversifying and strengthening core customer care services with technology-enabled solutions, data analytics, and consulting.
In Q3 2024, revenue was reported at $529.4 million, with the TTEC Digital segment contributing approximately $115.7 million (22%) and TTEC Engage at $413.8 million (78%).
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenue decreased to $1.64 billion from $1.84 billion in 2023, reflecting a decline of 11.8% in the TTEC Engage segment. The operating income for TTEC Digital was $16.8 million with an operating margin of 4.9%.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company’s strategic initiatives focus on expanding its geographic footprint and enhancing its service capabilities. In particular, capital expenditures are expected to range from 2.1% to 2.3% of revenue in 2024, aimed at supporting growth and maintaining existing infrastructure.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $529.4 million | $602.9 million | ($73.5 million, -12.2%) |
| TTEC Digital Revenue | $115.7 million | $133.3 million | (-$17.6 million, -13.2%) |
| TTEC Engage Revenue | $413.8 million | $469.7 million | (-$55.9 million, -11.9%) |
| Operating Income | $12.9 million | $25.4 million | (-$12.5 million, -49.2%) |
Competitive Advantages that Position the Company for Growth
The company serves approximately 750 clients globally, including Fortune 1000 companies, which provides a robust client base. The company’s unique offerings in customer experience technology, particularly in sectors such as healthcare and automotive, enhance its market position.
Additionally, the company’s offshore customer experience centers in 13 countries account for 35% of its revenue, showcasing its diversified operational capabilities.
Conclusion on Growth Opportunities
Overall, TTEC is positioned to capitalize on future growth through strategic investments, a diverse client base, and a focus on innovation in customer experience solutions.
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Updated on 16 Nov 2024
Resources:
- TTEC Holdings, Inc. (TTEC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of TTEC Holdings, Inc. (TTEC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View TTEC Holdings, Inc. (TTEC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.