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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☑ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-11919
TTEC Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
|
84-1291044 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization) |
|
Identification No.) |
6312 South Fiddler’s Green Circle, Suite 100N
Greenwood Village, Colorado 80111
(Address of principal executive offices)
Registrant’s telephone number, including area code: (303) 397-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class |
Trading Symbol |
Name of each exchange on which registered |
Common stock of TTEC Holdings, Inc., |
TTEC |
NASDAQ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ |
Accelerated Filer ☑ |
Non-accelerated Filer ☐ |
Smaller Reporting Company ☐ |
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Emerging Growth Company ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
As of July 31, 2024, there were 47,723,922 shares of the registrant’s common stock outstanding.
TTEC HOLDINGS, INC. AND SUBSIDIARIES
JUNE 30, 2024 FORM 10-Q
TABLE OF CONTENTS
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Page No. |
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Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (unaudited) |
1 |
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2 |
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3 |
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Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited) |
4 |
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5 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except share amounts)
(Unaudited)
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June 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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Current assets |
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|
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Cash and cash equivalents |
|
$ |
79,780 |
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$ |
172,747 |
|
Accounts receivable, net of allowance of $4,757 and $2,248 |
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381,685 |
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394,868 |
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Prepaids and other current assets |
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117,081 |
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95,064 |
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Income and other tax receivables |
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24,872 |
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18,524 |
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Total current assets |
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603,418 |
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681,203 |
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Long-term assets |
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|
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Property, plant and equipment, net |
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149,114 |
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191,003 |
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Assets held for sale |
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29,449 |
|
|
— |
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Operating lease assets |
|
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106,185 |
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121,574 |
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Goodwill |
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573,625 |
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808,988 |
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Deferred tax assets, net |
|
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12,439 |
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38,151 |
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Other intangible assets, net |
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181,338 |
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198,433 |
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Income and other tax receivables, long-term |
|
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37,194 |
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44,673 |
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Other long-term assets |
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99,859 |
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101,573 |
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Total long-term assets |
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1,189,203 |
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1,504,395 |
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Total assets |
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$ |
1,792,621 |
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$ |
2,185,598 |
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LIABILITIES, STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
87,115 |
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$ |
96,577 |
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Accrued employee compensation and benefits |
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132,824 |
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146,184 |
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Other accrued expenses |
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48,268 |
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32,217 |
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Income tax payable |
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1,159 |
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4,909 |
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Deferred revenue |
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77,783 |
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81,171 |
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Current operating lease liabilities |
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35,650 |
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38,271 |
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Other current liabilities |
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4,857 |
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3,698 |
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Total current liabilities |
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387,656 |
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403,027 |
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Long-term liabilities |
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Line of credit |
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930,000 |
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995,000 |
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Deferred tax liabilities, net |
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13,277 |
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3,137 |
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Non-current income tax payable |
|
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— |
|
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— |
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Non-current operating lease liabilities |
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83,855 |
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96,809 |
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Other long-term liabilities |
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73,657 |
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72,083 |
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Total long-term liabilities |
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1,100,789 |
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1,167,029 |
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Total liabilities |
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1,488,445 |
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1,570,056 |
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Commitments and contingencies (Note 10) |
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Stockholders’ equity |
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Preferred stock; $0.01 par value; 10,000,000 shares authorized; zero shares outstanding as of June 30, 2024 and December 31, 2023 |
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— |
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— |
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Common stock; $0.01 par value; 150,000,000 shares authorized; 47,608,318 and 47,427,200 shares outstanding as of June 30, 2024 and December 31, 2023, respectively |
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476 |
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|
474 |
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Additional paid-in capital |
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414,728 |
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407,415 |
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Treasury stock at cost; 34,443,935 and 34,625,053 shares as of June 30, 2024 and December 31, 2023, respectively |
|
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(586,812) |
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(589,807) |
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Accumulated other comprehensive income (loss) |
|
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(107,581) |
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(89,876) |
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Retained earnings |
|
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565,738 |
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870,429 |
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Noncontrolling interest |
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17,627 |
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16,907 |
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Total stockholders’ equity |
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304,176 |
|
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615,542 |
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Total liabilities, stockholders’ equity and mezzanine equity |
|
$ |
1,792,621 |
|
$ |
2,185,598 |
|
The accompanying notes are an integral part of these consolidated financial statements.
1
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(Amounts in thousands, except per share amounts)
(Unaudited)
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Three months ended June 30, |
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Six months ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
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$ |
534,085 |
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$ |
600,394 |
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$ |
1,110,723 |
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$ |
1,233,680 |
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Operating expenses |
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Cost of services (exclusive of depreciation and amortization presented separately below) |
|
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417,890 |
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464,686 |
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871,708 |
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947,364 |
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Selling, general and administrative |
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73,726 |
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75,338 |
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148,301 |
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149,348 |
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Depreciation and amortization |
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25,071 |
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24,946 |
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50,216 |
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50,773 |
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Restructuring charges, net |
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5,095 |
|
|
1,474 |
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5,344 |
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|
3,527 |
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Impairment losses |
|
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236,716 |
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2,652 |
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236,856 |
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6,959 |
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Total operating expenses |
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758,498 |
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569,096 |
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1,312,425 |
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1,157,971 |
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Income (loss) from operations |
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(224,413) |
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|
31,298 |
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(201,702) |
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|
75,709 |
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|
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|
|
|
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Other income (expense) |
|
|
|
|
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|
|
|
|
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Interest income |
|
|
414 |
|
|
1,126 |
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|
1,397 |
|
|
2,290 |
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Interest expense |
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(20,431) |
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|
(18,991) |
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|
(41,502) |
|
|
(36,382) |
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Other income (expense), net |
|
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1,788 |
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(3,574) |
|
|
1,994 |
|
|
(2,919) |
|
Total other income (expense) |
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(18,229) |
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|
(21,439) |
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(38,111) |
|
|
(37,011) |
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|
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Income (loss) before income taxes |
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(242,642) |
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|
9,859 |
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(239,813) |
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38,698 |
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|
|
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|
|
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|
|
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Provision for income taxes |
|
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(54,126) |
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(6,102) |
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(56,455) |
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|
(14,024) |
|
|
|
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|
|
|
|
|
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Net income (loss) |
|
|
(296,768) |
|
|
3,757 |
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|
(296,268) |
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|
24,674 |
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|
|
|
|
|
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|
|
|
|
|
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Net income (loss) attributable to noncontrolling interest |
|
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(2,771) |
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|
(2,546) |
|
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(5,576) |
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|
(4,816) |
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Net income (loss) attributable to TTEC stockholders |
|
$ |
(299,539) |
|
$ |
1,211 |
|
$ |
(301,844) |
|
$ |
19,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
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|
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Net income (loss) |
|
$ |
(296,768) |
|
$ |
3,757 |
|
$ |
(296,268) |
|
$ |
24,674 |
|
Foreign currency translation adjustments |
|
|
(7,381) |
|
|
19,367 |
|
|
(11,218) |
|
|
28,765 |
|
Derivative valuation, gross |
|
|
(8,854) |
|
|
712 |
|
|
(9,164) |
|
|
9,573 |
|
Derivative valuation, tax effect |
|
|
2,304 |
|
|
(187) |
|
|
2,379 |
|
|
(2,497) |
|
Other, net of tax |
|
|
91 |
|
|
108 |
|
|
212 |
|
|
180 |
|
Total other comprehensive income (loss) |
|
|
(13,840) |
|
|
20,000 |
|
|
(17,791) |
|
|
36,021 |
|
Total comprehensive income (loss) |
|
|
(310,608) |
|
|
23,757 |
|
|
(314,059) |
|
|
60,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Comprehensive income attributable to noncontrolling interest |
|
|
(2,779) |
|
|
(2,560) |
|
|
(5,490) |
|
|
(4,385) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to TTEC stockholders |
|
$ |
(313,387) |
|
$ |
21,197 |
|
$ |
(319,549) |
|
$ |
56,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
47,564 |
|
|
47,264 |
|
|
47,498 |
|
|
47,249 |
|
Diluted |
|
|
47,623 |
|
|
47,453 |
|
|
47,585 |
|
|
47,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to TTEC stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(6.30) |
|
$ |
0.03 |
|
$ |
(6.35) |
|
$ |
0.42 |
|
Diluted |
|
$ |
(6.29) |
|
$ |
0.03 |
|
$ |
(6.34) |
|
$ |
0.42 |
|
The accompanying notes are an integral part of these consolidated financial statements.
2
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity and Mezzanine Equity
(Amounts in thousands)
(Unaudited)
Three months ended June 30, 2023 and 2024
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Stockholders’ Equity of the Company |
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|
|
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Accumulated |
|
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|
|
|
|
|
|
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|
|
|
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|
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Other |
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|
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Common Stock |
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Treasury |
|
Additional |
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Comprehensive |
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Retained |
|
Noncontrolling |
|
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|
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Mezzanine |
|
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Shares |
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Amount |
|
Stock |
|
Paid-in Capital |
|
Income (Loss) |
|
Earnings |
|
interest |
|
Total Equity |
|
Equity |
|
||||||||
Balance as of March 31, 2023 |
|
47,252 |
|
$ |
473 |
|
$ |
(592,685) |
|
$ |
391,294 |
|
$ |
(110,389) |
|
$ |
905,309 |
|
$ |
16,836 |
|
$ |
610,838 |
|
$ |
3,936 |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,209 |
|
|
2,486 |
|
|
3,695 |
|
|
61 |
|
Dividends to shareholders ($0.00 per common share) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Dividends distributed to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,520) |
|
|
(2,520) |
|
|
— |
|
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
19,293 |
|
|
— |
|
|
74 |
|
|
19,367 |
|
|
— |
|
Derivatives valuation, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
525 |
|
|
— |
|
|
— |
|
|
525 |
|
|
— |
|
Vesting of restricted stock units |
|
24 |
|
|
— |
|
|
379 |
|
|
(498) |
|
|
— |
|
|
— |
|
|
— |
|
|
(119) |
|
|
— |
|
Equity-based compensation expense |
|
— |
|
|
— |
|
|
— |
|
|
5,648 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,648 |
|
|
— |
|
Other, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
108 |
|
|
— |
|
|
— |
|
|
108 |
|
|
— |
|
Balance as of June 30, 2023 |
|
47,276 |
|
$ |
473 |
|
$ |
(592,306) |
|
$ |
396,444 |
|
$ |
(90,463) |
|
$ |
906,518 |
|
$ |
16,876 |
|
$ |
637,542 |
|
$ |
3,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity of the Company |
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Treasury |
|
Additional |
|
Comprehensive |
|
Retained |
|
Noncontrolling |
|
|
|
|
Mezzanine |
|
|||||||||
|
|
Shares |
|
Amount |
|
Stock |
|
Paid-in Capital |
|
Income (Loss) |
|
Earnings |
|
interest |
|
Total Equity |
|
Equity |
|
||||||||
Balance as of March 31, 2024 |
|
47,447 |
|
$ |
474 |
|
$ |
(589,475) |
|
$ |
412,768 |
|
$ |
(93,733) |
|
$ |
865,277 |
|
$ |
17,098 |
|
$ |
612,409 |
|
$ |
— |
|
Net (loss) income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(299,539) |
|
|
2,771 |
|
|
(296,768) |
|
|
— |
|
Dividends to shareholders ($0.00 per common share) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Dividends distributed to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,250) |
|
|
(2,250) |
|
|
— |
|
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,389) |
|
|
— |
|
|
8 |
|
|
(7,381) |
|
|
— |
|
Derivatives valuation, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(6,550) |
|
|
— |
|
|
— |
|
|
(6,550) |
|
|
— |
|
Vesting of restricted stock units |
|
161 |
|
|
2 |
|
|
2,663 |
|
|
(3,144) |
|
|
— |
|
|
— |
|
|
— |
|
|
(479) |
|
|
— |
|
Equity-based compensation expense |
|
— |
|
|
— |
|
|
— |
|
|
5,104 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,104 |
|
|
— |
|
Other, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
91 |
|
|
— |
|
|
— |
|
|
91 |
|
|
— |
|
Balance as of June 30, 2024 |
|
47,608 |
|
$ |
476 |
|
$ |
(586,812) |
|
$ |
414,728 |
|
$ |
(107,581) |
|
$ |
565,738 |
|
$ |
17,627 |
|
$ |
304,176 |
|
$ |
— |
|
Six months ended June 30, 2023 and 2024
|
|
Stockholders’ Equity of the Company |
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Treasury |
|
Additional |
|
Comprehensive |
|
Retained |
|
Noncontrolling |
|
|
|
|
Mezzanine |
|
|||||||||
|
|
Shares |
|
Amount |
|
Stock |
|
Paid-in Capital |
|
Income (Loss) |
|
Earnings |
|
interest |
|
Total Equity |
|
Equity |
|
||||||||
Balance as of December 31, 2022 |
|
47,224 |
|
$ |
472 |
|
$ |
(593,164) |
|
$ |
367,673 |
|
$ |
(126,301) |
|
$ |
911,233 |
|
$ |
18,192 |
|
$ |
578,105 |
|
$ |
55,645 |
|
Noncontrolling interest adjustment due to buyout |
|
— |
|
|
— |
|
|
— |
|
|
20,457 |
|
|
— |
|
|
— |
|
|
— |
|
|
20,457 |
|
|
(20,457) |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
19,857 |
|
|
4,202 |
|
|
24,059 |
|
|
614 |
|
Dividends to shareholders ($0.52 per common share) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(24,572) |
|
|
— |
|
|
(24,572) |
|
|
— |
|
Buyout of noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(31,619) |
|
Dividends distributed to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,701) |
|
|
(5,701) |
|
|
(186) |
|
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
28,582 |
|
|
— |
|
|
183 |
|
|
28,765 |
|
|
— |
|
Derivatives valuation, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,076 |
|
|
— |
|
|
— |
|
|
7,076 |
|
|
— |
|
Vesting of restricted stock units |
|
52 |
|
|
1 |
|
|
858 |
|
|
(1,488) |
|
|
— |
|
|
— |
|
|
— |
|
|
(629) |
|
|
— |
|
Equity-based compensation expense |
|
— |
|
|
— |
|
|
— |
|
|
9,802 |
|
|
— |
|
|
— |
|
|
— |
|
|
9,802 |
|
|
— |
|
Other, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
180 |
|
|
— |
|
|
— |
|
|
180 |
|
|
— |
|
Balance as of June 30, 2023 |
|
47,276 |
|
$ |
473 |
|
$ |
(592,306) |
|
$ |
396,444 |
|
$ |
(90,463) |
|
$ |
906,518 |
|
$ |
16,876 |
|
$ |
637,542 |
|
$ |
3,997 |
|
|
|
Stockholders’ Equity of the Company |
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Treasury |
|
Additional |
|
Comprehensive |
|
Retained |
|
Noncontrolling |
|
|
|
|
Mezzanine |
|
|||||||||
|
|
Shares |
|
Amount |
|
Stock |
|
Paid-in Capital |
|
Income (Loss) |
|
Earnings |
|
interest |
|
Total Equity |
|
Equity |
|
||||||||
Balance as of December 31, 2023 |
|
47,427 |
|
$ |
474 |
|
$ |
(589,807) |
|
$ |
407,415 |
|
$ |
(89,876) |
|
$ |
870,429 |
|
$ |
16,907 |
|
$ |
615,542 |
|
$ |
— |
|
Net (loss) income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(301,844) |
|
|
5,576 |
|
|
(296,268) |
|
|
— |
|
Dividends to shareholders ($0.06 per common share) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,847) |
|
|
— |
|
|
(2,847) |
|
|
— |
|
Dividends distributed to noncontrolling interest |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,770) |
|
|
(4,770) |
|
|
— |
|
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(11,132) |
|
|
— |
|
|
(86) |
|
|
(11,218) |
|
|
— |
|
Derivatives valuation, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(6,785) |
|
|
— |
|
|
— |
|
|
(6,785) |
|
|
— |
|
Vesting of restricted stock units |
|
181 |
|
|
2 |
|
|
2,995 |
|
|
(3,603) |
|
|
— |
|
|
— |
|
|
— |
|
|
(606) |
|
|
— |
|
Equity-based compensation expense |
|
— |
|
|
— |
|
|
— |
|
|
10,916 |
|
|
— |
|
|
— |
|
|
— |
|
|
10,916 |
|
|
— |
|
Other, net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
212 |
|
|
— |
|
|
— |
|
|
212 |
|
|
— |
|
Balance as of June 30, 2024 |
|
47,608 |
|
$ |
476 |
|
$ |
(586,812) |
|
$ |
414,728 |
|
$ |
(107,581) |
|
$ |
565,738 |
|
$ |
17,627 |
|
$ |
304,176 |
|
$ |
— |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
|
|
Six Months Ended June 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(296,268) |
|
$ |
24,674 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
50,216 |
|
|
50,773 |
|
Amortization of contract acquisition costs |
|
|
677 |
|
|
1,158 |
|
Amortization of debt issuance costs |
|
|
985 |
|
|
534 |
|
Imputed interest expense and fair value adjustments to contingent consideration |
|
|
(1,047) |
|
|
6,762 |
|
Provision for credit losses |
|
|
2,644 |
|
|
1,704 |
|
Loss on disposal of assets |
|
|
1,252 |
|
|
856 |
|
Loss on dissolution of subsidiary |
|
|
— |
|
|
301 |
|
Impairment losses |
|
|
236,856 |
|
|
6,959 |
|
Deferred income taxes |
|
|
37,148 |
|
|
(10,390) |
|
Excess tax benefit from equity-based awards |
|
|
1,732 |
|
|
243 |
|
Equity-based compensation expense |
|
|
10,916 |
|
|
9,802 |
|
Loss on foreign currency derivatives |
|
|
145 |
|
|
247 |
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
8,315 |
|
|
14,645 |
|
Prepaids and other assets |
|
|
(10,804) |
|
|
20,324 |
|
Accounts payable and accrued expenses |
|
|
(996) |
|
|
43,429 |
|
Deferred revenue and other liabilities |
|
|
(8,126) |
|
|
(27,072) |
|
Net cash provided by operating activities |
|
|
33,645 |
|
|
144,949 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Proceeds from sale of long-lived assets |
|
|
116 |
|
|
28 |
|
Purchases of property, plant and equipment, net of acquisitions |
|
|
(27,682) |
|
|
(32,954) |
|
Net cash used in investing activities |
|
|
(27,566) |
|
|
(32,926) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from/(repayments of) line of credit, net |
|
|
(65,000) |
|
|
(45,000) |
|
Payments on other debt |
|
|
(1,379) |
|
|
(1,217) |
|
Payments of contingent consideration and hold back payments to acquisitions |
|
|
— |
|
|
(37,676) |
|
Dividends paid to shareholders |
|
|
(2,847) |
|
|
(24,572) |
|
Payments to noncontrolling interest |
|
|
(4,770) |
|
|
(5,887) |
|
Tax payments related to issuance of restricted stock units |
|
|
(606) |
|
|
(629) |
|
Payments of debt issuance costs |
|
|
(1,100) |
|
|
— |
|
Net cash (used in)/provided by financing activities |
|
|
(75,702) |
|
|
(114,981) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(4,612) |
|
|
1,275 |
|
|
|
|
|
|
|
|
|
Decrease in cash, cash equivalents and restricted cash |
|
|
(74,235) |
|
|
(1,683) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
173,905 |
|
|
167,064 |
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
99,670 |
|
$ |
165,381 |
|
|
|
|
|
|
|
|
|
Supplemental disclosures |
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
39,919 |
|
$ |
35,794 |
|
Cash paid for income taxes |
|
$ |
28,704 |
|
$ |
23,874 |
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
Acquisition of long-lived assets through finance leases |
|
$ |
184 |
|
$ |
1,560 |
|
Acquisition of equipment through increase in accounts payable, net |
|
$ |
(4,384) |
|
$ |
3,507 |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1)OVERVIEW AND BASIS OF PRESENTATION
Summary of Business
Founded in 1982, TTEC Holdings, Inc. (“TTEC”, “the Company”; pronounced “T-TEC”) is a global customer experience (“CX”) outsourcing partner for marquee and disruptive brands and public sector clients. The Company designs, builds, and operates technology-enabled customer experiences across digital and live interaction channels to help clients increase customer loyalty, revenue, and profitability. By combining digital solutions with data-driven service capabilities, the Company helps clients improve their customer satisfaction while lowering their total cost to serve. As of June 30, 2024, TTEC served approximately 740 clients across targeted industry verticals including financial services, healthcare, public sector, telecom, technology, media, travel and hospitality, automotive and retail.
The Company operates and reports its financial results of operation through two business segments:
| • | TTEC Digital is one of the largest CX technology providers and is focused exclusively on the intersection of Contact Center as a Service (CCaaS), Customer Relationship Management (CRM), and Artificial Intelligence (AI) and Analytics. A professional services organization comprised of software engineers, systems architects, data scientists and CX strategists, this segment creates and implements strategic CX transformation roadmaps; sells, operates, and provides managed services for cloud platforms and premise based CX technologies including Amazon Web Services (“AWS”), Cisco, Genesys, Google, and Microsoft; and creates proprietary IP to support industry specific and custom client needs. TTEC Digital serves clients across enterprise and small and medium sized business segments and has a dedicated unit with government technology certifications serving the public sector. |
| • | TTEC Engage provides the digitally enabled CX operational and managed services to support large, complex enterprise clients’ end-to-end customer interactions at scale. Tailored to meet industry-specific and business needs, this segment delivers data-driven omnichannel customer care, customer acquisition, growth, and retention services, tech support, trust and safety and back-office solutions. The segment’s technology-enabled delivery model covers the entire associate lifecycle including recruitment, onboarding, training, delivery, workforce management and quality assurance. |
TTEC demonstrates its market leadership through strategic collaboration across TTEC Digital and TTEC Engage when there is client demand and fit for the Company’s integrated solutions. This partnership is central to the Company’s ability to deliver comprehensive and transformational customer experience solutions to its clients, including integrated delivery, go-to-market and innovation for truly differentiated, market leading CX solutions.
During the second quarter of 2024, the combined TTEC Digital and TTEC Engage global operating platform delivered onshore, nearshore and offshore services in 22 countries on six continents – the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Colombia, Costa Rica, Egypt, Germany, Greece, Honduras, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, South Africa, Thailand, and the United Kingdom – with the help of approximately 54,000 customer care associates, consultants, technologists, and CX professionals.
Basis of Presentation
The Consolidated Financial Statements are comprised of the accounts of TTEC, its wholly owned subsidiaries, its 55% equity owned subsidiary Percepta, LLC, its 70% equity owned subsidiary First Call Resolution, LLC through March 31, 2023 and then 100% owned subsequently, and its 70% equity owned subsidiary Serendebyte, Inc. through December 31, 2023 and then 100% owned subsequently (see Note 2). All intercompany balances and transactions have been eliminated in consolidation.
5
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The unaudited Consolidated Financial Statements do not include all of the disclosures required by accounting principles generally accepted in the U.S. (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company and the consolidated results of operations and comprehensive income (loss) and the consolidated cash flows of the Company. All such adjustments are of a normal, recurring nature. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates including those related to derivatives and hedging activities, income taxes including the valuation allowance for deferred tax assets, litigation reserves, restructuring reserves, allowance for credit losses, contingent consideration, redeemable noncontrolling interest, and valuation of goodwill, long-lived and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.
Out-of-period Adjustment
The Consolidated Financial Statements for the three months ended June 30, 2023 included an adjustment of $14.2 million to other comprehensive income and deferred tax assets, to correct for an error identified by management during the preparation of the financial statements. This adjustment was to reflect the deferred tax impact of currency translation adjustments, of which $14.2 million related to prior annual fiscal periods. Management has determined that this error was not material to the historical financial statements in any individual period or in the aggregate and did not result in the previously issued financial statements being materially misstated. The impact to the three and six month periods ended June 30, 2023 was not material. As such, management recorded the correction as an out-of-period adjustment in the three months ended June 30, 2023.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of cash, primarily held in interest-bearing investments, and liquid short-term investments, which have original maturities of three months or less. Restricted cash includes cash whereby the Company’s ability to use the funds at any time is contractually limited or is generally designated for specific purposes arising out of certain contractual or other obligations.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets that sum to the amounts reported in the Consolidated Statement of Cash Flows (in thousands):
|
|
|
June 30, 2024 |
|
December 31, 2023 |
|
||
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
$ |
79,780 |
|
$ |
172,747 |
|
Restricted cash included in "Prepaid and other current assets" |
|
|
|
19,890 |
|
|
1,158 |
|
Total |
|
|
$ |
99,670 |
|
$ |
173,905 |
|
6
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Concentration of Credit Risk
The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and derivative instruments. Historically, the losses related to credit risk have been immaterial, but in light of recent economic headwinds the Company is reviewing and tightening its collection processes. The Company regularly monitors its credit risk to mitigate the possibility of current and future exposures resulting in a loss. The Company evaluates the creditworthiness of its clients prior to entering into an agreement to provide services and as necessary through the life of the client relationship. The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative hedging activities, as the Company diversifies its activities across eight investment-grade financial institutions.
Recently Adopted Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, “Reference Rate Reform” (Topic 848), which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform due to the anticipated cessation of the London Interbank Offered Rate (”LIBOR”). The ASU is effective from March 12, 2020, may be applied prospectively and could impact the accounting for LIBOR provisions in the Company’s credit facility agreement. In addition, in January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform – Scope,” which clarified the scope of FASB Accounting Standards Codification (“ASC”) 848 relating to contract modifications. The Company adopted the standard effective April 1, 2023 and the adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows.
Other Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting - Improvements to Reportable Segment Disclosures” which relates to disclosures regarding a public entity’s reportable segments and provides more detailed information about a reportable segment’s expenses. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with retrospective application required. The Company is assessing the effect on its annual consolidated financial statement disclosures; however, adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements.
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” to enhance the transparency and decision usefulness of income tax disclosures. The ASU is effective for fiscal years beginning after December 15, 2024, with retrospective application permitted. The Company is assessing the effect on its annual consolidated financial statement disclosures; however, adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements.
(2)ACQUISITIONS AND DIVESTITURES
Serendebyte
In connection with the acquisition by TTEC Digital, LLC of a 70% interest in Serendebyte Inc. (“Serendebyte”), Serendebyte’s founder exercised his put rights with respect to the remaining 30% interest in Serendebyte on December 8, 2023, but failed to fulfill the agreed exercise prerequisites. Pending the resolution of the put exercise formalities by Serendebyte’s founder, TTEC Digital is not able to determine the final purchase price for the remaining 30% buyout agreement.
In connection with triggering the option, on December 8, 2023, a $0.3 million accrual was reclassified from Redeemable noncontrolling interest to Accrued expenses and the remaining balance was reclassified to Additional paid in capital.
7
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
FCR
Pursuant to the Membership Interest Purchase Agreement of October 26, 2019 between Ortana Holdings, Inc. and TTEC Services Corporation for the acquisition by TTEC of 70% interest in First Call Resolution, LLC (“FCR” and “FCR MIPA”, respectively), Ortana Holdings exercised its put rights in January 2023, which required TTEC to acquire Ortana Holdings’ remaining 30% interest in FCR. The purchase price for the remaining 30% interest was determined based on the express provisions of the FCR MIPA and was based on FCR’s performance during 2022. The buyout agreement was signed on April 4, 2023 and reflected a buyout purchase of $22.4 million.
In connection with the triggering of the option, as of March 31, 2023, the $22.4 million purchase price was reclassified from Redeemable noncontrolling interest to Accrued expenses and the remaining balance of $20.5 million was reclassified to Additional paid in capital. In February 2023, a $9.2 million payment related to excess cash distribution was completed and in April 2023 the final payment of $22.4 million was completed.
Certain Assets of Faneuil
On April 1, 2022, the Company completed an asset acquisition through its subsidiary TTEC Government Solutions LLC, of certain public sector citizen experience contracts in the transportation infrastructure and healthcare exchange industries from Faneuil, Inc., a subsidiary of ALJ Regional Holdings, Inc. (“the Faneuil Transaction”). The acquired business is operated as part of the TTEC Engage segment and was fully consolidated into the financial statements of TTEC. The Faneuil Transaction was recorded as a business combination under ASC 805, Business Combinations, with identifiable assets acquired and liabilities assumed recorded at their estimated fair values as of the acquisition date.
Total cash paid at the time of acquisition was $142.4 million. In addition, Faneuil granted to TTEC Government Solutions LLC a three-year call right and right of first offer to purchase certain other assets of Faneuil in its utilities and commercial healthcare verticals as well as certain proprietary technology. The Faneuil Transaction includes two contingent payments which were anticipated to be paid in early 2024 and were based on the revenue and EBITDA performance of one contract and one potential contract.
The fair value of the two contingent payments was estimated using a Monte Carlo model. The model was based on current expected EBITDA performance for the two specific client programs, a discount rate of 7.6% related to revenue and a discount rate of 19.3% related to EBITDA, a volatility rate of 20%, and an adjusted risk-free rate of 1.7%. The potential payments ranged from a minimum of zero to an unlimited maximum. Based on the model, a combined $8.8 million expected future payment was calculated and recorded as of the acquisition date. During 2022, a $2.9 million net gain was recorded related to fair value adjustments for the estimated contingent payments based on changes in estimated EBITDA, the timing of cash flows and market interest rates which resulted in an updated discount factor for one contract, and a complete reduction for the second contract as it was not awarded to the Company. During the second quarter of 2023, an amendment to the agreement was signed which modified the contingent payment to a minimum payment of $7.4 million and a maximum payment of $10.4 million. An initial payment of $7.4 million was completed in May 2023. During 2023, a combined $3.0 million net expense was recorded related to fair value adjustments for the estimated contingent payment based on changes in estimated EBITDA, the timing of cash flows and market interest rate changes. These benefits (expenses) were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss). For the six months ended June 30, 2024, a $1.0 million net gain was recorded related to fair value adjustments for the estimated contingent payment based on changes in estimated EBITDA, the timing of cash flows and market interest rate changes. As of June 30, 2024, the contingent payment is accrued at $0.4 million and is included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.
8
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Faneuil Transaction included a call option providing the right but not the obligation to purchase additional assets in the utilities and commercial healthcare verticals based on trailing twelve-month revenue plus an additional earn-out payment based on newly added contracts. A second call option provided the right to purchase a software intangible asset and related support functions based on trailing twelve-month revenue. These call options were valued based on information including the call right and the exclusivity period and a $270 thousand asset was recorded as of the acquisition date which was included in Other long-term assets in the Consolidated Balance Sheets. During the fourth quarter of 2022 and the first quarter of 2023, reductions in fair value of $52 thousand and $140 thousand, respectively, were recorded due to changes in estimated revenue, which were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss). During the second quarter of 2023, an amendment to the agreement was signed which cancelled the option to purchase the additional assets in certain verticals, and thus the remaining $78 thousand accrual was removed and included in Other income. As of June 30, 2024, the fair value is zero.
