Teleperformance Ord

Hello and welcome to today's teleperformance call presenting the finalization of the acquisition of Majorelle and the Q3 and first nine months 2023 revenue of the company. My name is Karen, and I will be your coordinator for today's event. Please note this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0, and you will be connected to an operator. I will now hand you over to your host, Danielle Julien, CEO of Teleperformance to begin today's conference. Thank you.

Thank you very much, Karine. So good day and thank you for joining us as we are celebrating at the same time the finalization of Majorelle Acquisition and as we are sharing our first nine months actual results. I'm very excited to share my perspective about Majorelle and what it means for the future of our group, the new teleperformance. Then when I will be done, Olivier is going to present you the numbers, last quarter numbers and the nine months. And Olivier Rigaudi, who is the CFO and the deputy CEO of the group, And then we will answer your question and we will answer as much as we can in the time that we have. And Bhupendra Singh with the other deputy CEO of the group will join us for the Q&A. So next, please. Yes. So the new teleperformance, the new teleperformance with Majorelle. It's all about transformation and performance, of course. First, your group remains the number one global leader in customer experience outsourcing and digital integrated business services. We are going to be roughly half a million of employees And to give you an idea of the integration of the IT, this represents more or less 450 million of IT OPEX per year and more than 6,500 IT specialists. Beside that, we have a team of 3,000 experts in consulting, analytics, digital product, and Six Sigma processing. This is the new teleperformance. What are the key financial for 2023 in aggregated pro forma figures? We are going to be at the revenue level a little bit above 10 billion euros. With an EBITDA that will be a little bit above 2 billion euro. Aggregate free cash flow that should be in the range of the billion. And in fact, our debt level will be versus EBITDA will be in the range of the two multiple. Something important. The cost synergy that we expected have been confirmed and Olivier Rigaudi is going to explain that more in details later on. Very well into the 100 to the 150 million initial range. Last. The new geographical split of our activities is rebalanced with the Americas being 45% of the business, Europe and APAC 44% of the business, and our specialized services 11% of the business. Next, please. What is important today is that teleperformance will be in a leadership position or in a major competitive position, meaning number two or number three, in nine of the top ten markets of the world by GDP. US, China, Germany, India, UK, France, Italy, Brazil, Canada, systematically present in a dominant position or leadership position. Here on the map, you can see in magenta the TP presence and in blue the Majorelle presence. Next, please. What is important? And these are the lessons of the map. First, it's the fact that we are an augmented business leader. augmented by geographies. The acquisition of Majorelle strengthened our position in the German and French speaking market. I always had a lot of respect for Majorelle for their strong performance on these two markets. We scale up our impact presence And in fact, we multiply by two our presence on APAC, giving us a very significant position for a non-Asian business. And we become the largest partner and player in Africa, whether French-speaking Africa or English-speaking Africa. Then the verticals. Again, Majorelle is a very well-run company by talented people with a long experience in business process outsourcing. And this acquisition brings to teleperformance an expertise and a presence in the banking and financial service in Europe. Teleperformance is very present in banking and financial services in the US, in Latin America, in India, but not so much in Europe. This is over. Second, Majorelle has a strong presence in managing end-to-end complex business process for the insurance in Europe. This is also over. an