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ACQUISITIONS | 9 Months Ended
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Sep. 30, 2021
ACQUISITIONS [ABSTRACT] |
ACQUISITIONS | (2)ACQUISITIONS AND DIVESTITURES Avtex On April 8, 2021, the Company acquired, through its subsidiary TTEC Digital, LLC, 100% of the outstanding stock of Avtex Solutions Holdings, LLC (“Avtex”). Avtex is an end-to-end customer experience and CXaaS solutions provider with offerings in Genesys and Microsoft cloud solutions. The business is operated as part of the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC. Total cash paid at acquisition was $500.0 million ($490.0 million base purchase price plus cash, less debt and working capital estimate). The Avtex transaction is subject to customary representations and warranties, holdbacks, and a net working capital adjustment. The Company used cash from operations and drew down on its Credit Facility to fund the acquisition. The Company finalized the net working capital adjustment for $0.1 million during the third quarter of 2021 which was paid by Avtex to the Company in the third quarter of 2021. The following summarizes the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
​ | ​ | ​ | ​ | ​
​ |  | Preliminary |
​ | ​ | Estimate of |
​ | ​ | Acquisition Date |
​ | ​ | Fair Value |
Cash | ​ | $ | 18,638 | ​
Accounts receivable, net | ​ |  | 22,727 | ​
Prepaid expenses | ​ |  | 26,357 | ​
Current income tax receivables | ​ | ​ | 93 | ​
Net fixed assets | ​ | ​ | 3,162 | ​
Right of use assets | ​ | ​ | 3,614 | ​
Other Assets | ​ | ​ | 480 | ​
Tradename | ​ | ​ | 5,300 | ​
Intellectual property intangible | ​ | ​ | 770 | ​
Customer relationships | ​ | ​ | 124,660 | ​
Goodwill | ​ | ​ | 375,669 | ​
​ | ​ | $ | 581,470 | ​
​ | ​ | ​ | ​ | ​
Accounts payable | ​ | $ | 20,962 | ​
Accrued employee compensation | ​ |  | 4,325 | ​
Accrued expenses | ​ | ​ | 250 | ​
Right of use liability - current | ​ | ​ | 678 | ​
Deferred revenue | ​ |  | 52,031 | ​
Accrued income taxes | ​ | ​ | 332 | ​
Deferred tax liability | ​ | ​ | 11 | ​
Right of use liability - noncurrent | ​ |  | 2,936 | ​
​ | ​ | $ | 81,525 | ​
​ | ​ | ​ | ​ | ​
Total purchase price | ​ | $ | 499,945 | ​
​ The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending finalization of the valuation and tax returns, thus are subject to revisions that may result in adjustments to the value presented above. The Avtex customer relationships, intellectual property intangible, and tradename have been estimated based on the initial valuation and will be amortized over estimated useful lives of 9, 3, and 1 years, respectively. The goodwill recognized from the Avtex acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and intangibles and operating results of Avtex are reported within the TTEC Digital segment from the date of acquisition. VoiceFoundry On August 5, 2020, TTEC Digital, LLC closed the first phase of the acquisition of the VoiceFoundry business by acquiring 100% of the business’s net assets in the U.S. and U.K., (the “VF US Transaction”). VoiceFoundry is a preferred Amazon Connect cloud contact center service and implementation partner. The business has been integrated into the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC. Total cash paid at acquisition was $34.3 million. The VF US Transaction is subject to customary representations and warranties, holdbacks, and working capital adjustments. The VF US Transaction includes two contingent payments over the next two years with each payment having a maximum value of $7.4 million based on VF US’s EBITDA performance for 2020 and 2021. The Company finalized the net working capital adjustment for $0.3 million which was paid to VoiceFoundry during the first quarter of 2021. The fair value of the contingent consideration has been estimated using a Monte Carlo model. The model was based on current expected EBITDA performance, a discount rate of 23.1%, a volatility rate of 47%, and an adjusted risk-free rate of 2.6%. Based on the model, a $10.9 million expected future payment was calculated and recorded as of the acquisition date. During the fourth quarter of 2020, the first quarter of 2021 and the second quarter of 2021, a $3.2 million expense, a $0.5 million expense and a $0.2 million expense, respectively, were recorded related to fair value adjustments of the estimated contingent consideration based on revised estimates of EBITDA performance for 2021. These expenses were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss). During the first quarter of 2021, the contingent payment related to 2020 was finalized at a value of $7.4 million and was paid in April 2021. As of September 30, 2021, the value of the accrual is $7.4 million and is included in Other accrued expenses in the accompanying Consolidated Balance Sheets. A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible asset. The significant assumption utilized in calculating the fair value of the customer relationships intangible asset was the customer attrition rate. 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 |
Accounts receivable, net | ​ | $ | 3,758 | ​
Prepaid and other assets | ​ |  | 345 | ​
Tradename | ​ | ​ | 400 | ​
Non-compete | ​ | ​ | 150 | ​
Customer relationships | ​ | ​ | 6,550 | ​
Goodwill | ​ | ​ | 35,881 | ​
​ | ​ | $ | 47,084 | ​
​ | ​ | ​ | ​ | ​
Accounts payable | ​ | $ | 289 | ​
Accrued employee compensation | ​ |  | 741 | ​
Deferred revenue | ​ |  | 170 | ​
​ | ​ | $ | 1,200 | ​
​ | ​ | ​ | ​ | ​
Total purchase price | ​ | $ | 45,884 | ​
​ In the first quarter of 2021, the Company finalized the valuation of VF US for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required. The VF US customer relationships and tradename are being amortized over useful lives of 4 and 2 years, respectively. The goodwill recognized from the VF US Transaction is attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will be deductible for income tax purposes. The acquired goodwill and intangibles and operating results of VF US are reported within the TTEC Digital segment from the date of acquisition. VoiceFoundry ASEAN On November 4, 2020, TTEC Europe BV, a subsidiary of the Company, closed the final phase of the acquisition of the VoiceFoundry business by acquiring 100% of the issued stock of Saasy Ventures Pty Ltd. (“the VF ASEAN Transaction”). The business has been integrated into the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC. Total cash paid at acquisition was $15.2 million. The VF ASEAN Transaction is subject to customary representations and warranties, holdbacks, and working capital adjustments. The VF ASEAN Transaction includes two contingent payments over the next two years with each payment having a maximum value of $2.2 million based on VF ASEAN’s EBITDA performance for 2020 and 2021. The Company finalized the net working capital adjustment for $0.2 million which was paid from VoiceFoundry during the third quarter of 2021. The fair value of the contingent consideration has been estimated using a Monte Carlo model. The model was based on current expected EBITDA performance, a discount rate of 18.4%, a volatility rate of 50%, and an adjusted risk-free rate of 1.6%. Based on the model, a $2.8 million expected future payment was calculated and recorded as of the acquisition date. During the fourth quarter of 2020, the first quarter of 2021 and the second quarter of 2021, a $1.2 million expense, a $0.4 million expense and a $0.1 million benefit, respectively, were recorded related to fair value adjustments of the estimated contingent consideration based on estimates of EBITDA performance for 2020 and 2021. These expenses/benefits were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss). During the first quarter of 2021, the contingent payment related to 2020 was finalized at a value of $2.2 million and was paid in April 2021. As of September 30, 2021, the value of the accrual is $2.1 million and is included in Other accrued expenses in the accompanying Consolidated Balance Sheets. 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 | ​ | $ | 1,300 | ​
Accounts receivable, net | ​ | ​ | 937 | ​
Prepaid and other expenses | ​ |  | 115 | ​
Income tax receivable | ​ | ​ | 30 | ​
Property, plant and equipment | ​ | ​ | 274 | ​
Tradename | ​ |  | 300 | ​
Customer relationships | ​ |  | 3,100 | ​
Goodwill | ​ | ​ | 14,418 | ​
​ | ​ | $ | 20,474 | ​
​ | ​ | ​ | ​ | ​
Accounts payable | ​ | $ | 960 | ​
Accrued employee compensation | ​ |  | 113 | ​
