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spk00: Welcome to TTAC's first quarter 2022 earnings conference call. I'd like to remind all parties that you'll be in a listen-only mode until the question and answer session. This call is being recorded at the request of TTAC. I would now like to turn over the call to Paul Miller, TTAC's Senior Vice President, Treasurer, and Investor Relations Officer. Thank you, sir. You may begin.
spk09: Good morning and thank you for joining us today. T-TEC is hosting this call to discuss its first quarter financial results for the period ended March 31st, 2022. Participating on today's call are Ken Tuckman, T-TEC's Chairman and Chief Executive Officer, Dustin Simak, T-TEC's Chief Financial Officer, and Shelley Swanback, our newly appointed Chief Executive Officer of T-TEC Engage. Yesterday, T-TEC issued a press release announcing its financial results. While this call will reflect items discussed within that document, For complete information about our financial performance, we also encourage you to read our first quarter 2022 quarterly report on Form 10-Q. Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals, and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments which may occur. Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our 2021 Annual Report on Form 10-K. A replay of this conference call will be available on our website under the Investor Relations section. I will now turn the call over to Kim.
spk03: Thanks Paul and thanks everyone for joining us this morning. Before I discuss the highlights of our first quarter performance, I'd like to share details on the exciting announcement yesterday that we've named Shelley Swanback as our new Chief Executive Officer of T-TECH Engage. With a proven track record driving significant growth in a dynamic digital environment, Shelley is both a market maker and a strong cultural leader. With over 30 years of experience in digital transformation, strategic consulting, technology, services, analytics, and M&A. Many of you may know Shelley from her time at Accenture, where she launched and built Accenture Digital into a global transformation powerhouse with more than $20 billion in annual revenue. Skilled at driving innovation globally and at scale, Shelley brings vertical industry knowledge, customer experience domain expertise, and strength in digital product development to T-TECH. Shelley loves to win. and is completely aligned with our ambition to double our business in the next five years. A seasoned market-facing leader who excels at creating strategic value for clients, partners, employees, and shareholders. Shelley has the energy, intellect, and expertise to take T-TECH to the next level. At the helm of our Engage business, she will be responsible for driving growth, digital innovation, and global expansion. In finding the right leader for T-TECH Engage, Character and cultural fit were extremely important to us. Shelley's authentic, empathetic leadership style emerged immediately in our discussions, and her passion for developing and bringing out the best in every employee aligns perfectly with our value-driven culture. At this time of explosive growth in the digital experience economy, Shelley will amplify and accelerate our progress as we further capitalize on the immense opportunity for T-TECH on the horizon. Now let's turn to the first quarter. 2022 is off to a solid start. Demand for digital CX transformation continues to grow as top performing companies across industries and geographies intensify their focus and investment in digitizing the customer experience. Through our two businesses, Digital and Engage, we operate at the heart of these transformation agendas. Our ability to help clients drive growth, increase revenue, improve profitability, and build lasting trust and brand loyalty continues to position us as a strategic go-to CX partner across the globe. Our holistic customer experience as a service platform provides all the capabilities a corporate brand or government agency needs to deliver the effortless experiences that today's hyper-connected customers require. With a strong pipeline and significant large deal activity underway, T-TECH remains well positioned to benefit from the healthy market momentum. Our performance in the first quarter was driven by a broad and diverse set of established marquee brands, hyper growth disruptors, and public sector agencies across the full range of our comprehensive CX technology and service capabilities. Bookings increased 15% to 195 million. Revenue increased 9% to 589 million. And adjusted EBITDA was 86 million as we executed on our planned increase in growth-oriented investments. We made meaningful progress this quarter against our five strategic priorities. First, technology innovation and differentiated IP. Second, deep vertical, excuse me, deep industry verticalization. Third, enterprise-wide diversification across client segments, industries, capabilities, and geographies. And fourth, strategic and accretive M&A And lastly, maintaining a strong financial profile. Today, I'll focus my remarks on several representative examples of execution of these priorities this quarter. I'll begin with technology innovation and differentiated IP, which is driving growth for both our digital and engaged businesses. We're very pleased with the progress on the digital side of our business. Over the last 12 months, we've sold over $265 million in bookings, up 97% over the prior year period. added 47 new logos, up 194% from the prior period, grew revenue 58% over the prior year period, accelerated the growth of our IP business, which is up 64 business on a pro forma basis, and won several partner awards reflecting our deep relationships with the CX technology ecosystems. In addition, we've dramatically expanded our total addressable market to include the growing universe of mid-sized companies and we've added new IP, innovative technologies, service capabilities, and partnerships to our comprehensive CX platform. The market response to our diversified set of premium CX technology solutions and services has been extremely positive. Our domain expertise and exclusive focus on CX continues to set us apart as T-TECH clients increasingly take advantage of the full breadth of our omni-channel, CRM, automation, and analytic solutions. We're seeing engagements increase in scale, scope, strategic impact, and economic value for our clients, their customers, and T-tech. In our engaged business, innovation is taking the form of new technologies, tools, and processes to help our teammates be more efficient, effective, and empathetic. We're investing