addition to our expertise. And finally, Majorelle has developed a a comprehensive digital platform including social media and omni-channel for the luxury goods industry, specifically on the Chinese market that we intend to develop on other major markets that are not Europe or US but like Brazil or India. We bring also additional expertise. The end-to-end insurance claim management, which is a pretty sophisticated multi-stakeholder process. Different insurance companies have to deal together. You need to deal with the experts. You need to deal with the people who got an accident. And in auto and home property, Majorelle has a strong expertise. Complex middle and back office fulfillment management coming from this story. And specifically for the automotive industry. Of course, the cloud transformation and integration where there is a dedicated force based in Europe and Middle East. a full digital marketing platform for LATAM, and this social media and omnichannel platform for luxury industry in APAC that I was mentioning before. And right now, just to give you a sense of the way we embrace AI, I mean, Gen AI and large language model, together, Téléperformance and Majorelle we have more than 100 Gen AI application in development and combined basis, both for internal purpose and to serve our clients. Next, please. So, you can imagine that I'm extremely proud and thankful to lead such a group of talented people. And in fact, working together, we decided to make it simpler, leaner in terms of organization chart, reducing the layers and getting back to something which is the full PNL accountability by region. We're focusing excellence in delivery, and in innovation. For the core service, Bhupinder Singh, who is deputy CEO and chief transformation officer, lead two major regions, the Americas, where Agustin Grisanti becomes a president, from Alaska to Ushuaia, And the EMEA and APAC, where Thomas McEnbrook, who was the CEO of Majorelle, takes over the region. Of course, we have a significant group of global clients that needs to be managed as one. And our global chief client officer is Miranda Koller, who is a US citizen. On the other side, Scott Klein continued to be the CEO for our specialized services, Terry O'Brien, our global chief legal and compliance officer, and Olivier Rigaudi, deputy CEO and group CFO. Below this line, a large group of top leaders and managers from Majorelle take accountability for many clusters. Next, please. Now, just a quick snapshot on our 2023 revenue. It's a challenging year. Everybody knows that. It's challenging on all the macro, social, politics, business. And this challenging year has defined for the IT industry in Silicon Valley what has been called the year of efficiency and has slowed down many decision process. Still, I'm very proud and happy to report that our revenue like for like are up by plus 6% on the nine months, excluding the one-time COVID business, of course. And our Q3 revenue were up by plus 4% like for like. For the full year 2023, today with the peak season of the Q4, We continue to have for objective to be around plus 6%. Of course, excluding the potential volatility related to countries who have hyperinflation that can have an impact of plus or minus 0.5%. Olivier Rigaudi will give more explanation later on. We continue to target an EBITDA margin around 16%. And we are going to consolidate Majorelle from November 1st, 2023, as 99.9% of the Majorelle shareholder contributed to the operation. My last word in the presentation, and I think it makes sense, is the cash return that we provided to our shareholders that should be around $600 million by the year end 2023, resulting from the dividend that we paid, $227 million, and the share buyback. Today, we are already above $200 million, and we will be probably around the $360 or the $370 million by year end. Yes, correct. Today, with the valuation of teleperformance, we are deeply convinced that the best investment that we can make for our shareholders is to buy teleperformance shares. Thank you very much. And now I'm going to ask... Olivier Rigaudi, our talented chief financial officer, to give you in details the picture of the numbers.

