This discussion should be read in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report and the consolidated financial statements and notes in theSykes Enterprises, Incorporated ("SYKES," "our," "we" or "us") Annual Report on Form 10-K for the year endedDecember 31, 2019 , as filed with the Securities and Exchange Commission ("SEC"). Our discussion and analysis may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates, forecasts, and projections about SYKES, our beliefs, and assumptions made by us, including our belief that our operations have not been materially impacted by theApril 2020 cyber incident, as discussed in Note 18, Subsequent Event, in our Form 10-Q for the three months endedMarch 31, 2020 , as filed with theSEC . In addition, we may make other written or oral statements, which constitute forward-looking statements, from time to time. Words such as "believe," "estimate," "project," "expect," "intend," "may," "anticipate," "plan," "seek," variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives, or goals also are forward-looking statements. Further, statements about the effects of the novel coronavirus ("COVID-19") pandemic on our business, operations, financial performance and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our clients, third parties and us. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including those discussed below and elsewhere in this report. Our actual results may differ materially from what is expressed or forecasted in such forward-looking statements, and undue reliance should not be placed on such statements. All forward-looking statements are made as of the date hereof, and we undertake no obligation to update any such forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to: (i) the impact of economic recessions in theU.S. and other parts of the world, (ii) fluctuations in global business conditions and the global economy, (iii) currency fluctuations, (iv) the timing of significant orders for our products and services, (v) variations in the terms and the elements of services offered under our standardized contract including those for future bundled service offerings, (vi) changes in applicable accounting principles or interpretations of such principles, (vii) difficulties or delays in implementing our bundled service offerings, (viii) failure to achieve sales, marketing and other objectives, (ix) construction delays of new or expansion of existing customer engagement centers, (x) delays in our ability to develop new products and services and market acceptance of new products and services, (xi) rapid technological change, (xii) loss or addition of significant clients, (xiii) political and country-specific risks inherent in conducting business abroad, (xiv) our ability to attract and retain key management personnel, (xv) our ability to continue the growth of our support service revenues through additional technical and customer engagement centers, (xvi) our ability to further penetrate into vertically integrated markets, (xvii) our ability to expand our global presence through strategic alliances and selective acquisitions, (xviii) our ability to continue to establish a competitive advantage through sophisticated technological capabilities, (xix) the ultimate outcome of any lawsuits, (xx) our ability to recognize deferred revenue through delivery of products or satisfactory performance of services, (xxi) our dependence on the demand for outsourcing, (xxii) risk of interruption of technical and customer engagement center operations due to such factors as fire, earthquakes, inclement weather and other disasters, power failures, telecommunication failures, unauthorized intrusions, computer viruses and other emergencies, (xxiii) the existence of substantial competition, (xxiv) the early termination of contracts by clients, (xxv) the ability to obtain and maintain grants and other incentives (tax or otherwise), (xxvi) the potential of cost savings/synergies associated with acquisitions not being realized, or not being realized within the anticipated time period, (xxvii) risks related to the integration of the acquisitions and the impairment of any related goodwill, and (xxviii) other risk factors that are identified in our most recent Annual Report on Form 10-K for the year endedDecember 31, 2019 , including factors identified under the headings "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Executive Summary
We are a leading provider of multichannel demand generation and global comprehensive customer engagement services. We provide differentiated full lifecycle customer engagement solutions and services primarily to Global 2000 companies and their end customers, principally in the financial services, communications, technology,
29 -------------------------------------------------------------------------------- transportation & leisure, healthcare and other industries. Our differentiated full lifecycle management services platform effectively engages customers at every touchpoint within the customer journey, including digital marketing and acquisition, sales expertise, customer service, technical support and retention, many of which can be optimized by a suite of robotic process automation ("RPA") and artificial intelligence ("AI") solutions. We serve our clients through two geographic operating regions: theAmericas (United States ,Canada ,Latin America ,Australia and the Asia Pacific Rim) and EMEA (Europe , theMiddle East andAfrica ). OurAmericas and EMEA regions primarily provide customer engagement solutions and services with an emphasis on inbound multichannel demand generation, customer service and technical support to our clients' customers. These services, which represented 98.9% and 97.4% of consolidated revenues during the three months endedJune 30, 2020 and 2019, respectively, and 98.7% and 97.8% during the six months endedJune 30, 2020 and 2019, respectively, are delivered through multiple communication channels including phone, e-mail, social media, text messaging, chat and digital self-service. We also provide various enterprise support services inthe United States ("U.S.") that include services for our clients' internal support operations, from technical staffing services to outsourced corporate help desk services. InEurope , we also provide fulfillment services, which include order processing, payment processing, inventory control, product delivery and product returns handling. Additionally, through our acquisition of RPA providerSymphony Ventures Ltd ("Symphony") coupled with our investment in AI throughXSell Technologies, Inc. ("XSell"), we also provide a suite of solutions such as consulting, implementation, hosting and managed services that optimizes our differentiated full lifecycle management services platform. Our complete service offering helps our clients acquire, retain and increase the lifetime value of their customer relationships. We have developed an extensive global reach with customer engagement centers across six continents, includingNorth America ,South America ,Europe ,Asia ,Australia andAfrica . We deliver cost-effective solutions that generate demand, enhance the customer service experience, promote stronger brand loyalty, and bring about high levels of performance and profitability.
