TeleTech Q1 Earnings Call Highlights

Key Points

• TeleTech’s Q1 results weakened year over year, with revenue falling 7.1% to $496 million and adjusted EPS dropping to $0.15 from $0.28. Adjusted EBITDA also declined to $46 million, though management said a delayed public-sector receivable will add about $3 million of EBITDA in Q2.
• Cash flow and balance-sheet improvement remained a bright spot. Free cash flow rose to $21 million, and net debt fell $79 million from a year ago, leaving the company with $803 million in net debt and a 3.77x net leverage ratio.
• Management reiterated full-year guidance and leaned on AI, offshore delivery and client rationalization to lift profitability. TTEC expects Engage margins to improve later in the year as offshore mix rises above 40%, while Digital is adapting to market shifts through AI, data and security partnerships.

TeleTech NASDAQ: TTEC reported lower first-quarter revenue and profit compared with a year earlier, while management reiterated its full-year 2026 outlook and said investments in artificial intelligence, offshore delivery and client portfolio changes are expected to support improved profitability as the year progresses.

Chairman and Chief Executive Officer Ken Tuchman said revenue for the quarter ended March 31, 2026, was $496 million, adjusted EBITDA was $46 million and free cash flow was $21 million. He said the company has reduced credit facility borrowings by $79 million since the first quarter of 2025, reflecting a continued focus on strengthening the balance sheet.

Tuchman also noted that first-quarter EBITDA was affected by a delayed receivable tied to a large public sector project. He said a portion of the receivable has already been approved and that, had it been reflected in the quarter, EBITDA would have been $49 million, or 9.7% of revenue. The company expects the $3 million EBITDA impact to be reflected in second-quarter results.

Revenue declines, but cash flow improves

Chief Financial Officer Kenny Wagers said consolidated first-quarter revenue fell 7.1% year over year to $496 million from $534 million. Adjusted EBITDA declined to $46 million, or 9.2% of revenue, from $56 million, or 10.6% of revenue, in the prior-year quarter. Adjusted operating income was $32 million, or 6.4% of revenue, compared with $41 million, or 7.8%, a year earlier. Adjusted earnings per share were $0.15, down from $0.28.

Foreign exchange had a positive $8 million impact on revenue, primarily in the Engage segment, while having a nominal effect on adjusted EBITDA and operating income, Wagers said.

Free cash flow increased to $21 million from $16 million a year earlier, driven by an additional $6 million of cash flow from operations, partially offset by a $1 million increase in capital expenditures. Capital expenditures were $6 million, or 1.3% of revenue, with about 60% of the spending tied to product development, real estate expansion and client technology investments.

As of March 31, TTEC had $89 million of cash and $892 million of debt, primarily borrowings under its recently amended $1.05 billion revolving credit facility. Net debt was $803 million, down $79 million from a year earlier. The company ended the quarter with a net leverage ratio, as defined under its credit facility, of 3.77 times.

Engage segment pressured by client rationalization and offshore shift

In TTEC Engage, first-quarter revenue fell 7.5% year over year to $394 million. Operating income was $25 million, or 6.3% of revenue, compared with $29 million, or 6.9% of revenue, a year earlier.

Wagers said Engage revenue was in line with the company’s expectations, reflecting a forecast for lower first-half revenue as TTEC rationalizes a small number of underperforming clients and continues expanding its offshore mix. He said the actions are deliberate and designed to improve profitability despite near-term revenue pressure. A public sector seasonal client accounted for more than 40% of the first-quarter revenue decline, he added.

Adjusting for the delayed public sector receivable, Wagers said Engage revenue would have been $397 million and operating income would have been $28 million, or 7% of revenue, representing a slight margin increase from the prior year.

