NYSE:TDCX TDCX Q2 2023 Earnings Report Profile TDCX EPS ResultsActual EPS$0.14Consensus EPS $0.14Beat/MissMet ExpectationsOne Year Ago EPS$0.13TDCX Revenue ResultsActual Revenue$126.22 millionExpected Revenue$127.25 millionBeat/MissMissed by -$1.03 millionYoY Revenue GrowthN/ATDCX Announcement DetailsQuarterQ2 2023Date8/23/2023TimeN/AConference Call DateWednesday, August 23, 2023Conference Call Time8:30PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Company ProfileSlide DeckFull Screen Slide DeckPowered by TDCX Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 23, 2023 ShareLink copied to clipboard.Key Takeaways Q2 2023 revenue rose 5.5% YoY (11.3% constant currency), led by omni-channel CX growth of 8% and sales & digital marketing up 15%, significantly exceeding guidance. Adjusted EBITDA margin contracted to 25.9% from 29.4% a year ago, reflecting increased investments in geographic expansion, AI capabilities and elevated support ratios. Profit for the period grew 9.4% to US$21.6 million, with H1 operating cash flow of US$49.1 million and a debt-free balance sheet holding US$301 million in cash. Full-year 2023 revenue guidance was cut to 2–4% constant currency growth (previously 3–8%) due to delayed deal closures and volume reductions from key clients. Revenue from clients outside the top five jumped 67% YoY and new geography revenues were nine times higher than Q2 2022, highlighting stronger diversification. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallTDCX Q2 202300:00 / 00:00Speed:1x1.25x1.5x2xThere are 9 speakers on the call. Operator00:00:00Welcome to the TDCF's Q2 2023 Results Announcement. My name is Ada and I will be coordinating your call today. I will now hand you over to the management team to begin. Speaker 100:00:23Hello, everyone, and welcome to TDCX 2nd Quarter 2023 Earnings Conference Call. My name is Jason Lim, the Head of Investor Relations. Joining us on the call today is our Executive Chairman, Founder and CEO, Mr. Lau Hong Juning our CFO, Mr. Qing Zeng and our EVP of Corporate Development, Mr. Speaker 100:00:42Edward Koh. Before we continue, I would like to remind you that we will make forward looking statements, which are subject to risks and uncertainties and may not be realized in the future. You should not put any reliance on any forward looking statements. Also, this call includes the discussion of certain non IFRS financial measures, such as adjusted EBITDA and constant currency revenue growth. For reconciliation to the closest IFRS measures, please refer to the Form 6 ks, which is available on our website. Speaker 100:01:13We have prepared a convenience translation for the Singapore dollar to the U. S. Dollar at a rate of USD 1 to USD 1.3557. This shall not be construed as representation that any Singapore dollar amount can With that, let me hand over the call to Lahon. Lahon, please. Speaker 200:01:35Hello, everyone, and thank you for joining us today. We delivered a Strong and resilient set of results against the backdrop of a challenging environment. I appreciate that Everyone at TDCS has put in the extra mile to achieve this, and I would like to thank our global team for their efforts. Let me begin with some highlights. Q2 2023 revenue rose 5.5% year on year. Speaker 200:02:06On a constant currency basis, revenue would have grown an even stronger 11.3%, Which significantly exceeded our guidance. Our largest segment, omni channel CX, Continued to grow at a nice clip of 8% year on year. Our traditional strength In sales and digital marketing also came through as the segment grew 15%. We continue to deliver industry leading margins with adjusted EBITDA margin at 25.9% for Q2 2023. Margins were down compared to last year as we continued to put in necessary investments to position ourselves stronger for tech sector recovery. Speaker 200:02:58This includes initiatives such as our geographic expansion, Building out of our TD CX AI arm and operationally keeping strong agent and support ratios for our clients. Our CFO, Mr. Chin, will provide more details on our margins later. Operationally, I'm very proud that we remain at the top end of performance tables for our clients and as a result, Continue to grow business broadly across our clients. Revenue from clients outside the top 5 grew 67% year on year. Speaker 200:03:37If not for the impact of one of our key clients reducing volumes as part of their focus on cost efficiency, we would have registered much Stronger overall revenue growth. Our strategic geographic expansion over the last 2 years Has really started to contribute meaningfully. All in revenue from our new geographies was 9 times in Q2 2023 compared to what it was in Q2 2022. This included clients that we added from our Hong Kong subsidiary as well. Overall, we delivered a robust earnings performance as profit for the period rose 9.4 percent to US22 $1,000,000 We stand out amongst peers in our Sector is still being able to deliver good earnings growth over a very tough period. Speaker 200:04:32This Clearly demonstrates that TDCF continues to execute at very exceptional levels. Our profit performance Has translated into strong cash flows and a strong balance sheet. Cash generated from operations was US49 $1,000,000 for the first half of twenty twenty three. As of 30 June, 2023, we have US301 $1,000,000 cash and cash equivalents with no debt on the balance sheet. This Puts us in a very strong position to move quickly on several strategic growth options, especially in an environment of high interest rates. Speaker 200:05:15We continue to explore M and A opportunities that could help enhance our capabilities, our reach to better serve our clients or to accelerate our growth. Besides that, we have the financial strength and flexibility to deploy capital for important organic initiatives such as TDCX AI, our consulting capabilities Please and investing in our new geographic sites. I'm very happy with the progress that TCX AI is making, and we're growing our team steadily. Our clients have entrusted us on consulting and advisory services and in piloting and implementing AI enabled CX solutions. A number of projects are in the pipeline. Speaker 200:06:01For example, with a large tech client, our team was tasked to analyze the cognitive load of multi skilled agents and to identify the tipping point at which an individual agent would be overwhelmed by Product information and which would impact the way a customer service campaign would be set up. Another example we've done for clients It's modeling and analyzing agents' learning curves and thereafter developing customized roadmaps such that agents reach peak performance faster. For a travel and hospitality client, we Operator machine learning to anticipate and decrease employee attrition by up to 15%. We are also Leveraging Google Cloud's enterprise grade generative AI capabilities to build an AI enabled chatbot to respond to candidates' Queries about our company and the recruitment process and integrating this with our proprietary flash hire recruitment system. To sum up, there are huge businesses as well as productivity improvement opportunities with AI, and we're moving at incredible pace to take advantage of these. Speaker 200:07:22CVCX is very differentiated. We are agile, nimble and hyper focused on the complex CX segment, which requires human intervention and that is not easily replaceable. Our positioning and strength in Southeast Asia are unique amongst global CX providers. I'm not sure If the public markets have misunderstood or overreacted to the threat of Gen AI, while underestimating the efficiencies and opportunities that This could bring at current trader levels and considering the profitability and cash generation of our differentiated business, We see great value and we intend to prioritize share buybacks as a form of enhancing shareholders' returns. Next, let me touch on some client highlights. Speaker 200:08:15Our business development momentum remains very strong. Client count rose 52 percent to 91 clients as of June 30, 2023 And we have a further 7 clients who have been signed up but not yet launched. Beyond the quantity, I'm excited about the Quality of clients that we launched in Q2, which included several giants of the world in their respective spaces. This includes an established global e commerce platform based out of the U. S, a rapidly growing fast Fashion e commerce platform, which is one of the 2 fastest growing giants globally and a leading travel platform based out of Asia, which is one of the world's largest in this space. Speaker 200:09:03With a higher client count and broader growth, We improved our revenue diversification as our top 5 clients contributed 73% of this quarter's revenue, down from 83% in the same period last year. In terms of geographic reach, We now have a much wider footprint compared to 2 years ago. With a growing headcount of over 18,000 700 employees globally, we are able to serve more clients across the world. The revenue chart here demonstrates Our unique positioning amongst global listed CX providers with around 71% of our business focused on serving Southeast Asian And North Asian Languages. Before I hand over to our CFO, let me share some views on the outlook. Speaker 200:09:57Having completed Half the year now, we have a better sense of where we will land for FY 2023. We've seen delays in decision making from clients and the lengthening of the sales cycle throughout the 1st 6 