10-K
TTEC HOLDINGS, INC. filed this Form 10-K on 03/06/2019
Entire Document
 

Our 2018 Financial Results

In 2018, our revenue increased 2.2% to $1,509 million over the same period in 2017,  including a decrease of 0.5% or $8.0 million due to foreign currency fluctuations. The increase in revenue is primarily related to a $31.6 million revenue increase for CTS and a $12.6 million revenue increase for CGS offset by a $12.7 million net revenue decrease for CMS, which includes a $7.5 million decrease related to foreign exchange fluctuations offset by a $9.0 million net increase related to the adoption of ASC 606 for revenue.

Our 2018 income from operations decreased $8.4 million to $92.1 million or 6.1% of revenue, from $100.5 million or 6.8% of revenue for 2017.  The change in operating income is attributable to a number of different factors across the segments. The decline in income from operations relates exclusively to CMS, with all other segments experiencing improvement year over year. CMS’s income from operations declined on increases in labor costs related to wage and healthcare benefits within our U.S. business. This increased cost is tied to macroeconomic factors including a lower unemployment rate and rising wages. Additionally, an increase in business ramps associated with a higher volume of new business signings during the second and third quarters led to a spike in launch costs in the second half of 2018. Launch costs are incurred in transitioning new business from our clients to TTEC and historically are not specifically compensated for by our clients.

The CTS operating income expanded significantly with a 121% improvement over the prior year primarily on the growth of its higher margin recurring cloud business and its system integration business which provides services pre and post buildout of each client cloud platform, the write-off of a trade name in the prior year, and large second half of the year product sales. The CSS operating income improved 164% due primarily to the write-off of a trade name in the prior year and the rationalization of certain practice areas as they were integrated. The CGS operating income increased due to new business adds during the year.

Income from operations in 2018 and 2017 included a total of  $7.6 million and $20.0 million of restructuring and integration charges and asset impairments, respectively. 

Our offshore customer engagement centers serve clients based in the U.S. and in other countries and span five countries with 23,725 workstations representing 55% of our global delivery capabilities. Revenue for our CMS and CGS segments provided in these offshore locations was $438 million and represented 35% of our 2018 revenue, as compared to $450 million and 35% of our 2017 revenue.

As of December 31, 2018, the overall capacity utilization in our centers was 80%. The table below presents workstation data for all of our centers as of December 31, 2018 and 2017. Our utilization percentage is defined as the total number of utilized production workstations compared to the total number of available production workstations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

December 31, 2017

 

 

    

Total

    

 

    

 

    

Total

    

 

    

 

 

 

 

Production

 

 

 

% In

 

Production

 

 

 

% In

 

 

 

Workstations

 

In Use

 

Use

 

Workstations

 

In Use

 

Use

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total centers

 

 

 

 

 

 

 

 

 

 

 

 

 

Sites open >1 year

 

42,687

 

34,017

 

80

%  

42,033

 

34,409

 

82

%

Sites open <1 year

 

309

 

231

 

75

%  

2,404

 

2,392

 

100

%

Total workstations

 

42,996

 

34,248

 

80

%  

44,437

 

36,801

 

83

%

 

We continue to see demand from all geographic regions to utilize our offshore delivery capabilities and expect this trend to continue. On the other hand, some of our clients may be subject to  regulatory pressures to bring more services onshore to the United States. In light of these trends, we plan to continue to selectively retain and grow capacity in and expand into new offshore markets, while maintaining appropriate capacity in the United States. As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuations increases, we continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility.

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