Recent Developments
Coronavirus
OnMarch 11, 2020 , theWorld Health Organization characterized COVID-19 a pandemic. The global nature, rapid spread and continually evolving response by governments throughout the world to combat the spread has had a negative impact on the global economy. Certain of our customer engagement centers have been impacted by local government actions restricting facility access or are operating at lower capacity utilization levels to achieve social distancing. We are committed to the health and safety of our workforce and ensuring business continuity for the brands we serve. In response, we have shifted as many employees as possible to a work-at-home model. As of the middle ofJuly 2020 , approximately 95% of agents assigned to our brick-and-mortar facilities are working at our centers or from home across the world with 70% having transitioned to a work-at-home model. Approximately 5% of our agents lack the technical infrastructure to work from home. Our operations inthe Philippines ,El Salvador andMexico have been most impacted by the governmental restrictions. We continue to closely monitor the prevalence of COVID-19 in the communities where our centers are located as well as guidance from public health authorities, federal and local agencies and municipalities. We will work with employees and clients to transition agents back to our centers based on that guidance, but risk further disruption to our business if COVID-19 returns or governments reimpose restrictions.
Exit Plans
During the first quarter of 2019, we initiated a restructuring plan to simplify and refine our operating model in theU.S. (the "Americas 2019 Exit Plan"), in part to improve agent attrition and absenteeism. TheAmericas 2019 Exit Plan included the closure of customer engagement centers, the consolidation of leased space in various locations in theU.S. and management reorganization. We finalized the actions under theAmericas 2019 Exit Plan as ofSeptember 30, 2019 .
During the second quarter of 2018, we initiated a restructuring plan to manage and optimize capacity utilization, which included the closure of customer engagement centers and the consolidation of leased space in various locations in theU.S. andCanada (the "Americas 2018 Exit Plan"). We finalized the site closures under theAmericas 2018 Exit Plan as ofDecember 2018 , which resulted in a decrease of approximately 5,000 seats. 30 --------------------------------------------------------------------------------
See Note 4, Costs Associated with Exit or Disposal Activities, in the accompanying "Notes to Condensed Consolidated Financial Statements" for further information.
