Q2 2018 Presentation August 27 2018 Outstanding Customer - - PowerPoint PPT Presentation

Q2 2018 Presentation

August 27 2018

Strictly private and confidential

Outstanding Customer Experience

Agenda

2

2 Company overview 5 3 Financial performance 10 4 Summary 16 1 Presenters 3

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) 2018 LTM Q2

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

50

Languages spoken in our customer service delivery centres

33

LTM Q2 2018 Sales

558 €M

2017

Altor, a Nordic private equity firm, full owner as of April 2017 Privately owned since Employees in 21 countries

29,000

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)

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 50 sites across 21 countries

28% 16% 15% 14% 9% 6% 5% 2% 5%

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

477 507 496 506 491 617 627 586 584 558 5,3% 5,2% 5,3% 6,5% 6,8% 2014A 2015A 2016A 2017A 2018LTM Q2

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

• Adj. EBITDA margin

Boni

• New CTO, Stefan Berg, previously VP Connected Consumer Solutions Electrolux,

emphasizing our commitment to technology innovation

• New global contract with gamification solution provider Athand
• Digital recruitment process rolled out in several geographies

Increased focus on innovation

• Cost reductions realized in line with People, Passion, Performance plan
• Reallocation of resources to more profitable contracts
• Relaunch of branding, website and employer branding in September 2018

Transformation process well under way

Key Highlights Quarter 2 2018

A new, strengthened Transcom taking shape

• New locations to expand Transcom’s European footprint and enhance our nearshore and

multilingual services

• Ca. 270 seats in Zagreb, Croatia to support predominantly German clients but

also other languages

• Ca. 100 seats in Novi Sad, Serbia (satellite site to Belgrade) to provide expansion

space as well as additional sources of German language

• Ramp-up of ca. 300 work at home agents in North America

Organic growth to support strategy

7

• Adding of competence in senior sales positions as well as product management to drive

new revenue streams and focus on increasing footprint with current clients and building pipeline

• New MD in the Nordics, Pernilla Oldmark, with 20 years of experience from telecom and

service industry, 19 working for Tele2

Strengthened

• rganization

Strengthening of nearshore capabilities by expansion to Albania

• On July 31st, Transcom signed and closed an asset transfer agreement to take over a site in

Durres, Albania, currently operated by Transcom’s partner.

• The site in Durres has been delivering services to Transcom clients since 2013. For Transcom,

taking over the site with over 500 highly qualified multilingual employees, will strengthen Transcom’s European nearshore and multilingual services.

• The takeover will also strengthen Transcom’s results as well as the relationship with the served

customer.

8

Adding competence within e-commerce and digital with acquisition of Awesome OS

• On July 27th, Transcom signed and closed the acquisition of Awesome OS, a leading niche e-

commerce customer experience specialist providing customer experience and business process solutions to leading and fast-growing US e-commerce clients from its operations in Davao,

• Philippines. Awesome OS has approximately 2,000 team members. A vast majority of their
• fferings are digital/non-voice services such as emails, chat, and back office support.
• Awesome’s track record of partnering with US e-commerce companies from a very early stage,

combined with Transcom’s global footprint and robust delivery models, is a great opportunity to support high growth companies through their global expansion. For Transcom, this acquisition will also strengthen our digital capabilities and increase our global focus on the e-commerce industry.

• Awesome OS had revenues of 25 MUSD in 2017, and have shown very good growth over the

last years, with a CAGR of 34% since 2015. The acquisition will strengthen the blended margins

• f the group.
• The acquisition is financed by cash on the balance sheet and the issuance of an unsecured

note of 10 MEUR under the general basket of permitted financial indebtedness. The seller are also investing a significant amount in Transcom.

