Welcome to TP third quarter 2025 revenue conference call. For the first part of the conference call, the participants will be in listen only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers, Thomas Mackenbrock, Deputy CEO, and Olivier Rigotti, Deputy CEO and Group CFO. Please go ahead.
Thank you and a warm welcome from our side. Olivier and myself are very happy to present to you our Q3 numbers. Let's have a start. I will give you a short update on the key highlights. Olivier will deep dive on the composition of our Q3 and nine month revenue and then we provide also some further explanation on the outlook that we are currently seeing. Let's have a look at the key highlights. Here are three messages. First of all, the group is resilient and we have demonstrated in Q3 the resilience that we have shown in the first half of the year. It is very simple. We have grown in Q3 1.5% like-for-like which is exactly the same number that we have delivered for the first nine months of this year.
1.5% like-for-like growth and also in the first six months, if you remember the growth was 1.5% like-for-like. We are now at EUR 7.6 billion. We have, and that's the second metrics, also in Q3, a story of two tails. Our core business, our core BPO business, is growing healthy and demonstrates strong momentum. Also in Q3, you see the numbers here. We are close to 4% growth in Q3, which leads to growth of more than 3% for the first nine months. We continue to see strong momentum in EMEA, APAC, and, which is very positive to note in Q3, is a ramp-up and acceleration of the momentum in the Americas.
You see this year in the first half year we were less than 1% growth and we have now demonstrated with the team in particular with the strong performance in India and EMEA but also an improvement in our U.S. domestic market. To go back there of a growth rate of more than 2% in Q3 we see on top of that for our core BPO services, double-digit growth in back-office related tasks as well as in all our AI enabled solutions including AI data services. We are in this part fully on track with the execution of our strategy. On the other hand, specialized services. We talked about this in depth in our half year numbers. There we see a different picture.
As you can see, on a like-for-like basis, if we exclude the famous non-renewal of our visa application contract, the growth is at 2.6%. If you adjust and if you see the number on a true like-for-like basis, we are down at -8.7%, and if you just look at Q3, it is down by -12%. We are doing a bunch of measures addressing this. It is a highly volatile U.S. market that the specialized service team is facing, but they have implemented strong measures to protect profitability, and there we are on a good path. Third message is beyond the numbers. We are making good progress on executing our strategy Future Forward that we presented end of June.
We have set up now an institutionalized group Value Creation office that will focus and is focusing and supporting all our management teams across the world on three things. One, accelerating growth; three, driving efficiencies; and to accelerate the transformation we are working hard on expanding our AI solutions portfolio and I will give you later a sneak preview on the current status and more is to follow in the month ahead. We are continuing to leverage AI in our own operation and see there are opportunities to drive process excellence as well as enhanced efficiencies. Based on the current momentum and the latest forecast and also the volatile development in the world, we also have to adjust our financial objectives for 2025.
We don't see an acceleration in Q4 that would have allowed us to reach the 2% guidance on the revenue growth side, and thereby we see now a growth for the year between 1%-2%, a recurring EBITDA margin between 14.7%-15% at constant exchange rates, and a cash flow generation that is a bit lower at around $900 million excluding non-recurring items. Let's have a look at the different elements. If we start at the business side, as you can see here, the split specialized services and the core business 15%-85% is unchanged. What is interesting to note is the strong performance of almost 5% of our core BPO business in EMEA and APAC. This is true for a number of regions.
I just highlight here a few: the U.K., our Sub-Saharan Africa, APAC, our multilingual hubs, Egypt, Turkey, the Middle East really demonstrate strong performance, and we are seeing there good momentum across a number of verticals. In the Americas, as I said, it's important to note the acceleration that we're seeing in Q3. We see strong momentum in India, even moving more businesses for our Indian operation as well as in LATAM on the domestic side as well as on the near and offshore side. Specialized service, as mentioned before, is impacted negatively here in the nine months by a bit more than 8% like-for-like growth, but we see really a resilience in LanguageLine on the profitability side even though we see remaining challenges for the rest of the year.
To put this into perspective, in particular on the BPO businesses where we spent last time a lot of discussing the different elements of growth, you can see here over the last two years a continuous momentum of the business, and we see this really as a strength in our ability to adapt our business portfolio to the changing environment strategy. As announced in June, at our Capital Markets Day, we are in full force of implementing TP future forward, building a better TP for the future, enhancing our capabilities on transformation, driving efficiencies, and accelerating growth for selected areas. On the transformation side, as I said before, a few updates: we are growing double digit in these key areas—technology consulting, back-office solution, AI data services.