You're on mute, Olivier. Thank you, Daniel. Sorry, I was on mute. Thank you, Daniel. Hi, everyone. I'm going to cover two topics to give you some additional information about the closing of the deal and after to enter the Q3 figure. Let's start with the final deal closing and the next step. I just wanted to remind you some steps that have been achieved and what are the next ones. I remind you that we get the final last green authorization from the Antitrust Authority the 20th of October. At that time, we had two issues, two things that are happening. First, we get finally access to the information that we were not able to get earlier on. I'll come back in a minute to that for the synergy. And secondly, we get the result of the first acceptance period of the deal, which was 98.45. Last Friday, So the 3rd of November, we got the finalization of the second offer where we got 99.91% of the share that was standard in this deal. Next Wednesday, we are going to settle the deal and be finally owner. What will be the next step? We have already started the squeeze out of the company in front of the Luxembourg authority, and I do expect this will be done quickly in the next 15 days or three weeks. While in the meantime, we have asked the Netherlands authorities to delist the company from the Amsterdam Stock Exchange. meaning that probably mid-December we'll be the only shareholder of Majorelle, of a company that will be delisted at all, and where we are going to be owner at 100%. Next slide, please. So what are the additional information I want to give you on the deal? First of all, the acquisition costs are going to be around 20 million, which will be below 1% of the deal value, which I believe is acceptable, more than acceptable. Two new shareholders are going to come. on the list of tele-platform shareholders, of course, the SAM Group and Bestelman, that will own each of them close to 3.6% of our capital starting the 3rd of November. These two shareholders are under a lock-up period of 6, 9, 12 months by 3rd, and it's expected that Mr. Mouley Afidalami, founder of SAM Group, should join the board early 2024. Again, I say again that the consolidation of Majorelle will start from November 1. Next slide, please. So what are the cost synergies today? So cost synergy analysis has been performed by a team, not only dedicated teleperformance, but also a Majorelle team, we call it CLIM team, supported by EY, that work all along this summer to prepare the two things, the synergies, the operating model, and the day one action. And we have shared this information after the antitrust client runs approval, which was done last October. What are the main conclusions of this significant work? First, amount. As mentioned by Daniel, we are well into the 100 to 150 million initial range, and we are reasonably satisfied with that. Secondly, execution calendar, it's going to be executed between 24 and 25, mainly. What will be the cost of this synergy? Around one year cost of synergy. What are the key areas of synergies? There are three of them. Of course, one of the major is the IT. which is split between license, hardware, and procurement. As you mentioned earlier, under Daniel's presentation, there is a lot of IT in our company, and making that is absolutely key. Of course, operation and account management can be, of course, another target for reducing the cost, including the site, but not only. And lastly, mutualization and organization at central level will also generate savings. There is a team that has been set up with people coming from Majorelle and from Teleperformance to follow and to execute this synergy program that we will follow on a regular basis. As far as revenue synergy, it's too early to tell, but what we are clear is that we have not seen this synergy are anticipated. Next slide, and let's move to the Q3 figure. This is a Q3 figure, meaning that we have been able to deliver a 6% like follow-up growth on nine months, excluding COVID, and 4% on Q3. I have two comments, first two comments to make on this figure. The first one is to tell that teleperformance has faced an incredible year in terms of ethics. We are going to see that in a minute, and probably all of you have noticed have not kept that in their mind, because this is a big impact of FX, at least for teleperformance. And the second one is, despite that, probably teleperformance delivers the best performance of the competition in this market. And this is something that I want to come back to later on. Next slide, please. Clearly, Q3 was not an easy one, given the the comparison base we had. We had a 14% growth last year in Q3, and of course, it was difficult to meet this year in this global environment. I just wanted to remind you that the Q4 revenue will be easing with a lag for lag growth, which is a little less than 11% in Q4. Next slide, please. Here is probably something which has to be mentioned. When you look at this figure, you discover that Teleperformance has been able to deliver 345 million life-long growth over nine months. Despite that, we were facing headwinds that amounts to $450 million from currency effect and $200 million from COVID contracts that vanished. So this is the biggest stuff. Out of this 250 million, we have plenty of currencies that slipped this year, starting Q2, but accelerating in Q3. I'm thinking of the Egyptian lira, the USD, the Colombian pesos, or the Indian rupee. So despite these two major negative impacts, we have been able to deliver a growth, which is 345 million in like for life, on which you have to add the changes scope starting November 1, 2022. You remember that we bought PSG, the companies that are recruiting on the way. Why we have been able to deliver such a good performance? Next slide, please. Because of that, we are probably the only company that have such a diversified and balanced portfolio. This is true in vertical, as you can see on the left