Transcom provides outsourced customer care services through contact centers around the world. In recent years, its operating margin has declined but is now improving. Transcom continues focusing on underperforming areas and growing revenue efficiently. Its vision is to be recognized as a global leader in customer experience by providing outstanding customer experiences that drive revenue and brand loyalty for its clients.
3. What is Transcom?
• A global customer experience
specialist...
• ...providing outsourced
customer care, sales,
technical support, and credit
management...
• ...through an extensive
network of contact centers
”
and work-at-home agents
Transcom’s business is to
help make sure that our
clients’ customers form
positive perceptions of their
interactions with them.
3
4. Vision, brand promise and mission
Vision Recognised as a global leader in customer experience
Brand promise Outstanding customer experience, driving revenue and
brand loyalty
Mission Transcom enables companies to enhance their business
performance by improving the experience of their
customers.
For this we use:
• Talented, experienced and committed people, who
deliver outstanding customer experience across a
multitude of channels,
• Innovative technology for capturing, processing and
analysing customer intelligence,
• Continuously improved processes, working methods
and systems, for serving customers and advising clients,
• Deep understanding of customer trends, needs and
behavior.
4
5. Transcom in numbers
• More than 27,000 people, and growing fast
• 70 contact centers, onshore, off-shore and near shore
• 28 countries
• Delivering services in 33 languages
• To over 350 clients in various industry verticals
• €554 million revenue (2011)
• Market cap: SEK 691 million as at December 28, 2012. Listed on NASDAQ OMX Stockholm
(TWW SDB B and TWW SDB A)
5
6. We have an extensive global footprint
Home markets Near Shore Locations Offshore Locations
Austria Czech Republic Canada Chile*
France USA Croatia Peru*
Netherlands Canada Estonia Philippines*
Slovakia Italy Latvia Tunisia
UK Poland Czech Republic
Belgium Sweden Hungary * Developing into home/near shore
Germany Denmark Lithuania markets
Norway Portugal
Spain Switzerland
Australia Croatia
6
7. Transcom’s organization
• Corporate management
- CEO, CFO, CIO, Head of Operations, Head of Global
Sales & Accounts
• Regional management
- North region (28% of revenue)
- Iberia (19% of revenue)
- North America & Asia Pacific (19% of revenue)
- South (16% of revenue)
- Central Europe (9% of revenue)
- Credit Management Services (CMS) in eight European
countries (9% of revenue)
7
8. Transcom’s service portfolio
• Customer service
Customer experience specialists trained to support
best-in-class product, service and brand experiences
for our clients’ customers
• Technical support
Tiered support models, from the simplest questions to
more complex support scenarios
• Customer retention
Preventing defection and maximizing the lifetime of
a customer
• Customer acquisition
Acquiring new customers cost-efficiently, and building
strong customer relationships as a basis for future interactions
• Cross- and upselling
Building relationships and identifying customer needs
during any type of interaction, and taking appropriate
action to satisfy the customer’s need
• Credit management services (CMS)
Early collections, Contingent collections and Legal collections
8
9. Key messages today
Situation today and short-term focus Market trends
• Transcom’s profitability has decreased • Growth driven by domestic Asia Pacific
in recent years, but is now improving and Latin America markets
• Continuous focus on underperforming • Diversification (geography and
areas business models)
• Growth in selected areas and efficiency
improvements
• Broadening client base
Going forward - Strategic direction
• Creation of outstanding customer
experiences, while helping clients to
reduce cost and drive growth
• Flexibility is critical
9
11. Transcom’s operating margin has declined from
6% in 2007 to 1% in 2011
Revenue (€m)
631.8 Operating margin*
6.0%
599.2
589.1
4.4% 4.3%
560.2
554.1
2.2%
0.9%
2007 2008 2009 2010 2011
* Underlying performance, excluding restructuring and other non-
11
recurring costs
12. Compared to the same period in 2011, revenue was up by
8 percent* and operating margin** doubled in Jan–Sep 2012
442.7
Revenue (€m)
Operating margin*
1.4%
411.1
0.7%
9-mo 2011 9-mo 2012
* Excluding currency effects, revenue increased by 5 percent
** Underlying performance, excluding restructuring and other non-recurring costs
12
13. Revenue grew in all units except for CMS. Margin increase
primarily driven by the North America & APAC and South regions.