The Faneuil Transaction included an indemnity escrow which was disbursed as a holdback payment on the acquisition date. The indemnity payments related to real estate and technology funds that were spent post-close related to various IT upgrades and real estate expenses, and indemnity related to potential future employee wage increases. The indemnity payments were valued based on a weighted average of several current scenarios and a receivable of $10.4 million was recorded as of the acquisition date. During the third and fourth quarters of 2022 and the first quarter of 2023, reductions in the fair value were calculated and a $4.4 million expense, a $0.2 million expense and a $2.5 million expense, respectively, were recorded related to fair value adjustments for the receivable based on current information reflecting a better outcome with the contract negotiations and lower anticipated IT and facilities spending. During the second quarter of 2023, the payout value related to the IT and Facilities reimbursement was finalized at $1.3 million, and an expense of $1.9 million was recorded. The payment was received by TTEC in May 2023 and as of June 30, 2023, the receivables were reduced to zero on the Consolidated Balance Sheet. The reductions in fair value related expenses were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).
A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible assets. The significant assumptions utilized in calculating the fair value of the customer relationships intangible assets were the customer attrition rate, revenue growth rates, forecasted EBITDA, contributory asset charge, and the discount rate.
9
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
|
|
Acquisition Date |
|
|
|
|
Fair Value |
|
|
Cash |
|
$ |
— |
|
Accounts receivable, net |
|
|
704 |
|
Prepaid and other assets |
|
|
8,420 |
|
Net fixed assets |
|
|
5,622 |
|
Right of use lease assets |
|
|
17,778 |
|
Other assets |
|
|
2,572 |
|
Customer relationships |
|
|
61,310 |
|
Goodwill |
|
|
75,902 |
|
|
|
$ |
172,308 |
|
|
|
|
|
|
Accrued employee compensation |
|
$ |
202 |
|
Accrued expenses |
|
|
2,763 |
|
Right of use lease liability – current |
|
|
3,129 |
|
Right of use lease liability – non-current |
|
|
14,092 |
|
Deferred income |
|
|
811 |
|
Other liabilities |
|
|
8,891 |
|
|
|
$ |
29,888 |
|
|
|
|
|
|
Total purchase price |
|
$ |
142,420 |
|
In the first quarter of 2023, the Company finalized the valuation of Faneuil for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required.
The Faneuil customer relationships are being amortized over a useful life of 10 years. The goodwill recognized from the Faneuil acquisition is attributable to, but not limited to, the acquired workforce and expected synergies with the TTEC Engage segment. The tax basis of the acquired intangibles and goodwill will be materially deductible for income tax purposes. The acquired goodwill and intangibles and operating results of Faneuil are reported within the TTEC Engage segment from the date of acquisition.
Assets Held for Sale
In the second quarter of 2024, the Company reclassified $29.4 million from Property, plant and equipment, net to Assets held for sale as the Company expects to sell its former headquarters building in Englewood, Colorado within the next twelve months. This included $16.7 million from leasehold improvements, $6.7 million from buildings, $5.9 million from land, and $0.1 million from other Property, plant and equipment categories. These assets are allocated 85% to the TTEC Engage segment and 15% to the TTEC Digital segment. Funds received will be used to reduce the Company’s existing debt. The Company ceased depreciation on the assets upon reclassification. The estimated fair value less costs to sell the assets held for sale exceeded their carrying value as of the quarter ended June 30, 2024 and no impairment was considered necessary.
10
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(3)SEGMENT INFORMATION
The Company reports the following two segments:
TTEC Digital and the CX Technology Services Industry
TTEC Digital buyers are seeking solutions in several areas including cost optimization, migration from outdated legacy platforms to more agile cloud environments, lack of CX talent and expertise and a need for a practical way forward with AI. TTEC Digital takes a technology agnostic approach to these challenges and focuses on designing and delivering solutions specific to each client’s specifications. TTEC Digital has entered into strategic partnerships with the leading CX software vendors including Genesys, Microsoft, Cisco, AWS and Google which positions TTEC Digital to support the majority of CX platform requirements.
TTEC Digital’s solutions are built to respond to market needs for both enterprise and small and medium-sized business clients. AI design and delivery capabilities are woven across all four of the following pillars.
| • | Professional Services: CX and AI solution planning, design, and implementation services |
| • | Managed Services: Cloud application and premise support |
| • | CX Consulting, Analytics and AI: Transformation strategy and design, data science, engineering, and visualization |
| • | IP & Software: Custom software engineering through TTEC Digital’s IP and Software division |
The segment has a three-pronged go to market strategy that includes growing existing client relationships, partner channel motions and general market development. In 2023, TTEC Digital expanded its Hyderabad Innovation Studio in India with the goal of continuing to expand its offshore delivery capabilities, and currently approximately 41% of the staff are located in one of several offshore locations.
TTEC Engage and the CX Business Process Outsourcing Services Industry
The TTEC Engage segment’s solutions are built to respond to the following market needs for clients.
| • | Customer Support |
| • | Tech Support |
| • | Revenue Generation and Growth Services |
| • | Trust & Safety |
| • | AI Operations, including data annotation and labeling |
| • | Back-office Support |
TTEC Engage goes to market through a vertical approach with customized solutions that include industry-specific talent, technology, certifications, and capabilities. For example, in the Banking, Financial Services and Insurance (“BFSI”) vertical, we support several lines of business with customized offerings for retail banking, online banking, credit card, property and casualty and loans. In healthcare, the segment supports care, technical support, revenue generation and back-office capabilities to meet the needs of payer, provider, clinical and pharma clients.
The Company allocates to each segment its portion of corporate operating expenses. All intercompany transactions between the reported segments for the periods presented have been eliminated.
11
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following tables present certain financial data by segment (in thousands):
Three Months Ended June 30, 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
Income/ |
|
||
|
|
Gross |
|
Intersegment |
|
Net |
|
& |
|
(loss) from |
|
|||||
|
|
Revenue |
|
Sales |
|
Revenue |
|
Amortization |
|
Operations |
|
|||||
TTEC Digital |
|
$ |
116,368 |
|
$ |
— |
|
$ |
116,368 |
|
$ |
7,014 |
|
$ |
6,008 |
|
TTEC Engage |
|
|
417,717 |
|
|
— |
|
|
417,717 |
|
|
18,057 |
|
|
(230,421) |
|
Total |
|
$ |
534,085 |
|
$ |
— |
|
$ |
534,085 |
|
$ |
25,071 |
|
$ |
(224,413) |
|
Three Months Ended June 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
Income |
|
||
|
|
Gross |
|
Intersegment |
|
Net |
|
& |
|
from |
|
|||||
|
|
Revenue |
|
Sales |
|
Revenue |
|
Amortization |
|
Operations |
|
|||||
TTEC Digital |
|
$ |
117,585 |
|
$ |
— |
|
$ |
117,585 |
|
$ |
6,722 |
|
$ |
7,154 |
|
TTEC Engage |
|
|
482,809 |
|
|
— |
|
|
482,809 |
|
|
18,224 |
|
|
24,144 |
|
Total |
|
$ |
600,394 |
|
$ |
— |
|
$ |
600,394 |
|
$ |
24,946 |
|
$ |
31,298 |
|
Six Months Ended June 30, 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
Income/ |
|
||
|
|
Gross |
|
Intersegment |
|
Net |
|
& |
|
(loss) from |
|
|||||
|
|
Revenue |
|
Sales |
|
Revenue |
|
Amortization |
|
Operations |
|
|||||
TTEC Digital |
|
$ |
228,399 |
|
$ |
— |
|
$ |
228,399 |
|
$ |
14,064 |
|
$ |
9,296 |
|
TTEC Engage |
|
|
882,324 |
|
|
— |
|
|
882,324 |
|
|
36,152 |
|
|
(210,998) |
|
Total |
|
$ |
1,110,723 |
|
$ |
— |
|
$ |
1,110,723 |
|
$ |
50,216 |
|
$ |
(201,702) |
|
Six Months Ended June 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
Income |
|
||
|
|
Gross |
|
Intersegment |
|
Net |
|
& |
|
from |
|
|||||
|
|
Revenue |
|
Sales |
|
Revenue |
|
Amortization |
|
Operations |
|
|||||
TTEC Digital |
|
$ |
234,512 |
|
$ |
— |
|
$ |
234,512 |
|
$ |
13,583 |
|
$ |
7,939 |
|
TTEC Engage |
|
|
999,168 |
|
|
— |
|
|
999,168 |
|
|
37,190 |
|
|
67,770 |
|
Total |
|
$ |
1,233,680 |
|
$ |
— |
|
$ |
1,233,680 |
|
$ |
50,773 |
|
$ |
75,709 |
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
Capital Expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
TTEC Digital |
|
$ |
2,290 |
|
$ |
2,352 |
|
$ |
4,077 |
|
$ |
4,626 |
|
TTEC Engage |
|
|
11,919 |
|
|
16,933 |
|
|
23,605 |
|
|
28,328 |
|
Total |
|
$ |
14,209 |
|
$ |
19,285 |
|
$ |
27,682 |
|
$ |
32,954 |
|
|
|
|
June 30, 2024 |
|
December 31, 2023 |
|
||
Total Assets |
|
|
|
|
|
|
|
|
TTEC Digital |
|
|
$ |
798,832 |
|
$ |
815,488 |
|
TTEC Engage |
|
|
|
993,789 |
|
|
1,370,110 |
|
Total |
|
|
$ |
1,792,621 |
|
$ |
2,185,598 |
|
|
|
|
|
|
|
|
|
|
12
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents revenue based upon the geographic location where the services are provided (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
United States / Canada |
|
$ |
354,607 |
|
$ |
414,854 |
|
$ |
741,599 |
|
$ |
858,890 |
|
Philippines / Asia Pacific / India |
|
|
108,728 |
|
|
115,740 |
|
|
229,194 |
|
|
237,779 |
|
Europe / Middle East / Africa |
|
|
42,188 |
|
|
36,023 |
|
|
81,031 |
|
|
70,477 |
|
Latin America |
|
|
28,562 |
|
|
33,777 |
|
|
58,899 |
|
|
66,534 |
|
Total |
|
$ |
534,085 |
|
$ |
600,394 |
|
$ |
1,110,723 |
|
$ |
1,233,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS
The Company had one client that contributed in excess of 10% of total revenue for the six months ended June 30, 2024; this client operates in the automotive industry and is included in the TTEC Engage segment. This client contributed 11.0% and 10.1% of total revenue for the six months ended June 30, 2024 and 2023, respectively. In addition, the Company has other clients with aggregate revenue exceeding $100 million annually and the loss of one or more of these clients could have a material adverse effect on the Company’s business, operating results, or financial condition. To mitigate this risk, the Company’s business arrangements with these larger clients are structured as multiple contracts with different statements of work that are specific to a different line of business or service; each of these contracts have different durations and renewal dates and a revenue opportunity below the $100 million aggregate. In the first quarter of 2024, one of our larger financial services clients notified us that it is exiting one of the lines of business that we support.
To limit the Company’s credit risk with its clients, management performs periodic credit evaluations, maintains allowances for credit losses and may require pre-payment for services from certain clients whose financial stability or payment practices raise concern. Based on currently available information, management does not believe significant credit risk existed as of June 30, 2024.
Activity in the Company’s Allowance for credit losses consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
Balance, beginning of period |
|
$ |
2,065 |
|
$ |
5,078 |
|
$ |
2,248 |
|
$ |
3,524 |
|
Provision for credit losses |
|
|
2,675 |
|
|
(558) |
|
|
2,644 |
|
|
1,704 |
|
Uncollectible receivables written-off |
|
|
(6) |
|
|
(2,180) |
|
|
(156) |
|
|
(2,889) |
|
Effect of foreign currency |
|
|
23 |
|
|
7 |
|
|
21 |
|
|
8 |
|
Balance, end of period |
|
$ |
4,757 |
|
$ |
2,347 |
|
$ |
4,757 |
|
$ |
2,347 |
|
Accounts Receivable Factoring Agreement
The Company is party to an Uncommitted Receivables Purchase Agreement (“Agreement”) with BMO Bank, N.A. (“Bank”, or “BMO”), under the terms of which the Company may elect to sell, on a revolving basis, U.S. accounts receivables of certain clients at a discount to the Bank for cash on a limited recourse basis. The maximum amount of receivables that the Company may sell to the Bank at any given time shall not exceed $100 million. The sales of accounts receivable in accordance with the Agreement are reflected as a reduction of Accounts Receivable, net on the Consolidated Balance Sheets. The Company has retained no interest in the sold receivables but retains all collection responsibilities on behalf of the Bank. The discount on the accounts receivable sold will be recorded within Other expense, net in the Consolidated Statements of Comprehensive Income (Loss). The cash proceeds from this Agreement are included in the change in accounts receivable within the operating activities section of the Consolidated Statements of Cash Flow. The Agreement will be terminated in the third quarter of 2024.
13
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The balances related to the Agreement are as follows (in thousands):
|
|
June 30, 2024 |
|
December 31, 2023 |
|
||
Total accounts receivable factored |
|
$ |
61,956 |
|
$ |
99,994 |
|
|
|
|
|
|
|
|
|
Total amounts collected from clients not yet remitted to Bank |
|
$ |
19,890 |
|
$ |
1,158 |
|
The unremitted cash is restricted cash and is included within Prepaid and other current assets with the corresponding liability included in Accrued expenses on the Consolidated Balance Sheet. The Company has not recorded any servicing assets or liabilities as of June 30, 2024 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.
On July 21, 2023, BMO Financial Group completed its acquisition of Bank of the West from PNB Bank Paribas. The Agreement transitioned with the acquisition.
On January 2, 2024, the Company amended the arrangement to adjust the discount rate to reflect BMO’s updated market pricing levels and other minor items.
(5)GOODWILL
Goodwill consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
|
|
|
|
|
December 31, |
|
Acquisitions / |
|
|
|
|
Foreign |
|
June 30, |
|
||||
|
|
2023 |
|
Adjustments |
|
Impairments |
|
Currency |
|
2024 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TTEC Digital |
|
$ |
500,576 |
|
$ |
— |
|
$ |
— |
|
$ |
(740) |
|
$ |
499,836 |
|
TTEC Engage |
|
|
308,412 |
|
|
— |
|
|
(233,532) |
|
|
(1,091) |
|
|
73,789 |
|
Total |
|
$ |
808,988 |
|
$ |
— |
|
$ |
(233,532) |
|
$ |
(1,831) |
|
$ |
573,625 |
|
The Company performs an annual goodwill impairment assessment on December 1st, or more frequently, if indicators of impairment exist. The Company also monitors its reporting units for any triggering events and performs qualitative assessments of impairment indicators.
During the Company’s annual impairment testing as of December 1, 2023, the Company identified one reporting unit, TTEC Engage, being at risk for future impairment. The carrying value of Engage was $1,092.1 million at December 1, 2023, including approximately $308.4 million of goodwill.
During the first quarter of 2024, the Company concluded there were no triggering events and completed its qualitative assessment of impairment indicators, which included, among other things, an assessment of changes in macroeconomic conditions, comparison of the actual results to those forecasted in the most recent annual impairment test and performing sensitivity analysis on key assumptions.
In the second quarter of 2024, the Company identified a triggering event for impairment primarily attributable to the impact of a sustained decline in its market capitalization that was less than the combined carrying value of the Company’s reporting units. As such, the Company performed a quantitative goodwill impairment analysis.
14
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The fair value of each reporting unit was estimated using an equal weighting of the income and market valuation approaches. The income approach applied a fair value methodology to each reporting unit based on discounted cash flows. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internally developed forecasts, estimation of the long-term rate of growth for the Company’s business, estimation of the useful life over which cash flows will occur, and determination of the Company’s weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit. The weighted average cost of capital used in the Company’s most recent impairment test ranged from 13.8% to 16.5%. The Company also applied a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the operating results of the reporting units. The primary market multiples to which the Company compared are revenue and earnings before interest, taxes, depreciation, and amortization. The resulting fair value of the TTEC Engage reporting unit decreased below its carrying value, which resulted in recording a $196 million non-cash pre-tax impairment charge. Recognition of this non-cash goodwill impairment charge resulted in a tax benefit that generated an incremental deferred tax asset of $37.5 million to the reporting unit’s carrying value. Accordingly, the Company recorded an additional non-cash charge of $37.5 million to reduce the Company’s carrying value to its previously determined fair value in accordance with the applicable goodwill impairment guidance.
In total, a non-cash impairment loss of $233.5 million was recognized for the second quarter ended June 30, 2024.
(6)DERIVATIVES
Cash Flow Hedges
The Company enters into foreign exchange related derivatives. Foreign exchange derivatives entered into consist of forward and option contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations that are associated with forecasted revenue earned in foreign locations. Upon proper qualification, these contracts are designated as cash flow hedges. It is the Company’s policy to only enter into derivative contracts with investment grade counterparty financial institutions, and correspondingly, the fair value of derivative assets considers, among other factors, the creditworthiness of these counterparties. Conversely, the fair value of derivative liabilities reflects the Company’s creditworthiness. As of June 30, 2024, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults. The following table summarizes the aggregate unrealized net gain or loss in Accumulated other comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023 (in thousands and net of tax):
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate unrealized net gain/(loss) at beginning of period |
|
$ |
6,080 |
|
$ |
6,640 |
|
$ |
6,315 |
|
$ |
89 |
|
Add: Net gain/(loss) from change in fair value of cash flow hedges |
|
|
(6,281) |
|
|
(115) |
|
|
(5,315) |
|
|
6,052 |
|
Less: Net (gain)/loss reclassified to earnings from effective hedges |
|
|
(269) |
|
|
639 |
|
|
(1,470) |
|
|
1,023 |
|
Aggregate unrealized net gain/(loss) at end of period |
|
$ |
(470) |
|
$ |
7,164 |
|
$ |
(470) |
|
$ |
7,164 |
|
15
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company’s foreign exchange cash flow hedging instruments as of June 30, 2024 and December 31, 2023 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts.
|
|
Local |
|
|
|
|
|
|
|
|
|
|
|
|
Currency |
|
U.S. Dollar |
|
|
% Maturing |
|
|
Contracts |
|
|
|
|
Notional |
|
Notional |
|
|
in the next |
|
|
Maturing |
|
|
As of June 30, 2024 |
|
Amount |
|
Amount |
|
|
12 months |
|
|
Through |
|
|
Canadian Dollar |
|
750 |
|
$ |
557 |
|
|
100.0 |
% |
|
September 2024 |
|
Philippine Peso |
|
7,924,000 |
|
|
138,843 |
(1) |
|
61.8 |
% |
|
March 2027 |
|
Mexican Peso |
|
638,000 |
|
|
30,417 |
|
|
64.9 |
% |
|
December 2026 |
|
|
|
|
|
$ |
169,817 |
|
|
|
|
|
|
|
|
|
Local |
|
|
|
|
|
|
|
|
|
|
|
|
Currency |
|
U.S. Dollar |
|
|
|
|
|
|
|
|
|
|
Notional |
|
Notional |
|
|
|
|
|
|
|
|
As of December 31, 2023 |
|
Amount |
|
Amount |
|
|
|
|
|
|
|
|
Canadian Dollar |
|
2,250 |
|
$ |
1,670 |
|
|
|
|
|
|
|
Philippine Peso |
|
9,324,000 |
|
|
165,842 |
(1) |
|
|
|
|
|
|
Mexican Peso |
|
938,000 |
|
|
44,155 |
|
|
|
|
|
|
|
|
|
|
|
$ |
211,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) | Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S. dollars on June 30, 2024 and December 31, 2023. |
Fair Value Hedges
The Company enters into foreign exchange forward contracts to economically hedge against foreign currency exchange gains and losses on certain receivables and payables of the Company’s foreign operations. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net. As of June 30, 2024 and December 31, 2023 the total notional amounts of the Company’s forward contracts used as fair value hedges were $41.7 million and $73.3 million, respectively.
Derivative Valuation and Settlements
The Company’s derivatives as of June 30, 2024 and December 31, 2023 were as follows (in thousands):
|
|
June 30, 2024 |
|
||||
|
|
Designated |
Not Designated |
|
|||
|
|
as Hedging |
as Hedging |
|
|||
Designation: |
|
Instruments |
Instruments |
|
|||
|
|
Foreign |
|
Foreign |
|
||
Derivative contract type: |
|
Exchange |
|
Exchange |
|
||
Derivative classification: |
|
Cash Flow |
|
Fair Value |
|
||
|
|
|
|
|
|
|
|
Fair value and location of derivative in the Consolidated Balance Sheet: |
|
|
|
|
|
|
|
Prepaids and other current assets |
|
$ |
3,329 |
|
$ |
104 |
|
Other long-term assets |
|
|
429 |
|
|
— |
|
Other current liabilities |
|
|
(2,922) |
|
|
(41) |
|
Other long-term liabilities |
|
|
(1,469) |
|
|
— |
|
Total fair value of derivatives, net |
|
$ |
(633) |
|
$ |
63 |
|
16
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
|
|
December 31, 2023 |
|
||||
|
|
Designated |
Not Designated |
|
|||
|
|
as Hedging |
as Hedging |
|
|||
Designation: |
|
Instruments |
Instruments |
|
|||
|
|
Foreign |
|
Foreign |
|
||
Derivative contract type: |
|
Exchange |
|
Exchange |
|
||
Derivative classification: |
|
Cash Flow |
|
Fair Value |
|
||
|
|
|
|
|
|
|
|
Fair value and location of derivative in the Consolidated Balance Sheet: |
|
|
|
|
|
|
|
Prepaids and other current assets |
|
$ |
7,527 |
|
$ |
327 |
|
Other long-term assets |
|
|
2,415 |
|
|
— |
|
Other current liabilities |
|
|
(1,214) |
|
|
(120) |
|
Other long-term liabilities |
|
|
(197) |
|
|
— |
|
Total fair value of derivatives, net |
|
$ |
8,531 |
|
$ |
207 |
|
The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2024 and 2023 were as follows (in thousands):
|
|
Three Months Ended June 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
|
|
Designated as Hedging |
|
||||
Designation: |
|
Instruments |
|
||||
Derivative contract type: |
|
Foreign Exchange |
|
||||
Derivative classification: |
|
Cash Flow |
|
||||
|
|
|
|
|
|
|
|
Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax |
|
$ |
269 |
|
$ |
639 |
|
|
|
|
|
|
|
|
|
Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion: |
|
|
|
|
|
|
|
Revenue |
|
$ |
364 |
|
$ |
864 |
|
|
|
Three Months Ended June 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
Designation: |
|
Not Designated as Hedging Instruments |
|
||||
Derivative contract type: |
|
Foreign Exchange |
|
||||
Derivative classification: |
|
Fair Value |
|
||||
|
|
|
|
|
|
|
|
Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss): |
|
|
|
|
|
|
|
Other income (expense), net |
|
$ |
(756) |
|
$ |
(14) |
|
17
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2024 and 2023 were as follows (in thousands):
|
|
Six Months Ended June 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
|
|
Designated as Hedging |
|
||||
Designation: |
|
Instruments |
|
||||
Derivative contract type: |
|
Foreign Exchange |
|
||||
Derivative classification: |
|
Cash Flow |
|
||||
|
|
|
|
|
|
|
|
Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax |
|
$ |
1,471 |
|
$ |
1,023 |
|
|
|
|
|
|
|
|
|
Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion: |
|
|
|
|
|
|
|
Revenue |
|
$ |
1,988 |
|
$ |
1,383 |
|
|
|
Six Months Ended June 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
Designation: |
|
Not Designated as Hedging Instruments |
|
||||
Derivative contract type: |
|
Foreign Exchange |
|
||||
Derivative classification: |
|
Fair Value |
|
||||
|
|
|
|
|
|
|
|
Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss): |
|
|
|
|
|
|
|
Other income (expense), net |
|
$ |
(530) |
|
$ |
1,386 |
|
(7)FAIR VALUE
The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The following presents information as of June 30, 2024 and December 31, 2023 for the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.
Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature.
18
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Investments – The Company measures investments, including cost and equity method investments, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. The fair values of these investments are determined based on valuation techniques using the best information available, and may include market observable inputs, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary.
Debt - The Company’s debt consists primarily of the Company’s Credit Facility, which permits floating-rate borrowings based upon the current Prime Rate or SOFR plus a credit spread as determined by the Company’s leverage ratio calculation (in each case as defined in the Credit Agreement discussed in Note 10). As of June 30, 2024 and December 31, 2023, the Company had $930.0 million and $995.0 million, respectively, of borrowings outstanding under the Credit Facility. During the second quarter of 2024 outstanding borrowings accrued interest at an average rate of 7.4% per annum, excluding unused commitment fees. The amounts recorded in the accompanying Balance Sheets approximate fair value due to the variable nature of the debt based on Level 2 inputs.
Derivatives - Net derivative assets (liabilities) are measured at fair value on a recurring basis. The portfolio is valued using models based on market observable inputs, including both forward and spot foreign exchange rates, interest rates, implied volatility, and counterparty credit risk, including the ability of each party to execute its obligations under the contract. As of June 30, 2024, credit risk did not materially change the fair value of the Company’s derivative contracts.
The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of June 30, 2024 and December 31, 2023 (in thousands):
As of June 30, 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|||||||
|
|
Quoted Prices in |
|
Significant |
|
|
|
|
|
|
|
||
|
|
Active Markets |
|
Other |
|
Significant |
|
|
|
|
|||
|
|
for Identical |
|
Observable |
|
Unobservable |
|
|
|
|
|||
|
|
Assets |
|
Inputs |
|
Inputs |
|
|
|
|
|||
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
At Fair Value |
|
||||
Cash flow hedges |
|
$ |
— |
|
$ |
(633) |
|
$ |
— |
|
$ |
(633) |
|
Fair value hedges |
|
|
— |
|
|
63 |
|
|
— |
|
|
63 |
|
Total net derivative asset (liability) |
|
$ |
— |
|
$ |
(570) |
|
$ |
— |
|
$ |
(570) |
|
As of December 31, 2023
|
|
Fair Value Measurements Using |
|
|
|
|
|||||||
|
|
Quoted Prices in |
|
Significant |
|
|
|
|
|
|
|
||
|
|
Active Markets |
|
Other |
|
Significant |
|
|
|
|
|||
|
|
for Identical |
|
Observable |
|
Unobservable |
|
|
|
|
|||
|
|
Assets |
|
Inputs |
|
Inputs |
|
|
|
|
|||
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
At Fair Value |
|
||||
Cash flow hedges |
|
$ |
— |
|
$ |
8,531 |
|
$ |
— |
|
$ |
8,531 |
|
Fair value hedges |
|
|
— |
|
|
207 |
|
|
— |
|
|
207 |
|
Total net derivative asset (liability) |
|
$ |
— |
|
$ |
8,738 |
|
$ |
— |
|
$ |
8,738 |
|
19
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following is a summary of the Company’s fair value measurements as of June 30, 2024 and December 31, 2023 (in thousands):
As of June 30, 2024
|
|
Fair Value Measurements Using |
|
|||||||
|
|
Quoted Prices in |
|
|
|
|
Significant |
|
||
|
|
Active Markets for |
|
Significant Other |
|
Unobservable |
|
|||
|
|
Identical Assets |
|
Observable Inputs |
|
Inputs |
|
|||
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|
Derivative instruments, net |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Deferred compensation plan asset |
|
|
35,274 |
|
|
— |
|
|
— |
|
Total assets |
|
$ |
35,274 |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Derivative instruments, net |
|
$ |
— |
|
$ |
(570) |
|
$ |
— |
|
Contingent consideration |
|
|
— |
|
|
— |
|
|
(449) |
|
Total liabilities |
|
$ |
— |
|
$ |
(570) |
|
$ |
(449) |
|
As of December 31, 2023
|
|
Fair Value Measurements Using |
|
|||||||
|
|
Quoted Prices in |
|
|
|
|
Significant |
|
||
|
|
Active Markets for |
|
Significant Other |
|
Unobservable |
|
|||
|
|
Identical Assets |
|
Observable Inputs |
|
Inputs |
|
|||
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|
Derivative instruments, net |
|
$ |
— |
|
$ |
8,738 |
|
$ |
— |
|
Deferred compensation plan asset |
|
|
31,082 |
|
|
— |
|
|
— |
|
Total assets |
|
$ |
31,082 |
|
$ |
8,738 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Derivative instruments, net |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Contingent consideration |
|
|
— |
|
|
— |
|
|
(1,496) |
|
Total liabilities |
|
$ |
— |
|
$ |
— |
|
$ |
(1,496) |
|
Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan for certain eligible employees. The deferred compensation asset represents the combined fair value of all the funds based on quoted values and market observable inputs. All amounts deferred under the Plan are unfunded, unsecured obligations of the Company. The Company manages the risk of the changes in the fair value of the liability for deferred compensation by electing to match its liability under the Plan with investment vehicles that offset a portion of its exposure including a Company owned life insurance policy held in a rabbi trust.
Contingent Consideration - The Company recorded contingent consideration payable related to the acquisition of Faneuil that closed in 2022. The contingent payables for Faneuil were calculated using a Monte Carlo simulation including a discount rate of 19.3%. The measurements were based on significant inputs not observable in the market. The Company records interest expense each period using the effective interest method until the future value of these contingent payments reaches the expected total future value.
20
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
During 2022 and 2023, fair value adjustments of a $2.9 million benefit and a $3.0 million expense, respectively, were recorded related to fair value adjustments of the estimated contingent payments associated with the Faneuil acquisition based on updated discount factors, the passage of time, updated EBITDA estimates and a modification to the agreement (see Note 2) for one contract, and a complete reduction for the second contract as it was not awarded to the Company. During 2024, a fair value adjustment of a $1.0 million benefit was recorded related to fair value adjustments of the estimated contingent payments associated with the Faneuil acquisition based on updated discount factors, the passage of time, and updated EBITDA estimates. The fair value adjustment benefits(expenses) were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).
A rollforward of the activity in the Company’s fair value of the contingent consideration payable is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed |
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
Interest / |
|
June 30, |
|
|||
|
|
2023 |
|
Acquisitions |
|
Payments |
|
Adjustments |
|
2024 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Faneuil |
|
$ |
(1,496) |
|
$ |
— |
|
$ |
— |
|
$ |
1,047 |
|
$ |
(449) |
|
Total |
|
$ |
(1,496) |
|
$ |
— |
|
$ |
— |
|
$ |
1,047 |
|
$ |
(449) |
|
(8)IMPAIRMENT OF ASSETS
The Company evaluated the recoverability of its leasehold improvement assets at certain customer engagement centers, building and land assets, as well as all internally developed software projects. An asset group is considered to be impaired when the anticipated undiscounted future cash flows of its asset group is estimated to be less than the asset group’s carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. To determine fair value, the Company used Level 3 inputs in its discounted cash flows analysis. Assumptions included the amount and timing of estimated future cash flows and assumed discount rates. During the three and six months ended June 30, 2024, the Company recognized impairment losses, net related to leasehold improvements assets, right of use lease assets, capitalized software and certain computer equipment of $3.2 million and $3.3 million, respectively, across the TTEC Digital and TTEC Engage segments.
