Teleperformance: Strength in Scale and Service

Teleperformance is a global leader in outsourced customer experience management, providing front-office and back-office services to some of the world’s largest companies. With nearly half a million employees and operations in over 90 countries, the company delivers multilingual support at scale across industries ranging from tech and healthcare to banking and e-commerce. Through strategic acquisitions, ongoing investment in AI integration, and expansion into higher-value services, Teleperformance is evolving well beyond its call center roots. The question is: Does this global outsourcing giant belong in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Teleperformance at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Teleperformance, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Teleperformance is a global leader in digital business services and a major player in the business process outsourcing industry. Founded in 1976 and headquartered in Paris, the company supports clients in over 170 markets, operating in nearly 100 countries with services delivered in more than 300 languages and dialects. It operates through three segments: Core Services and Digital Integrated Business Services, Specialized Services, and Consulting and Transformation. Its offerings include customer care, technical support, content moderation, trust and safety, AI-enhanced services, healthcare support, visa processing, interpretation and translation, and customer experience consulting. Teleperformance serves a broad range of industries including technology, telecom, healthcare, financial services, e-commerce, travel, gaming, government, and insurance. The company has built a strong competitive moat through its global scale, multilingual reach, and ability to deliver consistent service across geographies. Its presence in cost-efficient regions such as Latin America, Eastern Europe, and Asia allows for 24/7 multilingual support, creating a barrier to entry for smaller competitors. Many of Teleperformance’s largest clients have worked with the company for over 20 years, embedding it deeply into their operations and making switching costly and risky. Teleperformance has also steadily moved up the value chain by integrating advanced analytics, artificial intelligence, and consulting into its offerings, evolving from a traditional call center provider into a strategic partner for customer experience transformation. Operational excellence, data security, and regulatory compliance further enhance its positioning, especially in sensitive sectors such as finance and healthcare. The company’s strong cash flow generation supports ongoing investment in technology and acquisitions, reinforcing its leadership and ability to adapt to evolving client needs.

Management

Daniel Julien serves as the Chairman and CEO of Teleperformance, a position he has held since founding the company in 1978. Under Daniel Julien’s leadership, Teleperformance has grown from a small French call center operator into a global leader in digital business services, with operations in nearly 100 countries, supporting clients in over 170 markets and delivering services in more than 300 languages and dialects. His long tenure at the helm has been defined by consistent strategic vision, operational excellence, and an ability to anticipate and adapt to changes in the business process outsourcing industry. Daniel Julien has overseen Teleperformance’s evolution from traditional customer service operations into a diversified provider of high-value services, including digital customer experience, trust and safety, AI-driven support, advanced analytics, and healthcare process management. He has played a central role in expanding the company’s capabilities through key acquisitions, such as Majorel in 2023 and ZP Better Together in 2025, enabling Teleperformance to broaden its client base, strengthen its technology portfolio, and enhance its global delivery model. Throughout his career, Daniel Julien has emphasized the importance of quality, compliance, and client satisfaction, particularly in highly regulated sectors like finance, healthcare, and government services. His ability to establish and maintain long-term relationships with major multinational clients has been a cornerstone of Teleperformance’s sustained growth and resilience. Many of the company’s largest customers have partnered with Teleperformance for over two decades, a testament to the trust Daniel Julien has cultivated through a relentless focus on service excellence and operational reliability. Daniel Julien continues to lead the company with an emphasis on integrating people, processes, technology, and operational expertise. Under his leadership, Teleperformance has maintained long-term relationships with major clients, expanded into new service areas, and adapted to changing market demands. I believe that Daniel Julien is the right person to lead Teleperformance moving forward.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year.  Teleperformance has only managed to achieve a ROIC above 10% once in the past decade. There are several reasons for the low ROIC. Teleperformance has pursued a capital-intensive growth strategy. The company has expanded through significant acquisitions, which require substantial capital and may take time to fully integrate and deliver the expected returns. The industry itself also plays a role. The business process outsourcing sector often operates on thin margins due to high competition and the labor-intensive nature of services, which can limit ROIC. I prefer companies that have a high ROIC, but the low ROIC of Teleperformance isn't necessarily a red flag. Despite a modest ROIC, Teleperformance consistently generates strong free cash flow. This suggests that the business remains fundamentally profitable and self-funding, even if returns on invested capital are not exceptionally high. Teleperformance has expanded by buying other companies. When it does this, the amount of money it has “invested” on its balance sheet goes up because of accounting items like goodwill and intangible assets. These don’t directly increase profits, but they do count in the ROIC calculation. As a result, the return on invested capital can look lower than it really is, especially right after an acquisition. The business process outsourcing industry is operationally intensive and price competitive. Structural factors like high labor costs and long-term contracts often lead to lower ROIC compared to asset-light, high-margin businesses. Within its peer group, Teleperformance is still a leader. Many of the company’s clients have been with Teleperformance for over 20 years. These long-standing relationships may not drive high ROIC but do offer predictable, recurring revenue and stable cash flow. Hence, the low ROIC won't necessarily keep me from investing in Teleperformance.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Teleperformance has managed to increase its equity every year for the past decade, except for 2020, which was affected by the pandemic. The steady increase is driven by several factors. The company has consistently generated strong net profits, a portion of which are retained rather than paid out, thereby increasing shareholders’ equity over time. In addition, acquisitions such as the purchase of Majorel in 2023 have expanded the company’s asset base and contributed to equity growth. Overall, Teleperformance’s ability to grow equity consistently reflects sound financial management and a strategy focused on long-term value creation for its shareholders.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Teleperformance has managed to deliver positive free cash flow every year for the past ten years and has grown its free cash flow every year since 2019. The levered free cash flow margin has also increased in most of these years. Both metrics reached record-high levels in 2024. This growth is the result of several reinforcing factors. The company has continued to grow its revenue while keeping operations efficient, which has helped generate more cash from its core business. It has also improved how quickly it gets paid by customers, especially following the integration of Majorel, which has made day-to-day cash management smoother and more predictable. At the same time, Teleperformance has been careful with how much it spends on new offices and infrastructure. By optimizing existing sites and relying more on cloud-based systems, it has kept spending under control. Finally, strategic acquisitions like Majorel have expanded the company’s services and created cost savings, further boosting its ability to turn profits into cash. Teleperformance uses this strong cash generation to invest in the business and pay down debt, while also paying dividends and repurchasing shares. Management has stated that they continue to expect strong free cash flow generation, which should support ongoing dividend growth. Hence, investors can reasonably expect higher dividends in the future. The free cash flow yield is currently very high, which suggests that the shares may be trading at a cheap valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is debt. It is crucial to assess whether a business has a manageable level of debt that can be repaid within a period of 3 years. We do this by dividing the total long-term debt by earnings. Upon analyzing Teleperformance’s financials, I have determined that the company has 5,8 years of earnings in debt. This is significantly higher than the three-year limit I prefer. That said, there’s a clear explanation for the high debt, which is the acquisition of Majorel. Management has also commented on the debt situation and pointed out that they are continuing to reduce debt while maintaining a strong balance sheet.  They also highlighted that Teleperformance has solid access to funding, with no liquidity concerns, and holds a BBB credit rating - the highest among peers. According to management, they are confident in the company’s ability to continue generating strong cash flow and gradually reducing debt. So while the debt-to-earnings number is above my usual limit, I don’t see it as a red flag in this case.

