Q2 2024 TTEC Holdings Inc Earnings Call

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Operator: Thank you for standing by. The conference will begin momentarily, and until such time, you will hear music.

Speaker Change: Thank you for standing by. The conference will begin momentarily. Until such time, you will hear music. Thank you and please continue to stand by.

Operator: Thank you, and please continue to stand by. [music] Thanks for watching, and don't forget to like, share, and subscribe to our channel. Welcome, everyone, to TTEC's second quarter 2024 earnings conference call. I would like to remind all parties that you will be in a listen-only mode until the question and answer session. This call is being recorded at the request of TTEC. I would now like to turn the call over to Paul Miller, TTEC's Senior Vice President, Treasurer, and Investor Relations Officer. Thank you, sir, and you may begin.

Speaker Change: Welcome everyone to TTEC second quarter 2024 earnings conference call.

Paul Miller: I would like to remind all parties that you will be in a listen-only mode until the question and answer session. This call is being recorded at the request of TTEC. I would now like to turn the call over to 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 the second quarter results for the Peer Defended June 30, 2024. On today's call are Ken Tuchman, Chairman and Chief Executive Officer of TTEC, Shelly Swanback, President of TTEC, and Chief Executive Officer of TTEC. Chief Financial Officer of TTEC Holdings Inc.

Speaker Change: Good morning and thank you for joining us today. TTEC is hosting this call to discuss the second quarter results for the period ended June 30, 2024. Participating on today's call are Ken Tuchman, Chairman and Chief Executive Officer of TTEC, Shelley Swanback, President of TTEC and Chief Executive Officer of Gage.

Paul Miller: Yesterday, TTEC issued a press release announcing its financial results. While this call will reflect items discussed in that document, for complete information about our financial performance, we also encourage you to read our second quarter 2024 orderly report. Before we begin, I want to remind you that the matters discussed in 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.

Kenny Wagers: Kenny Wagers, Chief Financial Officer of TTEC

Kenny Wagers: Yesterday, TTEC issued a press release announcing its financial results.

Kenny Wagers: While this call will reflect items discussed within that document, for complete information about our financial performance, we also encourage you to read our second quarter 2024.

Kenny Wagers: Orderly Report on Form 10-Q Before we begin, I want to remind you that matters discussed in 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.

Paul Miller: Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments. Statements of some of the various risks of these and other factors that could cause actual results to differ materially from those expected. Today.

Kenny Wagers: Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments that may occur.

Kenny Wagers: Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those expected and described today.

Paul Miller: For a more detailed description of our risk factors, please review our 2023 Annual Report on Form 10K. A replay of this conference will be available on our website. I will now turn the call over to you. Good morning, and thank you for joining us today.

Kenny Wagers: For a more detailed description of our risk factors, please review...

Kenny Wagers: Our 2023 Annual Report on Form 10-K . A replay of this conference will be available on our website under investor relations.

Shelly Swanback: On our earnings call earlier this year, we shared that 2024 would be a year of transition and evolution for TTEC. As we scale our diversification strategy and our cost optimization initiatives, the macroeconomic environment continues to create headwinds for our engaged business while our digital business continues to deliver solid results. Let me start with our second quarter results. Revenue was $534 million, and on a non-GAAP basis, our adjusted EBITDA was $46 million.

Kenny Wagers: I will now turn the call over to Kenneth.

Kenneth: Good morning and thank you for joining us today. On our earnings call earlier this year, we shared that 2024 would be a year of transition and evolution for TTEC.

Speaker Change: As we scale our diversification strategy and our cost optimization initiatives, the macroeconomic environment continues to create headwinds for our engaged business while our digital business continues to deliver solid results.

Speaker Change: Let me start with our second quarter results. Revenue was five hundred and thirty four million dollars and on a non-gap basis our adjusted EBITDA was approximately forty six million dollars.

Shelly Swanback: It's important to call out that this quarter we recorded a goodwill impairment on the engaged business. Triggered by a decline in our market capitalization, this non-cast charge materially impacts our GAP results, as detailed in our press release, and Kenny will discuss shortly.

Speaker Change: It's important to call out that this quarter we recorded a goodwill impairment on the engaged business, triggered by a decline in our market capitalization.

Speaker Change: This non-cast charge materially impacts our GAAP results as detailed in our press release and Kenny will discuss shortly. Now let me share an update on the Engage business.

Shelly Swanback: Now let me share an update on the engage business. Despite the current economic, excuse me, despite the current dynamic macroeconomic environment, we're encouraged by our continued momentum with new large enterprise client wins. These new clients are core to our strategy to diversify our engaged client portfolio across industries where we're currently underpenetrated and where we see solid opportunity for growth. As with all new clients, our recent wins in e-commerce, retail, media, and property and casualty insurance will take the customary time to scale.

Kenny Wagers: Despite the current dynamic macroeconomic environment, we're encouraged by our continued momentum with new large enterprise client wins.

Kenny Wagers: These new clients are core to our strategy to diversify our engaged client portfolio across industries where we're currently under-penetrated and where we see solid opportunity for growth.

Kenny Wagers: As with all new clients, our recent wins in e-commerce, retail, media, and property and casualty insurance will take the customary time to scale.

Shelly Swanback: These new enterprise clients have the potential to grow into top clients in the near term based on their historical spend in the CX outsourcing industry. However, as we look to the second half of the year, due to the weaker economic outlook, the demand from our embedded base is not shaping up as originally forecasted. This is especially pronounced in our largest sector, healthcare. For almost two decades, we've had reliable forecasts and consistent seasonal growth with our health care pay or clients.

Kenny Wagers: These new enterprise clients have the potential to grow into top clients in the near term based on their historical spend in the CX outsourcing industry.

Kenny Wagers: However, as we look to the second half of the year, due to the weaker economic outlook, the demand from our embedded base is not shaping up as originally forecasted. This is especially pronounced in our largest sector, health care.

Shelly Swanback: This year, the health care industry is facing extreme cost increases, which are creating significant budget pressures. As a result, while some clients are still finalizing their seasonal ramps, we expect significantly lower volumes this year than we have previously experienced.

Speaker Change: For almost two decades, we've had reliable forecasts and consistent seasonal growth with our health care payer clients.

Kenny Wagers: This year, the healthcare industry is facing extreme cost increases.

Kenny Wagers: which are creating significant budget pressures. As a result, while some clients are still finalizing their seasonal ramps, we expect significantly lower volumes this year than we have previously experienced.

Kenny Wagers: Given the overall environment, we've taken additional and significant actions to improve our cost structure without impacting our ability to continue to deliver quality outcomes for our clients and their customers.

Kenny Wagers: Due to these headwinds in Engage, we have updated our financial outlook for the full year 2024 to better reflect the current balance of the challenges and the opportunities. Kenny will share the specific details shortly.

Shelly Swanback: Now on to TTEC Digital. As we've diversified our CX technology segment, we've evolved from being a leading expert dedicated exclusively to CCAS to a multi-dimensional CX transformation partner with a broad portfolio of contact center capability, contact center, CRM, AI, and analytic solutions. We've doubled the number of our partners in our technology ecosystem this year and now have the full stack of CX capabilities to propel our business ahead into 2025 and beyond.

Kenny Wagers: Now on to TTEC Digital. As we've diversified our CX technology segment, we've evolved from being a leading expert dedicated exclusively to CCAS

Kenny Wagers: to a multi-dimensional CX transformation partner with a broad portfolio of contact center capability, contact center, CRM, AI, and analytic solutions.

Speaker Change: We've doubled the number of our partners in our technology ecosystem this year and now have the full stack of CX capabilities to propel our business ahead into 2025 and beyond.

Shelly Swanback: Today, our core advantage in TTEC Digital is the depth of our expertise in every aspect of the CX technology stack and our ability to integrate the disparate platforms into a cohesive, seamless CX operating system, including the latest in AI. Our teams are executing on more than 100 AI-enabled projects with specific business cases around increased efficiencies, revenue growth, and improved customer experience. Looking ahead, the CX marketplace continues to be compelling, and we remain excited about our position as a leading and trusted partner for AI-enabled CX technology and services.

Speaker Change: Thank you very much.

Speaker Change: Today, our core advantage in TTEC Digital is the depth of our expertise in every aspect of the CX technology stack and our ability to integrate the disparate platforms into a cohesive, seamless CX operating system, including the latest in AI.

Speaker Change: Our teams are executing on more than 100 plus AI-enabled projects with specific business cases around increased efficiencies, revenue growth, and improved customer experience.

Speaker Change: Looking ahead, the CX marketplace continues to be compelling and we remain excited about our position as a leading and trusted partner for AI enabled CX technology and services.

Shelly Swanback: We continue to attract new clients, be recognized as the best place to work, and be acknowledged as an industry innovator by trade analysts and media. Despite our progress, it goes without saying that I'm disappointed with our financial results and our revised outlook for the remainder of the year. As we move into 2025, I'm confident that our diversification initiatives will yield stronger financial performance with a broader client base, more offshore revenue, expanded client solutions, and a deeper partner at Ecos. And now, I'll turn the call over to

Speaker Change: We continue to attract new clients, be recognized as the best place to work, and acknowledge as the industry innovator by trade analysts and media.

Speaker Change: Despite our progress it goes without saying that I'm disappointed with our financial results and a revised outlook for the remainder of the year.

Speaker Change: As we move into 2025, I'm confident that our diversification initiatives will yield stronger financial performance with a broader client base, more offshore revenue, and expanded client solutions and a deeper partner ecosystem.

