TDCX Inc
NYSE:TDCX
Earnings Call Analysis
Q3-2023 Analysis
TDCX Inc
In the third quarter, TDCX reported a steady revenue of $120 million, maintaining stability on a constant currency basis. The company succeeded in improving operational rigor, leading to an impressive 27.8% adjusted EBITDA margin. This progress is evident in the company's strict cost optimization initiatives.
Profit witnessed a marginal year-on-year increase of 2.3%, reaching $23 million. This demonstrates TDCX's trajectory towards fulfilling its annual financial targets.
The company highlighted a reduction in client concentration, with the top two contributing 47% to revenue, down from 56% last year. Furthermore, client count saw an impressive 31% leap to 94, underscoring TDCX's efforts in diversification. Revenues outside the top five clients grew by 51% year-on-year, indicating a healthy and expanding client base. Geographical expansion has also paid off, with revenue from new regions growing fivefold compared to the same period last year.
Cash operations generated $86 million over nine months of 2023, reinforcing TDCX's robust financial position. The absence of debt and cash reserves amounting to $318 million indicate a healthy balance sheet. The company has actively implemented share buybacks, acquiring around 930,000 shares since July 1, 2023, as a strategy to enhance shareholder returns.
TDCX maintains a flexible approach towards strategic acquisitions and investments in organic initiatives like TDCX AI and consultancy capabilities. One particular area of focus, TDCX AI, helped increase client outreach by 20-40%, enhancing both client relations and efficiency in campaigns.
Performance within key verticals has been solid, with a year-on-year increase of 31% in client services. Sectors such as digital advertising and media, as well as travel and hospitality, exhibited sustained growth. TDCX's entry into health tech also positions it favorably for future growth opportunities.
TDCX saw a 7% rise in revenue over nine months on a constant currency basis, despite the strong Singapore dollar affecting the reported revenue. Profits climbed by 10.3% to $65 million due in part to cost optimization strategies. The company experienced margin pressures owing to investments in new geographies and capabilities, but is confident about sequential margin improvements moving forward.
For the nine-month period, omnichannel CX solutions contributed the majority to the business at 60%, followed by sales and digital marketing at 27%, and content, trust, and safety at 13%. The resilient financial results mirror the provided guidance. TDCX upholds its 2023 revenue growth projection at 2-4% and reaffirms its expected adjusted EBITDA margins to be approximately between 25-27% for the full year.
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Ladies and gentlemen, welcome to the TDCX Q3 2023 Results Announcement. My name is Neil, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Jason Lim from TDCX, to begin. Jason, please go ahead.
Hello, everyone, and welcome to TDCX Third Quarter 2023 Earnings Conference Call. My name is Jason Lim, the Head of Investor Relations. Joining us on the call today is our Executive Chairman, Founder and CEO, Mr. Laurent Junique; our CFO, Mr. Chin Tze Neng; and our EVP of Corporate Development, Mr. Edward Goh. Before we continue, I would like to remind you that we will make forward-looking statements, which are subject to risks and uncertainties that may not be realized in the future. You should not place any reliance on any forward-looking statements. Also, this call includes the discussion of certain non-IFRS financial measures, such as adjusted EBITDA and constant currency revenue growth. For reconciliation to the closest IFRS measures, please refer to the Form 6-K, which is available on our website. We have prepared a convenient translation for Singapore dollar to the U.S. dollar at a rate of USD 1 to SGD 1.3648. This should not be construed as representation that any Singapore dollar amount can be converted to USD at this or any other rate. With that, let me hand over the call to Laurent. Laurent, please?
