Q4 2023 TTEC Holdings Inc Earnings Call
Operator: Thank you for standing by. The conference will begin momentarily, and until such time, you will hear music.
Thank you first anybody conference will begin momentarily until such time, you will hear music thinking please continue to standby.
Operator: Thank you, and please continue to stand by. [inaudible] Thank you for standing by. The conference will begin momentarily. Until such time, you will hear music.
[music].
Operator: Thank you, and please continue to stand by. Welcome to TTEC's fourth quarter and full year 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 TTEC. I would now like to return the call to Paul Miller, TTEC's Senior Vice President, Treasurer, and Investor Relations Officer. Thank you, sir, and you may begin.
Paul Miller: Good morning, and thank you for joining us today. TTEC is hosting this call to discuss its fourth quarter and full year financial results for the period ended September 31, 2023. Participating on today's call are Ken Tuchman, Chairman and Chief Executive Officer of TTEC, Shelley Swanback, President of TTEC, and Executive Officer of TTEC Engage, and Francois Bourret, Interim. Yesterday, I think I should have pressed it to reflect items that are discussed in that document. For complete information about our financial performance, we also encourage you to read our 2023 annual report. Okay, before we begin, I want to remind you that the 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, 2012 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services. As a result of new developments which 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.
Thank you first anybody conference will begin momentarily until such time, you will hear music. Thank you and please continue to standby.
[music].
Yeah.
Welcome to T Chek fourth quarter and full year 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 T. Chek I would now like to return 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 <unk> is hosting this call to discuss its fourth quarter and full year financial results for the period ended December 31 two.
23 participating on today's call are Ken Tuchman, <unk>, Chairman and Chief Executive Officer, <unk>, <unk> President and.
Chief Executive officer of <unk>.
Paul Miller: For a more detailed description of our risk factors, please review our 2023 Annual Report on 410K. A replay of this conference call will be available on our website under the Investor Relations tab. I will now turn the call over to Kenneth. Good morning, and thank you for joining us today.
And Francois Blu ray interim chief.
The County Officer.
Yesterday <unk> issued a press release.
Financial results, Bob Oh, well results.
It reflect items that are discussed in that document for complete information about our financial performance. We also encourage you to read our 2023 annual report on form 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.
Kenneth D. Tuchman: 2023 was a dynamic year, to say the least. Over the past several quarters, we've been discussing the challenges posed by the macroeconomic environment on businesses across industries and geography. As a strategic CX technology and services partner for many of these large and complex enterprises, the market dynamics in the second half of the year moderated our performance. For the year, revenue was $2.46 billion.
This outlook, which are based on management's current beliefs and assumptions. Please note that these forward looking statements reflect.
The date of this call and we undertake no obligation to revise this information as a result of new developments, which 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.
Kenneth D. Tuchman: Adjusted EBITDA was $272 million, or 11% of revenue; adjusted EPS was $2.18 per share. In 2023, we had some bright spots as we made progress diversifying our business with several new clients, geographies, and We grew our client base with approximately 100 meaningful new relationships in TTEC Digital and TTEC Engage. We completed a strategic phase of geographic expansion with several new offshore locations and laid the groundwork to scale and roll out new operations in many new countries this year. We added multiple new offerings to our portfolio, including an expanded and continually growing ecosystem of AI-enabled solutions for TTEC Engage and TTEC Digital. We built on our premier partner status with our leading CX technology and hyperscaler partners, and we continue to be recognized as the best employer by Forbes magazine for the third consecutive year. As we move to 2024, the macroeconomic environment continues to be fluid, with even further headwinds arising both domestically and abroad. Over a third of the global economy is officially in recession, with an even larger percentage trending in that direction.
More detailed description of our risk factors. Please review our 2023 annual report on Form 10-K, a replay of this conference call will be available on our website under the Investor Relations section.
I'll now turn the call okay.
Good morning, and thank you for joining US today 2023 was a dynamic year to say the least of the <unk>.
Past several quarters, we've been discussing the challenges posed by the macroeconomic environment on businesses across industries and geographies.
The strategic CX technology and services partner for many of these large and complex enterprises the market dynamics in the second half of the year moderated our performance in 2023.
For the year revenue was 246 billion.
Adjusted EBITDA was $272 million or.
Or 11% of revenue.
And adjusted EPS was $2 18 per share.
In 2023, we had some bright spots as we made progress diversifying our business with several new clients geographies and offerings.
Kenneth D. Tuchman: While we're seeing momentum with new client wins across both business sectors, we expect these incremental headwinds to persist and continue to necessitate a conservative outlook for 2024. Our view on 2024 reflects the current economic backdrop and three very specific challenges in our engaged segment that are putting pressure on our outlook for both revenue and margin. The first challenge relates to a conservative client mindset.
We grew our client base with approximately 100 meaningful new relationships and T. Chek digital and <unk> engage we completed a strategic phase of geographic expansion with several new offshore locations and laid the groundwork to scale and rollout new operations in many new countries. This year.
We added multiple new offerings to our portfolio, including expanded and continue to be growing ecosystem of AI enabled solutions for <unk> engage and <unk> digital.
Kenneth D. Tuchman: To meet short-term budget constraints, some clients are driving their forecasts lower and, in many cases, changing their forecast horizon from 90 days to month-to-month until they get better visibility. In turn, these actions are reducing our visibility and impacting our revenue forecast. The second challenge is isolated to a large, long-term client.
We built on our on our Premier partner status with our leading CX technology and hyper Scaler partners and we continue to be recognized as the best employer by Forbes magazine for the third consecutive year.
As we move to 2020 for the macroeconomic environment continues to be fluid with even further headwinds arising both domestically and abroad.
Kenneth D. Tuchman: One of our tenured clients recently informed us that they plan to exit one of their many lines of business that we have supported for multiple years. While our relationship remains very strong with this client, and we continue to service their customers across several other business lines, the discontinuation of this one line of business will have an impact on our top and bottom lines in 2024. The last challenge is one of timing, a topic that we've discussed in our past conference calls. In the last half of 2023, several new prospects delayed decision making due to lack of visibility and spending constraints. Consequently, our booking levels were significantly lower than in the past quarter.
Over a third of the global economy is officially in a recession with an even larger percentage trending in that direction.
While we're seeing momentum with new wins across both business segments. We expect these incremental headwinds to persist and continue to necessitate a conservative outlook for 2024.
Our view on 2024 reflects the current economic backdrop and three very specific challenges in our engage segment that are putting pressure on our outlook for both revenue and margin.
The first challenge relates to a conservative mindset.
To meet short term budget constraints, some clients are driving their forecast lower and in many cases changing their forecast horizon from 90 days to month to month until they get better visibility.
Kenneth D. Tuchman: As we turn the corner into 2024, several of these opportunities closed and became wins. However, the combination of delayed client signings from the second half of 2023, along with the time that it takes to fully ramp these clients, is creating a lag effect in 2024 that delays normalized revenue run rates and margin. To offset these challenges, we're laser focused on execution with a keen eye towards margin optimization. Across TTEC, AI is enabling us to rewire our business and unlock innovation in everything that we do. Every client pitch, every solution, every process provides an opportunity to improve with AI capabilities woven in. Now, let me share an update on our TTEC Engage Priority.
In turn these actions are reducing our visibility and impacting our revenue forecast.
The second challenge is isolated to a large long term client.
One of our tenured clients recently informed us that they plan to exit one of their many lines of business that we have supported for multiple years.
While our relationship remains very strong with this point and we continue to service their customers across several other business lines.
The discontinuation of this one line of business will have an impact on our top and bottom line in 2024.
Yes.
The last challenge is one of timing a topic that we've discussed in our past conference calls in.
Kenneth D. Tuchman: Due to growing client demand, we're scaling our new offshore geographies and driving improved profitability. We've established anchor clients in each of the new geographies, and thus far, demand is robust. We expect margins will improve as we drive more volume into these offshore locations. Next, we're helping our clients pursue the right AI strategy that balances the human AI-driven experience. Our practical and data-driven approach to integrating AI is focused on delivering efficiency without sacrificing empathy and quality.
In the last half of 2023, several new prospects delayed decision, making due to lack of visibility and spending constraints. Consequently, our bookings levels were significantly lower than in the past quarters as we turned the corner into 2020 for several of these opportunities closed and became wins.
The combination of delayed client signings for the second half of 2023, along with the time that it takes to fully ramp. These clients is creating a lag effect in 2024 that delays normalized revenue run rate and margin.
Kenneth D. Tuchman: We're integrating these modern tools into our operations to automate administrative tasks, personalize and accelerate associated training, and unlock valuable insights across the customer lifecycle. We've moved into full production with several clients, and while still early days, the improvements in customer-related experiences are compelling. And last, we've accelerated our margin optimization initiatives that will yield efficiencies going forward. Shelley will expand further on our initiatives.
To offset these challenges we're laser focused on execution with a keen eye towards margin optimization across GTECH AI enabled is enabling us to rewire, our business and unlock innovation in everything that we do.
Every client pitch every solution every process provides an opportunity to improve with AI capabilities will open it.
Now, let me share an update on our <unk> engage priorities.
Kenneth D. Tuchman: Our deep and differentiated partnerships with all the premier CX technology players and hyperscalers have established us as the leading CX transformation partner operating at the intersection of CCaTS, CRM, and AI. With complex technology implementations across the globe, clients are embracing us as a trusted partner that understands the practical application and the economics of AI. They're looking for us.
Due to our growing client demand, we are scaling our new offshore geographies and driving improved profitability.
We've established anchor clients in each of the new Geos and thus far demand is robust we expect margins will improve as we drive more volume into these offshore locations.
Next we are helping our clients pursue the right AI strategy that balances human AI driven experiences are practical and data driven approach to integrating AI is focused on delivering efficiencies without sacrificing empathy and quality.
Kenneth D. Tuchman: They're looking to us for our experience designing, building, and operating sophisticated CX platforms that integrate into their existing digital ecosystem and deliver meaningful ROI. With our differentiated approach to TTEC Digital, we achieved record bookings in the fourth quarter and expect this momentum to continue through 2024. For 2025 and beyond, we expect to deliver double-digit growth.
We're integrating these modern tools into our operations to automate administrative task personalized and accelerated associated training and unlock valuable insights across the customer lifecycle.
We've moved into full production with several clients and while still early days the improvements in customer associate experiences are compelling.
And last we've accelerated our margin optimization initiatives that will yield efficiencies going forward Shelly will expand further on our initiatives.
