TDCX Inc (TDCX) 2021 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. I am [Stuart], your Chorus Call operator. Welcome and thank you for joining the TDCX Inc. third-quarter 2021 results conference call. (Operator Instructions).

I would now like to turn the call over to management. Please go ahead.

Hello, everyone, and welcome to TDCX 2021 third-quarter earnings conference call. My name is Jason Lim from Investor Relations and allow me to introduce management on the call. We have our Executive Chairman, Founder, and CEO, Mr. Laurent Junique; and our CFO, Mr. Chin Tze Neng.

Before we continue, I would like to remind you that we will be making forward-looking statements, which are subject to risks and uncertainties and may not be realized in the future. You should not place undue reliance on any forward-looking statements.

Also this call includes a discussion of certain non-GAAP financial measures, such as EBITDA and EBITDA margins. For reconciliation of the non-GAAP financial measures to the closest GAAP measures, please refer to our press release or the Form 6-K, which are available on our IR website.

Lastly, we have provided a convenient translation for the translations of Singapore dollar into the US dollar. This is done at the rate of USD1 to SGD1.3611. This should not be construed as representations that the Singapore dollar amounts could be converted into the USD at this or any other rate.

Our management will now share updates on the operating and financial performance. This will be followed by a Q&A session, in which we welcome any questions you may have. With that, let me turn the call over to Laurent. Laurent, please.

Thank you, Jason. Hello, everyone, and thank you for joining us today. It is my absolute pleasure to welcome you to our first-ever results call as a public company. Before we begin, I would like to take a moment to thank all our clients, partners, and investors for your support and for being part of this incredible journey towards our successful IPO in October.

What we've achieved would not have been possible without our amazing team of over 14,000 people who have helped deliver stellar results over the past years and, in particular, for this set of results which we are reporting on. Let me now go through some highlights of our Q3 performance. We are very pleased to announce strong revenue and earnings growth for the quarter.

So a strong Q3: revenue rose 41% year on year to USD109 million, mostly contributed by large established clients in digital media and travel. In particular, travel came back in a good way for us. It is still not at 2019 levels, though.

We also continued to ramp up in exciting verticals such as fintech and gaming. Revenue rose across all the geographies we operate in. Two of our largest geographies, Malaysia and the Philippines, continued to deliver very strong growth; whilst newer footprints, like Japan and China, grew in excess of 50%, and Spain doubled year on year.

During the quarter, we achieved a new milestone with maiden revenue contributions from Latin America as we commenced our first campaign in Colombia. I am also excited by our performance in sales and digital marketing where revenue rose 93%. Our largest clients in this space significantly expanded their volumes with us year on year. Revenue from a relatively new professional social media client in this segment rose four times.

We are focused on quality growth, higher margins by staying true to our strategy of focusing on New Economy clients and our strength in Southeast Asia. We continued to achieve quality growth and improve upon our margins. EBITDA rose 51% to $39 million as EBITDA margins rose to 35.5%. Revenue from New Economy clients continued to increase and now stands at 93.4% of total revenue in Q3.

New logos, we continue to gain traction with new clients. Since the start of 2021, we have signed 16 new logos, including several of the fast-growing technology companies in Asia. Our new logos also included our first clients in the food delivery and crypto verticals. Since we have signed that crypto client, we have deepened our relationship with them, and they have started to contribute meaningfully to revenue.

Operationally, we delivered on our headcount increase and continue to expand as total headcount rose 34% to over 14,100 as at September 30, 2021. We believe that this stellar set of results puts us on the firm footing moving forward as we start this new chapter as a listed entity.

Mr. Chin will share more details on the financials later. But for the benefit of the new investors and analysts joining us, let me quickly provide an overview of our business before I hand over to our CFO.

Our business comprises three key service offerings: number one, omnichannel CX solutions; number two, sales and digital marketing services; and number three, content monitoring and moderation services.