months. The effect flows through to the second half, which means that the higher end that we were aiming for in second half twenty twenty three It's not coming through. As such, we are adjusting our FY 2023 revenue outlook to reflect this. Mr. Speaker 200:10:33Chin will provide more details later. While we do not want to get too much ahead of ourselves, we are starting to get a slightly clearer picture Of how the next year is going to unfold, there are encouraging signs for economic activity in the U. S. Coupled with recent positive results for several of the tech giants, including those in the digital advertising space. This bodes well and I'm cautiously optimistic that we're starting to see some green shoots for 2024 rebound. Speaker 200:11:07With our efforts on operational excellence and focus on value adding to our clients, we're in a very Strong position to seize opportunities as they arise. With that, let me hand over to Mr. Chin. Speaker 300:11:23Thank you, Laurent. In Q2 2023, we delivered revenue of US126.2 million dollars Up 5.5% year on year on a reported basis. Had the Singapore dollar remained constant against our operating subsidiaries' currencies from Q2 2022, Revenue would have risen by 11.3%. The exchange rates used for the translation of the local functional currencies of Malaysian ringgit, Philippine peso, Hai baht, Japanese yen and renminbi depreciated between 3% to 9% against the group's presentation currency of Singapore dollar for Q2 2023 compared to Q2 2022. Moving on to profitability measures, EBITDA decreased by 2.2% to US33.7 million dollars this quarter, due largely to higher employee benefit expenses, which rose 7.1% year on year, higher than the revenue growth rate. Speaker 300:12:21Adjusted EBITDA declined 7.1 percent to US32.7 million dollars in Q2 2023 as margins contracted from 29.4% to 25.9% on high infrastructure and employee costs. I will elaborate more on this in a later slide. Interest income increased 6 times with increased funds in interest earning deposits against the high interest rate environment, While income tax expenses declined 24%, with the reinstatement of tax incentive in the Philippines that was suspended in Q2 last year. Consequently, profit for the period grew 9.4 percent to US21.6 million dollars Adjusted net income, which represents Profit before equity settled, share based payment expense, net foreign exchange gain or loss and acquisition related professional fees Was stable year on year. This was largely because we incurred lower equity settled share based payment expense in Q2 2023 compared to the same quarter last year. Speaker 300:13:26Let me next provide some insights of our revenue by service offerings. Our growth in Q2 was led by the sales and digital marketing line of business followed by omni channel CX Services That was partly offset by decline in content, trust and safety. Revenue from sales and digital marketing services increased by 15% to US33 $1,000,000 driven by the expansion of existing campaigns by digital advertising and media as well as e commerce clients. Our newer client cohorts from 2022 continue to scale up further contributing to the growth in this line of business. Omnichannel CX revenue rose 8% to US76 $1,000,000 as a result of higher business volumes driven by the expansion of existing campaigns by clients in the travel and hospitality, gaming, FMCG, financial services and tech verticals. Speaker 300:14:23Revenues from Content Trust and Safety declined 19% year on year to US16 million dollars Due to contraction of volume requirements by existing clients in the digital advertising and media vertical, partially offset by In summary, omni channel CX made up 60% of our total business in Q2, While sales and digital marketing and content trust and safety contributed 26% 13% respectively. Next, let me elaborate on the adjusted EBITDA margin movement from 29.4% in Q2 2022 to 25.9% in Q2 2023. In terms of margin impact, higher rental and maintenance, telecoms and tech expenses were offset by lower equipment costs leading to a neutral impact. There was a 0.8% impact from general overheads, largely high infrastructure costs linked to office space expansion for new sites And higher professional fees incurred such as tax and legal fees. Thirdly, there is a 2.7% impact from high employee costs, Of which the bigger factor is higher local support and shared service headcount. Speaker 300:15:37There is also some impact from higher headcount of deployed agents versus billable as well as higher corporate costs. However, when comparing to Q1 2023, there was a sequential improvement of margins from 24.2 percent to 25.9 percent. This was due to an improvement in utilization in both The mature sites and new sites like Brazil, Turkey and Korea as well as an improvement of excess headcount compared to Q1 2023 With resources in Q2 2023 closer to our deployed agent account and man hours. Let me next move on to the half year performance. Our revenue for the 6 months ended 30th June, 2023 was US247.9 million dollars Up 6.8% on a reported basis or up 11.8% in constant currency terms. Speaker 300:16:31EBITDA was up 2% to US65 $1,000,000 and profit for the period increased by 15.4% to US41.7 million dollars This was driven by a reversal of equity settled share based payment in Q1 2023, higher interest income as well as lower income tax expenses. Excluding the effects of the reversal of the share based payment expense, adjusted EBITDA declined 11.6 percent to US62 $1,000,000 while adjusted net income declined 9.9 percent to US38.9 million This was largely a result of increased employee costs and IO heads, in particular for the Q1 of 2023. Accordingly, adjusted EBITDA margins for first half twenty twenty three landed at 25%, down from 30.3% in First half of twenty twenty two. To a large extent, much of the margin compression is due to planned costs such as our geographic expansion, choosing to recruit in good time and keeping strong support and shared service staff ratios. For first half twenty twenty three, revenue from omni channel CX rose 8% to US148 million dollars Revenue from sales and digital marketing services increased by 19% to US66 $1,000,000 while revenue from Content Trust and Safety Services was down 18% at US32 $1,000,000 For the half year, omni channel CX Contributed 60% of our business, while sales and digital marketing stood at 27% and content trust and safety at 13%. Speaker 300:18:14Lastly, let me provide an update on our full year 2023 outlook. We have revised the full year 2023 revenue growth range 2% to 4% on a constant currency basis from 3% to 8% previously. As Laurent mentioned, some clients are taking Longer to commit to business volumes, during Q2, one of our key clients also reduced their volume forecast for the remaining months of FY 2023. This means that there is a knock on effect on the revenue numbers that we can put into our forecast of second half of twenty twenty three. Further, revenue was strong in the second half of twenty twenty two, which sets a high bar in terms of year on year percentage growth for the second half of twenty twenty three. Speaker 300:19:01In terms of adjusted EBITDA margins, we have trimmed the top end of our range And our guidance for full year 2023 is not expected to be approximately 25% to 27%. We are committed to putting in the necessary investments and spending in the business for the long term and remain cautious in our cost optimization efforts with an eye on volume recovery for 2024. We have adjusted the margin's outlook accordingly to reflect this. Against the backdrop of what we are expecting, we are re strategizing our overhead approach to make it more elastic against revenue. For example, this includes planning infrastructure, spending closer to revenue pipeline. Speaker 300:19:45These initiatives will take some time to benefit margins likely in full year 2024. With that, let me hand you back to Laurent. Speaker 400:19:57Thank you, Mr. Chin. We're ready to take questions. Hi, everyone. Operator00:20:13We now have our first question from Pang Bin from Goldman Sachs. Speaker 500:20:22Hi, good morning everyone and thank you very much for the opportunity. Three questions for me, please. Number 1, on the guidance and outlook, can you please go over the rationale why you make this substantial change to your revenue guidance, Especially if we're looking at your first half of the year on constant currency basis, you are up in double digits. So what has changed? I'm sure you're talking about some of your clients, but can you go into specific details of that? Speaker 500:20:52On the back of that as Well, what level of confidence and visibility, you have on this revised guidance? Is there any possibility of further revised out going forward? That's question number 1. Number 2, you also mentioned that you started seeing signs of better 2024. Can you further clarify and provide more color on that? Speaker 500:21:14Have any of your clients started indicating that they would likely increase their spending into next year? And number 3, lastly, can you share with us more around how AI may impact your business? How many percent of your business may see more impact comparatively and how do you plan to remit the list here? Speaker 400:21:36All right. Thank you, Pan, for all these questions. So yes, the revised guidance from 3% to 8% to 2 to 4, I mean you called it substantial, it's not tremendously substantial, but it does have an