Teleperformance: 2023 Annual Results: Profitable Growth and Strong Cash Flow

• Record results: fastest like-for-like growth (+5.1%⁽¹⁾ )in the industry, EBITA margin up +40 bps* and free cash flow up > +15%
• 2024 outlook: further growth and increase in margins on a pro forma basis⁽³⁾
• Majorel integration well on track: a targeted €150 million in synergies by 2025
• New governance for a robust medium-term outlook

PARIS–(BUSINESS WIRE)–Regulatory News:

The Board of Directors of Teleperformance, a global leader in digital business services, met today and reviewed the consolidated and parent company financial statements for the year ended December 31, 2023. The Group also announced its financial results for the year.

Robust growth and record operating margin and cash flow for the year

• Revenue: €8,345 million
  
  up +5.1% like-for-like⁽¹⁾
• EBITA before non-recurring items: €1,290 million
• EBITA margin: 15.9%*, up +40 bps vs. 2022
• Net free cash flow: €812 million, up +15.5% vs. 2022
• Cash conversion rate: 45.7% vs. 40.2% in 2022
• Diluted earnings per share: €10.18 and dividend per share: €3.85,** for a payout ratio of 38%

The Group’s growth and cash flow drivers

• Sustained revenue growth in Europe, in Indian offshore activities and in Specialized Services, in a highly volatile economic and currency environment
• A diversified client portfolio served in nearly 100 countries on five continents, with a broad range of high value-added services in a wide range of verticals
• A sustained AI innovation drive, with more than 250 projects, including projects with Gen AI, for our clients, and ongoing hiring of top talent, notably in India, to optimize the Group’s outsourcing solutions.
• An agile, multilingual operating model combining offshore facilities (57% of revenue⁽²⁾) and work-from-home solutions (more than 40% of employees)
• Tighter cost and cash discipline, with streamlining action plans and site optimization

Integrating Majorel

• Acquisition of a leading European business services provider completed on November 8, 2023
• Teleperformance’s positioning significantly enhanced in key markets, particularly in Europe, in high-potential verticals, such as banking, insurance and luxury goods, and in high value-added lines of expertise like end-to-end services.
• Strengthened Group leadership, with more than €10 billion in annual revenue⁽³⁾ and more than €2 billion in EBITDA ⁽³⁾
• Cost synergy plan on track to deliver around €150 million by 2025, of which €50 million expected in 2024 (before integration costs)

Outlook

• In 2024, taking a conservative approach and adjusting the Group’s business model in a volatile economic environment:
  • Like-for-like, pro forma⁽³⁾ revenue growth target of +2% to +4%
  • EBITA margin before non-recurring items up between 10bps and 20bps on a pro forma basis (vs. 14.9% in 2023) excl. Majorel integration costs
  • Increase in net free cash flow and ongoing cash return to shareholders, up to 2/3 of the net free cash flow, resulting from dividends and share buy-backs
  • A robust balance sheet, with leverage of less than 2x EBITDA⁽⁴⁾
• Over the medium term, sustained industry-outperforming growth, and further margin improvement

* Teleperformance excluding Majorel and €13 million in streamlining costs ** Subject to shareholder approval at the next Annual General Meeting, to be held on May 23, 2024 ⁽¹⁾ At constant scope of consolidation and exchange rates, and excluding the impact of lower revenue from Covid support contracts and hyperinflation ⁽²⁾ Percent of revenue from Core Services & D.I.B.S. ⁽³⁾ Pro forma full-year 2023 figures including 12 months of Majorel revenue ⁽⁴⁾ Net debt-to-EBITDA ratio

Governance

– A new governance organization with Daniel Julien, founder, Chairman and Chief Executive Officer, and Bhupender Singh, Deputy Chief Executive Officer and Director, acting as co-Chief Executive Officers until December 31, 2025;

– Preparations for separating the roles of Chairman of the Board and Chief Executive Officer on January 1, 2026, when Mr. Singh will be appointed sole Chief Executive Officer.

