Investor Presentation. March 2018

Transcription

1 Investor Presentation March

2 Forward-Looking Statements and Non-GAAP Measures This news release contains statements, estimates, or projections that constitute "forward-looking statements" as defined under U.S. federal securities laws. Forward looking statements may be identified by words such as "will," "expect," "estimate," "think," "forecast," "guidance, "outlook," "plan," "lead," "project" or other comparable terminology. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks include, but are not limited to: (i) adverse effects of our Board of Directors search for a new Chief Executive Officer, including the risk that a protracted search could affect our ability to attract and retain clients and employees; (ii) the loss of a significant client or significant business from a client; (iii) the future financial performance or outsourcing trends of our largest clients and the major industries that we serve, including continued volatility in volumes with certain of our largest communications and technology clients; (iv) contractual provisions that may limit our profitability or enable our clients to reduce or terminate services; (v) our failure to successfully acquire and integrate businesses; (vi) our inability to protect proprietary or personally identifiable data against unauthorized access or unintended release; (vii) the effects of complying with the European Union s General Data Protection Regulation, the Philippines Data Privacy Act and other jurisdiction-specific data privacy requirements, including increased expenses, operational and contractual changes, and diversion of resources; (viii) our inability to maintain and upgrade our technology and network equipment in a timely and cost effective manner; (ix) business and political risks related to our global operations, including ongoing political developments in the Philippines, uncertainty regarding the impact of Britain s vote to leave the European Union (Brexit) or other similar actions by European Union member states, and economic weakness and operational disruption as a result of natural events, political unrest, war, terrorist attacks or other civil disruption; (x) the effects of foreign currency exchange rate fluctuations; (xi) the failure to establish appropriate tax provisions for uncertain future tax liabilities, changes in tax law, regulations or regulatory guidance that increase our future tax liabilities, including regulations implementing the Tax Cuts and Jobs Act, or the unfavorable resolution of tax contingencies; (xii) adverse effects of regulatory requirements or changes thereto, investigative and legal actions, and other commitments and contingencies; (xiii) costs associated with conversions of our convertible debentures that may occur from time to time; (xiv) our inability to effectively manage our contact center capacity or attract and retain employees at competitive wages; and (xv) those factors contained in our periodic reports filed with the SEC, including in the "Risk Factors" section of our most recent Annual Report on Form 10-K. The forward-looking information in this document is given as of the date of the particular statement and we assume no duty to update this information. Our filings and other important information are also available on the investor relations page of our web site at The following presentation includes non-gaap financial measures as defined in Regulation G under the Securities Exchange Act of 1934, as amended. A reconciliation of GAAP to non-gaap results is available on the investor relations page of our web site at 2

3 Agenda Positioning Performance Value Creation 3

4 C O N V E R G Y S : Profile of a Global Leader in Customer Management 4 Global ranking by revenue % of Fortune 50 served Employees worldwide #1 in U.S. > 50% ~ 115,000 Languages served 58 Contacts per year 8 Billion

5 Recognized As a Global Leader Convergys positioned in Leaders quadrant six consecutive times March 2017, Gartner Magic Quadrant for Customer Management Contact Center BPO, Worldwide Gartner Magic Quadrant for Customer Management Contact Center BPO, Worldwide by TJ Singh, Misako Sawai, and Brian Manusama, March 22, This graphic was published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from Convergys. Gartner does not endorse any vendor, product or service depicted in our research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. 5

6 Strong Position in Large, Attractive Vertical Markets 2017 Customer Management Services BPO Market Forecast by Vertical (Total Market = $69 Billion) 36% 34% 18% 12% Communications Financial Services Technology Other 46% 9% 20% 25% % of our Revenue by Vertical Source: NelsonHall, June 2015; Company filings; other verticals include retail, healthcare, manufacturing, government, utilities, transportation 6

7 Industry Trends Play to Our Strengths Industry Trends Our Strengths Offshoring Vendor consolidation Increasing call complexity Digitization of the customer experience Breadth and depth of services comprehensive, omni-channel voice/digital platform, analytics Global operating model quality and consistent delivery metrics that matter to clients Close client engagement invest in what matters to clients strengthens loyal relationships Scale = unique ability to invest 7

8 Our Comprehensive Capabilities Meet Client Needs WHAT CLIENTS WANT WHERE THEY WANT IT HOW THEY NEED IT 8

9 Our Model Drives Operational Excellence Global Operating Model Recruiting and Onboarding Training WFM Performance Management Robotic Process Automation (RPA) Tools & Technology Customer Experience Insights Eliminate Calls Reduce Effort Drive Sales Conversion Improve Satisfaction Reduce Waste Accelerate Loyalty/Advocacy Technology Web/Mobile Omnichannel Proactive Personalized Engagement Co-browsing and Chat Security and Fraud 9

