Q3 2024 TTEC Holdings Inc Earnings Call
I would now like to turn the call over to Paul Miller, <unk> Senior Vice President Treasurer, and Investor Relations Officer. Thank you, Sir and you may begin good morning, and thank you for joining US today <unk> is hosting this call to discuss its third quarter results for the period ended September 32020 for participating on today's call are Ken Tuchman.
Chairman and Chief Executive Officer of GTECH, Kenny Wagers, Chief Financial Officer of <unk>, Tec, and Shelly swung back Chief Executive officer of <unk> engage.
Yesterday <unk> issued a press release announcing its financial results. While this call will reflect items discussed within that document for complete information about our financial performance. We also encourage you to read our third quarter 2024 quarterly report on Form 10-Q.
Before we begin I want to remind you that matters discussed on today's call may include forward looking statements related to our operating performance financial goals and business outlook, which are based on managements current believes and assumptions. Please note that these forward looking statements reflect our opinions as of the date of this call and we undertake no.
To revise this information as a result of new developments that may occur.
We're looking statements are subject to various risks uncertainties and other factors that could cause our actual results to differ materially from those expected and described today for a more detailed description of our risk factors. Please review our 2023 annual report on Form 10-K.
Before we proceed I want to mention that our call today, we will not address any questions about Mr. Tuchman September 27th 2020 for proposal two the company's board of directors to take T Tech private as the company shared in the press release on September 30, The board formed a special committee of independent.
Tenant directors to consider Mr. <unk> proposal and the committee in consultation with independent legal and financial advisors is evaluating and considering that proposal.
Speaker Change: A replay of this conference call will be available on our website under the Investor Relations section I will now turn the call over to Ken.
Ken Tuchman: Good morning, and thank you for joining us today as shared in prior quarters 2024 is a transitional year for <unk> across the company. We remain focused on our four priorities, winning new clients and continuing to execute our diversification strategy enhancing our portfolio of AI enabled <unk> solutions.
Speaker Change: Improving our operational agility and strengthening our financial performance.
Speaker Change: In the third quarter of 2024 revenue was $529 million and non-GAAP adjusted EBITDA was $50 million the dynamics of the CX industry and the macroeconomic environment continue to create headwinds as select clients delayed decision, making <unk> focus on near term.
<unk> cost savings.
Speaker Change: The uncertainties around the election and the fed's monetary policies have added to this wait and see mindset.
Speaker Change: Despite these market realities, our teams continue to close new business.
Speaker Change: <unk> remains a high priority as we engage in productive CX conversations with current and potential new clients. We believe these initiatives will normalize over the course of the next six months.
Speaker Change: And lead to a more attractive demand environment. We recently held one of our regularly scheduled client advisory board meetings, which included CX operational and technology focused leaders for many of our largest clients.
and Kaye.
The conversations highlighted their business priorities and focus areas as they navigate the current environment and set their priorities for 2025.
Speaker Change: Let me share a few recurring themes.
Speaker Change: Clients are weighing the promise of AI against the necessary work required in their systems data architecture, and CX infrastructure to realize the full benefits.
Speaker Change: Pilots are delivering encouraging results, however expense accuracy data protection and organizational readiness concerns continue to be top of mind.
Speaker Change: A more integrated and holistic view of CX processes and technology stack are a priority regardless of their current landscape clients are looking for ways to get more value from their CX investments theyre focused on activating new AI enabled capabilities as well as building tighter integrations between their contact center CRM.
In the third quarter of 2024 revenue was $529 million and non-GAAP adjusted EBITDA was $50 million the dynamics of the CX industry and the macroeconomic environment continue to create headwinds as select clients delayed decision, making <unk> focus on near.
Speaker Change: And analytics platforms.
Speaker Change: With limited near term budget increases clients are pursuing savings to invest in future innovation. This approach will increase operating efficiencies improve the quality of the customer experience and strengthen the brand differentiation.
Term cost savings.
The uncertainties around the election and the fed's monetary policies have added to this wait and see mindset.
Speaker Change: Deeply value. These in person discussions with our advisory Board and appreciate hearing what is top of mind for the CX executives and their companies.
Despite these market realities, our teams continued to close new business.
Speaker Change: As the market continues to evolve these discussions help validate our innovation agenda as well as uncover new growth opportunities for both of our business segments now.
<unk> remains a high priority as we engage in productive CX conversations with current and potential new clients. We believe these initiatives will normalize over the course of the next six months.
Speaker Change: Now, let's discuss T tech engage.
Speaker Change: Despite the current wait and see mindset and some pockets of the market, we continue to win new clients and expand our relationship and our embedded base.
And lead to a more attractive demand environment. We recently held one of our regularly scheduled client advisory board meetings, which included CX operational and technology focused leaders for many of our largest clients.
Speaker Change: We are on track to meet our goal of a dozen new meaningful client relationships by year end.
Speaker Change: These wins are strategic and diversified across industries, including financial services healthcare and retail as we've shared before we're keenly focused on winning new clients that will scale profitably as we leverage our expanded geographic footprint.
The conversations highlighted their business priorities and focus areas as they navigate the current environment and set their priorities for 2025.
Let me share a few recurring themes.
Clients are weighing the promise of AI against the necessary work required in their systems data architecture, and CX infrastructure to realize the full benefits.
Speaker Change: In addition, we continue to make progress selling new work types into our embedded base. This new business includes AI enabled solutions for back office revenue generation fraud prevention learning and knowledge services as well as work in new lines of business within several of our vertical portfolios.
Pilots are delivering encouraging results, however expense accuracy data protection and organizational readiness concerns continued to be top of mind.
A more integrated and holistic view of CX processes and technology stack are a priority regardless of their current landscape clients are looking for ways to get more value from their CX investments. They are focused on activating new AI enabled capabilities as well as building tighter integrations between their contact center CRM.
Speaker Change: For example in fourth quarter of 2023, we launched our loan origination support program with a leading digital financial services brand.
Speaker Change: Based on our strong performance the account has grown to hundreds of associates delivering five different work types, including care quality Tech support knowledge and workforce management as a service.
And analytics platforms.
With limited near term budget increases clients are pursuing savings to invest in future innovation. This approach will increase operating efficiencies improve the quality of the customer experience and strengthen the brand differentiation.
Speaker Change: Another example includes a recent win with a long term health care client.
Speaker Change: This exciting new opportunity extends our footprint into the provider market with patient access and back office support services increasingly.
I deeply value. These in person discussions with our advisory Board and appreciate hearing what is top of mind for the CX executives and their companies.
Speaker Change: Increasingly our new and existing business opportunities are offshore and leverage our expanded geographic footprint the.
Speaker Change: The head count in our new geographies has scaled 43% from the second to third quarter of this year.
As the market continues to evolve these discussions helped validate our innovation agenda as well as uncover new growth opportunities for both of our business segments now.
Speaker Change: In addition, more than 60% of the annual contract value of our five new client wins this quarter will be delivered offshore.
Now, let's discuss T tech engage.
Speaker Change: While we're excited about this trend it is important to note that the deal size of our offshore contracts are initially smaller as illustrated in previous examples. These relationships have the potential to grow as we introduce new work types into the account.
