Welcome to Teleperformance first quarter 2024 revenue. My name is Melissa, and I will be your coordinator for today's event. Please note this conference is being recorded, and for the duration of the call your lines will be in a listen-only mode. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I'll now turn the call over to Olivier Rigaudy, Deputy CEO and Group CFO. Please go ahead.
Thank you, Melissa. Good evening to all of you, and happy to have you tonight to speak about—to talk about our Q1 result. Let's enter directly into the next topic. Let's start. Maybe Quy, you can give some information, but disclaimer. Quy.
Yes, sure.
Yes. Go ahead on the disclaimer, please.
Yes, just to specify that all the forward-looking statements reflect Teleperformance Management's present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results as described in the forward-looking statements. So for a detailed description of these factors and uncertainties, please refer to the Risk Factors section of our Universal Registration Document available at www.teleperformance.com, our website. Teleperformance undertakes no obligation to publicly update or revise any of these forward-looking statements. So the floor is yours.
Thank you, Quy. So let's enter into the topic. Next slide, please. So what are the highlights of this first quarter? I'm going to be as quick as possible but as direct as possible. It's a good start of the year, which is a little above our expectation, and we confirm with full-year guidance. When we get into detail, I just wanted to point out the following points. So the gross, year-on-year, reported growth is 26.7% for the Q1. All pro forma growth and I'll come back in a minute to explain what pro forma is in Q1 2024 is + 0.9% in the range of the expectation and on track to achieve our annual financial objective in 2024. I will talk a little more if you are interested in ongoing implementation of AI, GenAI solutions that continue to accelerate our client growth and international efficiencies.
Another point which is key is the integration of Majorel, which is perfectly on track, and we confirm the expectation to generate EUR 150 million cost synergies on a run-rate basis by 2025. We will have this year, which is a clear focus of the group, a continued cash generation and return to shareholders while keeping a robust balance sheet in place. Just a word about pro forma growth. As we have bought, I would say, Majorel in November, we have designed pro forma growth including Majorel from the first day of 2023, even if we acquired the company only in November. So we will show the sales figures including Majorel for 2023 to help the comparison. Next slide, please. So that's the financial figure. Nothing new. So we are reporting EUR 2.542 billion versus EUR 2.0 billion last year.
Of course, the reported figure is increased by the Majorel figure. I'll come back in a minute. The pro forma is 0.9. This is the figure. Nothing material to tell about the dollar, which is key for us, which is roughly the same from Q1 2023 to Q1 2024. Our pro forma growth is on track. I confirm again our financial guidance for 2024. Next slide, please. If we want to understand what happened in Q1 2024, we designed the evolution of the sales like that. So we remember that last year in Q1 we realized EUR 2.0 billion, of which we had this year EUR 541 million from Majorel to achieve the Q1 2023 pro forma figure on which we are going to compare the Q1 figures that I'm going to express in a minute.
There is a limited currency effect, mainly made of difficult currency like Turkish lira, Egyptian pound, and also to a lesser extent U.S. dollar, that is negative by EUR 28 million. We have a pro forma growth of EUR 23 million of the 0.9%. I just wanted to highlight two things. These figures are totally fair and clean and easy. There is no more COVID. This year, this quarter, there was no impact on inflation. The level of the devaluation was absolutely linked to the CPI in the two countries we are speaking of, Turkey and Argentina. There is no impact of that. These figures are totally comparable from a year standpoint or quarter standpoint, sorry. Let's move to the next slide. This is just to show what happened, in fact, the profile of the year.
We have put there on a full-year basis, quarter by quarter, the evolution of the sales of last year, including Majorel and the like-for-like growth, which is estimated at 11% in Q1, 6% in Q2 last year, 4% in Q3 in 2023, to land at 11% in Q4 last year. So this is the picture of what we are fighting against this year because 2024, the 1% growth that we delivered this year has to be compared to the 11% growth that we had last year, which is a higher base of comparison that the group had in 2023. And all along the year, the year-over-year comparison will improve. This is going to help us, of course, to give some credibility to our full-year 2024 outlook, which is between 2% and 4%, as you remember. So growth decline beginning to drop. Next slide, please.
