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Q1 2018 Presentation May 30 2018
Strictly private and confidential
Outstanding Customer Experience
Agenda
2
2 Company overview 5
3 Financial performance 10
4 Summary 21
1 Presenters 3
5 Appendix 23
Presenters
. 1
4
Today’s presenters
Leif Mårtensson Chief Financial Officer
Transcom since August 2017
Previous roles: ‒ CFO, Hilding Anders
Group (2014 – 2017) ‒ CFO, Arjo Huntleigh,
Getinge Group (2009 – 2014)
Mattias Holmström Altor, Director
Board member of: ‒ Transcom ‒ BTI Studios ‒ Meltwater ‒ NorthStar Group
Altor since 2011
Previous roles: ‒ Senior Consultant,
Booz & Co (2010 – 2011)
Michael Weinreich Chief Executive Officer
Transcom since September 2017
Previous roles: ‒ VC Partner, FinLeap
(2016 – 2017) ‒ CEO, Arvato Financial
Services (2009 – 2016)
Company overview
. 2
31%
68%
1%
Note: 2014–2016 figures represents consolidated TWW accounts adjusted for EO items and D&A, FY 2017 is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). 1) Group total sales growth adjusted for discontinued/divested operations and Tele2 contract , Adj. EBITDA margin calculated as Adj. EBITDA/Total sales, 2) Sales by geography is 2018 LTM, 3) client vertical is per 2017 and including Xzakt.
contact centres worldwide; On-shore,
near-Shore, off-shore, plus Work-at-
Home agents
200+ Transcom serving a broad set of international clients
around the globe
Offering services in
45 Languages spoken in our customer service delivery centres
33 LTM Q1 2018 Sales 572 €M
2017 Altor, a Nordic private
equity firm, full owner as of April 2017
Privately owned since
Employees in 20 countries
26,500
Customers served daily on Transcom implemented campaigns
1.5m+
A Nordic outsourced contact centre champion with a global footprint
6
Transcom introduction in numbers Global footprint and service offering
Key financials1) Sales breakdown 2) 3)
Sales by segment Sales by client vertical
Manila EDSA Manila Pasig
Bacolod Iloilo
Concepcion
Sweden (HQ) Fredrikstad
Lithuania
Tallinn Riga
Groningen
Spain
Portugal
Italy Croatia Tunisia
Budapest Germany Poland
Leeds
Belgrade
North America: Work At Home Agents
Full service offering in 33 languages in 45 sites across 20 countries
30%
17% 15%
13%
8% 5% 6%
2% 4%
Telecom Cable Banking Gov & Healthcare Tech
Retail Transportation Media Other
English Speaking
Latin America Europe
477 507 496 506 502
617 627 586 584 572
5,3% 5,2% 5,3% 6,5% 6,7%
2014A 2015A 2016A 2017A 2018LTMTele2 contractSales from discontinued/divested operationsSales adj. for Tele2 and discontinued/divested operationsAdj. EBITDA margin
Boni
Supported by high tech systems
Transcom offers outsourced customer relationship management (1/2)
7
We help our clients in the contact with their clients with any requests, support need or other need of communications…
Clients benefit from improved cost structure and top of the line customer management
…through a variety of channels… …with support of more than 22,000 well trained agents
Postal mail
Face-to-face Social
Click-to-call Chat
SMS
sms
Call
@ Majority of calls and requests are completely handled by Transcom’s agents, minimising the degree of involvement from end client
Supported by high tech systems
Transcom offers outsourced customer relationship management (2/2)
8
Transcom’s services are integrated into the clients’ operations
Clients benefit from improved cost structure and top of the line customer management
Technically trained
On a technical query on your installation of your new broadband, the agent will be able to answer any of your most common questions. If not, you will be transferred to a more senior Transcom agent
Well updated and prepared
Transcom agents are aware of changes to client’s product offering (e.g. product launches or price increases) and therefore prepared how to handle any questions.
Integrated into the client systems
If you call to ask about a delivery of a package, the Transcom agent will be able to access its client’s systems and provide live information about your request
Up-sell, cross-sell and retention
To boost up-sell, cross-sell and retention, agents are incentivised by KPIs set by the client. Should a customer call to terminate a contract, there are pre-agreed deals that the agent can offer
Well progressed discussions with a number of potential targets Targets are in attractive verticals like Healthcare and e-commerce
Acquisitions under way
Client centric organization implemented with increased customer focus as a result First positive results already realized (+150 Agents in Iloilo, +350 Home agents in US) Substantial potential for increased volume in 2019 (> +1000 Agents in Europe)
Client Centric organization implemented
Key Highlights Quarter 1 2018 Positive signals from market and clients on the path chosen by Transcom
External recognition (Frost & Sullivan award 2017, CEO Magazine, Dutch award for Gamification) Pilot with spanish bank on conversational analystics Several projects for additional chat volumes in the Nordics and gamification projects in Italy
New value propositions well received
9
Sizeable tenders and RFQs in attractive verticals like tech, logistics and e-commerce New sites will be opened in Europe and Philippines during 2018 to serve current customer expansion The wind down of the Telenor business in Sweden is progressing
Improved industry sector focus
Continuing our journey to build platform for success…
10
Broadly and deeply defined milestones for improved profitability and growth
.
