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spk01: Ladies and gentlemen, thank you for standing by. I'm Stuart, your chorus call operator. Welcome and thank you for joining the TDCX Incorporated fourth quarter 2021 results conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. Presentation will be followed by a question and answer session. If you'd like to ask a question today, you press star followed by one on your touchtone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the call over to management. Please go ahead.
spk06: Hello, everyone, and welcome to TDCX 2021 Fourth Quarter and Full Year Earnings Conference Call. My name is Jason Lim, the Head of Investor Relations, and allow me to introduce management on the call. We have our Executive Chairman, Founder, and CEO, Mr. Lahong Junik, and our CFO, Mr. Chin Tsuning. 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 realised in the future. You should not place undue reliance on any forward-looking statements. Also, this call includes the discussion of certain non-IFRS financial measures such as adjusted EBITDA and adjusted EBITDA margins, For a reconciliation of the non-IFRS measures to the closest IFRS measures, please refer to our press release or the Form 6K, which are available on our website. Lastly, we have provided a convenient translation for the translations of Singapore dollar into the US dollar. This was done at the rate of 1 US dollar to 1.3517 Singapore dollar. This should not be construed as representations that the Singapore dollar amounts could be converted into the USD at this or any other rate. Our management will now share updates on the operating and financial performance. This will be followed by a Q&A session in which we welcome any questions you may have. With that, let me turn the call over to Lahorn. Lahorn, please.
spk02: Thank you, Jason, and hi, everyone. I'm very happy to report that in Q4 as well as for the whole of 2021, TDCX delivered financially, delivered operationally, and delivered strategically. First of all, a big thank you to our 14,700 employees who have made 2021 a record year through smart and hard work. Many of our employees had to adapt to the new hybrid work model, and CDCX have delivered enhanced services to support them in this constantly evolving environment. I have also a thought for our employees who were severely impacted by Typhoon Odette in Cebu in the Philippines and the floods in Malaysia at the end of Q4, just around Christmas. Our teams came together strongly to help, and I am very proud of them. Currently, 80% of our employees are still working from home, and I'm happy to report that our latest employee satisfaction survey indicates 89% satisfaction score globally, compared to 88% last year at the same period. What is also important to know is that all indicators in that survey are up. As a result of the contributions for our employees, we delivered a strong financial performance. Our Q4 revenue rose 28.8% year-on-year to a record $114 million or $155 million. Our adjusted EBITDA was $40 million versus $32 million for the same period last year. On a four-year basis, revenue rose 27.7% year-on-year to a record $411 million or $555 million. We managed to achieve a full-year performance above the top end of our guidance range. In particular, we have seen strong contributions across several verticals, Digital advertising and media continued its positive trajectory, rising over 40% in FY 2021 off a very large base. We grew our business with these clients both in the work streams of omnichannel CX and sales and digital marketing across multiple geographies. Two of our newer verticals continue to grow. We gain further traction in the FinTech space as revenue from FinTech clients rose 67% in FY 2021 and 114% in Q4 in particular. compared to the same period in 2020. Gaming was also another bright spot as revenue rose 99% in F1 2021 compared to last year. The travel and hospitality vertical posted a 15% gain in Q4 2021 versus Q4 2020 and showing signs of recovery. For the full year, this vertical was still down 4% compared to 2020. With our continued focus on new economy clients, revenue from new economy clients now stands at 93% of total revenue in FY21. We delivered operationally. So let me next touch on this. In terms of hiring, in Q4 alone, we hired close to 3,000 staff whom we call TDPs. This meant we achieved a 99% fill rate of what our clients asked for. demonstrating the effectiveness of our hiring mechanisms. I'm also very excited about some significant productivity gains we were able to deliver for some of our clients. In one instance, we were able to increase productivity by 170% on a project with more than 700 FTEs. The positive impact for our client was significant. In another instance, DBCX presented a unique concept of customer lifecycle management in new business programs that provides actionable insights, which resulted in 29% incremental acquisition of customers. We have numerous examples of performance, quality, or productivity improvements, and we're continuously working towards adding value to the business and that of our clients. Beyond servicing and growing our existing clients, we were focused on ramping up our business development efforts and adding new logos. These efforts are showing great results. We added a record 20 logos in 2021, more than double the nine that we added in 2020. Let me share some highlights of our logo additions. During the year, we further entrench our expertise in fintech and gaming, two new economy verticals that were not even existing five years ago. We're doing highly specialized work under the fintech umbrella, such as KYC for customer onboarding. and resolution of trading issues. The work for such