Teleperformance: First-Half 2017 Results

Regulatory News:

The Board of Directors of Teleperformance (Paris:RCF), the worldwide leader in outsourced omnichannel customer experience management, met today and reviewed the consolidated financial statements for the six months ended June 30, 2017. The Group also announced its half-year financial results.

SUSTAINED GROWTH IN REVENUE IN H1 2017

• up + 23.2% as reported at €2,081 million and up + 9.9% like-for-like*
• 10^th straight half-year of like-for-like growth above + 7%
• Consolidation of LanguageLine Solutions activities

FURTHER GROWTH IN EBITA MARGIN**

• 11.8% of revenue versus 8.9% of revenue in H1 2016

EARNINGS PER SHARE

• up + 33.7% at €1.98

STRONG CASH FLOW GENERATION

• Net free cash flow***: €178 million versus €113 million in H1 2016

FY 2017 OBJECTIVES CONFIRMED AND REFINED

• Like-for-like revenue growth of at least + 7%
• EBITA margin of above 13%

STRATEGIC PLAN AND 2020 TARGETS UNCHANGED

• Revenue above €5 billion
• EBITA margin above 14%
• Organic and acquisition-led growth

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NOTES:

* At constant exchange rates and scope of consolidation
** EBITA before non-recurring items as a % of revenue
*** Internally generated funds from operations after tax and finance costs - WCR - Net capital expenditure
A glossary of alternative performance indicators is included in the Appendix

INTERIM FINANCIAL HIGHLIGHTS

* A glossary of alternative performance indicators is included in the Appendix

Daniel Julien, Executive Chairman, and Paulo César Salles Vasques, Chief Executive Officer, Teleperformance Group, said:

"We had a good first half with very strong revenue growth and further gains in our EBITA margin, in line with our FY 2017 targets. This is also the tenth straight half-year of at least + 7% like-for-like revenue growth, once again confirming our status as a growth company. Vigorous momentum in our most profitable markets, particularly Ibero-LATAM, and the integration of the high value-added operations of LanguageLine Solutions led us to achieve another record high margin.

Our growth was not only profitable but also controlled, with improved margins and liquidity management discipline both reflected in robust cash flow generation, which was up by almost + 60% in the period.

This very good performance stems from Teleperformance's unique global leadership position. In June, Everest Group recognized us as one of the world's top-performing Contact Center Outsourcing providers for the fifth year in a row.

Backed by our very encouraging first-half results, we confirm and refine our full-year objectives and are now targeting like-for-like revenue growth of at least + 7% and an EBITA margin before non-recurring items of above 13%.

Thanks to our strong cash flow generation, Teleperformance is well placed to rapidly scale back its debt by the end of the year. This will allow us to continue leveraging highly profitable acquisition opportunities, particularly in the deeply fragmented specialized services market, a source of value creation for our shareholders."

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FIRST-HALF AND SECOND-QUARTER 2017 REVENUE

CONSOLIDATED REVENUE

Consolidated revenue amounted to €2,081 million in the first half of 2017, representing a year-on-year increase of + 9.9% on a like-for-like basis. Revenue growth was + 23.2% as reported, essentially due to the €204 million contribution from the consolidation of LanguageLine Solutions as from September 19, 2016. Reported revenue was also lifted by the €20 million positive currency effect, stemming mainly from the increase in the Brazilian real, Colombian peso and US dollar against the euro.

Consolidated revenue for the second quarter stood at €1,015 million, a sustained like-for-like increase of + 8.0% despite a less favorable basis of comparison in the second quarter compared to the first. Revenue rose + 20.2% as reported in the second quarter, spurred mainly by the contribution resulting from the consolidation of LanguageLine Solutions.

REVENUE BY ACTIVITY

Since January 1, 2017, Teleperformance’s business operations have been organized into two segments: Core Services, which cover customer care, technical support and customer acquisition, and Specialized Services, which comprise the recently acquired interpreting services provided by LanguageLine Solutions, the visa application management services outsourced by governments to TLScontact, the analytics solutions offered by the GN Research subsidiary, and the accounts receivable management services provided in North America by the AllianceOne Receivables Management (ARM) subsidiary.

• Core Services

Core Services revenue amounted to €1,752 million in the first half of 2017, a gain of + 11.2% as reported and of + 9.8% like-for-like. The currency effect was positive for the period, primarily reflecting the increase in the US dollar, Brazilian real and Colombian peso against the euro. As in the first quarter, growth was satisfactory in all regions, especially Ibero-LATAM.

• English-speaking market & Asia-Pacific

First-half revenue for the region climbed + 3.7% on both a like-for-like and reported basis compared to the same period in 2016. The positive impacts of a stronger US dollar were largely offset by the negative impacts of sterling's weakness against the euro. In second-quarter 2017, revenue for the region increased by + 2.3% like-for-like and by + 0.8% as reported.

