Welcome and thank you for standing by. Welcome to TTEC's second quarter 2020 earnings conference call. I would like to remind all parties that you will be on 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 second quarter results for the period ended June 30, 2020. Participating on today's call are Ken Tuchman, our Chairman and Chief Executive Officer, Regina Paolillo, our Chief Financial and Administrative Officer and Jonathan Lerner, our President of TTEC Digital. Yesterday, TTEC issued a press release announcing its financial results. While this call will reflect items discussed within those documents, please complete and review our second quarter 2020 quarterly report. 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 or 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 2019 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 to everyone. I am pleased to report that we delivered record second quarter results, demonstrating the relevance of our CX-as-a-Service platform as we rapidly pivoted to an engage-from-anywhere environment. Our focus on execution, combined with the agility of our team and platform provided seamless continuity to our embedded base and enabled us to win a significant number of new logos. Our revenue growth rate accelerated 15.4% and our non-GAAP operating income grew 96.2% versus the prior year period. Our adjusted EBITDA was an impressive $71 million, up 58.4% year-over-year. Based on our strong first half performance and forward revenue visibility we are reinstating and increasing our original 2020 guidance. Our record bookings of $214 million for the quarter predominantly reflected heightened demand for digitization and virtualization solutions across our client base. Our ability to rapidly enable clients with a frictionless and fully digitized customer experience has never been more critical. We continue to build momentum with our agile operating model and proprietary Humanify Cloud technology platform. Our end-to-end approach to designing, building and operating customer experience-as-a-service is succeeding for increasingly complex, high-end and mission-critical client needs. Here are some recent examples of the essential work we are handling on behalf of our clients. TTEC has helped multiple federal, state and local government agencies with citizen engagement throughout the pandemic. In the Commonwealth of Massachusetts, our TTEC Humanify Cloud stepped in to support the Bureau of Unemployment Insurance, who experienced a sudden spike in daily unemployment claims, moving from a couple hundred to tens of thousands of claims per day. We rapidly deployed our fully virtualized Humanify Cloud solution to provide an on-demand, highly scalable and secure at-home technology, along with a virtualized customer experience team to deliver end-to-end citizen engagement solution. We also partnered with the bureau in identifying new opportunities to improve citizen satisfaction and reduce costs through the expansion of digital channels. We rapidly implemented a new digital conversational messaging platform, so citizens could conveniently access vital info about their unemployment claims process. Our technology allowed the commonwealth to migrate 35% of their voice calls to digital interaction and delivered a 50% cost savings benefit. Operator, I apologize. I may have to take a brief break and pull up my script. I am very sorry.

Ken, I am e-mailing it to you right now.

No, I have it. I apologize. Apparently, my printer chose not to print one page. One of the benefits of doing this from home and last night, I did not check. So I have to find my second page. Okay. Apologies, everybody, for the break. For a premier Fortune 500 health care client, TTEC Engage won a new mandate linked to the mission-critical task of hiring hundreds of registered nurses and other medical professionals to bolster frontline staff battling the pandemic. The scope of the work quickly expanded to take advantage of TTEC Digital capabilities enabled through a nurse line, so patients can engage around the clock 24x7. TTEC registered nurses interact virtually with patients and utilize case-by-case evidence-based assessments to ensure appropriate care. Highlighting the complexity of the work, the nurses not only engage with patients, but also work with pharmacists and attending physicians to ensure clinically safe, cost-effective prescriptions. This is a great example of highly skilled work that has been virtualized as a result of the COVID surge and will remain with TTEC well beyond the pandemic. For Volkswagen Group U.K., TTEC has kicked off a five-year digital transformation project to reinvent the customer experience, moving from current voice-centric systems to a fully contextual and integrated omnichannel experience. With TTEC Digital, Volkswagen will leverage our AI, our machine learning solution to power intelligent virtual assistance and other cognitive engines to enhance VW's customer experience. The fully virtualized end-to-end CX ecosystem will be delivered with TTEC Engage work at home customer experience team. The outcome will be a solution with a significantly higher customer satisfaction and deliver on lower overall cost to serve. The VW solution reflects a mega trend where consumer products are turning into experiences. According to IDC, experience has overtaken price and brand as the…