impact, I do agree. So there's a few reasons behind this. The first one is the deals we were hoping to close Got delayed. Speaker 400:22:02So really the velocity of deals have been slower than anticipated. Some clients who had Indicated that second half was going to be stronger, was not really Didn't really materialize. It got delayed even further, let's say, into September at lower volumes than initially Peter, we still have so that's one factor. We still have pressure from the digital advertising sector, which was not doing terribly well in the first half, but it's not going to do better in the second half. And that's taking into account as well that our second half last year was also quite a good second half. Speaker 400:22:53So that doesn't help us very much. And then, yes, the opportunities So are coming though and we're a bit more optimistic around 2024 leading into your next question. I would say where clients are starting to indicate better forecast in 2024. Nonetheless, I think if I come back again on the impact on the second half, which was the primary question you had, Travel and hospitality is not really going to show up as much as we were anticipating. China hasn't really played out so well As we were hoping it would. Speaker 400:23:39So it's a whole bunch of factors. Although We have sectors that are doing pretty well like gaming, tech, e commerce, automotive for us are really Doing extremely well and there's a whole part of the business that's growing at fast pace, but it's being brought down by All the sectors that are weighed in. Now if you look at digital advertising, we see Some good results announced by our key clients generally in the 1st two quarters. Unfortunately, we don't see it translated in immediate growth. So how long more do they need to produce Better results until they decided to open the floodgates and decide to invest further It's a question mark that we still have on our list. Speaker 400:24:37So having said that, we see some green shoots in 20 24, we see that the recession fears are starting to subside, and we are seeing some also good Momentum on our pipeline, we are closing deals. The leads we're getting Starting in the Q2, starting to turn around compared to the Q1. So there's a number of encouraging signs That makes us pretty optimistic, if not cautiously optimistic for 2024. Now the last question you have and one of the questions I think you have is whether there's a chance that we're going to revise our forecast again in the next Cas again in the next announcement for Q3. We think we have a good sense of 2023 at this point. Speaker 400:25:35So any barring any unforeseen circumstances or something really major, we are pretty locked in that guidance at this point. The question on impact of AI, we've had very, very good momentum with TDCS AI, I have to say and a lot has to do with the role we think TD CX can play as an advisor to our clients. And so we've had a lot of very successful discussions with most of our clients And successful engagements in consulting projects with them, some that we, I think, have explained Earlier in the call, and really it's leveraging the possibilities that are available to us. In terms of impact, the first impact we expect from TD CX AI is strengthening our relationship, Defending our territory and really enhancing the business we already have with our clients to grow further, Show them better productivity, better insights, better quality. And what's interesting, I would say, in Q2 We didn't anticipate to monetize TVCX AI so quickly. Speaker 400:27:00We expected it for a few years to remain a value add to our clients to do what I just said. But now we're starting to make commercial proposals as well with the dollars associated with it. So there's a real appetite from clients, but we See real opportunities as a result of that. And one of the opportunities we see is a growing Terry, total addressable market for TD CX. We see the possibility now to offer Some of our services to the in house call centers and operation, and that's The total addressable market is 3 times the size of the outsourced CX market. Speaker 400:27:52So our total addressable market has grown 3 fold on the basis of that or 4 fold because from $100,000,000,000 We're moving into plus $315,000,000,000 $415,000,000,000 but there's also the consulting Market TAM in the CX industry, which is another $30,000,000,000 So we're talking about For $445,000,000,000 as opposed to $100,000,000,000 So this is a huge opportunity for us To play in and TDCX with its very differentiated offering, being in Asia, Working with the best clients in the world, we've got so much knowledge and capabilities that we can share As part of TDCX AI, for this total addressable market that gives us a good confidence level as to the opportunities for us to tap these new trends that we hear a lot about. I hope that answered your questions, Tom. Operator00:29:00Thank you. Our next question is from Magana Candi of CGICIMB. Hello. Speaker 600:29:16Hi. Thank you so much for the presentation. I just have a few questions here. First, the revenue contribution outside of your top five clients Things have bumped up really well in Q2. So could you please share a bit more color on this? Speaker 600:29:33Are you seeing clients that have onboarded over the past So you are ramping up the campaign sales scales more significantly? Or are there any other standout performers that are moving the needle here? And my next question would be on the EBITDA margin guidance. So should considering the lower adjusted EBITDA margin, Should we expect this trend to be more cyclical in nature given the lower volume outlook in second half? Or is this more structural looking at the types of services that you're providing to some of the newer clients. Speaker 600:30:07Thank you. Speaker 400:30:10Thank you very much for the questions. Yes, the performance outside of our top five clients is quite Staggering and significant. We're very happy with that. That's the whole goal of the company where we have Two strategies to diversify from our bigger clients, which is build out possible newer clients to Outpace the growth of our bigger clients, then the second one is on the M and A side, continue to have a more balanced business. So we've had great success bringing new clients for the past few years. Speaker 400:30:50Some of them date back to 2021, and they started Rather small, but they've now taken over the world. So we have a gaming client, for example, where we really started in one location Back in 2021, and now we are in Speaker 200:31:045 locations. Speaker 400:31:06It's become a global client. It's been growing very fast In the gaming sector, we onboarded on the back of this another great gaming client as well, Where we expect it's now operating in 2 locations. We expect it to grow in other location. So that's doing well. We onboarded as well. Speaker 400:31:30Recently, a fast moving fashion From Asia and this cloud is growing super fast, but really extremely fast. So it's a star For us in one of our locations in the Philippines, we have a digital advertising, a new client that We onboarded about 2 years ago. That's starting to really deliver. So we just We onboarded less than a year ago in automotive business and automotive is going through a bit of a revolution of A change of distribution model, transitioning from wholesale and And agents and distributors into an online model that creates tremendous opportunities for us. It's a global deal. Speaker 400:32:27So there are quite a few opportunities, but what I find super interesting as well A lot of our more and more of our clients are becoming originally from Asia. And there's a big trend where TDCX is able to Speaker 200:32:46attract Speaker 400:32:47the Asian superstars, The leading companies of Asia as part of our clientele, which really represent the future of The economy for Asia and for the world actually because they're not operating in Asia only. They've done their job of Having a good market share in this growing territory and they're taking over the world And we're there to support them where they need us to be. Now we have 16 locations to serve our clients. So we've been Making great progress on growing our location. So we're in a fantastic position and in a good place At this point. Speaker 400:33:32Maybe the second question, I think, is around the margins And both maybe the short term and the long term part of the margin, maybe I'll defer to Mr. Chin to Talk to you about the margin if you don't mind. Speaker 300:33:49Yes. Sure. Thanks, Laurent. So on the margin side of things, It is pretty much due to largely planned costs and planned investments and our continuing investments into the business. As a reflection of our geographic expansion that we have put in, in the last couple of years, the Building up of our AI arm, Laurent has alluded a bit a while ago. Speaker 300:34:20That also is baked into the EBITDA Outlook as well as what happened in Q1 on our improvement going into Q2 about Keeping our agents sizing and anticipation of the volume movement that which comes along with support And shared service staff ratios to deliver the best optimal outcome for our clients. And it's kind of reflected in Q2 that we are going to continue on that path going into the remaining Months of the year. In that sense, we think that these investments are quite necessary to put us in a healthy position to benefit from a possible