3Q14 Earnings Conference Call

Transcription

1 3Q14 Earnings Conference Call

2 2 Group Overview

3 CONTAX IS THE LEADING CRM BPO COMPANY IN SOUTH AMERICA Contax Group at a glance Contax Group footprint and portfolio of services Contax Group Highlights 4 th largest CRM BPO company in the world On shore operations in 4 countries Brazil, Colombia, Argentina and Peru Based operations Countries served off-shore Contax Group services Off shore services in Chile, Ecuador, Panama, USA, Canada and Spain Complete CRM BPO portfolio with unique ICT and Trade Marketing capabilities Net Revenue of R$ 3,618 million as of 2013 CRM BPO ITC Trade Marketing 108,044 employees and 59,504 workstations 1 Over 2 billion interactions with customers 1 83 locations with a total area of more than 440 thousand m Source: Company information Note: 1 Figures as of December 2013

4 SCALED OPERATOR WITH LEADING FRANCHISE IN BRAZIL AND SOUTH AMERICA One of the largest CRM BPO companies in the world Leading global CRM BPO company CRM BPO companies ranking by net revenues (2013 in US$ bn) 1 Leading CRM BPO player in Brazil CRM BPO companies market share in Brazil 3.2 Atento Others % 30% 29% 29% 25% 25% 23% 24% 46% 45% 48% 47% Among the largest employers in Brazil Benefits provided to customers Ranking 2013 (number of employees) 133, , , , ,956 98,125 88,000 Best Practices Award - Frost & Sullivan 2014 Best relationship services in the Brazilian card industry Card Monitor 2014 Grupo GPA Odebrecht Correios BRF OAS Atento One of the top 10 customer relationship services in Brazil Exame 2014 Best customer relationship services among Brazilian telecoms Exame Magazine 2014 As one of the largest employers in Brazil, Contax has unique expertise in recruiting, selecting, training and motivating talent Contax is historically the largest player in the Brazilian contact center market, being recognized as a first class solutions provider to its customers 4 Source: Company information and public filings, Revista Exame and Frost & Sullivan 1 Revenues calculated using a average FX rate of 2.16 BRL/USD and 0.75 EUR/USD

5 UNIQUE PORTFOLIO FOCUSED ON LARGE AND GROWING MARKETS The under penetration of CRM BPO services sustains industry s fast paced growth in South America Challenges in the outsourcing processes, according to clients (%) 1 G Government C Corporate Low ratio of call center seats per inhabitant 2013 call center seats / 000s population Legal uncertainty/ labor liabilities Larger than expected costs 43 Lower than expected quality 43 Labor inspection Excessive turnover Contax is a benchmark in addressing outsourcing processes difficulties 7.2 Significant underpenetration in South America Lack of labor supply 20 Increased risk in the production process 14 As legal uncertainties decrease, outsourcing to specialized providers should sustain the rapid sector growth The efficiency differentials that motivate outsourcing to specialized companies are becoming larger and have significant room for growth in developing countries 5 Source: Sondagem Industrial Especial Terceirização - CNI and The Conference Board Total Economy Database Source: Frost & Sullivan, IDC, Euromonitor, Economist Intelligence Unit Note: 1 Categories sum over 100% due to the fact that clients were allowed to chose more than one difficulty

6 SUCCESSFUL TRACK-RECORD A longstanding history of success START-UP ( ) MARKET LEADERSHIP ( ) INVESTMENT ( ) RESTRUCTURING ( ) GROWTH (2014 Onwards) Migration of Telemar operations Acquisition of new clients Operations knowledge and stability Net revenues evolution (R$ mm) Contact Center fast paced expansion Leader in the Brazilian Contact Center market Productivity and consistent delivery Listing on Bovespa South America Market Leader: operation in the whole relationship chain Operations in 4 countries Group expansion with the acquisition of Allus, Dedic and Ability and the creation of todo! Differentiated services Service lines expansion and differentiation Adoption of zero-base budget methodology Selective client portfolio restructuring Optimizing the full potential of the diversified platform and the synergies between the different segments Upgrade to Governance Level 2 of BM&F Bovespa PT disposes its ownership in the company Strengthen governance guidelines; seek Novo Mercado upgrade Leverage cross selling opportunities Penetrate new verticals Continue Latin America expansion Maintain focus on profitable growth Financial discipline focused on strong cash flow generation 421 1,045 1,775 2,398 3,119 3,620 3, Source: Contax