9

Financial Performance

3

Financial development

11

Sales and EBITDA development

617 627 586 584 558 33 32 31 38 38 5,3% 5,2% 5,3% 6,5% 6,8% 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 businesses.
• Q2 affected by final ramp-down of North American Bricks & Mortar business and ramp-down of a Nordic Telecom client.
• Gross profit margin improving on the back of costs trending down as a result of initiated cost savings program and depreciation from lower capex
• Continuous EBITDA improvement thanks to efficiency improvement actions being realised with more improvements to come in the following quarters
• Extraordinary items affected by restructuring costs from improvement program and from reservations in Spain related to a dispute regarding social fees for

consultants. EURm 2014A 2015A 2016A 2017A 2018LTM Sales 616.8 626.5 586.1 584.0 558.0 Cost of sales

• 481.9
• 492.7
• 458.7
• 456.3
• 434.8

D&A1)

• 7.4
• 8,9
• 8.0
• 8.2
• 7.5

Gross profit 127.6 125.0 119.4 119.5 115.7 % margin 20.7% 19.9% 20.4% 20.5% 20.7% SG&A

• 102.1
• 101.6
• 96.2
• 89.5
• 85.2
• Adj. EBITA

25.5 23.4 23.1 30.0 30.4 % margin 4.1% 3.7% 3.9% 5.1% 5.5%

• Adj. EBITDA

32.9 32.3 31.2 38.2 38.0 % margin 5.3% 5.2% 5.3% 6.5% 6.8%

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 7.9 Operational EO items2) 0.5 2.3 3.1 10.3 29.3 Total EO items 3.1 3.2

• 0.5

20.0 37.2

NWC development

12

Quarterly Net Working Capital

• Working capital relatively stable over time with some seasonal variations. Q2 is typically the lowest 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 Q2 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% 3,9%

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

• 6.6
• 8.8
• 6.6
• 6.5
• 5.2

Intangible capex

• 1.7
• 1.2
• 2.0
• 0.7
• 0.9

Total capex

• 8.3
• 10.0
• 8.5
• 7.2
• 6.1

% of Depreciation & Amortisation 112.0% 112.2% 106.4% 88.3% 81.1% % of Sales 1.3% 1.6% 1.5% 1.3% 1.1% 6,6 8,8 6,6 6,5 5,2 1,7 1,2 2,0 0,7 0,9 8,3 10,0 8,5 7,2 6,1 2014A 2015A 2016A 2017A 2018LTM Tangible capex Intangible capex

Capital expenditures

13

• Investments are mainly within IT equipment and other

assets connected with the company’s site buildings

• In 2018 the level of investment is temporarily lower due

to recycling of assets from structural changes

• Investments also benefits from the continuous

development with 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 38.0 Change in NWC

• 6.2
• 0.9
• 12.9
• 1.1

2.7 Capex

• 8.3
• 10.0
• 8.5
• 7.2
• 6.1

Operating Free Cash Flow 18.4 21.5 9.7 29.9 34.6 Operating Free Cash Flow (%) 56.1% 66.5% 31.1% 78.3% 91.1% 56,1% 66,5% 31,1% 78,3% 91,1%

• 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

14

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 with a continuous

improvement.

• 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

15

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

Cost program has as per Q2 2018 realised EUR 16.1m in annualised cost savings

Identified areas Target Identified today Realised 2017 1) Realised 2018 2) Status English speaking segment EUR 12.3m EUR 12.7m EUR 5.0M EUR 8.4m

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, starting from Q2

• 2018. Other savings includes transfer of support functions from North America to

the Philippines and rightsizing of the organisation.

Europe segment EUR 10.6m EUR 9.0m 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.

Central functions EUR 10.2m EUR 5.8m EUR 0.0m EUR 1.5m

The main realised saving comes from cost reductions in HR. Further cost reductions planned in IT and operations from automatization and Shared Service Centers.

Investments EUR -1.3m

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

Total EUR 33.1m EUR 27.5m EUR 11.0m EUR 16.1m

1) Realised 2017 was the annualised savings decided in 2017. 2) Realised by Q2 annualised effect.

Summary

4

Summary Transcom

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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 > 20% growth

With global account management in 2018

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 30%

Ramp up of Work at home agents in 2018

91.1%

Cash conversion (LTM 2018)

90%

Total cost base flexibility

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

6 2 M&A transactions

signed and closed in July 2018

More M&A targets

Processes on-going in multiple regions and verticals

Focus on growth verticals

Strong growth in tech, logistics and retail

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 16.1m

Tangible results realised on an annualised basis