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TH

TTEC Holdings, Inc. (TTEC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue of $519.1M rose sequentially and beat consensus ($497.9M*) while non-GAAP EPS of $0.12 missed ($0.225*) as lower Engage profitability and Digital mix shift weighed on margins .
  • Adjusted EBITDA was $43.4M (8.4% margin) vs $50.3M (9.5%) YoY; GAAP diluted EPS was $(0.23) vs $(0.40) YoY; guidance was reiterated for FY25 across consolidated and segment metrics .
  • Engage margin was pressured by up-front Q4 healthcare ramp costs and strategic investments; management expects sequential and YoY bottom-line growth in Q4 and for 2H25 in Engage .
  • Strategic positives: Digital revenue +5.4% YoY (20 new clients signed), expanding AI deployments (110+ programs across 65+ clients), stronger backlogs (Engage $1.66B; Digital $444M), and credit facility extended to Nov 23, 2027 .

What Went Well and What Went Wrong

What Went Well

  • Digital topline growth and client momentum: Digital revenue +5.4% YoY to $121.9M; 20 new meaningful clients signed; expanding partnerships and higher-margin AI-led offerings .
    “The TTEC Digital team signed 20 new meaningful clients… optimizing current technology infrastructure and design[ing] their roadmap for the future.”
  • AI execution and wins: Deployed AI in 110+ programs across 65+ clients; nearly all new pitches include AI augmentation; multiple outcome-based engagements advancing .
  • Strengthened liquidity and visibility: Credit facility term extended to Nov 23, 2027; Engage backlog $1.66B (102% of FY25 rev midpoint), Digital backlog $444M (95% of FY25 midpoint) .

What Went Wrong

  • Margin compression: Adjusted EBITDA margin fell to 8.4% (from 9.5% YoY) on Engage investments ahead of Q4 healthcare seasonality and Digital mix (low-margin product resales up ~$15M YoY) .
  • EPS miss and tax rate: Non-GAAP EPS $0.12 missed $0.225*; normalized tax rate remained elevated (53.7%), driven by jurisdictional mix and U.S. valuation allowance .
  • Free cash flow negative in-quarter: FCF $(9.6)M on $13.8M capex; mgmt noted higher in-quarter real estate/IT spend for healthcare ramps; sequential margin recovery guided for Q4 .

Financial Results

Consolidated trends (USD)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)$534.2 $513.6 $519.1
GAAP Income from Operations ($M)$24.2 $18.9 $12.3
GAAP Op Margin (%)4.5% 3.7% 2.4%
Adjusted EBITDA ($M)$56.4 $51.8 $43.4
Adjusted EBITDA Margin (%)10.6% 10.1% 8.4%
GAAP Diluted EPS$0.07 $(0.14) $(0.23)
Non-GAAP EPS$0.28 $0.22 $0.12

YoY snapshot (Q3)

MetricQ3 2024Q3 2025
Revenue ($M)$529.4 $519.1
Adjusted EBITDA ($M)$50.3 $43.4
GAAP Diluted EPS$(0.40) $(0.23)
Non-GAAP EPS$0.11 $0.12

Segment breakdown

MetricQ3 2024Q2 2025Q3 2025
Digital Revenue ($M)$115.7 $113.7 $121.9
Engage Revenue ($M)$413.8 $399.8 $397.2
Digital GAAP Op Inc ($M)$7.5 $11.4 $4.9
Digital Non-GAAP Op Inc ($M)$14.4 $18.36 $11.6
Engage GAAP Op Inc ($M)$5.4 $7.47 $7.5
Engage Non-GAAP Op Inc ($M)$19.7 $18.42 $17.3

KPIs and balance sheet (Q3 2025)

KPIQ3 2025
Cash from Operations ($M)$4.2
Free Cash Flow ($M)$(9.6)
Capex ($M)$13.8
Cash & Equivalents ($M)$73.5
Total Debt ($M)$886.0
Net Debt ($M)$812.5
Net Leverage (credit facility definition)3.46x
Engage Backlog$1.66B (102% of FY25 midpoint)
Digital Backlog$444M (95% of FY25 midpoint)
Credit FacilityTerm extended to Nov 23, 2027