in collaboration automation and analytics to ensure each healthcare advocate, financial service advisor, citizen engagement partner, retail concierge, auto mobility expert, and our other industry brand advocates have the technology and the knowledge they need to deliver seamless experiences to every one of our clients' customers. Our next pillar is deep industry verticalization. It's designed to help clients deliver experiences that are intent-driven, relevant, specialized, and personalized at scale. We've built vertical pods that link our go-to market motion with our operational delivery teams to continue to stay ahead of the changing dynamics in each industry. This integrated approach is unlocking deep industry expertise and building material scale to strengthen our long-term client relationships and provide momentum for the most compelling future growth opportunities. A prime example of this verticalized approach is our continued focus on the public sector. In early April, we closed the asset acquisition of the public sector citizen experience leader, Faneuil Inc. to further enhance our government services expertise. Integrating this new asset into T-TECH will enable us to respond with services built for fast-growing public sector demand in areas such as mobility, fleet management, congestion management, tolling, and transportation, government healthcare exchanges, labor and social benefit delivery, and emergency response systems. In addition, this example of our strategic accretive M&A growth pillar This expanded back office capabilities, including image review and processing and machine learning enabled data annotation. These solutions are in high demand and will provide us with a broader foundation for growth across multiple industries and clients. We've doubled down on the public sector in response to several sustainable trends specific to government. Last year, President Biden issued an executive order on transforming the customer experience and service delivery to rebuild trust in the federal government. This presidential action emphasized the urgency to improve the citizen experience by modernizing technology, automating processes, and reducing friction to better meet the needs of citizens. This spotlight on citizen centricity shines right in our sweet spot. We have been partnering with federal, state, and local agencies for decades, and we've worked hard to earn the credentials and the certifications required to do the business in the public sector. These authorizations create a high barrier to entry for competitors wanting to move into this space. Our differentiated citizen-first approach continually delivers the best outcomes for public sector clients, whether we're redesigning complex processes, standing up a CX ecosystem, or launching new digital solutions to personalize high-volume interactions at scale. For example, this quarter, we were awarded a significant contract with the state of Indiana to transform their citizen experience across the entire state. This comprehensive win includes upfront CX consulting, detailed journey mapping, the migration of their technology from on-premise to cloud, and managed services required to ensure that going forward every citizen of Indiana has an experience that is modern, seamless, and positive across all interaction channels. This meaningful win is but one of many conversations we're having with public sector agencies around migration to the cloud. Once hesitant about security and operational constraints, They're now fully embracing the idea of making the move to take advantage of the speed, flexibility, and feature-rich capabilities the cloud provides. These transformation projects are complex and provides long-term reoccurring revenue for T-TECH. With decades of experience working in the public sector and partnerships with all the leading CX technology providers, we expect to see a long tail of public sector opportunity in the quarters ahead. Now, I'd like to share a perspective on the current global market backdrop. which is highly dynamic and has numerous variables at play. As an industry pioneer who is constantly pushing the boundaries of what is possible now and into the future, we have proven time and time again that our defensible model enables us to quickly adjust to changing conditions. We've endured hurricanes, pandemics, earthquakes, tsunamis, social unrest, recessions, and the full range of economic cycles. Through trusted partnerships with our clients, and the grit and dedication of our employees, we've excelled through them all. Our solid track record of innovation and leadership across the full range of business cycle is a result of our deliberate diversification strategy that includes geographic geographies, verticals, clients, partners, and solutions. We've built a flexible operating model and made the investments required to ensure that we have the breadth, optionality, resilience, and balance sheet required to navigate the potential headwinds on the horizon. And we continue to invest in our future, as demonstrated with our announcement yesterday about our new engaged CEO. Shelley Swanback will continue to add significant leadership strength to our senior management. In addition, we continue to seek out strategic and accretive acquisitions and we're continually creating new solutions to expand our total addressable market and stay ahead of our clients and their customer needs. We are honored that our market strength continues to be recognized by leading industry analyst firms. This quarter, our engaged business was recognized by Gartner as one of the select few leaders in their 2022 Magic Quadrant for customer service BPO. Our position in the upper right quadrant illustrates our continued leadership in both CX technology and services. In an increasingly competitive virtual environment, the ability to personalize every interaction with empathy and context is what separates brands that are trusted and loved from those that are avoided or abandoned. For almost 40 years, we've been partnering with the most customer-obsessed brands to acquire, retain, and grow trusted, profitable customer relationships by delivering effortless, engaging experiences that build brand loyalty. Today, we're well positioned as ever to continue to deliver these positive outcomes to our clients, their customers, our employees, and our shareholders. We're thrilled to welcome Shelly to our T-TECH family, and she can't wait to get to know each of you. On behalf of our board, management team, and our amazing employees across the globe, thank you for your continued support. I'll now hand it off to Dustin for the financial details.