side of this slide, but it's true also in geographical. So when you mix together both approaches, it means that the group is able to swallow any hits that it might that is beyond its control, that could happen, but this globality across the vertical and across the region helps to be better. Next slide, please. So what happened over the different region? Here we are starting with a figure at a constant exchange rate, comparing the nine months 2022 to the nine months 2023. As you can see, you have, of course, this 200 million COVID impact contract that vanished, and and we had a growth of uh core service and dips which is 4.2 percent and specialized service growing at 17 when you look in detail in each segment you know that us is roughly flat which is due to two singles in the global environment that daniel julian explained a minute ago but also see of showing impact moving a lot of business from u.s domestic to india On the Latin side, where the growth is 2%, this is two things, the same issue about offshoring a part coming from the U.S., plus the impact of the increase of the Mexican pesos that makes this nation less appealing for U.S. corporate. When you look to Europe, it's a very good growth of 10% like for life, $188 million. why close to this in every in every sector it's true in multilingual meaning portugal greece egypt or on the on the lower extended lower level sorry spain and all the growth that we have been able to to sustain notably in germany specialized service is continuing to deliver its fantastic journey with lls language line solution growing very fast and tls resuming from um from the COVID period and from the fact that people were not traveling so much last year. So let's move now to the solidity of the group. Next slide. I do believe there is one thing which is going to be more and more important in the coming months is the solidity of the balance sheet and the depth of the group. Everybody is going to look to the level of the indebtedness, the cost of the indebtedness and the maturity of the indebtedness. When you look at these three point for teleperformance, you see we are absolutely safe. The amount of debt, as mentioned by Daniel a minute ago, or net debt to EBITDA is going to be two, around two, based on 2023 aggregate figures after the acquisition of the share buyback, after the share buyback program that we just mentioned. And if nothing happens, we should be probably able to deliver, to deliver, sorry, the this to a level of 1.5 by year end 2024. So no problem of volume of debt. When it comes to the cost of the debt, today we have also a good situation. The cost of the debt is before acquisition below 3%. And of course, after acquisition is going to climb a little, the 2 billion are going to be paid, as I told you Wednesday, and we will be still below 4.5%, which is acceptable in terms of coverage, largely acceptable. In terms of maturity, we have a maturity which is going to be around four years with no significant repayment before July 2025. As a consequence, as a result, S&P has confirmed a BBB rating with a stable outlook. That means that we have access without difficulty to the market. Beyond that, we are going to continue to have a capex discipline I strongly believe that we are going to run around, to land around 3% of our sales. Of course, the site substitute versus work at home will be, of course, a clear point to reduce our empty site. And we are going to focus our capex on IT, AI, and facility optimization versus work at home, as I told you a minute ago. Next slide, please. So let's move now to the capital allocation strategy. CLE Teleperformance is going to deliver close to 600 million to shareholders by year-end, which is significant when you compare to the cash flow. But it doesn't mean that the group is not looking for M&A at all. Of course, it's going to be much more in specialized service, BPO, ITO, and consulting business. Mid-sized company with strong management and financial and we believe that the best case scenario is to resume in late 2024. Before giving the conclusion to Daniel, I just wanted to come back to the hyperinflation issue, because I'm sure you are going to ask some questions. So next slide, please. What is the story of hyperinflation? The hyperinflation, the principle is to restate financial statements for companies located in countries impacted by hyperinflation. What does it mean? What is the methodology of that? Flow are denominated in local currency, are translated in Euro and adjusted with price evolution under IFRS 29. We have no choice but to do that. What we are using? We are using the CPI published by the local government and currency exchange rate at closing rate. This is beyond control of teleperformance. What is interesting is to say that the restatement is starting, is being made each time starting 1st of January 2023. And the impact of this restatement, the calculation of the cumulative impact value is recognized at the closing date. That means that this restatement may change dramatically from a quarter to another. As an example, I'll give you the impact that we had in Q2. In Q2, we had a negative impact of on the life-valued growth of 0.4 on this adjustment. And in fact, why? Because of two reasons. There is a significant increase in revenue in Turkish and Argentinian activity that has been coupled with significant and sudden currency devaluation, in that case not aligned with CPI, that may lead to slight uncertainty on life-valued growth unrelated to operational performance. It's exactly what happened, if you remember, last year in Argentina, when the currency slid at the very last minute and the CPI was not adjusted, or this first half, when the re-election of Mr. Erdogan in Turkey generated a decrease of the currency while the CPI was not adjusted. That is what I wanted to tell, and I'm going to leave the floor to Daniel to conclude this presentation. Thank you all.

