Q2 2021Presentation
August 27, 2021
Summary
• Transcom continues to grow strongly with organic growth of 11%
• eCommerce & Tech growing 32% vs Q2 LY to reach 43% of total revenue
• Strong intake of new business – Enabled by digital offering and near/offshore expansion
• Q2 EBITDA of 8.7% -2.4 pp vs Q2 LY –Impacted by investments in growth, consequences of the Covid pandemic and weak demand in Spain
• Actions taken and strong ending of the year expected, but issues related to profitability expected to linger into Q3
2
123
01
02
03
Company overview and Q2 highlights
3
Financial performance
Strategy going forward
123
01
02
03
Company overview and Q2 highlights
4
Financial performance
Strategy going forward
Transcom is a global leader in digital customer experience
…in digital and traditional channels…
…enabled by leading digital capabilities
5
Transcom provides world class customer experience…
Customer care & Technical support
Customer acquisition, sales & retention
Compliance & Back office
Chat & Email
Messaging & Social media
Voice & Video
Digital CX Advisory
Digital solutions
Digital operations
Services & Utilities
eCommerce& Tech
Telco & Cable Cable TV &
Broadband operatorsTelecom
operators
Segment Client examplesShare of revenue LTM
EBITDA margin Q2 LTM
19%
10%
6%
Serving leading consumer brands across industries
6
Utilities BFSI Gov &Healthcare
Media Travel
Online retail
IT/Tech Fintech Logistics Consumer durables
30%
28%
41%
Growing strongly in highly profitable eCommerce & Tech sector
Strong YoY growthRevenue, MEUR
Long term and profitable growth Revenue, MEUR; EBITDA, %
Growing share of portfolio %
47 62,1
Q220 Q221
36%43%
Q220 Q221
32% +8p.p.
7
140167
210245
20202019
14.3%16.9% 18.7%
2018*
19.0%
2021 Q2 LTM
RevenueEBITDA Margin
* 2018 EBITDA adj. For IFRS 16 is an estimate; IFRS16 reporting was fully implemented from 2019 onwards
‘Recognized as Star Performer by Everest Group
Transcom has established itself as strategic CXM partner for clients, especially for digital-native enterprises, with its comprehensive suite of proprietary and third-party CX solutions (T:Universe) and global delivery capability, with a strong presence in Europe.
David Rickard, Vice President, Everest Group
Global delivery and growing near/offshore capability provides scalability
8
33Languages
25Countries
63Locations
Site locationsServiced geographies
EuropeGlobal English
Regional mix2021Q2 LTM revenue
Shoring mix2021Q2 LTM revenue
37%
63%
12%
25%63%
OffshoreNearshore Onshore
• Continued acceleration of new business momentum• Contract wins split ~50/50 between new logos and existing
clients• Carry over provides solid growth momentum into 2022
Strong development of new sales
9
Contract wins new business1, Annual contract value, end Q2, MEURKey Q2 wins
Global TelcoBroadband tech care
US onshore16 MEUR
FintechCustomer careEU nearshore
14 MEUR
Global TelcoCustomer care &
back officeEU nearshore
3 MEUR
Consumer TechTechnical Support
US WAH5 MEUR
Consumer ProductsCustomer careEU nearshore
2 MEUR
Financial ServicesBack office
EU nearshore1 MEUR
1. Excludes renewals and growth in existing contracts 2. 2020 Sales year is 9 months and ending September 2020. 2021 Sales year is 12 months and starting 1 Oct 2020.