2012 2011 Growth
Jan-Sep Jan-Sep Y-o-Y
Net revenue (€m)
North 117.0 102.6 14.0%
Central Europe 41.8 41.3 1.3%
South 73.3 71.2 3.0%
Iberia 88.5 80.4 10.0%
North America & AP 80.2 72.6 10.6%
CMS 41.8 43.0 -2.9%
EBITA margin*
North 3.1% 4.6%
Central Europe -1.3% 3.1%
South -3.7% -7.0%
Iberia 4.6% 4.9%
North America & AP 1.1% -3.8%
CMS 8.9% 8.5%
* Underlying performance, excluding restructuring and other non-
13 recurring costs
14. Transcom’s peers generally have a greater share of
English-language and offshore revenue
Transcom Peer average*
Revenue 2011 (€m) 554 1,200
Operating margin 2011 0.9% 7.7%
(underlying)
Share of revenue 19% 35-40%
generated offshore
Share of revenue in 25% Approx. 67%
English
* Teleperformance, TeleTech, Sykes, Convergys
14
15. What will it take for Transcom to return to historical margins?
Continue improving key performance indicators
• Seat utilization
• Efficiency
• Offshore/onshore split
• Attrition
Improvements on four KPIs vs. previous year
Key performance Trend vs. 2011 Sept 2012 vs. Sept 2011
driver
Average Seat (86% vs. 74%)
Utilization ratio
Share of revenue (19% vs. 16%)
generated offshore
Average Efficiency n/a
ratio (billable over
worked hours)
Monthly attrition n/a
15
16. Successfully address a number of short- and
medium-term operational and financial challenges
Stop the losses in France (€1m/month in 2012). Transcom plans to stop financing
the French subsidiary’s loss-making operations beyond March 1, 2013
Increase onshore seat utilization in North America
Successfully resolve tax claims
Germany – renegotiate labor agreements
Return UK CMS to profitability
16
18. Communications & Media and Financial Services account
for almost two-thirds of global industry capacity
Distribution of outsourced agent positions* by industry vertical, 2011
100% = 1.58 million
Professional services
Professional services
Travel & Hospitality
Healthcare 3%2%1%
Government & Education 3%
4%
Other
4%
Energy & Utilities 4%
39% Communications & Media
Manufacturing 4%
Retail & Wholesale 8%
26%
Financial Services
18
* Agent positions in principal markets (reflecting approximately 75-80 percent of total global capacity)
Source: Ovum
19. Increasing demands for quality: an opportunity for Transcom
Historically
Our task: Respond to voice calls
from customers as efficiently as
possible, at the lowest possible cost
Today
Our task has expanded:
Deliver excellent customer experience
New channels and technology platforms
Offer more knowledge due to diversity of
products and greater customer
demands
Generating a much higher degree of
revenue and brand loyalty to clients
Feed back customer intelligence to
clients
-
19
20. As a consequence of changing client demands, contact center
outsourcers’ long-established business model needs to change
• PRICE: Ability to offer an attractive Contract structures and vendor incentive schemes
price level without sacrificing quality are evolving to put greater emphasis on customer
customer service loyalty and revenue generation.
Rapidly evolving quality definition: greater focus
• QUALITY: Ability to consistently on sales performance and ability to support clients’
achieve essential service level strategic goals; increasing product/service
Key Performance Indicators (KPI) complexity; technologically- empowered consumers
expect engagement on their terms!
Ability to identify issues and opportunities, and to
provide an environment that brings together
• CAPABILITY TO DRIVE solutions, process changes and technology to drive
INNOVATION new, different and innovative approaches.
Achieving a tight integration across different
channels for customer interaction will become an
even greater imperative for our clients.
20
21. Market trend:
Increased diversification in terms of market presence
• Stagnant growth in mature, Western outsourcing
markets
• Significantly higher levels of growth in selected
developing markets, and rising interaction volumes with
an increasingly sophisticated customer base
Expansion in new markets
• Outsourcers will seek to capitalize on
domestic opportunities in developing markets,
to drive growth and diversify revenue
• Traditional offshore locations also developing
into domestic delivery centers
22. Market trend:
Diversification in service channels changes business models
• Social networks are emerging as important customer
service channels
o Although still small in relation to voice, email and chat
• A growing number of people are more comfortable with non-
voice channels, and expect interaction on their terms...
• …As a result, companies are getting serious about social
media in customer service and marketing
Increasingly sophisticated non-voice offerings
• Outsourcers need to further develop analytics platforms
and KPIs specific to customer service via social media
• Agents are not only customer service representatives;
they become PR agents and brand ambassadors.