Thank you, Olivier. So let's go to the conclusion. The conclusion I would like to come back to the fundamentals. First, in 2023, we are going to increase to grow our revenue like for like basis and our margin in a very volatile environment. Second, With Majorelle acquisition, we augment the bandwidth of our top management. We consolidate our leadership position on the market, and we have multiple opportunities to leverage. So we consider Majorelle acquisition as a springboard to build the next wave of growth of teleperformance. And the next wave is not just 24. It's 24, 25, 26, and so on. So based on this fundamental, we are going... to have a capital day in Q2 2024, where Rupinder, the head of region, Olivier, Scott, and I will present you the new Teleperformance 2024-2027. And what are our objectives? Thank you very much. And now we are ready to answer your question. I think Bhupinder Singh was able to join us, so he is going to be with us to answer the question. Thank you, Bhupinder.

As a reminder, ladies and gentlemen, if you would like to ask a question on today's call, please press star 1 on your telephone keypad. Our first question comes from Simon Leshipra from C-Cell. Your line is open. Please go ahead.

Yes, good evening. Sri, if I may. First of all, on the top line revenue guidance, so it implies a slight acceleration of the lifeline growth in Q4 relative to Q3. Is it just a matter of combs or do you foresee some underlying improvements in terms of volumes or business developments? Secondly, could you just describe share some first comment on the sales pipeline for next year and in this context, how do you feel regarding QN consensus forecast of 5% life-like growth for next year? And lastly, just a quick clarification, does the margin guidance is including or excluding Majorelle? Thank you. Okay.

Very quickly, Q4 is typically... big time in our industry. And the comparative base versus last year is easier than the comparative base that we had in Q3. That's the first point. The second point, was what do we think about the consensus of plus 5% for 24% I think it's too early for us, too early to call because we are still working on our 24 plans and we have to integrate and consolidate Majorelle. Don't forget that until 10 days ago, we did not have access to any information by law. But my personal feeling is that 2024 is going to remain a challenging year, politically, socially, economically. And so definitely we are going to be extremely cautious with our guidance when it will be time to do that. Yeah. The third point, excuse me, the third point is the around 16% EBIT A is teleperformance standalone.

And how much of a drag will be Majorelle for two months of consolidation?

Too early to tell. As we speak, we are... We have a lot of work to be done because we have to make two consolidations, one on 1st November, the second one at the end of December. So we are working on that. We'll be able to give you much more detail in one month, one month. So clearly, the level of margin is different from major oils and teleperformance. That will be probably a reduced or published number. So we are going to have Three sets of publications, two sets of publications, one with a measure of two months, and we are going to publish a 12-month pro forma, a real pro forma, not aggregate, real pro forma figure by the end of 2023. So we need some time to put that in precise and exact figure.

But that's the picture at D0. We cannot forget that there is a synergy plan that is well into the 100 to the 150 million that at T plus one, you know, the movie and not the picture, it should be a relative.

Okay, thank you.

Our next question comes from . Your line is open. Please go ahead.

Yes. Good evening, gentlemen, and thanks for taking my questions. So first of all, regarding the new guidance that you are providing for 2023, what has changed since H1, which resulted into a cut again to your outlook? How conservative is your current and new guidance for 2023? And how do the trends in October compare to what you have seen for the third quarter? And then I have another question on Maggiorel, so we'll take one by one.

I'm not sure it's a new guidance. We were in the range of six to eight.

Yeah, the midpoint is a cut of 100 basis points.

Yeah. Just what I would say, I think that the whole world started to realize that things are not going necessarily, not only for teleperformance, but for more or less all industry in the best possible direction. I would say that for the BPO companies, consulting company, IT, service companies, CX management companies who were very present in the U.S. market, we started to be hit by the slowdown and the freeze of the decision in Q2, mid-Q2. And I would say for those who are less exposed to the U.S., the slowdown started to appear more in Q3. But right now, the global tendency is not to the upside, it's to the slowdown. We think that the 6% that we give, excluding any hyperinflation, it is reasonable due to the period of the year in which we are. And in which, for example, we are going to see the development of the enrollment period in the EU for the healthcare or the results of the Black Friday and many activities that typically happen in November and December.

Thank you. And if I may, there is one more, please, on Majorelle. So in Q3 also substantially decelerated. It was minus one, like four, like five. So how should we think about the full year? Also, there is no mention anymore of the guidance that was reiterated at the end of August of plastics plus 11%. Thank you.

I believe that the real COVID is not negative. Excluding COVID, it's 0% in Q3, to be precise. I don't know, but of course, we are seeing the same trend, but I believe that from what I understood, and I cannot speak for the majority of people, but they were absolutely in line with their low level of guidance again also.

