Earnings Call: Q1 2021

Apr 12, 2021

Hello, and welcome to today's Teleperformance First Quarter 2021 Revenue Call. My name is Rosie, and I'll be your coordinator for today's event. Please note this call is being recorded And for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions. I will now hand you over to your host Olivier Rigaudi, WTV CEO and Group CFO to begin today's conference. Thank you. Thank you, Robbie. Good morning, everyone, and thank you for your all presence today. I'm very happy to be with you this morning to comment on our Figures for 20 for the Q1 of the full year. We saw that given the figures that we were Knowing that we are going to publish, it was interesting to publish them as quick as we can to give you the right information and not to wait End of this month, as it was scheduled from the very beginning. I'm hosting this call from France with the Investor Relations team. Quinn Vien, our Head of Investor Relations, has primary comments to make before we start the presentation. Yes. Thank you, Olivier. Good morning, everybody. Financial press release related to the Q1 of 2021 revenue has been published today at 7 A and CET. Dedicated slides are available on Teleperformance website in the Quarterly Information page of the Investor Relations section. As usual, Olivier's presentation will be followed by a Q and A session. A replay of the conference call will be available Today, later, by dialing numbers, non mentioning invitation to the presentation. Today's call contains forward looking statements that address our expected future performance and that by nature address matters that are uncertain. These expectations are subject to numerous factors and uncertainties that could cause actual results To differ materially from those described in the forward looking statements. For a detailed description of these factors and uncertainties, please refer to the Risk And control section in our 2020 universal registration document available on Telecom France website. Now I'll add the floor to Olivier. Thank you, Olivier. Thank you, Cui. So let's move on Page 3 of this presentation. I just wanted to take 2 or 3 words before we dig in detail. So we have posted a strong Q1 2021 revenue at £1,712,000,000 up 26% 26.6 percent as reported and up 30.9% like for like versus last year. This is definitely a record like for like growth and the rationale are solid. There are in fact 3 drivers. The first one is, of course, the strong sales momentum supported by faster digitization of the client environment and The development of high value solution. This is exactly what we have believed, that we start to see for the first time in Q4 last So this is accelerating, this is increasing and this is developing. In addition, we have also some easy comps For the 2nd part of March, which was easier to beat, this is going to last, of course, until Early June, but this is where we are. You remember that last year we had this crisis where the sales Go down and we benefited from that in 2021 versus 2020. And on top of that also, we had a strong growth in support service or government Vaccination campaign in Continental Europe, mainly Netherland, but also in the U. K. There are the 3 steps on which the group take advantage this quarter. What I can say is that the driver of this growth are strong over time beyond the impact of the sanitary crisis. And if you take out What we call the support of government line and negative effect from lower activity, the growth of the group is significantly above 20%, probably in the range of 25%, 26% on like for like growth without this negative and non permanent effect. Finally, it's key to remind that this dynamic is driven by the effort of more than 250,000 people working from home and the rapid deployment of our typical campus solution, which is a group's digitally integrated solution for managing the customer experience remotely. That's what I just wanted. Let's move to the following page please, Page 4. It Give you the revenue growth analysis. So you have a currency effect of €96,000,000 mainly due to 3 Currency, of course, dollar is close to half of this, apart coming from also the Indian rupee and from the Brazilian dollar That is the main impact that we suffered from in Q1. But as you see, the growth from Q1 of Concentration to Q1 of 2021 is indicative because we are speaking of more than €450,000,000 for this quarter. Let's move to the following slide, please. Here are the It's a precise figure country region by region. I will say that everything has grown And we'll come back later on that in much more detail. But what is interesting is that the core service Business grew by close to 40%, and I'll come back in a minute. But also the specialized service grew by 10% despite There's still the difficulty is that we're still continuing in TRS contact because of the health crisis. Because Until mid March, TLS was doing well last year, and we are still down significantly down in TLS in the Q1 versus last year. So if we move to detail, so you see that everything is growing not exactly at the same level, not exactly at the same pace, But every part of the group except TELUS is growing dramatically. Let's move to The next slide, which is the English speaking word. So The growth is 26%. What we see is 2 things. Of course, U. S. Is probably North America is probably the most part that is much more hit by the crisis, notably because Travel and tourists are still important in this part of this world and has been, of course, continues very, very depressed. But we have a growth coming back on online entertainment, automotive and consumer electronics. We have 2 issues, very, very 2 We see very significant growth. 