In particular, we have launched more than 400 new AI projects in the first nine months of this year, of which more than 150 in Q3. The whole transformation teams are busying and developing, implementing on client side, while at the same time we are investing in our FAB Solution, our foundational AI backbone solution, and we focus on driving outcomes for the clients, and that means driving industry-specific AI solutions built on our deep domain expertise and our close proximity to our clients. On the other hand, we're building horizontal functional solution that address specific need of our clients. On the other side, on the flip side if you will, this is client phases, but on the internal side, we also have launched several projects to enhance the usage of AI in TP's internal processes.
As you can imagine, core processes like talent acquisition, training, coaching, workforce management, quality management are benefiting from an enhanced use of AI. We started their company wide program to accelerate the adoption. In parallel and closely linked to that, we do a thorough review of TP's processes and structures and see how we can, with an accelerated AI adoption, drive efficiencies for the future while at the same time improving our operational excellence as promised. To give you a quick sneak preview of what is happening on the AI acceleration side, this is the picture we discussed end of June, building our framework and orchestration platform for AI solution. It is really how will TP look like and it is a combination of agentic AI driving outcomes while combining it with the human ingenuity and the human competence that we have in the organization.
We believe we will be successful if we drive tangible outcomes for the clients. It is not an abstract concept, but we are building and are deploying AI solution on our client operation that drive these outcomes. For us it is a question about being close to the client and having specific solution that works in enterprise environments. As you can see, we have structured it here in two dimension, you see can dimension one how do we provide AI competence for functional needs? Dimension two, how do we drive point solutions with AI for industry specific needs as we speak today? Because TP has a rich portfolio already of AI microservices that already are built upon these FAB solutions and we are enhancing those.
have more than 400 live deployments of FAB solutions in place with our clients, and we are now honing and developing further these solutions as we move forward. This is really the future of TP. We will present now on a regular basis the progress along these different solution suites. To give you maybe one example, what is live today and where we spent already a lot of efforts over the last years, it is now our new platform Fab Assist, which combines a whole set of AI solutions TP has developed over the last two years. It is about augmenting human talent with AI when it comes to knowledge management, coaching, real-time feedback, quality, accent neutralization, language translation, decision support, next best action. This is live today in practice with more than 190 clients, driving real outcomes every day for our clients.
Another sneak preview is FAB Collect. As you know, we do provide for many clients around the world collection services with human. Starting in the summer we have developed a hybrid solution combining human talent with agentic AI to drive better outcomes on the collection process. I'm very proud to announce that we have already deployed now three client solutions with FAB Collect, which is an autonomous AI voice agent for early collections. That driving of course all the benefits also in collection services. We have great plans to accelerate FAB Collect and the other solution as we move forward. This is it, the sneak preview. I now hand over to my dear friend Olivier who will provide some further details on the numbers. Over to you, Olivier.
Thank you Thomas. Hello everyone. I'm really happy to present you the figure of the Q3 and the nine months. Let's start with this first figure. As you can see, Q3 is a good quarter. We have announced a growth of 1.5% which was significantly above what the market was waiting today. We are in a growth mode and we are going to see how it's going to be built. Clearly we have a positive momentum in core service all along the period, which is noticeable while having a volatile business environment in the U.S., which has impacted interpretation and also recruitment process outsourcing activity. Let's go in detail to understand what happened in this nine months.
As you can see here on the slide you have the impact of the different, I would say, events that had had an impact on 2024 on the nine months figure. Of course, the first one is a currency effect which is significantly high and higher than what we have known over the last, over the last months, $225 million. I'm sure you remember that in the first half, in the second quarter of the year, we had already a first impact. In Q3 we had an impact of close to more than $100 million, $104 million, which is of course mostly linked to dollar for $50 million but also from some other currency including Indian rupee and to a lesser extent pesos, Colombian peso and Turkish lira.
If you take out this EUR 225 million currency effect with a limited impact of hyperinflation, as you can see, which is negative by 0.1%, we had like-for-like growth which is EUR 108 million, mostly coming from core services. I'll come back in a minute to that. Of course, the change in scope and consolidation is mostly driven by ZP acquisitions that were consolidated early 2025, 1st of February 2025, and to a lesser extent Agents Only that came in the group in June last year. This year, of course, this EUR 108 million growth is split in two. As mentioned by Thomas, there is significant growth coming from the core service, which is roughly EUR 200 million. I'll come back later on. There is a negative impact from the specialized service, which is mostly due to the non-renewal of the significant visa application contract in the U.K.
