Earnings Call: Q3 2019

Nov 4, 2019

Ladies and gentlemen, welcome to the Q3 Revenue 2019 Telepar Pharma's Conference Call. I now hand over to Mr. Olivier Legosin, Liberty, CEO and CFO. Sir, please go ahead. Good evening, everyone, and thank you for your all for your presence tonight. We are here together to comment on our Teleperformance Group Revenue as of such as September 2019 that we just released. I am hosting this call from Paris with Inberos Industrial Relations team. And Queer or Head of Investor Relations at Premier Command to make before starting the presentation. Thank you, Olivia, and good evening, everybody. Welcome to this call. Financial press release related to the 1st 9 months and the first quarter 2019 revenue. The market. Dedicated slides are available on Tabafone's website in the Investor Relations section As usual, Olivier's presentation will be followed by a Q And A session. A payer for the conference call will be available later on the group website. Today's call contains forward looking statements that address our expected future performance and that, by their nature, address matters that are uncertain. These expectations are subject to a number of 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 section risk factors in our registration document available on Teleflex website. Now I'll turn the call over to Olivier. Thank you, Fred. Before going in-depth into Q3 and 1st 9 months figure with this slide, I just wanted to I just would like to add like free communication of this release. First of all, of course, we are all very happy with the strong growth recorded once again during this Q3. With close to 14% at like for like growth. This is the 3rd year's quarter in a row, posting organic growth above 5%. That demands again the strength of our business model that allows us to beat the market growth on a regular basis. It is also the strongest quarterly growth year on year recorded since 2012. Growth in all group businesses caused and dips and specialized service as accelerate in Q3. As a result, for the 1st 9 months of the year, like for like growth posted 11.5% versus 10.4% for the first 6 months. 2nd, This acceleration resulted from the successful deployment so far of the high touch strategy presented last month at the detailed day in Santa Clara in the Earth of Silicon Valley. This strategy aims to become a global leader in business service in integrated digital solutions. Our ongoing digital transformation to better address client demand will through strengthening our organization and investing in business critical areas such as civil security and development of expertise, specialized in data analysis and automation. 3rd, this strong performance allowed us to raise our financial objective from the full year in term of sales, from at least 8.5% like for like to around 10%. But as always, 9Q4 is always difficult to predict precisely Thery Farming, and this year, more demand income is especially in Europe, but not only also in excellent volatility in India that was not part of the of the figure last year. We also confirmed the 2022 objective as we raised a few weeks earlier at a digital day, reflecting our commitment in the success of this transformation strategy. Let's go on 9 months on Q3 performance in more details through slide. Let's move to slide 3. Group revenue amounts to $3,916,000,000, up 24% as reported and plus 11.5% on the like for liability in the 1st 9 months of 2019. 3rd quarter revenue posted 1,000,000,352,000,000, up 25.20 25.6% as reported year on year and got 13.5% like for like, making an acceleration compared with the 1st 2 quarters of the year. It's globally a solid performance, reflecting not only sales growth momentum, but also favorable outcomes in Q3. Especially in some regions, Europe and specialized areas. Let's move on to Slide 4. I like this slide. I know you all of you know him, because it shows one of my key messages on 3 performance regarding the longstanding sustainability and strong momentum we enjoy today. 30 quarter traits in a row posting organic growth of the 5% and the strongest product ever had achieved year on year since 2012. Is 2012. Again, let's move on Slide 5 and use this see the classical slide that you know, that shows the cash flow bridge, extending the growth component for the IX Health Finance. Of course, there is a 65,000,000 currency effect that is positive and mainly for U. S. Dollar. And the big impact, I would say, scope is a consolidation fintechlenet since Q4 last year. With an impact of $337,000,000 with the like for like growth of $368,000,000. If we move now on the slide per region, Before, I just wanted to put, sorry, I should have started with the slide 6. To show you what is key for me in this slide. The 12 if you look to the Q3 first, the 12% like for like growth in English and speaking market. You remember that we started the year mostly and we grew progressively along the quarter. It is really visible in this quarter. And also the growth of the specialized service that we mentioned to the market, that's growing now at 10.7% on this quarter. That are for me the two steps that need to be highlighted in this presentation beyond, of course, good result of idel LATAM that is, I would say, recurring as a good figure of Continental Europe to And I'll come back in the Indian Middle East figure, which are, of course, limited, more limited in term of 5. So if we move now to, the cost service and deeps and the English Asian market speaking in Asia Pacific market, where