Teleperformance continued to diversify its client portfolio in the region over the first half of the year. The fastest growing client segments in the United States were e-distribution and e-transport services, along with healthcare. Consumer goods and consumer electronics also contributed to regional revenue growth. In this way, over the period, the Group continued to reduce its dependence on pay-TV and other telecommunications segments, which accounted for less than 30% of the regional revenue stream in 2016.

Given the phase-out of unprofitable contracts in the United Kingdom, which primarily impacted revenue growth in the English-speaking market & Asia-Pacific region in late 2016, business in the United Kingdom was still down in the first half.

In Asia-Pacific, business continued to benefit from the significant investments made in the region since 2016 and remained upbeat, particularly in India, with North American and regional multinationals in a wide range of buoyant client industries, such as consumer electronics and e-tailing. The positive impacts of this good momentum were offset in the first half by a slowdown in offshore operations serving the North American market in the Philippines, to the benefits of Mexico (Ibero-LATAM region), which is currently enjoying a more favorable currency and geopolitical environment.

• Ibero-LATAM

Business in the Ibero-LATAM region saw exceptionally strong growth in first-half 2017, with year-on-year gains of + 25.1% like-for-like and of + 33.5% as reported, lifting revenue to €534 million for the period. Exchange rates had a positive impact on revenue, mainly reflecting gains in the Brazilian real and Colombian peso against the euro.

In the second quarter, revenue was up + 20.0% like-for-like, with the region delivering further vigorous growth despite a less favorable basis for comparison than in the first quarter.

The Group continued to leverage the same growth drivers in the second quarter as in the beginning of the year, reflecting the significant investments made during 2016 and successful diversification in a number of different sectors. Operations in Portugal, Colombia and Brazil along with offshore activities in the region, including in Mexico, delivered the highest levels of growth. Offshore activities have become particularly attractive as local currencies have weakened.

Operations in Brazil remain upbeat despite the persistently uncertain economic and political environment, thanks to recent new contract wins with large US companies in various sectors, and particularly the new economy.

Business in Portugal once again contributed to regional growth, still powered by the success of the Lisbon-based multilingual platforms with large international accounts. E-retailing and e-services were among the fastest growing customer segments.

• Continental Europe & MEA

In the Continental Europe & MEA region, first-half 2017 revenue rose by + 5.2% like-for-like and by + 3.4% as reported, ending the period at €406 million. The negative currency effects stemmed mainly from the fall in the Egyptian pound against the euro.

The healthy momentum seen in the three months to March 31, 2017 continued into the second quarter, which posted like-for-like growth of + 4.9%. The Group's growth drivers remained unchanged. Teleperformance continued to enjoy brisk sales momentum, particularly with global clients, in Eastern Europe (Russia, Poland, Czech Republic and Romania) and in most Mediterranean countries: in Greece where, as in Lisbon, the Group is benefiting from the success of its multilingual platforms; in Egypt, especially in the Internet and consumer electronics segment; in Albania, which serves the Italian market; and in Turkey.

In Northern Europe, the Group's operations in Scandinavia returned to firm growth in good profitability conditions, whereas the market environment in France, the Netherlands and Germany remained subdued.

The fastest growing markets in the region are consumer electronics, financial services, travel agencies and consumer goods. E-services accounted for a good number of the recently awarded contracts.

• Specialized Services

Revenue from Specialized Services rose sharply to €329 million in the first half of 2017 from €113 million one year earlier, due to the consolidation of LanguageLine Solutions as from September 19, 2016. On a like-for-like basis, revenue was up + 11.4% for the period.

Growth in Specialized Services was primarily attributable to the fast-paced expansion at TLScontact, led by an increase in visa applications and by brisk sales of add-on services.

LanguageLine Solutions reported satisfactory pro forma revenue growth in the first half, in line with Group expectations. Given the date on which LanguageLine Solutions was acquired, like-for-like growth for the Group in the first half of 2017 excludes growth reported by LanguageLine Solutions.

The LanguageLine Solutions and TLScontact businesses account for more than 80% of annual pro forma Specialized Services revenue.

FIRST-HALF 2017 RESULTS

EBITA before non-recurring items came to €245 million for the first half, up + 63.3% from €150 million in first-half 2016. EBITA margin before non-recurring items widened further to 11.8% from 8.9% in the six months to June 30, 2016.