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Risks

Macroeconomic factors is a risk for Teleperformance. Demand for BPO services closely follows the broader economic cycle, so when the global economy slows or enters a recession, Teleperformance can experience a drop in volume as clients face lower sales and reduce their need for customer support or outsourced sales services. Certain industries like e-commerce, travel, and retail are especially sensitive to changes in consumer demand. For example, fewer people booking flights means fewer customer service calls, which directly affects the volume of work Teleperformance handles. While outsourcing can benefit during downturns as companies look to cut costs, prolonged economic weakness or high unemployment levels tend to reduce the total number of customer interactions across the board, limiting organic growth. During stable periods of strong GDP growth, low interest rates, and moderate inflation, Teleperformance's clients are more likely to expand into new markets, launch products, and increase marketing efforts. These activities generate more customer inquiries and support needs, which in turn benefit Teleperformance. In these environments, there is also less pressure on pricing because companies are focused on growth rather than cost reduction. Unfortunately, the reverse is true when the economy becomes uncertain. Clients often reduce spending, delay expansion, and focus more on preserving cash. This results in fewer outsourced services and more aggressive pricing competition for what remains. Looking ahead, growth in developing economies is expected to be slower than in the past five years. This matters because many of Teleperformance’s delivery centers are based in these regions. Slower growth in those markets could limit new outsourcing demand, while rising wages and inflation may increase operating costs.

Technological disruption, particularly through AI automation, is a risk for Teleperformance. As artificial intelligence continues to advance, many customer service tasks that once required human agents are now being handled by automated systems such as chatbots, voice assistants, and AI-powered help desks. These technologies are becoming more effective at resolving basic inquiries, and they offer the added benefits of being available around the clock and operating at a lower cost than traditional call centers. This shift is already changing customer expectations. According to Nuance Communications, consumers increasingly prefer automated systems that are fast, accessible at any time, and capable of resolving common issues without waiting for a human representative. As more businesses adopt these technologies, some may decide to reduce their use of outsourced service providers like Teleperformance, especially for routine Tier-1 support where automation is most effective. The risk here is not just about lost volume but also about pricing. As AI handles more front-line interactions, Teleperformance could face pressure to lower prices on what remains - either to compete with automation or to justify human involvement in simpler tasks. If clients see automation as good enough, they may allocate fewer resources to traditional BPO contracts or renegotiate terms more aggressively. The impact of AI may be gradual, and human agents are still essential for complex, sensitive, or regulated interactions. But over time, the expansion of automation could reduce the total addressable market for traditional customer service outsourcing. For a company with over 400.000 employees globally, even small shifts in client demand toward automation could have a meaningful impact on growth and profitability.