Despite the current wait and see mindset and some pockets of the market, we continue to win new clients and expand our relationship and our embedded base.
We are on track to meet our goal of a dozen new meaningful client relationships by year end. These wins are strategic and diversified across industries, including financial services healthcare and retail as we've shared before we're keenly focused on winning new clients that will scale profitably as we leverage our expanded.
Speaker Change: Our focus on innovation continues to be a priority with an emphasis on practical use cases and applications our product and engineering teams have built a deep understanding of the evolving AI landscape for CX and have prioritized our roadmap based on what solutions are ready today, and what will be potentially viable in the future.
Geographic footprint.
In addition, we continue to make progress selling new work types into our embedded base. This new business includes AI enabled solutions for back office revenue generation fraud prevention learning and knowledge services as well as work in new lines of business within several of our vertical portfolios.
Speaker Change: Above all we're focused on delivering solutions that can be implemented successfully and we will return a positive ROI for our clients and our business.
Speaker Change: Let me share a few examples the ability to process call in digital transcripts at scale using AI is fueling operational efficiencies and revenue growth opportunities for our clients.
For example in fourth quarter of 2023, we launched our loan origination support program with a leading digital financial services brand.
Speaker Change: Insights gleaned from real time customer interactions are delivering benefits across multiple industries.
Based on our strong performance. The account has grown to one hundreds of associates delivering five different work types, including care quality Tech support knowledge and workforce management as a service.
Speaker Change: These benefits include improving coaching effectiveness and e-commerce, identifying customer journey pain points and luxury retail and accelerating sales in automotive we anticipate the impact from these insights will continue to grow as pilot programs move into production with our clients.
Another example includes a recent win with a long term health care client.
This exciting new opportunity extends our footprint into the provider market with patient access and back office support services increasingly.
Speaker Change: We're also making progress with voice and digital language translation as the quality of these AI enhanced services rapidly evolves and improves.
Increasingly our new and existing business opportunities are offshore and leverage our expanded geographic footprint.
Speaker Change: We're developing native language translation tools to meet our clients' practical use cases and cost requirements and see language translation is a substantial area of future opportunity.
The head count in our new geographies has scaled 43% from the second to third quarter of this year.
In addition, more than 60% of the annual contract value of our five new client wins this quarter will be delivered offshore.
Speaker Change: Now, let me switch gears to <unk> Tech digital where we create value at the intersection of contact Center, CRM, AI and analytics underpinned with software engineering and lead with consulting as the CX technology landscape continues to evolve clients are leaning into our deep CX expertise to help them navigate their.
While we're excited about this trend it is important to note that the deal size of our offshore contracts are initially smaller as illustrated in previous examples. These relationships have the potential to grow as we introduce new work types into the account.
Speaker Change: Path forward here are a few highlights we're on pace to close more than 60, new strategic clients in 2020 for these clients typically begin their relationship with us in one specific <unk> solution and have the potential to expand with adjacent services.
Our focus on innovation continues to be a priority with an emphasis on practical use cases and applications our product and engineering teams have built a deep understanding of the evolving AI landscape for CX and have prioritized our roadmap based on what solutions are ready today, and what will be potentially viable in the future.
Speaker Change: More than 75% of our bookings last quarter were with existing clients, we're choosing us for additional CX solutions year to date through September the total number of clients with revenues greater than $1 million continues to grow and our recurring revenue has increased quarter over quarter and year over year.
Above all we're focused on delivering solutions that can be implemented successfully and we will return a positive ROI for our clients and our business.
Speaker Change: Let me share a few examples the ability to process call in digital transcripts at scale using AI is fueling operational efficiencies and revenue growth opportunities for our clients.
Speaker Change: While we've made progress we also faced some headwinds in the second half of the quarter with delayed decision, making by clients on several of our larger deals. Consequently, our digital professional services revenue was lower than expected in the third quarter.
Speaker Change: As many of our current clients complete their contact center cloud migrations there considering the next CRM contact center or AI investment as I mentioned earlier, while clients are enthusiastic about the potential of AI, they must address data and organizational readiness before they commit to full scale rollouts.
Speaker Change: To provide clients with a low risk environment to test learn and deploy their AI solutions, we built a technology innovation environment, we call sand Castle CX and when combined with our technology management approach called surround CX, we're providing innovation and continuous technology.
Speaker Change: Optimization, so clients can easily create change Taylor and evolve their cloud based AI CX platforms over time.
Speaker Change: Okay.
Speaker Change: This year approximately 45% of our top 100 clients have deployed well defined AI projects with us.
Speaker Change: These projects are yielding positive results and are making the case for full scale implementations.
Speaker Change: Our ability to help clients integrate their myriad of technology solutions and activate relevant AI capabilities continues to set T Tech digital apart.
Speaker Change: For example, we closed an exciting new opportunity with a professional services firm using our enterprise knowledge engineering and content intelligence solutions.
Speaker Change: This three year CX engagement includes a comprehensive overall and reclassification of all the clients unstructured data. So it can be used for various CX and AI applications.
Speaker Change: For our global technology integrator, we modernized their CRM systems and created a data driven sales optimization solution that serves <unk> hundred sales executives in 62 countries with a 92% adoption rate. The program has delivered over 150000, new sales opportunities.
Speaker Change: With substantial increases in data accuracy and win rates and with a large media and entertainment clients we.
Speaker Change: We are in the midst of a multi phase transformation in which we're migrating over 4000 on premise contact center associates to our cloud platform.
Speaker Change: Once that phase is complete we will be launching several AI capabilities, including self service bots agent assist and analytics. These are just a few of the many AI enabled transformation initiatives underway.
Speaker Change: Through our ongoing partner diversification strategy, we've added new capabilities to our portfolio of CX solutions. We're excited about the growth in these new partnerships and are now selling and implementing projects with all of the leading CX technology platforms.
Speaker Change: Before I hand, it over to Kenny I'd like to recognize and thank Shelly swamp back for her many contributions to the company over the past two years as we previously shared Shelly has made a personal decision to leave <unk> at the end of this year for health reasons, she will be missed and we wish her all the best as he takes a well deserved.
Speaker Change: Break.
Speaker Change: Supporting our smooth transition I'd like to formally welcome John <unk> to our company as President of T. Chek engage a 27 year industry veteran and proven leader in the BPM space, John joined US several months ago and is already making a material impact a great cultural fit John brings both growth and operational expertise to.
Speaker Change: His role leading our engage go to market and operational teams.
Speaker Change: In conclusion, while taking more time than expected we are prudently working through various challenges during this transition year.
Speaker Change: We are executing against our top strategic priorities, while also taking the necessary cost reductions and profit improvement actions to strengthen our balance sheet and return the company to long term revenue growth and increased profitability as a management team. We're focused on our path forward and are actively executing on our strategy and improvement.
Speaker Change: <unk>.
Speaker Change: On behalf of the board of directors, our leadership team and our employees around the world. We look forward to continuing to share our progress in the quarters to come I will now turn the call over to Kenny.
Kenny Wagers: Thank you Ken and good morning, I will start with a review of our third quarter financial results before discussing our full year 2024 financial outlook.