Where does this growth come from? This growth is, of course, driven by Specialized Services and core activity in APAC in India. Here you have the evolution of the growth by region. You have the Americas. The Americas, I just remind you for those who might have forgotten it, it's made of North America, South America, and what I call the satellite, India and Philippines, because these two countries are working mostly for the North American market. So together, these figures are declining by EUR 34 million, mainly driven by the offshoring of the business in India that continued to accelerate in this quarter versus previous year. The EMEA and APAC region is growing by 1%, meaning we have good figures in the multilingual hub in Asia-Pacific.
The Specialized Services is growing notably in the U.S., very, very, I would say, very, very sharply at close to 14%, which delivered EUR 43 million in this quarter. This is the way the growth has been distributed all along the quarter. Let's move to the next slide. Just to show you now the pattern of the group on the right side of the slide, you have the Core Services, which is made of Americas and EMEA and APAC, which is 86% of the business. Both regions are roughly equal, while we have Specialized Services, which is 14%, mainly based in Americas, in the U.S., North America, notably for LanguageLine Solutions, PSG Global Solutions, and Health Advocate, TLScontact being much more European.
On the left side of the graph, you will see the evolution by vertical that shows that the group is, as usual, very, very diversified, unable to swallow any difficulty, whether it's by vertical and also by region, or also to take advantage of this position. Next slide, please. The mix by main business line is just to show that the customer care is 54% of the business. The rest is made of a wide range of value-added activity, while even in customer care, you have very, very much GenAI and AI business that is developed here and generating a lot of value. Next slide, please. The Majorel integration plan is on track, perfectly on track. We are exactly aligned. I just wanted to make it clear that Majorel business is no longer tracked on a standalone basis since January 1st, 2024.
So I'm not following at all Majorel on his previous, I would say, pattern or previous presentation. This is no more integrating all the business units of the group, whether it's geographical or functional. So they are mixed with the Teleperformance previous business. We confirm the cost confirmation of the cost synergy plan. Nothing new. That was announced early March on a run-rate basis, EUR 150 million by 2025, and on a run-rate basis, EUR 50 million in 2024. Most of it is coming from labor, not surprisingly, some premises too, and other, which is mostly made of some corporate stuff plus IT topics that are also under review as we speak. Finally, I'm going to finish with the last slide just to let you know two things. We maintain absolutely our 2024 outlook. The pro forma annual growth will be between 2%-4%.
Of course, we understood that the second part of the year should be easier, not only with basis of comparison but also increased new business expected. The EBITDA margin is confirmed to be up by 10-20 basis points versus the annualized pro forma basis of last year. We do believe that we are going to increase our net free cash flow, and we will continue to cash return to shareholders up to two-thirds of the net free cash flow through dividend and share buyback. But we want to keep our robust balance sheet with a leverage of less than 2x EBITDA by the end of this year. This is the figure of Q1, and I'm over with the presentation.
I'm ready to take the questions. To make it simple, I do believe this quarter is a good quarter. It is generating growth that was a little better than what we expected. I would say exit rate in March is significantly good, even if March figure in March month was not the easiest one given the calendar effect that we had. So we are reasonably confident for the rest of the year and to achieve our guidance. So I'm ready to take all your questions.
I'd like to ask a question. Please press star one on your telephone keypad to register your question. To withdraw your question for any reason, you may press star two. You will be advised when to ask your question. Our first question is from Simona Sarli with Bank of America. Please go ahead.