Competition is a risk for Teleperformance. The company operates in a highly fragmented and increasingly competitive industry, where it must constantly defend its position not only against other traditional BPO providers but also against a growing number of consulting firms, IT service providers, and digital transformation specialists. Many of these newer entrants are expanding into customer experience management by integrating advanced analytics, cloud solutions, and AI technologies - offering a broader suite of services that may appeal to clients looking for more integrated solutions. In every country where Teleperformance operates, it faces pressure from both international competitors and local players. This includes not just large global outsourcing firms but also smaller regional providers that can offer localized knowledge, lower pricing, or faster turnaround times. In some cases, clients may choose to work with multiple vendors, increasing the pressure on Teleperformance to retain its share of business. The competition extends to both renewing existing contracts and acquiring new ones. Most of Teleperformance’s contracts last between two and five years, which means that a significant portion of its revenue base is regularly up for renewal. If clients are not fully satisfied or are offered better terms elsewhere, they may choose to switch providers. This dynamic creates ongoing revenue risk and can force Teleperformance to offer lower prices to keep key accounts. While Teleperformance benefits from its scale, long-standing client relationships, and global footprint, the expanding and increasingly complex competitive environment remains a constant challenge.

Reasons to invest

AI and human connection is a reason to invest in Teleperformance. While artificial intelligence presents a long-term risk to the traditional outsourcing model, Teleperformance is actively positioning itself to benefit from the integration of AI with the human element, rather than viewing it as a replacement. Management sees AI and human empathy not as opposing forces but as complementary strengths that, when combined, create better outcomes for both clients and end users. Teleperformance has made substantial progress in aligning its workforce with this vision. The company has launched an AI and emotional intelligence upskilling program, training over 60.000 supervisors and more than 100.000 frontline employees in emotional intelligence. This initiative reflects a core belief that human connection remains critical in many types of customer interactions, especially those that are sensitive, complex, or emotionally charged. As AI becomes more common in customer service, the ability to combine it with human understanding and empathy is becoming a key differentiator. At the same time, Teleperformance is rolling out AI at scale across its operations. Over 200 AI projects have been implemented internally, and more than 700 clients now use AI solutions as part of their customer experience programs. One standout example is Teleperformance’s partnership with Sanas, a company specializing in real-time accent translation. This technology neutralizes accents and background noise during live calls, making communication smoother and more understandable. It has already been deployed in client operations in India and the Philippines, with plans to expand into other regions and languages. It is a clear example of how Teleperformance is combining AI and human capabilities to solve real-world communication challenges. Looking further ahead, Teleperformance believes the customer experience ecosystem will become more complex as it shifts toward a mix of human agents, AI-assisted humans, and fully autonomous agentic AI. The company sees its role as orchestrating these different elements into a seamless experience tailored to the customer’s needs, whether the customer prefers speaking to a person, interacting with a voice bot, or using an automated system.

Acquisitions is a reason to invest in Teleperformance. Over the years, the company has used acquisitions not only to expand its global footprint, but also to strengthen its capabilities, enter new markets, and build new business lines with long-term value. Two recent examples, Majorel and ZP Better Together, show how Teleperformance continues to execute this strategy with a clear focus on integration, synergies, and market leadership. In 2023, Teleperformance acquired Majorel, one of its largest competitors, for two strategic reasons. First, during periods of economic uncertainty, large clients tend to reduce the number of outsourcing partners they work with. By acquiring Majorel, Teleperformance reinforced its position as the global market leader, making it more likely to retain major accounts and win new ones. Second, Teleperformance had relatively limited exposure to Germany and France, two of the largest outsourcing markets in the world. Majorel was a strong player in both. The deal also doubled Teleperformance’s presence in Asia-Pacific, the fastest-growing region for business process outsourcing. In short, the acquisition added scale, expanded geographic reach, and increased exposure to faster-growing markets. While Majorel had lower margins than Teleperformance at the time of the acquisition, management expects this to change. The goal is to bring Majorel’s profitability in line with the group within two years, supported by cost savings and greater efficiency. Another acquisition, ZP Better Together, was completed in early 2025. ZP provides communication services for the deaf and hard-of-hearing and has now been integrated into Teleperformance’s LanguageLine business. This deal supports the company’s growth in Specialized Services, particularly in the U.S. Management sees the combination of LanguageLine and ZP as a valuable asset, creating one of the most prominent players in the language services space. It is a differentiated segment with recurring revenue and high barriers to entry.