7 Contax Group s Key Differentiators 7

8 CONTAX KEY DIFFERENTIATORS Contax has broad combination of strategic operational differentiators for the CRM BPO industry Unique portfolio of services fulfilling a broad range of client s needs in CRM BPO, ITC and Trade Market services Presence in key countries to take advantage of the underpenetrated market in South America Strong management with large experience in the CRM BPO, Telecom and ITC industries and strong complementary experience Solid free cash flow conversion sustained by a strong contract stickiness and health balance sheet 8

9 9 Strategy

10 CONTAX S GROUP GROWTH STRATEGY Contax Group is uniquely positioned to capture the sector s growth Profitable Growth Strategy Expand Top-Line & Increase Margins 3 Increase efficiency 2 Offer Complete Portfolio Monetize scale opportunities 1 Expand client base Reinforce leadership in underpenetrated Latin American markets Strategy Leverage in leading Spanish South American operation Capture increasing share of customers spending by up-selling and cross-selling integrated solutions in South America Expand services Strategy Continue to up-sell value added services to existing client base Opportunistic sale of value added services Innovation as differentiator to products and services Strategy Leverage scale and regional presence trough the use of bargaining power with suppliers Recruit, select, train and motive talent Continue delivery center relocation Invest in technology initiatives to capture benefits of scale, standardization, and consolidation 10

11 EXPAND CLIENT BASE AND PORTFOLIO OF SERVICES Defined strategy of reinforcing the leadership in under penetrated Latin American markets Capture increasing share of customers spending by up-selling and cross-selling integrated solutions in South America Contact Center ICT Trade Customer Care Social Media Care CRM Credit Recovery BPO SW Develop/t TIC Engineer/g ITO Marketing Growth opportunities Growth opportunities Growth opportunities leveraging in the leading Spanish South American operation On shore and off shore CAGR 13-20E Off shore On shore 15.0% 8.8% 9.6% 6.8% 3.3% 2.3% and expanding to different rapid growing verticals Industry vertical CAGR 13-18E 10.2% 6.9% Banking & Telecom Other sectors 1 11 Source: Frost & Sullivan 1 Other sectors includes Retail, Consumer Goods, Government, Education, Technology, Travel & Hospitality, Utilities & Energy, Healthcare, Services and Industry

12 Sector Client Customer Relations OFFER A COMPLETE PORTFOLIO OF SERVICES WITH INCREASING VALUE ADDED Clear strategy of services expansion to new and current clients ACTIVATE RETAIN GROW CUSTOMER ACQUISTION CUSTOMER ENGAGEMENT CUSTOMER LOYALTY Services/Consumer/Healthcare Airlines Telecom Telecom Banks Value added by services Trade marketing ITO ITC Engineering SW Development Credit Recovery Customer care Social Media Care BPO Credit Recovery Customer care Social Media Care BPO Credit Recovery Customer care 1 year 5 years 5+ years Relationship with client Sound presence in CRM services act as a feeding ground for Contax Group to expand its exposure to clients in services with higher value added, through a retroactive process 12

13 Technology / Scale CONTAX S STRATEGIC DRIVERS OF EFFICIENCY INCREASE Our ability to implement and integrate technology and scale allows for continuous efficiency gains in the three main cost pillars CHALLENGES STRATEGY i ii Personnel Turnover Absenteeism Personnel productivity Wage Inflation pressure Sites moved to attractive regions Selecting, recruiting, training and motivating talent Streamline G&A Best-in-class processes Facilities Workstation efficiency Operational and infrastructure efficiency Develop in-house IT solutions Improving uniformity of key performance indicators ( KPIs ) iii Suppliers Regional integration of procurement Improve procurement strategy Technology initiatives to capture benefits of scale, standardization and consolidation 13 Source: Company information