Food DeliveryCustomer servicesEU on/nearshore
4 MEUR
FintechCustomer service &
back officeEU nearshore
8 MEUR13
3973
18
411
2021 Q2 YTD2
60
2018 2019 20202
129
In-year revenue, 2021
Annual contract value
M&A growth agenda – City Connect acquisition speeds up shift towards nearshore and strengthens German capabilities
10
M&A focus in line with strategic priorities
Expand near/offshore delivery
Grow in eCom/Tech sector
Strengthen digital offering
• Transcom growing strongly in German nearshore delivery
• City Connect adding +540 employees in Adriatic region and significant additional growth potential
• Combined operations offering the market’s strongest nearshore offering for German
Germany
Adriatic Region
Continued growth in the 2nd quarter, but margin impacted by investments in growth, Covid and weak demand in Spain
11
2021 Q22020 Q2
14.712.5
-15.0%
EBITDA, EUR Millions Revenue, EUR Millions
2020 Q2
8.711.1
2021 Q2
-2.4pp
EBITDA Margin, Percent
• Organic growth 10.7%, currency impact -2.2%
• Growth driven by eCommerce & Tech sector and existing clients
• Investments in growth for ramping up new clients and new sites
• Business continuity costs for Covid
• Weakness in demand in Spain
2021 Q22020 Q2
132.2 143.4+8.5%
Three drivers impact EBITDA negatively
12
Investment in growth
Pandemic impact
Weak demand in Spain
Drivers Actions/Outlook EBITDA impact Q2
• Opening new sites• Ramp-up costs for new
contracts
• Positive contribution Q4 and onwards 1.6M
• Offshore business continuity cost
• Productivity loss and US labor shortage
• Temporary impact, but timing uncertain >1.4M*
• Overcapacity due to weak demand in banking and telecom
• Actions during Q3/Q4, positive impact Q4 and onwards
0.4M
∑3.4MEUR2.4 pp margin impact
*1.4M only BCP cost, not quantified impact of productivity loss and labor shortage
Transcom continues on the trend
13
Revenue EUR millions; EBITDA1 percent
Solid and accelerating organic growth in continuing business• Strong growth in eCommerce & Tech• Investments in sales organization• Development of digital offering
Continued steady margin improvements• Client mix shift• Operational Excellence• Near/offshore delivery
115 76 50
7.2%
9.1% 9.0%
2020
6.5%
2017*
9.8%11.6%
558
2018*
10.2%
2019
12.7%
542469
468 59219
12.4%11.9%
2021 Q2 LTM
2020 Q2 LTM
513
Exited businessContinuing business EBITDA Margin excl. IFRS 16
EBITDA Margin
* 2017 and 2018 EBITDA adj. For IFRS 16 is an estimate; IFRS16 reporting was fully implemented from 2019 onwards
469 468492
558
123
01
02
03
Company overview and Q1 highlights
14
Financial performance
Strategy going forward
Continued strong growth – Short term weakness in profitability
15
• Continued strong revenue growth– 143.4 MEUR (132.2)– Growth of 8.5% in Q2 2021 (10.7% excluding currency
impact – all organic)
• Q2 EBITDA ex Non-recurring items1
– 12.5 MEUR (14.7) – Margin of 8.7%, -2.4pp vs Q2 2020– Challenges driven by investments in growth, Covid costs, and
weakness in demand in Spain
• Solid operating cash flow 7.5 MEUR (13.6), and net cash flow of 60.3 MEUR (-7.9)
• Non-recurring items: +0.6 MEUR (-7.2)
• Net debt/EBITDA of 3.7x (Q1 2021 3.3x)
Continued growth momentum, but short term weakness of profitability
16
Revenue, EUR Millions
• Transcom is continuing the strong growth driven by eCommerce & Tech clients and primarily by English segment
• After three quarters with improving profitability, in Q2 EBITDA margin decreased with 2.4pp
EBITDA Margin, Percent
2019 2020 2021
131 142140157
128 132151 143
Q3 Q4 Q1 Q2
+7.6%+11.0% +18.1% +8.5%
Q3 Q4 Q1 Q2
10.8
15.1
11.012.413.2 14.3
11.18.7
+2.2pp+0.8pp
+1.6pp-2.4pp
Currency impacted negatively both revenue and profitability
17
All figures in EUR Millions
Q2 2020Growth and Productivity Currency
In-organic/structural changes Q2 2021
Revenue 132.2 14.2(+10.7%) -3.0 - 143.4
EBITDA 14.7 -0.7 -1.5 - 12.5
EBITDA Margin 11.1% -1.6 pp -0.8 pp - 8.7%
Continued strong growth in the most attractive sector
18
Note: 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. EBITDA% per industry includes allocation of unallocated/group-wide expenses.
6.2%
9.5%
18.7%
EBITDA LTM 2021
Revenue by industry, EUR Millions
140 167 210 245
195 195177
180
208 179 172167
2018 20202019 2021 LTM
Telco & Cable
Services & Utilities
eCommerce & Tech
543 542 558592
• 32.1% revenue growth in eCommerce & Tech vs Q2 last year, 35.4% growth LTM
• Accelerated demand growth and increased market share in eCommerce & Tech
Continued near/offshore expansion in 2021
19
Revenue by type of delivery, Percent
Note: 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).