Hello, everyone, and thank you for joining us today. Before I begin, I'd like to thank our team members across the TDCX global network for their exceptional efforts and our clients and investors for their continued trust and support. In the third quarter, TDCX delivered a solid revenue of USD 120 million, which is stable on a constant currency basis. We also demonstrated improved operating rigor as we delivered Q3 adjusted EBITDA margins of 27.8%, a testament to the success of our ongoing cost optimization initiatives. This compares with 25.9% in Q2 2023. Profit for the period was USD 23 million, an increase of 2.3% year-on-year. This means we are very much on track to meet our guidance for the year. I would say that the overall business continues to be strong and resilient. Notably, if you were to exclude revenue from our top client, revenues from the rest of the business would have grown in the low teens percentage year-on-year for Q3 2023 compared to Q3 2022. This demonstrates a very healthy performance against the backdrop of a really tough operating environment, which speaks to the way we continue to deliver excellence for our clients. You can also see this across a few operational parameters. Firstly, we continue to register broad-based business growth as revenue from clients outside the top 5 rising 51% year-on-year. These newer clients, while starting from a smaller base, are growing quite steadily and continue to ramp nicely with us. Secondly, we continue to make progress in reducing client concentration and diversifying our business. Our top 2 clients contributed 47% of this quarter's revenue, hence, reducing our concentration by almost 10 percentage points from 56% in the same period last year. Thirdly, our business development efforts have yielded good results. Total client count rose 31% to 94 clients as of September 30, 2023, with bright spots in some key sectors, which I'll speak more about shortly. And last but not least, our geographic expansion in the last 2 years continues to bear fruit as revenue from new geographies grew 5x this quarter compared to the same period last year. These indicators show that despite an uncertain backdrop, we are managing the business well while simultaneously achieving growth in earnings. Despite these improvements, the macroeconomic environment remains challenging. As communicated before, several of our key clients have reduced volumes during the year as part of their focus on cost efficiency. We're seeing the impact of these reductions against a strong Q3 last year, but these are within our forecast and expectations for FY 2023. We're very disciplined with regards to cost controls. Furthermore, we have actively deployed our cash to drive higher returns. Our profit performance has translated into strong cash flows and a strong balance sheet. Cash generated from operations was USD 86 million for the 9 months of 2023. As of September 30, 2023, we have USD 318 million of cash and cash equivalents with no debt on the balance sheet. Again, our strong cash flow generation and low leverage provides us with ample flexibility to pursue strategic growth as well as to enhance shareholder returns through a variety of avenues. We see great value in our shares at current valuations and have prioritized share buybacks as a form of enhancing shareholder returns. We were much more active in the market in the third quarter. From 1st July to 17th November 2023, we purchased around 930,000 shares. Since the inception of this program in March 2022, we have deployed more than $15 million and bought back around 2 million shares. We see this as an attractive use of our capital and believe that as growth returns, repurchases at these levels will create significant value. In terms of M&As, with our strong cash balance, we have the ability to move very quickly on targets that could help enhance our capabilities, our reach to better serve our clients or to accelerate our growth. Additionally, we have the financial strength and flexibility to allocate capital to strengthen our organic initiatives, such as TDCX AI, our consulting capabilities and reinvesting in our business. This quarter, at TDCX AI, we have accelerated our progress in deploying AI solutions for select clients while continuing to refine other pilot AI initiatives to boost internal productivity. Let me outline another use case that we launched this quarter to showcase how we help clients solve major pain point. For a sales campaign for a large digital advertising client, we built an AI-enabled sales catalyst accelerator to enhance outreach success and to maximize customer engagement in our sales and digital marketing programs. Our team took our treasure trove of historical contact data assets and overlaid them with additional data such as interaction nodes and customer profiles, and we trained the model to predict and identify the optimal moment for marketing specialists to carry out a marketing plan review. This improvement boosted their reach by 20% to 40%. With a higher reach, our marketing specialists were able to assist users in a more timely and strategic manner and significantly increase monetization for our digital advertising client. This is a good example of where TDCX establishes our right to play as a strategic advisory partner to clients who are looking for actionable ways to gain incremental productivity and efficiency within their campaigns as they come under pressure to do more with less. Through TDCX AI, we leverage our deep operational experience as CX practitioners and our tech stack to better understand clients' pain points and advise and implement feasible solutions to drive improved outcomes in their campaigns without losing that human touch. This is ultimately what clients have always come to us for. Most of our campaigns, which involve complex tasks that require humans in the loop, we