macro recovery If it turns in towards the end of this year going into 2024. So On that basis, we do commit ourselves to putting in, as I said earlier on, necessary investment And spending for the business in the long term rather than going on a quarter to quarter basis. Remaining careful in how we optimize our cost, we are eye on volume rebound in 2024. Speaker 300:35:49But at the same time, against what's happening in the near term, we are also reprioritizing our overheads Generally, from what we have planned early on, to make it more Stay kind of elastic against our revenue volume debt in the near term, so that our EBITDA stays on cost of what Outlook, things like infrastructure, capacity planning decisions are still to be revisited to ensure that we don't stay too off course from the business side of things. So that's what is We are. It's happening now and also going into the remaining Speaker 100:36:49Thanks, Mr. Chin. We have some questions on the webcast That I can read out. Speaker 700:36:57Number 1, can you share a bit more Speaker 100:36:59color on your business development pipeline? How is it coming along? And second one will be, you announced some share buybacks in Q2, 2023. Can you give more color around that and your plans going forward? Speaker 400:37:14Yes. Thank you for the question. So our pipeline is building up pretty nicely. And What I like about it as well this year is we've gotten quite a bit of interest in a new sector that we haven't been really In 2, which is HealthTech, so we won 2 contracts in that sector in Europe, but we have And then the third one in Asia as well. We have more coming up on the health sector as well, which is It will be an interesting new development for TDCX to grow our opportunities for business. Speaker 400:37:56We see in Q3 the number of leads starting to get into the Zone of the higher numbers than we've had before over the past two quarters, Good opportunities in still a lot of new economy companies as well for us. And As well, I would say that what makes this year different is we're getting a lot more RFPs from existing clients. And the deals we're closing as well have a much higher Sales value than they did in the previous quarter. So our business development team that was recently Structured is doing a great job and that can only get better. So that answers the questions on the pipeline. Speaker 400:38:54I'll Leave the other question to be answered by Edward Gohr, Head of Corporate Development. Speaker 800:39:00Sure. Thanks, Laurent. On the topic of buyback, I think we've always said we guided by valuation against our peers, but mindful on sort of impact of liquidity. But I think Current levels, definitely we're seeing very attractive values. I think, sort of prioritizing really the use of our On this exercise, I think looking at just sort of our cash Bing, RMB300 million still, that's about 40% of our current market cap. Speaker 800:39:36It looks like a very sort of a good level for us to Continue to be more proactive in our share buyback program. So definitely we've sort of done some in the second quarter Of 23, which we purchased about 160,000 ADS over this period of time. So we'll continue to sort of adopt the same approach going forward. Thank you. Speaker 400:40:01And if I can Rattle on a little bit on the business development pipeline as well. Just wanting to indicate a little bit of what we're seeing as Potential trends that are going to impact us and drive more business for us. Really the opportunity for outsourcing, Which we think is going to fuel 2024. We're starting to see that clients who have laid off Need to get things done, but they don't have the manpower, they don't have the capabilities. Even in the in house So market clients don't have the capabilities because everybody's been going through the leaner exercise And the kind of inquiries we're getting from clients are becoming increasingly complex Because those are the resources that they cut. Speaker 400:40:56So the second trend that we see also It's the ever rising expectations as the world becomes more and more digital, the expectations are much higher. So some of our clients have increased their NPS expectations, the CSAT expectations and these increases come at a cost That can be mitigated through automation, but will require much More investments and effort and that's we think will be driving Speaker 200:41:33The price Speaker 400:41:36of the business and what we sell to our clients And leveraging absolutely TD CX AI to help to drive that. So we see quite a number of positive Trends at this point that can continue to power the business in 2024 and beyond. Speaker 100:42:08Operator, can we have the next question please? Operator00:42:12Sure. Our next question is from Jonathan Wu of Philippines Securities. Speaker 700:42:22Good morning, management. Thanks for taking my questions. I have 2. The first is, Could you give some update on the new geographies, Indonesia and Brazil? How has the progress been? Speaker 700:42:33Has the pipeline over there been as expected? And the second question would be on the key client that actually reduced volumes for you guys or is reducing volumes. Can you give a little bit more color on them? How much volume did they cut and how much expected growth was this in percentage terms? Thank you. Speaker 400:42:54Thank you, Jonathan. So, 2, 2 here. Indo Indonesia, Pretty new to us. So it's at this point, it's embryonic expansion. We're very early days in Indonesia, but successful already with a client because our strategy for 2023 2024 will be to I go in greenfield operations supported by clients as previously different where we were In some locations strategically investing, but for several reasons. Speaker 400:43:32One that we already have quite a good footprint globally That we're trying to control our costs as well. Now we choose locations when we have business. So Indonesia was exactly that. So it's just starting, but very successful at this point. Brazil is, I would call it, a tremendous success. Speaker 400:43:52Started with a client. We have a bit more than 100 headcount now in Brazil. When I say it's a tremendous success because We were able to do this really in a very short period of time in Sao Paulo that the business is performing super well for our clients, But that also we are getting a number of inquiries. And finally, because it's also completing the puzzle of Latin America where We were in Colombia. We are in Colombia doing really well in Bogota. Speaker 400:44:23But it's difficult to have a Latin American strategy unless To cover Portuguese and Brazil, because Brazil is still a huge powerhouse in Latin America, having the combination of Bogota and Sao Paulo It makes it really credible and capable. So very happy with where this is going. Very happy also with our Operational capability in terms of setting up greenfield sites over the past 2 years, we've done mostly 100% success. In Greenfield Operations, which is a tribute to our operations teams and it's Super important for our clients to give us more business moving forward. So that plays around our agility. Speaker 400:45:12Now going back to the second question about clients reducing volume. Yes, I cannot give too much details about which Clients, I'd rather give sectors. So as you would expect, digital advertising has been under pressure. For the right or for the wrong reasons, I would See the sales and digital marketing a lot less under pressure, more the OCX and content moderation We're under pressure, and that will continue to be the case a little bit. FinTech has also contracted, yet we're seeing some rebound, But more in the later part of the year. Speaker 400:45:56So that's why our guidance is affected as well. But that's giving us Some hope in 2024 on the FinTech side. I would say Travel and Hospitality, We were expecting, I would say, a much better Q2, Q3 out of Travel and Hospitality. And is it mostly because China didn't show up? Is it because Japan is not traveling Outside, there could be different reasons. Speaker 400:46:32I think maybe globally as well. But if it's not Delivering the usual power numbers that we are used to. Nonetheless, our first half on Travel and Hospitality is quite spectacular nonetheless and good. It's just that the second half is not tremendous. So that's what's going on, if I can say. Speaker 400:46:59We have other sectors like tech, gaming, E commerce that's flying, so that opportunities even in the financial services for us. So it's not all gloom. It's a mix of factors That are pretty sectoral and the other sectors are doing well. I hope that answers the question Jonathan. Operator00:47:37This concludes today's Q and A session. I will now hand over to Jason for closing remarks. Speaker 100:47:45Okay. Thanks everyone for joining us on this call. If you have any further questions or any follow ups, please feel free to get in touch with us. On behalf of management, we're signing off. Thank you and goodbye.Read morePowered by Earnings DocumentsSlide DeckPress Release(8-K) TDCX Earnings HeadlinesTDCX acquires SUPA to boost AI platform CheminJune 20, 2025 | msn.comTDCX Founder and CEO, Laurent Junique,May 24, 2025 | msn.comThis Signal Only Flashes Once Every 4 Years – And It Just TriggeredThis same signal has appeared twice before in the past 8 years — both times, it kicked off major moves in crypto. Now it’s back, and the smart money is already positioning. A free training reveals