Results of Operations The following table sets forth, for the periods indicated, the amounts presented in the accompanying Condensed Consolidated Statements of Operations as well as the change between the respective periods: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2020 2019 $ Change 2020 2019 $ Change Revenues$ 416,833 $ 389,006 $ 27,827 $ 827,999 $ 791,931 $ 36,068 Operating expenses: Direct salaries and related costs 268,433 252,161 16,272 535,378 513,889 21,489 General and administrative 102,664 104,282 (1,618 ) 205,911 208,962 (3,051 ) Depreciation, net 12,630 13,052 (422 ) 25,091 26,949 (1,858 ) Amortization of intangibles 4,093 4,127 (34 ) 8,212 8,413 (201 ) Impairment of long-lived assets 1,800 129 1,671 1,800 1,711 89
Total operating expenses 389,620 373,751 15,869 776,392 759,924 16,468 Income from operations 27,213 15,255 11,958 51,607 32,007 19,600
Other income (expense): Interest income 165 192 (27 ) 428 377 51 Interest (expense) (560 ) (1,179 ) 619 (1,280 ) (2,357 ) 1,077 Other income (expense), net 1,797 (533 ) 2,330 (2,996 ) 77 (3,073 ) Total other income (expense), net 1,402 (1,520 ) 2,922
(3,848 ) (1,903 ) (1,945 )
Income before income taxes 28,615 13,735 14,880 47,759 30,104 17,655 Income taxes 6,385 2,466 3,919 11,611 7,148 4,463 Net income$ 22,230 $ 11,269 $ 10,961 $ 36,148 $ 22,956 $ 13,192 Three Months EndedJune 30, 2020 Compared to Three Months EndedJune 30, 2019 Revenues Three Months Ended June 30, 2020 2019 (in thousands) Amount % of Revenues Amount % of Revenues $ Change Americas$ 339,272 81.4%$ 310,307 79.8%$ 28,965 EMEA 77,561 18.6% 78,676 20.2% (1,115 ) Other - 0.0% 23 0.0% (23 ) Consolidated$ 416,833 100.0%$ 389,006 100.0%$ 27,827
Consolidated revenues increased
The increase inAmericas' revenues was due to higher volumes from existing clients of$40.6 million and new clients of$11.4 million , partially offset by end-of-life client programs of$21.5 million primarily in the communications vertical and an unfavorable foreign currency impact of$1.6 million . Revenues from our offshore operations represented 42.6% ofAmericas' revenues in 2020, compared to 43.1% for the comparable period in 2019. The decrease in EMEA's revenues was due to end-of-life client programs of$2.6 million primarily in the communications and other verticals and an unfavorable foreign currency impact of$2.4 million , partially offset by new clients of$2.5 million and higher volumes from existing clients of$1.4 million . On a consolidated basis, we had 48,600 brick-and-mortar seats as ofJune 30, 2020 , an increase of 1,200 seats from the comparable period in 2019. Virtually all of this additional capacity was demand driven and was contracted at the start of the year. On a segment basis, 40,400 seats were located in theAmericas , an increase of 700 seats from the comparable period in 2019, and 8,200 seats were located in EMEA, an increase of 500 seats from the comparable period in 2019. 31
-------------------------------------------------------------------------------- On a consolidated basis, the capacity utilization rate was 73%, compared to 71% in the comparable period in 2019, primarily driven by higher demand coupled with our ability to rapidly mobilize our brick-and-mortar agents to the home agent platform globally to service that demand. As of the middle ofJuly 2020 , approximately 70% of agentswho typically work in our brick-and-mortar facilities have transitioned to work at home, 25% are working in our facilities and the remaining 5% of agents are at home but idle. The capacity utilization rate for theAmericas in 2020 was 73%, compared to 70% in the comparable period in 2019, with the increase driven by higher demand. The capacity utilization rate for EMEA in 2020 was 69%, compared to 74% in the comparable period in 2019, with the decrease due to the timing of the capacity additions contracted at the start of the year. We strive to attain a capacity utilization rate of 85% at each of our locations. Capacity utilization is measured by taking the number of agents and indirect support headcount and dividing it by the number of seats provisioned for utilization. Capacity utilization is a critical metric for us as it is used as an input to the pricing, revenue and margin drivers of our business as well as capital allocation.