clients is segregated into various complexity and escalation levels, and we're already helping our FinTech clients at the most complex levels. In gaming, we're starting to move beyond the customer support work on gaming matters, and we now even help to moderate speech and player interaction for our clients, also in foreign languages. We added another two globally recognized gaming clients to our register during the later part of the year. In addition to this, we also added an interesting new food delivery client. Beyond the established international Western firms, we are seeing a wave of exciting Asian-originated large logos across verticals. This includes e-commerce, gaming, fintech, and technology. They will provide a tailwind for TDCX over the medium term, even as we continue to grow along with the established clients already on our client list. With the Strong Logos edition, we ended December 2021 with 52 clients, a 37% jump from the 38 clients as at the end of last year. Now, I was saying that we also delivered strategically. From a geographic perspective, revenue rose across all the geographies we operate in. Our key Southeast Asian geographies, Malaysia, Philippines, and Thailand, continue to deliver very strong growth, while our newer footprint in North Asia, China, and Japan is starting to contribute a sizable mix to overall group revenue. Recently, we've also announced that we commenced operations in South Korea, our newest geography with three projects at the onset. This further augments our North Asia presence. All in all, 2021 was a good year for geographical expansion and saw us achieving maiden revenue contribution from four geographies, Colombia, India, Romania, and South Korea. These four newly added geographies underscore our plan to continuously expand our global footprint, to offer more language capabilities than ever, and to be better positioned for global RFPs. My executive search unit also delivered the goods in 2021 and continues to be on overdrive mode. Attracting talent in new markets is super important and we have onboarded two senior hires who will be part of the core team in Korea. It's worth noting that one of them joins us from a large Korean CX operator. where he oversaw the international business unit covering some exciting new economy clients in 2021. We also made some senior key hires in India, Romania, in Colombia to lead the new sites. Aside from new GOs, Ben Sun, an ex-McKinsey consultant, joined us in 2021 as SVP Business Intelligence and Solutions and to lead our in-house advisory unit. Ben has been very involved in redesigning our data and process solutions to provide management and our clients with better data and insights for us to make quicker and better decisions. Now, besides new hires, we have made some internal reorg as well. Ricard Valvacant, our EVP for Philippines and Americas, was promoted to Group Chief Client Solutions Officer to oversee areas of B2B branding, marketing, solutioning, and RFP proposals management. Whilst early 2021, Angie Tay took the all-important and new role of Group Chief Operating Officer. As you can see, we have been busy and we still have an exciting pipeline of key hires to fill in 2022, and I will update along the way. In terms of tools and innovation and through our very own digital lab, we invest in developing tools based on artificial intelligence and machine learning to augment delivery of desired CX. We now have 39 tech headcount across Malaysia and India who are doing two things. One, enhancing existing tools such as Flash Suite, our own proprietary suite, of management tools to improve productivity and quality. Number two, this team has been working on some new tools. We leverage artificial intelligence and machine learning to deploy seven bots, which are now working in sync with our agents in the trust and safety team for a new economy client. The bots truly augment our agents here and drove huge productivity gains. In 2021, this team helped to roll out more than 100 RPA robots to drive efficiency across the group. Our in-house advisory unit led by Benson functions as a close business partner to our ops teams to identify operational and process improvements. I'm confident that these two units will make key contributions to productivity gains. Our offerings to clients continue to evolve to meet their changing needs. In 2021, we commence providing data labeling services. We categorize and label content on our clients' platforms to train and improve machine learning, while also refining algorithms and predictive models. Our clients then use this information to enhance the user experience and utilize key insights on user behavior and evaluation of models for further product improvements and developments. For another client, we also set up a regional team in charge of driving sales for cloud services. On the M&A front, we continue to build our pipeline. Being public listed has certainly given us a boost as our M&A unit has received more ideas in the last five months than in the last five years. So the pipeline is healthy in the sense that we have a good view of what's in the market or coming to the market. And we want to be very selective and act only on the right targets in terms of client mix, footprint, culture, and financial profile. I hope I've given you a good view of what we've achieved during the year. We're now more ready than ever to provide our clients with a truly global solution platform and I'm excited by the opportunities as I look forward to 2022. We believe that what we've achieved so far and the plans that we've laid out sets us on the best possible path forward. I'll now pass over to Mr. Chin to share more details on the financials as well as the outlook for FY 2022.
