10-Q
TTEC HOLDINGS, INC. filed this Form 10-Q on 11/07/2018
Entire Document
 

Financial Highlights

In the third quarter of 2018, our revenue increased 1.6% to $364.9  million over the same period in 2017. This increase in revenue is primarily related to a  $15.4 million revenue increase for CTS and a $5.1 million revenue increase for CGS offset by a $15.0 million net revenue decrease for CMS including a $10.1 million decrease related to the adoption of ASC 606 for revenue and a  $5.4 million decrease related to foreign exchange fluctuations.

Our third quarter 2018 income from operations decreased 7.2% to $14.7 million or 4.0% of revenue, from $15.8 million or 4.4% of revenue in the third quarter of 2017.  The change in operating income is comprised of a number of factors across the segments. The decline in income from operations relates exclusively to CMS, with all other segments experiencing improvement year over year. CMS’s income from operations declined on increases in labor costs related to wage and healthcare benefits within our U.S. business. This increased cost is tied to macroeconomic factors including a lower unemployment rate and rising wages as well as an increase in business ramps associated with  a higher volume of new business signings during the second and third quarters leading to a spike in launch costs. Launch costs are incurred in transitioning new business from our clients to TTEC and historically are not specifically compensated for by our clients.

The CTS operating income expanded significantly with a 63% improvement over the same period last year primarily on the growth of its higher margin recurring cloud business as well as its system integration business which provides services pre and post the buildout of each client’s cloud platform and a large third quarter product sale. The CSS operating income improved 79% due to reduced losses for the asset held for sale.  The CGS operating income increased due to new business adds during the first nine months of 2018.

Income from operations in the third quarter of 2018 and 2017 included $2.7 million and $6.0 million of restructuring and integration charges and asset impairments, respectively.

Our offshore customer engagement centers serve clients based in the U.S. and in other countries and spans six countries with 24,200 workstations, representing 57% of our global delivery capability. Revenue for our CMS and CGS segments provided from these offshore locations was $106 million and represented 36% of our revenue for the third quarter of 2018, as compared to $111 million and 36% of our revenue for 2017.

As of September 30, 2018, the overall capacity utilization in our centers was 77%, consistent with the third quarter last year. The table below presents workstation data for all of our centers as of September 30, 2018 and 2017. Our utilization percentage is defined as the total number of utilized production workstations compared to the total number of available production workstations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2018

 

September 30, 2017

 

 

    

Total

    

 

    

 

    

Total

    

 

    

 

 

 

 

Production

 

 

 

% In

 

Production

 

 

 

% In

 

 

 

Workstations

 

In Use

 

Use

 

Workstations

 

In Use

 

Use

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total centers

 

 

 

 

 

 

 

 

 

 

 

 

 

Sites open >1 year

 

42,560

 

32,838

 

77

%  

39,856

 

30,916

 

78

%

Sites open <1 year

 

51

 

51

 

100

%  

969

 

949

 

98

%

Total workstations

 

42,611

 

32,889

 

77

%  

40,825

 

31,865

 

78

%

 

We continue to see demand from all geographic regions to utilize our offshore delivery capabilities and expect this trend to continue with our clients. On the other hand, some of our clients may be subject to regulatory pressures to bring more services onshore to the United States. In light of these trends we plan to continue to selectively retain and grow capacity in and expand into new offshore markets, while maintaining appropriate capacity in the United States. As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuations increases, we continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility.

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