Kenneth D. Tuchman: We're successfully increasing the percentage of professional services and recurring managed services that deliver higher growth and margin. Our offerings lead to more transformational deals that take advantage of our full suite of CX solutions. These engagements are critical enablers of Argo. We're confident that our go forward plan for TTEC will pave the way for significantly improved results as we exit 2024, setting us up for renewed growth and improved possibilities in 2025 and beyond. Now transitioning to our capital deployment strategy. We have always tried to optimize our capital structure to the benefit of our shareholders, whether it be M&A, share buybacks, or dividends to maximize shareholder value. Given the current environment, earlier this week, our board made the decision to prioritize our capital initiatives and debt reduction associated with strategic acquisitions. The decision was based on continuous economic headwinds.
Shifting gears to <unk> digital.
Our deep and differentiated partnerships with all the premiere CX technology players in Hyperscale.
Has it has established us as the leading CX transformation partner operating at the intersection of C Cat.
RM.
Hi.
With complex technology implementations across the globe clients are embracing us as a trusted partner that understands the practical application and the economics of AI, they're looking for us.
Excuse me, they're looking to us for our experience designing building and operating sophisticated CX platforms that integrate into their existing digital ecosystem and deliver meaningful ROI.
With our differentiated approach and <unk> digital we achieved record bookings in the fourth quarter and expect this momentum to continue through 2024 for.
For 2025, and beyond we expect to deliver double digit growth.
We're successfully increasing the percentage of professional services and recurring managed services that deliver higher growth and margins are offerings lead to more transformational deals that take advantage of our full suite of CX solutions. These engagements are a critical enabler.
Kenneth D. Tuchman: Persistently high interest rates, which we expected to begin to normalize by now, and the desire to reduce our debt in order to continue investing in the future. As revised, the dividend is in line with our stock price and the dividend yield typical for our industry and the broader market. This reprioritization of our capital allocation will allow us to continue to invest in growth, increase the flexibility of our capital structure, accelerate value creation, and continue the expansion of our ecosystem of AI solutions. Before I close, I'm thrilled to welcome Kenny Wagers to TTEC. He officially begins his role as Chief Financial Officer today.
Our growth.
We're confident that our go forward plan for T. Chek will pave the way for significantly improved results as we exit 2020 for setting us up for renewed growth and improved profitability in 2025 and beyond.
Now transitioning to our capital deployment strategy, we have always tried to optimize our capital structure to the benefit of our shareholders, whether it be M&A share buybacks or dividend to maximize shareholder value.
Given the current environment earlier this week, our board made the decision to prioritize our capital initiatives.
And debt reduction associated with strategic acquisitions.
Kenneth D. Tuchman: Kenny's finance and operational experience includes complex operational transformations and significant cost optimization initiatives. His career spans almost three decades and includes leadership roles in large Fortune 500 corporations, including UPS and Amazon, as well as venture-backed startups. I'd like to personally thank Francois Bourret for his contribution as interim CFO.
The decision was based on the continuous economic headwinds persistently high interest rates, which we expect it to begin to normalize by now and the desire to reduce our debt.
In order to continue investing in the future.
As revised the dividend is in line with our stock price and the dividend yield typical for our industry and the broader market.
This re prioritization of our capital allocation will allow us to continue to invest in growth increased the flexibility with our capital structure accelerate value creation and continue the expansion of our ecosystem of AI solutions.
Kenneth D. Tuchman: He will continue to be a valuable member of our executive leadership team as TTEC's Chief Accounting Officer. In closing, thank you. I'm disappointed in our 2024 outlook. It does not reflect the standard to which we hold ourselves accountable.
Before I close I am thrilled to welcome Kenny wafers to GTECH. She officially begins his role as Chief Financial Officer Today, Kenny's Finance and operational experience includes complex operational transformations and significant cost optimization initiatives is career spans almost three decades and includes.
Kenneth D. Tuchman: Please know that I have my full commitment, along with the rest of TTEC's leadership and our board of directors. We've navigated change multiple times before and always come through stronger. I'll continue to be inspired by the dedication of our employees across the globe and grateful to our growing and valued client base. We look forward to sharing our progress throughout the year. Now, I'll hand it off to Shelley.
Leadership roles in large fortune, 500, corporations, including UBS and Amazon as well as venture backed startups I'd like to personally. Thank Francois beret for his contribution as interim CFO. He will continue to be a valuable member of our executive leadership team as <unk>, Chief accounting officer and closing.
Michelle R. Swanback: Thank you, Ken, and good morning. As Ken just described, 2023 was a year of challenges and also some notable wins. Over the past 12 months, we made continued progress with our diversification across clients, geographies, and solutions. However, our disappointing outlook for 2024 reflects three specific challenges primarily impacting our engaged segment. First, our revenue is being impacted by the carry forward from 2023 of conservative volume forecasts and budget constraints at our embedded base clients, as well as the shift to more offshore delivery. In this environment, our clients are more frequently adjusting their volume forecasts, which is impacting our visibility. Next, one of our large clients recently informed us of their plans to exit one of their lines of business, which will impact our revenue. However, our relationship with this client remains extremely strong as we continue to support them across many other lines of their business.
I am disappointed in our 2024 outlook. It does not reflect the standards to which we hold ourselves accountable. Please know that you have my full commitment along with the rest of <unk> leadership and our board of directors, we've navigated change multiple times before and have always come through stronger while continue to be inspired by the debt.
<unk> of our employees across the globe and grateful to our growing and valued client base, we look forward to sharing our progress throughout the year and now I'll hand, it off to Shelley.
Thank you Ken and good morning, as Ken just described 2023 with a year of challenges and also some notable wins over the past 12 months. We made continued progress with our diversification across clients geographies and solutions. However, our disappointing outlook for 2024 reflects three specific challenges primarily impacting our engage segment.
First our revenue is being impacted by the carryforward from 2023 is conservative volume forecast and budget constraints at our embedded base clients as well as the shift to more offshore delivery.
In this environment, our clients are more frequently adjusting their volume forecast, which is impacting our visibility.
Michelle R. Swanback: And lastly, the delayed client signings from both the second half of 2023 and early 2024 are impacting our 2024 outlook. The typical lag effect between signing and the full ramp of new opportunities is delaying normalized revenue and margin. Given these short-term challenges impacting the top line of Engage, we're rebalancing our fixed and variable cost structure. We have a rigorous focus on fine-tuning operational delivery across every aspect of our business.
Next one of our large clients recently informed us of their plans to exit one of our lines of business, which will impact our revenue our relationship with this client remains extremely strong as we continue to support them across many other lines of their business.
And lastly, the delayed client signings for both the second half of 2023 in early 2024 are impacting our 2024 outlook. The typical lag effect between signing and full ramp as new opportunities is delaying normalized revenue and margins.
Given these short term challenges impacting the top line of engage we're rebalancing our fixed and variable cost structure, we have a rigorous focus on fine tuning operational delivery across every aspect of our business.
Michelle R. Swanback: However, in the near term, our fixed cost structure will be higher as a percentage of revenue. We're confident these fixed costs will realign with revenue and we will get back to positive growth in 2025, delivering double-digit EBITDA. I echo Ken's sentiments about our disappointing 2024 outlook, and I stand by his confidence in our path forward.
However, in the near term our fixed cost structure will be higher as a percentage of revenue.
We're confident these fixed costs will realign with revenue and we will get back to positive growth in 2025, delivering double digit EBITDA.
I Echo <unk> sentiments about our disappointing 2024 outlets and a standby as confidence in our path forward in 2023, we demonstrated progress on our diversification strategy and we're well positioned to build on that momentum.
Michelle R. Swanback: In 2023, we demonstrated progress on our diversification strategy, and we're well positioned to build on that momentum. Now, let me discuss the progress with each of our businesses, starting with Engage. Our investments in geographic expansion and AI-enabled solutions are paying off with recent new wins. These expanded capabilities are helping us meet our clients' most pressing CX demands, including a shift from onshore delivery to more cost-effective nearshore and offshore geographies, a desire to consolidate and move away from smaller regional players and diversify from the large players, and a need for an innovative AI-enabled approach that is scalable and also economically viable.
Now, let me discuss the progress with each of our business units starting with engage.
Our investments in geographic expansion and AI enabled solutions are paying off with recent new wins. These expanded capabilities are helping us meet our clients' most pressing CX demands, including a shift from onshore delivery to more cost effective nearshore and offshore geographies.
Our desire to consolidate and move away from smaller regional players and diversify from the large players.
And the need for an innovative AI enabled approach that is scalable and also economically viable.
Michelle R. Swanback: So far in the first quarter, we've won several new strategic growth accounts that are multi-geo and have the potential to scale well beyond the initial scope of our work. While these new clients will take time to fully ramp, we're already pursuing additional growth opportunities with these clients. Overall, our engaged pipeline remains strong and includes many similar large opportunities with new clients that have complex requirements and diverse geographic needs. The pipeline also has several cross-sell opportunities, including our managed services and AI-enabled solutions at our embedded-based clients. Over a third of our sales pipeline is now made up of deals with annual contract values over $10 million. In addition, our offshore pipeline has grown more than 35% year over year and represents over 50% of our total pipeline.
So far in the first quarter, we won several new strategic growth accounts that are multi GL and have the potential to scale well beyond the initial scope of our work. While these new clients will take time to fully ramp we're already pursuing additional growth opportunities with these clients.
Overall, our engaged pipeline remains strong and includes many similar large opportunities with new clients that have complex requirements and diverse geographic needs. The pipeline also has several cross sell opportunities, including our managed services and AI enabled solutions at our embedded base clients.
Over a third of our sales pipeline is now made up of deals with annual contract values over $10 million.
In addition, our offshore pipeline has grown more than 35% year over year and represents over 50% of our total pipeline.
Michelle R. Swanback: Given client demand, we will continue to invest in and scale additional new geographies and are on track to deliver approximately 35% of our revenue offshore by the end of the year. One new deal highlighting the benefits of our diversified geographic approach is our recent win in financial services. Our relationship with this client began with TTEC Digital, who was implementing a new global CX technology platform. We expanded our services to include a comprehensive workforce optimization model and offshore delivery. We're now ramping front line delivery with financial ambassadors, as well as back office compliance teams across multiple geographies for the client. We're starting in Latin America with plans to begin work in APAC this year.
Given client demand, we will continue to invest in scale additional new geographies and are on track to deliver approximately 35% of our revenue offshore by the end of the year.
One new deal highlighting the benefits of our diversified geographic approach is our recent win in financial services.
Our relationship with this client began with T Tech digital who is implementing a new global CX technology platform.
We expanded our services to include a comprehensive workforce optimization model and offshore delivery, we're now ramping frontline delivery with financial ambassadors as well as back office compliance teams across multiple geographies for the client.
Starting in Latin America with plans to begin work in APAC. This summer.
Michelle R. Swanback: While our business has a long sales cycle, we're encouraged by the number of active opportunities with new prospects who have the potential to grow into strategic growth, fueling our client diversification. Now, on to the topic of AI. Clearly, this is a focus for all clients in the current environment.
