管理層發言
Thank you for standing by. The conference will begin momentarily. Until such time, you will hear music. Thank you, and please continue to stand by. Welcome to TTEC Holdings, Inc. fourth quarter and full year 2024 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 Holdings, Inc. I would now like to turn to Bob Belnap, TTEC Holdings, Inc.'s Group Vice President, Corporate Finance. Thank you, sir. You may begin.
Good morning, and thank you for joining us today. TTEC Holdings, Inc. is hosting this call to discuss its fourth quarter and full year results for the period ended December 31, 2024. Participating on today's call are Ken Tuchman, Chairman and Chief Executive Officer of TTEC Holdings, Inc., and Kenny Wagers, Chief Financial Officer of TTEC Holdings, Inc. Yesterday, TTEC Holdings, Inc. issued a press release announcing its financial results. While this call will reflect items discussed within that document, for complete information about our financial performance, we also encourage you to read our full year 2024 annual report on Form 10-K. Before we begin, I want to remind you that matters 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 opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments. 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 2024 annual report on Form 10-K. Before we proceed, I would like to state that our call today will not be addressing Mr. Tuchman's proposal. The special committee of the board formed to evaluate that proposal, together with its independent legal and financial advisors, continue to engage with Mr. Tuchman, and the proposal evaluation is ongoing. The company cannot comment on that process and will not be. 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. As previously shared, 2024 was a transitional year for TTEC Holdings, Inc. Across the company, we continued to advance on three major priorities: our diversification strategy with a broadened geographic delivery footprint and client portfolio, our expanded digital CX value proposition with differentiated technology-enabled solutions, and our overall goal of achieving and exceeding our historical growth and run rate margins in the near term. For the full year 2024, revenue and non-GAAP adjusted EBITDA were in line with the guidance commentary that we provided last quarter, representing $2.2 billion and $202 million or 9.2% respectively. With a disciplined focus on these priorities, we made progress on many fronts in 2024. We continued our success winning new clients. These deals are diversified across our solutions and core industries of financial services and healthcare, as well as emerging verticals including retail, travel, and streaming services.
We established and strengthened additional relationships with over a dozen CX technology partners through collaborative product development, joint engineering efforts, and shared go-to-market strategies. We advanced AI adoption internally for our own associates and with our embedded base clients in both business segments and have accelerated the infusion of AI capabilities into every new sales opportunity. For the second consecutive year, we were recognized as a great place to work in fifteen geographies where we operate. Although we are pleased with our improvements in key areas of our business in 2024, we were constructively dissatisfied with our overall financial results for the year. While our forecasted margin improvements reflect our progress, top-line revenue is impacted by two client business decisions unrelated to our performance. The relationships with both clients remain strong, with ample opportunity for growth.
Additionally, our top line was also being impacted by a muted open enrollment healthcare season and our continued focus on rationalizing client engagements that do not meet our target financial profile. Kenny will share details on those topics in his comments shortly. Moving on to the discussion about the industry. The AI revolution is creating exciting opportunities for us. Innovative technologies are flooding the market with entirely new ways to advance the customer journey and the associate experience. In this environment, the needs of clients' Chief Operating Officers and Chief Information Officers are converging. They are working together to find approaches that go far beyond labor augmentation endpoint solutions. They are looking for the integration of CX technology and services that seamlessly work together end-to-end to increase operating efficiencies, improve customer experiences, and strengthen the top and bottom line.
This capability is right in our sweet spot and remains a differentiator for TTEC Holdings, Inc. With our heritage of digital innovation woven into everything we do, we are uniquely prepared to take advantage of this moment. It took us many years to build the capabilities and perfect the solutions that are resonating with clients today. We believe these capabilities and solutions, if carefully inspected, are highly differentiated relative to what our competitors claim to have. We have done the hard work to complete thousands of technology implementations for leading brands across the globe, develop collaborative partnerships with all the dominant CX technology leaders, and build a deep and enviable bench of full-stack CX technologists, data scientists, and customer journey strategists. As the digital customer experience transformation company, clients are looking to us as they navigate the complex CX ecosystem.
