Q1 2025 TTEC Holdings Inc Earnings Call
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Thank you for standing by.
Tayo I felt touch time Youll gave music.
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[music].
Speaker Change: Welcome to TTEC's first quarter 2025 earnings conference call. I would like to remind all parties that you will be at a listen, only moments of the question and answer session. This call has been reported at the request of TTEC. I would now like to turn the call over to Bob Bellnatt, TTEC's Group Vice President, COVID Finance. Thank you sir, you may begin.
Speaker Change: Good morning and thank you for joining us today. TTEC is hosting this call to discuss its first quarter results for the period ended March 31, 2025.
Speaker Change: Participating on today's call are Ken Tuchman, Chairman and Chief Executive Officer of TTEC and Kenny Wagers, Chief Financial Officer of TTEC.
Yesterday, TTEC issued a press release announcing its financial results [inaudible]
Speaker Change: While this call will reflect items discussed in that document for complete information about our financial performance, we also encourage you to read our quarterly report on Form 10Q for the period ended on March 31, 2025.
Speaker Change: Before we begin, I want to remind you that mattress is 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.
Speaker Change: Please note that these forward-looking statements reflect our opinions as of the date of this call, and we undertake no obligation to update this information as a result of new developments that may occur.
Speaker Change: For looking statements are subject to various risks and certain needs and other factors that could cause our actual results to differ materially from those expected and described today.
Speaker Change: For a more detailed description of our risk factors, please review our 2024 Annual Report on Form 10K.
Speaker Change: Before we proceed, I would like to state that our call today will not be discussing or addressing Mr. Tuchman's non-binding proposal to take TTEC private.
Speaker Change: The Special Committee of the Board, formed to evaluate that proposal, issued a press release on April 1st to update interested parties on its evaluation of the proposal.
Speaker Change: We refer you to that press release as neither the company nor Mr. Tuchman will comment on the process nor will respond to any questions about it on this call.
Speaker Change: As always, we remain focused on executing against our top business priorities and serving the best interests of our stockholders and all of their stakeholders for the best interests of our stockholders.
Speaker Change: A replay of this conference call will be available on our website under the Investor Relations
I will now turn the call over again [inaudible]
Good morning, and thank you for joining us today.
Speaker Change: 2025 is off to a good start with our financial performance exceeding plan [inaudible]
Speaker Change: In the first quarter, our revenue was $534 million, which was in the range of our forecasted plan EBITDA was $56 million, up from $55 million in the prior year This upside was driven by improved EBITDA margins of 10.6% versus 9.5% in the prior year
Speaker Change: While we are pleased with our Q1 results, many of our clients are adopting a cautious approach in the current economic environment.
Speaker Change: Due to recent uncertainty in trade policy, it is challenging for any business operating on a global scale to accurately predict the future. As a result, we're staying close to our clients and remaining agile as we look forward to stabilization.
Speaker Change: Despite the current environment, we're encouraged by our progress to date. We're gaining ground as we sign new large enterprise clients, grow our share of wallet with our embedded base and broaden our market reach with more complex AI-enabled solution.
Speaker Change: Additionally, we're strengthening our operational equipment and rigor as we continue to fortify our leadership team.
Speaker Change: As Kronstein's try to make sense of the increasingly complex TXT ecosystem, our long-standing track record and command of interplay between CX technology and operation makes us the go-to partner for companies that will strive to differentiate on TXT for it.
Speaker Change: Clients are entrusting us with their CX strategy and execution because of our unparalleled technology credentialed and real world frontline experience.
Speaker Change: We have decades of domain expertise, have made significant investments in proprietary technology, have delivered thousands of complex implementation, and employed deep bench of TX strategist and full stack digital engineers. [inaudible]
Speaker Change: Our CX focus and AI focus has helped drive our deep partnerships with the hyperscalers. These dominant tech partners with their scale and massive market reach are leading the way into every aspect of multimodal AI.
Speaker Change: Today, we're co-investing in collaborating with all three hyper-scalers on CX Roadmaps, building proprietary AI-enabled capabilities on their platforms, and selling and implementing enterprise-wide programs together for a client to cross the globe.
Moving on to a Business Update [inaudible]
Speaker Change: Across both business segments, we remain focused on executing the three priorities we outlined last year. First, increased diversification across clients, geographies, partners, and solutions.
Speaker Change: 2. Transform experiences for employees and clients with digital innovation, and 3. Strengthen our financial performance on the top and bottom line.
Speaker Change: In TTEC Engage this quarter, we made measurable improvements on all three objectives. Our solid performance is evident in the growth of new lines of business with our existing clients.
Speaker Change: In the first quarter alone, we added contracts with embedded-based clients worth over 75% of what we signed in all of last year.