For omnichannel customer experience, we help our clients manage relationships with their customers by providing complex customer experience solutions, such as after-sales service and customer support across multiple languages and multiple channels. One simple example would be helping a foreign English-speaking visitor resolve urgent accommodation issues with a Japanese host who has a bilingual agent, who is well trained to handle complex level issues.

For sales and digital marketing services, we help small, medium enterprises plan and execute their digital advertising campaigns on the world's leading social media and search engine platforms. This requires specialized personnel well versed in the science of ad optimization on such digital platforms.

Lastly, our content monitoring and moderation services help our clients create a safe and secure online environment for social media platforms by providing the human touch to content monitoring.

So these services made up 62%, 22%, and 14% of our Q3 revenues, respectively. While CX solutions have historically represented the majority of our business, over time, sales and digital marketing as well as content monitoring and moderation services have both seen a greater share of the revenue mix.

This increased diversification in our business mix represents our efforts in continually adapting to our customers' changing business needs and our ability to grow with our customers at scale.

Now in terms of the addressable market, we operate in a very exciting space where we see increasing demand in CX services, especially in Southeast Asia, from New Economy clients. According to Frost & Sullivan, the Southeast Asia CX market size stood at $10 billion in 2020 and is expected to grow to $14 billion by 2025. Within this space, the New Economy segment alone is expected to rise even faster at a compounded annual growth rate, or CAGR, of 19%.

From a global context, the market is expected to rise from $80 billion to $100 billion over the same period with the New Economy segment growing at a CAGR of 17%.

So we are strongly positioned to capture the market from these trends. We believe that we have the first-mover advantage in Southeast Asia with a unique footprint. And we plan to continue to carefully expand our global footprint while keeping a very firm focus on our sense of gravity in Asia.

We have an attractive client base that consists of some of the largest and most innovative brands in their respective industries, such as social media and travel and hospitality. Our relationships with our blue-chip New Economy clients offer significant opportunities, and we are well positioned to ride their growth.

We have an international footprint in 10 geographies across Asia, Europe, and Latin America. This provides us with access to a broad talent pool and equips us with multilingual capabilities to serve a global customer base including English and key Asian languages such as Mandarin, Thai, Korean, Malay, Vietnamese, Japanese, as well as Asian unicorn languages such as Bhutanese and Sinhalese.

In recent years, we have opened new offices and took on new client mandates in different geographies, representing our global ambitions and execution.

As you can see in the pie chart, over 90% of our Q3 revenues come from our core businesses in Southeast Asia, while our relatively new geographies in Japan and China are starting to contribute meaningfully. We have also expanded into Colombia, India, and Romania in the past two years, and we are ramping up our business there.

Let me round up with the TDCX key competitive advantages. We have, first of all, a strong Pan Asia footprint, and our leadership position in key Southeast Asian markets helps drive our competitive edge. We run highly successful offshore operations, which drives cost benefits and higher margins. We focus on market-leading global leaders in the New Economy sectors.

To meet the demands of high-growth digital clients, we are designed to be agile and flexible and scalable in line with our clients' rapid growth. Our emphasis on supporting complex issues is why more than 60% of our employees have college or university degrees. And the quality of our employees is a key differentiator.

Next, we are domain experts with a deep understanding of high-growth and complex verticals such as digital advertising, fintech, gaming. Finally, we augment our incredibly talented people with proprietary technology that drives productivity and accuracy of our service delivery.

All the above leads to better employee outcomes including a lower attrition rate compared to the industry average and high employee satisfaction scores. Our corporate culture is designed to foster a work environment that is fully aligned with our tech clients. I would like now to spend a bit of time on some upcoming trends as well as reiterating the key tenets of our strategy.

As economies reopen, we are progressively getting ready for return to the office and for the great reshuffle, as it is called. Our teams are reviewing protocols right now as well as people trends, and we will be leveraging several of the solutions we have available.

Firstly, a key theme will be flexibility. We will implement hybrid work arrangements for both office collaboration and work from home. Secondly, keeping in touch with our people a lot more frequently. Treat them like our customers and empower them. Supersize engagements, and bring mental health support front and center.