spk08: Thanks, Ken, and good morning, everyone. As Ken mentioned, we had a solid start to the year as we executed our strategic priorities. The demand side remains strong as evidenced by record first quarter revenue results and meaningful new business signings. We were capitalizing on a large, growing addressable market characterized by a heightened level of urgency and the growing importance for brands to distinguish themselves with exceptional customer experiences and outcomes. Now I'll move to our first quarter results. First quarter bookings increased 15% to 195 million over the prior year period. resulting in $776 million of bookings over the last 12 months. In our digital segment, bookings increased 137% in the first quarter over the prior period and 97% over the last 12 months versus the prior period. Strong demand continues for our Genesis, Amazon Connect, and Microsoft CX solutions, including larger CX technology transformational engagements, like the public sector client example Ken shared earlier. Our engaged segment also saw healthy demand across our core customer acquisition, hypergrowth and care services. Our first quarter bookings included six multi-segment deals, approximating 17 million, and 16 new logos with cumulative bookings exceeding 23 million, many of which were hypergrowth clients. We exited the first quarter with 2022 revenue backlog of 2.3 billion, or 91% of the midpoint of our guidance. Our current in-year sales pipeline is 1.8 billion, up 12% over the prior year period. We are well positioned for strong profitable growth in 2022. My discussion on the first quarter of 2022 results reference to revenue is on a GAAP basis, or EBITDA, operating income and earnings per share on a non-GAAP adjusted basis. A full reconciliation of our GAAP to non-GAAP results is included in the tables attached to our earnings press release. On a consolidated basis in the first quarter of 2022, revenue was $588 million, an increase of 9.2%. Adjusted EBITDA was $85.5 million, or 14.5% of revenue. compared to 95.9 million or 17.8% in the prior year period. Operating income was 67.2 million or 11.4% of revenue compared to 79.9 million or 14.8% in the prior year. And EPS was $1.08 compared to $1.26 in the prior year. Foreign exchange had a negative 5.2 million impact on revenue given the recent strengthening of the US dollar against select foreign currencies and a positive 3.1 million impact on operating income. FX primarily impacted our engaged segment. Our first quarter revenue performance was primarily driven by the ATEX acquisition, which we will laugh in April. Increased business as usual volumes from existing clients and new business from our expanded client base. Our other revenue highlights include the booking details outlined earlier, as well as a 22% increase in revenue from EMEA, 124% increase in travel and hospitality, a 13% increase in healthcare, a 21% increase from our hyper-growth sector, and continued momentum in our client engagements that are utilizing multiple offerings across our digital and engaged businesses. We are also pleased with our performance when adjusting for foreign exchange and higher pandemic-related revenue in the prior year period. Excluding FX and pandemic volumes, revenue increased 23% in the first quarter of 2022 versus the reported 9.2%. Our first quarter profitability is broadly benefiting from top line scale in a combination with value and outcome based pricing, an increased mix of higher margin offerings, offshore delivery, and lower depreciation expenses and percentage of revenue. The year-over-year moderation in operating profits is within our guidance range and reflects last quarter's communicated incremental growth oriented investments that were broad based across leadership, sales and marketing, product and engineering talent, IT and security infrastructure, geographic expansion, as well as reflecting upon the reduction in higher margin pandemic related work from the prior year period. Turning now to our first quarter 2022 segment results. Our digital segment revenue increased 78.6% to 113.6 million in the first quarter of 2022 over the prior year period. Operating income was 14 million or 12.3% of revenue compared to 6.7 or 10.5% of revenue. Top-line growth is primarily attributable to increased contribution from our higher-margin Genesys and Amazon Connect omni-channel cloud solutions, in addition to omni-channel product sales to support our clients' CS infrastructure investments. As mentioned during the last couple of quarters, we continue to partner with Cisco on its renewed focus on its cloud CX platforms. As we continue to work through the transition of our existing customer base, growth will be muted in the short term. Excluding the Cisco practice, our digital business grew 16.6% on a pro forma basis. in line with our long-term growth rates of 15% to 25%. Our recurring cloud and managed services revenue grew 75% in the first quarter of 2022 over the prior year period, representing 55% of digital's total revenue. Our diverse systems integration services, which have a high attachment rate for supporting future upgrade and expansion engagements, grew 79%, representing 26% of total