14 Results 14

15 3Q14 HIGHLIGHTS Net Operating Revenue (NOR) reached R$ million in 3Q14 Contact Center operations outside Brazil kept growing at a robust pace, contributing R$ million to revenue in 3Q14 and accounting for 19% of the total, while presenting growth of 23.3% in functional currency year-over-year Gross Operating Margin equaled 21.9%, up by 3.4 p.p. compared with 3Q13 and 1.4 p.p. from 2Q14, reflecting the improvement in operating efficiency Consistent EBITDA margin at R$ million in 3Q14, with a 11.6% margin over NOR, in line with the best players in the industry and now at more stable levels Greater stability and predictability for EBIT, which totaled R$ 59.9 million in 3Q14, up by 48% compared with 3Q13. EBIT margin reached 6.8% of NOR, which compares with 4.3% in 3Q13, near 7.1% over NOR in 2Q14 Cash generation net of Capex totaled R$ million (5.3% of NOR) 15 * Without effect of debt issuance/amortization

16 OTHER HIGHLIGHTS Debt reduced to 1.7 of Net Debt/EBITDA versus 2.1 in 3Q13 and 1.8 in 2Q14 Revalidation of AA(bra) rating at Fitch for the debenture issuances from Contax Participações, mentioning the improvement in leverage ratios Advance in corporate governance with the creation of the Audit, Financial and People Management Committees Significant advance in judiciary regulatory context Senate Approval of Provisional Measure that makes the payroll tax break definitive Free Float increased to 71% in 3Q14, which compares with 67% in 2Q14 and 57% in 3Q13 16

17 NET OPERATING REVENUE Total net revenue (R$ mi) -6.0% +1.9% 2, % 2,591 Net revenue breakdown by service (9M14) Trade Marketing, 4% ITC, 2% Other, 5% Debt Collection, 7% CRM, 19% Customer service / e-care 62% 3Q13 2Q14 3Q14 9M13 9M14 Net revenue in South America, excluding Brazil (R$ mi) Net revenue breakdown by region (9M14) +1.3% +5.1% % 482 South America, 19% Brazil, 81% 3Q13 2Q14 3Q14 9M13 9M14 Net Operating Revenue (NOR) reached R$ MM in 3Q14, down by 6% compared with 3Q13. Quarter-overquarter, revenue rose 2%. Contact Center operations outside Brazil kept growing at a robust pace, contributing R$ million to revenue in 3Q14 and accounting for 19% of the total, while presenting growth of 23.3% in functional currency year-over-year 17

18 GROSS OPERATING MARGIN AND EBITDA Gross Margin (R$ MM, % NOR) EBITDA (R$ MM, % NOR) 18.5% 20.5% 21.9% 18.5% 20.9% 10.0% 12.2% 11.6% 9.6% 11.7% Q13 2Q14 3Q14 9M13 9M14 3Q13 2Q14 3Q14 9M13 9M14 Gross Operating Margin equaled 21.9%, up by 3.4 p.p. compared with 3Q13 and 1.4 p.p. from 2Q14. When we compare 9M14 with 9M13 we see a gain of 2.4 p.p. year-over-year, reflecting the Company s competence in seizing operating efficiencies Compared with 2Q14, EBITDA was lower by R$ 3.2 MM, or 3%. EBITDA margin in the quarter declined 0.6 p.p., due to higher general and administrative expenses in the period. Year-over-year, we also see an explicit improvement of EBITDA margin by 2.1 p.p. from 9.6% in 9M13 to 11.7% in 9M14. 18