While our business has a long sales cycle, we're encouraged by the number of active opportunities with new prospects, who have the potential to grow into strategic growth accounts fueling our client diversification strategy.
Now onto the topic of AI clearly this is a focus for all clients in the current environment, while many of our clients have completed proof of concepts and many cases, the commercial viability of scaling. These solutions is still unclear.
Michelle R. Swanback: While many of our clients have completed proof of concepts, in many cases, the commercial viability of scaling these solutions is still unclear. Our ecosystem of AI-enabled services is helping to eliminate the noise. With a focus on augmenting associate productivity, we're currently operating about 50 client programs involving close to 10,000 AI-enabled associates, or over 20% of our total associate population. We expect this percentage to continue to grow over the months and years ahead. Our ecosystem of AI solutions in ENGAGE includes language enhancement, generative learning, knowledge management, and conversational intelligence, to name a few.
Our ecosystem of AI enabled services is helping to eliminate the noise.
With a focus on augmenting associate productivity. We're currently operating about 50 client programs involving close to 10000 AI enabled associates are over 20% of our total associate population.
We expect this percentage to continue to scale over the months and yes.
Our ecosystem of AI solutions and engage includes language enhancement generative learning knowledge management and conversational intelligence came this year.
Michelle R. Swanback: Clients are keenly focused on a differentiated and impactful AI approach. We plan to keep expanding our ecosystem by introducing new AI solutions as they mature. We believe that we are well positioned to continue to innovate and meet client demand. Wrapping up Engage, while our outlook is disappointing because of the challenges we noted earlier, we're encouraged by our progress. The demand for our new geos continues to grow. We're winning with new strategic growth accounts, and we are weaving AI into all client engagement. Moving on to TTEC Digital.
Clients are keenly focused on the differentiated and impactful AI approach, we plan to keep expanding our ecosystem by introducing new AI solution as they mature.
We believe that we are well positioned to continue to innovate and meet client demand.
Wrapping up engaged while our outlook is disappointing because of the challenges. We noted earlier, we're encouraged by our progress the demand for our new Geos continues to grow we are winning with new strategic growth accounts, and we are weaving AI into all client engagements.
Moving on to <unk> digital in the fourth quarter of 2023, we saw client decision, making accelerate and we delivered record bookings for the quarter.
Michelle R. Swanback: In the fourth quarter of 2023, we saw client decision making accelerate, and we delivered record bookings for the quarter. This year, the team is off to a strong start in the first quarter with continued booking traction and a growing revenue backlog. This momentum gives us confidence that, outside of our Cisco business, we will deliver strong double-digit revenue growth in both professional services and recurring managed services. Our booking momentum is broad-based across the sales pipeline and includes a very healthy mix of transformational deals and exciting follow-up opportunities with current clients. Our focus on cross-selling our full suite of capabilities to expand our impact at existing clients is delivering results. More than half of our current pipeline is made up of following opportunities with existing clients. And these opportunities move faster through our sales cycle. Fallen opportunities include helping our clients expand the scope and scale of their CX cloud platforms and unlocking the power of AI and analytics.
This year the team is off to a strong start in the first quarter with continued bookings traction and a growing revenue backlog. This momentum gives us confidence the outside of our Cisco business, we will deliver strong double digit revenue growth in both professional services and recurring managed services.
Our bookings momentum is broad based across the sales pipeline and includes a very healthy mix of transformational deals and exciting follow on opportunities with current clients.
Our focus on cross selling our full suite of capabilities to expand our impact at existing clients is delivering results more than half of our current pipeline is made up of following opportunities with existing clients.
And these opportunities to move faster through our sales process.
Fallen opportunities include helping our clients expand the scope and scale of our CX cloud platforms and unlocking the power of AI and analytics.
Michelle R. Swanback: Our work with a high-end travel company is one example of the differentiated value of TTEC's digital focus on client, business, and. We were chosen to help redefine their end-to-end customer experience across the entire customer journey. Our team started by building a strategic roadmap that identified and aligned their CX priorities.
Our work with the high end travel company is one example of the differentiated value of <unk> digital focus on client business impact we.
We were chosen to help redefine their end to end customer experience across the entire customer journey. Our team started by building a strategic roadmap that identified and aligned their CX priorities. We then prioritize migrating their contact center technology to the cloud consolidated all of their customer data into a state of the art CRM platform and simplified the associate experience.
Michelle R. Swanback: We then prioritized migrating their contact center technology to the cloud, consolidated all of their customer data into a state-of-the-art CRM platform, and simplified the associate experience by integrating all of the systems into a single platform. Early results include a double-digit increase in both sales and service handle times and a notable increase in sales conversion. Our work with this client is a great example of how TTEC Digital is improving customer experiences at the intersection of CCAS, VRM, and AI and analytics. To take full advantage of our momentum and demand for TTEC digital solutions in the market, we're increasing our investments in partnerships, AI, product innovation, sales, and talent to drive further growth. In closing, across all of TTEC, we're laser focused on margin optimization, as well as diversification of our clients, partnerships, solutions, and effective delivery.
By integrating all of the systems into a single pane of glass.
The early results include a double digit increase in both sales and service handle times and a notable increase in sales conversion. Our work with this client is a great example of how <unk> digital improving customer experiences at the intersection of Sekos, CRM and AI and analytics.
To take full advantage of our momentum in demand for T. Chek digital solutions in the market, we're increasing our investments in partnerships AI product innovation sales and talent to drive further growth.
In closing across all of T. Chek for laser focused on margin optimization as well as diversification our clients partnerships solutions package delivery.
Michelle R. Swanback: We're committed to improving cost efficiency in the business as an ongoing discipline, ensuring our competitiveness, rather than viewing it as a one-time optimization effort. I stand by Ken's confidence in our team and our path forward. We have strong fundamentals in place, including trusted new and tenured client relationships, a differentiated portfolio of proven CX solutions, and a committed and dedicated We're well positioned to overcome the current dynamics, and I look forward to sharing our progress in the quarters to come. Now, I'll hand it over to Francois.
We're committed to improving cost efficiency in the business as an ongoing discipline, ensuring our competitiveness.
Other than viewing it as a onetime optimization effort.
I standby ken's confidence in our team and our path forward with.
With strong fundamentals in place, including trusted new and tenured client relationships, a differentiated portfolio of proven CX solutions.
Committed and dedicated team.
We are well positioned to overcome the current dynamics and I look forward to sharing our progress in the quarters to come.
And now I'll hand, it over to Francois.
Francois Bourret: Thank you, Shelly, and good morning. I will start with a review of our fourth quarter and full year 2023 results before providing context for our 2024 financial outlook. In my discussion on the fourth quarter and full year financial results, reference to revenue is on a gap basis, while EBITDA, operating income, and earnings per share are on a non-gap adjusted basis. Full reconciliation of our GAAP to non-GAAP results is included in the tables attached to our earnings press release.
Thank you Sheila and good morning, I will start with a review of our fourth quarter and full year 2023 results before providing context into our 2024 financial outlook.
In my discussion on the fourth quarter and full year financial results referenced.
You referenced the revenue is on a GAAP basis, while EBITDA operating income and earnings per share our non-GAAP adjusted basis.
Full reconciliation of our GAAP to non-GAAP results is included in the tables attached to our earnings press release.
Francois Bourret: Her fourth-quarter financial performance was in line with our expectations. On a consolidated basis, revenue exceeded our guidance. Operating income and EBITDA margins would have ended in the high end of her guidance range if it wasn't for a $7.3 million unforeseen one-time cost for employee-related health care expenses. As a result, her profit margin ended near the low end of the range.
Our fourth quarter financial performance was in line with in line with our expectations on a consolidated basis revenue exceeded our guidance operating income and EBITDA margins would have ended and the high end of our guidance range. If it wasn't for a $7 3 million unforeseen onetime costs for employee related to healthcare expenses.
As a result, our profit margin in that near the low end of their range. While this negatively impacted both segments I will provide details in my engaged pigments review given this larger impacts that business unit.
Francois Bourret: While this negatively impacted both segments, I will provide details in my Engage Segment Review given its larger impact on that business unit. On a consolidated basis for the fourth quarter of 2023, compared to the prior year period, revenue was $626 million, compared to $658 million, a decrease of 4.9%. Adjusted EBITDA was $58 million, or 9.2% of revenue, compared to $87 million, or 13.1%.
On a consolidated basis for the fourth quarter of 2023 compared to prior year period revenue was $626 million compared to $658 million a decrease of four 9%.
Adjusted EBITDA was $58 million or nine 2% of revenue compared to $87 million or 13, 1%.
Francois Bourret: Operating income was $42 million, or 6.7% of revenue, compared to $17 million, or 10.6%, and EPS was $0.37 compared to $0.91. Boring Exchange had a $6 million positive impact on revenue in the fourth quarter over the prior year period, while negatively impacting upper rating income by $2 million, primarily in our engaged segment, on a consolidated basis for the full year 2023 compared to the prior year period. Revenue was $2.46 billion compared to $2.44 billion, an increase of 0.8% and decrease of 1.1% organic. Operating income was $200 million, or 8.1% of revenue, compared to $249 million, or 10.2% in the prior year.
Operating income was $42 million or 667% of revenue compared to $70 million or 10, 6% and EPS was <unk> 37 compared to <unk> 91.
Foreign exchange at a $6 million positive impact on our revenue in the fourth quarter over the prior year period, while negatively.
Impacting operating income by $2 million, primarily in our engage segment.
On a consolidated basis for the full year 2023 compared to the prior year period.
Revenue was $2 46 billion compared to $2 44 billion, an increase of <unk>, 8% and decrease of one 1% organic.
Operating income was 200 million or eight 1% of revenue compared to $249 million or 10, 2% in the prior year.
Francois Bourret: Adjusted EBITDA was $272 million, or 11% of revenue, compared to $320 million, or 13.1%, and EPS was $2.18 compared to $3.59 in the prior year. Boring Exchange had a $4 million positive impact on revenue, while negatively impacting operating income by $2 million, primarily in our engaged segment. Turning to our fourth quarter and full year 2023 segment results. In our digital segment, fourth quarter revenue was $119 million, a decrease of 2.1% over the prior year period. Digital revenue, excluding our Cisco practice, grew 7.1% in the fourth quarter.
Adjusted EBITDA was $272 million or 11% of revenue compared to $320 million or 13, 1%.
And EPS was $2 18 compared to $3 59 in the prior year.
Foreign exchange had a $4 million positive impact on our revenue while negatively impacting operating income by $2 million, primarily in our engage segment.
Turning to our fourth quarter and full year 2023 segment results.
Digital segment, the fourth quarter revenue was $119 million a decrease of two 1% over the prior year period.