revenue. Margins reflect the impact from acquisition-related integration costs and incremental investments in CX leadership and engineering talent, sales and marketing, and product and technology developments. Our engaged segment reported first quarter 2022 revenue of $475.1 million, steady with the prior year, which included a high contribution for pandemic-related revenue. Excluding FX and pandemic-related work, engaged revenue increased 13.7%, all organic. Operating income was 53.2 million or 11.2% of revenue compared to 73.2 million or 15.4%. We are experiencing increased business-as-usual volumes across numerous industries as we further verticalize our operating model and expertise, new lines of business, and hyper-growth client acquisition platforms. Our embedded base continues its strong performance as demonstrated by engaged revenue retention rate of 102%. Excluding pandemic-related volumes, engaged revenue retention rate is up to 111%. Our engaged profit margin is benefiting from top line scale, an increased percentage of revenue, and our higher margin verticals and offerings, and efficiency in our asset utilization leading to lower depreciation expense as a percentage of revenue. Margin pressures reflect those highlighted in my comments on the total company results. I will now share some metrics related to our cash flow, liquidity, and capital deployment before discussing our outlook. At quarter end, Cash was $156.8 million with $807.9 million of debt, of which 803 represented borrowings under our $1.5 billion credit facility. Net debt increased to $446.6 million to $651.1 million year-over-year as our strong cash flow generation was offset primarily by acquisition-related investments and capital distributions. Cash flow from operations was $13.7 million in the first quarter of 2022 compared to 69.8 million in the prior year. The decrease was primarily a result of higher use of working capital due to the timing of select customer billings that moved the accounts receivable collection to the second quarter. DSO was 61 days in the first quarter of 2022, up from 59 in the prior year period. Capital expenditures remained very low as a percentage of revenue, coming in at 16.7 million, or 2.8% of revenue for the first quarter of 2022, compared to 11.6 million, or 2.1% in the prior year. Our normalized tax rate was 21.5% in the first quarter of 2022 versus the 23.7% in the prior year. The reduction is primarily related to beneficial jurisdictional mix of income and the benefit of various tax credits. We anticipate our forward tax rate in the range of 21 to 23%. In February, the board declared the next semiannual dividend of 50 cents per share, which was paid on April 20th of 2022 to shareholders of record as of March 31st of 2022. This dividend represented a 6.4% increase over the October 21 dividend and a 16.3% over the April 21 dividend. We remain committed to our capital distribution to shareholders through the semi-annual dividend, which we have consistently increased since the dividend program's inception in 2015. Turning to our outlook, we are well positioned for continued profitable growth in 2022 augmenting our organic growth through meaningful strategic acquisitions. We are experiencing a strong growing sales pipeline, strong bookings, and an increased revenue backlog. We are pleased with our go-to-market platform, which is delivering a differentiated set of CX solutions. As a result, we are reiterating our guidance for 2022. And with that said, I'm going to give you some further context on Outlook. First, we closed acquisition of certain FANU assets on April 1st and have begun integration to the broader T-TECH Engage segment. We are on track to invest an incremental 50 million in leadership, sales, marketing, and product innovation this year to capitalize on the marketplace opportunities inclusive of our verticalization and diversification strategies. Our margin profile this year reflects these incremental investments with an anticipated payback in the form of margin expansion next year and beyond. Growth is anticipated to increase in the second half of 2022, given the bookings composition, timing of projects and program launches, and the comparison to a more normalized pandemic-related volumes in the second half of 2021. Guidance for the second quarter revenue and profitability reflects a slower than normal ramp in new bookings in both digital and engaged based on the mix of bookings and we deem this to be short term. For further details on our guidance, please reference our commentary in the business outlook section to our first quarter 2022 earnings press release to obtain our expectations for the second quarter and full year 2022 performance at the consolidated and segment level. In closing, we are executing on numerous fronts across the business and realizing tangible results from our strategy. Expanded CX technology and service solutions and improved go-to-market platform. The investments we are making, the client relationships we have built, and our talented leadership and teams position us well for the next phase of growth. Thank you for your continued interest and support of T-TECH. I will now turn it back over to Ken.