Across our two business segments, TTEC Engage and TTEC Digital, we offer the breadth and depth of CX expertise unmatched in the industry. At this pivotal time in the market, we are helping clients create experiences that feel seamless and intuitive, even if they are being delivered by a combination of human interaction and modern technology. Now let's move on to an update on our two business segments. Starting with TTEC Engage. Over the past six months, we strengthened our TTEC Engage management team with several strategic hires to capitalize on numerous opportunities in the market. We brought in experienced client-focused professionals worldwide, including our new President, three vertical industry executives, and operational leaders in the Americas and EMEA. Each of these leaders blends strategic thinking with a focus on performance, and they are accelerating our momentum while also delivering measurable client value.
In TTEC Engage, our sales momentum is beginning to improve. In 2024, with fifteen new enterprise client wins, our go-to-market engine exceeded its new client acquisition goal. Though many of these new relationships start with a single line of business, they offer significant potential for future expansion with new solutions and additional business units. Increasingly, these deals are being delivered offshore, as evidenced by our growth in our new geographies year over year. We continue to leverage technology at scale in TTEC Engage to amplify the skills and the talent of our frontline teams. Internally, we are using AI-enabled solutions and data-driven insight across the entire associate lifecycle to recruit, train, engage, and empower our people. In addition, we are implementing solutions that directly improve the customer journey, including self-service knowledge management, accent neutralization capabilities, and our proprietary voice translation applications.
While it is still early days, we are encouraged by the potential of these technologies to increase quality, efficiencies, and customer satisfaction. Several wins this quarter underline the value of our digital-first expertise. For example, a recent success with a popular travel platform stemmed from their dissatisfaction with their CX partners' lack of innovation. They chose us for our proven ability to enhance quality and operational efficiency through human-enabled AI-powered solutions. This new program will utilize the full extent of our operating model, including learning, knowledge optimization, voice translation, and conversational analytics. Now on to TTEC Digital. This year, we closed fifty-five new clients, including many larger enterprise-sized companies that provide significant runway for future expansion. As clients' technology needs shift from cloud migration services to more complex enterprise-wide digital transformation, we are dramatically expanding our total addressable market.
These multifaceted engagements typically start with shorter cycle professional services and grow into longer-term recurring managed service engagements. Let me share a few examples. We started our relationship with a regional healthcare provider by implementing their new CRM system. During the project, we recognized the need for a customized modern CCaaS platform. Utilizing our proprietary software, we connected the two systems and now provide ongoing holistic support through our Surround CX managed services methodology. We have streamlined various systems to enhance connectivity for our clients' patients and caregivers. Throughout this process, we have established a long-term trusted partnership that will continue to grow. In another healthcare example, we are partnering with a Fortune ten global healthcare solutions company to modernize their infrastructure for enhanced voice and digital interactions.
Our collaboration began nearly a decade ago with a Cisco deployment. Following a major acquisition in 2024, they recognized the need to centralize and modernize their critical CX interactions. Together, we developed a robust technology roadmap that will transition them from a rigid legacy IVR system to an intuitive conversational AI platform, simplifying interactions, streamlining routing, reducing cost, while improving healthcare outcomes across their network. With several client engagements like this in development, I look forward to sharing both the customer experience and the business impact of these initiatives in the months to come. In closing, our goal remains the same: to be the undisputed leader in the future of CX, where human expertise integrates seamlessly with advanced technologies. As the digital customer experience transformation company, we will continue to deliver an end-to-end portfolio of outcome-based CX technology and service.
As we move into 2025, we remain focused on growing our business by diversifying our client base, solutions, and geographic footprint, improving our operating leverage and profitability, and continuing to strengthen the intensity of our performance-based culture. We are confident that our priorities will drive our vision forward and position the company for success in 2025 and beyond. On behalf of our global team, board of directors, and leadership, thank you for your continued support. Now, I will hand it over to Kenny.
