TDCX expands client range in gaming, crypto; eyes acquisitions

BEHIND the scenes of tech giants Facebook and Airbnb, a Singapore company has been quietly providing mission-critical services. Its capabilities include multi-lingual customer support, content moderation and even building AI tools.

But chief executive and founder Laurent Junique doesn't want his company, TDCX, to just be known for its two blue-chip clients.

"We definitely want to diversify and minimise our concentration; and as a result of that, we are building our business development capabilities and acquiring many more logos than we used to," the 56-year-old told The Business Times.

With the pandemic-driven boom of the digital economy, TDCX has added 16 new brands as clients in the first three quarters of this year - bringing its total number of clients to 48 as at end-September. It had added 9 new brands in the first 9 months of 2020.

With this accelerated growth pace, the company is also making a push into nascent tech sectors and new geographies.

It recently bagged business from two crypto exchanges. "One of them is the largest in the world," said Junique, and the other is based in Thailand. He declined to confirm if they are, respectively, Binance and Bitkub.

TDCX helps its crypto clients with user onboarding and resolving complex customer issues such as trading difficulties, transaction discrepancies, and deposits and withdrawals. It also helps conduct Know Your Customer checks.

TDCX has also added a European gaming company as a client, servicing it from offices in South Korea and Barcelona, Spain; and 2 food delivery clients with businesses in Thailand and Hong Kong. TDCX services the latter out of Malaysia, where Junique said it can engage Cantonese speakers at a much more affordable rate.

Following the recent opening of new offices in Romania and Colombia, TDCX now has over 14,100 employees across 10 locations. In Colombia it has bagged a social media company as its first client.

"Our clients are spread all over the world, which is what I like as well," Junique said. In the past, he added, companies such as banks and insurers tended to be more territory-centric. Now, the bulk of TDCX's clients are new economy companies; in Q3, they contributed to 93 per cent of revenue.

"The clients we work with are very global. If they like you in one location, then they want to use you everywhere."

Contracts vary in length from 1-year terms that are renewable, to 5 years with an option to add 2 more.

Steady growth

Founded in 1995, TDCX has humble origins as a call centre-focused business called Teledirect. It has since expanded into 3 core verticals: omnichannel customer experience, sales and digital marketing, and content monitoring and moderation.

For most of its history, it was founder-owned. Junique did contemplate taking on private equity (PE) money, but eventually decided against it as the company was already growing organically.

"It's a question of confidence; we found that the company was in good shape, it had a great track record; we were scratching our heads a little as to the value a PE could have brought. They could have, not saying that they couldn't, (but) we felt maybe it was not so necessary or a bit too late in the game," he said.

This year, however, Junique decided it was time to go public and raise funds for global expansion.

The company listed on the New York Stock Exchange in October, selling shares at US$18 each to raise US$348 million. Of this, some US$188 million is designated to repay a Credit Suisse facility and the remainder is for growth.

TDCX's shares gained 5.9 per cent on the first day of trading, but have fallen 11.2 per cent since to close at US$16.94 on Dec 17. This gives the company a market capitalisation of US$2.5 billion and a price-to-earnings multiple of 36.

In a Sept 28 report, analyst Shifara Samsudeen, who publishes on Smartkarma, noted that based on TDCX's IPO price range, its shares "do not seem particularly expensive given its better-than-peer growth profile".

The company also enjoyed a strong Q3 showing. It posted a 46.7 per cent increase in profit to S$30.2 million for the three months ended September, on the back of S$148.8 million in revenue.

It expects its full-year revenue for FY2021 to come in between S$549 million and S$553 million, with a margin on its earnings before interest, taxes, depreciation and amortisation ranging between 31.7 per cent and 32.2 per cent.

TDCX did not disclose a detailed breakdown of its balance sheet in its latest earnings; but according to its pre-IPO filings it had S$81.2 million in cash and S$289.1 million in bank loans as at end-June.

The company also has not provided any guidance for next year. Junique reckons this lack of guidance could have contributed to the lukewarm sentiment, alongside a market-wide correction.

"We took a more conservative approach to communicating and I stand by it," he said, adding that his focus is more on company fundamentals.

Covid concerns

Heading into 2022, Junique is cautious about the implications of the Omicron variant. Contributions from clients in the travel and hospitality segment, such as Airbnb, have seen good recovery this year as travel resumed, but not yet recovered to the extent of pre-pandemic times.

Talent acquisition will be a key focus for TDCX, along with opening up offices at locations that can be a magnet for highly-skilled employees. At present, about 80 per cent of staff work from home.

"There will be a return to the office challenge that we need to tackle. I assume there'll be increased demand for people from every sector. We'll be out there to win the war on talent," he said.

M&A is also on the cards, with TDCX looking out for interesting acquisitions and building a pipeline, said Junique.

"We will be looking for companies that can bring complementarity to us, either geographically or from a vertical point of view, or from a discipline that we don't have ... HR services is a big activity, there's IT outsourcing as well, but I don't think we will go into ITO as the market is already very well-covered," he said, adding that there are many options for the company.

Said Junique: "We will strike when the time comes."