(9)INCOME TAXES
The Company accounts for income taxes in accordance with the accounting literature for income taxes, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the Consolidated Financial Statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. Quarterly, the Company assesses the likelihood that its net deferred tax assets will be recovered. Based on the weight of all available evidence, both positive and negative, the Company records a valuation allowance against deferred tax assets when it is more-likely-than-not that a future tax benefit will not be realized. The Company’s selection of an accounting policy with respect to both the global intangible low taxed foreign income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) rules is to compute the related taxes in the period the entity becomes subject to either GILTI or BEAT.
21
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and to use that rate to provide for income taxes for the current year-to-date reporting period. The Company’s 2024 estimated annual effective tax rate of 21.4%, before discrete items, is driven by the distribution of income between the U.S. and international tax jurisdictions, earnings in international jurisdictions currently under an income tax holiday, and the impact of valuation allowances in the United States and several other jurisdictions. The Company’s effective tax rate for the six months ended June 30, 2024 was (23.5)%. This rate was the result of low year-to-date income, the exclusion of losses related to entities with a full valuation allowance and includes a $37.5 million benefit related to an impairment charge, and $84.1 million of expense related to changes in valuation allowances during the quarter.
The Company’s U.S. income tax returns filed for the tax years ending December 31, 2017 to present, remain open tax years. The Company has been notified of the intent to audit or is currently under audit of income taxes for the United States for tax year 2017 and 2018, the Philippines for tax years 2021 to 2023, the State of Oregon in the United States for tax years 2020 through 2022, the State of Illinois in the United States for tax year 2020, the State of Wisconsin in the United States for tax years 2019 through 2021, Canada for tax year 2021, and India for tax years 2017 through 2022. Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company’s Consolidated Financial Statements.
The Organization for Economic Co-operation and Development (OECD), supported by 140 of their member countries, have agreed to implement a minimum 15% tax rate on certain multinational enterprises and have released model guidance. This global minimum tax, known as the Pillar Two framework, became effective across various countries in 2024, as each country works to enact legislation influenced by the OECD Pillar 2 rules. While the Company does not expect the adoption of the Pillar Two framework to have a material impact on its effective tax rate, the Company continues to evaluate additional guidance released by the OECD, along with the pending and adopted legislation in each of the countries in which it operates.
When there is a change in judgment concerning the recovery of deferred tax assets in future periods, a valuation allowance is recorded into earnings during the quarter in which the change in judgment occurred. During the first, second and third quarters of 2023, a $1.3 million, a $3.1 million and a $4.4 million valuation allowance were recorded, respectively, for assets that are not expected to be recovered in future periods. Additionally, during the third quarter 2023, a valuation allowance in the amount of $1.7 million was released for assets now expected to be recovered in future periods. During the first and second quarters of 2024, a $3.0 million and $81.1 million net valuation allowance was recorded, respectively, for assets that are not expected to be recovered in future periods.
The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the governments of the Philippines and Honduras. Generally, a Tax Holiday is an agreement between the Company and a foreign government under which the Company receives certain tax benefits in that country, such as exemption from taxation on profits derived from export-related activities. In the Philippines, the Company has been granted multiple agreements under local laws which result in an overall reduced tax rate. These incentives have varying benefit year over year and expire at various times beginning in 2031. The aggregate benefit to income tax expense for the three months ended June 30, 2024 and 2023 was approximately $0.6 million and $0.4 million, respectively, which had an impact on diluted net income per share of $0.01 and $0.01, respectively. The aggregate benefit to income tax expense for the six months ended June 30, 2024 and 2023 was approximately $1.3 million and $1.1 million, respectively, which had an impact on diluted net income per share of $0.03 and $0.02, respectively.
Since 2017, the Company has been making tax payments to the IRS due to the one-time transition tax on untaxed foreign earnings of foreign subsidiaries, as mandated by the Tax Cuts and Jobs Act. The final payment for this charge will be paid in December of 2024 for a total cash payment of $10.4 million this year, resulting in reduction in cash taxes going forward.
22
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(10)COMMITMENTS AND CONTINGENCIES
Credit Facility
On April 3, 2023, the Company entered into a Seventh Amendment to the Credit Agreement which replaces the use of LIBOR with SOFR as of the date of the amendment, thus will affect the interest rates paid for a portion of the Credit Facility starting in the second quarter of 2023.
On February 26, 2024, the Company entered into an Eighth Amendment to the Credit Agreement to increase the net leverage ratio covenant, the lenders’ commitment fee rate and margin for a period starting with the quarter ending March 31, 2024 through the quarter ending March 31, 2025, from the current 3.5 to 1 to between 4.0 to 1 and 4.5 to 1, as may be applicable in different quarters; and reduced the total lenders’ commitment from $1.5 billion to $1.3 billion. TTEC may, at its option for any quarter during the amendment period, elect to revert to the net leverage ratio and the corresponding lenders’ commitment fee rate and margin to pre-amendment levels. The term of the Credit Facility will remain unchanged through November 23, 2026.
On August 8, 2024, the Company entered into a Ninth Amendment to the Credit Agreement (the “Ninth Amendment”) to, among other things, provide for less restrictive financial covenants in respect of the leverage ratio and the interest coverage ratio for the period beginning with the third quarter of 2024 through the first quarter of 2026 (the “Covenant Adjustment Period”). Specifically, the revisions permit a maximum leverage ratio of up to 5.15 to 1.00 and a minimum interest coverage ratio of not less than 2.00 to 1.00 as of the end the third quarter of 2024, with such levels gradually becoming more restrictive during subsequent quarters of the Covenant Adjustment Period. Pursuant to the Ninth Amendment, the Company agreed to permanently reduce the total lenders’ commitment from $1.3 billion to $1.2 billion and to provide certain additional assets as collateral, with the effect that the facility is now secured by substantially all personal property assets of the Company and its subsidiaries. In addition, the Company agreed, to certain Credit Agreement changes, including, among others, (i) increased pricing on borrowings and increased facility fees, in each case, determined according to the Company’s leverage ratio, (ii) more restrictive limitations in respect of debt, liens, investments, acquisitions, asset sales and restricted payments, and (iii) requirements to apply certain equity and debt issuances and asset sale proceeds to the prepayment of the facility and permanent reduction of the total facility commitment amount.
The Company’s Credit Agreement includes a number of financial covenants and operating restrictions of which failure to comply could result in a default under the Credit Agreement. The Company’s ability to comply with the covenants will depend on, among other matters, factors discussed in the section titled “Cautionary Note Regarding Forward Looking Statements” included elsewhere in this report, many of which are beyond the Company’s control. As of the issuance of these financial statements, the Company believes it has sufficient cash on hand, positive working capital, and availability to access additional cash under the Credit Facility to meet its business operating requirements, its capital expenditures and to continue to comply with the amended debt covenants. In the event that the Company does not remain in compliance with the financial covenants under the Credit Facility, it may need to negotiate additional amendments to or waivers of the terms of such credit facilities, refinance its debt, or raise additional capital. The Company could also adjust its capital allocation strategy.
The maximum commitment under the Credit Facility is $1.2 billion in the aggregate, if certain conditions are satisfied. The Credit Facility commitment fees are payable to the lenders in an amount equal to the unused portion of the Credit Facility multiplied by a rate per annum as determined by reference to the Company’s net leverage ratio. The Credit Agreement contains customary affirmative, negative, and financial covenants. The Credit Agreement also permits the utilization of up to $100 million of limits within the Credit Facility for letters of credit to be used in the business.
23
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
As defined in the Credit Agreement, base rate loans bear interest at a rate equal to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, and (c) SOFR in effect on such day plus 1.0%. Base rate loans shall be based on the base rate, plus the applicable credit margin which ranges from 0.375% to 2.5% based on the Company’s net leverage ratio. SOFR loans bear interest at a rate equal to the applicable spread adjusted SOFR plus applicable credit margin which ranges from 1.375% to 3.5% based on the Company’s net leverage ratio. Alternative currency loans (not denominated in U.S. Dollars) bear interest at rates applicable to their respective currencies.
Letter of credit fees are one eighth of 1% of the stated amount of the letter of credit on the date of issuance, renewal or amendment, plus an annual fee equal to the borrowing margin for SOFR loans.
As of June 30, 2024 and December 31, 2023, the Company had borrowings of $930.0 million and $995.0 million, respectively, under its Credit Facility, and its average daily utilization was $1,045.3 million and $1,057.7 million for the six months ended June 30, 2024 and 2023, respectively. Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $100 million as of June 30, 2024. As of June 30, 2024, the Company was in compliance with all covenants and conditions under its Credit Agreement.
Letters of Credit
As of June 30, 2024, outstanding letters of credit under the Credit Facility totaled $0.2 million. As of June 30, 2024, letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $0.3 million.
Guarantees
Indebtedness under the Credit Agreement is guaranteed by certain of the Company’s present and future domestic subsidiaries.
Legal Proceedings
From time to time, the Company has been involved in legal actions, both as plaintiff and defendant, which arise in the ordinary course of business. The Company accrues for exposures associated with such legal actions to the extent that losses are deemed both probable and reasonably estimable. To the extent specific reserves have not been made for certain legal proceedings, their ultimate outcome, and consequently, an estimate of possible loss, if any, cannot reasonably be determined at this time.
Based on currently available information and advice received from counsel, the Company believes that the disposition or ultimate resolution of any current legal proceedings, except as otherwise specifically reserved for in its financial statements, will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.
(11)DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS
Revenue recognized for the six months ended June 30, 2024 from amounts included in deferred revenue as of December 31, 2023 was $140.2 million. Revenue recognized for the six months ended June 30, 2023 from amounts included in deferred revenue as of December 31, 2022 was $167.1 million.
Remaining performance obligations (“RPO”) represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. The Company’s RPO excludes performance obligations from on-demand arrangements as there are no minimum purchase commitments associated with these arrangements, and certain time and materials contracts that are billed in arrears.
24
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
As of June 30, 2024, the Company’s RPO was $425.4 million, which will be delivered and recognized within the next five years. However, the amount and timing of revenue recognition are generally driven by customer consumption, which can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.
(12)ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents changes in the accumulated balance for each component of Other comprehensive income (loss), including current period other comprehensive income (loss) and reclassifications out of Accumulated other comprehensive income (loss) (in thousands):
|
|
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency |
|
Derivative |
|
|
|
|
|
|
|
||
|
|
Translation |
|
Valuation, Net |
|
Other, Net |
|
|
|
|
|||
|
|
Adjustment |
|
of Tax |
|
of Tax |
|
Totals |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) at December 31, 2022 |
|
$ |
(123,734) |
|
$ |
89 |
|
$ |
(2,656) |
|
$ |
(126,301) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications |
|
|
28,281 |
|
|
8,100 |
|
|
56 |
|
|
36,437 |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
301 |
|
|
(1,024) |
|
|
124 |
|
|
(599) |
|
Net current period other comprehensive income (loss) |
|
|
28,582 |
|
|
7,076 |
|
|
180 |
|
|
35,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) at June 30, 2023 |
|
$ |
(95,152) |
|
$ |
7,165 |
|
$ |
(2,476) |
|
$ |
(90,463) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) at December 31, 2023 |
|
$ |
(93,144) |
|
$ |
6,315 |
|
$ |
(3,047) |
|
$ |
(89,876) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications |
|
|
(11,132) |
|
|
(5,315) |
|
|
19 |
|
|
(16,428) |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
— |
|
|
(1,470) |
|
|
193 |
|
|
(1,277) |
|
Net current period other comprehensive income (loss) |
|
|
(11,132) |
|
|
(6,785) |
|
|
212 |
|
|
(17,705) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) at June 30, 2024 |
|
$ |
(104,276) |
|
$ |
(470) |
|
$ |
(2,835) |
|
$ |
(107,581) |
|
25
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents the classification and amount of the reclassifications from Accumulated other comprehensive income (loss) to the Statement of Comprehensive Income (Loss) (in thousands):
|
|
|
|
|
|
|
|
Statement of |
|
|
|
For the Three Months Ended June 30, |
|
Comprehensive Income |
|
||||
|
|
2024 |
|
2023 |
|
(Loss) Classification |
|
||
|
|
|
|
|
|
|
|
|
|
Derivative valuation |
|
|
|
|
|
|
|
|
|
Gain on foreign currency forward exchange contracts |
|
$ |
364 |
|
$ |
864 |
|
Revenue |
|
Tax effect |
|
|
(95) |
|
|
(225) |
|
Provision for income taxes |
|
|
|
$ |
269 |
|
$ |
639 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Actuarial loss on defined benefit plan |
|
$ |
(110) |
|
$ |
(69) |
|
Cost of services |
|
Gain on liquidation |
|
|
19 |
|
|
— |
|
Other income (expense), net |
|
Tax effect |
|
|
11 |
|
|
7 |
|
Provision for income taxes |
|
|
|
$ |
(80) |
|
$ |
(62) |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
Statement of |
|
|
|
For the Six Months Ended June 30, |
|
Comprehensive Income |
|
||||
|
|
2024 |
|
2023 |
|
(Loss) Classification |
|
||
|
|
|
|
|
|
|
|
|
|
Derivative valuation |
|
|
|
|
|
|
|
|
|
Gain on foreign currency forward exchange contracts |
|
$ |
1,988 |
|
$ |
1,383 |
|
Revenue |
|
Tax effect |
|
|
(518) |
|
|
(359) |
|
Provision for income taxes |
|
|
|
$ |
1,470 |
|
$ |
1,024 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Actuarial loss on defined benefit plan |
|
$ |
(231) |
|
$ |
(138) |
|
Cost of services |
|
Gain on liquidation |
|
|
19 |
|
|
— |
|
Other income (expense), net |
|
Tax effect |
|
|
19 |
|
|
14 |
|
Provision for income taxes |
|
|
|
$ |
(193) |
|
$ |
(124) |
|
Net income (loss) |
|
(13)WEIGHTED AVERAGE SHARE COUNTS
The following table sets forth the computation of basic and diluted shares for the periods indicated (in thousands):
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
|
|
Shares used in basic earnings per share calculation |
|
47,564 |
|
47,264 |
|
47,498 |
|
47,249 |
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Restricted stock units |
|
59 |
|
186 |
|
84 |
|
156 |
Performance-based restricted stock units |
|
— |
|
3 |
|
3 |
|
12 |
Total effects of dilutive securities |
|
59 |
|
189 |
|
87 |
|
168 |
Shares used in dilutive earnings per share calculation |
|
47,623 |
|
47,453 |
|
47,585 |
|
47,417 |
26
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
For the three months ended June 30, 2024 and 2023, there were 2.3 million and 1.0 million outstanding Restricted Stock Units (“RSUs”), respectively, that were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive. For the six months ended June 30, 2024 and 2023, there were 1.7 million and 0.9 million outstanding RSUs, respectively, that were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.
(14)EQUITY-BASED COMPENSATION PLANS
All equity-based awards to employees are recognized in the Consolidated Statements of Comprehensive Income (Loss) at the fair value of the award on the grant date.
The following tables present the total equity-based compensation expense for the three and six months ended June 30, 2024 and 2023 (in thousands):
|
|
Three Months Ended June 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
|
|
|
|
|
|
|
|
Equity-based compensation expense recognized in Cost of services |
|
$ |
1,991 |
|
$ |
2,536 |
|
Equity-based compensation expense recognized in Selling, general and administrative |
|
|
3,113 |
|
|
3,113 |
|
Total equity-based compensation expense |
|
$ |
5,104 |
|
$ |
5,649 |
|
|
|
Six Months Ended June 30, |
|
||||
|
|
2024 |
|
2023 |
|
||
|
|
|
|
|
|
|
|
Equity-based compensation expense recognized in Cost of services |
|
$ |
4,235 |
|
$ |
4,398 |
|
Equity-based compensation expense recognized in Selling, general and administrative |
|
|
6,681 |
|
|
5,404 |
|
Total equity-based compensation expense |
|
$ |
10,916 |
|
$ |
9,802 |
|
Restricted Stock Unit Grants
During the six months ended June 30, 2024 and 2023, the Company granted 3,106,297 and 547,254 RSUs, respectively, to new and existing employees, which vest over four to five years. The Company recognized compensation expense related to RSUs of $5.1 million and $10.9 million for the three and six months ended June 30, 2024, respectively. The Company recognized compensation expense related to RSUs of $5.5 million and $9.3 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, there was approximately $41.8 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.
Performance Based Restricted Stock Unit Grants
During 2021, the Company awarded Performance Restricted Stock Units (“PRSUs”) subject to service and performance vesting conditions. If defined minimum targets were met, the annual value of the PRSUs issued would be between $1.2 million and $4.9 million and vest in 2024. If the defined minimum targets were not met, then no PRSUs will be issued. The award amounts were based on the Company’s annual revenue and adjusted operating income for fiscal year 2023. The Company recognized compensation expense related to the 2021 PRSUs of $0.0 million and $0.0 million for the three and six months ended June 30, 2024, respectively. The Company recognized compensation expense related to the 2021 PRSUs of $0.2 million and $0.4 million for the three and six months ended June 30, 2023, respectively.
27
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
During 2022, the Company made awards of two different PRSU programs that are subject to service and performance vesting conditions: ordinary course annual PRSUs and one-time stretch financial goals PRSUs. For the ordinary course annual PRSUs, if defined minimum targets are met, the annual value of the PRSUs issued will be between $0.9 million and $3.5 million and vest in March 2025. If the defined minimum targets are not met, then no shares will be issued. The number of shares awarded will be based on the Company’s annual revenue and adjusted EBITDA for fiscal year 2024. For the one-time stretch financial goals PRSUs, if defined minimum targets at TTEC Engage and TTEC Digital business segments’ levels are met, the Company will issue between 0.0 million and 0.5 million PRSUs that will vest immediately in March 2026. If the defined minimum targets are not met, then no shares will be issued. The number of shares awarded will be based on the TTEC Engage and TTEC Digital business segments’ annual revenue and adjusted EBITDA for fiscal year 2025. For the ordinary course annual PRSUs, no expense was recognized for the six months ended June 30, 2024. Expense for the one-time stretch financial goals PRSUs will begin at the start of the requisite service period, beginning January 1, 2025.
During 2023, the Company awarded PRSUs that are subject to service and performance vesting conditions. If defined minimum targets are met, the Company will issue PRSUs with an annual value between zero and $8.9 million that will vest in 2026. If the defined minimum targets are not met, then no PRSUs will be issued. The number of PRSUs awarded will be based on the Company’s annual revenue and adjusted EBITDA for fiscal year 2025. Expense for these awards will begin at the start of the requisite service period, beginning January 1, 2025.
During the second quarter of 2024, the Company awarded PRSUs to one senior executive that are subject to service and performance vesting conditions. If defined minimum targets are met, the Company will issue PRSUs with an annual value between zero and $2.9 million that vest in 2025. If the defined minimum targets are not met, then no PRSUs will be issued. The number of PRSUs awarded will be based on the Company’s Europe, Middle East and Africa region of TTEC Digital’s annual revenue and adjusted EBITDA for fiscal year 2025. Expense for these awards will begin at the start of the requisite service period, beginning January 1, 2025. Additional PRSUs may be issued to other Company executives before the end of the fiscal year 2024 based on performance targets in the measurement period of fiscal year 2026, which PRSUs will vest in 2027; the terms and conditions for these additional PRSUs have not yet been determined.
(15)NON-QUALIFIED DEFERRED COMPENSATION PLAN
The Company maintains a non-qualified deferred compensation plan for executive officers and other eligible employees that permits such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment. The plan allows for deferral of up to 75% of a participant’s base salary, bonus, commissions, and any amounts that U.S. highly compensated employees are limited from contributing into TTEC’s Deferred Tax Retirement Savings Plan (the “401K Plan”). All amounts deferred under the plan are unfunded, unsecured obligations and are recorded within Other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets. In the event of bankruptcy, the assets of this plan are available to satisfy the claims of general creditors. Participants may choose among alternative earnings rates for the amounts they defer, which are primarily based on investment options within the 401K Plan. Amounts contributed and deferred under the Plan are credited or charged with the performance of investment options offered under the plan as elected by the participants. The Company manages the risk of changes in the fair value of the liability for deferred compensation by electing to match its liability under the plan with investment vehicles that offset a portion of its exposure including a Company owned life insurance policy held in a rabbi trust.
28
TTEC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(16)RELATED PARTY TRANSACTIONS
The Company entered into an agreement under which Avion, LLC (“Avion”) and Airmax LLC (“Airmax”) provide certain aviation flight services as requested by the Company. Such services include the use of an aircraft and flight crew. Kenneth D. Tuchman, Chairman and Chief Executive Officer of the Company, has an indirect 100% beneficial ownership interest in Avion and Airmax. During the six months ended June 30, 2024 and 2023, the Company expensed $0.2 million and $0.7 million, respectively, to Avion and Airmax for services provided to the Company. There was $36 thousand in payments due and outstanding to Avion and Airmax as of June 30, 2024.
Ms. Michelle Swanback, President of the Company, is a member of the board of directors of WTW (NYSE: WTW) (fka “Willis Towers Watson”), that provides compensation consulting and insurance brokerage services to the Company. During the six months ended June 30, 2024 and 2023, the Company expensed $1.5 million and $1.8 million, respectively, for these services.
29
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding our operations, expected financial condition, results of operation, effective tax rate, cash flow, leverage, liquidity, business strategy, competitive position, demand for our services in international operations, acquisition opportunities and impact of acquisitions, capital allocation and dividends, growth opportunities, spending, capital expenditures and investments, competition and market forecasts, industry trends, our human capital resources, and other business matters that are based on our current expectations, assumptions, and projections with respect to the future, and are not a guarantee of performance.
In this report when we use words such as “may,” “believe,” “plan,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “project,” “would,” “could,” “target,” or similar expressions, or when we discuss our strategy, plans, goals, initiatives, or objectives, we are making forward-looking statements. Unless otherwise indicated or except where the context otherwise requires, the terms “TTEC,” “the Company,” “we,” “us” and “our” and other similar terms in this report refer to TTEC Holdings, Inc. and its subsidiaries.
We caution you not to rely unduly on any forward-looking statements. Actual results may differ materially from those expressed in the forward-looking statements, and you should review and consider carefully the risks, uncertainties and other factors that affect our business and may cause such differences as outlined in Part II. Item 1A Risk Factors of this report and Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023. Important factors that could cause our actual results to differ materially from those indicated in the forward looking statements include, among others, risks related to our business operations, our strategy and our industry, including risks related to our strategic execution in a competitive market, our ability to innovate and introduce technologies that are sufficiently disruptive to allow us to maintain and grow our market share such as the effective adoption of artificial intelligence into our solutions, revenue risks specific to client concentration in our TTEC Engage business segment and risks related to the product reliability of the technology partners and client transition from on premises to public cloud and SaaS information technology solutions in our TTEC Digital business segment, risks specific to remote work environment, risks related to the challenges inherent in demand and delivery center capacity forecasting, risks specific to labor costs and retention, risks related to operations controls and employees engaging in fraud, long sales cycles and lead time to revenue, risks specific to potential geographic and other expansions, risks that may arise in connection with events outside of our control such as macroeconomic conditions, geopolitical tensions, and outbreaks of infectious diseases, risks of M&A activity including our ability to identify, acquire and properly integrate acquired businesses in accordance with our strategy; risks related to our use of technology, including risk that could arise due to disruption to our information technology systems, cybersecurity events and unauthorized data access, our reliance on communication and utility services provided to third parties, risks specific to rapid adoption of AI/GenAI technologies, and the growing reliance on third parties for data, cloud and SaaS services; risks of our financial operations, including ineffective cost-management strategies, our leverage and debt service obligations, risks specific to financial and operating restrictions built into our credit facility, changes in the cost or availability of labor, telecommunication services, and other operational necessities that we cannot pass on to our clients, risks related to foreign currency exchange, changes in income tax rates and laws, and other laws and regulations relevant to our business, interpretations of transfer pricing arrangements, uncertainties tied to goodwill, assets and strategic investments’ impairments; risks specific to our contracting practices and laws and regulations that impact our business, including uncertainty and inconsistency in privacy and data protection laws, the high cost of compliance with such laws, the high cost and reputational damage of wage and hour class action lawsuits, contract terms that lead to volatility in revenue and profitability, the efforts by clients to transfer contractually cybersecurity, data privacy and emerging technology risks to service providers and our inability to always control or mitigate them, uncertainty in AI/GenAI regulatory environments, risks specific to IP protection and infringement, and our ability to timely secure and maintain licenses needed to support certain regulated lines of business; risks specific to operations outside of the U.S. and in jurisdictions where we have limited experience; risks related to the ownership of our common stock, including risks inherent in our capital structure, our controlling shareholder risk, risks related to the price and trading volumes of our common stock being affected by factors that we cannot fully impact or control, risks inherent in our dividend and stock repurchase policies, risks specific to being a Delaware company and provisions in our charter documents that may discourage, delay or prevent a change in control events potentially depressing the price of our common stock, and the fact that our Chairman and Chief Executive Officer has control over matters requiring shareholder action potentially impacting our stock price and making it less attractive to investors.
30
Our forward-looking statements speak only as of the date that this report is filed with the United States Securities and Exchange Commission (“SEC”). We undertake no obligation to update them, except as may be required by applicable law. Although we believe that our forward-looking statements are reasonable, they depend on many factors outside of our control and we can provide no assurance that they will prove to be correct.
31
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Executive Summary
Founded in 1982, TTEC is a global CX outsourcing partner for marquee and disruptive brands and public sector clients. The Company designs, builds, and operates technology-enabled customer experiences across digital and live interaction channels to help clients increase customer loyalty, revenue, and profitability. By combining digital solutions with data-driven service capabilities, we help clients improve their customer satisfaction while lowering their total cost to serve. As of June 30, 2024, TTEC served approximately 740 clients across targeted industry verticals including financial services, healthcare, public sector, telecom, technology, media, travel and hospitality, automotive and retail.
TTEC operates through two business segments.
| • | TTEC Digital is one of the largest CX technology providers and is focused exclusively on the intersection of Contact Center as a Service (CCaaS), Customer Relationship Management (“CRM”), and Artificial Intelligence (AI) and Analytics. A professional services organization comprised of software engineers, systems architects, data scientists and CX strategists, this segment creates and implements strategic CX transformation roadmaps; sells, operates, and provides managed services for cloud platforms and premise based CX technologies including Amazon Web Services, Cisco, Genesys, Google, and Microsoft; and creates proprietary IP to support industry specific and custom client needs. TTEC Digital serves clients across Enterprise and Small & Medium Sized (“SMB”) business segments and has a dedicated unit with government technology certifications serving the public sector. |
| • | TTEC Engage provides the digitally enabled CX operational and managed services to support large, complex enterprise clients’ end-to-end customer interactions at scale. Tailored to meet industry-specific and business needs, this segment delivers data-driven omnichannel customer care, customer acquisition, growth, and retention services, tech support, trust and safety and back-office solutions. The segment’s technology-enabled delivery model covers the entire associate lifecycle including recruitment, onboarding, training, delivery, workforce management and quality assurance. |
TTEC demonstrates its market leadership through strategic collaboration across TTEC Digital and TTEC Engage when there is client demand and fit for our integrated solutions. This partnership is central to our ability to deliver comprehensive and transformational customer experience solutions to our clients, including integrated delivery, go-to-market and innovation for truly differentiated, market leading CX solutions.
During 2024, the TTEC global operating platform delivered onshore, nearshore, and offshore services in 22 countries on six continents -- the United States, Australia, Belgium, Brazil, Bulgaria, Canada, Colombia, Costa Rica, Egypt, Germany, Greece, Honduras, India, Ireland, Mexico, the Netherlands, New Zealand, the Philippines, Poland, South Africa, Thailand, and the United Kingdom with the help of approximately 54,000 consultants, technologists, and CX professionals.
Our revenue for second quarter 2024 was $534.1 million, approximately $116.4 million, or 22% of which came from our TTEC Digital segment and $417.7 million, or 78%, of which came from our TTEC Engage segment.
To improve our competitive position in a rapidly changing market and to lead our clients with emerging CX methodologies, we continue to invest in innovation and service offerings for both mainstream and high-growth disruptive businesses, diversifying and strengthening our core customer care services with technology-enabled, outcomes-focused services, data analytics, insights and consulting.
We also invest to broaden our product and service capabilities, increase our global client base and industry expertise, tailor our geographic footprint to the needs of our clients, and further scale our end-to-end integrated solutions platform.
We have extensive expertise in the healthcare, automotive, national/federal and state and local government, financial services, communications, technology, travel, logistics, media and entertainment, e-tail/retail, and transportation industries. We serve approximately 740 diverse clients globally, including many of the world’s iconic brands, Fortune 1000 companies, government agencies, and disruptive growth companies.
32
Financial Highlights
In the second quarter of 2024, our revenue decreased $66.3 million, or 11%, to $534.1 million over the same period in 2023 including a decrease of $1.8 million, or 0.3%, due to foreign currency fluctuations. The decrease in revenue was comprised of a $1.2 million, or 1.0%, decrease for TTEC Digital and a decrease of $65.1 million, or 13.5%, for TTEC Engage.
Our second quarter 2024 income (loss) from operations decreased $255.7 million, or 817.0%, to $(224.4) million or (42.0)% of revenue, compared to $31.3 million or 5.2% of revenue in the second quarter of 2023. The decrease in operating income is due to several factors across both segments. The TTEC Digital operating income decreased 16% over the same period last year primarily due to higher impairment expenses and delays with launching new projects partially offset by a change in the revenue mix. The TTEC Engage operating income decreased 1,054.4% over the same period last year due to impairment of Goodwill, higher restructuring charges, lower revenue, negative change to our revenue mix and launch of a new large public contract.
Income (loss) from operations in the second quarter of 2024 and 2023 included $241.8 million and $4.1 million of restructuring charges and asset impairments, respectively.
Our offshore customer experience centers spanning twelve countries serve clients based in the U.S. and in other countries with 22,900 workstations, representing 74% of our global delivery capability. Revenue for our TTEC Engage segment provided in these offshore locations represented 33% of our revenue for the second quarter of 2024, as compared to 32% of our revenue for the corresponding period in 2023.
Our seat utilization is defined as the total number of utilized workstations compared to the total number of available production workstations. As of June 30, 2024, the total production workstations for our TTEC Engage segment was 31,000, a net decrease of 1,900 workstations over the same period last year, with an overall capacity utilization 72% in line with the prior year period.
We plan to continue to selectively retain and grow capacity and expand into new offshore markets, while maintaining appropriate capacity onshore. As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuation increases, we will continue to actively manage this risk via a multi-currency hedging program.