Thirdly, rewarding our people with smart compensation and benefits and even greater focus on performance-based compensation, and real-world results versus time spent.

Lastly, reinvent training: less classroom, more self-paced and online. Recognize and reward people while investing in themselves by using our training tools and options. In essence, it's all about culture, culture, culture. It's so easy to lose our culture with the reduced personal time in the office. So this will need renewed focus and energy.

Now from a strategic point of view, our plans have not changed. We want to: one, expand geographies. We are opening new offices in North Asia and looking at other locations in Asia. The approach to work from home has opened new possibilities with lighter, in-country satellite setups for us. Number two, invest in people. As I mentioned earlier, attracting, retaining the best will be central to our success. Number three, lean and effective. Continue to digitalize HR, finance; anticipate inflation. Number four, acquisitions: building pipelines but staying true to our DNA principles. We will be very selective when we look for acquisition.

Let me now hand over to Mr. Chin to cover the financial.

Thank you, Laurent. Let me first quickly share some details on our historical financial performance before we dive into details of Q3 2021 over the next few slides. On the left, we have the revenue performance. In the middle, our EBITDA numbers. And on the right, net profit.

As you can see, our business has achieved consistent high growth with 55% revenue CAGR from FY 2018 to FY 2020 and 61% EBITDA CAGR from FY 2018 to FY 2020. Net profit CAGR was 50% over the same period. This was coupled with a fair record of consistently high EBITDA margins rising to 32.9% in FY 2020, up from 30.6% in FY 2018.

For the nine months ended September 30, 2021, we recorded USD294 million in revenue, USD96 million EBITDA, and USD35 million net profit. These numbers attest to the successful execution of our business strategies and competitive positioning where we are focused on the following principles: focus on high-growth CX segment, strong exposure to New Economy clients, focus on complex offerings, regionalization of operations underpinned by multilingual hubs, and 90% of our agents based in Southeast Asia.

Let me now share some details on our Q3 financial performance. Revenue rose 41.3% to USD109.3 million, driven by broad-based growth across all of our key business segments and across all geographies.

In the next slide, I will share the breakdown by service type and geography. EBITDA rose 51.1% to USD38.8 million, as we expanded margins from 33.3% to 35.5% on the back of improved stock productivity and continued focus on careful and disciplined cost management.

Net profit for the period rose 46.7% to USD22.2 million that reflected some incremental tax charges in Q3. On this slide, we will share more details on our Q3 revenue performance by the services we offer and by the geographies in which we operate.

Revenue from OCX solutions rose 37.9% to USD68.2 million due mainly to higher business volumes driven by expansion of existing campaigns, as well as the ramp-up of new projects that commenced during the first half of 2021. In addition, business volumes benefitted from the nascent recovery in the travel and hospitality sector from the impact of COVID-19.

Revenues from sales and digital marketing services rose strongly by 93.4% to USD23.7 million due to the volume expansion of existing campaigns for our social media clients and search engine clients across our delivery sites in Asia. Revenues from content monitoring and moderation services increased by 7.1% to USD15.6 million. This is high contribution from a social media client.

In terms of revenue contribution by key geographies, Singapore rose 32% to USD28.7 million. Philippines rose 45% to USD28.7 million. Malaysia rose 40% to USD28.2 million. Thailand rose 35% to USD13.3 million. Japan rose 66% to USD6.3 million. And China rose 73% to USD2.4 million.

Let me now share some details on our expenses. We continue to monitor closely our overall cost structure and ensure that our total operating cost base is streamlined and aligned to support our fast-growing business. For the three months ended September 30, 2021, operating cost as a percentage of revenue improved to 74.0% compared to 77.2% for the same period last year.

Being a people-centric business, employee benefits expense makes up the largest portion of our total operating cost base. Our employee benefit expenses increased by 37.5% to USD63.6 million for Q3, in tandem with business volume expansion. The average number of employees in Q3 rose by 44% compared to the same period of 2020.

