Prepared remarks
Welcome to TTEC's First Quarter 2026 Earnings Conference Call. I would like to remind all parties that you will be in a listen-only mode until the question-and-answer session. This call is being recorded at the request of TTEC. I would now like to turn the call over to Bob Belknapp. He is a Group Vice President, Corporate Finance. Thank you, sir, and you may begin.
Good morning, and thank you for joining us today. TTEC is hosting this call to discuss its first quarter 2026 results for the period ended March 31, 2026. Participating on today's call are Ken Tuchman, Chairman and Chief Executive Officer of TTEC; and Kenny Wagers, Chief Financial Officer of TTEC. Yesterday, TTEC issued a press release announcing its financial results. While this call will reflect items discussed in that document, for complete information about our financial performance, we also encourage you to read our Q1 2026 quarterly report on Form 10-Q. Before we begin, I want to remind you that management discussed on today's call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinions as of the date of this call, and we undertake no obligation to update this information as a result of new developments that may occur.
Forward-looking statements are subject to various risks, uncertainties and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our 2025 annual report on Form 10-K. A replay of this conference call will be available on our website under the Investor Relations section. I will now turn the call over to Ken.
Good morning, and thank you for joining us today. This quarter, we maintained our focus on strengthening our foundation, while continuing to invest in AI-enabled innovations across our business. For the first quarter of 2026, revenue was $496 million. EBITDA was $46 million, and we generated $21 million in free cash flow this quarter, which contributed to our reduction of $79 million in our credit facility borrowings since the first quarter of 2025. This reflects our continued focus on strengthening our balance sheet. I also want to call out that our first quarter EBITDA was impacted by a delayed receivable on one of our large public sector projects, for which a portion has already been approved. This receivable would have resulted in first quarter EBITDA of $49 million or 9.7% of revenue. We expect the $3 million of EBITDA to be reflected in our Q2 financials. Regarding our outlook, we're reiterating our full-year guidance.
While our year-over-year results reflect our offshore expansion in Engage, a changing market remix in digital and the deliberate rationalization of a handful of underperforming clients, we expect these dynamics to improve our year-over-year profitability as the year progresses. With that context as a backdrop, I'd like to turn to market insights from our recent client advisory meeting. Twice a year, we sit down with several of our largest and most strategic clients to understand what's shaping their priorities. It was no surprise, AI and security were at the center of our conversations. We're seeing a real shift in how companies approach AI. Early adoption was limited to siloed proof of concepts with varied success. Now leaders are taking a much broader view. Instead of just plugging in new tech for tech's sake, they're starting with their actual business goals and working backwards to build a road map.
They've realized that real transformation isn't just about the software, it's about rethinking processes, culture and how the work actually gets done. We also heard from our CAB members that their internal bandwidth-constrained IT teams are realizing they can't go it alone in such a fast-moving environment. They're looking for agile outside partners that have deep experience in CX as well as expertise in specialized security and fraud prevention. Facing risk of potential AI hallucinations, bots and ballooning unplanned token compute expenses, business and IT leaders are seeking more than just technical help. They're looking for a partner that can turn these AI-specific technologies and financial challenges into a sustainable competitive advantage. This environment plays directly into our AI strategy, which has three pillars of value: one, client transformation. Because we live exclusively in the CX space, we know exactly where technology succeeds and where it can be improved.
We combine premier tech partnerships with our own custom-built software to optimize our clients' tech stack, turning AI into a tool to augment associates, remove costly friction and deliver insight-driven growth. Two, human augmentation. True augmentation isn't just about giving an agent a bot. It's about knowing the technology so deeply that we can fundamentally reshape the frontline experience. We optimize the human-to-tech interface, automating the mundane so our associates can leverage personalized insights to deliver more customized, higher-value customer experiences. And three, operational excellence to strengthen our go-to-market as well as our internal operations. We're leaning into our deep technology and process expertise. We're automating redundant internal tasks and using analytics to gain insight into key value drivers to accelerate our growth and reduce cost. Our AI strategy is woven throughout our end-to-end approach, spanning consulting, technology and managed services.
Now I'll share two quick stories that highlight how AI is helping us bring people, processes and technology together, not just to talk about innovation and positive business outcomes but to deliver them. First, let's look at a new client of ours, a fast-growing telehealth provider. They needed to optimize a complex ecosystem of payers, providers and patients with disparate systems, customer needs and industry regulations. They chose us to design, build and operate an AI-driven road map that will unify their tech stack and empower frontline human healthcare advisers with real-time insights. With our solution in place, our client will be able to improve health outcomes at scale by balancing high-touch service with high-speed efficiency. The second example is a longtime partner of ours, a global travel brand. They were struggling with fragmented AI adoption and inconsistent results across dozens of different partners.