we are, you have here on Page 7, the figure that are also for the 9 months and for the 3 months. Of course, we are now 12% like for like for the Q3, giving you 7% like for like for the 1st 9 months. We saw the increased acceleration of the like for like growth, which was 2.8% in Q1 and 6.1% in Q2. So, where does it come from health care, detailing, transportation, service and logistics, of course, offshore business from the Philippines and the North America are really good. In Asia, The growth was mainly sustained by Malaysia, since we opened the 2nd material hub for content moderation, the solution dedicated to large social network. As far as UK is concerned, we have still a decline in revenue in UK, to a lesser extent than each one in an environment that is at least uncertain. I've had time to tell you what is going to happen in this country. Not the only one I believe to have this comment. If we move to Ybarrelatam, I would say nothing more fruitful. Figures are picking by themselves, even if there is an acceleration in Q3, but this is, I would say, marginal We had 16.1 in Q1, 16.2 in Q2, 18.5 in Q3. So we have already the initial solution that are strong driver for the region, Colombia, Mexico, but also domestic market in Colombia, Mexico and Argentina, even if it's I would say, followed by the inflation, which is roughly dynamic. Portugal remains an important source of growth and operation in Brazil are satisfactory, the public and financial service and logistics. So all in all, of course, figure out different from a country for a country, but the global Latin region is doing well. Let's move to Europe, again, very solid sales performance among multinational client and fast growing local market leader. Especially 10.8% in Q3 means 13.2% in Q3 for the 1st 9 months. Of course, as well as the Machining will have the capability of the group in Turkey, in Greece, but also in Eastern Europe, in Turkey, key growth also significant. We know that the comps expected in Q4 are very, very challenging. I remember you that last year, Q4. It was plus 18%. And clearly, this is something that has to be beaten. And I do not believe that we are going to make it. If we move to Indiana, now on Page 10, remember you that in the like for like figure here, you have only what we call the previous business of Philippines, which is an Indian business that the performance was doing before acquisition at L And A. So it's the last quarter where you have only TIP India. So we have a significant growth. As you can see, it's still small. As a business. So next quarter, you will have full business in India, including the Indian business and LMS that has also good facilities which it comes to beat in Q4, even if they were not part of this figure last year. PCR service, and I'm sure if we please allow a few that we are, I would say, coming back to growth on Q3, which is 10.7% like for like, which is mainly driven by luggage line solution and also by TLS. I remember you that we made 3.7% in Q1 point 3 in Q2 and now 10.7. Again, acceleration of growth in Longeda Line and good growth also in TLS. Since the progress in sale of a value added service. Clearly, the Q4 for TLS is less than less important, but the growth, you're also good in this area. So good growth in specific in core and leads to growth in specialized service. So what we said that, we said that we are going deliver an annual like for like growth of around 10%. We continue to guide the market on 20 basis points more EBITDA margin before nonrecurring items and with a strong net free cash flow that we are waiting for. Of course, on Page 13, We reentered the 2022 objectives that we just announced 16 days ago in Santa Clara So nothing new, organic growth at 6% 7% a year over the 3 years to come, that means $6,500,000,000 excluding acquisition, In top of acquisition, which is between $255,000,000 $500,000,000, we believe that we could be at $7,000,000,000 by the end of the period. And again, with a 10 basis point increase every year or per year, during this period. That's what I wanted to tell you about the figure. I'm, of course, open for the question. We see, I'm open for the question. So, let's go for questions and I'm listening to We have a first question from Alan Saeed from UBS. Good evening, Lauren. Blasi from UBS. And just three quick questions from my side, please. Can you please break out the growth in Specialty Services between NLS and TNS like you did in the last quarter. And tied to that, in TNS, can you perhaps break out between what is the volume driven and new contract acquisition in the quarter as well. And very lastly, your comment on the Exane Tenlet revenues in India and Middle East, which were growing at the satisfactory pace. Can you give us an indication of the pro form a organic run rate of that division ahead of consolidation in 4Q? Just to make it simple, NLS is growing faster than TLS, double digit. Made a mistake. CNX is going faster than LLS, even if it's both of them are double digit. That's what I can tell you. You remember that in this division, there is still a business called Allianz Swan, which is a debt collection business that is declining. Still declining this quarter that explains this figure, but TLS is higher than LLS in growth. Second question was linked to, the farming and hunting. I would say we are here at fifty-fifty, I would say. Clearly, clearly, the farming will be higher in Q4 than in Q3, but we are roughly fifty-fifty from what I Big volume are coming from, from farming are