TTEC Holdings Inc. Q1 2023 Earnings Call

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Welcome to <unk> first quarter 2023 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 <unk> I would now like to turn the call over to Paul Miller, <unk> Senior Vice President Treasurer, and Investor Relations Officer. Thank you Sir you may begin.

Good morning, and thank you for joining us today to check associated this call to discuss its first quarter financial results for the period ended March 31 2023.

On today's call are Ken Tuchman, our chairman and Chief Executive Officer of <unk>, Shelly swung back Chief Executive Officer of T. Chek engage and president of T Chek and Francois <unk> interim Chief Financial Officer of T. Chek, Yes.

Yesterday <unk> issued a press release announcing its financial results. While this call will be items discussed within that document for complete information about our financial performance. We also encourage you to read our first quarter 2023 quarterly report on Form 10-Q, which we anticipate filing in the plumbing business days.

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 that may occur forward looking statements are subject to various risks uncertainties and other factors that could cause actual results to differ materially from those expected and described today for a more detailed description of our risk factors. Please review our 2022 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.

Thanks, Paul and good morning, everyone. We appreciate you joining us today.

We're off to a strong start in 2023 with a beat on both top and bottom line.

Revenue increased eight 6% to $633 million on a constant currency basis, adjusted EBITDA was $83 million or.

A 13, 1% of revenue.

And non-GAAP EPS was <unk> 78 per share.

As the CX technology and services landscape grows more complex our clients are trusting us to manage their current CX teams, while also seeking guidance for the future.

Our full range of AI enabled CX technology managed services and operational capabilities has the breadth and depth to deliver strategic benefits to our clients right now while also preparing them for what's on the horizon.

Demand for our solutions remained strong as CX executives are caught in a balancing act between the efficiencies of Digitization and the empathy of human conversations.

With our domain expertise in both CX technology and operations, our business is well positioned to meet this challenge with tailored programs that optimize both digital and human interactions.

The three trends that I shared last quarter remained relevant and timely the.

The move to the cloud for CX technology continues focus on evolving from reactive support proactive experiences remains mission critical and the advancements in digital CX and AI are accelerating.

Given the current focus on AI My comments today will center on the developments happening at the intersection of customer experience and artificial intelligence, we've been integrating AI technology into our <unk> offerings for some time with.

With the current buzz surrounding all things AI, we plan to share details on our approach to AI with you more frequently.

We have many examples of solutions that are delivering high value outcome, leveraging AI, including using analytics to simplify and pushed lines customer journeys.

Bots to facilitate training.

Automation to augment associate efficiency.

And predictive models to support intelligent routing.

Also across verticals, we're customizing solutions to address industry specific business challenges.

Advancements in generative AI have opened up a wealth of new CFT use cases, including exciting new ways to dramatically improve the customer experience it.

It is early days and as with any disruptive technology, it's important to separate the helpful from the hype.

To gain the full benefit of AI brands need to have their systems data processes and teams prepared and aligned.

We're working with our clients to help them assess their readiness to cost capabilities, such as mix of voice and digital interactions Jeff.

Depth of understanding of their current customer journeys.

Quality accuracy and completeness of their existing knowledge bases.

<unk> of their current automation tools and.

The level of integration across their enterprise technologies.

Above all else, we're helping our clients maintain a customer first mindset.

So that theres no margin for error and customer experience.

Simplicity accuracy and trust makes the difference between a loyal customer advocate and a vocal to tractor across the customer lifecycle.

Is the answer is an AI presents tremendous.

Tremendous opportunities, but getting it right is not easy.

<unk> requires deep technology integration experience vertical expertise and organizational agility.

<unk> is uniquely positioned to harness the full potential of AI capabilities for CX by leveraging the synergies between our two business segments.

Through key tech engage we provide digitally enabled infrastructure operational delivery.

Quality assurance workforce management, and an amazing employee experience.

Firsthand knowledge from direct interactions with millions of customers on behalf of our clients and expertise from our associates operating on the front lines provides the insight and experiences to differentiate our clients brands.

<unk> digital we design build integrate and operate all the core technologies required to power CX.

<unk> <unk> CRM.

AI and analytics platforms. Unlike some of our competitors who are attempting to offer point solutions, we have the capability to seamlessly integrate all elements of the CX ecosystem, giving us a significant advantage in delivering comprehensive and cohesive solutions to our clients.

The result of this world class offerings as increase revenue per customer reduce total cost to serve and the highest level of customer satisfaction and loyalty.

<unk> digital is a pure play a $500 million.

CX technology and services business that generates revenue through professional services managed services software and proprietary IP.