the step-by-step strategy and altcoin picks designed to help you capitalize on the next wave.July 5 at 2:00 AM | Crypto Swap Profits (Ad)TDCX CEO Laurent Junique Named Businessman of the Year Launches AI ConsultancyMay 23, 2025 | msn.comTDCX Maintains Lead as Southeast Asia s Top Outsourced CX ProviderMay 6, 2025 | msn.comTDCX acquires Open Access BPO to capitalize on global shift towards strategic outsourcingApril 6, 2025 | markets.businessinsider.comSee More TDCX Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like TDCX? Sign up for Earnings360's daily newsletter to receive timely earnings updates on TDCX and other key companies, straight to your email. Email Address About TDCXTDCX (NYSE:TDCX), together with its subsidiaries, provides outsource contact center services for technology and other blue-chip companies worldwide. The company offers digital customer experience solutions, such as after-sales service and customer support across various industry verticals, including travel and hospitality, digital advertising and media, fast-moving consumer goods, technology, financial services, fintech, government and non-governmental organizations, gaming, e-commerce, and education industries; and omnichannel CX solutions comprising end-user support and troubleshooting for software and consumer electronic devices. It also provides sales and digital marketing services to market products and services to customers in the business-to-consumer and business-to-business markets. In addition, the company offers content monitoring and moderation services that create an online environment for social media platforms by providing human interaction to content moderation services; workspaces to its existing clients; and human resource and administration services. The company was formerly known as TDCX Capital Pte Ltd and changed its name to TDCX Inc. in January 2021. TDCX Inc. was founded in 1995 and is headquartered in Singapore. 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There are 9 speakers on the call. Operator00:00:00Welcome to the TDCF's Q2 2023 Results Announcement. My name is Ada and I will be coordinating your call today. I will now hand you over to the management team to begin. Speaker 100:00:23Hello, everyone, and welcome to TDCX 2nd Quarter 2023 Earnings Conference Call. My name is Jason Lim, the Head of Investor Relations. Joining us on the call today is our Executive Chairman, Founder and CEO, Mr. Lau Hong Juning our CFO, Mr. Qing Zeng and our EVP of Corporate Development, Mr. Speaker 100:00:42Edward Koh. Before we continue, I would like to remind you that we will make forward looking statements, which are subject to risks and uncertainties and may not be realized in the future. You should not put any reliance on any forward looking statements. Also, this call includes the discussion of certain non IFRS financial measures, such as adjusted EBITDA and constant currency revenue growth. For reconciliation to the closest IFRS measures, please refer to the Form 6 ks, which is available on our website. Speaker 100:01:13We have prepared a convenience translation for the Singapore dollar to the U. S. Dollar at a rate of USD 1 to USD 1.3557. This shall not be construed as representation that any Singapore dollar amount can With that, let me hand over the call to Lahon. Lahon, please. Speaker 200:01:35Hello, everyone, and thank you for joining us today. We delivered a Strong and resilient set of results against the backdrop of a challenging environment. I appreciate that Everyone at TDCS has put in the extra mile to achieve this, and I would like to thank our global team for their efforts. Let me begin with some highlights. Q2 2023 revenue rose 5.5% year on year. Speaker 200:02:06On a constant currency basis, revenue would have grown an even stronger 11.3%, Which significantly exceeded our guidance. Our largest segment, omni channel CX, Continued to grow at a nice clip of 8% year on year. Our traditional strength In sales and digital marketing also came through as the segment grew 15%. We continue to deliver industry leading margins with adjusted EBITDA margin at 25.9% for Q2 2023. Margins were down compared to last year as we continued to put in necessary investments to position ourselves stronger for tech sector recovery. Speaker 200:02:58This includes initiatives such as our geographic expansion, Building out of our TD CX AI arm and operationally keeping strong agent and support ratios for our clients. Our CFO, Mr. Chin, will provide more details on our margins later. Operationally, I'm very proud that we remain at the top end of performance tables for our clients and as a result, Continue to grow business broadly across our clients. Revenue from clients outside the top 5 grew 67% year on year. Speaker 200:03:37If not for the impact of one of our key clients reducing volumes as part of their focus on cost efficiency, we would have registered much Stronger overall revenue growth. Our strategic geographic expansion over the last 2 years Has really started to contribute meaningfully. All in revenue from our new geographies was 9 times in Q2 2023 compared to what it was in Q2 2022. This included clients that we added from our Hong Kong subsidiary as well. Overall, we delivered a robust earnings performance as profit for the period rose 9.4 percent to US22 $1,000,000 We stand out amongst peers in our Sector is still being able to deliver good earnings growth over a very tough period. Speaker 200:04:32This Clearly demonstrates that TDCF continues to execute at very exceptional levels. Our profit performance Has translated into strong cash flows and a strong balance sheet. Cash generated from operations was US49 $1,000,000 for the first half of twenty twenty three. As of 30 June, 2023, we have US301 $1,000,000 cash and cash equivalents with no debt on the balance sheet. This Puts us in a very strong position to move quickly on several strategic growth options, especially in an environment of high interest rates. Speaker 200:05:15We continue to explore M and A opportunities that could help enhance our capabilities, our reach to better serve our clients or to accelerate our growth. Besides that, we have the financial strength and flexibility to deploy capital for important organic initiatives such as TDCX AI, our consulting capabilities Please and investing in our new geographic sites. I'm very happy with the progress that TCX AI is making, and we're growing our team steadily. Our clients have entrusted us on consulting and advisory services and in piloting and implementing AI enabled CX solutions. A number of projects are in the pipeline. Speaker 200:06:01For example, with a large tech client, our team was tasked to analyze the cognitive load of multi skilled agents and to identify the tipping point at which an individual agent would be overwhelmed by Product information and which would impact the way a customer service campaign would be set up. Another example we've done for clients It's modeling and analyzing agents' learning curves and thereafter developing customized roadmaps such that agents reach peak performance faster. For a travel and hospitality client, we Operator machine learning to anticipate and decrease employee attrition by up to 15%. We are also Leveraging Google Cloud's enterprise grade generative AI capabilities to build an AI enabled chatbot to respond to candidates' Queries about our company and the recruitment process and integrating this with our proprietary flash hire recruitment system. To sum up, there are huge businesses as well as productivity improvement opportunities with AI, and we're moving at incredible pace to take advantage of these. Speaker 200:07:22CVCX is very differentiated. We are agile, nimble and hyper focused on the complex CX segment, which requires human intervention and that is not easily replaceable. Our positioning and strength in Southeast Asia are unique amongst global CX providers. I'm not sure If the public markets have misunderstood or overreacted to the threat of Gen AI, while underestimating the efficiencies and opportunities that This could bring at current trader levels and considering the profitability and cash generation of our differentiated business, We see great value and we intend to prioritize share buybacks as a form of enhancing shareholders' returns. Next, let me touch on some client highlights. Speaker 200:08:15Our business development momentum remains very strong. Client count rose 52 percent to 91 clients as of June 30, 2023 And we have a further 7 clients who have been signed up but not yet launched. Beyond the quantity, I'm excited about the Quality of clients that we launched in Q2, which included several giants of the world in their respective spaces. This includes an established global e commerce platform based out of the U. S, a rapidly growing fast Fashion e commerce platform, which is one of the 2 fastest growing giants globally and a leading travel platform based out of Asia, which is one of the world's largest in this space. Speaker 200:09:03With a higher client count and broader growth, We improved our revenue diversification as our top 5 clients contributed 73% of this quarter's revenue, down from 83% in the same period last year. In terms of geographic reach, We now have a much wider footprint compared to 2 years ago. With a growing headcount of over 18,000 700 employees globally, we are able to serve more clients across the world. The revenue chart here