Recently Issued Accounting Pronouncements
Refer to Part I, Item I, Financial Statements, Note 1 to the Consolidated Financial Statements for a discussion of recently adopted and issued accounting pronouncements.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. We regularly review our estimates and assumptions. These estimates and assumptions, which are based upon historical experience and on various other factors believed to be reasonable under the circumstances, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Reported amounts and disclosures may have been different had management used different estimates and assumptions or if different conditions had occurred in the periods presented. For further information, please refer to the discussion of all critical accounting policies in Note 1 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023.
33
Results of Operations
Three months ended June 30, 2024 compared to three months ended June 30, 2023
The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the three months ended June 30, 2024 and 2023 (amounts in thousands). All intercompany transactions between the reported segments for the periods presented have been eliminated.
TTEC Digital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
||||
|
|
2024 |
|
2023 |
|
$ Change |
|
% Change |
|
|
|||
Revenue |
|
$ |
116,368 |
|
$ |
117,585 |
|
$ |
(1,217) |
|
(1.0) |
% |
|
Operating Income |
|
|
6,008 |
|
|
7,154 |
|
|
(1,146) |
|
(16.0) |
% |
|
Operating Margin |
|
|
5.2 |
% |
|
6.1 |
% |
|
|
|
|
|
|
The decrease in revenue for the TTEC Digital segment was driven by the reduction in professional services due to the temporary lower bookings in the prior year partially offset by the 8% growth in recurring revenue.
The operating income decrease was primarily related to asset impairment partially offset by the positive change in the revenue mix. Operating income as a percentage of revenue decreased to 5.2% in the second quarter of 2024 as compared to 6.1% in the prior period. Included in operating income was amortization expense related to acquired intangibles of $4.3 million and $4.3 million for the quarters ended June 30, 2024 and 2023, respectively.
TTEC Engage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
||||
|
|
2024 |
|
2023 |
|
$ Change |
|
% Change |
|
|
|||
Revenue |
|
$ |
417,717 |
|
$ |
482,809 |
|
$ |
(65,092) |
|
(13.5) |
% |
|
Operating Income (loss) |
|
|
(230,421) |
|
|
24,144 |
|
|
(254,565) |
|
(1,054.4) |
% |
|
Operating Margin |
|
|
(55.2) |
% |
|
5.0 |
% |
|
|
|
|
|
|
The decrease in revenue for the TTEC Engage segment is explained by a long tenured client exiting a large line of business supported by TTEC, lower demand from select enterprise clients due to clients’ continued conservative management of discretionary spending influenced by a challenging macro-economic environment and delays attributable to launching new and larger awarded contracts.
The operating income (loss) change was primarily attributable to a goodwill impairment charge, higher restructuring charges, of which $4.7 million related to a specific cost optimization program, lower revenue, negative change in the revenue mix, and the launch of a new large public contract. As a result, operating income (loss) as a percentage of revenue decreased to (55.2)% in the second quarter of 2024 as compared to 5.0% in the prior period. Included in operating income was amortization expense related to acquired intangibles of $4.1 million and $4.7 million for the quarters ended June 30, 2024 and 2023, respectively.
Interest Income (Expense)
For the three months ended June 30, 2024 interest income decreased to $0.4 million from $1.1 million in the same period in 2023 due to a lower balance of international cash resulting from repatriated cash at the end of the first quarter of 2024. Interest expense increased to $20.4 million during 2024 from $19.0 million during 2023 due to higher interest rates.
Other Income (Expense)
For the three months ended June 30, 2024 Other income (expense), net increased to income of $1.8 million from expense of $3.6 million during the prior year quarter.
Included in the three months ended June 30, 2024 was a $0.8 million gain related to recovery of a social security tax credit related to 2008-2012.
34
Included in the three months ended June 30, 2023 was a $3.6 million expense related to the fair value adjustments of contingent consideration for the Faneuil acquisition (see Part I. Item 1. Financial Statements, Note 2 to the Consolidated Financial Statements).
Income Taxes
The effective tax rate for the three months ended June 30, 2024 was (22.3)%. This compares to an effective tax rate of 61.9% for the comparable period of 2023. The effective tax rate for the three months ended June 30, 2024 is primarily driven by the distribution of income between the U.S. and international tax jurisdictions, earnings in international jurisdictions currently under an income tax holiday, an impairment charge, and the impact of valuation allowances in the United States and several other jurisdictions. After $50.7 million of Non-GAAP adjustments, the Company’s normalized tax rate for the second quarter of 2024 was 33.7%.
Six months ended June 30, 2024 compared to six months ended June 30, 2023
The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the six months ended June 30, 2024 and 2023 (in thousands). All intercompany transactions between the reported segments for the periods presented have been eliminated.
TTEC Digital
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
||||
|
|
2024 |
|
2023 |
|
$ Change |
|
% Change |
|
|
|||
Revenue |
|
$ |
228,399 |
|
$ |
234,512 |
|
$ |
(6,113) |
|
(2.6) |
% |
|
Operating Income |
|
|
9,296 |
|
|
7,939 |
|
|
1,357 |
|
17.1 |
% |
|
Operating Margin |
|
|
4.1 |
% |
|
3.4 |
% |
|
|
|
|
|
|
The decrease in revenue for the TTEC Digital segment was driven by decreases in professional services impacted by the lower bookings from 2023.
The operating income increase is primarily attributable to lower restructuring and impairment charges. Operating income as a percentage of revenue increased to 4.1% for the six months ended June 30, 2024 as compared to 3.4% in the prior period. Included in operating income was amortization expense related to acquired intangibles of $8.7 million and $8.7 million for the six months ended June 30, 2024 and 2023, respectively.
TTEC Engage
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
||||
|
|
2024 |
|
2023 |
|
$ Change |
|
% Change |
|
|
|||
Revenue |
|
$ |
882,324 |
|
$ |
999,168 |
|
$ |
(116,844) |
|
(11.7) |
% |
|
Operating Income (loss) |
|
|
(210,998) |
|
|
67,770 |
|
|
(278,768) |
|
(411.3) |
% |
|
Operating Margin |
|
|
(23.9) |
% |
|
6.8 |
% |
|
|
|
|
|
|
The decrease in revenue for the TTEC Engage segment is explained by a long tenured client exiting a large line of business supported by TTEC, lower demand from select enterprise clients due to clients’ continued conservative management of discretionary spending influenced by a challenging macro-economic environment and delays attributable to launching new and larger awarded contracts.
The operating income (loss) change was primarily attributable to a goodwill impairment charge, higher restructuring charges, lower revenue and negative change in the revenue mix. As a result, operating income (loss) as a percentage of revenue decreased to (23.9)% for the six months ended June 30, 2024 as compared to 6.8% in the prior period. Included in operating income was amortization expense related to acquired intangibles of $8.2 million and $9.3 million for the six months ended June 30, 2024 and 2023, respectively.
35
Interest Income (Expense)
For the six months ended June 30, 2024 interest income decreased to $1.4 million from $2.3 million in the same period in 2023 due to a lower balance of international cash resulting from repatriated cash at the end of the first quarter of 2024. Interest expense increased to $41.5 million during 2024 from $36.4 million during 2023 due to higher interest rates.
Other Income (Expense)
For the six months ended June 30, 2024 Other income (expense), net increased to net income of $2.0 million from net expense of $2.9 million during the prior year period.
Included in the six months ended June 30, 2024 was a $1.0 million gain related to the fair value adjustment of a contingent consideration accrual.
Included in the six months ended June 30, 2023 was a gain of $4.5 million due to insurance recovery related to property damages and a net $6.8 million expense related to the fair value adjustments of contingent consideration accruals and receivables for one acquisition.
Income Taxes
The effective tax rate for the six months ended June 30, 2024 was (23.5)%. This compared to an effective tax rate of 36.2% for the comparable period of 2023. The effective tax rate for the six months ended June 30, 2024 is primarily driven by the distribution of income between the U.S. and international tax jurisdictions, earnings in international jurisdictions currently under an income tax holiday, an impairment charge, and the impact of valuation allowances in the United States and several other jurisdictions. After $46.9 million of Non-GAAP adjustments, the Company’s normalized tax rate for 2024 was 33.1%.
Liquidity and Capital Resources
Our principal sources of liquidity are our cash generated from operations, our cash and cash equivalents, and borrowings under our Credit Facility. During the six months ended June 30, 2024, we generated positive operating cash flows of $33.6 million. We believe that our cash generated from operations, existing cash and cash equivalents, and available credit will be sufficient to meet expected operating and capital expenditure requirements for the next 12 months, however, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.
We manage a centralized global treasury function in the United States with a focus on safeguarding and optimizing the use of our global cash and cash equivalents. Our cash is held in the U.S. in U.S. dollars, and outside of the U.S. in U.S. dollars and foreign currencies. We expect to use our cash to fund working capital, global operations, dividends, acquisitions, and other strategic activities. While there are no assurances, we believe our global cash is well protected given our cash management practices, banking partners and utilization of diversified bank deposit accounts and other high quality investments.
We have global operations that expose us to foreign currency exchange rate fluctuations that may positively or negatively impact our liquidity. To mitigate these risks, we enter into foreign exchange forward and option contracts through our cash flow hedging program. Please refer to Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk, Foreign Currency Risk, for further discussion. We are also exposed to higher interest rates associated with our variable rate debt.
The following discussion highlights our cash flow activities during the six months ended June 30, 2024 and 2023.
Cash and Cash Equivalents
We consider all liquid investments purchased within three months of their original maturity to be cash equivalents. Our cash and cash equivalents totaled $79.8 million and $172.7 million as of June 30, 2024 and December 31, 2023, respectively. The decline with the prior year is explained by the change in our APB 23 policy that allowed the Company to repatriate international cash and reduce the credit line. We diversify the holdings of such cash and cash equivalents considering the financial condition and stability of the counterparty institutions.
36
We reinvest our cash flows to grow our client base, expand our infrastructure, invest in research and development, for strategic acquisitions and to pay dividends.
Cash Flows from Operating Activities
For the six months ended June 30, 2024 and 2023, net cash flows provided by operating activities was $33.6 million and $144.9 million, respectively. The decrease is primarily due to a $48.4 million decrease in net cash income from operations and a $62.9 million decrease in net working capital.
Cash Flows from Investing Activities
For the six months ended June 30, 2024 and 2023, net cash flows used in investing activities was $27.6 million and $32.9 million, respectively. The decrease was due to a $5.3 million decrease in capital expenditures.
Cash Flows from Financing Activities
For the six months ended June 30, 2024 and 2023, net cash flows used in financing activities was $75.7 million and $115.0 million, respectively. The change in net cash flows from 2023 to 2024 was primarily due to a ($20.0) million net change in the line of credit offset by $37.7 million related to payments of contingent consideration and $21.7 million of incremental dividends paid during 2023.
Free Cash Flow
Free cash flow (see “Presentation of Non-GAAP Measurements” below for the definition of free cash flow) decreased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to a decrease in net cash from operations and a decrease in working capital. Free cash flow was $6.0 million and $112.0 million for the six months ended June 30, 2024 and 2023, respectively.
Presentation of Non-GAAP Measurements
Free Cash Flow
Free cash flow is a non-GAAP liquidity measurement. We believe that free cash flow is useful to our investors because it measures, during a given period, the amount of cash generated that is available for debt obligations and investments other than purchases of property, plant and equipment. Free cash flow is not a measure determined by GAAP and should not be considered a substitute for “income from operations,” “net income,” “net cash provided by operating activities,” or any other measure determined in accordance with GAAP. We believe this non-GAAP liquidity measure is useful, in addition to the most directly comparable GAAP measure of “net cash provided by operating activities,” because free cash flow includes investments in operational assets. Free cash flow does not represent residual cash available for discretionary expenditures, since it includes cash required for debt service. Free cash flow also includes cash that may be necessary for acquisitions, investments and other needs that may arise.
The following table reconciles net cash (used in) provided by operating activities to free cash flow for our consolidated results (in thousands):
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
Net cash provided by operating activities |
|
$ |
49,274 |
|
$ |
95,891 |
|
$ |
33,645 |
|
$ |
144,949 |
|
Less: Purchases of property, plant and equipment |
|
|
14,209 |
|
|
19,285 |
|
|
27,682 |
|
|
32,954 |
|
Free cash flow |
|
$ |
35,065 |
|
$ |
76,606 |
|
$ |
5,963 |
|
$ |
111,995 |
|
Obligations and Future Capital Requirements
There were no material changes to the Company’s contractual obligations and future capital requirements outside the normal course of business from the date of our 2023 Form 10-K filing on February 29, 2024 through the filing of this report.
37
Future Capital Requirements
We expect total capital expenditures in 2024 to be between 2.5% and 2.7% of revenue. Approximately 60% of these expected capital expenditures are to support growth in our business and 40% relate to the maintenance for existing assets. The anticipated level of 2024 capital expenditures is primarily driven by site expansions, new builds in emerging geographies, enhancements and modernization to our technological infrastructure and ongoing digital integration and product development.
The amount of capital required over the next 12 months will depend on our levels of investment in infrastructure necessary to maintain, upgrade or replace existing assets. Our working capital and capital expenditure requirements could also increase materially in the event of acquisitions or joint ventures, among other factors. These factors could require that we raise additional capital through future debt or equity financing. We can provide no assurance that we will be able to raise additional capital upon commercially reasonable terms acceptable to us.
Client Concentration
During the six months ended June 30, 2024 and 2023, one of our clients represented more than 10% of our total revenue. Our five largest clients, collectively, accounted for 31.7% and 36.3% of our consolidated revenue for the three months ended June 30, 2024 and 2023, respectively and 33.8% and 35.4% of our consolidated revenue for the six months ended June 30, 2024 and 2023, respectively. We have had long-term relationships with our top five TTEC Engage clients, ranging from 7 to 24 years, with all of these clients having completed multiple contract renewals with us. The relative contribution of any single client to consolidated earnings is not always proportional to the relative revenue contribution on a consolidated basis and varies greatly based upon specific contract terms. In addition, clients may adjust business volumes served by us based on their business requirements. We believe the risk of this concentration is mitigated, in part, by the long-term contracts we have with our largest clients. Although certain client contracts may be terminated for convenience by either party, we believe this risk is mitigated, in part, by the service level disruptions and transition/migration costs that would arise for our clients if they terminated our contract for convenience.
Some of the contracts with our five largest clients expire between 2025 and 2027, but many of our largest clients have multiple contracts with us with different expiration dates for different lines of work. We have historically renewed most of our contracts with our largest clients, but there can be no assurance that future contracts will be renewed or, if renewed, will be on terms as favorable as the existing contracts.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our consolidated financial position, consolidated results of operations, or consolidated cash flows due to adverse changes in financial and commodity market prices and rates. Market risk also includes credit and non-performance risk by counterparties to our various financial instruments. We are exposed to market risk due to changes in interest rates and foreign currency exchange rates (as measured against the U.S. dollar); as well as credit risk associated with potential non-performance of our counterparty banks. These exposures are directly related to our normal operating and funding activities. We enter into derivative instruments to manage and reduce the impact of currency exchange rate changes, primarily between the U.S. dollar/Philippine peso, the U.S. dollar/Mexican peso, and the Australian dollar/Philippine peso. To mitigate against credit and non-performance risk, it is our policy to only enter into derivative contracts and other financial instruments with investment grade counterparty financial institutions and, correspondingly, our derivative valuations reflect the creditworthiness of our counterparties. As of the date of this report, we have not experienced, nor do we anticipate, any issues related to derivative counterparty defaults.
Interest Rate Risk
The interest rate on our Credit Agreement is variable based upon the Prime Rate and SOFR and, therefore, is affected by changes in market interest rates. As of June 30, 2024, we had $930.0 million of outstanding borrowings under the Credit Agreement. Based upon average outstanding borrowings during the three months ended June 30, 2024, interest accrued at a rate of approximately 7.4% per annum. If the Prime Rate or SOFR increased by 100 basis points, there would be an annualized $1.0 million of additional interest expense per $100.0 million of outstanding borrowing under the Credit Agreement.
38
Foreign Currency Risk
Our subsidiaries in the Philippines, Mexico, India, Bulgaria and Poland use the local currency as their functional currency for paying labor and other operating costs. Conversely, revenue for these foreign subsidiaries is derived principally from client contracts that are invoiced and collected in U.S. dollars or other foreign currencies. As a result, we may experience foreign currency gains or losses, which may positively or negatively affect our results of operations attributed to these subsidiaries. For the six months ended June 30, 2024 and 2023, revenue associated with this foreign exchange risk was 21% and 19% of our consolidated revenue, respectively.
In order to mitigate the risk of these non-functional foreign currencies weakening against the functional currencies of the servicing subsidiaries, which thereby decreases the economic benefit of performing work in these countries, we may hedge a portion, though not 100%, of the projected foreign currency exposure related to client programs served from these foreign countries through our cash flow hedging program. While our hedging strategy can protect us from adverse changes in foreign currency rates in the short term, an overall weakening of the non-functional foreign currencies would adversely impact margins in the segments of the servicing subsidiary over the long term.
Cash Flow Hedging Program
To reduce our exposure to foreign currency exchange rate fluctuations associated with forecasted revenue in non-functional currencies, we purchase forward and/or option contracts to acquire the functional currency of the foreign subsidiary at a fixed exchange rate at specific dates in the future. We have designated and account for these derivative instruments as cash flow hedges for forecasted revenue in non-functional currencies.
While we have implemented certain strategies to mitigate risks related to the impact of fluctuations in currency exchange rates, we cannot ensure that we will not recognize gains or losses from international transactions, as this is part of transacting business in an international environment. Not every exposure is or can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts for which actual results may differ from the original estimate. Failure to successfully hedge or anticipate currency risks properly could adversely affect our consolidated operating results.
Our cash flow hedging instruments as of June 30, 2024 and December 31, 2023 are summarized as follows (in thousands). All hedging instruments are forward contracts, except as noted.
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Local |
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Currency |
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U.S. Dollar |
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% Maturing |
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Contracts |
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Notional |
|
Notional |
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|
in the next |
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Maturing |
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|
As of June 30, 2024 |
|
Amount |
|
Amount |
|
|
12 months |
|
|
Through |
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|
Canadian Dollar |
|
750 |
|
$ |
557 |
|
|
100.0 |
% |
|
September 2024 |
|
Philippine Peso |
|
7,924,000 |
|
|
138,843 |
(1) |
|
61.8 |
% |
|
March 2027 |
|
Mexican Peso |
|
638,000 |
|
|
30,417 |
|
|
64.9 |
% |
|
December 2026 |
|
|
|
|
|
$ |
169,817 |
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Local |
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Currency |
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U.S. Dollar |
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Notional |
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Notional |
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As of December 31, 2023 |
|
Amount |
|
Amount |
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|
|
|
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|
Canadian Dollar |
|
2,250 |
|
$ |
1,670 |
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|
|
Philippine Peso |
|
9,324,000 |
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165,842 |
(1) |
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Mexican Peso |
|
938,000 |
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|
44,155 |
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|
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|
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$ |
211,667 |
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| (1) | Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S. dollars on June 30, 2024 and December 31, 2023. |
39
The fair value of our cash flow hedges as of June 30, 2024 was assets/(liabilities) (in thousands):
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Maturing in the |
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|
June 30, 2024 |
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Next 12 Months |
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||
Canadian Dollar |
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$ |
(8) |
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$ |
(8) |
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Philippine Peso |
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(3,444) |
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|
(2,292) |
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Mexican Peso |
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|
2,819 |
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2,706 |
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|
|
$ |
(633) |
|
$ |
406 |
|
Our cash flow hedges are valued using models based on market observable inputs, including both forward and spot foreign exchange rates, implied volatility, and counterparty credit risk. The decrease in fair value from December 31, 2023 reflects changes in the currency translation between the U.S. dollar and Mexican peso and U.S. dollar and Philippine pesos.
We recorded net gains of $2.0 million and $1.4 million for settled cash flow hedge contracts and the related premiums for the six months ended June 30, 2024 and 2023, respectively. These gains were reflected in Revenue in the accompanying Consolidated Statements of Comprehensive Income (Loss). If the exchange rates between our various currency pairs were to increase or decrease by 10% from current period-end levels, we would incur a material gain or loss on the contracts. However, any gain or loss would be mitigated by corresponding increases or decreases in our underlying exposures.
Other than the transactions hedged as discussed above and in Part I, Item 1. Financial Statements, Note 6 to the Consolidated Financial Statements, the majority of the transactions of our U.S. and foreign operations are denominated in their respective local currency. However, transactions are denominated in other currencies from time-to-time. We do not currently engage in hedging activities related to these types of foreign currency risks because we believe them to be insignificant as we endeavor to settle these accounts on a timely basis. For the six months ended June 30, 2024 and 2023, approximately 15% and 14%, respectively, of revenue was derived from contracts denominated in currencies other than the U.S. dollar. Our results from operations and revenue could be adversely affected if the U.S. dollar strengthens significantly against foreign currencies.
Fair Value of Debt and Equity Securities
We did not have any investments in marketable debt or equity securities as of June 30, 2024 or December 31, 2023.
ITEM 4. CONTROLS AND PROCEDURES
This report includes the certifications of our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”) required by Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.
Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation under the supervision and with the participation of management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures, as of June 30, 2024, the end of the period covered by this Form 10-Q. Based on this evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
40
Inherent Limitations of Internal Controls
Our management, including the CEO and CFO, believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control are met. Further, the design of internal controls must consider the benefits of controls relative to their costs. Inherent limitations within internal controls include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of controls. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. While the objective of the design of any system of controls is to provide reasonable assurance of the effectiveness of controls, such design is also based in part upon certain assumptions about the likelihood of future events, and such assumptions, while reasonable, may not take into account all potential future conditions. Thus, even effective internal control over financial reporting can only provide reasonable assurance of achieving their objectives. Therefore, because of the inherent limitations in cost effective internal controls, misstatements due to error or fraud may occur and may not be prevented or detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth under the caption “Legal Proceedings” in Part I, Item 1. Financial Statements, Note 10 to the Consolidated Financial Statements of this Form 10-Q is hereby incorporated by reference.
ITEM 1A. RISK FACTORS
There were no material changes to the Risk Factors described in Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Stock Repurchase Program
We continue to have the opportunity to return capital to our shareholders via a stock repurchase program (originally authorized by the Board of Directors in 2001). As of December 31, 2023, the cumulative authorized repurchase allowance was $762.3 million, of which we have used $735.8 million to purchase 46.1 million shares. The Board most recently authorized additional funds under the repurchase program in 2017 and of the total amount authorized, approximately $26.6 million continues to be authorized for repurchase as of December 31, 2023. During 2023, and year to date in 2024, we did not purchase any shares under the program. Although the stock repurchase program does not have an expiration date, we would seek a re-authorization of repurchases from the Board of Directors, if we decide to make repurchases during 2024.
ITEM 5. OTHER INFORMATION
During the three months ended June 30, 2024, none of the Company's directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408 of Regulation S-K.
41
ITEM 6. EXHIBITS
Exhibit |
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Incorporated Herein by Reference |
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No. |
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Exhibit Description |
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Form |
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Exhibit |
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Filing Date |
4.02 |
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10.08 |
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10.88* |
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10.99* |
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31.1* |
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31.2* |
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32.1* |
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32.2* |
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101.INS |
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XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase |
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104 |
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The cover page from TTEC Holdings, Inc’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in Inline XBRL (included in Exhibit 101) |
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* |
Filed or furnished herewith. |
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42
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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TTEC HOLDINGS, INC. |
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(Registrant) |
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Date: August 8, 2024 |
By: |
/s/ Kenneth D. Tuchman |
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Kenneth D. Tuchman |
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Chairman and Chief Executive Officer |
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Date: August 8, 2024 |
By: |
/s/ Kenneth R. Wagers, III |
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Kenneth R. Wagers, III |
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Chief Financial Officer |
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43
EXHIBIT 10.88
Amendment to
EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment (“Amendment #1” to the Executive Employment Agreement (the “Agreement”) of January 1, 2019, by and between TTEC Services Corporation, a Nevada (formerly Colorado) corporation (the “Company”) a wholly owned subsidiary of TTEC Holdings, Inc., a Delaware corporation (“TTEC Parent”), and Margaret B. McLean ("Executive" or “McLean”), is executed to be effective as of January 1, 2023 (“Effective Date”).
Whereas, Ms. McLean joined the Company in 2013 and the terms of her employment with the Company were most recently documented in the Agreement;
Whereas, Ms. McLean’s terms of employment have changed from time to time since the inception of the Agreement;
NOW, THEREFORE, the parties wish to enter into this Amendment #1 to update and more accurately reflect these terms, including the reporting relationship and compensation.
| 1. | PARAGRAPH 1(a) (APPOINTMENT) is hereby amended and restated as follows: |
“As of the Effective Date, McLean is hereby appointed as the Chief Legal Officer/General Counsel and Risk Officer for TTEC Holdings, Inc. reporting to TTEC Parent’s President, Ms. Michelle “Shelly” Swanback. In this role, the Executive shall be a member of TTEC Executive Leadership Team (or its successor in reference) and will continue to have overarching responsibilities for global legal, regulatory and compliance, as well as risk oversight, for TTEC Parent.”
| 2. | PARAGRAPH 2 (COMPENSATION) would be amended and restated as follows: |
“a. Salary. As of January 1, 2023, McLean’s base salary was amended to be $420,000 per year (“Base Salary”), payable in equal installments in accordance with the Company’s standard payroll practice, less legally required deductions and withholdings. The Base Salary may be periodically reviewed and adjusted to appropriately reflect the Executive’s role in the business, the contribution of the role, and the market pay for such role in accordance with TTEC Parent’s standard compensation review practices. Notwithstanding the foregoing, nothing in this Agreement provides assurances that the Executive’s salary will be increased from time to time.
| b. | Variable Incentive Compensation (annual cash bonus). McLean shall continue to be eligible to participate in the TTEC annual performance-based cash incentive program, currently referred to as TTEC Variable Incentive Plan (“VIP”). As of January 1, 2023, McLean’s annual VIP opportunity is 85% of Base Salary tied to the annual targets and goals of the business as set by TTEC Parent’s Board of Directors and her personal performance goals; and is based 100% on the collective performance of TTEC Parent. |
In addition, the Compensation Committee of the Board may, but shall not be obligated to, adjust the Executive’s VIP award upward based on TTEC Parent’s performance against annual metrics set by the Board and deemed to be that year’s business imperatives, such as but not limited to annual bookings and backlog, revenue, adjusted EBITDA, operating income, cash flow, TTEC stock price appreciation and other metrics as approved by the Compensation Committee of the Board from time to time.
The timing for the annual determination and payment of VIP awards, if any, are determined from time to time by the Compensation Committee of TTEC Parent’s Board.
| c. | Equity Incentive Compensation (annual equity compensation). McLean shall continue to be eligible to participate in the TTEC annual Equity program, designed to provide long-term incentives for senior executives of the Company and align the employees’ interests with the interests of TTEC Parent’s stockholders. Currently, TTEC offers its equity grants in the form of restricted stock units (the “RSUs) and performance restricted stock units (“PRSUs”) vesting over a period of years. Until and unless modified by the Compensation Committee of the Board, the Executive shall be eligible for an annual RSU equity grant opportunity and annual PRSU equity grant opportunity of up to 100% of Base Salary (50/50 between time based RSUs and performance based PRSUs), in fair market value of TTEC equity, based on the market value of TTEC stock at the time of the grant. The RSU grants are usually time based with a three-year vesting schedule; while the PRSUs are performance-based equity with a three-year cliff-vesting schedule based on the performance of the business during the three-year measurement period, and an opportunity to overperform up to 200% of the original grant. |
The RSUs/PRSUs are granted under the terms of grant-specific agreements that are approved by the Compensation Committee of the Board from time to time (“Equity Agreements). These Equity Agreements provide vesting schedules, performance metrics, if any, and other material terms of each grant. TTEC Parent and the Compensation Committee of the Board reserve the right, at their discretion, to change the terms of future Equity Agreements and the equity granted thereunder. The use of the RSUs/PRSUs, as part of the annual equity grant, is discretionary and may be substituted, at the discretion of the Compensation Committee of the Board, by other equity instruments in accordance with incentive compensation plans adopted by TTEC Parent from time to time. All grants as part of TTEC Parent Equity program are subject to Executive Stock Ownership Guidelines in effect from time to time.
All other provisions of PARAGRAPH 2 shall remain unchanged.
| 3. | PARAGRAPH 8 (MISCELLANEOUS) would be amended as follows: |
“a. PARAGRAPH 8(f) (MODIFICATION OF AGREEMENT) would be amended and restated as follows: “This Agreement or any other term of McLean’s conditions of employment may not be modified by word or deed, except in writing signed by the Executive and the Chief People Officer (or successor officer) for TTEC Parent.”
| b. | PARAGRAPH 8(i) (DODD-FRANK CLAWBACK PROVISION) would be amended and restated as follows: |
“Dodd-Frank Recoupment Provisions. TTEC Executive Incentive Recoupment Policy is incorporated into the Agreement by reference and can be found at https://investors.ttec.com/static-files/c8d8459a-049e-472a-a3ef-35654486a970
All other provisions of PARAGRAPH 8 shall remain unchanged.
| 4. | Employee hereby confirms that by executing this Amendment she agrees that this Amendment 2024 and agreements made herein do not give rise to any claims and that she intends to raise no claims pursuant to PARAGRAPH 6(j) of the Agreement (TERMINATION FOR GOOD REASON). |
All other provisions of the Agreement shall remain unchanged.