2023 Financial Highlights

* Adjusted following final measurement of the fair value of the identifiable acquired assets and assumed liabilities of PSG Global Solutions

** 15,9% excluding €13 million in streamlining costs

*** Subject to shareholder approval at the next Annual General Meeting, to be held on May 23, 2024

Teleperformance Chairman and Chief Executive Officer Daniel Julien said: “2023 was a year of profitable growth and many success that have positioned the group for a solid future. In a volatile economic and geopolitical environment, Teleperformance not only continued to grow its business delivering a record €8.4 billion in revenue, but also improved its operating margin by +40 basis points and its cash flow by more than +15%. Our profitability model has created one of the highest annual EBITA margins in the industry.

In addition to our successes, there are challenges that we are overcoming. The global slowdown in volumes, the impact of regional crises on client decision-making processes, and the shift in consumer behavior after several years of pandemic lockdowns all slowed the Group’s traditional revenue growth. In this environment, our relentless focus on maximizing operational efficiency with flawless execution enabled us to drive much faster development of our offshore solutions. Witnessing a tougher environment throughout the year, we deployed highly disciplined cost and cash management policies while adjusting our growth model. Our shareholders were rewarded as well since we returned a significant portion of the year’s cash flow to them.

2023 also saw the successful acquisition of Majorel, which was completed in record time and was recently honored with the “French Deal of The Year” prize awarded by Global Capital, a renowned institution in the financial sector in Europe which has been rewarding the best financial transactions for over 20 years. As a result of this acquisition, Teleperformance has given birth to a new, more diverse company, in terms of markets, client verticals and expertise. It strengthens Teleperformance’s #1 global leadership position and provides a new springboard for our future. The “new Teleperformance” represents nearly 500,000 employees, more than €10 billion in revenue and more than €2 billion in EBITDA.

Innovation is at the heart of Teleperformance’s “High Touch-High Tech” strategy, including the development of AI solutions designed to increase productivity and accuracy. Today, many clients are depending on us to manage more than 250 AI-projects including projects that incorporate Gen-AI components, to help accelerate their own business results. In this highly mobile, increasingly complex world, we launched TP Infinity, whose client consulting solutions are expected to sustain and support the Group’s transformation into more high value-added business segments.

People are still an important ingredient to our value proposition. In 2023, Teleperformance confirmed that it is the industry’s preeminent employer by creating many new jobs around the world in a workplace environment of excellence and employee well-being. For the first time, the Group was named one of the top five World’s Best Workplaces™ 2023 by Fortune and Great Place to Work^®. For the third year in a row, Teleperformance was honored to once again be among the 25 Best Workplaces among global leaders. Teleperformance is now certified as a Great Place to Work^® in 72 countries, covering more than 99% of its workforce, demonstrating the trust and engagement of our employees.

In 2024, Teleperformance’s priority will be to pursue its profitable, cash-generating growth model despite the uncertain environment we are operating in today. With agility and flexibility, the Group will continue to tightly manage its costs and harvest the synergies expected to be created by the Majorel integration. We will increase the promotion of our offshore and digital solutions to meet clients’ growing demand for optimized efficiency. As a result, and taking a conservative approach, particularly for the first half, the Group is targeting pro forma* like-for-like revenue growth of +2% to +4% in 2024, pro forma* recurring EBITA margin up between +10bps and +20bps and increased cash flow.

Looking beyond 2024, Teleperformance’s business fundamentals are solid in both our core business and specialized services. Over the medium term, we aim to deliver like-for-like growth outpacing the market, while continuing to improve our margins. We will also continue to pursue targeted acquisitions, particularly in specialized services.

The Group recently made some important decisions concerning its governance, to prepare the future of the “new Teleperformance”. Following unanimous approval by the Board of Directors, Bhupender Singh and I will be acting as co-CEOs of the Group until the end of 2025. This decision has been taken in order to ensure a smooth leadership transition, with the objective of separating the responsibilities of Chairman and CEO after this date.”

