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Ladies and gentlemen, welcome to the Q1 Revenue 2019 Teleperformance Conference Call. I now hand over to Mr. Olivier Rigaudy, Deputy CEO and CFO. Sir, please go ahead.
Thank you. Good evening, everyone, and thank you for all -- for your presence tonight. We are going to commence our quarterly group figure for the first quarter that had just been released. I hope you get all of us the press release and the presentation that is available also on the website. I'm hosting this call from Paris with the team here: Head of Investor, Quy Nguyen and [ Julien and Marie ]. And let's give them -- the speech to Quy that has preliminary remarks to make first.
Yes. Thank you, Olivier. And good evening, everybody, welcome to this call. Financial press release related to the first quarter of 2019 revenue has been released today after the closing of the market. Dedicated slide -- slides are available on Teleperformance website in the Investor Relations section. As usual, Olivier's presentation will be followed by a Q&A session. And a replay of the conference call will be available later on the group website. Today's call contains forward-looking statements that address our expected future performance and, thus, by their nature, address matters that are uncertain. These expectations are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the looking forward -- forward-looking statements. For a detailed description of these factors and uncertainties, please refer to the section Risk Factors in our registration document available on Teleperformance website. Now I turn the call over to Olivier.
Thank you, Quy. Before going in depth in the figure on the Q1 figure in looking precisely to the slide, I want to highlight 3 message -- 3 key message from this release. First of all, of course, we are very happy with the strong growth recorded again -- once again during this Q1. With 10% like-for-like growth, this is the 28th straight quarter in a row posting organic growth above 5%. That demonstrates, if it was still needed, that strength of our business model and confirm our status as a growth company. We just put on the appendix of the presentation a slide showing quarterly like-for-like performance in 2012, if you are interested. So one thing, and I'm sure you have noticed that, we have changed our presentation of our business to reflect 2 things: the expansion of its range of service and its shift to high-value solution, notably following the acquisition of Intelenet; and of course, information about the digital solution deployments of 3G across the operation. We continued to split our business by geographical because it is the way that we manage a group. This is manageable for the group to follow by geography, and that's the way we conduct our business. That's why we added a new region, and I'll come back in a minute to that, we added a new region. And in the meantime, we have gathered all what we call the digital solution in the so-called D.I.B.S. total to allow you to capture the size of this new business. We'll come back in a minute to that. This new organization enable us to more effectively meet our client need in term of development and digital transformation. For sure, it doesn't change at all the full financial performance of the group. But of course, it illustrates progressive transformation and convergence between these different business line. Today, close to 20% of the revenue comes from digital solution that we call D.I.B.S., and more than 20% is generated from what we call worldwide leader in digital -- in [ magic apps ] that like business -- in business like retail, transportation [indiscernible]. So first of all, very good strongly record; secondly, change of the reporting; and third, very promising start in year allowing to confirm, obviously, on our target at 7% like-for-like growth for 2019 plus increased profitability by 20 basis points. Let's go more in detail now in Slide 3. So you have the figure of the Q1 and the Q 18 -- Q1 for '19 and '18 figures showing that we are at EUR 1,271 million, up 9.9% on a like-for-like basis. I agree we missed 0.1%. We should have been at 10%, but we are 9.1% (sic) [ 9.9% ]. Clearly, system performance, it's continuing as we have seen in the past over the last quarter. Total growth is, of course, close -- is higher, close to 24%, 23.9% to be precise. And it takes in account, of course, the acquisition of Intelenet that is recorded now. If we move to the following slide, you have the detail of what is the currency effect, the like-for-like growth and the change in scope. No surprise, here the change in scope, of course, is Intelenet. And the currency effect is EUR 30 million, of which the dollar is the main impact. There are other impact, but net-net, the full impact -- major impact is dollar, which is close to the EUR 30 million that I described here. So that is the fourth.I'm going to stay a minute on Slide 5 because this is probably the most new thing that we are going to make just to explain you how we are now explaining -- how we explain you our new sector. Following the acquisition of Intelenet, we maintain the position -- the presentation of our activity by region. Why? Because TP organization remains structured by region in term of operational management. You may have people that are a running country in where you have D.I.B.S. and non-D.I.B.S business in the same country, so we wanted to keep this operational management alive and living as we have done in the past. Anyway, 2 main engines are -- impacted the business presentation over as follows: First of all, we call the first category Core Services. It's changing to a larger new category called Core Services and D.I.B.S., or the Developed Integration Business Service (sic) [ Digital Integrated Business Services ], still split into region. A fourth region named India & Middle East has been created, gathering all the ex-Intelenet activities in the zone; plus Teleperformance India that's what before, I would say run, under for the EWAP business; and Praxidia of TP consulting solution that has been close to all the activity of the engineer of Intelenet. Secondly, we put -- we identify