much more coming, sat in October of November. And December. So we are in the same trend that's what we are seeing on a regular basis. As far as as accent Telenet is concerned, which is difficult now to follow because it's split across different regions. We are a little less than double digit in term of growth will be less in this year, but knowing that the quarter of Q4 is going to be a tough to beat, but we have good growth in this business too. Great. Thank you very much. Thank you. We have a nice question from Edra Sandler from Morgan Stanley. Evening, thank you. I don't know how many you've got a couple. If I understood you're right, you said that the comp effect in Sameer would be pretty hard in Q4, which suggested you think is going to be down organically in Q4? No, not down. The gross will be lower. That's what I'm telling. Okay. And if I know you don't talk about margins on this call, but if we were to think about the 12% in E laps, which I think came as a bit of a positive surprise, what proportion of that growth is coming from offshore versus onshore? I would say it's relatively flat from, from previous. So we have exactly from what I see, we have exactly the 10 trends that we have for the full year. We are ramping up contract that we had signed last year or end of last year, beginning of this year, that we're ramping up in the first half, as mentioned, especially in Q1, and growing the same way that we grew in term of percentage, in term of a bit of a breakdown the same way in Q1 and in Q2, there's no, the only thing which is different is that the only thing that makes a little difference is U. K. Is a little less bad. Let's put it this way. Okay. And finally, you made a sound at the beginning of the call like you were sort of slightly optimistic that the cash performance this year should be pretty good. I just wonder how much incremental CapEx you had to put in above what you previously expected in order to capture this growth rate in Q3? In fact, that's what we have announced at the beginning of the year that the CapEx would be in the range of 4.2,4.3. I don't know exactly where I'm going to land, but something around 4.6% and 4.7%, maybe 4.8%, it's too early, but that's the too early to tell, because what's happening in Q4, there are a lot of CapEx that are booked for next year. And weather there. So it's not really not during the year, but they are not during the following year. I don't know whether they will fall in Q4 and Q1 next year. But that's the reason why I'm less confident. But clearly, clearly, we the growth of the CapEx, so I'm mostly, that's a disaster. It's a number of these growth. We are mostly done in Q1, Q3, Q4. In Q3. Q4 is much more for next year. But I believe we might go to 4.8 it's difficult to tell today something like that. Yes. Okay. And sorry to be a pain on a follow-up to one of Bilal's questions. Are you able to give a number for how much Alliance 1 was trading down this quarter? Are you able to give a split of revenues that Alliance 1 now comprises within the Specialized Services division or how fast it was growing negatively this quarter? I just want to understand how long you expect it to sustain. Okay. But I hope to we hope to be able to revisit next year. Thank you. We have a nice question from Nicole Atago from MainFirst. Good evening, everyone. Thank you very much for taking my question. So the first question would be base in the eWAC region, as you have stated, changed the scope. I mean, you said that you don't expect really to see an expiration in Q4. But would you still manage to keep the same level as you had in Q3? What's your view here? And how much of the UK situation is important on the, on this estimate. And then also on the specialized services, composing basis seems quite fairly okay for Q4. Do you expect to manage double digit organic growth? Is it what you see now? As you just said that you look hope to revert the Alan Swan situation and you see additional mix effect with TLS? Thank you very much. So on Ewap, I don't know, to be honest, on Ewap, Q4 last year was the highest, highest level because it was plus 7 if I'm not mistaken. There are 2 effects that I don't know. U. K. Is going to improve, I believe, I'm not saying it's going to decrease more, but I'm not seeing any improvement on that. And what I don't know so far today is the level of the farming. Because that's a tough time to see that. So remember last year, It gives you a sequence of EWAAP. We had 3% in Q3, plus 7% in Q4. So, you more than doubled between Q3 and Q4. So it just on figures that are significantly higher in Q4. So I'm not sure we are going to deliver 12% in Q4 in Europe, frankly, I don't see that happening, maybe I'm wrong, but it's too early to tell. But I would not bet on that. That's the first point. 