Introducing a more client centric model
Moving to a leaner and more agile organization
Investing in innovation and forward leaning technology
New Business Support SSC
CSM with P&L ownership
Client service managers (CSM)
CSM with end-to-end delivery of services
Global IT
Global and digitized HR
Product management
Technology for world class delivery
Commercial capabilities
Financial Performance
. 3
Financial development
12
Sales and EBITDA development
617 627 586 584 572
33 32 31 38 38
5,3% 5,2% 5,3% 6,5% 6,7%
2014A 2015A 2016A 2017A 2018LTM
EURm
Sales Adj. EBITDA Adj. EBITDA %
Summary of historical P&L
Sales down since 2015 due to discontinued/divested services and purposely discontinued relationship with Lombardia of EUR 22.2m due to terms of contract not attractive enough
The headwind within Nordic telecom has been partly mitigated by increased sales from both new and existing clients Costs trending down as a result of initiated cost savings program EBITDA improvement in 2017 thanks to efficiency improvement actions being realised with more improvements to come in the following quarters
EURm 2014A 2015A 2016A 2017A 2018LTM
Sales 616.8 626.5 586.1 584.0 571.5
Cost of sales -481.9 -492.7 -458.7 -456.3 -445.8 D&A1) -7.4 -8,9 -8.0 -8.2 -7.9 Gross profit 127.6 125.0 119.4 119.5 117.9 % margin 20.7% 19.9% 20.4% 20.5% 20.6% SG&A -102.1 -101.6 -96.2 -89.5 -87.5 Adj. EBITA 25.5 23.4 23.1 30.0 30.3 % margin 4.1% 3.7% 3.9% 5.1% 5.3% Adj. EBITDA 32.9 32.3 31.2 38.2 38.2 % margin 5.3% 5.2% 5.3% 6.5% 6.7%
Solid EBITDA margin improvement proof for successful acceleration of strategic initiatives
1) M&A amortisation not included in D&A. 2) Costs for consultancy transformation support was included as transactional in 2017 but moved to operational in 2018 since the consultants are supporting the cost saving program PPP.
Extraordinary items (EURm) 2014A 2015A 2016A 2017A 2018
LTM
Transaction related EO items 2.6 0.9 -3.5 9.6 10.1
Operational EO items2) 0.5 2.3 3.1 10.3 14.1
Total EO items 3.1 3.2 -0.5 20.0 24.2
NWC development
13
Quarterly Net Working Capital
Working capital relatively stable over time with some seasonal variations. Q1 is typically the highest quarter in terms of NWC as % of sales.
Movements between quarters are mainly referring to timing effects of collections
Net working capital trending down as share of sales
Note: 2014–2016 figures represents consolidated TWW accounts, 2017 -2018 figures are consolidated at Issuer level. Q2,Q3 ,Q4 2017 and 2018 include the acquisition of GVP Communication AB (Xzakt).
-150
-100
-50
0
50
100
150
200
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Trade receivables Trade payablesPrepaid expenses and accrued income Accrued expenses and prepaid incomeOther receivables - Current Other liabilities - CurrentNet Working capital
7.5% 6.3% 6.9% 5.3% 6.5% 3.4% 5.4% 4.8% 4.9% 3.0% 5.4% 5.3% 6.1% 4.0% 4.3%
% NWC as % of LTM Sales
4.7%
EURm
5.4%
EURm 2014A 2015A 2016A 2017A 2018LTM
Tangible capex -6.6 -8.8 -6.6 -6.5 -5.0
Intangible capex -1.7 -1.2 -2.0 -0.7 -0.8
Total capex -8.3 -10.0 -8.5 -7.2 -5.8
% of Depreciation & Amortisation 112.0% 112.2% 106.4% 88.3% 65.1%
% of Sales 1.3% 1.6% 1.5% 1.3% 0.9%
6,6 8,8
6,6 6,5 5,0
1,7
1,2
2,0 0,7
0,8
8,3 10,0
8,5 7,2
5,8
2014A 2015A 2016A 2017A 2018LTM
Tangible capex Intangible capex
Capital expenditures
14
Investments are mainly within IT equipment and other assets connected with the company’s site buildings
In 2015 the company had an increase in investments as a result of launching a new operational site in Iloilo, Philippines
Since 2015 the investments have gone down mainly due to benefits from lower hardware and software cost
Operational capex development1)
Comments
Capital light business model evident by low capex needs
Note: 2014–2016 figures represents consolidated TWW accounts, FY 2017 and 2018is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). 1) Capex and is excluding M&A in order to represent operational capex, 2) Depreciation & Amortisation excluding M&A amortisation.
