TDCX Inc.

Welcome to the TDCX Q3 2023 results announcement. My name is Neil and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. I will now hand you over to your host, Jason Lim from TDCX to begin. Jason, please go ahead.

Hello everyone and welcome to TDCX Third 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 Lahong Junick, our CFO, Mr Chin Tzu Ning, 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 that 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 and constant currency revenue growth. For reconciliation to the closest IFRS measures, please refer to the Form 6-K, which is available on our website. We have prepared a convenient translation for Singapore dollars to the US dollar at the rate of US $1 to SGD $1.3648. This should not be construed as representation that any Singapore dollar amount can be converted to USD at this or any other rate. With that, let me hand over the call to Lahon. Lahon, please.

Hello everyone and thank you for joining us today. Before I begin, I'd like to thank our team members across the TDCX global network for their exceptional efforts and our clients and investors for their continued trust and support. In the third quarter, TDCX delivered a solid revenue of $120 million, which is stable on a constant currency basis. We also demonstrated improved operating rigor as we delivered Q3 adjusted EBITDA margins of 27.8%. A testament to the success of our ongoing cost optimization initiatives, This compares with 25.9% in Q2 2023. Profit for the period was 23 million US dollars, an increase of 2.3% year on year. This means we are very much on track to meet our guidance for the year. I would say that the overall business continues to be strong and resilient. Notably, if you were to exclude revenue from our top client, Revenues from the rest of the business would have grown in the low teens percentage year on year for Q3 2023 compared to Q3 2022. This demonstrates a very healthy performance against the backdrop of a really tough operating environment, which speaks to the way we continue to deliver excellence for our clients. You can also see this across a few operational parameters. Firstly, we continue to register growth-based business growth as revenue from clients outside the top five rising 51% year on year. These newer clients, while starting from a smaller base, are growing quite steadily and continue to ramp nicely with us. Secondly, we continue to make progress in reducing client concentration and diversifying our business. Our top two clients contributed 47% of this quarter's revenue hence reducing our concentration by almost 10 percentage points from 56% in the same period last year. Thirdly, our business development efforts have yielded good results. Total client count rose 31% to 94 clients as of September 30th, 2023, with bright spots in some key sectors, which I'll speak more about shortly. And last but not least, our geographic expansion in the last two years continues to bear fruit, as revenue from new geographies grew five times this quarter compared to the same period last year. These indicators show that despite an uncertain backdrop, we are managing the business well while simultaneously achieving growth in earnings. Despite these improvements, the macroeconomic environment remains challenging. As communicated before, several of our key clients have reduced volumes during the year as part of their focus on cost efficiency. We're seeing the impact of these reductions against a strong Q3 last year, but these are within our forecast and expectations for FY2023. We're very disciplined with regards to cost controls. Furthermore, we have actively deployed our cash to drive higher returns. Our profit performance has translated into strong cash flows and a strong balance sheet. Cash generated from operations was 86%. million US dollars for the nine months of 2023. As of September 30 of 2023, we have 318 million US dollars of cash and cash equivalents with no debt on the balance sheet. Again, our strong cash flow generation and low leverage provides us with ample flexibility to pursue strategic growth as well as to enhance shareholder returns through a variety of avenues. We see great value in our shares at current valuations and have prioritized share buybacks as a form of enhancing shareholder returns. We were much more active in the market in the third quarter. From 1st July to 17th November 2023, we purchased around 930,000 shares. Since the inception of this program in March 2022, we have deployed more than $15 million and bought back around 2 million shares. We see this as an attractive use of our capital and believe that as growth returns, repurchases at these levels will create significant value. In terms of M&As, with our strong cash balance, we have the ability to move very quickly on targets that could help enhance our capabilities or reach to better serve our clients or to accelerate our growth. Additionally, we have the financial strength and flexibility to allocate capital to strengthen our organic initiatives such as TDCS AI, our consulting capabilities, and reinvesting in our business. This quarter at TDCS AI, we have accelerated our progress in deploying AI solutions for select clients while continuing to refine other pilot AI initiatives to boost internal productivity. Let me outline another use case that we launched this quarter to showcase how we help clients solve major pain points. For sales campaign for large digital advertising clients, we built an AI-enabled sales catalyst accelerator to enhance outreach success and to maximize customer engagement in our sales and digital marketing programs. Our team took our treasure trove of historical contact data sets and overlaid them with additional data, such as interaction notes and customer profiles, and we trained the model to predict and identify the optimal moment for a marketing specialist to carry out a marketing plan review. This improvement boosted their reach by 20 to 40%. With a higher reach, our marketing specialists were able to assist users in a more timely and strategic manner and significantly increased monetization for our digital advertising clients. This is a good example of where TDCX establishes our right to play as a strategic advisory partner to clients who are looking for actionable ways to gain incremental productivity and efficiency within