revenue generated by D.I.B.S. solution in addition to the activity in the middle -- in India and Middle East region. These include all the BPO activities as well as e-mail, chat and social network solutions. So we have a decent Core Services that generate -- followed on a geographical basis that we disclosed on these 4 region, including the new regions that we created, the total of the D.I.B.S. activity across these 4 region. Specialized Services remain globally unchanged with LLS and TLS, except for Praxidia that is now reclassified in Core Services and D.I.B.S. category as explained earlier in the region of India & Middle East. I hope it's clear, but it's not so complex. In fact, when you look on Page 5, you understand what has been done. What was devoted to some specific region has been from Intelenet has been classified with region: I mean that Guatemala is going -- INTELENET Guatemala is going to Ibero-LATAM. INTELENET Poland is going to Continental Europe and Middle East. Philippines, U.S.A. and U.K. that are, of course, coming from Intelenet are, I would say, now gathered in EWAP, while the TP India has been moved to middle -- to India & Middle East.So let's move now to the activities and the message of Q1. So we recorded a growth of 11.1%, I'm on Slide 6, in Core Services and D.I.B.S. That has been clearly across the different region and, in the end, really driving the growth of this quarter, clearly. Secondly, if you stripped -- if you look to Specialized Services, you have a growth which is at 3.7%. But most of the growth and even more than most of the growth -- all the growth and more than most of the growth is coming from LLS. That is growing dramatically again. And we are confident that it will be able to swallow the fact that our ARM business is a little down and TLS is flat. So we are experiencing again a significant growth in LLS. At the end of the day, and we put that here, all the D.I.B.S. business in the group is now EUR 235 million, which represent 18% of the group revenue in Q1. That reflects the progressive transformation of the group and the capacity to take profit from the market evolution and digitalization. Obviously, we don't have this figure from 2018. We will be able, as the years go by in the future, to populate this figure on a regular basis, and you will be able to follow that on a regular basis. Let's come to EWAP. EWAP, we have announced -- I am on Page 7. We have announced a 2.8% like-for-like growth. In fact, this figure is showing 2 things: the confirmation of the recovery in the North American domestic business, especially since the second half; and the continued successful diversification of client portfolio, especially in e-tailing, health care and transportation service and fast-moving consumer goods.Asia is growing dramatically, especially driven by Malaysia, with the, finally, the development -- the rapid development of the multilingual hub in Penang. We have a decrease of the business in U.K. as weighted. We are close to be double-digit down. And we have no more TP India in this business -- in this division. If we would have had TP India in Teleperformance, the growth would be close to 5.3%, showing the decline of U.K. If you again take U.K. that would have been flat, we will be close to the 7% that we have experienced in last year in Q4. So as a whole, the region is doing well even if it has been hampered by the decline of U.K., which we believe is going to be continued in Q2 and with the disappearance of India.If we move now to Ibero-LATAM on the following page. I would say little that you don't know already. Of course, the growth is 16.1% like-for-like, which has been, I would say, fueled by Portugal, as always, but also with Mexico, Colombia that are growing in nearshore in Pan-American solution. Market -- domestic market are good in Mexico, Colombia and Argentina. And we are seeing a pickup in Brazil. So when you look to this region, everything seems going well. I would say same story for CEMEA on Page 9, even if it's a little less, 15.1% like-for-like, very solid sales performance among multinational client. So good increase in revenue in Eastern Europe but also in Turkey, in -- of course, in Greece with multilingual hub. And finally, a good performance in France that shows also the growth that we are experiencing. Lastly, for the core and D.I.B.S. service, here you have the new sector, which is India & Middle East. Like-for-like, you have only India. TP India, that was -- before that, that was accounted in EWAP. The growth is absolutely amazing, 42.5%. That means that we are experiencing significant growth in India and to a lower limit also -- to lower level, sorry, as the same story in Praxidia. [indiscernible]. So strong growth of ex Intelenet activities on a pro forma basis. We are experiencing also on the business more than double-digit figures as done at the time we made the acquisition. Let's move to Specialized Services. So 3.7% here. Just to be clear, all the growth and more than whole the growth is coming from LanguageLine Solutions, which returned to normal growth after a more mixed performance in 2018. We are close to 7% -- towards the 7% again. TLS, there is modest growth, as we knew. We have still the negative impact of the method of invoicing in UKVI that will continue at least in Q2, and we'll see what'll happen after. And we have revenue from debt collection, which is down year-on-year and showing a decline. So no major fear about Specialized Services, especially when you see 2 things: the level of the growth of LanguageLine Solutions and the fact that the growth in the last -- how can I say that? In the last months has been accelerated versus the first months of the quarter. So all in all, we are happy with Q1. Of course, it's just the Q1, but it's better to start this way than to start -- this is good. We confirm of, obviously, our full target: like-for-like growth at least 7%, 20 basis point more in EBITA, continued good strong free -- net free cash flow. So we are reasonably confident on the year to come. So that's where we are. Nothing really worried about that. Good performance. And I'm open to -- I'm with the team here to answer your question.
