Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Teleperformance SE (TLPFF, Financial) reported a 28.2% year-on-year growth in revenue, surpassing EUR 5 billion for the first time.
- The company successfully integrated Majorel without losing any clients, and expects to generate EUR 100-150 million in cost synergies by 2024-2025.
- Teleperformance SE (TLPFF) is implementing over 300 AI projects, which are enhancing client growth and internal efficiency.
- The company achieved a 45% increase in free cash flow, reaching close to EUR 450 million.
- Teleperformance SE (TLPFF) has a diversified client portfolio across various geographies, verticals, and products, which helps mitigate risks.
Negative Points
- The company faced negative impacts from foreign exchange movements, particularly in Latin America, affecting profitability.
- Integration costs for Majorel, including licensing and infrastructure reinforcement, were higher than expected.
- The core services segment experienced a decline in profitability due to FX impacts and integration costs.
- Teleperformance SE (TLPFF) continues to incur transformation and development costs, impacting net free cash flow.
- The company has not yet seen a significant increase in new contract wins, indicating potential challenges in achieving higher growth rates.
Q & A Highlights
Q: Can you maybe talk about the ramp-up of new contract wins that you expect will benefit the growth in the second half of the year? Should we expect the benefit to accelerate evenly through 3Q and 4Q? Or is it going to be more 4Q weighted?
A: About the growth, it's difficult to tell. Of course, it depends a lot on the volumes that people are going to give us, because it's always something that we don't know. What we see is, of course, you understood that there is a base of comparison which is easing. Of course, we are waiting for the -- specifically for -- also healthcare in Q4, but this is not written today in terms of -- we are seeing Q3 to be honest. Today, we are seeing growth in Q3. We still need to see what's going to happen in Q4. But this is equally between Q3 and Q4, and there are still things that we don't know.
Q: The second question is on the synergy generation cost, I think, about EUR35 million, EUR36 million that you booked in 1H. Is it right that you booked it in the holding company costs and -- holding company line item? And how should we think about that number for the second half of this year and for 2025, please?
A: As far as synergy is concerned, we do believe that at the end of the day, you remember that we have announced last March, a cost of synergy around EUR50 million for the full year. This is based on what we know. Clearly, this figure is going to be confirmed. And of course, there will be synergy that will be significantly beyond this figure. This is without taking account any additional thinking or view that we might make on different topics. But roughly, we do believe that the cost of synergy will be around EUR50 million this year. And this is not always, I would say, booked in a holding company. It's at a different level. So this is not in holding only. So again, EUR50 million roughly of cost synergy. Synergy will be above -- significantly above this amount. And we will see whether we can make additional decision on the second part of the year we are looking for.
Q: The first question is on the guidance itself. So you're guiding for 2% to 4%. You said the base is easing, you expect some ramp-up in contracts. So the first question is on whether -- why you've not decided to slightly increase the lower end of the guidance. What concerns you that you don't have the visibility to do that?
A: I'm going to be very clear, I'm -- we have been hit once in the last 15 years in guidance. We are very careful, but I'm convinced that we will be between 2% and 4%. So I don't want to make any -- to take any risk, to make any chance of changing. So there is no reason to change that. We'll see whether we will do that and if we do that in Q3, but this is -- there is no reason to increase the guidance. And people will understand.
Q: The second one is on the profitability of the core business. I understand the currency rationale, the currency evolution rationale, but can you maybe try to quantify its impact and elaborate whether there's -- there is any other negative factors to highlight there on why the profitability of the core business is down? And also on that, given the current FX rates, what would you expect the impact from currencies to be on the profitability of that division in the second half?
A: First of all, there is a significant hit coming from the FX in LatAm. And we have been able to secure significantly more the second part of the year following the bleed that happened in Mexican pesos following the election of the new president last May, and that was well welcome. And we hope that we will be able to -- be in a better situation for the second part of the year. So I'm not going to give you a precise figure, but this is helping dramatically the story. On top of that, there are some costs associated to integration. As I told you, I took this example of the license when you want that -- everybody wants to have the same systems that you have across the groups, you have to pay some license for a whole group like Majorel that was significantly more important than was expected.
Q: The third point is on the quite significant improvement in the profitability of specialized services. If you could elaborate on the drivers of that, whether it's been operating leverage, positive net pricing seems to be the case from what you're saying in the press release and positive mix effect within.
A: You remember that part of the story came from last year that the first half, notably in LanguageLine was not at levels that we were used to, even if it was significantly at a good level. So LanguageLine came back on the level that it used to be delivering. And I strongly believe that in the second part of the year, we will continue to deliver roughly the same figures that what we have delivered the last year in the second part of the year. So globally, specialized services is going to have a good year, whether it's growth or whether it's in margin. Of course, the leverage -- the operational leverage and in fact, if you add the business on the same level of cost, it help. So upon the wall, we are seeing a reasonable increase in specialized services, too. That's what I can tell you today.
Q: Two questions on my side. The first one relates to your CapEx spending in H1. It was very limited at 1.7% of sales. Do you expect it to be in the same corridor in H2?
A: Traditionally, we have always a little more CapEx in the second part of the year. But I do believe that at the end of the day, we should be around 2% on a full year basis. But clearly, we are benefiting from what we have done over the last three or four years that are significantly improving each year, what we call the cloudification of our system. And of course, you are moving, the hardware is less important, you have less stuff, but you are paying some license on top of that, but you are avoiding to buy hardware. You are -- and in the meantime, we are less using -- we are needing less site because we have site with Majorel. And the growth in site is coming from Asia, India and to a lesser extent, Philippine. So it's where we are going to put new sites if needed or new extension of site. Of course, they are still refurbishing, but the 2% seems to be reasonable as we speak today.
Q: And for the second one, in your core service EBIT margin, is there some stuff that are nonrecurring? Because you are mentioning license
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