Yes. Good evening. Thank you very much for taking my question. First of all, on Core Services, you mentioned that they reported strong pro forma growth but then declined by 0.9% due to the headwind from offshoring. Can you maybe provide a little bit more detail on the headwind from offshoring for this division? Also, you mentioned that the exit rate in March was very good. Clearly, the comps are 500 basis points easier, so going from +11 to +6 for Q2. How should we think about Q2? If you can please comment a little bit on the momentum on volumes? Thank you.
So headwind, it's difficult to comment. So what's happening in the U.S.? In the U.S., in Americas or the U.S. market, because it could have been, I would say, executed either in North America or Mexico or Latin America. Part of this business is moving to India. A significant part of this business is moving to India. So of course, you have a decrease of the published figure of the U.S. market, of the U.S. core service market. I'm not speaking, of course, of Specialized Service, which is growing dramatically, and Latin America to a lesser extent that moved to India. So this is quite massive. How can I say that? The Indian business is growing more than 15%. It gives you some idea of the size of the switch in Q1. So it shows that a lot of businesses move from North America or North American market to India.
This probably will continue all along the year. It's difficult to predict exactly what will be the outcome at the end of the day. But this is real. About the exit rate, what was the expectation of the market? I'm sure you have noticed that March was a complex month this year because there was two days less than last year given Easter that fell, I would say, was happening in March versus April last year. So we were not expecting a fantastic March. But finally, March figures are reasonably good, growing despite this two day calendar negative that is going to revert, of course, in April and should help Q2. That's what I can tell you. We are quite, of course, careful on the full year. We know that the H1, if you make a comparison to summarize, will be a base of comparison above 8%.
So it's not so easy to beat. So I don't know exactly what will be the figure in May and June, but April should be okay. We'll see where we are going to land. But the volumes are reasonably here. They are not fantastic, but they are far from being negative, largely. And again, it's the first quarter, so we have to be careful. The year is not over by far, but it's a reasonable good start. That's what I can tell today.
Thank you. Maybe if I can just kindly squeeze one last one, and that's about specialized solutions. Can you talk a little bit about the sustainability of this growth trajectory through the rest of the year, please?
This is a permanent question since we bought the LanguageLine in 2016. I remember perfectly at the time of this acquisition, people were just, I would say, questioning the sustainability of this growth. This company has doubled in size since 2016, and not only this one. TLS also is growing fast. So what we see, at least for LLS, is the same kind of growth all along the year, maybe 2%-3%, 1%-2% ± is difficult to tell. But as a whole, we see a LanguageLine Solutions delivering fantastic growth all along the year, yes.
Thank you.
Thank you. Our next question is from Suhasini Varanasi with Goldman Sachs. Please go ahead.
Hi. Good evening. Thank you for taking my question.
Hi.
A question from me, please. Hello. You've mentioned that you won additional new business in recent months. Can you perhaps share some color on how the sentiment is today?
I've had time to listen. What you said? You said that color on April?
Yes.
I had time to hear your question. Sorry.
Hello. Can you hear me?
Yeah. Hardly, but go ahead.
Can you hear me?
Hardly.
Perfect. So just asking about the additional new business that you won in recent months. Can you share some color on how the customer sentiment is today versus last year where you actually saw project cancellations or delays, and maybe also some color on which geographies and verticals are seeing the improvement? And then I'll ask the next question after this. Thank you.
Okay. So there was growth last year. You remember. We were doing 11% in Q1 and close to 6% in Q2. So I'm not saying that, again, people were growing last year. So of course, by nature, we are at the lower level versus last year. What we see is that specifically on travel and hospitality and BFS, bank and finance business, and to a lesser extent in media and entertainment and gaming, still growing business. So that's what we see. This is roughly spread across geographies. There is nothing specifically different from a geography to another. But as a whole, of course, when you compare to last year, the volume is lower, but we are starting from higher base. But the thing seems not dramatic. That's what I can tell you.
Got it. Is it a bit sad to say that it's maybe seen some improvement since 4Q?