Speaker Change: In my discussion of the third quarter financial results referenced to revenue is on a GAAP basis, while EBITDA operating income and earnings per share are on a non-GAAP adjusted basis, a full reconciliation of our GAAP to non-GAAP results is included in the tables attached to our earnings press release.
Speaker Change: Turning to our consolidated third quarter 2024 financial results.
Speaker Change: Revenue was $529 million, a decrease of 12, 2% over the prior year period and relatively unchanged sequentially.
Speaker Change: Adjusted EBITDA was $50 million or nine 5% of revenue a decrease from $64 million or 10, 6% of revenue in the prior year period, and an increase from $46 million or eight 7% of revenue in the prior quarter.
Speaker Change: EPS was <unk> 11, compared to <unk> 48 in the prior year period and 14 in the prior quarter.
Speaker Change: Foreign exchange had a nominal impact on revenue in the third quarter over the prior year period, while positively impacting adjusted EBITDA by $2 million, primarily in our engage segment.
Speaker Change: At the company level, we delivered the third quarter within our performance expectations in our digital segment. Our recurring managed service offerings continued to deliver double digit revenue growth.
Speaker Change: However for the reasons mentioned by Ken Our professional services revenue was negatively impacted by the unanticipated delays in closing select larger deals.
Speaker Change: In our engage segment topline performance met our expectations and was relatively in line with the prior quarter.
Speaker Change: We are encouraged by the improved profitability in both our digital and engage segments, reflecting the early benefits from our profit optimization initiatives.
Speaker Change: Turning to our third quarter 2024 segment results.
Speaker Change: Our digital segments third quarter, 2024 revenue was $116 million down 13, 2% over the prior year period and relatively unchanged sequentially.
Speaker Change: The year over year results are a difficult comparison as the reduction primarily relates to a large one time on premise product sale in the prior year period for one of our existing clients.
Speaker Change: As previously communicated for 2024 outlook. The one time on premise related revenue is declining overall as more clients migrate to cloud based CX delivery, partially offset by the growth in recurring revenue related to cloud infrastructure.
Speaker Change: <unk> digital professional services and recurring revenue together increased by five 9% year over year in the third quarter.
Speaker Change: We continued to deliver solid results in our recurring managed services offerings, which increased 12, 9% year over year and four 2% sequentially.
Speaker Change: Managed services represented approximately 65% of Digital's total revenue in the third quarter of 2024 compared to 51% in the prior year period.
Speaker Change: We are pleased with the demand for our <unk> managed services solutions.
Speaker Change: Related to our CX professional services offerings revenue declined over the prior year and sequentially by six 4% and five 1% respectively.
Speaker Change: As shared select clients unexpectedly delayed the timing of larger engagements, which impacted the third quarter and is adding pressure to our fourth quarter outlook.
Speaker Change: While we continue to view this dynamic as temporary the trend could take a few quarters before normalizing as it is influenced by many macro factors.
Speaker Change: Digital's third quarter 2024, operating income was $14 million or 12, 5% of revenue. This.
Speaker Change: This compares to $19 million or 14, 5% in the prior year period, and $15 million or 12, 8% in the prior quarter.
Speaker Change: While we had a healthier revenue mix in the prior year. It was offset by the lower revenue previously mentioned and the investment in talent to support our continuous effort to diversify our offerings for 2025.
Speaker Change: Digital's backlog for the full year is $446 million or 92% of our 2020 for revenue guidance at the midpoint in line with the prior year.
Speaker Change: We are encouraged by Digital's overall strong pipeline that has been growing in terms of the number of deals but has reduced an average deal size due to the growing number of pilot projects attached to AI initiatives.
Speaker Change: Our engage segment revenue was $414 million in the third quarter of 2024 down 11, 9% over the prior year period and relatively unchanged sequentially.
Speaker Change: Operating income was $20 million or four 8% of revenue compared to $28 million or five 9% of revenue in the prior year.
Speaker Change: Sequentially operating income increased 35% with an approximate 130 basis point improvement as a percentage of revenue.
Speaker Change: Overall, we are encouraged by our engage segment sequential performance and most importantly, the increase in profitability.
Speaker Change: This is primarily a function of our efforts to transition through the headwinds shared earlier this year in executing upon our profit optimization initiatives without impacting our delivery quality.
Speaker Change: We are more effectively managing our operations and overall cost structure by further enabling technology and improving our processes.
Speaker Change: We also strengthened our leadership team with tenured industry hires to continue accelerating our efforts in advancing our performance in key areas.
Speaker Change: Consistent with our messaging last quarter the quality of engage opportunities remains strong and we are seeing encouraging signs based on clients' discussions around CX delivery strategies. However.
Speaker Change: However, clients are prioritizing initiatives that will yield cost savings near term and postponing new program investments into next year.
Speaker Change: Engages last 12 month revenue retention rate was 85% compared to 96% in the prior year the.
Speaker Change: The decline is primarily explained by the revenue reduction from one large client in financial services mentioned earlier this year and declines in our seasonal health care volumes, primarily due to changes by clients to moderate the level of customer support to address cost pressures I.
Speaker Change: I will now share other third quarter 2024 metrics before discussing our outlook.
Speaker Change: Free cash flow in the third quarter of 2024 was a negative $100 million compared to a negative $53 million in the prior year. The decline was primarily related to the impact of the accounts receivable factoring facility discontinuation previously communicated when we announced the latest amendment to our credit agreement.
Speaker Change: This discontinuation negatively impacted our cash flow by $82 million for the three months ended September 32024, and by a $101 million for the nine months ended September 32024.
Speaker Change: Normalized free cash flow in the third quarter of 2024 was a negative $19 million and positive $7 million year to date.
Speaker Change: The year over year improvement reflects improved working capital conversion and lower capital expenditures, partially offset by lower profitability.
Speaker Change: Capital expenditures were $9 million or one 7% of revenue for the third quarter 2024, compared to $22 million or three 6% in the prior year with most expenses related to our geographic expansion.
Speaker Change: Our normalized tax rate was 58, 3% in the third quarter of 2024 compared to 25% in the prior year.
Speaker Change: The increase is primarily a function of the ongoing impact of the U S valuation allowance recorded during the second quarter, whereby the benefits of the future tax credits from the U S pretax losses couldnt be recognized in.
Speaker Change: In addition, there were several profitable foreign jurisdictions, where the income tax expense was driven higher.
Speaker Change: As a result, we ended up with a low global pre tax income in relation to the net positive tax expense for which the U S tax loss couldnt be offset.
Speaker Change: As of September 32024, cash was 97 million with 1.028 billion of debt, primarily representing borrowings under our $1 2 billion credit facility.
Speaker Change: Partially offset by positive cash flow from operations net debt increased $116 million over the prior year largely due to higher interest expense and the discontinuation of our accounts receivable factoring facility last quarter.
Speaker Change: We ended the quarter with a net debt to EBITDA ratio of 449 times in line with our internal forecasts.
Speaker Change: Alright.
Speaker Change: Looking forward, we anticipate our net debt and leverage to decline in the fourth quarter and into next year due to the positive cash flow from operations prudent capital allocation proceeds from assets held for sale, including a large real estate asset there was not used in operations as disclosed in our form eight.
