Transcom investor presentation_may 14

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Information about Transcom investor presentation_may 14

Published on June 4, 2013

Author: TranscomGroup



Investor presentation

14 May 2013TranscomJohan Eriksson, President & CEOOutstandingCustomerExperience

Transcom at a glance, currentsituation and focus areas1

3• A global customer experiencespecialist...• ...providing outsourcedcustomer care, sales,technical support, and creditmanagement...• ...through an extensivenetwork of contact centersand work-at-home agentsTranscom’s business is tohelp make sure that ourclients’ customers formpositive perceptions of theirinteractions with them.”What is Transcom?

Transcom in numbers• 30,000 people• 70 contact centers, onshore, off-shore and near shore• 27 countries• Delivering services in 33 languages...• over 400 clients in various industry verticals• €605.6 million revenue in 2012• Market cap: SEK 1046.2 million as at March 28, 2013. Listed on NASDAQ OMX Stockholm(TWW SDB B and TWW SDB A)4

We have an extensive global footprintHome markets Austria Netherlands Slovakia UK Belgium Germany Norway Spain AustraliaNear Shore Locations Offshore Locations Chile* Peru* Philippines* Tunisia5 Czech Republic USA Canada Italy Poland Sweden Denmark Portugal Switzerland Croatia* Developing into home/near shoremarkets Canada Croatia Estonia Latvia Czech Republic Hungary Lithuania

Transcom’s organization6• Corporate management- CEO, CFO, CIO, Head of Operations, Head of GlobalSales & Accounts• Regional management- North region (25% of revenue)- Iberia (19% of revenue)- North America & Asia Pacific (19% of revenue)- South (16% of revenue)- Central Europe (10% of revenue)- Credit Management Services (CMS) in eight Europeancountries (10% of revenue)

Transcom’s service portfolio7• Customer serviceCustomer experience specialists trained to supportbest-in-class product, service and brand experiencesfor our clients’ customers• Technical supportTiered support models, from the simplest questions tomore complex support scenarios• Customer retentionPreventing defection and maximizing the lifetime ofa customer• Customer acquisitionAcquiring new customers cost-efficiently, and buildingstrong customer relationships as a basis for future interactions• Cross- and upsellingBuilding relationships and identifying customer needsduring any type of interaction, and taking appropriateaction to satisfy the customer’s need• Credit management services (CMS)Early collections, Contingent collections and Legal collections

Recap of our situation and focus areas8Situation today and short-term focus• Transcom’s profitability has decreasedin recent years, but is now improving• We see positive effects as a result ofrestructuring actions• Continuous focus on underperformingareas• Growth in selected areas and efficiencyimprovements• Broadening client baseMarket trends• Growth driven by domestic Asia Pacificand Latin America markets• Diversification (geography andbusiness models)Going forward - Strategic direction• Creation of outstanding customerexperiences, while helping clients toreduce cost and drive growth• Flexibility is critical

Market trends– Understanding our business2

Communications & Media and Financial Services accountfor almost two-thirds of global industry capacity10Communications & Media39%26%Financial ServicesRetail & Wholesale 8%Manufacturing 4%Energy & Utilities 4%4%4%OtherGovernment & EducationHealthcare3%3%Travel & HospitalityProfessional services2%1%Professional servicesDistribution of outsourced agent positions* by industry vertical, 2011100% = 1.58 million* Agent positions in principal markets (reflecting approximately 75-80 percent of total global capacity)Source: Ovum

Increasing demands for quality: an opportunity for Transcom11HistoricallyOur task: Respond to voice callsfrom customers as efficiently aspossible, at the lowest possible costTodayOur task has expanded: Deliver excellent customer experience New channels and technology platforms Offer more knowledge due to diversity ofproducts and greater customerdemands Generating a much higher degree ofrevenue and brand loyalty to clients Feed back customer intelligence toclients-

