Investor Presentation Today’s presenters
Michael Weinreich Jonas Dahlberg Chief Executive Officer Chief Financial Officer
Transcom since September 2017 Transcom since June 2019
Previous roles: Previous roles: VC Partner, FinLeap (2016 – 2017) CFO, Sweco Group (2012 – 2019) CEO, Arvato Financial Services (2009 – 2016) President, Sweco Russia (2008 – 2012) Associate Principal, McKinsey (1998 – 2008)
2 Highlights
• Transcom provides world class customer services to leading consumer brands in Europe and North America • Since Altor buy-out 2017, Transcom is on a transformation journey aiming at double digit margins and profitable growth • Strategy includes improvement of operational efficiency, growth in attractive segments, further development of delivery model, expansion of digital offering, supported by M&A • Developments during 2018-2019 shows improvements on essentially all key financials: EBITDA, margin, E/O-items, cash flow, leverage • Transcom is now ready for the next phase of the journey – profitable growth through organic and acquired growth in attractive segments
3 Agenda
• Company overview • Industry trends and company strategy • Financial development Company overview Who we are: Transcom at a glance
543€M 2017 11 27,000 2019 LTM sales privately owned 40 people, 50 sites, 20 countries sites in sites in the since 2017 Europe Philippines Majority owner Altor serving the English speaking markets Non-IG 33 1.5m+ 200+ 1,000+ rating customer languages international distributed workforce interactions spoken clients in North America (US & Rating from on a daily basis Moody’s and S&P Canada) (B3 and B)
Global presence: Albania, Canada, Croatia, Estonia, Germany, Hungary, Italy, Latvia, Lithuania, Netherlands, Norway, Philippines, Poland, Portugal, Serbia, Spain, Sweden, Tunisia, United Kingdom, USA
6 What we do: outsourced customer relationship management
We are a global customer care provider …supporting our clients’ digital agenda …delivering services in 33 languages to offering future proof customer facing by combining our core services with international brands in various concepts delivered by our global leading digital capabilities and tools… industries team of local specialists… Services & utilities 27,000 Conversational customer experience specialists commerce serving customers via Utilities BFSI Gov & Media Travel Health- Digital care Gamification channels Commerce & Logistics Core
Call Chat Email services Auto- Logistics Retail/ IT/Tech White- Robotic motive e-commerce goods Chatbots Process Automation Telco & Cable
Social media Messaging Interaction Analytics
Telco Cable
7 Serving Global English and European market through global delivery
Europe Global English
Markets • Delivery across • US Europe • UK • 33 languages • Philippines
Delivery model • On-shore in 9 • Off-shore from countries the Philippines • Near- /off-shore • Work-at-home in 8 countries the US
Share of total
revenue 36% Europe as of Q3 LTM 2019 64% Global English
Site locations Serviced geographies
8 Founded in 1995 – Taken private by Altor 2017 – Transformation since then
2019 • Acquisition of tms connected! outside of the bond group, creating a center of excellence for 1995 utilities and strengthening exposure to German market Founded by Swedish 2017 2004 • Taken private by Altor investment company Kinnevik, as a Expansion into Hungary • Carve-out of ASA Informationsdienste GmbH customer service outsourcing to a with acquisition of 2009 (DPV), further strengthening the position on the division of Tele2 customer management Opening two new sites German market business, MarketLink 2001 in the Philippines and doubling the capacity • Acquisition of Xzakt Kundrelation AB Listing on the OMX on that market • Establishing an innovation hub Nordic Exchange MarketLink • Opening of the IT Development Hub in Zagreb • Start of the transformation program: People, Passion, Performance 1995 2000 2005 2010 2015 2020