Speaker Change: Capital expenditures were $9 million or one 7% of revenue for the third quarter 2024, compared to $22 million or three 6% in the prior year with most expenses related to our geographic expansion.
Speaker Change: K filing and disciplined working capital management.
Speaker Change: Lower anticipated interest rates will also support our free cash flow and debt reduction efforts.
Our normalized tax rate was 58, 3% in the third quarter of 2024 compared to 25% in the prior year.
Speaker Change: Further on November four 2024, <unk> board of directors suspended the company's semiannual dividend as part of its ongoing shift to prioritize debt reduction.
Speaker Change: The increase is primarily a function of the ongoing impact of the U S valuation allowance recorded during the second quarter, whereby the benefits of the future tax credits from the U S pretax losses couldnt be recognized.
Speaker Change: Turning to our outlook and closing remarks.
Speaker Change: At the company level, we are reiterating full year 2024 guidance, but expect revenue and profitability to be towards the lower end of the ranges provided last quarter.
In addition, there were several profitable foreign jurisdictions, where the income tax expense was driven higher.
Speaker Change: At the segment level the appropriate contribution adjustments are made to reflect our third quarter actual results and updated fourth quarter forecast.
As a result, we ended up with a low global pre tax income in relation to the net positive tax expense for which the U S tax loss couldnt be offset.
Speaker Change: For <unk> on a consolidated basis, the midpoint of our guidance range is unchanged with revenue at two to three 5 billion and EBITDA at $209 million or nine 3%.
Speaker Change: As of September 32024, cash was 97 million with 1.028 billion of debt, primarily representing borrowings under our $1 2 billion credit facility.
Speaker Change: In our digital business, we are forecasting revenue and EBITDA of $483 million and $66 million or 13, 8% at the midpoint of our updated guidance range down from $490 million and $73 million or 15% respectively.
Partially offset by positive cash flow from operations net debt increased $116 million over the prior year largely due to higher interest expense and the discontinuation of our accounts receivable factoring facility last quarter.
Speaker Change: This is below our prior guidance range, primarily impacted by the previously mentioned revenue moderation in our professional service offerings.
We ended the quarter with a net debt to EBITDA ratio of 449 times in line with our internal forecasts.
Speaker Change: In our engage business, we are forecasting revenue and EBITDA of $1 $75 2 billion in $142 million or eight 1% at the midpoint of our updated guidance range up from one seven and $4 5 billion and $135 million or seven 8% respectively.
Okay.
Looking forward, we anticipate our net debt and leverage to decline in the fourth quarter and into next year due to the positive cash flow from operations prudent capital allocation proceeds from assets held for sale, including a large real estate asset that was not used in operations as disclosed in our form eight.
Speaker Change: This is slightly above the midpoint of our prior guidance range.
Speaker Change: Please reference our commentary in the business outlook section of our third quarter 2024 earnings press release for our expectations for our 2020 for full year guidance at the consolidated and segment level.
K filing and disciplined working capital management.
Lower anticipated interest rates will also support our free cash flow and debt reduction efforts.
Speaker Change: In closing we are achieving many of our key objectives that we set forth during this transitional year and.
Speaker Change: Further on November four 2024, <unk> board of directors suspended the company's semiannual dividend as part of its ongoing shift to prioritize debt reduction.
Speaker Change: <unk> digital we are diversifying our CX technology partnerships and broadening our expertise and capabilities across contact center.
Turning to our outlook and closing remarks.
Speaker Change: RM AI and analytics solutions and remain confident in the long term market demand for our CX technology and service capabilities in.
Speaker Change: At the company level, we are reiterating full year 2024 guidance, but expect revenue and profitability to be towards the lower end of the ranges provided last quarter.
Speaker Change: <unk> engage we are winning in launching new client programs across our expanded geographic footprint working through the previously mentioned headwinds in executing upon our profit optimization initiatives.
At the segment level the appropriate contribution adjustments are made to reflect our third quarter actual results and updated fourth quarter forecast.
For <unk> on a consolidated basis, the midpoint of our guidance range is unchanged with revenue at two to three 5 billion and EBITDA at $209 million or nine 3%.
Speaker Change: As we transition to 2025, we remain focused on our strategic priorities and resolute and our ability to return <unk> to long term organic growth and increased profitability.
Speaker Change: In our digital business, we are forecasting revenue and EBITDA of $483 million and $66 million or 13, 8% at the midpoint of our updated guidance range down from $490 million and $73 million or 15% respectively.
Paul Miller: I'll now turn the call back to Paul.
Paul Miller: Thanks, Kenny I want to remind everyone that our call today, we will not address any questions about Mr. <unk> proposal to take T Tech private as we open up the call. We ask that you limit your questions to one or two at a time operator, you may open the line.
Speaker Change: This is below our prior guidance range, primarily impacted by the previously mentioned revenue moderation in our professional service offerings.
Speaker Change: Thank you well now begin the question and answer session, if you'd like to ask a question. Please press star and then the number one please mute your phone and record your name and company name clearly even contact your name and company name all require concur does your question to cancel your request. Please press star and then re queue. Our first question comes.
Speaker Change: In our engage business, we are forecasting revenue and EBITDA of $1 $75 2 billion in $142 million or eight 1% at the midpoint of our updated guidance range up from one seven and $4 5 billion and $135 million or seven 8% respectively.
Speaker Change: From Mike Latimore of Northland Capital markets. Your line is now open.
Speaker Change: This is slightly above the midpoint of our prior guidance range.
Mike Latimore: Alright, great Hi, good morning.
Mike Latimore: I've said a couple of questions on the digital business.
Speaker Change: Please reference our commentary in the business outlook section of our third quarter 2024 earnings press release for our expectations for our 2020 for full year guidance at the consolidated and segment level.
Speaker Change: Your guidance seems to imply a nice acceleration in the fourth quarter, Eric So I guess.
Mike Latimore: And essentially getting to double digit growth year over year.
Speaker Change: What are what.
Speaker Change: In closing we are achieving many of our key objectives that we set forth during this transitional year and.
Speaker Change: That gives you confidence that could occur.
Speaker Change: Is there some of these deals that didn't close going to close like what's driving that.
Speaker Change: <unk> digital we are diversifying our CX technology partnerships and broadening our expertise and capabilities across contact center.
Speaker Change: Hey, Mike It's Kevin good morning.
Speaker Change: Yes look.
Speaker Change: RM AI and analytics solutions and remain confident in the long term market demand for our CX technology and service capabilities in.
Speaker Change: We are bullish obviously on digital we've been bullish all year from an outlook perspective.
Speaker Change: Our Q3, when you get closer towards the end of the year, obviously, when we have our Q3 results. We have Q4 sitting in front of US we did have some some deals slide from three and.
Speaker Change: <unk> engaged we are winning in launching new client programs across our expanded geographic footprint working through the previously mentioned headwinds in executing upon our profit optimization initiatives.
Speaker Change: Dave is a.
Speaker Change: As we transition to 2025, we remain focused on our strategic priorities and resolute and our ability to return <unk> to long term organic growth and increased profitability.