Market trend:Increased diversification in terms of market presence• Stagnant growth in mature, Western outsourcingmarkets• Significantly higher levels of growth in selecteddeveloping markets, and rising interaction volumes withan increasingly sophisticated customer base• Outsourcers will seek to capitalize ondomestic opportunities in developing markets,to drive growth and diversify revenue• Traditional offshore locations also developinginto domestic delivery centersExpansion in new markets

Industry growth in the coming years will primarily be driven bydomestic expansion in Asia Pacific and Latin America478,5683,8420,6481,3330,8466,3234,5264,860,596,55985,92011 201613Central & East EuropeWestern EuropeLatin AmericaNorth AmericaAsia Pacific15842079 2011-16 CAGR7.8%9.8%7.1%2.7%7.4%* Agent positions in principal markets (reflecting approximately 75-80 percent of total global capacity)Source: Ovum, Transcom analysisMiddle East & Africa2.5%83% of expected growth in LatinAmerica is domestic, i.e. non-offshore64% of expected growth in AsiaPacific is domestic, i.e. non-offshoreOutsourced agent positions* by region, 2011 and 2016eThousands

Market trend:Diversification in service channels changes business models• Social networks are emerging as important customerservice channelso 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 socialmedia in customer service and marketing14• Outsourcers need to further develop analytics platformsand 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 importantIncreasingly sophisticated non-voice offerings

Growth will be driven by opportunities beyond thetraditional voice business1525.021,45,517,52011 2016e30.538.9Multichannel, automatedand analytics servicesTraditional voice businessCustomer management BPO market,2011 and 2016eUSD billionSource: Gartner (October 2012)• The market today comprises mainlyvoice-based services…• … but the situation is expected tochange dramatically in the next fewyears with the emergence ofmultichannel, automated and analyticsservices

The number of work-at-home agents is expected to growsignificantly faster than contact center-based agents0200004000060000800001000001200001400002011 2012 2013 2014 2015162011–15 CAGR = 18%Global outsourced home-based agent growth*,2011–2015** Total agents working exclusively from home for 20 or more hours per weekSource: Ovum• Higher quality of customerservice• Lower overall cost• Scheduling flexibility• Empowers employees• Resilience in face of externaldisruption• Lower absenteeism and betterstaff retention• Ability to recruit high-qualityemployeesKey drivers

3Our performance in Q1 2013

Revenue in Q1 2013 increased 15.9% compared to Q1 201238,1 43,225,431,630,633.224,628.014.016.714,417,8Q1 2012 Q1 201318Central EuropeSouthIberiaNorth America& Asia PacificNorthGrowth+13.5%CMSNet revenue, Q113 vs. Q112€m+24.5%+8.3%+13.9%+19.3%+23.3%170.5147.1• All units contributed positively to the top-line growth• Main driver is increasing volumes withour installed base clients• Several new clients added during theyear also contributed• Revenue benefited from €3.8m incompensation received for transferringthe right to collect on a Swedish debtportfolio• France deconsolidated from March 1(effect in Q113: -€0.9m)

EBIT increased by €5m in Q1 2013 compared to Q1 201219Restructuringnet effectsVolume &efficiency-drivengainsExpansioninvestmentsOtherEBITQ113EBITQ1121.1+2.3+4.3 -1.7+0.1 6.1• €3.8 million positive impact in Q113 as a result of compensation that Transcom hasreceived in exchange for transferring our right to collect on a Swedish debt portfolio• €6.0 million positive impact in Q113 due to a capital gain following thedeconsolidation of our former French subsidiary, offset by €6.0 million inrestructuring and other non-recurring costs• EBIT in Q112 included a non-recurring cost of €1.3 million related to site closures inNorth America

EBIT margin improvements in North America & APAC, CentralEurope, South and CMS, counterbalanced by North and Iberia202013Jan-Mar2012Jan-MarEBIT marginNorthCentral EuropeSouthIberiaNorth America & APCMSTOTAL0.2%3.4%4.7%2.0%-2.0%23.4%3.6%3.4%-1.9%-4.9%5.5%-4.8%6.0%0.7%• Volume and efficiency-driven performance improvementsin North America & Asia Pacific, Central Europe andSouth• Deconsolidation of France as well as higher volumes andefficiency in Italy benefited South• North: Volume fluctuations against forecast, leading tooverstaffing, and salary increases• Iberia: Impact of early Easter• CMS: Compensation received for transferring our right tocollect on Swedish debt portfolio

