transcom – telenor · transcom in numbers •30,000 people •70 contact centers, onshore,...
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14 May 2013
Transcom Johan Eriksson, President & CEO
Outstanding
Customer
Experience
Transcom at a glance, current situation and focus areas
1
3
• A global customer experience
specialist...
• ...providing outsourced
customer care, sales,
technical support, and credit
management...
• ...through an extensive
network of contact centers
and work-at-home agents Transcom’s business is to
help make sure that our
clients’ customers form
positive perceptions of their
interactions with them.
”
What is Transcom?
Transcom in numbers
• 30,000 people
• 70 contact centers, onshore, off-shore and near shore
• 27 countries
• Delivering services in 33 languages...
• ...to over 400 clients in various industry verticals
• €605.6 million revenue in 2012
• Market cap: SEK 1046.2 million as at March 28, 2013. Listed on NASDAQ OMX Stockholm
(TWW SDB B and TWW SDB A)
4
We have an extensive global footprint
Home markets
Austria
Netherlands
Slovakia
UK
Belgium
Germany
Norway
Spain
Australia
Near Shore Locations Offshore Locations
Chile*
Peru*
Philippines*
Tunisia
5
Czech Republic
USA
Canada
Italy
Poland
Sweden
Denmark
Portugal
Switzerland
Croatia
* Developing into home/near shore
markets
Canada
Croatia
Estonia
Latvia
Czech Republic
Hungary
Lithuania
Transcom’s organization
6
• Corporate management
- CEO, CFO, CIO, Head of Operations, Head of Global
Sales & Accounts
• Regional management
- North region (25% of revenue)
- Iberia (19% of revenue)
- North America & Asia Pacific (19% of revenue)
- South (16% of revenue)
- Central Europe (10% of revenue)
- Credit Management Services (CMS) in eight European
countries (10% of revenue)
Transcom’s service portfolio
7
• Customer service
Customer experience specialists trained to support best-in-class product, service and brand experiences for our clients’ customers
• Technical support
Tiered support models, from the simplest questions to more complex support scenarios
• Customer retention
Preventing defection and maximizing the lifetime of a customer
• Customer acquisition
Acquiring new customers cost-efficiently, and building strong customer relationships as a basis for future interactions
• Cross- and upselling
Building relationships and identifying customer needs during any type of interaction, and taking appropriate action to satisfy the customer’s need
• Credit management services (CMS)
Early collections, Contingent collections and Legal collections
Recap of our situation and focus areas
8
Situation today and short-term focus
• Transcom’s profitability has decreased
in recent years, but is now improving
• We see positive effects as a result of
restructuring actions
• Continuous focus on underperforming
areas
• Growth in selected areas and efficiency
improvements
• Broadening client base
Market trends
• Growth driven by domestic Asia Pacific
and Latin America markets
• Diversification (geography and
business models)
Going forward - Strategic direction
• Creation of outstanding customer
experiences, while helping clients to
reduce cost and drive growth
• Flexibility is critical
Market trends – Understanding our business
2
Communications & Media and Financial Services account for almost two-thirds of global industry capacity
10
Communications & Media 39%
26%
Financial Services
Retail & Wholesale 8%
Manufacturing 4%
Energy & Utilities 4%
4%
4% Other
Government & Education Healthcare
3% 3%
Travel & Hospitality
Professional services
2% 1%
Professional services
Distribution of outsourced agent positions* by industry vertical, 2011
100% = 1.58 million
* Agent positions in principal markets (reflecting approximately 75-80 percent of total global capacity)
Source: Ovum
Increasing demands for quality: an opportunity for Transcom
11
Historically
Our task: Respond to voice calls
from customers as efficiently as
possible, at the lowest possible cost
Today
Our task has expanded:
Deliver excellent customer experience
New channels and technology platforms
Offer more knowledge due to diversity of
products and greater customer
demands
Generating a much higher degree of
revenue and brand loyalty to clients
Feed back customer intelligence to
clients
-
Market trend: Increased diversification in terms of market presence
• Stagnant growth in mature, Western outsourcing
markets
• Significantly higher levels of growth in selected
developing markets, and rising interaction volumes with
an increasingly sophisticated customer base
• Outsourcers will seek to capitalize on
domestic opportunities in developing markets,
to drive growth and diversify revenue
• Traditional offshore locations also developing
into domestic delivery centers
Expansion in new markets
Industry growth in the coming years will primarily be driven by domestic expansion in Asia Pacific and Latin America
478,5 683,8
420,6
481,3 330,8
466,3 234,5
264,8
60,5
96,5
59
85,9
2011 2016
13
Central & East Europe
Western Europe
Latin America
North America
Asia Pacific
1584
2079 2011-16 CAGR
7.8% 9.8%
7.1%
2.7%
7.4%
* Agent positions in principal markets (reflecting approximately 75-80 percent of total global capacity)
Source: Ovum, Transcom analysis
Middle East & Africa
2.5%
83% of expected growth in Latin
America is domestic, i.e. non-offshore
64% of expected growth in Asia
Pacific is domestic, i.e. non-offshore
Outsourced agent positions* by region, 2011 and 2016e
Thousands
Market trend: Diversification in service channels changes business models
• Social networks are emerging as important customer
service channels
o Although still small in relation to voice, email and chat
• A growing number of people are more comfortable with non-
voice channels, and expect interaction on their terms...