Today 2002 2007 2018 Acquisition of a Strengthening the • First-time public debt issuance of EUR180M 6.5% senior secure notes due 2023 majority shares in a Spanish presence in the North (Moody’s B3 / S&P B) customer management American market with • Acquisition of Awesome OS and strengthening digital capabilities as well as business, Gestel acquisition of focus on the e-commerce industry NuComm International
• Expansion to Albania by take-over of a site in Durres
9 Experienced and renewed management team
Alexandra Dahan Michael Weinreich Jonas Dahlberg Eva Wikmark-Walin Stefan Berg Helene Ruda Head of Corporate Projects Steffen Bagge CEO & President CFO CPO CTO Head of Communications Transcom since 2003 COO Europe Transcom since Sep 2017 Transcom since June 2019 Transcom since May 2019 Transcom since Sep 2019 Transcom since Sep 2017 Transcom since Aug 2019 • Head of IR, Transcom • VP Partner, FinLeap (’16-’17) • CFO, Sweco Group (’12-’19) • HR, 4potentials (’18-’19) • VP, Electrolux (’14-’18) • Director, Sensavis (’15-’17) (’08-’11) • Co-founder, Plecto (’13-’19) • CEO, Arvato Financial • President, Sweco Russia • Talent Acquisition (’09-’17) • CIO, ComHem (’09-’14) • DGM Sweden, Bite (’12-’15) • Head of M&A, Transcom • VP, YouSee (’15-’17) Services (‘09 – ’16) (‘08-’12) (’03-’08)
Mark Lyndsell Gianluca Gemma Juan Brun Pernilla Oldmark Robert Kresing Oliver Cook CEO, Global English Region GM, Italy GM Iberia GM Nordics GM Central Chief Sales Officer Transcom since Sep 2009 Transcom since Mar 2012 Transcom since Mar 2016 Transcom since May 2019 Transcom since Sep 2019 Transcom since Jul 2018 • Head of Care, Tiscali • Group controller, Ciccolella • Ops Director, Atento (’14- • CCO, Cabonline (’16-’18) • COO, Terram Energie • Senior Director, Diconium (’08-’09) (’09-’12) ’16) • Communication, Tele2 (’18-’19) (’16-’18) • Head of CS, UK Broadband • Internal audit, Falck • Ops Director, Transcom (’06- (’07-’14) • MD, Accenture (’12-’17) • Head of Business (’04-’08) Renewables (’07-’08) ’10) Development, Sitel (’14-’16)
10 Joined Transcom after Altor’s engagement in April 2017 As of Q3 2019 Transcom has an extensive portfolio of satisfied clients
Select clients by verticals(1)
Services and utilities Commerce and logistics
IPSY
NPS 45(2)
Telecom & cable
11 (1) As of H1 2019. Select clients, where Transcom has a consent to show their logos. (2) Net Promoter Score calculated in line with the industry practice, NPS of 26 in H2 2018. Transcom has a broad client base with long-last relations
Cumulative share of revenue by client number
% Revenue
100% + 200 clients • No single client >10% of revenue 75% • Top 10 clients <55% of revenue 50%
25% • Top 10 client relations 13-year-long on average 0% 0 10 20 30 40 50 +20060
12 Note: As of Q3 2019 Mature industry driven by fast growing segments
Global BPO CRM market, USD bn estimated CRM BPO revenue expected growth by vertical(2), CAGR 17-20,%
~10.0% Market size, in USD bn ~5% ~5.0% 83 ~4.5% ~4.0% ~4.0% 3.7% ~4% 79 ~3.0% 75 ~2.5% Europe 72 ~1.5% average 66 68 Retail incl. High IndustrialFinancial Utilities Public Telco & Other ecommerce Tech & Auto. services sector & Media Healthcare
Global contact center outsourcing spend in 2018
LatAm 12% APAC 15% 45% North America 2015 2016 2017 2018 2019E 2020E 29% EMEA
13 Source: Citi, McKinsey, Everest Group (1) The reported numbers are for Europe only. However similar trends are reported for the US market (Everest Group, 2019) Consumer behavior and technology driving new channels and thus services
Market growth by channel (2016-2020E)(1)
18%
12% Expected industry 8% 8% growth 6% 5%
Social Chat E-mail SMS Voice media (complex issues)
Interaction Bots and Artificial Digital Conversational Automation analytics virtual agents intelligence channels commerce
14 (1) Source: Citi, 2019 Fragmented industry under consolidation