Thank you.

I should maybe precise something that is maybe a subliminal question. As much as we have embraced Gen AI and we have focused a specific team to develop internally and externally a generic solution. I would say that nothing in the slowdown of the activity seems to be related to Gen-AI, but much more on the trend that we have seen specifically in the cutting of the cordon in the US for the wired industry. and also on the fact that many companies are taking all over the world a short-term, extremely conservative budget approach.

Our next question comes from Antonin Baudry from HSBC. Your line is open. Please go ahead.

yes good evening everyone and thank you to take my question three if i made the first one i would want to come back on the on the cost space for 2023 so you change a bit the guidance from 16 to around 16 so i wanted to know what changed in terms of cost space in q3 and what makes you less confidence to be above 16 for this year The second question is about the cost of debt. I appreciate that your new cost of debt will be below 4.5%, but could you confirm the implied cost of new debt? Let's say, is it 5% to 6% range, something like that? My third question is about the revenue synergies that we could expect from natural acquisitions. Do you have some examples of what could be done potentially in terms of revenue synergies, what you see so far, which kind of offer, which kind of country, or which kind of verticals? Thank you very much.

I'm going just to answer to your last question and let Olivier answer to your more technical question. The synergies that have been identified in details, line per line, have been identified by the work during several months of clean teams working together, both sides of the two companies, and with the support of Ernst & Young. I'm not going to give you, of course, the details right now, but it's not just a guess in the wind. Now, Olivier, if you want to answer the other question about the Beauvoir Round,

I'm not sure we have said above 16%. I don't see that. I don't recall that. We said 16%, around 16%. That means that this is marginal ethics stuff or whatever. So it's not really something that we can debate on it. As far as the cost debt is concerned, you're probably right. When you make the math, you are between 5.5, 5.7 for the 2 billion expected. As you know, we have not yet refinanced this debt by 2 billion. We'll take the best opportunity, the best timing to take advantage of the market to reduce the cost of the debt versus its liquidity and its maturity. but your expectations are not totally wrong as of today. Hopefully, we'll be able to do better later on.

Thank you very much.

Our next question comes from Suhasini Varanasi from GS. Your line is open. Please go ahead.

Hi, good evening. Thank you for taking my questions. I have a few, please. You mentioned that synergies on major acquisition, you have visibility well into the 100 to 150 million range. Just wanted to clarify, does that mean you have visibility in the upper end of the range? And how should we think about the phasing of the synergies? Is it that you expect to get access to most of the synergies by the end of 24 and therefore the full impact annualized by 2025? That's the first question. I'll just Wait for the answer and go to the next one. Thank you.

You want me to answer, Daniel? Either you or Bhupendra. Bhupendra, go ahead.

Hi, Swasini. Yeah, as Daniel mentioned that we had a clean team working during the summer along with the NY. When we say we are well into the 100, 150 million, I won't give you the exact number, but we feel comfortable about this range. That's where we are. In terms of timing, yes, a substantial portion of this will happen in 24, but also please bear in mind a good chunk of it will come from technology, OPEX spend, and some of these may be some slightly longer-term contracts, so it will spill over into 25 also.

Thank you very much. My second question is on the hyperinflation currencies, please. What is the total percentage revenue exposure that you have to Turkey and Argentina?

To make it simple, we are speaking of something around €250 million, but that could change dramatically from one year to another with no control.

Is that €250 million each for Turkey and Argentina?

No, no, total, total, total, total.

half each, Turkey, Argentina? 125, 125? Roughly.

Not exactly this way, but more for Turkey. More for Turkey.

And nobody... I hope it's just Turkey and Argentina, but the way several countries evolve around the world, nobody can say that it's going to be only limited to Turkey and Argentina.

If I may, I would just add a point, Mussolini. We are probably the only one company in CAC 40 to be facing such a situation. Other companies are working in these countries, but they have been able to make the criteria to change their currency in functional currency, either in dollar and in euro. As we are mostly, a significant part of our business is working locally, we cannot use a functional currency solution that would have helped a lot, but this is beyond our control.