We've been helping them move millions of their travelers around the world for over a decade. So we understand the complexity and unpredictability that they face every day. When it was time to level up their CX, they realized that their outside consultants, systems integrators and even their own internal IT teams didn't have the AI experience or operational depth to meet their needs. They chose us because we knew their systems, processes, business and most importantly, their customers almost as well as they did. Together, these examples highlight the strength of our AI-enabled end-to-end value proposition and why it's so important for our long-term growth. By integrating strategy, technology and operations into a single delivery engine, we address a core challenge in our industry, the execution gap. Because we deliver a continuously improving CX ecosystem with clear accountability we're enabling solutions that are not only innovative but durable and future-proof.
We're encouraged that our strategy is beginning to take form even if it hasn't hit the numbers column yet. Our pipeline is growing. We're closing new deals and the level of engagement from our clients tells us we're on the right path for long-term growth. Now I'll turn to our segments. We'll start with our digital customer experience business, TTEC Engage. We're continuing to focus our efforts on three specific areas of the business. First, our continued offshore expansion is supporting both cost efficiency and scale. Our offshore revenue mix has increased from 34% to 38% for the 12 months ended March 31, 2026, compared to the prior-year period. We expect, by the end of the year, we will be delivering over 40% offshore. Second, we're actively refining our client mix by intentionally exiting a few lower-margin accounts and prioritizing higher value, more complex engagements. And third, embedding AI across our associates' life cycle from recruitment to learning and performance management.
While these capabilities are just beginning to scale, results to date are encouraging. For example, through AI-aided hiring using our smart hire screening approach, we've increased interview-to-hire rates by as much as 25%, with early signals showing meaningful improvement in the retention and quality of the hire. In learning and performance, over 100 Engage clients and over 25,000 associates now operate on our TTEC Perform platform. In select programs, we're seeing improvements in NPS and higher quality scores tied to AI-enabled coaching and support, and we're seeing strong results with our accent softening and language translation platforms. These AI-supported tools are enabling offshore deployment that delivers premium voice experiences without compromising scale. Our TTEC Engage pipeline is healthy as customer-centric brands seek partners that can move quickly and demonstrate results.
Our vertical-focused go-to-market platform is yielding year-over-year pipeline growth with larger average deal sizes. While some of these opportunities involve more complex commercial models and therefore take longer to close, we remain confident in both the pipeline and our outcome-focused strategy. Now on to TTEC Digital, where we continue to evolve our professional and managed services to align with how clients are approaching digital transformation. As a data, AI and security partner for our CX solutions, we're helping our clients optimize the tech they already have while making sure their CCaaS, CRM and AI investments are disciplined, secure and built to scale. Q1 results were largely impacted by the short-cycle nature of our professional services business. Although we achieved nearly 90% of our bookings target and a 96% book-to-bill ratio, 50% of our bookings closed in the final three weeks of the quarter.
While this concentration led to a shortfall against our initial targets, the increase in late-quarter demand and pipeline strength is encouraging. With new leadership in place, we're confident in our ability to manage through these timing delays as we build a more consistent and resilient foundation for growth. Our progress is driven by a clear market evolution: clients want to navigate the AI landscape without abandoning their existing investments. Our CX and technical expertise allows us to optimize their current platforms. Whether hyperscalers or best-in-breed tools, where we see gaps in the market, we're building proprietary software to stitch the CX ecosystem together. By infusing these tools with AI, we can deliver secure, rapid results without forcing our clients into those costly and disruptive rip-and-replace projects that everybody wants to avoid. Our AI Gateway launched this quarter highlights our fit-for-purpose software strategy.
As a proprietary integration platform, it bridges existing CCaaS systems with leading AI platforms, shrinking deployment timelines from months to weeks. This momentum is extending across all our CX technology solutions, including our modern data state and our AI observability platforms currently in beta. These new software solutions are meeting growing demand as we address urgent client needs for data readiness and systems transparency and accuracy. These platforms combined with our tenured relationships with the leading CX technology titans position TTEC as a partner designed to accelerate scalable growth. Working side by side with our clients, we're unlocking faster insight-to-action cycles, strengthening trust in AI-driven decisions and expanding long-term value creation through more intelligent, differentiated customer experiences. In closing, across both business segments, we recognize that our financial results are still catching up to our go-to-market and operational progress.
