Investor Presentation JP Morgan European High Yield & - - PowerPoint PPT Presentation

Investor Presentation

JP Morgan European High Yield & Leveraged Finance Conference Sep 10, 2020

Today’s presenters

2

Jonas Dahlberg Chief Executive Officer

Transcom since June 2019

Previous roles: CFO, Transcom (2019) CFO, Sweco Group (2012-2019) President, Sweco Russia (2008-2012) Associate Principal, McKinsey (1998-2008)

Snejana Koleva Chief Financial Officer

Transcom since August 2020

Previous roles: Finance Director, Rock Tools Sandvik (2017-2020) VP Strategy Sandvik Mining & Rock Technology (2013-2017) McKinsey (2005-2013)

Highlights

• Transcom provides world class customer services to leading

consumer brands predominately in Europe and North America

• Since the buy out by Altor in 2017, Transcom is on a

transformation journey aiming at profitable growth and double- digit margins

• Strategy is focusing on client focus and operational excellence,

driven by strong culture and leadership. Moreover, Transcom has a strong portfolio of digital services and is shifting the mix towards attractive client segments and delivery locations

• During 2018-2020H1 Transcom shows improvements on all key

financials: EBITDA, margins, E/O-items, cash flow and leverage

• Transcom is resilient in Covid due to Work-At-Home (increased

from 6% to >60% in the span of 8 weeks), Digital and a diverse footprint

• As consumers chose to interact with brands at distance, Transcom

experiences strong demand and inflow of new contracts, driving

• rganic growth

3

Agenda

4

• Company overview and

strategy

• Industry trends
• Financial development

Transcom overview

5

Who we are: Transcom at a glance

6

200+

international clients

33

Languages spoken

1.5m+

Customer interactions

• n a daily basis

26,000

people, 50+ sites, 22 countries

40+

sites in Europe

Global presence: Albania, Bosnia Herzegovina, Canada, Croatia, Egypt, Estonia, Germany, Hungary, Italy, Latvia, Lithuania, Netherlands, Norway, Philippines, Poland, Portugal, Serbia, Spain, Sweden, Tunisia, United Kingdom, USA

1,000+

distributed workforce in North America (US & Canada)

11 sites in

the Philippines serving the English speaking markets

532 €M

2020 Q2 LTM sales

49 €M

2020 Q2 LTM EBITDA (1)

(1) Adjusted EBITDA excl. IFRS 16

Utilities BFSI Gov & Health- care Media Travel

What we do: outsourced customer relationship management

We are a global customer care provider

• ffering future proof customer facing

concepts delivered by our global team of local specialists… …supporting our clients’ digital agenda by combining our core services with leading digital capabilities and tools… …delivering services in 33 languages to international brands in various industries

Call Chat Email

26,000

customer experience specialists serving customers via Services & utilities Commerce & Logistics

Auto- motive Logistics Retail/ e-commerce IT/Tech White- goods

Telco & Cable

Social media Messaging

Telco Cable

7

Conversational commerce Core services Digital channels Robotic process automation Interaction analytics Chatbots Gamification

Transcom has an extensive portfolio of satisfied clients…

8

Telco & cable Commerce & logistics Services & utilities

IPSY

NPS 49(2)

Selected clients by vertical (1)

• No single client >10% of revenue
• Top 10 clients <55% of revenue
• Top 10 client relations 13-year long on

average

(1) (2) As of H1 2020 Net Promoter Score as of August, 2020, calculated in line with the industry practice

25 50 75 100

Cumulative share of revenue by client (1)

% Revenue +200 clients

… and is growing in attractive customer segments

Developments during Q2 2020

6.8% 6.5% 14.6%

EBITDA Q2 2020 LTM Revenue by industry segment, EUR Millions

169 130 206 208 2018 155 208 179 2019 175 Q2 2020 LTM 188 Telco & Cable Service & Utilities Commerce & Logistics 544 541 532

• Strong demand in commerce and

logistics from existing clients

• Continued intake of new contracts, of

which some COVID-driven

• COVID-driven delays of tenders and

ramp-ups of new contracts

• Travel and hospitality subsegment at

standstill (<1% of Transcom revenue)

9 Notes: On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. 2019 includes Latin America until Feb 2019 (0.9M Sales and -0.1M EBITA).