On a group staff productivity basis, revenue per employee rose by 5% while employee benefit per employee rose by 3%, demonstrating that we have improved productivity while managing wage inflation. Our depreciation expense increased by 22.2% to USD7.6 million for Q3, primarily due to depreciation on right of use assets, new renovations, and capital expenditure in relation to office expansion for business growth.

All other expenses which include items such as recruitment, transport, and telecommunication expenses rose 34.3% to USD9.6 million. Aggregating the above movements, total operating expenses rose by 35.5% to USD80.9 million, which is lower than our topline growth of 41.3%.

Lastly, let me now move to the financial outlook. We expect full financial year 2021 revenues to be in the range of SGD549 million to SGD553 million. This translates to USD403 million to USD406 million, assuming an exchange rate of USD1 to SGD1.3611.

At the midpoint of the range, revenue growth is expected to be 26.7% compared to 2020. We expect full-year 2021 EBITDA margins to be approximately 31.7% to 32.2%. This excludes expenses associated with the performance share plan, which will be recognized from Q4 2021 onwards.

The PSP serves to incentivize and retain our senior management team and top talents, as well as to ensure alignment of interest with investments in creating shareholder value. We will start to incur expenses related to our listing and ongoing life as a publicly listed company.

Lastly, the margin guidance includes our expectations to continue to invest in business development efforts, technology, and innovation to drive growth in the long term.

With that, we end our presentation. I will now hand it back to Laurent for some closing remarks.

Thank you, Mr. Chin. Finally, a big thank you again to our incredible employees and my incredible management team. How collectively they are maneuvering around the obstacles created by the pandemic, particularly in Asia, is exemplary.

I also wanted to touch a bit on our corporate social responsibility initiatives. So #BeGreener is a program for all of us to care for the environment. And TDCX, this year, was able to offset 38,770 tons of carbon dioxide.

#BeHappier, which is about our employee well-being -- I am happy to report we achieved an employee satisfaction score of 89%, even as the pandemic was creating havoc everywhere in Asia.

And finally, the third pillar of our corporate social responsibility is #BeKinder which is our community outreach program and which is about to be redesigned as a central entity to uplift communities in Asia through digital empowerment.

Thank you, everyone, for listening. And let's now move to Q&A.

(Operator Instructions). One moment for the first question, please. Pang Vitt, Goldman Sachs.

Hi, everyone. Thank you very much for the time, and congratulations for the great set of results. A couple of questions from me; maybe we can go one by one. Firstly, I just want to understand the growth trend, especially as you mentioned that there is still certain impact from the slowdown in travel and hospitality segment. If you were to include the travel and hospitality segment, what would the growth rate look like in third quarter on a year-on-year basis?

And similarly to that, could you also comment whether the growth from the extension of the current client is higher or the new win of the new client is coming in at a higher rate? That's question number one.

Great. Thank you, Pang. So on the travel -- we are still deeply affected by the travel impact. If you look at Q3 alone, our whole travel and hospitality business is still down by 22% Q on Q. If you look at it from the last trading nine months, we are still minus -- yes, around the same number in the 20% zone.

So it's still a significant impact for us in terms of travel and hospitality. But because we have other businesses that have picked up in fintech, in gaming, and in digital advertising, we are able to compensate that pretty nicely.

And now in terms of the growth coming from the clients, still, the majority of our growth is still coming from our larger clients. But other businesses, like fintech, grew by 62.5% if I include the crypto, for example, in our fintech business. Gaming grew 86%. We have a new social media client that grew by 300%.

So there is growth almost everywhere in all our client lines. But the two larger clients seem to be contributing to the bigger part of the growth for the business.

Well, thank you very much. Maybe also on things we touched upon the growth rate, right? Just want to understand the guidance that you provide for the full year a bit better.