Implications for training and recruiting
• Channel integration will become more important
22
23. Industry growth in the coming years will primarily be driven by
domestic expansion in Asia Pacific and Latin America
Outsourced agent positions* by region, 2011 and 2016e
Thousands
2079 2011-16 CAGR
85.9 7.8%
96.5 9.8%
1584 264.8 2.5%
Middle East & Africa 59
Central & East Europe 60.5 83% of expected growth in Latin
466.3 7.1%
Western Europe 234.5 America is domestic, i.e. non-offshore
Latin America 330.8
2.7%
481.3
North America 420.6
64% of expected growth in Asia
683.8 7.4%
Pacific is domestic, i.e. non-offshore
Asia Pacific 478.5
2011 2016
23
* Agent positions in principal markets (reflecting approximately 75-80 percent of total global capacity)
Source: Ovum, Transcom analysis
24. The number of work-at-home agents is expected to grow
significantly faster than contact center-based agents
Global outsourced home-based agent growth*, Key drivers
2011–2015*
• Higher quality of customer
140000 service
• Lower overall cost
120000 2011–15 CAGR = 18% • Scheduling flexibility
100000 • Empowers employees
80000 • Resilience in face of external
disruption
60000 • Lower absenteeism and better
staff retention
40000
• Ability to recruit high-quality
20000 employees
0
2011 2012 2013 2014 2015
* Total agents working exclusively from home for 20 or more hours per week
Source: Ovum
24
27. How we increase revenue and reduce costs
Baseline Apply our Apply Maximize Manage Optimize operational
operating industry segmented workforce sourcing mix performance
environment experience channel options effectiveness and business results
27
28. A range of disciplines underpin the
effective delivery of customer care services
• Operations: Deliver training, manage day-to-day performance and ensure that the right
skills are available in the right place in the right quantity.
• Business Support Team (BST): Provides the intelligence and applies it to the data that is at
the heart of the contact center. This can consist of leveraging workforce optimization tools
such as eWFM to helping clients better understand their customers by using quality
monitoring and advanced voice analytics.
• Human Resources (HR): The performance of finding, recruiting and training new staff or
ensuring that tenured staff are leveraged and retained as campaigns flex in volumes, is
essential in a “people business”
• Information Technology (IT): Contact center staff are 100% IT enabled – which means any
break in availability has a direct and measurable impact on the business of Transcom and its
clients. Integration to client systems, together with cost efficient call delivery, is an essential
and fundamental component of providing outsourced contact center services.
28
29. Growth opportunities
North America and Asia Pacific
• Continue expanding in local markets in Asia Pacific
Latin America
• Serving domestic markets and the US,
in addition to Spanish clients
North Europe
Central Europe
• Near shore
30. Summary: key priorities going forward
Short-term focus
• Continuous focus on executing turnaround in
underperforming areas
• Continued focus on revenue expansion and
efficiency improvements
• Increased focus on quality and service delivery
to support significant ramp-up of new volumes
Medium-to long-term priorities
• Grow revenue in line with overall market growth
in the markets where we choose to compete
• Improve profitability and decrease earnings
volatility
- Continuously strengthen operational efficiency
- Optimizing our geographic delivery mix
- Focus on broadening our client base
30
33. Revenue is typically driven by the time
that our agents spend in contact with customers
Illustrative
Actual call volume
“Extraordinary
circumstances”
(~>120% of forecast)
Volume forecast
Guaranteed volume
(~80-90% of forecast)
• Accuracy of volume forecast is key to planning and profitability
• Transcom typically commits to delivering against agreed service levels for volumes in the
range of 80-120 percent of the forecast (non-compliance being subject to penalties)
• Average call time is capped: Transcom does not get paid for time exceeding this limit
33
34. Flexibility is critical since
our industry is very event-driven
Example
Staffing need based on actual volume
Scheduled staffing level based on forecast
Delayed
campaign
Invoice sent out
two days later
than forecast
Time
34
35. Q3 2012 Group financial results
• 11.7% revenue increase
142.8 147.1 147.4 148.2 - All our regions managed to deliver growth while
132.7
CMS revenue fell
• Gross margin 19.1% (19.2%)
- Improvements in NAA and South offset by
25.1 27.6 26.5 27.3 28.3
decreases in other regions and CMS
2.7 2.2 2.4 2.2
• EBITA €2.2m (€-4.8m). Q311 impacted by €8.6m in
-4.8
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 restructuring- and other non-recurring costs.
