Hello, and welcome to the Teleperformance acquired Senture call. My name is Judy, and I'll be the coordinator for today's event. Please note that this call is being recorded. For the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad at any time. If you require technical assistance at any point, please press star zero and you'll be connected to an operator. I would now like to hand you over to your host, Olivier Rigaudy, Deputy CEO and Group CFO, to begin today's conference. Thank you. Thank you, Judy. Good evening, good afternoon, and good morning for those who are based in U.S. today. The first thing I just wanted to tell you Happy New Year. We are starting 2022 as a rush. We are here together to comment on recent acquisitions that have just been announced end of December. Next slide, please. I'm skipping directly the disclaimer and just explaining what we have done. As you have read in the press release that we issued just before the end of the year, we acquired a company called Senture. Here you have the presentation of this company, which is a major BPO operator for government service, mainly federal, state, and local in the United States. It is providing fundamental support at this power point for citizen-first experience in different sector. I'll come back in a minute to that. Focused on government service in the U.S. As you can see, there are also commercial sales, but more than 80% of the business is government service. It's split across federal government and state and local. We have listed here all the different activities in which Senture is active. It could be defense, civilian health, education, transportation, tourism. But it could also be unemployment assistance, call center, national interest, COVID vaccine, and three one one services across the different town or county. This is very large business speaking to 11 federal states, at least with federal government across the U.S. This is the most important part of the business of Senture. This company is also active in commercial health care in different business that we know well. Senture is. Let's move to the next slide just to show you what is Senture. Senture has been established in 2003. It's based in London, but their clients in the U.S. and not in the U.K. They are running a business of 4,500 full-time employees, of which most of them are working from home. They have roughly 50 clients, and they will deliver for this year roughly $192 million sales, just below $200 million. The margin, the EBITDA margin is around 19%, close to 20%. The adjusted EBITDA margin is at 16%, above the group standard. What is interesting, here you have the figures that have been displayed, the revenue breakdown by end market and also by vertical. As you can see, the commercial is only 23%. The pure commercial is only 23% of the business, while government roughly 80% of the business, 77% to be precise, is citizen line of service in the different states that I just mentioned earlier on, in the different sector. They are working in, as you understood, healthcare, which is 52% of the business, but also transport, education, social assistance, other and different sector. Here, the 52% are, of course, including the 23% commercial that are mostly in healthcare business. This is a company that is well managed, not big size, but well managed. As you can see, if we go to the next slide, this company has grown dramatically over the last three years. Of course, a part of it is coming from the COVID line, but not only, roughly 20% of the business is COVID there. The growth has been very, very important over the last two or three years in different sector, adding new service in new states, adding new county, new town, and new business. The growth has been tremendous and very quick. In fact, it seems that the digitalization of the world is now touching the public sector, not only in the U.S., and this is really a change versus the previous year. When you look to the results, the growth of the EBITDA is above, of course, the growth of the sales. More interestingly, they are delivering very good cash. Most of the EBITDA is confirming in cash. You see 82% of the EBITDA is confirming cash. All these figures, of course, are totally consistent with our financial criteria, whether it's growth, whether it's margin, whether it's cash conversion. That is why this company has been appealing to us and at least for financial, I'll come back in a minute for the reason for which we have decided to buy that. What are the rationale? In fact, the rationale is very simple. For those who know us for some time, we are just pursuing. I'm going to the next slide, sorry. It is pursuing our vertical specialization strategy by strengthening our citizen service, citizen line of service, which is already active in U.S., but not so much, much more in U.K., in Europe, in Middle East, in Asia, and Africa. Clearly we were dwarf in U.S., and this is opening new opportunity for growth in the U.S. in this sector, and it's booming. We have seen that not only for COVID, but also for other services. We were lagging behind in this part of the world on this vertical. Of course, on second point, strong. Senture benefits from some financials with strong top line growth and maybe the margin above that of Teleperformance. Figures are okay and more than okay. Strategically it makes sense, financially it makes sense. Not only it makes sense also with management teams that are going to stay with us as we have the ability to do that for years now. The operation is very accretive to Teleperformance earnings per share by around 55%. When you look at that, and I'll come back later on that, we are buying this company at a price which is around 10x the EBITDA, and financing below 1% in terms of cost of debt. That makes sense, and that helps dramatically first to fit our whole, you know, strategic, I would say, pattern. Secondly, to continue to growth in