believe will benefit from the productivity gains AI provides and will help us scale the business to even greater heights. We have won some very exciting clients during the quarter as total client count rose to 94, a 31% increase year-on-year. Our domain expertise in key verticals and strategic footprint in APAC continues to shine through. The clients we launched in Q3 included one of the world's most popular mobile messaging apps and a leading global airline based out of Asia, both of whom have the potential of ramping meaningfully with us. Our client count does not include the further 4 clients that have been signed but not yet launched, which includes Southeast Asia's leading super app providing everyday services as well as a European medical device manufacturer. Such wins are a testament to deep domain expertise that we have built over the years, such as our social media platforms within our digital advertising and media vertical, in travel and hospitality as well as in sales and digital marketing. We have also made forays into innovative verticals such as health tech with 2 clients, which we are pretty excited about. For one client, TDCX will be providing customer support for patients with specific medical needs; and for the other, helping medical practitioners understand how to use sophisticated medical devices. TDCX' ability to break into new verticals such as health tech stems from our specialization in managing complex customer interactions and the ability to deliver excellent CX outcomes. With a higher client count and broader growth, we have improved our client concentration profile with top 2 clients contributing 47% of revenue compared to 56% in Q2 2022, while top 5 clients contributed 71% of this quarter's revenue, down from 82% in the same period last year. In terms of contribution from verticals, digital advertising and media now represents 43% of our business and remains pressured by softness from our largest clients. We see some bright spots in travel and hospitality, our second largest vertical at 29% of revenue, which grew 8% year-on-year, demonstrating a stabilization of the travel sector with a runway for longer-term growth as we win more clients in this vertical. E-commerce and gaming are also doing very well, growing at an incredible clip of 63% year-on-year and 110% year-on-year, both reflecting the underlying strength of these sectors. I'd like to emphasize at this juncture that TDCX is unique amongst global CX providers with over 70% of the business focused on serving Southeast Asian and North Asian languages, serving complex business needs. Since 2021, we've expanded quite rapidly, adding 9 new geographies to our global footprint, including Colombia, India, Romania, South Korea, Hong Kong, Turkey, Vietnam, Brazil and Indonesia. Our new geos have been scaling well, and revenue in Q3 2023 was 5x that of Q3 2022. We are happy with our strategic footprint now, and we will be focusing on growing and stabilizing these new sites, generating better economies of scale and progressively improving their margins. Korea has been one of our top performers in terms of new sites revenue expansion and continues to do well as we add more headcount and deliver on customer satisfaction scores. In Indonesia, we recently launched on the ground with a large social media client. It's early days, yet we are excited about the market's potential. In Vietnam, we are delivering top of the network scores for a client launched a few quarters ago, and we are in active talks to sign up another client. These are positive developments, which really gives me confidence that our footprint in Asia will only continue to strengthen. Some updates on Lat Am as well. Earlier this year, we launched our first campaign in São Paolo, Brazil, a pivotal step in our journey, and our team has continued to grow ever since. We have delivered what the clients have called their smoothest launch to date, and we are now one of the top 3 performing sites globally based on customer satisfaction. In Colombia, we expanded our customer service support team with a very innovative robot-assisted food delivery service, and we continue to receive interest from clients looking to launch in the region. Beyond delivering value to our clients, our goal at TDCX is also to ensure that we provide the best employee experience to our global TDCX team members and continue to attract and retain the best talent. I'm extremely proud of our engagement teams who champion a vibrant multicultural and joy for work culture and 7 of our campuses are Great Place To Work-certified, among the many other industry recognitions celebrating TDCX. In closing, we remain super focused on executing and delivering excellence for our clients, and the results can be seen in many of the indicators that we shared earlier. Over the past 9 months, our nimble and agile structure has allowed us to pivot quickly, strategizing to make overheads more elastic against revenue, which in turn has contributed to margins improving. We have also made good progress on the AI and consulting front, which really helps to position us to be the ideal outsourcing partner for our clients. Moving forward, we will continue to invest for growth while at the same time, managing our costs carefully. While we are focused on some of these immediate priorities, I would like to convey my confidence on TDCX' differentiated footprint, domain expertise in doing complex work for key verticals and strong track record in developing client vendor relationships into key strategic partnerships for large global enterprises. We see green shoots in 2024, but it also appears that the global macroeconomic environment is not out of the woods yet. So we'll have to be very careful and robust with our guidance when it's time to do so during our Q4 results announcement. With that, let me hand it over to Mr. Chin.
