Welcome to TTEC's First Quarter 2018 Earnings Conference Call. I would like to remind all parties that you will be in a listen-only mode until the question-and-answer session. This call is being recorded at the request of TTEC. I would now like to turn the call over to Paul Miller, TTEC's Senior Vice President, Treasurer, and Investor Relations Officer. Thank you. Sir, you may begin.

Good morning and thank you for joining us today. TTEC is hosting this call to discuss its first quarter financial results for the period ended March 31, 2018. Participating on today's call are Ken Tuchman, our Chairman and Chief Executive Officer; and Regina Paolillo, our Chief Financial and Administrative Officer. Yesterday, TTEC issued a press release announcing its financial results. While this call will reflect items discussed within that document. For a complete information about of our financial performance in the first quarter, we encourage you to read our Quarterly Report on Form 10-Q when we file with the SEC in the coming days. 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 that 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. Such factors include, but are not limited to, reliance on large clients, the risks associated with lower profitability from or the loss of one or more significant clients, execution risks associated with ramping new business or integrating acquired businesses, the possibility of asset impairments and our restructuring charges, as well as the potential impact to the financial results due to foreign exchange rate fluctuations or legislative developments in the United States or other countries where we do business. For a more detailed description of our Risk Factors, please review our 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 Ken Tuchman, TTEC's Chairman and Chief Executive Officer.

Thanks, Paul, and good morning, everyone. This quarter, we continued to advance our position as a leading global provider of end-to-end transformational digital customer experience solutions for the worlds most innovative and customer centric brands. We remain firmly committed to our direction and our progress is steady. We're growing our pipeline, we're diversifying our bookings with offerings from our TTEC Digital and TTEC Engage centers of excellence that include strategy, analytics, consulting, technology, trust and safety, and operational delivery. We're tracking new customer centric companies seeking technology rich solutions to accelerate their digital transformation. We're successfully leveraging machine learning and automation to improve operational efficiencies and augment human capabilities. And we continue to invest in innovation to remain strategically relevant and ahead of the market. Shortly, Regina will discuss our financial performance and provide a bridge from our first quarter results to our full-year guidance. In the meantime, let me update you on some key activities from the quarter. Our new market-facing position with TTEC Digital and TTEC Engage is relevant, compelling, and resonating with current clients and new prospects. In a world that is now wrapped in a digital skin, brands are understanding the technology impacts, everything they do, they have recognized that their business strategies are correctly linked to technology and they must fundamentally rethink how they operate and differentiate. Digital transformation has become the critical enabler to satisfy rising customer expectations and companies are rushing to figure out a way forward. Our positioning that unifies customer experience strategy and enabling technology under the TTEC Digital, with exceptional operational execution under TTEC Engage, is resonating with a ready market. According to Forrester, 60% of executives believe that they are dangerously behind in their digital transformation. Our conversations with prospects and clients reflect the sense of urgency. Companies are…

Thanks Ken and good morning everyone. I'll review our first quarter 2018 financial results and then provide additional context reporting our full-year guidance. Our first quarter results included short list of items which requires some context, head of my comments on the GAAP and non-GAAP results. At the top of this list is our adoption of ASC 606, our first quarter 2018 results include $12.5 million of net revenue, $6.3 million of net EBITDA, and $6.3 million of net operating income related to ASC 606. It's important to note that the guidance we provided in our March earnings call included a net impact of ASC 606 which we estimated to be immaterial to our full-year results with a net increase to revenue and operating income in the first half and a net reduction to revenue and operating income in the second half. While we continue to estimate ASC 606 as immaterial to our full-year results, the impact between first and second quarter will be different than originally anticipated with the first quarter receiving a greater benefit and the second quarter a lesser benefit. Our full-year guidance on revenue of between $1.505 billion and a $1.525 billion is unchanged. In the first quarter, we made incremental investments in our strategy branding, product development, marketing programs, and sales resources. Additionally, our non-cash stock-based compensation was up year-over-year. As planned and included in our guidance these investments representing approximately $8 million are pulling our adjusted EBITDA and operating income margin percentages down in the first quarter, but will decline as a percentage of revenue and be accretive to our profit margins as we progress through the remainder of the year. Our full-year adjusted EBITDA guidance of between 13.9% and 14.2% and our full-year operating income margin between 8.7% and 8.9% are unchanged. On…

Thanks, Regina. As we open the call, we ask that you limit your questions to two at a time. Operator, you may now open the line.

Thank you. We will now begin the question-and-answer session in today's conference. [Operator Instructions]. Our first question is coming from Mr. Frank Atkins from SunTrust. Frank, your line is now open.

Thank you for taking the questions. Congrats on the hire of Dave Anderson. I wondered if you could talk a little bit about your goals could have been in the near-term as well as the longer-term on the consulting and transformational work side and how that kind of integrates with the full strategy at TTEC?

