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TH

TTEC Holdings, Inc. (TTEC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $534.2M declined 7.4% YoY, but exceeded internal plan; adjusted EBITDA rose to $56.4M (10.6% margin) vs $54.9M (9.5%) in Q1 2024, with non-GAAP EPS of $0.28 vs $0.27 prior year .
  • Results beat S&P Global consensus: revenue by $23.4M (+4.6%) and non-GAAP EPS by $0.09; the company reiterated full-year 2025 guidance across consolidated and segment metrics . Revenue/EPS consensus values marked with * and sourced from S&P Global*.
  • Engage segment profitability improved on operational efficiencies and offshore mix; Digital improved mix toward recurring and professional services, growing non-GAAP operating income to 11.2% of revenue .
  • Management’s tone: constructive on AI-enabled CX demand and hyperscaler partnerships, but cautious on 2H macro/trade-policy uncertainty; near-term pipeline/backlog support, leverage trending down (net leverage 3.79x) .

What Went Well and What Went Wrong

  • What Went Well

    • Margin expansion: adjusted EBITDA margin improved to 10.6% (Q1 2025) from 9.5% (Q1 2024); non-GAAP operating margin rose to 7.8% vs 6.6% YoY .
    • Segment execution: Digital non-GAAP operating income reached 11.2% of revenue; Engage non-GAAP operating income rose to 6.9% despite revenue decline; FX aided Engage operating income .
    • Strategic wins and partnerships: new enterprise logos, expanded share of wallet, and deep collaboration with all three hyperscalers; quote: “We’re co-investing and collaborating with all 3 hyperscalers… building proprietary AI-enabled capabilities” .

  • What Went Wrong

    • Top-line pressure: consolidated revenue down 7.4% YoY; Engage revenue down 8.3% YoY; FX a $6.0M headwind to revenue .
    • Macro caution: clients hesitant amid trade-policy uncertainty and AI reliability questions; quote: “Instead of jumping in with both legs… hesitation… trade policies…” .
    • Tax rate and leverage: non-GAAP adjusted tax rate elevated; net debt $881.4M, though net leverage trending down (3.79x) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$529.4 $567.4 $534.2
GAAP Operating Income Margin (%)2.4% 2.7% 4.5%
Adjusted EBITDA ($USD Millions)$50.3 $50.9 $56.4
Adjusted EBITDA Margin (%)9.5% 9.0% 10.6%
GAAP Diluted EPS ($)-$0.40 $0.10 $0.07
Non-GAAP EPS ($)$0.11 $0.19 $0.28

Segment breakdown

Segment MetricQ3 2024Q4 2024Q1 2025
Digital Revenue ($USD Millions)$115.7 $115.0 $108.0
Engage Revenue ($USD Millions)$413.8 $452.5 $426.2
Digital Non-GAAP Operating Income ($USD Millions)$14.4 $12.7 $12.1
Engage Non-GAAP Operating Income ($USD Millions)$19.7 $22.3 $29.4

KPIs

KPIQ1 2025
Cash from Operations ($USD Millions)$21.6
Free Cash Flow ($USD Millions)$16.2
Capital Expenditures ($USD Millions)$5.4
Cash and Equivalents ($USD Millions)$85.1
Total Debt ($USD Millions)$966.6
Net Debt ($USD Millions)$881.4
Revolver Remaining Capacity ($USD Millions)~$230
Net Leverage Ratio (x)3.79x
Engage Backlog ($USD Billions)$1.59
Engage LTM Revenue Retention (%)88% (93% ex-large client)
Non-GAAP Adjusted Tax Rate (%)37.9%

Q1 2025 vs S&P Global Consensus

MetricConsensus*ActualSurprise
Revenue ($USD Millions)510.84*534.23 +$23.39 (+4.6%)
Non-GAAP EPS ($)0.19*0.28 +$0.09

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024)Current Guidance (Q1 2025)Change
Consolidated Revenue ($M)FY 2025$2,014–$2,064 (Mid: $2,039) $2,014–$2,064 (Mid: $2,039) Maintained
Non-GAAP Adjusted EBITDA ($M)FY 2025$215–$235 (Mid: $225) $215–$235 (Mid: $225) Maintained
Non-GAAP Operating Income ($M)FY 2025$154–$174 (Mid: $164) $154–$174 (Mid: $164) Maintained
Non-GAAP Adjusted EBITDA Margin (%)FY 202510.7–11.4 (Mid: 11.0) 10.7–11.4 (Mid: 11.0) Maintained
Non-GAAP Adjusted Tax Rate (%)FY 202538–42 (Mid: 40) 38–42 (Mid: 40) Maintained
Diluted Share Count (M)FY 202548.2–48.6 (Mid: 48.4) 48.2–48.6 (Mid: 48.4) Maintained
Non-GAAP EPS ($)FY 2025$0.95–$1.20 (Mid: $1.08) $0.95–$1.20 (Mid: $1.08) Maintained
Net Interest Expense ($M)FY 2025($75)–($79) (Mid: ($77)) ($75)–($79) (Mid: ($77)) Maintained
Engage Revenue ($M)FY 2025$1,556–$1,586 (Mid: $1,571) $1,556–$1,586 (Mid: $1,571) Maintained
Digital Revenue ($M)FY 2025$458–$478 (Mid: $468) $458–$478 (Mid: $468) Maintained
DividendOngoingSuspended Nov 4, 2024 until further notice No change disclosed Maintained (suspension)