Executive |
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TTECH Holdings, Inc. |
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/s/Margaret B. McLean |
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/s/Laura Butler, Chief People Officer |
Date: June 17, 2024 |
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Date: June 17, 2024 |
Exhibit 10.99
ANNEX A TO NINTH AMENDMENT
Published Revolver CUSIP Number: 87952JAF0
Published Transaction CUSIP Number: 87952JAE3
|
|
AMENDED AND RESTATED CREDIT AGREEMENT
(as amended by the First Amendment dated as of February 11, 2016,
the Second Amendment dated as of February 27, 2017,
the Third Amendment and Incremental Increase Agreement dated as of October 30, 2017,
the Fourth Amendment dated as of February 14, 2019,
the Fifth Amendment dated as of March 25, 2021, the Sixth Amendment dated as of November 23, 2021, the Seventh Amendment dated as of April 3, 2023 and, the Eighth Amendment dated as of February 26, 2024 and the Ninth Amendment dated as of August 8, 2024)
among
TTEC HOLDINGS, INC. (formerly known as TeleTech Holdings, Inc.),
as US Borrower
and
THE FOREIGN BORROWERS NAMED HEREIN,
collectively, as Borrowers
THE LENDERS NAMED HEREIN,
as Lenders
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent, Swing Line Lender and Fronting Lender
WELLS FARGO SECURITIES, LLC,
BOFA SECURITIES, INC.,
PNC BANK, NATIONAL ASSOCIATION,
U.S. BANK, NATIONAL ASSOCIATION,
and
BMO BANK N.A., successor by merger to BANK OF THE WEST,
as Joint Lead Arrangers and Joint Bookrunners
BANK OF AMERICA, N.A.,
PNC BANK, NATIONAL ASSOCIATION,
U.S. BANK, NATIONAL ASSOCIATION,
and
BMO BANK N.A., successor by merger to BANK OF THE WEST
each as Syndication Agent
KEYBANK NATIONAL ASSOCIATION,
as Documentation Agent
dated as of
June 3, 2013
|
Exhibit 10.99
Page
i
Exhibit 10.99
ii
Exhibit 10.99
iii
Exhibit 10.99
iv
Exhibit 10.99
v
Exhibit 10.99
Exhibits:
Exhibit AForm of US Borrower Revolving Credit Note
Exhibit BForm of Foreign Borrower Revolving Credit Note
Exhibit CForm of Swing Line Note
Exhibit DForm of Notice of Loan
Exhibit EForm of Compliance Certificate
Exhibit FForm of Assignment and Assumption Agreement
Exhibit GForm of Additional Foreign Borrower Assumption Agreement
Exhibit HForm of Request for Extension
Exhibit I-1Form of U.S. Tax Compliance Certificate (Non-Partnership Foreign Lenders)
Exhibit I-2Form of U.S. Tax Compliance Certificate (Non-Partnership Foreign Participants)
Exhibit I-3Form of U.S. Tax Compliance Certificate (Foreign Participant Partnerships)
Exhibit I-4Form of U.S. Tax Compliance Certificate (Foreign Lender Partnerships)
Exhibit J Form of Term Loan Note
Schedules:
Schedule 1Commitments of Lenders
Schedule 2Foreign Borrowers
Schedule 2.2Existing Letters of Credit
Schedule 3Domestic Guarantors of Payment
Schedule 5.8Indebtedness
Schedule 5.9Liens
Schedule 6.1Corporate Existence; Subsidiaries; Foreign Qualification
Schedule 6.4Litigation and Administrative Proceedings This AMENDED AND RESTATED CREDIT AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this “Agreement”) is made effective as of the June 3, 2013 among:
Schedule 6.9Locations
Schedule 6.11Employee Benefits Plans
Schedule 6.16Material Agreements
Schedule 6.18Insurance
vi
Exhibit 10.99
WITNESSETH:
WHEREAS, US Borrower, the lenders named therein, as lenders, and KeyBank National Association, as agent, entered into that certain Credit Agreement, dated as of October 1, 2010, as amended by a First Amendment thereto dated as of March 27, 2012 (collectively, the “Existing Credit Agreement”);
WHEREAS, this Agreement amends and restates in its entirety the Existing Credit Agreement and, upon the effectiveness of this Agreement, the terms and provisions of the Existing Credit Agreement shall be superseded hereby. All references to “Credit Agreement” contained in the Loan Documents, as defined in the Existing Credit Agreement, delivered in connection with the Existing Credit Agreement, shall be deemed to refer to this Agreement. Notwithstanding the amendment and restatement of the Existing Credit Agreement by this Agreement, the obligations outstanding (including, but not limited to, the letters of credit issued and outstanding under the Existing Credit Agreement as of the date hereof) shall remain outstanding and constitute continuing Obligations hereunder. Such outstanding Obligations and the guaranties of payment thereof shall in all respects be continuing, and this Agreement shall not be deemed to evidence or result in a novation or repayment and re-borrowing of such Obligations. In furtherance of and, without limiting the foregoing, from and after the date hereof and except as expressly specified herein, the terms, conditions, and covenants governing the obligations outstanding under the Existing Credit Agreement shall be solely as set forth in this Agreement, which shall supersede the Existing Credit Agreement in its entirety; and
WHEREAS, Borrowers, Agent and the Lenders desire to contract for the establishment of credits in the aggregate principal amounts hereinafter set forth, to be made available to Borrowers upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, it is mutually agreed as follows:
1
Exhibit 10.99
“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of any Person (other than a Company), or any business or division of any Person (other than a Company), (b) the acquisition of in excess of fifty percent (50%) of the outstanding capital stock (or other equity interest) of any Person (other than a Company), or (c) the acquisition of another Person (other than a Company) by a merger, amalgamation or consolidation or any other combination with such Person.
“Additional Commitment” means that term as defined in Section 2.9(b) hereof.
“Additional Foreign Borrower Assumption Agreement” means each of the Additional Foreign Borrower Assumption Agreements executed by a Foreign Borrower, as applicable, after the Closing Date, substantially in the form of the attached Exhibit G, as the same may from time to time be amended, restated or otherwise modified.
“Additional Lender” means an Eligible Transferee that shall become a Lender during the Commitment Increase Period pursuant to Section 2.9(c) hereof.
“Additional Lender Assumption Agreement” means an additional lender assumption agreement, in form and substance satisfactory to Agent, wherein an Additional Lender shall become a Lender.
“Additional Lender Assumption Effective Date” means that term as defined in Section 2.9(c) hereof.
Adjusted Eurodollar Rate = |
Eurodollar Rate for such Currency for such Interest Period |
|
|
1.00-Eurodollar Reserve Percentage |
|
“Adjusted Eurodollar Rate” means, as to any Loan denominated in any applicable Currency not bearing interest based on an RFR (which, as of the Sixth Amendment Effective Date, shall mean Dollars and each of the Currencies identified in clause (a) of the definition of “Alternate Currency”, other than Sterling) for any Interest Period, a rate per annum determined by the Agent pursuant to the following formula:
“Administrative Borrower” means US Borrower.
“Advantage” means any payment (whether made voluntarily or involuntarily, by offset of any deposit or other indebtedness or otherwise) received by any Lender in respect of the Obligations, if such payment results in that Lender having less than its pro rata share (based upon its Commitment Percentage) of the Obligations then outstanding.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means any Person, directly or indirectly, controlling, controlled by or under common control with a Company and “control” (including the correlative meanings, the terms “controlling”, “controlled by” and “under common control with”) means the power, directly or indirectly, to direct or cause the direction of the management and policies of a Company, whether through the ownership of voting securities, by contract or otherwise.
“Agent” means that term as defined in the first paragraph hereof.
2
Exhibit 10.99
“Agreement” means that term as defined in the first paragraph hereof.
“Alternate Currency” means (a) Euros, Canadian Dollars, Sterling, Yen, New Zealand Dollars and Australian Dollars, in each case as acceptable to Agent, and (b) any other currency, other than Dollars, agreed to by Agent and the Required Lenders in writing, that (i) shall be freely transferable and convertible into Dollars, (ii) is dealt with in the London interbank deposit market, and (iii) for which no central bank or other governmental authorization in the country of issue of such currency is required to give authorization for the use of such currency by any Lender for making Revolving Loans unless such authorization has been obtained and remains in full force and effect.
“Alternate Currency Equivalent” means, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Alternate Currency as determined by the Agent or the applicable IssuingFronting Lender (with notice thereof to the Agent), as the case may be, in its sole discretion by reference to the most recent Spot Ratespot rate (as determined in respect of the most recent Revaluation Date) for the purchase of such Alternate Currency with Dollars.
“Alternate Currency Exposure” means, at any time and without duplication, the sum of the Dollar Equivalent of (a) the aggregate principal amount of Alternate Currency Loans outstanding to US Borrower, (b) the aggregate principal amount of Alternate Currency Loans outstanding to the Foreign Borrowers, and (c) the Letter of Credit Exposure that is denominated in one or more Alternate Currencies.
“Alternate Currency Loan” means a Revolving Loan described in Section 2.2(a) hereof, that shall be denominated in an Alternate Currency and on which a Borrower shall pay interest at a rate based upon the Eurodollar Rate applicable to such Alternate Currency.
“Alternate Currency Maximum Amount” means an amount equal to fifty percent (50%) of the Revolving Amount.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction concerning or relating to bribery or corruption, including, without limitation, the United States Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder and the U.K. Bribery Act 2010 and the rules and regulations thereunder.
“Anti-Money Laundering Laws” means any and all laws, statutes, regulations or obligatory government orders, decrees, ordinances or rules related to terrorism financing or money laundering, including, without limitation, any applicable provision of the Patriot Act and The Currency and Foreign Transactions Reporting Act (also known as the “Bank Secrecy Act,” 31 U.S.C. §§ 5311-5330 and 12U.S.C. §§ 1818(s), 1820(b) and 1951-1959).
“Applicable Commitment Fee Rate” means:
3
Exhibit 10.99
Net Leverage Ratio |
Applicable Commitment Fee Rate |
Greater than or equal to 3.504.50 to 1.00 |
0.2750.325% |
Greater than or equal to 3.004.00 to 1.00 but less than 3.504.50 to 1.00 |
0.2500.300% |
Greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00 |
0.200% |
Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00 |
0.175% |
Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00 |
0.150% |
Less than 1.00 to 1.00 |
0.125% |
(c) commencing on the Calculation Date for the first fiscal quarter ending after the date on which the Covenant Adjustment Period terminated (including a termination pursuant to clause (b) of the definition thereof), the percentage per annum set forth in the following matrix, based upon the result of the computation of the Net Leverage Ratio as set forth in the Compliance Certificate for such fiscal period, as provided below:
Net Leverage Ratio |
Applicable Commitment Fee Rate |
Greater than or equal to 3.50 to 1.00 but less than 4.00 to 1.00 |
0.275% |
Greater than or equal to 3.00 to 1.00 but less than 4.003.50 to 1.00 |
0.250% |
Greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00 |
0.200% |
Greater than or equal to 2.00 to 1.00 but lessLess than 2.50 to 1.00 |
0.175% |
Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00 |
0.150% |
Less than 1.00 to 1.00 |
0.125% |
The Applicable Commitment Fee Rate shall be determined and adjusted quarterly on the date five (5) Business Days after the day on which US Borrower provides a Compliance Certificate pursuant to Section 5.3(c) for the most recently ended fiscal quarter of US Borrower (each such date, a “Calculation Date”). The above matrix (as applicable) does not modify or waive, in any respect, the requirements of Section 5.7 hereof, the rights of Agent and the Lenders to charge the Default Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof. Notwithstanding anything herein to the contrary, (i) during any period when US Borrower shall have failed to timely deliver the Consolidated financial statements pursuant to Section 5.3(a) or (b) hereof, or the Compliance Certificate pursuant to Section 5.3(c) hereof, until such time as the appropriate Consolidated financial statements and Compliance Certificate are delivered, the Applicable Commitment Fee Rate shall be the highest rate per annum indicated in the above pricing grid then in effect regardless of the Net Leverage Ratio at such time, and (ii) in the event that any financial information or certification provided to Agent in the Compliance Certificate is shown to be inaccurate, and such inaccuracy, if corrected, would have led to the application of a higher Applicable Commitment Fee Rate for any period (an “Applicable Commitment Fee Period”) than the Applicable Commitment Fee Rate applied for such Applicable Commitment Fee Period, then (A) US Borrower shall immediately deliver to Agent a corrected Compliance Certificate for such Applicable Commitment Fee Period, (B) the Applicable Commitment Fee Rate shall be determined based on such corrected Compliance Certificate, and (C) US Borrower shall immediately pay to Agent the accrued additional fees owing as a result of such increased Applicable Commitment Fee Rate for such Applicable Commitment Fee Period.
“Applicable Margin” means, with respect to the Revolving Loans:
4
Exhibit 10.99
Net Leverage Ratio |
Applicable Margin for Eurodollar Fixed Rate Loans/Transitioned RFR Loans/Initial RFR Loans (GBP) |
Applicable Margin for Base Rate Loans |
Greater than or equal to 3.504.50 to 1.00 |
2.003.500% |
1.002.500% |
Greater than or equal to 3.004.00 to 1.00 but less than 3.504.50 to 1.00 |
1.7503.000% |
0.7502.000% |
Greater than or equal to 2.503.50 to 1.00 but less than 3.004.00 to 1.00 |
1.5002.500% |
0.5001.500% |
Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00 |
1.375% |
0.375% |
Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00 |
1.125% |
0.125% |
Less than 1.00 to 1.00 |
1.000% |
0.000% |
(c) commencing on the Calculation Date for the first fiscal quarter ending after the date on which the Covenant Adjustment Period terminated (including a termination pursuant to clause (b) of the definition thereof), the percentage per annum (depending upon whether Loans are Eurodollar Fixed Rate Loans, Transitioned RFR Loans, Initial RFR Loans (GBP) or Base Rate Loans) set forth in the following matrix, based upon the result of the computation of the Net Leverage Ratio as set forth in the Compliance Certificate for such fiscal period, as provided below; provided, however, that in the case of any Initial RFR Loan (GBP), the Applicable Margin set forth below shall be the Applicable Margin for Eurodollar Fixed Rate Loans plus 0.0326% at each level of the matrix:
5
Exhibit 10.99
Net Leverage Ratio |
Applicable Margin for Eurodollar Fixed Rate Loans/Transitioned RFR Loans/Initial RFR Loans (GBP) |
Applicable Margin for Base Rate Loans |
Greater than or equal to 4.00 to 1.00 |
1.875% |
0.875% |
Greater than or equal to 3.00 to 1.00 but less than 4.003.50 to 1.00 |
1.750% |
0.750% |
Greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00 |
1.500% |
0.500% |
Greater than or equal to 2.00 to 1.00 but lessLess than 2.50 to 1.00 |
1.375% |
0.375% |
Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00 |
1.125% |
0.125% |
Less than 1.00 to 1.00 |
1.000% |
0.000% |
The Applicable Margin shall be determined and adjusted quarterly on the date five (5) Business Days after the day on which US Borrower provides a Compliance Certificate pursuant to Section 5.3(c) for the most recently ended fiscal quarter of US Borrower (each such date, a “Calculation Date”) The above matrix (as applicable), does not modify or waive, in any respect, the requirements of Section 5.7 hereof, the rights of Agent and the Lenders to charge the Default Rate, or the rights and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof. Notwithstanding anything herein to the contrary, (i) during any period when US Borrower shall have failed to timely deliver the Consolidated financial statements pursuant to Section 5.3(a) or (b) hereof, or the Compliance Certificate pursuant to Section 5.3(c) hereof, until such time as the appropriate Consolidated financial statements and Compliance Certificate are delivered, the Applicable Margin shall be the highest rate per annum indicated in the above pricing grid then in effect for Loans of that type, regardless of the Net Leverage Ratio at such time, and (ii) in the event that any financial information or certification provided to Agent in the Compliance Certificate is shown to be inaccurate, and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Margin Period”) than the Applicable Margin applied for such Applicable Margin Period, then (A) US Borrower shall immediately deliver to Agent a corrected Compliance Certificate for such Applicable Margin Period, (B) the Applicable Margin shall be determined based on such corrected Compliance Certificate, and (C) US Borrower shall immediately pay to Agent the accrued additional interest owing as a result of such increased Applicable Margin for such Applicable Margin Period.
“Approved Foreign Jurisdiction” means, subject to Section 2.13(a) hereof, (a) Australia, Canada, Japan, Mexico, New Zealand, or any European Union country (other than Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, France, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, and Slovenia), in each case as acceptable to Agent, and (b) any other jurisdiction approved by Agent and the Required Lenders in writing.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
6
Exhibit 10.99
“Arrangers” means Wells Fargo Securities, LLC, BofA Securities, Inc., BMO Bank N.A., successor by merger to Bank of the West, PNC Bank, National Association and U.S. Bank, National Association, each in its capacity as a joint lead arranger and joint bookrunner.
“Assignment Agreement” means an Assignment and Assumption Agreement in the form of the attached Exhibit F.
“Authorized Officer” means a Financial Officer or other individual authorized by a Financial Officer in writing (with a copy to Agent) to handle certain administrative matters in connection with this Agreement.
“Australian Dollar” means the lawful currency of Australia.
“Available Liquidity” means, at any time, the sum, without duplication, of (a) all Unrestricted cash on hand of the Companies, plus (b) all Unrestricted Cash Equivalents of the Companies that have a maturity of not more than one year from the date of determination, plus (c) the Revolving Credit Availability; provided that, for the purposes of calculating Available Liquidity for Section 5.7(d) hereof, to the extent that cash needs to be repatriated to a jurisdiction for the payment of all or any part of the Expected Earn-Out Amount, the costs (including taxes and other related costs) of such repatriation shall be subtracted from Available Liquidity.
“Available Tenor” means, as of any date of determination and with respect to any then-current Benchmark for any Currency, as applicable, (a) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an Interest Period pursuant to this Agreement or (b) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 3.5(c)(iv).
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Bank Product Agreements” means those certain cash management services and other agreements entered into from time to time between a Company and Agent or a Lender (or an affiliate of a Lender) in connection with any of the Bank Products.
“Bank Product Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by a Company to Agent or any Lender (or an affiliate of a Lender) pursuant to or evidenced by the Bank Product Agreements.
7
Exhibit 10.99
“Bank Products” means a service or facility extended to a Company by Agent or any Lender (or an affiliate of a Lender) for (a) credit cards and credit card processing services, (b) debit cards, purchase cards and stored value cards, (c) ACH transactions, and (d) cash management, including controlled disbursement, accounts or services.
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now or hereafter in effect, or any successor thereto, as hereafter amended.
“Base Rate” means, at any time, the highest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 0.50% and (c)(i) prior to the USD LIBOR Transition Date, the Adjusted Eurodollar Rate for Dollars for a one-month term in effect on such day plus 1.00% and (ii) on and after the USD LIBOR Transition Date, Daily Simple RFR for Dollars in effect on such day plus 1.00%. Each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate, Federal Funds Effective Rate, Adjusted Eurodollar Rate for Dollars or Daily Simple RFR for Dollars, as the case may be (provided that clause (c) shall not be applicable during any period in which the Adjusted Eurodollar Rate or Daily Simple RFR, as applicable, is unavailable or unascertainable).
“Base Rate Loan” means a Revolving Loan described in Section 2.2(a) hereof, which shall be denominated in Dollars and on which Borrowers shall pay interest at a rate based on the Base Rate plus the Applicable Margin for Base Rate Loans.
“BBSY” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“BBSY Rate” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“Benchmark” means, initially, with respect to any (a) Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Dollars, the Adjusted Eurodollar Rate for Dollars; provided that if (i) the USD LIBOR Transition Date has occurred or (ii) a Benchmark Transition Event or a Term RFR Transition Event, as applicable, has occurred with respect to the then-current Benchmark for Dollars, then “Benchmark” means, with respect to such Obligations, interest, fees, commissions or other amounts, the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 3.5(c)(i), (b) Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Sterling, the Daily Simple RFR applicable for Sterling; provided that if a Benchmark Transition Event or a Term RFR Transition Event, as applicable, has occurred with respect to such Daily Simple RFR or the then-current Benchmark for Sterling, then “Benchmark” means, with respect to such Obligations, interest, fees, commissions or other amounts, the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 3.5(c)(i) and (c) Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Australian Dollars, Euros, New Zealand Dollars or Yen, the Adjusted Eurodollar Rate applicable for such Currency; provided that if a Benchmark Transition Event or a Term RFR Transition Event, as applicable, has occurred with respect to such Adjusted Eurodollar Rate or the then-current Benchmark for such Currency, then “Benchmark” means, with respect to such Obligations, interest, fees, commissions or other amounts, the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 3.5(c)(i).
“Benchmark Replacement” means,
8
Exhibit 10.99
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:
9
Exhibit 10.99
provided that, (x) in the case of clause (2) above, such adjustment is displayed on a screen or other information service that publishes such Benchmark Replacement Adjustment from time to time as selected by the Agent in its reasonable discretion and (y) if the then-current Benchmark is a term rate, more than one tenor of such Benchmark is available as of the applicable Benchmark Replacement Date and the applicable Unadjusted Benchmark Replacement that will replace such Benchmark in accordance with Section 3.5(c)(i) will not be a term rate, the Available Tenor of such Benchmark for purposes of this definition of “Benchmark Replacement Adjustment” shall be deemed to be, with respect to each Unadjusted Benchmark Replacement having a payment period for interest calculated with reference thereto, the Available Tenor that has approximately the same length (disregarding business day adjustments) as such payment period.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate” (if applicable), the definition of “Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), the definition of “Eurodollar Banking Day”, the definition of “RFR Business Day”, timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods and other technical, administrative or operational matters) that the Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark for any Currency:
10
Exhibit 10.99
For the avoidance of doubt, (A) if the Reference Time for the applicable Benchmark refers to a specific time of day and the event giving rise to the Benchmark Replacement Date for any Benchmark occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such Benchmark and for such determination and (B) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means, with respect to the then-current Benchmark for any Currency (other than Adjusted Eurodollar Rate for Dollars), the occurrence of one or more of the following events with respect to such Benchmark:
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, with respect to any Benchmark, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the
11
Exhibit 10.99
90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means, with respect to (a) the Adjusted Eurodollar Rate for Dollars, the period (if any) (i) beginning at the time that the USD LIBOR Transition Date has occurred pursuant to clause (a) of that definition if, at such time, no Benchmark Replacement has replaced the Adjusted Eurodollar Rate for Dollars for all purposes hereunder and under any Loan Document in accordance with Section 3.5(c)(i) and (ii) ending at the time that a Benchmark Replacement has replaced the Adjusted Eurodollar Rate for Dollars for all purposes hereunder and under any Loan Document in accordance with Section 3.5(c)(i) and (b) any then-current Benchmark for any Currency other than the Adjusted Eurodollar Rate for Dollars, the period (if any) (i) beginning at the time that a Benchmark Replacement Date with respect to such Benchmark pursuant to clauses (a) or (b) of that definition has occurred if, at such time, no Benchmark Replacement has replaced such Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.5(c)(i) and (ii) ending at the time that a Benchmark Replacement has replaced such Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.5(c)(i).
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 CFR § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“BKBM” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“BKBM Rate” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“BMO Factoring Facility” means that certain Uncommitted Receivables Purchase Agreement, dated as of March 5, 2019, among BMO Bank N.A., US Borrower, TTEC Services Corporation, TTEC Healthcare Solutions, Inc., TTEC@HOME, LLC, TTEC Financial Services Management, LLC and TTEC Digital, LLC, as amended, restated, supplemented, assigned or otherwise modified from time to time.
“Borrower” means that term as defined in the first paragraph hereof.
“Borrower Investment Policy” means the investment policy of US Borrower in effect as of the Closing Date, together with such modifications as approved from time to time by the chief financial officer of US Borrower.
“Borrower Materials” means that term as described in Section 5.3 hereof.
“Borrowers” means that term as defined in the first paragraph hereof.
12
Exhibit 10.99
“Business Day” means a day that is not a Saturday, a Sunday or another day of the year on which national banks are authorized or required to close, and, in addition, (a) if the applicable Business Day relates to a Eurodollar Loan, is a day of the year on which dealings in deposits are carried on in the London interbank Eurodollar market,[intentionally omitted], (b) if the applicable Business Day relates to an Alternate Currency Loan denominated in Euros, any fundings, disbursements, settlements and payments in Euros in respect of any such Alternate Currency Loan, or any other dealings in Euros to be carried out pursuant to this Agreement in respect of any such Alternate Currency Loan, is day on which the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) payment system (or, if such payment system ceases to be operative, such other payment system (if any) determined by Agent to be a suitable replacement) is open for the settlement of payments in Euros and (c) if the applicable Business Day relates to an Alternate Currency Loan denominated in an Alternate Currency other than Euros, is a day on which dealings in deposits are carried on in the relevant Alternate Currency.
“Calculation Date” has the meaning set forth in the definition of “Applicable Commitment Fee Rate”.
“Canadian Dollar” means the lawful currency of Canada.
“Canadian Reference Bank” means any one or more of The Bank of Nova Scotia, Bank of Montreal, Royal Bank of Canada, The Toronto-Dominion Bank, Canadian Imperial Bank of Commerce or National Bank of Canada, as the Agent may determine.
“Capital Distribution” means a payment made, liability incurred or other consideration given by a Company to any Person that is not a Company, (a) for the purchase, acquisition, redemption, repurchase, payment or retirement of any capital stock or other equity interest of such Company, or (b) as a dividend, return of capital or other distribution (other than any stock dividend, stock split or other equity distribution payable only in capital stock or other equity of such Company) in respect of such Company’s capital stock or other equity interest.
“Capitalized Lease Obligations” means obligations of the Companies for the payment of rent for any real or personal property under leases or agreements to lease that, in accordance with GAAP, have been or should be capitalized on the books of the lessee and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP, subject to the terms of Section 1.2(c); provided, however, that “Capitalized Lease Obligations” shall exclude Facility-Related Leases.
“Cash Collateralize” means, to pledge and deposit with, or deliver to Agent, or directly to the applicable Fronting Lender (with notice thereof to Agent), for the benefit of one or more of the Fronting Lenders, the Swing Line Lender or the Lenders, as collateral for outstanding Letters of Credit or obligations of the Lenders to fund participations in respect of Letters of Credit or Swing Loans, cash or deposit account balances or, if Agent and the applicable Fronting Lender and the Swing Line Lender shall agree, in their sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to Agent, such Fronting Lender and the Swing Line Lender, as applicable. “Cash Collateral” shall have a meaning correlative to the definition of Cash Collateralize and shall include the proceeds of such cash collateral and other credit support.
“Cash Equivalents” means those securities and other investments described in the Borrower Investment Policy.
“CDOR Rate” means the rate of interest per annum determined by the Agent on the basis of the rate applicable to Canadian Dollar bankers’ acceptances for the applicable Interest Period (or if such Interest Period is not equal to a number of months, for a term equivalent to the number of months closest to such Interest Period) appearing on the “CDOR Page”, or any successor page of Reuters Monitor Money Rates Service (or such other page or commercially available source displaying Canadian interbank bid rates for Canadian Dollar bankers’ acceptances as may be designated by the Agent from time to time), as of 10:00 a.m. (Toronto, Ontario time) on the Rate Determination Date. If, for any reason, such rate does not appear on the “CDOR Page” on such day as contemplated, then the “CDOR Rate” on such day shall be calculated as the arithmetic average of the rates for a one month interest period applicable to Canadian Dollar bankers’ acceptances quoted by the banks listed in Schedule I of the Bank Act (Canada) which are also Revolving Lenders (or, if there are no such Lenders, then the Canadian Reference Bank) as of 10:00 a.m. on the Rate Determination Date. Each calculation by the Agent of the CDOR Rate shall be conclusive and binding for all purposes, absent manifest error. Notwithstanding the foregoing, if the CDOR Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
13
Exhibit 10.99
“CFC” means any Foreign Subsidiary that is a “controlled foreign corporation” within the meaning of Section 957 of the Code.
“CFC Holding Company” means, as of any time of determination, a Domestic Subsidiary that at such time has no material assets other than the equity interests in one or more CFCs. For the avoidance of doubt, US Borrower shall not be treated as a CFC Holding Company.
“Change in Control” means (a) the acquisition of, or, if earlier, the shareholder or director approval of the acquisition of, ownership or voting control, directly or indirectly, beneficially (within the meaning of Rules 13d-3 and 13d-5 of the Exchange Act) or of record, on or after the Closing Date, by any Person (other than Kenneth D. Tuchman, his spouse, any of his lineal descendants or any trustees or trusts established for his benefit or the benefit of his spouse or any of his lineal descendants) or group (within the meaning of Sections 13d-3 and 14d of the Exchange Act), of shares representing more than forty percent (40%) of the aggregate ordinary Voting Power represented by the issued and outstanding equity interests of US Borrower; (b) the occupation of a majority of the seats (other than vacant seats) on the board of directors or other governing body of US Borrower by Persons who were neither (i) nominated or approved by the board of directors or other governing body of US Borrower nor (ii) appointed or approved by directors so nominated or approved; (c) if US Borrower shall cease to own, directly or indirectly, seventy-five percent (75%) of the aggregate ordinary Voting Power represented by the issued and outstanding equity interests of each Foreign Borrower; or (d) the occurrence of a change in control, or other term of similar import used therein, as defined in any Material Indebtedness Agreement.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued; provided further, that solely for the purposes of Section 3.1 hereof, any increased costs associated with a Change in Law based on the foregoing clauses (i) and (ii) may only be imposed to the extent the applicable Lender or Recipient is generally seeking such costs from other similarly situated borrowers that are similarly affected by the circumstances giving rise to such costs under credit facilities that such Lender or Recipient reasonably deems to afford such Lender or Recipient the legal right to impose such costs, but no such Lender or Recipient shall be required to disclose any proprietary or confidential information in exercising its rights under Section 3.1 hereof.
“Closing Date” means the effective date of this Agreement as set forth in the first paragraph of this Agreement.
14
Exhibit 10.99
“Code” means the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.
“Collateral” means the Collateral, as defined in the Security Documents from time to time.
“Commitment” means, collectively, as to all Lenders, the Revolving Credit Commitments of such Lenders.
“Commitment Increase Period” means the period from the Closing Date to the date that is three (3) months prior to the Revolving Credit Maturity Date, or such later date (prior to the Revolving Credit Maturity Date) as shall be agreed to in writing by Agent.
“Commitment Percentage” means, for each Lender, with respect to the Revolving Credit Commitment, the percentage set forth opposite such Lender’s name under the column headed “Revolving Credit Commitment Percentage”, as listed in Schedule 1 hereto as of the SixthNinth Amendment Effective Date (taking into account any assignments pursuant to Section 11.10 hereof).
“Commitment Period” means the period from the Sixth Amendment Effective Date to the Revolving Credit Maturity Date.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Companies” means all Borrowers and all Subsidiaries of all Borrowers.
“Company” means a Borrower or a Subsidiary of a Borrower.
“Compliance Certificate” means a Compliance Certificate in the form of the attached Exhibit E.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profit Taxes.
“Consent Deadline” means that term as defined in Section 2.15(a) hereof.
“Consideration” means, in connection with an Acquisition, the aggregate consideration paid or to be paid, including borrowed funds, cash, deferred payments, the issuance of securities or notes, the assumption or incurring of liabilities (direct or contingent), the payment of consulting fees or fees for a covenant not to compete and any other consideration paid or to be paid for such Acquisition, but in all cases excluding earn-outs in respect of such Acquisition, so long as such cash earn-outs (which may be roughly quantified) are not in excess of twenty percent (20%) of the purchase price.
“Consolidated” means the resultant consolidation of the financial statements of US Borrower and its Subsidiaries in accordance with GAAP, including principles of consolidation consistent with those applied in preparation of the consolidated financial statements referred to in Section 6.14 hereof.
“Consolidated Depreciation and Amortization Charges” means, for any period, the aggregate of all depreciation and amortization charges for fixed assets, leasehold improvements and general intangibles (specifically including goodwill) of US Borrower for such period, as determined on a Consolidated basis.