spk05: Thank you, Lohan. Let me first touch on our track record over the past four years. We have delivered consistent growth from 2018 to 2021. Over this period, our revenue rose at a compounded annual growth rate or CAGR of 45%, while adjusted EBITDA rose at a CAGR of 49% and profit rose at a CAGR of 40%. This was coupled with a track record of consistently high adjusted EBITDA margins rising to 33.3% in FY21, up from 32.9% in FY20. These numbers are the results of our business strategy and positioning. Our focus remains on the high growth CX segment, on new economy clients, on complex offerings, as well as regionalization of operations underpinned by multilingual hubs. Next, let me share a bit about our geographical presence. We have a strong global presence across 11 geographies and we continue to expand. As mentioned earlier, we recognized maiden revenue from four new geographies in FY 2021. Of these, Romania, India, South Korea registered their first revenue in Q4 2021 itself. In terms of revenue contribution, Philippines, Malaysia and Singapore are the largest contributors to FY21 revenue at around 26% each. Thailand contributed 12.9%, Japan 5.6% and China 2.1%. Our global headcount stands at just over 14,700 employees as of December 2021. Next, let me elaborate a bit about our client numbers. As Lohan mentioned earlier, we added a record 20 logos in 2021. This represents a significant increase, more than double the nine that we added in 2020. and is a testament to our intensified business development efforts. We ended December 2021 with 52 clients, which represents a 37% increase compared to 38 clients as of December 2020. We continue to focus on new economy clients, and for FY21, new economy clients contributed 93% of our revenue. Let me now share some details on our Q4 2021 financial performance. Revenue rose 28.8% to $114 million, our highest ever quarterly revenue. This was driven by broad-based growth across all of our three business segments and across all geographies. In the next slide, I'll share the breakdown by service type and geography. To recap, we introduced the Performance Share Plan or PSP in November 2021 to incentivize our staff and act as a long-term talent retention and attraction tool. The adjusted EBITDA metric excludes the cost from the PSP and helps provide for a like-for-like comparison to track earnings performance. Adjusted EBITDA rose 26.1% to US$40 million, again the highest we achieved in a quarter. Adjusted EBITDA margins stood at 34.8% for Q4 2021, a decline against Q4 2020, which had exceptionally high margins of 35.6%. Net profit for the period rose 7% on a reported basis. On a comparable basis, excluding PSP costs, net profit would have risen by 26.3%. Excluding PSP costs, net profit margins would have been 22%, slightly below 22.4% of the same period in 2020. Next, we share more details on our Q4 revenue performance by the services we offered and by the geographies in which we operate. Revenue from omnichannel CX solutions rose 24% to US$71 million, due mainly to higher business volumes driven by the expansion of existing campaigns. In addition, volumes benefited from the mild recovery in the travel and hospitality sector from the impact of the pandemic, as compared to the same period of 2020. Revenue from sales and digital marketing services increased by 72% to US$26 million, with the expansion of existing campaigns for clients in the digital advertising and media vertical. Revenue from content monitoring and moderation services increased by a modest 3% to $16 million due to higher business volumes from an existing client in our digital advertising and media vertical. In terms of revenue contribution by key geographies, Singapore rose 18% to $27 million, Philippines rose 21% to $30 million, Malaysia rose 39% to $31 million, Thailand rose 44% to US$60 million. Let me now share some details on our expenses. We continue to monitor closely our overall cost structure and ensure that our total operating cost base is streamlined and aligned to support our fast-growing business. For Q4 2021, operating costs as a percentage of revenues stood at 73%, excluding PSB costs. marginally lower than 73.7% for the same period of 2020. Being a people-centric business, employee benefit expense makes up the largest portion of our total operating cost base. Our employee benefit expenses increased by 42% to US$72 million for Q4 in tandem with business volume expansion. If we exclude the PSB costs, employee benefit expense would have increased by 34%. This is higher than the increase in average number of employees by 29% over the same period due largely to compensation adjustments to employee reference to performance, cost of living and prevailing talent market conditions in the respective sites and a one-off