Digital revenue, excluding our Cisco practice grew seven 1% in the fourth quarter.
Francois Bourret: Operating income was $18 million, or 14.8% of revenue, in line with the prior year period. Normalized for the $1 million additional health care expense, digital operating income was 15.6% of revenue. In the fourth quarter, Digital delivered a solid performance relative to our expectations on both the top and bottom lines. In addition, and as mentioned by Ken, Digital exceeded our bookings forecast for the quarter, in part attributable to prior quarters' delayed engagements closing in the fourth quarter. Professional services bookings were particularly strong, with high demand across most of our CX consulting practices.
<unk> operating income was $18 million or 14, 8% of revenue in line with the prior year period.
Normalized for the $1 million additional health care expense digital operating income was 15, 6% of revenue.
In the fourth quarter digital delivered a solid performance relative to our expectations on both top and bottom lines. In addition, and as mentioned by Ken digitally exceeded our bookings forecast for the quarter in part attributable to prior quarters delayed engagements closing in the fourth quarter.
Professional services bookings were particularly strong with high demand across most of our six consulting practices.
Francois Bourret: Recruiting managed services bookings were also strong in the quarter. Digital backlog increased to 343 million, or 69 percent of our 2024 guidance at the midpoint, an improvement from 65 percent in the prior year. On a full year basis, Digital's 2023 revenue increased 5% to $487 million over the prior year period. Operating income was $62 million, or 12.8% of revenue, compared to $65 million, or 13.9% in the prior year
Recurring managed services bookings were also strong in the quarter digital backlog increased to $343 million or 69% of our 2024 guidance at the midpoint an improvement from 65% in the prior year.
On a full year basis digital 2023 revenue increased 5% to $487 million over the prior year period.
Operating income was $62 million or 12, 8% of revenue compared to $65 million or 13, 9% in the prior year period.
Francois Bourret: School Year 2023 revenue benefited from strength in most of our CX technology practice areas. Recurring Managed Services and Professional Services revenues both grew 2% over the prior year. Recurring managed services continues to represent approximately 55% of digital total revenue. [inaudible] The modest operating margin pressure on a full-year basis was a function of revenue mix and investment in CX leadership and engineering talent. We are encouraged by the revenue mix of opportunities and the increased number of clients modernizing their CX technology infrastructure, including adoption of cloud-based technologies. We are also pleased with the continued digital bookings momentum in the new year. Our engaged segment revenue decreased 5.5% to $507 million in the fourth quarter of 2023 compared to the prior year period. Operating income was $24 million, or 4.8% of revenue, compared to $52 million, or 9.7% of revenue, in the prior year period.
Full year 2023 revenue benefited from strength in most of our CX technology practice areas.
Recurring managed services and professional services revenues, both grew 2% over the prior year.
Recurring managed services continues to represent approximately 55% of digital total revenue.
If we exclude the Cisco practice over the same period the digital segment grew nine 6%.
The modest operating margin pressure on a full year basis was a function of revenue mix and investment in CX leadership in engine and engineering talent.
We are encouraged by the revenue mix of a portion of <unk> and increased number of clients modernizing their CX technology infrastructure, including adoption of cloud based technologies.
We're also pleased with the continued digital bookings momentum into the new year.
Our engage segment revenue decreased five 5% to $507 million in the fourth quarter of 2023 over the prior year period.
Operating income was $24 million or four 8% of revenue compared to $52 million or nine 7% of revenue in the prior year period.
Francois Bourret: Engaged fourth quarter revenue exceeded our guidance due to stronger volume than anticipated in the financial services and telco verticals. As I mentioned, her engaged segments operating income margin was on the lower end of her guidance range, primarily due to an unprecedented high level of employee-related health care claims. TTEC is self-insured in the United States and faced an elevated number of high-cost claims in December that impacted us by approximately two times the normal level. We do not expect this situation to recur in future years.
Engage fourth quarter revenue exceeded our guidance due to stronger volume than anticipated in the financial services and telco verticals.
As I mentioned, our engage segment operating income margin was on the lower end of our guidance range, primarily due to an unprecedented level of employee related health care claims.
<unk> is self insured in the United States and faced an elevated number of high cost claims in December that impacted us by approximately two times the normal level.
We do not expect this situation to reoccur in future years.
Francois Bourret: These unforeseen costs decreased the engaged operating income by $6.3 million in the fourth quarter. Excluding the non-operating increase in health care costs, the engaged operating profit margin was 6%, meaning the high end of our guidance range. On a four-year basis, engaged 2023 revenue was $1.98 billion, relatively unchanged over the prior year period. Operating income was $138 million, or 7% of revenue, compared to $184 million, or 9.3% in the prior year period.
These unforeseen cost decrease the engage operating income by $6 3 million in the fourth quarter, excluding the non operational increase in healthcare cost engaged operating profit margin was 6% meeting the high end of our guidance that guidance range.
On a full year basis engage 2023 revenue was $1 98 billion relatively unchanged over the prior year period.
Operating income was $138 million or 7% of revenue compared to $184 million or nine 3% in the prior year period.
Francois Bourret: The annual acquisition, the annual asset acquisition in April 2022 contributed 2.3% of inorganic revenue growth in 2023, offset by volume pressures in the second half of the year for the reasons previously discussed. The engaged segment of the main environment was software initially anticipated in the second half of 2023, primarily driven by clients' conservative views and lower projected 2024 budget. While we are seeing some positive signs of recovery, the timing difference between near-term volume reductions and the time to launch new programs is temporarily putting downward pressure on revenue. The committed backlog for the next 12 months is $1.71 billion, or 94% of our 2024 revenue guidance, at the midpoint of the range, relatively unchanged over the prior year. Engaged's last 12 months revenue retention rate is 95% compared to 97% in the prior year. I will now share other 2023 metrics before discussing our outlook. TTEC paid a $0.52 per share, or $24.7 million, semiannual dividend on October 31, 2023.
If annual acquisition is this annual asset acquisition in April 2022 contributed two 3% of inorganic revenue growth in 2023.
<unk> by volume pressures in the second half of the year for the reasons previously discussed.
The engage segment the demand environment was softer than initially anticipated in the second half of 2023, primarily driven by clients Conservative views and lower project at 2020 for budget.
While we are seeing some positive signs of recovery the timing difference between near term volume reductions in the time to launch new programs is temporarily putting downward pressure on our revenue.
The engage backlog for the next 12 months is $1 71 billion or 94% over 2020 for revenue guidance at the midpoint of the range relatively unchanged over the prior year.
Engage last 12 months revenue retention rate is 95% compared to 97% in the prior year.
I will now share other 2023 metrics before discussing our outlook.
<unk> paid a <unk> 52 per share or $24 7 million semi annual dividend on October 31 2023.
Francois Bourret: On February 27, 2024, the board declared the next semi-annual dividend of $0.06 per share or $2.9 million payable on April 30, 2024 to shareholders of record as of April 3, 2024. TTEC's Board of Directors' decision to reduce the dividend reflects a prudent shift to prioritize our capital deployment towards continued investment in sustainable growth initiatives, in addition to debt reduction associated with strategic acquisitions. We have also taken other measures to increase our financial flexibility under our amended credit facility, in addition to taking other meaningful actions to improve our cash flow, including margin optimization initiatives, which I will discuss shortly in my Outlook remarks. As of December 31, 2023, cash was $173 million, with $999 million of debt, of which $995 million represented borrowings under a recently amended $1.3 billion credit facility. Net debt increased year-over-year by $16 million to $827 million.
On February 27, 2024, the board declared the Nixon next semiannual dividend of <unk> <unk> per share or $2 9 million payable on April 32.
2024 to shareholders of record as of April three 2024.
<unk> board of directors decision to reduce the dividend reflects a prudent shift to prioritize our capital deployment towards continued investments in sustainable growth initiatives. In addition to debt reduction associated with strategic acquisitions.
We have also taken other measures to increase our financial flexibility under our amended credit facility. In addition to taking other meaningful actions to improve our cash flow, including margin optimization initiatives, which I will discuss shortly in my outlook remarks.
As of December 31, 2023, cash was $173 million with $999 million of debt of which $995 million represented borrowings under our recently amended $1 3 billion credit facility.
Net debt increased year over year by $16 million to $827 million, the stronger free cash flow of $77 million in comparison to $53 million in the prior year was more than offset by acquisition related investments and capital distributions.
Francois Bourret: The stronger free cash flow of $77 million in comparison to $53 million in the prior year was more than offset by acquisition-related investments and capital distribution. Cash flow from operations increased to $145 million in 2023, compared to $137 million in the prior year, a function of stronger working capital cash conversion offset by lower profitability and, large part due to $39 million higher interest expense over the prior year. Capital expenditures were $68 million, or 2.8% of revenue for the full year 2023, compared to $84 million, or 3.4% in the prior year. The decrease is primarily related to a reduced level of IT infrastructure investment despite our accelerated geographic extension efforts. Her full-year normalized tax rate was 22.7% in 2023, relatively unchanged from 22.8% in the prior year, primarily a function of the jurisdiction mix of income.
Cash flow from operations increased to $145 million in 2023 compared to $137 million in the prior year a function of stronger working capital cash conversion offset by the lower profitability in large part due to $39 million.
Dollar higher interest expense over the prior year.
Capital expenditures were $68 million or two 8% of revenue for the full year 2023, compared to $84 million or three 4% in the prior year.
The decrease is primarily related to reduced level of infrastructure investments, despite our accelerated geographic extension efforts.
Our full year normalized tax rate was 22, 7% in 2023 relatively unchanged from 22, 8% in the prior year, primarily a function of jurisdiction mix of income.
Francois Bourret: Transitioning to our 2024 outlook, I will now provide some context supporting our financial guidance. As Ken outlined, our engaged segment faces three specific challenges impacting our 2024 financial forecast. Most notably, a long-tenured client will be exiting a line of business supported by TTEC, which negatively impacts Engage 2024 revenue and represents approximately half of the 8% revenue reduction. In addition, the continuous conservative mindset and budget constraints from CELIC Enterprise clients primarily explain the remaining 2024 revenue reduction, especially in the first half of the year.
Transitioning to our 2024 outlook I will now provide some context supporting our financial guidance.
Our skin outline our engage segment faces three specific challenges impacting our 2024 financial forecast.
Notably our long tenured clients will be exiting a line of their business supported by <unk>, which negatively impacts engage 2020 for revenue and represents approximately as of the 8% revenue reduction.
In addition, the continuous conservative mindset and budget constraints from Citic enterprise clients, primarily explains the remaining 2024 revenue reduction, especially.
Especially in the first half of the year.