Thank you, Laurent. In Q3 2023, we delivered revenue of USD 120 million, which is stable on a constant currency basis. On a reported basis, revenue is down 5.4% year-on-year due to the strengthening of Singapore dollar against most of our operational FX functional currency. This was driven by a decline in required volumes of some of our key clients, resulting in lower revenue from our top 5 clients combined. Our clients outside the top 5 continued to grow strongly, rising 51% year-on-year, which is in line with our continuous measures to broaden our customer base. This has improved our customer revenue diversification as Laurent has shared with you. Adjusted EBITDA declined 9.1% year-on-year, and we delivered margins of 27.8% this quarter compared to 29% in the corresponding period last year. As shared throughout the earlier part of this financial year, we have continued with investment expenses to grow our business, including entering into new geographies and building new capabilities such as TDCX AI. As part of our planned geographical expansion strategy, we incurred higher rental and maintenance expenses with the setup of [indiscernible] as well as higher telecom and technology expenses to support campaign volume requirements at both existing and new sites. That said, our cost management and productivity initiatives have started to show results as adjusted EBITDA margins have improved sequentially from Q1 2023 through to Q3 2023. I will share a bit more on this in the next slide. In Q3 2023, we recorded higher interest income from increased placement of cash and interest-earning deposits compounded by the elevated interest rate environment. We also recorded lower income tax expenses from the reinstatement of tax incentives in the Philippines that was suspended temporarily last year, lower profitability of a few key operating units and the nonrecurrence of the one-off prosperity tax innovation that was implemented in 2022. As a result, profit for the period grew 2.3% to USD 23 million. Adjusted net income, which represents profit before equity-settled share-based payment expense, net foreign exchange gain or loss and acquisition-related professional fees, rose 2.2% year-on-year. We have reported sequential adjusted EBITDA margin improvement from quarter 1 to quarter 3, which demonstrated the effects of our focus on cost optimization and improving productivity and agility. Adjusted EBITDA margins rose from 24% in Q1 2023 to 25.9% in Q2 2023, and up to 27.8% in Q3 2023. Throughout the course of the year, our efforts to rightsize headcount against business requirements have started to bear fruit, resulting in better employee cost efficiencies. Secondly, as our new geographies started to launch new campaigns and generate revenue, this also helped increase utilization at the new sites and deliver better economies of scale as we move through 2023. Let me next provide some insights of our revenue by service offering. Revenue from omnichannel CX solutions services decreased by 3% to USD 72 million, primarily due to a contraction of volumes from key clients in the digital advertising and media vertical. We were able to partly offset this with higher business volumes in the travel and hospitality, gaming, fast-moving consumer goods, financial services, technology and e-commerce verticals. Revenue from sales and digital marketing services increased by 3% to USD 32 million due to the expansion of existing campaigns by key digital advertising and media clients and scaled up contributions from new clients secured in 2022. Revenue from content, trust and safety declined 30% year-on-year to USD 14 million due to downward revision of volume requirements by an existing client in the digital advertising and media vertical but was partially offset by expansion in the travel and hospitality vertical. Because we only have 2 clients in this segment, it is more susceptible to swings due to changes in volume. There continues to be good opportunities within the content, trust and safety sector, which we are working to tap. In summary, omnichannel CX made up 60% of our total business in Q3, while sales and digital marketing and content, trust and safety contributed 27% and 12%, respectively. Much of the swing in this quarter was driven by movement in volumes of an existing large client. If we exclude the key client, we delivered double-digit percentage growth across all 3 service offerings. Let me next move on to our year-to-date performance. Our revenue for the 9 months ended 30 September 2023 rose 7% on a constant currency basis. Due to the impact of the strong Singapore dollar, reported revenue was up by a lower 2.5% to USD 366 million. We delivered strong earnings growth over the 9-month period as profit for the period rose 10.3% to USD 65 million. This was driven by a tight focus on cost optimization and further boosted by a net reversal of equity-settled share-based payment expense in Q1 2023. Margins were down year-on-year as we continued with our planned investments into new geographies and new capabilities. In particular, in the first and second quarter of this year, we had opted to keep strong support and shared service ratios, which impacted margins during the early part of the year. Margins have since improved sequentially quarter-on-quarter as shared earlier. Excluding the effects of equity-settled share-based payment expense, adjusted EBITDA declined 10.8% to USD 95 million due to the lower margins year-on-year. Adjusted net income declined by a lower 5.8% to USD 