Speaker Change: We are expanding our share of wallet with our clients due to our digital first approach, our operational excellence, ability to deliver new complex work types.
Speaker Change: For example, this quarter we pioneered a specialized new line of business with a Fortune 50 technology coin expanded our relationship with one of the largest healthcare payers into provider and clinical services and we added commercial license support for a Fortune 100 financial services client
Much of this new business will be delivered offshore.
Speaker Change: We are pleased with the growth in the embedded base, as well as our progress continuing to sign new high growth enterprise clients.
Speaker Change: One of our most exciting new client wins this quarter is with a fan of test sports streaming service.
Speaker Change: The company chose us to help them accelerate their vision of delivering a premium experience aligned with their customer interaction preferences.
Speaker Change: In partnership with TTEC Digital, we developed an end-to-end solution that includes a digital insight tub for analytics that will unify customer data across multiple databases and deliver actionable insights into each customer's unique journey.
Speaker Change: A technology ecosystem that will deliver the optimal customer journey across channels, whether it's with self-service through agentic AI or human assisted service through a live voice and chat interaction.
Speaker Change: and a team of frontline associates chosen exclusively for their passion for sports and our client's
Speaker Change: When live, we are confident we will see double-digit improvement in first contact resolution, self-service containment, and significantly improve customer satisfaction and employee engagement.
Speaker Change: Moving on, our progress in TTEC Engage includes meaningful profitability improvement driven by operational efficiencies, an expanded offshore footprint, and accelerated AI integration with our frontline teams.
through our AI-nabled platform.
Speaker Change: We are beginning to see gains in time to proficiency, first contact resolution, and employee engagement and retention.
Our proprietary solutions include TTEC Real Skill,
Speaker Change: Sonario Learning, TTEC Perform, Employee Engagement, and TTEC Addie, Automated Voice Translation to name a few. Now let's move on to TTEC Digital. The CX technology market is at an inflection point. As I mentioned before, the strong entrance of the hyperscalers into the CX space is redefining the role of CX technology, from providing infrastructure to powering intelligence.
Speaker Change: The Contact Center is transforming into a virtual interaction hub that connects bricks and mortar and digital channels seen with life This convergence is creating entirely new ways to interact and build engaged, profitable customer relationships
Speaker Change: T-Tech Digital operates at the core of this expanding digital ecosystem, driving our strategy beyond cloud migration and traditional contact center services.
Speaker Change: We're investing in an integrated approach that will enable us to deliver comprehensive AI enabled enterprise-wide digital transformation.
Speaker Change: Whether a client is going all in on end-to-end platform with hyperscalers or wants to layer on AI technology to their existing platform, our deep relationships and knowledge of hyperscalers CX tools puts us in a unique position to deliver outcomes that others can't.
Speaker Change: For example, this quarter we closed a significant deal with a large financial services brand that was facing end of life with their legacy natural language processing technology
Speaker Change: With a new hyperscaler platform, we're helping our client modernize their customer experience by driving better intent recognition, more intelligent routing and expanded self service capabilities, while also building the foundation to enable generative AI to further personalize their customer journey.
Speaker Change: In another example, our technology agnostic positioning helped to secure a complex TX transformation deal with a multinational financial services company
Initially, the client plan to select one hyperscaler platform.
but ultimately chose a different one. [inaudible]
Speaker Change: We were by their side from the beginning, and our expertise in both of their platform options made us uniquely qualified to be their partner of choice. Our expertise in deep understanding of how to activate the AI benefits and our proven integration capabilities across the existing platforms made the decision an easy one. [inaudible]
Speaker Change: Although it's early in our journey with data modernization and agentic AI,
Speaker Change: Our growth with the hyperscalers and new partners provides us confidence in our direction. In many client engagement, we're starting with smaller clients at first [inaudible]
Speaker Change: That will build momentum and grow over time. We are encouraged by our progress across all our newer practices and believe they will be meaningful contributors in the future.
Speaker Change: As I mentioned earlier, technology innovation is embedded in everything we do. This quarter we are recognized for our progress bringing real-world AI solutions to market with multiple Stevie Awards for Excellence in Sales and Service.
Speaker Change: We brought home trophies for several of our proprietary AI-nabled solutions including TTEC perform, our employee learning and engagement platform, TTEC Insights, our next-generation quality assurance solution, and TTEC Addie, our real-time voice-to-voice translation
Improving.
Speaker Change: As we look to the future, one thing is crystal clear, no matter how fast tech evolves and how many tools we stack, the customer is still human, and at the end of the day, humans want to feel heard, helped and value. It's our mission to ensure that every interaction reflects this fundamental truth.
Speaker Change: Transforming technology into a powerful ally in creating genuine connections and meaningful experience [inaudible]
Speaker Change: When done right, CX will build loyal customers who will spend more, stay longer, and become advocates for the brands they love.