15
Exhibit 10.99
“Consolidated EBITDA” means, for any period, as determined on a Consolidated basis, Consolidated Net Earnings for such period plus, without duplication, the aggregate amounts deducted in determining such Consolidated Net Earnings in respect of (a) Consolidated Interest Expense, (b) Consolidated Income Tax Expense, (c) Consolidated Depreciation and Amortization Charges (and, in addition, current and future amortization charges relating to the capitalized costs incurred by the Companies in connection with the execution and closing of this Agreement and the other Loan Documents (and future costs directly related to the amendment, from time to time, of the foregoing documents)), (d) one-time, non-recurring cash charges, including severance and other restructuring-related expenses, up to an aggregate amount of Twenty Million Dollars ($20,000,000) in any fiscal year of the US Borrower, (e) (i) non-cash charges or expenses incurred in accordance with GAAP (but excluding any non-cash charges related to receivables impairment), minus (ii) extraordinary or unusual non-cash gains not incurred in the ordinary course of business but that were included in the calculation of Consolidated Net Earnings for such period; provided that, for purposes of calculating the Net Leverage Ratio, the Secured Net Leverage Ratio and the Interest Coverage Ratio, (1) a pro forma calculation of Consolidated EBITDA shall be made for Significant Positive EBITDA Dispositions for any fiscal year of US Borrower if Significant Positive EBITDA Dispositions are made, during such fiscal year, in excess of the aggregate amount of Twenty Million Dollars ($20,000,000), (2) a pro forma calculation of Consolidated EBITDA shall be made for Significant Positive EBITDA Acquisitions made during such period, and (3) to the extent that any changes to GAAP pursuant to FASB ASC 842 require the reclassification or recharacterization of Operating Leases as capital leases, changes to Consolidated EBITDA that result from such reclassification or recharacterization shall be excluded from the calculation of Consolidated EBITDA, (f) synergies resulting from Acquisitions (to be achieved within eighteen (18) months of the consummation of such Acquisition and are not anticipated to be incurred on an ongoing basis following the consummation thereof), to the extent the synergies included in this clause (f) (1) are certified by a Financial Officer in form and substance reasonably satisfactory to Agent, (2) are reasonably acceptable to Agent and (3) do not exceed ten percent (10%) of Consolidated EBITDA (determined without reference to this clause (f) but including the EBITDA of the Person or assets to be acquired pursuant to such Acquisition or potential Acquisition, on a pro forma basis, for the most recent consecutive four quarter period prior to the closing of such Acquisition for which financial statements are available) and (g) reasonable legal, due diligence and other customary advisory and transaction costs and expenses incurred in connection with this Agreement, any Acquisition or potential Acquisition, any Disposition, issuance or redemption of capital stock or other equity interests, or any incurrence, amendment or waiver of any Indebtedness (in each case, whether or not consummated) permitted under this Agreement, in each case, so long as, such costs and expenses are incurred no later than six months from either the consummation of such Acquisition, the termination of such potential Acquisition, or the effectiveness of the applicable event, as applicable.
“Consolidated Funded Indebtedness” means, at any date, solely with respect to Indebtedness and other obligations owing by the Companies to Persons other than the Companies and without duplication, the sum of (a) all Indebtedness for borrowed money, (b) all obligations evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all guaranties of Indebtedness of the type described in this definition, (d) all obligations created under any conditional sale or other title retention agreements, (e) all Capitalized Lease Obligations, Synthetic Lease and asset securitization obligations (provided that the Companies may exclude Synthetic Leases of aircraft up to the aggregate amount of Ten Million Dollars ($10,000,000)), (f) all obligations (contingent or otherwise) with respect to letters of credit (other than a letter of credit or similar form of credit enhancement issued as a Performance Guaranty), and (g) all obligations for the deferred purchase price of capital assets as determined on a Consolidated basis. Notwithstanding anything in this definition to the contrary (i) all deferred payment obligations (that are not based on performance) that are part of the total Consideration for an Acquisition shall be considered to be Consolidated Funded Indebtedness, (ii) no performance based contingent obligation that is part of the total Consideration for any Acquisition shall be considered to be Consolidated Funded Indebtedness, (iii) no Permitted Factoring Transaction shall be considered to be Consolidated Funded Indebtedness, and (iv) up to an aggregate amount of Fifteen Million Dollars ($15,000,000) in economic incentives or grants provided by third parties, which may be recorded as liabilities until certain conditions are met, shall be excluded from Consolidated Funded Indebtedness, so long as the Companies remain in material compliance with the terms of such economic incentives and grants.
16
Exhibit 10.99
In addition, for the avoidance of doubt, the net obligations under any currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device or any Hedge Agreement shall not be considered Consolidated Funded Indebtedness.
“Consolidated Income Tax Expense” means, for any period, all provisions for taxes based on the gross or net income of US Borrower (including, without limitation, any additions to such taxes, and any penalties and interest with respect thereto), as determined on a Consolidated basis.
“Consolidated Interest Expense” means, for any period, the interest expense of US Borrower, paid in cash, on Consolidated Funded Indebtedness for such period, as determined on a Consolidated basis.
“Consolidated Net Earnings” means, for any period, the net income (loss) of US Borrower for such period, as determined on a Consolidated basis.
“Consolidated Net Worth” means, at any date, the stockholders’ equity of US Borrower, determined as of such date on a Consolidated basis.
“Consolidated Total Assets” means, at any time, all of the assets of the Companies, as determined on a Consolidated basis.
“Control Agreement” means a Deposit Account Control Agreement or a Securities Account Control Agreement.
“Controlled Group” means a Company and each Person required to be aggregated with a Company under Code Section 414(b), (c), (m) or (o).
“Convertible Indebtedness” means (a) senior, unsecured Indebtedness of the US Borrower that is convertible into shares of common stock of the US Borrower (or other securities or property following a merger event, reclassification or other change of the common stock of the US Borrower), cash or a combination thereof (such amount of cash determined by reference to the price of the US Borrower’s common stock or such other securities or property), and cash in lieu of fractional shares of common stock of the US Borrower and (b) any guarantee by any Credit Party of Indebtedness of the US Borrower described in clause (a).
“Covenant Adjustment Period” means the period commencing with the fiscal quarter ending March 31September 30, 2024 and ending on the earlier of (a) April 1, 20252026 and (b) upon written notice from the Administrative Borrower, at the Administrative Borrower’s option, the date that the Administrative Borrower provides a Compliance Certificate to the Agent demonstrating that the US Borrower is in pro forma compliance with the financial covenants set forth in Section 5.7, as in effect immediately prior toafter the termination of the Covenant Adjustment Period, for the applicable fiscal quarter.
“Credit Event” means the making by the Lenders of a Loan, the conversion by the Lenders of a Base Rate Loan to a EurodollarTransitioned RFR Loan, the continuation by the Lenders of a EurodollarTransitioned RFR Loan after the end of the applicable Interest Period, the making by the Swing Line Lender of a Swing Loan, or the issuance (or amendment or renewal) by the Fronting Lender of a Letter of Credit.
“Credit Party” means a Borrower and any Subsidiary or other Affiliate that is a Guarantor of Payment.
17
Exhibit 10.99
“Currencies” means Dollars and each Alternate Currency, and “Currency” means any of such Currencies.
“Customary Setoffs” means, as to any Securities Intermediary or depository institution, as applicable, with respect to any Securities Account or Deposit Account, as applicable, maintained with such Person, setoffs and chargebacks by such Person against such Securities Account or Deposit Account, as applicable, that directly relate to the maintenance and administration thereof, including, without limitation, for the following purposes: (a) administrative and maintenance fees and expenses; (b) items deposited in or credited to the account and returned unpaid or otherwise uncollected or subject to an adjustment entry; (c) for adjustments or corrections of posting or encoding errors; (d) for any ACH credit or similar entries that are subsequently returned thereafter; (e) for items subject to a claim against the depository bank/securities intermediary for breach of transfer, presentment, encoding, retention or other warranty under Federal Reserve Regulations or Operating Circulars, ACH or other clearing house rules, or applicable law (including, without limitation, Articles 3, 4 and 4A of the U.C.C.); and (f) for chargebacks in connection with merchant card transactions.
“Daily Simple RFR” means, for any day (an “RFR Rate Day”), a rate per annum equal to, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, (a) Dollars, on and after the USD LIBOR Transition Date, the greater of (i) Spread Adjusted SOFR for the day (such day, an “RFR Determination Day”) that is five (5) RFR Business Days prior to (A) if such RFR Rate Day is an RFR Business Day, such RFR Rate Day or (B) if such RFR Rate Day is not an RFR Business Day, the RFR Business Day immediately preceding such RFR Rate Day, in each case, utilizing the SOFR component of such Spread Adjusted SOFR that is published by the SOFR Administrator on the SOFR Administrator’s Website, and (ii) the Floor and (b) Sterling, the greater of (i) SONIA for the day (such day, an “RFR Determination Day”) that is five (5) RFR Business Days prior to (A) if such RFR Rate Day is an RFR Business Day, such RFR Rate Day or (B) if such RFR Rate Day is not an RFR Business Day, the RFR Business Day immediately preceding such RFR Rate Day, in each case, as such SONIA is published by the SONIA Administrator on the SONIA Administrator’s Website, and (ii) the Floor. If by 5:00 pm (local time for the applicable RFR) on the second (2nd) RFR Business Day immediately following any RFR Determination Day, the RFR in respect of such RFR Determination Day has not been published on the applicable RFR Administrator’s Website and a Benchmark Replacement Date with respect to the applicable Daily Simple RFR has not occurred, then the RFR for such RFR Determination Day will be the RFR as published in respect of the first preceding RFR Business Day for which such RFR was published on the RFR Administrator’s Website; provided that any RFR determined pursuant to this sentence shall be utilized for purposes of calculation of Daily Simple RFR for no more than three (3) consecutive RFR Rate Days. Any change in Daily Simple RFR due to a change in the applicable RFR shall be effective from and including the effective date of such change in the RFR without notice to the Borrower.
“Daily Simple RFR Loan” means a Loan that bears interest at a rate based on Daily Simple RFR other than pursuant to clause (c) of the definition of “Base Rate”.
“Debt Issuance” means the issuance of any Indebtedness for borrowed money by any Company.
“Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.
“Default” means an event or condition that constitutes, or with the lapse of any applicable grace period or the giving of notice or both would constitute, an Event of Default, and that has not been waived by the Required Lenders (or, if required hereunder, all of the Lenders) in writing.
18
Exhibit 10.99
“Default Rate” means (a) with respect to any Loan or other Obligation for which a rate is specified, a rate per annum equal to two percent (2%) in excess of the rate otherwise applicable thereto, and (b) with respect to any other amount, if no rate is specified or available, a rate per annum equal to two percent (2%) in excess of the Base Rate plus the Applicable Margin for Base Rate Loans from time to time in effect.
“Defaulting Lender” means, subject to Section 3.8(b) hereof, any Lender that (a) has failed to (i) fund all or any portion of any Loan or any participations in a Letter of Letters of Credit or participations in Swing Loans required to be funded by it hereunder within two Business Days of the date such Loans or participations were required to be funded hereunder unless such Lender notifies Agent and the Administrative Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to Agent, any Fronting Lender, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Loans) within two Business Days of the date when due, (b) has notified the Administrative Borrower, Agent, any Fronting Lender or the Swing Line Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by Agent or the Administrative Borrower, to confirm in writing to Agent and the Administrative Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by Agent and the Administrative Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-In Action, unless in the case of any Lender subject to this clause (d), the Administrative Borrower, Agent, each Fronting Lender and the Swing Line Lender shall each have determined that such Lender intends, and has all approvals required to enable it (in form and substance satisfactory to each of the Administrative Borrower, Agent, each Fronting Lender and the Swing Line Lender), to continue to perform its obligations as a Lender hereunder; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error. Such Lender shall be deemed to be a Defaulting Lender (subject to Section 3.8(b) hereof) (x) immediately in the case of clause (a)(i) and (b) or (c) (if notified by the Administrative Borrower) or (d) above and (y) upon delivery of written notice of such determination to the Administrative Borrower, each Fronting Lender, the Swing Line Lender and each Lender in the case of clause (a)(ii) and (b) or (c) (if notified to Agent or any Lender).
“Deposit Account” means a deposit account, as that term is defined in the U.C.C.
“Deposit Account Control Agreement” means each Deposit Account Control Agreement among US Borrower or a Domestic Guarantor of Payment, Agent and a depository institution, dated on or after the Closing Date, to be in form and substance reasonably satisfactory to Agent, as the same may from time to time be amended, restated or otherwise modified.
19
Exhibit 10.99
“Disposition” means the lease, transfer or other disposition (including by statutory division) of assets (including, without limitation, equity interests in subsidiary companies) by a Company (whether in one or more than one transaction), other than a sale, lease, transfer or other disposition made by a Company pursuant to Section 5.12(b), (c) or (g) hereof or in the ordinary course of business. For the avoidance of doubt, none of (x) the sale of any Permitted Convertible Indebtedness by the US Borrower, (y) the sale of any Permitted Warrant Transaction by the US Borrower nor (z) the performance by the US Borrower of its obligations under any Permitted Convertible Indebtedness or any Permitted Warrant Transaction, shall constitute a “Disposition”.
“Disqualifying Event” has the meaning set forth in Section 3.5(e).
“Dollar” or “$” means lawful money of the United States of America.
“Dollar Equivalent” means (a) with respect to an Alternate Currency Loan or Letter of Credit denominated in an Alternate Currency, the Dollar equivalent of the amount of such Alternate Currency Loan or Letter of Credit denominated in such Alternate Currency, determined by Agent on the basis of its spot rate at approximately 11:00 A.M. (London time) on the date two Business Days before the date of such Alternate Currency Loan or issuance of such Letter of Credit denominated in such Alternate Currency, for the purchase of the relevant Alternate Currency with Dollars for delivery on the date of such Alternate Currency Loan or Letter of Credit, and (b) with respect to any other amount, if such amount is denominated in Dollars, then such amount in Dollars and, otherwise the Dollar equivalent of such amount, determined by Agent on the basis of its spot rate at approximately 11:00 A.M. (London time) on the date for which the Dollar equivalent amount of such amount is being determined, for the purchase of the relevant Alternate Currency with Dollars for delivery on such date; provided that, in calculating the Dollar Equivalent for purposes of determining (i) a Borrower’s obligation to prepay Revolving Loans, Swing Loans and Letters of Credit pursuant to Section 2.11(a) hereof, or (ii) a Borrower’s ability to request additional Loans or Letters of Credit pursuant to the Commitment, Agent may, in its discretion, on any Business Day selected by Agent (prior to payment in full of the Obligations), calculate the Dollar Equivalent of each such Loan or Letter of Credit. (Note that for purposes of repayment of an Alternate Currency Loan at the end of an Interest Period, the amount of the Alternate Currency borrowed (as opposed to the Dollar Equivalent of such amount) is the amount required to be repaid.) Agent shall notify Administrative Borrower of the Dollar Equivalent of such Alternate Currency Loan or any other amount, at the time that such Dollar Equivalent shall have been determined.
“Domestic Guarantor of Payment” means each of the Companies designated a “Domestic Guarantor of Payment” on Schedule 3 hereto as of the SixthNinth Amendment Effective Date, each of which is executing and delivering a Guaranty of Payment, and any other Domestic Subsidiary that shall deliver a Guaranty of Payment to Agent subsequent to the SixthNinth Amendment Effective Date.
“Domestic Subsidiary” means a Subsidiary that is not a Foreign Subsidiary.
“Dormant Subsidiary” means a Company that (a) is not a Credit Party or the direct or indirect equity holder of a Credit Party and (b) together with its direct or indirect Subsidiaries, has Consolidated Total Assets of less than the greater of (i) Thirty-Five Million Dollars ($35,000,000) and (ii) one and three-quarter percent (1.75%) of Consolidated Total Assets of the US Borrower and its Subsidiaries.
“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Agent has not received, by 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders.
20
Exhibit 10.99
“Early Opt-in Election” means the occurrence of: (a) a notification by the Agent to (or the request by the Administrative Borrower to the Agent to notify) each of the other parties hereto that at least five currently outstanding Dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and (b) the joint election by the Agent and the Administrative Borrower to trigger a fallback from the Adjusted Eurodollar Rate for Dollars and the provision by the Agent of written notice of such election to the Lenders.
“EBITDA” means, for any period, the net earnings of a Person (without giving effect to extraordinary losses or gains) for such period, plus the aggregate amounts deducted in determining such net earnings in respect of (a) interest expense of such Person, (b) income taxes of such Person and (c) the aggregate of all depreciation and amortization charges of such Person for fixed assets, leasehold improvements and general intangibles (specifically including goodwill).
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Eighth Amendment Effective Date” means February 26, 2024.
“Electronic Record” has the meaning assigned to that term in, and shall be interpreted in accordance with, 15 U.S.C. 7006.
“Electronic Signature” has the meaning assigned to that term in, and shall be interpreted in accordance with, 15 U.S.C. 7006.
“Eligible Transferee” means any Person that meets the requirements to be an assignee under Section 11.10(a)(iii), (v) and (vi) hereof (subject to such consents, if any, as may be required under Section 11.10(a)(iii) hereof).
“EMU Legislation” means the legislative measures of the European Council for the introduction of changeover to or operation of a single or unified European currency.
“Environmental Laws” means all provisions of law (including the common law), statutes, ordinances, codes, rules, guidelines, policies, procedures, orders-in-council, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by a Governmental Authority or by any court, agency, instrumentality, regulatory authority or commission of any of the foregoing concerning environmental health or safety and protection of, or regulation of the discharge of substances into, the environment.
21
Exhibit 10.99
“Environmental Permits” means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws.
“Equity Issuance” means (a) any issuance by the US Borrower of shares of its equity interests to any Person that is not a Credit Party (including in connection with the exercise of options or warrants or the conversion of any debt securities to equity) and (b) any capital contribution from any Person that is not a Credit Party into any Credit Party or any Subsidiary thereof (other than by one Subsidiary that is not a Credit Party into another Subsidiary that is not a Credit Party).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated pursuant thereto.
“ERISA Event” means (a) the existence of a condition or event with respect to an ERISA Plan that is reasonably likely to result in the imposition of a material excise tax or any other material liability on a Company or of the imposition of a Lien on the assets of a Company; (b) the engagement by a Controlled Group member in a non-exempt “prohibited transaction” (as defined under ERISA Section 406 or Code Section 4975) or a breach of a fiduciary duty under ERISA that is reasonably likely to result in a material liability to a Company; (c) the application by a Controlled Group member for a waiver from the minimum funding requirements of Code Section 412 or ERISA Section 302 or a Controlled Group member is required to provide security under Code Section 401(a)(29) or Code Section 436; (d) the occurrence of a Reportable Event with respect to any Pension Plan that is reasonably likely to result in a material liability to a Company; (e) the withdrawal by a Controlled Group member from a Multiemployer Plan in a “complete withdrawal” or a “partial withdrawal” (as such terms are defined in ERISA Sections 4203 and 4205, respectively) or the withdrawal of any Controlled Group member from any Pension Plan subject to ERISA Section 4063 during a plan year in which such entity was a “substantial employer” as defined in ERISA Section 4001(a)(2) or a cessation of operations that is treated as such a withdrawal under ERISA Section 4062(e), which is reasonably likely to result in a material liability to a Company; (f) the failure of an ERISA Plan (and any related trust) that is intended to be qualified under Code Sections 401 and 501 to be so qualified or the failure of any “cash or deferred arrangement” under any such ERISA Plan to meet the requirements of Code Section 401(k); (g) the taking by the PBGC of any steps to terminate a Pension Plan or Multiemployer Plan or appoint a trustee to administer a Pension Plan or Multiemployer Plan, or the taking by a Controlled Group member of any steps to terminate a Pension Plan in a distress termination under ERISA Section 4041(c) or a Multiemployer Plan under ERISA Section 4041A; (h) the failure by a Controlled Group member or an ERISA Plan to satisfy any requirements of law applicable to an ERISA Plan which is reasonably likely to result in a material liability to a Company; (i) the commencement, existence or threatening of a claim, action, suit, audit or investigation with respect to an ERISA Plan (other than a routine claim for benefits) which is reasonably likely to result in a liability to a Company; (j) any incurrence by or any expectation of the incurrence by a Controlled Group member of a material increase in the liability for post-retirement benefits under any Welfare Plan, other than as required by ERISA Section 601, et seq. or Code Section 4980B; (k) the determination that any Pension Plan or Multiemployer Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Code Sections 430, 431 and 432 or ERISA Sections 303, 304 and 305; or (l) a Reportable Event with respect to a Pension Plan or a Multiemployer Plan.
“ERISA Plan” means an “employee benefit plan” (within the meaning of ERISA Section 3(3)) that a Controlled Group member at any time sponsors or sponsored, maintains or maintained, contributes to or contributed to, has liability contingent or otherwise with respect to or has an obligation to contribute to such plan, and which is not excluded from the coverage of ERISA pursuant to Section 4(b)(4) of ERISA.
22
Exhibit 10.99
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“EURIBOR” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“EURIBOR Rate” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“Euro” and “€” mean the single currency of the Participating Member States introduced in accordance with the EMU Legislation.
“Eurodollar Banking Day” means, (i) for Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Dollars, aany day (other than a Saturday or Sunday) on which bank are open for business in London Banking Day, (ii) for Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Euros, a TARGET Day and (iii) for Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Yen, any day (other than a Saturday or Sunday) on which banks are open for business in Japan; provided, that for purposes of notice requirements in Sections 2.5(a), 2.5(c) and 2.7(a), in each case, such day is also a Business Day.
“Eurodollar” means a Dollar denominated deposit in a bank or branch outside of the United States.
“Eurodollar Fixed Rate Loan” means a Eurodollar Loan or an Alternate Currency Loan.
“Eurodollar Rate” means,
(i)denominated in Dollars, the greater of (A) the rate of interest per annum equal to the London interbank offered rate for deposits in Dollars (“USD LIBOR”) as administered by the IBA, or a comparable or successor administrator approved by the Agent, for a period equal to the applicable Interest Period (in each case, the “USD LIBOR Rate”), at approximately 11:00 a.m. (London time) on the Rate Determination Date; and (B) the Floor;
23
Exhibit 10.99
“Eurodollar Reserve Percentage” means, for any day, the percentage which is in effect for such day as prescribed by the FRB for determining the maximum reserve requirement (including any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City or any other reserve ratio or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Loans. The Adjusted Eurodollar Rate for each outstanding Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.
“Event of Default” means an event or condition that shall constitute an event of default as defined in Article VII hereof.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Assets” means (a) US Borrower’s headquarters at 9197 Peoria Street, Englewood, Colorado and any other fee-owned real property (other than real property (and any improvement thereon) with an individual fair market value of more than $5,000,00010,000,000), (b) all leasehold interests in real property, (c) motor vehicles, airplanes and other assets subject to certificates of title, letter of credit rights (to the extent a security interest therein cannot be perfected by a U.C.C.
24
Exhibit 10.99
Financing Statement) and commercial tort claims; (d) pledges and security interests in any asset prohibited (i) by applicable law, rule, regulation at any time or (ii) by a contractual obligation binding on the grantor at the time the asset subject to such contractual obligation was acquired (in each case, except to the extent such prohibition is unenforceable after giving effect to the applicable provisions of the U.C.C.) or which could require governmental (including regulatory) consent, approval, license or authorization to be pledged (unless such consent, approval, license or authorization has been received) (in each case, after giving effect to the applicable provisions of the U.C.C.); provided that such exclusion shall not include any proceeds, products, substitutions or replacements of such asset, except to the extent that any such proceeds, products, substitutions or replacements would otherwise be excluded by this definition; (e) equity interests in Percepta LLC and in any other Person other than Wholly Owned Subsidiaries to the extent not permitted by the terms of any applicable organizational documents, joint venture agreement or shareholder agreement or similar contractual obligation (other than with US Borrower or any of its Wholly Owned Subsidiaries); (f) assets to the extent a security interest in such assets could reasonably be expected to result in a material adverse tax consequence as determined in good faith by the US Borrower; (g) any lease, license or other agreement to the extent that a grant of a security interest therein would violate or invalidate such lease, license or agreement or create a right of termination in favor of any other party thereto (other than the US Borrower or any of its Wholly Owned Subsidiaries) after giving effect to the applicable anti-assignment provisions of the U.C.C. or similar laws; provided that such exclusion shall not include any proceeds, products, substitutions or replacements of such asset, except to the extent that any such proceeds, products, substitutions or replacements would otherwise be excluded by this definition; (h) those assets as to which Agent and the US Borrower reasonably agree that the cost or other consequence of obtaining such a security interest or perfection thereof are excessive in relation to the value afforded thereby; (i) any governmental licenses or state or local franchises, charters and authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby after giving effect to the applicable anti-assignment provisions of the U.C.C. or similar laws; (j) “intent-to-use” trademark applications prior to the filing of a statement of use; (k) any segregated accounts or segregated funds held or received on behalf of third parties (it being understood that third parties shall not include the US Borrower or any of its Subsidiaries); and (l) any equipment or other asset subject to Liens permitted under Section 5.9(h), sale and leaseback transactions, capital lease obligations or other purchase money debt, if the contract or other agreement providing for such debt or capital lease obligation prohibits or requires the consent of any Person (other than the US Borrower or one of its Wholly Owned Subsidiaries) as a condition to the creation of any other security interest on such equipment or asset and, in each case, such prohibition or requirement is permitted under the Loan Documents. and (m) with respect to the equity interests of a Foreign Subsidiary that is a CFC or a Domestic Subsidiary that is a CFC Holding Company, all voting equity interest in excess of 65% of the voting equity interest of such Foreign Subsidiary or CFC Holding Company.
“Excluded Subsidiary” means (a) each of Percepta and TTEC Investments, Inc., (b) any joint venture, partnership or limited liability company in which US Borrower (or any other Company) and a non-Affiliate of US Borrower (or any other Company) hold an interest, (c) any captive insurance company in which US Borrower (or any other Company) holds an interest, (d) any Subsidiary that is prohibited by its charter documents, contract or applicable law from guaranteeing the Secured Obligations (provided that such prohibition was in existence at the time such Subsidiary was acquired or such contract was entered into, as applicable, and not included in anticipation thereof), (e) any Domestic Subsidiary of a CFC, (f) any CFC Holding Company and (g) any Dormant Subsidiary.
“Excluded Swap Obligation” means, with respect to any Guarantor of Payment, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Guarantor of Payment of, or the grant by such Guarantor of Payment of a security interest to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor of Payment’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such Guarantor of Payment or the grant of such security interest becomes effective with respect to such Swap Obligation.
25
Exhibit 10.99
If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, United States federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Administrative Borrower under Section 3.4(b) hereof) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 3.2, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.2(g) hereof, and (d) any United States federal withholding Taxes imposed under FATCA.
“Existing Credit Agreement” means that term as defined in the first paragraph hereof.
“Existing Letter of Credit” means that term as defined in Section 2.2(b)(vii) hereof.
“Expected Earn-Out Amount” means US Borrower’s best estimate of the aggregate amount that the Companies will be required to pay, during the next twelve (12) months, in connection with performance based contingent obligations that were incurred in connection with one or more Acquisitions.
“Facility-Related Leases” means lease arrangements in relation to office leases, contact center leases and non-contact center leases, in each case, entered into in the ordinary course of business with third-party commercial landlords, where the lessee pays base rent and other customary additional rent in respect of matters such as common area maintenance, utilities, tenant improvements, real estate taxes, and other operating expenses commonly assessed under commercial real estate leases and that do not contain a purchase option by the lessee for such property, unless based on the fair market value for such property.
“FASB ASC 842” means Accounting Standards Update No. 2016-02 February 2016, Leases (Topic 842) promulgated by the Financial Accounting Standards Board.
“FATCA” means Sections 1471 through 1474 of the Code, as of the First Amendment Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
(a) the Foreign Subsidiary Exposure exceeds seven and one-half percent (7.5%) of Consolidated Total Assets at any time during any two consecutive fiscal quarters of US Borrower; and
26
Exhibit 10.99
(b) the Net Leverage Ratio is greater than or equal to 3.25 to 1.00 as of the last day of each such fiscal quarter.
“Federal Funds Effective Rate” means, for any day, the rate per annum announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System on the previous Business Day; provided that if such rate is not so published for any day which is a Business Day, the Federal Funds Effective Rate shall be the average of the quotation for such day on such transactions received by Agent from three federal funds brokers of recognized standing selected by Agent.
“Fee Letter” means, collectively, (i) the Engagement Letter between the US Borrower and Wells Fargo Securities, LLC, dated as of January 3, 2019, as the same may from time to time be amended, restated or otherwise modified, which terminates and supersedes the “Fee Letter” between the US Borrower and Wells Fargo Securities, LLC, dated as of December 15, 2015 and, (ii) the Engagement Letter between the US Borrower and Wells Fargo Securities, LLC, dated as of March 2, 2021, as the same may from time to time be amended, restated or otherwise modified and (iii) the Fee Letter between the US Borrower and Wells Fargo Securities, LLC, dated as of the Ninth Amendment Effective Date.
“Financial Officer” means any of the following officers: chief executive officer, president, chief financial officer, treasurer, vice president of finance or controller. Unless otherwise qualified, all references to a Financial Officer in this Agreement shall refer to a Financial Officer of US Borrower.
“First Amendment Date” means February 11, 2016.
“First FB Addition Date” means the date of the addition of the first Foreign Borrower under this Agreement, pursuant to Section 2.13(a).
“First-Tier Material Foreign Subsidiary” means a first-tier Foreign Subsidiary of US Borrower or a Domestic Guarantor of Payment (with assets (consolidated for the foreign jurisdiction) in excess of five percent (5%) of Consolidated Total Assets).
“Flood Insurance Laws” means, collectively, (a) the National Flood Insurance Act of 1968, (b) the Flood Disaster Protection Act of 1973, (c) the National Flood Insurance Reform Act of 1994, (d) the Flood Insurance Reform Act of 2004 and (e) the Biggert-Waters Flood Insurance Reform Act of 2012, as each of the foregoing is now or hereafter in effect and any successor statute to any of the foregoing.
“Floor” means a rate of interest equal to 0%.
“Foreign Affiliate” means, with respect to a Foreign Borrower, a parent company, sister company or Subsidiary of such Foreign Borrower (that is not US Borrower or a Domestic Subsidiary).
“Foreign Benefit Plan” means each material plan, fund, program or policy established under the law of a jurisdiction other than the United States (or a state or local government thereof), whether formal or informal, funded or unfunded, insured or uninsured, providing employee benefits, including medical, hospital care, dental, sickness, accident, disability, life insurance, pension, retirement or savings benefits, under which one or more Companies have any liability with respect to any employee or former employee, but excluding any Foreign Pension Plan.
“Foreign Borrower” means each of the Foreign Subsidiaries of US Borrower set forth on Schedule 2 hereto, together with any otherany Foreign Subsidiary of US Borrower that, on or after the SixthNinth Amendment Effective Date, shall have satisfied, in the opinion of Agent, the requirements of Section 2.13(a) hereof.