recognition award bonus accorded to a certain group of employees for the successful IPO project in Q4 2021. Our depreciation expense increased by 8% to US$7 million for Q4, primarily due to a higher depreciation on right-of-use assets, renovations and capital expenditure in relation to office expansion catered for business growth. All other expenses, which include items such as recruitment, transport and telecommunication expenses rose 2% for Q4 2021. Next, let me touch on our full year 2021 financial performance. We achieved our highest ever revenue, adjusted EBITDA, and net profit for a full year. Revenue rose 27.7% to $411 million. Our top two clients make up 62% of revenue compared to 60% for FY 2020, and our top five make up 84% compared to 83% for FY 2020. While we have added new clients during the year, this will take time to contribute more meaningfully in terms of revenue makes. Meanwhile, our top clients continue to grow very strongly with us in FY 2021, leading to a slight increase in concentration. In terms of earnings, we improved EBITDA margins to 33.3% for FY 2021, marginally higher than 32.9% for FY 2020. Adjusted EBITDA rose 29.4% to US$137 million. Accordingly, net profit for the period rose 20.6% to US$77 million. Excluding PSP expenses, net profit growth would have been up 26.7% while margins would have stood at 19.6%. Let me next touch on the revenue by service and geography for the full year. Revenue from omnichannel CX solutions rose 22% in FY 2021, while revenue from sales and digital marketing services increased by 73%, and revenue from content monitoring and moderation rose 7%. OCX remains the largest contributor at 62% of revenue, followed by SDM at 21% and CMM at 15%. In terms of revenue contribution by key geographies, Singapore rose 22% to US$106.5 million, Philippines rose 30% to US$106.8 million, Malaysia rose 27% to US$107.4 million, while Thailand rose 32% to US$53 million. Let me round up on the full year 2021 expenses for the financial section. For the full year 2021, operating costs as a percentage of revenue stood at 75% excluding PSP costs, marginally lower compared to 76.7% for the same period of 2020. Excluding PSP costs, employee benefit expense rose 30%, slightly higher than the increase in average number of employees of 29% over the same period. Our depreciation expense increased by 21% due to depreciation on capital expenditure invested in new and expansion capacities to support the business growth in several locations. In addition, there was increased depreciation with respect to our office property lease in Spain and Japan to replace the co-working space memberships occupied previously. All other expenses were rather flat as increases in telecoms expenses were offset by lower transport and travelling as well as other operating expenses. Lastly, Let me now move to the financial outlook. We expect full financial year 2022 revenue to be in the range of US$510 million to US$519 million. This translates to US$689 to US$702 million, assuming an exchange rate of US$1 to SG$1.3517. At the midpoint of the range, revenue growth is expected to be 25.3% compared to 2021. We expect full year 2020 to adjusted EBITDA margins to be approximately 30% to 32%. The revenue guidance reflects our latest perspective of the business after iterations with existing clients and includes some anticipation of growth from our business development activities. The margin guidance builds in our expectations as we continue to invest in business development efforts, geographical expansion and market conditions for talent. With that, let me hand over back to Lohan.
spk02: Thank you, Mr. Chin. I believe we've given you a good view of what we've achieved in 2021 as well as some of our plans moving forward. Thank you for your time. We're happy to take any questions you have. Jason, please.
spk06: Thanks, Lihong. I think right now we are ready for Q&As. Can I ask that you restrict yourself to three questions? So, operator, we are ready for the first question.
spk01: Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question, press star followed by one at this time. Moment for the first question, please. The first question comes from the line of Casey Ong from CGS SINB. Please go ahead.
spk04: Hi. Thanks for taking my question. And congrats on the strong, fair results. I have two questions. First one, can you provide more color and broad parameters around your revenue guidance for FY22? And secondly, could you give some comments on the trends that you're observing for your largest account, Facebook? Noted that they have guided for a rather soft outlook for first quarter 22, while another peer of yours seems to have mentioned that they are shifting roles serving this particular account to Asian countries like Philippines and India.