Thanks Ken. Good morning everyone. I hope you are well and remaining safe and healthy. I will start with some highlights on our record second quarter performance, go through our financial results and then provide some context regarding our 2020 guidance. We had an exceptional quarter. Our strong financial performance is attributable to a handful of factors, including: our deep hands-on experience and tech-rich assets, the strength of our client relationships, enabling us to be a partner of choice in times of crisis and transformation, the speed at which we securely and efficiently shifted to our work from home platform, the rapid design and deployment of COVID-19 offerings and the early actions we took to safeguard our profits, cash flow and liquidity. Turning to our second quarter results. We closed $214 million of new business compared to $122 million in the prior year, a 75.4% increase. We had a healthy balance between business as usual and COVID-19 volumes. Engage grew 118%. Digital included a three-month extension on the large government contract. 67.5% of the booking dollars were in multi-capability deals. We had noteworthy bookings in our financial services, government, automotive, insurance and hyper growth sectors. We added 17 new logos. We signed nine deals, which included our messaging and automation platforms. Our robust pipeline for the remainder of the year is approximately $1.1 billion, providing four times coverage on our forecasted second half bookings. On a GAAP basis, we recorded a 15.4% year-over-year increase in revenue to $453.1 million, of which 9.3% was organic. GAAP operating income was $49 million or 10.8% of revenue compared to 5.8% in the prior year period. GAAP earnings per share was $0.67 in the second quarter, up from $0.25 in the prior year. The remainder of my comments are on a non-GAAP basis, which…

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.

[Operator Instructions]. Speakers, for questions, we have George. George, your line is now open. You may proceed.

I assume I am the George you are referring to. So this is George Sutton. Congrats on the great results. The VoiceFoundry deal looks outstanding from our perspective. Given its attachment to the Amazon and Salesforce ecosystems, along with all the other partnerships that you mentioned, Cisco, LivePerson, Pega, you are obviously getting a lot of touches, given all of these relationships. Can you talk about how that's influencing that pipeline of opportunities?

Hi George. I will begin to answer that question and then I really would like Jonathan Lerner, our President of Digital, to be able to chime in and this will be his first time on our conference calls. What I would just simply tell you is the following. If you look at the OEM today and the smaller ones like the Five9, et cetera, they not only have a direct sales force, but they also have an agent sales force. And although their model is very robust and doing extremely well, we have a very different approach. Our approach is a partner approach. And it's an approach of basically becoming the largest and most valuable and important partner of theirs, where we partner with them and have access to their pipeline of many of their strategic deals. This is how we have gone to market with Cisco. It's been very successful. And it's how we are going to market with Pega. It's been successful. It's how we are going to market with LivePerson and it's how we will continue to go-to-market with Amazon and others. So what I would just simply say to you is that these organizations have dramatically larger sales forces than we have. And therefore, they are out there doing the hard rock mining, while our direct sales force is doing hard rock mining. And we are both coming up with deals. And because of our expertise in CX, we think we have a unique ability to help them close these deals because we bring so much more to the table than just the actual capabilities of integrating this all together. So what I would say to you is that there's a myriad of touch points that are added, a myriad of new channels that are added to bring forth a lot more additional opportunities. And I think you will see over time, as we continue to build out our partner ecosystem that it will give us the best opportunities to have access to the largest deals in the marketplace since that's the part of the market that we are focused on. Jonathan, you want to take it from there?

Sure. Thank you Ken. Good morning George.

Hi Jonathan.

Hi there. VoiceFoundry is consistently the go-to partner for complex and high-touch Amazon Connect engagement. I am sure you have seen that. They have also been highly engaged as a partner with AWS in planning the aligned Salesforce Service Cloud Voice go-to-market effort. So they are right in the thick of educating, aligning and enabling this corral of 3,000 sellers on the AWS side and complement that with now tremendous interest and access to the Salesforce sales team. It pumps up the pipeline tremendously, George. And there are tremendous synergies around how this diversifies our Humanify Cloud solution offering with the industry-leading omnichannel platform alongside, as Ken mentioned, our long-standing and highly successful Cisco partnership. What it also does, as Ken mentioned, is it addresses the reality that consumers are looking for CX-as-a-Service end-to-end system. So we have gone from point solutions to building systems with CX as the sustainable differentiated strategy. And this combination, not only of the VoiceFoundry acquisition in the AWS ecosystem, but layer on Pega and the trend towards automating and augmenting both agents and customers and we see tremendous potential to accelerate and scale and reach a broader audience of customers and satisfy consumers and citizens as a result, George.

Perfect. A quick one for Regina. Just definitionally, when you talk about 4x coverage with your pipeline coverage, can you just give us a sense of what that represents in your mind?