Thank you, Ken, and good morning. I will start with a review of our full year and fourth quarter 2024 results before providing context into our 2025 full year financial outlook. In my discussion on the fourth quarter and full year 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. On a consolidated basis for full year 2024, compared to the prior year period, revenue was $2.21 billion compared to $2.46 billion, a decrease of 10.4%. Adjusted EBITDA was $202 million or 9.2% of revenue compared to $272 million or 11%. Operating income was $136 million or 6.2% of revenue compared to $200 million or 8.1%. And EPS was $0.71 compared to $2.18. Foreign exchange had a $3 million negative impact on revenue while positively impacting operating income by $7 million, primarily in our Engage segment.
Turning to our consolidated fourth quarter 2024 financials, revenue was $567 million, a decrease of 9.4% over the prior year period and an increase of 7.2% over the prior quarter. Adjusted EBITDA was $51 million or 9% of revenue compared to $58 million or 9.2% of revenue in the prior year. Sequentially, adjusted EBITDA was relatively unchanged but declined by 50 basis points as a percentage of revenue. Operating income was $35 million or 6.2% of revenue compared to $42 million or 6. Operating income increased 2.5% over the prior quarter but declined by 20 basis points as a percentage of revenue. And EPS was $0.19 compared to $0.37 in the prior year period and $0.11 in the prior quarter. Foreign exchange had a $2 million negative impact on revenue while positively impacting operating income by $4 million, primarily in our Engage segment. At the company level, our fourth quarter financial performance was in line with the guidance expectations communicated last quarter, at the lower end of the guidance range.
Now turning to our fourth quarter and full year 2024 segment results. In our Digital segment, fourth quarter revenue was $115 million compared to $119 million in the prior year and relatively unchanged sequentially. The year-over-year comparison continues to be impacted by one-time on-premise product sales, which are decreasing as clients migrate to cloud-based CX delivery solutions. Excluding these one-time product sales, Digital's revenue grew 3.8% in the quarter compared to the prior year. We continue to deliver growth in our recurring managed services offerings, increasing 10.2% compared to the prior year and representing approximately 64% of Digital's total fourth quarter revenue compared to 56% in the prior year. In our CX professional services offerings, revenue declined 8.5% year over year. As shared previously, select clients have delayed the timing of quarter revenue as communicated with our most recent guidance.
We continue to view this as a temporary pause and expect recovery supported by our strong pipeline activity. Digital's fourth quarter 2024 operating income was $13 million or 11% of revenue compared to $18 million or 14.8% in the prior year and $14 million or 12.5% in the prior quarter. On a full-year basis, Digital's 2024 revenue was $459 million compared to $487 million in the prior year period. Operating income was $51 million or 11.2% of revenue compared to $62 million or 12.8% in the prior year. Excluding the one-time on-premise product sales, Digital revenue grew slightly at 1%. Recurring managed services grew 9.1% and represented 64% of Digital's full-year revenue compared to 55% in the prior year. The year-over-year decline in the professional services offerings of 12% combined with investments in leadership and talent resulted in lower profitability. Despite the second-half headwinds in 2024, we are confident that Digital will return to growth in 2025.
Our ability to solution enterprise-wide digital transformations with our professional services engagements will result in long-term recurring revenue. Our Digital backlog for the next twelve months is at $308 million or 66% of our 2025 revenue guidance at the midpoint of the range, slightly down from 69% in the prior year. Moving on to our Engage segment, fourth-quarter seasonal volumes came in above our most recent guidance but were down compared to the prior year as expected. Revenue decreased 10.8% to $452 million in the fourth quarter of 2024 over the prior year period. Compared to the prior quarter, revenue increased $39 million or 9.4%. Operating income was $22 million or 4.9% of revenue compared to $24 million or 4.8% of revenue in the prior year. Sequentially, operating income increased 13.3% with an approximate 20 basis points improvement as a percentage of revenue. Engage fourth-quarter revenue and operating income exceeded our low end of guidance, coming in closer to the mid-range provided.