27
Exhibit 10.99
As of the Ninth Amendment Effective Date, there are no Foreign Borrowers.
“Foreign Borrower Revolving Credit Note” means a Foreign Borrower Revolving Credit Note, substantially in the form of the attached Exhibit B (or as otherwise required by Agent after consultation with foreign counsel to Agent), executed and delivered by a Foreign Borrower pursuant to Section 2.4(b) hereof.
“Foreign Guarantor of Payment” means each of the Companies set forth on Schedule 3 hereto as of the Sixth Amendment Effective Date that shall have been designated a “Foreign Guarantor of Payment”, that are each executing and delivering a Guaranty of Payment, or any other Foreign Subsidiary that shall execute and deliver a Guaranty of Payment to Agent subsequent to the Sixth Amendment Effective Date.
“Foreign Lender” means (a) with respect to the Administrative Borrower, a Lender that is not a U.S. Person, and (b) with respect to each Foreign Borrower, a Lender that is resident or organized under the laws of a jurisdiction other than that in which such Foreign Borrower is resident for tax purposes.
“Foreign Pension Plan” means a pension plan required to be registered under the law of a jurisdiction other than the United States (or a state or local government thereof), that is maintained or contributed to by one or more Companies for their employees or former employees.
“Foreign Proceeds” means that term as defined in Section 2.11(f) hereof.
“Foreign Subsidiary” means a Subsidiary that is organized under the laws of any jurisdiction other than the United States, any State thereof or the District of Columbia.
“FRB” means the Board of Governors of the Federal Reserve System of the United States.
“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to any Fronting Lender, such Defaulting Lender’s Commitment Percentage of the outstanding Letter of Credit Exposure with respect to Letters of Credit issued by such Fronting Lender, other than such Letter of Credit Exposure as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Commitment Percentage of outstanding Swing Loans other than Swing Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.
“Fronting Lender” means, (a) as to any Letter of Credit transaction hereunder, Wells Fargo as issuer of the Letter of Credit, or, in the event that Wells Fargo shall be unable to issue or shall agree that another Lender may issue, a Letter of Credit, such other Lender as shall agree to issue the Letter of Credit in its own name, but in each instance on behalf of the Lenders hereunder, or (b) as to any Existing Letter of Credit, KeyBank National Association or Bank of America, N.A., as applicable.
28
Exhibit 10.99
“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of its activities.
“GAAP” means, subject to the provisions of Section 1.2(b) hereof, generally accepted accounting principles in the United States as then in effect, which shall include the official interpretations thereof by the Financial Accounting Standards Board, applied on a basis consistent with the past accounting practices and procedures of US Borrower.
“Governmental Authority” means any nation or government, any state, province or territory or other political subdivision thereof, any governmental agency, department, authority, instrumentality, regulatory body, court, central bank or other governmental entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization exercising such functions.
“Guarantor” means a Person that shall have pledged its credit or property in any manner for the payment or other performance of the indebtedness, contract or other obligation of another and includes (without limitation) any guarantor (whether of payment or of collection), surety, co-maker, endorser or Person that shall have agreed conditionally or otherwise to make any purchase, loan or investment in order thereby to enable another to prevent or correct a default of any kind.
“Guarantor of Payment” means a Domestic Guarantor of Payment or Foreign Guarantor of Payment, or any other Person that shall deliver a Guaranty of Payment to Agent subsequent to the Closing Date.
“Guaranty of Payment” means each Guaranty of Payment executed and delivered on or after the Closing Date in connection with this Agreement by the Guarantors of Payment, as the same may from time to time be amended, restated or otherwise modified.
“Guaranty of Payment Joinder” means each Guaranty of Payment Joinder, executed and delivered by a Domestic Guarantor of Payment for the purpose of adding such Domestic Guarantor of Payment as a party to a previously executed Guaranty of Payment.
“Hedge Agreement” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement.
“Incremental Increase” means that term as defined in Section 2.9(b) hereof.
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Exhibit 10.99
“Incremental Revolving Credit Increase” means that term as defined in Section 2.9(b) hereof.
“Incremental Term Loan” means that term as defined in Section 2.9(b) hereof.
“Incremental Term Loan Commitment” means that term as defined in Section 2.9(b) hereof.
“Indebtedness” means, for any Company (excluding in all cases trade payables and guaranties of performance by a Subsidiary payable in the ordinary course of business by such Company), without duplication, (a) all obligations to repay borrowed money, direct or indirect, incurred, assumed, or guaranteed, (b) all obligations in respect of the deferred purchase price of property or services (other than any performance based contingent obligation that is part of the total Consideration for any Acquisition), (c) all obligations under conditional sales or other title retention agreements, (d) all obligations (contingent or otherwise) under any letter of credit or banker’s acceptance, (e) all net obligations under any currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device or any Hedge Agreement, (f) all Synthetic Leases, (g) all Capitalized Lease Obligations, (h) all obligations of such Company with respect to asset securitization financing programs that are required to be reported as a liability in accordance with GAAP, (i) all obligations to advance funds to, or to purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person, (j) all indebtedness of the types referred to in subparts (a) through (i) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Company is a general partner or joint venturer, unless such indebtedness is expressly made non-recourse to such Company, (k) any other transaction (including forward sale or purchase agreements) having the commercial effect of a borrowing of money entered into by such Company to finance its operations or capital requirements, and (l) any guaranty of any obligation described in subparts (a) through (k) hereof. Notwithstanding the foregoing, the obligations of the US BorrowerCompanies under any Permitted Warrant Transaction or Permitted Factoring Transaction shall not constitute Indebtedness. For purposes hereof, the amount of any Permitted Convertible Indebtedness shall be the aggregate stated principal amount thereof without giving effect to any obligation to pay cash or deliver shares with value in excess of such principal amount, and without giving effect to any integration thereof with any Permitted Bond Hedge Transaction pursuant to U.S. Treasury Regulation § 1.1275-6.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.
“Initial RFR Loan (GBP)” means an RFR Loan that would have borne interest based upon a Daily Simple RFR or a Term RFR on the Closing Date, which for all purposes of this Agreement shall refer only to Loans denominated in Sterling.
“Interest Adjustment Date” means the last day of each Interest Period.
“Interest Coverage Ratio” means, as determined for the most recently completed four fiscal quarters of US Borrower, on a Consolidated basis, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense.
“Interest Payment Date” means (a) as to any Base Rate Loan or Daily Simple RFR Loan, the last Business Day of each March, June, September and December and the Revolving Credit Maturity Date and (b) as to any Eurodollar Fixed Rate Loan or Term RFR Loan, the last day of each Interest Period therefor and, in the case of any Interest Period of more than three (3) months’ duration, each day prior to the last day of such Interest Period that occurs at three-month intervals after the first day of such Interest Period; provided, that each such three-month interval payment day shall be the immediately succeeding Business Day if such day is not a Business Day, unless such day is not a Business Day but is a day of the relevant month after which no further Business Day occurs in such month, in which case such day shall be the immediately preceding Business Day and the Revolving Credit Maturity Date.
30
Exhibit 10.99
“Interest Period” means, as to any Loan, the period commencing on the date such Loan is disbursed or converted to or, with respect to any Eurodollar Fixed Rate Loan or Term RFR Loan, continued as a Eurodollar Fixed Rate Loan or Term RFR Loan, as applicable, and ending on the date one (1), three (3) or six (6) months thereafter, in each case as selected by the Administrative Borrower in its Notice of Borrowing or Notice of Conversion/Continuation and subject to availability; provided that:
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Lender” means that term as defined in the first paragraph hereof and, as the context requires, shall include the Fronting Lender and the Swing Line Lender.
“Letter of Credit” means a standby letter of credit that shall be issued by the Fronting Lender for the account of US Borrower or a Domestic Guarantor of Payment, including amendments thereto, if any, and shall have an expiration date no later than the earlier of (a) one year after its date of issuance (provided that such Letter of Credit may provide for the renewal thereof for additional one year periods), or (b) one year after the Revolving Credit Maturity Date, subject to Section 2.2(b)(viii) hereof.
“Letter of Credit Commitment” means the commitment of the Fronting Lender, on behalf of the Lenders, to issue Letters of Credit in an aggregate face amount of up to One Hundred Million Dollars ($100,000,000).
“Letter of Credit Exposure” means, at any time, the Dollar Equivalent of, the sum of (a) the aggregate undrawn amount of all issued and outstanding Letters of Credit, and (b) the aggregate of the draws made on Letters of Credit that have not been reimbursed by Borrowers or converted to a Revolving Loan pursuant to Section 2.2(b)(iv) hereof.
31
Exhibit 10.99
“Lien” means any mortgage, deed of trust, security interest, lien (statutory or other), charge, assignment, hypothecation, encumbrance on, pledge or deposit of, or conditional sale, lease (other than Operating Leases), sale with a right of redemption or other title retention agreement and any capitalized lease with respect to any property (real or personal) or asset.
“Limited Conditionality Acquisition” means that term as defined in Section 2.9(d) hereof.
“Loan” means a Revolving Loan or a Swing Loan.
“Loan Documents” means, collectively, this Agreement, each Note, each Guaranty of Payment, each Guaranty of Payment Joinder, all documentation relating to each Letter of Credit, each Security Document, each Additional Foreign Borrower Assumption Agreement and the Fee Letter, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced, and any other document delivered pursuant thereto.
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, liabilities (actual or contingent), operations or condition (financial or otherwise) of the Companies taken as a whole, (b) the material rights and remedies of Agent or the Lenders under any Loan Document, (c) the ability of the Credit Parties, taken as a whole, to perform their obligations under any material Loan Document, or (d) the legality, validity, binding effect or enforceability against any Credit Party of any material Loan Document to which it is a party.
“Material Indebtedness Agreement” means any debt instrument, capital lease (but not any Operating Lease), guaranty, contract, agreement or other arrangement evidencing any Indebtedness of any Company or the Companies in excess of the amount of Twenty Million Dollars ($20,000,000).
“Maximum Rate” means that term as defined in Section 2.3(d)(i) hereof.
“Minimum Collateral Amount” means, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to 103% of the sum of (i) the Fronting Exposure of theapplicable Fronting LenderLenders with respect to Letters of Credit issued and outstanding at such time and (ii) the Fronting Exposure of the Swing Line Lender with respect to all Swing Loans outstanding at such time and (b) otherwise, an amount determined by Agent and each of the applicable Fronting Lenders that is entitled to Cash Collateral hereunder at such time in their sole discretion.
“Multiemployer Plan” means a Pension Plan that is subject to the requirements of Subtitle E of Title IV of ERISA.
“Net Cash Proceeds” means, as applicable, (a) with respect to any sale, lease, transfer or other disposition of assets, all cash and Cash Equivalents received by any Company therefrom (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, as and when received) less the sum of (i) all income taxes and other taxes assessed by, or reasonably estimated to be payable to, a Governmental Authority as a result of such transaction (provided that if such estimated taxes exceed the amount of actual taxes required to be paid in cash in respect of such sale, lease, transfer or other disposition of assets, the amount of such excess shall constitute Net Cash Proceeds), (ii) all reasonable out-of-pocket fees and expenses incurred in connection with such transaction or event, (iii) the principal amount of, premium, if any, and interest on any Indebtedness (other than Indebtedness under the Loan Documents) secured by a Lien on the asset (or a portion thereof) disposed of, which Indebtedness is required to be repaid in connection with such transaction or event and (iv) all amounts that are set aside as a reserve (A) for adjustments in respect of the purchase price of such assets, (B) for any liabilities associated with such sale or casualty, to the extent such reserve is required by GAAP or as otherwise required pursuant to the documentation with respect to such sale, lease, transfer or other disposition of assets, (C) for the payment of unassumed liabilities relating to the assets sold or otherwise disposed of at the time of, or within 30 days after, the date of such sale or other disposition and (D) for the payment of indemnification obligations; provided that, to the extent and at the time any such amounts are released from such reserve and received by such Company, such amounts shall constitute Net Cash Proceeds, and (b) with respect to any Equity Issuance or Debt Issuance, the gross cash proceeds received by any Company therefrom less all reasonable out-of-pocket legal, underwriting and other fees and expenses incurred in connection therewith.
32
Exhibit 10.99
“Net Leverage Ratio” means, as any date of determination, the ratio of (a) Consolidated Funded Indebtedness (as of the end of the most recently completed fiscal quarter of US Borrower) minus seventy percent (70%) of Unrestricted cash and Cash Equivalents of the Companies as of such date of determination in an amount not to exceed (i) at any time during the Covenant Adjustment Period, the lesser of (x) seventy percent (70%) thereof and (y) One Hundred Million Dollars ($100,000,000) and (ii) at any time after the termination of the Covenant Adjustment Period, seventy percent (70%) thereof to (b) Consolidated EBITDA (for the most recently completed four fiscal quarters of US Borrower).
“New Zealand Dollar” means the lawful currency of New Zealand.
“Ninth Amendment Effective Date” means August 8, 2024.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver, amendment, modification or termination that (a) requires the approval of all Lenders, each Lender directly and adversely affected thereby or all affected Lenders in accordance with the terms of Section 11.3 hereof and (b) has been approved by the Required Lenders.
“Note” means a Revolving Credit Note or the Swing Line Note, or any other promissory note delivered pursuant to this Agreement.
“Notice of Loan” means a Notice of Loan in the form of the attached Exhibit D.
“Obligations” means, collectively, (a) all Indebtedness and other obligations now owing or hereafter incurred by one or more Borrowers to Agent, the Swing Line Lender, the Fronting LenderLenders, or any Lender (or any affiliate thereof) pursuant to this Agreement and the other Loan Documents, and includes the principal of and interest on all Loans, (b) all obligations of US Borrower or any Credit Party pursuant to Letters of Credit; (c) each extension, renewal, consolidation or refinancing of any of the foregoing, in whole or in part; (d) the commitment and other fees, and any prepayment fees payable pursuant to this Agreement or any other Loan Document; (e) all fees and charges in connection with the Letters of Credit; (f) every other liability, now or hereafter owing to Agent or any Lender by any Company pursuant to this Agreement or any other Loan Document; and (g) all Related Expenses.
“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.
“Operating Leases” means all real or personal property leases under which any Company is bound or obligated as a lessee or sublessee and which, under GAAP (prior to the effectiveness date of FASB ASC 842), would not be required to be capitalized on a balance sheet of such Company; provided that Operating Leases shall not include any such lease under which any Company is also bound as the lessor or sublessor. For the avoidance of doubt, Facility-Related Leases shall be deemed to constitute Operating Leases.
33
Exhibit 10.99
“Optional Leverage Ratio Increase” means that term as defined in Section 5.7 hereof.
“Organizational Documents” means, with respect to any Person (other than an individual), such Person’s Articles (Certificate) of Incorporation, operating agreement or equivalent formation documents, and Regulations (Bylaws), or equivalent governing documents, and any amendments to any of the foregoing.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means all present or future stamp, court, documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.4 hereof).
“Overnight Rate” means, for any day, (a) with respect to any amount denominated in Dollars, the greater of (i) the Federal Funds Effective Rate and (ii) an overnight rate determined by the Agent (or to the extent payable to an Fronting Lender or the SwinglineSwing Line Lender, such Fronting Lender or SwinglineSwing Line Lender, as applicable, in each case, with notice to the Agent) to be customary in the place of disbursement or payment for the settlement of international banking transactions, and (b) with respect to any amount denominated in an Alternate Currency, an overnight rate determined by the Agent (or to the extent payable to an Fronting Lender or the SwinglineSwing Line Lender, such Fronting Lender or SwinglineSwing Line Lender, as applicable, in each case, with notice to the Agent) to be customary in the place of disbursement or payment for the settlement of international banking transactions.
“Participant” means that term as defined in Section 11.10(c) hereof.
“Participant Register” means that term as defined in Section 11.10(c) hereof.
“Participating Member State” means any member state of the European Union that has the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001, as amended from time to time.
“PBGC” means the Pension Benefit Guaranty Corporation, and its successor.
“Pension Act” means the Pension Protection Act of 2006.
“Pension Plan” means an ERISA Plan that is a “pension plan” (within the meaning of ERISA Section 3(2)).
“Percepta” means Percepta, LLC and each of its Subsidiaries.
34
Exhibit 10.99
“Performance Guaranty” means a performance guaranty entered into in the ordinary course of business and upon terms typical in the industry of Borrowers; provided that Performance Guaranties shall not include guaranties of Indebtedness.
“Permitted Bond Hedge Transaction” means any bond hedge, call or capped call option (or substantively equivalent derivative transaction and whether a stand-alone transaction or a combined transaction with a Permitted Warrant Transaction, such as a capped call or call spread transaction) relating to the US Borrower’s common stock (or other securities or property following a merger event, reclassification or other change of the common stock of the US Borrower) purchased by the US Borrower in connection with the issuance of any Permitted Convertible Indebtedness and settled in common stock of the US Borrower (or such other securities or property), cash or a combination thereof (such amount of cash determined by reference to the price of the US Borrower’s common stock or such other securities or property), and cash in lieu of fractional shares of common stock of the US Borrower; provided that the purchase price of any such Permitted Bond Hedge Transaction does not exceed, the net proceeds received by the US Borrower in connection with the issuance of any Permitted Convertible Indebtedness.
“Permitted Convertible Indebtedness” means any Convertible Indebtedness permitted to be incurred under Section 5.8(o).
“Permitted Factoring Transaction” means an accounts receivable factoring or other similar arrangement for the sale of accounts receivable that is structured as a “true-sale”, limited-recourse to the Companies and provides for payment to such Company prior to the date that such accounts receivable would otherwise be due; provided that the aggregate book value of all accounts receivable that have been sold (or otherwise subjected to such arrangement) by the Companies and that remain outstanding shall not at any time exceed the greater of (i) $100,000,000 and (ii) twenty-five percent (25%) of the average book value of all accounts receivable of the Companies determined over the most recent ended twelve month period for which Consolidated financial statements are available pursuant to Sections 5.3(a) or (b).
“Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction and whether a stand-alone transaction or a combined transaction with a Permitted Bond Hedge Transaction, such as a capped call or a call spread transaction) relating to the US Borrower’s common stock (or other securities or property following a merger event, reclassification or other change of the common stock of the US Borrower) sold by the US Borrower substantially concurrently with any purchase by the US Borrower of a Permitted Bond Hedge Transaction and settled in common stock of the US Borrower (or such other securities or property), cash or a combination thereof (such amount of cash determined by reference to the price of the US Borrower’s common stock or such other securities or property), and cash in lieu of fractional shares of common stock of the US Borrower.
“Person” means any individual, sole proprietorship, partnership, joint venture, unincorporated organization, corporation, limited liability company, unlimited liability company, institution, trust, estate, Governmental Authority or any other entity.
“Plan Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and Multiemployer Plans set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Code Section 412 and ERISA Section 302, each as in effect prior to the Pension Act and, thereafter, Code Sections 412, 430, 431, 432 and 436 and ERISA Sections 302, 303, 304 and 305.
“Platform” means that term as described in Section 5.3 hereof.
35
Exhibit 10.99
“Prime Rate” means the interest rate established from time to time by Agent as Agent’s prime rate, whether or not such rate shall be publicly announced; the Prime Rate may not be the lowest interest rate charged by Agent for commercial or other extensions of credit. Each change in the Prime Rate shall be effective immediately from and after such change.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Public Lenders” means that term as described in Section 5.3 hereof.
“Qualifying Debt Issuance” means the issuance by the US Borrower and/or its Subsidiaries, in one or more issuances, an aggregate amount of at least One Hundred Fifty Million Dollars ($150,000,000) initial face amount of unsecured debt in the nature of unsecured high yield notes or unsecured Convertible Indebtedness.
“Rate Determination Date” means, with respect to any Interest Period, (a) in the case of the Eurodollar Rate (other than the CDOR Rate), two (2) Eurodollar Banking Days prior to the commencement of such Interest Period or (b) in the case of the CDOR Rate, first day of such Interest Period (or in each case of clause (a) or (b) such other day as is generally treated as the rate fixing day by market practice in such interbank market, as determined by the Agent; provided that to the extent that such market practice is not administratively feasible for the Agent, such other day as otherwise reasonably determined by the Agent).
“Recipient” means (a) Agent, (b) any Lender and (c) any Fronting Lender, as applicable.
“Reference Time” with respect to any setting of the then-current Benchmark for any Currency means (a) if such Benchmark is a Daily Simple RFR, (i) if the RFR for such Benchmark is SOFR, then four (4) RFR Business Days prior to (A) if the date of such setting is an RFR Business Day, such date or (B) if the date of such setting is not an RFR Business Day, the RFR Business Day immediately preceding such date and (ii) if the RFR for such Benchmark is SONIA, then four (4) RFR Business Days prior to (A) if the date of such setting is an RFR Business Day, such date or (B) if the date of such setting is not an RFR Business Day, the RFR Business Day immediately preceding such date, (b) if such Benchmark is an Adjusted Eurodollar Rate, (i) if the applicable Adjusted Eurodollar Rate for such Benchmark is based upon USD LIBOR, then 11:00 a.m. (London time) on the day that is two (2) Eurodollar Banking Days preceding the date of such setting, (ii) if the applicable Adjusted Eurodollar Rate for such Benchmark is based upon EURIBOR, then 11:00 a.m. (Brussels time) on the day that is two (2) Eurodollar Banking Days preceding the date of such setting, and (iii) if the applicable Adjusted Eurodollar Rate for such Benchmark is based upon TIBOR, then 11:00 a.m. (Tokyo time) on the day that is two (2) Eurodollar Banking Days preceding the date of such setting and (c) otherwise, then the time determined by the Agent, including in accordance with the Benchmark Replacement Conforming Changes.
“Register” means that term as described in Section 11.10(b) hereof.
36
Exhibit 10.99
“Regularly Scheduled Payment Date” means the last day of each March, June, September and December of each year.
“Related Expenses” means any and all reasonable and documented out-of-pocket costs, liabilities and expenses (including, without limitation, losses, damages, penalties, claims, actions, reasonable and documented out-of-pocket attorneys’ fees, reasonable legal expenses, judgments, suits and disbursements) (a) incurred by Agent, or imposed upon or asserted against Agent or any Lender, in any attempt by Agent and the Lenders to (i) obtain, preserve, perfect or enforce any Loan Document or any security interest evidenced by any Loan Document; (ii) obtain payment, performance or observance of any and all of the Obligations; or (iii) maintain, insure, audit, collect, preserve, repossess or dispose of any of the collateral securing the Obligations or any part thereof, including, without limitation, reasonable and documented out-of-pocket costs and expenses for appraisals, assessments and audits of any Company or any such collateral; or (b) incidental or related to subpart (a) above, including, without limitation, interest thereupon from the date due until paid at the Default Rate.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“Related Writing” means each Loan Document and any other assignment, mortgage, security agreement, guaranty agreement, subordination agreement, financial statement, audit report or other writing furnished by any Credit Party, or any of its officers, to Agent or the Lenders pursuant to or otherwise in connection with this Agreement.
“Relevant Governmental Body” means (a) with respect to a Benchmark Replacement in respect of Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Dollars, the FRB or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the FRB or the Federal Reserve Bank of New York, or any successor thereto and (b) with respect to a Benchmark Replacement in respect of Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, any Alternate Currency, (1) the central bank for the Currency in which such Obligations, interest, fees, commissions or other amounts are denominated, or calculated with respect to, or any central bank or other supervisor which is responsible for supervising either (A) such Benchmark Replacement or (B) the administrator of such Benchmark Replacement or (2) any working group or committee officially endorsed or convened by (A) the central bank for the Currency in which such Obligations, interest, fees, commissions or other amounts are denominated, or calculated with respect to, (B) any central bank or other supervisor that is responsible for supervising either (i) such Benchmark Replacement or (ii) the administrator of such Benchmark Replacement, (C) a group of those central banks or other supervisors or (D) the Financial Stability Board or any part thereof.
“Reportable Event” means any of the events described in Section 4043 of ERISA.
“Request for Extension” means a notice substantially in the form of the attached Exhibit H.
“Required Lenders” means, at any time, Lenders having Total Credit Exposure representing more than fifty percent (50%) of the Total Credit Exposure of all Lenders; provided that the Total Credit Exposure held or deemed to be held by any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders. For purposes of this definition, “Total Credit Exposure” means, as to any Lender at any time, the unused Commitments, Revolving Credit Exposure of such Lender at such time.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
37
Exhibit 10.99
“Restricted Payment” means, with respect to any Company, (a) any Capital Distribution or (b) any amount paid by such Company in repayment, redemption, retirement or repurchase, directly or indirectly, of any Subordinated Indebtedness. For the avoidance of doubt, none of (i) the exercise and settlement or termination of any Permitted Warrant Transaction, whether in cash, capital stock or other securities, (ii) the purchase or other acquisition of any Permitted Bond Hedge Transaction and any exercise and settlement or termination thereof, whether in cash, capital stock or other securities, (iii) the payment of principal or interest at scheduled maturity or otherwise on any Permitted Convertible Indebtedness nor (iv) the settlement of any conversion of any Permitted Convertible Indebtedness, whether in cash, capital stock or other securities, shall constitute a “Restricted Payment”.
“Revaluation Date” means (a) with respect to any Loan, each of the following: (i) each date of a borrowing of an RFR Loan or a Eurodollar Fixed Rate Loan denominated in an Alternate Currency, as applicable, but only as to the amounts so borrowed on such date, (ii) each date of a continuation of an RFR Loan or a Eurodollar Fixed Rate Loan, as applicable, denominated in an Alternate Currency pursuant to the terms of this Agreement, but only as to the amounts so continued on such date, and (iii) such additional dates as the Agent shall determine or the Required Lenders shall require; and (b) with respect to any Letter of Credit denominated in an Alternate Currency, each of the following: (i) each date of issuance, amendment or extension of such Letter of Credit, but only as to the stated amount of the Letter of Credit so issued, amended or extended on such date,; (ii) each date of the borrowing (or deemed borrowing) of a Revolving Loan in respect of any unreimbursed portion of any payment by the applicable Issuing LenderFronting Bank under any Letter of Credit denominated in an Alternate Currency, but only as to the stated amount of the unreimbursed amount of such Letter of Credit that is paid on such date; and (iii) such additional dates as the Agent or the applicable Fronting Lender (with notice thereof to the Agent) shall determine or the Required Lenders shall require.
“Revolving Amount” means, for each Lender, the amount set forth opposite such Lender’s name on Schedule 1 hereto as of the Eighth Amendment Effective Date, subject to decreases determined pursuant to Section 2.9(a) hereof, increases pursuant to Section 2.9(b) hereof and assignments of interests pursuant to Section 11.10 hereof; provided that the Revolving Amount for the Swing Line Lender shall exclude the Swing Line Commitment (other than its pro rata share), and the Revolving Amount of the Fronting Lender shall exclude the Letter of Credit Commitment (other than its pro rata share). The Revolving Amount for all the Lenders on the EighthNinth Amendment Effective Date shall be One Billion ThreeTwo Hundred Million Dollars ($1,300,000,0001,200,000,000).
“Revolving Credit Availability” means, at any time, the amount equal to the Revolving Credit Commitment minus the Revolving Credit Exposure.
“Revolving Credit Commitment” means the obligation hereunder, during the Commitment Period, of (a) the Lenders (and each Lender) to make Revolving Loans, (b) the Fronting Lender to issue and each Lender to participate in, Letters of Credit pursuant to the Letter of Credit Commitment, and (c) the Swing Line Lender to make, and each Lender to participate in, Swing Loans pursuant to the Swing Line Commitment; up to an aggregate principal amount outstanding at any time equal to the Revolving Amount.
“Revolving Credit Exposure” means, at any time, the Dollar Equivalent of the sum of (a) the aggregate principal amount of all Revolving Loans outstanding, (b) the Swing Line Exposure, and (c) the Letter of Credit Exposure.
“Revolving Credit Maturity Date” means November 23, 2026 (as such date may be extended pursuant to Section 2.15 hereof), or such earlier date on which the Commitment shall have been terminated pursuant to Article VIII hereof.
38
Exhibit 10.99
“Revolving Credit Note” means a US Borrower Revolving Credit Note or a Foreign Borrower Revolving Credit Note.
“Revolving Lenders” means, collectively, all of the Lenders with a Revolving Credit Commitment or if the Revolving Credit Commitment has been terminated, all Lenders having Revolving Credit Exposure.
“Revolving Loan” means a loan made to US Borrower or a Foreign Borrower by the Lenders in accordance with Section 2.2(a) hereof.
“RFR” means, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, (a) Dollars, on and after the USD LIBOR Transition Date, SOFR and (b) Sterling, SONIA.
“RFR Administrator” means the SOFR Administrator or the SONIA Administrator, as applicable.
“RFR Business Day” means, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, (a) Dollars, on and after the USD LIBOR Transition Date, any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities and (b) Sterling, any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which banks are closed for general business in London; provided, that for purposes of notice requirements in Sections 2.5(a) and 2.7(b), in each case, such day is also a Business Day.
“RFR Loan” means a Daily Simple RFR Loan or a Term RFR Loan, as the context may require.
“RFR Rate Day” has the meaning assigned thereto in the definition of “Daily Simple RFR”.
“Sanctioned Country” means at any time, a country, region or territory which is itself (or whose government is) the subject or target of any Sanctions (which, as of the Sixth Amendment Effective Date, includes Cuba, Iran, North Korea, Syria and Crimea).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC (including, without limitation, OFAC’s Specially Designated Nationals and Blocked Persons List and OFAC’s Consolidated Non-SDN List), the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority, (b) any Person organized or resident in a Sanctioned Country, (c) any Person owned or controlled by any such Person or Persons described in clauses (a) and (b).
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government (including those administered by OFAC), the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.
“Screen Rate” means, for any Eurodollar Fixed Rate Loan denominated in Dollars, the USD LIBOR Rate, for any Eurodollar Fixed Rate Loan denominated in Euros, the EURIBOR Rate, for any Eurodollar Fixed Rate Loan denominated in Canadian Dollars, the CDOR Rate, for any Eurodollar Fixed Rate Loan denominated in Australian Dollars, the BBSY Rate and for any Eurodollar Fixed Rate Loan denominated in New Zealand Dollars, the BKBM Rate.
39
Exhibit 10.99
“SEC” means the United States Securities and Exchange Commission, or any governmental body or agency succeeding to any of its principal functions.
“Secured Hedge Agreement” means (a) any Hedge Agreement between or among any Credit Party or any of its Subsidiaries and a counterparty that is the Agent or any of its Affiliates, (b) any Hedge Agreement in effect on the Closing Date between or among any Credit Party or any of its Subsidiaries and a counterparty that is a Lender or an Affiliate of a Lender as of the Closing Date or (c) any Hedge Agreement entered into after the Closing Date between or among any Credit Party or any of its Subsidiaries and a counterparty that is a Lender, an Agent or an Affiliate of a Lender or an Agent at the time such Hedge Agreement is entered into.