With an unparalleled set of credentials and references we have deep strategic partnerships with the leading technology players and employ the most experienced CX data scientist cloud engineers and consultants in the market.

We're leveraging our cross functional domain expertise from digital and engage through our AI center of excellence for customer experience.

This diverse team a technologist in operational delivery experts are combining last mile customer engagement with the latest in digital innovation to expand our solutions drive thought leadership and develop the AI guardrails necessary for clients to protect their businesses and customers.

These guardrails are especially important as we see increasing pressure from government agencies and regulators as the risk around security privacy and intellectual property becomes better understood.

We're using AI to streamline workflows and speed up processes through the automation of binary transactions and interactions. Additionally, one of our top priorities is leveraging AI to enhance the capabilities of our knowledge workers, who are focused on complex mission critical interactions for our clients.

Improving efficiency simplifying repetitive task, we're freeing up time for our employees to listen and respond to customers during emotionally charged moments of truth.

This genuine human connection is what ultimately builds trust loyalty revenue growth and ongoing affinity with our brands.

Now I'd like to share a few thoughts on the M&A and.

And specifically consolidation among some of our engage competitive.

As you know M&A has been and will continue to be an important pillar for shareholder value creation at <unk>.

That said, we don't believe in building scale for scale sake, M&A must ultimately create tangible value for our clients.

We remain committed to M&A that help to differentiate our solutions for our clients and accelerate the execution of our business strategy.

Our M&A strategy will continue to be focused on both digital and engage acquisitions to help accelerate vertical solutions through incremental capabilities, new geographies and additional clients.

In closing I'd like to reiterate my confidence in our business. Our management team is executing our clients continue to rely on us.

As a strategic partner, our CX engineers are developing new and relevant solutions for the market and our frontline teams are delivering exceptional T sat scores across the globe.

We're operating on a strong foundation and I remain excited about the future.

And now I'll hand, it off to Shelley.

Thanks, Ken and good morning, everyone.

Pleased with our first quarter performance across both of our key tech engage and T Tech digital business segments, our strong performance on revenue and profitability as a result of our disciplined and agile execution, we acquired 20, new clients across the business and have a strong and growing pipeline.

I'll begin my review of the quarter with some highlights from our <unk> engage business first quarter growth was driven by engagements and resilient verticals, where our work is mission critical and also complex.

Revenue from our top 10 clients continue to grow our strong relationships and delivery track record with these top clients are enabling us to expand our business with them through new solutions and offshore delivery.

In addition, we are seeing a growing number of first time, outsourcers and our new client wins and pipeline.

In healthcare, we had a robust close to the year. This strong performance extended seasonal revenue beyond expectations for several programs into the first quarter.

Depth of knowledge and proven expertise with complex licensed work is driving growth with very large national payer clients and also with regional brands.

Beyond our power segment, we're also seeing increasing momentum in clinical and provider services, which include higher margin offshore data management and back office programs.

New deals this quarter included initiatives provider data management consumer directed health and also durable medical equipment.

In addition, our domain expertise across the breadth of the CX healthcare member journey was recognized by the global research firm Everest, who know the <unk> as a market value leader in healthcare BPL CN exam.

With consumers in the driver's seat demanding improved health care experiences our CX transformation expertise is in high demand.

Now onto our BSI vertical where historically many companies have been hesitant to consider digital channels and nearshore or offshore options for their customer experience support.

Increasingly we are helping both existing and new clients use new delivery and support models, including these nearshore and offshore locations.

For example, this quarter, we expanded into a new line of business with one of our insured tech clients by implementing human powered data invitation to process claims offshore.

And with growing national focus on improving the citizen experience our public sector practice is in a unique position to capitalize on opportunities across federal state and local government agencies.

Our engage and digital teams are working to combine citizen experience consulting systems integration managed services and operational excellence, all backed by our fed ramp and state ramp certifications.

Another client highlight from the first quarter is the consultative approach, we're taking with a long tenure clients in the tech space, we're beginning to work with them to deploy generative AI to leverage their full library of product knowledge across thousands of different products gifts in order to provide our associates with more accurate and timely answers than ever before.

We're executing well on our plans to expand our footprint with new geographies and languages client demand continues to accelerate with growing offshore pipeline and five of our seven new logos for the quarter, including offshore services.

For example, one of our offshore wins with a first time Outsourcer a growing business, whose primary focus is on reducing the carbon footprint in the U S by partnering with major retailers to reuse and recycle electronics.

Now I'll move onto our <unk> digital segment.

Similar to engage our digital segment delivered value to our clients and partners with strong first quarter performance.

Capitalizing on the demand from clients, who are migrating to the cloud and also from clients who are delaying their cloud migrations, but wanted to get more from their existing CX technology.

