Ladies and gentlemen, welcome to the Q3 Revenue 2019 Teleperformance conference call. I now hand over to Mr. Olivier Rigaudy, the Deputy CEO and CFO. Sir, please go ahead.
Good evening, everyone. Thank you all for your presence tonight. We are here together to comment on our Teleperformance Group revenue as of 30th September 2019 that we just released. I'm hosting this call from Paris with the Investor Relations team and Quy, our Head of Investor Relations, has primary comments to make before starting the presentation.
Thank you, Olivier. Good evening, everybody. Welcome to this call. Financial perspectives related to the first nine months and the third quarter 2019 revenue had t he market. Dedicated slides are available on Teleperformance website in the investor relations section. As usual, Olivier's presentation will be followed by a Q&A session. A replay of 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 Teleperformance website. Now, I turn the call over to Olivier.
Thank you, Quy. Before going in depth into Q3 and first nine months figure with the slide, I just would like to highlight three key messages 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% like-for-like growth, this is the 13th quarter in a row posting organic growth above 5%. That demands, again, the strength of our business model that allow 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, Core Services and D.I.B.S. and Specialized Services has accelerated in Q3. As a result, for the first nine months of the year, like-for-like growth posted 11.5% versus 10.4% for the first six months.
Second, this acceleration result from the successful deployment so far of the high-tech, high-touch strategy presented last month at the Digital Day in Santa Clara in the heart of Silicon Valley. This strategy aims to become a global leader in business services in integrated digital solutions. Our ongoing digital transformation to better address client demand goes through strengthening our organization and investing in business-critical areas such as cybersecurity and the development of expert teams specialized in data analysis and automation. Third, this strong performance allow us to raise our financial objective from the full year in terms of sales from at least 8.5% like-for-like to around 10%.
As always, mind Q4 is always difficult to predict precisely as very firming driven, and this year, more demanding commerce, especially in Europe, but not only, also in ex-Intelenet and Teleperformance India, that was not part of the figure last year. We also confirmed the 2022 objective we raised a few weeks earlier at the Digital Day, reflecting our confidence in the success of this transformation strategy. Let's go on nine months on Q3 performance in more details through slides. Let's move to the slide three. Group revenue amounts to EUR 3 billion 916 million, up 24% as reported, and plus 9%. No, not 9%, 11.5% on a like-for-like basis in the first nine months of 2019. Third quarter revenue posted EUR 1 billion 352 million, up 25.6% as reported year-on-year, and plus 13.5% like-for-like, making an acceleration compared with the first two quarters of the year.
It's globally a solid performance, reflecting not only further growth momentum, but also favorable comps in Q3, especially in some regions, Europe and Specialized Services. Let's move on to slide four. I like this slide, and I know all of you know him, because it shows one of my key messages on Q3 performance regarding the long-standing sustainability and strong momentum we enjoy today. 30 quarter straight in a row, posting organic growth above 5%, and the strongest quarter ever achieved year-on-year since 2012. Again, let's move on slide five, and you see the classical slide that you know that shows the cash flow bridge, explaining the growth component for the nine months. Of course, there is a $65 million currency effect that is positive, mainly for US dollar.
A big impact within scope is a consolidation of Intelenet since Q4 last year, with an impact of EUR 337 million, with a like-for-like growth of 368%. If we move now on the slide per region. Before, I just wanted, sorry, I should have started with the slide six, to show you what is key for me in this slide. If you look to the Q3 first. The 12% like-for-like growth in English speaking markets. You remember that we started the year mostly, we grew progressively along the quarter. It is really visible in this quarter. Also the growth of the Specialized Services that we mentioned to the market that is growing now at 10.7% on this quarter.
That are for me, the two stats that need to be highlighted in this presentation, beyond, of course, the good result of Ibero-LATAM, that is, I would say recurring, and the good figure of continental Europe too. I'll come back in the Indian, Middle East figure, which are, of course, more limited in term of size. If we move now to the Core Services & D.I.B.S. and the English Asia market, English speaking and Asia Pacific market, we call it EWAP. You have here on page seven the figure that are also for the nine months and for the three months. Of course, we are now 12% like-for-like for the Q3, giving a 7% like-for-like for the first nine months. We saw the increased acceleration of the like-for-like growth, which was 2.8 in Q1 and 6.1 in Q2. Where does it come from?