I completely understand. Thank you. My last question is on specialized services, please. It's shown amazing growth this year, but is it fair to assume that these trends potentially normalize from next year, or do you think growth can continue at decently high levels due to end market demand, or maybe because M&A becomes organic? Thank you.

I think that we are going to continue to have a high growth on the specialized services and from our two main engines. In language line, there is the migration trend in the USA that fuels a lot of needs. And on TLS, I would say that China has not really fully reopened to the external world, and so there is still a potential for growth.

I appreciate that. Thank you so much.

Our next question comes from Carl Green from RBC. Your line is open. Please go ahead.

Yeah, thanks very much. Just a few questions remaining from me. The first one, just very straightforwardly, just in terms of the new organisation chart, are you implying that the regional reporting is just going to move to two segments next year for core and dibs? from the current three. That's a pretty easy question first. The second question, it's just around the ongoing deceleration in organic growth, looking at both North America and Asia Pacific plus LATAM. I think one of the comments you made earlier this year about the reason for the better outlook for the margin was the shift towards offshoring, but it's not evident which region or which countries are actually benefiting from that accelerated offshoring. And then looking specifically within North America and Asia Pacific, I think you did give some narrative in the statements about the nine-month trends. But could you unpack in Q3 what's happening in the U.S. and India specifically? Let's just go with those two questions to start, please.

I think that technically, Olivier is going to answer you, and then there is nobody better place to answer your question than Bhupendra Singh.

On reporting, this, I would say, change of segmentation is going to happen not before early 2024. That means that for 2023, we are going to stay on the reporting, I would say, geographical reporting that we were using in the past, adding the two months of Majorelle. Later on, we will go to this presentation by three main categories, one being the America, the other one being Europe, and the last one like specialized service. Not so far from Accenture, in fact. Europe and APAC. Europe and APAC, sorry. Not so far from what Accenture is doing, in fact.

Yeah. And in terms of America's, so as... We have said it a few times. You've seen it in all other presentations, whether it's from consulting companies, IT companies, BPO companies. There has been a deceleration in the Americas market, largely driven by, one, some of the digital commerce companies that were growing very fast. They have slowed down. Second, many of the big companies, whether it's in the technology sector, telecom sector, they have cut back on new products, new services, scaled back some of their ambitions and much more conservative and more cash conscious. So because of that, either some of the big decisions have been pushed out or there's only kind of some incremental demand that's coming from there. So you've seen that slow down. But as part of that efficiency, we've also seen increased offshoring. So no wonder, while overall market demand may be slow, we are seeing a strong growth for our India business. It is double digit even this year and it continues. In fact, it continues to accelerate quarter on quarter as we see. But it's a zero sum if overall America's is relatively flat. So that means some of the onshore business has a negative growth rate. Also, as you would remember, it is not a one-to-one revenue transfer. So when the same volume of activity moves to a low-cost location like India, the revenue It's deflationary on the top line, though on the bottom line, both in absolute terms and margin percentage terms, it is okay.

Yeah, and I would like to say that you don't see it in our presentation here, but India is a big winner, and we continue to have plans to grow our India extremely aggressively in the coming years. Now, I would like to mention something that everybody has forgotten, and that to me explains also some of the elements of the year 2023. Remember, 20, 21, 22, the year of confinement. People are at home, cannot move, are mostly online, and try to find anything to remain sane. and probably increase their level of interaction with their friends, but also with the companies they buy product and service from. 2023, no more confinement. Freedom. Much more time offline with the kids in the parks or doing brick-and-mortar shopping and so on. This is major. A lot of people have totally forgotten this element. And that's why I don't think that we are going to see the same dynamic between 24 and 23, because 24 will be similar in global behavior of the end consumer to 23.

Okay, thanks very much. Just a follow-on question, a very easy one. Just the comment you made about the cost of delivering the synergies. I mean, clearly it's a fairly wide range for the synergy target for reasons which are understandable, but the cost of delivering that, would you say it's likely to be at the lower end of the 100 to 150?

We are going to work to do that.

We are going to do... We do not expect... the cost to deliver the synergy to be superior to one. Okay, thanks. Maybe one or two questions.

