TTEC Holdings, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; the supplied filing does not provide standalone fourth-quarter results. TTEC provides customer-experience technology and outsourced services through TTEC Digital and TTEC Engage.
Key financial results
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $2,273.1 million | $1,949.2 million | +16.6% |
| Income from operations | $217.2 million | $204.7 million | +6.1% |
| Operating margin | 9.6% | 10.5% | Down 0.9 percentage points |
| Net income attributable to TTEC stockholders | $141.0 million | $118.6 million | +18.8% |
| Diluted EPS | $2.97 | $2.52 | +17.9% |
| Cash from operating activities | $251.3 million | $271.9 million | Down $20.6 million |
| Free cash flow (non-GAAP) | $190.9 million | $212.1 million | Down $21.2 million |
- Segments: Digital revenue was $414.1 million (+34.9%) with an 8.6% operating margin (14.8% in 2020). Engage revenue was $1,859.0 million (+13.2%) with a 9.8% margin (9.7% in 2020). Digital operating income fell 21.8%; Engage operating income rose 14.0%.
- Cash uses and funding: Investing activities used $542.0 million, including $481.7 million for acquisitions. Financing activities provided $319.6 million, principally reflecting increased credit-facility borrowing. Capital expenditures were $60.4 million.
- Year-end liquidity and debt: Cash and cash equivalents were $158.2 million; current assets were $698.0 million and current liabilities $444.4 million. The $791.0 million revolving credit balance compared with $385.0 million a year earlier. Reported remaining borrowing capacity was approximately $565 million; TTEC said it was in compliance with its credit covenants.
- Margins and unusual charges: FY2021 results included $15.1 million of restructuring and asset-impairment charges. Engage recorded $13.4 million of net costs related to the September cyber incident; Digital’s lower margin also reflected acquisition-related amortization and a reduced government contract.
Material changes and management commentary
- Revenue growth reflected expansion in cloud and systems-integration work, acquisitions, and Engage client programs, including some pandemic-related work; these gains were partly offset by completed programs and the decline of a large Digital government contract. Excluding that contract, Digital revenue grew 88%, according to management.
- TTEC acquired Avtex in April 2021 for approximately $499.9 million, expanding Digital’s Genesys and Microsoft cloud capabilities. It drew approximately $500 million on its credit facility to help fund the acquisition.
- TTEC agreed to acquire certain Faneuil public-sector citizen-experience contracts for $140 million plus potential contingent payments. The transaction was expected to close in Q1 2022, subject to conditions.
- Management reported that COVID-19 had not materially adversely affected results through year-end, while warning of continuing uncertainty, inflation, client demand changes, and work-from-home delivery risks.
- Management expected 2022 capital expenditures of 2.9%–3.1% of revenue, approximately 65% for growth and 35% for maintenance. It anticipated at least $6 million of additional cybersecurity investment in 2022 and beyond; the total had not been determined.
- The Board authorized a $0.50-per-share semiannual dividend in February 2022, payable April 20, 2022. TTEC paid $0.90 per share in regular dividends during 2021 and made no share repurchases during 2021.
Risks, contingencies, and other notable items
- Cybersecurity: A September 2021 ransomware incident encrypted systems and involved data exfiltration or destruction, temporarily disrupting Engage client support. Client-facing systems were restored within five days; management reported no long-term operating impact and no indication financial-reporting accuracy was affected. Privacy lawsuits were served in Q1 2022. Potential regulatory, litigation, contractual, reputational, and insurance consequences remain uncertain.
- Customer concentration: The five largest clients generated 38% of revenue and the ten largest 49%; one financial-services client represented 12%. Some major-client contracts expire in 2022–2023.
- Cost and delivery risks: Management cited inflationary wage and operating-cost pressure, tight labor markets, contract terms that may not permit full cost recovery, and uncertainty around work-from-home capacity and related controls.
- Other exposures: International operations and foreign-exchange movements, privacy and employment regulation, client program-volume variability, and acquisition integration may affect results. The company also disclosed a $15.6 million CaféX investment impairment to zero.
- Capital return: Future dividends remain subject to Board approval and credit-facility restrictions. The CEO beneficially owned approximately 59% of common stock, giving him control over stockholder matters.
Important facts for investors to verify
- Review the audited statements and notes for acquisition accounting, Avtex’s contribution and valuation assumptions, goodwill and intangible assets, and the related increase in debt.
- Track whether Digital growth and margins recover, and whether Engage’s growth and margin withstand the expiration or reduction of large client programs.
- Monitor cash conversion, working-capital movements, acquisition spending, credit-facility utilization, covenant headroom, and the cost of variable-rate debt.
- Follow cyber-incident lawsuits, any client losses or claims, regulatory actions, insurance coverage, and actual cybersecurity spending.
- Assess inflation and labor-cost recovery, major-client renewals, and the closing and performance of the Faneuil acquisition.
Audit note: PwC issued unqualified opinions on the financial statements and internal control over financial reporting. Avtex, acquired in 2021, was excluded from the internal-control assessment and audit.