Yes. I mean as I said, we have a total pipeline for Q3 and Q4 of over $1 billion. And if you kind of look towards our view of being able to predictably do between $100 million and $150 million of bookings a quarter, when you look at the second half, right, we have done $300 million in the first. And just again, making sure that we keep the context of Coronavirus pandemic in the room, that creates some different uncertainty than previously. We believe that that pipeline, based on conversion rate should, outside of potential delays because of the pandemic, give us really good coverage. And what I mean by that is that pipeline is growing. It is equally strong in Digital as in Engage. Depending on the quarter, Digital will be anywhere from 35% to 40% of that. Within that, the amount of pipeline even beyond kind of Q3, Q4 is growing and very strong against Webex CCE. So hopefully, that's a little bit more context than whether that conversion happens, in Q3, Q4 or Q1, Q2, it is there and it is real and there are tailwinds like the acceleration of digitization, where I think the logos that we work with, both existing and prospects really have seen what's possible and they seem what's possible because in that surge of work is not humanly possible to get the number of humans in place in time to cover all these engagements. And so we saw a pretty rapid movement from voice to more digitized options like messaging.

Perfect. Ken, I just wanted to note the irony of talking about the most fast and forward of technologies and you get impacted by an old line printer.

Well, it's 100% my fault. I should have done some quality assurance last night. It was late and I just assumed that the printer spit it out and it missed page four. So I apologize to everybody.

Very good. Thank you.

Thank you so much. Our next question is coming from the line of James. Your line is now open.

Hi. Good morning. You guys did a fantastic job, obviously, responding in a very dynamic environment and taking advantage of the opportunities, but probably at least as importantly, helping your customers get to what they need to do for theirs. I wanted to ask, as you are looking at kind of that pacing of new business and the like, obviously, some big response in the June quarter, how are you or what are you being told in terms of urgency and that kind of thing from your customers as the pipeline is developing? And are there things that you need to do from a hiring perspective or other resources to be able to match what the pipeline is asking of you, at least what it could be for the time being?

Thanks for your question. That's not the easiest question in the world to answer. So you did not throw me a softball, only because it's all over the board. We have clients that are trying to stabilize their own business and are rapidly shifting from a person-to-person business to a virtualized business and we are there to help them and ramping them up and getting them so that they can operate in this new modality. We have clients that have built their business digitally from day one and their business is growing by leaps and bounds and they are capitalizing off of the fact that they were always virtual. So you can think of whether it be streaming companies, gaming companies, in-home exercise companies, et cetera, those end mill companies, all those companies are growing very rapidly right now and seizing the moment and capitalizing off of it. And then you have more institutional-based companies who are trying to figure out what's around the corner and are frankly having difficulty in expressing what their long term future volumes are going to be. That said, those companies, in many cases, are also seeing surge volumes because of whether it's unemployment issues or insurance issues, et cetera. So I would love to give you a pat answer. What I would just simply tell you is that we are seeing a mixture of opportunities. We are seeing what I would call pandemic opportunities. We are seeing companies repositioning themselves opportunities and we are seeing people thinking about post-pandemic opportunities. I mean when you just think about every aspect of society has been impacted, think of what's going on with universities and how they are going to bring people back to schools and we are getting involved with that. Or how they are going…

But let me just back it up a little bit with some quantification. So I think when all is said and done or something like maybe what we would have said at first, 25% to 30% of our bookings for the year and COVID-19-related, whether that's surge for the industries that have spiked in volumes or it's for essential work. The reality of it is, we believe that at least 60% of that definitely moves into next year. And a piece of that just becomes ongoing for the reasons I can't just talk about. But more importantly, to your question, at this point, when we look at, right, our highly probable pipeline for the second half, in Digital, 97% of that is non-COVID-19, right. It's business as usual. And it's about 82% in Engage. And so we see a dramatic change from the first half into the second half, which I think is definitely a sign from our clients, that they are starting to pick up their pencils on what I would say more generic transformation, improvement initiatives in and around CX.

Great. Well, thanks for the color there, Ken and Regina. Regina, quick follow-up questions for you. First, it looked like DSOs ticked up a little bit in the quarter. Is that just the linearity in the quarter and business being reflected on DSO?

No. It's a function of a 20% increase in Engage. As you know, as companies who have high growth, they also have increased working capital needs. And so it's really purely when I analyze time to bill, when I analyze, right, the kind of days sales outstanding or average days sales outstanding, it's really a function of the tick-up in our revenue. And it also affected our cash flow, which you would have thought was higher given the growth rate, but in reality, you will see it spike up in the second half. It's just really a timing.