Speaker Change: With our discipline strategies, rigorous performance standards, and pragmatic approach to innovation will continue to build a high value business for the long term. On behalf of our Board of Directors, management team, and employees across the globe, thank you for your continued support. 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 first quarter 2025 financial results before providing context into our reiterated 2025 full-year financial outlook.
Kenny Wagers: In my discussion of the first quarter financial results, reference to revenue is on a gap basis while EBITDA operating income and earnings per share are on a non-GAAP adjusted basis.
Kenny Wagers: A full reconciliation of our gap to non-GAAP results is included in the tables attached to our earnings release.
Kenny Wagers: The adjusted EBITDA and operating income contributions and margins were in line with our expectations, reflecting improvements year over year and on track to our 2025 whole year guidance.
Kenny Wagers: On a consolidated basis for the first quarter of 2025 compared to the prior year period, revenue was 534 million compared to 577 million, a decrease of 7.4 percent.
Kenny Wagers: Adjusted EBITDA was 56 million or 10.6 percent of revenue compared to 55 million or 9.5 percent.
Kenny Wagers: Operating income was 41 million or 7.8% of revenue compared to 38 million or 6.6%
Kenny Wagers: and Earnings for Share was $0.28 compared to $0.27 [inaudible]
Kenny Wagers: For Exchange had a 6 million negative impact on revenue in the first quarter over the prior year, while positively impacting operating income by 4 million, primarily in our engaged segment.
Turning to our first quarter, 2025 Segment Results [inaudible]
Kenny Wagers: As discussed in prior quarters, the revenue continues to be impacted by the intentional decline in the lower margin one time on-premise product sales as clients migrate to cloud-based
Kenny Wagers: Excluding one-time product sales, Digital's revenue grew 2.8% over the prior year period.
Kenny Wagers: More importantly, we continue to grow our recurring managed service offerings, increasing 2.7% compared to prior year, and representing approximately 66% of digital's total first quarter revenue compared to 62% in the same period last year.
Kenny Wagers: In our CX Professional Services offerings, revenue increased 3.1% year-over-year, partially driven by the diversification and expansion of our CX Technology Partner Network and our deepening relationships with hyperscalers.
Kenny Wagers: Our digital backlog is 359 million or 77% of our 2025 revenue guidance at the midpoint of the range, slightly down from 80% for the same period last year.
Kenny Wagers: Digital's first quarter, 2025 operating income was 12 million, or 11.2% of revenue, compared to 9 million, or 8.3% in the prior year.
Kenny Wagers: The year over year improvement was due to revenue mix and improved utilization in our professional services practice
Kenny Wagers: We are pleased with our digital segments, first quarter results. We are seeing good traction in our go-to-market approach, engaging in enterprise-wide digital transformations, utilizing multi-platform solutions across all our practices.
Kenny Wagers: With this dynamic in mind, we are focused on efficiencies, capacity management, and redeployment of our talent to the AI market opportunity, all of which is evident in our first quarter 2025 profitability improvement.
Kenny Wagers: Moving on to our Engage segment, first quarter revenue decreased 8.3% to 426 million over the prior year period
Kenny Wagers: Operating income was 29 million or 6.9% of revenue, relatively flat compared to the prior year, but a 70 basis point improvement as a percentage of revenue.
Kenny Wagers: The engaged segments first quarter financial results were above expectations when compared to our full year guidance. Reflecting the profit optimization initiatives we put in place in the second half of 2024.
Kenny Wagers: The revenue decline was expected, although less impactful than planned, primarily due to higher revenue retention in the quarter.
Speaker Change: As Ken previously mentioned, Engage closed a high volume of contracts representing new lines of business with its embedded base in the first quarter. We also continue to add high growth potential enterprise logos with three new signings during the quarter. On top of the 15 signed in 2024, all of which will be serviced all shore.
Speaker Change: The segments diversified offshore footprint, implementation of AI-enabled solutions, and focus on operational excellence are resonating with our existing clients and continue to attract
Speaker Change: Much of the groundwork was started in the second half of last year, and we will continue to drive efficiencies in our operational delivery, improve our operational agility, and manage cost alignment throughout 2025.
Speaker Change: The engaged backlog is 1.59 billion or 101% of our 2025 revenue guidance at the midpoint of the range, up from 94% for the same period of 2024.
Speaker Change: The Engage last 12-month revenue retention rate is 88%, compared to 94% in the prior year. Adjusted for the revenue decline related to the large financial services client discussed in our quarters, the Engage last 12-month revenue retention rate is 93%.
Speaker Change: I will now share other first quarter 2025 metrics before discussing our outlook.