Francois Bourret: The revenue decline and timing to right-size the cost structure while balancing the support needed to ramp revenue in the second half of the year explain the 220 basis point margin compression in 2024. As mentioned, our Engaged Margin Optimization Initiatives are meaningful and designed to transform the way we work. It targets select areas of our business and adds 130 basis points to our 2024 margin. That said, during this transition year, the EBITDA margin percentage will not fully reflect the annualized contribution from these margin optimization initiatives.
The revenue decline and timing to rightsize, our cost structure, while balancing the support needed to ramp revenue in the second half of the year explains a 220 basis point margin compression in 2024.
As mentioned our engage margin optimization initiatives are meaningful and designed to transform the way we work at target select areas of our business and adds 130 basis points to our 2020 for margin.
That said during this transition year, the EBITDA margin percentage will not fully reflect the annualized contribution from these margin optimization initiatives as revenue grows the margin improvement efforts are anticipated to contribute to a more impactful margin run rate in 2025.
Francois Bourret: As revenue grows, the margin improvement efforts are anticipated to contribute to a more impactful margin run rate in 2025 for our digital business. We expect solid performance throughout the year. Our high-margin professional services and recurring managed services are expected to grow by 11% in 2024, driven by the high demand for cloud migration and CX technology. However, the one-time on-premise revenue that averaged approximately 10% of digital revenue in recent years is anticipated to naturally decline by approximately 50% in 2024, putting pressure on digital's overall revenue growth. While the shift in the revenue mix will improve digital profit margins, over the long term, in 2024, it will be upset by the continuous investment in talent, as well as sales and marketing to maintain double-digit growth in 2025 and beyond across each of our practices.
In our digital business, we expect solid performance throughout the year.
Our high margin professional services and recurring managed services are expected to grow by.
11% in 2024, driven by the high demand for our cloud migration and CX technology.
However, the onetime on premise related revenue that average approximately 10% of digital revenue in recent years is anticipated to naturally decline by approximately 50% in 2020 for putting pressure on digital overall revenue growth.
While the shift into revenue mix will improve digital's profit margins over the long term in 'twenty 'twenty four it will be offset by our continuous investment in Thailand, as well as sales and marketing to maintain double digit growth in 2025 and beyond at crush E across each of our practices.
Francois Bourret: Turning to the midpoint of our 2024 guidance, as outlined in greater detail in our fourth quarter and full year 2023 earnings brief release. Gap revenue of $2.32 billion, a decrease over the prior year. Sorry, gap revenue of $2.32 billion, a decrease over the prior year of 5.8%. Adjusted EBITDA of $237 million, a decrease of 12.7% over the prior year and 10.2% of revenue compared to 11% in the prior year; non-GAAP operating income of $172 million, a decrease of 14.4% over the prior year, and 7.4% of revenue compared to 8.1% in the prior year; and non-GAAP earnings per share of $1.51, a decrease of 30.8% over the prior year. Other relevant guidance metrics include capital expenditures between 2.7% and 2.8% of revenue, of which approximately 55% is growth-oriented, and a full year effective tax rate between $23,000 and $25,000.
Turning to the midpoint of our 2020 for guidance.
As outlined in greater detail in our fourth quarter and full year 2023 earnings press release GAAP revenue of $2 32 billion a decrease over the prior year, sorry, GAAP revenue of $2 32 billion a decrease over the prior year of five 8% adjusted EBITDA of $237 million a decrease of $12 seven.
And over the prior year, and 10, 2% of revenue compared to 11% in the prior year.
non-GAAP operating income of $172 million, a decrease of 14, 4% over the prior year and seven 4% of revenue compared to eight 1% in the prior year.
non-GAAP earnings per share of $1 51, a decrease of 38% over the prior year.
Other relevant guidance metrics include capital expenditures between two 7% and two 8% of revenue of which approximately 55% is growth oriented.
The full year, a full year effective tax rate between 23% and 25%.
Please reference our commentary and the business outlook section of our fourth quarter and full year 2020 earnings press release to obtain our expectations for the first and full year 2020 for performance at the consolidated and segment level.
In closing we ended 2023 in line with expectations, but the recent dynamic NDA gauge segment are causing a reduction in our 2020 for revenue and margin outlook. We are confident in our go forward plan that focuses on growth and margin improvement with a series of initiatives in motion to support both.
Francois Bourret: Please reference our commentary in the business outlook section of our fourth quarter and full year 2023 earnings press release to obtain our expectations for the first and full year 2024 performance at the consolidated and segment levels. In closing, we ended 2023 in line with expectations, but the recent dynamic and the engaged segment are causing a reduction in our 2024 revenue and margin outlook. We are confident in our go-forward plan that focuses on growth and margin improvement with a series of initiatives in motion to support both.
As digital transformation continues to be a top priority for our clients. We are encouraged by the growing momentum with <unk> digital.
As we move forward, we will navigate the dynamic environment to position the company to exit 2024 would have you towards long term profitable growth I will now turn the call back to Paul.
Thanks, Francois as we open up the call. We ask that you limit your questions to one or two at a time operator, you may open the line.
Francois Bourret: As digital transformation continues to be a top priority for our clients, we are encouraged by the growing momentum with TTEC Digital. As we move forward, we will navigate the dynamic environment to position the company for exit in 2024 with a view to long-term profitable growth. I will now turn the call back to Paul. Thanks, Francois.
Thank you Paul we will now begin the question and answer session. If you would like to ask a question. Please press star and then the number one please <unk> your phone and record your name and your company name clearly even from your name and company name are required to introduce to your question to cancel your request. Please press star and then the number two.
Our first question comes from George Sutton of Craig Hallum. Your line is now open.
Operator: As we open up the call, we ask that you limit your questions to one or two at a time. Operator, you may open the line. Thank you, Paul. We will now begin the question and answer session. If you would like to ask a question, please press star and then the number 1.
Thank you Ken you mentioned that you believe that.
One third of the global economies during a recession today and I know you expressed.
Similarly, <unk> for the U S in effect being in recession.
I would say the general narrative has been that we may be moving into a soft landing scenario. So I wanted to if.
Operator: Please unmute your phone and record your name and your company name clearly when prompted. Your name and company name are required to introduce your question. To cancel your request, please press star and then the number.
We can get a better picture of sort of your macro view as it pertains to your guidance and the expectation that youll exit 'twenty four.
Better place.
Hi, George Good morning.
When you ask my macro view I'm not sure I'm understanding the question I'm not an economist so I want to make sure that.
George Frederick Sutton: Our first question comes from George Sutton. Greg Ellum, your line is now open. Thank you. Can you mention that you believe that one-third of the global economies are in a recession today? And I know you've expressed a similar belief about the U.S., in effect, being in recession. I would say the general narrative has been that we may be moving into a soft landing scenario. So I wondered if we could get a better picture of your macro view as it pertains to your guidance and the expectation that you'll exit 24 in a better place. Hi George.
I'm qualified.
To answer your question.
So you want to just give me a little bit more color on your question. So that I can be more accurate.
It was obviously a macro view that is built into your guidance and it includes the scenarios that we're seeing where clients are moving from 90 day visibility to month to month.
You are seeing volume reductions at some clients. So im curious how much of that is macro in your view and when does that lift.
Kenneth D. Tuchman: Good morning. Um, when you ask me about my macro view, I'm not sure I'm understanding the question. I'm not an economist. So I want to make sure that I'm, I'm, qualified to answer your question. So you want to just give me a little bit more color on your question so that I can be more accurate. So there's obviously a macro view that is built into your guidance, and it includes the scenarios that we're seeing where clients are moving from 90-day visibility to month-to-month. You are seeing volume reductions at some clients, so I'm curious... How much of that is macro in your view and when will that lift?
Yes, I mean, I think that what we're seeing I think the whole industry is seeing I think.
It is very simply that clients are our operating and acting in a very conservative fashion, you can see that with everything from the cost optimization programs that they've announced to the layoffs that they've announced et cetera, and so consequently, I think that many many.
Clients for many many industries are seeing lower growth.
And they are basically doing everything they can.
Kenneth D. Tuchman: Yeah, I mean, I think that what we're seeing, I think the whole industry is seeing, is that clients are operating and acting in a very conservative fashion. You can see that with everything from the cost optimization programs that they've announced to the layoffs that they've announced, etc. And so consequently, I think that many, many clients or many, many industries are seeing lower growth, and they're basically doing everything they can to try to anticipate what's in front of them.
To try to anticipate whats in front of them and I think that they don't necessarily know whether or not we're going to have a soft landing or whether things are just slowing down for a period of a period of time I would agree with that.
In the U S.
The consumers still is acting somewhat resilient, but what we're seeing is that the consumer is becoming.
Much much more conservative in.
Their purchase Decisioning.
Already showing up and what types of retail stores that theyre going to versus where they were shopping at et cetera, due to things like food prices being higher.
Kenneth D. Tuchman: And I think that they don't necessarily know whether or not we're going to have a soft landing or whether things are just slowing down for a period of time. I would agree that in the US, the consumer is still acting somewhat resilient. But what we're seeing is that the consumer is becoming much, much more conservative in their purchase decisions. It's already showing up in what types of retail stores that they're going to, versus where they were shopping at, etc. Due to things like food prices being higher, due to the fact that their rents are at a much higher level than they were as a percentage of their income, etc.
Due to the fact that their rents are at a much higher level than they have been as a percentage of their income et cetera. So all all at all.
I think that we feel that that.
That the U S. Hopefully can escape through this while a big chunk of the western Western Europe and other parts of the world.
Already in an actual recession.
Kenneth D. Tuchman: So, all in all, I think that we feel that the US can hopefully skate through this while a big chunk of Western Europe and other parts of the world are already in an actual recession. So, our goal and our hope is that we will get through 2024, and we'll be right back to seeing growth in 2025. By then, interest rates will have moderated, and by then, I think the Feds will feel that inflation has come down a bit.
So our goal and our hope is that we.
We will.
Get through 2024, and we'll be right back to seeing growth in 2025 by then interest rates will have moderated.
By then I think the feds will feel that inflation has come down a bit.
And.
The good news is what we're seeing is is that clients are absolutely.
Kenneth D. Tuchman: And, you know, I think that the good news is what we're seeing is that clients are absolutely doing what they feel is necessary and critical, which is one of the reasons why our digital business is showing good signs of growth right now because so many clients who want to take advantage of any form of AI realize that they now have to move off their bare metal systems and into the cloud. And so, that's an example of where when a client has no choice to do something, they do it. And consequently, as we've said on several conference calls prior to this call, a high percentage of large enterprises do not have their contact center technology in the cloud as it relates to CCAS, and therefore, we're benefiting from it.
Doing what they feel is necessary and critical which is one of the reasons why our digital business is showing good signs of growth right now because so many clients who want to take advantage of any form of AI realize that they now have to.
Move off their bare metal systems and into the cloud.
So.
