Transcom Holding AB (publ): Third quarter report 2024

Q3 2024 highlights

• Revenue increased to 181.7M€ (180.6)
• EBITDA excluding non-recurring items decreased to 23.9M€ (25.1)
• EBITDA margin excluding non-recurring items decreased to 13.1% (13.9%)
• Operating cash flow increased to 21.7M€ (9.4)
• Net debt/EBITDA increased to 4.3 (3.5)

January-September 2024

• Revenue increased to 551.6M€ (548.2)
• EBITDA excluding non-recurring items decreased to 62.6M€ (70.6)
• EBITDA margin excluding non-recurring items decreased to 11.4% (12.9%)
• Operating cash flow increased to 46.7M€ (33.1)
• Net debt/EBITDA increased to 4.3 (3.5)

Comments by the CEO: Moderate growth and improving trend in performance

Q3 results were in line with expectations, with a modest improvement compared to the previous quarter, in an environment of continued softness with slow recovery in Europe and uncertainty in the US.  With revenue at €181.7 million, growth was 0.6% compared to Q3 2023. The growth was driven primarily from the Service & Utilities and eCommerce & Tech sectors within the European segment. The net growth versus Q3 2023 is supported by 3.9% organic and 0.2% inorganic growth, offset by the negative impact of -3.2% from ended contracts in the first half of the year as previously reported, as well as a negative currency impact of -0.3%. Aligning well to the group strategy, nearly all the new growth was delivered from near- and offshore locations. This means growth the total growth % in terms of FTE are higher than reflected in revenue, as the revenue per FTE in these markets is inherently lower.

EBITDA excluding non-recurring items decreased to €23.9 million, with a margin of 13.1% compared to 13.9% in the previous year. This lower overall margin stems largely from the eCommerce & Tech sector within the English-speaking segment, due to extensive ramp up costs to support new business. The ramp up costs will continue into Q4 of this year.

The residual impact of ended contracts, the investments in our sales force and the cost of ramping as we continue to add new logos and LOBs to our portfolio are the main drivers for the lower EBITDA margin as compared to last year. The impacts of the ended contracts will have dissipated and the major ramps underway will be largely completed as we enter 2025.

Operating cash flow is €21.7 million (9.4), which is a significant improvement compared to the same period last year, mainly driven by lower losses before tax, and positive working capital development.

We are progressing well towards improving the fundamental performance of the business. We have successfully executed our strategy to rationalize capacity within EMEA most notably within, but not limited to, Germany, Croatia, and Spain, where excess capacity has impacted financial performance. Realignments within the executive team have been completed, including well-known and respected leader Marieke Smidt assuming the role of CEO EMEA as of January of 2025.  Marieke will succeed Robert Kresing who has chosen to pursue a new opportunity. Robert has been an excellent leader and contributor to the success of Transcom and we wish him all the best.

On the business transformation front, excellent progress has been made facing both our internal teams, clients, and technology partners. The key areas of focus include further strengthening of our digital capabilities, delivering high value solutions with minimal complexity, development and integration of new technologies, highly targeted market penetration and growth objectives, enhancement of operational performance, driving innovation, and adapted commercial models that incorporate both technology and people enabling for competitive and compelling offerings.

These efforts will bring even greater value to our clients while partnering exclusively with technology partners that can keep pace with in a rapidly changing landscape. More concretely, we continue developing our AI solution offerings with Autopilots, Copilots and Insights, aiming to provide the best total cost of ownership to our clients. In parallel we continue to seek and actively explore intelligent bolt-on acquisitions that will enhance our profile in alignment with our objectives.

Looking ahead, we expect revenue growth to remain moderate, as the aforementioned impact of the ended contracts ages out of the baseline. We remain committed to our cost reduction initiatives including restructuring and downsizing of underutilized capacity in Europe and workforce optimization - further enabled through our internal transformation work underway. We expect the results in Q4 to show improvement as compared to last year. 2024 has been a year of investment in our operational and sales foundation, and we continue to expect 2025 to be a year of growth that matches or outpaces the market while also delivering improved margins.

Brian Johnson, President & CEO

Q3 2024 financial update webcast
Transcom will host a live webcast on Thursday, November 14, 2024 at 9:00 CET. The presentation is available on https://www.transcom.com/global/about-us/investor-relations.

Presentation details
Date/Time: Thursday, November 14, 9:00-10:00 am CET
Online Registration link: https://app.livestorm.co/transcom-holding/transcom-holding-ab-q3-2024-results-presentation

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 85 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