Got it. Okay. That makes sense. I appreciate that. And then lastly, how is attrition trending? And is that benefiting your margins at all? And should we expect some variance on that as the world normalizes?

Yes. I mean our attrition is definitely up. Depending on the month, you are talking about seven to 10 percentage points of improvement. Our absenteeism is very low. Two metrics that, as you know, when they spike, can eat at your margins. I would say that if everything was equal and we come out of COVID-19 and unemployment goes back to a reasonable level, of course, that will change. But we are not waiting for that. We have multiple stokes in the fire working on that. And then I would say we clearly are seeing a very different mix, geographic mix and importantly, a brick-and-mortar versus at-home mix and we do not believe that we will be back to probably anything less than 50% on the work at home. Work at home has a lot of financial advantages. The margins are higher for a variety of reasons. The TA is more efficient. You can go anywhere in the world, if you will. Training is more efficient because you have less churn. So back to your point, people who work at home, we see less turnover in general outside the pandemic. And then obviously, you have the facilities costs, the real estate costs and that includes not only the operating costs, but importantly, that capital deployment that comes back in depreciation and interest costs. So we feel that we are doing the things to keep that improvement through a variety of channels.

That's great. Thanks guys.

Thank you.

Thank you so much. For our next question, we have Mike Latimore of Northland Capital Markets. Your line is now open.

Thanks. Yes. Congratulations, impressive across the board there. In terms of VoiceFoundry, can you give a little more color on just how much activity they have had with Amazon Connect, maybe number of customers or seats that they deployed and then like typical deal sizes you are looking at there?

Yes. I will --

No, go ahead. I was just going to say, hi Mike, some of that we can answer, some of that I think we feel is proprietary. So I will let Regina and Jonathan click in on that.

Yes. I was actually just going to pivot to Jonathan to do a high level on that. Sorry, Ken.

Go ahead, Jonathan.

Thank you guys. So complementary to what we do, we see their ASP, their average selling price, is very similar to ours. They traditionally, about 90% of their implementations involve integrations to, for instance, CRM and Salesforce. So from a fit, they are very similar. They are the leading independent partner to Amazon Connect. And as I have said in my earlier question's response, they are looked to as the roll-up-the-sleeves partner and they provide that white glove support much like we do and have built a significant brand inside of the Amazon ecosystem to deliver on-time and on-budget deployments of Connect and beyond into the full suite of AWS. So it's an excellent accretive acquisition. It's a great complement to what we do and what our customer driven inorganic activity has been and will be in the future. And it really complements what the market is demanding, right. And that's not only choice, but cloud-first choice.

Great. And I noticed Salesforce Service Cloud now has Amazon as basically the preferred out-of-the-box contact center. I guess I think it just came out last month. Is that something that you think sort of accelerates opportunities there?

100%. We have been working on this deal for almost a year. And this is something that we have been very well aware of and very focused on. And we think that, again, for the large enterprise-class customers, we think that this will open up a whole new pipeline. Again, we already have people from VoiceFoundry that are literally training large portions of the sales force, training salespeople. And so we do absolutely believe that this will be a good opportunity for adding to our pipeline.

Yes. They do bring a rich set of clients with, let's say, 15 to 20, what I would say extra-large enterprise clients, in particular in insurance, financial services, e-commerce and a couple of others. So we do see a huge opportunity through their relationships to cross-sell into their client base. And then importantly, this is a very important asset for us to provide optionality to our Engage-embedded base as well as our Digital-embedded base.

I am piling on here, guys, but not to mention their presence in EMEA and ASEAN and their strength globally. So this is, again, extending our reach not only in the Americas, their reputation for that roll-up-the-sleeves, white-glove delivery extends into EMEA, ASEAN, especially in Australia and New Zealand. Thanks.

Thanks very much.

And then on the Engage business, how much of the sort of incremental demand you are seeing comes from companies with sort of internal call centers? Everybody has to go home, these companies are just not technologically savvy enough to handle kind of remote agents and so they may be now outsourcing more to you guys. I mean how much of that dynamic is sort of occurring right now?