Given the guidance that you provide us, assume that if you look at the fourth-quarter revenue, the year-on-year growth rate will come down from what you actually achieved in third quarter.

Is there any specific trend that you observe that suggests for the slowdown? And could you also help provide some framework on what should we think about growth going forward into next year as well?

Okay. So Q4 this year -- one first thing you need to take into account, first of all, we had a very strong Q3 to begin with. Second, Q4 last year was unusually high. So it was almost 20% more than Q3, which is -- it was an unusual year. It was 2020, we were in -- still big time in the pandemic.

So we are doing -- we are going to do a great Q4. It's just that the base of comparison is much higher if you look at 2020. So normally, Q4 is not as strong of all the quarters in terms of seasonality. So that explains this, to begin with. But still, it will be a very decent growth compared to Q4 2020.

Now forward-looking, the way we look at growth moving into 2022, we are very, very much guided by the statistics of the markets we operate in. And we know that specifically in Southeast Asia, we see growth at 19%. But that's the statistics we look at and we rely upon.

We need to be doing more than that, and we have demonstrated in the past that we were able to beat those numbers pretty comfortably. Now we are not ready to give guidance for next year. We will do that in the quarter-four results announcements.

Sure, thank you very much. I'm not sure whether -- if there is still time to ask more questions, or maybe I can go back on the queue as well.

You can monopolize the time. (laughter). I have no issue to you, Pang.

Sure. Maybe I also wanted to understand, right, the quote. If you could share in terms of country by country, is there any color on like which country you see a very interesting trend. And especially I notice that you mentioned that there is growth in countries, like Philippines and Malaysia, that seem to be doing better as well.

If there is any color on that, that would be helpful. And further on that, as you expand it into more geographies, whether it's Colombia, Spain, and you have Romania, if you can also share with us how the progress and traction being in these new geographies work.

Absolutely. So absolutely, Malaysia and the Philippines are powerhouses. Malaysia grew by 40% and the Philippines by 45%. So it's quite solid growth, but other markets grew as well pretty well; Japan by 66% and Spain, which is starting from a small base, by 193%.

But really, we are placing a lot of expectations around Malaysia and the Philippines, as they are the central keys to our business.

And now, moving forward in terms of new countries, as you know, we pursue an organic growth strategy. We're pursuing quality growth. So it will take time for them to grow. So usually, it takes us about three years to get to decent levels, which we were starting to enjoy with Spain.

As Colombia, we just opened at the beginning of this year in the middle of the pandemic. And then, we just opened India as well in the middle of the pandemic, but we have signed up our first client in India. We have signed up our first client in Colombia.

We are opening Romania as well, and we did in a small way as a support to our Barcelona operation. And so the global expansion will take a bit of time to grow, but -- so we are relying a lot of our growth on our existing footprint in Asia Pacific for the moment.

Sure. Thank you very much. Maybe I'll --.

Thanks, Pang. I think we have about six questions online. So maybe we'll just tackle the six questions first before we come back to you if we have more time.

Great. Thank you.

Okay, thanks. Thanks again.

Thank you, Pang. Sorry.

So I'll just read off some of the questions that we have. I think we can combine two questions from [Jin Jiang Co. partners] and KC from CIMB. It's about wage inflation. Can you talk about the impact of inflation on wages in our cost structure? And what is the -- that the MSE allowed for the wage inflation to be passed on to your clients? And if so, how [quickly]?

All right. So I will share this one with Mr. Chin. So far, we have been able to cushion wage inflation pretty well, and it's a collaboration with our clients, to begin with. So our clients are very involved in the work we do, and we are always watching labor competition, attrition, competencies. And so we work together to adapt our compensation and benefits strategies together with our clients' pricing.

We are not always able to offset wage inflation on our clients, but we do work together. And we track a number where we look at our revenue growth versus our wage inflation, and Mr. Chin will talk more about this. At this point, it's positive.