[Operator Instructions] We have first question from Mr. Bilal Aziz from UBS.
Just 3 questions from my side. I'm just trying to dive a bit deeper into the growth within Specialized Services. And on LLS, you kind of suggested it was at 7%. Was that helped by a reversal of the 2% drag you had from a technical issue last year? And did you see any notable calendar impacts within LLS this year? Second question on TLS, can you perhaps talk a bit about the pipeline for any material visa application contracts that might be coming up for tender and your -- perhaps your outlook post 2Q for that business? And lastly, and I appreciate there's quite a few moving parts within the reclassification of Intelenet, but when you acquired it, I guess, the message was that it should be growing at 10% to 12% organically. And on a pro forma basis, how is that growth tracking ahead of 3Q?
So LLS, of course, we have an impact only on March because it was March last year. But as a whole, this is not explaining the reasons of the growth. It has a positive effect, I'm sure you have understood that. The growth is sitting a bit beyond that point. So we are seeing again a better growth in LLS. And I have confidence that this will continue over the next month. Of course, you never know. But we see a good momentum in LLS so far. As far as TLS is concerned, we are, as you can -- as you know, competing on some specific contract. There is -- I have nothing new to tell you that have been said to the market at the time of the release of the result early in March. Beyond it, it's too early to tell. Your third question, I'm sorry, I missed. It was on the...
Intelenet.
Intelenet. So Intelenet, so we are experiencing an Intelenet growth, which is not the way we follow now the business. You have understood that we cut the business in piece across all different region. But the Intelenet business is growing above 10% as planned. And we are reasonably confident that it will be exactly like that for the full year. So we are exactly on track of what we said.
We have another question from Mr. Edward Stanley from Morgan Stanley.
I've got 3. Firstly, on EWAP, despite the easier comps in Q1, you flag only really Brexit as being the negative headwind. But in the past, you've said that the U.K. is a pretty small portion of that group. So explain 170 basis points, which is basically what you're saying is the step-down because of Brexit, I mean...
I don't know it's only Brexit. Brexit has a large shoulder on, and you know that better than me being in U.K. I'm just saying that U.K. is a significant part of the business, of course. It's a big -- it's the most -- I should not tell that this way, but probably the most important European company in the group. So this company is down in Q1 and probably will be down in Q2 also. So it has an impact on the EWAP, yes. You hear me? Although it's only Brexit or global mood. I don't know, to be frank. But it has clearly an impact, yes. In fact, in terms of figure, U.K., I'm delighted to see that it's still important for us.
Sure. But I mean the fact that it's -- you're saying it will last into Q2, but if it is Brexit related, then presumably, we should, if we're being conservative, assume that it lasts into Q3 as well.
I'm just saying that I knew that Q2 -- you're probably right. I'm not sure the trend of this issue will be so bad in Q3 than it would be -- it has been in Q1 and probably in Q2. Frankly, I don't know. But you could be conservative, too. Of course, you can be conservative. You are, if I may say, much more place than me to have an idea of what is going to happen in U.K.
I'm not sure I am. On -- and secondly, on debt collection. I know it's a small part of the group, but it appears to have been a drag for about 6 quarters now. Is there any update on when you think this can drop away?
So what has been done, and I'm sure you have noticed that Specialized Services is not under control of -- under management of the manager of LLS. It not only oversees LLS but also TLS and our ARM, the debt collection business. Again, I believe this is going to suffer in Q2. I believe it's going to progressively come back to a better solution in Q3. But you're right.
Okay. Okay. And finally, I know we're not allowed to talk about Intelenet because we have to talk about D.I.B.S. now. But where -- if I think about the business and you're integrating it [ and everything ] is on track, but are there any -- one, are there any positive or negative surprises that you've found within that business now that you've had it for a while? And secondly, roughly, when do you think you'll get a feel for how much synergy could be delivered across -- integrating that into the group?
