TTEC Holdings, Inc. (TTEC) Earnings

Management highlights

- Overall Business Context * Q2 2026 performance missed internal plans, but management remains confident in the company's long-term path. * The core strategic priorities are to improve revenue growth, enhance cost efficiency, and restore historic profitability levels. * The company reduced net debt by $36 million in Q2 2026, with a $58 million year-to-date net debt reduction as of the end of Q2. * The company secured covenant flexibility from its relationship banks to align the credit facility with the current performance outlook, and maintains adequate liquidity to support operations. - T-TECH Engage Operational Highlights * Management is focused on improving pipeline quality and sales execution, with early positive momentum from new strategic enterprise opportunities. * AI and automation are being deployed to improve operational productivity, simplify workflows, and expand operating capacity. * The company is streamlining operations, optimizing vendor and partner returns, and shifting select support functions to lower-cost delivery locations to reduce structural costs. * Rationalization of underperforming clients is underway, with a focus on preserving margin even as it creates near-term top-line pressure. - T-TECH Digital Operational Highlights * The segment is shifting its service mix toward high-demand client needs, including data-enabled, AI-powered CX solutions, observability, and security. * The segment leverages deep technical expertise and strategic partnerships with leading CX technology providers to address clients' unmet talent gaps for digital transformation. * Excluding legacy CCAS practices, professional services has delivered sustained double-digit year-over-year growth, supported by an expanded network of more than a dozen strategic CX partners. * The T-TECH board of directors has initiated a review of strategic alternatives for T-TECH Digital to maximize shareholder value and help the segment reach its full growth potential. All outcomes, including the segment remaining part of T-TECH, are under consideration, and commercial collaboration between Engage and Digital will continue long-term regardless of outcome.

Guidance

- For the consolidated business, full-year 2026 guidance has been updated to reflect revised outlooks for the Engage segment, while the Digital segment's original guidance is maintained. - For T-TECH Engage, full-year 2026 revenue is now expected to decline 4.1% to 8% year-over-year at the midpoint of the updated guidance range, a downward revision from prior outlooks. Adjusted EBITDA margin guidance for 2026 is revised down to 10.1% from 10.6%, though the midpoint still represents a 110 basis point improvement over full-year 2025 results. Management expects sequential quarter-over-quarter revenue growth in H2 2026, with full H2 growth over the prior year period. - For T-TECH Digital, management reaffirms the original full-year 2026 guidance, in line with Q2 performance meeting internal targets. - Full-year 2026 capital expenditure guidance remains unchanged, despite higher-than-anticipated spending in Q2 due to timing of investments.

Segment performance

Consolidated Q2 2026 revenue: $455 million, a 11.3% year-over-year decrease. Adjusted EBITDA: $39 million (8.7% of revenue), down from $52 million (10.1% of revenue) YoY. Operating income: $26 million (5.7% of revenue), down from $37 million (7.2% of revenue) YoY. EPS: $0.03, down from $0.22 YoY. 1. T-TECH Engage: Q2 2026 revenue is $351 million, an decrease of 12.1% YoY, contributing 77.1% of total consolidated revenue. Operating income is $14 million, which accounts for 3.8% of the segment's revenue, compared to $18 million (4.6% of revenue) YoY. Backlog stands at $1.5 billion, equal to 98% of 2026 full-year updated revenue guidance at the midpoint of the range, down from 101% YoY. 12-month trailing revenue retention rate is 93%, up from 88% YoY. 2. T-TECH Digital: Q2 2026 revenue is $104 million, a decrease of 8.5% YoY, contributing 22.9% of total consolidated revenue. After adjusting for a 2025 one-time $4 million IP software sale, the revenue decline is 4.6% YoY. Operating income is $12 million, equal to 11.7% of the segment's revenue, compared to $18 million (16.1% of revenue) YoY. After adjusting for the 2025 one-time gain, 2025 operating income was $14 million (13% of revenue). Backlog is $364 million, equal to 85% of 2026 full-year revenue guidance at the midpoint of the range, up from 83% YoY. Excluding legacy CCAS practices, professional services grew 13% YoY, following 15.3% growth in Q1.

Risks & headwinds

- Underperformance concentrated in a small number of public sector and TMT clients for the Engage segment created larger-than-anticipated Q2 2026 revenue shortfalls that led to a downward full-year guidance revision. - New enterprise deals for Engage are elongating, with clients starting at smaller initial volumes to validate performance before scaling, creating slower revenue growth than previously projected. - Digital segment new deals have smaller average sizes and longer closing timelines as clients evaluate transformation investments, requiring more rapid scaling of new high-growth practices to offset declines in legacy CCAS revenue. - The company operates with a higher normalized effective tax rate in 2026, driven by a valuation allowance against U.S. losses, which negatively impacts net income per share. - The net leverage ratio as of Q2 2026 is 3.85x under the credit facility's definition, requiring covenant flexibility from banks to align with the current performance outlook.

Analyst Q&A

• Q: What is the status and process of profitability rationalization for low-economy clients in Engage, and how much pushback does management expect? /

  A: Management is currently reviewing roughly a high single-digit number of Engage clients, assessing profitability at the client and line of business level. The process is collaborative, with management working with clients to adjust contract terms and operating models to improve margins, often shifting work to lower-cost offshore delivery. While the rationalization creates near-term top-line pressure, clients that do not reach an agreement will be exited professionally, and some previously exited clients have returned after finding competitors could not deliver on promised terms. The effort only impacts a small share of the overall business.

• Q: Why is the board initiating a strategic alternatives review for T-TECH Digital at this time? /

  A: Digital has strong current performance, growing momentum from its new AI and CX transformation offerings, and favorable market valuations for AI-related businesses. The board wants to gauge current market value for the segment to identify options that will maximize shareholder value and allow Digital to reach its full growth potential. Any transaction completed would retain close commercial and go-to-market collaboration between Digital and the Engage business.

• Q: Is the Q2 Engage revenue shortfall concentrated in specific verticals, and how strong is the current pipeline? /

  A: The majority of the Q2 shortfall comes from just two clients, a large public sector client impacted by third-party technology performance issues, and a smaller technology client. Management confirms the pipeline is strong, with a backlog of $1.5 billion equal to 98% of full-year guidance at the midpoint, and expects sequential revenue growth in Q3 and Q4, with H2 2026 growth over the prior year. The updated guidance reflects this pipeline strength and management has clear line of sight to hitting the revised targets.

• Q: What is the expected trajectory of additional restructuring costs to right-size the cost structure? /

  A: Restructuring activity will continue at roughly the same trajectory seen over the past four to six quarters, consistent with the first half of 2026. The company already implemented major cost actions in 2025 that are annualized into 2026, so no large unexpected incremental restructuring costs are anticipated for the remainder of the year.