So it's definitely on the list of things we do. Our contracts vary in terms and in the duration. And in terms of whether we can have a COLA, cost-of-living adjustments, or do we need to wait for the contract to be renewed to ask for wage increase -- or price increase? But in some cases, we work with clients directly even during contract term to decide on changing the pricing to give us the possibility to attract the right competent labor.

So I hope that answers the question. Mr. Chin, if you would give a bit of color on how our wages have inflated versus our revenue, that would be useful.

Yes, Laurent. Revenue per agent has increased quarter to quarter by 5%. And on the flipside, wage -- employee benefit expense per employee on average, blended, has increased by 3%.

So I would supplement Laurent's explanation by saying that while we try to pass on a-dollar-for-a-dollar of wage inflation to our clients, we also work on enhancing and improving our productivity to buffer against such wage inflation, in terms of using better tools, automation, and reorganize our support team and management team on all those programs that are going through this wage [inflation-met] issues.

So I would say, we historically have been able to buffer this wage inflation pretty closely. While the remaining period in coming months and years inflation is a pretty common topic, espoused by many companies and employees, we will still -- we'll be watching closely and reorganize our compensation package to be able to meet the -- our deliverables to our clients; at the same time, to manage the margins closely. Thank you.

Thank you, Mr. Chin.

Okay, thanks, Mr. Chin. We have the next question online from a couple of investors again, more or less the same. We have grown at 13% Q on Q in the current quarter, but the implied guidance is only 2% to 3% Q on Q into the fourth quarter. Any reason for the change to a different growth rate in Q4 revenue?

No. I think we were really tracking according to plan. This is very much what we had forecast Q4 that we got. As I mentioned earlier, the contrast between Q4 2020 and then the strong Q3 that we were anticipating. So it's not unexpected. It's very much in line with our forecast.

And I think there was a question earlier on about the impact of travel on our business and actually, I may not have answered it properly but our growth, excluding travel, would have been 43%. So that's to give you a sense of the overall impact of travel on the business.

Sorry, just to clarify the -- is that out for the nine months?

Yes, for the first nine months.

So I think we now have a question on the conference call from Varun. Stuart, can we move back to having the question from Varun on the call, please?

Sure, Jason. Varun [Ahuja], Credit Suisse.

Congrats to the management for the strong quarter. I've got a few questions.

Laurent, you have seen a really strong traction in the clients metrics, so you've added 16 clients. Would love to hear the breakup where which verticals and any of the clients -- obviously, without naming -- even though a lot more excitement from your side. Plus, how long do you think these clients will take to ramp up? Generally, client addition is a strong metric we should focus on because it leads to a future growth potential. How long does it take, in your experience, for a client to start meaningfully ramping up?

And on the client, again, side, the last question, want to understand -- for the last few years, you have been looking at your client base and kind of restructuring some of those clients who are not paying. Are you over that phase now, or should we expect the continued growth in client and kind of turning out some of the low accounts? So that is on the client side. I can come back for the other question.

Thank you, Varun. So yes, I'm quite excited about the new logos that we have brought in. To begin with, in terms of acceleration of the pace, I think the first nine months of last year, we had brought in about nine new logos; this year it's 16. So there's definitely an acceleration here.

Out of the 16 logos we brought in as well, if you wanted a bit of color, nine of them are from Asia, which is an interesting trend. Historically, a lot of our logos are companies from the west, North America primarily, but we are starting to see the emergence of Asian companies, which is exciting.

I'm excited about the businesses we brought it in terms of crypto, which is starting to yield pretty fast. And then, we brought in also food and delivery, which is an interesting new sector for us that we didn't have. We brought in interesting business in gaming as well; two of them in gaming: one Asian and one European.

So that's going to be super interesting. And one in travel as well; social media as well. So really interesting New Economy sectors primarily. Now how long does it take for these businesses to really yield? It takes time. It takes two or three years for them to ramp to the kind of revenues we enjoy with the bigger clients that we have at this point.

But they are going to be yielding as soon as next year. So it's a small base, and then they will grow in the next two to three years.