• Adj. EBITDA% by industry segment includes allocation of unallocated/group-wide expenses, excludes IFRS16 adjustments

10

Europe Global English Markets

• Delivery across

Europe

• 33 languages
• US
• UK
• Philippines

Delivery model

• On-shore in 8

countries

• Near- /off-shore

from 10 countries

• Off-shore from the

Philippines

• Work-at-home in

the US and Canada Share of total revenue Q2 2020 LTM

Europe Global English

Site locations Serviced geographies

67% 33%

Serving Global English and European market through global delivery

Continued shift towards more profitable delivery locations

Of which WAH ~60% <3% 74% 71% 65% 63% 18% 20% 25% 25% 8% 9% 10% 12% Onshore 2019 2017 2018 541 544 2020 Q2 LTM Nearshore Offshore 584 532

Share of revenue by delivery location % of Revenue Current EBITDA levels

Low teens High teens Single digit 100% 

11 Notes: FY 2017 is consolidated at Issuer level, adjusted for EO items and full year adjusted for the acquisitions of TWW group and Xzakt group. On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. 2019 includes Latin America until Feb 2019 (0.9M Sales and -0.1M EBITA)

Highly competitive digital offering

• Chatbots: AI serving as

customer service representative to both agent and end-consumer. Often embedded in chat or messaging channel

• Robotic process

automation: automation of repetitive manual back-office process

• Robotics desktop

automation: real time automation of front-end tasks on the screen of the agent

Digital Process Automation

• Gamification: application of

game-design elements in a non-game context. Game types cover the full agent life-cycle needs:

• Leadership
• Employability
• Operational
• Commercial

Gamification

• Global Business

Intelligence: data-driven analysis and reporting

• Interaction Analytics:

insights from in-depth analysis of communications between end-customer and Transcom’s clients

• CX Advisory Services:

advisory on designing, implementing and management of the best-in- class customer experience solutions

Customer Experience (CX) Management

• Digital channels
• Messaging (Conversational

commerce)

• Webchat
• Social media
• Rating-apps
• Self-service

Digital Interactions

12

Best Cloud Implementation Best Use of Customer Insights, Finalist

• Digital solutions implemented for 45% of top 20 clients
• Launch of T:Labs – Transcom’s hub for rapid digital innovation and experimentation with our clients
• Innovation & CX Awards

Acquisitions supporting growth and increasing its exposure to attractive segments and geographies

to strengthen European nearshore and multilingual services with +500 employees

August 2018

Transcom Holding AB acquires a site in Durrës to strengthen digital capabilities and position on in the e-commerce industry

July 2018

Transcom Holding AB acquires Awesome OS to create a center of excellence for utilities and strengthen exposure to German market

March 2019

TopCo AB acquires TMS connected!(1) to expand footprint on the German market and strengthen capabilities in the media industry

April 2019

Transcom Rostock acquires ASA Informationsdienste GmbH to further strengthen its position in the Nordic within the SME market

June 2017

Transcom Holding AB acquires Xzakt Kundralatiom AB

M&A transactions since take-private in 2017

• Going forward, Transcom is looking for “polished pearls”, i.e. companies with double digits profitability,

attractive growth potential and complementary assets

• ASA Informationsdienste was Transcom’s first carve-out transaction, transaction type growing in importance for

the future

(1) Acquired outside bond group, intended to be incorporated at a later stage 13

Overview of strategic roadmap

14

Establish platform

• OH cost out 30 MEUR
• Developing strong digital offering
• Repositioning towards attractive

segments and locations 2017 2018 2019 2020 2021 2022 2023 Drive profitable organic growth

• Increased Client focus
• Drive Operational Excellence
• Strong Culture & Leadership

Accelerate development

• Invest in near- and offshore
• Carve outs
• M&A to support repositioning

Financial objectives

• Solid double digit

EBITDA

• Organic growth above

industry average

• Further inorganic value

creation

Industry trends

Strong global industry growth is expected to continue

Source: Third party provider 16

CAGR ‘19-’24F Global outsourced customer care services market, EUR Billions CAGR ‘19- ’24F Market size, 2019, EUR Billions

