Transcom Holding AB (publ): Second quarter report 2024

Q2 2024 highlights

• Revenue increased to 180.7M€ (174.8)
• EBITDA excluding non-recurring items decreased to 16.8M€ (20.0)
• EBITDA margin excluding non-recurring items decreased to 9.3% (11.4%)
• Operating cash flow increased to 6.2M€ (5.8)
• Net debt/EBITDA increased to 4.3 (3.5)

January-June 2024

• Revenue increased to 369.9M€ (367.6)
• EBITDA excluding non-recurring items decreased to 38.7M€ (45.5)
• EBITDA margin excluding non-recurring items decreased to 10.5% (12.4%)
• Operating cash flow increased to 26.1M€ (23.7)
• Net debt/EBITDA increased to 4.3 (3.5)

Comments by the CEO: Q2 results in line with expectations

Q2 results were, as expected, with subdued revenue growth and a lower EBITDA margin compared to the same period last year. Overall revenue increased 3.4%, whereof 3.1% inorganic, and 0.3% from currency impact. While net organic revenue change was flat, the underlying growth of new and existing clients was 3.9%, fully compensating for the Q2 impact of exited and ended contracts. The underlying growth demonstrates a strong core and sales engine. This is reinforced by our most recent client satisfaction survey, where we are proud to report an NPS score of 73, amongst best in class.

EBITDA excluding non-recurring items decreased by 3.2M€ compared to last year, primarily due to lower margins in Europe, but also impacted by sales investments. We are actively addressing these challenges as we reassess our EMEA strategy. We will continue to be aggressive in adapting to the changing market conditions by partnering with our clients to reshore services to markets that create the most value for both parties. We will further rationalize our capacity in markets where it makes sense to do so. Sector performance remains mixed. eCommerce & Tech sector, while still our largest revenue contributor, experienced slower growth this period, primarily onshore.

Substantial investments have been made in our sales team to broaden our depth in the US market, and in our digital sales capabilities. The impact is temporarily dilutive to our margin (-2.3M€ in Q2, run-rate of ca -6M€). We have a strong pipeline of new opportunities, and we are confident our new sales will continue to grow at healthy levels.

While the potential and impacts of AI and Digital remain a key focus for us and our clients, we have not experienced a significant impact on clients’ actual capacity demand. Our strategic focus on digital expertise has led to organizational restructuring and alignment with our priorities, including forming tech partnerships and enhancing our digital sales capabilities with innovations like autopilots, copilots, real-time text and voice translation, accent localization, and AI-driven analytical insights. These efforts have resulted in a 41% penetration of advanced digital and AI solutions within our client base and a 32% penetration with our prospects. These propositions are maintaining and, in some cases, increasing our revenue. We see significant opportunities to deploy AI and digital technology to improve operational efficiency, leading to cost reduction and improved pricing, which position us well to continue to win business in a highly competitive market.

Looking ahead, we expect Q3 and Q4 to remain challenging from a year over year perspective as a function of the exited contracts. Expectations should be tempered accordingly. However, our in-year new business sales already in ramp, our current pipeline, and projected run rate at the end of this year offer strong confidence. We anticipate that 2025 will be a year of growth that matches or outpaces the market averages while also delivering improved margins.

We remain committed to our strategic priorities, and being digitally enabled in all that we do. We will continue to pursue growth organically and through acquisitions and drive operational efficiency and cost reductions to improve profitability. We will push further our shoring mix while minimizing our footprint in unfavorable delivery markets. In parallel, we aim to drive higher value partnerships along with a substantial investment in talent and resources actively working to grow our US client base and our competitive off- and nearshore delivery footprint.

Brian Johnson, President & CEO

Q1 2024 Financial Update Webcast

Transcom will host a live webcast on Thursday, August 22, 2024 at 9:00 CET. The presentation is available on https://www.transcom.com/global/about-us/investor-relations.

Presentation details

Date/Time: Thursday, August 22, 9:00-10:30 am CET

Online Registration link: https://app.livestorm.co/transcom-holding/transcom-holding-ab-q2-2024-results-presentation

Important note: Please register via the link above at least 5-10 minutes prior the webcast in order to obtain the webcast link. If you register in advance, you will be sent an email reminder an hour prior to the webcast.

For further information, please contact

Snejana Koleva, Chief Financial Officer
Phone: + 46 (0)70 508 3830, email: snejana.koleva@transcom.com

Helene Ruda, Head of Sustainability and Corporate Communications
Phone: +46 (0) 70 311 7560, email: helene.ruda@transcom.com

About Transcom

Transcom provides AI and digitally enhanced customer experience (CX) services to some of the world's most ambitious brands. More than 300 clients globally, including disruptive e-commerce players, category redefining fintechs, and technology legends rely on us for on-, off-, and nearshoring services. Transcom’s over 30,000 employees work in over 90 contact centers and work-at-home networks across 29 countries, creating brilliant experiences in customer care, sales, content moderation and backoffice services. We help our clients drive their brands forward, customer satisfaction up and operating costs down. For more information, visit www.transcom.com.