Shelly Swanback: Good morning, everyone. As Ken mentioned, we're in the midst of a transition year, navigating headwinds in the macroeconomic environment and making progress as we execute on our overall diversification strategy. I'll start by discussing the current factors impacting the performance of the engaged business. First, some of our embedded-based clients have revised their volume forecast for the second half of the year. The decline is especially prominent in our biggest vertical, health care. Several of our health care payer clients are reacting to increased budget pressure and have made recent decisions which are impacting our seasonal volumes. In addition, one of our health care clients decided to delay a large growth initiative.

Speaker Change: And now, I'll turn the call over to Shelley.

Shelley: Good morning, everyone. As Ken mentioned, we're in the midst of a transition year, navigating headwinds in the macroeconomic environment and making progress as we execute on our overall diversification strategy. I'll start by discussing the current factors impacting the performance of the engaged business.

Shelley: First, some of our EmbeddedBase clients have revised their volume forecast for the second half of the year. The decline is especially prominent in our biggest vertical, healthcare. Several of our healthcare payer clients are reacting to increased budget pressure and have made recent decisions which are impacting our seasonal volumes.

Shelley: In addition, one of our health care clients decided to delay a large growth initiative.

Shelly Swanback: Second, challenges in a large public sector program caused by external factors, including a delay in the client system conversion, will create a short-term drag on our profitability and delay the full program. We're working with our clients through these issues and expect to get back to the anticipated financial profile early next year. And third, we exited some underperforming client programs that, in the short term, will impact our top line but ultimately improve our profitability.

Shelley: Second, challenges in a large public sector program caused by external factors, including a delay in the client system conversion, will create a short-term drag on our profitability and delay the full program ramp.

Shelley: We're working with our clients through these issues and expect to get back to the anticipated financial profile entering next year.

Shelley: And third, we exited some underperforming client programs that in the short term will impact the top line, but ultimately improve our profitability.

Shelly Swanback: Moving on to Progress Updates, Diversifying Our Engaged Business. While the market remains competitive, we're winning new enterprise clients and expanding with new solutions for our embedded base. As we continue to diversify our client portfolio, our primary focus is on opportunities where we can successfully deliver a quality solution and programs that have the potential to scale and grow profitably. This quarter, our strategic wins with enterprise clients include a large financial services institution and a multinational home improvement manufacturer and retailer.

Shelley: Moving on to progress updates diversifying our engaged business.

Shelley: While the market remains competitive, we're winning new enterprise clients and expanding with new solutions for our embedded base.

Shelley: As we continue to diversify our client portfolio, our primary focus is on opportunities where we can successfully deliver a quality solution and programs that have the potential to scale and grow profitably.

Shelley: This quarter, our strategic wins with enterprise clients include a large financial services institution and a multinational home improvement manufacturer and retailer.

Shelly Swanback: We're on track this year to add a dozen new enterprise clients diversified across our core verticals, as well as emerging verticals like retail, e-commerce, media, and technology. While these programs initially start small, they provide the opportunity for scale in the future.

Shelley: We're on track this year to add a dozen new enterprise clients, diversified across our core verticals, as well as emerging verticals like retail, e-commerce, media, and technology.

Shelley: While these programs initially start small, they provide the opportunity for scale in the future. We expect several of our new clients to become top 20 clients in the future.

Shelly Swanback: We expect several of our new clients to become top 20 clients in the future. We continue to see strong demand in our new geographies, with anchor clients driving growth in several regions. This quarter, we began onboarding a major health care client in South Africa and a financial services brand in Egypt.

Shelley: We continue to see strong demand in our new geographies with anchor clients driving growth in several regions. This quarter we began ramping a major health care client in South Africa and a financial services brand in Egypt.

Shelly Swanback: With strong client demand and more than half of our pipeline comprised of offshore opportunities, we continue to expand in these regions. Our banking, financial services, and insurance practice is healthy and performing well. We're diversifying with our embedded base and have recently won new lines of business that we'll ramp up later this year with two of our largest clients. For example, with one of these clients, we're expanding our work to include back office services. Regarding new Enterprise BFSI clients, we have recently launched two and will launch two more in Q3.

Shelley: With strong client demand and more than half of our pipeline comprised of offshore opportunities, we continue to expand in these regions.

Shelley: Our banking, financial services, and insurance practice is healthy and performing well. We're diversifying with our embedded base and have recently won new lines of business that we'll ramp up later this year with two of our largest clients.

Shelley: For example, with one of these clients, we're expanding our work to include back-office services.

Shelley: Regarding new Enterprise BFSI clients, we have recently launched two and will launch two more in Q3. We're focused on scaling these new programs as well as pursuing expansion opportunities.

Shelly Swanback: We're focused on scaling these new programs as well as pursuing expansion opportunities. For example, with a new offshore client we launched late Q4 last year, we've added five new solutions, including care, workforce management, tech support, knowledge management, and quality assurance. In our healthcare vertical, we have some early momentum diversifying our solutions and expanding our reach from member experience to patient experience. Targeting the Provider Landscape

Shelley: For example, with the new offshore client we launched late Q4 last year, we have added five new solutions, including care, workforce management, tech support, knowledge management, and quality assurance.

Shelley: In our healthcare vertical, we have some early momentum, diversifying our solutions and expanding our reach from member experience to patient experience.

Shelly Swanback: We have several late-stage opportunities with provider organizations to support them with our offshore footprint, spanning a wide range of solutions, including patient credentialing, claims, and clinical nurse support. Across industries, we can continue to make progress in a number of areas tied to the practical use of AI. Through a combination of technology partnerships and our own internal engineering teams, we're applying AI across the entire employee life cycle. For example, we're seeing good results leveraging AI to accelerate curriculum design and increase training effectiveness, which helps to reduce ramp times and increase speed to proficiency.

Shelley: Targeting the Provider Landscape. We have several late-stage opportunities with provider organizations to support them with our offshore footprint, spanning a wide range of solutions including patient credentialing, claims, and clinical nurse support.

Shelley: Across industries, we continue to make progress in a number of areas tied to the practical use of AI.

Shelley: Through a combination of technology partnerships and our own internal engineering teams, we're applying AI across the entire employee life cycle. For example, we're seeing good results leveraging AI to accelerate curriculum design and increase training effectiveness, which helps to reduce ramp times and increase speed to proficiency.

Shelly Swanback: Our private LLM, called Let Me Know, which is built on Google technology, is now being deployed in several client environments, including our travel and public sector verticals. In addition, we're using AI-enhanced voice translation to extend the reach of our optimized geographic footprint as we create digital multilingual hubs. Moving on to an update on our cost optimization initiatives, we recently executed on several programs that will deliver approximately $10 million of in-year savings and annualized savings of at least $30 million starting in 2025.

Shelley: Our private LLM, called Let Me Know, which is built on Google technology, is now being deployed in several client environments, including our travel and public sector verticals.

Shelley: In addition, we're using AI-enhanced voice translation to extend the reach of our optimized geographic footprint as we create digital multilingual hubs.

Shelley: Moving on to an update on our cost optimization initiatives. We recently executed on several programs that will deliver approximately $10 million of in-year savings and annualized savings of at least $30 million starting in 2025.

Shelly Swanback: With a guiding principle of maintaining our high-quality delivery standards, we're implementing new ways of working using technology and improved processes to transform our delivery cost structure across the enterprise. We have also recently strengthened our leadership team with tenured industry hires to accelerate our efforts and advance our performance in key areas. Now, I'll switch gears to TTEC Digital.

Shelley: With a guiding principle of maintaining our high-quality delivery standards, we're implementing new ways of working using technology and improved processes to transform our delivery cost structure across the enterprise.

Shelley: We have also recently strengthened our leadership team with tenured industry hires to accelerate our efforts and advance our performance in key areas.

Shelly Swanback: While the demand environment is somewhat tempered, our value proposition continues to resonate with clients. As Ken mentioned, our expansion of solutions and partnerships beyond CCAS to adjacencies like CRM, AI, and analytics is enabling us to broaden our impact with new and existing clients and will fuel the momentum in our professional services growth. As we continue to expand our partner ecosystem, we expect several of our new emerging partnerships to play a more meaningful role starting in 2025.

Shelley: Now, I'll switch gears to TTEC Digital.

Speaker Change: While the demand environment is somewhat tempered, our value proposition continues to resonate with clients.

Speaker Change: As Ken mentioned, our expansion of solutions and partnerships beyond CCADS to adjacencies like CRM, AI, and analytics is enabling us to broaden our impact with new and existing clients and will fuel the momentum in our professional services growth.

Ken: As we continue to expand our partner ecosystem, we expect several of our new emerging partnerships to play a more meaningful role starting in 2025.

Shelly Swanback: Our pipeline remains strong, and we're on pace to close 60 new clients this year. Additionally, close to 80% of digital bookings this past quarter were with existing clients, and the number of clients that we bill more than $1 million annually is continuing to grow. Let me share a couple of client examples. After helping a global mobility company optimize its CCAS platform, we're now unlocking actionable insights from AI-based conversational intelligence to clarify apps and act on drivers of call intents, volume spikes, and the effectiveness of their automation. For a healthcare payer, we're building on their cloud migration to integrate AI-enabled knowledge assistance and call summarization to improve the effectiveness of their clinical care support advocate.

Speaker Change: Our pipeline remains strong and we're on pace to close 60 new clients this year. Additionally, close to 80% of digital bookings this past quarter were with existing clients, and the number of clients that we billed more than $1 million annually is continuing to grow.

Speaker Change: Let me share a couple of client examples.

Speaker Change: After helping a global mobility company optimize its CCAS platform, we're now unlocking actionable insights from AI-based conversational intelligence to clarify and act on drivers of call intents, volume spikes, and the effectiveness of their automations.