this sector and honor some financial figure. If we move now to the next slide, page seven. Here is the pattern of the growth, like it's generational. You have on this slide the industry vertical that we are operating in and all the line of service. Of course, there are these two major axes of the group that we are trying to fix in each intersection to get market. These two axes are of course complemented, let's say, with all the other stuff, meaning interaction channel, what kind of product we are selling, is it support service, is it technical support, is it sales, is it BPO? Geo strategy, of course, in what country are we operating? Is there holes in your pattern? Lastly, we are trying to digitalize to use all this AI technical techniques, predict program and all that stuff that helps to deliver a better strategy. All that, all these four axes, and maybe with the help with the digitalization, is now explaining what we are doing there. When you look Senture acquisition, this is totally consistent with our vertical specialization strategy. The line of service is clearly core services. The industry vertical is clearly citizen service, and geography is clearly U.S., where we were probably not at the level that we should have. This is helping to accelerate and to give a better role there. We do believe that, if you move to the next slide, that this is absolutely a huge market to be tapped. The citizen service is around $7 billion out of the BPO of $35 billion and the ITO of $300 billion. We do believe that the U.S. government service represent an untapped opportunity for Teleperformance. U.S. government service market, BPO market, is five times bigger than the citizen service market. There are possibilities here to grow profitably and to grow with a very good rationale. This is the reason why we did this acquisition. We strongly believe that when we put the commercial force of Teleperformance on this company that is already active in 11 states in the U.S., we are going to accelerate dramatically this line of service. If we move now to the next slide, what are the financial impact for Teleperformance? What are the key transaction data? As I told you, the enterprise value is $400 million. Everything is financed through debt. The transaction has been closed on the 28th of December, and the consolidation will start from January 1 of this year. Of course, the debt to EBITDA is not going to be impacted very much by this acquisition. We are going to be significantly below two, and this is an accretive impact to earnings per share should take out amortization of intangible by around 5%. In a nutshell, if we want to, I would say list the reason of this acquisition. Strategically, it's a good acquisition. It fits wholly in the footprint and helps to accelerate in this booming environment. It's going to be easy to integrate for Teleperformance. The price is quite cheap, I would say, 10 times the EBITDA, and significantly below what we are seeing around the market as we speak. Easy to finance. It's going to be accretive and help us to continue to have, I would say, the entry for our further acquisition in the future, because it's not so much a big deal. That is the reason of this acquisition, and of course, I'm ready to answer your question, and if you have further question. Thank you. If you would like to ask a question on today's call, please press star one on your telephone keypad. You will then be asked to ask your question and be unmuted. Again, it is star one on your telephone keypad to ask a question. The first question in the queue is from Sylvia Barker from JP Morgan. You may now ask your question. Thank you. Hi, good afternoon. Firstly, could I please ask on the. Well, first of all, Happy New Year, actually, to everyone on the call. Thank you. You too. Most people's first call of 2022. Could I just ask on the COVID work? You mentioned 20% of revenue- COVID related. This is COVID related. Could you confirm how much of that, how much of the EBITDA in 2021 will be COVID related and the longevity of that profit going forward? EBITDA is not different from the other, frankly. Longevity of the COVID business. This is a permanent story. No, I know that everybody was supposed that this COVID business will disappear in Q4. I don't. I doubt that is going to happen in Q4, but I'm sure, and probably not in Q1, too. What maybe is the way we have seen the stuff is just to see what will be the growth for 2022 for I don't know what, if we were not having some COVID business or if we are losing the COVID business or a significant part of it. We do believe that Senture is going to deliver double-digit growth in 2022, even with a sharp decline of COVID lines that they got last year. Okay. Thank you. Maybe could you just talk about the, I guess, the details of the deal? How, you know, what w as the process like? Was there anyone else bidding? We were alone. Why the private equity company is exiting at this point? Oh, you know, private equity are always trying to exit at a good point to make money. That there is no chance of that. No different. That's clear. We were the only one on this deal. We were the only one to bid. Okay. You were the only ones bidding. I mean, I guess it does seem like it's a good multiple. Yeah. I agree. You know, for that business. I was just wondering if I agree. Yeah. I agree. Why was no one else bidding? I guess, how did you end up being the only ones interested in this asset or? Maybe, you know, Teleperformance is also known to be easy to work with, sure to work with. That means that when we enter a deal, we are going to make it. If we decide to make it, we are going to make it. We are not there to come and disappear just before the deal. The management was keen also to continue. When you put that together, you know, the agility to make the deal before in very short time, because it has been done in very short time, all that reason