TDCX Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome and thank you for joining the TDCX second quarter 2022 results conference call. Through our today recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Press the star key followed by zero for operator assistance. It's my pleasure and I would now like to turn the conference over to the management. Please go ahead.

Hello everyone and welcome to TDCX Second Quarter 2022 Earnings Conference Call. I'm Jason Lim, the Head of Investor Relations. Allow me to introduce management on the call.

We have our Executive Chairman, Founder and CEO, Mr. Lahorn Junick, our CFO, Mr. Chin Suning, and our EVP of Corporate Development, Mr. Edward Goh. 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 any reliance on any forward-looking statements. Also, this call includes the discussion of certain non-IFRS financial measures such as adjusted EBITDA, adjusted EBITDA margins, adjusted net income and adjusted net income margins. For reconciliation of the non-IFRS measures to the closest IFRS measures, please refer to our press release on the Form 6K, which are available on our website. We have provided a convenient translation for the translation of Singapore dollar to US dollar. This was done at the rate of $1 to 1.3918 Singapore dollar. This should not be construed as representation that any Singapore dollar amount can be converted into USD at this or any other rate. Our mentor will now share updates on the operating and financial performance. With that, let me hand over the call to Lahong. Lahong, please. Hello everyone and welcome to our Results Dealing for the second quarter of 2022. We are happy to deliver another strong set of quarterly results. Once again, The people of TDCX have put together another outstanding performance and have navigated through the market's overall macroeconomic challenges. I am so proud of their determination, resolve, and I sincerely appreciate their tremendous efforts. TDCX's emphasis on competency and building a wonderful working environment for all has paid off. I would also like to thank all our clients for their support and putting their faith in us. And I'm also happy to report that during the quarter, we had our carbon footprint reporting certified by British Standards Institute ISO 14064-1. And for our corporate social responsibility initiatives, we just incorporated the TDCX Foundation Our focus here is on building long-term partnerships to uplift communities in Asia through digital empowerment, specifically with three key themes of digital access, digital literacy, and capabilities in terms of readiness for digital work and small business support. Let me next cover some highlights of our financial performance. We delivered robust revenue growth in Q2 2022, as revenue rose 23.3% to $117 million or $162 million. This was driven by strong contributions from clients across key verticals, including digital advertising and media, and travel and hospitality, and especially from our top five clients, who are growing at the fastest pace in twisting at twice the pace of our deep revenue growth in Q2 2022. Now, in terms of revenue contribution from verticals of travel and hospitality, including our airline clients, continued its recovery trajectory and was up 25% compared to Q2 2021. Our revenue from travel and hospitality is now higher compared to Q2 2021. We're still some 16% below our peak order in this space in 2019. There's still some room for us to grow, and this will depend on the output of global and especially Asian travel. The prospect of North Asia travel reopening is an exciting one, of course, but this is not confirmed yet as I speak. On the fintech side, we continue to rise at high percentages year on year, and it remains our third largest vertical. To recap, we serve payment gateways, crypto exchanges, and other fintech companies. And as shared before, we have always taken a careful approach to crypto. While we're happy with our progress in this space, the revenue contribution is around 1%. We feel the risks are manageable. We're looking to add more FinTech clients and also to continue to bring in a variety of clients across different verticals, such as e-commerce, to grow the business. On the digital advertising media vertical, we continue to deliver double-digit percentage growth year-on-year, powered by our strength in the sales and digital marketing service and the acquisition of new clients. We have onboarded the leading short-form video social media platform and we started to contribute in Q2. As shared before, it will take time for any new clients to start contributing meaningfully in terms of group revenue, but we are happy with the progress we've made yet. On our earnings and quality growth, even as we pressed on with our business expansion, we maintain our focus on quality growth Adjusted net income, which