Teleperformance SE (TEP) Earnings Call Transcript & Summary

Hello, and welcome to today's Teleperformance call presenting the finalization of the acquisition of Majorel and the Q3 and first 9 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. [Operator Instructions]. I will now hand you over to your host, Daniel Julien, CEO of Teleperformance to begin today's conference. Thank you.

Thank you very much, Karen. So good day and thank you for joining us as we are celebrating at the same time the finalization of Majorel acquisition. And as we are sharing our first 9 months actual results. I'm very excited to share my perspective about Majorel and what it means for the future of our group, the new Teleperformance. Then when I will be done, Olivier is going to present to you the numbers last quarter numbers and the 9 months; and Olivier Rigaudy, who is the CFO and 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 Bhupender 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 Majorel. It's all about transformation and performance, of course. First, your group remains the #1 global leader in customer experience outsourcing and digital integrated business services. We are going to be roughly 0.5 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. Besides 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 a revenue level, a little bit above EUR 10 billion with an EBITDA that will be a little bit above EUR 2 billion, aggregate free cash flow that should be in the range of the EUR 1 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 Rigaudy is going to explain that more in details later on, very well into the EUR 100 million to the EUR 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 #2 or #3 in 9 of the top 10 markets of the world by GDP. U.S., China, Germany, India, U.K., France, Italy, Brazil, Canada, systematically presence in dominant position or leadership position. Here on the map, you can see in magenta that TP presents and in blue, the Majorel presents. 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 Majorel strengthened our position in the German and French-speaking market. I've always had a lot of respect for Majorel for their strong performance on these two markets. We scale up our APAC 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 with French-speaking Africa or English-speaking Africa. Then the verticals. Again, Majorel is a very well-run company by talented people with a long experience in business process outsourcing. And this acquisition brings to Teleperformance and expertise and a presence in the banking and financial service in Europe. Teleperformance is very present in banking and financial services in the U.S., in Latin-America, in India, but not so much in Europe. This is over. Second, Majorel has a strong presence in managing end-to-end complex business process for the insurance in Europe. Sales is also an addition to our expertise. And finally, Majorel has developed a comprehensive digital platform, including social media and omnichannel for the luxury goods industry, specifically on the Chinese market that we intend to develop on all the major markets that are not Europe or U.S., but like Brazil or India. We bring also additional expertise. The end-to-end insurance claim management, which is a pretty sophisticated [indiscernible] 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, Majorel has a strong expertise. Complex middle and back-office fulfillment management coming from the history 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, Teleperformance and Majorel, we have more than 100 Gen AI applications in development on a 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 P&L accountability by region. We are focused in excellence in delivery and in innovation. For the core service, Bhupender Singh, who is Deputy CEO and Chief Transformation Officer, lead to the two major regions, the Americas, where Agustin Grisanti becomes a present from the Alaska to [ Oshawa ]. The EMEA and APAC where Thomas Mackenbrock, was the CEO of Majorel, 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 Collard with a U.S. citizen. On the other side, Scott Klein continued to be the CEO for our specialized services. Teri O'Brien, our Global Chief Legal and Compliance Officer; and Olivier Rigaudy, Deputy CEO and group CFO. Below this line, a large group of top leaders and managers from Majorel, take accountability for many clusters. Next, please. Now no, 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 and 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% in the 9 months excluding the onetime 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 our 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 Rigaudy will give more explanation later on. We continue to target an EBIT margin around 16%. And we are going to consolidate Majorel from November 1, 2023. As 99.9% of the Majorel shareholder contributed to the operation. My last word in the presentation, and I think it makes sense is the cash written that we provided to our shareholders that should be around EUR 600 million by the year-end 2023, resulting from the dividend that we paid, EUR 227 million. And the share buyback, today, we are already above EUR 300 million, and we will be probably around the EUR 360 million or the EUR 370 million by year-end. Yes, today, with the evaluation 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 Rigaudy, 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. I'm going -- hi, everyone. I'm going to cover two topics to give you some additional information about the closing of the deal after quarter the Q3 figure. Let's start with the final closing and the next step. I just wanted to remind you some steps that have been achieved and what are the next one. I remind you that we get the final last green authorization from the Antitrust authorities, at 20th of October. At that time, we have 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 review that was the first acceptance period of the deal, which was 98.45%. Last Friday, to the third of November, we got the finalization of the second offer where we got 99.91% of the share that was to underwrite in this deal. Next one is there, we are going to settle -- no, no, please stay on the previous -- next one is that we are going to set on 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 3 weeks. While in the meantime, we've asked the Netherlands authorities to delist the company from the Amsterdam Stock Exchange, meaning that probably mid-December will be the only shareholder of Majorel of a company that will be delisted at all and where we are going to be at 100%. Next slide, please. So what are the additional information that I want to give you on the deal. First of all, the acquisition costs are going to be around EUR 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 Teleperformance shareholder, of course, the SAM Group and [ VESTAL Man ] that will own each of them close to [ 3.68% ] of our capital starting the 3rd of November. These two shareholders are under a lockup period of 6, 9, 12 months by third. And it's expected that