Sorry, of course this is a global picture. Let's go in detail on the figure. As you can see, you have here laid out on this slide the revenue by activity for the quarter and for the nine months. What we see. And I just wanted to highlight two points. The growth of the core service + 3.9% in Q3, which is clearly the most higher figures that we have achieved over the last quarters. Driven not only by the growth in Europe which is we knew from sometimes 5.1% but also with a growth that is coming back in Americas 2.4%. Of course the impact of the specialized service is -12.3% which if you exclude this famous control is still positive at 1.7% you have also for the nine months the figures that are shown here, + 1% for Americas and - 8.7% for specialized service.
Core service is growing at 3.2%. If I want to summarize this quarter, what we see is a continuous growth of the core service, mostly driven by Europe, continuing Europe performance, but also by the fact that Americas are back on track in terms of growth. Now if I want to look where does this growth come from. Of course, the fact that TP benefits from and enjoys a diversified client portfolio is also really a strength, and as a value, we had a very good momentum this quarter. Since the beginning of the year, in the public sector, in the media and gaming, and to a lesser extent in FMCG and travel and hospitality. When you look at this broad vertical approach, it helps the group to be resilient. What could happen?
As mentioned by Thomas a minute ago, if you look where we are, care is always 54% as before, 55% of the business. What we see is a growth of the BPO back-office service solution and the trust and safety and technical support solution. We have double-digit growth in back-office BPO solution and AI-powered solution everywhere across the region. We have a care that is roughly at the same level that he had before. That is the figure for Q3 and for the nine months. I hand it over to Thomas to give you an updated approach on the target for 2024 for the full year.
Sure. As discussed before, we have updated our objectives because we are a bit cautious for Q4 and the reasons are threefold. Number one, we do not expect a stronger rebound of our specialized services business in Q4. Yes, there is the effect of the UKVI where Q2 and Q3 have been the biggest impact. We do not expect that the other businesses are growing more than anticipated before. Second effect, the strong performance of our core services that you have seen throughout this year. We do not believe that this will overcompensate the weakness in our specialized services in Q4. We see in really this volatile environment some cautiousness from our clients based on the latest business forecast and thereby we do not see that this can accelerate more than anticipated, this weakness.
Thirdly, even from a macro environment, as you can see almost every day in the news, we had yesterday a hurricane in the Philippines that impacted our sites. We had four weeks ago an earthquake in the Philippines. We had a hurricane in Jamaica that impacted our operations in Jamaica. We have the U.S. government shutdown that obviously impacts also our government services operation in the U.S. but also general consumer sentiment. We are a bit cautious when it comes to Q4. It's still very much sort of in line in terms of range with what we've delivered for the first nine months of this year.
We want to give here this warning and this impacts also our EBITDA guidance and to some extent the net free cash flow guidance in context, and many of you know this Q4 is always typically the strongest month of the year for our BPO operations, but it is also the most volatile quarter of the year that gets a little bit of uncertainty as we have for many clients their peak period in this period, and this will ultimately land how we then deliver now, November, December in the numbers. If you look at a quarterly revenue of $2.5 billion, you see also the magnitude we are operating. Lastly, and just as a reminder, our financial ambitions as we highlighted our strategy in June are unchanged.
With this I would open the floor for Q& A and I'm sure you have many questions that we are happy to answer. The floor.
Ladies and gentlemen, if you wish to ask a question, please dial key five on your telephone keypad. If you wish to withdraw your question, please dial pound key siz. The next question comes from Remy Grenoux from Morgan Stanley. Please go ahead.
Good evening gentlemen. Three questions on my side please. The first one would be on your revised margin guidance. Can you first explain what has changed between July and now to explain that 30 downgrade at the midpoint, if there is any competitive or pricing pressure, or if it is only in the context of what you were saying about expectations for Q4, would be great. Also, to have an idea of what you expect will be the effect we need to add to that constant currency guidance at current level of effect, so we can kind of make the forecast on the back of that. The second question is on the downgrade to free cash flow generation as well.
Is it purely about lower organic growth and margin guidance, or is there also some drivers within CapEx intensity or working capital that we need to have in mind and which would have changed? The third one, I think you're referring to some kind of strategic review, the press release, and that you will announce the conclusions from that in February. I just wanted to have your initial thoughts on what could be included in that plan. Is it about a review of the perimeter, cost cutting, headcount reduction, what are the UTIL trends you're looking at?
Sure. You want to go ahead first with the cash flow and EBITDA.
Yeah, let's go with a revised guidance, which is mostly due to the fact that we are cautious as our clients are cautious for the next three months to go. There is nothing major different from that except this one. That's the first point, a fixed impact. We do not see something very different than what we had in the first half. Something between 20-30 basis points. It's difficult to tell today, but that's probably the magnitude of the topic as far as cash flow is concerned. I would say for a group like us, which is so big, it's challenging to forecast on a monthly basis a cash flow specifically with our global footprint. You may remember that in the first half we published a first half year that was done versus the previous year on the back of a few, one-off effect.