2015 12% 2% 10% 83 16% 31% 44% 12% 3% 11% 14% 30% 42% 2019 3% 28% 41% 2024 58 68 +4% +4% 19,0 12,7 7,1 5,9 5,4 2,8 15,1 IT and tech Telecom Retail Financial services Healthcare Travel Other 3.5% North America 2.6% Europe 6.4% APAC 6.0% LatAm 5.3% MEA 8.3% 6.3% 4.4% 2.6% 1.5% 5.6% 5.0%

Note: estimates pre- Covid – impact on e.g., Travel not reflected

Drivers of increased outsourcing:

• More complex and multi-channeled interactions
• Ongoing digitalization of customer service activities
• Value-added and outbound services
• Contact centers as sales engines

Drivers of sustained profitability levels:

• High and increasing entry barriers
• Increased lock-in effect for SMEs
• Steady growth with only some volume variability

Stability of industry revenue and margins over cycles

(1) Includes Teleperformance, Convergys (acquired by Synnex Corp. in 2018), Sykes, TTEC and Transcom. FX rates based on constant currency as of year-end 2018 Source: Capital IQ, AT Kearney, Company information 17

5,9 6,5 6,5 6,2 6,2 6,4 6,7 7,0 8,1 8,8 9,2 9,9 10,1

2008

12.6% 13.2%

2006 2007

11.9% 12.2% 12.6% 10.9%

2009

10.7% 11.9%

2010 2018

12.5% 10.4%

2013 2011

10.7%

2016 2012

11.7%

2014 2015

13.4%

2017

EBITDA margin Percent Peer group sales, EUR Billions

Historical sales and EBITDA margin for the largest players (1)

• Top-line growth with stable profitability for the 5 largest

players over the last 10+ years, driven partly by market consolidation, a broadened service offering and geographic expansion

• Strong underlying growth, sector consolidation and

increasing barriers to entry have strengthened the main players whilst protecting and enhancing their profitability

• Profitability of the largest companies in the sector

underpins the non-cyclicality of the industry

Transcom is at the forefront of the key trends shaping the industry future

Source: Third party provider 18

Market consolidation New technologies and ongoing digitalization Increasing

• utsourcing

share Service mix change towards higher-value interactions

• Market is consolidating through mega-deals and smaller roll-ups
• Vendors pursue consolidation path acquiring other global and local players to

strengthen delivery footprint and industry exposure

• Financial investors continue to remain interested in the segment (e.g. GBL’s

acquisition of Webhelp)

• New technologies, such as AI and analytics, will have a significant long-term

impact and shape the future of the CRM/BPO industry

• However, the market will continue to be dominated by human interactions in the

foreseeable future

• New technologies will automate some interactions but mainly augment agent

capabilities

• Focus is moving from voice to text-based channels
• Additional volume from increasing outsourcing drives ~25% of the annual market

growth

• The need to access capabilities remains a fundamental growth driver, especially

given the increased digital interaction complexity

• Continued push for lower cost and improved customer experience
• The service mix changes towards value-added care, sales, and outbound provide

significant upside

• New high-margin care models (in- and out-bound) are emerging and many

companies are shifting volume to pro-active outbound care and sales

• Companies follow different archetypes in their customer experience models

~25%

Technological capabilities Value per contract Selected consolidators

• f annual market growth

Additional volume from outsourcing drives Maturity Outsourced contract volume High Lo w

Current contracted value Service expansion Value-added sales Analytics Cognitive / Artificial Intelligence Robotic Process Automation

Transcom in the COVID-19 pandemic

Our business model has proven more relevant than ever

20

As consumers are socially distanced from physical retail…

Call Chat Email Social media Messaging

… Transcom is available to service consumers 26,000 customer experience specialists serving customers via

Workforce capacity maximized through WAH and safe site delivery

21

May 55% 6% March June 60% 62% April

Percentage of direct workforce working from home Move back to site in certain geographies with strict preventive measures

• >1.5 meter distance between workstations
• High frequency of disinfections and cleaning
• Reinforcement of hygiene measures and

disinfection stations

• Following local regulations and requirements

regarding masks, gloves, temperature checks

• Cooperation with worker’s councils and unions

Transcom’s resilience is based on WAH, digital solutions and a diversified footprint

22

Digital solutions

• Increased productivity & business resilience
• Improved customer experience
• Increased sales conversion