• EBITA margin: 1.5%, up from -3.6% in Q311
• Net currency impact:
Y-o-Y Revenue +€6.4m, EBITA +€0.2m
• EPS at -0.3 euro cents, compared to -31 euro cents in
Q311
• Net Debt decreased by €41.3m to €32.1m; Current Net
Debt / EBITDA ratio at 1.71 (4.2 in Q311)
-
• Net cash flow from operations €-13.2m compared to
€18.9m in Q311
36. EBITA, Q312 vs. Q311
• Overall, savings from the restructuring program were more than offset by additional expansion
and ramp-up costs, and – to a lesser extent – by volume and efficiency deterioration in some
regions, as well as investments in sales & support functions
• Q312 results impacted by significant expansion costs, particularly in the Philippines. Revenue
associated with these investments will increase gradually in the coming months
* Underlying performance, excluding restructuring and other non-recurring costs
36
37. North America & Asia Pacific Region*
Net Revenue (€m) Gross Profit (€m) EBITA (€m) 19%
30.0
27.0 27.9
24.6 25.8 25.4
25.0
20.0
15.0 o Revenue increased by 13.1%
10.0
6.9 6.7 o Continued expansion in the Philippines
5.1 5.8 6.2
5.0 o New volumes and shift of volumes offshore
0.1 0.3 1.0
0.0 o Gross margin up by 3.3 percentage points
-5.0
-0.5 -0.5 o Higher share of volumes delivered from offshore
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 sites in the Philippines
o Increased operational efficiency and capacity
adjustment
o EBITA decreased by €0.6m
o increased investments related to further expansion in
the Philippines
o Revenue associated with these investments to be
gradually ramped up during the coming months
o Key priorities
o Continue acquisition of new clients
o Recruitment and training to support massive ramp
* Underlying performance, excluiding restructuring and other non- offshore
recurring costs in 2011 o Onshore capacity utilization
** Historical data reflects a reclassification of costs from depreciation to o Focus on quality and service delivery
amortization
38. Central Europe Region*
9%
16.0
14.0
12.0
10.0
8.0 o Revenue increased by 2.5%
o Ramp-up of a contract with a new consumer
6.0
electronics client in the Netherlands.
4.0
2.0
0.0 o Positive volume trend with our installed client base in
-2.0
some countries, particularly in Poland and Hungary.
-4.0
o Gross margin decreased by 2.5 percentage points
o Lower volume and efficiency in Germany.
o Start-up costs related to new business in the
Netherlands
o EBITA decreased by €0.5m
o Factors described above, and higher costs related to
new volumes.
o Key priorities
o Germany: increase capacity utilization and improve
efficiency
o Sales: funnel build-up and deal closure
* Underlying performance, excluiding restructuring and other non-
recurring costs in 2011
** Historical data reflects a reclassification of costs from depreciation to
amortization
39. Iberia Region*
19%
35.0
30.0
25.0
20.0
o Revenue increased by 8.3%
15.0
o Additional volumes with existing clients in Spain
10.0
o New business in Spain and Portugal
5.0 o Gross margin decreased by 0.9 percentage
0.0
points
o Appreciation of the Chilean Peso
o Higher salary costs in Chile following a new labor
agreement.
o EBITA decreased by €0.4m
o SG&A increased due to investments related to
expansion, both in Spain and Peru
o Key priorities
o Growth Latin America (on- and offshore), new site
in Lima, Peru
o Continue driving operational efficiency
o Sales: funnel build-up and deal closure
* Underlying performance, excluiding restructuring and other non-
recurring costs in 2011
** Historical data reflects a reclassification of costs from depreciation to
amortization
40. North Region*
28%
45.0
40.0
35.0
30.0
25.0
o Revenue increased by 23.2%
20.0
o Increased contact center volumes with existing clients
15.0
10.0
o Growth in the interpretation business
5.0
o Gross margin decreased 1.9 percentage points
o Lower operational efficiency
0.0
o Higher training costs, mainly as a result of attrition
o EBITA decreased by €0.3m
o SG&A costs increased compared, mainly due to
investments in strengthening our sales force and
support functions
o Key priorities
o Stabilize ramp-up of new volumes
o Implementation of new clients
o Continue improving operational efficiency
o Sales: funnel build-up and deal closure
o Focus on quality and service delivery
* Underlying performance, excluiding restructuring and other non-
recurring costs in 2011
** Historical data reflects a reclassification of costs from depreciation to
amortization
41. South Region*
16%
30.0
25.0
20.0
15.0
o Revenue increased by 14.0%
o Higher onshore volumes with existing clients in
10.0
5.0
Italy
0.0
o New business for Italian clients delivered from
-5.0
offshore centers
o Gross margin increased by 4.7 percentage points
o Volume increases and efficiency improvements in
Italy
o Higher proportion of offshore delivery at higher
margins.
o The closure of the Vélizy site, and additional cost
savings in France
o EBITA improved by €0.7m
o Driven by factors described above. SG&A costs
increased, mainly due to increased volumes in Italy
and ramp-up costs.
o Key priorities
* Underlying performance, excluiding restructuring and other non-
recurring costs in 2011 o France turnaround
** Historical data reflects a reclassification of costs from depreciation to o Continue improving operational efficiency
amortization o Sales: funnel build-up and deal closure.