That's an example of where when when a client.
<unk> has no choice to do something.
They're doing it and consequently, as we've said on several conference calls prior to this call.
A high percentage of large enterprises do not have their contact center technology in.
In the cloud as it relates to see Cas and therefore, we're benefiting from it so sorry for the very long winded answer but.
Kenneth D. Tuchman: So, sorry for the very long answer, but we believe that right now, clients are no longer as, let's say, confused as they were in the second half. We're seeing decision-making taking place. That said, we're seeing that the time that we get a verbal commitment to the time that a contract is signed is absolutely elongated, and again, this is really kind of very typical of what we experience in environments where clients felt that they were going into a recession or where clients felt like they needed to tighten their belts. They ultimately go through and sign the contract, but I'm just simply telling you, it's not like during COVID where there was an absolute sense of urgency and where we were getting contracts signed in 90 days and 120 days, et cetera, and so, therefore, not only is the sales cycle elongated, but from the time of the verbal award to the time of the actual signing is taking a bit longer. I have no doubt that this is a temporary situation.
But our we believe that that right now clients are no longer is let's say confused as they were in the second half we're seeing decision, making taking place that said, we're seeing from the time that we get a verbal commitment to the time that a contract is signed is absolutely elongated.
And again is really kind of very typical of what we experienced in an environments, where where clients felt that they were going into a recession or where clients felt like they needed to tighten their belt. They ultimately go through and sign the contract, but I am just simply telling you.
It's not like during Covid, where there was an absolute sense of urgency in what we were getting contract signed in 90 days and 120 days et cetera, and so therefore, not only is the sales cycle elongated but from the time of the verbal awards at the time of the actual signing.
He is taking a bit longer I have no doubt that this is a temporary <unk>.
Kenneth D. Tuchman: We've experienced this before. We've been through multiple recessionary cycles, and so I'm very confident that this will lift and will pass and that we feel we'll be right back on track in 2025. But we want to be conservative.
<unk>, we've experienced this before we've been through multiple recessionary cycles.
So I'm very confident that this will this will lift and shall pass and that we feel we will be right back on track in 2025, but we want to be conservative we want to be realistic.
Michelle R. Swanback: We want to be realistic about what it is that we're seeing. Quick follow-up for Shelley. You talked about the proof of concept stage moving forward with a number of your clients, and you mentioned 50 programs and 10,000 associates affected by the AI programs. I'm not totally clear what you meant by that. I wondered if you could just explain that a little bit. Yes, good morning, George.
What it is that we're seeing.
Just a quick follow up for Shelley.
You talked about the proof of concept stage moving forward with a number of requirements and you mentioned 50 programs.
And associates affected.
By the AI programs I'm not totally clear what you meant by that I wondered if you could just.
Explain that a little bit.
Yes, good morning, George So client 50 client programs, meaning we have various kinds of we're using various types are applications of AI at clients. So example.
Michelle R. Swanback: So client, 50 client programs, meaning we have various kinds of we're using various types or applications of AI at clients. For example, think of it as a personal assistant to help agents access information to do their job better, generative learning in terms of using some of these new technologies to change the way that we train associates, language enhancement, language neutralization, sorts of technologies. And so we have a number of these programs underway at clients. We typically start with a proof of concept or a smaller number of agents to test out the technology in their environment, see how it works, you know, learn how to train the agents better to use those technologies, and then scale from there.
Think of it as a personal assistant to help agents access information to do their job better generative learning in terms of using some of these new technologies to change the way that we trained associates language enhancement language neutralization sorts of technologies and so we have a number of these programs.
The way our clients, we typically start with a proof of concept or a smaller number of agents to test out the technology in their environment and see how it works learned how to train the agents that are to use those technologies and then scale from there and so it's impacting about 10000 agents across those 50 client programs and we expect.
Michelle R. Swanback: And so, you know, it's impacting about 10,000 agents across those 50 client programs. And, you know, we expect that over time, we'll have 100% of our agents that will be enabled with these various AI technologies. I mean, what I would say just more generally about AI is that we really see our clients right now leaning into the agent augmentation sorts of use cases, the kinds of things that I just talked about, because the business case for them is compelling. And, you know, we actually have a set of tools that we're developing and testing and continuing to scale ourselves. And we see compelling results. In one case, we saw a 17% productivity increase from new agents by just giving them, you know, easier access to knowledge, if you will, sort of a personal assistant to help them find the information they need to do their job. Hopefully, that answers your question.
That over time, we will have 100% of our agents that will be enabled with these various AI technologies.
I mean, what I would say relative to just more generally around AI as well.
We really see our clients right now leaning into the agent augmentation sorts of use cases, the kinds of things that I just talked about because the business case for them is compelling.
We actually have a set of tools.
We are developing and testing and continuing to scale ourselves and we see compelling results in one case, we saw 17% productivity increase from new agents by just giving them.
Easier access to knowledge, if you will sort of a personal assistant to help them find the information they need to do their job.
Hopefully that answered your questions stretched.
George Frederick Sutton: Our next question comes from Maggie Nolan of William Blair. Your line is now open. Hi, everyone. This is Kate Kronstein on behalf of Maggie Nolan.
Great. Thank you.
Thank you. Our next question comes from Maggie Nolan of William Blair. Your line is now open.
Hi, everyone. This is Keith.
For Maggie Nolan I was curious are there any green shoots with clients that you guys are seeing that gives you hope that you could possibly hit the higher end of the guidance range.
Kate Kronstein: I was curious, are there any green shoots with clients that you guys are seeing that gives you hope that you could possibly hit the higher end of the guidance range? Yeah, so let me start. First of all, as we said, in the digital practice, we've got really good booking momentum and traction right now. We mentioned that over 50% of the opportunities in our pipeline right now are with existing customers. And, you know, I think this is important for two reasons.
Yes, So let me let me start.
First of all as we said in the digital practice, we've got really good bookings momentum and traction right now we mentioned that over 50% of the opportunities in our pipeline right now are with existing customers.
I think this is important for two reasons, one just demonstrates that as we expand our capabilities and the solutions that we can offer our clients not only just helping them migrate their technology to the cloud, but then extending the use of that technology, adding AI.
Michelle R. Swanback: One just shows that as we expand our capabilities and the solutions that we can offer clients, you know, not only just helping them migrate their technology to the cloud but then expanding the use of that technology, adding AI, not just doing CCAS but getting into CRM, it gives us an opportunity to do more with our existing clients. And it's also important because those opportunities tend to move through our sales process more quickly. So that gives us, you know, good confidence in our digital business. On the engaged side, I mentioned this idea that we've got a couple of early wins here this year. We're calling them strategic growth accounts. And what does that mean?
Not just doing <unk>, but getting into CRM. It gives us an opportunity to do more with our existing clients and it is also important because those opportunities tend to move through our sales process more quickly so that gives us.
Good confidence in our digital business on the engage side I've mentioned this idea that we've got a couple of early wins here. This year, we're calling them strategic growth accounts and what does that mean well. These are clients, where we're starting initial scope of work maybe in the $10 million a year range, but by clients, where we know we can.
Michelle R. Swanback: Well, these are clients where we're starting, you know, an initial scope of work, maybe in the $10 million a year range, but clients where we know we can expand our relationship. Ken mentioned that it's taking time from a verbal win to a contract to launch these services. One of the things that I'm pleased about is that with some of these new clients of ours, we're literally just in the early stages of launching the work that they've contracted us to do, and we're already talking to them about new opportunities to be able to support them in other lines of business and in other areas of work. Okay, great. Thank you, Shelly.
And our relationship Ken mentioned that it's taking time from a verbal wins to a contract for launching these services one of the things that I'm pleased about is with some of these new.
Clients of ours, we're literally just in the early stages of launching the work that they've contracted and we're already talking to them about new opportunities to be able to support them in other lines of business and then other scopes of work.
Yeah.
Okay, great. Thank you Shine that was helpful. And then just one follow up if I may are you guys able to provide any detail on the line of business back to long term client discontinued and the general margin profile of this survey.
Michelle R. Swanback: That was helpful. And then just one follow-up question, if I may, are you guys able to provide any detail on the line of business that the long-term client discontinued and the general margin profile of this service? No, I mean, we're not in a position to share anything about this client situation. What I can just tell you is that this was a business decision they made based on their business factors. It didn't have anything to do with us.
No we're.
We're not in a position to share anything about this client situation. What I can just tell you is this was this was a business decision. They made based on their business factors. It didn't have anything to do with US. We just happened to be the main provider for them. In this line of business, which is why it's having such an impact on our business.
Michelle R. Swanback: We just happen to be the main provider for them in this line of business, which is why it's having such an impact on our, (inaudible) Thank you. Our next question comes from Michael Latimore of Northland Capital Markets. Your line is now open.
Okay, great. Thank you.
Thank you. Our next question comes from Mike Latimore of Northland Capital markets. Your line is now open.
Michael James Latimore: All right. Thanks. I'm on the digital side of the business. Sounds pretty healthy there.
Alright. Thanks.
On the digital side of the business sounds pretty healthy there are we back to sort of normal sales cycles now or is there still a little bit of ways to go and then it also sounds like.
Kenneth D. Tuchman: Are we back to sort of a normal sales cycle now? Or is there just a little bit of a way to go? And then it also sounds like just the need for AI is driving a lot of demand here. I just want to clarify that. I think we are definitely I think the sales cycle is, is normalized, but I think it's... normalized most likely by my previous comments, which is that there is so much of the CCAS space that is not yet in the cloud, and a lot of our clients have technology that, frankly, is hitting end of life. And so, consequently, that is really lighting a fire to get them to move to the cloud.
The need for AI is driving a lot of the demand here just want to clarify that.
I think we are definitely I think the sales cycle is.
As normalize, but I think it's normalized most likely by my previous comments, which is that there is.
So much of the <unk> space that is not yet in the cloud and a lot of our clients have technology that frankly is hitting end of life.
And so consequently that is really lighting a fire.
To get to move them to the cloud and Thats why we feel confident that.
Kenneth D. Tuchman: And it's why we feel confident that our business, not only our pipeline, not only did we have record bookings in the fourth quarter, but we feel very strongly about the first quarter. And we feel that this will persist and that, in 2025, we will see double-digit growth as well as profit margins. So, yeah, we feel very confident in the space as it relates to AI.
That our business Donnelley, our pipeline not only did we have record bookings in the fourth quarter, we feel very strongly about first quarter and we feel that this will persist.
And that 22025.
We will see double digit growth as well as.
Profit margin. So, yes, we feel very confident in.
In the space as it relates to AI.