Direct Salaries and Related Costs
Three Months Ended June 30, 2020 2019 Change in % of (in thousands) Amount % of Revenues Amount % of Revenues $ Change Revenues Americas$ 214,606 63.3%$ 197,879 63.8%$ 16,727 -0.5% EMEA 53,827 69.4% 54,282 69.0% (455 ) 0.4%
Consolidated
-0.4%
The increase of
The decrease inAmericas' direct salaries and related costs, as a percentage of revenues, was primarily attributable to lower recruiting costs of 0.5%, lower auto tow claim costs of 0.4%, lower customer-acquisition advertising costs of 0.3%, lower communications costs of 0.3% and lower other costs of 0.2%, partially offset by higher travel costs of 0.7% and higher compensation costs of 0.5%. The increase in EMEA's direct salaries and related costs, as a percentage of revenues, was primarily attributable to higher compensation costs of 2.3% driven by a decrease in consultant productivity at Symphony resulting principally from project delays due to COVID-19 in the current period and higher software and maintenance costs of 0.2%, partially offset by lower software purchased for resale of 1.1% due primarily to the aforementioned project delays, lower travel costs of 0.6%, lower auto and parking costs of 0.2% and lower other costs of 0.2%. General and Administrative Three Months Ended June 30, 2020 2019 Change in % of (in thousands) Amount % of Revenues Amount % of Revenues $ Change Revenues Americas$ 69,018 20.3%$ 71,768 23.1%$ (2,750 ) -2.8% EMEA 17,026 22.0% 17,266 21.9% (240 ) 0.1% Other 16,620 - 15,248 - 1,372 -
Consolidated
The decrease of
The decrease inAmericas' general and administrative expenses, as a percentage of revenues, was primarily attributable to lower facility-related costs of 1.2% was primarily attributable to COVID-19 restrictions related to the on-site facility occupancy rates as well as fewer sites in operation, lower compensation costs of 0.5%, lower travel costs of 0.4%, lower software and maintenance costs of 0.3% and lower other costs of 0.4%. The increase in EMEA's general and administrative expenses, as a percentage of revenues, was primarily attributable to higher compensation costs of 1.0% and higher software and maintenance costs of 0.4%, partially offset by lower travel costs of 0.7%, lower legal and professional fees of 0.3%, lower technology equipment and maintenance costs of 0.2% and lower other costs of 0.1%. 32 -------------------------------------------------------------------------------- The increase in Other general and administrative expenses, which includes corporate and other costs, was primarily attributable to higher compensation costs of$1.9 million and higher software and maintenance costs of$0.2 million , partially offset by lower travel costs of$0.4 million and lower other costs of$0.3 million .
Depreciation, Amortization and Impairment of Long-Lived Assets
Three Months Ended June 30, 2020 2019 Change in % of (in thousands) Amount % of Revenues Amount % of Revenues $ Change Revenues Depreciation, net: Americas$ 10,088 3.0%$ 10,659 3.4%$ (571 ) -0.4% EMEA 1,818 2.3% 1,628 2.1% 190 0.2% Other 724 - 765 - (41 ) - Consolidated$ 12,630 3.0%$ 13,052 3.4%$ (422 ) -0.4% Amortization of intangibles: Americas$ 3,281 1.0%$ 3,288 1.1%$ (7 ) -0.1% EMEA 812 1.0% 839 1.1% (27 ) -0.1% Other - - - - - - Consolidated$ 4,093 1.0%$ 4,127 1.1%$ (34 ) -0.1% Impairment of long-lived assets: Americas$ 1,800 0.5%$ 129 0.0%$ 1,671 0.5% EMEA - 0.0% - 0.0% - 0.0% Other - - - - - - Consolidated$ 1,800 0.4%$ 129 0.0%$ 1,671 0.4%
The decrease in depreciation was primarily due to the impact since the prior period of certain fully depreciated fixed assets, partially offset by new depreciable fixed assets placed into service supporting site expansions and infrastructure upgrades.
Amortization remained consistent with the comparable period.
See Note 5, Fair Value, in the accompanying "Notes to Condensed Consolidated Financial Statements" for further information on the impairment of long-lived assets. Other Income (Expense) Three Months Ended June 30, (in thousands) 2020 2019 $ Change Interest income $ 165 $ 192$ (27 ) Interest (expense) $ (560 )$ (1,179 ) $ 619 Other income (expense), net: Foreign currency transaction gains (losses) $ 48 $ (361 )$ 409 Gains (losses) on derivative instruments not designated as hedges (164 ) (432 ) 268 Gains (losses) on investments held in rabbi trust 1,816 426 1,390 Other miscellaneous income (expense) 97 (166 ) 263
Total other income (expense), net
Interest income remained consistent with the comparable period.
The decrease in interest (expense) was primarily due to lower average outstanding borrowings and lower average interest rates than in the comparable period.
33 -------------------------------------------------------------------------------- The change in other income (expense), net, was primarily due to an increase in value of investments held in rabbi trust and an increase in foreign exchange gains over the comparable period.
See Note 8, Investments Held in Rabbi Trust, in the accompanying "Notes to Condensed Consolidated Financial Statements" for further information.
Income Taxes Three Months Ended June 30, (in thousands) 2020 2019 $ Change Income before income taxes$ 28,615 $ 13,735 $ 14,880 Income taxes 6,385 2,466 3,919 % Change Effective tax rate 22.3 % 18.0 % 4.3 % The increase in the effective tax rate in 2020 compared to 2019 was primarily due to an election made during the three months endedJune 30, 2019 to step up tax basis in a foreign subsidiary which resulted in a$0.6 million discrete tax benefit. The increase was also affected by shifts in earnings among the various jurisdictions in which we operate. Several additional factors, none of which are individually material, also impacted the rate.