spk03: Thank you, Dustin. I'm excited to announce that Shelly is here with us on the call today, and I'm happy to formally introduce you to our new Chief Executive Officer of Engage, Shelly Swanback.
spk01: Thank you, Ken, and good morning, everyone. It's so great to be here and to be joining T-TECH. It's such an exciting time. The market opportunity is just tremendous, as every business, regardless of their sector, knows that to win an experienced economy, they must deliver customer experiences that are both effortless and also engaging. I just love this CX space, and I joined T-TECH for a couple of reasons. First, I believe our customer experience as a service platform is unique. We can bring together technology, customer insights, and talent to help clients design, build, and also operate experiences at scale like no one else can. And second, I'm inspired by the company's vision and values-driven culture. I'm passionate about partnering with clients, passionate about driving growth, and also building high-performing teams. And that's what makes this a perfect fit. I'm really looking forward to taking TTAC to the next level and also looking forward to spending more time with all of you in the future as we work toward our goal and ambition of doubling our business. Thank you and back to you, Paul.
spk09: Thanks, Shelly. As we open the call, we ask that you limit your questions to one at a time. Operator, you may open the line.
spk00: Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star 1. One moment please for the first question. Our first question comes from George Stetson of Craig Hallam. Your line is open.
spk10: Thank you. And first, Shelley, welcome to T-TECH. We certainly understand how big a deal it is that you've come on. I would tell you that when I want to feel good about myself or the market, I pull up the 10 and 20-year ACM chart. And it just makes me feel good. So what I am aware of for Accenture, and this is really a question for Ken, is it's normally BPO style growth. And I'm just curious if this gives us a message that you're going to be moving T-Tech in that direction a little bit.
spk03: You know, what I would say to you is we're already doing a fair bit of back office services as I mentioned even in my script today as it relates to public service area and some other areas that we're focused on providing back office and claims area, etc. What I would just simply say to you is that we're going to stay very, very focused on anything and everything that drives overall a better client relationship for our customers. And in many cases, Our clients' back offices are broken. They need new technology because if the back office isn't working properly, then the front office gets the complaints and vice versa. So that's my way of saying to you that it's one of many areas that we see as a growth area, but the reality is is that there's so much growth just in our core business of what we currently do today that I think you're going to see that Shelley's really going to be doubling down in that area and expanding us on multiple fronts there, as well as internationally as well. So I hope that answers your question.
spk10: That's great. Just a follow-up on government. Congratulations on Indiana and getting the Faneuil deal closed as well. Can you just talk about how broad the government opportunities are? I sense that you're seeing a bit of an increase in demand there, and I just want to be clear how significant that could be.
spk03: Yeah, so as all of you know, we've had a couple of administrations that have decided to put out trillions of dollars, something that none of us have ever experienced in our lifetime. Those trillions of dollars, the majority of which flows down to state and public sector. And so we're a big believer in following the money. And that's really all we're doing. And so consequently, what the pandemic did is it made it brutally honest to each and every one of these states that they're not equipped to provide virtual capabilities and that when there's a pandemic and you can't get your driver's license renewed, you can't pay a ticket, you can't pay your franchise tax or get a building permit, et cetera. And so our focus is going to be in the area of helping these governments provide e-government services so that we have the ability to assist them in having a more digital interface to the public. They need it. They want it for a myriad of reasons, and frankly, selfishly for them, not the least of which is political. And so we all saw what happened to Department of Labor. We did a ton of work for many states in that area, and basically all their systems crashed. They had no real ability to deal with people because they're used to people standing in line to get their checks, etc., We saw the same thing across a myriad of other government entities. So I think what you're going to see is that there's going to be massive investment across the United States and other countries where they're going to want to modernize their platforms on the technology side as well as take advantage of our CX capabilities with our citizen ambassadors. And that's part of what FANUL helps us do. Today we're covering Just in the health exchange area alone, I don't want to give out a wrong stat, but I believe that 40% of the health exchanges were now interfaced to and providing, you know, providing services. And the same thing, you know, our tolling business is growing very rapidly. Our roads are falling apart. We all know that. And so the solution to solve this, since they don't want to raise the federal gas tax, is to start converting roads to tollways. And so we're very excited about what we can bring to the table in this area of tollway management. Not just the classic way that people pay tolls, but also taking advantage of new IoT services that we plan on being very involved with in the future. So sorry for the long-winded answer, but the bottom line is that we see a lot of potential.