4Short-term focus areas to improve profitability

What will it take for Transcom to return to historical margins?22Key performancedriverTrend vs. Q1 2012 Q1 2013 vs. Q1 2012Average SeatUtilization ratio(89% vs. 83%)Share of revenuegenerated offshore(21% vs. 16%)Average Efficiencyratio (billable overworked hours)n/a (positive development)Monthly attrition n/a (unchanged)Improvements on four KPIs vs. previous yearContinue improving key performance indicators• Seat utilization• Efficiency• Offshore/onshore split• Attrition

We need to successfully address a number of short-and medium-term operational and financial challenges23Stop the losses in France (€1m/month in 2012). Transcom plans to stop financingthe French subsidiary’s loss-making operations beyond March 1, 2013.Increase onshore seat utilization in North AmericaSuccessfully resolve tax claimsGermany – renegotiate labor agreementsReturn UK CMS to profitabilitySuccessfully implement action plan to improve operational performance in the North region

Revenue in the North region is typically driven by the timethat our agents spend in contact with our clients’ customers• In the North region, Transcom typically commits to delivering against agreed servicelevels for volumes in the range of 80-120 percent of the forecast (non-compliance beingsubject to penalties)• Volumes in Q1 2013 in the North region fell significantly short of forecast call volumes,leading to a situation of overstaffing24Volume forecastGuaranteed volume(~80-90% of forecast)“Extraordinarycircumstances”(~>120% of forecast)Actual call volumeIllustrative

Accuracy of volume forecast is key to planning and profitability25Scheduled staffing level based on forecastStaffing need based on actual volumeInvoice sent outtwo days laterthan forecastDelayedcampaignTimeExample

Key business/pricing models used by Transcom26Business/pricingmodelKey characteristicsPrice pertransaction ( or data entry)• Transcom gets paid for each transaction, e.g. each calltaken• Time spent per transaction is capped  critical tobalance quality and time spent on each transaction• Accuracy of volume forecast is key to planning andprofitabilityPrice per minute • Transcom gets paid based on the time the agentspends with each customer (usually no cap)• Accuracy of volume forecast is key to planning andprofitability, but less risk than in price per call modelsPrice per activity • Typically used for back-office tasks/processes• Time spent per activity is capped  important tobalance quality and time spent on each task• Transcom uses client systems and pre-definedprocesses• Back-office tasks usually take longer to complete thanthe typical callPrice per hour • Provides a greater degree of financial predictabilityand stabilityCurrently the mostcommonly usedmodel in the NorthregionAlternative modelsused by Transcom

Key business models used by Transcom, by region27Pricing model NorthregionAverage for otherregionsPrice per transaction (e.g. call)Price per minutePrice per activityPrice per hour1-25%26-50%51-80%0%• Business model mix currently used in the Northregion is more exposed to accuracy of volumeforecasts, compared to other regions• We are currently working to improve the balanceof pricing models used in all regions

5Going forward– Transcom’s strategic direction

29Transcom’s brand promiseOutstanding CustomerExperience, drivingrevenue and brandloyalty”

North America and Asia Pacific• Continue expanding in local markets in Asia PacificLatin America• Serving domestic markets and the US,in addition to Spanish clientsNorth EuropeCentral Europe• Near shoreShort- and medium-term growth opportunities

31Short-term focus• Continuous focus on executing turnaround inunderperforming areas• Continued focus on revenue expansion andefficiency improvements• Increased focus on quality and service deliveryto support significant ramp-up of new volumesMedium-to long-term priorities• Grow revenue in line with overall market growthin the markets where we choose to compete• Improve profitability and decrease earningsvolatility- Continuously strengthen operational efficiency- Optimizing our geographic delivery mix- Focus on broadening our client baseSummary: key priorities going forward

Thank you!Questions?

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