The shift, however, towards our historic growth and margin profile is well underway. We remain disciplined and focused on our fundamentals that include strengthening our differentiated position as an end-to-end CX transformation partner through our vertical-specific solutions, strategic technology partnerships and proprietary software. Winning higher-value technology and services opportunities with our existing client base and new clients, and continuing to improve our profitability by strategically rebalancing our client portfolio, driving operational efficiencies and capitalizing on global talent pools. We have the right team, platform and strategy in place to capture the significant long-term opportunities ahead. By applying an agile approach to innovation and doubling down on AI-driven efficiency, we're doing far more than just navigating a changing market. We're positioning TTEC to own it in the future. On behalf of our Board, leadership and teams around the world, thank you for your continued support. And I'll now hand the call over to Kenny.
Thank you, Ken, and good morning. I will start with a review of our first quarter 2026 financial results before discussing our reiterated full-year 2026 financial outlook. In my discussion of the first quarter financial results, reference to revenue is on a GAAP basis, while EBITDA, operating income and earnings per share are on a non-GAAP adjusted basis; a full reconciliation of our GAAP to non-GAAP results is included in the tables attached to our earnings press release. Turning to our results. On a consolidated basis for the first quarter of 2026 compared to the prior-year period, revenue was $496 million compared to $534 million, a decrease of 7.1%. Adjusted EBITDA was $46 million or 9.2% of revenue compared to $56 million or 10.6%. Operating income was $32 million or 6.4% of revenue compared to $41 million or 7.8%. And EPS was $0.15 compared to $0.28. Foreign exchange had a positive $8 million impact on revenue in the first quarter over the prior year period, primarily in our Engage segment, while having a nominal impact on adjusted EBITDA and operating income.
Turning to our first quarter 2026 segment results. In our Engage segment, first quarter revenue decreased 7.5% over the prior-year period to $394 million. Operating income was $25 million or 6.3% of revenue compared to $29 million or 6.9% of revenue in the prior year. The Engage segment's first quarter revenue was in line with our expectations. As discussed in my fourth quarter 2025 earnings comments, and as Ken mentioned, we forecasted lower first-half revenue for Engage compared to the prior year as we rationalized a small number of underperforming clients and continue to expand our offshore mix. These actions are deliberate as we continue to focus on profitability despite near-term pressure on revenue. Based on embedded base expansion and new client launches, we are still on track to return to top-line growth in the second half of the year at higher profit margins. It is also important to note that the year-over-year revenue variance was impacted by a public sector seasonal client, which accounted for over 40% of the first quarter revenue decline.
First quarter 2026 Engage profitability was slightly below our plan, primarily related to a receivable generated from one of our largest public sector clients that Ken referenced in his comments. This impact was timing-related and resulted in approximately $3 million of lower revenue and profitability in the quarter. Adjusting for this impact, Engage first quarter revenue was $397 million with operating income of $28 million or 7% of revenue, a slight margin increase over the prior year. We expect this positive adjustment to be recorded in our second quarter results as a portion of this receivable has already been resolved. We remain confident in the actions we have taken and continue to implement to drive higher profitability in our Engage segment. That said, these decisions do not necessarily result in straight-line improvements. While our first quarter Engage operating income declined versus the prior year, we anticipate this trajectory to positively change in the second quarter with margins further expanding throughout the second half of the year.
The Engage backlog is $1.51 billion or 94% of our 2026 revenue guidance at the midpoint of the range, down from 101% for the same period of 2025. The Engage last 12-month revenue retention rate is 94%, an improvement over the 88% for the same period last year. In our Digital segment, first quarter revenue was $102 million, a decrease of 5.7% over the prior year. Operating income was $7 million or 6.6% of revenue compared to $12 million or 11.2% of revenue for the same period last year. Digital's first quarter 2026 revenue was slightly below expectations with revenue mix impacting profitability. Recurring revenue declined 7.3% primarily within one of our traditional CCaaS practices due to the ongoing market shift away from legacy contact center point solutions. This decline was expected, and we continue to structure our managed services resources to align with forecasted revenue. Excluding our two legacy CCaaS practices, professional services grew 15.3% year-over-year.