19 EBIT AND OPERATING CASH FLOW BEFORE TAXES (OCF) EBIT (R$ MM, % NOR) CF (R$ MM) and EBITDA Conversion (%) 4.3% 7.1% 6.8% 4,0% 6,2% 98.5% Q13 2Q14 3Q14 9M13 9M14 9M13 9M14 We highlight greater stability and predictability for EBIT, which totaled R$ 59.9 million in 3Q14, up by 48% compared with 3Q13. EBIT margin reached 6.8% of NOR, which compares with 4.3% in 3Q13, due to a higher gross result Operating Cash Flow reached R$ million in 9M14, representing an EBITDA conversion of 77%. 19

20 CASH FLOW Cash Flow (R$) 3Q14 9M13 9M14 Net income 19,590 26,946 46,835 Operating cash flow (CF) 98, , ,329 Capex (53,191) (84,916) (95,073) Operating cash flow net of investments (FCFF) 45, , ,256 Investments cash flow (ex. Capex) (13,658) (3,261) (16,853) Financing cash flow 269,127 (111,202) 155,509 Exchange variation 17,177 7,675 (8,035) Change in cash balances 318,025 66, ,877 EBIT 59, , ,557 EBITDA 101, , ,169 Ratios M13 9M14 FCFF / EBIT 75.8% 160.3% 86.1% CF / EBITDA 96.9% 98.5% 77.0% 20

21 CAPEX Capex (R$ MM) Breakdown (%) 26% M14 38% % 3Q13 2Q14 3Q14 9M13 9M14 In 9M14, Capex totaled R$ 95.1 MM. The investments were mainly earmarked for technology projects aimed at the quality and efficiency of contact center operations and to underpin our international growth. Expansion Transformation Maintenance 21

22 CONSOLIDATED DEBT Debt amortization schedule Debt profile Total gross debt (in 3Q14): R$ 1.438mi Net debt / EBITDA Net Debt Net Debt / EBITDA LTM Caixa Debt breakdown (3Q14) 1T13 2T13 3T13 4T13 1T14 2T14 3T14 CDI and average debt cost UDM BNDES 23% Other Other 3% 4% IPCA 25% Debenture 74% CDI 40% TJLP 31% 7.0% 7.7% CDI LTM 8.7% 9.8% Debt average cost 9.4% 9.4% 9.3% 9.6% 10.0% 10.6% 10.8% 10.8% 10.1% 10.7% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Gross Debt compared with September 2013 was higher by R$ 221 million due to an increase in long-term debt stemming from the issuance of debentures in the amount of R$ 310 million in August Foreign currency debt accounted for roughly 2.6% of the total and the average cost of debt was 10.6% per annum. The increase in the average debt cost is mainly due to a rise in rates. At the end of September 2014, 82% of the Company s debt was due in the long term. Net Debt-to-EBITDA in the past 12 months decreased from 2.10 in 3Q13 to 1.80 in 2Q14 and 1.72 in 3Q14. 22

23 EBITDA, EBIT, OPERATING CASH & NET INCOME EBITDA Operating Cash Generation EBIT Net Income ,2% 9,4% 161 7,1% %NOR 9M13 9M14 9.6% 9.5% 4.0% 1.0% 11.7% 9.0% 6.5% 1.8% The Company presented a positive performance in the main financial indicators in 9M14, compared with 9M13 with EBITDA growth of 16% and EBIT growth of 49%. Net Income was R$ 46.8 MM in 9M14, up by R$ 20.1 MM or 74% over 9M13. 23

24 CONTACT IR This report contains market projections that do not amount to actual financial results nor past information. These are subject to risks and uncertainty, and actual results may differ from projections. Many of these risks and uncertainties are related to factors beyond Contax control or capacity to estimate, such as future market conditions, currency swings, the behavior of market participants, government regulating agencies, the company s capability to maintain funding, political and social changes or economic changes, including inflation and consumer confidence, regionally, nationwide or globally. Readers are warned not to fully trust these projections. Contax has no obligation whatsoever to revise these projections after this presentation is finalized. José Roberto Beraldo Chief Financial Officer and Investor Relations Officer Daniel de Andrade Gomes Treasury and IR Director Alexandre Freire IR Manager +55 (11) (11) ri@contax.com.br