Well, first of all, you should know that on the Digital side, we are helping those clients with their at-home solutions. So clients of ours who are struggling, the first thing we are saying to them is, if you like we can put you on a platform and we will help you do this yourself. So we think that that is an important aspect of huge opportunities as well as future opportunities. As far as how much of it is clients with captives, I think there's just, when you look at the overall outsourcing marketplace, not according to TTEC, but according to the third-party analysts, they claim that only 25% to 30% of the marketplace is actually outsourced. Even if you think, that number to me feels a little on the low side. I think it's maybe more like 35%. But regardless, there is a tremendous amount of work that is yet to be outsourced. And I think that this, in itself, has been a huge wake-up call because so many of these clients have really, they were caught flat-footed. And even though they had all kinds of disaster preparedness plans, they weren't prepared for this. And so I think you are going to see over time that the mixture of internal versus external is going to change and I believe you are going to see it increase pretty significantly, that more and more clients are going to realize this isn't their core competency. They don't have all the agility and they don't have the fault tolerance capabilities that we have built in globally to our systems and technology. And so I think you are going to see just overall, not only in this business, some of which is temporary shifts, I think that more and more are rethinking how much of this business they want to permanently place in an outsourced situation. And we are definitely having those conversations as we speak right now with many clients about their interest in increasing the amount of business and decreasing the amount of captive. Let alone, we are more cost effective. And I don't want to sound like I am bragging. But in most cases, we significantly outperform our clients' captives. And so at some point, I think many of our clients are going to realize that if we are operating at a lower overall cost to serve, we are delivering a higher quality, it makes more sense for them to continue to distribute more business to us as a partner as well as others.

Yes. Great. And just last one. Ken, did you say that the bookings strength has continued in July? Is that what you said?

Yes. Our booking strength across both -- excuse me, I am sorry, bookings or pipeline? I apologize.

Whatever your timing was, I thought you said something about July.

Yes. We had a comment in Ken's script that indicated strength in July. And it was a strong month.

Okay. Great. Thank you.

We have ways to go, but a strong month.

Right. Thanks a lot.

Thank you.

Thank you. For our next question, we have Bhavan Suri of William Blair. You may begin.

Hi everyone. And let me echo my congrats. It was a great quarter. Given who's on the phone, I would love to just touch on the Digital segment for a second. Better margin, more sustainable revenue and then sort of when you think about sort of it growing 15% to 25% and the Cloud business growing really fast, I guess the question I have is that you have got essentially lower sales versus competitors and you are relying on partnerships, why not sort of say, okay, we might invest a little more in sales, kind of own the customer relationship as opposed to partners owning them and drive growth that way? So maybe why not start more sales people to drive that growth? Just trying to understand the philosophy that you guys have on that side given sort of the traction we are seeing?

Yes. Let me just kind of add a data endpoint and then maybe hand it to Ken or Jonathan. But I think you will see if you kind of, the SG&A second half to first half is up about $2 million. And that's specifically in Digital. So to your point, we are very much stepping up the investment in the go-to-market. Ken or Jonathan?

So yes, we are stepping up the investment in go-to-market. One of the things that is probably we do to a fault is we are a conservative company. So unlike some of the other tech companies that, it's growth at any cost, we appreciate the fact that we are a public company and that we need to deliver consistently on the promise of being a profitable company, et cetera. And we don't have the luxury of pivoting, like other tech companies, where you are expecting us to basically lose money or breakeven just so that we can put up very high growth numbers. What we are doing is kind of riding that tight rope, so to speak, of balancing the investment and the return on investment and then also being able to deliver the profitability, the EPS, the cash flow, et cetera. What I would say to you is that, first, understand that Jonathan has a direct sales force and he also gets to capitalize off of the TTEC Engage sales force as well that's in the market every single day. And as it relates to partners, yes, in some cases they are bringing us business and in some cases there is margin that they are benefiting off of, et cetera. But what I would say to you is that at the end of the day, we still think that it helps us reduce our overall SG&A. And I am actually going to take it a step further and tell you that not only do we want to be the prime and we want to also work with prime, but we also want to be the subpartner. And what the marketplace doesn't really know and I can't really say who they all are, but let me just say this to…

I will echo. Predictable and profitable revenue sales growth is what our commitment is to the shareholders and to you, Ken and Regina, in the Digital business. But additionally, if you peel back to our recent acquisition of VoiceFoundry, for instance, we are expanding our reach both directly and indirectly, right. And I will also comment that in Q2, we also signed up a global SI as a means to distribute and work together in addressing citizens' requirements for contact tracking and tracing. So our reach, as we have been given the rope, is to both manage the business profitably, but look for the opportunities you described, right and do so by expanding our reach through partnerships, through direct adds to our sales force and through our aggressive growth with VoiceFoundry, expanding another dozen people to represent our brands, both indirectly and directly. So I think we are very much accomplishing that and taking advantage of scaling the volume and the hot market in CX right now.