We are catching up this effect and resuming a solid path of cash flow generation. I do believe that since July, I'm sure that since July we have made significant progress in cash flow and specifically in the last two months, specifically on working cap and also on CapEx. I am quite confident. On the back of the slight revision of our revenue margin guidance, we want to be on the safe side. We are, of course, cautious on that. It is around. It could be a little more, a little less, difficult to predict $20 million-$30 million on the cash flow of $1 billion. Remember that we have $2.5 billion, I would say, current receivable on the balance sheet and missing $20 million payment or $10 million payments, it is difficult to predict at this level, so we are on a cautious approach.
We should be delivering the figures that Thomas mentioned a minute ago.
To answer your last question regarding transformation, we're building a future company that is the best possible partner for our clients on the transformation side, while at the same time using the same competence and focus on driving transformation of our internal processes. As we outlined in our strategy, the second part of the coin, how do we drive transformation internally is critical. You've seen probably many news also from our industry and competitors how they are adopting AI to drive efficiency. We do the same process. We look step by step, process by process, structure by structure, how we can be better set up for the future and driving these with AI adoption. Not just that, but also rethinking how we operate. We do this process now and once we've completed it, we will present the finding at the end of February. This is very common.
I mean if you just look in the news as some of the announcements for all our process, our principle is to be client number one. So if we use AI to drive better outcomes, we also have to do it for ourselves.
Okay, understood. Just one more question to follow up on that. On the capital allocation. Given the share price performance, the recent share price performance, are you thinking about or considering potentially shifting a little bit the capital allocation? What about like increasing the level of share buyback? I think that was a change in wording in that sense with the H1 duplication. Any update on the thought process around that?
No, as we said before, this is being discussed on the TP board level and once the decision is being made will be announced. To be honest, Q3 would not be the right timing, but once we have the cash flow numbers then in February.
Anyway, it's much more a 2026 decision than a 2025 one. Yes.
Understood. Thank you very much.
Next question please.
The next question comes from Suhasini Varanasi from Goldman Sachs. Please go ahead.
Hi, good evening. Thank you for taking my question. Just one for me please. As a follow up to the previous one on margins, can you please help us understand what you've assumed in the EBIT by division in the new outlook for the year now, you did put 12.4% margins in core services last year. Specialized services was 30%. It fell a little bit in specialized services in first half, but improved maybe. So how do you think about the progress in the second half of the year? For the full year, are you expecting further deterioration in specialized services and maybe further modest expansion in core services? Thank you.
Difficult to tell today. We expect of course a better, a little bit better margin on the specialized as a percentage, there is a mix effect that will have an impact because we have less business coming versus the total of coming from specialized service. We are going to see that in a much more precise way. This depends. What is difficult is to predict exactly the FX impact on the core service where it is much more important. Probably it is where we could have an impact. That is what I can tell you, but I will not give you precise figure at this stage. It is too early to tell.
Understood. Thank you.
Next question.
The next question comes from Karl Green from RBC Capital Markets. Please go ahead.
Yeah, thanks very much. Good evening to you. Just two remaining questions from me. Firstly, could you just elaborate a little bit more about the recruitment process, outsourcing trends and how that's tracked through the year and then what measures you've indicated there's been a change of CEO for that division. What measures specifically you think could get that back to a better place in 2026? Secondly, just in terms of the Majorel integration and synergies flowing from that, I mean, it's clearly very difficult to track in a Q3 revenue update, but just any kind of color as to what's going on there and, you know, how come that's not really sufficient to offset the mixed pressures on the margin that you've outlined just before. Thank you.
Let's start with recruiting. Recruiting. We saw, of course, that the activity of outsourcing recruitment in the US was under pressure and it does have an impact in the second part of the year. All the decisions that will be made have already been made to reduce the cost as much as we can to cover that. There are plenty of new initiatives that are made to offer a new product. I'm thinking of a product that uses AI to automate the process of recruitment that seems to be promising. It's just starting as we speak. It's too early to give you a good precise announcement and figures on it, but it seems that it is, I would say, recognized by the market and it is starting to be better.
That is the first one on the Majorel integration. I must say that most of the integration has been done, whether it's organization and merger process orientation, and everything has been done, and this is behind us. Still minor costs to be incurred in 2025 in the second part of the year, but most of it is done as we speak.
