GOODWILL

12 Months Ended

Dec. 31, 2024

GOODWILL [ABSTRACT]

Goodwill Disclosure [Text Block]

(6)GOODWILL

Goodwill consisted of the following (in thousands):

							Effect of
	December 31,		Acquisitions /				Foreign		December 31,
	2023		Adjustments		Impairments		Currency		2024
TTEC Digital	$	500,576	$	—	$	—	$	(2,363)	$	498,213
TTEC Engage		308,412		—		(233,532)		(1,896)		72,984
Total	$	808,988	$	—	$	(233,532)	$	(4,259)	$	571,197

							Effect of
	December 31,		Acquisitions /				Foreign		December 31,
	2022		Adjustments		Impairments		Currency		2023
TTEC Digital	$	502,806	$	(2,763)	$	—	$	533	$	500,576
TTEC Engage		305,039		2,763		—		610		308,412
Total	$	807,845	$	—	$	—	$	1,143	$	808,988

Impairment

The Company has three reporting units with goodwill and performs a goodwill impairment test on at least an annual basis. The Company conducts its annual goodwill impairment test during the fourth quarter, or more frequently if indicators of impairment exist. In the second quarter of 2024, management identified a triggering event for impairment. Management performed a quantitative goodwill impairment analysis using the same methodology as the Company’s annual Step 1 analysis described below, which resulted in reporting a $196 million 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 in the second quarter of 2024.

For the annual goodwill impairment analysis, the Company elected to perform a Step 1 evaluation for all of its reporting units, which includes comparing a reporting unit’s estimated fair value to its carrying value. The determination of fair value requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term growth rates for the businesses, the useful lives over which the cash flows will occur and determination of appropriate discount rates (based in part on the Company’s weighted average cost of capital). Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. As of December 1, 2024, the date of the annual impairment testing, the Company concluded that for all three of the reporting units, the fair values were in excess of their respective carrying values and the goodwill for those reporting units was not impaired.

The carrying value of Engage was $612.0 million at December 1, 2024, including approximately $73.0 million of goodwill. Based on the Company’s assessment, the estimated fair value of the Engage reporting unit exceeded its carrying value by approximately 17%. If all assumptions are held constant, either a 6.4% increase in the discount rate or a 19.7% decrease in each year’s projected revenue over the forecast period, would result in approximately a $103.0 million decrease in the estimated fair value of the Engage reporting unit. Such a change in either of these assumptions individually would have resulted in the Engage reporting unit failing Step 1 of the goodwill impairment analysis on December 1, 2024.

The carrying value of Digital Recurring was $433.5 million at December 1, 2024, including approximately $310.2 million of goodwill. Based on the Company’s assessment, the estimated fair value of the Digital Recurring reporting unit exceeded its carrying value by approximately 7%. If all assumptions are held constant, either a 1.7% increase in the discount rate or a 2.6% decrease in each year’s projected revenue over the forecast period, would result in approximately a $30.0 million decrease in the estimated fair value of the Digital Recurring reporting unit. Such a change in either of these assumptions individually would have resulted in the Digital Recurring reporting unit failing Step 1 of the goodwill impairment analysis on December 1, 2024.

The carrying value of Digital Professional Services was $225.9 million at December 1, 2024, including approximately $188.0 million of goodwill. Based on the Company’s assessment, the estimated fair value of the Digital Professional Services reporting unit exceeded its carrying value by approximately 10%. If all assumptions are held constant, either a 3.0% increase in the discount rate or a 3.5% decrease in each year’s projected revenue over the forecast period, would result in approximately a $22.1 million decrease in the estimated fair value of the Digital Professional Services reporting unit. Such a change in either of these assumptions individually would have resulted in the Digital Professional Services reporting unit failing Step 1 of the goodwill impairment analysis on December 1, 2024.

As an international outsourcing agent, TTEC’s revenue and cash flows are susceptible to global economic conditions and client business volumes. In performing the Step 1 evaluation, the reporting unit’s current backlog and pipeline of customer business were considered, as well as inflation rates, gross domestic product rates, historical revenue growth and profitability, and state of the CX industry.

The estimates of fair value were based on generally accepted valuation techniques and information available at the date of the assessment, which incorporated management’s assumptions about expected revenues, future cash flows and available market information for comparable companies.

The process of evaluating the fair value of the reporting units is highly subjective and requires significant judgment and estimates as the reporting units operate in a number of markets and geographical regions. The Company used a market approach and an income approach to determine its best estimates of fair value which incorporated the following significant assumptions:

● Revenue projections, including revenue growth during the forecast periods ranging from (7.5)% to 15.0% and revenue terminal growth rates between 1.8% and 3.0%;

● EBITDA margin projections held relatively flat over the forecast periods ranging from 9.0% to 18.0%;

● Estimated income tax rates of 25.4% to 26.5%;

● Estimated working capital of 3.1% to 14.3% of revenue;

● Estimated capital expenditures ranging from 1.0% to 3.0% of revenue;

● Discount rates ranging from 13.5% to 16.5% based on various inputs, including the risks associated with the specific reporting units, the country of operations as well as their revenue growth and EBITDA margin assumptions;

● Guideline public company revenue multiples of 0.35 to 1.50 and EBITDA multiples of 4.0 to 13.0;

● Guideline transaction revenue multiples of 0.2 to 9.8; and

● Market participant acquisition premiums of 0.6% to 113%.