Speaker Change: For a healthcare payer, we're building on their cloud migration to integrate AI-enabled knowledge assist and call summarization to improve the effectiveness of their clinical care support advocates.

Shelly Swanback: And for a luxury retail brand, we're creating a unified desktop leveraging AI that combines interaction history and profile data so their customer concierge team can proactively provide personalized, These are just three examples of more than 100 AI technology implementations with clients that are underway. Our clients are looking to us for practical applications of AI, and we're currently building solutions for more than 40% of our top 100 clients. Hyperscalers and leading CX technology providers play a key role in our CX ecosystem.

Speaker Change: And for a luxury retail brand, we're creating a unified desktop leveraging AI that combines interaction history and profile data so their customer concierge team can proactively provide personalized white glove support.

Speaker Change: These are just three examples of more than 100 AI technology implementations with clients that are underway. Our clients are looking to us for practical applications of AI, and we're currently building solutions for more than 40% of our top 100 clients.

Speaker Change: The hyperscalers and leading CX technology providers play a key role in our CX ecosystem. Working as strategic partners, we're helping them optimize their development roadmaps, build pipelines, and deliver complex implementations.

Shelly Swanback: Working as strategic partners, we're helping them optimize their development roadmaps, build pipelines, and deliver complex implementations. Because of our deep CS technology and operational expertise, clients are depending on us to help them eliminate silos within their organization. We bridge the gap between technology partners, business functions, and operating groups in order to simplify the associate and customer experience. In the same way we connect the dots for our clients, we're facilitating collaboration with tech partners to deliver the best outcomes for our shared clients.

Speaker Change: Because of our deep CX technology and operational expertise, clients are depending on us to help them eliminate silos within their organization. We bridge the gap between technology partners, business functions, and operating groups in order to simplify the associate and customer experience.

Speaker Change: In the same way we connect the dots for our clients, we're facilitating collaboration with TTEC partners to deliver the best outcomes for our shared clients.

Shelly Swanback: In conclusion, while we're disappointed in our financial results, we continue to make progress on our diversification strategy. We're growing our geographic footprint, winning new business, and expanding our solutions and partnerships. In addition, we're taking necessary cost and margin improvement actions to strengthen our financial profile in order to return to overall revenue growth and to normalize EBITDA run rate. As a management team, we're confident in our path forward and resolute in executing on our strategy and improvement initiatives.

Speaker Change: In conclusion, while we're disappointed in our financial results, we continue to make progress on our diversification strategy. We're growing our geographic footprint, winning new business, expanding our solutions and partnerships.

Speaker Change: In addition, we're taking the necessary cost and margin improvement actions to strengthen our financial profile in order to return to overall revenue growth and a normalized EBITDA run rate.

Speaker Change: As a management team, we're confident in our path forward and resolute in executing on our strategy and improvement initiatives.

Shelly Swanback: On behalf of our board, leadership, and our employees around the world, we look forward to continuing to share our progress in the quarters to come. Kenny, it's over to you to share our second quarter financial results and updated full year outlook.

Speaker Change: On behalf of our board, leadership, and our employees around the world, we look forward to continuing to share our progress in the quarters to come.

Speaker Change: Kenny, over to you to share our second quarter financial results and updated full year outlook.

Kenny: Thank you, Shelly, and good morning. I will start with a review of our second quarter financial results before providing context for our updated full year 2024 financial outlook. In my discussion of the second quarter 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. A full reconciliation of our GAAP to non-GAAP results is included in the tables attached to our earnings press release.

Kenny Wagers: Thank you, Shelly, and good morning. I will start with a review of our second quarter financial results before providing context in our updated full year 2024 financial outlook.

Kenny Wagers: In my discussion on the second quarter 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.

Kenny Wagers: A full reconciliation of our GAAP and non-GAAP results is included in the tables attached to our earnings press release.

Kenny: Turning to our second quarter 2024 financial results on a consolidated basis for the second quarter of 2024 compared to the prior year period, revenue was $534 million compared to $600 million, a decrease of 11%. Adjusted EBITDA was $46 million or 8.7% of revenue compared to $67 million or 11.2%. Operating income was $30 million or 5.5% of revenue compared to $51 million or 8.4%. And EPS was $0.

Kenny Wagers: Turning to our second quarter 2024 financial results on a consolidated basis for the second quarter of 2024 compared to the prior year period.

Speaker Change: Revenue was $534 million compared to $600 million, a decrease of 11%. Adjusted EBITDA was $46 million or 8.7% of revenue compared to $67 million or 11.2%.

Speaker Change: Operating income was $30 million or 5.5% of revenue compared to $51 million or 8.4%.

Speaker Change: And EPS was 14 cents compared to 55 cents.

Kenny: Foreign exchange had a negative 1.8 million impact on revenue in the second quarter over the prior year period, while positively impacting operating income by 0.8 million, primarily in our engaged sector. In our digital business, we delivered upon our second quarter plan supported by CX demand from clients across multiple industries. In our TTEC Engage business, our performance was at the low end of a range of our expectations due to challenges in the public sector program already discussed by Shelley and lower bookings due to the factors already covered by. Turning to our second quarter 2024 segment.

Speaker Change: Foreign exchange had a negative 1.8 million impact on revenue in the second quarter over the prior year period while positively impacting operating income by 0.8 million primarily in our engaged segment.

Speaker Change: In our digital business, we delivered upon our second quarter plan supported by CX demand from clients across multiple industries.

Speaker Change: In our TTEC Engage business, our performance was at the low end of a range of our expectations, with challenges in the public sector program already discussed by Shelley, and lower bookings due to the factors already covered by Ken.

Speaker Change: Turning to our second quarter 2024 segment results.

Kenny: Our digital segment's second quarter 2024 revenue was 116 million. While it represents a decrease of 1% over the prior year period, digital revenue grew quarter over quarter by approximately 4%, reflecting the backlog conversion of our strong books. Recurring Managed Services, which represents 60% of digital's revenue, continues to deliver solid growth. Increasing nearly 8% year-over-year and 6% sequentially, The strongest contribution continues to come from our CCAS

Speaker Change: Our digital segment's second quarter 2024 revenue was $116 million. While it represents a decrease of 1% over the prior year period, digital revenue grew quarter over quarter by approximately 4%, reflecting the backlog conversion of our strong bookings.

Speaker Change: Recurring managed services, which represents 60% of digital's revenue, continues to deliver solid growth.

Speaker Change: increasing nearly 8% year-over-year and 6% sequentially.

Speaker Change: The strongest contribution continues to come from our CCAST practices.

Kenny: Due to the tail of softer bookings in 2023, professional services revenue declined from the prior year, but it is up 11% from the first quarter of 2024, driven by the recent quarter's improved book. As previously communicated, the one-time on-premise revenue is declining as demand is shifting to cloud migration, resulting in an 8% year over year revenue decline in the first half of 2020. Operating income was $15 million, or 12.8% of revenue, in the second quarter of 2024, relatively unchanged over the prior year in both absolute and relative terms.

Speaker Change: Due to the tail of softer bookings in 2023, professional services revenue declined from the prior year but is up 11% from the first quarter of 2024 driven by the recent quarter's improved bookings.

Speaker Change: As previously communicated, the one-time on-premise-related revenue is declining as demand is shifting to cloud migration, resulting in an 8% year-over-year revenue decline in the first half of 2024.

Speaker Change: Operating income was $15 million, or 12.8% of revenue in the second quarter of 2024, relatively unchanged over the prior year in both absolute and relative terms.

Kenny: The temporary lower revenue contribution was offset by reduced SG&A from the prior year. Digital's backlog for the full year is $450 million, or 85% of our 2024 revenue guidance at the midpoint, in line with the prior year. The strong backlog and pipeline continue to demonstrate the importance of TTEC Digital CX technology and service solutions to our clients.

Speaker Change: The temporary lower revenue contribution was offset by reduced SG&A from the prior year.

Speaker Change: Digital's backlog for the full year is $450 million or 85% of our 2024 revenue guidance at the midpoint, in line with the prior year.

Speaker Change: The strong backlog and pipeline continue to demonstrate the importance of TTEC digital CX technology and service solutions to our clients.

Kenny: Our engaged segment revenue decreased 13.5% to $418 million in the second quarter of 2024 from the prior year period. Operating income was $15 million, or 3.5% of revenue, compared to $36 million, or 7.4% of revenue, in the prior year. Our second quarter performance was at the low end of the range of our expectations due to the challenges with the public sector program mentioned earlier and softer rev We are now at the end of the range of our expectations due to the challenges with the public sector program mentioned earlier and softer rev Reverend Reverend Reverend Reverend Reverend Reverend Reverend Reverend Reverend Reverend Reverend Reverend Reverend Reverend Rev Regarding Engage's pipeline, the quality of opportunities remains strong, and we see encouraging signs based on clients' discussions around CX delivery strategies.

Speaker Change: Our engaged segment revenue decreased 13.5% to $418 million in the second quarter of 2024 over the prior year period. Operating income was $15 million or 3.5% of revenue compared to $36 million or 7.4% of revenue in the prior year.

Speaker Change: Our second quarter performance was at the low end of the range of our expectations due to the challenges with the public sector program mentioned earlier and softer revenue.

Speaker Change: I will address the impact of the public sector program for the balance of the year and the segment's outlook in my closing remarks.

Speaker Change: Regarding engages pipeline, the quality of opportunities remain strong and while we see encouraging signs based on clients discussion around CX delivery strategies

Kenny: Near term, clients continue to prioritize initiatives that will yield cost savings in the year and postpone new investments or more meaningful CX transformations to 2025. Engage's last 12-month revenue retention rate was 89% compared to 96% in the prior year. The decline is primarily explained by the prior year revenue reduction in our hyper growth portfolio and the impact from one large client and financial services exiting one of their lines of business supported by TTEC previously meant, We are doubling down our efforts with measurable actions to strengthen our foundation and increase the company's profitability.

