TeleTech (NASDAQ:TTEC) reported second-quarter results that fell short of its plan, as revenue and profitability declined from a year earlier amid pressure in its Engage segment. Management said it is pursuing cost reductions, operational changes and client profitability reviews while beginning a strategic-alternatives review for its TTEC Digital business.
Revenue for the quarter ended June 30 was $455 million, down 11.3% from $514 million in the prior-year period. Adjusted EBITDA declined to $39 million, or 8.7% of revenue, from $52 million, or 10.1% of revenue, a year earlier. Adjusted operating income was $26 million, compared with $37 million, while adjusted earnings per share fell to $0.03 from $0.22.
Engage Revenue Declines as Client Pressures Weigh
TTEC Engage generated second-quarter revenue of $351 million, down 12.1% year over year. Segment operating income was $14 million, or 3.8% of revenue, compared with $18 million, or 4.6% of revenue, in the prior-year quarter.
CFO Kenny Wagers said the first-half revenue decline was partly anticipated, reflecting the company’s rationalization of a small number of underperforming clients and a seasonal public-sector engagement that accounted for approximately 24% of the year-over-year revenue reduction. However, second-quarter performance also faced additional pressure from a small number of clients in public sector and technology, media and communications.
During the question-and-answer session, Tuchman said the largest single driver of the quarter’s weakness was a large public-sector client experiencing problems with technology and infrastructure provided by an unaffiliated third party. He said the issue had created operational effects for the service TTEC provides and that the company was working with the client toward a resolution.
Management said it is reviewing the profitability of a high-single-digit number of Engage clients. The company is discussing potential changes to those engagements, including automation, offshore delivery and operating-model redesign. Wagers said these discussions are collaborative and vary by country, facility and the cost structure associated with each program.
If the parties cannot reach mutually beneficial terms, TTEC may professionally transition the business and make capacity available for other clients, executives said. Tuchman said the company’s focus is on clients that are not meeting margin expectations, though he described the affected business as a small portion of the overall portfolio.
Engage backlog stood at $1.5 billion, equal to 98% of the midpoint of updated full-year revenue guidance, compared with 101% at the same point a year earlier. The segment’s trailing 12-month revenue retention rate improved to 93% from 88%.
Digital Mix Shift Continues; Strategic Review Begins
TTEC Digital revenue was $104 million, down 8.5% from the prior-year quarter. The prior-year period included a one-time $4 million sale of intellectual-property software at a 100% profit margin. Excluding that transaction, Digital’s revenue decline was 4.6%.
Digital operating income was $12 million, or 11.7% of revenue, compared with $18 million, or 16.1% of revenue, a year earlier. Excluding the prior-year software sale, operating income in the comparable period was $14 million, or 13% of revenue.
Wagers said the segment’s results were in line with its targets as the business shifts from traditional contact-center-as-a-service engagements toward end-to-end customer-experience transformations. Excluding two legacy CCaaS practices, professional-services revenue increased 13% year over year, following 15.3% growth reported in the first quarter.
The company said its Digital pipeline remains strong, though average deal sizes are smaller and take longer to close as customers evaluate transformation investments. Digital backlog was $364 million, or 85% of the midpoint of 2026 revenue guidance, up from 83% a year ago.
TTEC’s board has initiated a review of strategic alternatives for TTEC Digital after earlier retaining PJT Partners to assist in evaluating strategic and capital-market alternatives. Tuchman said the company wants to assess options that could help Digital realize its growth potential and maximize shareholder value.
The review has no definitive completion timetable and could result in multiple outcomes, including Digital remaining part of TTEC. Management said the Engage and Digital businesses would continue to have commercial collaboration and innovation ties over the long term.
Cash Flow, Debt Reduction and Outlook
Free cash flow was $39 million, compared with $86 million in the prior-year quarter. Wagers said the year-over-year decline partly reflected the prior-year collection of a $21 million aged VAT receivable and a $5 million increase in capital expenditures.
Capital expenditures totaled $13 million, or 2.8% of revenue, up from $7 million, or 1.4% of revenue, a year earlier. The increase was primarily tied to accelerated purchases of computer equipment and accessories ahead of expected second-half price increases.
As of June 30, TTEC had $94 million in cash and $861 million in debt, resulting in net debt of $767 million. Net debt declined $37 million year over year and $58 million year to date. The company’s net leverage ratio under its credit facility was 3.85 times.
The company also secured covenant flexibility from its lending banks during the second quarter and in future periods. Wagers said the amendment, alongside cash on hand and positive cash-flow generation, provides liquidity to support TTEC’s operating plan.
TTEC revised its full-year Engage outlook, projecting a year-over-year revenue decline of 4.1% to 8% at the midpoint of the updated range. The segment’s adjusted EBITDA margin outlook moved to 10.1% from 10.6%, though management said the updated midpoint would still represent a 110-basis-point improvement over full-year 2025.
Management expects sequential revenue and margin growth in Engage during the third and fourth quarters, as well as second-half growth from the prior-year period. TTEC reiterated its original full-year 2026 guidance for Digital.
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.
