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Investing.com -- Teleperformance (EPA:TEPRF) shares plunged more than 16% on Friday after the company cut its full-year revenue outlook, reported weaker-than-expected margins and missed earnings forecasts, with operational challenges in its Specialized Services unit and currency headwinds weighing on results.
The French company lowered its 2025 like-for-like revenue growth guidance to the lower end of its prior 2% to 4% range and maintained its recurring EBITA margin forecast of 15.0% to 15.1% at constant exchange rates.
According to Morgan Stanley (NYSE:MS), this equates to a roughly 30 basis point downgrade in reported margin guidance due to foreign exchange translation impacts.
First-half revenue rose 1.5% like-for-like to €5.12 billion, below the consensus estimate of €5.15 billion.
Growth in Core Services offset the 7% like-for-like decline in Specialized Services, which was affected by the nonrenewal of a major visa processing contract.
Core Services revenue increased 2.9% like-for-like, with acceleration to 3.5% in the second quarter. In contrast, Specialized Services fell 11.6% in the second quarter, due to both the TLScontact contract loss and reduced volumes in U.S. language services (LLS), according to management.
Recurring EBITA declined to €697 million, about 2% below consensus, with a reported EBITA margin of 13.6%, missing the 13.8% estimate and falling 30 basis points year over year.
Morgan Stanley attributed the margin miss primarily to foreign exchange effects, noting constant currency margins were flat year over year.
The company reported net profit of €249 million, down from €291 million a year earlier.
Diluted earnings per share fell to €4.19 from €4.83, a miss of roughly 12% versus consensus estimates, due to higher tax and financial expenses.
Free cash flow declined to €259 million from €448 million in the prior year period, driven by higher cash taxes, working capital requirements and front-loaded investments.
Teleperformance reiterated its full-year free cash flow target of about €1 billion excluding nonrecurring items, which include €20 million in the first half and a projected €50 million in the second half.
“Overall, we think this should lead to c3% downward revision of consensus adjusted EBITA for FY25,” said analysts at Jefferies in a note.
The company said that Core Services growth was supported by business wins in Europe, the Middle East, Africa and Asia-Pacific, particularly in Egypt and Turkey.
In the Americas, growth remained modest, with North America underperforming and foreign exchange continuing to drag on Latin America results.
In response to declining revenue in U.S. language services, management said the drop is not structural and is linked to political factors that began in January.
While no quick recovery is expected in the next two quarters, margins improved in the second quarter due to cost controls.
Teleperformance launched over 250 AI projects during the period and completed acquisitions of ZP and Agents Only. AI-related investments are expected to total up to €100 million in 2025.
The company reiterated its medium-term guidance through 2028, targeting 4% to 6% annual like-for-like revenue growth and a recurring EBITA margin of 15.5%.