Speaker Change: Near-term, clients continue to prioritize initiatives that will yield cost savings in-year and postpone new investments or more meaningful CX transformations to 2025.

Speaker Change: Engage's last 12-month revenue retention rate was 89% compared to 96% in the prior year.

Speaker Change: The decline is primarily explained by the prior year revenue reduction in our hypergrowth portfolio and the impact from one large client and financial services exiting one of their lines of business supported by TTEC previously mentioned.

Speaker Change: We are doubling down our efforts with measurable actions to strengthen our foundation and increase the company's profitability.

Kenny: This includes initiatives to improve operating efficiencies at the client program level in addition to broader actions to align our corporate cost structure with forecasted revenue to become more agile and efficient by changing the way we work. The related restructuring charge in the second quarter is associated with this plan, which was largely completed in the third quarter. These actions are anticipated to reduce our operating costs by approximately $30 million on an annualized end-of-year exit rate, benefiting both gross and operating margins.

Speaker Change: This includes initiatives to improve our operating efficiencies at the client-program level, in addition to broader actions to align our corporate cost structure with forecasted revenue to become more agile and efficient by changing the way we work.

Speaker Change: The related restructuring charge in the second quarter is associated with this plan, largely completed in the third quarter.

Speaker Change: These actions are anticipated to reduce our operating costs by approximately $30 million on an annualized end-of-year exit rate, benefiting both gross and operating margins.

Kenny: Before I discuss other financial metrics, I will address the non-cash goodwill impairment charge and the related tax adjustment recorded in the second quarter. In the ordinary course, we perform goodwill impairment analyses in accordance with GAP on an annual basis, or more frequently, if indicators of impairment exist.

Speaker Change: Before I discuss other financial metrics, I will address the non-cash goodwill impairment charge and the related tax adjustment recorded in the second quarter.

Speaker Change: In ordinary course, we perform goodwill impairment analyses in accordance with GAP on an annual basis or more frequently if indicators of impairment exist.

Kenny: During our second quarter, we performed a quantitative goodwill impairment analysis triggered by the decline in our market capitalization. Based on this analysis, which reflects financial projections and market-based metrics, the fair value of our Engage reporting unit decreased below its carrying value, and as such, resulted in a $196 million non-cash pre-tax impairment. Our digital reporting unit's fair value remains in excess of the respective book values and is not impacted by the impairment.

Speaker Change: During our second quarter, we performed a quantitative goodwill impairment analysis triggered by the decline in our market capitalization.

Speaker Change: Based on this analysis, which reflects upon financial projections and market-based metrics, the fair value of our engaged reporting unit decreased below its carrying value and as such resulted in $196 million non-cash pre-tax impairment charge.

Speaker Change: Our digital reporting unit's fair value remains in excess of the respective book values and are not impacted by the impairment.

Kenny: The impairment resulted in a deferred tax asset of $38 million, which was subsequently included in a valuation allowance recorded for tax assets, creating a net incremental $46 million income tax charge recorded during the second quarter. Please refer to our Form 10-Q for more details on the impairment and related tax impact. While impactful from a GAAP reporting perspective, the impairment and the tax valuation allowance were non-cash items and do not impact our strategy and capabilities or the value of our CX solution. These charges are normalized in our non-GAAP reconciliation package.

Speaker Change: The engage impairment resulted in a deferred tax asset of $38 million, which was subsequently included in a valuation allowance recorded for tax assets, creating a net incremental $46 million income tax charge recorded during the second quarter.

Speaker Change: Please refer to our Form 10-Q for more details on the impairment and related tax impact.

Speaker Change: While impactful from a GAAP reporting perspective, the impairment and the tax valuation allowance were a non-cash expense and do not impact our strategy and capabilities or the value of our CX solutions.

Speaker Change: These charges are normalized in our non-GAAP reconciliation calculations.

Kenny: I will now share other second quarter 2024 metrics before discussing our outlook. Free cash flow was $35 million in the second quarter of 2024 compared to $77 million in the prior year. The year-over-year variance is the result of lower profitability and working capital conversion. Capital expenditures were $14 million, or 2.7% of revenue, for the second quarter of 2024, compared to $19 million, or 3.2% in the prior year, with most expenses related to our geographic expansion. Our normalized tax rate was 33.7% in the second quarter of 2024, compared to 22.3% in the prior year. The increase is primarily a function of lower pre-tax income and jurisdiction measures.

Speaker Change: I will now share other second quarter 2024 metrics before discussing our outlook.

Speaker Change: Pre-cash flow was $35 million in the second quarter of 2024 compared to $77 million in the prior year. The year-over-year variance is the result of lower profitability and working capital conversion.

Speaker Change: Capital expenditures were $14 million, or 2.7% of revenue, for the second quarter of 2024, compared to $19 million, or 3.2% in the prior year, with most expenses related to our geographic expansion.

Speaker Change: Our normalized tax rate was 33.7% in the second quarter of 2024, compared to 22.3% in the prior year. The increase is primarily a function of lower pre-tax income and jurisdiction mix.

Kenny: As of June 30, 2024, cash was $80 million, with $933 million of debt, of which $930 million represented borrowings under our amended $1.2 billion credit facility. Net debt increased $49 million over the prior year to $853 million, primarily associated with geographic expansion investments, higher interest expense, and capital distributions, partially offset by positive cash flow from operations. We ended the quarter with a net debt to EBITDA ratio of 3.8. As discussed last quarter, beyond returning the company to sustainable long-term organic growth, Shelley and I are taking prudent actions to improve our cash flow and strengthen our balance. These actions start with continuous cost improvement initiatives, reprioritization of our capital allocation strategy, and optimization of our working capital. We have also taken additional measures to increase our financial flexibility under our current credit facility.

Speaker Change: As of June 30, 2024, cash was $80 million, with $933 million of debt, of which $930 million represented borrowings under our amended $1.2 billion credit facility.

Speaker Change: Net debt increased $49 million over the prior year to $853 million, primarily associated with geographic expansion investments, higher interest expense, and capital distributions partially offset by positive cash flow from operations.

Speaker Change: We ended the quarter with a net debt to EBITDA ratio of 3.8 times.

Speaker Change: As discussed last quarter, beyond returning the company to sustainable long-term organic growth, Shelley and I are taking prudent actions to improve our cash flow and strengthen our balance sheet.

Shelley: These actions start with the continuous cost improvement initiatives, reprioritization of our capital allocation strategy, and optimization of our working capital.

Shelley: We also took additional measures to increase our financial flexibility under our current credit facility.

Kenny: Turning to our updated outlook in my closing remarks, you may recall that we moved to providing guidance on an annual basis during this transition period with directional commentary for each quarter as viewed appropriately. Last quarter's commentary pertaining to the second quarter outlook remains active. We still see the second quarter as the transition of our engaged performance in 2024, as we one, work through the peak of our previously mentioned headwinds in our business, and two, further execute upon meaningful cost optimization initiatives, which are well underway in the third quarter.

Shelley: Turning to our updated outlook and my closing remarks.

Shelley: You may recall that we moved to providing guidance on an annual basis during this transition period with directional commentary for each quarter as viewed appropriate.

Shelley: Last quarter's commentary pertaining to the second quarter outlook remains accurate.

Shelley: We still see the second quarter as the transition of our engaged performance in 2024 as we, one, work through the peak of our previously mentioned headwinds in our business, and two, further execute upon meaningful cost optimization initiatives, which are well underway in the third quarter.

Kenny: However, the lower demand environment continues to have a larger impact on our engaged revenue trend for the remainder of the year. Engaged revenue is now expected to decline from 8% to 12% at the midpoint of the updated guidance.

Shelley: However, the lower demand environment continues to have a larger impact on our engaged revenue trend for the remainder of the year.

Shelley: The engaged revenue is now expected to decline from 8% to 12% at the midpoint of the updated guidance range.

Kenny: As a result, we are revisiting the company's full-year guidance on both the top and bottom line due to the revised Engaged Outlook. That said, we continue to build a healthier 2024 exit rate for the Engaged business as operations in the public sector program normalize. Guidelines for digital are minimal, with delays to launch some projects impacting the top line, offset by stronger execution that increases our profitability expectations from an EBITDA margin of 14.5% to 15% at the midpoint of our guidance.

Shelley: As a result, we are revisiting the company's full year guidance on both the top and bottom line due to the revised Engaged Outlook.

Shelley: That said, we continue to build a healthier 2024 exit rate to the engaged business as operations in the public sector program normalize.

Shelley: www.ottobock.com

Shelley: ...guidance for digital are minimal with delays to launch some ...

Shelley: Projects impacting the top line offset by stronger execution that increases our profitability expectations from an EBITDA margin of fourteen and a half percent to fifteen percent at the midpoint of our guidance.

Kenny: Please reference our commentary in the Business Outlook section of our second quarter 2024 earnings press release to obtain our expectations for our updated 2024 full year guidance at the consolidated and segment levels. In closing, we met many of our transitional year objectives in the first half of 2024 while continuing to navigate a dynamic demand environment. In TTEC Digital, the acceleration of new partnerships continues to strengthen and diversify an already strong foundation and is noticeable with our sequential growth quarter over quarter.

Shelley: Please reference our commentary in the Business Outlook section of our second quarter 2024 earnings press release to obtain our expectations for our updated 2024 full year guidance at the consolidated and segment level.