Six Months Ended
Revenues Six Months Ended June 30, 2020 2019 (in thousands) Amount % of Revenues Amount % of Revenues $ Change Americas$ 672,198 81.2%$ 635,084 80.2%$ 37,114 EMEA 155,794 18.8% 156,804 19.8% (1,010 ) Other 7 0.0% 43 0.0% (36 ) Consolidated$ 827,999 100.0%$ 791,931 100.0%$ 36,068
Consolidated revenues increased
The increase inAmericas' revenues was due to higher volumes from existing clients of$66.4 million and new clients of$18.7 million , partially offset by end-of-life client programs of$46.2 million primarily in the communications vertical and an unfavorable foreign currency impact of$1.8 million . Revenues from our offshore operations represented 42.7% ofAmericas' revenues in 2020, compared to 41.5% for the comparable period in 2019. The decrease in EMEA's revenues was due to end-of-life client programs of$5.4 million primarily in the communications and other verticals and an unfavorable foreign currency impact of$5.0 million , partially offset by higher volumes from existing clients of$5.6 million and new clients of$3.8 million .
Direct Salaries and Related Costs
Six Months Ended June 30, 2020 2019 Change in % of (in thousands) Amount % of Revenues Amount % of Revenues $ Change Revenues Americas$ 427,234 63.6%$ 405,478 63.8%$ 21,756 -0.2% EMEA 108,144 69.4% 108,411 69.1% (267 ) 0.3%
Consolidated
-0.2%
The increase of
The decrease inAmericas' direct salaries and related costs, as a percentage of revenues, was primarily attributable to lower customer-acquisition advertising costs of 0.5%, lower auto tow claim costs of 0.4%, lower communications 34 -------------------------------------------------------------------------------- costs of 0.3% and lower other costs of 0.2%, partially offset by was primarily attributable to higher compensation costs of 0.8% and higher travel costs of 0.4%. The increase in EMEA's direct salaries and related costs, as a percentage of revenues, was primarily attributable to higher compensation costs of 1.7% driven by a decrease in consultant productivity at Symphony resulting principally from project delays due to COVID-19 in the current period and higher other costs of 0.3%, partially offset by lower software purchased for resale of 0.8%, lower communications costs of 0.3%, lower rebillable costs of 0.3% and lower travel costs of 0.3%. General and Administrative Six Months Ended June 30, 2020 2019 Change in % of (in thousands) Amount % of Revenues Amount % of Revenues $ Change Revenues Americas$ 140,218 20.9%$ 142,351 22.4%$ (2,133 ) -1.5% EMEA 35,224 22.6% 37,300 23.8% (2,076 ) -1.2% Other 30,469 - 29,311 - 1,158 -
Consolidated
The decrease of
The decrease inAmericas' general and administrative expenses, as a percentage of revenues, was primarily attributable to lower facility-related costs of 0.7%, lower merger and integration costs of 0.3%, lower compensation costs of 0.3% and lower travel costs of 0.2%. The decrease in EMEA's general and administrative expenses, as a percentage of revenues, was primarily attributable to lower merger and integration costs of 1.0%, lower travel costs of 0.4%, lower legal and professional fees of 0.3% and lower technology equipment and maintenance costs of 0.2%, partially offset by higher software and maintenance costs of 0.3%, higher compensation costs of 0.2% and higher other costs of 0.2%. The increase in Other general and administrative expenses, which includes corporate and other costs, was primarily attributable to higher merger and integration costs of$1.3 million , higher software and maintenance costs of$0.4 million , higher charitable contributions of$0.2 million and higher other costs of$0.1 million , partially offset by lower compensation costs of$0.4 million and lower travel costs of$0.4 million .
