Q1 2018 Presentation May 30 2018 Outstanding Customer Experience - - PowerPoint PPT Presentation

Q1 2018 Presentation

May 30 2018

Strictly private and confidential

Outstanding Customer Experience

Agenda

2

2 Company overview 5 3 Financial performance 10 4 Summary 21 1 Presenters 3 5 Appendix 23

Presenters

1

4

Today’s presenters

Leif Mårtensson

Chief Financial Officer

• Transcom since August

2017

• Previous roles:

‒ CFO, Hilding Anders Group (2014 – 2017) ‒ CFO, Arjo Huntleigh, Getinge Group (2009 – 2014)

Mattias Holmström

Altor, Director

• Board member of:

‒ Transcom ‒ BTI Studios ‒ Meltwater ‒ NorthStar Group

• Altor since 2011
• Previous roles:

‒ Senior Consultant, Booz & Co (2010 – 2011)

Michael Weinreich

Chief Executive Officer

• Transcom since

September 2017

• Previous roles:

‒ VC Partner, FinLeap (2016 – 2017) ‒ CEO, Arvato Financial Services (2009 – 2016)

Company overview

2

31% 68% 1%

Note: 2014–2016 figures represents consolidated TWW accounts adjusted for EO items and D&A, FY 2017 is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). 1) Group total sales growth adjusted for discontinued/divested operations and Tele2 contract , Adj. EBITDA margin calculated as Adj. EBITDA/Total sales, 2) Sales by geography is 2018 LTM, 3) client vertical is per 2017 and including Xzakt.

contact centres worldwide; On-shore, near-Shore, off- shore, plus Work-at- Home agents

200+

Transcom serving a broad set of international clients around the globe

Offering services in

45

Languages spoken in our customer service delivery centres

33

LTM Q1 2018 Sales

572 €M

2017

Altor, a Nordic private equity firm, full owner as of April 2017 Privately owned since Employees in 20 countries

26,500

Customers served daily on Transcom implemented campaigns

1.5m+

A Nordic outsourced contact centre champion with a global footprint

6

Transcom introduction in numbers Global footprint and service offering Key financials1) Sales breakdown 2) 3)

Sales by segment Sales by client vertical

Manila EDSA Manila Pasig Bacolod Iloilo Concepcion Sweden (HQ) Fredrikstad Lithuania Tallinn Riga Groningen Spain Portugal Italy Croatia Tunisia Budapest Germany Poland Leeds Belgrade North America: Work At Home Agents

Full service offering in 33 languages in 45 sites across 20 countries

30% 17% 15% 13% 8% 5% 6% 2% 4%

Telecom Cable Banking Gov & Healthcare Tech Retail Transportation Media Other English Speaking Latin America Europe

477 507 496 506 502 617 627 586 584 572 5,3% 5,2% 5,3% 6,5% 6,7% 2014A 2015A 2016A 2017A 2018LTM

Tele2 contract Sales from discontinued/divested operations Sales adj. for Tele2 and discontinued/divested operations

• Adj. EBITDA margin

Boni

Supported by high tech systems

Transcom offers outsourced customer relationship management (1/2)

7

We help our clients in the contact with their clients with any requests, support need or other need of communications…

Clients benefit from improved cost structure and top of the line customer management

…through a variety of channels… …with support of more than 22,000 well trained agents

Postal mail Face-to-face Social Click-to-call Chat SMS sms Call E-mail

@

Majority of calls and requests are completely handled by Transcom’s agents, minimising the degree of involvement from end client Supported by high tech systems

Transcom offers outsourced customer relationship management (2/2)

8

Transcom’s services are integrated into the clients’ operations

Clients benefit from improved cost structure and top of the line customer management

Technically trained

• On a technical query on your

installation of your new broadband, the agent will be able to answer any of your most common questions. If not, you will be transferred to a more senior Transcom agent



Well updated and prepared

• Transcom agents are aware of

changes to client’s product

• ffering (e.g. product launches or

price increases) and therefore prepared how to handle any questions.



Integrated into the client systems

• If you call to ask about a delivery
• f a package, the Transcom

agent will be able to access its client’s systems and provide live information about your request



Up-sell, cross-sell and retention

• To boost up-sell, cross-sell and

retention, agents are incentivised by KPIs set by the client. Should a customer call to terminate a contract, there are pre-agreed deals that the agent can offer



• Well progressed discussions with a number of potential targets
• Targets are in attractive verticals like Healthcare and e-commerce

Acquisitions under way

• Client centric organization implemented with increased customer focus as a result
• First positive results already realized (+150 Agents in Iloilo, +350 Home agents in US)
• Substantial potential for increased volume in 2019 (> +1000 Agents in Europe)

Client Centric

• rganization

implemented

Key Highlights Quarter 1 2018

Positive signals from market and clients on the path chosen by Transcom

• External recognition (Frost & Sullivan award 2017, CEO Magazine, Dutch award for Gamification)
• Pilot with spanish bank on conversational analystics
• Several projects for additional chat volumes in the Nordics and gamification projects in Italy

New value propositions well received

9

• Sizeable tenders and RFQs in attractive verticals like tech, logistics and e-commerce
• New sites will be opened in Europe and Philippines during 2018 to serve current customer expansion
• The wind down of the Telenor business in Sweden is progressing

Improved industry sector focus

Continuing our journey to build platform for success…

10

Broadly and deeply defined milestones for improved profitability and growth

.