explain why Teleperformance has been chosen by the seller. I think final question, if I may. Of course. Just a technical question, could you just talk about the tax rate they're using, kind of any synergy or. They have Yep. Thank you. They have a tax rate which is around 22%-23%, which is roughly the same that we have in U.S. It's not their main impact. You know, we are not so aggressive in terms of tax. Finally, the main question is simple, strategically fit. We don't pay too much. We do believe that we are going in terms of synergy. We do believe this company is well managed. There are some things that could be fixed, of course. There are some costs that could be reduced. The main story is to develop this business quicker and wider than what they are doing. Hopefully, all the commercial team from Teleperformance, whether it's pharma or hunter, is going to accelerate this trend. Okay, great. Thank you very much. Thank you so much for your question. The next question is coming from the line of Nicolas Tabor from Stifel. You're now unmuted. Now go ahead. Good evening, gentlemen. Thank you very much. First of all, Happy New Year, of course. I wanted to know more and understand more about the historical growth of the company. Of course, yes, there was the COVID contract, but apart from that, what was the driver for such a fast organic growth, and how did it deliver also in terms of ramping up the number of employees, of course? And can we have an idea of the breakdown in terms of clients? What I mean by client, of course, is different state institutions that are, let's say, different contractors. So- Per se, the concentration we can think of. Is it large contracts or more, let's say diffuse? I would say big names, if I may. Big states in the east side of the country, big populated states. Of course, you might think to Ohio, Illinois, all these states that are big ones, and we are working, and Somfy is working with them. Why is that growing? First of all, there are a reason that is clear is that. If I may say, all this, what we are seeing in the commercial and private sector is of course arriving in the public sector. It started in Europe. I'm sure you remember that Teleperformance is already very active in U.K., has been very active over the COVID line, but not only on the COVID line in France, Netherlands, Germany, and Abu Dhabi and other country like that. The citizen is a client like another, I can say. This is exactly what happened. People, as a citizen cannot accept not to have the same service that they are asking for, their phone, their computer, or whatever. It's exactly what's happening in the world. I do believe that this company started to work very early with the main states in the U.S. and has been able to succeed very suddenly in five, six, seven states very quickly because they have been able to deliver properly on site in the States sometimes. That is also something that rings a bell for the government. They have been credible. You know, what is important is to be credible with this build-out. The growth has been over the year 45%. Not all that is of course coming from the COVID. They are coming from different sector, different situation. This is growing dramatically. These employees, they're U.S.-based employees? All of them are U.S.-based. Okay. In 200 states. It's a more higher value type of service, say it's not nearshore or offshore services, right? There is no nearshore, no offshore, which is not surprising for such business. But again, For these line of business, those operators, they're working, I mean, excluding the COVID situation right now, but let's say before COVID, were these people working on site or- Yeah. now it's shifting to a remote So far, we're facing the same situation as the commercial one, meaning that 85% of the people are working from home. The attrition is significantly lower than in the rest of the commercial business. This is a very well-managed company. This is in good margin, good EBITDA. It's well managed, well under control, and now the question is just to grow. Are there a foot in the door as well? I mean, for the visa contracts you are building on- It's not exactly the same business because it's they are much more on the federal states than on the federal government. They are working for the federal government, but most of them are working for federal states, different states, the 11 states that I just mentioned earlier on. Okay. Visa is not. They might have some consular issue, but most of the business of the visa is much more on the federal state. Great. Thank you very much for all your answers. Thank you so much for your question. As a reminder, it is star one on your telephone keypad to register for a question. The next question is coming from the line of Anvesh Agrawal from Morgan Stanley. You're now unmuted. Now go ahead. Hi. Good evening. Happy New Year. Can I ask two questions, please? First, Yeah. 23% of I have trouble to hear you. I'm sorry. Maybe you can be closer from the microphone, please. Can you hear me now? Yes. Significantly better. Thank you. I mean, if I can ask two questions, please. 