Kenneth D. Tuchman: I would say, yes, AI. All of our clients are talking to us about AI, but at the end of the day, before they can even get to AI and really properly take advantage of AI, they really need to have their capabilities in the cloud. So I think that AI might be one of the motivators just in general, but I also think the fact that they're receiving notices of end of life from a myriad of manufacturers that they're no longer going to support the platform that they were on. Yeah,
The I would say, yes, AI all of our clients are talking to us about AI, but at the end of the day before they can even get to AI and really properly take advantage of AI, they really need to have their capabilities in the cloud so I.
I think that AI might be one of the motivators just in general, but I also think the fact that they are receiving notices of end of life across a myriad of manufacturers.
There are no longer going to support.
The platform that they were off.
Got it.
Kenneth D. Tuchman: And then I guess staying on the topic of AI, I think there's been a general concern these past couple of weeks, at least that AI could, you know, while it would benefit your digital business, might have an industry impact in terms of, you know, just slowing interaction volume to the Contact Center. And by AI, I mean, like, virtual agents, not necessarily agent augmentation. But what's your general view on AI, you know, in the longer term, as it might have, you know, what kind of effect, particularly virtual agents, could have on the engaged business? You know, what I would say is that we're embracing AI. We view it as a very big, we view it as a positive change.
And then I guess staying on the topic of AI I think theres been a general <unk>.
Certain last couple of weeks at least.
While it would benefit your digital business.
Industry impact in terms of.
Slowing interaction volumes to the contact center.
I mean like virtual agents not necessarily agent augmentation, but kind.
Kind of what's your general view on AI longer term as it might.
What kind of effect, particularly virtual agents can have on the engage business.
No what I would say is that we're embracing AI, we view it as a very we view it as a positive change we view it as a huge opportunity.
Kenneth D. Tuchman: We view it as a huge opportunity. I can't stress enough that, at the end of the day, the market, the engaged marketplace, for the most part, is consolidated. There are, roughly speaking, five tier one providers that are in the marketplace.
Can't stress enough that at the end of the day the market or the engage marketplace for the most part is consolidated.
Roughly speaking five tier one providers that are in the marketplace and at the end of the day all five of US are included in almost every major opportunity that's out there.
Kenneth D. Tuchman: And at the end of the day, all five of us are included in almost every major opportunity that's out there. What AI affords all of us, the entire industry, is an opportunity to show our clients a way to increase quality and lower overall costs to serve. Why does that matter?
What AI affords all of us the entire industry.
Is an opportunity to show our clients away to increase quality and lower overall cost to serve why does that matter. It matters because when you have a $400 billion Tam of which only $100 billion has been outsourced even with interactions that potentially become par.
Kenneth D. Tuchman: It matters because when you have a $400 billion TAM, of which only $100 billion has been outsourced, even with interactions that potentially could become partially self-automated because they're more or less transactions, not interactions. The fact of the matter is there is more TAM and more opportunity out there than the top five competitors combined could ever handle. And I think I still feel very confident that the captive operations are beginning to realize that, A, they're not that good at doing this.
Partially self automated because there are more or less transactions not interactions. The fact of the matter is there is more.
More more Tam and more opportunity out there than the top five competitors combined could ever handle and I think.
Still feel very confident that the captive operations are beginning to realize that a they're not that good at it.
Doing this the business has become way too complicated way to sophisticated.
Kenneth D. Tuchman: Businesses are becoming way too complicated, way too sophisticated, and requiring more and more geographies, more and more technologies, and advanced processes. And so, consequently, it's our belief that that embedded base is going to continue to be the gift that keeps on giving as they begin to look for ways to reduce their employee count and drive better productivity. So do I think that it's going to have an impact on very low-end transactions? Yes, but that's not a space that we're focused on. Our business is not providing what your bank balance is or when my product will arrive or whatever. That's just not the type of work that we're focusing on.
And requiring more and more.
Geographies more and more technologies and.
In advanced processes and so consequently.
It's our belief that that embedded base is going to continue to be the gift that keeps on giving as they begin to look for ways to reduce their employee count.
And drive better productivity. So do I think that it's going to have an impact on very low end.
Transactions, yes, but that's not a space that we're focused on our business is not providing what youre bank balances or.
When will my product arrive or whatever.
That's just not the type of work that we're focusing on the work that we're focusing on is work that that typically is assisting our clients in acquiring growing and retaining their customer base and building a level of trust and I.
Kenneth D. Tuchman: The work that we're focusing on is work that typically assists our clients in acquiring, growing, and retaining their customer base and building a level of trust. And I think that you can only take a chatbot so far before it actually becomes disruptive to a long-term customer relationship. And I can tell you that when we have our meetings with our client advisory board, to a T, every single client that we have says that they are only interested in using AI in a selective way and that they are very conscious of the fact that if they were to over-self-serve, that would have a negative impact on their business. So that's my way of saying that.
I think that you can only take a chatbot so far before it actually becomes disruptive in our long term customers relationship and and I can tell you that when we have our meetings with our client Advisory Board.
Two a T. Every single client that we have says that they are only interested in using AI in a selective way.
And that they are very conscious of the fact that if they were to oversell serve that would have a negative impact on their business.
So that's.
Thats my way of saying that.
Kenneth D. Tuchman: I think that it will have a positive impact. I think it'll drive more clients to want to work with companies that know how to work with these technologies, and it's our goal and our hope to benefit from it. Got it, got it.
I think that it will have a positive impact I think it will drive more clients to wanting to work with companies that know how to work with these technologies.
And it's our goal and our hope to benefit from it.
Got it got it that makes sense.
Joseph Anthony Vafi: That makes sense. Thank you. Our next question comes from Joseph Vafi of Canada Corridor. Your line is now open. Hey guys, good morning. Thanks for all the color.
Thank you. Our next question comes from Joseph <unk> of Canaccord. Your line is now open.
Hey, guys. Good morning, Thanks for all the color, maybe we could circle back just one more on AI here and going back to Shelley I know you said.
Michelle R. Swanback: Maybe we just circle back just one more on AI here and go back to Shelly. I know you said that the agent augmentation application in one instance drove 17% efficiencies, which is great. I'm just trying to get a feel for how you know that level of efficiency using an AI Co-pilot or whatever you want to call it. How's that going to affect economics? with clients on a maybe per transaction or contract basis. Do you see sharing some of those savings with the client, or you know, how does that play out? And just a clarification, the 17% was actually time to proficiency, meaning getting new agents up to speed and being able to be proficient at answering questions and doing their job.
That the.
The agent augmentation application in one instance, I think you said.
Drove 17% efficiencies, just which is great I'm, just trying to get a feel for how to that level of efficiency using.
Co pilot whatever you want to call. It how is that going to affect economics with clients on up maybe per transaction or contract basis Tc sharing some of those savings with the client or.
How does that play out.
Yes.
And just a clarification.
17% was actually time to proficiency, meaning getting new new agents up to speed and being able to be proficient at answering questions.
Doing their job.
Michelle R. Swanback: Having said that, I think, you know, we'll definitely, first of all, I would say that one of the reasons that we're winning these new clients right now is because of the AI tools that we're bringing to augment our agents. So I think this is absolutely something that's resonating with our clients. And, you know, in some cases, you know, I guess in all cases, there'll be an opportunity to pass on some of the economics to our clients but also for ourselves, right? In terms of time to proficiency, being able to keep agents engaged in their work, lower attrition, all of those things will have a bottom-line impact on us and also for our clients. So that's helpful. And then maybe just kind of switching gears around global delivery. I know you really worked hard on that and made a lot of progress in 23.
Having said that I think will.
<unk>.
There will definitely first of all I would say this.
One of the reasons that we're winning these new clients right now is because of the AI tools that we're bringing to augment our agents. So I think this is absolutely something that's resonating with our clients.
And in some cases.
I guess in all cases, there'll be an opportunity to pass on some of the economics.
Our clients, but also for ourselves right in terms of time to proficiency being able to keep agents engaged.
There were lower attrition all of those things.
We will have a bottom line impact for us and also for our clients.
So that's helpful. And then maybe just switching gears around global delivery I know you.
Really worked hard on that and made a lot of progress in 'twenty three how do we.
Joseph Anthony Vafi: How do we, you know, as clients are onboarding this year, I mean, you know, and looking at volumes and, you know, there's, and, you know, and the drive to, you know, take costs down? How are you seeing kind of volume dynamics, where they're ramping, you know, maybe moving volumes around globally with existing just kind of some color around those dynamics would be helpful. Thanks a lot, guys.
As clients are Onboarding this year I mean.
Looking at volumes.
They are.
And.
And the drive to trade.
<unk> costs down.
How are you seeing kind of volume dynamics.
While onshore versus offshore new account.
They are ramping.
Maybe moving volumes alone globally with existing.
Some color around those dynamics would be helpful. Thanks, a lot guys.
Michelle R. Swanback: Yeah, great. Well, the first thing I would just say is our expanded geographic footprint, absolutely strategic to our growth and profitability going forward and absolutely responding to our existing clients, but in particular, helping us with these new client wins. But I'm encouraged by the wins that we've closed early this year and the ones we have in the pipeline. As Ken said, they're taking a bit longer than we'd like, but I'm very encouraged by that. And, you know, most of our client wins right now are multi-geo. So leveraging both our offshore and nearshore locations, driven by these new expansion geographies that we've talked about over the last 12 months. Now, you know, as clients move into some of these new geographies, they start with a pilot or sort of a contained effort to start with, and then we scale from there. And so that's why you know, this lag effect that we're talking about in terms of scaling some of this work in these new offshore geographies is making an impact for 2024. But I would tell you there is lots of interest in Latin America and lots of interest in Africa, in particular.
Yeah, Great well first thing I would just say is our expanded geographic footprint, absolutely strategic to our growth and profitability going forward and absolutely <unk>.
Our existing clients, but in particular, helping us with these new client wins.
But I'm encouraged by that.
The wins that we've closed early this year and the ones. We have in the pipeline as Ken said, theyre, taking taking a bit longer than we'd like but I'm very encouraged by that and most all of our client wins right now are multi geo so leveraging off both our offshore and near shore locations driven by these these new expansion.
Geographies that we've talked about over the last 12 months now as clients move into some of these new geographies.
Start with a pilot or sort of contained effort to start with and then we scale from there and so that's why this lag effect that we're talking about in terms of scaling some of this work in these new offshore geographies is making an impact for 2024, but I would tell you lots of interest in Latin America lots of interest in Africa and <unk>.
Kenneth D. Tuchman: And, you know, also, we're, as we've talked about, getting into the Asian language space more and more as well. And so, you know, we're excited about the demand that we see for our clients across all of those areas around the globe. Joe, I also want to just remind you as a backdrop that because we do a lot of complex financial services work that requires licensing, as well as a lot of healthcare work that requires licensing, that work has no risk of going offshore as it legally cannot. And then, on top of that, we do quite a bit of public sector and federal work, and that work also cannot go offshore.