* on a pro forma 2023 basis including Majorel over 12 months

2023 REVENUE

Consolidated revenue

Revenue amounted to €8,345 million for the year ended December 31, 2023, representing a year-on-year increase of +1.7% like-for-like (at constant exchange rates and scope of consolidation).

On a reported basis, revenue was up +2.3% on the prior year. The difference between like-for-like and reported growth rates stems from the net impact of:

(i) the -€346 million highly negative currency effect, particularly in the second half, due to the decline against the euro in the US dollar, the Egyptian pound, the Argentine peso, the Indian rupee, the Turkish lira, the Colombian peso and the Philippine peso.

(ii) the +€404 million positive impact from changes in the scope of consolidation, led by the inclusion of Majorel since November 1, 2023. These changes also reflected the contributions from PSG Global Solutions since November 1, 2022 and from Capita Translation & Interpreting since January 1, 2023.

Reported growth was dampened by the non-recurring impact of the year-on-year decline in the contribution from Covid support contracts (-€223 million over the full year), and the adjustment for the impact of high volatility of exchange rates in countries with hyperinflationary (-€32 million), notably in Argentina. Adjusted for these impacts, like-for-like growth stood at +5.1% for the year.

Over the period, like-for-like growth* was particularly robust, given the volatile economic environment and uncertain geopolitical situation. The performance reflected the diversity of Teleperformance’s client and service lines portfolio, as well as its unrivaled global geographic footprint in nearly 100 countries.

In Core Services & Digital Integrated Business Services like-for-like growth* was strong in the EMEA region but remained sluggish in the LATAM-based offshore activities and in the North America & Asia-Pacific regions.

Growth was particularly varied by industry vertical. Financial services, social media, entertainment and government agencies (excluding Covid support contracts) saw the fastest growth, while retail, technology and telecoms were flat.

The sustained strong momentum in offshore solutions, particularly in India, exerted downward pressure on the Group’s revenue growth over the year but had a positive impact on Group margin.

Specialized Services continued to expand at a sustained pace, led by the still very fast rebound in TLSContact’s visa application management business post-Covid and the steady growth in LanguageLine Solutions’ interpretation business throughout the year.

Fourth-quarter 2023 revenue amounted to €2,396 million, down -0.6% at constant exchange rates and scope of consolidation (like-for-like). Adjusted for the year-on-year decline in revenue from Covid support contracts and the impact of high volatility of exchange rates in countries with hyperinflation, like-for-like growth stood at +2.4%.

On a reported basis, revenue was up by +11.3%, reflecting the net impact of:

(i) a significant +€351 million increase from changes in the scope of consolidation, with the inclusion of Majorel, PSG Global Solutions and Capita Translation & Interpreting

(ii) the highly negative -€96 million currency effect due to the decline against the euro in the US dollar, the Argentine peso, the Egyptian pound, the Turkish lira and the Philippine peso.

• Analysis of 2023 revenue growth

[Graphic omitted]

* At constant scope of consolidation and exchange rates, excluding the impact of lower revenue from Covid support contracts and the adjustment for the impact of high volatility of exchange rates in countries with hyperinflationary

Revenue by activity

* Digital Integrated Business Services

** +3.2% for Core Services and D.I.B.S. and +5.1% for the Group total on a like-for-like basis, excluding Covid support contracts and the adjustment for the impact of high volatility of exchange rates in countries with hyperinflation

• Core Services & Digital Integrated Business Services (D.I.B.S.)

Revenue from Core Services and D.I.B.S. amounted to €6,982 million in 2023, almost stable (-0,7%) at constant exchange rates and scope of consolidation (like-for-like). Adjusted for the year-on-year decline in revenue from Covid support contracts and the impact of high volatility of exchange rates in countries with hyperinflationary (Argentina and Turkey), like-for-like growth stood at +3.2%.