So absolutely no surprise for different reason. The quality of the team, the quality of the business, the quality of these people, and I'm sure you know that they know how to work with different shareholder so they are able to adjust very quickly. And here, we are shaking a lot the coconut because we are cutting the business in parts, putting in a part in Europe, a part in LATAM, a part somewhere and giving them also business that we are not managing by them. So this is doing well, frankly.Of course, the idea is to develop synergies. There are a lot of things that are going on as we speak. Nothing has been really -- there are some stuff that have been materialized but nothing that has been -- could be told properly. We are thinking, this is not an announcement, we are thinking to make something much more precise and much more detailed during Q3 probably in U.S. on the D.I.B.S. and on the synergy and on the digital approach.
Sorry. What does that mean you'll -- what? You're going to do an Investor Day on it? Or you're...
Yes, yes, yes. What we call a Digital Day or Capital Market Day. We have not defined it because it's not totally defined for different reason because we are waiting from some -- we wanted to make it probably in U.S., and we need to have something that is -- that need to be finished in term of CapEx. And we hope to be able to do that in October.
We have another question from Mr. Christophe Chaput from ODDO BHF.
Quy and Olivier, 2 questions for me. The first one is again on LLS. I just want to understand the plus 7% that you mentioned, do you think with new clients, more business with actual client or is there are as well a price effect linked to the video development? And the second one is just to understand and to come back on Intelenet. So you implement the Spanish language, if I remember well. So do you see the first...
We stopped.
Yes. So that's a part of my question. Do you see your first sign in Q1 of additional revenue? Or we are going to see it in Q3, as you said?
Nothing in Q1. Maybe in Q2, but I'm not expecting a significant number of -- there are some things that are signed or under scrutiny or under RFP or under negotiation, as we speak, but nothing that is material that you can take in account for in this figure. As far as LLS is concerned, you're right. The video is increasing significantly, and it helps in terms of volume and in term of price. I don't know, it's difficult to tell whether it's new client or no because when you look LLS, the portfolio of clients is so big and the size of the clients compared to a core business are small. So it's difficult to tell whether you're -- there is nothing material. What we see is that the volumes, the minutes plus the video are increasing. So it -- there are 2 reasons, in this business, not only you need to have the client, but you need to be able to answer them at the time when they call you on when they Facebook -- when they FaceTime you. If you have not, the proper organization, you are missing sales. So I believe that we have been able in this sort of part of the year to be better on these 2 element. But it's clear video was increasing significantly higher than -- at higher speed than the voice, than the phone call.
We have another question from Mr. Patrick Jousseaume from Societe Generale.
My first question is on U.K. Just wanted to know why the revenue is down 10%. Is it a question of volume, price or of decisions that you have taken to get rid of some contracts? I mean, could you give us more details about that?
Volume, volume, volume.
Volume? Okay. Volume, yes. And my second question...
Volume is made of 2 things. It's made of volume on the client that you get and sometimes the client that you lose. So it's a mix of both.
That was my question. Okay. And my second question is about CEMEA. So we see quite a strong revenue growth. Could you elaborate a bit on these and especially about the potential improvements that we could see on margin in this geography, where the margin was the lowest last year?
Okay. So yes, I mean it is the same, I would say, pattern that we had in Q4. That means the multilingual hub, that is going well, the East part of Europe, that is going well, including Egypt, including Eastern countries in the -- in Europe, speaking of all the Eastern country. Nordics is doing reasonably well. France is back on track. Italy isn't growing a lot. It's growing, I would say -- it's growing. Germany seems to be a little better too. So you have roughly the same patterns in Q1 and Q4. Of course, if it's continued all over the year, it should have a positive impact on our margin, clearly, again.
We have another question from Mr. Han Hampton (sic) [ Dan Hobden ] from Credit Suisse.
It's Dan Hobden from Crédit Suisse. Just 2 questions, if I may. The first one is on India & Middle East and, obviously, the amazing like-for-like growth rate. With it being a new division, I was wondering, is that the sort of growth rate you'd be expecting throughout the course of 2019?
No, no, no. What happened in Middle East? In Middle East, in fact, you have for like-for-like only what we call the -- what was named before Teleperformance India. You have also Praxidia. But all the zone is mainly Intelenet except Teleperformance India. So here, you have as a like-for-like only TP India. TP India, we knew that we wanted to invest a lot in this country so we are experiencing a significant growth in TP India since now close to 1.5 year. And we are very confident of the fact that we are here serving as some non-Indian company from India. And that is going -- and that is now managed by Middle East and India -- TP India and Middle East under the management of the previous manager of Intelenet, but that was the decision that we have made last year to invest so much in and to develop so much in India.