23% of the business is commercial, and a lot of that is healthcare. Are there any synergies with your Health Advocate business that we can think about in terms of- No. In fact, it's business that Teleperformance is not exactly the same contract, the same plan. Okay. Teleperformance is already doing such kind of business with the insurer. Okay. Is there any It's interesting, but the most interesting part for Teleperformance is of course the citizen line. Yeah. There is sort of no synergies or are there synergies within the health business that is sitting within the- Yes, of course, of course. Absolutely. Of course. Okay. What I just want to convey as a real message, of course this is important and we have also practice for healthcare. What we are doing is to add practice on practice. You have a practice for retail, you have a practice for healthcare, you have a practice for automotive, now you have practice for citizen. All the job is just to add practice to practice in like a bank. I'm sure there are some banker across the call. You have the guy in charge of DCM, the guy in charge of ECM and cash management, all that. It's exactly what we are trying to do. I would say use the metaphor to a business. Okay. That's interesting. Then, just, you said most of the or all of the employees are actually nearshore. There is no offshore in this business. No. Is there an opportunity to do that in future? Just sort of thinking from a margin perspective, can- I would be surprised because this is mostly domestic business for our citizen. I would be surprised that the federal government, federal state will be. Mm. will be, I would say, keen to move to Mexico, Colombia, or Philippines. All right. Well, that's all I have. Thanks so much for now. Thank you. Okay. Thank you for your question. The next question is coming from the line of Patrick Jousseaume from Société Générale. You're now unmuted, and now go ahead. Hello. Good evening and happy New Year, Olivier. Can you hear me? Happy New Year. Yeah. Oh, 60. Fantastic year. Okay. I have two question on my side. First question, were you a candidate for the acquisition of this company one year ago when it was acquired by the private equity company? No. Why? Because we didn't even know this company. Okay. My second question was about the acquisition calculation. Well, because we understand that the EBIT is around EUR 27 million-EUR 28 million, and you have the tax rate. I guess that there is some financing costs for the acquisition. We go to something maybe between around EUR 20 million plus the contribution in 2021 pro forma basis. I have difficulties to reconcile this with. Yeah. with 5% acquisition. We said around 5%. Okay. Without intangible, the cost of debt is very, very low. Yeah. I don't know what you have taken. Maybe it's a little more, too, but keep in mind that the cost of debt is Well- Yeah. What was the last time you shared with us, because I think that the denominator that you take is the net profit after goodwill. I No. Without goodwill. Yeah. You mean after goodwill? Yeah. Yeah. We have no idea what will be the modification of intangible on Senture. We have a rough idea, we don't have a precise idea. I took it out- Mm-hmm. make a computation based on that. This is around 5%. Okay. Fine. Thank you. I must confess it's not mechanical, but what is interesting for me. It's not a big deal. We have understood that it's not Yeah. Changing the pattern of the group. Yeah. What is interesting is that, first of all, it's positive. You understood that we are paying at the price which is acceptable. On top of that, this is also opening new doors that are not so open, not so easy to open, specifically, wherever countries are to open the door of the government is always complex. Okay. Thank you. Thank you for your questions. The next question in the queue is coming from the line of Andy Grobler from Credit Suisse. You're now unmuted. Now go ahead. Hi, good evening, everybody, and happy new year from me as well. Just in terms of contracts, you mentioned you had around 50. I guess two questions- 50 clients. Fifty clients. One is, in terms of your largest one, two or three clients, what percentage of revenues would that make up? Could you talk through how that client's, approximately- No. I'm not going to enter in detail. What I can tell you is that, first, the contracts are longer than commercial one. They are much more. Okay. Five years. Of course, there are big states. Texas is not exactly Kentucky or you understand that. Illinois is not exactly Utah or whatever. This is clearly like the when you are working with such organization, all the job is just to add more. Of course, you understood there are. I'll give you an example which is very interesting because we have a contract like that in the Middle East, where we have in a single point, a single entry point for citizen, meaning that all the agencies are gathered there. All the jobs that we are going to try to do is just to make sure that when you call for your driving license, for your employment stuff, for your health care stuff, you are going to be supported by the federal state or the state in each dimension. That is something that is probably going to be the future of such contract. The quality of the contract is classical. It's very classical contract even but longer than the commercial one. I mean, historically, in BPO contracts in the U.S., I know there's lots of variation about what BPO means. Those contracts- contracts. The margins have been lower than the 19-odd% that you're looking at here. You know, why do you think those are sustainable, and why have they gone up so much over the past two years? Well, first of all, I'm not sure you know very well Teleperformance, but clearly Teleperformance is not going to make commodity for low price. We are not going to enter BPO just to make volume like they did notably in U.K. Even in U.K. we have a lot of business that we are doing in U.K. with very good margin. That is the reason. The second reason is that, of course, we have a size effect with improvement. There is a size effect with the margin improvement, and also the ability to price better some services. That are the reason. One of them, the motto of Teleperformance is clearly to fight on price. when people want low price with the same quality, it's not possible. People start to understand that, and I do believe that we are going to do the same in Senture. So sorry. That, I mean, that's in the future. This is all in the past in terms of that margin improvement in- In Canada. What I told you is to think this first. They are growing the operational gearing effect of the size of the business. Yeah. Secondly, the good management that they