Got you. That's very helpful. Just one quick one and I will actually going to end here and maybe for Regina here. How are you guys monetizing customer rep calls vis-à-vis digital interactions? If you look at that math, it just moved to 35% digital interaction. I guess, how the monetization works? And is that sort of why gross margin is kind of flat? Just trying to understand those two components. Thank you.

Yes. I wouldn't say that the improvement in margin we get by virtue of putting our revenue at risk on an outcome basis is the reason why Digital revenues. We are more and more pricing to outcomes, making commitments on the deflection rates as well as conversion rates. So much of our messaging and automation or in general, engagements now are including that. But what you are seeing in this quarter doesn't have enough of that to be the cause to profit. That said, at a 24.2% EBITDA, probably sooner than we had anticipated, we believe that we have got, again, multiple stokes in the fire on the things that we are going to do. Not necessarily cost-cutting or restructuring our costs, but importantly extracting the value that we are bringing to our clients in terms of our topline, albeit some of it may be fixed fees and then some of it tied to the outcomes that we drive for our clients.

Got it. Helpful. Thank you guys. I appreciate it and very nice job there.

Thank you very much.

Thank you. For our next question, we have Bryan Bergin of Cowen. You may proceed.

Hi. Yes, it's actually Jared Levine on for Bryan. Congrats on the strong results. In terms of bookings, can you kind of help us parse the mix between Digital and Engage within bookings? And then were there any notable large deals within the bookings this quarter?

Yes. From a quarter point of view, of our $214 million, just under $45 million of that is Digital and the balance is Engage. It's a typical mix. And in both of these businesses, yes, we had some very significant bookings. Jonathan, I don't know if you want to cover a couple of noteworthy bookings on the Digital side.

Sure. Well, let me begin, Jared, with just the strength of our Humanify platform solutions for the public sector, mainly in the federal space. We have got really the Cisco ecosystem markets only FedRAMP and IL4 pending certified solution on the market today. So we had great growth in strength, expanding in the public sector in all three of federal, state and DoD. So that was the highlight. We also, as Regina commented, we expanded our global footprint with a top insurance company in the quarter. And what I would say is that that success continues into the third quarter as well, contributing to not only a nice start, but a linear start to month one. And we see that continuing around our unique solutions and how we have actually orchestrated a lot of those solutions for an increasing mix of the global brands that rely on us to power better experiences at lower overall total cost of ownership.

Yes. I mean I think the other thing about bookings is, we had a new logo in auto, a big deal there. We had two new insurance companies come into the fold. We had three new public sectors now getting into state, five new hypergrowth. We did, as Jonathan said, we closed 10 government deals in the quarter. And very interesting, if you look at auto, right, auto, year-to-date we have grown our order bookings 4.2% and we have grown our retail 2.9%. So even the verticals where we felt we were maybe going to be negative this year are positive. And as I said in my script, I think one of the things that we are most proud of is the nine deals that we did in Digital relative to automation solutions. And just the percentage of our bookings, 67.5% of our bookings had multi-segment capability in them. So I would say those are some of the most noteworthy things from a bookings point of view in addition to the volume.

Okay. Great. And then in terms of Engage, looking at the guide for 4Q, I believe it's implied to contract at a low single digit rate. Is that a bit of an element of conservatism or maybe an expectation of kind of a drop in kind of surge related activity? Kind of if you could just provide some color there?

Yes. And if you go back to my script and I gave some context before I jump into the guidance, there's a paragraph there in and around that that we are admittedly conservative in the fourth quarter, pending some insights on Q3 bookings, depending what happens to the HEROES or the HEALS Act and just pending basic macroeconomic relative to our seasonal volumes. So we feel that we did take for the fourth quarter. We obviously have great visibility to the third quarter. And then for the fourth quarter, we wanted to lean in and give guidance because we are very confident in the numbers that we have put out. But just caution that that fourth quarter does look to come down primarily because of our conservatism. Our management plan would be different than that, but we want it to be cautionary.

And I think it's really prudent for us to do that because even though we are watching our pipeline grow, et cetera, I just think that when you re-listen to all the other public companies that are reporting and I am not speaking about even in our space and we listen to the uncertainty of all the different CEOs of the Fortune 500 companies, we just think it's the right thing to do at this point instead of acting reckless and just simply saying, it doesn't matter what happens, et cetera. There is, as we all know, a lot of variables: a pandemic that is unknown as to when we will have a vaccine and when enough people will actually be vaccinated that it will make a difference and how effective that vaccine will be. We will have a major election coming up, et cetera. And so we just feel that there's tremendous amount of uncertainty. That said, we are going to do the very best we can to capitalize off of the environment that we are in and we are very confident that we will deliver on the numbers that we are putting forward. We just don't want to get ahead of our skis and we think it's time to be prudent and conservative.