This growth reflects the momentum we are seeing in our expanded CX technology partnership network as we optimize clients' existing platforms through end-to-end transformative solutions. We are pleased with the first quarter double-digit growth in these practices and expect them to scale more rapidly throughout the year. Digital's total first quarter professional services revenue decreased 4.8% compared to the prior year, as front-end consulting engagements related to cloud migrations declined. The professional services revenue was also impacted by new contracted business signed during the quarter, with approximately 50% closed during the last three weeks. This pushed revenue out to the second quarter and beyond, negatively impacting first quarter profitability. Although these deals are not reflected in our current quarter results, we are pleased with the sales momentum. First quarter revenue benefited from product resale, which represented 2.5% of Digital's total first quarter revenue compared to 1.7% in the prior year.
Although we still expect these product resales to decline on a full-year basis, as discussed in our fourth quarter commentary, we will participate in intermittent opportunities as they arise. However, we remain focused on our core growth strategies across professional services and recurring revenue in our nontraditional CCaaS practices. Our Digital backlog is $325 million or 76% of our 2026 revenue guidance at the midpoint of the range, essentially flat to the 77% for the same period last year. I will now share other first quarter 2026 metrics before discussing our outlook. Free cash flow was $21 million in the first quarter of 2026 compared to $16 million in the prior year. The year-over-year improvement of $5 million is due to an additional $6 million of cash flow from operations, less an increase in capital expenditures of $1 million. The increase in cash generation reflects our continued focus on cash management and working capital improvements.
In the first quarter of 2026, capital expenditures were $6 million or 1.3% of revenue compared to $5 million or 1% in the prior year. Approximately 60% of the current quarter spend relates to growth in product development, real estate expansion and client technology investments. As of March 31, 2026, cash was $89 million with $892 million of debt, primarily representing borrowings under our recently amended $1.05 billion revolving credit facility. The net debt position of $803 million represents a year-over-year decrease of $79 million as we continue to focus on cash flow generation and debt reduction. We ended the first quarter 2026 with a net leverage ratio as defined under our credit facility of 3.77x, relatively unchanged over the prior year period. Our normalized tax rate was 52.9% in the first quarter of 2026 compared to 37.9% in the prior year. The tax rate is primarily due to the jurisdictional mix of pretax income.
The impact of the U.S. valuation allowance recorded against the U.S. pretax losses will continue to impact the normalized tax rate with the rate fluctuating based on the total pretax income and the mix between foreign and U.S. jurisdictions. Turning to our 2026 outlook. I will now provide some context supporting our full-year financial guidance. Overall, our first quarter results were in line with expectations, taking into account the timing considerations mentioned for both Engage and Digital. Our Engage segment is expected to return to improved profitable year-over-year growth starting in the second quarter primarily driven by the operating and cost management actions implemented over the past two years to return to historical margins. We continue to build on this foundation through the rationalization of certain underperforming clients and the growth of offshore revenue mix. These actions don't always translate to growth over the prior year in every quarter but are important contributors to delivering our full-year improvements and keeping us on course for longer-term margin expansion.
In our Digital segment, we are executing on the shifting market demands through new partnerships for AI, data and security. These factors, combined with our in-depth knowledge and years of experience working with end-to-end CX platforms position us to profitably scale these practices in 2026. As with any market shift, the timing of revenue and related margins are not necessarily aligned to reflect consistent quarterly improvements. However, we remain confident in our ability to deliver on our full-year 2026 guidance. Please reference our commentary in the Business Outlook section of our first quarter 2026 earnings press release to obtain our expectations for our reiterated 2026 full-year guidance at the consolidated and segment level. In closing, we remain committed to our goals of continued profitable growth, cash flow improvement and debt reduction. These objectives are at the forefront of every decision we make and require continued focus and operational execution across the business. We are appreciative of the dedication of our leadership and employees around the globe and for the support from all our stakeholders. I will now turn the call back to Bob.
Thanks, Kenny.
Questions and answers
Our first question will be coming from George Sutton of Craig-Hallum.
Thank you. Obviously, a little noise in the quarter. So I wanted to kind of think about the industry narrative around the whole space. On one hand, your Q4 would sort of play into the narrative. But I'd say on the other hand, your larger pipeline for Engage with higher average deal sizes would play against it. So I just wanted to make sure I sort of fully understood the pipeline that you're looking at and at the same time, the deliver rationalization you're having with some other clients. I assume the new clients you bring in come in at much higher margins than the clients that you are rationalizing.
George, I'm not fully understanding the question, but maybe what I'll do is just give a bit of a narrative on the health of the pipeline and of the business. Is that what you're asking of me?