Speaker Change: Free cash flow was a positive 16 million in the first quarter of 2025 compared to a negative 29 million in the prior year
Speaker Change: Working Capital provided 23 million of the cash flow from operations improvement compared to prior year
Speaker Change: Capital expenditures were 5 million or 1% of revenue for the first quarter of 2025, compared to 13 million or 2.3% for the first quarter of last year.
Speaker Change: As of March 31st, 2025, cash was 85 million with 967 million of debt, primarily representing borrowings under our 1.2 billion revolving credit facility.
Speaker Change: Net debt increased year-over-year by $16 million to $881 million, but decreased by $12 million compared to the prior quarter.
Speaker Change: We ended the quarter with a net leverage ratio as defined under the credit facility of 3.79 times continuing the downward trend from 3.99 times at the end of 2024 and 4.49 times at the end of the third quarter of 2024.
Speaker Change: The increase is primarily due to the impact of the US valuation allowance recorded against the US free tax losses in the second quarter of 2024.
Speaker Change: Turning to our 2025 outlook, I will now provide some contact supporting our full-year financial guidance.
Speaker Change: Overall, we are pleased with our first quarter results and we are reiterating our 20-25 full-year guidance.
Speaker Change: However, as Ken mentioned, the current global economic environment gives us a cautious outlook for the second half of the year
Speaker Change: Both segments are well positioned to navigate this environment, appreciating that it is difficult to predict the investment decisions of our existing clients and potential new clients as a result of their economic uncertainties and impact on their demand.
Speaker Change: This emphasizes the importance of the actions we implemented in the second half of last year.
Speaker Change: Inengage, new key talent combined with our tenured leadership provides the delivery experience necessary to operate going forward.
Speaker Change: Our focus on improving operational agility, providing digitally enabled solutions and driving cost optimization efforts positioned us to better navigate the near term uncertainty.
Speaker Change: These actions are resonating in the market as evidenced by the growth in new lines of business within our existing clients and the additional enterprise logo signed in the first quarter.
Speaker Change: Indigital, the market pivot from engagements that only focus on cloud migrations or contact center technology to enterprise-wide digital transformations aligns with our strategic priorities.
Speaker Change: Digital is now executing an integrated go-to-market approach, solving clients' needs that include AI-enabled solutions, analytics, and multi-platform options across our broad base of practice.
Speaker Change: Although this market transition creates growth opportunities beyond our legacy practices, we remain focused on the balance between these opportunities and the competitive pressure on traditional contact center cloud migrations and transformation services.
Speaker Change: Please reference our commentary in the Business Outlook section of our first quarter 2025 earnings press release to obtain our expectations for our reiterated 2025 full year guidance at the consolidated and segment level.
Speaker Change: In closing, the actions we took in the second half of 2024 and continue to drive our evident in our first quarter 2025 results in terms of profitability, cash flow generation, and a stronger balance sheet.
Speaker Change: We remain committed to our focus on executing against our top business priorities and serving the best interest of all our stakeholders.
I will now turn the call back to Bob.
Speaker Change: Thanks, Kenny. As we open the call, we ask that you limit your questions to one or two at a time. 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 any questions, please press far. Followed with a number one. Please add your phone and record your name and company name clearly when prompted. Your name and company name are required to do your question. As the
Our first question comes from the line of George Sutton
Hello.
Craig Collins, your line is now open.
Thank you.
Speaker Change: Thank you. Can you mention that the client's adoption was someone under pressure given caution on their side? But by the same token you're working with a lot of the hyperscalers which are not cautionary at all. So I'm just curious if you could focus where the client adoption challenges are.
I'm very, George. You know, I, I chased it.
Speaker Change: I think it's safe to say that all clients are very excited and looking forward to taking advantage of a lot of the technologies that we are recommending to them and demonstrating to them, etc.
Speaker Change: But I think that at the same time there is a number of factors [inaudible]
Speaker Change: that are causing them to instead of jumping in with, you know, both legs to jump in with maybe a toe or a foot.
and we've been hearing this now for quite some time. [inaudible]
Speaker Change: Part of it just related to how reliable, for example, is AI and therefore their ability to experiment with it and get comfortable.
Speaker Change: Part of it is then getting educated on AI and understanding the differences between deterministic AI and how safe that is, which we know is extremely safe versus generative AI, which, as we all know, has some hallucination issues, etc. So there's some of that. And then there's the backdrop of that, you know, there's a bit of uncertainty about their business as to how these trade policies are going to impact them. [inaudible]
Speaker Change: And so, you know, what I would say is that's causing a bit of hesitation as to what their cap expend is going to be, how what their investment levels are going to be, etc. I think it's safe to say that the majority of clients
Speaker Change: We're going in 2024. We're going into 2025 with the expectation that this was going to be a growth year.