Introducing a more client centric model Moving to a leaner and more agile organization Investing in innovation and forward leaning technology

New Business Support SSC CSM with P&L ownership Client service managers (CSM) CSM with end-to-end delivery of services Global IT Global and digitized HR Product management Technology for world class delivery Commercial capabilities

Financial Performance

3

Financial development

12

Sales and EBITDA development

617 627 586 584 572 33 32 31 38 38 5,3% 5,2% 5,3% 6,5% 6,7% 2014A 2015A 2016A 2017A 2018LTM EURm Sales

• Adj. EBITDA
• Adj. EBITDA %

Summary of historical P&L

• Sales down since 2015 due to discontinued/divested services and purposely discontinued relationship with Lombardia of EUR 22.2m due to terms of contract

not attractive enough

• The headwind within Nordic telecom has been partly mitigated by increased sales from both new and existing clients
• Costs trending down as a result of initiated cost savings program
• EBITDA improvement in 2017 thanks to efficiency improvement actions being realised with more improvements to come in the following quarters

EURm 2014A 2015A 2016A 2017A 2018LTM Sales 616.8 626.5 586.1 584.0 571.5 Cost of sales

• 481.9
• 492.7
• 458.7
• 456.3
• 445.8

D&A1)

• 7.4
• 8,9
• 8.0
• 8.2
• 7.9

Gross profit 127.6 125.0 119.4 119.5 117.9 % margin 20.7% 19.9% 20.4% 20.5% 20.6% SG&A

• 102.1
• 101.6
• 96.2
• 89.5
• 87.5
• Adj. EBITA

25.5 23.4 23.1 30.0 30.3 % margin 4.1% 3.7% 3.9% 5.1% 5.3%

• Adj. EBITDA

32.9 32.3 31.2 38.2 38.2 % margin 5.3% 5.2% 5.3% 6.5% 6.7%

Solid EBITDA margin improvement proof for successful acceleration of strategic initiatives

1) M&A amortisation not included in D&A. 2) Costs for consultancy transformation support was included as transactional in 2017 but moved to operational in 2018 since the consultants are supporting the cost saving program PPP.

Extraordinary items (EURm) 2014A 2015A 2016A 2017A 2018 LTM Transaction related EO items 2.6 0.9

• 3.5

9.6 10.1 Operational EO items2) 0.5 2.3 3.1 10.3 14.1 Total EO items 3.1 3.2

• 0.5

20.0 24.2

NWC development

13

Quarterly Net Working Capital

• Working capital relatively stable over time with some seasonal variations. Q1 is typically the highest quarter in terms of NWC as % of sales.
• Movements between quarters are mainly referring to timing effects of collections

Net working capital trending down as share of sales

Note: 2014–2016 figures represents consolidated TWW accounts, 2017 -2018 figures are consolidated at Issuer level. Q2,Q3 ,Q4 2017 and 2018 include the acquisition of GVP Communication AB (Xzakt).

• 150
• 100
• 50

50 100 150 200 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Trade receivables Trade payables Prepaid expenses and accrued income Accrued expenses and prepaid income Other receivables - Current Other liabilities - Current Net Working capital 7.5% 6.3% 6.9% 5.3% 6.5% 3.4% 5.4% 4.8% 4.9% 3.0% 5.4% 5.3% 6.1% 4.0% 4.3% % NWC as % of LTM Sales 4.7% EURm 5.4%

EURm 2014A 2015A 2016A 2017A 2018LTM Tangible capex

• 6.6
• 8.8
• 6.6
• 6.5
• 5.0

Intangible capex

• 1.7
• 1.2
• 2.0
• 0.7
• 0.8

Total capex

• 8.3
• 10.0
• 8.5
• 7.2
• 5.8

% of Depreciation & Amortisation 112.0% 112.2% 106.4% 88.3% 65.1% % of Sales 1.3% 1.6% 1.5% 1.3% 0.9% 6,6 8,8 6,6 6,5 5,0 1,7 1,2 2,0 0,7 0,8 8,3 10,0 8,5 7,2 5,8 2014A 2015A 2016A 2017A 2018LTM Tangible capex Intangible capex

Capital expenditures

14

• Investments are mainly within IT equipment and other

assets connected with the company’s site buildings

• In 2015 the company had an increase in investments as

a result of launching a new operational site in Iloilo, Philippines

• Since 2015 the investments have gone down mainly due

to benefits from lower hardware and software cost

Operational capex development1) Comments

Capital light business model evident by low capex needs

Note: 2014–2016 figures represents consolidated TWW accounts, FY 2017 and 2018is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). 1) Capex and is excluding M&A in order to represent operational capex, 2) Depreciation & Amortisation excluding M&A amortisation.