spk02: All right. Hi, Casey. Thank you for the question. Appreciate it. So, yeah, in terms of the guidance for 2022, we're looking at really a continuation from last year. So, first of all, we see fintech as a big, big growth driver for us. So that's the first thing. Second is we continue to see digital advertising to be a big contributor because a large portion of what we do But we also see high growth from new clients that we've acquired over the past two to three years, and they're starting to really show in a big way. So we will have a higher growth as well outside of the top two clients that we have. We've also incorporated the good work that was done in our business development activities to significantly increase from last year. On the travel and hospitality business, we factor in a more modest recovery. And for any further recovery, we'll update as we go along. Now, for Meta, Facebook question, really, I don't want to comment on specifics for the client. I can say that, first of all, digital advertising, we have a number of clients, not just Meta as our in digital advertising. So I believe there's still great growth opportunities in the sector. I also want to point out that we work primarily in Asia Pacific and typically the growth of digital advertising in Asia Pacific is faster than the rest of the world. What we can see and we're continuing to watch for is the intensification of competition in the digital advertising landscape, which we believe could become a fertile ground for TDCX sales and digital marketing, and you can see that. In 2021, sales and digital marketing was quite the hero for us in terms of growth, but we expect sales and digital marketing for 2022 to still be the faster-growing segment of the three that we have. So we're going to continue to stay the course on the business, and we think we'll be doing quite well. Thank you, Casey. Thank you so much.
spk01: Next question is from the line of Pang Vit from Goldman Sachs. Please go ahead.
spk00: Thank you very much, Lohong, for the opportunity to ask a question, and congrats for the great efforts of yourselves. Maybe also further on from the question earlier just now on the guidance for revenue in 2022. I understand you explained a little bit of the color behind that, but specifically, can you also comment on the visibility that you currently have behind this guidance, meaning that the guidance are based on the contract that you already signed and you already see coming in, and that's why you put it in the guidance. And have any of that actually already count any potential win of the new client that you potentially can gain over the year as well? And when you talk about the recovery of travel and hospitality segment being modest, How do we actually stress the word, actually understand the word more? Are we actually talking about it going back to the rate of recovery, or are you still going to expect to see some softness in the segment still? So that would be really appreciated if you can provide more color on that. That's question number one. Question number two is regarding the growth that we've seen in fourth quarter, both in the omni-channel and digital segment. Quarter-on-quarter growth looks a little bit muted, especially on the omni-channels, with a look at around 4% Q1Q. Can you explain what actually happened there in the fourth quarter that led to quite a slower in growth on a sequential quarterly basis? And especially we've seen a reopening of the economy a bit more apparent there. You've seen Airbnb also report quite a good set of numbers. Well, have you seen any challenges? It would be appreciated if you can also explain on that. And last question will be on the EBITDA margin and the guidance. How comfortable are you with this set of guidance, especially as you are growing into the new regions and new countries? Would appreciate any thought on that. Thank you.
spk02: Great, Pang. Very thorough. Appreciate it. So on the growth that we've planned for 2022, we've taken the majority of the growth will come from existing contracts with existing clients. We've incorporated growth from business development activities, but it's a lower number in really the large, large, large majority of our growth is from existing clients, a mix of the more established clients as well as the new clients that we've acquired over the past two years. So it's a pretty stable growth. revenue guidance. From a travel hospitality in terms of that forecast, it's moderate because we did it at the time of Omicron. And I think now with the Ukraine crisis looming, I think we were well advised to put it as a modest recovery at this point. The other question around, I think the last question was around the way we see also recovery on the travel. So in Q4, the fact that the growth between Q3 and Q4 is not so strong, I just wanted to look back at the growth we had in Q3, which was I think 41%. So it was a very big quarter in growth, and then we carried through that in Q4. And the role of travel in Q4 was an increase of 15%, I think, on the travel and hospitality. So I think we still have a reasonable growth for Q4 versus Q3, considering we were carried through the Q3 very big quarter.
spk00: Thank you. And how about on the margins? How comfortable are you with this guidance, especially as you're growing into the new regions? and also just on that point as well, do you foresee or see any pricing pressure when the contract comes up for renewable with any of your clients recently?
spk02: There is always negotiations going on with clients, so we haven't anticipated price pressure, but what we've done in our forecasting, we forecast some modest inflation, modest in the sense that it's higher than last year, but we've not factored in price increase. So, once again, I think we've taken a fairly conservative stance. And hence, we imagine the impact on our margins to be between 30% to 32%, so there is a range here due to that specific aspect.
spk03: Thank you.