Expanding its back office segment is a reason to invest in Teleperformance. Traditionally known for its front-office services like customer support and technical assistance, Teleperformance is now increasingly focusing on the back-office segment. This shift opens up new markets and strengthens its position in the digital business services landscape. Back-office services refer to the behind-the-scenes processes that keep businesses running, such as claims processing, data entry, billing, and finance and accounting. These services often require a combination of operational efficiency, industry expertise, and adherence to regulatory standards. Teleperformance has already seen double-digit growth in this area, and management has made it clear that back office will be a key strategic focus going forward. One of the most promising areas within this segment is data annotation and labeling for AI. As demand for artificial intelligence grows, so does the need for high-quality, human-curated training data. This is a relatively new and fast-growing market, comparable to how content moderation evolved a decade ago, and Teleperformance is positioning itself as a key player. The company has already secured new contracts and is building specialized teams to support this growth. With a dedicated workforce and ongoing investment, Teleperformance is developing the capabilities needed to serve both large tech platforms and more specialized industry-specific AI needs. In addition to data-related services, Teleperformance is investing in back-office functions tied to verticals such as banking, healthcare, and IT services. These industries require deep domain knowledge, and the company is actively hiring for roles that support complex workflows such as claims management and regulatory compliance. This move up the value chain allows Teleperformance to provide more than just cost savings. It positions the company as a strategic partner in sectors where accuracy and trust are critical. The company also sees strong potential in areas like finance and accounting outsourcing and B2B sales support. These functions typically involve recurring work, long-term contracts, and higher levels of integration with client systems. As a result, they offer more stable revenue streams and deeper client relationships compared to traditional call center services.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 8,71, which is from 2024. I have selected a projected future EPS growth rate of 10%. Finbox expects EPS to grow by 15,9% in the next five years, but I'm more conservative. Additionally, I have selected a projected future P/E ratio of 20, which is twice the growth rate. This decision is based on Teleperformance's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be €111,69. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Teleperformance at a price of €55,84 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 1.813, and capital expenditures were 219. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 153 in our calculations. The tax provision was 346. We have 59,19 outstanding shares. Hence, the calculation will be as follows: (1.813 – 153 + 246) / 59,19 x 10 = €322,01 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Teleperformance's Free Cash Flow Per Share at €26,93 and a growth rate of 10%, if you want to recoup your investment in 8 years, the Payback Time price is €338,77.

Conclusion

I believe that Teleperformance is an intriguing company with good management. The company has built a moat through its global scale, multilingual reach, and ability to deliver consistent service across geographies. While its return on invested capital has been underwhelming, this has much to do with the sector it operates in. Teleperformance continues to grow its free cash flow and levered free cash flow, both of which reached record high levels in 2024. The company has a high level of debt, but management has made it a priority to reduce it. Macroeconomic factors are a risk for Teleperformance because demand for its services depends on the health of the global economy. During downturns, clients may reduce spending and outsource less, especially in cyclical industries like travel and retail. Slower growth in emerging markets and rising costs can also pressure volumes, pricing, and profitability. Technological disruption, particularly through AI automation, is another risk. As more businesses adopt chatbots and virtual assistants to handle basic customer interactions, demand for traditional outsourced services may decline. This could lead to lower volumes and pricing, especially for routine support tasks. Competition is also a constant challenge. Teleperformance operates in a crowded industry with both global and local rivals, including IT and consulting firms offering integrated digital services. With many client contracts up for renewal every few years, the company must continually defend its market share and pricing. AI and human connection is a reason to invest in Teleperformance. Rather than seeing AI as a threat, the company is integrating it into its operations while emphasizing emotional intelligence and human empathy. Initiatives like real-time accent translation and employee upskilling show how Teleperformance is using AI to enhance, not replace, the human element. Acquisitions are another reason to invest. They have helped the company expand globally, strengthen its services, and enter high-growth markets. Recent acquisitions such as Majorel and ZP Better Together have added scale, improved capabilities, and supported growth in specialized areas. Expanding its back office segment is also a positive. By moving beyond traditional customer support into areas like data labeling, finance and accounting, and healthcare operations, Teleperformance is positioning itself as a more strategic partner with longer-term, stable revenue streams. There are many things to like about Teleperformance, and the shares are trading at a very attractive valuation. However, even as the company embraces AI, I personally cannot fully grasp the extent to which AI may disrupt its business. For that reason, I will not be investing in the company at this time.

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