Okay, time's up for the final presentation here at ABG Investor Days, where we have the pleasure of welcoming Jessica Skon, who is the CEO of BTS Group. My name is Simon Granath, and I am an equity analyst at ABG, covering IT and technology companies, and I will be moderating this session. So for the coming 15-20 minutes, Jessica will present the company, and then we will follow up with a brief Q&A session. So with that said, Jessica, we're all set to go.
Great. Good afternoon, everybody. Pleasure to be with you. I'm calling in from sunny San Francisco, where the sun is starting to come up. Looking forward to introducing the firm. So go ahead, Simon, to the next slide. BTS is a different consulting firm, one that we feel we love, to be perfectly honest with you, and I'll give you a couple reasons why it's different. Since our founding, our focus has been on the people side of change. So if you think about typically CEOs think about change, you need technology implementation, process redesign, and then how do you get all your people to actually shift?
That's been our focus for 30-something years, and that means that what's fun for us is we get to take share, both from the traditional HR consulting firms who do training, leadership development, selection of employees, and so forth, and we take share from the Big Four consulting firms in terms of how do they drive, actually change and implementation of the strategies. If you go to the next slide, it can give you a sense of our overall size and kind of history. We're 37 years old. We're about EUR 225 million in revenue. We have approximately 1,100 full-time people. We have about 600 contractors as well, which gives us nice flexibility in kind of upturns and downturns. We currently have over 40 of the world's largest 100 clients and 50 of the US Fortune 100 as well.
Go to the next slide. We're organized essentially by three geographical PNLs. You can see them here, they're color-coded. So North America is about 50% of the business. We have BTS Other Markets, which is the mint green color, so all the kind of fast growth, smaller offices are there, and then we have Europe in purple. 36 offices in 24 countries, which for a very long time now, has been a huge advantage because we can serve those global clients that I mentioned earlier. And I will say, one of the special secret sauces of BTS is the culture, and there's many facets of that. But, when you see three different PNLs, I think that creates a lot of entrepreneurial ownership, but we have really great relationships globally.
So it allows us to team and share resources and serve those clients in an effective way. If you look at the next slide, you'll see we're really diversified across industries. Here's just some example clients that we have. Our average customer lifespan is approximately seven years. Our average deal sizes have been going up over time, and that continues. I think we've done a great job of diversifying across industries because North America is 50% of the business, and the San Francisco office historically has been slightly bigger than the New York office. We've had historically about 20% penetration in tech and software, and then the rest are fairly diversified from there.
I'd say in the last 6 quarters, we've done a really good job of focusing on energy, pharma, bio, financial services, and growing our share there as well. Infrastructure is another growing industry for us. You can go ahead and go to the next slide. In terms of overall kind of where does demand come from BTS services? There's three different types of buyers or budgets that we target inside of our clients. The first is what I would call HR, so leadership development, learning budgets, and typically there is they're trying to institutionalize leadership. They're trying to get them ready for their next jobs. Perhaps you have a CEO who's not happy with the culture. They want to shift values, shift leadership expectations, equip their leaders to better understand the business model, how they make money, P&L management, and so forth.
Those are all typical needs that BTS services. And on that side, we have a growing number of clients where we're their top to bottom kind of leadership, leadership development partner, from C-suite all the way down to individual contributors. The second, buyer type or budget is supporting the chief revenue officers and sales enablement. So how do you get your sellers more productive? How do you help them shift and be on brand? How do you help them show up differently for their accounts? And there you might see demands like, they're not growing at the speed they want to grow. Customer demands have shifted, and the go-to-market team needs to transform to support the demands. How do you show up differently in a high inflationary environment, for example, different ways of pricing and structuring deals?
Then, the third budget, if I were to simplify, where we compete more with the traditional consulting firms, is transformation office, CEO, COO, business unit leader, P&L owner. Here you find typically they need to get their executive team aligned on the future direction of that business. And the question would be then: how do you implement that across the entire business unit or the company? Another example would be, they've got 3,000 people, and they need to shift how they work in terms of ways of working, and they tried something complicated and told them what to do, but lo and behold, nobody changed. So that type of need is where BTS really shines, and we go in and we help them understand and see the differences and actually shift how they team and work.