• …As a result, companies are getting serious about social
media in customer service and marketing
14
• Outsourcers need to further develop analytics platforms
and KPIs specific to customer service via social media
• Agents are not only customer service representatives;
they become PR agents and brand ambassadors.
Implications for training and recruiting
• Channel integration will become more important
Increasingly sophisticated non-voice offerings
Growth will be driven by opportunities beyond the traditional voice business
15
25.0 21,4
5,5 17,5
2011 2016e
30.5
38.9
Multichannel, automated
and analytics services
Traditional voice business
Customer management BPO market,
2011 and 2016e
USD billion
Source: Gartner (October 2012)
• The market today comprises mainly
voice-based services…
• … but the situation is expected to
change dramatically in the next few
years with the emergence of
multichannel, automated and analytics
services
The number of work-at-home agents is expected to grow significantly faster than contact center-based agents
0
20000
40000
60000
80000
100000
120000
140000
2011 2012 2013 2014 2015
16
2011–15 CAGR = 18%
Global outsourced home-based agent growth*,
2011–2015*
* Total agents working exclusively from home for 20 or more hours per week
Source: Ovum
• Higher quality of customer
service
• Lower overall cost
• Scheduling flexibility
• Empowers employees
• Resilience in face of external
disruption
• Lower absenteeism and better
staff retention
• Ability to recruit high-quality
employees
Key drivers
3
Our performance in Q1 2013
Revenue in Q1 2013 increased 15.9% compared to Q1 2012
38,1 43,2
25,4 31,6
30,6
33.2
24,6
28.0 14.0
16.7 14,4
17,8
Q1 2012 Q1 201318
Central Europe
South
Iberia
North America
& Asia Pacific
North
Growth
+13.5%
CMS
Net revenue, Q113 vs. Q112
€m
+24.5%
+8.3%
+13.9%
+19.3%
+23.3%
170.5
147.1
• All units contributed positively to the top-line growth
• Main driver is increasing volumes with our installed base clients
• Several new clients added during the year also contributed
• Revenue benefited from €3.8m in compensation received for transferring the right to collect on a Swedish debt portfolio
• France deconsolidated from March 1 (effect in Q113: -€0.9m)
EBIT increased by €5m in Q1 2013 compared to Q1 2012
19
Restructuring
net effects
Volume &
efficiency-
driven
gains
Expansion
investments
Other
EBIT
Q113
EBIT
Q112
1.1
+2.3
+4.3 -1.7
+0.1 6.1
• €3.8 million positive impact in Q113 as a result of compensation that Transcom has
received in exchange for transferring our right to collect on a Swedish debt portfolio
• €6.0 million positive impact in Q113 due to a capital gain following the
deconsolidation of our former French subsidiary, offset by €6.0 million in
restructuring and other non-recurring costs
• EBIT in Q112 included a non-recurring cost of €1.3 million related to site closures in
North America
EBIT margin improvements in North America & APAC, Central Europe, South and CMS, counterbalanced by North and Iberia
20
2013
Jan-Mar
2012
Jan-Mar
EBIT margin
North
Central Europe
South
Iberia
North America & AP
CMS
TOTAL
0.2%
3.4%
4.7%
2.0%
-2.0%
23.4%
3.6%
3.4%
-1.9%
-4.9%
5.5%
-4.8%
6.0%
0.7%
• Volume and efficiency-driven performance improvements
in North America & Asia Pacific, Central Europe and
South
• Deconsolidation of France as well as higher volumes and
efficiency in Italy benefited South
• North: Volume fluctuations against forecast, leading to
overstaffing, and salary increases
• Iberia: Impact of early Easter
• CMS: Compensation received for transferring our right to
collect on Swedish debt portfolio
4
Short-term focus areas to improve profitability
What will it take for Transcom to return to historical margins?