spk01: As a reminder, if you'd like to ask a question, please press star followed by one on your touchtone telephone. Next question is from the line of Varun Ahuya from Credit Suisse. Please go ahead.
spk03: Yeah, hi. Good evening, management. And congrats on a good set of numbers. I've got a few questions. Sorry to pester on revenues outside, but I will ask for details on the guidance first. But some question on the revenue front will be helpful. So you have added 20 clients. So how long does it take for them to ramp up? Usually, I believe, the contracts were one to three years. If you added some of the clients in first half, I believe this year, next year, they should be on full-scale ramp up by second half. So I wanted to understand, because you mentioned you're still looking at existing clients. So how much of these 20 clients are contributing towards the growth trajectory? Secondly, how many people have you added on the business development side this year versus last year? And what's your target to add the sales people in the organization? And thirdly, on the revenue side again, what's your view still on growth versus margin? Are you still pretty much focused on profiting high margin, maintaining margin kind of a growth trajectory? or you can kind of grow for growth at this stage in order to capture market share. And lastly, on the content monitoring and modulation, how should we think about this segment? It's been for the last few quarters a very dynamic growth. Is there any more clients that you're talking to, or is it still a segment which should be more of a flattish kind of thing over the next few quarters. Thank you.
spk02: Hi, Varun. Nice hearing you again. So coming back to your first question, the 20 clients that we've acquired last year are definitely contributing this year to the revenue. They do take time to bring a certain amount of revenue, but every client is different. So we have larger ones, we have smaller ones, but they will all be contributing. What we've seen in general is that they take about two to three years to come to maturity, and that's what we're monitoring right now in 2022 is the kinds of clients brought it in 2019, 2020 are starting to really contribute to the growth in revenue. So it does take time, but we'll see some immediate revenue from them in a modest way this year, and we've taken that into account in our forecast. In terms of business development team, I mentioned earlier on that We've appointed Ricard Valvacant to accelerate on that front. Beyond the headcount that we've added three last year, we want to add another five this year. It's not as fast as I'd like in terms of addition, and we're really looking for top quality personnel in the right geographies. But our listed status is really helping us to acquire the right caliber of personnel. Beyond hiring, we've improved on our client solutions team, and also in our advertising and marketing budget. So there's quite a bit of things going on on that front. And once again, we're starting to see the results in terms of new client acquisitions. On the growth, the quality growth, we spoke about TDCX pursuing quality growth and the The question is, can we grow faster with looking at a wider group of clients? So we're open to it. We're looking at that. We're looking at opportunities to expand into new geographies, acquire new verticals like e-commerce, food delivery. And we've acquired a food delivery client that could generate more growth. And they could bring us lower margins. But we want to be able to balance the quality growth for volume and maintain the right balance so we're not closing the door on growing larger volume accounts when the opportunities arise in the right geographies as well. But we still continue to believe that we can continue to drive more complex work and a large potential percentage of our business coming from On the content moderation side of your question, we expect it to be stable. We don't expect tremendous growth from it at this point in our budget 2022. We've acquired a new client in 2021 in content moderation. What we see is an increase in business from trust and safety for some clients, which is related. We've had a nice uptake also of data labeling, which are more or less in the same category of business for TDC-X. I hope that answers your question, Varun.
spk03: Sure, it does. Lastly, if I can take just a confirmation, the PSP cost, all of it is an employee benefit or is it the line item?
spk02: Maybe, Mr. Chin, an opportunity for you to answer this question.
spk05: Could you repeat that question? I can hear bits and pieces of it. Sure.
spk03: Sure, Mr Chin. Is the PSP cost, stock compensation cost, is it all of it in employee benefit or is it split between some of the other headings, line items in the cost?
spk05: All of them are in the employee benefit expense, factored in.
spk00: Okay.
spk05: Okay. Thank you.
spk01: Next question is from the line of Han Tan from HSBC. Please go ahead.
spk03: Hey, thanks very much. I wanted to ask a little bit about currency impacts. Given we have seen strength in the dollar, does your existing EBITDA margin guidance of 30% to 32% factor that in? Maybe if you could help us understand the sensitivity impact of dollar on earnings and margins. Thanks.
spk02: Mr Chin, for you.