Shelley: In closing, we met many of our transitional year objectives in the first half of 2024 while continuing to navigate a dynamic demand environment.

Shelley: In TTEC Digital, the acceleration of new partnerships continues to strengthen and diversify an already strong foundation and is noticeable with our sequential growth quarter over quarter.

Kenny: In TTEC Engage, we are ramping new enterprise client programs across our CX technology-enabled solutions and expanded geographic footprint while working through select near-term headwinds and executing upon our profit optimization mission. We remain committed to returning the Engaged segment and TTEC as a whole to long-term organic growth and increased profitability.

Shelley: In TTEC Engage, we are ramping new enterprise client programs across our CX technology-enabled solutions and expanded geographic footprint while working through select near-term headwinds and executing upon our profit optimization initiatives.

Shelley: We remain committed to returning the engaged segment and TTEC as a whole to long-term organic growth and increased profitability. I will now turn the call back to Paul.

Paul Miller: Thanks, Kenny. As we open the call, we ask that you limit your questions to one or two, if possible. Operator, you may open the line.

Paul Miller: Thanks Kenny. As we open the call we ask that you limit your questions to one or two at a time.

Operator: Thank you. 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. 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 the star and then the number 2. Our first question comes from the line of George Sutton of Craig Allen. Sir, your line is now open.

Paul Miller: Operator, you may open the line.

Speaker Change: Thank you. 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. 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 2.

Speaker Change: Our first question comes from the line of George Sutton of Craig Allen. Sir, your line is now open.

Kenneth Tuchman: Thank you. Um, Ken, I'm wondering how much of this would you credit to AI in some way, shape, or form in terms of not necessarily AI impacting the inbounds that you're getting yet, but just really a crowding out of the focus for companies moving forward with other initiatives that might have positively impacted you? To be frank, I think that very little to none. I think that we talk to our clients on almost a daily basis.

George Sutton: Thank you. Ken, I'm wondering how much...

George Sutton: Of this, would you credit to AI in some way, shape, or form in terms of, not necessarily AI impacting the inbounds that you're getting yet, but just really a crowding out of the focus for companies moving forward with other initiatives that might have positively impacted your business?

Ken: To be frank, I think very little to none. I think that every, you know, we talk to our clients on almost a daily basis. We know the initiatives that they're focused on, etc.

Kenneth Tuchman: We know the initiatives that they're focused on, etc. Many of them are still just trying to get to the cloud, let alone to just modernize their overall digital capabilities. And the ones that are working on AI, I would argue that, for the most part, it's in the experimentation stage in most cases. So, no, I do not think that that's it.

Ken: Many of them are still just trying to get to the cloud, let alone to just modernize their overall digital capabilities.

Speaker Change: and the ones that are...

Speaker Change: are working on AI, I would argue that it's, for the most part, it's in an experimentation stage.

Speaker Change: in most cases. So.

Kenneth Tuchman: I think that just overall, the verticals that we have served for so many years really are experiencing some of the macro headwinds of the consumer becoming cautious and slowing down. And I think that that will become more obvious as many of these very large enterprises start to report in their future quarters. One question for Kenny, you're kind of drawing a little bit of a line in the sand. The second quarter will be the peak of the headlines in the engage business.

Speaker Change: No, I do not think that that's it. I think that just overall the...

Speaker Change: The verticals that we have served for so many years.

Speaker Change: you know, really are unfortunately experiencing some of the macro headwinds of the consumer becoming cautious and slowing down. And I think that

Speaker Change: That'll become more obvious as many of these very large enterprises start to report in their future quarters.

Kenny: Just help us understand the comfort you have in that statement, sort of what backs that up.

Kenny Wagers: One question for Kenny. You're kind of drawing a little bit of a line in the sand. The second quarter will be the peak of the headwinds in the Engage business. Just help us understand the comfort you have in that statement, sort of what backs that up.

Kenny: Yeah, George, I would say, you know, Shelly covered a lot of that in her script. We've just got a lot of good tailwinds around operational rigor. A lot of the actions that we took in Q3 that I mentioned that are worth, you know, $10 million in annual savings, and as we exit 2024 into 2025, north of $30 million. Those are in play, and so from an operational, margin expansion, operating leverage standpoint, we feel really good with what we've accomplished, and we're not done yet.

Kenny Wagers: Yeah, George, I would say, you know, Shelly covered a lot of that in her script. We've just got a lot of good tailwinds around.

Speaker Change: Thank you.

Speaker Change: Operational rigor, a lot of the actions that we took.

Speaker Change: in Q3 that I mentioned that are worth, you know, 10 million in-year savings.

Speaker Change: And as we exit 2024 into 25.

Speaker Change: North of 30 million.

Speaker Change: Those are in play.

Speaker Change: And so, from an operational, from a margin expansion, from an operating leverage standpoint,

Speaker Change: We feel really good with what we've accomplished and we're not done yet. Shelly also mentioned we brought in some industry veterans on the delivery and operational side and they continue to drive value as they onboard at TTEC.

Kenny: She also mentioned we brought in some industry veterans on the delivery and operational side, and they continue to drive value as they onboard at TTEC. So from a cost, from an operational, from a leverage standpoint, we've just got a lot of tailwinds that we feel confident in. On the revenue side, a little more choppy. We discussed that, but as seasonality throughout 2024 picks up in Q3 and Q4, and as our bookings and backlog and what we see with the new enterprise clients that we've signed this year, we feel relatively confident in that trend.

Speaker Change: From a cost, from an operational, from a leverage standpoint.

Speaker Change: We've just got a lot of tailwinds that we feel confident in. On the revenue side, a little more choppy, we discussed that. But as seasonality throughout 2024 picks up into Q3 and Q4, and as our bookings...

Speaker Change: and backlog and what we see with the new enterprise clients that we've signed this year. We feel relatively confident in that trend going forward.

Shelly Swanback: Thank you. Our next question comes from the line of Maggie Nolan from William Blair. Your line is now open.

Speaker Change: Gotcha. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Maggie Nolan from William Blair. Your line is now open.

Shelly Swanback: Hi, thank you. Can you comment a little bit on whether or not you're seeing a competitive pricing environment impacting the Engage segment?

Maggie Nolan: Hi, thank you. Can you comment a little bit on whether or not you're seeing a competitive pricing environment impacting the engaged segment?

Shelly Swanback: Good morning, Maggie. Well, I think no doubt there's a competitive environment out there. What I would just say, in particular, for companies who are looking for a willingness to trade off quality for price. And so, of course, we handle those situations one at a time as needed.

Speaker Change: Good morning, Maggie. Well, I think no doubt it's a competitive environment out there. What I would just say is probably in particular for companies who are looking at, you know,

Speaker Change: willingness to trade off quality for price. And so of course, we handle those situations one-off.

Speaker Change: as needed. What I would just tell you is...

Speaker Change: The enterprise, the dozen new enterprise clients that we're bringing on, we feel really good about the work that we're going to do for these clients, the commercial structure with them, and we expect that book of business to be accretive.

Speaker Change: to our core business, so we feel good from that perspective. But no doubt, it's a competitive pricing environment, particularly, again, companies that have those budget constraints and might be willing to trade off quality for price.

Shelly Swanback: Okay, thank you. And then on those several new enterprise clients, it's great to hear you say that those have the potential to become top clients in the future. Were those competitive wins or competitive displacements? And overall, how do you feel about your positioning in the market and your ability to take market share? Yeah.

Speaker Change: Okay, thank you. And then on those several new enterprise clients, it's great to hear you say that those have, you know, potential to become top clients in the future. Were those competitive wins or competitive displacements? And overall, how do you feel about your positioning in the market and your ability to take market share?

Shelly Swanback: Yeah, absolutely. They were competitive wins, right? And displacing partners, I think, in every single case.

Speaker Change: Yeah, absolutely. They were competitive wins, right? And displacing partners, I think, in every single case.

Shelly Swanback: So we feel really good about that. You know, it's a combination of what was our vertical expertise and also our expanded geographic footprint that we've been talking about for the last few quarters. And, you know, let me just maybe emphasize again some of these wins are in what we call our core verticals, things that we've got good vertical expertise in, healthcare, BFSI, some of our biggest practices, but also, excitingly, new verticals, a large e-commerce platform, a couple new clients in the retail sector.

Speaker Change: So, we feel really good about that, you know, it's a combination of what were our vertical expertise and also our expanded geographic footprint that we've been talking about for the last many quarters.

Speaker Change: And, you know, let me just maybe emphasize again.

Speaker Change: Some of these wins are in what we call our core verticals, things that we've got good vertical expertise, health care, BFSI, some of our biggest practices. But also, excitingly, new verticals, a large e-commerce platform, a couple new clients in the retail sector.

Speaker Change: We've got some good work that we're doing with some of the luxury brands as an example in retail. A new win in media.

Shelly Swanback: We've got some good work that we're doing with some of the luxury brands as an example in retail, a new win in media, new opportunities in our pipeline in the tech vertical. And so, you know, we're really serious about diversifying our business. And I think we feel good about the breadth of these wins, that they were absolutely competitive.

Speaker Change: New opportunities in our pipeline in the tech vertical and so, you know We're really serious about diversifying our business and I think we feel good about the breadth of these wins that absolutely they were competitive

Shelly Swanback: Okay, thank you for that detail.

Michael Latimore: Thank you. Our next question comes from Michael Latimore of Northland Capital Markets. Your line is now open.

Speaker Change: Okay, thank you for that detail.

Speaker Change: Thank you. Our next question comes from Michael Latimore of Northland Capital Markets. Your line is now open.

Michael Latimore: Great. Thanks a lot.