their campaigns as they come under pressure to do more with less. Through TDCX AI, we leverage our deep operational experience as CX practitioners and our tech stack to better understand clients' pain points and advise and implement feasible solutions to drive improved outcomes in their campaigns without losing that human touch. This is ultimately what clients have always come to us for. Most of our campaigns, which involve complex tasks that require humans in the loop, we believe will benefit from the productivity gains AI provides and will help us scale the business to even greater heights. We have won some very exciting clients during the quarter as total client count rose to 94, a 31% increase year on year. Our domain expertise in key verticals and strategic footprint in APAC continues to shine through. The clients we launched in Q3 included one of the world's most popular mobile messaging apps and a leading global airline based out of Asia, both of whom have the potential of ramping meaningfully with us. Our client count does not include a further four clients that have been signed but not yet launched, which include Southeast Asia's leading super app providing everyday services, as well as a European medical device manufacturer. Such wins are testament to deep domain expertise that we have built over the years, such as for social media platforms within our digital advertising and media vertical, in travel and hospitality, as well as in sales and digital marketing. We have also made forays into innovative verticals, such as health tech with two clients, which we are pretty excited about. For one client, TDCX will be providing customer support for patients with specific medical needs, and for the other, helping medical practitioners understand how to use sophisticated medical devices. CDCX's ability to break into new verticals such as health tech stems from our specialization in managing complex customer interactions and the ability to deliver excellent CX outcomes. With a higher client count and broader growth, we have improved our client concentration profile, with top two clients contributing 47% of revenue compared to 56% in Q2 2022, while top five clients contributed 71% of this quarter's revenue, down from 82% in the same period last year. In terms of contribution from verticals, digital advertising and media now represents 43% of our business and remains pressured by softness from our largest clients. We see some bright spots in travel and hospitality, our second largest vertical at 29% of revenue, which grew 8% year on year, demonstrating a stabilization of the travel sector with a runway for longer-term growth as we bring more clients in this vertical. E-commerce and gaming are also doing very well, growing at an incredible clip of 63% year on year, and 110% year on year, both reflecting the underlying strength of these sectors. I'd like to emphasize at this juncture that TDCX is unique amongst global CX providers with over 70% of the business focused on serving Southeast Asian and North Asian languages, serving complex business needs. Since 2021, We've expanded quite rapidly, adding nine new geographies to our global footprint, including Colombia, India, Romania, South Korea, Hong Kong, Turkey, Vietnam, Brazil, and Indonesia. Our new geos have been scaling well and revenue in Q3 2023 was five times that of Q3 2022. We are happy with our strategic footprint now, and we will be focusing on growing and stabilizing these new sites generating better economies of scale and progressively improving their margins. Korea has been one of our top performers in terms of new sites revenue expansion and continues to do well as we add more headcount and deliver on customer satisfaction scores. In Indonesia, we recently launched on the ground with a large social media client. It's early days yet. We are excited about the market's potential. In Vietnam, we are delivering top of the network scores for a client launched a few quarters ago, and we are in active talks to sign up another client. These are positive developments, which really gives me confidence that our footprint in Asia will only continue to strengthen. Some updates on LATAM as well. Earlier this year, we launched our first campaign in Sao Paulo, Brazil, a pivotal step in our journey, and our team has continued to grow ever since. We have delivered what the clients have called their smoothest launch to date. And we're now one of the top three performing sites globally based on customer satisfaction. In Colombia, we expanded our customer service support team with a very innovative robot assisted food delivery service. And we continue to receive interest from clients looking to launch in the region. Beyond delivering value to our clients, Our goal at TDCX is also to ensure that we provide the best employee experience to our global TDCX team members and continue to attract and retain the best talent. I'm extremely proud of our engagement teams who champion a vibrant, multicultural, and joyful work culture. And seven of our campuses are Great Place to Work certified among the many other industry recognitions celebrating TDCX. In closing, we remain super focused on executing and delivering excellence for our clients, and the results can be seen in many of the indicators that we shared earlier. Over the past nine months, our nimble and agile structure has allowed us to pivot quickly, strategizing to make overheads more elastic against revenue, which in turn has contributed to margins improving. We have also made good progress on the AI and consulting front, which really helps to position us to be the ideal outsourcing partner for our clients. Moving forward, we will continue to invest for growth while at the same time managing our costs carefully. While we are focused on some of these immediate priorities, I would like to convey my confidence on TDCX differentiated footprint domain expertise in doing complex work for key verticals and strong track record in developing client-vendor relationships into key strategic partnerships for large global enterprises. We see green shoots in 2024, but it also appears that the global macroeconomic environment is not out of the woods yet. So we'll have to be very careful and robust with our guidance when it's time to do so during our Q4 results announcement. With that, let me hand it over to Mr. Chip.