have put in place that we are improving over the year. Yes. Okay, great. Thank you very much. Okay, thank you so much for your question. Final reminder, if you would like to ask a question, it is star one on your telephone keypad. The next question is coming from the line of Christophe Chaput from Oddo. You're now unmuted, and now go ahead. Yes. Good evening, Olivier, and Good evening, Christophe. Obviously I wish you a happy new year and to the full team. Thank you. Just one or two questions for me. Mm-hmm. Coming back to the business of Senture, do they got some specific accr editation with? Yeah. Obviously the government. Yeah, yeah. that could help you to leverage the business in terms of top line. Exactly. which means participate in public This is exactly what we want to. Yeah. This is exactly what we want to do at federal states, at federal level, but also at different local states. When you are working with a big federal state, you can compete. You know how to, I would say, to navigate, to be aware of story before it goes to public, and you are able to go to a new business of course. This is what we are going to do, yes. Okay. That's the first and the main value added of- Exactly. Senture versus Teleperformance, let's say. Exactly. Mm-hmm. You would say that they've got higher market share when there is tender offer than Teleperformance? Of course they are aware of the story before the tender share, before the tender. Okay. Just to understand the gap you have. It's a different world, you know. It's a world that Teleperformance was not very good at- Mm-hmm. Could be better, let's put it this way. This is a different world where we are going to invade this new world now. Okay. Just to be sure, the gap in terms of profitability, us versus you is linked with pricing? Yeah, is linked with pricing. Pricing operational gearing also there are. It's not big, it's not huge. You have 16% margins that I don't know where you are on your model for 2022, but this is also management ability to price, to execute properly, reducing attrition, all that stuff that helps to deliver better. But if I may, Christophe, we can dig in this detail, acquisition in detail, whether it's 0.2, 0.3, or 0.1% margin. This is interesting, but the main story there is the ability to accelerate dramatically on this market that is going to be the same as the product one. With this huge demand, with the huge possibility of growth, delivering good margin, that is the main, I would say story of this acquisition. Much more to discuss about than 50 basis points here or there, given the size of the business compared to Teleperformance. Yeah. That's why I What makes the story? Regarding the specific accreditation. Yeah. What makes the story for us is the ability to accelerate on this under-penetrated business that is growing fast, the same way in the commercial one. Okay. What was your growth in the U.S. related to the government? The pace of growth of your top line at Teleperformance- I don't know. -with the- I cannot answer like that. What I can tell you is that in U.S. we were not at the level that we should be, we should be in terms of size, even the size of the group. Let's put it this way. You say in line with the average of the group, sorry. No, no. In line with the growth of the group. I don't know what you mean by your question. What I'm saying is that Teleperformance was not at level, not where it should be, where it should be in terms of on this market in U.S. That's what I can tell you. Okay. Understood. Thank you very much, Olivier. Thank you for your question. Do you need me to ask a last question? Last question. Okay, no problem. The last question will be coming from the line of David Cerdan from Kepler. You're now unmuted, and now go ahead. Hey, good evening, Olivier, and all the best for 2022. Thank you. You too. Okay. Thank you. I have a very simple question. It's regarding the top management of this company. What are their objectives now that they are part of Teleperformance family? Well, they are going to be part of this Teleperformance family probably, and they are going to accelerate to enlarge dramatically the size of this business. I don't know whether we are able to double or triple it, but there is no reason by which we could not grow very fast. This is exciting for them. That's the reason why. They have much more ability to do that, being part of the Teleperformance family than being owned by a private equity. Do you think a risk related to the recruitment of staff to limit the potential of expansion of a company? Well, this is a question that is much more U.S. one, not specifically for this company. The question that everybody has today is what will be the labor market in U.S. The question is simple. When you pay, you find people. When you find people, when you deliver your service, you have to be paid for that. That is the motto of Teleperformance, and so far we have been able to succeed to do it. By how much do you think that wages in the U.S. have increased in 2021? I don't know. Clearly the average, we are approaching the level of, depending on the state, of course, it's not exactly the same, but it has increased significantly. Yes, significantly, more than 10%. Thank you, Olivier. Thank you to all. I'm very happy to have been with you tonight. Again, you have to understand this operation as a part of a strategic approach, meaning that we are filling a gap, and we are working on that, and we will continue to do so in the future. Doing that proper way, good growth, price acceptable, relative impact, accretion impact. This is actually the strategies that Teleperformance wants to develop over the next years to come. With that, I wish you again a happy new year, and I hope to be able to see you physically one day. Thank you. Bye-bye. Thank you everyone for joining us on today's call. You may now disconnect your handsets. Host, please stay connected.