So these are all different kind of typical, kind of more macro drivers of demand for our services. We have a lot of different practice areas, and if you go to the next slide, you'll see those. The beautiful thing here is that BTS has been extraordinarily innovative over the last 30-something years. In fact, if I, if I reflect for a minute on the type of companies we typically acquire, one of their mistakes is that they didn't expand their portfolio at all, or even close to the same pace that BTS has expanded it over time. I think that's for two reasons: One, we have a high freedom culture, highly entrepreneurial. There's a lot of creativity.
The teams that are close to the clients are innovating all the time, new services, so we have the organic innovation, and then we also make acquisitions to fill certain capability gaps or to help us with the geographical spread. But you can see these are different centers of expertise. So in the upper left-hand corner, one of the things we're most famous for is our modeling and our simulation abilities. We help CEOs and their teams simulate future strategic alternatives, because visualizing that is incredibly important to getting everybody aligned and making the same decisions. We use simulations at scale for 50,000 people, 30,000 people, 500 people. Anytime you're trying to get a shift or a clarity, it's a very powerful tool or mechanism to do that.
Leadership development, as I mentioned, assessment, we help companies figure out who they should hire, both from the external market and who's ready for the next critical job inside a company. We have a pharma bio client, for example, that has named 47 critical jobs in the company, from chief scientist, controller, all of that. They use our simulations to assess if somebody's ready, because the simulation is a simulation of the job, right? We have a change in transformation practice, executive presence, and executive team performance. We provide coaching from CEO level all the way down to at scale, innovation and digital transformation, our sales and marketing practice, and of course, diversity, equity, and inclusion. And what this has allowed us to do and allows us to continue to focus on is include more pieces of these practices against our clients' problems.
So the average deal size increases, and the average account size increases over time. Plus, it's a lot more fun and interesting for the account manager to be able to solve a lot of a wider breadth of problems for clients. Of course, the teaming behind this is critical. If you go to the next slide. One of the interesting things of where we are in our company's evolution right now, given that we're about EUR 220 million in revenue, and we have, you know, as you mentioned, 1,100 people, we are at a different size, right, than we were. I've been with the firm for 24 years, and we can take advantage of our size now to get to kinda the next level of scale.
So some of the things we're doing here, which drive efficiencies across the organization, and should result in our target margin improvement of, you know, approximately 0.5% a year, but getting closer to 17% over time, are the following. So because I mentioned we've been doing custom simulations for a long time, what we can do now is do them on demand and at scale. And when we do things on demand and at scale, like, for example, we have a client where in February, we will put 35,000 people through a simulation of how they should team and show up for their customers in a 24-hour period of time. When we do engagements like that, it's typically associated with a large amount of license and subscription fees.
So that, and because our tech has gotten a lot better over the last 8 years, we can spin those up much more quickly, and that will allow us to scale, both in partnering models and in the cost to design and deploy. Second thing, knowledge management and global apprenticeship. I mean, this is about getting those best people across the practice areas around the world to support kind of at the moment of need. So we've just redesigned our approach to knowledge management. Obviously, the large language odels, Generative AI, is helping us take that even to the next level and just really embed it where people are doing their work, so they don't really have to find things anymore. It goes to them.
I mentioned that we have 600 contractor freelance employees, and some of the work they do, only they can do, like coaching, for example. But sometimes we can use them to do some of the core work in times of hypergrowth, and when we slow down, we can shut down that valve and ask our full-time people to take over some of that work. So it gives us a more flexible business model. And the fourth one, global content tools, micro simulations. We've been spending a lot of time over the last 3 or 4 years digitizing our core assets, and that helps us to be a better partner at scale and on demand, which is associated with license and subscription revenue. And then, One BTS global support.
You know, this is a cultural shift, and we'll be very careful on this, and the good news is it's coming from our heads of offices. But I've mentioned the highly entrepreneurial spirit that our founder created, which is hugely advantageous to growth across the 24 countries. And at the same time, they are asking for more kind of one way. For example, could we establish globally the top ten client events, conversations, roundtables we wanna have, and we can deploy it across the world, so we don't have every office inventing their own thing? Or how can we provide better global support for legal and finance than too much of that relying on the senior leadership team of the office?