Obviously, there is a narrative in the market about AI's impact. And your pipeline would suggest, when you're seeing larger average deal sizes in that space, that's very intriguing. I wouldn't get behind that a little bit and understand it.
Yes. So first of all, I'm not trying to come across as a contrarian. But up to this point, as it relates to the DCX Engage business, we're not feeling a reduction in volumes due to AI. We're not suggesting that over time, that won't take place. But at this point in time, that is not something we're seeing. As a matter of fact, what we're actually seeing right now is a significant amount of activity with net new clients that are expanding as well as our embedded base that is now coming to us and expanding on many of our larger accounts. That, coupled with the fact that on DCX the actual amount of deals that have already been closed in first quarter and the deals that we expect to close in the second quarter is what gives us confidence to maintain our guidance. And frankly, we're really feeling good right now about what we're seeing coming at us, the deals that we're closing, the mix of the deals that are now starting to take advantage of our digital capabilities.
We feel like that's giving us a significant edge because we can demonstrate to clients that not only do we have the right partnerships, but we have such a deep understanding technologically of what our clients are dealing with as well as what our partners have to offer. Therefore, it's giving us an edge to be able to demonstrate to our clients that we can have an impact on their business from an efficiency standpoint as it relates to applying technology and AI. The pot is still so large and we're relatively small to the overall size of that TAM that we're still seeing and winning many opportunities. In the first quarter, we will wait until second quarter before we quote the number of net new clients that we've signed. What I will say is that on a new logo standpoint, we're well ahead of last year's first quarter of net new logos. We're confident the logos that we are in the process of signing will continue that trend through the second quarter.
The marketplace is healthy. Providers that are providing high-quality service are winning consolidated business from other providers who, for whatever reason, aren't performing. That provides significant amounts of future opportunity for us as the space continues to go through organic and inorganic consolidation.
Our next question will be coming from Maggie Nolan of William Blair.
I'm hoping you can comment on — you made a comment that new proposals — most of the new proposals now incorporate AI. And I'm hoping you can give us some insight into kind of the average deal size and implementation timeline for some of these AI-enabled digital engagements as they compare to legacy contracts?
That's a great question. It's not an easy one to answer because it's so dependent upon our clients' data states and how much data we can actually gain access to. If it's a company that was born natively digital, our ability to provide a much more AI-intensive capability for voice bots and chatbots can be done in a reasonable period of time measured in about three months, and in some cases, if it's just the basic front end, even less. But many of our Fortune 500 clients have very large legacy systems with a myriad of siloed systems. To give you an example, a client that we recently completed a large project for had 235 separate systems that we had to connect to in real time. That project took 24 months to write all the APIs, tap all the different systems, and get synchronization out of them. The big misnomer about taking advantage of AI is that people don't fully appreciate how complex it is for companies to achieve a modern data estate.
That is one of the biggest issues that many legacy companies have: their data is in so many different systems that don't necessarily talk to each other. It's our job to bring all of that together. Our focus when going into a client is the stuff we know we can turn on almost immediately. Those are the tools that augment associates. What can we do with AI from a quality standpoint? What can we do with AI for real-time language translation? What can we do with AI for scheduling and forecasting? What can we do with AI for training, learning and development — building new curriculum and new capabilities? These are designed to augment the associate to get more proficiency, more accuracy, more quality out of the associate and to allow them to focus more on the customer and less on the systems. We view that as Phase 1 across all of our clients. Phase 2 is creating self-service chatbots and voice bots that ultimately keep the human in the loop.
At our CAB meetings every six months, virtually every large company is focused on keeping the human in the loop. They realize that while AI can replace certain interactions, they don't want to lose the connective tissue to customers, so they want to help pick the points of intersection where technology touches the customer and where a human touches the customer. We see this industry moving to hybrid capabilities where customers will always have access to a live human for important interactions, often augmented by AI, and where low-value, transactional interactions will be self-service. Our clients are analyzing journeys and mapping this. We're excited about it, and this is why our digital business has so much potential as we transition from legacy CCaaS capabilities to building modern data estates and providing AI-based analytics.
And then I'd like to comment on the improvement in the retention and Engage revenues on a year-over-year basis. So could you link those continued efforts and expected improvements there, continued improvements, I would suspect back to kind of the return-to-growth timeline and trajectory for Engage?