22
Key performance
driver
Trend vs. Q1 2012 Q1 2013 vs. Q1 2012
Average Seat
Utilization ratio
(89% vs. 83%)
Share of revenue
generated offshore
(21% vs. 16%)
Average Efficiency
ratio (billable over
worked hours)
n/a (positive development)
Monthly attrition n/a (unchanged)
Improvements on four KPIs vs. previous year
Continue improving key performance indicators
• Seat utilization
• Efficiency
• Offshore/onshore split
• Attrition
We need to successfully address a number of short- and medium-term operational and financial challenges
23
Stop the losses in France (€1m/month in 2012). Transcom plans to stop financing
the French subsidiary’s loss-making operations beyond March 1, 2013.
Increase onshore seat utilization in North America
Successfully resolve tax claims
Germany – renegotiate labor agreements
Return UK CMS to profitability
Successfully implement action plan to improve operational performance in the North region
Revenue in the North region is typically driven by the time that our agents spend in contact with our clients’ customers
• In the North region, Transcom typically commits to delivering against agreed service
levels for volumes in the range of 80-120 percent of the forecast (non-compliance being
subject to penalties)
• Volumes in Q1 2013 in the North region fell significantly short of forecast call volumes,
leading to a situation of overstaffing
24
Volume forecast
Guaranteed volume
(~80-90% of forecast)
“Extraordinary
circumstances”
(~>120% of forecast)
Actual call volume
Illustrative
Accuracy of volume forecast is key to planning and profitability
25
Scheduled staffing level based on forecast
Staffing need based on actual volume
Invoice sent out
two days later
than forecast
Delayed
campaign
Time
Example
Key business/pricing models used by Transcom
26
Business/pricing
model
Key characteristics
Price per
transaction (e.g.
call or data entry)
• Transcom gets paid for each transaction, e.g. each call
taken
• Time spent per transaction is capped critical to
balance quality and time spent on each transaction
• Accuracy of volume forecast is key to planning and
profitability
Price per minute • Transcom gets paid based on the time the agent
spends with each customer (usually no cap)
• Accuracy of volume forecast is key to planning and
profitability, but less risk than in price per call models
Price per activity • Typically used for back-office tasks/processes
• Time spent per activity is capped important to
balance quality and time spent on each task
• Transcom uses client systems and pre-defined
processes
• Back-office tasks usually take longer to complete than
the typical call
Price per hour • Provides a greater degree of financial predictability
and stability
Currently the most
commonly used
model in the North
region
Alternative models
used by Transcom
Key business models used by Transcom, by region
27
Pricing model North
region
Average for other
regions
Price per transaction (e.g. call)
Price per minute
Price per activity
Price per hour
1-25%
26-50%
51-80%
0%
• Business model mix currently used in the North
region is more exposed to accuracy of volume
forecasts, compared to other regions
• We are currently working to improve the balance
of pricing models used in all regions
5
Going forward – Transcom’s strategic direction
29
Transcom’s brand promise
Outstanding Customer
Experience, driving
revenue and brand
loyalty
”
North America and Asia Pacific • Continue expanding in local markets in Asia Pacific
Latin America • Serving domestic markets and the US,
in addition to Spanish clients
North Europe
Central Europe • Near shore
Short- and medium-term growth opportunities
31
Short-term focus
• Continuous focus on executing turnaround in underperforming areas
• Continued focus on revenue expansion and efficiency improvements
• Increased focus on quality and service delivery to support significant ramp-up of new volumes
Medium-to long-term priorities
• Grow revenue in line with overall market growth in the markets where we choose to compete
• Improve profitability and decrease earnings volatility
- Continuously strengthen operational efficiency
- Optimizing our geographic delivery mix
- Focus on broadening our client base
Summary: key priorities going forward
Thank you! Questions?
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