Things like that should provide lift for us over the next few years without taking away the- their own, kind of P&L ownership and ownership around the performance of the firm. And then, go ahead to the next slide. Given that we just recently, in the last, couple weeks, shared our Q3 report, I will give you kind of a couple snapshots of that, just to kinda share with you where we are financially. Please move forward. The third quarter for us this year felt similar to the first two quarters in a way, in that, we'd continued to experience what we would call customer cautiousness, right? In terms of deal flow and how quickly it takes them to go from idea to project start, compared to what we're used to. We did see about five quarters ago when the,
I think it was in May 2022, when the tech sector was hit and the market caps dropped pretty significantly, and we saw some, I would call, freezing of movement of P&Ls, and it took them a few months to kind of recalibrate their spending, and then they went into the, I think we had over 300,000 layoffs, and we've had maybe third rounds from then. So from that time, we have seen, you know, customers' delays evolve from tech into some of the other industries and other parts of the world, just as you all have been aware of, I guess, throughout the same year.
But despite that, even though we were more concentrated, as I mentioned, 20% in tech, our focus on diversifying outside of tech, which we are now in for our seventh quarter in a row, really helped us. So, despite the customer cautiousness, we remained essentially flat in the third quarter. North America was flat. BTS Other Markets grew 3%, and Europe fell 4%, mainly due to, again, some pausing of projects, some delays on stuff that, you know, was in our pipeline that we thought was gonna start, and they had one large project in professional services that was pushed out. You can see our EBIT performance. Obviously, we're not happy with that. It was 10.7 a year ago. It's 8.4 now.
Now, the interesting thing for us this year is, we moved really fast and started in terms of our planning in the fourth quarter and then in January, in terms of what we thought the year might be like, and we did quite a lot in terms of cost and efficiency measures. Now, one of the things that is important to BTS is that we don't do drastic short-term moves that will hurt our ability to scale or hurt our ability to grow again when the market gets just a little bit easier. This is my fourth soft year of being with the company, and every time we've come out with high demand, and we need our people to be able to take advantage of that.
So we have done, I think, some really smart moves in terms of, you know, obviously, performance management across the levels of the company. We've shared talent globally more than we have in the past. We shut down the use of external spend. We're doing a better job of scoping and pricing our work. And all of that, despite the fact that we've been flat for the year and we started the year, you know, with, more people and high inflation salaries, we think our outlook will be in line with last year. If, I can double-click a little bit into the different markets, if you go to the next slide. North America, which I mentioned, is the biggest market. We're continuing to focus on the strong industries. Biopharma, in particular, have been great for us this year. Energy is really strong.
Financial services and CPG are also doing pretty well. We made an acquisition in May called The Boda Group, and their specialty is CEO executive team, executive team minus one and two, one-on-one coaching. It's been absolutely fantastic. The founder coaches a lot of American CEOs. We have leads from those already. We've already closed quite a lot of transformational work that will support us in the fourth quarter and moving forward next year. On the reverse side, we've brought her and her team into... They've won nine different executive coaching deals since we started. Some have been competitive, some have just gone through into our accounts, and so far, we're off to a great start there.
In terms of the market evolution, just to give you some up-to-date information, given that the conservatism started with the tech and software clients, and now we're in the sixth quarter of that, we did see, at the end, you know, I'd say the last four to five weeks of the third quarter, a bit more movement amongst some of our software and tech clients, right? So it's not a complete reversal, but things are starting to flow again in some pockets, which feels great. And then across industries, because we do selection services, and we help companies decide who they should hire, we are. This is, for example, and therefore the use of our assessments back up in some of those clients to 2021 rates, which was great to see.
But I mean, I offer these as like small anecdotes. I wouldn't say it's a holistic shift yet in the market. If you go to the next slide, you can, I can talk for a minute about BTS Europe and BTS Other Markets. You can see North America at the top and then Europe, Other Markets, and then APJ down below. The hit in the margin for BTS Europe was, I mean, we have temporarily higher people costs affected by, you know, with the decline in revenue, so it's mainly a revenue issue. The other thing that hurt BTS Europe is we had some demand for the services that the externals do more than normal, right? And the stuff that only they can do, like coaching, for example. So the external costs went up a bit in the third quarter.