Deferred revenue | ​ | ​ | 236 | ​
Deferred tax liability | ​ | ​ | 1,013 | ​
Other accrued liabilities | ​ |  | (78) | ​
​ | ​ | $ | 2,244 | ​
​ | ​ | ​ | ​ | ​
Total purchase price | ​ | $ | 18,230 | ​
​ In the second quarter of 2021, the Company finalized the valuation for VF ASEAN for the acquisition date assets acquired and liabilities assumed and determined that no material adjustments to any of the balances were required. The VF ASEAN customer relationships and tradename are being amortized over useful lives of 4 and 2 years, respectively. The goodwill recognized from the VF ASEAN Transaction is attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will not be deductible for income tax purposes. The acquired goodwill and intangibles and operating results of VF ASEAN are reported within the TTEC Digital segment from the date of acquisition. Serendebyte On February 7, 2020, the Company acquired, through its subsidiary TTEC Digital, LLC, 70% of the outstanding shares of capital stock of Serendebyte Inc., a Delaware corporation (“the Serendebyte Transaction”). Serendebyte is an autonomous customer experience and intelligent automation solutions provider based in India, the United States, and Canada. The business has been integrated into the TTEC Digital segment and is being fully consolidated into the financial statements of TTEC. Total cash paid at acquisition, for 70% of the outstanding shares of capital stock, was $9.0 million. The Serendebyte Transaction is subject to customary representations and warranties, holdbacks, and a net working capital adjustment. The Company finalized the net working capital adjustment for $0.8 million during the second quarter of 2020 which was paid by Serendebyte to the Company in the second quarter of 2020. As of the closing of the Serendebyte Transaction, Serendebyte’s founder and certain members of its management continued to hold the remaining 30% interest in Serendebyte, Inc. (“Remaining Interest”). Between January 31, 2023 and December 31, 2023, Serendebyte’s founder and the management team shall have an option to sell to TTEC Digital, LLC and TTEC Digital, LLC shall have an option to purchase the Remaining Interest at a purchase price equal to a multiple of Serendebyte’s adjusted trailing twelve month EBITDA for this particular acquisition. The noncontrolling interest was recorded at fair value on the date of acquisition. The fair value was based on significant inputs not observable in the market (Level 3 inputs) including forecasted earnings, discount rate of 35%, working capital requirements and applicable tax rates. The noncontrolling interest was valued at $3.8 million at the acquisition date and is shown as Redeemable noncontrolling interest in the accompanying Consolidated Balance Sheets. The Company recognizes changes in the redemption value of the Redeemable noncontrolling interest immediately as they occur but does not reduce the carrying value below the carrying value determined in accordance with ASC 810 (that amount being determined based on the allocation of income or loss to the noncontrolling interest as adjusted for distributions). At each subsequent reporting date, the current redeemable value is calculated and, if necessary, an adjustment is recorded to increase or decrease the noncontrolling interest account to reflect the appropriate balance, with the corresponding adjustment to retained earnings. As of September 30, 2021, no adjustments have been recorded related to changes in the estimated redemption value. As a condition to closing, Serendebyte’s founder and certain members of the management team agreed to continue their affiliation with Serendebyte at least through 2023, and the founder agreed not to compete with TTEC for a period of four years after the disposition of the Remaining Interest. 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 | ​ | $ | 3,123 | ​
Accounts receivable, net | ​ |  | 1,243 | ​
Prepaid and other assets | ​ |  | 1,327 | ​
Property, plant and equipment | ​ | ​ | 20 | ​
Deferred tax assets | ​ | ​ | 14 | ​
Tradename | ​ | ​ | 400 | ​
Customer relationships | ​ | ​ | 1,920 | ​
Goodwill | ​ | ​ | 9,033 | ​
​ | ​ | $ | 17,080 | ​
​ | ​ | ​ | ​ | ​
Accounts payable | ​ | $ | 120 | ​