strips out the performance, share plan costs for a life-for-life basis comparison, rose 35.5% year-on-year to $22 million, or $30 million. We continue to deliver our industry-leading profitability with adjusted EBITDA margins of 31% in Q2 2022, and I want to take this opportunity We thank our CFO, Mr. Chin, and his team of incredible professionals for the continuous efforts in cost control and efficient planning. The quality of our earnings growth is also shown in the strong cash flow conversions. Q3 2022 net cash from operating activities was $76 million, almost doubling year-on-year. Our CFO will share more details on the numbers in the later sections. From a business segment point of view, from Q2 2022, we have renamed our content monitoring and moderation services as content trust and safety services. The change reflects the industry's broader view that content moderation services are part of a larger group of services that include other trust and safety-related services and helps enhance our ability to track our performance. The content, trust and safety services comprises content moderation and monitoring. Trust and safety services, such as those to ensure authenticity and accuracy of listing, as well as data annotation services for machine learning. Our total revenue from Southeast Asia stands at 91% of first half of 2022 revenues. In the latest edition of the Internet Economy Research Program by Google, the Masek, Zain, Southeast Asia now has a total of 440 million Internet users, while the Southeast Asian Internet economy is expected to reach $360 billion by 2025, powered by e-commerce, food delivery, With our unique footprint, TDCX provides investors with strong exposure to Southeast Asia fast-growing digital transformation. Our plant team in Indonesia and Vietnam are on track and we aim to launch operations there before the end of the year. The new market adds further flexibility to offer key Southeast Asia languages in a multi-lingual centralized model as well as a decentralized model. In addition, North Asia is gaining momentum with a contribution of 7% of revenue. Our expansion in Asia Pacific, Europe, and Latin America was strategically planned with the objective of positioning ourselves well to be much stronger amid the changes in the CX outsourcing space. This means even more time now with the rapid changes in the business environment, and I'm confident our end will provide us with a competitive edge going forward. Now, on fine wings, we have continued our business development momentum, signing up a total of 25 logos for the first half of 2022, more than triple the age we signed in the first half of 2021. This includes two Southeast Asian market leaders, added in Q2, a leading regional airline, and one of the largest integrated car e-commerce platforms. This demonstrates our strength, once again, Our long-time count now stands at 16 as of 1 June 2022, up 40% compared to 43 a year ago. Revenue from new economy clients stood at 93% for the first half of 2022. We've put in efforts to reduce our current concentration, and our top three clients now represent 57% of Q2 2022 revenue, compared to 63% in Q2 2021. Now I'll hand over to Mr Chin to cover the financials in detail as well as an update on the guidance. Thank you, Lohan. Let me first share some details on our Q3 2022 financial performance. Revenue rose 23.3% to USD 117 million, driven by growth across the omnichannel, CX, and SAFE and digital marketing business segments. Adjusted EBITDA, which excludes share-based expense, for the like-for-like comparison rose 23% to $26 million, while margins remained largely stable at 31%. Adjective net income, which similarly excludes share-based expense, rose 35.5% to $22 million. Net profit for the period rose at a normal 19.6% on the reported basis due largely to the implementation of the performance share plan, which did not exist in the same period last year, as well as higher income tax expense. Next, we share more details on our Q2 revenue performance by the services type that we offer. Revenue from omni-channel CS solutions goes 19% to $16 million due mainly to high business volumes driven by the expansion of existing campaigns in the feedback and technology verticals. In addition, business volumes for our two travel and hospitality clients are benefited from the gradual recovery from the impact of the COVID-19 pandemic, although the recovery has yet to reach pre-pandemic levels. Revenue from sales and digital marketing services increased by 64% to 28 million users with the continuing volume expansion of existing campaigns by key digital advertising and media clients. Commencing from Q2 2022, content monitoring and moderation service has been renamed as content trust and safety. Relay for Trust and Safety Related Services that were previously classified under Omni-Channel State Solutions