TeleTech (NASDAQ:TTEC) executives highlighted margin expansion, stronger cash generation, and continued investment in AI-enabled customer experience (CX) capabilities during the company’s fourth-quarter and full-year 2025 earnings call, while also discussing a significant non-cash goodwill impairment tied to part of its Digital segment.
Full-year results: revenue down, profitability up
Chairman and CEO Kenneth Tuchman said 2025 was a “pivotal year” in which the company met its financial commitments, improved its balance sheet, and reinforced its position in “AI-enabled CX.” For the full year, TTEC reported revenue of $2.136 billion, which management said exceeded the high end of guidance, and adjusted EBITDA of $214 million, up 5.6% year over year. The company generated $83 million in cash flow and reduced credit facility borrowings by $70 million.
Wagers noted that full-year performance was in line with previously communicated expectations, with revenue above the high end of the guidance range while profitability landed near the low end.
Fourth quarter: higher margins and EPS growth
For the fourth quarter, TTEC reported revenue of $570 million, slightly above $567 million a year earlier. Adjusted EBITDA increased to $62 million (10.9% of revenue) from $51 million (9%). Adjusted operating income rose to $48 million (8.4% of revenue) from $35 million (6.2%), and adjusted EPS increased to $0.47 from $0.19.
Foreign exchange had a $4 million positive impact on quarterly revenue and a $1 million negative impact on operating income compared with the prior-year period, primarily in the Engage segment, Wagers said.
Segment performance: Engage margins expand; Digital mix shifts
In the Engage segment, fourth-quarter revenue declined 1.8% to $444 million. However, operating income increased to $36 million, or 8.1% of revenue, from $22 million, or 4.9%, representing margin expansion of 320 basis points.
Wagers attributed the quarter’s revenue and profit performance to healthcare seasonal volumes that added $22 million of revenue versus the prior year, offset by a decline in the public sector portfolio due to the loss of a previously disclosed large client. He said the public sector revenue decline had a nominal impact on operating income because it was lower margin, and he pointed to investment timing—particularly seasonal ramp investments made in the third quarter—as a driver of year-over-year profitability improvement in the fourth quarter.
For the full year, Engage revenue was $1.67 billion, down 4.6% from $1.75 billion, while operating income rose to $101 million (6.1% margin) from $85 million (4.9% margin). Wagers said the profitability improvement reflected deliberate actions over the past 18 months, including cost structure realignment, improved operating efficiency, and increasing the offshore revenue mix, along with new leadership additions. The Engage backlog for the next 12 months was $1.48 billion, which management said equates to 92% of 2026 revenue guidance at the midpoint, and the last-12-month revenue retention rate was 95%, up from 82%.
In the Digital segment, fourth-quarter revenue increased 9.2% to $125 million, driven by product resale that added $15 million year over year. Operating income declined to $12 million (9.4% margin) from $13 million (11% margin), which Wagers attributed to a less favorable revenue mix, including a 5.6% decline in recurring revenue and a 1.6% dip in professional services.
For the full year, Digital revenue rose 2.2% to $469 million, while operating income increased to $54 million (11.5% margin) from $51 million (11.2% margin). Wagers said nearly all of the revenue growth came from product resale, which increased $24 million year over year and “nearly doubled,” tied to multiple deals with clients that had not yet migrated to cloud-based CX delivery solutions. He added that management expects product resale opportunities to diminish over time. Excluding product resale, Digital revenue declined $14 million, or 3.2%, amid a market shift away from traditional CCaaS point solutions. Digital recurring revenue declined 4% year over year, while professional services were down 1.5%, though professional services tied to an expanded partnership network grew 15.8% outside traditional CCaaS offerings. Digital backlog for the next 12 months was $287 million, or 67% of 2026 revenue guidance at the midpoint.
Goodwill impairment: $205 million non-cash charge
Both Tuchman and Wagers addressed a one-time goodwill impairment recorded in the fourth quarter tied to a portion of the Digital segment. Wagers said the company’s annual quantitative goodwill impairment analysis resulted in the fair value of the “digital recurring reporting unit” falling below its carrying value, leading to a $193 million non-cash impairment charge. He linked the decline to industry dynamics shifting legacy recurring managed services from point solutions toward AI-led consulting, journey orchestration, and data and analytics services.
Wagers also detailed a related tax impact that produced a net incremental non-cash charge of $12 million, bringing the total impairment charge to $205 million. Management emphasized the impairment was non-cash and normalized in non-GAAP results.
2026 outlook: revenue declines expected, EBITDA growth guided
Looking ahead, Wagers said TTEC expects 2026 revenue declines in both segments but continued profitability improvement. Engage revenue is expected to decline about 4%, driven by rationalizing underperforming clients and lines of business and by shifting and growing revenue in offshore locations; management expects the declines to be concentrated in the first half of 2026 and flatten in the second half. Digital revenue is forecast to decline 8.4%, primarily due to reduced product resale as fewer opportunities remain while clients transition to cloud-based CX solutions. Wagers said these lower-margin resale deals have less impact on profitability, and he expects Digital professional services growth to offset declines in traditional managed services tied to legacy CCaaS partners.
At the midpoint of guidance, TTEC forecast:
- GAAP revenue: $2.03 billion (down 5%)
- Adjusted EBITDA: $230 million (up 7.6%), or 11.3% of revenue
- Non-GAAP operating income: $169 million (up 9%), or 8.3% of revenue
- Non-GAAP EPS: $1.19 (up 9%)
Other guidance items included capital expenditures of 1.8% to 2% of revenue (about 60% growth-oriented) and an effective tax rate of 38% to 42%. Wagers said profitability is expected to be weighted to the second half of 2026, consistent with historical seasonality.
During Q&A, Tuchman said the company’s “near 100% AI adoption” goal refers to AI tools used across delivery and internal operations—such as recruiting, quality assurance, translation, and associate enablement—while also working with clients to automate lower-value transactions with “human in the loop” support for complex interactions. He also said most onshore revenue cannot be shifted offshore due to regulatory requirements in areas such as healthcare, federal/public sector, and financial services. Tuchman added that clients are consolidating vendors, and he expects that trend to continue as enterprises seek fewer partners with deeper technology capabilities.
About TeleTech (NASDAQ:TTEC)
TTEC Holdings, Inc (NASDAQ: TTEC) is a global customer experience technology and services company that designs, builds and delivers transformative solutions for customer acquisition and engagement. Leveraging a combination of digital consulting, technology, analytics and operations services, TTEC helps clients across industries enhance their customer journeys, automate key processes and harness data-driven insights to foster loyalty and drive revenue growth.
The company’s core offerings span end-to-end customer engagement solutions, including customer experience (CX) strategy consulting, cloud migration, omni-channel contact center operations and managed services.