Mr. [indiscernible], founder of SAM Group should join the Board early 2024. Again, I said again that the consolidation of Majorel will start from November 1. Next slide, please. So what are the cost synergy today? The cost synergy analysis has been performed by your team not only dedicated Teleperformance, but also a manager and team, we call it clean team, supported by EY that work all along this summer to prepare the two things, the synergies, operating model and the day one action. And we have already -- we have shared this information after the antitrust clearance approval, which was done last October. What are the main conclusion of this syndicative work. First half, this amount, as mentioned by Daniel, we are well into the EUR 100 million to EUR 150 million in the share launch, 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 the 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 on or 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, be one of the -- 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 -- that has been set up with people coming from Majorel 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-for-like growth on 9 months, excluding COVID and 4% on Q3. I have two comments -- first two comment 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 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 later. Next slide, please. Clearly, Q4 was not an easy one. Q3, sorry, wasn't an easy one, given the comparison base we had. We had a 14% growth last year in Q3. And of course, it was difficult to beat this year in this global environment. I just wanted to remind you that the Q4 revenue will be easy with a like-for-like growth, which is a little less than [indiscernible] in Q4. Next slide, please. Here, it's probably something which has to be mentioned. When you look at this figure, you discovered that Teleperformance has been able to deliver EUR 345 million like-for-like growth over 9 months despite that we were facing headwinds that amounts to EUR 451 million, EUR 250 million from currency effect and EUR 200 million from COVID contracted vanished. So this is the bigger stuff. Out of this EUR 250 million, we have plenty of currencies that slipped this year, starting Q2, but accelerating in Q3. I'm thinking of the Egyptian [indiscernible], the USD, the Colombian pesos or in Indian rupee. So despite these two major negative impact, we have been able to deliver growth, which is EUR 345 million in like-for-like on which you have to add the change in scope starting November 1, 2022. You remember that we bought PSG, the company that is operating on [indiscernible]. 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 on geographical. So when you mix together both approach, it means that the group is able to swallow any hits that 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 regions? Here, we are starting with a figure at constant exchange rate comparing the 9 months 2022 to the 9 months 2023. As you can see, you have, of course, this EUR 200 million COVID impact contract that vanish. And we had a growth of core service and dips, which is 4.2% and specialized service growing at 17%. When you look in detail in each segment, you know that U.S. is roughly flat, which is due to two things the global environment that Daniel Julien explained a minute ago, but also the offshoring impact moving a lot of business from U.S. domestic to India. On the LatAm side, where the growth is 2%, this is two things, the same issue about the offshoring part coming from U.S. plus the impact of the increase of the Mexican pesos that makes decision less appealing for U.S. corporate. When you look to Europe, it's -- it's a very good growth of 10% like-for-like, EUR [ 188 ] million. Why close to the -- in every sector. It's true in multilingual meaning Portugal, Greece, Egypt or on a low extent -- lower level, sorry, Spain and all the growth that we have been able to sustain notably in Germany. Specialized Service is continuing to deliver its fantastic journey with LLS, LanguageLine Solution growing very fast and TLS resuming from the COVID period and from the fact that people were not tracking so much last year. So let's move now to the solidity of the group. Next slide, please. 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 debt of the group. Everybody is going to look to the level of indebtedness, the cost of the indebtedness and the maturity of indebtedness. When you look at these three points for Teleperformance, you see we are absolutely safe. The amount of debt as mentioned by Daniel a minute ago, our net debt-to-EBITDA is going to be 2 -- around 2 on -- 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 deleverage or this to a level of 1.5 by year-end 2024. So no prime 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. So EUR 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 4 years with no significant repayment before July 2025. As a consequence, as -- as a result, S&P has confirmed a BBB rating with a stable outlook. That means that we have access to without difficulty to the market. Beyond that, we are going to continue to have a CapEx discipline. I still believe that we are going to run around -- to land around 3% of our sales. Of course, as a [indiscernible] versus work at home will be, of course, a clear or a clear point to reduce 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 next, let's move now to the capital allocation, clearly, Teleperformance is going to deliver closely to -- close to EUR 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 services, BPO, ITO and consulting business, midsized 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 statement for a company located in country 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 rates. This is beyond control of Teleperformance. What is interesting is to say that the restatement is starting, is made each time starting 1st of January 2023. And the impact of this restatement is the calculation of secured impact valued is recognized at the closing date. That means that this statements 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 on the like-for-like growth of 0.4% on this adjustment. And in fact, why? Because two reasons, there is a significant increase in revenue in Turkish and Argentina 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 like-for-like growth and related to operational performance. It's exactly what happened if you remember last year in Argentina. When the currency split at the very last minute and the CPI was not adjusted for this first half when the reelection 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 '23, we are going to increase -- to grow our revenue like-for-like basis. and our margin in a very volatile environment. Second, with Majorel 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 can see the Majorel 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 Bhupender, the Head of region, Olivier, Scott and I will present to 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 Bhupender Singh was able to join us. So he is going to be with us to answer the question. Thank you, Bhupender.