Hi, this is Ken. Clearly, our goals are to accelerate the growth within CSS and we have full intention or very confident that that's going to take place with the new leadership that's been brought in and additional folks that are being recruited that are rainmakers for that particular business. But I think that the central part of your question is, is that the goals are really very simple and that is, is that every client that we have across the globe yet as per my script is realizing the digital transformation is hard and that omnichannel is extremely hard and the customer orchestration is something that they're trying to figure out. And so consequently our management consulting organization is getting in the middle of assisting our clients with sorting that out, coming up with strategies, helping them design all of the necessary journeys and the micro journeys et cetera, identifying the technology voids, so that there's a proper handoff between our consulting organization and our technology organization. And so those two organizations are working very closely together and as they work together, they're also obviously identifying opportunities for our TTEC Engage business. So I don't know if I’m answering your question and if I'm not feel free to ask additional questions.

That was helpful, thank you. And then my second question is on CTS, you've seen strong demand there. Can you talk a little bit about why you think you're winning more and your positioning within the competitive landscape and just where the areas of demand in CTS are coming from?

So when you look at our CTS business and you look at our embedded client base and then you look at the "Cloud-based competitors" that are out there, there's a) there's only a few of them and b) the few that there are have been very, very focused on what I would call the entry level part of the marketplace. So one to 25 positions, and in many cases, they will talk about that they have some clients that are 500 or 700 positions but for the most part 85%, 90% of their business is in the smaller contact center space. Our focus has been in the enterprise space and we have a reputation and have been involved in that space for decades. And so consequently virtually every client that we do business with is a very large multinational enterprise with thousands of positions, not hundreds of positions. So consequently our credentials across financial services industry, the insurance industry within the financial services industry, the banking industry, the automotive industry, the government like the IRS, like the U.S. Census, like multiple states, et cetera, are all taking advantage of our platform. And so I think that what we have here is significant credibility for providing turnkey CX space strategy where we're either hosting it for our clients in our cloud or where we are deploying it for them in their own cloud and then managing it for them over a long-term contract. This is a business that right now everybody who had traditional contact centers is now having to expand from a voice centric environment to an omnichannel environment which means that they need to add chat, they need to add SMS text, they need to be connected to all the new chat channels whether it be Facebook Messenger, whether…

And not to make it longer, I would just add two things, two additional themes one the business has significant attach rate whether that attach rate comes from an initial implementation and a part of the business and extended, but also as our clients continue to integrate the platforms that we're building with them with additional applications, there's lot more work for us. And then last but not least that there is an important theme in that growth that a lot of it is in our cloud platform which has elements of what I would say multi-tenant and has a significantly different gross margin than the balance of the business and that's why you're seeing the level of uplift in our margin and we expect that to continue.

Okay, great. I appreciate all the color. Thank you very much.

Our next question is coming from Mr. Bill Warmington from Wells Fargo. Bill, your line is now open.

Thank you, good morning everyone. So my first question for you was going to be on the ASC 606 adjustment, the $12.5 million on the revenue line was a lot larger than what we had expected. And so I wanted to ask what segment that was coming from within the business? And then also in terms of how it flowed through you mentioned $6.3 million on the operating income line, the EPS impact ballpark, it looks like about $0.10 benefit in the quarter; is that about right? That was the first question.

Yes. So as we outlined in the script impacted in CMS, it was planned I would say what's off is that the split between Q1 and Q2 is different than what we saw. It is a result of upfront fees and we have a fair amount of upfront fees from our seasonal business as we applied 606 we need to take those fees and push them from 2017 into 2018 and the same thing will happen at a higher level because of the growth we're having in the second half of last year. So it's immaterial to the year and from our EPS point of view, I don't have that number handy but when we talk later I'll confirm that for you or just affirm it.

Okay. And then how much FEMA revenue was there from -- in CMS this quarter?

Yes, so if you remember that FEMA revenue related to storms and late third quarter and fourth quarter of last year. And so you're really looking at a quarter that had no FEMA in Q1 of last year and no FEMA in this quarter.

Got it. Okay. And then a question on the revenue by vertical that's something that you guys had been providing and the fact sheets on the -- on your website and I didn't see it for the fourth quarter and I just wanted to check and see if you guys are going to be providing that for Q1 and I was specifically trying to get out what the telecom vertical exposure was running?

We haven't been -- we haven't been providing it. What I can say I think your question is more pointed towards the headwind in the industry in and around Telco and I can tell you that our Telco concentration is down significantly over the last five or six years and we're probably in around the mid-20s. I will also say that we've been very focused in Telco on working with partners who are value seekers not cost seekers, so we've been selective about the Telcos we work with. And secondly we are focusing our work on what I would say higher ground, higher value work in service to sales and in sales. So not suggesting that we don't have some of that historical Telco, but we have very little of it, the bulk of our portfolio in Telco is more CGS work or in CMS service to sales and also work that we would do in onshore.

Got it. Okay. And then the other thing that caught my attention was that $15.6 million write-off for an equity investment, what was that for?

It was various different investments that were made in various different software that we just thought we weren't realizing the full value of its sector and thought that it was the appropriate thing to do.

Got it. All right. One last one if I could. The -- I just wanted to make sure I got the organic constant currency revenue growth by segment figure probably for that?

We -- yes, why don’t we take that offline, it feels to me more like a model question but happy to go through that with you guys in detail. We gave the numbers very, very, very specifically in our script. My sense is that you can derive it from that but happy to help you do that interpretation when we get into a one-on-one.

Thank you for your questions. That is all the time we have today. This concludes TTEC's first quarter 2018 conference call. You may disconnect at this time.