1 in U. K, of course, of the Sheppard COVID line, COVID Sheppard service, but also In the energy, in the e commerce that is growing fast in U. K. And we are back on track with the high growth in China And in Malaysia, too. So finally, this part of the world is growing by close 26%. If we move to Ibero LatAm, here it's 37.4% growth with no support to government for the crisis. We have, of course, numerous contracts signed with the client across the world. We have sharp gain in Colombia and in the near shore region, And we have also a solid revenue growth in Portugal and Spain that is satisfactory to 37.4% growth in this Q1. If we move to Europe, here it's probably the most outstanding figure, 73.70 percent like for like growth. Of course, there is a rapid ramp up of support service for the government, notably in Netherlands, To a lesser extent, in France and Germany. But despite that, we had a very, very dynamic or not despite, but close to that. We have very, very dynamic sales performance with multinational client, not only Greece, also in Finland, but also Germany, Netherlands, Italy, Turkey and Egypt and to a lesser extent in Russia too. That is not mentioned here. So here, we are Seeing a fantastic growth in Europe, which is going far beyond the COVID support. India and Middle East, lower growth, 7%, mainly in offshore operation, which were given priority, as you know, for the deployment of the work of home solution and with high value solution. We are here trying to improve dramatically the performance in terms of margin, but it's significantly growing fast. And we are very happy of this result for India and Middle East. Again, retailing, consumer electronic and food service are the most dynamic segments. If we move now to Specialized Service, okay, as I told you, G and A remained sharply down around 75%, maximize that. And of course, With travel resolution and border closure, we hope that we'll be we are going I'll come back in a minute, but what's going on, it's starting now. We have a Comparating basis, which is easing. And we hope that in 2nd part of the year, we'll see again travel, again and a better situation for CFS. Long edge line solution continued at a brisk pace, very, very high, Delivering very, very good figures, growing very, very fast. And also, we have solid growth in the debt collection business in North America. So based on that, we do believe that we have to increase our target, which will be a like for like growth at least 12%. We stay to date on the margin EBITDA figure of more than 14%, sorry. And we do believe that we are going to integrate Health Advocates quickly, hopefully next month, But in 2020 in Q2 2021. That's what I wanted to leave you And to give you as information before the market open. And I'm, of course, ready to take with the team all the questions that you will have or may have. And the first question comes from the line of Patrick Giussime from Societe Generale. Please go ahead. Hello. Good morning, Olivier. Can you hear me? Yes, yes, of course. Okay. So thank you for this presentation and congratulations for this good figure. I have 3 questions. The first one, you upgrade your like for like revenue guidance, but not Your EBITDA margin guidance, so could you elaborate a bit on that? 2nd, what I understand from Your detailed and organic growth is that you have €180,000,000 of additional revenue coming from COVID related business. Could you tell us what is the size of the business currently, I mean, in Q1? And should Should we expect more ramp up in Q2? And the third question is more a housekeeping question. You have moved €10,000,000 of revenue from India, Middle East to CEMEA for the quarter. Could you tell us how much we should move for the full year, please? Okay. I'm going to start with that. The idea was simply On this Indian stuff and Middle East stuff, you remember that when we bought Intelenet at that time, there was India and Middle East. So there was a business that was made In Saudi Arabia, Jordan, Dubai mainly, that was run By the end of the year, so we decided to put all this business under the CME business where you still already you had already Dubai and the Egypt business, which is a big one, to put that together. So as a whole, we are speaking of business so We're speaking a little bit between €40,000,000 45,000,000 And we do believe that it was a sense to have our unique management for the region And to be under the same management, and we do believe that we are going not only to make some savings, but to increase dramatically over our commercial approach. That is the first point. 2nd point, about the COVID lines. I don't know if it's COVID line because it's support to government. You're right. This is roughly the figure. You should take the figure, we have something around 190, Something like that. We have no visibility of what could be. Clearly, it might continue. It will probably continue in Q2. To what level? It's too early to tell, but this is difficult to see because it's linked to a mix of vaccination, mix of Information mix of follow-up of people. So it's difficult to tell what will be The decision of the government, mainly Netherland One, UK and to a lesser extent, France and Germany. So we have no visibility on that. What is interesting is that when you take the growth of teleperformance that has been published, which is 36 If you strip down this part and if you have what has been missed by GLS and all the hotel industry, You have a net impact of roughly 10%, meaning that the group will be at 26% growth without the COVID line. So that is what I need To explain that so whether this COVID line or this support agreement will continue or not, I don't know. How long it will of course, it will continue in Q2, but how long, I don't know. What is clear is that this is something that Show to the government and not only to the one we are used to work with, I'm thinking to UK, That we are able to support them in different