“Secured Hedge Obligations” means all existing or future payment and other obligations owing by any Credit Party or any of its Subsidiaries under any Secured Hedge Agreement; provided that the “Secured Hedge Obligations” of a Credit Party shall exclude (a) any Excluded Swap Obligations with respect to such Credit Party and (b) any Permitted Bond Hedge Transaction.
“Secured Net Leverage Ratio” means, as any date of determination, the ratio of (a) Consolidated Funded Indebtedness (as of the end of the most recently completed fiscal quarter of the US Borrower) that is secured by a Lien on any assets of the US Borrower or any of its Subsidiaries minus seventy percent (70%) of Unrestricted cash and Cash Equivalents of the Companies as of such date of determination to (b) Consolidated EBITDA (for the most recently completed four fiscal quarters of the US Borrower).
“Secured Obligations” means, collectively, (a) the Obligations, (b) any Secured Hedge Obligations, and (c) the Bank Product Obligations owing to a Lender (or an entity that is an affiliate of a then existing Lender) under Bank Product Agreements.
“Secured Parties” means, collectively, Agent, the Lenders, the Fronting Lender, the holders of any Secured Hedge Obligations, any Lender (or an entity that is an affiliate of a then existing Lender) party to a Bank Product Agreement with a Company, each co-agent or sub-agent appointed by Agent from time to time pursuant to Section 9.5 hereof, any other holder from time to time of any of any Secured Obligations and, in each case, their respective successors and permitted assigns.
“Securities Account” means a securities account, as that term is defined in the U.C.C.
“Securities Account Control Agreement” means each Securities Account Control Agreement among US Borrower or a Domestic Guarantor of Payment, Agent and a Securities Intermediary, dated on or after the Closing Date, to be in form and substance reasonably satisfactory to Agent, as the same may from time to time be amended, restated or otherwise modified.
“Securities Intermediary” means a clearing corporation or a Person, including, without limitation, a bank or broker, that in the ordinary course of its business maintains Securities Accounts for others and is acting in that capacity.
“Security Agreement” means eachthe Second Amended and Restated Security Agreement, executed and delivered by a Credit Party in favor of Agent, for the benefit of the Secured Parties, dated on or after the ClosingNinth Amendment Effective Date, as the same may from time to time be amended, restated or otherwise modified.
“Security Agreement Joinder” means each Security Agreement Joinder, executed and delivered by a Guarantor of Payment for the purpose of adding such Guarantor of Payment as a party to the previously executed Security Agreement.
40
Exhibit 10.99
“Security Documents” means eachthe Security Agreement, each Security Agreement Joinder, each Pledge Agreement, each Control Agreement, each U.C.C. Financing Statement or similar filing as to a jurisdiction located outside of the United States of America filed in connection herewith or perfecting any interest created in any of the foregoing documents, and any other document pursuant to which any Lien is granted by a Company or any other Person to Agent, for the benefit of the Secured Parties, as security for the Secured Obligations, or any part thereof, and each other agreement executed or provided to Agent in connection with any of the foregoing, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced.
“Significant Positive EBITDA Acquisition” means an Acquisition that, as measured for the four fiscal quarters then most recently ended, generated positive EBITDA in excess of Five Million Dollars ($5,000,000) for the Person or assets being acquired.
“Significant Positive EBITDA Disposition” means a Disposition that, as measured for the four fiscal quarters then most recently ended, generated positive EBITDA for the Company effecting such Disposition in excess of Five Million Dollars ($5,000,000).
“Sixth Amendment Effective Date” means November 23, 2021.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“SONIA” means a rate equal to the Sterling Overnight Index Average as administered by the SONIA Administrator.
“SONIA Administrator” means the Bank of England (or any successor administrator of the Sterling Overnight Index Average).
“SONIA Administrator’s Website” means the Bank of England’s website, currently at http://www.bankofengland.co.uk, or any successor source for the Sterling Overnight Index Average identified as such by the SONIA Administrator from time to time.
“Special Notice Currency” means, at any time, an Alternate Currency other than the currency of a country that is a member of the Organization for Economic Cooperation and Development at such time located in North America.
“Spread Adjusted SOFR” means with respect to any RFR Business Day, a rate per annum equal to the sum of (a) SOFR for such RFR Business Day and (b) 0.11448% per annum.
41
Exhibit 10.99
“Spread Adjusted Term SOFR” means, for any Interest Period, a rate per annum equal to the sum of (a) the forward-looking term rate based on the SOFR for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) RFR Business Days prior to the first day of such Interest Period, as such rate is published by CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rateforward-looking term rate based on SOFR selected by the Agent in its reasonable discretion) (the “Term SOFR Administrator”); provided, however, that if as of 5:00 p.m. (Eastern time) on any Periodic Term SOFR Determination Day the SOFR for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to SOFR has not occurred, then this clause (a) will be deemed to refer to SOFR for such tenor as published by the Term SOFR Administrator on the first preceding RFR Business Day for which SOFR for such tenor was published by the Term SOFR Administrator so long as such first preceding RFR Business Day is not more than three (3) RFR Business Days prior to such Periodic Term SOFR Determination Day, plus (b) (i) with respect to an Interest Period of one month, 0.11448% per annum, (ii) with respect to an Interest Period of three months, 0.26161% per annum and (iii) with respect to an Interest Period of six months, 0.42826% per annum.
“Sterling” or “£” means the lawful currency of the United Kingdom.
“Subordinated Indebtedness” means Indebtedness that shall have been subordinated (by written terms or written agreement being, in either case, in form and substance reasonably satisfactory to Agent and, if the aggregate amount of such Subordinated Indebtedness is in excess of Ten Million Dollars ($10,000,000), the Required Lenders) in favor of the prior payment in full of the Obligations.
“Subsidiary” means (a) a corporation more than fifty percent (50%) of the Voting Power of which is owned, directly or indirectly, by such Person or by one or more other subsidiaries of such Person or by such Person and one or more subsidiaries of such Person, (b) a partnership, limited liability company or unlimited liability company of which such Person, one or more other subsidiaries of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, is a general partner or managing member, as the case may be, or otherwise has an ownership interest greater than fifty percent (50%) of all of the ownership interests in such partnership, limited liability company or unlimited liability company, or (c) any other Person (other than a corporation, partnership, limited liability company or unlimited liability company) in which such Person, one or more other subsidiaries of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, has at least a majority interest in the Voting Power or the power to elect or direct the election of a majority of directors or other governing body of such Person. Unless the context otherwise requires, Subsidiary herein shall be a reference to a Subsidiary of US Borrower.
“Supporting Letter of Credit” means a standby letter of credit, in form and substance reasonably satisfactory to Agent and the Fronting Lender, issued by an issuer reasonably satisfactory to Agent and the Fronting Lender.
“Swap Obligation” means, with respect to any Guarantor of Payment, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
“Sweep Arrangement” means that term as defined in Section 2.2(c)(i)(B) hereof.
“Swing Line Commitment” means the commitment of the Swing Line Lender to make Swing Loans to US Borrower up to the aggregate amount at any time outstanding of Fifteen Million Dollars ($15,000,000).
“Swing Line Exposure” means, at any time, the aggregate principal amount of all Swing Loans outstanding.
“Swing Line Lender” means Wells Fargo, as holder of the Swing Line Commitment.
42
Exhibit 10.99
“Swing Line Note” means the Swing Line Note, in the form of the attached Exhibit C, executed and delivered by US Borrower pursuant to Section 2.4(c) hereof.
“Swing Loan” means a loan that shall be denominated in Dollars made to US Borrower by the Swing Line Lender under the Swing Line Commitment, in accordance with Section 2.2(c) hereof.
“Swing Loan Maturity Date” means, with respect to any Swing Loan, the earlier of (a) twenty (20) days after the date such Swing Loan is made, or (b) the Revolving Credit Maturity Date.
“Synthetic Lease” means any lease (a) that is accounted for by the lessee as an Operating Lease, and (b) under which the lessee is intended to be the “owner” of the leased property for federal income tax purposes.
“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilizes a single shared platform and which was launched on November 19, 2007.
“TARGET Day” means any day on which TARGET2 is open for the settlement of payments in Euros.
“Taxes” means any and all present or future taxes of any kind, including but not limited to, levies, imposts, duties, surtaxes, charges, fees, deductions or withholdings now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (together with any interest, penalties, fines, additions to taxes or similar liabilities with respect thereto).
“Term RFR” means, for any Interest Period, a rate per annum equal to (a) for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Dollars, the greater of (i) Spread Adjusted Term SOFR and (ii) the Floor and (b) for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to, Sterling, the greater of (i) the forward-looking term rate for a period comparable to such Interest Period based on the RFR for such Currency that is published by an authorized benchmark administrator and is displayed on a screen or other information service, each as identified or selected by the Agent in its reasonable discretion at approximately a time and as of a date prior to the commencement of such Interest Period determined by the Agent in its reasonable discretion in a manner substantially consistent with market practice and (ii) the Floor.
“Term RFR Loan” means a Loan that bears interest at a rate based on Term RFR other than pursuant to clause (c) of the definition of “Base Rate”.
“Term RFR Notice” means a notification by the Agent to the Lenders and the US Borrower of the occurrence of a Term RFR Transition Event.
“Term RFR Transition Date” means, in the case of a Term RFR Transition Event, the date that is thirty (30) calendar days after the Agent has provided the related Term RFR Notice to the Lenders and the Administrative Borrower pursuant to Section 3.5(c)(i)(C).
“Term RFR Transition Event” means, with respect to any Currency for any Interest Period, the determination by the Agent that the applicable Term RFR for such Currency has been recommended for use by the Relevant Governmental Body.
“TIBOR” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“TIBOR Rate” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
43
Exhibit 10.99
“Transitioned RFR Loan” means a Loan that is an RFR Loan that would not have borne interest based upon a Daily Simple RFR or a Term RFR on the Closing Date. To the extent that Loans denominated in Dollars bear interest based on a Daily Simple RFR or Term RFR after the Closing Date, such Loans would be Transitioned RFR Loans.
“U.C.C.” means the Uniform Commercial Code, as in effect from time to time in the State of New York.
“U.C.C. Financing Statement” means a financing statement filed or to be filed in accordance with the Uniform Commercial Code, as in effect from time to time, in the relevant state or states.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unrestricted” means, when referring to cash and Cash Equivalents of any Person, that such cash and Cash Equivalents (a) do not appear, or would not be required to appear, as “restricted” on the financial statements of such Person and its Subsidiaries (unless related to the Loan Documents or the Liens created thereunder), (b) are not subject to a Lien in favor of any Person other than Agent under the Loan Documents or Liens permitted under Section 5.9(l) hereof or (c) are not otherwise unavailable to such Person or its Subsidiaries.
“US Borrower” means that term as defined in the first paragraph hereof.
“US Borrower Revolving Credit Note” means a US Borrower Revolving Credit Note, in the form of the attached Exhibit A, executed and delivered by US Borrower pursuant to Section 2.4(a) hereof.
“USD LIBOR” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“USD LIBOR Rate” has the meaning assigned thereto in the definition of “Eurodollar Rate”.
“USD LIBOR Transition Date” means, the earlier of (a) the date that all Available Tenors of USD LIBOR have either (i) permanently or indefinitely ceased to be provided by IBA; provided that, at the time of such cessation, there is no successor administrator that will continue to provide any Available Tenor of USD LIBOR or (ii) been announced by the FCA pursuant to public statement or publication of information to be no longer representative (in which case the date shall be the later of the date of such announcement or the date specified in such announcement as the date it will no longer be representative) and (b) the Early Opt-in Effective Date.
“Voting Power” means, with respect to any Person, the exclusive ability to control, through the ownership of shares of capital stock, partnership interests, membership interests or otherwise, the election of members of the board of directors or other similar governing body of such Person. The holding of a designated percentage of Voting Power of a Person means the ownership of shares of capital stock, partnership interests, membership interests or other interests of such Person sufficient to control exclusively the election of that percentage of the members of the board of directors or similar governing body of such Person.
44
Exhibit 10.99
“Waterfall” means that term as defined in Section 8.7(b)(ii) hereof.
“Welfare Plan” means an ERISA Plan that is a “welfare plan” within the meaning of ERISA Section 3(l).
“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.
“Wholly Owned Subsidiary” means any Person, the equity interests of which are one hundred percent (100%) owned (other than, with respect to the ownership of equity interests of Foreign Subsidiaries, such equity interests as are necessary to qualify directors where required by applicable law or to satisfy other requirements of applicable law) are at the time owned by US Borrower, directly, or indirectly through other Persons one hundred percent (100%) of whose equity interests are at the time owned, directly or indirectly, by US Borrower.
“Withholding Agent” means any Credit Party and Agent.
“Write-Down and Conversion Powers” means (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
“Yen” or “¥” mean the lawful currency of Japan.
45
Exhibit 10.99
46
Exhibit 10.99
47
Exhibit 10.99
48
Exhibit 10.99
49
Exhibit 10.99
50
Exhibit 10.99
51
Exhibit 10.99
52
Exhibit 10.99
53
Exhibit 10.99
Interest on Daily Simple RFR Loans shall be payable on each Regularly Scheduled Payment Date thereafter and at the maturity thereof. Interest on Term RFR Loans shall be payable on each Interest Adjustment Date with respect to an Interest Period (provided that if an Interest Period shall exceed three months, the interest must be paid every three months, commencing three months from the beginning of such Interest Period).
54
Exhibit 10.99
55
Exhibit 10.99
56
Exhibit 10.99
57
Exhibit 10.99
58
Exhibit 10.99
59
Exhibit 10.99
60
Exhibit 10.99
61
Exhibit 10.99
62
Exhibit 10.99
63
Exhibit 10.99
64
Exhibit 10.99
(e) Liability of Foreign Borrowers and Foreign Guarantors of Payment. Anything herein to the contrary notwithstanding, no Foreign Borrower or Foreign Guarantor of Payment shall at any time be liable for the Indebtedness of US Borrower under this Agreement (exclusive of Indebtedness of the Foreign Borrowers that is guaranteed by US Borrower under this Agreement).
65
Exhibit 10.99
(b) Addition of Foreign Guarantor of Payment. At the request of Administrative Borrower (with at least fifteen (15) days prior written notice to Agent and the Lenders) and the approval of Agent, in its reasonable discretion, a Foreign Subsidiary of US Borrower that shall not then be a Foreign Guarantor of Payment may become a Foreign Guarantor of Payment hereunder, provided that all of the following requirements shall have been met at the time of such addition to the reasonable satisfaction of Agent:
66
Exhibit 10.99
67
Exhibit 10.99
68
Exhibit 10.99
69
Exhibit 10.99
70
Exhibit 10.99
71
Exhibit 10.99
72
Exhibit 10.99
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Administrative Borrower and Agent in writing of its legal inability to do so.
73
Exhibit 10.99
74
Exhibit 10.99
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Administrative Borrower to require such assignment and delegation cease to apply. Each Lender agrees that if it is replaced pursuant to this Section 3.4, it shall execute and deliver to Agent an Assignment Agreement to evidence such sale and purchase and shall deliver to Agent any promissory note (if the assigning Lender’s Loans are evidenced by one or more promissory notes) subject to such Assignment Agreement; provided that the failure of any Lender replaced pursuant to this Section 3.4 to execute an Assignment Agreement or deliver such promissory notes shall not render such sale and purchase (and the corresponding assignment) invalid and such assignment shall be recorded in the Register and the promissory notes shall be deemed cancelled upon such failure. Each Lender hereby irrevocably appoints Agent (such appointment being coupled with an interest) as such Lender’s attorney-in-fact, with full authority in the place and stead of such Lender and in the name of such Lender, from time to time in Agent’s discretion, with prior written notice to such Lender, to take any action and to execute any such Assignment Agreement or other instrument that Agent may deem reasonably necessary to carry out the provisions of this Section 3.4(b).
75
Exhibit 10.99
76
Exhibit 10.99
77
Exhibit 10.99
78
Exhibit 10.99
79
Exhibit 10.99
80
Exhibit 10.99
81
Exhibit 10.99
82
Exhibit 10.99
83
Exhibit 10.99
84
Exhibit 10.99
Each request by Administrative Borrower or any other Borrower for a Credit Event (other than the conversion of any Loan to a EurodollarTransitioned RFR Loan or the continuation of any EurodollarTransitioned RFR Loan) shall be deemed to be a representation and warranty by Borrowers as of the date of such request as to the satisfaction of the conditions precedent specified in subsections (c), (d), (e) and (f) above.
85
Exhibit 10.99
86
Exhibit 10.99
87
Exhibit 10.99
Documents required to be delivered pursuant to Section 5.3(a), (b) or (f) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which such documents are posted on the Administrative Borrower’s behalf on an internet or intranet website, if any, to which each Lender and Agent have access (whether a commercial, third-party website or whether sponsored by Agent); provided that such documents or information shall be deemed to have been delivered if such documents, information, or one or more annual or quarterly reports containing such information, shall be available on the website of the SEC at http://www.sec.gov. Notwithstanding anything contained herein, in every instance the Administrative Borrower shall be required to provide Compliance Certificates required by Section 5.3(c) to Agent (which may be provided by electronic communications pursuant to procedures approved by Agent).
The Administrative Borrower hereby acknowledges that (i) Agent will make available to Lenders, on Administrative Borrower’s behalf, (A) materials and/or information provided by or on behalf of the Administrative Borrower concerning US Borrower and its Subsidiaries (collectively, “Borrower Materials”) by posting the Informational Materials on SyndTrak Online or by other similar electronic means (the “Platform”), and (ii) certain prospective Lenders may be “public side” (i.e., lenders that have personnel that do not wish to receive material non-public information (within the meaning of the United States federal securities laws) with respect to US Borrower and its Subsidiaries and securities, and who may be engaged in investment and other market-related activities with respect to such entities’ securities (such Lenders, “Public Lenders”)). The Administrative Borrower hereby agrees that, upon request of the Agent, it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, means that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Company shall be deemed to have authorized Agent and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to US Borrower, its Subsidiaries or its securities for purposes of United States Federal and state securities laws; (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (z) Agent shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.” Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable law, including United States Federal and state securities laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Company or its securities for purposes of United States Federal or state securities laws.
88
Exhibit 10.99
89
Exhibit 10.99
Period |
Maximum Ratio |
Fiscal quarter ending September 30, 2024 |
5.15 to 1.00 |
Fiscal quarter ending December 31, 2024 |
5.00 to 1.00 |
Fiscal quarter ending March 31, 20242025 |
4.004.75 to 1.00 |
Fiscal quarter ending June 30, 20242025 |
4.254.50 to 1.00 |
Fiscal quarter ending September 30, 20242025 |
4.504.25 to 1.00 |
Fiscal quarter ending December 31, 20242025 |
4.504.00 to 1.00 |
Fiscal quarter ending March 31, 20252026 and each fiscal quarter ending thereafter |
4.003.50 to 1.00 |
90
Exhibit 10.99
Period |
Maximum Ratio |
Fiscal quarter ending September 30, 2024 |
5.15 to 1.00 |
Fiscal quarter ending December 31, 2024 |
5.00 to 1.00 |
Fiscal quarter ending March 31, 2025 |
4.75 to 1.00 |
Fiscal quarter ending June 30, 2025 |
4.50 to 1.00 |
Fiscal quarter ending September 30, 2025 |
4.25 to 1.00 |
Fiscal quarter ending December 31, 2025 |
4.00 to 1.00 |
Fiscal quarter ending March 31, 2026 and each fiscal quarter ending thereafter |
3.50 to 1.00 |
Period |
Minimum Ratio |
Fiscal quarters ending September 30, 2024 through and including March 31, 2025 |
2.00 to 1.00 |
|
Fiscal quarter ending June 30, 2025 |
2.25 to 1.00 |
Fiscal quarter ending September 30, 2025 and each fiscal quarter ending thereafter |
2.50 to 1.00 |
91
Exhibit 10.99
Notwithstanding the foregoing, upon the consummation of any Acquisition with Consideration in excess of Seventy-Five Million Dollars ($75,000,000) and upon written notice from US Borrower, the required levels for the Net Leverage Ratio or the Secured Net Leverage Ratio, as applicable, shall be increased (the “Optional Leverage Ratio Increase”) commencing with the fiscal quarter during which such Acquisition occurs and continuing thereafter for the next three full fiscal quarters of US Borrower in accordance with the following schedule:
Period |
Net Leverage Ratio or the Secured Net Leverage Ratio (as applicable) |
Fiscal quarter in which the Acquisition date occurs through and including the first full fiscal quarter ending after the Acquisition date |
4.00 to 1.00 |
Second full fiscal quarter ending after the Acquisition date |
3.75 to 1.00 |
Third full fiscal quarter ending after the Acquisition date and thereafter |
3.50 to 1.00 |
provided that (i) there shall be at least one full fiscal quarter following the cessation of each such Optional Leverage Ratio Increase during which no Optional Leverage Ratio Increase shall then be in effect, (ii) US Borrower may only elect three Optional Leverage Ratio Increases during the term of this Agreement and (iii) the Optional Leverage Ratio Increase shall not be available during the Covenant Adjustment Period.
92
Exhibit 10.99
93
Exhibit 10.99
Notwithstanding anything to contrary in this Section 5.8, during the Covenant Adjustment Period, the aggregate outstanding principal amount of Indebtedness permitted to be incurred under this Section 5.8 following the Ninth Amendment Effective Date (other than pursuant to clauses (a), (c), (e), (f), (g) (in the case of clause (g), solely to the extent permitted under the last paragraph of Section 5.9), (h) and (m) hereof (and any extensions, renewals or refinancings of the forgoing)) shall not at any time exceed $25,000,000.
94
Exhibit 10.99
95
Exhibit 10.99
Notwithstanding anything to contrary in this Section 5.9, at all times during the Covenant Adjustment Period following the Ninth Amendment Effective Date, (i) in no event shall this Section 5.9 permit the incurrence of any consensual Liens on real property owned by any Credit Party or any Subsidiary thereof, other than Liens under clauses (a), (b), (d) and (g) of this Section 5.9; (ii) no Liens securing Indebtedness for borrowed money shall be permitted to be incurred pursuant to this Section 5.9 (other than pursuant to clauses (d), (e), (f), (h), (j), (k) and (m) hereof); (iii) except to the extent permitted in clause (iv) below or as otherwise may be approved by the Agent (in an aggregate amount not to exceed $50,000,000 at any time outstanding for all such Liens permitted under this clause (iii)), the aggregate amount of Liens permitted to be incurred securing any Permitted Factoring Transaction or an accounts receivable factoring facility of a Foreign Subsidiary permitted pursuant to Section 5.8(g) shall not exceed $15,000,000 at any time outstanding; provided that, following the Administrative Borrower’s delivery to the Agent of a Compliance Certificate demonstrating that the US Borrower is in compliance with the financial covenants set forth in Section 5.7 for the fiscal quarter ending June 30, 2025, Liens securing any Permitted Factoring Transaction or an accounts receivable factoring facility of a Foreign Subsidiary pursuant to Section 5.8(g) shall be permitted under Section 5.9(n) in aggregate amount not to exceed $25,000,000 at any time outstanding; and (iv) the existing Liens permitted under Section 5.9(n) in respect of the existing accounts receivable factoring arrangement with BMO Bank N.A. pursuant to the BMO Factoring Facility shall not exceed $50,000,000 in the aggregate at any time outstanding; provided, further, that the BMO Factoring Facility shall be terminated and the Liens thereunder released, on or prior to October 31, 2024).
96
Exhibit 10.99
Notwithstanding anything to contrary in this Section 5.11, during the Covenant Adjustment Period, the aggregate outstanding amount of investments of, loans from or guaranties by, the Companies (or any of them) incurred following the Ninth Amendment Effective Date pursuant to this Section 5.11 (other than pursuant to clauses (i), (ii), (iii), (v), (viii), (xi) and (xii) (in the case of clause (xii), subject to the last paragraph of Section 5.9) shall not at any time exceed $25,000,000.
97
Exhibit 10.99
98
Exhibit 10.99
For the avoidance of doubt, none of (w) the making of any investment permitted pursuant to Section 5.11 or any Restricted Payment permitted pursuant to Section 5.15, (x) the sale of any Permitted Convertible Indebtedness by the US Borrower, (y) the sale of any Permitted Warrant Transaction by the US Borrower nor (z) the performance by the US Borrower of its obligations under any Permitted Convertible Indebtedness or any Permitted Warrant Transaction, shall constitute a disposition under this Section 5.12.
Notwithstanding anything to contrary in this Section 5.12, during the Covenant Adjustment Period, the aggregate amount of assets sold, leased, transferred or otherwise disposed of (including pursuant to a statutory division, but in any event excluding the transactions referenced in clauses (w), (x), (y) and (z) of the immediately preceding paragraph) pursuant to this Section 5.12 following the Ninth Amendment Effective Date (other than pursuant to clauses (a), (b), (c), (d), (g), (h), (k) and (l) hereof) shall not exceed $25,000,000 without the prior written consent of the Agent.
99
Exhibit 10.99
Notwithstanding anything to contrary in this Section 5.13, the aggregate Consideration for all Acquisitions consummated after the Ninth Amendment Effective Date and during the Covenant Adjustment Period shall not exceed $15,000,000.
Notwithstanding anything to contrary in this Section 5.15, during the Covenant Adjustment Period, the aggregate amount of Restricted Payments made pursuant to this Section 5.15 following the Ninth Amendment Effective Date shall not exceed $10,000,000 in any fiscal year; provided, however, that such limitation shall not apply to the following transactions: (i) any Company that is a non-Wholly Owned Subsidiary shall be permitted to pay Capital Distributions to the holders of its equity interests, which such payment shall be distributed ratably to such holders, solely to the extent required to be so distributed
100
Exhibit 10.99
pursuant to the Organizational Documents thereof and (ii) any Company that is a Wholly Owned Subsidiary may make Restricted Payments to the Company that owns the equity in such Subsidiary.
101
Exhibit 10.99
102
Exhibit 10.99
103
Exhibit 10.99
104
Exhibit 10.99
105
Exhibit 10.99
106
Exhibit 10.99
107
Exhibit 10.99
108
Exhibit 10.99
109
Exhibit 10.99
110
Exhibit 10.99
Any of the following specified events shall constitute an Event of Default (each an “Event of Default”) hereunder:
111
Exhibit 10.99
112
Exhibit 10.99
Notwithstanding any contrary provision or inference herein or elsewhere:
113
Exhibit 10.99
114
Exhibit 10.99
then such Lender will apply all such payments (other than Customary Setoffs with respect to the Deposit Accounts or Securities Accounts referenced in subpart (b) above) first to any and all Obligations owing by Borrowers to that Lender (including, without limitation, any participation purchased or to be purchased pursuant to this Section 8.5 or any other section of this Agreement), and to the extent not prohibited by law, to the remainder of the Obligations (and the Secured Obligations in accordance with Section 8.6 hereof). Each Credit Party agrees that any Lender so purchasing a participation from the other Lenders or any thereof pursuant to this Section 8.5, or exercising rights under this provision, may exercise all of its rights of payment (including the right of set-off) with respect to such participation or otherwise as fully as if such Lender were a direct creditor of such Credit Party in the amount of such participation.
115
Exhibit 10.99
The Lenders authorize Wells Fargo and Wells Fargo hereby agrees to act as agent for the Lenders in respect of this Agreement upon the terms and conditions set forth elsewhere in this Agreement, and upon the following terms and conditions:
116
Exhibit 10.99
117
Exhibit 10.99
118
Exhibit 10.99
119
Exhibit 10.99
120
Exhibit 10.99
121
Exhibit 10.99
122
Exhibit 10.99
With respect to its obligations hereunder, US Borrower hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Loan Documents or any other agreement or instrument referred to in the Loan Documents, or against any other Person under any other guarantee of, or security for, any of the Secured Obligations.
123
Exhibit 10.99
124
Exhibit 10.99
125
Exhibit 10.99
126
Exhibit 10.99
127
Exhibit 10.99
128
Exhibit 10.99
129
Exhibit 10.99
130
Exhibit 10.99
Subject to acceptance and recording thereof by Agent pursuant to paragraph (c) of this Section 11.10, from and after the effective date specified in each Assignment Agreement, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.1, 3.2, 3.3, 3.5, 11.5 and 11.6 hereof with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section 11.10 (other than a purported assignment to a natural Person or a Borrower or any of a Borrower’s Subsidiaries or Affiliates, which shall be null and void.)
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in Section 11.3(b)(i)(A), (B) or (C) hereof that directly and adversely affects such Participant.
131
Exhibit 10.99
The Borrowers agree that each Participant shall be entitled to the benefits of Sections 3.1, 3.2 and 3.3 hereof (subject to the requirements and limitations therein, including the requirements under Section 3.2(g) (it being understood that the documentation required under Section 3.2(g) hereof shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (a) of this Section 11.10; provided that such Participant (A) agrees to be subject to the provisions of Section 3.4 hereof as if it were an assignee under paragraph (a) of this Section 11.10; and (B) shall not be entitled to receive any greater payment under Sections 3.1 or 3.2 hereof, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Administrative Borrower’s request and the Borrowers’ expense, to use reasonable efforts to cooperate with the Borrowers to effectuate the provisions of Section 3.4(b) hereof with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 8.4 hereof as though it were a Lender; provided that such Participant agrees to be subject to Section 8.5 hereof as though it were a Lender.
Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts of (and stated interest on) each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.
132
Exhibit 10.99
133
Exhibit 10.99
134
Exhibit 10.99
135
Exhibit 10.99
136
Exhibit 10.99
137
Exhibit 10.99
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Covered Entity” means any of the following:
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
[Signature pages intentionally omitted]
138
Exhibit 31.1
CERTIFICATIONS
I, Kenneth D. Tuchman, certify that:
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I have reviewed this quarterly report on Form 10-Q of TTEC Holdings, Inc.; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 8, 2024
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By: |
/s/ KENNETH D. TUCHMAN |
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Kenneth D. Tuchman |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Kenneth R. Wagers, III, certify that:
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I have reviewed this quarterly report on Form 10-Q of TTEC Holdings, Inc.; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 8, 2024
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By: |
/s/ KENNETH R. WAGERS, III |
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Kenneth R. Wagers, III |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Executive Officer of TTEC Holdings, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:
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the Form 10-Q of the Company for the quarter ended June 30, 2024 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and |
(b) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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/s/ KENNETH D. TUCHMAN |
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Kenneth D. Tuchman |
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Chairman and Chief Executive Officer |
Date: August 8, 2024
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Financial Officer of TTEC Holdings, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:
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the Form 10-Q of the Company for the quarter ended June 30, 2024 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and |
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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By: |
/s/ KENNETH R. WAGERS, III |
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Kenneth R. Wagers, III |
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Chief Financial Officer |
Date: August 8, 2024