Shelly Swanback: Stay on the digital business. You mentioned there were some project delays. Can you elaborate on that a little bit? You know, what would cause that, what technology or

Mike Lattimore: Great, thanks a lot. On the digital business, you mentioned there were some project delays. Can you just elaborate on that a little bit? What caused that? What technology areas?

Shelly Swanback: You know, no particular technology, Mike, these weren't delays because of us per se, these were just delays in the client being ready to start programs, deals that we had won in previous quarters, and just delays in getting them started. And therefore, there's a slight delay in revenue recognition. But these programs are all underway at this point.

Speaker Change: No particular technology, Mike, these weren't delays because of us per se, these were just delays in the client being ready to start programs, deals that we had won in previous quarters and just delay in getting them started and therefore there's a slight delay in revenue recognition. But these programs are all underway at this point.

Shelly Swanback: Okay, so was it macro-related? They just needed to find the budget to move forward, or not?

Mike Lattimore: Okay, so was it macro-related? They just needed to find the budget to move forward, or?

Shelly Swanback: I'm sorry, say your question again. Yes, but it was macro-related. Oh, no. I think these were just specific. These were a couple of specific client situations. Okay, got it. And then

Speaker Change: I'm sorry, say your question again? Yes, but it was macro related. Oh, no, I think these were just specific, these were a couple of specific client situations.

Shelly Swanback: Okay, got it. And then I know you don't give quarterly guidance, but... On the digital side, is the guidance implied kind of exiting the year at, you know, 10% or so growth there?

Speaker Change: Okay, got it. And then I know you don't give quarterly guidance, but

Speaker Change: On the digital side, does the guidance imply kind of exiting the year at, you know, 10% or so growth there?

Kenny: Yeah, obviously, we don't get the quarterly guidance, but I would say that we are exiting 2024 again, we're still working on 2025, and we're not going to comment on 2025 yet, but you're in the rain.

Speaker Change: Yeah, obviously we don't give the quarterly guidance, but I would say that we are exiting 2024. Again, we're still working on 2025, and we're not going to comment on 2025 yet, but you're in the range.

Shelly Swanback: And then on Engage, were new logo bookings as expected, or were they a little light as well?

Speaker Change: Okay.

Speaker Change: And then on Engage, were new logo bookings as expected or were they a little light as well?

Shelly Swanback: Well, no, this is what we're talking about, these new enterprise clients that we're winning. Mike, this is where, you know, we're really excited about them.

Speaker Change: Well, no, this is where we're talking about these new enterprise clients that we're winning. Mike, this is where, you know, we're really excited about these. And so this is...

Shelly Swanback: And so this is, so yes, as expected, I suppose, in terms of winning new clients. What I would just tell you is, you know, clients are, these programs always start a bit small, and this is what you keep hearing us talk about, really excited about the new client wins that we have, recognizing, and this is not a new phenomenon, by the way, these programs take time to scale, right? Clients start small, with a small number of agents in Engage, and then we scale from there.

Speaker Change: Thank you.

Mike Lattimore: So, yes, as expected, I suppose, in terms of...

Mike Lattimore: Winning New Clients. What I would just tell you is...

Mike Lattimore: These programs always start a bit small, and this is what you keep hearing us talk about is really excited about the new client wins that we have, recognizing, and this is not a new phenomena, by the way, these programs take time to scale, right? Clients start small.

Mike Lattimore: Small amount of agents in Engage.

Mike Lattimore: And then we scale from there. And so we have launched several of those in Q2, several more in Q3, and more here in Q4.

Ken: Where we're saying we see these making a more material contribution to the top line in 2025. Hey Mike, this is Ken. How you doing? I want to just point out something that maybe we haven't made very clear. We have a very...

Kenneth Tuchman: Hey Mike, this is Ken. How are you doing?

Shelly Swanback: And so we have launched several of those in Q2, several more in Q3, and more here in Q4. So this is part of where we're saying we see these making a more material contribution to the top line in 2025. Hey, Mike, this is Ken. How are you doing?

Kenneth Tuchman: I want to just point out something that maybe we haven't made very clear. We have a very strategic focus on winning a significant amount of new client logos. And there are multiple reasons behind that. One, we're not satisfied with the diversification across the board of all the different verticals that we serve; we feel that we need more business in each of the verticals. And therefore, we feel really good about the fact that, when many others aren't actually winning a lot of new logos, we feel like we're doing, we're on track, and we are winning the logo.

Mike Lattimore: Strategic Focus

Mike Lattimore: on winning a significant amount of new client logos.

Speaker Change: And there's multiple reasons behind that. One, we're not satisfied with the diversification across the board of all the different verticals that we serve, that we feel that we need more business in each of the verticals.

Speaker Change: And therefore we feel really good about the fact that when many others aren't actually winning a lot of new logos, we feel like we're on track and we are winning the logos.

Kenneth Tuchman: [inaudible] What we're feeling and what we're talking about as it relates to revenue is that several of our clients, our embedded base clients, are just not providing the growth that they've historically provided. And so there is such a focus on us winning new logos, new client logos, excuse me, across various different verticals, including verticals that maybe are not as impacted by some of the macroeconomic trends. So I just want to stress that it's a bit of a seesaw that our embedded clients are still in good shape, but they don't, you know, they don't have the same, in some cases, fourth quarter push that they typically do going into their seasonality.

Speaker Change: What we're feeling and what we're talking about as it relates to the revenue is that

Speaker Change: several of our clients of embedded base clients.

Speaker Change: are just not providing the growth that they've historically provided.

Speaker Change: And so it's why there is such a focus.

Speaker Change: on us winning new client logos across various different verticals, including verticals that maybe are not as impacted by some of the macroeconomic trends.

Speaker Change: So I just want to stress that it's a bit of a see-saw that our embedded clients are still in good shape.

Speaker Change: But they're not, you know, they don't have the same, in some cases, fourth quarter push that they typically do going into their seasonality.

Kenneth Tuchman: And therefore, we've made the strategic decision to really put the pedal to the metal in acquiring net new clients. And I can tell you that we are, in fact, winning net new clients. The bummer is that, you know, to take these clients and get them, you know, bedded down and launched, it's historically taken to reach full ramp anywhere between 12 and 18 months. And we're on track with many of them have literally, some of them have just launched in the last two weeks, as an example. And so we'll see the benefits of those launches in the quarters to come.

Speaker Change: And therefore, we've made the strategic decision to really put the pedal to the metal in acquiring net new clients. And I can tell you that we factually are in fact winning net new clients.

Speaker Change: The bummer is, is that, you know, to take these clients and get them, you know, bedded down and launched.

Speaker Change: It's always historically taken to reach full ramp anywhere between 12 and 18 months. And we're on track with many of them have literally, some of them have just launched the last two weeks as an example. And so we'll see the, you know, the…

Speaker Change: The benefits from those launches in the quarters to come.

Pallav Saini: Thank you. Our next question comes from the line of Joe Baffi of Kennecourt. Your line is now open.

Speaker Change: I hope that makes sense. Thanks.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Joe Baffi of Kennecourt. Your line is now open.

Pallav Saini: Good morning, this is Pallav Saini on for Joe. Thanks for taking our questions. First, can you give us an update on what you're seeing on the vendor consolidation front? Is it still playing out the way you expected, or is it not much of a factor going forward, you think?

Bala Saini: Good morning. This is Bala Saini on for Joe. Thanks for taking our questions. First, can you give us an update on what you're seeing on the vendor consolidation front? Is it still playing out the way you expected, or is it not much of a factor going forward, you think?

Shelly Swanback: I assume your question is really more related to engaged business vendor consolidation. Is that what you were asking about? Yes, it is.

Speaker Change: I assume your question is really more related to the engaged business. Vendor consolidation, is that what you were asking about? Yes.

Shelly Swanback: Okay, great. Yeah, absolutely. I'd say a couple of things.

Shelly Swanback: We certainly, some of our competitive wins actually have come from situations where companies have decided to consolidate their vendor network and consider new partners at the same time just based on what they're looking for relative to quality delivery capabilities and the like. And so we do see that playing out. On the other hand, we see some clients; some of our opportunities are actually situations where some work is being done in-house, a captive operation, if you will, and those are new opportunities for us as well.

Speaker Change: Yes. Okay. Great. Yeah, absolutely. I'd say a couple things. We certainly, some of our competitive wins, actually, have come from situations where companies have decided to...

Speaker Change: Consolidate their vendor network and consider new partners at the same time, just based on what they're looking for relative to, you know, quality delivery.

Speaker Change: capabilities and the like. And so we do see that playing out. On the other side, we see some clients, we know some of our opportunities are actually

Speaker Change: Situations where some work is being done in-house, captive operation if you will, and those are new opportunities for us as well. One of the things that is probably worth emphasizing is there's a dozen new enterprise client logos

Shelly Swanback: One of the things that is probably worth emphasizing is there are a dozen new enterprise client logos, and we're focused, you know, we keep saying, we keep focusing on these dozen new clients because they're the ones that we think can scale and become top 20 clients. With only one exception, all of them are leveraging our new offshore footprint.

Speaker Change: We keep focusing on these dozen new clients because they're the ones that we think can scale and become top 20 clients. With only one exception, all of them are leveraging our new offshore footprint.

Shelly Swanback: Got it. Thank you. And on the softness in the healthcare vertical this year, is there any way, you know, these headwinds could persist next year as well? Or are you very confident in this being largely limited to this year?

Speaker Change: Thank you. And on the softness in the healthcare vertical this year,

Speaker Change: Is there any way these headwinds could persist next year as well, or are you very confident in this being largely limited to this year? Thank you.

Kenneth Tuchman: Um, this is Ken. Hi.

Ken: This is Ken. Hi.