I understood from your question because I have had time to hear you, whether it is going to improve over the next quarter. I hope. This is, I would say, not to bet or guess. We do believe that we are going to see specifically in the second part of the year much more than Q2. Of course, it's always difficult to predict, but the base of comparison is going to ease dramatically in the second part of the year and will help us all along the year. So business is still there. You have to be ready. You have to be able to deliver and to offer solutions. That's it. But it's difficult to tell more as we speak. But frankly, we are in a reasonable good direction, I would say.
Got it. And the last question from me, please, is on the margin expansion potential for first half. Can we expect some improvement on a year-over-year basis, or is that more weighted to second half of the year? Thank you.
Probably the second half. So I'm not there to speak about the margin, but we know that the H1 will be more complex than the H2, of course, given the operational leverage, given the different topic, and given the synergies that should come much more on the second part of the year. But yes, you are right. But I'm not going to give any more upside on the 10-20 basis points that we have announced early March.
Got it. Thank you.
Thank you. Our next question is from Antonin Baudry with HSBC. Please go ahead.
Yes. Thank you for squeezing me in. Good evening, everyone. The first one is about revenue growth. Another way to ask the question on the environment, did you experience any surprise this quarter, good or bad, on which sector? Is the environment become less volatile and more predictable in Q1 versus previous quarter? And would it be possible to have more color about trends in tech clients, which represent a big part of your business? My second question is about margin. I know it is only Q1, but if you have a strong growth of offshore, and if you combine with cost synergies, would you say that the full-year guidance or full operating margins for the full year now appear cautious? Thank you.
No, the general environment, frankly, I would love to tell you this is significantly improved. There are some modest signs. I don't want to sell the bear until we have killed it. So it's too early to tell that. There are some good signs, some very, very minor signs. So don't overestimate it. We don't want to be caught by the way we have been caught last year. So we are going to stay careful. Things are reasonably okay. So, you know, Q2 is not always the most important quarter, as you know, the most important quarter being in Q3 and Q4 and to a lesser extent Q1. So it's difficult to tell, but we are not seeing collapse at all. The environment could be blurry in some place. So it's difficult to say the market is less volatile than it was.
I cannot tell that today, even if I believe that we are well placed to take any advantages. So frankly, I'm not sure it's answering your question, but there are still uncertainties, and we want to be careful specifically on Q1. On the margin, you're right. Two or three things to tell. First of all, operational leverage is much more in the second part of the year. First, synergy will be much more accounted for in the second part of the year.
We know that we have some FX that is playing against us, notably in transaction in Latin, specifically starting first half. So we are also careful. So I hope our 10-20 basis points will be careful, will be, I would say, conservative, will be in a better position in H1 to comment on that. And I don't want to commit on anything different so far. But it's true that the balance between H1 and H2 should be favorable to H2. That's what I can tell you.
Thank you, Olivier. I have a third question. It's about the return to shareholders. You reiterate that 2/3 of free cash flow.
Up to 2/3.
Up to 2/3. Sorry. Will be returned to shareholders. It's possible to update the share buyback program currently, the current share buyback program, on what we should expect when this program will be finished. Thank you.
So as you may remember, the program was EUR 500 million that was announced the 11th of August last year. Out of this EUR 500 million, EUR 430 million has been already done. We will announce at the next board, after the general meeting, the cancellation of the repurchased shares, again, just as planned. So there are still in fact, if you make a quite small basic computation, we are buying shares around EUR 60 million-EUR 80 million every month. So there are still one month to go.
The board will make a decision after the general meeting that should take place on the 23rd of May after this. So we align that. What we want absolutely is to keep our debt until 2x the EBITDA. This is, I would say, something we want to do. So we will adjust based on our, I would say, forecast and on the figure what can be done. So again, we are not saying that we are going to make two-thirds of the cash flow, but up to two-thirds of the cash flow. I just wanted to be clear on that.
Thank you, Olivier.
Thank you. Our next question is from Carl Raynsford with Berenberg. Please go ahead.
