Q4 2019 Presentation
February 14, 2020
Today’s presenter
Jonas Dahlberg President & Chief Executive Officer Transcom since June 2019 Previous roles: • CFO, Transcom Holding AB (2019-2020) • CFO, Sweco Group (2012 – 2019) • President, Sweco Russia (2008 – 2012) • Associate Principal, McKinsey (1998 – 2008)
2
Agenda
• Q4 highlights • Company and strategy • Financial performance • Summary
Q4 highlights
• Continued positive trajectory on key financials – EBITDA, E/O items, operating cash flow, leverage
• Strong inflow of new business in Q4 and early 2020 – Mitigating INPS contract ended November 30
• Continued expansion in near/offshore – Ramping up additional capacity in Zagreb (Croatia) and new site in Tunis (Tunisia), sites in Cairo (Egypt) and Davao (Philippines) under development
• Gearing up for next phase for Transcom – Profitable growth through client focus and operational excellence, supported by strong leadership and culture
4
Company and strategy
Utilities BFSI Gov & Health-
care
Media Travel
What we do: outsourced customer relationship management
We are a global customer care provider offering future proof customer facing
concepts delivered by our global team of local specialists…
…supporting our clients’ digital agenda by combining our core services with
leading digital capabilities and tools…
…delivering services in 33 languages to international brands in various
industries
Core services
Conversational commerce
Digital channels
Robotic Process
Automation
Interaction Analytics
Chatbots
Gamification
Call Chat Email
27,000 customer experience specialists
serving customers via
Services & utilities
Commerce & Logistics
Auto- motive
Logistics Retail/ e-commerce
IT/Tech White- goods
Telco & Cable
Social media Messaging Telco Cable
6
Where we do it: Western Europe and Global English markets – Through international delivery
7
Europe Global English
Markets • Delivery across
Europe • 33 languages
• US • UK • Philippines
Delivery model • On-shore in 9
countries • Near- /off-shore
from 8 countries
• Off-shore from the Philippines
• Work-at-home in the US
Share of total revenue
2019FY
66% 34% Europe
Global English
Site locations Serviced geographies
Solid foundation as basis for profitable growth
8
1. Building the foundation
2. Profitable growth
• Reduction of 30 MEUR OH and support cost
• Attractive segments and delivery locations
• Developing strong digital offering
• Client focus • Operational Excellence • Culture & Leadership
Double digit margin and solid organic growth
From 5 to 9% EBITDA 2015-2019
Closing the books on PPP – 33 MEUR savings achieved in OH and administration
9
2017 Target
11.0
2018 2019
21.0
33.0 33.1
5.0
6.0 10.8
8.4
1.8
16.0
12.2
4.8
12.3
10.6
10.2
English speaking region Europe Central functions
Headcount reductions in support functions, transfer to Shared service centers, and procurement
Headcount reduction through delayering, ratio optimization, and transfer of services to Shared service centers
Headcount reduction through delayering, ratio optimization, and transfer of services to Shared service centers
Actual run-rate
Gross of investments, ca. EUR 1.5m in 2018 and ca. EUR 1.0m in 2019. Some Central functions savings shifted to Europe and English
EUR m
Transcom is growing in attractive customer segments
10 Note: FY 2017 is consolidated at Issuer level, adjusted for EO items and full year adjusted for the acquisitions of TWW group and Xzakt group. On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. 2019 includes Latin America until Feb 2019 (0.9M Sales and -0.1M EBITA). Adj. EBITA% per industry includes allocation of unallocated/group-wide expenses.
Developments during the quarter
5.1%
6.4%
10.7%
EBITA 2019
Revenue by industry segment, EUR m
99 130 155
214 206
208
271 208 179
2017 2018 2019
Telco & Cable
Service & Utilities
Commerce & Logistics
584 544 541
• Ramping up Danske bank • New utility client • Exiting INPS
• Further optimization of Telco portfolio
• Adding several new small and mid-sized e-com clients
Transcom is shifting towards profitable delivery locations
11
Revenue by type of delivery (%), EUR m Q4 2019 • Ramping up additional capacity in Zagreb
and new site in Tunis • Developing new sites in Cairo (Egypt) and
Davao (Philippines) – Ready for clients end Q1
Q3 2019
• New site in Pasig, Philippines • New site in Elblag, Poland
Q2 2019 • Acquisition of ASA Informationsdienste
Q1 2019
• Divesting operations in Chile • New site in Novi Sad, Serbia • New site in Zagreb, Croatia
Nearshore 544
2017 2018 2019
Offshore
Onshore
584 541
Note: FY 2017 is consolidated at Issuer level and full year adjusted for the acquisitions of TWW group and Xzakt group. On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. 2019 includes Latin America until Feb 2019 ((0.9M Sales and -0.1M EBITA).
8%
19%
2%
EBITA 2019
74% 71% 65%
18% 20% 25%
8% 9% 10%
Next phase is about profitable growth – Achieving double digit margins and solid organic growth
12
Client focus Operational excellence Culture and leadership • Leadership for people performance
• Clear, decentralized accountability and lean OH
• Culture of client and customer
centricity
• Operational performance management
• Best practices for productivity, recruiting, retention and workplace presence
• Client-by-client improvement approach
• Strengthen market presence in North America
• Accelerate sales in Europe
• Develop and protect existing clients
Financial performance
Q4 – Solid improvement of financials
• Profitability – Q4 EBITDA ex EO • 16.6 MEUR, +1.0 MEUR • 11.7%, +0.8pp
• Significantly lower EO items: Q4 -0.5 MEUR (-3.6)
• Improved operating cash flow: Q4 21.2 MEUR (3.5)
• Net debt/EBITDA 4.2x (5.3) 1)
14 1) Net debt / EBITDA 2019 calculated in line with the definition of Leverage Ratio in the terms and conditions of the outstanding senior secured notes based on an EBITDA of EUR 47.4m (not including non-recurring items in excess of 15% of EBITDA) and Net Interest Bearing Debt of EUR 198.3m (excluding Subordinated Loans and pension liabilities)
Continued trajectory of improved profitability
15 1) 2014 – 2016 figures represents consolidated TWW accounts, 2017-2018 is consolidated at Issuer level, and adjusted for the acquisitions of TWW and Xzakt group. On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. 2019 is fully including recording of IFRS 16 Leases, no retroactive calculation done for comparison periods.