The overage was primarily driven by upside related to two specific clients in our public sector vertical. We are pleased with our Engage segment's fourth-quarter financial results and the profitability improvement in the second half of the year. The actions we have taken and communicated throughout the second half of 2024 in terms of our profit optimization efforts are evident over the last two quarters and will be more impactful in 2025. On a full-year basis, the Engage 2024 revenue was $1.75 billion compared to $1.98 billion in the prior year. Operating income was $85 million or 4.9% of revenue compared to $138 million or 7% in the prior year period. Approximately half of the full-year revenue decline related to the discontinuation of the line of business early in 2024. We continue to service this client across other programs which are anticipated to grow in 2025. The remaining revenue impact is primarily attributable to a decrease in healthcare volumes, including the reduction in seasonal work previously mentioned, partially offset by volume increases in our public sector vertical.
Despite the top-line growth headwinds, the quality of Engage opportunities remains strong and our unique solutions continue to resonate in the market. This is evidenced by the twenty new logos signed in 2024, of which fifteen are large enterprise clients with significant growth potential as previously mentioned by Ken. The Engage backlog for the next twelve months is $1.51 billion or 96% of our 2025 revenue guidance at the midpoint of the range, up from 94% in 2024. The Engage last twelve-month revenue retention rate is 82%, compared to 95% in the prior year. Adjusted for the revenue decline related to the large financial services client, Engage's last twelve-month revenue retention rate is at 87%. I will now share other 2024 metrics before discussing our outlook. Cash flow from operations was a negative $59 million in 2024 compared to a positive $145 million in the prior year. As discussed last quarter, the discontinuation of the accounts receivable factoring facility impacted our cash flow by approximately $100 million during the year.
Excluding the effect of the factoring facility, 2024 cash flow from operations was a positive $42 million. The remaining impacts are a result of the lower profitability compared to the prior year and a decrease in other working capital. Free cash flow for 2024 was a negative $104 million compared to a positive $77 million in the prior year. Excluding the effect of the accounts receivable factoring facility and including the proceeds from the sale of a significant real estate asset of $46 million, 2024 free cash flow was a positive $43 million. As of December 31, 2024, cash was $85 million with $978 million of debt, primarily representing borrowings under our $1.2 billion revolving credit facility. Net debt increased year over year by $66 million to $893 million, impacted by the factoring facility discontinuation. The net leverage ratio as defined under the credit facility was 3.99 times at year-end, a half-turn reduction from the prior quarter.
Capital expenditures were $45 million or 2% of revenue for the full year 2024, compared to $68 million or 2.8% in the prior year. Again, with the majority of the spend related to our engaged geographic expansion. Our full-year normalized tax rate was 40.9% in 2024 compared to 22.7% in the prior year. This increase is primarily due to the impact of the U.S. valuation allowance recorded against the U.S. pre-tax losses and profitable foreign jurisdictions, which drove a higher tax expense. Transitioning to our 2025 outlook, I will now provide some context supporting our full-year financial guidance. Relating to Engage, we expect a decline in revenue of approximately 10%, primarily due to the impact of a public sector client and the previously mentioned financial services client discontinuing certain lines of business. This, combined with the anticipated foreign exchange translation headwinds, our focus on expanding our offshore revenue, and the rationalization of client engagements that are consistently performing below our targeted financial profile, is putting pressure on the top line.
As Ken mentioned, and as we communicated last year, we have put tremendous focus on our profit optimization efforts within the Engage segment. These include expanding our geographic delivery footprint to meet clients' needs for lower-cost delivery and solutions, cost optimization initiatives driving efficiency in our operational delivery, aligning our corporate costs to our revenue, improving our operational agility and margin performance through detailed operational metrics, and recruiting new talent in key leadership roles that, combined with our tenured leadership, will execute on our 2025 objectives. These actions have laid a strong foundation for the profitability improvements in 2025 and are evidenced by the early pull-through of increased margins. We emphasize that last year was a transitional year with these actions being our priority, and we have confidence that they will deliver the bottom-line benefits in 2025.
In our Digital business, we expect to return to year-over-year revenue growth through our professional services and recurring managed services, together forecasted to grow by approximately 5% in 2025. This is driven by our end-to-end digital CX value proposition with differentiated technology-enabled solutions delivered through our growing diversified offerings. This growth offsets the decline in our one-time on-premise product revenue of approximately 45%. Turning to the midpoint of our 2025 guidance, as outlined in greater detail in our fourth quarter and full-year 2024 earnings press release: GAAP revenue of $2.04 billion, a decrease over the prior year of 7.6%. Adjusted EBITDA of $225 million, an increase of 11.2% over the prior year and 11% of revenue compared to 9.2% in the prior year. Non-GAAP operating income of $164 million, an increase of 20% over the prior year and 8% of revenue compared to 6.2% in the prior year.