Good evening, Olivier. Just three from me, please. First, I'll take them one by one. But the first one, what are the positive movements you're seeing in retail and tech, just to suggest the momentum is improving? I know you mentioned it in the comments. That's number one.
Retail?
I'll take them one by one, sir.
Okay. Retail and tech are not the most, I would say, booming sector, as I told you. We are much more seeing dynamism of sales in BFS and travel and hospitality and entertainment and gaming. Retail and tech are just behind, I would say, correct, not booming, correct.
Fine. Okay.
That's what I can tell today.
Yeah. Second question, just around the new contracts in financial services in both.
The new what? Sorry.
Sorry. The new contracts you were saying, the new contracts signed in financial services in both segments. I'm just wondering, are those separate contracts, or is that one contract which is global?
No, no. They are separate contracts. There is no big fish, let's put it this way, because that's a question that you may ask. There are plenty of different contracts that have been signed that now need to ramp up, specifically in travel and hospitality, BFSI, media entertainment, and all of that that should ramp up. So this is the name of the game today. We have to ramp up. It's a good start, but it's far from being totally done. But there is not a big fish, let's put it this way, because it's somewhere your question that is behind.
Yeah. Fine. Okay. Thank you. And lastly, just around resourcing demand decreasing, I think you said in the comments, which I find quite interesting. It goes against a lot of rhetoric, I think, more broadly in the market. So why is that happening? I know you're getting, obviously, demand for offshoring versus decrease in resourcing. Do you have any sense if that's structural or temporary, what the reason for that is?
Because people want they want to associate, I would say they are looking for savings. They are looking also for efficiencies. To a certain extent, it's a leap.
Are those efficiencies and savings then more prevalent in India versus, I don't know, Colombia, for instance, if we're talking offshore?
Yeah, but sorry. Sorry. It's partially linked also to the forex issues. I'm sure you have noticed that either for Colombia and for Mexico, the increase in the currency made this destination, if I may say, less appealing than they were before. So a part of the story is there also. People have moved business from a region to another, not all of the business, of course, but a significant part of it. And that's happening, yes. It's savings. And people, especially in English, are much more keen to offshore, much more than nearshore. That's what we are seeing. But this is a trend. This is a big trend. As I told you, India is clearly growing very fast.
I don't know if you remember, but in the presentation we did in March, we showed that India was growing very fast, and it is continuing. This is what we are seeing. India is now one of if not one, it's by far the most important, I would say, delivery country of the group, and it's still continuing to grow. When you look at the competition, you see the same trend.
Perfect. Thanks, Olivier. Appreciate that.
Thank you. Our next question is from Nicole Manion with UBS. Please go ahead.
Good afternoon. Thank you for taking my questions, mainly on Majorel, if that's okay. I know you've said that you're no longer tracking that separately, but you've commented before on the need to install a growth engine here and maybe the potential for some revenue to synergies, although I know you've said before that you don't expect these to be all that significant. Could you maybe give us an update on the progress here? Is disruption likely to increase through the year, and is that part of your sort of cautious guidance? Any kind of extra color on that would be great. Thanks.
No, I'm not going to comment on Majorel, which is now totally mixed with our different business unit. What we know for sure is that the 2023, I would say, base of comparison for Majorel was different than what we call TP, original TP. That's part of the story that we are living today. But all in all, what we see, of course, integration is far from being finished. There are plenty of things to be done, but we are perfectly on line. There are still, I would say, big stuff to be done, and there are still operations to be done in some countries. But we are running fast. We are running fast on operation, marketing, and sales, system and security, and also some cost.
The main story for us is just to make sure that the so-called Majorel part is now totally embedded with Teleperformance and makes only one company. That's where we are. We are rushing to do that. We hope to be well advanced by the end of this year. Teleperformance has a lot of deals, and you are the first to know them. But the ability to integrate companies is something that Teleperformance is able to do quite well. We are working on that. We are working as maniacally as we can, as slow as we need. Of course, we have to take care of different topics, but we are well on track. I don't know if it answers precisely to your question, but that's what I can tell you about Majorel integration.