demonstrates Our unique positioning amongst global listed CX providers with around 71% of our business focused on serving Southeast Asian And North Asian Languages. Before I hand over to our CFO, let me share some views on the outlook. Speaker 200:09:57Having completed Half the year now, we have a better sense of where we will land for FY 2023. We've seen delays in decision making from clients and the lengthening of the sales cycle throughout the 1st 6 months. The effect flows through to the second half, which means that the higher end that we were aiming for in second half twenty twenty three It's not coming through. As such, we are adjusting our FY 2023 revenue outlook to reflect this. Mr. Speaker 200:10:33Chin will provide more details later. While we do not want to get too much ahead of ourselves, we are starting to get a slightly clearer picture Of how the next year is going to unfold, there are encouraging signs for economic activity in the U. S. Coupled with recent positive results for several of the tech giants, including those in the digital advertising space. This bodes well and I'm cautiously optimistic that we're starting to see some green shoots for 2024 rebound. Speaker 200:11:07With our efforts on operational excellence and focus on value adding to our clients, we're in a very Strong position to seize opportunities as they arise. With that, let me hand over to Mr. Chin. Speaker 300:11:23Thank you, Laurent. In Q2 2023, we delivered revenue of US126.2 million dollars Up 5.5% year on year on a reported basis. Had the Singapore dollar remained constant against our operating subsidiaries' currencies from Q2 2022, Revenue would have risen by 11.3%. The exchange rates used for the translation of the local functional currencies of Malaysian ringgit, Philippine peso, Hai baht, Japanese yen and renminbi depreciated between 3% to 9% against the group's presentation currency of Singapore dollar for Q2 2023 compared to Q2 2022. Moving on to profitability measures, EBITDA decreased by 2.2% to US33.7 million dollars this quarter, due largely to higher employee benefit expenses, which rose 7.1% year on year, higher than the revenue growth rate. Speaker 300:12:21Adjusted EBITDA declined 7.1 percent to US32.7 million dollars in Q2 2023 as margins contracted from 29.4% to 25.9% on high infrastructure and employee costs. I will elaborate more on this in a later slide. Interest income increased 6 times with increased funds in interest earning deposits against the high interest rate environment, While income tax expenses declined 24%, with the reinstatement of tax incentive in the Philippines that was suspended in Q2 last year. Consequently, profit for the period grew 9.4 percent to US21.6 million dollars Adjusted net income, which represents Profit before equity settled, share based payment expense, net foreign exchange gain or loss and acquisition related professional fees Was stable year on year. This was largely because we incurred lower equity settled share based payment expense in Q2 2023 compared to the same quarter last year. Speaker 300:13:26Let me next provide some insights of our revenue by service offerings. Our growth in Q2 was led by the sales and digital marketing line of business followed by omni channel CX Services That was partly offset by decline in content, trust and safety. Revenue from sales and digital marketing services increased by 15% to US33 $1,000,000 driven by the expansion of existing campaigns by digital advertising and media as well as e commerce clients. Our newer client cohorts from 2022 continue to scale up further contributing to the growth in this line of business. Omnichannel CX revenue rose 8% to US76 $1,000,000 as a result of higher business volumes driven by the expansion of existing campaigns by clients in the travel and hospitality, gaming, FMCG, financial services and tech verticals. Speaker 300:14:23Revenues from Content Trust and Safety declined 19% year on year to US16 million dollars Due to contraction of volume requirements by existing clients in the digital advertising and media vertical, partially offset by In summary, omni channel CX made up 60% of our total business in Q2, While sales and digital marketing and content trust and safety contributed 26% 13% respectively. Next, let me elaborate on the adjusted EBITDA margin movement from 29.4% in Q2 2022 to 25.9% in Q2 2023. In terms of margin impact, higher rental and maintenance, telecoms and tech expenses were offset by lower equipment costs leading to a neutral impact. There was a 0.8% impact from general overheads, largely high infrastructure costs linked to office space expansion for new sites And higher professional fees incurred such as tax and legal fees. Thirdly, there is a 2.7% impact from high employee costs, Of which the bigger factor is higher local support and shared service headcount. Speaker 300:15:37There is also some impact from higher headcount of deployed agents versus billable as well as higher corporate costs. However, when comparing to Q1 2023, there was a sequential improvement of margins from 24.2 percent to 25.9 percent. This was due to an improvement in utilization in both The mature sites and new sites like Brazil, Turkey and Korea as well as an improvement of excess headcount compared to Q1 2023 With resources in Q2 2023 closer to our deployed agent account and man hours. Let me next move on to the half year performance. Our revenue for the 6 months ended 30th June, 2023 was US247.9 million dollars Up 6.8% on a reported basis or up 11.8% in constant currency terms. Speaker 300:16:31EBITDA was up 2% to US65 $1,000,000 and profit for the period increased by 15.4% to US41.7 million dollars This was driven by a reversal of equity settled share based payment in Q1 2023, higher interest income as well as lower income tax expenses. Excluding the effects of the reversal of the share based payment expense, adjusted EBITDA declined 11.6 percent to US62 $1,000,000 while adjusted net income declined 9.9 percent to US38.9 million This was largely a result of increased employee costs and IO heads, in particular for the Q1 of 2023. Accordingly, adjusted EBITDA margins for first half twenty twenty three landed at 25%, down from 30.3% in First half of twenty twenty two. To a large extent, much of the margin compression is due to planned costs such as our geographic expansion, choosing to recruit in good time and keeping strong support and shared service staff ratios. For first half twenty twenty three, revenue from omni channel CX rose 8% to US148 million dollars Revenue from sales and digital marketing services increased by 19% to US66 $1,000,000 while revenue from Content Trust and Safety Services was down 18% at US32 $1,000,000 For the half year, omni channel CX Contributed 60% of our business, while sales and digital marketing stood at 27% and content trust and safety at 13%. Speaker 300:18:14Lastly, let me provide an update on our full year 2023 outlook. We have revised the full year 2023 revenue growth range 2% to 4% on a constant currency basis from 3% to 8% previously. As Laurent mentioned, some clients are taking Longer to commit to business volumes, during Q2, one of our key clients also reduced their volume forecast for the remaining months of FY 2023. This means that there is a knock on effect on the revenue numbers that we can put into our forecast of second half of twenty twenty three. Further, revenue was strong in the second half of twenty twenty two, which sets a high bar in terms of year on year percentage growth for the second half of twenty twenty three. Speaker 300:19:01In terms of adjusted EBITDA margins, we have trimmed the top end of our range And our guidance for full year 2023 is not expected to be approximately 25% to 27%. We are committed to putting in the necessary investments and spending in the business for the long term and remain cautious in our cost optimization efforts with an eye on volume recovery for 2024. We have adjusted the margin's outlook accordingly to reflect this. Against the backdrop of what we are expecting, we are re strategizing our overhead approach to make it more elastic against revenue. For example, this includes planning infrastructure, spending closer to revenue pipeline. Speaker 300:19:45These initiatives will take some time to benefit margins likely in full year 2024. With that, let me hand you back to Laurent. Speaker 400:19:57Thank you, Mr. Chin. We're ready to take questions. Hi, everyone. Operator00:20:13We now have our first question from Pang Bin from Goldman Sachs. Speaker 500:20:22Hi, good morning everyone and thank you very much for the opportunity. Three questions for me, please. Number 1, on the guidance and outlook, can you please go over the rationale why you make this substantial change to your revenue guidance, Especially if we're looking at your first half of the year on constant currency basis, you are up in double digits. So what has changed? I'm sure you're talking about some of your clients, but can you go into specific details of that? Speaker 500:20:52On the back of that as Well, what level of confidence and visibility, you have on this revised guidance? Is there any possibility of further revised out going forward? That's question number 1. Number 2, you also mentioned that you started seeing signs of better 2024. Can you further clarify and provide more color on that? Speaker 500:21:14Have any of your clients started indicating that they would likely