spk05: In our earnings guidance, we took a stand of neutral forex assumption as how we ended the year before. We didn't take any views on how the US dollar will behave in the current year.
spk03: So if the dollar strengthens by 3%, what sort of margin impact might that have? If the dollar strengthens versus the peso and sing dollar by 3%, how much would that benefit margins and earnings?
spk05: If the pesos or the Thai baht move deteriorate against the US dollar, Yes, then it will definitely help the margins on a top-line basis. As to how much is it, well, it really depends on at what rate that we build and at what rate that we collect. Because sometimes the timing between billing and collection can flux the Florex. You can earn at the top line and then later if the collection... the forex turns the other way upon collection, then it might actually neutralize. Essentially, so far in the concluded year, in Q4, actually, we did have enjoyed a bit of forex gain, predominantly because talking about the historical trend, 2021, um the the currency of uh pesos thai baht even malaysian ringgit actually uh weakened against the u.s dollar i think due to the rebound of the strengthening of the u.s dollar uh versus the um the 2020 situation where we began the year strongly. I mean, most currencies began the year strongly, and then at the onset of COVID, and even during COVID, these currencies turned around. So, I think the US dollar became stronger. So, in a way, in 2021, we did have some good forex movement in our favor in quarter three and also a bit in quarter four. So I would say that really helps. On a hypothetical basis, maybe on a constant currency basis, I would say maybe a percent or two, it will help on that front.
spk03: Can I understand for your EBITDA margin guidance of 30% to 32%, what factors are you thinking of on the lower end of that range and higher end of that range?
spk05: It will stay within that range. I really can't comment whether we will land at the lower end or the higher end. I would just comment that we are quite comfortable to stay within that range for now. I guess we can comment if a better, narrower guidance as the years turn, as a quarter rolls by, that much I would be able to say for now.
spk03: Okay, no problem. Just one last question for me. I wonder if you could tell a bit more about the AI data labeling segment. How should investors think about this segment? Is it more tactical or strategic? And if it's strategic, how big do you expect contribution to be? Thanks.
spk02: Yeah. Laurent here. So yes, that segment for now is not very big. So we would call it tactical. But it's a nice complement to our services and to our clients. So we're watching it and we are looking at it and we're creating value for our clients with that segment. And as it grows further, then we'll see whether it should become a But now it's an adjacent service to the services we provide. So the bulk of what we do is still omnichannel CX and sales and digital marketing. But we are building our competence. We're building our client base on that sector, and we're definitely watching that space.
spk03: Okay, thanks very much. No more questions for me.
spk01: There are no further telephone questions. Are there any questions from the webcast?
spk06: Yes, Stuart. So I have two questions on the webcast around the same thing. How do you expect revenue concentration to evolve in 2022? And how do we expect the top two client concentration to change in 2022? Thank you, Jason. So yeah, concentration in 2022, we see it coming down.
spk02: due to the fact that the clients that are not those high concentration clients are growing faster. And I mentioned FinTech, I mentioned some sectors that are bringing us that accelerated growth. So from that organic growth, we're seeing a reduction in concentration and we're continuing to monitor this as we want to continue reducing our concentration and possibly accelerate that through other options as well that we're considering at this point.
spk06: Thanks, Lohan. There's another question on the webcast. What guidance do you provide for Q1? I think the response is that we only provide the full year guidance for FY22. We do not have a specific guidance for the quarter. So I think we've reached the end of questions for the webcast. Can I check for the conference call? We have actually a few more minutes. We can take more questions either on the conference call or the webcast. May I know if any of the analysts on the call would like to ask any more questions?
spk01: As a reminder, if you would like to ask a telephone question, please press star followed by one on your touchtone telephone. We have a follow-up question from the line of Pang Vitt from Goldman Sachs. Please go ahead.
spk00: Hi, thank you very much again. Just a quick follow-up here. Is there any current update on what's going on with the Airbnb warrant? Do we have any timeline or anything that we can foresee this should come into play? Any update on that would be very helpful. And secondly, I also just wanted to have a better understanding. Last time in the third quarter results, you mentioned that you have won so far 16 new clients over the first nine months of 2021. And now you mentioned that you have been 20 new clients, right? That means that in the fourth quarter, there are four more clients that you want. Any update or particular more colors on who are the new clients that you recently acquired?