EURm

EURm 2014A 2015A 2016A 2017A 2018LTM Adjusted EBITDA 32.9 32.3 31.2 38.2 38.2 Change in NWC

• 6.2
• 0.9
• 12.9
• 1.1

1.7 Capex

• 8.3
• 10.0
• 8.5
• 7.2
• 5.8

Operating Free Cash Flow 18.4 21.5 9.7 29.9 34.1 Operating Free Cash Flow (%) 56.1% 66.5% 31.1% 78.3% 89.3% 56,1% 66,5% 31,1% 78,3% 89,3%

• 22
• 12
• 2

8 18 28 38 2014A 2015A 2016A 2017A 2018LTM Adjusted EBITDA Change in NWC Capex

• Op. Free Cash Flow (%)

Operating free cash flow

15

Operating cash flow development1)

Solid operating free cash flow of +60% on average since 2014

Note: 2014 – 2016 figures represents consolidated TWW accounts, FY 2017-2018 is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). Please refer to Supporting financials in IM. 1) Operating cash flow excludes change in provisions, result from disposal of business, non-cash adjustments and income taxes paid and includes adjusted EBITDA, change in NWC and operational capex (excluding M&A).

EURm

• Cash flow is relatively stable over time
• Working capital movements between the years are

mainly coming from timing of collections

• In 2016 the company had a negative working capital,

due to both timing of collections as well as payment of previous year restructuring costs

Comments

Progressing on identified initiatives for improved profitability

16

Savings are rapidly progressing and expected to further increase in short term

Cost program has as per Q1 2018 realised EUR 13.9m in annualised cost savings

Identified areas Target Identified today Realised 2017 1) Realised 2018 2) Status English speaking segment EUR 12.3m EUR 10.4m EUR 5.0M EUR 6.5m

First wave of cost savings was implemented before end of 2017. Second wave was decided in Q4 2017. The main item is the closure of the North America sites that will generate approx. 1.6 M in cost savings. The effect starts in Q2 2018.

Europe segment EUR 10.6m EUR 9.3m EUR 6.0m EUR 7.5m

First wave of cost savings successfully implemented in 2017. Second wave was decided in Q4 2017 and most of it has now been implemented. The biggest impact comes from the delayering program as a result of the new

• rganisation and the site consolidation in North.

Central functions EUR 10.2m EUR 5.3m EUR 0.0m EUR 0,7m

The main realised saving comes from head count reduction in HR. Further savings planned in IT and COO from automatisation and SSC.

Investments EUR -0,8m

Investment in innovation, RPA, digitalisation and in Centres of Excellence for HR and Operations

Total EUR 33.1m EUR 25.0m EUR 11.0m EUR 13.9m

1) Realised 2017 was the annualised savings decided in 2017. 2) Realised by Q1 annualised effect.

Summary

4

Summary Transcom

18

Attractive and growing market proven to be resilient over time 1 Driven by significant trends

i.e. increased outsourcing and higher value services

EUR 51bn

Total Addressable Market (2016A)

Growing at 4-5% p.a.

CAGR (2010-2016A and 2017-2021F)

Diversified business model with blue-chip client base 2 16

Number of targeted verticals

1.5m+

Number of customers served on a daily basis

<27%

Top 3 client concentration

Leading market position with sticky client relationships driven by industry leading client endorsement

3 Clear #1 in Sweden and Norway

Top 10 player in Europe and the world

13 years

Average length of relationships with top 10 clients

97%

Retention rate (FY 2017)

Stable and cash generative business with highly flexible cost base 4 5,2%

Underlying sales growth (2014A-2018LTM)

89,3%

Cash conversion (FY 2017)

90%

Total cost base flexibility

Implemented strategy program to build platform for success supported by selective value accretive acquisition strategy

6 7 milestones

Broadly and deeply defined for improved profitability and growth

Long list of M&A targets

Processes on-going in multiple regions and verticals

22%

Top 5 players share of fragmented core markets

Clearly identified initiatives for improved profitability 5 PPP

Strategy program emphasising People, Passion and Performance

EUR 33.1m

Targeted tangible results to be realised

EUR 13.9m

Tangible results realised on an annualised basis