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2025)Current Guidance (Q3 2025)Change
Consolidated RevenueFY 2025$2,064M–$2,114M (mid $2,089M) $2,064M–$2,114M (mid $2,089M) Maintained
Adj EBITDA ($)FY 2025$215M–$235M (mid $225M) $215M–$235M (mid $225M) Maintained
Adj EBITDA MarginFY 202510.4%–11.1% (10.8%) 10.4%–11.1% (10.8%) Maintained
Non-GAAP Op Inc ($)FY 2025$154M–$174M (mid $164M) $154M–$174M (mid $164M) Maintained
Non-GAAP Op MarginFY 20257.4%–8.2% (7.8%) 7.4%–8.2% (7.8%) Maintained
Interest Expense (net)FY 2025$(72)M–$(74)M (mid $(73)M) $(72)M–$(74)M (mid $(73)M) Maintained
Non-GAAP Tax RateFY 202539%–43% (41%) 40%–44% (42%) Slightly raised
Diluted SharesFY 202548.0M–48.4M (48.2M) 48.1M–48.5M (48.3M) Slightly higher
Non-GAAP EPSFY 2025$0.95–$1.20 (mid $1.08) $0.95–$1.20 (mid $1.08) Maintained
Engage RevenueFY 2025$1,606M–$1,636M (mid $1,621M) $1,606M–$1,636M (mid $1,621M) Maintained
Engage Adj EBITDA ($)FY 2025$151M–$163M (mid $157M) $151M–$163M (mid $157M) Maintained
Engage Adj EBITDA MarginFY 20259.4%–10.0% (9.7%) 9.4%–10.0% (9.7%) Maintained
Engage Non-GAAP Op Inc ($)FY 2025$101M–$113M (mid $107M) $101M–$113M (mid $107M) Maintained
Digital RevenueFY 2025$458M–$478M (mid $468M) $458M–$478M (mid $468M) Maintained
Digital Adj EBITDA ($)FY 2025$64M–$72M (mid $68M) $64M–$72M (mid $68M) Maintained
Digital Adj EBITDA MarginFY 202513.9%–15.0% (14.5%) 13.9%–15.0% (14.5%) Maintained
Digital Non-GAAP Op Inc ($)FY 2025$53M–$61M (mid $57M) $53M–$61M (mid $57M) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
AI/Technology initiativesDigital-first approach; building partnerships; AI-enabled solutions; utilization focus (Q1/Q2) 110+ AI programs across 65+ clients; 1,700 AI-skilled engineers; 125+ active AI projects; outcome-based models; 20 new Digital clients Accelerating scope and commercialization
Healthcare seasonalityNoted seasonality; solid H2 positioning (Q2) Up-front Q3 costs to ramp healthcare for Q4; expect double-digit seasonal growth and sequential/YoY bottom-line growth in Q4 and 2H Investment now; payoff expected near-term
FX and macroFX mixed: negative in Q1 revenue; positive in Q2 revenue but margin headwind; macro caution/trade policy (Q1/Q2) FX +$2M to revenue; negative profitability impact; tax rate elevated by jurisdictional mix FX remains two-sided
Product resales/Cloud mixCloud migrations; partner remix (Q2) ~$15M YoY increase in low-margin resales; ex-resale Digital revenue -7.9% YoY; some clients delaying cloud or rebalancing to multi/hybrid Transitional; temporary pressure
Backlog/RetentionNot quantified earlierEngage backlog $1.66B (102% of FY midpoint); Digital backlog $444M (95%); adjusted quarterly retention 98% vs 97% in Q2 Improving visibility
Leverage/LiquidityBorrowing capacity up in Q2; deleveraging focus Net leverage down to 3.46x; facility term extended to Nov 2027 Balance sheet strengthening
Outcome-based pricingNot emphasizedIncreasing outcome-based and per-transaction models anticipated to improve margins over time Strategic shift underway
Regulatory/Trade policyUncertainty highlighted (Q1) Continued attention to public sector opportunities and outsourcing trends; captives as TAM source Supportive TAM dynamics