Non-GAAP earnings per share of $1.08, an increase of 52.5% over the prior year. Other relevant guidance metrics include capital expenditures between 2.2% and 2.4% of revenue, of which approximately 51% is growth-oriented, a full-year effective tax rate between 38% and 42%. We expect the phasing of our profitability improvement to be more pronounced in the second half. Please reference our commentary in the business outlook section of our fourth quarter and full-year 2024 earnings press release to obtain our expectations for full-year 2025 performance at the consolidated and segment level. In closing, we are confident in the actions we took in 2024 and continue to execute on in the new year. These, combined with our demonstrated forty-plus years of delivering value-driven CX technology and service solutions, position the company well for improved operational efficiency and profitability in 2025. As always, we remain focused on executing against our top business priorities, serving the best interest of all stakeholders. I will now turn the call back to Bob.
Thanks, Kenny. As we open the call, we ask that you limit your questions. Operator, you may open the line.
分析師問答
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one. Please unmute your phone and record your name and company name clearly when prompted. Name and company name are required to introduce your question. And to cancel your request, you may press star two. Our first question comes from the line of George Sutton of Great Hallum. Your line is now open, sir.
Thank you. Ken, you mentioned that all of your deals are being infused with AI. I am curious if you could give us a sense of how exactly that is working and what sort of impacts that might have on your win rates and your deal structures?
Good morning, George. How are you? It is going great. On the digital side alone we have approximately 145 to 155 projects underway where we are implementing AI on behalf of a number of clients. On the Engage side, more than three-quarters of our associates now have various tools that take advantage of AI. We have a significant amount of additional technology coming in the second quarter that will reach the majority, if not all, of the desktops on the Engage side. We view AI as a friend. We believe AI gives us the ability to provide a better overall quality of service. Once we get past the hype cycle, AI will enhance the associate experience, make their job easier, make information available faster and more nimble, and drive better compliance and fraud detection. We are utilizing AI in the agent desktop to make associates more productive. We are using AI throughout our operations, including quality assurance, training and learning, and recruiting. We are well on track with our goals for AI adoption. We will share many examples and outcomes on future calls. I hope that answers your question.
Yeah. Thank you. And just a comment as I leave. I am encouraged the take-private process continues, but on behalf of many shareholders I have spoken with, there is frustration on the timing and the perceived do-nothing strategy from the committee. I would like to hear an update, so I want to make sure I express that.
I appreciate that. I absolutely appreciate that. I hope the committee will take that into consideration.
Thank you. Next question comes from the line of Maggie Nolan of William Blair. Your line is now open.
Thank you. I wanted to make sure that I fully understand the 2025 revenue guidance. Can you comment on whether there are any revenues related to the clients that had previously delayed large projects that impacted 2024? Also, what are your assumptions for seasonal revenue versus 2024 in the 2025 revenue guidance?
Hey, Maggie. Good morning. For the midpoint of guidance for 2025, it is all about the sequential quarters. We expect slightly higher revenue in the second half of the year. We are looking at a peak season in 2025 that is relatively equivalent to the peak season we saw in 2024 from a healthcare standpoint. The sequential quarters will follow our normal seasonality as seen in 2024 and 2023. There are tailwinds from new enterprise logos we won in the second half of 2024; those specific enterprise clients are forecasted to grow over 125% year over year. Those new clients that were delayed in 2024 are now underway in the second half of 2024 and the beginning of 2025, and they will provide underlying growth for the second half in our guidance.
Thank you. Our next question comes from the line of Cassie Chan of Bank of America. Your line is now open.
Hey, guys. Thanks for taking my question. On the margin front for 2025, you are continuing to make reinvestments. Where are the offsets from operating leverage? Can you talk a bit more about the investments you are making in 2025 versus 2024 and what kind of ROI you expect going forward? Thanks.