Speaker Change: I think it's safe to say that right now they feel very differently as to whether this is going to be a growth here.
Speaker Change: And so consequently, we are a bit of a mirror of our clients of our clients.
Speaker Change: and the good news is that we're winning a plenty of share of our business and we feel really good about how we're positioned and, you know, it'll be interesting to see whether or not, you know, I don't want to get political but just whether
Speaker Change: These, all these different trade negotiations go in the favor of our clients and that they don't have issues like delves that are potentially don't aren't fully stocked, etc.
So I hope I may attend your question.
Speaker Change: Yeah, so finally for me, this is timely update as our call started, it was announced that passed out to be taken private by their co-founders and by Blackstone, just curious if there would be any comments.
Kenneth Tuchman, George Sutton,
Speaker Change: See that as an opportunity, but no nor do I actually have any insights I really don't have any ability to comment.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you George Thank you.
Speaker Change: Our next question comes from William Blair. Your line is now open.
Speaker Change: Alright, thank you.
Speaker Change: Clear that your knowledge of and your partnership with Hyperscale orders will be important to our future success.
Speaker Change: You have an ability to differentiate there.
Speaker Change: With your peers or if you view this as something that would be more table stakes for any industry, where do you think is most important or key technical differentiation.
Speaker Change: That's a great question good morning.
Speaker Change: So.
Speaker Change: There is no question that we feel that we have the ability to differentiate.
Speaker Change: On on multiple fronts.
Speaker Change: One.
Speaker Change: We feel we can say to the Hyperscale and we know that they believe US no. One has been doing what we do longer than we have we have more experience.
Speaker Change: We have more credentials.
Speaker Change: And we have more engineers that have been focused in this space.
Speaker Change: Not only the space of of helping clients build customer interaction centers and integrating with their CRM.
Speaker Change: But more experience working with on the product development side.
Speaker Change: Of the tools that are necessary to bring this all together and so the reason why we have been successful with building deep relationships with these hyper scaler and it's not just.
Speaker Change: Hyperbole.
Speaker Change: Platitudinal press release stuff is because they actually are looking to us to help them.
Speaker Change: In many areas as it relates to <unk>.
Speaker Change: Product direction as it relates to us helping them with coding of product offer tech products and new products that are coming to market.
Speaker Change: Et cetera, so our differentiation is that we've done.
Speaker Change: Zinc multiple many thousands of <unk> implementation and all of those implementations that we've done over the last call. It 25 years et cetera have all gone through a myriad of phases of of upgrades.
Speaker Change: From the day of TDMA to voice over IP to now to cloud and now going to the next phase of introducing.
Speaker Change: AI, introducing a gesture capabilities.
Speaker Change: Etcetera, and so we feel very confident that we have.
Speaker Change: The credentials.
Speaker Change: That that afford us the benefit of our relationship with all of the hyper scaler.
Speaker Change: And we're co selling with them.
Speaker Change: So it's.
Speaker Change: It's early days.
Speaker Change: At the end of the day the.
Speaker Change: The hyperscale.
Speaker Change: Are going to what they care about is consumption and we're one of many organizations that will help them achieve their goals of consumption, but we think that we have.
Speaker Change: Far deeper understanding of far better track record far better credentials.
Speaker Change: Certainly than any of our engage partners and on the digital side.
Speaker Change: Our uniqueness is very simple and they really like it and that is that we are singularly focused on.
Speaker Change: On <unk>.
Speaker Change: Digital CX transformation.
Speaker Change: Whereas the whereas the size.
Speaker Change: Focus on.
Speaker Change: Everything so.
Speaker Change: So consequently.
Speaker Change: They don't have the level of attention to detail and focus that we have in the space of of the CX digital transformation and so what we've always said and we're going to stick with it is that if it doesn't really.
Speaker Change: Has to do with helping companies acquire customers grow customers service customers Bill.
Speaker Change: Bill.
Speaker Change: Build loyalty.
Speaker Change: Through their front in their back office, and we're not going to be providing the technology.
Speaker Change: Required and I think that that's why we've been so successful in building these relationships.
Speaker Change: Sorry for the long winded answer, but yes, I'm very passionate about our relationships.
Kenny Wagers: Thanks, Ken.
Speaker Change: And and.
Speaker Change: My follow up.
Speaker Change: Can you give us a sense of where we are in some of that cost optimization.
Speaker Change: Robert.
Speaker Change: Is this somewhere where it be.
Speaker Change: I think you mentioned the fortified leadership team as a semi annual basis okay.
Speaker Change: Is there more to go in the second half.
Speaker Change: This year or is it more kind of a.
Speaker Change: And validation of the efforts that you made in the back half of last year.
Speaker Change: I would say that it is part of.
Speaker Change: Our day to day work and what we're doing the answer is yes, there is more to go.