EURm
EURm 2014A 2015A 2016A 2017A 2018LTM
Adjusted EBITDA 32.9 32.3 31.2 38.2 38.2
Change in NWC -6.2 -0.9 -12.9 -1.1 1.7
Capex -8.3 -10.0 -8.5 -7.2 -5.8
Operating Free Cash Flow 18.4 21.5 9.7 29.9 34.1
Operating Free Cash Flow (%) 56.1% 66.5% 31.1% 78.3% 89.3%
56,1% 66,5% 31,1%
78,3% 89,3%
-22-12-28
182838
2014A 2015A 2016A 2017A 2018LTM
Adjusted EBITDA Change in NWC Capex Op. Free Cash Flow (%)
Operating free cash flow
15
Operating cash flow development1)
Solid operating free cash flow of +60% on average since 2014
Note: 2014 – 2016 figures represents consolidated TWW accounts, FY 2017-2018 is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). Please refer to Supporting financials in IM. 1) Operating cash flow excludes change in provisions, result from disposal of business, non-cash adjustments and income taxes paid and includes adjusted EBITDA, change in NWC and operational capex (excluding M&A).
EURm
Cash flow is relatively stable over time
Working capital movements between the years are mainly coming from timing of collections
In 2016 the company had a negative working capital, due to both timing of collections as well as payment of previous year restructuring costs
Comments
Progressing on identified initiatives for improved profitability
16
Savings are rapidly progressing and expected to further increase in short term
Cost program has as per Q1 2018 realised EUR 13.9m in annualised cost savings
Identified areas Target Identified today
Realised 2017 1)
Realised 2018 2) Status
English speaking segment
EUR 12.3m
EUR 10.4m EUR 5.0M EUR 6.5m
First wave of cost savings was implemented before end of 2017. Second wave was decided in Q4 2017. The main item is the closure of the North America sites that will generate approx. 1.6 M in cost savings. The effect starts in Q2 2018.
Europe segment EUR 10.6m EUR 9.3m EUR 6.0m EUR 7.5m
First wave of cost savings successfully implemented in 2017. Second wave was decided in Q4 2017 and most of it has now been implemented. The biggest impact comes from the delayering program as a result of the new organisation and the site consolidation in North.
Central functions EUR 10.2m EUR 5.3m EUR 0.0m EUR 0,7m
The main realised saving comes from head count reduction in HR. Further savings planned in IT and COO from automatisation and SSC.
Investments EUR -0,8m Investment in innovation, RPA, digitalisation and in Centres of Excellence for HR and Operations
Total EUR 33.1m
EUR 25.0m
EUR 11.0m
EUR 13.9m
1) Realised 2017 was the annualised savings decided in 2017. 2) Realised by Q1 annualised effect.
Summary
. 4
Summary Transcom
18
Attractive and growing market proven to be resilient over time
1
Driven by significant trends i.e. increased outsourcing and higher value services
EUR 51bn Total Addressable Market (2016A)
Growing at 4-5% p.a. CAGR (2010-2016A and 2017-2021F)
Diversified business model with blue-chip client base
2
16 Number of targeted verticals
1.5m+ Number of customers served on a daily basis
<27% Top 3 client concentration
Leading market position with sticky client relationships driven by industry
leading client endorsement
3
Clear #1 in Sweden and Norway Top 10 player in Europe and the world
13 years Average length of relationships with top 10 clients
97% Retention rate (FY 2017)
Stable and cash generative business with highly
flexible cost base
4
5,2% Underlying sales growth (2014A-2018LTM)
89,3% Cash conversion (FY 2017)
90% Total cost base flexibility
Implemented strategy program to build platform for success supported by selective value accretive acquisition
strategy
6
7 milestones Broadly and deeply defined for
improved profitability and growth
Long list of M&A targets Processes on-going in multiple regions and verticals
22% Top 5 players share of fragmented core markets
Clearly identified initiatives for improved profitability
5
PPP Strategy program emphasising
People, Passion and Performance
EUR 33.1m Targeted tangible results to be realised
EUR 13.9m Tangible results realised on an annualised basis