Healthcare, retailing, transportation, service, and logistics. Of course, offshore business from the Philippines and Latin America are really good. In Asia, the growth was mainly sustained by Malaysia. Since we opened the second multilingual hub for content moderation, the solution is dedicated to large social networks. As far as U.K. is concerned, we are still declining revenue in U.K. to a lesser extent than each one, in an environment that is at least uncertain. I've hard time to tell you what is going to happen in this country. I'm not the only one, I believe, to have this comment to make. We move to Ibero-LATAM, I would say nothing more to tell. Figures are speaking by themselves, even if there is an acceleration in Q3, it is, I would say marginal. We are 16.1% in Q1, 16.2% in Q2, 18.5% in Q3.
We have always the initial solutions that are strong driver for the region, Colombia, Mexico, but also domestic market in Colombia, Mexico and Argentina, even if it was, I would say, swallowed by the inflation, which is roughly dynamic. Portugal remains an important source of growth, and operation in Brazil are satisfactory, probably in financial service and logistics. All in all, of course, figure are different from country for country, but the global Latin region is doing well. Let's move to Europe. Again, very solid sales performance among multinational clients and fast-growing local market leader, especially 10.8% in Q3, means 13.2% for the first nine months. Of course, as a result, the multilingual hub capability of the group in Turkey, in Greece, sorry, but also in Eastern Europe, in Turkey, growth also significant. We know that the comps expected in Q4 are very challenging.
I remember you that last year for Q4, it was +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 India now on page 10, I remember you that in the like-for-like figure here, you have only what we call the previous business of TP India, which is the Indian business that Teleperformance was doing before acquisition of Intelenet. It's the last quarter where you have only TP India. We have a significant growth, as you can see. It's still small as a business. Next quarter, you will have the full business in India, including the Indian business and Intelenet. That has also good significant, I would say, comps to beat in Q4, even if they were not part of this figure last year.
Specialized Services. I'm sure it will please a lot of you that we are, I would say, coming back to growth on Q3, which is 10.7% like-for-like, which is mainly driven by LanguageLine Solutions and also by TLS. I remember you that we made 3.7% in Q1, 6.3% in Q2, and now 10.7%. Acceleration growth in LanguageLine and good growth also in TLS, thanks to the progress in sale of value-added service. The Q4 for TLS is less important, but the growth is also good in this area. Good growth in Core and BPS, good growth in Specialized Services. What we say that we are going to deliver an annual like-for-like growth of around 10%.
We continue to guide the market on 20 basis points more in the EBITDA margin before non-recurring item, and with a strong net free cash flow that we are maintaining. Of course, on page 13, we reiterate the 2022 objective that we just announced 16 days ago in Santa Clara. Nothing new. Organic growth at least plus 7% a year over these three years to come. That means EUR 6.5 billion excluding acquisitions. On top of acquisition, which is between EUR 260 million and EUR 500 million, we believe that we could be at EUR 7 billion by the end of the period. Again, with a 10 basis points increase every year per year during this period. That's what I wanted to tell you about the figures. I'm, of course, open for the questions. I'm open for the questions. Let's go for question and I'm listening to you.
Ladies and gentlemen, if you wish to ask a question, please press zero and one on your telephone keypad. We have a first question from Alan Saye from UBS. Sir, please go on.
Good evening, [Laurent]. Alan Saye from UBS. Just three quick questions from my side, please. Firstly, can you please break out the growth in Specialized Services between LLS and TLS like you did in the last quarter? Tied to that, in TLS, can you perhaps break out between what is volume-driven and new contract acquisition, in the quarter as well? Very lastly, you comment on the ex-Intelenet revenues in India and Middle East, which were growing at a satisfactory pace. Perhaps can you give us an indication of the pro forma organic run rate for that division ahead of consolidation in 4Q? Thank you.