Accrued employee compensation and benefits | ​ |  | 1,025 | ​
Accrued income taxes | ​ |  | 170 | ​
Accrued expenses | ​ | ​ | 2,208 | ​
Deferred tax liabilities - long-term | ​ |  | 629 | ​
​ | ​ | $ | 4,152 | ​
​ | ​ | ​ | ​ | ​
Total purchase price | ​ | $ | 12,928 | ​
​ In the fourth quarter of 2020, the Company finalized the valuation of Serendebyte for the acquisition date assets acquired and liabilities assumed and determined no material adjustments to any of the balances were required. At the date of the purchase, an additional $2.2 million of cash was retained in the entity that was withdrawn by the holders of the Remaining Interest during the second quarter of 2020. The Serendebyte customer relationships and tradename are being amortized over useful lives of 5 and 3 years, respectively. The goodwill recognized from the Serendebyte acquisition is attributable, but not limited to, the acquired workforce and expected synergies with the TTEC Digital segment. The tax basis of the acquired intangibles and goodwill will not be deductible for income tax purposes. The acquired goodwill and intangibles and operating results of Serendebyte are reported within the TTEC Digital segment from the date of acquisition. Financial Impact of Acquired Businesses The acquired businesses purchased in 2021 and 2020 noted above contributed revenues of $130.4 million and net income of $9.9 million, inclusive of $11.8 million of acquired intangible amortization, to the Company for the nine months ended September 30, 2021. The unaudited proforma financial results for the nine months ended September 30, 2021 and 2020, combines the consolidated results of the Company, Avtex, VoiceFoundry US, VoiceFoundry ASEAN and Serendebyte assuming the acquisitions had been completed on January 1, 2020. The reported revenue and net income of $1,660.7 million and $112.2 million would have been $1,707.8 million and $115.0 million for the nine months ended September 30, 2021, respectively, on an unaudited proforma basis. For 2020, the reported revenue and net income of $1,378.3 million and $74.2 million would have been $1,516.3 million and $83.7 million for the nine months ended September 30, 2020, respectively, on an unaudited basis. The unaudited proforma consolidated results are not to be considered indicative of the results if these acquisitions occurred in the periods mentioned above, or indicative of future operations or results. Additionally, the proforma consolidated results do not reflect any anticipated synergies expected as a result of the acquisition. Dissolutions In the ordinary course of business, the Company operates different legal entities around the globe that have functional currencies other than USD. From time to time, the Company liquidates some of the entities when they are no longer needed to operate its business, and also forms new entities to support the needs of the business. The liquidation proceedings may take different forms, take considerable amount of time, and may also result in losses or gains unrelated to operations. In the second quarter ended June 30, 2020, the Company exited a foreign subsidiary that resulted in a non-cash $2.5 million loss included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss) from the realization of the Accumulated other comprehensive income (loss), which represents the currency translation adjustment of the investment in the foreign subsidiary. Similarly, in the third quarter ended September 30, 2020, the Company exited two foreign subsidiaries that ceased operations and were removed from the consolidated financial statements as of the reporting period ended September 30, 2020. As a result of the deconsolidation, a non-cash $17.4 million loss was included in Other income (expense), net in the Consolidated Statement of Comprehensive Income (Loss). The majority of this loss related to the realization of the Accumulated other comprehensive income (loss) balance which represents the currency translation adjustment of the investment in the foreign subsidiaries. The operating income of these subsidiaries prior to dissolution was not material to the year-to-date consolidated results of the Company.

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