[Operator Instructions]. Our first question comes from Simon LeChipre from Stifel.

Good evening. Three, if I may. First of all, on the top line revenue guidance. So it implies a slight acceleration of the like-for-like growth in Q4 relative to Q3. Is it just a matter of comps? Or do you foresee some underlying improvements in terms of volumes or business development? Secondly, could you just share some first comment on the sales pipeline for next year. And in this context, how do you feel regarding current consensus of [indiscernible] 5% like-for-like growth for next year? And lastly, just a quick clarification. Does the margin guidance is including or excluding Majorel.

Okay. Very quickly, Q4 is typically a 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 Majorel. Don't forget that until 10 days ago, we did not have access to any information by law. But my personal feeling is that 2/24 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. Yes, the third point -- excuse me, the third point, the around 16% EBITA is Teleperformance stand-alone.

And how much of a drag will be Majorel like for 2 months of consolidation?

Too early to tell. As we speak, we are -- we are answering -- we have a lot of work to be done because we have to make two consolidations, one at November 1, 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's month about that. So clearly, the level of margin is different from Majorel and Teleperformance that will be probably reduced our published numbers. So we are going to have three set of publication -- two set of publications, one with Majorel of two months, and we are going to publish a 12 months pro forma -- real pro forma, not aggregate, real pro forma by the end of 2023. So we need some time to put that in precise and exact figure in terms of...

That's the picture at [ the zero]. We cannot forget that there is a synergy plan that is well into the EUR 100 million to the EUR 150 million that T+1, the movie and not the picture, it should be a relative.

Our next question comes from Simona Sarli from BofA.

Good evening 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 [indiscernible] again to your outlook? How conservative is your current and new guidance for 2023? And how do the trends in October compared to what you have seen for the third quarter? And then I have another question on Majorel. So we'll take one by one.

I'm not sure it's a new guidance. We were in the range of 6% to 8%.

Yes. The midpoint is a cut of 100 basis points.

Yes. 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 the all in -- for more or less all industry in the best possible direction. I would say that for the BPO companies, consulting company, IT service company, 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 [ attendance ] is not to the upside, is to the slowdown. We think that the 6% that we give, excluding any be 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 U.S. for the health care or the results of the Black Friday and many activities that typically happen in November and December.

And if I may, there is one more please on Majorel. So in Q3, also substantially decelerated. It was minus 1 like-for-like. 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 plus 6%, plus 11%. Thank you.

I believe that the real without COVID is not negative, excluding COVID, 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 Majorel people, but they were absolutely in line with low level of guidance again also.

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 Gen AI 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 IT in the cutting of the [ cordon ] for -- in the U.S. for the wired industry and also on the fact that many companies are taking all over the world short-term extremely conservative budget approach.

Our next question comes from Antonin Baudry from HSBC.

Three, If I may. First one, I would want to come back on the cost base for 2023. So you changed a bit the guidance from 16% to around 16%. So I wanted to know what changed in terms of cost base 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. And my third question is about the revenue synergies that we could expect from Majorel 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, kind of country or which kind of verticals. Thank you very much.

I'm going just to answer to your last question and let's 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 [indiscernible]. 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 above or around.

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 fixed 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. We -- when you make the math, you are between 5.5%, 5.7% for the EUR 2 billion expected. As you know, we have not yet refinances debt by EUR 2 billion. We'll take the best opportunities, the best timing to take advantage of the market to reduce the cost of debt versus liquidity and this maturity, but your expectations are not totally wrong. As of today, hopefully, you will be able to do Majorel later on.

Our next question comes from Suhasini Varanasi from GS.

I have a few, please. You mentioned that synergies on material acquisition. You have visibility well into the 100 million 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 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.