Tuchman said the company’s offshore revenue mix in Engage rose to 38% for the 12 months ended March 31, 2026, from 34% in the prior-year period. He said TTEC expects to be delivering more than 40% offshore by the end of the year. The company is also embedding AI across recruiting, learning and performance management. Tuchman said AI-aided hiring through the company’s SmartHire screening approach has increased interview-to-hire rates by as much as 25% in some cases.

Wagers said the Engage backlog was $1.51 billion, or 94% of 2026 revenue guidance at the midpoint, down from 101% for the same period in 2025. The segment’s last-12-month revenue retention rate improved to 94% from 88% a year earlier.

Digital segment reflects market shift in contact center technology

TTEC Digital revenue declined 5.7% year over year to $102 million. Operating income fell to $7 million, or 6.6% of revenue, from $12 million, or 11.2%, in the prior-year period.

Wagers said Digital revenue was slightly below expectations, with the revenue mix weighing on profitability. Recurring revenue declined 7.3%, primarily in one traditional CCaaS practice, due to a market shift away from legacy contact center point solutions. Excluding two legacy CCaaS practices, professional services grew 15.3% year over year, reflecting momentum in expanded CX technology partnerships.

Total Digital professional services revenue declined 4.8% year over year, partly due to fewer front-end consulting engagements tied to cloud migrations. Wagers also said about 50% of new contracted business signed during the quarter closed in the final three weeks, pushing revenue into the second quarter and beyond.

Tuchman said TTEC Digital is focused on helping clients optimize existing technology investments rather than pursue “costly and disruptive rip-and-replace projects.” He highlighted the company’s AI Gateway, a proprietary integration platform designed to connect existing CCaaS systems with leading AI platforms and reduce deployment timelines “from months to weeks.”

AI strategy central to management’s outlook

Tuchman said recent client advisory meetings showed that AI and security are top priorities for TTEC’s large strategic clients. He said companies are moving beyond isolated proofs of concept and are increasingly approaching AI from the standpoint of business goals, processes and operating models.

Management described TTEC’s AI strategy as focused on three areas: client transformation, human augmentation and operational excellence. Tuchman cited examples involving a fast-growing telehealth provider and a global travel brand, saying both illustrate demand for AI-enabled customer experience services that combine consulting, technology and managed operations.

During the question-and-answer session, Tuchman said TTEC is not currently seeing volume reductions in its digital customer experience Engage business due to AI. Instead, he said the company is seeing activity from new clients and expansion within its existing base. He said new logos signed in the first quarter were “well ahead” of the prior-year first quarter, though he did not provide a specific number.

Asked about AI implementation timelines, Tuchman said they vary widely depending on the state of a client’s data systems. For companies that are more digitally native, AI-enabled voice bots and chatbots may be implemented in roughly three months or less for basic front-end use cases. For large legacy enterprises with many siloed systems, he said projects can be far more complex, citing one completed project involving 235 separate systems that took 24 months.

Full-year guidance reiterated

TTEC reiterated its full-year 2026 guidance. Wagers said first-quarter results were in line with expectations after accounting for timing issues in both Engage and Digital.

He said Engage is expected to return to improved profitable year-over-year growth starting in the second quarter, supported by cost management actions, client rationalization and offshore growth. In Digital, Wagers said the company is responding to shifting market demand through partnerships in AI, data and security, while leveraging its experience with end-to-end customer experience platforms.

“We remain committed to our goals of continued profitable growth, cash flow improvement, and debt reduction,” Wagers said.

About TeleTech NASDAQ: TTEC

TTEC Holdings, Inc NASDAQ: TTEC is a global customer experience technology and services company that designs, builds and delivers transformative solutions for customer acquisition and engagement. Leveraging a combination of digital consulting, technology, analytics and operations services, TTEC helps clients across industries enhance their customer journeys, automate key processes and harness data-driven insights to foster loyalty and drive revenue growth.

The company's core offerings span end-to-end customer engagement solutions, including customer experience (CX) strategy consulting, cloud migration, omni-channel contact center operations and managed services.

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