Sure. Also if you can give more color on the food delivery plan. Is it Asia-based or is it European or American based? Any color?

They are both European-based -- Western-based.

Okay. Got it. Laurent, now that post the IPO, there is a cash on the balance sheet. You are pretty comfortable. And clearly, there are certain product gaps, maybe in terms of market abilities or in terms of region. How are you thinking about the M&A part -- angle towards it? Is there any timeline that you have in mind? How are you thinking about the M&A? That would be helpful.

Great question, Varun. So we want to be very selective in terms of our M&A. We are starting to build our pipeline, and we want to be strategic about it. We know also that M&As can be opportunistic, so one needs to be patient. But we will be looking at either the possibility of bringing complementary companies who are accretive to our profits.

So to begin with, first criteria, they need to be profitable. Second, they need to be adding to either verticals we don't already have or geographies we don't already have. So really complementary to our business. And then, they need to be, in the sense, profitable but also having a similar culture of DNA that we have.

So that makes quite a number of criteria, and that's why I am saying it is going to be beyond strategic. It's going to be also opportunistic. So our team is working on this. But at least now we have the means and the capabilities to complete those deals; and there are quite a few.

The market is sufficiently fragmented worldwide and in our region, as well in some geographies, to have enough opportunities for us to pounce. So there will be some possibilities there.

Sure. Last question from me. Laurent, you mentioned on nine-month basis, you have grown 43%. (technical difficulty) -- but you also added new logos. So should we expect, on a YoY basis, a much stronger number than the 19% industry number that you indicated, based on the traction that you've seen on the business?

I think, Varun, what you asked is that we grew 43% that if I exclude travel and hospitality, and that's a much stronger number than the 19% which is the market -- what the market is doing. Is that correct?

Yes, and additionally, that travel should recover next year is the general perception. But if you think that's not right, still in your outlook, when you travel -- will be a little bit of a struggle? We want to hear. Because travel this year, as you mentioned, has declined 20%. So a steady recovery, hopefully. That's going to provide for the tailwind for your (inaudible). So just wanted to understand your views overall.

Yes, I understand. You know what I mean. I only apply common sense, too, and guesstimates that travel will pick up next year. We sense on the airlines in Asia that there's some moves happening right now in terms of growth. You can see that the economies are reopening.

I know you are based in Singapore. We know that the VTLs, I think, are really happening, which is good news for us for sure. So yes, that should be, if it picks up as expected, and there is no new crazy thing happening, we should be able to definitely benefit from the growth of the travel and hospitality next year.

Thank you, Laurent, and good luck for the next quarter.

Thank you, Varun.

Thank you. So we move on to a question from one line from [Saralts], GMO. The content moderation business has shown low single-digit growth. Is this the new normal for the business?

So well, content moderation is interesting. There's definitely a favorable market for it, as you can see from the news; as you have heard, increased scrutiny around social media. So we believe there is a conducive environment for social media players to increase their support in terms of content moderation.

So now, at TDCX, this is a business that started pretty recently in 2018, and it grew significantly. And so it kind of steadied a little bit more this year for us. And we have one major client in the space; I think you can guess which one.

And then, of course, we are now adding more clients on the back of our experience in social media and in content moderation. So we've added one new client that is starting with us in Colombia. So we are also working on their annotation and their labeling as a support to content monitoring and moderation as well, or an extension to it.

So there is potential in the space. We don't have statistics or market statistics at this point to indicate or give us guidance as to the growth and the pace at which it will grow moving forward. So I cannot really comment at what pace it is going to grow at this point.

Thanks, Laurent. So now we move back to the conference call. There's a follow-up question from Pang. Stuart, we can move back to Pang, please.

Thank you, Jason. Pang Vitt, Goldman Sachs.

Thank you very much. Maybe I want to also hear your thoughts about the fact that one of your main clients actually announcing a plan to move toward the concept of metaverse and investing more from that angle. Do you think that there are going to be any materially or potential benefit from your point in the service that you actually serve the clients?