spk02: Yes, thank you for this question. So the Airbnb warrant discussion is ongoing. It's going well according to our plan. I can't provide a particular date, but we'll definitely bring it to your attention as soon as we know. In terms of coming back to the new clients, we had clients who are interesting sectors in gaming in the last quarter, two clients in the gaming, one client in the tech sector as well, another one actually in the social space. So it's still mostly new economy are the kind of clients that we have. we are tracked and we're able to close, and we're excited about that for sure.
spk00: I see. And just to be clear, are these high-end, are we expect to serve them mainly in Southeast Asia, or any of these are actually meant for the global mandate or the regions that you are going in?
spk02: Well, there's one in Korea. The other two are in Asia. And then there's one that is going to be both in Asia and in Colombia. And actually, the one in Korea is also in Spain as well for us. So it's a mix of geographies.
spk00: I see. Thank you very much.
spk02: You're welcome, Paul.
spk01: We also have another follow-up question from the line of Casey Ong from . Please go ahead.
spk04: Hi. Thanks for taking my question again. Just wanted to confirm two numbers. First one, I think on the FinTech vertical, you did emphasize that this is a segment that you're excited about for FY22. May I just understand better, how big is the revenue contribution currently you're seeing from FinTech vertical in FY21? And second question is, can you understand better what's your revenue-weighted customer retention rate for FY21 as well? Thanks.
spk02: So I'll defer the FinTech question to Mr. Chin. In the meantime, the other question is around the retention. Clients, we did the revenue-weighted average was 129% versus In 2020, I think it was 128%. So very stable on that front, yeah. Mr. Chin, on the fintech contribution in 2021, right, is the question. Yes, that's correct.
spk03: Thank you.
spk01: We also have a follow-up question from Varoum Ahouya from Credit Suisse. Please go ahead.
spk03: Yeah, thanks. So two questions. First, if you can tell us for this fourth quarter and for the overall year, what has been the churn in the client base? So obviously, when you ended 2020, you were kind of recalibrating your client base and more focusing on profitable ones. So is that exercise completed? What is the normal churn level on client side? And number two, On new geographic expansion, are there further geographies that you're looking to add? I remember, I think you mentioned about Taiwan sometime, so if that is on the line, and any further expansion that you're looking at? And given the geography that you've entered, the contribution still remains very low at 1%. How should we think about pharma, medium-term perspective? What conversations are you having with clients? Thank you.
spk02: Thank you, Varun. So the client retention was, I think, the first question. And so we were at 79% in 2021. And so that's where we are. On the new geos, yes, Taiwan is on our list of new countries. We have a new list as well for 2022. We're not ready to share that list yet, but we will continue to increase our expansion in different geos. And then their contribution to revenue is going to take time. That's what we said before. It takes a few years, about two to three years. And I think I did mention before, we have two strategies. One where we do a strategic entry into a market to add to the network. And when we do this, we go in without a client. So it takes two to three years to build this in our revenue, but it's an investment into the future. And then we have geographies that we set up very closely with our clients, and those start yielding revenue straight away. South Korea is an example of that. We're starting with three clients in South Korea, and we've already started last year. So that's how we played. So in our budget 2022, we have a bit of revenue contribution from new GEOs, but it's still very moderate at this point.
spk03: Thank you very much.
spk06: Okay, I think we just have time to squeeze in one very last question from the webcast. What's the best way to think about receivables? Why did it increase in 2021? and how do we think about EBITDA free cash flow conversion? Maybe Mr Chin, do you want to take that?
spk05: Yes. During the year end of 2021, there was some increase in the bump up in the receivables, primarily due to a couple of the top clients that had some administrative challenges, hiccups in the billing process, culminating to a large, slight backlog in the billings in the last quarter. Having said that, we have managed to get those backlog billings paid off by end of February. So there's a slight hiccup happening on that front. On the EBITDA, over the cash flow basis, It's still looking healthy. It's tracking quite healthily on the front. We are still going to careful cash management in terms of our working capital as well as our overhead, as well as our capex pacing in accordance with our internal planning of our capacities and business expansion.
spk06: Thanks, Mr. Chin. I think that's all the time we have on the call. Maybe we have Lahan give some closing remarks.
spk02: Well, thank you very much, everyone, for your support, and then we'll see you next quarter. Thank you. Thanks. Goodbye.
spk01: Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.
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