Estimate BPO CRM market share by Examples of recent transactions
top 5 players(1) + Global Groupe Bruxelles Arvato Bertelsmann and Lambert acquires the Covisian acquires Grupo Saham forms a joint venture majority share in Webhelp in GSS, Feb 2019 in Sep 2018 25% Jul 2019
75%
Synnex acquires Convergys Blacktone buys a stake in Webhelp acquires Sellbytel to integrate it with TaskUS in Aug 2018 in Jun 2018 Concentrix in Jun 2018 Europe
25%
Transcom has done a series TP acquires Intelnet in Jun Ardian acquires CCC in Nov of M&A transaction since 2018 2017 75% mid-2017
15 (1) OES (2018) Overview of strategic objectives
Improve operational efficiency
Grow in attractive segments
Develop delivery model Profitable growth with double digit EBITDA margin
Expand digital
Support with M&A
16 People, Passion, Performance (PPP) – Closing in on cost-out target
EUR m 33.1 33.1 29.4 6.0 HeadcountContinued headcount reductions reductions in support in HR, 3.9 10.2 functionsIT and operations
21.0 1.8 12.7 Headcount reduction through delayering 11.9 and transfer of services to Shared 10.6 service centers 8.4 11.0
6.0 Continued cost reductions through 13.6 14.4 administration and HR efficiency 10.8 12.3 increases and transfer to Shared service 5.0 centers 2017 2018 2019 Q3 LTM Identified savings Target
Actual run-rate
English speaking region Europe Central functions
17 Gross of investments, ca. EUR 1.5m in 2018 and ca. EUR 0.8 m in 2019 Transcom is aiming for world class performance in operations
1 2 Until recently, the PPP program has In the next stage will focus on been focusing on improving Transcom’s efficiency effectiveness and agility of Transcom
Indicative adj. EBITDA sensitivity to changes in select operational metrics(1)
Efficiency • Customer-centric delivery model +1-2% units +EUR 5-10m • Focus on digital • Take-out ca. EUR 33m cost Attrition -10% units +EUR 2-5m
Paid absenteeism +EUR 2-3m -1% unit
(1) Estimate based of Q3 2019 LTM after IFRS 16 18 Transcom is growing in attractive customer segments
Revenue by industry segment, m EUR 584 EBITA 544 543 Q3 LTM Commerce & Logistics 99
130 152 10.5% • Telco & Cable – Revenue shrinking while profitability is improving due to operational improvements and exits Service & Utilities 214 from unprofitable contracts 206 210 7.6% • Service and utilities stable – Impacted by divestiture of Legal services in Spain end June 2019 Telco & Cable 271 • Commerce & Logistics – Growing 208 181 4.3% strongly driven by e-commerce and acquisition of Awesome 2017A 2018 2019 LTM
Note: 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 19 group acquired Awesome OS which has been consolidated from this date. 2019 LTM includes Latin America until Feb 2019 (2.3M Sales and -0.2M EBITDA). Adj. EBITA% per industry includes allocation of unallocated/group-wide expenses. Transcom is shifting towards profitable delivery locations
Revenue by type of delivery (%), EUR m EBITA 584 544 543 Q3 LTM Nearshore 8% 9% 10% 7% • Q3 2019 Offshore 18% - New site in Pasig, Philippines 20% 19% 24% - New site in Elblag, Poland - Soon opening new site in Tunis, Tunisia - Expansion decided of Zagreb, Croatia
• Q2 2019 - Acquisition of ASA Informationsdienste Onshore 74% 71% 66% 3% • Q1 2019 - Divesting operations in Chile - New site in Novi Sad, Serbia - New site in Zagreb, Croatia 2017 2018 Q3 2019 LTM
20 Note: FY 2017 is consolidated at Issuer level 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 LTM includes Latin America until Feb 2019 (2.3M Sales and -0.2M EBITDA). Transcom is developing a highly competitive digital offering
Customer Experience Digital Process Digital Interactions Gamification (CX) Management Automation