Okay. Great. Congrats on the results again.

Thank you so much.

Thank you. For our next question, we have Jason Kupferberg of Bank of America. You may begin. Q - Unidentified Analyst Hi guys. Good morning. This is Cathy [ph] on for Jason. I will just ask a quick like two-part question. So first, I wanted to know, overall it kind of seems like utilization ticked down a little bit. Just how are you guys thinking about balancing the growing margins with kind of a lower utilization, maybe continuing in the back half of the year and continuing investments in the workforce, especially on the Digital side? And then the second part of my question is just an update on how you are seeing hiring, especially in some of the key geographies that you are looking to maybe maintain or develop a more bigger presence in? Thank you.

So how about if I answer the last part of your question. And then Regina or Jonathan can answer the first part of your question. So as it relates to hiring, we couldn't feel better about our hiring, not just because the environment is such with a lot of highly unemployed people, but we are really excited about the culture that we have created and just the momentum that we have off of the culture that we have created. I can tell you that in doing this for 38 years, we have never ever had more talent seeking us that are gainfully employed in the highest level of executive positions looking to come to work for us. The realization that customer experience is the go-forward differentiator of all brands is now here. We no longer have to proselytize it. And consequently, the amount of middle management all the way up to senior executive leadership that is seeking us out and looking to work for us is unprecedented and we couldn't be happier. And on the frontline, it goes without saying we have ample access to labor across the globe in all markets. And then I just want to second something that Regina said, which is we believe that a high percentage of our business will stay at home. And so consequently, we have always been successful because we have been in the at-home business for well over a decade. We have always been successful in attracting we feel are the best and the brightest to our at-home environment. So regardless of how much the economy, how tight the economy gets, how successful it gets as it relates to a recovery, et cetera, we are not in any way, shape or form concerned about our ability to hire frontline as it…

Yes. I mean I think this is an Engage question, not a Digital question. So just a couple of things. First for clarification, our utilization of our capacity is relevant to our seats and this is about our associate seats in Engage. And it is down. Just further clarification that Digital certainly has space, but it is a light footprint and will get even lighter as most other companies with more, even professional services is doing. On the Engage side, it is down. As I said, it's down because as we kind of built our capacity, the only thing we have built this year are two sites that are dedicated sites for a major financial services company we have and a new auto company that we got at the end of next year. That is now ramped and very successfully ramped. So the seat utilization really right now is all about net new, new business from new logos or existing clients that are predominantly picking a work from home option. Please understand that, while a good 85% of our global workforce, including the associates, are at home, that those seats are paid for by our clients and are being reserved for them as they request. So Ken talked about the fact that we jumped into action. In fact, we have probably 10 sites that we are now affecting improved reduction of all or some. But the reality of it is, our clients are still in the process of making their decisions on their mix between brick-and-mortar and at-home. And while they are doing it, make no mistake, their pricing has to continue to include the reservation of those seats. And then I think Ken talked about the most important, which is we are very, very active with our clients and internally. And in fact, as usual, we have developed some thought leadership and a thought leading workshop to actually work through with our clients' TTEC's point of view on where they should be. So very collaborative sessions going on now to format in a positive way for the clients and us.

Got it. Thanks for the color, guys.

Thank you.

Thank you so much. For our next question, we have Josh Vogel of Sidoti & Company. Your line is now open.

Hi. Good morning. Thank you for taking my questions. Pretty impressive results, all things considered. I apologize I was bouncing back and forth between calls, so I apologize if any of this is redundant. But could you quantify the amount of surge or temporary work you picked up in Q2 as well as what's baked into your second half guidance? And maybe just some commentary around what the margin was on that business? Thank you.

Yes. So I think I will go back to a comment that I made earlier. And the way we would articulate that is, we believe that when all is said and done, about 25% to 30% of the bookings that we have that were inspired, if you will, by COVID-19, are full year bookings. And we also believe that we will keep that on a go-forward basis, importantly, through next year, at about a 60% rate. When you look at our kind of COVID-inspired bookings, a good amount of that is surge work. And our view is, it's surge work for human that's related to human behavior, eating more at home, doing more things at home, consuming in-home types of things. So we don't believe that those behaviors are going to change on a dime and that we get the benefit of new logos in states that we are working with, where we laid in messaging. And there's just no way that they are going to do unemployment without that into the future. And so the way we would call it now, we can update this, is when all is said and done, because I also talked about the fact that when you look at the first half versus second half, the second half pipeline has maybe 82% of it is non-COVID on Engage and 97% is non-COVID on Digital. So when all is said and done and like I said, 25% to 30%, but I think it's important when you think about that, that it's just not a Q2. It is in Q3, it is in Q4 and we are seeing clients move. Somebody asked the question earlier. We are seeing clients that we helped in tech actually move and now say, as part of my strategy, I need to start outsourcing on the service side.