What's interesting is to note that PSG also undergoes a transformation in itself. Of course, the core recruiting services business is under pressure this year, but they've also built a solution that addresses that need. Olivier mentioned it. Ana is exactly the solution. When I look at the pipeline, I'm, I would say, cautiously optimistic for next year. Of course, it doesn't help with the numbers this year. There is a headwind unfortunately also when it comes to the results this year on the existing business of PSG. They're also building a new business for the future. When it comes to Majorel, really from an operational standpoint, it's over. The integration is over. There was some on the IT side that has happened, but it's really sort of focusing now on the future.
We will of course share the detailed breakdown on the EBITDA development in our full year numbers.
Okay, that's helpful. Just to clarify then, I think Olivier, you said that the specialized services that you'd expect the margin to be a little bit better year on year because of the cost measures you take, particularly in LLS. Just to clarify, the group margin downgrade is essentially purely a function of the mix away from specialized services towards core services.
Mostly yes. Mostly, yes.
Okay, thank you.
The next question comes from Will Kirkness from Bernstein. Please go ahead.
Thanks. Two questions please. Firstly, I just wondered if you could just talk about core services and whether you're seeing any change in trends with regard to gross wins versus the outsourcing or automation headwinds. And then secondly, just on pricing, are you seeing any headwinds or difficult conversations with customers as you bring in AI either as your own solutions or in terms of processes that make things more efficient? Essentially, are they looking to take some share of AI efficiencies? Thanks.
The core trends in the core BPO services are unchanged. As you said, automation and AI is happening, has happened in the past, and we see this every day in the business. There is no change there. You also see a push for efficiency, and I would say it is less so on the pricing side. Of course, this also exists, but it is more on the geo shoring side. We see clients that look for more efficiencies, in particular global clients, and they ask then for a different delivery location. We have this trend. We see the volume stays in the business, but it moves from a, let's say, mid price or higher price location to a lower priced location. That has, of course, a deflationary impact on our revenue, but has at least in percentage a positive impact on the margin.
Depends a little bit on the location and the transition cost. We see this push, there's definitely a push for efficiency from in particularly our global international clients and we expect to continue this in the future. That explains also to some extent this very strong momentum that we see in India because India is a massive delivery location when it comes to efficient solution as well as back-office solution and integrated tech solution. The trends that we see, and that also remains the case, is really also continuous consolidation that clients want to work with reliable and strong partners. I think there we at Teleperformance are very well positioned also going forward. Did that answer your question?
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.
Sorry, sorry.
Yeah, there's just a question on pricing, whether customers are pushing back on sharing some of the key.
Ah, that's actually an interesting field. We do have for our AI solution a full spectrum of pricing. When it comes to AI, it's fascinating to see, I think the market, even if you look at pure solution play at tech companies, there's a whole spectrum of gain share models, not gain share models. Bundling it with existing BPO, not existing BPO. You see it's evolving. We do believe there's an opportunity to push for more gain share models. That is why we see in the future that we invest in the business to drive outcomes or efficiencies and share the gain share. It's a very fluid concept, so everybody's experimenting. What's the right price on token? Do you mimic also with a solution, a human-based pricing that is linked to time and material, do you drive it on outcomes? We see it's changing.
There's also higher willingness for clients to discuss different pricing models. We have in fact invested in capabilities in a new pricing team that drives exactly this new pricing model. It will ultimately define also the BPO services industry in the next years, how this pricing will evolve. We see it on the positive side. I think this discussion and to move away from input based pricing to more to output price pricing is definitely an opportunity and AI helps here massively because the dynamics change.
Okay, great, thank you.
The next question comes from Nicole Manion from UBS. Please go ahead.
Good evening. Thanks for taking my question. Just one left for me please. Just on the visa contract loss actually looks like that's sort of evolved in line with what you guided to in Q3. I remember you had some impact I think in Q4 of last year. If you could remind us of the moving parts and the expectations around the annualization of that essentially that would be helpful. Thank you.
Thanks Nicole.
There is still an impact for this contract of roughly $20 million in Q4. Negative of course, just to be.
Okay, thank you.
Other questions?
There are no further questions at this time. I hand the conference back to Mr. Mackenbrock for any closing remarks.
It was a pleasure to be with you again. We are looking forward to present our full year results in February. As we said, we are content with the development in particular of our core businesses in the first three quarters of this year. Also in Q3, I think they did a great job of overcompensating some of the weaknesses we see in specialized services. We remain cautious but vigilant for Q4. Trust us that we will drive the outcomes as much as possible to present you not just the numbers for 2025 next year, but also the update on the strategic plan and the guidance for 2026 end of February next year. Thank you.
Thank you.