No, no. That's helpful. Thanks. Maybe just a quick follow-up. I can see that you've given quite a few, obviously, pro forma figures from 2023 in the presentation. Maybe this is me missing it, but have you given that geographic detail for core services for the quarters last year anywhere? I mean, I can see it for Q1.
I'm not sure we have done that yet. We are rushing. There is a lot of work to be done. I hope we would be able to do that quickly, of course, but I'm not too sure because we need to make a consolidation by the end of June. So we are rushing to do that. If we are able to do it by region as quick as we can, we will publish it on our website. But today, we have not been able to deliver it.
Got it. Yeah. Just wanted to check. Great. Thank you.
Thank you.
Thank you. Our next question is from Markus Schmidt with ODDO BHF Corporates and Markets AG. Please go ahead.
Thanks for taking the question. I have only one left for me that is on your maturity profile. I think you have a bond that matures in July 2025. How do you want to address the maturity? Will you likely come to market in H2 to refinance the bond, and would a tender offer make sense for you since the bond is trading at 97% right now, or would you issue a new bond in H2 and keep the cash on the balance sheet and to wait until the bond matures? Any thoughts, maybe how you want to address this would be helpful.
So we have time. We have more than one year to do that because if I'm not mistaken, the redemption is in September or October 2025, if I remember. So we will see that probably in the second part of the year. Just to be clear to all bondholder, we have no issue of cash. We are sitting pre-dividend on EUR 800 million of cash at group level, and we have no issue. Standard & Poor's just confirmed our BBB rating, I would say, months ago. So we have no liquidity nor financing issue. The debt is totally under control. So we will see what's going to happen on the rate. I'm sure you are much more aware than me of what could happen on the euro and on the U.S. bond, on the U.S. rate.
If there is a window that makes sense for us, we'll take advantage of it. Frankly, it's too early to tell. What I'm telling you is that there is no issue of financing, no access to cash, no access to liquidity, whether it's bond, whether it's banking. Just to remind you that we have a EUR 1.5 billion banking credit line that is undrawn, and we have access to the short-term market as well. So we have no issue of financing. We will make our decision. I do believe I'm not sure we are going to make a decision before the fall 2024, and I don't know what we are going to make as a decision, but we have time to do it.
Maybe one follow-up in this context. I mean, you're producing cash, obviously, every day, basically. So this is clearly not a bottleneck that is not coming from that direction. But maybe you have some bold- on acquisitions in front of you, something like this, other cash out. You have your buybacks, of course. So is there a minimum cash position which you, as a CFO, don't want to undermine? I mean, the minimum cash you want to have on balance sheet always?
Yes. I want to make sure to pay the salary and whatever. So we are careful, of course. And of course, when you are present in one other country, you know that the cash is not coming from day one so easily. But we are working on that on a regular basis. Now, what we know is that we have access to cash. Frankly, our priority today is to integrate Majorel much more than to make acquisition. You never know. We said to the market that we might look to something on a bolt-on acquisition in H2. So far, we have nothing to look at. The way we are valued by the market doesn't help to make acquisition because it's going to be dilutive. So it might happen. It's not the most likely option.
Okay. Good to know. Thank you.
Thank you very much. As we have no further questions in the queue, I would like to turn it back over to Mr. Rigaudy for any closing remarks. Please go ahead.
No, thank you to all. I'm happy to have been able to report a reasonable figure. The year is not finished, of course, but the good start is there. There is two messages that I want you to keep in mind. First of all, a good start of the year, and we confirm our 2024 guidance. Let's see where we are going to land in the second quarter, but we are going to meet again for the H1 end of July. Of course, before, if you want to have some information from the investor relations team or myself. Thank you to all. Bye-bye. Have a great evening.