Diversified footprint

• Flexibility and scalability from more

sites

• De-risked footprint - clients’ and

Transcom

• Larger talent pool and sourcing

capabilities Work at Home flexibility

• Increased business resilience
• Increased business agility &

flexibility

• Larger talent pool and sourcing

capabilities

Transcom is highly competitive in the “new normal”

23

• Continued social distancing drives consumers

from physical channels to distance channels

• Clients looking for improved efficiency and

improved customer experience

• Increased demand of resilient business

continuity options in case of coronavirus resurgence The new normal

 Strong references in ecom, fin-tech and digitally

enabled businesses

 Strong portfolio of digital services and CX

services

 Leading WAH service and globally diversified

site operations Transcom’s position

Financial highlights

Q2 2020 Highlights

• Strong quarter in the midst of the pandemic – Revenue

from continuing business +11%, and improved EBITDA (1) +19% and +1.5 pp vs last year (excl. NRI)

• Resilience based on WAH, digital solutions and

diversified footprint – 60% of workforce WAH during Q2

• Production bottlenecks and COVID-related NRIs

tampering off from June – Positive outlook for H2 2020, provided no major COVID resurgence

• NRI: EUR -7.2 million (-3.1) – EUR 3.6 million relating to

COVID business continuity cost, and EUR 3.0 million relating to Transcom’s operational and commercial transformation

• Net debt/adj. EBITDA 4.3x (1) (4.5x bond leverage

definition)

25 (1) Adj. EBITDA excluding effects from IFRS 16

Strong EBITDA and organic top line growth, adjusting for last year divested and exited business

(1) 2016 figures represents consolidated TWW accounts, 2017-2018 is consolidated at Issuer level, and adjusted for the acquisitions of TWW and Xzakt

• group. On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. 2019 and onwards are fully including recording of

IFRS 16 Leases, no retroactive calculation done for comparison periods (2) M&A amortization not included in D&A 26

Sales and EBITDA development (1) Summary of historical P&L (1)

EUR Millions 2016 2017 2018 2019 2020 LTM 2019 Q2 YTD 2020 Q2 YTD 2019 Q2 2020 Q2 Sales 586.1 584.0 543.6 541.5 532.3 269.1 260.0 134.0 132.2 Cost of sales

• 458.7
• 456.3
• 419.3
• 399.3
• 387.1
• 202.0
• 189.9
• 101.5
• 96.2

D&A(2)

• 8.0
• 8.2
• 7.7
• 10.9
• 12.1
• 4.5
• 5.7
• 2.4
• 2.8

D&A leasing

• 0.4
• 0.4
• 0.2
• 0.2
• 0.0
• 0.1

Gross profit 119.4 119.5 116.7 130.9 132.8 62.5 64.3 30.0 33.2 % margin 20.4% 20.5% 21.5% 24.2% 24.9% 23.2% 24.7% 22.4% 25.1% SG&A

• 96.2
• 89.5
• 85.1
• 79.3
• 82.1
• 38.8
• 41.6
• 20.2
• 21.3

D&A leasing

• 12.5
• 12.5
• 6.0
• 6.0
• 2.1
• 2.8
• Adj. EBITA (1)

23.1 30.0 31.6 39.0 38.2 17.6 16.7 7.8 9.0 % margin 3.9% 5.1% 5.8% 7.2% 7.2% 6.6% 6.4% 5.8% 6.8%

• Adj. EBITDA (1)

62.8 63.1 28.3 28.5 12.2 14.7 % margin 11.6% 11.9% 10.5% 11.0% 9.1% 11.1%

• Adj. EBITDA
• excl. IFRS 16

31.2 38.2 39.4 48.8 48.9 21.6 21.6 9.7 11.5 % margin 5.3% 6.5% 7.2% 9.0% 9.2% 8.0% 8.3% 7.2% 8.7%

586 584 544 542 532 31 38 39 49 49 5.3 2019 2018 2016 6.5 2017 7.2 9.0 9.2 2020 LTM

• Adj. EBITDA excl IFRS 16

Sales

• Adj. EBITDA excl IFRS 16,

Percent

EUR Millions

NRI increasing due to COVID and accelerated transformation efforts

Note: FY 2017 is consolidated at Issuer level and full year adjusted for the acquisitions of TWW group and Xzakt group 27