Management Commentary

  • “As expected, our Engage third quarter profitability was down… expenses ahead of our fourth quarter healthcare seasonal ramps and planned investments for future growth.” – Ken Tuchman, CEO .
  • “We expect Engage to deliver solid bottom-line growth sequentially and year-over-year in the fourth quarter and overall for the second half of the year.” – Kenny Wagers, CFO .
  • “We’ve deployed AI in over 110 programs with more than 65 clients… almost 100% of our new client pitches include our core AI associate augmentation tools.” – Ken Tuchman .
  • “Digital’s revenue benefited from a $15M YoY increase in product resales… delivering lower margins… Excluding resales, revenue was $103M, down 7.9% YoY.” – Kenny Wagers .
  • “Our net leverage ratio… 3.46x vs 4.49x last year; we extended the term of our credit facility to November 23, 2027.” – Kenny Wagers .

Q&A Highlights

  • Healthcare ramp ROI: Q3 investments target double-digit Q4 seasonal growth and more recurring, year-round healthcare work into 2026; emphasis on sustaining client relationships post-peak .
  • AI economics: Moving toward outcome-based and per-transaction pricing; coupling AI with human agents to improve margins and client value; AI also expected to reduce internal delivery costs over time .
  • Capacity and talent: ~1,700 full-time engineers with AI backgrounds; ~125 paid AI projects in Digital; deep CCaaS and subsystem integration capabilities cited as differentiation .
  • Digital resales: One-off, chunky, hard to forecast; some clients delay cloud migrations or consider multi/hybrid models following outages; near-term revenue noise but strategic focus on AI/cloud persists .
  • TAM expansion: Evidence of first-time outsourcers (e.g., healthcare testing), with sizable captive internal spend (~$300B) seen as multi-year outsourcing opportunity .

Estimates Context

  • Q3 2025 vs consensus: Revenue $519.1M vs $497.9M* (beat); non-GAAP EPS $0.12 vs $0.225* (miss) .
  • FY 2025 context: Company guidance midpoint revenue $2.089B aligns with consensus $2.086B*; EBITDA midpoint $225M above consensus $217.3M*; non-GAAP EPS midpoint $1.08 aligns with $1.09* .
    Values with asterisk (*) retrieved from S&P Global.
MetricPeriodConsensus*Actual/Guide
Revenue ($M)Q3 2025497.9519.1
Non-GAAP EPS ($)Q3 20250.2250.12
Revenue ($B)FY 20252.0862.064–2.114 (mid 2.089)
EBITDA ($M)FY 2025217.3215–235 (mid 225)
Non-GAAP EPS ($)FY 20251.090.95–1.20 (mid 1.08)

Key Takeaways for Investors

  • Mix and timing drove the quarter: Strong revenue and Digital growth offset by lower-margin resales and Engage investments; watch for a Q4 profitability inflection as healthcare ramps complete and volumes convert .
  • Near-term setup: Management explicitly guides to sequential and YoY bottom-line growth in Q4/2H for Engage—delivery against this should be a key stock driver into print and early 2026 .
  • Medium-term thesis: AI commercialization, outcome-based contracting, and a growing multi-partner Digital practice should expand margins as resales fade and utilization rises; backlog/retention improvements bolster durability .
  • Balance sheet trend improving: Net leverage down to 3.46x and facility extended to 2027; continued FCF conversion and deleveraging remain key to multiple expansion .
  • Estimates recalibration: Street EPS likely drifts modestly lower near term on Q3 miss and margin mix, but consolidated FY guide implies intact EBITDA trajectory; upside if Q4 margin rebound outperforms .
  • Watch variables: FX translation on margins, Digital resale volatility, healthcare seasonality/retention into Q1, and execution on outcome-based pricing to drive structural margin lift .
  • Strategic optionality: Expanding hyperscaler ties and onramp to hybrid/multi-cloud transformations position TTEC as a beneficiary of multi-year AI modernization cycles across verticals .