Yes. If I could just add one other thing and that is that we have historically, on the Digital side, been a big-deal company. And as you can imagine, a lot of the deals that Jonathan's group are shaping and forming are deals that, in many cases, take nine months, 12 months, et cetera, to shape and form, et cetera, because they are very large, they are multi-country, they are, in some cases, 5,000, 10,000-plus seats, et cetera. Those types of deals, which were really not included in this quarter, are very active still and they have only been temporarily put on hold as we help those clients with what they need for their emergency work of creating at-home capabilities, et cetera. So there is a very significant pipeline of what I would call transformative digital deals that are going to take place. And depending upon the company, they are either already making plans on when they are going to start that transformation whether it be in the fourth quarter or first quarter or there are companies that are saying, we are absolutely going ahead with this, however we want to wait until there's a vaccine out. And even if people haven't been fully vaccinated, at least we know we are on our way to recovery. So as you can imagine, in the travel industry, any massive project has been put on hold for obvious reasons, along with other industries that are there. So not only are we short-term capitalizing off of the work that needs to be done to help these companies stabilize their business from a virtual standpoint, but there's still the deals that are in the pipeline that we have been working for, in some cases, the last year, last year-and-a-half year, et cetera, that simply are being delayed that we are very excited about because we are confident that they will still go through. It's just simply a matter of will they go through in fourth quarter? Will they go through in first quarter, et cetera? So I just want to put that out there.

That's helpful. And as a whole, understanding that a lot of these deals or all the deals are put on hold. But when you think about clients making that decision in April or May, are you seeing any pockets where some of those programs are starting to move ahead where they feel comfortable to move ahead? Or is it just not happening?

Jonathan, you want to go ahead with that?

Yes. Thanks, Ken. Yes, that abundance of caution and the rise of multi-looks and iterations of business cases benefits us. We have a very disciplined approach of working with customers. And what we are seeing is back burnered initiatives definitely moving to front burner. And it's a transformation from buying point solutions to talking with TTEC to help orchestrate outcome. So we are feeling that benefit. There are several mid and lower level pipeline opportunities in those eight figure transformative, we call them XXL deals, that are maturing nicely through the pipeline. And as Ken said, still TBD on releasing the capital and the OpEx in the environment, but whether that's Q4, Q1, we are working very collaboratively with larger buying suites of people, right. Larger influencers, casual influencers around CX, multi-disciplined, often led by CFO now and our discipline in guiding to outcomes with very disciplined business cases behind them is really propelling and helping us lead those discussions.

Thank you for that. And lastly, when we think about the successful and rapid pivot to an at-home or virtual model and this new world that will materialize in coming months and quarters, do you think there's an opportunity with regard to the real estate footprint to pare that down?

Well, I am sorry. Can you just repeat that?

Yes. So Ken, the question is, which was asked a little bit earlier as well, right. It's what are our plans, just given the pivot to at-home, given we think that there will be much more at-home in the future, what are our plans relative to reshaping the real estate portfolio?

Yes. So we are well underway on that. We started in early January, as I said previously and we are taking down real estate as prudently and as fast as we can. And I feel very, very comfortable that we are rationalizing at a rapid rate. And that we feel very comfortable that we are well prepared for the shift to more at-home business. So what I would just simply say to you is we started that process in early January. We have already exited multiple leases and we will continue to do so in certain geographies where we feel like we might be a bit top-heavy, et cetera. Our goal right now during this pandemic, while we have been handling all the work and is growing and expanding, we have simultaneously have a team that is optimizing our cost structures all across the globe on multiple fronts, not just real estate, but tremendous amounts being invested in automation and other areas to make us dramatically more efficient as well as to be able to drive a better quality set of outcomes.

All right. Well, thank you for taking my questions.

Thanks a bunch.

Thanks Josh. Bye, bye.

Thank you for your questions. And that's all the time we have today. I will turn the call over to Paul Miller.

Yes. That concludes our call today. Thanks, everyone, for joining.

Thank you.

Thank you. This concludes TTEC's second quarter 2020 earnings conference call. You may disconnect at this time.