Okay. And then the second question, if I may. I think you mentioned that LLS was growing stronger in the third month of the quarter than the first month. I was wondering, in terms of an exit rate in general for the group, are you able to give us some guidances to watch what sort of rate March was growing at, at a group level?
I'm not going telling it. I'm not going to mention it by months because if I'm starting to give you the figure by months, you are going to call me every month to have that. What I just wanted to give you as an idea that what we are seeing, that the increased business in LLS, especially in March, a part of that is coming from the one-off that we had last year, but is going beyond the one-off. So what I'm just telling that forecasting higher figure for the full year in LLS that we had last year seems at least reasonable. That's what -- that's the message that I wanted to convey during the sentence, for the issue.
And at the group level, obviously, 9.9% for the quarter, there's nothing you draw out there about it slowing or speeding up throughout the course of the quarter.
Of course, the quarter just started. We have just even in the initial first months of the quarter, but the trend seems to be good. Where we are going to land in second quarter, it's too early to tell you where we would start. The second quarter is never the biggest one of the group, as you know. But in term of volume, not in term of growth. But we have not seen a big change in the second quarter so far. But it's -- again, we are just 25th of March -- or 24th of April, sorry, so it's not over, clearly.
We have another question from Mr. Laurent Gelebart from Exane.
Three questions on my side. So the first one is on Brazil. So if I remember, while it is a decent chunk of your Ibero-LATAM business, so I would like to know what was the level of organic growth there and if you think it is sustainable. The second question relates to India. As you are becoming Indian in India with the acquisition of Intelenet, do you believe those guys are helping you to develop further the business, do you believe the growth will just -- because of what you have been doing in the past year or not? And finally, Turkey. I think it's the first time you mentioned Turkey. So could you let us know what do you do there, I mean it is nearshore or offshore or it is for the American market?
Brazil, no. I'm not going to give you the precise figure of Brazil, but I know that was a concern by a lot of your colleagues what's happening in Brazil. What we see -- in fact, we made decent year last year in Brazil, but it seems that Brazil is doing, so far, not badly. And we hope that it will continue. There was a lot of question about Brazil. It's much more the uncertainty. And it seems that despite what people might think -- might have in mind from the new government, it seems that in term of business, the business seems to be reasonably good. So we hope that we will be able to get that all along the year. That's the first plan. In India, of course, India, the like-for-like growth is only capturing what has been decided for India because it's by nature. It doesn't mean that the Indian business is not doing well at all. In fact, we have different business in India. You have the international business and the domestic business. If you want to grow dramatically domestic business in India, we might say it's not so difficult. The idea is not to grow so much in domestic business with low margin. So the idea, to select precisely for the domestic part with whom at what margin we want to work. So this is under control. We are looking that precisely to develop the business. But the growth that we have in India from the Intelenet business, whether it's domestic or nondomestic is not at 45% like TP India, which is smaller but has a good rate. Frankly, we have a good rate. As far as Turkey is concerned, I mentioned it. I shouldn't -- probably enough. It's doing well. It's not a big business. We are doing offshore -- nearshore, I would say, mainly, but it's not a huge business. So we do believe that this country, one day, will grow significantly much more than what its size is today. So we are working on it. Why don't we just take the last question?
So we have no other questions, sorry.
Oh, that's great. So all in all, I just wanted to say that, first of all, I want to thank you for your participation and your interest in Teleperformance. Quy is going to give you some detailed agenda on what is going on for Teleperformance. Again, I wanted to highlight this is a good quarter, a good start of the year. We are happy with that. We do believe this is a good start of the year. And there are issues, we mention them sometimes, but as a whole, we are more than satisfied with the beginning of the year. Quy, I give you the floor.
Yes. Thank you, Olivier. I will give you a few key dates for the coming months. So I indicate here agenda. Teleperformance holds its Annual General Meeting on 9 May in Paris. We invite our shareholders to participate in the event and actively take part to the resolution voting site or through our dedicated voting platform. All the details to participate are available online on Teleperformance website. Please also save the date of the 2019 half year result publication on 25th July 2019. And of course, in the meantime, Teleperformance continue -- we continue to participate to numerous conferences organized by brokers. And of course, we would be happy to see you in there. Thank you. Thank you all. And see you in the coming weeks and coming months. Bye-bye.
Bye-bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.