In terms of other markets, our strongest demand across the globe and other markets is in the Middle East right now and Southeast Asia, and that's helping to offset a slowdown in demand in China, for example, Argentina. Korea slowed down a bit. They had a lot of, layoffs and so forth in the tech clients there. Yeah, and overall, you know, I'd say that they're still experiencing the conservative market. Europe seems to be in its third quarter now of that. Yeah, so it seems to be rolling a little bit across the world. If you go to the next slide. This is just a double-click.
I mean, we, I, my experience at BTS over the years is we tend to do some of our best work in the most challenging years, mainly because we have a core kind of belief or premise that we don't wanna waste the year, and we want to make sure that our people and that we all feel proud that we've made ourselves a lot stronger, during a soft year. So if we're flat and we're not growing or just growing a little bit, like, what else are we doing to position ourselves to scale to the next level? And so I mentioned already the operational efficiencies we've put underway. And those have gone beautifully and according to plan. We expect the full benefit of that now in this fourth quarter.
We're in our seventh quarter of focusing on what are the right industries and the right companies who are investing in our services right now, and we've been able to do a great shift there, as I mentioned. Also, we tend to innovate, right? So in terms of the new service offerings just in the last few quarters, on the leadership development and the learning side, a lot of our clients seem to be unhappy with the performance of that function over time, or new clients for us. So here we're competing against Accenture, for example, and Korn Ferry, to rearchitect the entire function. And this is something BTS wasn't doing or thinking about doing, you know, six or seven years ago.
But now, because of our brand and the full portfolio of our services and the uniqueness of the simulations that we have, for example, we're being asked to help redefine the function, rearchitect how thousands of people are gonna get learning and training and become ready for their next jobs or be aligned to the strategy. That's leading to much bigger partnerships at scale. Then, no surprise, our innovation and digital transformation practice has pivoted really fast since May, and we have a growing offering around AI in terms of taking the mystery and misery out of AI and change offering associated with that. I mean, it's, it's a much simpler lift. This is not old-fashioned ERP implementation. So the change services and the culture services associated with adopting this stuff is require something totally different, and it's right in BTS' sweet spot.
And then finally, we wanna make sure that we feel like our team is stronger, the talent is stronger this year. And so, one, yep, we get rid of the low performers, of course, but two, we've invested quite a lot in training our team around the world, both in terms of how to just be better consultants, write more effective proposals, team better, so bring in the full portfolio, and we've upgraded our knowledge management system. So those are some of the examples of the things we've gotten done this year. We feel proud and good about it. Next slide, please. And for those of you who are getting to know us, we're very proud of our long-term profitable growth year after year. Go to the next. Actually, we'll just go to the next one. We have...
You can see the results here in terms of if you invested when we went public in 2001, we've had average growth, revenue growth of 13% per year, average EBITDA growth of 16% per year. As of a year ago, we had an 18% annual shareholder return since going public. This is because we operate in a super high and fragmented market, both taking share from HR and the traditional consulting firms. We have a super strong competitive position in the simulations and how custom and bespoke we get, and now the sims combined with scale is-- I mean, nobody has that. It's super unique, and we're lucky. We also are big believers in acquisitions.
When we find companies that fill our capability gaps, we see as a culture add or help us get geographical expansion, so we will continue to do that. And if you go to the next slide. This is just a summary. Despite the flat growth and the fact that we started the year with much more expensive employees and more of them, we believe our outlook will be in line with 2022, which we're proud of. Yeah, and we're continuing to be cautious, right? And continue to have the discipline that made this year a proud year for us, and focusing right now on next year. Next slide, please.
The last thing I'll say in terms of our shareholders, you can see who our major investors are in the Stockholm market, and then the two largest investors is the BTS founder and a BTS early employee who's no longer with the company. And, following slide. Next slide, please. Oh, that's it. Okay, so we can go ahead and turn off the slides, and be happy to answer any questions.
Yes. Thank you so much, Jessica. I believe that was the last slide. I'll go to-
Thank you
... the first slide. Thank you so much. We now have a couple of minutes left for some Q&A. Initially, I'd like to discuss a little bit about your workforce. How would you describe them? Are they primarily junior consultants or senior consultants? And how long does it take for a new hire, primarily relating to the younger consultants, to become up and running?