Depreciation, Amortization and Impairment of Long-Lived Assets
Six Months Ended June 30, 2020 2019 Change in % of (in thousands) Amount % of Revenues Amount % of Revenues $ Change Revenues Depreciation, net: Americas$ 20,121 3.0%$ 22,166 3.5%$ (2,045 ) -0.5% EMEA 3,523 2.3% 3,254 2.1% 269 0.2% Other 1,447 - 1,529 - (82 ) - Consolidated$ 25,091 3.0%$ 26,949 3.4%$ (1,858 ) -0.4% Amortization of intangibles: Americas$ 6,567 1.0%$ 6,726 1.1%$ (159 ) -0.1% EMEA 1,645 1.1% 1,687 1.1% (42 ) 0.0% Other - - - - - - Consolidated$ 8,212 1.0%$ 8,413 1.1%$ (201 ) -0.1% Impairment of long-lived assets: Americas$ 1,800 0.3%$ 1,711 0.3%$ 89 0.0% EMEA - 0.0% - 0.0% - 0.0% Other - - - - - - Consolidated$ 1,800 0.2%$ 1,711 0.2%$ 89 0.0% 35
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The decrease in depreciation was primarily due to the impact since the prior period of certain fully depreciated fixed assets, partially offset by new depreciable fixed assets placed into service supporting site expansions and infrastructure upgrades.
The decrease in amortization was primarily due to the impact since the prior period of certain fully amortized intangible assets.
See Note 5, Fair Value, in the accompanying "Notes to Condensed Consolidated Financial Statements" for further information on the impairment of long-lived assets. Other Income (Expense) Six Months Ended June 30, (in thousands) 2020 2019 $ Change Interest income $ 428 $ 377$ 51 Interest (expense)$ (1,280 ) $ (2,357 ) $ 1,077 Other income (expense), net: Foreign currency transaction gains (losses)$ (1,558 ) $ (537 )$ (1,021 ) Gains (losses) on derivative instruments not designated as hedges (410 ) (465 ) 55 Gains (losses) on investments held in rabbi trust (241 ) 1,606 (1,847 ) Other miscellaneous income (expense) (787 )
(527 ) (260 )
Total other income (expense), net
Interest income remained consistent with the comparable period.
The decrease in interest (expense) was primarily due to lower average outstanding borrowings and lower average interest rates than in the comparable period.
The change in other income (expense), net, was primarily due to a decline in value of investments held in rabbi trust and an increase in foreign exchange losses over the comparable period.
See Note 8, Investments Held in Rabbi Trust, in the accompanying "Notes to Condensed Consolidated Financial Statements" for further information.
Income Taxes Six Months Ended June 30, (in thousands) 2020 2019 $ Change Income before income taxes$ 47,759 $ 30,104 $ 17,655 Income taxes 11,611 7,148 4,463 % Change Effective tax rate 24.3 % 23.7 % 0.6 % The increase in the effective tax rate in 2020 compared to 2019 was primarily due to an election made during the three months endedJune 30, 2019 to step up tax basis in a foreign subsidiary which resulted in a$0.6 million discrete tax benefit, partially offset by shifts in earnings among the various jurisdictions in which we operate. Several additional factors, none of which are individually material, also impacted the rate. 36 --------------------------------------------------------------------------------
Client Concentration
Our top ten clients accounted for 45.9% and 42.9% of our consolidated revenues in the three months endedJune 30, 2020 and 2019, respectively, and 45.3% and 42.5% of our consolidated revenues in the six months endedJune 30, 2020 and 2019, respectively. Total revenues by segment from our largest client in each of the periods, which was in the financial services vertical for the three and six months endedJune 30, 2020 and the communications vertical for the three and six months endedJune 30, 2019 , were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Amount % of Revenues Amount % of Revenues Amount % of Revenues Amount % of Revenues Americas$ 32,123 9.5%$ 28,238 9.1%$ 61,726 9.2%$ 58,863 9.3% EMEA - 0.0% 52 0.1% - 0.0% 89 0.1%$ 32,123 7.7%$ 28,290 7.3%$ 61,726 7.5%$ 58,952 7.4% Total revenues by segment of our clients that each individually represents 10% or greater of that segment's revenues in each of the periods were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Amount % of Revenues Amount % of Revenues Amount % of Revenues Amount % of Revenues Americas $ - 0.0% $ - 0.0% $ - 0.0% $ - 0.0% EMEA 17,683 22.8% 10,103 12.8% 35,156 22.6% 20,036 12.8%$ 17,683 4.2%$ 10,103 2.6%$ 35,156 4.2%$ 20,036 2.5% Business Outlook OnMarch 11, 2020 , theWorld Health Organization characterized COVID-19 as a pandemic. The global nature, rapid spread and continually evolving response by governments throughout the world to combat the spread has had a negative impact on the global economy. Certain of our customer engagement centers have been impacted by local government actions restricting facility access or are operating at lower capacity utilization levels. We are committed to the health and safety of our workforce and ensuring business continuity for the brands we serve. In response, we have shifted as many employees as possible to a work-at-home model. As of the middle ofJuly 2020 , approximately 95% of agents assigned to our brick-and-mortar facilities are working at our centers or from home across the world with 70% having transitioned to a work-at-home model. Approximately 5% of our agents lack the technical infrastructure to work from home. Our operations inthe Philippines ,El Salvador andMexico have been most impacted by the governmental restrictions. We continue to monitor the progression of the pandemic and may take additional actions in response to government orders or that we believe are in the best interests of our employees, clients and shareholders. Due to the unprecedented nature of this pandemic, forward-looking guidance has been suspended.