You want me to answer, Daniel?

Either you or Bhupender.

Bhupender, go ahead.

Hi Suhasini. Yes. As Daniel mentioned that we had a clean team working during the summer, along with the NY. So when we say we are well into the 100 million to 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.

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 EUR 250 million. But that could change dramatically from 1 year to another, we have no control.

Is that EUR 250 million each for Turkey and Argentina?.

No, total, total, total.

Total. And roughly half each, Turkey, Argentina, EUR 125 million, EUR 125 million?

Not exactly this way, but a little more for Turkey.

No for Turkey.

And but I hope it's just Turkey in 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, Suhasini. We are probably the only one company in CAC 40 who are facing such a situation. Other companies are working in -- other companies are working in these countries, but they have been able to match the criteria to change their currency in functional currency, with either in dollar or in Europe. As we are mostly -- or significant part of our business is working locally. We cannot use the functional currency solution that would have helped a lot, but this is beyond our control.

I completely understand. 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?

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

Our next question comes from Karl Green from RBC.

Yes. Just a few questions remaining from me. The first one, just very straightforwardly. Just in terms of the new organization chart, are you implying that the regional reporting is just going to move to two segments next year for core and debt from the current rate. That's 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 statement about the 9 months trends. But could you unpack in Q3, what's happening in the U.S. and India specifically? Let's just go with those 2 questions to start, please.

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

On reporting this, I would say, change of segmentation is going to be 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 2 months of Majorel. Later on, we will go to this presentation by three main categories: one being America, the other one being Europe and the last one, like Specialized Services, not so far from...

Europe and APAC.

Europe and APAC, sorry, not so far from what Accenture is doing in fact.

Yes. And in terms of Americas, so as -- we've said it a few times. You've seen it in all of the 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, scale 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 Americas is relatively flat. So that means some of the onshore business is -- 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 lower-cost location like India, the revenue is -- it's deflationary on the top line, though on the bottom line, both in absolute terms and margin percentage terms, it is okay.

Yes. 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, explain also some of the element of the year 2023. Remember, '20, '21, '22 the year of confinement. People are at home cannot move mostly online and try to find anything to remain seen and probably increase their level of interaction with a friend, but also with the companies they buy product and service from. 2023, no more confinement freedom, much more time off-line with the kids in the park or doing brick-and-mortar shopping and so on. Sales is major. A lot of people are 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. Just a follow-on question, a very easy one. Just the comment that you made about the cost of delivering the synergies. I mean clearly, it's a fairly wide range for the synergy target, but which are understandable, but the cost of delivering that would you say it's likely to be at the lower end of the EUR 100 million to EUR 150 million?

We are going to work with that. We are going to be to do...

We do not expect the cost to deliver the synergy to be superior to one.

Our next question comes from Nicole Manion from UBS.

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 multiyear stack, there's also an implied underlying improvement in 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 our decisions. Do you expect this need this to change to some extent in Q4 then, given the acceleration there?

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 confirmation related to the peak season as usual. And typically, whether it's in health care, whether it is FMCG, electronics and so on, or fashion, you've so many acquisitions that are concentrated during this last 2 months period. And then you have so many friction that happened, 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.

Comps are easier.

Maybe the last question, please.

Our last question comes from Carl Raynsford from Berenberg.

I've only got a couple left and I'll let hopefully, fairly straightforward. The first one is moving into next year just on Europe. Obviously, Europe has had a good year this year. Now with Majorel, Europe will obviously be the majority of revenue if we split out LatAm as reporting currently is. And do you have any insight on how we should think about growth next year for the new -- just from a high 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 buyback. What sort of level would your valuation have to get back to you before you begin to target acquisitions more than kind of a share buyback. Presumably, those bolt-ons are likely to be fairly AI-based and therefore, pretty expensive. So if nothing changes in the buyback program, something you'll undertake into the midterm. I'll leave it that.

Bhupender, 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 certain degree of slowdown in Q3 in Europe, what we started seeing in the U.S. 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 you have to look at it from that perspective. Secondly, with the Majorel acquisition, we believe that our position has become much, much stronger. And there are additional lines of businesses that we were in Europe and also some of the other delivery capabilities that we needed to be able to convince our clients. So with the combination of having a much stronger team with ability to showcase additional lines of business, along with the better mix of countries, we are reasonably confident that we should be able to tie it over next year too.

And 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 guaranty 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 is has always been to work while very profitable, well-run company 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.

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

I would like to thank all of you who join us to listen at what we had to say. We are deeply convinced that the consolidation that we decided in integrating material 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 spring board to build the next wave of growth of the company. Thank you very much.