TTEC Holdings, Inc. Goodwill & Intangibles Disclosure
(6)GOODWILL
Goodwill consisted of the following (in thousands):
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| Effect of |
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December 31, | Acquisitions / | Foreign | December 31, |
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2020 | Adjustments | Impairments | Currency | 2021 |
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TTEC Digital | $ | 128,211 | $ | 378,908 | $ | — | $ | (1,897) | $ | 505,222 | ||||||
TTEC Engage |
| 235,291 |
| — |
| — |
| (1,032) |
| 234,259 | ||||||
Total | $ | 363,502 | $ | 378,908 | $ | — | $ | (2,929) | $ | 739,481 | ||||||
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| Effect of |
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December 31, | Acquisitions / | Foreign | December 31, |
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2019 | Adjustments | Impairments | Currency | 2020 |
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TTEC Digital | $ | 66,275 | $ | 59,341 | $ | — | $ | 2,595 | $ | 128,211 | ||||||
TTEC Engage |
| 235,419 |
| (254) |
| — |
| 126 |
| 235,291 | ||||||
Total | $ | 301,694 | $ | 59,087 | $ | — | $ | 2,721 | $ | 363,502 | ||||||
Impairment
The Company has three reporting units with goodwill and performs a goodwill impairment test on at least an annual basis. The Company conducts its annual goodwill impairment test during the fourth quarter, or more frequently, if indicators of impairment exist.
For the annual goodwill impairment analysis, the Company elected to perform a Step 1 evaluation for all of its reporting units, which includes comparing a reporting unit’s estimated fair value to its carrying value. The determination of fair value requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term growth rates for the businesses, the useful lives over which the cash flows will occur and determination of appropriate discount rates (based in part on the Company’s weighted average cost of capital). Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. As of December 1, 2021, the date of the annual impairment testing, the Company concluded that for all three of the reporting units the fair values were in excess of their respective carrying values and the goodwill for those reporting units was not impaired.
The process of evaluating the fair value of the reporting units is highly subjective and requires significant judgment and estimates as the reporting units operate in a number of markets and geographical regions. The Company used a market approach and an income approach to determine our best estimates of fair value which incorporated the following significant assumptions:
| ● | Revenue projections, including revenue growth during the forecast periods ranging from 2.5% to 28.8%; |
| ● | EBITDA margin projections held relatively flat over the forecast periods ranging from 11.5% to 21.1%; |
| ● | Estimated income tax rates of 26.1% to 26.9%; |
| ● | Estimated capital expenditures ranging from $3.9 million to $81.3 million, and |
| ● | Discount rates ranging from 8.5% to 12.5% based on various inputs, including the risks associated with the specific reporting units, the country of operations as well as their revenue growth and EBITDA margin assumptions. |
During the third quarter 2020, the Company reassessed the reporting units within the TTEC Digital segment based on a reorganization of the reporting structure within this segment. The Company has changed how it views and assesses performance of the components within the segment as the business has evolved and multiple recent acquisitions have been incorporated. After evaluation, The Company will maintain two reporting units within TTEC Digital but these include different components than previously included. Given the change in reporting units, the Company conducted an impairment test before and after the change, and it was concluded that the fair value of the reporting units exceeded the carrying value on both testing dates. With the change in reporting units, the Company performed a relative fair value valuation calculation to allocate the Company’s historical goodwill between the two reporting units based on the shift in components. The resulting reallocation of goodwill was not material.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2021 | Mar 3, 2022 | Showing above |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 4, 2020 | |
| 2018 | Mar 6, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Mar 16, 2017 | |
| 2015 | Mar 14, 2016 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.