Liquidity and Capital Resources
Our primary sources of liquidity are typically cash flows generated by operating activities and from available borrowings under our revolving credit facility. We utilize these capital resources to make capital expenditures associated primarily with our customer engagement services, invest in technology applications and tools to further develop our service offerings and for working capital and other general corporate purposes, including the repurchase of our common stock in the open market and to fund acquisitions. In future periods, we intend similar uses of these funds. Our Board of Directors authorized us to purchase up to 10.0 million shares of our outstanding common stock (the "2011 Share Repurchase Program") onAugust 18, 2011 , as amended onMarch 16, 2016 . A total of 7.8 million shares have been repurchased under the 2011 Share Repurchase Program since inception. The shares are purchased, from time to time, through open market purchases or in negotiated private transactions, and the purchases are based on factors, including but not limited to, the stock price, management discretion and general market conditions. The 2011 Share Repurchase Program has no expiration date. 37 -------------------------------------------------------------------------------- During the six months endedJune 30, 2020 , cash increased$86.6 million from operating activities,$23.0 million of debt proceeds and$0.6 million of other cash inflows, partially offset by$47.0 million used to repay long-term debt,$35.9 million used to repurchase common stock,$22.9 million used for capital expenditures and$1.1 million to repurchase common stock for tax withholding on equity awards, resulting in a$3.3 million increase in available cash, cash equivalents and restricted cash (including the unfavorable effects of foreign currency exchange rates on cash, cash equivalents and restricted cash of$1.8 million ). Net cash flows provided by operating activities for the six months endedJune 30, 2020 were$86.6 million , compared to$56.3 million for the comparable period in 2019. The$30.3 million increase in net cash flows from operating activities was due to a net increase of$15.9 million in cash flows from assets and liabilities, a$13.2 million increase in net income and a$1.2 million increase in non-cash reconciling items such as net unrealized foreign currency transaction gains (losses), bad debt expense, net unrealized gains (losses) and premiums on financial instruments and depreciation. The$15.9 million increase in 2020 from 2019 in cash flows from assets and liabilities was principally a result of a$7.5 million change in net taxes payable, a$5.0 million decrease in other assets and a$3.1 million increase in other liabilities. The$7.5 million increase in net taxes payable was primarily due to extensions of payment deadlines granted by several jurisdictions. The$5.0 million decrease in other assets was primarily due to a$3.4 million decrease in deferred charges and other assets driven by an increase in the prior year in long-term accounts receivable and deferred finance charges associated with the 2019 Credit Agreement. The$3.1 million increase in the change in other liabilities was primarily due to a$5.5 million increase in other long-term liabilities driven by the deferral of our portion of social security taxes as permitted by the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, partially offset by a$1.5 million decrease related to the timing of accrued expenses and current liabilities and a$1.4 million decrease related to the timing of accounts payable. Capital expenditures, which are generally funded by cash generated from operating activities, available cash balances and borrowings available under our credit facilities, were$22.9 million for the six months endedJune 30, 2020 , compared to$16.4 million for the comparable period in 2019, an increase of$6.5 million . OnFebruary 14, 2019 , we entered into a$500 million senior revolving credit facility (the "2019 Credit Agreement") with a group of lenders,KeyBank National Association , as Administrative Agent, SwingLine Lender and Issuing Lender ("KeyBank"), the lenders named therein, andKeyBanc Capital Markets Inc. as Lead Arranger and Sole Book Runner. The 2019 Credit Agreement replaced our previous$440 million revolving credit facility datedMay 12, 2015 (the "2015 Credit Agreement"), which agreement was terminated simultaneous with entering into the 2019 Credit Agreement. The 2019 Credit Agreement is subject to certain borrowing limitations and includes certain customary financial and restrictive covenants. We are not currently aware of any inability of our lenders to provide access to the full commitment of funds that exist under the 2019 Credit Agreement, if