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TTEC (TTEC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 11, 2026

Source: earnings call transcript

Executive summary

TTEC Q2 FY26 — Strategic Review of Digital Segment Amidst Challenging Quarter

TTEC experienced a challenging Q2 FY26, falling short of its plan with significant revenue and EBITDA declines, primarily due to underperformance in its Engage segment. The company is undertaking a strategic review of its T-TECH Digital segment to maximize shareholder value, while Digital itself remains on track with its targets. Management is focused on cost efficiency, profitability restoration, and debt reduction, with actions underway to improve performance in the second half of the year.

Highlights

4

  • Net debt decreased by $36 million in Q2 FY26, contributing to a $58 million year-to-date reduction.

  • T-TECH Digital segment is on track to hit its full-year revenue and profitability targets.

  • Engage segment's last 12-month revenue retention rate improved to 93%, up from 88% in the prior year.

  • T-TECH Digital's professional services (excluding legacy CCAS practices) grew 13% year-over-year.

Concerns

5

  • Consolidated revenue decreased 11.3% year-over-year to $455 million.

  • Adjusted EBITDA declined to $39 million (8.7% of revenue) from $52 million (10.1% of revenue) in the prior year.

  • Adjusted EPS was $0.03, down from $0.22 in the prior year, with a negative $0.08 impact from a higher tax rate.

  • Engage segment revenue decreased 12.1% year-over-year to $351 million, impacted by underperforming clients and public sector engagement.

  • The full-year 2026 revenue outlook for the Engage segment was revised to a decline of 4.1% to 8% at the midpoint.

Guidance & targets

CategoryTargetConfidence
Engage full year 2026 revenue decline
4.1% to 8% at the midpoint
high materiality
Medium
Engage adjusted EBITDA margin
10.1%
high materiality
Medium
Digital full year 2026 guidance
Reiterated
medium materiality
High
Full year capital expenditure forecast
Unchanged
low materiality
High
Engage sequential quarter over quarter growth
Expected
medium materiality
High
Engage second half growth
Expected over prior year
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Engage
Revenue decreased due to planned rationalization of underperforming clients and a seasonal public sector client engagement (approximately 24% of YoY reduction). Additional pressures concentrated within a small number of public sector and technology, media, and communications clients. Operating income was $14 million or 3.8% of revenue, compared to $18 million or 4.6% of revenue in the prior year.
$351 million-12.1%—$14 million (3.8% of revenue)
Digital
Revenue decreased 8.5% YoY, or 4.6% adjusted for a $4 million one-time IP software sale in Q2 2025. Operating income was $12 million or 11.7% of revenue, compared to $18 million or 16.1% of revenue in the prior year (or $14 million or 13% adjusted for the IP sale). Financial performance aligned with targets as the segment executes on the market shift to end-to-end CX transformations. Professional services (excluding legacy CCAS practices) grew 13% YoY.
$104 million-8.5%—$12 million (11.7% of revenue)

Orderbook & backlog

Engage backlog $1.5 billion Q2 FY26

down from 101% of FY25 updated revenue guidance for the same period in 2025

98% of full-year 2026 updated revenue guidance at the midpoint of the range

Digital backlog $364 million Q2 FY26

up from 83% of FY25 revenue guidance for the same period last year

85% of 2026 revenue guidance at the midpoint of the range

Deals & partnerships

PJT Partners Independent financial advisor engaged to assist in the evaluation of strategic and capital market alternatives for T-TECH Digital.

The Board of Directors has determined it is the right time to initiate a review of strategic alternatives for T-TECH Digital to realize its full growth potential and maximize shareholder value. No definitive timeline for completion, and outcome may take many forms, including Digital remaining part of T-TECH. Commercial collaboration between Engage and Digital will continue.

Risks & headwinds

Underperforming client programs in Engage Ongoing

High single-digit clients identified for margin rationalization.

Mitigation:Partnering with clients to address issues through automation, offshore delivery, operating model redesign, or professional transition if a mutual path isn't possible.

Specific public sector and technology, media, and communications clients in Engage Q2 FY26 impact, actions for Q3 and beyond

Impacted Q2 results; one large public sector client having problems with a third-party technology accounted for approximately 24% of the year-over-year revenue reduction.

Mitigation:Working closely with these clients and taking appropriate actions to improve performance in the third quarter and beyond.

Elongated sales cycle for Engage Ongoing

Deals are becoming more complex, evaluating the mix of technology and human interaction.