2) M&A amortisation not included in D&A.
627 586 584
544 541
32 31 38 39 49
5,2% 5,3% 6,5% 7,2%
9,0%
2015A 2016A 2017A 2018A 2019A
EURm
Sales Adj. EBITDA Adj. EBITDA %
(11.6%)
Sales and EBITDA development 1) Summary of historical P&L 1)
EURm 2015 2016 2017 2018 2019 2018 Q4 2019 Q4
Sales 626.5 586.1 584.0 543.6 541.5 143.0 141.8
Cost of sales -492.7 -458.7 -456.3 -419.3 -399.3 -105.8 -101.1
D&A2) -8,9 -8.0 -8.2 -7.7 -10.9 -2.1 -4.1
D&A leasing -0.4 -0.1
Gross profit 125.0 119.4 119.5 116.7 130.9 35.1 36.5
% margin 19.9% 20.4% 20.5% 21.5% 24.2% 24.5% 25.8%
SG&A -101.6 -96.2 -89.5 -85.1 -79.3 -21.7 -20.5
D&A leasing -12.5 -3.3
Adj. EBITA 1) 23.4 23.1 30.0 31.6 39.0 13.5 12.7
% margin 3.7% 3.9% 5.1% 5.8% 7.2% 9.4% 9.0%
Adj. EBITDA 1) 62.8 20.2
% margin 11.6% 14.3%
Adj. EBITDA excl. IFRS 164) 32.3 31.2 38.2 39.4 48.8 15.6 16.6
% margin 5.2% 5.3% 6.5% 7.2% 9.0% 10.9% 11.7%
E/O items trending downwards
Non recurring items, EUR millions LTM By quarter
Q4 non recurring items totaled EUR -0.5 million
• Of which EUR -0.3 million operational
• Of which EUR -0.2 million transactional
E/O continued to decline and totaled EUR 8.4 million for 2019
Note: FY 2017 is consolidated at Issuer level and full year adjusted for the acquisitions of TWW group and Xzakt group. 16
0
5
10
15
20
25
30
35
40
45
50
16.6
2.2
37.3
7.2
Q2 2017
7.0 6.0
Q1 2017
9.5
Q3 2017
20.0
3.5
Q4 2017
23.8
Q1 2018
34.5
20.6
Q4 2018
4.3
Q2 2018
34.4
Q3 2018
3.6 4.0
32.5
Q2 2019
Q1 2019
15.0
3.1 2.2
Q3 2019
0.8
11.5
0.5
8.4
Q4 2019
Improved operating cash flow
• 2019 operational cash flow improved to EUR 51.4 million (2.5)
• Q4 operating cash flow improved to EUR 21.2 million (3.5)
• Q4 working capital improved EUR 8.4 million (-0.8)
17
EURm 2018 2019 2018
Q4 2019
Q4
Profit/loss before tax -32,226 2,143 2,636 4,496
Adjustments for non cash items 30,050 33,429 -752 5,717
Net financial items 19,674 17,565 3,861 4,973
Income taxes paid -2,288 -7,456 -1,513 -2,382
Changes in working capital -12,716 5,684 -774 8,417
Operating cash flow 2,495 51,366 3,459 21,220
Investments -8,803 -16,522 -2,162 -6,738
Acquisitions/disposals of business, net of cash -34,033 -1,101 -1,046 -
Other 1,048 -560 791 -476
Cash flow from investing activities -41,788 -18,183 -2,416 -7,213
Cash flow form financing activities 34,072 -32,055 -4,450 -12,165
Cash flow for the period -5,222 1,127 -3,407 1,841
Q4 working capital in line with normal variations
Note: 2014–2016 figures represents consolidated TWW accounts, 2017-2018 figures are consolidated at Issuer level. Q2 2017 and onwards includes the acquisition of Xzakt group. Q3 2018 and onwards, includes the acquisition of Awesome group.
Non recurring items, EUR millions
18
-120-100
-80-60-40-20
020406080
100120140160
6,5
8,5
3,5
0,0
3,0
0,5
7,5 7,0
1,5
5,0
1,0
8,0
5,5
2,0
6,0
2,5
4,0 4,5 4.3
6.1
Q3 2018
Q4 2018
Q2 2016
21
5.4 5.4
Q4 2017
Q1 2017
Q1 2019
Q2 2019
6.5 6.3
Q1 2015
5.3
3.4
24
Q2 2015
Q3 2015
4.7 4.8
Q4 2015
4.9
Q1 2016
3.0
40
Q3 2016
Q4 2016
4.0
Q2 2017
Q3 2017
Q1 2018
6.4 5.5
18
Q2 2018
5.3 5.5
34 30 30 31 31
3.9
26 27 31
22 29 34 25 30 36
NWC %
Prepaid expenses and accrued income
Trade receivables
Trade payables
Other receivables - Current
Accrued expenses and prepaid income
Other liabilities - Current
6.1
33
Q3 2019
Q4 2019
5.6
30
Summary
• Solid quarter ending a strong year
• Strong order intake, mitigating loss of INPS • Gearing up for profitable growth
Summary
Thank you.