increase their spending into next year? And number 3, lastly, can you share with us more around how AI may impact your business? How many percent of your business may see more impact comparatively and how do you plan to remit the list here? Speaker 400:21:36All right. Thank you, Pan, for all these questions. So yes, the revised guidance from 3% to 8% to 2 to 4, I mean you called it substantial, it's not tremendously substantial, but it does have an impact, I do agree. So there's a few reasons behind this. The first one is the deals we were hoping to close Got delayed. Speaker 400:22:02So really the velocity of deals have been slower than anticipated. Some clients who had Indicated that second half was going to be stronger, was not really Didn't really materialize. It got delayed even further, let's say, into September at lower volumes than initially Peter, we still have so that's one factor. We still have pressure from the digital advertising sector, which was not doing terribly well in the first half, but it's not going to do better in the second half. And that's taking into account as well that our second half last year was also quite a good second half. Speaker 400:22:53So that doesn't help us very much. And then, yes, the opportunities So are coming though and we're a bit more optimistic around 2024 leading into your next question. I would say where clients are starting to indicate better forecast in 2024. Nonetheless, I think if I come back again on the impact on the second half, which was the primary question you had, Travel and hospitality is not really going to show up as much as we were anticipating. China hasn't really played out so well As we were hoping it would. Speaker 400:23:39So it's a whole bunch of factors. Although We have sectors that are doing pretty well like gaming, tech, e commerce, automotive for us are really Doing extremely well and there's a whole part of the business that's growing at fast pace, but it's being brought down by All the sectors that are weighed in. Now if you look at digital advertising, we see Some good results announced by our key clients generally in the 1st two quarters. Unfortunately, we don't see it translated in immediate growth. So how long more do they need to produce Better results until they decided to open the floodgates and decide to invest further It's a question mark that we still have on our list. Speaker 400:24:37So having said that, we see some green shoots in 20 24, we see that the recession fears are starting to subside, and we are seeing some also good Momentum on our pipeline, we are closing deals. The leads we're getting Starting in the Q2, starting to turn around compared to the Q1. So there's a number of encouraging signs That makes us pretty optimistic, if not cautiously optimistic for 2024. Now the last question you have and one of the questions I think you have is whether there's a chance that we're going to revise our forecast again in the next Cas again in the next announcement for Q3. We think we have a good sense of 2023 at this point. Speaker 400:25:35So any barring any unforeseen circumstances or something really major, we are pretty locked in that guidance at this point. The question on impact of AI, we've had very, very good momentum with TDCS AI, I have to say and a lot has to do with the role we think TD CX can play as an advisor to our clients. And so we've had a lot of very successful discussions with most of our clients And successful engagements in consulting projects with them, some that we, I think, have explained Earlier in the call, and really it's leveraging the possibilities that are available to us. In terms of impact, the first impact we expect from TD CX AI is strengthening our relationship, Defending our territory and really enhancing the business we already have with our clients to grow further, Show them better productivity, better insights, better quality. And what's interesting, I would say, in Q2 We didn't anticipate to monetize TVCX AI so quickly. Speaker 400:27:00We expected it for a few years to remain a value add to our clients to do what I just said. But now we're starting to make commercial proposals as well with the dollars associated with it. So there's a real appetite from clients, but we See real opportunities as a result of that. And one of the opportunities we see is a growing Terry, total addressable market for TD CX. We see the possibility now to offer Some of our services to the in house call centers and operation, and that's The total addressable market is 3 times the size of the outsourced CX market. Speaker 400:27:52So our total addressable market has grown 3 fold on the basis of that or 4 fold because from $100,000,000,000 We're moving into plus $315,000,000,000 $415,000,000,000 but there's also the consulting Market TAM in the CX industry, which is another $30,000,000,000 So we're talking about For $445,000,000,000 as opposed to $100,000,000,000 So this is a huge opportunity for us To play in and TDCX with its very differentiated offering, being in Asia, Working with the best clients in the world, we've got so much knowledge and capabilities that we can share As part of TDCX AI, for this total addressable market that gives us a good confidence level as to the opportunities for us to tap these new trends that we hear a lot about. I hope that answered your questions, Tom. Operator00:29:00Thank you. Our next question is from Magana Candi of CGICIMB. Hello. Speaker 600:29:16Hi. Thank you so much for the presentation. I just have a few questions here. First, the revenue contribution outside of your top five clients Things have bumped up really well in Q2. So could you please share a bit more color on this? Speaker 600:29:33Are you seeing clients that have onboarded over the past So you are ramping up the campaign sales scales more significantly? Or are there any other standout performers that are moving the needle here? And my next question would be on the EBITDA margin guidance. So should considering the lower adjusted EBITDA margin, Should we expect this trend to be more cyclical in nature given the lower volume outlook in second half? Or is this more structural looking at the types of services that you're providing to some of the newer clients. Speaker 600:30:07Thank you. Speaker 400:30:10Thank you very much for the questions. Yes, the performance outside of our top five clients is quite Staggering and significant. We're very happy with that. That's the whole goal of the company where we have Two strategies to diversify from our bigger clients, which is build out possible newer clients to Outpace the growth of our bigger clients, then the second one is on the M and A side, continue to have a more balanced business. So we've had great success bringing new clients for the past few years. Speaker 400:30:50Some of them date back to 2021, and they started Rather small, but they've now taken over the world. So we have a gaming client, for example, where we really started in one location Back in 2021, and now we are in Speaker 200:31:045 locations. Speaker 400:31:06It's become a global client. It's been growing very fast In the gaming sector, we onboarded on the back of this another great gaming client as well, Where we expect it's now operating in 2 locations. We expect it to grow in other location. So that's doing well. We onboarded as well. Speaker 400:31:30Recently, a fast moving fashion From Asia and this cloud is growing super fast, but really extremely fast. So it's a star For us in one of our locations in the Philippines, we have a digital advertising, a new client that We onboarded about 2 years ago. That's starting to really deliver. So we just We onboarded less than a year ago in automotive business and automotive is going through a bit of a revolution of A change of distribution model, transitioning from wholesale and And agents and distributors into an online model that creates tremendous opportunities for us. It's a global deal. Speaker 400:32:27So there are quite a few opportunities, but what I find super interesting as well A lot of our more and more of our clients are becoming originally from Asia. And there's a big trend where TDCX is able to Speaker 200:32:46attract Speaker 400:32:47the Asian superstars, The leading companies of Asia as part of our clientele, which really represent the future of The economy for Asia and for the world actually because they're not operating in Asia only. They've done their job of Having a good market share in this growing territory and they're taking over the world And we're there to support them where they need us to be. Now we have 16 locations to serve our clients. So we've been Making great progress on growing our location. So we're in a fantastic position and in a good place At this point. Speaker 400:33:32Maybe the second question, I think, is around the margins And both maybe the short term and the long term part of the margin, maybe I'll defer to Mr. Chin to Talk to you about the margin if you don't mind. Speaker 300:33:49Yes. Sure. Thanks, Laurent. So on the margin side of things, It is pretty much due to largely planned costs and planned investments and our continuing investments into the business. As a reflection of our geographic expansion that we have put in, in the last couple of years, the Building up of our AI arm, Laurent has alluded a bit a while ago. Speaker 300:34:20That also is baked into the EBITDA Outlook as well as what happened in Q1 on our