Reported revenue was stable for the year (-0.1%), reflecting:

(i) the positive impact of consolidating Majorel since November 1, 2023

(ii) the unfavorable currency effect stemming from the decline against the euro in the Egyptian pound, the US dollar, the Colombian peso, the Indian rupee, the Turkish lira, the Philippine peso and most other operating currencies.

Over the year as a whole, like-for-like growth* was relatively satisfactory given the volatile economic environment and uncertain geopolitical situation. This resilience was underpinned in particular by the diversity of both the Group’s client portfolio and the geographic footprint of its activities.

Business rose steadily in Europe over the period, while the North American market slowed sharply year-on-year on the back of reduced volumes post-Covid, impacting the Group’s activities in the North America & Asia-Pacific and LATAM regions. The best results were reported in the social media (content moderation), financial services and government agency verticals (excluding Covid support contracts). On the other hand, business in technologies, retail and telecoms was flat over the year.

The fast momentum in offshore solutions continued apace, particularly in India, where the Group is deploying high value-added, technology-intensive global solutions on behalf of large global industry-leading corporations in the North American market. The expansion in offshore activities exerted downward pressure on the Group’s revenue growth over the year but had a positive impact on Group margin.

In the fourth quarter alone, Core Services & D.I.B.S. revenue amounted to €2,042 million, representing a decline of -1.7% like-for-like excluding the Covid support contracts. In addition to the impact of slowing volumes in an uncertain economic environment, growth was held back by the highly volatile exchange rates in countries in hyperinflation.

Reported growth stood at +11.6%, reflecting:

(i) the positive impact from changes in the scope of consolidation, led by the inclusion of Majorel since November 1, 2023;

(ii) the unfavorable currency effect stemming from the decline against the euro in the US dollar, the Egyptian pound, the Colombian peso, the Indian rupee and most other operating currencies.

* At constant scope of consolidation and exchange rates, excluding the impact of lower revenue from Covid support contracts and the adjustment for the impact of high volatility of exchange rates in countries with hyperinflation

• North America & Asia-Pacific

Regional revenue came to €2,534 million in 2023, down a slight -1.4% from the year before on a like-for-like basis. Reported revenue declined by -5.4% over the year, reflecting the unfavorable currency effect from the decline against the euro in the Indian rupee and, in the second half, the US dollar. In the final quarter, revenue amounted to €661 million, down -4.6% like-for-like and -9.7% as reported.

The slight contraction in revenue over the year was attributable to corporate budget cuts in the United States and the post-Covid slowdown in volumes in the North American market, in such industries as telecommunications, technology, and retail. Growth was also dampened by the client project cancellations, as well as by program scale-backs and postponements.

In this challenging environment, highly competitive offshore solutions enjoyed fast growth, particularly in India, although the resulting deflationary impact detracted from regional revenue.

In the Asia-Pacific region, revenue growth was robust throughout the year, supported in particular by the ramp-up of new contracts in China in the financial services and travel verticals.

Across the region as a whole, the content moderation (Trust & Safety), back-office services and customer acquisition activities expanded at a steady pace over the year.

• LATAM

In 2023, revenue in the LATAM region amounted to €1,569 million, a year-on-year increase of +0.5% like-for-like. Growth was damped by the adjustment for the impact of high volatility of exchange rates in countries with hyperinflationary (Argentina). On a reported basis, growth was down -5.1%, primarily reflecting the decline in the Colombian and Argentine pesos against the euro.

Fourth-quarter revenue stood at €390 million, a year-on-year decrease of -3.2% like-for-like and of -6.4% as reported. Adjusting for the impact of hyperinflation on activities in Argentina, following the change of government, weighed heavily on like-for-like growth at year-end.

Over the full year, regional growth was supported by the robust momentum in the social media content moderation, financial services and healthcare verticals, attenuated by softer business in transportation services and retail.

The LATAM region’s offshore activities were confronted with a slowdown in North American demand, particularly in the second half.