EBITA BEFORE NON-RECURRING ITEMS BY ACTIVITY

• Core Services

EBITA before non-recurring items for the Core Services business amounted to €147 million in first-half 2017, compared to €126 million in the prior-year period. EBITA margin before non-recurring items stood at 8.4% versus 8.0% in first-half 2016. This advance essentially reflects a positive mix effect resulting from bullish growth in the Ibero-LATAM region, which proved the Group's most profitable region in the half-year period, and the ongoing rally in margins for Continental Europe & MEA.

• English-speaking market & Asia-Pacific

The English-speaking market and Asia-Pacific region achieved EBITA before non-recurring items of €60 million in the first half of 2017, on a par with the prior-year period. EBITA margin before non-recurring items came to 7.4% versus 7.7% in first-half 2016. This primarily reflects:

• An unfavorable geographic mix effect on margins owing to significant growth in domestic business in the United States, whereas offshore operations slowed in the Philippines in favor of offshore activities in Mexico (Ibero-LATAM region), which has become particularly attractive thanks to local currency trends and a more secure geopolitical environment.
• Significant investments made in the region over the past few half-year periods and the resulting gradual ramp-up of facilities opened in Australia, China and, more recently, Malaysia.
• Ibero-LATAM

EBITA before non-recurring items in the Ibero-LATAM region amounted to €55 million in the first half of 2017, compared to €43 million in the same period in 2016.

EBITA margin before non-recurring items remained high, representing 10.3% versus 10.7% in the first half of 2016. Growth in operations in Portugal and Colombia was particularly robust and profitable over the period.

The region benefited once again from currency fluctuations that continue to favor offshore business in Mexico serving the US market, but to a lesser extent than in first-half 2016.

• Continental Europe & MEA

In the Continental Europe & MEA region, Teleperformance remained on the steady upward trend in profitability that began in 2012. EBITA before non-recurring items for the region came to €11 million, giving a margin of 2.7% versus 1.6% in the prior-year period. Positive factors contributing to this growth included:

• Vibrant business growth with global clients and satisfactory cost discipline in a number of countries in Southern and Eastern Europe, such as Greece with its highly efficient multilingual solutions, and Russia.
• Ongoing improvement in profitability in certain countries, such as the Nordics, and to a lesser extent Italy with the development of its offshore solutions in Albania.
• Specialized Services

In Specialized Services, EBITA before non-recurring items amounted to €98 million in the first half of 2017, compared to €24 million in first-half 2016. EBITA margin before non-recurring items stood at 29.7% versus 21.0% in the prior-year period.

These figures primarily reflect the consolidation of LanguageLine Solutions as from September 19, 2016. The US company contributed €41 million to consolidated EBITA before non-recurring items in full-year 2016, for a margin of 36.3%. On a pro forma basis, LanguageLine Solutions’ operating margin remains stable in the 1^st half 2017 compared to the prior-year period.

Consolidated operating profit (EBIT) amounted to €191 million, up + 45.8% from €131 million in first-half 2016.

First-half 2017 EBIT reflects the amortization of intangible assets in an amount of €45 million, up sharply on the prior-year period following the acquisition of LanguageLine Solutions, and an €8 million accounting expense on performance share plans.

The financial result represented a net expense of €25 million versus €10 million in first-half 2016, reflecting the cost of debt incurred in connection with the LanguageLine Solutions acquisition.

Income tax expense amounted to €49 million. The Group's average tax rate was 29.5% compared to 28.0% in first-half 2016, owing to the increasing contribution of the Group's North American operations to its results.

Net profit attributable to minority interests represented €1 million.

Net profit - Group share stood at €116 million for the period, up + 34.9% from the €86 million reported in first-half 2016. Diluted earnings per share stood at €1.98, up + 33.7% year-on-year.

CASH FLOWS AND FINANCIAL STRUCTURE

Cash flow after interest paid and tax was €224 million compared to €168 million in first-half 2016. The change in consolidated working capital requirement during the first half was an inflow of €22 million, vs €20 million in first-half 2016. This good performance reflects, in particular, the policy deployed to improve the Group's liquidity.

Net capital expenditure amounted to €68 million, or 3.3% of revenue, versus €75 million and 4.4% in first-half 2016. The Group continued to invest in its future development in terms of both business and margin growth while maintaining strict financial discipline. It continues to open new facilities and extend its existing facilities in order to support its clients in all of their markets (see the "Recent developments" section).

In all, consolidated net free cash flow increased sharply to €178 million from €113 million in the prior-year period.

Financial investments, which totaled €40 million in the first half, included the last outlay under TLScontact earn-out clauses.

After taking into account €75 million in dividends to be paid, net debt stood at €1,501 million at June 30, 2017. The Group's financial structure therefore remains very solid, with equity of €1,827 million at June 30, 2017.