71 65 64 63
20 25 24 25
9 10 12 12Nearshore
2018
Onshore
Offshore
2021 LTM2019 2020
EBITDA
Teens
High teens
Single digit
Four near/offshore sites launched or expanded during 2020• Cairo, Egypt• Tuzla, Bosnia & Herzegovina• Davao, Philippines• Zagreb, Croatia
Three new near/offshore sites operational Q1-Q2 2021• Bogota, Colombia• Malaga, Spain• Zenica, Bosnia & Herzegovina
Stable operating cash flow in the quarter
20
• Q2 2021 operating cash flow is EUR 7.5M (13.6)
• Negative difference to Q2 2020 mostly driven by higher cash income taxes paid as compared to Q2 2020
• Q2 2021 cash flow from financing activities mostly driven by refinancing and issuing of EUR 315M Floating Rate Bonds
EURm 2019 2020 2020 Q2 2021 Q2
Profit/loss before tax 2,143 -7,949 -6,932 -7,490
Adjustments for non-cash items 33,429 38,599 8,817 9,962
Net financial items 17,565 19,445 6,081 10,431
Income taxes paid -7,456 -4,881 -516 -4,405
Changes in working capital 5,684 5,040 6,157 -980
Operating cash flow 51,366 50,255 13,606 7,518
Investments/disposals -16,522 -14,438 -3,807 -5,994
Acquisitions/disposals of business, net of cash -1,101 -6,781 -6,781 -
Other -560 98 -29 -220
Cash flow from investing activities -18,183 -21,121 -10,617 -6,214
Cash flow from financing activities -32,055 -28,775 -10,881 59,762
Cash flow for the period 1,127 359 -7,892 61,066
Q2 working capital within normal variations
Note: 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.
EUR millions
21
Q2-Q3 2020: Covid-related government support in terms of deferred taxes, due in 2022, total of EUR 12 M
Q4 2020: Timing effect of increased receivables
Q1-2 2021: Timing effect of decreased payables
25
3032
3031
28
14
23
26
31
Q3 19
4.7%5.5%
Q1 19 Q2 19
5.8% 5.6%
2.6%
Q4 19
5.9%
Q1 20
5.2%
Q2 20
4.5%
Q3 20
4.1%
Q4 20 Q1 21
5.3%
Q2 21
NWC, totalNWC % of LTM Sales
2.6%
Net debt and leverage development
22
Debt structure Maturity
Outstanding balance
2019 2020 2021 Q2
Fixed rate secured notes
Paid June 2021 180.0 180.0 -
Floating rate secured notes Dec 2026 - - 315.0
Secured term loan Paid June 2021 - 20.0 -
SSRCF incl overdraft facility usage June 2026 21.0 - -
5-year secured bond Paid June 2021 10.0 10.0 -
Lease liabilities 27.5 28.8 33.4
Other liabilities2) 7.1 8.2 -2.9
Gross debt 245.6 247.0 345.5
Cash on balance 14.3 13.7 76.9
Net debt 231.2 233.3 268.6Net debtLeverage1
Net debt excl. Lease liabilities
All figures in EUR Millions
Net debt and leverage
1) Net debt, incl. Lease liabilities/fully adjusted EBITDA; 2) Other liabilities includes subordinated loans, pension liabilities and unamortized cost.
231 233251
269
204 205218
235
3.7x
2019
3.3x
2020
3.7x3.3x
2021 Q1 2021 Q2
Continued reduction of NRIs
Non-recurring items, EUR millions
23
Q2 NRI totaled +0.6 MEUR related to transaction-related costs and release of various provisions
The majority of NRIs during LTM relates to the transformation program support (EUR 10m) completed in 2020
From 2021, all Covid costs are taken as operational
• In Q2 2020 Covid costs reported as NRI amounted to 3.6 MEUR (LTM of EUR 4.4m)
• In Q2 2021 1.4M of Covid costs have been reported as operational costs, and not as NRI
10.1
20.9
Q3-
2019
Q1-
2019
Q2-
2019
15.0Q
1-20
20
0.1
11.5
Q4-
2020
Q4-
2019
13.1Q
2-20
20
1.6
17.6
Q3-
2020
Q1-
2021
Q2-
2021
7.2
32.5
4.0 3.10.8
8.4
0.5
6.08.3
22.4
5.3
-0.6
Quarter LTM
123
01
02
03
Company overview and Q1 highlights
24
Financial performance
Strategy going forward
Financial targets
25
Continuation on the trend• Operational Excellence• Client mix shift• Near/offshore expansion
Sustaining current momentum• Continued mix shift towards eCommerce & Tech• Investments in sales and commercial organization• Grow share of wallet of strategic clients
Shifting up to the next gear• Supporting strategic shift: Digital, eCommerce & Tech• Near and offshore delivery• Reinforcing market access and accretive in-market bolt-ons
Conservative leverage, reinvesting in growth when leverage permits• Strong cash flow generation and EBITDA expansion providing natural de-leveraging• Ability for targeted accretive M&A growth within leverage limits
>16% EBITDA IFRS 16
>5–10% organic
growth p.a.
>5–10% acquired
growth p.a.
Conservative leverage