Our next question comes from Nicole Mannion from UBS. Your line is open. Please go ahead.

Hi. Thanks for taking my question. A follow-up question, please, on the 6% organic guidance and then the implied 6% growth in Q4. I get that there's the comp effect to consider, but looking at the multi-year stack, there's also an implied underlying improvement Q4 compared to Q3. I know you've mentioned that Q4 is a big and important quarter, but what actually needs to happen to meet this guidance. I know you've mentioned, for instance, through the year that clients have been hesitant and pushed out decisions. Do you expect this and need this to change to some extent in Q4 then, given the acceleration there? Thanks.

No, because, I mean, the path of relationship with the client is a long process. It doesn't move from one week to another. What we think is that Q4, we are going to see much more customer interaction because we are going to see a surge. in consumption related to the peak season as usual. And typically, whether it's in healthcare, whether it's FMCG, electronics, and so on, or fashion. You have so many acquisitions that are concentrated during this last two months period. And then you have so many frictions that happen. People who send back what they got. People who are anxious because they are not going to get, they are afraid not to get what they ordered before Christmas and so on. Which make us think that there is no major reason for the Q4 2023 to be different from the Q4 of the last 20 years. Yeah, got it.

That makes sense. Thank you.

Maybe the last question, please.

Our last question comes from Carl Rainsford from Birnberg. Your line is open. Please go ahead.

Good evening, everyone. Thanks for taking my questions. I've only got a couple left on my list, hopefully fairly straightforward. The first one is moving into next year, just on Europe. Obviously, Europe's had a good year this year. Now with Majorelle, Europe will obviously be the majority of revenue if we spit out LATAM, as reporting currently is. So do you have any insight on how we should think about growth next year for the new group, just from a higher level, given those strong European comps? And could those comps cause a drag on a group basis in the way North America has this year? And then the second question, just regarding acquisitions versus a buyback, what sort of level would your valuation have to get back to you before you begin to target acquisitions more than share buybacks? Presumably, those bolt-ons are likely to be fairly AI-based and therefore pretty expensive. So if nothing changes, a buyback program is something you'll undertake into the midterm. I'll leave it there. Thank you.

Bhupendra, do you want to answer the first phase of the question so I can think to the last phase?

Look, it's again, we always say we don't have a crystal ball here to kind of figure out what Europe will be next year. From what we have seen so far, yes, we have seen a certain degree of slowdown in Q3 in Europe. What we started seeing in the US starting February, mid-February onwards, we've seen a certain degree of slowdown in Europe. But Europe also is multiple markets. It's not one market. And it's not behaving in kind of one uniform manner. So there are markets which are kind of growing slower. There are markets which are still growing fairly fast. So we have to look at it from that perspective. Secondly, with the measure of acquisition, we believe that our position has become much, much stronger. And there are additional lines of businesses that we were targeting for the US market. We did have the capabilities for those activities, but we just did not have the right A demonstration cases within Europe and also some of the other delivery capabilities that we needed to be able to convince our clients. So with a combination of having a much stronger team with ability to showcase additional lines of businesses, along with a better mix of countries, we are reasonably confident that we should be able to tide over next year too.

For the last part of the question, yes, I am sure that every company that AI wash itself is going to have high multiple. It's not necessarily a guarantee for growth and profitability. We embrace AI. we hire specialists in AI. Maybe we will buy companies with a real specialization, but our preference clearly has always been to acquire very profitable, well-run companies niche market, if possible, having a kind of black box in which you have some part of digital, but that can command higher pricing and higher margin. And so really, we consider that the Future acquisitions are going to be much more related to the specialized service or the management of end-to-end complex business process that integrates AI, but not only.

Thank you very much. That's very helpful. Thank you.

There are no further questions, so I will hand you back over to your host, Daniel Julliet, CEO, to conclude today's conference.

I would like to thank all of you who joined us to listen to what we had to say. We are deeply convinced that the consolidation that we decided in integrating Majorelle goes in the sense of the market, goes in the sense of what are looking our major clients. And we believe that we have a springboard to build the next wave of growth of the company. Thank you very much.