Speaker Change: Very confident in those deals closing in Q4 Q1, it's a little tricky at the end of the year with these with these big consulting engagements on whether or not.
Speaker Change: I will now turn the call back to Paul.
Speaker Change: Yes.
Paul: Thanks, Kenny I want to remind everyone that our call today, we will not address any questions about Mr. <unk> proposal to take T Tech private as we open up the call. We ask that you limit your questions to one or two at a time operator, you may open the line.
Speaker Change: Those to the Magic date of December 31 versus January one so the trajectory as you alluded to we do feel confident in over the longer next two to three quarters based on where we're at with bookings and where we're at with our backlog.
Speaker Change: Thank you well now begin the question and answer session, if you'd like to ask a question. Please press star and then the number one please <unk> your phone and record your name and company name clearly even contact Rene.
Speaker Change: So assuming you do even hit the lower end of the digital guidance.
Speaker Change: You can get back to growth is that something that.
Speaker Change: Maybe a sustainable where we could see that business growing.
Speaker Change: The company name all required <unk>.
Speaker Change: Year over year going forward.
Speaker Change: To cancel your request. Please press star and then re queue. Our first question comes from Mike Latimore of Northland Capital markets. Your line is now open.
Mike Latimore: Yes, Mike.
Speaker Change: We do add.
Speaker Change: Absolutely there is a lot of mix involved with product sales versus the consulting business and so.
Mike Latimore: Alright, great Hi, good morning.
Mike Latimore: Had a couple of questions on the digital business.
Speaker Change: No.
Speaker Change: We are in obviously 2025 planning season, right now and so as we work through the practices as we work through.
<unk>.
Speaker Change: Your guidance seems to imply a nice acceleration in the fourth quarter, Eric So I guess.
Speaker Change: And essentially getting to double digit growth year over year.
Speaker Change: A lot of the upside that we see in 2025 with the new practices and the tailwind that we have we just have to obviously also work through the product sales.
Speaker Change: What are what.
Speaker Change: Kind of gives you confidence that could occur.
Speaker Change: Is there some of these.
Speaker Change: Deals that didn't close is going to close.
Speaker Change: Following off and so.
Speaker Change: What's driving that.
Speaker Change: That gives us a mixed result at the top line, but the health of the business that we have going forward, we're very confident there.
Speaker Change: Hey, Mike It's Kevin good morning.
Speaker Change: Alright, Yes look we are bullish obviously on digital we've been bullish all year from an outlook perspective.
Speaker Change: In particular markets.
Speaker Change: We continue on our initiatives for diversifying the business inside of digital with new partners that we've talked about.
Speaker Change: Our Q3, when you get closer towards the end of the year, obviously, when we have our Q3 results. We have Q4 sitting in front of US we did have some some deals slide <unk> three.
Speaker Change: Variable this on all the AI projects started.
Speaker Change: Tim mentioned earlier that 75% of our sales are coming from existing clients, we like that does that help.
Speaker Change: Dave is.
Speaker Change: Very confident in those deals closing in Q4 Q1, it gets a little tricky at the end of the year with these with these big consulting engagements on whether or not.
Speaker Change: Good indicator that we can have multiple projects with existing clients.
Speaker Change: Typically our faster to close I think.
Speaker Change: Pat.
Speaker Change: And a positive trajectory as Ron if you look at our pipeline continues to be healthy is that we have more opportunities coming into the top of the funnel.
Speaker Change: Close to the Magic date of December 31 versus January one so the trajectory as you alluded to we do feel confident in over the longer next two to three quarters based on where we're at with bookings and where we're at with our backlog.
Speaker Change: And really really healthy sales.
Speaker Change: Deals that we're working on with our partners. So I think overall positive.
Speaker Change: At this time.
Speaker Change: It's always tricky right Q4 was the big one for US last year in terms of closing deals and where Dave and team are really focused on.
Speaker Change: So assuming you do even hit the lower end of the digital guidance.
Speaker Change: Yes, everything over the line that we can here in Q4.
Speaker Change: You can get back to growth is that something that maybe a sustainable where we could see that business growing.
Speaker Change: I think Mike I think.
Speaker Change: We should point out the fact as I said in my script that.
Speaker Change: Clients in general have been focused on cost in 2024, and so in many cases, they've been kicking the can on projects you read about this through all the different it services companies et cetera, I think where we feel more confident just as as we get into 2025 as interest rates start to come down as we.
Speaker Change: Year over year going forward.
Speaker Change: Yes, Mike.
We do.
Speaker Change: Absolutely there is a lot of mix involved with product sales versus the consulting business and so.
Speaker Change: We are in obviously 2025 planning season, right now and so as we've worked through the practices as we work through.
Speaker Change: As the all this political stuff is hopefully behind us et cetera.
Speaker Change: There'll be a much more focused mindset on on launching larger projects et cetera. So that's that's where we see things starting to accelerate.
Speaker Change: A lot of the upside that we see in 2025 with the new practices and the tailwind that we have we just have to obviously also worked through the product sales.
Speaker Change: Is next year et cetera based on just the feedback that we're hearing from clients that their budgets are a bit constrained and therefore, they've been delaying projects and kicking the can.
Speaker Change: Following off and so.
Speaker Change: That gives us a mixed result at the top line, but the health of the business that we have going forward, we're very confident there I think.
Speaker Change: A bit but.
Speaker Change: That said they can only kick the can for so long until they have no choice, but to start to adapt to this new technology or unfortunately, they can't stay competitive.
Speaker Change: In particular, Mike.
Speaker Change: We continue on our initiatives for diversifying the business inside of digital with new partners that we've talked about.
Speaker Change: Variable this on all the AI projects started.
Speaker Change: Yeah, Okay, great. Thanks very much.
Speaker Change: Tim mentioned earlier that 75% of our sales are coming from existing we like that does that help.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Maggie Nolan of William Blair. Your line is now open.
Speaker Change: Good indicator that we can have multiple projects with existing clients.
Maggie Nolan: Hi, everyone.
Speaker Change: Maggie.
Speaker Change: I had a question about healthcare payer clients that were a weak spot last quarter can you touch a little bit on what youre seeing in this client cohort this quarter.
Speaker Change: Typically our faster to close.
Speaker Change: And a positive trajectory Ron if you look at our pipeline continues to be healthy in fact, we have more opportunities coming into the top of the funnel.
Speaker Change: Yes, well last quarter you talked about.
Speaker Change: And really really healthy deals.
Speaker Change: Deals that we're working with our partners. So I think overall positive.
Speaker Change: Lot of our payer clients, just making some decisions relative to say the lending rate the cost pressures that they have and staffing differently for our seasonal ramp which is Q4 and into Q1, and so I'd say no change there.
Ed.
Ed: It's always tricky right Q4, it was a big one for US last year in terms of closing deals and where David and team are really focused on.
Speaker Change: Yes, everything over the line that we can here in Q4.
Speaker Change: I think Mike I think.
Speaker Change: Played out this quarter and we see Q4 similar to what we talked about last quarter I mean, they are continuing to.
Speaker Change: We should point out the fact as I said in my script that.