spk10: That's great detail. Thank you very much.
spk03: Thanks, George.
spk00: Our next question comes from Vincent Colicchio of Barrington Research. Your line is open.
spk07: Yes, a nice quarter. I'm curious if there's any thoughts on the overall economic outlook and if you're seeing any signs of weakness in any of your geos or verticals, Ken.
spk03: I think it's a little premature for us to really give you an accurate answer. What I would say to you is we're not seeing volumes coming down. What we'll start looking for as we slide into a higher interest rate environment is are people going to start downgrading various different services, which doesn't necessarily affect us. It just simply means that they go from a premium something in cable or canceling HBO or whatever. I'm using that as an example. I don't think we're yet seeing that, but I won't be surprised if in fact over time we do begin to see that. We're somewhat insulated because we have very consciously built our business around healthcare and we have a very significant amount of healthcare business. And healthcare is really not affected by recessions. Companies issue benefits and consumers sign up for those benefits regardless of what's happening to their paycheck or their mortgage, et cetera. So we think that we have multiple segments and verticals that we're focused on that really don't get hugely impacted or impacted at all by the recession. The same thing with public sector, and we were very conscious about that. That money is going to be spent regardless of what is going on in the economy. So, but what I would say is it's a good question, Vincent, and I think that on the next call I'm going to be able to give you a much better read than I can I just think it's premature because the Fed is really just now starting to tighten things up.
spk07: And one for Dustin. What percentage of bookings were deals that combined Engage and digital, and how does that compare to the prior quarter?
spk08: You're looking at about, Vincent, I want to say about 10 million, I mean, excuse me, about 10% of overall bookings, slightly down from the prior quarter. I want to say six deals overall.
spk07: Thanks for answering my questions. Thank you, Vincent.
spk00: Our next question comes from Brian Bergen of Cowan. Your line is open.
spk11: Hi, this is actually Jared Levine on for Brian. First, in terms of the fiscal year 22 guidance, can you discuss what went into the thought process to reiterate the guide despite the one QB and healthy bookings commentary?
spk03: Dustin, do you want to take that?
spk08: Yeah, absolutely. So a couple of things I would say. First off, you know, we're still, it's Q1, right? So we're early part of the year. And as I mentioned earlier, you know, so part of it is just reiterating from that basis. We feel good about the pipeline. We feel good about our overall backlog. And we talked about both are increasing and growing. And we had a really strong bookings beat. Part of it, we mentioned that there is some, you know, some of the deals, if you think about some of the more transformational deals that we did, larger ramp times, et cetera, you know, leading to revenue kind of from Q2 shifting to the second half. And that's what led us to kind of reiterate guidance at this point. But we're very, you know, very confident about the second quarter and feel good about where we're at from a bookings momentum and a pipeline perspective. And, you know, we'll come out in August and have a further discussion about it.
spk11: Okay, great. And then what was the scale of those incremental $50 million of growth investments in one queue? And was that in line with your expectations? And are you expecting any change in the pace of that expected spend?
spk08: I mean, as we mentioned before, even in Q4, right, we're always evaluating our overall investments and how we're deploying it and making sure we're getting the right return on investment. And it is on pace in Q1. It will ramp throughout the year, though, right? Just kind of if you think about this relative to our overall SG&A profile, our revenue profile as well, and then ramping more in the second half. And it's evidenced by the, you know, even the announcement today of Shelley and some of the investments we're making in leadership. And so in Q1, we're on pace.
spk11: Can I sneak in one more real quickly? What was that organic revenue growth rate in 1Q?
spk08: Organic revenue growth rate was roughly flat. It goes back to the discussion that we had, again, as we guided. This is a difficult compare as it relates to pandemic-related volumes in Q1. Excluding that, you're looking at roughly eight points of growth for a total company organically. Thanks.
spk00: Our next question comes from Joseph Vassi of Canaccord. Your line is open.