Earnings Call Themes & Trends

TopicQ3 2024 (Prior-2)Q4 2024 (Prior-1)Q1 2025 (Current)Trend
Macro demand and decision delaysHeadwinds; clients delaying decisions, near-term cost focus Transitional year; profit optimization focus; preparing for margin improvements Cautious 2H outlook due to trade-policy uncertainty; near-term pipeline solid Stable caution with improving execution
AI-enabled CX and hyperscaler partnershipsNoted diversification of CX tech and AI solutions Diversifying CX tech partnerships, expanded capabilities Deep co-investment with all 3 hyperscalers; building proprietary AI capabilities Intensifying focus and credibility
Offshore delivery and cost optimizationProfit improvement actions underway Engage profitability improvement in H2 2024 Accelerating offshore mix; continuous improvement mindset; AI leveraged to efficiency Margin accretive mix shift continuing
Backlog/retention visibilityNot disclosedNot disclosedEngage backlog $1.59B (101% of FY25 guided revenue); LTM retention 88% (93% ex-large client) Improved coverage vs guidance
Recurring/managed services mix (Digital)Excluding on-prem, services + recurring grew 5.9% YoY Segment mix shifting; laying foundation for 2025 margin improvements Recurring managed services +7%; 66% of Digital revenue; CX professional services +3.1% Mix quality improving

Management Commentary

  • CEO on Q1 execution and client caution: “2025 is off to a good start… EBITDA was $56M… clients are adopting a cautious approach in the current economic environment… uncertainty in trade policy” .
  • CEO on differentiation: “We’re co-investing and collaborating with all 3 hyperscalers… building proprietary AI-enabled capabilities on their platforms” .
  • CFO on segment results and mix: “Digital… excluding onetime product sales, revenue grew 2.8%… recurring managed service offerings increased 7%… Engage revenue decline less impactful than planned due to higher retention” .
  • CFO on balance sheet and leverage: “Net debt increased YoY to $881M but decreased $12M vs prior quarter… net leverage ratio 3.79x, down from 3.99x at YE 2024” .
  • CEO on offshore and AI: “We are really pushing hard tying more and more business offshore… embracing AI… cost takeout is not just for profit optimization but to invest in tech” .

Q&A Highlights

  • Client adoption and macro: Clients remain engaged but cautious due to AI reliability (deterministic vs generative) and trade-policy uncertainty; smaller initial contract sizes expected to expand with execution .
  • Differentiation vs peers and GSIs: TTEC cites deep hyperscaler relationships, thousands of CCaaS implementations, and singular focus on digital CX transformation vs broad GSI scope .
  • Pipeline/near-term outlook: Management expects Q2 trajectory similar to Q1; guidance to be revisited after Q2 given 2H uncertainty .
  • Margin levers: Offshore mix, AI-enabled productivity, continuous improvement operating model under new Engage leadership; reinvestment in AI products alongside cost optimization .
  • Pricing discipline: Industry rationalizing; TTEC avoids below-cost bids, expects consolidation to favor rational pricing; holds pricing discipline to drive long-run profitability .

Estimates Context

  • Q1 2025 beat: Revenue $534.23M vs $510.84M*; non-GAAP EPS $0.28 vs $0.19*; margin expansion supports the beat . Values marked with * retrieved from S&P Global.
  • Near-term estimates: Management reiterated FY25 guidance; given macro caution in 2H, consensus may hold near current ranges until Q2 update; Engage backlog at 101% of FY25 guidance midpoint supports revenue visibility .
  • Forward consensus snapshot: Q2 2025 consensus revenue $495.93M* and EPS $0.235* as of current; company indicated Q2 performance similar to Q1, suggesting limited near-term estimate volatility pending macro clarity . Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Quality over quantity in revenue: Mix shifting to higher-margin recurring and professional services in Digital; Engage margin improvement from offshore and operational discipline—supports sustained EBITDA margin >10% if execution persists .
  • Visibility improved: Engage backlog covers ~101% of FY25 guided revenue at midpoint, with retention stabilizing ex-large client; de-risks near-term revenue trajectory .
  • Macro/trade-policy overhang: Management’s reiterated guidance with 2H caution frames risk-reward; updates at Q2 will be pivotal for estimate revisions and stock narrative .
  • Balance sheet trend: Net leverage falling (3.79x), FCF positive; dividend remains suspended as focus stays on debt reduction—watch leverage path vs 2025 EBITDA guidance .
  • AI/hyperscaler partnerships as differentiators: Deep co-selling and platform expertise should drive pipeline quality and consumption-led opportunities; monitor execution of enterprise-wide digital transformations .
  • Pricing discipline amid consolidation: TTEC’s refusal to chase uneconomic deals suggests healthier long-term margins; industry rationalization is a tailwind .
  • Catalysts: Q2 execution vs similar trajectory, potential guidance update, progress on offshore ramp/AI productization, and any developments from the Special Committee process (management not commenting on the call) .