improvement going into Q2 about Keeping our agents sizing and anticipation of the volume movement that which comes along with support And shared service staff ratios to deliver the best optimal outcome for our clients. And it's kind of reflected in Q2 that we are going to continue on that path going into the remaining Months of the year. In that sense, we think that these investments are quite necessary to put us in a healthy position to benefit from a possible macro recovery If it turns in towards the end of this year going into 2024. So On that basis, we do commit ourselves to putting in, as I said earlier on, necessary investment And spending for the business in the long term rather than going on a quarter to quarter basis. Remaining careful in how we optimize our cost, we are eye on volume rebound in 2024. Speaker 300:35:49But at the same time, against what's happening in the near term, we are also reprioritizing our overheads Generally, from what we have planned early on, to make it more Stay kind of elastic against our revenue volume debt in the near term, so that our EBITDA stays on cost of what Outlook, things like infrastructure, capacity planning decisions are still to be revisited to ensure that we don't stay too off course from the business side of things. So that's what is We are. It's happening now and also going into the remaining Speaker 100:36:49Thanks, Mr. Chin. We have some questions on the webcast That I can read out. Speaker 700:36:57Number 1, can you share a bit more Speaker 100:36:59color on your business development pipeline? How is it coming along? And second one will be, you announced some share buybacks in Q2, 2023. Can you give more color around that and your plans going forward? Speaker 400:37:14Yes. Thank you for the question. So our pipeline is building up pretty nicely. And What I like about it as well this year is we've gotten quite a bit of interest in a new sector that we haven't been really In 2, which is HealthTech, so we won 2 contracts in that sector in Europe, but we have And then the third one in Asia as well. We have more coming up on the health sector as well, which is It will be an interesting new development for TDCX to grow our opportunities for business. Speaker 400:37:56We see in Q3 the number of leads starting to get into the Zone of the higher numbers than we've had before over the past two quarters, Good opportunities in still a lot of new economy companies as well for us. And As well, I would say that what makes this year different is we're getting a lot more RFPs from existing clients. And the deals we're closing as well have a much higher Sales value than they did in the previous quarter. So our business development team that was recently Structured is doing a great job and that can only get better. So that answers the questions on the pipeline. Speaker 400:38:54I'll Leave the other question to be answered by Edward Gohr, Head of Corporate Development. Speaker 800:39:00Sure. Thanks, Laurent. On the topic of buyback, I think we've always said we guided by valuation against our peers, but mindful on sort of impact of liquidity. But I think Current levels, definitely we're seeing very attractive values. I think, sort of prioritizing really the use of our On this exercise, I think looking at just sort of our cash Bing, RMB300 million still, that's about 40% of our current market cap. Speaker 800:39:36It looks like a very sort of a good level for us to Continue to be more proactive in our share buyback program. So definitely we've sort of done some in the second quarter Of 23, which we purchased about 160,000 ADS over this period of time. So we'll continue to sort of adopt the same approach going forward. Thank you. Speaker 400:40:01And if I can Rattle on a little bit on the business development pipeline as well. Just wanting to indicate a little bit of what we're seeing as Potential trends that are going to impact us and drive more business for us. Really the opportunity for outsourcing, Which we think is going to fuel 2024. We're starting to see that clients who have laid off Need to get things done, but they don't have the manpower, they don't have the capabilities. Even in the in house So market clients don't have the capabilities because everybody's been going through the leaner exercise And the kind of inquiries we're getting from clients are becoming increasingly complex Because those are the resources that they cut. Speaker 400:40:56So the second trend that we see also It's the ever rising expectations as the world becomes more and more digital, the expectations are much higher. So some of our clients have increased their NPS expectations, the CSAT expectations and these increases come at a cost That can be mitigated through automation, but will require much More investments and effort and that's we think will be driving Speaker 200:41:33The price Speaker 400:41:36of the business and what we sell to our clients And leveraging absolutely TD CX AI to help to drive that. So we see quite a number of positive Trends at this point that can continue to power the business in 2024 and beyond. Speaker 100:42:08Operator, can we have the next question please? Operator00:42:12Sure. Our next question is from Jonathan Wu of Philippines Securities. Speaker 700:42:22Good morning, management. Thanks for taking my questions. I have 2. The first is, Could you give some update on the new geographies, Indonesia and Brazil? How has the progress been? Speaker 700:42:33Has the pipeline over there been as expected? And the second question would be on the key client that actually reduced volumes for you guys or is reducing volumes. Can you give a little bit more color on them? How much volume did they cut and how much expected growth was this in percentage terms? Thank you. Speaker 400:42:54Thank you, Jonathan. So, 2, 2 here. Indo Indonesia, Pretty new to us. So it's at this point, it's embryonic expansion. We're very early days in Indonesia, but successful already with a client because our strategy for 2023 2024 will be to I go in greenfield operations supported by clients as previously different where we were In some locations strategically investing, but for several reasons. Speaker 400:43:32One that we already have quite a good footprint globally That we're trying to control our costs as well. Now we choose locations when we have business. So Indonesia was exactly that. So it's just starting, but very successful at this point. Brazil is, I would call it, a tremendous success. Speaker 400:43:52Started with a client. We have a bit more than 100 headcount now in Brazil. When I say it's a tremendous success because We were able to do this really in a very short period of time in Sao Paulo that the business is performing super well for our clients, But that also we are getting a number of inquiries. And finally, because it's also completing the puzzle of Latin America where We were in Colombia. We are in Colombia doing really well in Bogota. Speaker 400:44:23But it's difficult to have a Latin American strategy unless To cover Portuguese and Brazil, because Brazil is still a huge powerhouse in Latin America, having the combination of Bogota and Sao Paulo It makes it really credible and capable. So very happy with where this is going. Very happy also with our Operational capability in terms of setting up greenfield sites over the past 2 years, we've done mostly 100% success. In Greenfield Operations, which is a tribute to our operations teams and it's Super important for our clients to give us more business moving forward. So that plays around our agility. Speaker 400:45:12Now going back to the second question about clients reducing volume. Yes, I cannot give too much details about which Clients, I'd rather give sectors. So as you would expect, digital advertising has been under pressure. For the right or for the wrong reasons, I would See the sales and digital marketing a lot less under pressure, more the OCX and content moderation We're under pressure, and that will continue to be the case a little bit. FinTech has also contracted, yet we're seeing some rebound, But more in the later part of the year. Speaker 400:45:56So that's why our guidance is affected as well. But that's giving us Some hope in 2024 on the FinTech side. I would say Travel and Hospitality, We were expecting, I would say, a much better Q2, Q3 out of Travel and Hospitality. And is it mostly because China didn't show up? Is it because Japan is not traveling Outside, there could be different reasons. Speaker 400:46:32I think maybe globally as well. But if it's not Delivering the usual power numbers that we are used to. Nonetheless, our first half on Travel and Hospitality is quite spectacular nonetheless and good. It's just that the second half is not tremendous. So that's what's going on, if I can say. Speaker 400:46:59We have other sectors like tech, gaming, E commerce that's flying, so that opportunities even in the financial services for us. So it's not all gloom. It's a mix of factors That are pretty sectoral and the other sectors are doing well. I hope that answers the question Jonathan. Operator00:47:37This concludes today's Q and A session. I will now hand over to Jason for closing remarks. Speaker 100:47:45Okay. Thanks everyone for joining us on this call. If you have any further questions or any follow ups, please feel free to get in touch with us. On behalf of management, we're signing off. Thank you and goodbye.Read morePowered by