10 E X A M P L E S : Our Model Focuses on Outcomes Our Clients Want Reduce Cost Improve Satisfaction / Quality Increase Revenue Onshore/offshore planning Digital, non-voice engagement Client process improvement consulting Enhancing customer experience with analytics Net promoter score improvement Point of sale evaluation surveys Sales center of excellence B2B model Collections Customer retention 10

11 Agenda Positioning Performance Value Creation 11

12 Building on Solid Performance Record Revenue Growth 4-Year CAGR ($M) 2792 Diluted EPS Growth 4-Year CAGR $ % CAGR 14% CAGR $ % CAGR $1.22 $ Strategic Acquisitions GAAP Adjusted Reconciliation tables of GAAP to non-gaap results are available in Convergys Annual Report on Form 10-K and on the Convergys website at 12

13 Resilient, Solid Cash Flow Business Loyal customer base Tenure with top 10 clients averages > 17 years High visibility revenue stream Multi-year contracts > 90% of revenue Strong cash flow $196M average adjusted free cash flow last 3 years 8% FCF yield Reconciliation tables of GAAP to non-gaap results are available in Convergys Annual Report on Form 10-K and on the Convergys website at Free cash flow yield calculated using market capitalization at December 31,

14 A Record of Strategic Growth and Diversification Convergys Client Base Revenue Breakdown Top 3 clients 50% Rest of clients Top 3 clients 30% Rest of clients Accretive M&A reduces client concentration 14

15 Expansion Into Other Verticals and Geographies Proven Ability Examples % of Total Revenues Technology clients 10% 20% Non-US revenue 9% 26% Attractive Other Verticals growing at double-digits Healthcare Retail 15

16 Growth Challenges and Actions to Address Challenges Convergys Actions Largest clients strategy changes Partner through account management to stabilize top client relationships Maintain operational excellence and pricing discipline Episodic client volume volatility Focus on closing new programs, logos Invest in other verticals organically and inorganically to diversify client base 2017 record year of new business signings 16

17 Margin Remains Strong, Including Revenue Impacts Adjusted EBITDA Margins 12.6% Track record of sustained margins Reconciliation tables of GAAP to non-gaap results are available in Convergys Annual Report on Form 10-K and on the Convergys website at 17

18 Our Strategy for Value Creation 1. Grow with existing and new clients 2. Drive margin expansion 3. Remain disciplined with capital deployment 4. Pursue selective acquisitions 18

19 Agenda Positioning Performance Value Creation 19

20 What Will Drive Sustained Value Creation Drivers of Future Total Shareholder Return TSR Revenue growth Margin expansion Share repurchase Dividend Goal 20

21 R E V E N U E G R O W T H Long Term Revenue Growth Drivers Future Revenue Growth Drivers GDP+ Consumer Demand Secular Outsourcing Trend Vendor Consolidation Mix Shift Offshore Simpler Transaction Automation Strategic Acquisitions CVG Long Term Revenue 21

22 M A R G I N E X P A N S I O N Margin Opportunities and Challenges Future EBITDA Margin Expansion Drivers 13%+ Offsets include: labor increases general inflation Revenue Growth Mix Shift Offshore Productivity Gains Goal 22

23 Disciplined Capital Deployment Strong Liquidity Position >$600M cash and undrawn credit facilities Invest in Strategic Growth Return Capital to Investors Build the core Capex 3%-4% of revenue annually Acquisitions Selective pursuit of clients, capabilities and countries Dividend ~1.7% yield Share buyback $62M remained authorized at EOY 23

24 E X A M P L E : Invest in Strategic Growth Stream Acquisition Strategic Benefits Expanded US and global presence Combination created #2 global service provider by revenue Strengthened offering to technology clients Diversified client portfolio Reduced client concentration Allowed Convergys to apply its successful business model across increased client base Enhanced geographic reach, breadth of languages and service capabilities Added multi-shore delivery capacity Provided new in-country language skills in EMEA/CALA to serve multinational clients Strong technical support expertise, leadgeneration solution offerings Financial Benefits More balanced revenue profile More diversified client base, geographic footprint and service capabilities Enhanced prospects for future revenue and EPS growth Cost synergy potential Cost efficiencies from IT/IS infrastructure, operations/support, executive and finance Compatible business models, similar structures and cultures eased integration Highly accretive transaction Leveraged strong balance sheet Tax efficient use of cash held offshore Preserved financial flexibility Strong cash flow generation Ample liquidity after close 24

25 Returning Capital to Investors > $500M Capital Returned Past 5 Years (cumulative $M) Dividend Buyback Capital Return Share buyback $62M remained authorized EOY ~3% of outstanding stock Quarterly dividend raised to $0.10 per share May 17 fifth consecutive year

26 S U M M A R Y Attractive Business Set for Sustained Value Creation Solid performance record Strong industry fundamentals Scale to invest in quality, capabilities and client success Committed to strong balance sheet, investor capital returns Targeting sustained growth, value creation 26