Speaker Change: Clients in general have been focused on cost in 2024, and so in many cases, they've been kicking the can on projects you read about this through all the different it services companies et cetera, I think where we feel more confident just as as we get into 2025 as interest rates start to come down as we.
Speaker Change: To face a lot of cost pressure in the health care industry, and so they're making choices in terms of that.
Speaker Change: Cutting cost and now the good news is there's lots of conversations that we're having about starting to think about using offshore talent offshore resources. Some technology things that has typically been a little bit off limits. If you will from a health care payer perspective, and so those early conversations but I expect it will continue to have those conversations here to the end.
Speaker Change: As the all this political stuff is hopefully behind us et cetera.
Speaker Change: There'll be a much more focused mindset on on launching larger projects et cetera. So that's that's where we see things starting to accelerate.
Speaker Change: For the year and into next year and see some proof of concepts underway.
Speaker Change: In the next couple of quarters.
Speaker Change: Okay, great. Thank you Sherry and then one final question on <unk>.
Speaker Change: Is next year et cetera based on just the feedback that we're hearing from clients that their budgets are a bit constrained and therefore, they've been delaying projects and kicking the can.
Speaker Change: Cost saving initiative do you guys still expect that.
Speaker Change: Provide roughly $30 million in savings in 2020 fiber has that expectation changed at all.
Speaker Change: A bit but.
Speaker Change: No as we mentioned last quarter 10 year of in year savings in 2020 for an annualized savings of $30 million in 2025 and we.
Speaker Change: But that said they can only kick the can for so long until they have no choice, but to start to adapt to this new technology or unfortunately, they can't stay competitive.
Speaker Change: Yeah, Okay great.
Speaker Change: We've executed well on that to our internal numbers coming out of Q2 into the Q3 results and so we do expect that.
Speaker Change: Great. Thanks very much.
Thank you.
Speaker Change: Thank you. Our next question comes from Maggie Nolan of William Blair. Your line is now open.
Speaker Change: Those numbers to manifest in 2025.
Maggie Nolan: Hi, everyone.
Speaker Change: Sign on for Maggie.
Speaker Change: Okay, great. Thank you Bob.
<unk>.
Speaker Change: I had a question about healthcare payer clients that were a weak spot last quarter can you touch a little bit on what youre seeing in this client cohort this quarter.
Speaker Change: Thank you.
Speaker Change: Thank you once again to all participants if you would like to ask a question. Please press star and then the number one record your name and company name clearly ones from pad and to cancel your request. Please press star and then that number one.
Speaker Change: Yes, hi, there.
Speaker Change: But last quarter you talked about.
Speaker Change: Out of our payer clients, just making some decisions relative to saving money right. The cost pressures that they had and staffing differently for our seasonal ramp which is Q4 and into Q1, and so I'd say no change there I mean things that played out this quarter and we see Q4 similar to what we talked about last quarter.
Speaker Change: One moment please.
Speaker Change: Once again to ask a question. Please press Star then the number one.
Speaker Change: Our next question comes from the line of Kathy Ken. Your line is now open from Bank of America.
Kathy Ken: Hi, Jack.
Speaker Change: We are continuing to.
Speaker Change: To face a lot of cost pressure in the healthcare industry, and so they're making choices in terms of.
Speaker Change: Are you also like that being a longer ramp up here as well and you mentioned the macro issues that could theyre concerned about the you just elaborate a little bit more about that and why you expect that Hawaii why you wouldn't expect that to persist and maybe other coming up in other client conversations that youre, having as well not just the new the new Iowa. Thank you yes.
Speaker Change: Cutting cost and now the good news is there's lots of conversations that we're having about starting to think about using offshore talent offshore resources. Some technology things that has typically been a little bit off limits. If you will from a health care payer perspective, and so those early conversations but I expect that we'll continue to have those conversations here to the end.
Speaker Change: I didn't hear the beginning part of your question sorry about that you might've been can you just repeat your question.
Speaker Change: For the year and into next year and see some proof of concepts underway in the next couple of quarters.
Speaker Change: Yes, so I just wanted to ask a little bit about the select client delay projects. Then implementations that you guys had backend. So the first part is yes.
Speaker Change: Okay, great. Thank you Sherry and then one final question.
Speaker Change: Are you sort of expecting a longer ramp up period for those as well even after they closed in the fourth quarter. Our first quarter of next year and you know you.
Speaker Change: Cost saving initiative.
Speaker Change: So expect that those will provide roughly $30 million in savings in 2020 fiber has that expectation changed at all.
Speaker Change: You mentioned the macro issue that we're concerned about so what are those.
Speaker Change: I know that other client conversations as well.
Speaker Change: No as we mentioned last quarter 10 year of in year savings in 2020 for an annualized savings of $30 million in 2025 and <unk>.
Speaker Change: Okay well.
Speaker Change: Let me just take it in each business segment.
Speaker Change: His side as we've been talking about for some time in the last couple of quarters, great pleased with being on target.
Speaker Change: We've executed well on that to our internal numbers coming out of Q2 into the Q3 results and so we do expect that.
Speaker Change: Bring on a dozen or so new meaningful client relationships are starting small in terms of the ramp and part of that is also because many of them are leveraging our new offshore geographies and so I'd say no change really there is just kind of more of the same in terms of getting those client launches right and then.
Speaker Change: Those numbers to manifest in 2025.
Speaker Change: Okay, great. Thank you Bob.
Speaker Change: Thank you.
Speaker Change: Thank you once again to all participants if you would like to ask a question. Please press star and then the number one record your name and company name clarity once from pad and to cancel your request. Please press star and then that number one.
Speaker Change: Scaling as we go from a couple of those new.
Speaker Change: Clients that we brought in a landscape where already.
Speaker Change: Expanding the services that we're providing for them. So I'd say that's pretty much the same as what we have described over the over the last couple of quarters on the digital side Ken's comments in Kenny's comments were really around some delays in some of those projects going forward and so that.
Speaker Change: One moment please.
Speaker Change: Once again to ask a question. Please press Star then the number one.
Speaker Change: Our next question comes from the line of Kathy Ken. Your line is now open from Bank of America.
Speaker Change: Not necessarily meant to be a delay in terms of ramping and doing our projects just the delay in getting them started and so again, we're really focused on getting those deals closed here in Q4. So we can start that here at the latter half of the care early.
Kathy Ken: Hi, guys.
Kathy Ken: Are you also expecting a longer ramp up period for these as well and you mentioned the macro issues that could theyre concerned about the you just elaborate a little bit more about that and why you expect that Hawaii why you wouldn't expect that to persist and maybe other coming up in other client conversations that youre, having as well not just the new the new area. Thank you.
Speaker Change: Early into next year.
Speaker Change: Okay. That's helpful and then I guess, the higher tax rate of 40% to 46%.
Speaker Change: Just talk a little bit more about that is that also the right way that we should think about in terms of 2025 modeling purposes.
Speaker Change: I didn't hear the beginning part of your question sorry about that you might've been can you just repeat your question.
Speaker Change: Yes, so I just wanted to ask a little bit about the select client delay projects. Then implementations that you guys had backend. So the first part is just how.
Speaker Change: And as <unk> kind of a good <unk>.