areas, and this is something that is very good for the future. That's what I can tell you. Your second question was linked to I forgot, to the EBIT margin. Yes. So what is the stuff? Of course, we are reporting there a sales figure. So it's difficult to start to speak about margin. By nature, it helps. It would be difficult to tell you that this is going to be a negative. Of course, it helps. So this is something that we will come back with later on, probably in Q2. But this is, of course, as you can imagine, something that is going to help us to achieve our goals. Thank you. Our next question comes from the line of Edward Stanley from Morgan Stanley. Please go ahead. Good morning, Olivier. Thank you for taking my questions. I've got a couple as well. The first one, you haven't given your monthly like for like chart anymore. So I was just wondering whether you could comment on the exit rate. And the second question, assuming TLS is still very difficult, which you've said, and LLS is growing very strongly, Have you raised prices in LLS? Or is that all volume led with contracts like the one with FEMA, which I think you've signed or expanded? And then finally, your cash performance must be increasingly strong this year. Do you have your eye on any acquisition targets? Or are you waiting until Health Advocate is fully integrated before you acquire anything else? Okay. Coming to our exit rates, Of course, we are not going to publish every time. I'm sure you would be delighted with that, The monthly figure. What I can tell you is that, of course, March has been good. Of course, there is a part which is linked to the COVID line, so This is support to the government. So clearly, we have a good March, but I can tell you that we have a good March. So What is going to happen? It's clear for everybody that the Q2, at least until early June, is going to be strong, of course, because We have a reference basis that is low. So no doubt on that. Last question was on acquisition. The second question was on Elenet. Elenet, Elenet. Elenet, okay. We have not increased price. No, There is no most of the story in LLS is volume. It's the fact that people Are referring to are using Teles as quick as much as they can because I do believe and I don't want to be arrogant, but I do believe that we are taking market share in this business because of the quality of the service where people are I contact very quickly with interpreters, helps to drive the growth. And people are failing, I would say home or we start to define a new way by which people think to LLS To help them to for their day to day business. So this is mainly volume. That's true, but volume in new contract And also informing with contractors we are already working ways. So this is clear. In terms of cash, of course, The story is good, as you can imagine. It's difficult to predict where we are going to land for the full year depending, Of course, of the working cap, but clearly this is positive. We are not waiting that at Target will Close to look towards our target. Frankly, as our case, we are ready to integrate it. All the work is Ongoing as we speak for all the team, notably for commercial, but not only for that. And now the job is to see We are there is no change. We are still looking for how can I say that, meaningful acquisition? Thank you very much. The next question comes from the line of David Ryu from Bank of America. Please go ahead. Good morning, Olivia. Just two questions from my side, please. Just going back to The COVID-nineteen support contracts, could you perhaps just give us a sense of Whether these are coming in at above group margin or below? And then my second question is relating to contracts Outside of the government support contracts, so with your normal clients, how does the value of new contract wins In Q1 compared to what we've been seeing in the last few quarters. And then my last question relates to your U. S. Operations. Given the strength of the recovery in the U. S. Economy so far, are you seeing or are you Pacing any wage inflation pressures for your U. S.-based agents in the near term? Thank you. Coming to your first question, which was the value of the margin of this contract, depending There are different cases. In certain cases, it's good with very high margin. On the other, it's low it's less That's important. So as a whole, this is in line with what the group is delivering, just to make it simple. The second stuff about the wage inflation, of course, this is not new. We are living with that for now Months and months in a row. The difficulty was much more and is told by All people is to find people, to run around people. We are and to make sure People will continue to work with us. So today, in the part of the country where we In U. S, we are able to make it happen. So we are not seeing A huge impact. But of course, this is something that was happening For months, we continue to leave that on a regular basis, and we don't see why we should not be able to continue to do that. All the questions will be at certain point of time, a discussion if it's a matter. It will be a matter of dramatically. All the questions will be a discussion With the clients, then I'm sure we will be in a good position to take advantage of it. After if you come to the sales pipeline because that is a question that you have, we are not So different from last year. It's different from region to other, but we are in a roughly same pattern. That's what we were living before. So there is a sustained, I would say, sustainable Significant growth, and we are very good with that. So We are on the same trend than last year in terms of business as we speak today in terms of It's not done exactly the same way region by region and country by country. But as a whole, we do believe that we are going to also continue to take advantage