62 million, aided by lower taxes and higher interest income. For the 9 months of 2023, revenue from omnichannel CX rose 4% to USD 219 million. Revenue from sales and digital marketing services increased by 13% to USD 98 million, while revenue from content, trust and safety services was down 22% at USD 46 million due largely to a drop in volumes from a key client in this segment. For the 9 months of 2023, omnichannel CX contributed 60% of our business while sales and digital marketing stood at 27%, and content, trust and safety at 13%. Lastly, let me provide an update on our full year 2023 outlook. We have delivered a resilient set of results in line with our guidance. For the 9 months of 2023, we have reported a 7% growth in revenue in constant currency terms and adjusted EBITDA margins of 25.9%. Based on the near-term visibility on revenue in Q4 2023 that reflects confirmed volume requirements, expected operational delivery and seasonality and barring unfortunate significant events, we are reiterating our full year 2023 revenue growth range at 2% to 4% on a constant currency basis. We also reaffirm our full year 2023 adjusted EBITDA margins to be approximately between 25% to 27%. We will share FY '24 guidance when we next report our Q4 and full year results. With that, let me hand you back to Jason.
Thank you. Thanks, Mr. Chin, Laurent for the presentation. We are now ready for the Q&As. [Operator Instructions] Operator, please?
[Operator Instructions] We now have our first question from KC Ong from CGS-CIMB.
I have 3 questions here. The first one is regarding the revenue slowdown in the third quarter of the year. This seems to be mainly driven by your top 2 customers. Based on my rough calculation, it seems that the revenue has fell 20% year-on-year here. Can you share more on what's happening here that results or impacted drop? Question number two, I think Meta showed a return to growth for its digital advertising in the latest quarter. Why hasn't that translated into your numbers? And based on your latest discussion with them, when can we see contributions from digital advertising clients returning to growth? Third question, I think we see some bright spots here in terms of X top 5 client performance. Maybe you can share some more color on this. That would be very helpful.
Thank you, KC. I appreciate the question. I'll answer both the revenue slowdown and the bright spot within the same answer then I can talk about any growth implied or announced by our digital advertising clients. So in terms of revenue slowdown, really, this is what -- it was expected and the reason we revised our guidance back in August. So some key clients, particularly our large digital advertising client has cut volumes. But if you exclude that top client, our revenues across all 3 segments would have grown in low teens. The clients outside the top 5 are still growing very well at 51% from Q3 '23 to Q3 '22. But the impact, as you know, from the bigger client is the one causing that slowdown. So we're really in a situation where we have almost 2 different companies here: one that's being impacted by some large clients who are restructuring, looking for efficiencies; and then we have a mix of new clients and existing clients who are growing at a very fast pace. And so we have to manage that operationally. In answering the brighter spots, we've brought in some exciting clients. We have some verticals that are doing well for us. Travel is performing. Gaming is exploding. Tech is doing well. Health tech is a new sector. So that's exciting. I'm excited about the global messaging platform that we've brought in, which has a great potential. And it's a multipurpose service that we provide, whether it's B2B support, technical support, but also content moderation. Another client in the e-commerce side from Asia, another social media company that we are working with from Asian footprint but also global footprint, Asia's preferred super app and more gaming, a new airline that we're bringing in as well. So quite excited. One of our tech clients as well has some potential to grow. So it's more about the quality of those clients that excites me and that I see as a bright spot. Now in terms of the second question about the digital advertising clients announcing better performance. Yes, it's good for them, and we are very happy, of course, to see this. It's, however, a bit difficult to connect and map this with us. We don't own 100% of their business. We have 1 percentage of it in specific service lines, specific geos. So from day 1, and I think now we've been public listed for the past 2 years, we've had difficulties really connecting the dots between their performance, the macroeconomic performance and our performance because a lot of things get in the way. But if you want to also look at the Q4 outlook, they've remained a little bit cautious as well. So it's not impossible that those clients are not pressing on the accelerator pedal right now, watching and planning for next year. So from quarter-to-quarter, I wouldn't jump into making predictions. Watch it carefully and then see how things pan out next year. So I have, however, a sentiment that we've been under a situation where there's been a lot of management reshuffle over the past 12 months, a bit of paralysis in making decisions. That should be normalizing, and I could expect that maybe clients are looking at 2024 with a bit more stability, strategy, planning and decisions. So that's what I'm thinking of. I hope that answers the question.