Maggie, this is Kenny. I'll take that one. We are seeing steady and good improvement in our embedded base growth. We've talked about this quarter-over-quarter. We're improving our quality and service; it has been a focus for Engage over the last two years to get back to the historical margins that we're committed to. There's a direct correlation to providing outstanding service on the floor of our operational centers. Embedded base growth is improving as we bring in external talent to our leadership team in Engage, and they bring expanded ideas around lines of business we can get into that we haven't traditionally been in. That underpins our offshore growth in Engage. That gives us the breadth of offering to go back to our embedded base and say, 'Hey, we're investing in AI and all the things Ken talked about earlier from our performance to our training to our QA. With the footprint we have, we can sell many different lines of business that we couldn't in the past.'
The embedded base is moving with us and is underpinning the growth you'll see in the second half of the year. We've reaffirmed in our guidance that we will return to top-line growth in Engage by the end of the year. That's a big part of it. We're happy with where we're at, the service we're providing, the embedded base business and their desire to come back to us and grow in different lines of business and geographies.
Our next question will be coming from Jonathan Lee of Guggenheim Partners.
Kenny, helpful that you broke out the public sector seasonal client is 40% plus the decline in Engage. Of the remaining, call it, $19 million of Engage revenue decline, was any of that unplanned volume loss on retained clients? Or was it entirely delivered rationalization? And what's the same-client organic growth rate for the portfolio you're choosing to keep?
Yes, Jonathan, it is definitely a little of both. As we discussed coming into this year and in Q4, our full-year guidance was always going to be a story of two halves. We are rationalizing, as Ken mentioned, clients to make sure we have the profit profile we need for this business moving forward. I don't have the exact split for you, but it is a portion of both unplanned volume declines and deliberate rationalization. The timing of bookings, pipeline and momentum Ken talked about leads to a stronger second half than first half for Engage. We're happy with the bookings we have, the new logos and how that revenue will realize in the second half of the year. Rationalizations with clients are somewhat of a push-and-take; we engage with them to try to keep the business and make it profitable for both parties. If we can't, that's fine because we have demand offshore — our pipeline is up 17% year-over-year with offshore demand. We are focused on diversification of the Engage business from a geographic, line-of-business and vertical standpoint.
I will say, though, that the public sector pipeline is actually fairly healthy. With my personal involvement along with John Abou's involvement, we are ensuring that net new public sector accounts are profitable from day one. We inherited multiple public sector clients through an old acquisition done years ago; a couple of those accounts are ones Kenny was referring to. The government sector is still a healthy sector for Engage and for Digital, especially Digital. There's a lot of federal spending going on right now in modernization, and our goal is to get our piece of that.
Got it. And just as a follow-up, I want to tie it back to margins. Adjusted you're at, call it, 7% for Engage. But you've executed, call it, 400 basis points of offshore shift. You're near-full AI deployment, you've exited unprofitable work. In 3Q of last year, I think you said we'd see far better efficiencies in 2026. Ken, I believe you said you're 100% volunteering AI savings on new pitches to win new business. Is that the answer — the tailwinds are real, but you're giving them back on new deals? If so, when does volume from those wins overcome the rate concession?
You had multiple questions there. To be clear, we're not giving it away. Our Engage number, but for a receivable pushed into second quarter, was essentially in line with management's plan forecast, which I believe was around 9.7% or 9.8% EBITDA. We always anticipated our EBITDA number would be at that level for the first quarter. The benefits are realized more in the second half of the year. We've always been back-end loaded in the 40 years we've been in business. Typically you win business in the first two quarters and continue to win in the third and fourth quarters, but you ramp a big chunk of that business in the first and second quarters and realize the benefits in the third and fourth quarters. That's the nature of the business. Because we are focused on client diversification right now, there are a fair number of ramps taking place, in addition to embedded base ramping.
Jonathan, on the specific question of monetization of AI from a pricing standpoint, we're still not seeing a clear trend one way or the other. The AI we've deployed around contact agent quality and performance don't drive hard negotiations about pricing between client and us. What we're really seeing is the normalization of offshore growth, which has near-term pressure on the top-line revenue, but ultimately yields a better EBITDA margin profile. As we move through new business, new logos and embedded base growth this year toward year-over-year top-line revenue growth, that revenue is fortified by the offshore portion of the business. We committed last quarter to being over 40% offshore by the end of the year, and we're on target to do that. That mix is a big portion of the margin improvement for Engage throughout the full year of guidance.
Thank you for your questions. That is all the time we have today. This concludes TTEC's First Quarter 2026 Earnings Conference Call. You may disconnect at this time.