Mitigation:New business starts at smaller volumes to validate outcomes before scaling to significant growth.

Digital deal sizes smaller and longer to close Ongoing

Average deal sizes are smaller and take longer to close as customers evaluate their investments in CX transformations.

Mitigation:Optimizing onshore-offshore delivery mix and overall utilization to maintain profit margin expectations.

Higher normalized tax rate Q2 FY26

82.8% in Q2 FY26 compared to 43.4% in the prior year, resulting in a negative $0.08 impact on non-GAAP EPS.

Mitigation:Partially offset by income in foreign tax jurisdictions; impact exacerbated by lower overall pre-tax income.

What to watch in Q3 FY26

Engage sequential revenue growth

Q3 FY26 and Q4 FY26
Current Q2 FY26 revenue $351M, declined 12.1% YoY
Target Sequential quarter-over-quarter growth

Why it matters

Indicates recovery and effectiveness of actions to address underperforming clients and sales cycle elongation.

And we expect both sequential quarter over quarter growth for the remainder of the year and second half growth over the prior year.

Find out whether TTEC delivers this. Inve re-checks your case every morning.

Q&A highlights

Can you describe the process of addressing clients with lower economics in the Engage segment, the pushback received, and how many clients are involved?

Management explained they identify high single-digit clients, review P&Ls collaboratively, and seek mutual agreements for adjustments or assist with professional transitions. The focus is on ensuring clients are accretive to margin goals, and while some clients may leave, they occasionally return.

“So what we do is we look at that P&L, we sit down with that customer, we walk through the contract and where we see opportunities for us to improve and where we ask for them to look at adjustments to the engagement we have.”

asked by George Sutton · answered by Kenneth Wagers

2 min read 6 chapters

Detailed narrative

Q2 Performance & Strategic Focus

TTEC reported a challenging Q2 FY26, falling short of plan with $455 million in revenue and $39 million in EBITDA. The company is executing a focused strategy to improve revenue, cost efficiency, and profitability, emphasizing pipeline quality, sales execution, and structural cost reduction across both Engage and Digital segments. Management remains confident in the path forward despite the disappointing results.

T-TECH Engage Initiatives

The Engage segment is actively improving pipeline quality and sales execution, seeing positive momentum with new strategic enterprise opportunities. It is also partnering with clients to address financially underperforming programs through automation, offshore delivery, and operating model redesign. Efforts are underway to simplify the cost structure by streamlining operations and shifting support functions to lower-cost locations, strengthening the operating model for improved performance.

T-TECH Digital Strategy & Performance

T-TECH Digital is successfully shifting its CX technology and services mix towards areas of high client demand, focusing on data, AI, observability, and security solutions. This shift involves deepening relationships with CX technology partners, expanding in EMEA and APAC, and increasing sales coverage. Professional services within Digital (excluding legacy CCAS practices) grew 13% year-over-year, reinforcing the segment's strong market traction and robust pipeline, keeping it on track for full-year targets.

Strategic Review of T-TECH Digital

The Board of Directors has initiated a review of strategic alternatives for T-TECH Digital, engaging PJT Partners as an independent financial advisor. The objective is to best position Digital to realize its full growth potential and maximize shareholder value, given its strong growth and differentiated platform. The review has no definitive timeline, and the outcome may vary, including Digital remaining part of T-TECH, with continued commercial collaboration between the Engage and Digital businesses.

Financial Performance & Debt Reduction

Consolidated revenue decreased 11.3% year-over-year to $455 million, and adjusted EBITDA was $39 million (8.7% margin) compared to $52 million (10.1% margin) in the prior year. Net debt decreased by $36 million in Q2, contributing to a $58 million year-to-date reduction, with a net leverage ratio of 3.85 times. The company secured covenant flexibility in its credit facility to support its business plan and operations, maintaining focus on deleveraging the balance sheet.

Capital Expenditures & Tax Rate Impact

Capital expenditures were $13 million (2.8% of revenue) in Q2 FY26, up from $7 million (1.4%) in the prior year, primarily due to accelerated purchases of computer equipment to avoid imminent price increases. Approximately 63% of this spend relates to growth and product development. The normalized tax rate was 82.8% in Q2, significantly higher than 43.4% YoY, largely due to a valuation allowance against U.S. losses and lower pre-tax income, resulting in a negative $0.08 impact on non-GAAP EPS.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.