Q2 NRI EUR -7.2 million

• Of which EUR -3.6 million relating to COVID

business continuity cost

• Of which EUR -3.2 million relating to

Transcom’s operational and commercial transformation

• Of which EUR -0.4 million transactional

NRI totaled EUR 10.1 million for 2020 LTM Non-recurring items, EUR Millions

2,2 7,2 3,5 6,0 20,6 4,3 3,6 4,0 3,1 0,8 0,5 1,6 16,6 37,3 34,4 34,5 32,5 8,4 6,0 10,1 20.0

Q2 2019 Q4 2017

2.2

Q1 2017

9.5

Q3 2017 Q2 2017 Q3 2019

23.8

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q4 2019

15.0 11.5 7.2

Q1 2020

7.0

Q2 2020 Quarter LTM

Solid operating cash flow in the quarter

28

EUR Millions 2019 FY 2019 Q2 YTD 2020 Q2 YTD 2019 Q2 2020 Q2 Profit/loss before tax 2,143

• 3,345
• 7,855
• 2,437
• 6,932

Adjustments for non-cash items 33,429 19,220 16,887 12,009 8,817 Net financial items 17,565 8,429 10,373 4,388 6,081 Income taxes paid

• 7,456
• 2,834
• 642
• 2,171
• 516

Changes in working capital 5,684

• 3,819

2,160

• 7,216

6,157 Operating cash flow 51,366 17,651 20,924 4,573 13,606 Investments

• 16,522
• 5,182
• 6,950
• 2,837
• 3,807

Acquisitions/disposals of business, net of cash

• 1,101

5,936

• 6,781

6,540

• 6,781

Other

• 560
• 84
• 3

9

• 29

Cash flow from investing activities

• 18,183

670 -13,733 3,712 -10,617 Cash flow from financing activities

• 32,055
• 7,120 -12,123
• 4,880 -10,881

Cash flow for the period 1,127 11,201

• 4,933

3,405

• 7,892
• Q2 operating cash flow

amounted to EUR 13.6 million (4.6)

• Q2 working capital change

amounted to EUR 6.2 million (- 7.2)

• Working capital developing

positively – partly swing of temporary nature, partly tax deferrals enabled by government support programs

Working capital is improving slightly in Q2 2020

Note: 2016 figures represents consolidated TWW accounts, 2017-2018 figures are consolidated at Issuer level Q2 2017 and onwards includes the acquisition of Xzakt group Q3 2018 and onwards, includes the acquisition of Awesome group 29 31 4.9% 25 Q1 16 3.0% Q2 16 29 5.3% Q4 16 31 5.8% Q1 18 Q3 16 4.7% 5.4% 6.1% 6.4% Q1 17 31 4.0% Q2 17 4.3% 22 6.3% Q3 17 Q4 17 Q4 19 5.5% 5.3% 3.9% 30 Q3 19 Q2 18 5.2% Q3 18 Q4 18 32 Q1 19 Q1 20 5.5% Q2 19 5.6% 5.9% 34 Q2 20 30 18 30 36 23 28 31 26 27 Oth rec Prep exp accr Trade pay Trade rec Accr exp prep Oth liab NWC%

EUR Millions

Leverage ratios improving and long term financing is secured

Note: On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. Figures based on legal reporting of Transcom Holding (1) EBITDA levels are calculated excl. IFRS 16 for comparison (2) Excluding local facilities and subordinated loans (Q2’20: 6.7MEUR); Fixed rate secured notes mature in July 2021, SSRCF in September 2022, Secured term loan in March 2023, 5-year secured bond in March 2023 30

Net debt and leverage Debt structure and maturity profile (2)

EUR Millions EUR Millions 208 204 209 5,3 4,2 4,3 2018 2019 2020 Q2 Net debt / Adj EBITDA (1) Net debt 180 180 180 180 45 47 47 20 20 20 2019 2020 2021 2022 235 257 247 200 10 10 Fixed rate secured notes 5-year secured bond SSRCF Secured term loan

Summary

31

• We are more relevant than ever – And we have a resilient

delivery model

• Transcom shows improvements on all key financials and

resilience in the midst of the pandemic

• Our priorities remain – Profitable growth through client focus

and operational excellence, driven by great culture and leadership

Thank you.