of Digitalization of this world. But clearly, the size of the group makes it more difficult. But despite that, we are able to deliver very good growth. And of course, in the right countries, that helps to deliver good margin. Great. Thank you very much. The next question comes from the line of Nicolas Dubois from Stifel. Please go ahead. The first question would be on the government contracts. Could you tell us if they were more, let's say, back end loaded towards the month So March in Q1 and how we should think of their impact across the quarter in Q1 to expect upcoming impact into Q2? And then coming back to the commercial pipeline. How much of the growth for Q1 was already something that you had locked in, in H2 In Q4 last year and you had good visibility. And how much of that was maybe incremental demand that came on top of your initial expectations Okay. That is a tough question. This one is a tough question because it's a moving target, as you can imagine. This is not always easy to be fair. If we come back To the government business. What's happening? The government business, because they are different government. The government business is large. They are large. They are different business. They are different from a country to another. They are different place at that time, Additional timing also. So it might continue probably it will continue in Q2. That's the way I'm seeing. At Quest level, I don't know. This is difficult to tell. This is going to continue At least till early June, probably mid June. This is and maybe later on. But that's too early to tell. And as you know, Most of these governments, probably in Europe, don't know when they will get the vaccine. So they have time to predict the volumes that they are going to be able to deliver to Aspore. So that is the first point. The second point is that my view our view is it's probably going to continue at the end point of At least continuing To continue probably during the summer at what level, difficult to predict. But clearly, we'll be able to give much more detail on that once the Q2 will be over. But at least that's what we see. But what is is there an acceleration? I do believe there is an acceleration Versus what we missed in Q4. If you remember, we had 22, 23, if I Remember properly, in Q4, there was already a small part coming from the government, but now we are Beyond that, significantly beyond that, as a whole, we are at 46% versus 22%, 23%. While, of course, Both legs have grown. Of course, you have the COVID lines that have grew significantly, but all the other legs grew also significantly. So this is where we are. And I do believe it's going to help us For the year, what is difficult for us to tell today is what how we look in the 2nd part of the year, not only the Q4. I'm sure you remember that we had this fantastic growth in Q4. So we have had time to predict what will be the Q4 today. But as a whole, we are not really worried about that as a whole, as you can imagine. Great. And if I could follow-up on I mean, could you try and explain us how you were able to capture such strong growth, Both in government support services and also in the digitization versus some of your key competitors, I mean, how were you able to deliver such a strong capture of pipeline? So that means maybe some of the growth in the market is rather captured by you than the competitors? And what made a difference again this year in the value proposition? First of all, we decided very early To beat development very early, we started to do that in Q3, end of Q3 last year, Sometimes with success, sometimes with no success. And of course, it's different from a country to another. You have to go from Germany, different States in France is different. Also IRS, we saw it in the U. K. Is more centralized, in Netherlands. So there are plenty of situations which are different from a country to another and From an organization from an organization to Azure. Of course, sanitary organization are different from country to country. That is clear. That is clear. As far as the rest is concerned, I would say there is no major change that what we have already done in H2 last year. Of course, we are here as investing the job that has been the work that has been done in Q3, Q4. As we speak, If I may say, we start to enter 2022 for the hunting season. Not yet, but in 2 months from now, we will be in 20 2022 season. So the job is much more now to work for next year. Even if we have plenty of work to deliver That has been sold in 2021 or end of 2020, plus the farming job that needs to be achieved too. Great. Thank you very much. The next question comes from the line of Susini Varanasi from Goldman Sachs. Please go ahead. Hi, good morning. Thank you for taking my questions. Just one for me, please. I I think it's very clear that your commercial sales momentum has been very strong. I just wanted to get some color Is there scope for new contracts to continue to ramp up in Q2? I mean, just sequentially, Should we expect further acceleration in revenues? Maybe it's contracts that you signed through the quarter that need to ramp up in Q2? Or is it now going to be sequentially stable and just better, easier comps in Q2 that we should be looking at? I do believe there will be some ramp up in Q2. It's hard to tell. It's hard to tell. But classically, the ramp up is much more Q2, Q3, Q4, much more than Q1 classically. But the thing that little change with this A pandemic, but classically, yes, that's the way it should work. But of course, this is not written today in detail. Thank you. Our next question comes from the line of Sylvia Barker from Goldman Sachs. Please go ahead. It's Sylvia Barker from JPMorgan actually. Can I ask 3, hopefully not too long? On the COVID work, so I think you mentioned €200,000,000 of COVID related work in