Well, yes. I mean, we think the positioning of our client is -- I cannot speak on their behalf. I just know that reading like you the news, there's a lot of excitement around metaverse. There's also, I think, market consensus that both our biggest clients are growing. There are plenty of new initiatives.

So it's very exciting to be part of this space now. It's up to us and, of course, our client to see how we can take these opportunities on board and see how we can benefit from it. But other than that, I don't have enough knowledge about the metaverse to imagine at this point the impact it's going to have, except being very excited about it.

Thank you. Maybe I can also ask on the guidance around the EBITDA margins, especially as your EBITDA margin this quarter increased significantly to close to 36%. But the full-year guidance for EBITDA margin still imply that margins will go back to around 30%, 31% next quarter.

In the longer point of view, what should we think about the margin's trend? Are you going to go for like higher margins from where we are -- where we see you are or it's going to be in a steadily decline? And also on that point, is there any one-off expense that we should be aware of in the quarter?

Very sharp question. I'm going to handle the first one on the outlook for the margin, and then I will leave Mr. Chin to talk to you about the behavior of the margin over the past few months and so on.

From the outlook, we don't see a tremendous drop or any drop; we don't see an increase, either. We think it will steady around between 29% to 32% as long as we can continue to stick to our strategy which is quality growth. At this point, we have no intentions to change that strategy.

So the quality growth, working offshore on the increasingly complex work.

I'm very happy that this quarter, actually, we brought in a new client in the cloud business, so where we are helping them to sell cloud in multiple geographies in 13 countries. And it's really top-notch personnel that we need to deploy on this program, and it's fairly complex.

We are continuously looking for this kind of engagement and that will give us a chance to maintain our margins if we also play our overheads well, and be careful with our cost management. Now, there is some one-off. And also the margin question you have, can I ask Mr. Chin to answer that question?

Yes, Laurent. On the margin uptick in quarter three, I believe there was some movement in the Forex on a few delivery sites -- a few key -- key of our delivery sites in TDCX that had a bit of movement that moved in favor of TDCX. That helped to a certain extent bump up the EBITDA margin by one to two percentage points from my back-of-the-envelope calculation. As well as we -- typically, in quarter three, even pre-COVID, we typically pump up a lot of our activity in terms of getting a lot of billable hours [on box], so that we do not want to miss the revenue that has been ordered or placed onto our order book.

So in a sense, quarter three this year was enhanced by our pump-up productivity of our agents that performed pretty well, considering the low base of quarter three of 2020. And the slight uptick in a few of our key currencies from our delivery sites, that also helped towards bettering the margins in -- notably in September month alone. Thank you.

Thank you very much. Maybe last question for you here. Is there any update that you can share with us regarding the Airbnb warrant that was part of the disclosure that you mentioned during the prospectus?

Yes. So thank you for this one as well. So we are still discussing with Airbnb. We become very excited about the opportunity of having this project with Airbnb. I feel that it's an honor that the company is so interested in us.

We are getting close; we are working with them and moving in the right direction. And we do not anticipate that the conclusion of it will be very material to any dilution. And so we are very much on track with our plan for the warrant. Just takes a bit of time because it is usually quite complex, the way it's structured and so on; and it's new to us as well. So we are on track here with the warrant with Airbnb.

Thank you very much.

So I would just like to add on to the discussion on EBITDA margins just now. That our guidance for EBITDA margin, if you can see the presentation, it excludes the PSP cost which will be recognized from Q4 2021 onwards.

So I think that's it. That's all the time we have and all the questions we have. Maybe I'll just hand over to Laurent for some closing remarks.

Thank you, Jason. Thank you for dialing in, appreciate it; and for your interest in TDCX. This is our first earnings call, so apologies if we are not experts at it, but we are learning as we go along, and we are very excited to be public listed. And looking forward to seeing you next quarter for the next earning results. Thank you very much. Thank you.

The conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.