<unk>.
And also where as we've talked about getting into the Asian language space more and more as well and so we're excited about the demand that we've seen for our clients across all of those areas around the globe.
Joe I also want to just remind you as a backdrop that because we do a lot of complex financial services work that requires licensing as well as a lot of health care work that requires licensing that work has no risk of going offshore as it legally cannot.
No.
And then on top of that we do quite a bit of public sector and federal work and that work also cannot go offshore.
Kenneth D. Tuchman: So, what I would say is the good news is that our sales energies and our sales efforts are very focused on winning offshore businesses. Therefore, we're seeking out clients that have the interest and the need to offshore. But the good news about the embedded base is that, for the most part, it's very solid, so to speak, because of the nature of the licensing and just the legal requirements. Thanks, Ken.
So what I would say is the good news is that our sales energies in our sales efforts are very focused on winning offshore business. Therefore, we're seeking out clients.
That.
Have the interest and the need.
To offshore, but the good news about the embedded base is is that for the most part.
Got it.
Okay.
It's very solid so to speak because of the nature of the licensing and.
Just the legal requirements so to speak.
Great. Thanks, Ken Thanks Shelly.
Michelle R. Swanback: Thanks, Shelly. Thank you. Our next question comes from Kathy Kent of Bank of America. Your line is now open.
Thank you. Our next question comes from Cathy Chan of Bank of America. Your line is now open.
Kathy Kent: Hey guys, thanks for taking my question. I just wanted to touch on offshore again a little bit more. I know you guys mentioned that you're expecting it to increase to about 35% of revenues by year-end 24. What is it exiting in 2023 right now? Is it going to be more of a gradual increase?
Hey, guys. Thanks for taking my question I, just wanted to touch on offshore again, a little bit more I know you guys mentioned that you're expecting it to increase to about 35% of revenues.
At year end 2000 and for.
What is it exiting 2023 right now is it going to be a more of a gradual increase in can you just comment anything about kind of the size of those engagements.
Francois Bourret: And can you just comment anything about the size of those engagements? You know, are they, is there any difference that you're seeing now in the pipeline versus before? Thanks.
Are they is there any difference that youre seeing now in the pipeline record before thanks.
Kathy Kent: Yes, so just to start, we exited 2023 with about 30% of our revenue coming from offshore. And as you stated, we're going to increase it to 35%. And when you look at ultimately, the dynamic of our offshore revenue is where we're seeing growth next year expected to grow 5% year over year. So this is truly where we're seeing momentum right now in our top line and demand. And that's been really accelerating with our expanded footprint that we have now in multiple new geographies. Got it.
This was just started so we exited 2023 with about 30% of our review.
We're coming from a pure and as you stated we're going to increase it to 35% and when you look at ultimately the dynamic over offshore revenues, where we're seeing growth next year expected to grew 5% year over year. So this is truly where we're seeing momentum right now in our top line and demand and thats been really accelerating with our expanded footprint that we have now in multiple.
With multiple new geographies.
Michelle R. Swanback: And can you just talk about some vertical dynamics that you're expecting, you know, in 24? I know you called out financial services and telco that were helpers for engaged, but any other color around, what are you expecting to maybe do a little bit better? Are you expecting these dynamics to continue? for 1QN24.
Got it. Thank you just talk about some vertical dynamics are you expecting in 'twenty four I know you called out financial services and telco that were held for foreign gauge, but any other color around.
I think you maybe do a little bit better are you expecting these dynamics to continue.
When do you like 'twenty four.
Michelle R. Swanback: Yeah, let me maybe focus on where we see new client win opportunities. I would tell you that we have several new, very exciting prospects in our BFSI sector, so financial services. We also have a couple of exciting wins that we'll be contracting here soon in the healthcare space. We will be at full ramp with our new client in New York State Metro by the end of Q1. We also have a couple of very exciting deals outside of those verticals. In fact, 1 of our wins here early this year is actually with a global retailer.
Yes, let me, let me maybe focus on where we see new client win opportunities I would tell you that we have several new very exciting prospects.
Our BSI sector. So financial services. We also have a couple of exciting wins that will be contracting here soon in the healthcare space.
We will be at full ramp with our new client in pub SEC in New York State Metro by the end of Q1. We also have a couple of very exciting <unk> deals and then outside of those verticals we.
One of our wins here early this year is actually with our global retailers so that.
Michelle R. Swanback: So that is a space we're seeing more and more. And also in travel, I would, I would say, you know, we have a number of existing clients in the travel sector where we see growth opportunities. So those are the ones that come to mind first, Cassie.
As in a space, where we're seeing more and more.
And also in travel.
Paul I would say, we have a number of existing clients in the travel sector, where we see growth opportunities. So those are the ones that come to mind first Kathy.
Kathy Kent: Our last question is from Vincent Colicchio of Barrington Research. Your line is now open. Yeah, Kenneth Shelley, to what extent do you think some of the noise and confusion, if you will, around the impact of AI is having an effect on demand? Go ahead, Shelley.
Thank you.
Thank you. Our last question is from Vincent Colicchio of Barrington Research. Your line is now open.
Okay.
Yes, Ken Kenny Shelley.
To what extent do you think some of the noise.
Confusion, if you will around.
The impact of AI.
Being an effect on demand.
Vincent Alexander Colicchio: Well, I think what I would tell you is our clients want to talk to us about that, right? Because we're helping them sort out the noise and understand where they can really practically apply these AI solutions and get business benefits. So that's driving a lot of demand on the digital side.
Go ahead Kelly.
Well I mean, I think what I would just tell you that our clients want to talk to us about that right, because we're helping them sort out the noise and understand where they can really practically apply these AI solutions and get business benefit. So that's driving a lot of demand in the digital side and as I said.
Michelle R. Swanback: And as I said, every opportunity in Engage, we're talking to our clients about where to apply AI, particularly with these use cases around agent augmentation. So I think for us, it's driving a lot of great client conversations, lots of demand. As Ken said, every opportunity, every prospect, every pitch, we're talking about AI, whether it's a digital opportunity or an Engage opportunity. Let me say a couple things.
Every opportunity and engaged we're talking to our clients about where to apply AI, particularly with this these use cases around HR applications. So I think for us it's driving a lot of great client conversation lots of demand as Ken said every opportunity every prospect every pitch, we're talking about AI, whether it's a digital opportunity to earn.
<unk> opportunity.
Let me, let me, though let's say a couple of things number one it is really imperative to understand that because we have a digital division that has a very unique skill set of working with every single major hyperscale or in a very deep way in a partnering way down to the point, where we're very involved in.
Kenneth D. Tuchman: Number one, it's really imperative to understand that because we have a digital division that has a very unique skill set of working with every single major hyperscaler in a very deep way, in a partnership way, down to the point where we're very involved in consulting with these hyperscalers, helping them with their product development, etc. On top of that, all the major CCAS providers where we have literally thousands of engineers that are our engineers that do absolutely nothing but integrate into their systems. The fact of the matter is that we can have an intelligent conversation with our clients about what it takes to actually bring in AI and take advantage of it, as well as understand what are the best use cases that actually make the most sense. I wanted to clarify something based on your question. If your question is, is AI having an impact on volumes? The answer is absolutely, positively not, no matter what.
Salting with these hyperscale or helping them with their product development et cetera on top of that all the major <unk> providers, where we have literally thousands of engineers that are our engineers that do absolutely nothing but integrate to their systems.
Back to the matter is is that we can have an intelligent conversation with our clients about what it takes to actually bring in.
And to take advantage of it as well as understanding what are the best use cases that actually make the most sets.
I wanted to clarify something based on your question. If your question is is AI, having an impact on volumes.
The answer is absolutely positively not.
No.
No matter what there was.
Kenneth D. Tuchman: There was a bunch of uproar about a client that put out a press release having, you know, a real success with AI and how it was reducing their customer service associates. This is a company that is way behind the times, and when you go look at the AI that they're using, which is online and very easy to validate, it is nothing more than a knowledge-based system. Virtually every client that we have already has a knowledge-based system, and therefore, it goes without saying, if a client didn't have a knowledge-based system on the web, on the internet, then, of course, you'd be taking a lot more voice interactions than one who already has one.
A bunch of uproar about a client that put out not.
Our client, but a company that put out a press release having.
Having.
Of real success with AI and how it was reducing their customer service associates. This is a company that is way behind the times and when you go look at the AI that they are using which is online and very easy to validate it as nothing more than the knowledge based system virtually every client that we have.
<unk> already has a knowledge based system and therefore, it goes without saying if a client didn't have a knowledge based system on there.
On the web on the Internet then of course, you'd be taking a lot more voice interactions.
Then than than one who already has one so what I would say to you is do we think that it will impact volumes, we absolutely think that it will impact interaction volumes.
Kenneth D. Tuchman: So what I would say to you is, do we think that this will impact volumes? We absolutely think that it will impact interaction volumes, but what we believe is more importantly is that it will enhance more of the complex interactions and allow our associates to get up to speed quicker, be more accurate with the information, have much more understanding of when to cross sell, when to upsell, and have much better data on where the client's mindset is so that they can serve the client in a much more sophisticated fashion. And look, this is like every hype cycle; it's going to take years before clients are going to be able to truly take advantage of AI. So I hope I answered your question and would be happy to take any other questions about this offline if you have more questions. Yeah, that was a very good color.
But we what we believe is more importantly is that it will enhance.
More of the complex interactions and allow our associates to get up to speed quicker.
Be more accurate with the information have much more understanding of when the cross sell win to upsell.
And have much better data on where the client's mindset is so that they can serve the client and a much more sophisticated fashion and look this is like every hype cycle, it's going to take years before clients are going to be able to truly take advantage of AI.
So.
I Hope I answered your question and happy to take any of these or any other questions about this offline if you have more questions.
Yeah that was very good color. Thank you for that.
Kenneth D. Tuchman: Thank you for that. And then one other question, are you seeing increased pressure on pricing or terms currently? Well, there's no doubt it's a competitive environment on the engaged side. And this is why we're leading with leading with AI-enabled associates, and our new geographic footprint. And, you know, we feel good about our competitiveness.
And then 111 other are.
Are you seeing increased pressure.
On pricing or terms currently.
Well, it's no doubt, it's a competitive environment on the engage side and but this is why we are meeting with leading with AI enabled.
<unk>, our new geographic footprint and we feel good about our competitiveness.
Vincent Alexander Colicchio: Okay, thank you. Thank you. Thank you for your questions. That is all the time we have today. This concludes TTEC's fourth quarter and full year 2023 earnings conference call.
Okay. Thank you.
Thank you.
Thank you for your questions that is all the time, we have today. This concludes <unk> fourth quarter and full year 2023 earnings Conference call. You may disconnect at this time.