spk05: Hey, guys. Good morning, good quarter, and welcome on board, Shelly. I just want to go back to your comment. I think you said something about EMEA growth of 20% in the quarter. You know, just given the macro backdrop in Europe, I was wondering if we could get a little more color on that.
spk08: Sure. Yeah, so keep in mind our media business is still relatively small to the broader portfolio. That's number one. Number two is, as we mentioned, you go back to exposure, you know, we only have businesses within Poland and Bulgaria, and a lot of that growth is coming from other areas. Keep in mind contracts that may be in the U.K. as an example or in Western Europe, but being delivered out of the Philippines or being delivered out of another location, which is part of the reason. So we haven't seen, if you can't answer directly to your question, we haven't seen a slowdown in that particular space. We're impacting our ability to deliver or impacting our ability to win in the market.
spk05: Got it. And any kind of change of pace in kind of your fast growth internet native clients this quarter?
spk08: We talked about, you know, I highlighted that as well. So hyper growth grew 21%. A couple of different clients drove that, you know, particularly in the travel space where we have a couple of hypergrowth customers that did very well. It's part of the reason we called out travel more broadly that has hypergrowth embedded in that number. So it's still, the business is still very strong and continuing to accelerate, and we feel really good about that. We talked about some of the new logos we want as well, and even in that new logo space, we're still doing very well in terms of being able to acquire customers with that kind of profile.
spk05: Great. Thanks, guys. Thanks, Joseph.
spk00: Our next question comes from Maggie Nolan of William Blair. Your line is open.
spk06: Hi, this is Jesse on for Maggie. Congrats on the quarter. I wanted to touch on talent. So how many employees do you have in the Philippines and what steps are you taking to mitigate attrition there?
spk08: Ken, do you want to take that or do you want to take the... Yeah, go ahead. I mean, you know the stats as well. So you're looking at roughly 25,000 within the Philippines. And keep in mind, too, that you're going back now to the pandemic started. We shifted, broadly speaking, that entire employee base to work from home. And we did that, I would say, in a much more differentiated way relative to our competitors. And that led to a lot of the growth that we were able to secure during that period of time as well. As it relates to attrition, a lot of it, there's a number of things that we're doing in terms of being able to improve that, but we haven't seen, and I can go to those in a second, but we haven't seen a notable uptick in attrition. While I would say labor markets across other GOs are difficult, I would say the most difficult labor market that we're dealing with is still the U.S. In the Philippines, we haven't seen a notable change, and I do think that part of the flexibility that we're offering in this work-from-home type environment is driving some of that benefit. In terms of broader initiatives that we have, we talked about before, humanified neighborhood. Think of it as a broader statement about going into a work-from-home environment and making sure that you're keeping our overall employee base engaged and connected. So a lot of our initiatives are around those aspects. Other pieces would be improving our overall work-from-home kind of training and virtualized training, aspects like that that we continue to work on, but not only do we do for our own internal customers, But we also do externally within our digital segment, so we're applying a lot of those technologies to improve the overall experience when they're onboarding, coming onboard, and producing attrition that way. And, Ken, I'll turn it to you and see if you have any other color you want to add.
spk03: No, I don't think so. I mean, I think that we feel very comfortable with what our attrition is running right now, and I guess all I would add is that, We've never been in a situation in our entire history of being in business where clients are more understandable about wage increases, et cetera, because they're experiencing such significant shortages with their internal operations. And so they're working with us when we see the need to adjust wages up and obviously pass that on. And so we feel, you know, really good about this. I mean, at the end of the day, The services that we provide are mission critical. And I mean, just yesterday evening as an example, I was speaking to our chief revenue officer and she was telling me about a particular client that is 4,000 associates deficit and is desperately trying to get back, add back 4,000 associates. We're seeing this across the board and that creates opportunity for us. We're very good at talent acquisition. We've got quite the machine for that. And we're very good at onboarding and training and good at showing the love to our employees for retention. So I would say that right now we feel quite good about where we stand with our labor at this point in time.
spk06: That's great to hear. And then, uh, one follow up from me on IP, how are connector sales progressing? I know we're approaching almost halfway through the year. Um, so yeah, I'll hop back in the queue. Thanks.
spk03: Yeah, I think he's referring to the marketplace sales of the APIs and connectors. Is that correct?
spk08: I would say broadly speaking, our connector business and, and, uh, and to answer that question directly, One of the comments that Ken referenced in terms of the past 12 months, that business is growing at 65%, and we feel very good about how sales are progressing. And we expect a number of new product releases further this year to continue to accelerate and ignite that overall business. And it continues to be a primary focus.