Yeah. So I, I would say, we have more of a McKinsey-style pyramid and approach to talent, where we hire younger people, and then we grow them through their, through their careers. At the same time, the acquisitions, and occasionally we'll bring in seasoned talent from the competitors, especially if they give us a capability or they broaden the portfolio that we don't have, right? So we have a nice mix of seniors who are kind of experts in their domain and entrepreneurial, and then the pyramid is a more traditional consulting pyramid. And in terms of the new hires, in terms of getting them up to speed, we, we look at it from two perspectives. One is, like, time to being billable, which we try to do absolutely as quickly as possible. They have a boot camp where they practice the core skills.
We get them on client projects right away. And part of that is we have a very strong kind of apprenticing model in terms of the project leads, engagement managers. Account managers know their job in bringing the young consultants up to speed. But the second thing that I think makes BTS, in particular, unique, and I haven't found this in any of the companies we've acquired to date, is we also measure time to revenue generating. And we're not the type of firm that once you get to partner, then you start to generate revenue and have your own client relationships. We try to give that freedom as early as possible in somebody's career, and that takes about, let's say, three years, because you kind of earn the respect of the clients by being a great project leader and delivering value, and then you have that relationship.
We look at both time to productivity billable, which is a matter of basically weeks and months, and then time to revenue generation, which is approximately 3 years.
For that. You've now been the CEO of BTS for some years. Could you discuss a little bit or highlight some of the main achievements from your point of view? And perhaps there are some, some things in the plan that have perhaps been somewhat left behind.
Sure. And it's been 6 quarters, so I'll say that. Look, I was pretty aware during this transition that it was unlike when I took over BTS North America, meaning, 6 quarters ago, BTS, as a group, didn't need to do a turnaround, right? It wasn't a moment where heavy change was gonna be required. It was more, how do we just keep growing across the 24 countries and ensure that the people will experience the culture that they know and love through my leadership and Philios as well, which is different from when I took over BTS North America in 2016. So I've been trying to be very aware of that and thoughtful, right, in terms of the type of leadership style and what initiatives we get underway.
Mm.
So pretty quickly in, the market started to shift, right? First in tech, and then became a little bit softer, and so I would say mainly what I've been driving has been in preparation for that, in the readiness of that, and in the speed and adaptability with which we can move. And so in terms of like measurable impact, it's on the innovation side, it's primarily the bigger stuff I was talking about around re-architecting an entire leadership and learning function, using our full portfolio at scale, and the different partnering models that will come from that. That's been a big focus of mine this year. And then on the operational side, it's two things: It's the efficiencies I've already talked about, which were unique and different across the different countries, and I'm very proud of that.
I think we did it in a long-term, sustainable way. And the third one is, which I haven't talked about, it's the use of Generative AI combined with asking all of our functions and our COE leaders to relook at kind of how they're working, and ensuring we have a kind of continuous improvement, efficiency mindset in those functions. So those would be the three things that I've been particularly focused on for the last, I guess, year now. Yeah, four to five quarters.
Good, and, I believe that we have time for a final question as we are running out of time. But, could you please describe some of the main focus areas that you have for 2024?
Yeah, I mean, it's back to growth.
Mm.
That's number one, right? So, our people need growth for their careers, we need growth as a company, and it's not very fun to be flat, and I think we've been focusing quite a lot on the efficiency side. So we can start the year with a bit less headcount, more efficiencies in place, and we have capacity to grow based on what we have. So we should be set up well if we get back to growth. So that's, that is absolutely number one, and that's why every time I travel, I meet with clients, I meet with them basically daily with the teams. I'm ensuring that our, you know, our win rates, actually, our win rates have not changed, which is great. They've even improved in a couple of our markets.
So that is absolutely number 1, and then associated with that, and because we'll have growth, I know the margins would be, would be solid then. It's pushing our partnerships to the next level of scale. That's, I guess, job number 2, and that's highly correlated with job number 1, and if I do those two things, then our margin improvement plan of going from 15%-17% seems, I don't know, seems quite doable, so.
Very good. As mentioned, we are running out of time, but thank you so much, Jessica, for attending here today, and I wish you a continued nice rest of the day.
Thank you. Have a good evening.