Kenny Wagers: And as Kenny I believe reiterated in his script.
Speaker Change: And.
Speaker Change: We are this is something that we would be doing.
Speaker Change: Going forward just as with me.
Speaker Change: The leader of <unk>.
Speaker Change: Tech is something that.
Speaker Change: We feel as.
Speaker Change: Part of just our normal course of business, but to answer your question directly.
Speaker Change: Yes, there is more to go and so yes, we will benefit from what we've already done and we will be doing our goal is to be doing more of that said I want to just stress we have to counterbalance that with our investments and so we are really doubling down in a myriad of other areas with product development.
Speaker Change: <unk>.
Speaker Change: On technology et cetera, so part of.
Speaker Change: Our cost take out is not just for optimization of <unk>.
Speaker Change: Bottom line profit, but it's also to protect our future and for us to be able to really take advantage of the future that we see going forward.
Speaker Change: We are really embracing AI as our friend and we really believe that AI is the future of our business and therefore, you can imagine that there's a fair bit of rejiggering and that we are planning on taking advantage of AI with everything that we do internally.
Speaker Change: Every single Department every single.
Speaker Change: Desktop.
Speaker Change: All of our frontline associates.
Speaker Change: As well as helping our clients with AI, including with with areas, where theyre not even taking advantage of our engaged services.
Speaker Change: They may even be using other competitors.
Speaker Change: Makes sense. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Mike Latimore.
Kevin: Kevin Your line is now open.
Speaker Change: Yes.
Speaker Change: Mark.
Speaker Change: And I think Mike from.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yep.
Speaker Change: Any delays.
Speaker Change: Any new deals or expansion.
Speaker Change: Okay.
Speaker Change: Are properly it's cutting in and out maybe you can answer that question because I can't hear it on my side.
Speaker Change: Could you repeat that one time I Couldnt hear you this is Kevin.
Speaker Change: Yes.
Speaker Change: Have you seen any delays in getting new.
Speaker Change: Alright.
Speaker Change: I think you are asking about delays in new deals.
Speaker Change: No I would say I would look at digital a little different than engage I would say in our digital business segment.
Speaker Change: We've got a good.
Speaker Change: So business coming right now as we've mentioned in prior quarters. It seems like the deal sizes are getting a little smaller than they were in prior years.
Speaker Change: But on the engage side other than what Ken mentioned about the macro environment, we feel very good about where our pipeline sits we feel very good about our backlog and.
Speaker Change: We think the customers coming into 2025.
Speaker Change: Are interested in the product and services that we have to offer right now so we're very happy with the sales motion and we're very happy.
Speaker Change: With what we're seeing from our embedded base and what we're seeing from new customers coming to pizza.
Speaker Change: Okay.
Got it.
Speaker Change: And also on the call.
Speaker Change: <unk> growth.
Speaker Change: <unk> seen any changes.
Speaker Change: Yes.
Speaker Change: The April and May.
Speaker Change: Plus block.
Speaker Change: I think.
Speaker Change: Look.
Speaker Change: Our outlook I mean, we're already in the Q2.
Speaker Change: What we see coming into Q2 and through the balance of the first half of the year is more of the say, we think the trajectory of our pipelines the projectors the trajectory of the backlog that we have our sales motion in the market, both with digital and engage.
Speaker Change: We think Q2 is going to perform very similar to the way Q1 has performed for us.
Speaker Change: That's correct, yes. Thank you.
Speaker Change: Thank you. Our next question comes from Cathy Chan of Bank of America. Your line is now open.
Cathy Chan: Hey, guys I appreciate the color on second quarter I just wanted to just ask I guess you guys had talked about basically youre not really seeing any macro deterioration right now, but then you also talked about potential softness in the back half is it fair to say that alright path plan will be a little bit stronger and maybe backpack and Alex.
Speaker Change: Further.
Speaker Change: Further deterioration just given more uncertainty in tobacco.
Speaker Change: The reason you didn't.
Speaker Change: That really changed your guidance.
Speaker Change: Is that you can kind of accommodate that further macro softness just want to make sure I understand the assumptions that are built then.
Cathy Chan: Yes, Kathy this is getting great question and.
Cathy Chan: Yes, I think the way you bounced on both those rails as kind of the way were bouncing all both the rails were seeing for our company and the positioning that we have in our markets with both digital and engage.
Cathy Chan: We feel very good about our quarter, we feel very good about how we're performing in the market.
Ken Tuchman: But as Ken mentioned, then as Ken talked about at length in his script.
Ken Tuchman: The second half is more about our customers and about how our customers are being impacted by the macro and.
Ken Tuchman: Everything else what's happening.
Ken Tuchman: With geopolitics and so.