Our growth in professional services this quarter was driven by projects from both types of clients.

These professional services create high value outcomes for our clients on our strategic for us because they deliver higher margins expand our scope of influence and open the door to new areas for growth with anchor clients.

Key wins for cloud migration. This quarter included clients in banking insurance and also public sector.

Our recurring revenue also continues to grow with a focus on providing ongoing managed services is the volume of pace of features and functions increase on literally every CX platform. We are helping our clients absorb and take advantage of these changes to optimize their customer experiences.

For existing clients, who arent ready to migrate to the cloud, we're extending our managed services relationships and leveraging our professional services to help them optimize their current technology.

It's rewarding to see our technology partners recognize T Tech digital significance in the market. This quarter. We won several prestigious awards, including contact center innovation from AWS and North American partner of the year from Genesis.

To meet demand and strengthen our profit margins, we continue to expand our costs optimize global delivery model. This quarter, we opened our new flagship Engineering Center in Hyderabad, India by mid year, a third of our engineering talent will be operating out of tech hubs in India in the Philippines with more locations to come in the near future.

Not surprisingly AI has emerged as a top priority for our clients and my discussions during our client Advisory Board session last week generative AI was a key topic.

Our clients are optimistic about the transformation capabilities, yet measured in our plants, they're looking for us to help them understand the requirements and risks that must be addressed in order to be successful in fact, many companies don't yet have the foundational elements. Our CX expertise needed. This is where we come in.

We're helping clients across the AI spectrum for making tech platform decisions to executing new AI initiatives to improving their existing AI efforts for a bigger impact.

For example, this quarter, we worked with a financial services company to improve the effectiveness of their conversational messaging. Their first implementation lack of sophisticated analysis of speech patterns and was routing interactions to the wrong channels.

Our team came in and strengthen the predictive models with a deeper understanding of language and intense to properly route interactions and improve customer experience.

As Ken mentioned, we continue to expand our AI offerings to help our clients take advantage of the new capabilities enabled by generative AI for.

For example, we've enhanced our CX AI readiness assessment and roadmap to help clients understand their current ability to use AI and shape their go forward initiatives.

We recognize the importance of safeguarding our clients' data and minimizing the inherent risks of using emerging technologies are key to successful generative AI efforts will require the use of private large language models, we're helping clients safely implement these private large language models with an expert team the customize the platform and trained the proprietary data.

<unk>.

The progress in AI is advancing quickly our team is staying ahead with latest innovations in tools and solutions and I look forward to sharing our progress with you in the months to come.

Overall, our strong first quarter performance is a great start to the year as we move into the second quarter were laser focused on execution, maintaining an agile cost structure and executing on the strategic investments we have underway.

We'll provide further updates on our full year outlook, when we share our second quarter results.

Across both our digital and engage businesses our employees are at the heart of everything we do every day I am inspired by the talent dedication and energy of almost 65000 employees that make up our <unk> family.

We're deeply committed to an inclusive environment that inspires our employees to do their best for our clients every single day.

We're very proud to have been named number 17 on the Forbes list of top 500 employers for diversity.

To learn more about our full range of ESG programs I invite you to read our recently published ESG report.

On behalf of our board and our teams operating across the globe. Thank you for your continued support.

Now let me introduce you to your friends swap array, our interim CFO , who has been with our company over the past seven years, serving in multiple financial roles and most recently as our global controller.

Francois over to you.

Thank you Shirley and good morning, I'm excited to be here today and share additional details on our first quarter financial results and provide more insight into our second quarter and full year 2023.

In my discussion on the first quarter of 2023 financial results referenced your revenue is on a GAAP basis, while EBITDA operating income and earnings per share our 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 over the prior year period. Our non-GAAP reporting is also adjusted for gains or losses from foreign exchange included in other income that impact EBITDA and EPS calculations.

Press release includes the adjusted reconciliation for 2022 to reflect the same my references disarm on a like for like basis describe our revenue growth excluding the impact of foreign exchange translation and treating acquisition, if we own them in the prior year period.

Turning to our first quarter financial results.

Revenue was 632 million an increase of eight 6% on a constant currency basis.

On a like for like basis growth was one 4%.

Adjusted EBITDA was $83 million or 13, 1% of revenue compared to 84 million or 43% in the prior year.

Seasonality elegance to treat your head count and now the genomics can influence your account, but right now we're seeing an offshore headcount growing at a faster pace than onshore head count supported by the pipeline that we have in the backlog as well that we've seen growing of Schwartz.

The.

Maybe provide an update on some of the opportunities Shelley you mentioned you were working on on the queue for a call. Thank you.

Thank you.