What TeleTech (TTEC) Said on Its Q3 Earnings Call

Key Points

• Revenue fell while profitability improved: Q3 revenue declined 5.2% to $492 million, but adjusted EBITDA rose 18.7% to $51 million and adjusted EPS increased to $0.22, supported by cost cuts, offshore delivery and AI tools.
• Engage margins strengthened despite lower sales: Engage revenue fell 6.8%, while its adjusted operating margin rose to 6.7% from 4.3%. TTEC expects further margin improvement in Q4, though Engage profitability for the year is projected in the lower half of its guidance range.
• Digital showed pockets of growth, and cash flow improved: Digital revenue was roughly flat, while professional services in high-growth practices grew 28%; TTEC is also exploring strategic alternatives for the segment. Quarterly free cash flow improved to $28 million from negative $10 million a year earlier.

TeleTech NASDAQ: TTEC reported a decline in third-quarter revenue but higher adjusted profitability as the customer experience company cut costs, shifted more work offshore and used artificial intelligence tools to improve operations.

Revenue for the period ended Sept. 30, 2026, fell 5.2% to $492 million from $519 million a year earlier. Adjusted EBITDA rose 18.7% to $51 million, with the margin expanding to 10.5% from 8.4%. Adjusted earnings per share increased to $0.22 from $0.12.

Chairman and CEO Ken Tuchman said the results reflected progress on the company’s operating plan, while acknowledging that more work remains to restore historical growth rates and margins. TTEC reiterated its full-year outlook but said profitability in its Engage segment is expected to fall between the low end and midpoint of its guidance range.

Engage Margins Improve Despite Revenue Decline

TTEC Engage revenue fell 6.8% year over year to $370 million. Adjusted operating income increased to $25 million, or 6.7% of revenue, from $17 million, or 4.3%, a year earlier. The segment’s adjusted EBITDA margin rose to 9.8% from 7.4%.

CFO Kenny Wagers attributed the profitability improvement to changes in the onshore and offshore delivery mix, efforts to improve or rationalize lower-margin client programs, greater use of AI tools alongside human agents, and other cost initiatives. He said Engage margins are expected to improve further in the fourth quarter.

Tuchman said nearshore and offshore delivery represented 42% of revenue year to date in 2026, up from 36% in 2025. He cited expansion in India, Egypt and continental Europe.

Wagers said the average size of Engage signings with new clients rose 56% year over year on a year-to-date basis. Engage’s backlog stood at $1.52 billion, while its trailing 12-month revenue retention rate improved to 92% from 89% a year earlier.

Digital Growth Practices Gain Ground

TTEC Digital revenue was $122 million, relatively unchanged from a year earlier. Adjusted operating income rose to $13 million, or 10.3% of revenue, from $12 million, or 9.5%.

Tuchman said professional services revenue in Digital’s high-growth practices increased 28% year over year. Revenue in Europe, the Middle East, Africa and Asia-Pacific grew 24%, while the segment added 24 significant new clients during the quarter, up 20% from a year earlier.

Hyperscaler partners and high-growth practices accounted for 73% of Digital’s pipeline, compared with 62% a year earlier, Tuchman said. In response to an analyst’s question, he said TTEC is co-selling with Amazon, Google and Microsoft as large organizations seek to modernize their technology.

TTEC is also exploring strategic alternatives for Digital with PJT Partners as financial adviser. Tuchman said the process has generated a high level of interest and constructive conversations, and that the company will provide an update when it has something definitive to report.

AI Adoption and Cash Flow

Tuchman said clients see promise in AI but face work to redesign processes, retrain employees, connect legacy systems and improve data. Questions about accuracy, governance and computing costs can also slow returns, he said.

Asked how much of Engage’s AI opportunity involves replacing contact center services, Tuchman said relatively little of the company’s AI work is designed to eliminate a human agent entirely. He said TTEC is replacing some interactive voice response systems with conversational voice bots for simpler interactions, but clients generally are not ready to hand entire interactions to autonomous AI agents.

“We believe that AI right now, in this current stage, is primarily best used for supporting our associates, making them better, making them faster, making them more efficient,” Tuchman said.

Free cash flow improved to $28 million in the quarter from negative $10 million a year earlier. As of Sept. 30, TTEC had $91 million in cash and $835 million in debt, for net debt of $744 million. Wagers said the company extended its credit facility maturity to November 2028 and ended the quarter with a net leverage ratio of 3.63 times under the facility.

Wagers said the Engage revenue decline is leveling off from the first half of 2026 and that the trend is expected to continue through the second half. He also said Digital remained on track with its initial full-year guidance.

About TeleTech (NASDAQ:TTEC)

TeleTech, now known as TTEC Holdings, Inc. NASDAQ: TTEC, is a global customer experience technology and services company. Founded in 1982 by Kenneth Tuchman, the company helps organizations design, build and manage customer interactions across digital and traditional channels. TTEC's services include customer care, technical support, sales and marketing, trust and safety, consulting, artificial intelligence, automation, analytics, cloud technologies and customer experience strategy. Its offerings are delivered through a combination of customer experience software, technology platforms and outsourced business-process services.

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