42. Credit Management Services (CMS)*
16.0 9%
14.0
12.0
10.0
8.0
6.0 o Revenue decreased by 6.1%
4.0
o Decrease in case volumes and collection rates,
2.0 particularly in Germany, Austria and Poland
0.0
o Good growth potential based on recent strong
sales performance
o Gross margin decreased by 3.3 percentage points
o Decrease in volumes handled
o EBITA decreased by €0.5m
o Cost reduction initiatives lowered SG&A expenses
by €0.3 million
o In the UK, performance is improving steadily and
we expect a full turnaround during 2013, driven by
volume growth, operational efficiency
improvements and SG&A savings
o Key priorities
o Generate new volumes, installed base and new
logos
* Underlying performance, excluiding restructuring and other non-
recurring costs in 2011 o Improve operational efficiency
** Historical data reflects a reclassification of costs from depreciation to o Execution of the UK turnaround
amortization o Appoint a new Head of CMS
43. Financial Statements
Consolidated Financial Summary
o Net revenue €148.2m in Q312, up
11.7% compared to Q311.
o Gross margin flat. Margin
improvements in the North America &
Asia Pacific and South regions.
Margins fell in CMS, Central Europe,
North, and Iberia.
o SG&A costs in Q312 amounted to
€26.1 million, compared to 29.9
million in Q311. In Q311, SG&A cost
-
included €8.3 million in restructuring-
and non-recurring costs.
o Net financial result: €-2.1 (€-1.8m).
Interest expense €-0.5 (€-1.1m).
* Historical data reflects a reclassification of €0.3m in costs from
depreciation to amortization
** Q3 2011 includes €8.6 million of restructuring & non-recurring costs.
44. Financial Statements
Balance Sheet
o Net debt €32.1 as at
September 30, 2012,
compared to €73.4m as at
September 30, 2011
o Net Debt / EBITDA ratio at
1.71 (0.77 in Q212)
o Consolidated net financial
expenses/EBITDA at 5.78x
(5.42 in Q212)
45. Financial Statements
Cash Flow
o Net cash flow provided by operations
was €-13.2m, compared to €18.9m in
Q311
o Net working capital was €51.5 million,
an increase of €10.2 million (€41.3
million in Q212).
o Significant rise in trade receivables,
resulting from late payment by
clients, as well as increased
revenues.
o Capex in Q312 was €2.3m
46. Debt & Leveraging
Gross debt (€ m) Net debt (€ m) Net debt/EBITDA
4.50
Gross debt decreased by €35.3m vs. Q311
140.0
126.8 o
117.8 4.00
120.0
111.2
3.50 o Net Debt decreased by €41.3m compared to
the Q311 level
100.0
89.1 3.00
74.7 73.4 75.9
80.0
71.0 2.50
65.3 65.0 o Net Debt/EBITDA ratio: 1.71 (4.2 in Q311)
60.0
2.00
1.50 o Interest charge €0.5m (€1.1m in Q311)
40.0
32.1
1.00
17.2
20.0 13.2 11.9
0.50
0.0
0.00
Q111 Q211 Q311 Q411 Q112 Q212 Q312
(€ millions) Q312 Q212 Q112 Q411 Q311 Q211 Q111 Q410 Q310 Q210
Gross debt 75.9 71.0 65.0 65.3 111.2 126.8 117.8 118.5 118.4 133.1
Net debt 32.1 17.2 11.9 13.2 73.4 89.1 74.7 77.5 81.8 85.7
Net debt/EBITDA 1.71 0.77 0.71 0.75 4.2 4.2 2.6 2.5 2.3 2.3
Interest charge -0.8 -0.8 -0.7 -1.3 -1.1 -0.9 -0.6 -0.6 -0.4 -0.5
47. Cost reduction initiatives to yield €1.9m in annual savings
• In order to further align our cost base to current business conditions, and concentrate the focus
of our central support teams, we will be making some changes to our corporate organization
• Reduction of overhead costs by approximately €1.9 million on an annual basis, with full effect
from 2013
• Restructuring costs amounting to approximately €1.7 million will impact Q4 2012 results