Just to make it simple, LLS is growing faster than TLS, double-digit. No. Sorry, I made a mistake. TLS is growing faster than LLS. Even if both of them are double-digits. That's what I can tell you. You remember that in this division, there is still a business called AllianceOne, which is a debt collection business that is declining, still declining this quarter. That explains this figure. TLS is higher than LLS in growth. Second question was linked to Farming and hunting. Farming and hunting. I would say we are here at 50/50, I would say. Clearly, the farming will be higher in Q4 than in Q3. We are roughly 50/50. Big volumes are coming from farming, are much more coming starting October, November, and December.
We are in the same trend that what we are seeing on a regular basis. As far as ex-Intelenet is concerned, which is difficult now to follow because it's split across different regions. We are a little less than double-digit in terms of growth. We will be less this year. Knowing that the quarter of Q4 is going to be tough to beat, but we have good growth. Good growth in this business, too.
Brilliant. Thank you very much.
Thank you. We have the next question from Ezra Sandler from Morgan Stanley. Sir, please go on.
Evening. Thank you. I don't know how many I've got, a couple. If I understood you right, you said that the comp effect in Somnia would be pretty hard in Q4, which suggested you think it's going to be down organically in Q4?
No, not down. The growth will be lower. That's what I'm telling you.
Okay. I know you don't talk about margins on this call, but if we were to think about the 12% in EWAP, 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 previous. From what I see, we have exactly the same trend that we had for the full year. We are ramping up contracts that were 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 terms of percentage, in terms of breakdown, the same way in Q1 than in Q2. There is no major difference. The only thing that makes a little difference is U.K. is a little less bad, let's put it this way.
Okay. Finally, you made it sound at the beginning of the call like you were sort of slightly optimistic that cash performance this year should be pretty good. I just wonder how much incremental CapEx you've had to put in above what you previously expected in order to capture this growth rate in Q3.
In fact, we have announced at the beginning of the year that the CapEx will be in the range of 4.2, 4.3. I don't know exactly where I'm going to land, something around 4.6 and 4.7, maybe 4.8. As Pierre just said, it's too early to tell, because what's happening in Q4, there are a lot of CapEx that are done for next year. 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 or in Q1 next year. That's the reason why I'm less confident. Clearly, the growth of the CapEx, that deserves it, the nature of this growth were mostly done in Q1, Q2, and Q4. In Q3. Q4 is much more for next year. I believe we might go to 4.8, but it's difficult to tell today.
Something like that, yes.
Okay. Sorry to be a pain. A follow-up to one of [Bilal's] questions. Are you able to give a number for how much AllianceOne was trading down this quarter?
Sorry, I missed.
Are you able to give a split of revenues that AllianceOne 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.
I understand your question, but more than
Okay.
We hope to be able to revert that next year.
Thank you. We have the next question from Nicolas Tabard from Kempen. Sir, please go.
Good evening, everyone. Thank you very much for taking my question. The first question would be on the understanding comparison base in the EWAP region, as you have stated, changed the scope. You said that you don't expect really to see an acceleration in Q4, but would you still manage to keep the same level as you had in Q3? What's your view here? How much of the U.K. situation is important on this estimate? On the Specialized Services, comparison basis seems fairly okay for Q4. Do you expect to manage double-digit organic growth with what you see now, as you just said, that you hope to reverse the AllianceOne situation and you see additional mix effect with TLS? Thank you very much.
On EWAP, I don't know, to be honest. On EWAP, Q4 last year was the highest level because it was +7%, if I'm not mistaken. There are two effects that I don't know. U.K. is not going to improve, I believe. I'm not saying it's going to decrease more, but I'm not seeing any improvement of that. What I don't know so far today is the level of the farming, because I've had time to see that. Remember last year, I give you a sequence of EWAP. We were at +3% in Q3, +7% in Q4. More than double between Q3 and Q4. It just figures that are significantly higher in Q4. I'm not sure we are going to deliver 12% in Q4 in EWAP. Frankly, I don't see that happening. Maybe I'm wrong, but it's too early to tell.
I would not bet on that. That's the first point. Second point on Specialized Services, what I can tell you is that, again, that probably is something which is difficult for me to predict, because volume is linked, especially in TLScontact, and again, it's also linked to the U.K. situation. I don't know whether this famous Brexit will happen today or not. What will become a tradition, we discuss that for years and years. As far as LLS, I don't see why they should not continue to deliver something in the same range. That's what I believe. It could be a little less, it could be a little difficult to predict. I've much more visibility on Iberia or LATAM, which is going to be good. Clearly, again, because I'm on these two stuff, but clearly, that's what I see today.