RECENT DEVELOPMENTS

In the first half of 2017, Teleperformance continued to deploy its strategy of expanding worldwide by opening new facilities in:

• the English-speaking market & Asia-Pacific (China and the UK);
• the Ibero-LATAM region (Colombia and Spain);
• the Continental Europe & MEA region (Russia, Kosovo and Greece).

The Group also increased the number of workstations at its existing facilities, in the English-speaking market & Asia-Pacific (Jamaica and India), in the Ibero-LATAM region (Colombia, the Dominican Republic and Mexico), and in Continental Europe & MEA (Germany, Sweden, Russia, Poland, Italy and Greece).

In all, more than 5,000 new workstations were created during the first half.

2017 OUTLOOK

In light of the encouraging first-half results, Teleperformance confirms and refine its full-year financial objectives, targeting:

• Like-for-like revenue growth of at least + 7%.
• EBITA margin before non-recurring items above + 13%.

Teleperformance also expects to maintain a high level of net free cash flow over 2017 as a whole.

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DISCLAIMER

All forward-looking statements reflect Teleperformance management’s present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. For a detailed description of these factors and uncertainties, please refer to the "Risk Factors” section of our Registration Document, available at www.teleperformance.com. Teleperformance undertakes no obligation to publicly update or revise any of these forward-looking statements.

RESULTS PRESENTATION AND DOCUMENTATION
A conference call and webcast will be held today at 6:15 PM CEST
The webcast will be available live or for delayed viewing at:
http://teleperformance.webcast.ldvproduction.com/Index.aspx?eid=151&LngId=en

The half-year financial report and presentation materials will be available after the conference call on www.teleperformance.com at:
https://www.teleperformance.com/en-us/investor-relations/press-releases-and-documentation/financial-results

INVESTOR CALENDAR

Third-quarter 2017 revenue: Monday, November 13, 2017

ABOUT TELEPERFORMANCE
Teleperformance (RCF - ISIN: FR0000051807 - Reuters: ROCH.PA – Bloomberg: RCF FP), the worldwide leader in outsourced omnichannel customer experience management, serves companies and administrations around the world, with customer care, technical support, customer acquisition (Core Services), as well as with online interpreting solutions, visa application management services, data analysis and debt collection programs (Specialized Services). In 2016, Teleperformance reported consolidated revenue of €3,649 million (US$4,050 million, based on €1 = $1.11).

The Group operates 163,000 computerized workstations, with 217,000 employees across 340 contact centers in 74 countries and serving 160 markets. It manages programs in 265 languages and dialects on behalf of major international companies operating in a wide variety of industries.

Teleperformance shares are traded on the Euronext Paris market, Compartment A, and are eligible for the deferred settlement service. They are included in the following indices: STOXX 600, SBF 120, Next 150, CAC Mid 60 and CAC Support Services. They also have been included in the Euronext Vigeo Eurozone 120 index since December 2015, with regard to the Group’s performance in corporate responsibility.

For more information: www.teleperformance.com
Follow us: Twitter @teleperformance

N.B.: The half-year financial statements at June 30, 2016 and June 30, 2017 have been subject to review by the auditors.

APPENDICES

CONSOLIDATED INCOME STATEMENT
€ millions

CONSOLIDATED CASH FLOW STATEMENT
€ millions

CONSOLIDATED BALANCE SHEET
€ millions

GLOSSARY

EBITDA before non-recurring items (Earnings before Interest, Taxes, Depreciation and Amortizations):

Operating profit before depreciation & amortization, amortization of intangible assets acquired as part of a business combination, goodwill impairment charges and non-recurring items.

EBITA before non-recurring items (Earnings before Interest, Taxes and Amortizations):

Operating profit before amortization of intangible assets acquired as part of a business combination, goodwill impairment charges and non-recurring items.

Non-recurring items:
Principally comprises restructuring costs, incentive share award plan expense, costs of closure of subsidiary companies, transaction costs for the acquisition of companies, and all other expenses that are unusual by reason of their nature or amount.

Net free cash flow:
Cash flow generated by the business - acquisitions of intangible assets and property, plant and equipment net of disposals - financial income/expenses.

Net debt:
Current and non-current financial liabilities - cash and cash equivalents

Change in like-for-like revenue:
Change in revenue at constant exchange rates and scope of consolidation, corresponding to current year revenue - last year revenue at current year rates - revenue from acquisitions at current year rates/last year revenue at current year rates.

Diluted earnings per share (net profit attributable to shareholders divided by the number of diluted shares and adjusted):
Diluted earnings per share is determined by adjusting the net profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding by the effects of all potentially diluting ordinary shares. These include convertible bonds, stock options and incentive share awards granted to employees when the required performance conditions have been met at the end of the financial year.

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