Ken Tuchman: Early in the year again, good good beat for US in Q1, we'll revisit guidance at the end of Q2 to see what we looked like for the full year, but we are we're very happy with where we're sitting as a company and again happy with the way the customers are reacting to the way we are providing.
Ken Tuchman: Great products and good services to them right now.
Ken Tuchman: Yes, I don't know if you want to add anything.
Ken Tuchman: But what I'm looking at the second half just like I'm looking at the first half.
Ken Tuchman: And back to the point.
Ken Tuchman: We know a lot of these things get resolved in the macro environment, because we think we're positioned extremely well.
Ken Tuchman: Okay. Thank you.
Ken Tuchman: Thanks <unk>.
Speaker Change: Yeah. That's helpful. And then I guess, just a quick follow up on the margin side, I guess, where are the incremental levers that you guys can tell Paul if we get those cost efficiencies can you just talk a little bit more about where your plans are in the offshore and near our operations.
Ken Tuchman: Bookings et cetera. Thank you.
Speaker Change: Yes.
Speaker Change: Let me I'll start and then you finished Kenny I think it goes without saying that we are really pushing hard to sign more and more business offshore and that will be the single biggest margin driver.
Speaker Change: For us two diverse have continued to diversify.
Speaker Change: I believe about 50% of the signings or more.
Speaker Change: Just on the engage side has already been.
Have been signed for offshore business I believe it's actually more than 50%.
Speaker Change: And the same thing on the digital side as far as.
Speaker Change: Rapidly hiring more offshore engineers.
Speaker Change: Well so offshore is certainly a focus and then it goes without saying with AI. We're looking at all aspects of our business and how that impacts us from a cost optimization standpoint.
Speaker Change: And then there's just a myriad of technologies that have been coming online that were that were very frankly, very hopeful and that will also drop to.
Speaker Change: To the bottom line, but this all of these actions.
Speaker Change: Unfortunately, they take time.
Speaker Change: And so right now.
Speaker Change: We're balancing where as I said to the previous.
Speaker Change: The previous question.
Speaker Change: Balancing the cost savings with the reinvestment in the business to take advantage of a lot of these technologies and just what it how it sets us up for the future.
Danny: Danny you want to add to that.
Danny: Yes look I would say this I mean.
Danny: Credit where credit is due John John <unk>, who came in last year, our new president of engaged we have a continuous improvement mindset now right. We didn't have that middle approach or mental model really pervasive and engage I would say in the last couple of years, but the continuous improvement mindset.
Danny: Not just cutting costs for the sake of cutting cost, but cutting costs.
Danny: And running an operation that really provides the type of product and services that our customers want and need is manifesting itself in the results that we're seeing and then the leverage that we're creating on the digital on the engage side I'm, sorry, and a big piece of that again is the diversity that Ken talked.
Danny: About which is one of our strategic points not just about onshore offshore but about the line of businesses that we're getting involved in as well we've got a large portion of the growth that we're starting to see is with our embedded base clients.
Danny: Rodney.
Speaker Change: <unk> with us and so on the engage side, we're going to continue to see more of that on the digital side, Dave <unk> and his team.
Danny: As we.
Danny: Mix shift into these new practices, these hyperscale or kind of away from product and on Prem.
Danny: That by itself is accretive to the margin and to EBITDA, but also there is a big focus and we've made a good organizational change in digital to focus on the utilization of our talent and the cross pollination of that talent GB able to work on multiple platforms and.
Danny: <unk> partners.
Danny: That utilization emphasis on the digital side and the continuous improvement mindset with our delivery.
Danny: An engaged not only did we started in 2024, but again it will continue into 2025 and beyond so we feel very good about where we're positioned but I also want to emphasize what Ken said, we're not just dropping all of this to the bottom line. We are then taking that and using that to invest in what matters.
Danny: Most right now and that is a lot of our AI products that we're developing both cross functionally between both segments.
Danny: But specifically in engage to enhance those products that we're delivering to our customer base.
Danny: Thank you.
Danny: Thank you.
Speaker Change: Question comes from Jonathan <unk> of Guggenheim. Your line is now open.
Speaker Change: Great. Thanks for taking our questions is there anything specific in your customer conversations that give you pause around how you feel about the demand environment, especially as you talk through the strength of your pipeline and your backlog.
Speaker Change: I think for me.
Speaker Change: The only thing that gives me pause.
Speaker Change: Is that what we're seeing right now we by the way I've experienced this.
Speaker Change: Multiple times through various different cycles.
Speaker Change: Is that although we are signing some really interesting contracts with very large enterprises.
Speaker Change: Fortune 10, Fortune 25, Fortune 50, fortune 100 et cetera.
Speaker Change: Contract sizes, I think are starting out much smaller.
Speaker Change: And we again I've experienced this before.