and other services which can currently be reasonably identified and quantified will now be reported as Content, Trust and Safety Services. In Q22022, revenue from content, charts, and safety services rose by 6% to $19 million, primarily due to an increase in business volumes from the client in the travel and hospitality vertical. In Q22022, Omnichannel CX mixed up 59% of our business, while sales and digital marketing is at 24%, and content, charts, and safety, 70%, respectively. Let me next share some details on our expenses. For Q2 2022, operating costs as a percentage of revenues stood at 27.5%. Excluding TSC costs on a life-for-life basis, this stood at 25.3%, lower than 27.3% for the same period last year, largely due to the lower depreciation expenses. Employee benefit expenses remain the largest portion of our total operating cost base. Our employee benefit expenses increased by 31% to $75 million for Q2. Excluding P&T costs for a life-for-life basis, employee benefit expense would have increased by 20%, higher than revenue growth of 23%. pursuant to higher wage costs of our staff costs and the increased competition for talent in the respective markets that we operate in. Our depreciation expense declined by 8% largely due to certain office renovation assets in Singapore, Thailand and Philippines being only repriced during the period with no big ticket capital expenditure incurred. All other expenses, which include items such as recruitment, transport and telecommunication expenses rose 1% for Q2 2022, lower than our revenue growth, which demonstrates continuing focus on student cost management. Next, let me share some details of our first half 2022 financial performance. Revenue rose 25.1% to USD 226 million, similarly driven by growth in the omnichannel sales and digital marketing business segment. Adjusted EBITDA rose 25.2% to USD 17 million, with margins stable at 31.1%. Adjusted net income, which excludes the impact of share-based expense, rose by 25.2% to USD 43 million. That profit for the period rose at a lower 9.5% on the reported basis due largely to the implementation of the performance share plan, which did not appear in the same year last year. In terms of performance by services we offer, revenue for omnichannel PX solutions rose 21% to $133 million due mainly to higher interest rates given by the expansion of existing campaigns. Revenue from sales and digital marketing services increased by 57% to $54 million, with the expansion of existing campaigns of key types in the digital, advertising, and media verticals. Revenue from content, charts, and safety services rose by 6% to $38 million, primarily due to an increase in business volumes for a trial in the travel and hospitality verticals. In the first half of 2022, Only channel sales reached up 59% of our business, while sales and digital marketing is at 24% and content trust and safety, 70% respectively. Let me make share some details on our first half expenses. The trends are largely similar to what I shared earlier for Q2 2022. For 3rd half 2022, operating costs as a percentage of values stood at 29.3%. Exceeding TSC costs due to at 25.7% lower than 27.9% for the same period of 2021 due to lower depreciation expense. Employee benefit expressed increased by 35% to US$150 million for the first half and would have increased by 10% excluding CSE costs due to higher wage costs and increased competitive dynamics of the talent market conditions. Our depreciation expenses declined by 5% lastly due to student renovation assets due to depreciation costs. All other expenses rose by 4% for first half 2022, lower than our revenue growth, which illustrates our continued prudent attention to cost management. Lastly, let me provide an update on our two-year 2022 outlook. We are reiterating the FY 2022 outlook which we issued during our Q1 results announcement. Our full-year 2022 revenue guidance remains unchanged at $625 million. This represents revenue growth range of 20.1% to 21.6% compared with FY 2021. The company's financial information is stated in Singapore dollars. However, we provide a continuous translation to help regions who are not familiar with the Singapore Dollar Currency to understand the approximate context and content of the numbers in USD. As the approximate rate in effect as of June 30, 2022 of USD1 to USD1.3918, this represents around USD467 to USD425 million. Previously, at the approximate rate in the 10th of March 2022 of USD1 to USD1.3534, which represented around USD400 to USD499 million. Do note that there is no change to Al-Qaeda in Singapore Donald Trump. With a continued focus on cost management and employee productivity, we maintain our full year 2020 adjusted EBITDA margins to be approximately 13% to 32%. With that, let me hand over back to Jameson. Thank you Mr Chin for bringing us through the results presentation.