We now have our next question from Ranjan Sharma from JPMorgan.
Just one question from my side. The headcount has come down. How should we think about a growth opportunity? I mean, could this be a leading indicator that you expect revenues to be under pressure in the coming periods as well, that you are reducing the headcount?
Thank you, Ranjan. Look, the headcount reduction is absolutely directly related to the reduction in business volume. As we announced, we are minus 5.4%. So that translate into reduced headcount invariably. So again, we have to be careful to look at it from quarter-to-quarter and not make predictions. Q4 will also be a different quarter than Q3 was. There's some seasonality. So if I look at the headcount, I look at it from where we've been, and we have quite a bit of flex in terms of hiring fast and also reducing our headcount fast as well. So yes, I wouldn't put that as your leading indicator into reading into 2024, if I assume what you're asking right now. So we usually rightsize according to the business volumes, and that's one of the strengths and reasons why clients come to us, right? So it's really direct correlation between revenue and headcount sizing for TDCX.
I mean I appreciate that you've done a very efficient business. But what I'm grappling with is that if you were expecting revenues to pick up, would you still cut headcount? So on the corollary of that -- on the corollary to that is that if you're reducing headcount, then you would expect revenues not to pick up in the coming periods.
Look, I think we are sticking to our guidance of revenue for 2024. So we report to you the headcount we had in Q3, which we were cutting because we started cutting before Q3. So that it looks like we have less headcount so that we meet our targets and meet our clients' requirements. But it's not like we're cutting headcount continuously. It's not a program of layoffs. It's rightsizing. So that's a continuous operational method that we've been carrying out. So -- and as the business picks up, we'll be hiring more. So that's the logical typical mechanics. I hope I understand and answer your question correctly.
We now have our next question from Han Tan from HSBC.
Could I ask how much of this quarter's EBITDA margin improvement you attribute the FX effect versus the other effects you mentioned like higher utilization? So if FX turns, do you expect some pressure to these margins?
Mr. Chin, maybe you could answer this question?
Your question centers around how much is FX and how much is...
How much of quarter-on-quarter EBITDA margin improvement is FX versus other factors?
I would say not an awful lot because the FX in Q2 to Q3 was -- the movement was not as apparent in the earlier 2 quarters -- or no, earlier first quarter. So I would say it's to a lesser effect on that front, but more of the utilization costs, rightsizing effects of the headcount deployment and better -- I mean, enhanced performance because due to the rightsizing of headcount, calibration of people according to the business demand. It will be very more weight on that front, more effect on that front rather than the FX, which totally helps a bit. It is not the main core issue for the period.
Okay. My next question is on the gross reduction in headcount. Is there a way that you could provide color in terms of geography or segment?
We don't really give a breakdown here depending on the geos. But if I can maybe take your question a little bit further and say that some of the clients have also been looking for cost reductions and have asked to move from some more expensive locations to lower-cost location. The good news is we have now a network of 16 geographies with different profiles and capabilities from a language and pricing and technical capability point of view. And we can offer these options, which was, I think, 2 years ago, not the case. So we're pretty well shielded and ready to deal with those challenges. And -- but yes, it depends really. It's not uniform across the board. You have -- look, we have the new geos who have grown 5x compared to last year. That's 9 different countries out of 16. So you would expect that those have progressed in terms of headcount, whilst the legacy, larger geos where we operate from have been under a bit more pressure, and not all of them, some of them, right? I hope that answers the question.
Got it. Then on that point on shifting to lower-cost locations. Has that been a headwind to top line? And if so, how much?