necessary. However, there can be no assurance that such facility will be available to us, even though it is a binding commitment of the financial institutions. The 2019 Credit Agreement will mature onFebruary 14, 2024 . As ofJune 30, 2020 , we were in compliance with all loan requirements of the 2019 Credit Agreement and had$49.0 million of outstanding borrowings under this facility. For additional discussion of our credit agreements, see Note 18, Borrowings in the "Notes to the Consolidated Financial Statements" section of our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Our credit agreements had an average daily utilization of$71.4 million and$90.0 million during the three months endedJune 30, 2020 and 2019, respectively, and$67.6 million and$92.8 million during the six months endedJune 30, 2020 and 2019, respectively. During the three months endedJune 30, 2020 and 2019, the related interest expense, including the commitment fee and excluding the amortization of deferred loan fees, was$0.4 million and$0.9 million , respectively, which represented weighted average interest rates of 2.3% and 4.1%, respectively. During the six months endedJune 30, 2020 and 2019, the related interest expense, including the commitment fee and excluding the amortization of deferred loan fees, was$1.0 million and$1.9 million , respectively, which represented weighted average interest rates of 3.0% and 4.1%, respectively.
We repaid
We are currently under audit in several tax jurisdictions and believe we have adequate reserves related to all matters pertaining to these audits. Should we experience unfavorable outcomes from these audits, such outcomes could have a significant impact on our financial condition, results of operations and cash flows.
As part of the
38 -------------------------------------------------------------------------------- installments on or aroundJuly 1, 2019 , 2020 and 2021. We paid the first installment of AUD 6.0 million ($4.2 million ) inJuly 2019 . We accelerated the 2021 installment of the retention bonus and paid AUD 8.0 million ($5.6 million ) inJuly 2020 , which represented both the 2020 and 2021 installments. No further amounts are due. Also, as part of the Symphony acquisition onNovember 1, 2018 , a portion of the purchase price, with an acquisition date present value ofGBP 7.9 million ($10.0 million ), was deferred and is payable in equal installments over three years, on or aroundNovember 1, 2019 , 2020 and 2021. We paid the first installment ofGBP 2.7 million ($3.3 million ) inOctober 2019 . As ofJune 30, 2020 , we had$129.1 million in cash and cash equivalents, of which approximately 81.9%, or$105.6 million , was held in international operations. Most of these funds will not be subject to additional taxes inthe United States if repatriated; however, certain jurisdictions may impose additional withholding taxes. There are circumstances where we may be unable to repatriate some of the cash and cash equivalents held by our international operations due to country restrictions. We expect our current cash levels and cash flows from operations to be adequate to meet our anticipated working capital needs, including investment activities such as capital expenditures and debt repayment for the next twelve months and the foreseeable future. However, from time to time, we may borrow funds under our 2019 Credit Agreement as a result of the timing of our working capital needs, including capital expenditures. Our cash resources could also be affected by various risks and uncertainties, including but not limited to, the risks described in our Annual Report on Form 10-K for the year endedDecember 31, 2019 .
Off-Balance Sheet Arrangements
As ofJune 30, 2020 , we did not have any material commercial commitments, including guarantees or standby repurchase obligations, or any relationships with unconsolidated entities or financial partnerships, including entities often referred to as structured finance or special purpose entities or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Contractual Obligations
There have not been any material changes to the outstanding contractual
obligations outside of the ordinary course of business from the disclosure in
our Annual Report on Form 10-K for the year ended
Critical Accounting Estimates
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 for a discussion of our critical accounting estimates, including a description of the methods and key assumptions used and how the key assumptions were determined.
New Accounting Standards Not Yet Adopted
See Note 1, Overview and Basis of Presentation, in the accompanying "Notes to Condensed Consolidated Financial Statements" for information related to recent accounting pronouncements.
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