Speaker Change: Jumping off point that we should think about in terms of at least the first half of 'twenty five 'twenty five understanding that youre, not obviously, providing formal guidance right now.
Speaker Change: Are you sort of expecting a longer ramp up period for those as well even after they closed in fourth quarter or first quarter of next year and you.
Speaker Change: Thanks for the caveat at the end yes.
Speaker Change: <unk>.
Speaker Change: And you mentioned the macro issue that we're concerned about so what are those are you hearing those and other client conversations as well.
Speaker Change: The normalized tax rate.
Speaker Change: What I've said in the in the call is exactly where we see.
Speaker Change: Okay, well, let me just take it in each business segment on the engage side as we've been talking about for some time in the last couple of quarters, great pleased with being on target.
Speaker Change: Sure.
Speaker Change: Over the next couple of quarters and so to your point.
Speaker Change: With the deferred tax asset or with the valuation allowance that we had in the previous quarter.
Speaker Change: Bring on a dozen or so new meaningful client relationships are starting small in terms of the ramp and part of that is also because many of them are leveraging our new offshore geographies and so I'd say no change really there is just kind of more of the same in terms of getting those client launches right and then.
Speaker Change: Just really a mix issue between our pre tax income in the U S versus our income and the rest of the world and what that effective tax rate is so again, not giving guidance onto what we're looking at into the future.
Speaker Change: Asked yet for 2025.
Speaker Change: Scaling as we do some a couple of those new.
Speaker Change: But that's where we're at in our Q3 results and we anticipate relatively the same in Q4.
Speaker Change: Clients that we brought in a man gave side we're already now.
Speaker Change: Expanding the services that we're providing for them. So I'd say, that's pretty much the same as what we've described over the over the last couple of quarters.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: Thank you. Our next question comes from Joe <unk> of Canaccord. Your line is now open.
Speaker Change: The digital side Ken's comments in Kenny's comments were really around some delays in some of those projects going forward and so that's.
Speaker Change: Good morning, This will Johnson on for Joe Thanks for taking our questions.
Speaker Change: To see the strong growth in new Gms. This quarter do you mind, just giving us a sense for your offshore investment program in 2025, and do you think you could potentially accelerate this program given that demand dynamic this quarter.
Speaker Change: Not necessarily meant to be a delay in terms of ramping and doing a project just the delay in getting them started and so again, we're really focused on getting those deals closed here in Q4. So that we can start that here at the latter half of the carrier.
Speaker Change: Hey will I would say this.
Speaker Change: Early into next year.
Speaker Change: I think the commentary throughout the year.
Speaker Change: Okay. That's helpful and then I guess, the higher tax rate the 40% to 46%.
Speaker Change: Had about our geo expansion in 2024.
Speaker Change: <unk> holds.
Speaker Change: Just talk a little bit more about that is that also the right way that we should think about in terms of 2025 modeling purposes, and as <unk> kind of a good.
Speaker Change: Very happy with how those deals are performing I think I've said it since the first quarter that I got here earlier. This year is the investments that were made in 'twenty two and in 'twenty three to set the company up for the offshore diversification.
Speaker Change: Jumping off point that we should think about in terms of at least the first half of 'twenty five 'twenty five understanding that youre, not obviously, providing formal guidance right now.
Speaker Change: And those products and the services and offerings that now provide in the marketplace because the customer demand is in that space on an offshore basis on new lines of business, we've executed well on it this year the ground work is there.
Speaker Change: Thanks for the caveat at the end yes.
<unk>.
The normalized tax rate.
Speaker Change: What I've said in the in the call is exactly where we see.
Sure.
Speaker Change: You see our capex spend for the quarter as we are starting to trend down on that because we've made the investments. So I would just say how we have performed.
Speaker Change: Over the next couple of quarters and so to your point.
Speaker Change: With the deferred tax asset or with the valuation allowance that we had in the previous quarter.
Speaker Change: Offshore this year is going to be the continuation of 2025. It is the diversification is definitely one of our top four priorities as Ken mentioned earlier, and so you will see more of that off shoring into 2025, because thats, where the demand is that's where the customers are asking us for for various reason.
Speaker Change: It's just really a mix issue between our pre tax income in the U S versus our income and the rest of the world and what that effective tax rate is and so again, not giving guidance onto what we're looking at into the future.
Speaker Change: Yet for 2025.
Speaker Change: And so we're meeting them with great products, and great services and offshore environment.
Speaker Change: Great.
Speaker Change: Are you seeing any changing dynamics and kind of the cadence of scaling smaller deal sizes offshore.
Speaker Change: Yes.
Speaker Change: Don't know if I'd say any changes I think just.
Speaker Change: Obviously offshore program.
Speaker Change: <unk>.
Speaker Change: Sure the revenue scale from SAR services scale faster than onshore.
Speaker Change: That's the first thing when we talked about.
Speaker Change: Over the last couple of quarters, but yes.
Speaker Change: We have it sort of just varies on the client we have some clients that wanted to start with.
Speaker Change: 50, 50 agents to start with in some hundred so it just it really is sort of client depending on what I would just say is.
Speaker Change: Lots still continue to have lots of interest in our new geographies as Kenny said, particularly Latin America Africa and.
Speaker Change: And we have a couple of clients in the banking financial services and insurance sector, where we're already expanding in terms of the lines of business that we're supporting them. So.
Speaker Change: I'd say sort of the dynamics continue similar to what we've been talking about the last quarter or two.
Speaker Change: Great. Thanks.
Speaker Change: Thank you. Our last question is from Jonathan Lee of Guggenheim. Your line is now open.
Speaker Change: Great. Thanks for taking our questions tremendous to see the uptick in offshore here and thanks for the color there so far but to clarify our further investments needed to ramp offshore revenue and are you seeing any existing onshore customers, maybe think about moving some of their volumes offshore.
Speaker Change: Yes, I will take the investments first and I'll, let Shelley take the second half of your question.
Speaker Change: What I would say is the footprint has been laid right. We are in the countries and in the tier one tier two cities that we are very happy with right.
Speaker Change: The customers want to be in the cities that we.
Speaker Change: <unk> expanded into over the last two years and so from an.
Speaker Change: <unk> standpoint, I would tell you at this point now that the foundation is laid the facilities are there the human capital infrastructure is in those companies, if you will to support growth and scale.
Speaker Change: Any investment would be specific to new revenue and growth on a customer by customer basis.
Speaker Change: E internally, Jonathan I always say, we can go across the parking lot.
Speaker Change: In South Africa or Wanda.
Speaker Change: We're expanding beyond the building that we currently have so I would say it is.
Speaker Change: It's a good matching of revenue and expense from an investment standpoint, all based on new clients growing with us in the footprint that we have.
Speaker Change: And then I guess, maybe what I would just add Jonathan is as we've talked about previously we have.
Speaker Change: A good percentage of our work is with regulated and regulated industries, which has to stay onshore so that hasn't changed.
Speaker Change: I would say, though some of our clients in some of our clients, we're being very proactive about being able to serve them offshore for work that might have been previously done onshore, but so far.
Speaker Change: We're still seeing that the offshore work that we're winning in dealing with our clients is not.
Speaker Change: Instead of the work that we're doing on <unk>. In addition.