• Global Business • Digital channels • Chatbots: AI serving as • Gamification: application of customer service representative game-design elements in a non- Intelligence: data-driven - Messaging (Conversational to both agent and end-consumer. game context. Game types cover analysis and reporting commerce) Often embedded in chat or the full agent life-cycle needs: • Interaction Analytics: - Webchat messaging channel insights from in-depth analysis of - Leadership communications between end- - Social media • Robotic process - Employability customer and Transcom’s clients - Rating-apps automation: automation of repetitive manual back-office - Operational • CX Advisory Services: - Self-service process advisory on designing, - Commercial implementing and management • Robotics desktop of the best-in-class customer automation: real time experience solutions automation of front-end tasks on the screen of the agent
• 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
Best Cloud Implementation Best Use of Customer Insights, Finalist
21 Transcom has been supporting its growth through acquisitions, increasing its exposure to attractive segments and geographies
M&A transactions since take-private in 2017
June 2017 July 2018 August 2018 March 2019 April 2019
Transcom Holding AB Transcom Holding AB Transcom Holding AB TopCo AB Transcom Rostock acquires acquires Xzakt acquires Awesome OS acquires a site in Durrës acquires TMS ASA Informationsdienste Kundralatiom AB connected!(1) GmbH
to strengthen European to create a center of to expand footprint on the to further strengthen its to strengthen digital nearshore and multilingual excellence for utilities and German market and position in the Nordic within capabilities and position on services with +500 strengthen exposure to strengthen capabilities in the the SME market in the e-commerce industry employees German market media industry
• 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
22 (1) Acquired outside bond group, intended to be incorporated at a later stage Financial highlights Continued trajectory of improved profitability
Sales and EBITDA development 1) Summary of historical P&L 1)
EUR m 2018 2019 2019 2018 2019 EUR m 2015 2016 2017 2018 Q3 Q3 LTM Q3 Q3 627 YTD YTD 586 584 544 543 Sales 626.5 586.1 584.0 543.6 542.6 400.6 399.6 130.5 130.5 Cost of sales -492.7 -458.7 -456.3 -419.3 -403.9 -313.4 -298.2 -100.8 -96.2
2) (10.7%) D&A -8.9 -8.0 -8.2 -7.7 -8.9 -5.6 -6.8 -2.0 -2.4 D&A leasing -0.2 -0.2 -0.1 8.80% Gross profit 125.0 119.4 119.5 116.7 129.5 81.6 94.4 27.7 31.9 7.20% 6.50% % margin 19.9% 20.4% 20.5% 21.5% 23.9% 20.4% 23.5% 21.2% 24.5% 5.32% 5.16% SG&A -101.6 -96.2 -89.5 -85.1 -80.6 -63.3 -58.8 -21.9 -20.0
D&A leasing -9.3 -9.3 -3.3
1) 32 31 38 39 48 Adj. EBITA 23.4 23.1 30.0 31.6 39.8 18.1 26.3 5.7 8.7 % margin 3.7% 3.9% 5.1% 5.8% 7.3% 4.5% 6.6% 4.4% 6.6%
2015A 2016A 2017A 2018A Q3 2019LTM Adj. EBITDA 1) 58.1 42.6 14.4
% margin 10.7% 10.6% 11.0% Sales Adj. EBITDA Adj. EBITDA % Adj. EBITDA 32.3 31.2 38.2 39.2 47.6 23.7 32.2 7.8 10.6 excl. IFRS 16
% margin 5.2% 5.3% 6.5% 7.2% 8.8% 5.9% 8.1% 5.9% 8.1%
1) 2014 – 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 24 acquired Awesome OS which has been consolidated from this date. 2019 is fully including recording of IFRS 16 Leases, no retroactive calculation done for comparison periods. 2) M&A amortization not included in D&A. E/O items trending downwards
Non-recurring items, EUR m
LTM By quarter 50 • Restructuring cost for PPP 45 37.3 40 34.4 34.5 32.5 35 • Consultancy cost for PPP 30
23.8 25 • Non-operational acquisition and divestiture cost 20.0 20 16.6
15.0 15 11.5 • Legal claims and settlements with clients 9.5 20.6 10
5 2.2 7.0 7.2 6.0 4.3
• Management restructuring 2.2 3.5 3.6 4.0 3.1 0.8
Q1 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q2 2017 0
25 Note: FY 2017 is consolidated at Issuer level and full year adjusted for the acquisitions of TWW group and Xzakt group. E/O items are driven by specific initiatives and events of non-operational nature