Regional growth was also pulled down by the diminished appeal of Mexico, and more recently Colombia, compared with other offshoring locales following the strengthening of their currencies against the US dollar. Demand from North America & Asia-Pacific clients shifted favorably to the India-based offshore activities, but with a deflationary effect on consolidated revenue growth.

• Europe & MEA (EMEA)

Regional revenue came to €2,536 million in 2023, representing a like-for-like increase of +8.0%, excluding the Covid support contracts. Growth was damped by the adjustment for the impact of high volatility of exchange rates in Turkey, which is a country with hyperinflation. In the fourth quarter alone, like-for-like growth excluding the impact of Covid support contracts came to +2.3%, with a slight dampening from adjustments for the impact of hyperinflation on activities in Turkey.

Multilingual activities, which are the primary contributors to the region’s revenue stream and mainly serve large global industry-leading corporations, especially in the digital economy, reported sustained growth for the year. While particularly buoyant in Greece, Egypt and Turkey over the year, growth in multilingual hub activities slowed in the final quarter in Portugal, particularly in the social media vertical.

Business in the United Kingdom rose sharply over the period, driven by the ramp-up of new contracts in financial services, with government agencies (excluding Covid support contracts) and in retail.

Operations in Germany expanded at a satisfactory pace, thanks in particular to the fast growth in nearshore services in the Balkans and robust business development in the social media, travel and consumer electronics verticals.

• Specialized Services

Revenue from Specialized Services stood at €1,363 million in 2023, a year-on-year increase of +16.1% like-for-like and of +17.0% as reported. The difference between like-for-like and reported growth rates reflected:

(i) the positive impact of consolidating PSG Global Solutions from November 1, 2022, and of Capita Translation & Interpreting from January 1, 2023.

(ii) the negative currency effect stemming from the decline in the US dollar against the euro.

In the fourth quarter, revenue rose by +13.3% like-for-like, extending the robust gains reported in the first two quarters of the year.

LanguageLine Solutions, the main contributor to Specialized Services revenue, continued to enjoy significant growth throughout the year. Its performance was led by market share gains in a fast-expanding industry, supported in particular by the ongoing development of video and telephone interpreting solutions and the growth in digital platforms.

TLScontact’s activities continued to grow very rapidly over the year, driven by the still highly robust post-Covid rebound in the visa application management business, which is leveraging the favorable environment created by increased passenger traffic and the strong growth in premium ancillary services. As a result, revenue from these activities rose to a record high in 2023, well above pre-Covid levels.

2023 RESULTS

EBITDA before non-recurring items ended 2023 at €1,775 million, up +1.4% from the prior year and representing a margin of 21.3%, versus 21.5% in 2022.

EBITA before non-recurring items was €1,290 million, vs. €1,262 million in 2022, for a margin of 15.5%, unchanged from the year before. It was shaped by:

(i) two months of EBITA from Majorel, consolidated since November 1, 2023, which corresponded to a EBITA margin before non-recurring items of 8.5%

(ii) €13 million in streamlining costs already recognized in the first half to offset the impact of slowing volumes in an uncertain environment.

Excluding the impact of consolidating Majorel over two months and adjusting for streamlining costs, Teleperformance’s underlying EBITA margin before non-recurring items would have been 15.9%, up +40 basis points compared with 2022.

The improvement was primarily led by:

(i) a positive mix effect from the fast growth in high-margin Specialized Services activities;

(ii) the rapid expansion in offshoring activities in India;

(iii) dedicated action plans and tight cost control.

Operating earnings by activity

EBITA before non-recurring item

Contacts

FINANCIAL ANALYSTS AND INVESTORS
Investor relations and financial

communication department

TELEPERFORMANCE

Tel: +33 1 53 83 59 15

[email protected]

PRESS RELATIONS
Europe
Karine Allouis – Laurent Poinsot

IMAGE7

Tel: +33 1 53 70 74 70

teleperf[email protected]

PRESS RELATIONS
Americas and Asia-Pacific
Nicole Miller

TELEPERFORMANCE

Tel: + 1 629-899-0675

[email protected]

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