Speaker Change: The good news is that when you execute well they get larger and in some cases they get larger.
Speaker Change: At a pretty nice clip.
Speaker Change: But that can mean demonstrates that theres caution in the market.
Speaker Change: So I think that what we're seeing both on the digital side as well as on the engage side.
Speaker Change: Especially even on the digital side is <unk>.
Speaker Change: These companies know that their behind and they have no choice in order to compete.
Speaker Change: To be able to.
Speaker Change: Start.
Speaker Change: The journey.
Speaker Change: <unk>.
Speaker Change: Really starting to reinvent.
Speaker Change: How they serve their customers. They also know that it's a heavy lift.
Speaker Change: So in some cases, they are taking it piece by piece instead of entering into a very large transformational contract where everything is contemplated upfront as to the dollars that they're going to spend et cetera, and so.
Speaker Change: No.
Speaker Change: It doesn't concern me to be very candid with you because to me. It's all about getting the contract building the relationship having the <unk> and then continuing to expand through demonstration of of <unk>.
Speaker Change: Quality and capability.
Speaker Change: That said, what we liked them to start out larger it goes without saying.
Speaker Change: And I think that I'll be surprised if we won't experience.
Speaker Change: At least through <unk>.
Speaker Change: All of second quarter.
Speaker Change: And probably even in the third quarter.
Speaker Change: As the dust settles, let's hope that it does on all these various different.
Speaker Change: Negotiations that are taking place.
Speaker Change: It's no secret I mean, we serve.
Speaker Change: A lot of different industries.
Speaker Change: <unk>.
Speaker Change: They have been they have I'm not going to mention client names, but they've all been for the most part very vocal.
Speaker Change: That there is they are trying to get there they're trying to get their groundings and.
Speaker Change: Until.
Speaker Change: These trade situations are settled.
Speaker Change: They're concerned that it's going to impact their business and their customers' business, whether it be through because of higher cost or whether it be through inventory levels that are being depleted.
Speaker Change: With no no shipments coming forward.
Speaker Change: So.
Speaker Change: It's been it's been an interesting kind of decade, so to speak when it comes to the unexpected rate Covid was totally unexpected.
Speaker Change: I don't think we necessarily expected.
Speaker Change: This level of tariffs.
Speaker Change: <unk> that said I have confidence that this is going to come.
Speaker Change: Two and ending in the very near future.
Speaker Change: I appreciate that color, Ken and just as a follow up as you think about the contracts that you're signing are you seeing any evolution in like for like pricing. Obviously, there is impact from off from onshore to offshore mix shift is there any pressure given maybe increased competition.
Speaker Change: Or just client budget needs.
Speaker Change: What I would say is the following.
Speaker Change: This is we're in a very competitive industry.
Speaker Change: And there is.
Speaker Change: There is.
Speaker Change: A handful of competitors.
Speaker Change: That when their business through price.
Speaker Change: What I would just say to you is.
Speaker Change: They ultimately end up.
Speaker Change: That ultimately ends up being a positive for us because the amount of business that we have lost over the years because clients thought that they could get it at a lower cost going to a bottom Peter or second tier third tier provider only to come back a year later, saying well that didn't work out we need your help and so what I would say to you.
Speaker Change: Is that the marketplace in my opinion is rationalizing and it's consolidated and the larger.
Speaker Change: The players get or the more consolidation that takes place.
Speaker Change: The more youre going to have rational thinkers and versus smaller more desperate players that are trying to buy the business. So do we run up against people that are putting forth pricing that we say no to absolutely.
Speaker Change: Probably on a weekly basis, if not daily.
Speaker Change: But at the end of the day I want to just remind you that.
Speaker Change: <unk>.
Speaker Change: When you look at the captive combined with the.
Speaker Change: With the outsource its a $400 billion marketplace and at the end of the day.
Speaker Change: And that doesn't include the digital side.
Speaker Change: Side of the market and so at the end of the day. There is a limited number of players that are capable of providing the level of process the level of technology the level of geographic diversity et cetera.
Speaker Change: And you can count that number of players on your left and right hand, so ultimately we feel pretty comfortable that the marketplaces absolutely.
Speaker Change: Rationalizing and we think Thats a good thing not a bad thing so.
Speaker Change: I'm not I'm, probably not giving you the exact answer that you want to hear.
Speaker Change: But what I would say to you is that.
Speaker Change: We're going to hold to our disciplined of our pricing and.
Speaker Change: To do everything we can to try to make our company.
Speaker Change: Much more profitable than it currently is over the long run.
Ken Tuchman: Thanks, Ken.
Speaker Change: And that is all the time, we have today. This concludes <unk> first quarter 2025 earnings Conference call. You may disconnect at this time.
Ken Tuchman: Thank you.