Yeah, Cassie. Good question. Last year we adjusted the company's cost structure to meet where our revenue is. For 2025, it's more of the same. We brought in experienced industry leaders, specifically on the Engage side, and are doubling down on operational metrics and cost drivers to continue improving gross margin year over year and quarter over quarter. Desktop AI is creating operating leverage for agents to be more efficient and deliver better quality. We are starting to see that in our gross margin attainment, including how Engage structures bonuses, penalties, and contract terms. Operational discipline is delivering quality service and margin expansion. The key for 2025 is sequential improvement at the gross margin line and the EBITDA line.
I would add that on the Digital side we have significantly expanded our partner network and brought in strong leadership to gain traction across the CX continuum, not just CCaaS but desktop solutions and core AI partnerships. We are investing in those practices, which are the fastest growing percentage-wise. We have also added strong operating leadership globally to drive better efficiencies. Additionally, we have products coming in language translation and accent neutralization that are in beta testing with clients and will roll out soon, opening new opportunities.
Got it. That is really helpful. A quick follow-up on your revenue growth guidance assumptions for 2025: are you assuming a stable macro backdrop from current levels? Anything AI-related factored into the guidance? And how should we think about growth by verticals — healthcare, financial services, public sector, etc. — embedded in your 2025 guidance?
Cassie, GDP in 2024 was about 2.3% and 2025 is forecasted around 1.9% to 2%. From a macro standpoint we feel 2025 will be relatively similar to 2024. From a TTEC Holdings, Inc. standpoint we expect to outperform that. We have tailwinds in both Digital and Engage. We are somewhat bullish on most of our verticals given our wins and the new enterprise clients signed in 2024 that have a good forecasted growth rate in the second half of 2025. John and our sales leaders brought in over the last 18 months are experts in their verticals. We like technology and retail verticals, and public sector performed well in Q4. Our strategy is diversification by geography and verticals.
I don't want to hype the future. What gives me confidence is the amount of net new clients we are bringing on. Many competitors acquired clients through acquisitions; we are winning them organically. We had fifteen new enterprise clients on Engage in 2024 and a large number on Digital. That reduces revenue concentration and creates future growth. However, patience is required as clients ramp — it typically takes twelve to eighteen months to reach full ramp. We are winning many logos, but the benefit is not immediate; it accrues over time.
That is helpful. Thank you.
Thank you. Our last question is from Jonathan Lee of Guggenheim Security. Your line is now open.
Hey. Thanks for taking our question. How do we think about the type of margin uplift you are getting from increased offshore delivery versus your cost takeout initiatives? And how do you defend your margins relative to the perceived need to pass on some of these benefits to your customers?
Hey, Jonathan. Our diversification strategy includes geography expansion and onshore-offshore mix changes. Our offshore mix grew about 300 basis points in 2024 and we forecast another 300-plus basis points in 2025. That revenue still takes time to onboard. The margin expansion and double-digit EBITDA growth we forecast for 2025 are more heavily weighted toward operational improvements driven by AI and operational discipline across the organization than just onshore-offshore mix changes. Those operational improvements are creating efficiency and quality gains that expand profitability.
Got it. Thanks. Maybe last one: how do we get comfortable with your back half for the year relative to your typical visibility going out thirty to ninety days as it relates to client volumes?
It comes down to onboarding cycles. We have good precision in forecasting when clients will start because many wins are tied to new buildings and new geographies like South Africa, Egypt, Europe, and LatAm. The majority of our current Engage pipeline is offshore, and we know when those clients are starting, so sequential quarter forecasting has relatively high confidence. We expect second-half revenue to be slightly higher than the first half, with profitability pull-through more back half weighted. Digital is a closer-in target with good book-to-bill visibility and a strong pipeline, so we feel very good about the top-line revenue forecast in Digital.
Thanks for taking our questions again.
Thank you.
Thank you for your questions. That is all the time we have today. This concludes the TTEC Holdings, Inc. fourth quarter and full year 2024 earnings conference call. You may disconnect now.