Ken: So as it relates to the the payer market, you know, all I can simply say is the following it's it's common knowledge

Ken: That all of the

Speaker Change: All the health care payers are experiencing increased claims.

Speaker Change: Due to post-COVID.

Speaker Change: And those, as you can imagine, there was a two-year period where people didn't actually go to the hospital, didn't get cancer treatment, et cetera. And consequently, when they did ultimately go, their situation was more extreme, and therefore the claims have come in at much higher rates, et cetera. And so consequently,

Kenneth Tuchman: So as it relates to the payer market, you know, all I can simply say is the following. It's common knowledge that all of the large health care payers are experiencing increased claims due to post COVID. And those, as you can imagine, there was a two-year period where people didn't actually go to the hospital, didn't get, you know, cancer treatment, etc. And consequently, when they did ultimately go, their situation was more extreme, and therefore, the claims have come in at much higher rates, etc.

Speaker Change: The entire healthcare industry right now is very budget constrained and is very focused on getting through this, what I'd call this claim cycle, so to speak.

Kenneth Tuchman: And so consequently, the entire health care industry right now is very budget constrained, and it's very focused on getting through this, what I'd call this claim cycle, so to speak. Additionally, there have been some changes in reimbursements from the federal government.

Speaker Change: Additionally, there's been some changes in reimbursements from the federal government, and I think that's another challenge that they're facing. I'm very confident that they'll work through this.

Speaker Change: These are some of the largest companies in the world, et cetera, and they are extremely well run, and I think that this is just a temporary measure on their behalf.

Kenneth Tuchman: And I think that's another challenge that they're facing. But I'm very confident that they'll work through this. These are some of the largest companies in the world, etc., and they are extremely well run. And I think that this is just a temporary measure on their behalf. But, you know, obviously, I can't, can't speak for the whole industry, other than to simply say that I think this is a moment in time. We've been doing business in this sector now for over 20 years, and this is the first time that we've ever experienced anything to this extent with this particular vertical.

Speaker Change: And, but, you know, obviously I can't.

Speaker Change: Can't speak for the whole industry, other than to just simply say that I think this is a moment in time. And we've been doing business in this sector now for over 20 years.

Speaker Change: And this is the first time that we've ever experienced anything to this extent with this particular vertical.

Kenneth Tuchman: That's very helpful. Thanks, Ken.

Ken: That's very helpful. Thanks, Ken.

Cassie Chan: Thank you. Our next question comes from Cassie Chan of Bank of America. Your line is now open.

Speaker Change: Thank you. Our next question comes from Kathy Chan of Bank of America. Your line is now open.

Cassie Chan: Hey, I just wanted to follow up on that question. So I guess just to be really here.

Kathy Chan: Hey, I just wanted to follow up on that question. So I guess just to be really

Shelly Swanback: What's causing the incremental decline, you know, relative to like three months ago when you gave the full year guidance? You know, it sounds like it's healthcare, the public sector as well continues to have some delays, and financial services. I guess, collectively, how much are you expecting those verticals to decline in 2024? And on the flip side, you know, are there any verticals that you're expecting to grow, maybe a little faster or in line with expectations?

Kathy Chan: What's causing the incremental decline?

Kathy Chan: You know, relative to like three months ago when you gave the full year guidance, you know, it sounds like it's health care, public sector as well continues to have some delays, financial services, I guess, collectively, how much are you expecting those verticals to decline in 2024? And on the flip side, you know, are there any verticals that you're expecting to grow?

Speaker Change: Maybe a little faster or in line as expected.

Shelly Swanback: Yeah, well, for the for your first question, Cassie. The change in our guidance was... the change in our guidance was based on the two factors that we've talked about, healthcare and the public sector client that we mentioned. So yes, that's exactly what we're saying in terms of what's changed since our last earnings call.

Speaker Change: Yeah, well, for the, for the, for your first question, Cassie,

Speaker Change: The change in our guidance was...

Speaker Change: was based on the two factors that we talked about, healthcare and the public sector client that we mentioned. So yes, that's exactly what we're saying in terms of what's changed since our last.

Shelly Swanback: With regard to areas that we see growth coming, again, it's these new clients that we're adding across verticals. A couple of them, financial services, as I mentioned, a new one in healthcare, and a couple of new clients in e-commerce, in retail, one in media, and a number of opportunities that we have in our pipeline right now for those verticals as well as the tech vertical. And so that's where we're going to continue to focus, bringing on new clients in these areas that we think can grow.

Speaker Change: Earnings Call. With regards to areas that we see growth coming again it's these new it's these new clients that we're adding across

Speaker Change: Verticals, a couple of them financial services, as I mentioned, a new one in health care.

Speaker Change: and a couple of new clients in e-commerce.

Speaker Change: One in retail, one in media.

Speaker Change: and a number of opportunities that we have in our pipeline right now for those verticals as well as the TEC vertical.

Speaker Change: And so that's where we're going to continue to focus is with bringing on new clients.

Shelly Swanback: And then secondly, of course, we're also expanding with our embedded-based clients, two of our largest financial services clients. We just recently signed new work, new lines of business, as we like to say, new work types with those clients, and those will be launching in the latter part of this year.

Speaker Change: in these industries that we think can grow. And then secondly, of course, we're also expanding with our Embedded Base clients, two of our largest financial services clients. We just recently signed new work, new lines of business, as we like to say, new work types.

Speaker Change: with those clients and those will be launching at the later part of this year.

Cassie Chan: Okay, that's helpful. And I guess just a follow up. So it looks like you're cutting your four-year EPS guide a lot more than your revenue and margin guide. Can you just talk about some of the factors there, you know, your ability to protect the bottom line, line of top line, and selflessness, and some of the incremental actions that you're taking? Because you guys have continuously been doing cost optimization actions and initiatives. So just anything incremental that you're taking there would be helpful. Thank you.

Speaker Change: Okay, that's helpful. And I guess just a follow-up. So it looks like you're cutting your full-year EPS guide a lot more than your revenue and margin guide. Can you just talk about, you know, some of the factors there? You know, your ability to protect the bottom line, line of top line, selfless, and some of the incremental actions that you're taking, because you guys have continuously been doing cost optimization.

Speaker Change: actions and initiatives, so just anything incremental that you're taking there would be helpful. Thank you.

Kenny: and Cassius Kenney. The incremental actions are, we talked earlier in the year, we took some actions coming out of Q4 2023, but the real actions are what Shelley and I discussed in our prepared remarks. As we looked at our margins, as we looked at our operational leverage, and as we looked at our delivery operations around the world, it was those actions that we took at the end of Q2 and into Q3. They gave us that 10 million of in-year savings with a run rate of 30 million plus going into next year.

Cassius Kenny: This is Kenny. The incremental actions are, we talked earlier in the year, we took some actions coming out of Q4 2023, but the real actions are what Shelly and I discussed in our prepared remarks.

Shelley: As we looked at our margins, as we looked at our operational leverage...

Speaker Change: And as we looked at our delivery operations around the world, it is those actions that we took at the end of Q2 into Q3 that give us that $10 million of in-year savings.

Speaker Change: with a run rate of 30 million plus going into next year. So it's that leverage that we're creating in the engaged business.

Speaker Change: Just to get us back to the right ratios, the right operating structure, you know, when we've done the geo-expansion that we've done over the last two years, as we look to optimize that footprint,

Speaker Change: especially with all the new business that Shelley articulated. Most of those, if not all, but one I think of our enterprise clients.

Speaker Change: are now in our offshore locations. It takes a couple of cycles to make sure that we match those revenue and expenses as we continue to grow. It's a great problem to have as we expand.

Speaker Change: But we continue to optimize in those areas going forward into the year. And so that's why you're seeing some good leverage and some margin improvement on the bottom.

Shelly Swanback: And we'll continue to have a lot of focus on just tightening up operations, you know, across the board, client program by client program, obviously, staying focused on good quality delivery for our clients. And I mentioned that we've brought on a few new leaders recently in various parts of our business that we are really confident are going to help accelerate our efforts. Okay, thanks guys. Our next question comes from Vincent Colicchio of Barrington Research. Sir, your line is now.

Speaker Change: And we'll continue to have a lot of focus on just tightening up operations, you know, across the board.

Speaker Change: Client program by client program obviously stay focused on good quality delivery for our clients And I mentioned that we've brought on a few new leaders Recently in various parts of our business that we are you know really confident are going to help accelerate our efforts

Vincent Colicchio: Our next question comes from Vincent Colicchio of Barrington Research. Sir, your line is now open. Yes, good morning. I'm curious about the Shelley.

Speaker Change: Okay, thanks guys.

Speaker Change: Our next question comes from Vincent Colicchio of Barrington Research. Sir, your line is now open.

Vincent Colicchio: Yes, good morning. I'm curious, Shelly, the exits of underperforming client programs, is that largely cleaned up or maybe we see more of that in the back half of the year?

Shelly Swanback: largely played out. I mean, we just had a couple of specific client situations where their needs and what they wanted from the services and what they wanted to pay for it, and you know, what we could deliver for them. We just collectively decided that wasn't a match.

Shelly: largely played out. I mean, we just, it was a couple of specific client situations where

Speaker Change: their needs and what...

Shelly: What they wanted from the services and what they wanted to pay for it and, you know, what we could deliver for them and just we collectively decided that wasn't a match.

Shelly: And so those have played out. Those programs will ramp out through the back half of the year. Right now, our focus right now is delivering great service for our clients and tightening up our operations, being able to take those profit improvement actions that Kenny and I have discussed.