Yes, it is definitely a headwind. It's unavoidable as a headwind to the top line. I cannot share the amount, but it's not terribly significant. It does have an impact, but it's not probably worth mentioning in terms of value. But it's a natural progression of the way we are rebalancing demand in a tough market environment. The macro is challenging. Clients are quite price sensitive, and we need to be able to offer them solutions. But it's trending pretty fine and within our guidance once again for this year.
If I could just squeeze in one question. Could I ask about lead time to -- sort of between headcount additions and ramp up? Has that timing changed since 2 years ago?
No, no. This is still the same cycle of recruiting. It's more or less the same and the impact on revenue follows. So no major transformation here within our operational model.
Okay. Thanks, Han. I think next, we have a question from Jonathan Woo via the webcast from Phillip. Moving into 2024, can we expect revenue growth from your larger clients to remain relatively muted and overall growth to be driven by newer or smaller clients?
Thank you, Jonathan. So -- well, it's early days at this point, and we -- I cannot comment really into how 2024 will look like, and we'll provide our guidance at the full year results soon. We are absolutely working on our forecast right now, discussing volumes with clients and planning. As you know, those large clients have quite significant chunk of our business. So definitely, if their growth is muted, then we will be impacted, but it's too early to comment on this. On the other clients that we have, the smaller ones, same thing, I don't want to commit at this point, although they would have logically a faster growth profile than the top 2 and top 3. Yes. So it's a bit early to talk about this, but that's as far as I think I can go at this point.
[Operator Instructions] We now have a follow-up question by KC Ong from CGS-CIMB.
In terms of guidance for FY '23, I observed that you decided to keep your full year guidance of about 2% to 4% in constant currency terms. I noticed that in 9 months this year, revenue growth on constant currency terms was already about 7%. So is this more of a conservatism? Or are you expecting further weakness Q-on-Q in fourth quarter?
Thank you, KC. No, I think we planned this pretty well. And as you can see, the first half, we were up 11%. But the third quarter, we're down 5.4%. So we're pretty well tracking within the guidance that we've given, 2% to 4%. So this is a year where the first half was stronger than the second half. And I guess, every year is different, and we adapt depending on how our business evolves and how our clients are behaving, how the macroeconomic environment behaves. But that's more or less the picture. So I think we're reiterating that guidance of 2% to 4%. And I guess, you can draw your own conclusions as to how Q4 is going to look like.
Got it. And just wondering, in terms of AI, yes, can you talk a bit more about the latest monetization of this opportunity -- yes. Yes, any color would be helpful.
Great. Thank you for the question. So quite excited here. We are pursuing our journey with TDCX AI, making great progress. As expected, as I said before, we use TDCX AI as a strategic advantage to strengthen our relationship with our clients, especially the larger clients. And so we are continuously investing in that space. We've brought in 2 new professionals into the mix, whom I'm very happy with. And we've continuously engaged with our clients. We continue to build interesting products and prototypes. And I mentioned one of them in the call in terms of helping to accelerate our sales on digital marketing. But one that got me very excited as well was one with gen AI that we've done with OpenAI on knowledge base that we've improved from one of our airline clients. And it's a very exciting use case at this point in terms of seeing the value it brings in adding more speed to proficiency. Monetization is still a long way away, if you want it in terms of value. But we're looking at different ways to monetize: one, charging clients for strategic consulting fees, and we're seeing some traction in that possibility; sharing of productivity gains over time, getting into outcome-based pricing models; but also, helping our employees to be more efficient and relevant to where we think the world is going to turn, which is going to be having to do more complex transactions. And as we've said from the day we went IPO, automation will rid the business of the simple tasks, and we'll continue to drive the more complex task to humans in the loop. And so we focus on that. And so yes, I'm happy with that. I'm always never happy enough, it could go faster, but it's -- we're in a good place. And I think what I like about is really the strategic intent not to confuse ourselves with an IT company, but more as a CX strategic adviser leveraging AI for our clients in general.
Thanks, KC. I think that's all the questions we have on the call today. If you have any follow-up, please feel free to reach out to Investor Relations. On behalf of management, thank you for your time and for dialing in. Goodbye, and have a good day ahead.
Thank you very much. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.