E/O items by Quarter, EUR m Comments: 9.8 Restructuring cost 3.5 • Exiting unprofitable contracts PPP 1.8 Severance cost 1.3 1.1 0.3 0.2 • • Onerous leases
Consultancy support 2.7 1.0 1.0 for PPP 0.1 0.2 0.0 0.2 • Transformation support
Acquisition and • Acquisitions of Transcom, 3.2 2.7 divestitures 1.4 Awesome, Durrës, ASA 0.0 0.4 0.3 • Divestments of Chile, Legal services -1.6 8.1 Legal claims and • Spain social cost claim settlements with 1.6 • Client settlement clients 0.0 0.2 0.8 0.1 0.1 • Other claims
Management 1.0 restructuring and 0.0 0.0 0.0 0.3 0.3 0.0 • Management restructuring other Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
26 Solid and improving operating cash flow
2018 2019 2018 2019 EURm 2018 Q3 YTD Q3 YTD Q3 Q3
Profit/loss before tax -32,226 -34,862 -2,352 -4,698 992 • Q3 YTD operational cash Adjustments for non-cash items 30,050 30,802 27,712 12,106 8,492 flow improved to EUR 30.1 Net financial items 19,674 15,813 12,593 4,033 4,164 million (-1.0) Income taxes paid -2,288 -775 -5,074 526 -2,239 Changes in working capital -12,716 -11,942 -2,733 -15,618 1,087 • Q3 operational cash flow Operating cash flow 2,495 -964 30,146 -3,652 12,495 improved to EUR 12.5 Investments -8,803 -6,641 -10,175 -3,226 -4,993 million (-3.7) Acquisitions/disposals of subsidiaries, net of -34,033 -32,987 -711 -32,987 -6,647 cash • Q3 NWC fluctuation Other 1,048 256 -85 158 -1 improved to EUR 1.1 million Cash flow from investing activities -41,788 -39,372 -10,971 -36,056 -11,641 (-15.6) Cash flow from financing activities 34,072 38,522 -19,890 35,505 -12,770
Cash flow for the period -5,222 -1,814 -715 -4,203 -11,915
27 Despite renewed investments, Transcom still has a capital light business model
Operational capex development(1) Working capital and D&A as %of Revenue (2)
EUR m 12.5 7.5% 6.1% 10.0 10.1 6.0% 6.0% 5.3% 8.5 4.8% 4.7% 7.2 10.3 4.5%
8.8 6.6 9.8 3.0% (3) 6.5 1.4% 1.4% 1.4% 1.4% 1.7% 1.5% 1.2 2.0 2.2 0.7 0.3 0.0% 2015A 2016A 2017A 2018A Q3 2019 2015 2016 2017 2018 Q3 LTM 2019 LTM Tangible capex D/A % Rev Intangible capex WC % Rev
1) Capex and is excluding M&A in order to represent operational capex. 2) M&A amortization not included in D&A. 28 3) 3.39% considering IFRS 16 Leases, no retroactive calculation done for comparison periods. Note: 2014–2016 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. Working capital is stable with modest fluctuations
NWC % Accrued expenses and prepaid income Trade receivables Other receivables - Current EUR m Trade payables Other liabilities - Current Prepaid expenses and accrued income
160 40 8,5 34 140 36 8,0 21 30 30 31 31 26 31 29 34 25 30 33 7,5 120 18 24 27 22 6.5 7,0 100 6.1 6.1 6,5 6.0 80 6,0 5.4 5.4 5.4 5.4 5.3 5.2 60 4.9 5,5 4.8 4.6 5,0 40 4.3 4.0 4,5 20 4.7 3.9 4,0 0 3.4 3.0 3,5 -20 3,0 -40 2,5
-60 2,0 1,5 -80 1,0
-100 0,5
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 Q4 2018 Q1 2019 Q2 2019
-120 Q3 2018 0,0 Q3 2019
29 Note: 2014–2016 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. Leverage ratios improving and long term financing is secured
Net debt and leverage Debt structure and maturity profile (1) EUR m EUR m Net debt / Adj EBITDA Fixed rate secured notes Net debt SSRCF 5-year secured bond
235 250 8 10 225 225 206 206 7 45 45 45 200 180 5.3 6 157 5 150 4.2 4.3 4 100 3 180 180 180 2 50 1 0 0 2017 2018 2019 2019 2020 2021 2022
Note: 2017 is full year adjusted for the acquisitions of TWW and Xzakt group. On July 27, 2018, the group acquired Awesome OS which has been 30 consolidated from this date. EBITDA levels are calculated excl. IFRS 16 for comparison (1) Excluding 2.8 MEUR local facilities; Fixed rate secured notes mature in July 2020, SSRCF in September 2022, 5-year secured bond in March 2023 Summary Overview of strategic objectives
EUR 27m cost out(1)
67% in growth sectors(1)
Ready for the 34% near/offshore delivery(1) next phase: growth
Challenger position for digital
(1) Q3 2019 LTM 32 Thank you.