Shelly Swanback: And so those have played out. Well, those programs will ramp up through the back half of the year. Right now, our focus right now is delivering great, great service for our clients and tightening up our operations, being able to take those profit improvement actions that Kenny and I have discussed, and winning new business with our existing clients and bringing on these new clients that we're excited about. And could you give us a sense of your offshore investment program in 2025? Will you potentially accelerate the program given the demand, the dynamics? I'm sorry, will we expand the web?

Kenny Wagers: and winning new business with our existing clients and bringing on these new clients that we're excited about.

Speaker Change: Can you give us a sense for your offshore investment program in 2025? Will you potentially accelerate the program given the demand dynamic?

Shelly Swanback: Offshore next year. Oh, offshore next year.

Shelly Swanback: Oh, offshore next year. Oh, absolutely. Absolutely.

Shelly Swanback: The scale of our offshore and geographic expansion Absolutely. One of the things that I mentioned earlier is that we're going to continue to expand in the locations that we've recently entered in the last couple of years. Simply, for one reason, we see a lot of client demands, right? South Africa is probably one of the biggest highlights in terms of launching some, you know, really large clients that we expect to scale there. So that's first up in terms of expansion, and again, we continue to see really good client demand for our new geographic footprint. So we're leaning into that.

Speaker Change: I'm sorry, will we expand the lead?

Speaker Change: Offshore next year. Oh, offshore next year. Oh, absolutely. Absolutely. The scale of our offshore and geographic expansion, absolutely. You know, one of the things that I mentioned earlier,

Speaker Change: is we're going to continue to expand in the locations that we've recently, you know, entered in the last couple of years. Simply, for one reason, we see a lot of client demands, right? South Africa is probably one of the biggest highlights in terms of...

Speaker Change: Launching some really large clients that we expect to scale there. So that's first up in terms of expansion. And again, we continue to see really good client demand for our new geographic subprime. So we are leaning into that.

Vincent Colicchio: Thank you. Our last question is from Jonathan Lee of Guggenheim Securities. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Thank you. Our last question is from Jonathan Lee of Guggenheim Securities. Your line is now open.

Jonathan Lee: Great, thanks for doing our questions. Jonathan, can you hear that?

Jonathan Lee: Great, thanks for taking our questions.

Jonathan Lee: Can you provide any incre

Jonathan Lee: Jonathan, can you speak up just a little bit? We can't hear you, sorry.

Jonathan Lee: of detail around what unfolded it.

Speaker Change: Jonathan, can you speak up just a little bit? We can't hear you, sorry.

Jonathan Lee: That's much better. Appreciate it. Can you provide any incremental detail around what unfolded in the public sector over the course of the quarter and what's contemplated there in your outlook for the remainder of the year?

Jonathan Lee: Hey, is this any better?

Speaker Change: Can you provide any incremental detail around what unfolded in public sector over the course of the quarter and what's contemplated there in your outlook for the remainder of the year?

Shelly Swanback: You know, we don't share a lot of specific client details, of course. I would just tell you this is a large public sector program, it's a multi-year contract, and we're providing a number of services to the client. We also have to – they also have some other vendors involved that are providing some technology, and there's been some delays outside of our control that do impact our operations here in the short term, and we're working through them with the client as we speak.

Speaker Change: You know, we don't share a lot of specific client details, of course. I would just tell you this is a large public sector program.

Speaker Change: It's a multi-year contract and we're providing a number of services to the client.

Speaker Change: They also have some other vendors involved that are providing some technology and there's been some delays outside of our control that do impact our operations here in the short term and we're working through them with the client as we speak but given the current challenges getting to a full program launch and just some of the early challenges with a technology conversion, again, not one that we're doing,

Shelly Swanback: But given the current challenges, getting to a full program launch and just some of the early challenges with a technology conversion, again, not one that we're doing, have an impact on this year. But I'm confident we're going to get through those. We expect that we'll have the program economics as originally expected. We'll get there by the end of the year and be in better shape for 2025.

Speaker Change: has the impact for this year. But I'm confident we're going to get through those. We expect that we'll have the program economics as originally expected. We'll get there by the end of the year and be in better shape for 2025.

Shelly Swanback: So it's limited to one specific client program, Jonathan. It's not a broad thing across our public sector business.

Jonathan Lee: So it's limited to one specific client program, Jonathan, it's not a broad thing across our public sector business.

Jonathan Lee: Got it. And as a follow-up, you talked about wanting to win new logos, but you've also highlighted the competitive pricing environment. How are you looking to protect contract profitability there, and can you help us unpack the margin dynamics with new clients, especially as those relationships mature?

Shelly Swanback: Again, we're obviously having to, all of these wins are competitive wins, but we're leveraging our new offshore expanded footprint, feel really good about the work that we're going to do for these clients, and the margin profile is accretive to our core business. And so we're winning. And we were really excited about what they were going to bring to our business.

Speaker Change: Again, we're obviously having to, all of these wins are competitive wins, but we're leveraging our new offshore expanded footprint, feel really good about the work that we're going to do for these clients, and the margin profile is accretive to our core business.

Speaker Change: And so, we're winning and we're really excited about what they're going to bring to our business. That's really across, I mean, that's across, again, these wins are across industries, right? They're not focused with just one sort of client. And these are big enterprises where we think many of these clients can become top 20 clients.

Shelly Swanback: Yeah, that's really across the board. I mean, these wins are across industries, right? They're not focused on just one sort of client. And these are big enterprises where we think many of these clients can become top 20 clients here over the coming years.

Kenneth Tuchman: Yeah, and as I've said in previous calls, there are many clients out there that are rebalancing their business. And in some cases, it's not because they're dissatisfied; it's just due to the consolidation that's taken place. They don't want to have all their eggs in one or two baskets. And so, consequently, they maybe started out where they had their eggs in four baskets, and through consolidation, it turned into two.

Speaker Change: here over the coming years. Yeah, and as I've said in previous calls, there's many clients out there that are rebalancing their business.

Speaker Change: And in some cases, it's not because they're dissatisfied. It's just due to the consolidation that's taken place. They don't want to have all their eggs in one or two baskets. And so consequently, they maybe started out where they had their eggs in four baskets and through consolidation, it turned into two.

Kenneth Tuchman: Now they're looking for some other reliable partners that can help them with a balanced portfolio. So what I would say is that there's still plenty of business out there to be had by all. And even though it's a competitive environment, there's certain businesses that, frankly, we're focused on, and there's other businesses that we go out of our way not to be focused on and allow other competitors that think that they can figure out a way to do a good job and make money.

Speaker Change: And now they're looking for some other reliable...

Speaker Change: You know partners

Speaker Change: that can help them with a balanced portfolio.

Speaker Change: So, you know, what I would say is, is that, you know, there's, there's still...

Speaker Change: ...plenty of business out there to be had by all, and even though it's a competitive environment, there is...

Speaker Change: Certain, you know, there's certain business that frankly we're focused on and there's other business that we go out of our way not to be focused on and and allow other competitors that think that they can figure out a way to

Kenneth Tuchman: And like I said, it's a very large, total addressable market, etc. So, in many ways, we can be very targeted and very specific with the type of business that we know that we can execute well and consistently perform as the number one provider in the partner network.

Speaker Change: to do a good job and make money. And like I said, it's a very large...

Speaker Change: You know, total addressable market, etc. So in many ways we can be very targeted and very specific with the type of business that we know that we can execute well and consistently perform as the number one provider in the partner network.

Jonathan Lee: Tremendous. Thanks very much.

Speaker Change: Tremendous. Thanks very much.

Operator: Thank you for your questions. That is all the time we have today. This concludes TTEC's second quarter 2024 earnings conference call, and we disconnect at this time.

Speaker Change: Thank you.

Speaker Change: Thank you for your questions. That is all the time we have today. This concludes TTEC's second quarter 2024 earnings conference call. You may disconnect at this time.

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Jonathan Lee: Got it. And as a follow-up, you talked about wanting to win new logos, but you've also highlighted the competitive pricing environment. And how are you looking to protect contract profitability there, and can you help us unpack the margin dynamics with new clients, especially as those relationships mature?

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Speaker Change: Everybody has a story to tell He stopped breathing Someone's in an ambulance Before they knew it Schumer had a nosebleed When they all left, it was one in the many Everybody wants to shake their head So take a step back And realizing where it is There's no escape And we're all in dire stries

Shelly Swanback: This year, the health care industry, the health care industry, the health care industry, the health care industry, the health care industry, the health care industry, the health care industry, the health care industry, the health care industry, the health care industry, Given the overall environment, we've taken additional and significant actions to improve our cost structure without impacting our ability to continue to deliver quality outcomes for our clients and their customers. Due to these headwinds and engagement, we have updated our financial outlook for the full year 2024 to better reflect the current balance of the challenges and the opportunities. Kenny will share the specific details shortly.

Shelly Swanback: What I would just tell you is the new enterprise clients that we're bringing on. We feel really good about the work that we're going to do for these clients. And the commercial structure with them, and we expect that book of business to be creative in relation to our core business, so we feel good from that perspective. But no doubt it's a competitive pricing environment, particularly again companies that are deep in budget constraints and might be willing to trade off quality for price.

Kenny: So it's that leverage that we're creating in the engaged business, just to get us back to the right ratios, the right operating structure. You know, when we did the geo-expansion that we did over the last two years, as we looked to optimize that footprint, especially with all the new business that Shelley articulated, most of those, if not all, the ones I think of our enterprise clients are now in our offshore locations.

Kenny: It takes a couple of cycles to make sure that we match those revenue and expenses as we continue to grow. It's a great problem to have as we expand, but we continue to optimize in those areas going forward into the year, and so that's why you're seeing some good leverage and some margin improvement on the bottom, and we'll continue to do that.