Thank you. Could I have another question, please? On the margin guidance, could we have sort of an idea of what the pressure you have on OpEx from these investments that you're making, the one you mentioned on obviously the deep new expert team and so on, to have sort of an idea of why you are able to raise the organic guidance, we don't see the effect on the operating leverage not raising the EBITDA margin guidance.
What we said to the max. First of all, it's not a margin call, so I'm not going to enter in much detail. I know it's a field, but I guess here we are speaking of right figure. First off, I'm not going to enter in detail. The margin is made of different sets. There are some volume, I would say mix effect, and there are different effects, and there are also costs, so cyber costs, and costs like that. It's difficult to enter in detail so far without having the right figure in detail. 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 Joussen from Societe Generale. Sir, please go.
Yes. Good evening, Olivier. Can you hear me?
Yeah, 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?
Second question, could you confirm that there will be no more scope impact in Q3? Third question, regarding the organic growth calculation in Q4, I guess that the new base will include Intelenet. Could you elaborate on this, and does it change something that you have or not Intelenet in the base to calculate the organic growth?
On the drop you are speaking of, I have no specific figure, specific reason to tell you. I'm not sure it's something that covers something that is real. It's much more a mixed effect, probably. I have nothing precise to give you on that. That deserves to be the same. Clearly, there is no more scope effect in Q4, that's for sure. On this, as I told you, Intelenet, the Q4 last year, that is not in the figure, are already very high. I'm just telling that it's going to be.
It was not in the base last year and in the previous quarter.
Exactly. Comes in Q4. That's what I'm trying to explain badly. That is the story.
Okay. Thank you.
Thank you. We haven't any more questions. Ladies and gentlemen, I remind you that if you wish to ask a question, please press zero and one on your telephone keypad. We have another question from Nicolas Tabard from Kempen. Sir, please go ahead.
Thank you very much for taking another question from me. I had a short one. You mentioned in the 1st place that you were particularly interested in Specialized Services, businesses for your target acquisitions. Could you remind us exactly what budget you forecast for these potential acquisitions by the end of the plan? Precise so if you're rather looking into, let's say, more Intelenet-like companies or rather Specialized Services-like companies, and how your pipeline looks so far. Thank you very much.
Okay. We are looking for Specialized Services company, much more like what we have, TLS, LLS, and others. The idea of the size, it's difficult to tell. I don't want to tell to the seller how much I'm prepared to pay. Anyway, clearly, we are looking for business that in term of sales could be between EUR 300 to EUR 268 minimum to EUR 500, EUR 600 in term of sales. If you imagine that this business is delivering good margin, because we will never buy something that is not profitable, at least at the level of the group, maybe more. It gives you some idea that make figures that are significant. We have stuff in the pipeline. There is nothing new about pipeline. Pipeline is, we are 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 different 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. That is, I remember you Specialized Services, probably much more in U.S., with good figure, probably, with a higher, at least at the level of the group, ratio. We don't want to overpay in the meantime. That are the criteria that we want to achieve. It means that it is not so easy to make, but we are looking from different stuff.
Thank you very much.
There is other question?
We haven't any other question.
Okay. As there is no more question. I would like to thank you for your participation to this call and your interest in our group. This is a good figure. Question now is to the future. We are committed to deliver good figures for 2019, of course, and 2020. We'll have discussion later on that stuff, in the coming weeks. Thank you so much for your attention and your participation. Bye-bye. I leave Quy give you some details.
Yes, we'd like to specify a few key information and dates. As usual, our new result will be released late February, early March. Please note also that the documentation, all the documentation related to the group Digital Day held in Santa Clara on 17 October, is available online on Teleperformance website in the Investor Day section, and the packet includes the presentations and the webcast of the events. Of course, as usual, Teleperformance will continue to participate at the end of the year to numerous conferences, October conferences, and we'll be happy to see you there. Thank you.
Thank you. Bye-bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.