2nd point on the specialized service, what I can tell you is that, again, that's probably the something which is difficult for me or to predict because volume is linked especially in TLS. And again, it's also linked to the UK situation. I don't know whether if I must break it will happen a day or not, what will be it will become a tradition, we'll discuss that for year over year. As far as NNS, I don't see why they should not continue to deliver something in the same range. So, that's what I believe. So, it could be a little less. It could be a little difficult to predict, but that's I'm much more visibility on Nidea, well, Latam, which is going to be good, clearly, again, Lamanzi on these two steps, but clearly, that's what I see today. Thank you. And could I have another question, please? On the margin guidance, could we have such an idea of what the pressure you have on on OpEx from these investments that you're making, the one you mentioned on, obviously, the, the deep new expertise and so on, sort of an idea of why you are able to raise the ongoing guidance, but we don't see the effect on the operating leverage raising the not raising the EBITDA margin guidance. What we say to Jumak. So first of all, it's not a margin call. So I'm not going to enter in mid detail. And it's a it's a it's a cash here when I'm speaking of right figure. So first off, I'm not going to enter in details. The margin has made a difference. So there are some volume it's a mix effect or and the additional detections are also cost. So side by side, of course, of course, like that. So it's difficult to enter in details so far. Without having the right legal details. So, that's the reason why I don't want to enter such a discussion. Okay. Thank you very much. Thank you. We have another question from Patrick Grusam from Societe Generale. Yes. Good evening, Vivek. Can you hear me? Yes, of course. Okay. I have three questions. Please first question, could you comment on the drop in revenue from the ABS on a quarter on quarter basis? 2nd question, Could you confirm that there will be no more scope impact in Q3? And third question regarding the organic growth calculation on Q4, I guess that is the new base will include interlenet Could you elaborate on this and does it change something that you have or not implemented in the base to like the organic growth? So on the drop, you are speaking of a I have no specific figure specific reason to tell you, I'm not sure it's something that is, that covers something that's clear that is real. It's much more a mix effect probably. So I have no no, not precise on some give you on that. This has to be a big thing. Clearly, there is no more scope effect in Q4, that's for sure. And on this, as I told you, in LNS, the Q4 last year, that is not in the figure, are going to be, to be, are going to be are already very high. So, I'm just telling that it's going to be So it was not in the base last year, and this year, I mean, within the previous quarter, and then it Exactly. It's coming again for That's what I'm trying to extend, I believe, but that is the story. Thank you. We have another question from Nikolasiban from MainFirst. Thank you very much for taking another question from me. I had a short one. You mentioned in the press release that you were particularly interested in specialized services businesses for your target acquisitions. Could you remind us exactly what budget you forecast for this potential acquisitions by the end of the plan and precisely. So if you're rather looking into let's say more internet like companies or whether specialized services like companies and how your pipeline looks so far. Thank you very much. Okay. So we are looking for specialized service company, much more like what we have at DLS, LLS and others. So I'm not for the idea of, of the size, it's difficult to tell. I don't want to to tell to the seller how much I'm prepared today. Anyway, clearly, we are looking for business system of sales could be between $300,000,000 to $258,000,000,000 to $258,000,000,000 to $258,000,000, I don't know, somewhat in terms of sales. So if you imagine that this business is delivering a good margin because there is no we will never buy something that is not profitable at least at the level of the group, maybe more. Give you some ID give you some ID that make, figures that have a significant we have stuff in the pipeline. There is nothing new, but pipeline. Pipeline is, when we're receiving a lot of offers, whether this will be happening or not. Frankly, I don't know what I'm telling you is that we are seeing a difference strong type of situation. And we are looking to them to see whether we can make a good deal and make a deal that match our strategy. So if I remember you specialized service, probably much more in U. S. With good figure, probably I'm not probably with a higher, at least at the level of the group ratio, and we don't want to ever pay in the meantime. That are the real that are the criterion that we want to achieve. It means that this is not so easy to make we are looking from the different stuff. So We haven't had any other questions. Okay. I just want to, as there is no more question, I would like to thank you for your participation to this call. And your entrance in our group. Again, again, this is a good figure. A question now is to, is a future as a way to we are committed to deliver good security for for 2019, of course, in 2020, we'll have discussion later on on that stuff in the coming weeks Thank you so much for your attention and your participation. Bye bye. I'll leave, Qui, give you some details. Yes. We'd like to specify a few key information. And that, as usual, I know, result will be released late February, early March. Please note also that the documentation also documentation related to the group digital pay, having contact around 17 October is available online, and teleperformance website in the Investor Relations section and the packet includes the presentation and the webcast of the event. Of course, as usual, taperon will continue to participate at the end of the year to numerous conferences all your condolences, and we'll be happy to see you there. Thank you. Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.