spk02: Thanks. Thank you. Thank you.
spk00: Our next question comes from Mike Lattimore of Northland Capital Markets. Your line is open.
spk04: Hi, Mike. Hi. I'm Rebecca on behalf of Mike Lattimore of Northland Securities. Am I audible?
spk08: I'm sorry. You're coming across so it's very difficult to hear.
spk04: Yeah. I have a couple of questions. So the first one is, is inflation slowing customer interaction volumes in any verticals?
spk08: I'm sorry, it's still a little difficult to hear. You're saying something about customer interaction volumes in different verticals maybe?
spk04: Yeah, I was asking if inflation is slowing down customer interaction volumes in any verticals.
spk08: Yeah, I think Ken kind of hit that on the head a little bit earlier, which was that right now at this point in time, it's a little early to call it. And broadly speaking, the comment was that we don't see any reduction in volume at this point in time. And we can give a broader update on kind of how inflation is affecting different areas in Q2. But again, I think the point he made earlier in his own comments, which I think is important to reference, is that we do have a highly defensible model and a very diversified set of businesses that can weather any type of challenge like that.
spk04: My second question is, is Cisco Contact Center demand improving?
spk03: Yes. Definitely. Definitely. The pipeline is far better than we've seen it in a year and a half. And people are really starting to now resonate. to their new offerings, et cetera. So time will tell if it becomes a major force in the marketplace, but definitely we are seeing a much more significant pipeline and more deals coming through and more clients that want to transfer their premise licenses to WebEx, CC, et cetera. Right now we definitely are seeing and feeling it. As a matter of fact, I just spoke to the gentleman that's running that unit yesterday and he ran me through the pipeline and I was pretty surprised. To the positive. Yes, to the positive. Thank you.
spk04: That's brilliant. Thanks. That's it from my side. Have a nice day. Bye. Thank you. You too.
spk00: The next question comes from James Fawcett of Morgan Stanley.
spk02: Hey, it's Jonathan on for James. Thanks for taking my question. Can you help decompose growth in hyper growth? I want to better understand how much of that growth is driven by share gains versus new clients versus volume growth, if possible.
spk08: Yeah, we typically, so Jonathan, I like this in a couple different ways. So right now, if you look at the business more broadly, If you go back to last year, we probably had 2 or 3 significant customers that have ramped on the back half of 2021 that are ramping across 2022. So that is driving – they're performing very well and driving – if you think about it, it's very similar or comparable to kind of what we talk about as our overall embedded base versus new logos, where you're looking at roughly 80% of the business is driven by our embedded base, and I would say the same for hypergrowth, and then roughly 20% is driven by new logos. But we did have a couple last year that ramped and continue to drive significant growth in 2022. Got it. That's helpful. I think the one thing that's important to note in that segment, it is a very diverse segment in terms of size of the clients, et cetera. So in a lot of ways, if you think about the size of the customer, the end customer, that speaks to a lot of it. So it's a highly diversified hyper-growth sector, which I do think differentiates us relative to our competitive set.
spk02: Yeah, I appreciate that clarity. And a follow-up, if I may, on headcount. It looks like headcount declined sequentially, at least based on your filings. And I fully recognize that the delta there may be because of seasonal temp workers. Can you talk about the rate of headcount additions that you expect this year and what you need to achieve your outlook?
spk08: You're talking about for the full year? Yeah. Yeah, there's two things I would tell you. So one is, if we go back to our guidance when we talked about and that we are looking to shift. It was a little bit different about our business, I think, relative to using that metric, which, candidly, we typically don't always use as a leading indicator to growth, and for a simple reason that we're in the process of rotating our overall headcount in business. We talked about this focus on offshore delivery. We're going to continue to focus there, but we have a very strong kind of U.S. domestic business As a result of that, our headcount metrics are different, I would say, in a lot of ways relative to peers. This year, with that said, to answer your question directly, you're looking at roughly 10,000 kind of in total headcount year-over-year from a seasonal perspective and sense of like end-of-quarter comparison. Got it. Really helpful color. Thanks, guys. Thank you. Thank you.
spk00: Thank you for your questions. That's all the time we have for today. I will now turn the call back to Paul Miller.
spk09: Yes, thank you all for your participation and have a great day. This concludes our call. Thank you.
spk00: This concludes TTAC's first quarter 2022 earnings conference call. You may disconnect at this time.
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