Speaker Change: Now those dynamics, we'll see how those play out again, we're being very proactive with our clients that where we think onshore work can be done offshore is higher it will be higher profitable work for us where we're being very thoughtful about that.
Speaker Change: I appreciate that.
Speaker Change: Secondly, can you share more color on the velocity of debt reduction you expect in the coming quarters and maybe some of the drivers of your ability to pay that down just given where cash flow is today versus some of the investments needed to drive some of your expansion.
Speaker Change: Yes, Jonathan I don't know if I can expand much more than what's in the press release or what's out there right. We are committed to debt reduction as you see our profitability increase as you see our free cash flow from operations increase.
Speaker Change: The asset sale.
Speaker Change: You saw the disclosure on the dividend and so as we've been talking over the previous quarters. During this transition year. We are focused on debt reduction we are focused on our capital structure and it is those.
Speaker Change: Input metrics, if you will that we will continue to double down on.
Speaker Change: Two to continue to drive down those ratios to the levels that.
Speaker Change: We would be happy with over the coming quarters.
Speaker Change: Thanks for that.
Speaker Change: Thank you for your questions that is all the time, we have today. This concludes <unk> third quarter tiny tiny for earnings Conference call. You may disconnect at this time.
[music].
[music].
Speaker Change: Welcome to <unk> third quarter 'twenty 'twenty four earnings conference call I'd 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 pretax I would now like to turn the call over to Paul Miller <unk>.
Paul Miller: Senior Vice President Treasurer, and Investor Relations Officer. Thank you. Sir you may begin good morning, and thank you for joining us today to tech is hosting this call to discuss its third quarter results for the period ended September 32020 for participating on today's call are Ken Tuchman, Our chairman and Chief Executive Officer of T tax Kenny wager.
Paul Miller: <unk> Chief Financial Officer of <unk>, Tec, and Shelly swung back Chief Executive Officer of <unk> engage.
Paul Miller: Yesterday <unk> issued a press release announcing its financial results. While this call will reflect items discussed within that document for complete information about our financial performance. We also encourage you to read our third quarter 2024 quarterly report on Form 10-Q.
Paul Miller: Before we begin I want to remind you that matters discussed on today's call may include forward looking statements related to our operating performance financial goals and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward looking statements reflect our opinions as of the date of this call and we undertake no.
Paul Miller: <unk> to revise this information as a result of new developments that may occur forward looking statements are subject to various risks uncertainties and other factors that could cause our actual results to differ materially from those expected and described today for a more detailed description of our risk factors. Please review our 2023 annually.
Paul Miller: Report on Form 10-K, before we proceed I want to mention that our call today, we will not.
Speaker Change: Dress any questions about Mr. Tuchman September 27, 2020 for proposal two the company's board of directors to take to take private.
Speaker Change: As the company shared in the press release on September 30th the Board formed a special committee of independent directors to consider Mr. <unk> proposal and the committee in consultation with independent legal and financial advisors is evaluating and considering that proposal.
Ken Tuchman: Replay of this conference call will be available on our website under the Investor Relations section I will now turn the call over to Ken.
Ken Tuchman: Good morning, and thank you for joining us today as shared in prior quarters 2024 is a transitional year for <unk> across the company. We remain focused on our four priorities, winning new clients and continuing to execute our diversification strategy enhancing our portfolio of AI enabled <unk> solutions, Inc.
Speaker Change: Proving our operational agility and strengthening our financial performance.
Speaker Change: In the third quarter of 2024 revenue was $529 million and non-GAAP adjusted EBITDA was $50 million the dynamics of the CX industry and the macroeconomic environment continue to create headwinds as select clients delayed decision, making <unk> focus on <unk>.
Speaker Change: Near term cost savings.
The uncertainties around the election and the fed's monetary policies have added to this wait and see mindset <unk>.
Despite these market realities, our teams continue to close new business.
<unk> remains a high priority as we engage in productive CX conversations with current and potential new clients.
Speaker Change: We believe these initiatives will normalize over the course of the next six months.
Speaker Change: And lead to a more attractive demand environment. We recently held one of our regularly scheduled client advisory board meetings, which included CX operational and technology focused leaders for many of our largest clients.
Speaker Change: The conversations highlighted their business priorities and focus areas as they navigate the current environment and set their priorities for 2025.
Speaker Change: Let me share a few recurring themes.
Clients are weighing the promise of AI against the necessary work required in their systems data architecture, and CX infrastructure to realize the full benefits.
Speaker Change: Pilots are delivering encouraging results, however expense accuracy data protection and organizational readiness concerns continue to be top of mind.
Speaker Change: A more integrated and holistic view of CX processes and technology stack are a priority regardless of their current landscape clients are looking for ways to get more value from their CX investments theyre focused on activating new AI enabled capabilities as well as building tighter integrations between their contact center.
Crem and analytics platforms.
Speaker Change: With limited near term budget increases clients are pursuing savings to invest in future innovation. This approach will increase operating efficiencies improve the quality of the customer experience and strengthen the brand differentiation.
Speaker Change: Deeply value. These in person discussions with our advisory Board and appreciate hearing what is top of mind for the CX executives and their companies.
As the market continues to evolve these discussions help validate our innovation agenda as well as uncover new growth opportunities for both of our business segments now.
Speaker Change: Now, let's discuss T tech engage.
Despite the current wait and see mindset and some pockets of the market, we continue to win new clients and expand our relationship and our embedded base.
Speaker Change: We are on track to meet our goal of a dozen new meaningful client relationships by year end.
These wins are strategic and diversified across industries, including financial services healthcare and retail as we've shared before we're keenly focused on winning new clients that will scale profitably as we leverage our expanded geographic footprint.
In addition, we continue to make progress selling new work types into our embedded base. This new business includes AI enabled solutions for back office revenue generation fraud prevention learning and knowledge services as well as work and new lines of business within several of our vertical portfolios.
Speaker Change: For example in fourth quarter of 2023, we launched our loan origination support program with a leading digital financial services brand.
Based on our strong performance the account has grown to hundreds of associates delivering five different work types, including care quality Tech support knowledge and workforce management as a service.
Another example includes a recent win with a long term health care client.
This exciting new opportunity extends our footprint into the provider market with patient access and back office support services increasingly.
Speaker Change: Increasingly our new and existing business opportunities are offshore and leverage our expanded geographic footprint.
The head count that are new geographies has scaled 43% from the second to third quarter of this year.
In addition, more than 60% of the annual contract value of our five new client wins this quarter will be delivered offshore.
While we're excited about this trend it is important to note that the deal size of our offshore contracts are initially smaller as illustrated in previous examples. These relationships have the potential to grow as we introduce new work types into the account.
Our focus on innovation continues to be a priority with an emphasis on practical use cases and applications our product and engineering teams have built a deep understanding of the evolving AI landscape for CX and have prioritized our roadmap based on what solutions are ready today, and what will be potentially viable in the future.
Above all we are focused on delivering solutions that can be implemented successfully and we will return a positive ROI for our clients and our business.
Let me share a few examples the ability to process call in digital transcripts at scale using AI is fueling operational efficiencies and revenue growth opportunities for our clients.