full year 2020. Just to understand what's In 2020. What's included in the 12% growth guidance for 2021 in terms of the COVID work if we compare The 2021 versus 2020 figure? And then maybe I'll take the other 2 in To be honest, To be very clear, we made some assumptions, some conservative assumption because we don't know. Even the government does know. So I can tell you it's difficult for us to predict something. So we know what has been done in Q1. We had Still growth in Q2, but we are not really how can I say that? Okay. Very aggressive on H2, let's put it this way. But you assume nothing in H2? Nothing. I don't know, but something low. This is not dramatic, let's put it this way. It's difficult to predict, really difficult Okay. Thank you. And then the other 2, on the COVID work, just some color on how it's delivered. Have you had to hire new people To deliver these government contracts, are there any limitations because they're government contracts on the use of offshore? Do you have to use onshore? And then finally, my third question is just on eClients. I can I work out that eClients contributed about 7% of your full year 2020 growth? But presumably that was running much faster at the moment. Should we think about eClients growing at, I don't know, 10%, 15% year on year at the moment? Or is it not quite as much? Coming back to your question, of course, most not most, all of the people that we hire for this business are onshore, no doubt. There is no this is not offshore business. This is done onshore in all these countries. So yes, it doesn't change dramatically The margin, we have good margin depending where, but we have, in some cases, very good margin, some other we are aware. But as a whole, we have a good margin on this job. The growth of clients is of course higher. In fact, you have 2 effects. You have the effect that the growth of this business As it sounds, without taking in account Teleper and TP in a minute, it's growing dramatically more than the rest. If you take all these people coming from in the economy, they are growing faster than the others. So we took advantage of that, And we continue to take advantage of that. This is going to continue. 2nd thing is that Even the brick and mortar business had to move to digital. They are still going to survive. I'm exaggerating, but we have to move, we have to change. And this is just generally leading to opportunity that were not That was existing before, but now there is no time to wait. Let's put it this way. And that, of course, We are growing faster in this business than the other. Clearly, we still have a telco business that is not growing at the same pace Then direct, of course, yes. Okay. Thank you. Before we continue, please be reminded And our next question comes from the line of David Kedam from Kepler Cheuvreux. Please go ahead. Yes. Good morning, Olivier. Congratulation for your strong start to the year. I have some You have gained some contract in few countries, but what about the U. S? Can you explain why you have not through gains from contract in the U. S. Related to COVID? Maybe we are working on it. Maybe we are working on it. It's not done. Situation is different in U. S. Because it's by state, As you know, this is now it could be global, it could be federal, but it's also by state. So this situation is a little more complex. We are working on it as we speak. That's what I can tell you today. But regarding the U. S. And the U. S. States, do you think that some contracts are already in place with some other I'm less informed in detail of that. The story is different from country to from state to state, But I do believe there are some stuff that are existing today, yes. Okay. And do you think that some other countries, Brazil or Brazil, Brazil or Brazil, I won't base a lot on Brazil, to be honest. But there are probably other countries, yes, yes, of course. Of course. But in the U. S, Brazil, etcetera, Is it managed by some public Depending on the reason, in Brazil, I'm not sure it's really managed At all, but it's also done by local states, Sao Paulo, different from Oreo, different from Brazil, yes. So it's a different approach, but clearly, we are working on that as we speak. Okay. And regarding I'm just surprised by the size the scale of this kind of Close to €200,000,000 over a quarter. So if we take just the example of Netherlands, which seems to be Maybe the largest contract for you related to COVID. How many calls? Can you give us some We are speaking of more than 10,000 people. Hello? Yes. Can you hear me? Yes, yes. More than 10,000 people. Okay. So we have no further questions coming through. Olivier, I'll hand back to you to conclude. We are going to finish with this last question, if there is a I left because I have 20 It was the last question. It was the last question. Okay. Thank you to all. Thank you for having been able to join so quickly. And of course, the team is ready to answer. Kui is going to give you some detail, And we are here to ready to answer your remaining Yes. Thank you, Olivier. A few key information and updates on our agenda. The next investor meeting is the Teleperformance Shareholders General Meeting on 22 April. To have all the documentation And the agenda of the event, please go to our website in the IR Shareholders General Assembly section. And of course, please reach out Regarding the communication and the financials, Teleperformance first half Results will be released on 28 July with a webcast planned that day. Of course, teleconference will continue to In the coming months, we have numerous digital conferences organized by brokers. In parallel, don't hesitate to contact us Thank you. Bye bye. Have a good day. And of course, let's continue. Thank you. Bye bye. Thank you everyone for joining today's conference. You may now disconnect your lines.