IBEX Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 9 speakers on the call.

Operator

Welcome to the Ibex First Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To note, there is an accompanying earnings deck presentation available on the investor Ibex Investor Relations website at investor. Ibex.co.

Operator

I will now turn this conference over to Mr. Michael Darwall, Deputy CFO and Investor Relations of Ibex. Please go ahead.

Speaker 1

Good afternoon and thank you for joining us today. Before we begin, I want to remind you that matters discussed on today's call may include forward looking statements related to our operating performance, financial goals and business outlook, which are based on management's current beliefs and assumptions. Please note These forward looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments, which may occur. Forward looking statements are subject to various risks, uncertainties and other factors that could cause Our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, Please review our annual report on Form 10 ks filed with the U.

Speaker 1

S. Securities and Exchange Commission on September 13, 2023. As a reminder, as of July 1, 2023, we became a domestic filer and are reporting on a U. S. GAAP basis rather than from the With that, I will now turn the call over to Bob Duckett, CEO of IVXX.

Speaker 2

Thank you, Mike. Good afternoon, everyone, and thank you all for joining us today as we share our Q1 fiscal 2024 results. I'm extremely proud of how well our business continues to perform. In the quarter, we delivered on our key objectives, While achieving the high end of our revenue guidance and coming in line with our EBITDA margin guidance. More importantly, Ibex continues to consistently execute, capitalize on market opportunities And strengthen our position.

Speaker 2

Q1 FY 2024 is our 7th consecutive quarter of year over year adjusted EBITDA growth and our 5th straight quarter of year over year adjusted EBITDA Margin improvement, driven by continued growth of our high margin services and geographies. Revenues for the quarter were $124,600,000 as we continue to migrate portions of our onshore business to higher margin offshore and nearshore regions. Adjusted EBITDA increased 6% year on year to $13,700,000 up 90 basis points to 11%, while adjusted net income improved to $7,600,000 from $6,800,000 in the quarter and adjusted EPS increased to $0.40 From $0.36 prior year, we generated $6,600,000 in free cash flow, More than tripled from the prior year quarter, finishing the quarter with an outstanding balance sheet that is debt free And with a net cash position of $61,100,000 our conversion rate Of adjusted EBITDA to free cash flow was nearly 50%. We believe that our consistent trajectory Of margin improvement and maintaining an outstanding balance sheet and our ability to generate strong free cash flow Puts us in an enviable competitive position. From an overall client and sales standpoint, Our pipeline is resuming its pace of wins and deal flow.

Speaker 2

Our growth has been fueled historically by our powerful new logo engine. And fiscal 2024 is off to a fast start. We began the Q1 with 4 impressive new client wins across key verticals, including healthcare and Financial Services. And that carried into Q2. I'm excited to report That we have won 2 blue chip Fortune 100 brands, 1 in the automotive transportation vertical And one with a very large retail brand in highly competitive deals.

Speaker 2

Both are launching in late Q2. Our competitive advantage continues to be centered around our BPO 2.0 capabilities And now more recently, in our ability to bring advanced AI based technology to our solution. Of these two wins, one is in our nearshore Jamaica region and the other in our provincial Philippines geography, demonstrating our ability to win in all the diverse markets we serve. We expect these two clients to scale in the second half of FY 2024. Additionally, 5x continues to expand its higher margin Integrated omnichannel and digital first support, which is now 77% of our overall business, up from 71% a year ago.

Speaker 2

With these new wins and our strong pipeline, We remain confident in our brand and our ability to win transformative new business throughout the fiscal year. Operationally, we continue to execute well for our clients across all geographies and consistently outperform our competition. Our ability to not only land new clients, but to expand with them It's a strong proof point of our ability to operationally deliver. As a data point, today, For our top 25 clients, we operate on average in nearly 2.5 distinct geographies for them. We typically start with a client in one geography and then we grow with them in new regions based on our strong performance.

Speaker 2

We view this as a proxy for being a trusted partner to our clients and our ability to deliver exceptional customer experiences in all our operating regions. Now last quarter, I discussed our 3 axis strategy for deploying AI for our clients to improve performance and the customer experience. The first axis This focus on the frontline agent, where we have been deploying generative AI to make the agent more productive as part of our Wavex toolset. 2nd is where we use AI in our deep analytics and business intelligence offering, enabling us to provide better, more actionable insights into the customer. And third is where we deploy generative AI to automate contacts with solutions such as voice bots and chat bots.

Speaker 2

This 3rd prong is a further evolution of our digital transformation, where we have been working with our clients Moving from voice calls to digital contacts, such as chat and SMS, we are now building solutions Where the digital first experience can start with digital automation, which we see as an even higher margin service. This is why we are bullish on generative AI and we see this as more opportunity than risk. I want to highlight that we are using our speed and our tech strength to quickly move into these opportunities. We now have over 15 opportunities in our pipeline with both existing and new clients. And these solutions are helping us win new clients.

Speaker 2

As an example, one of the key differentiators In our recent automotive transportation client win I referenced earlier was our unique ability to demonstrate and deliver An AI powered smart IVR solution to digitally transform their customer experience. We leveraged our new Genesis platform and generative AI to build a solution that also includes conversational voice and chat box, creating a seamless CX solution from an AI agent to a live agent. We see this as the next generation of integrated omni channel and the next wave of Wavex. We believe solutions like this will continue the growth of our higher margin digital first services. From a capital allocation standpoint, we are successfully executing on our share buyback program, Given the current valuation and the confidence in the trajectory of IVEX, Since we announced the program, we have acquired more than 400,000 shares back.

Speaker 2

We see this as a very attractive use of our growing capital. Additionally, we are actively exploring new markets for client expansion. Our strong balance sheet puts us in a great position to expand our geographical footprint And analyze market by market whether to organically expand or to look for a small tuck in acquisition. And finally, our debt free environment and our overall structure is enabling us to generate strong free cash flow, enabling us to put our capital to constructive use and to make targeted investments for growth. In closing, my team and I are focused on continued strengthening of the business and driving value for our employees, I will now turn the call over to Taylor to go through our financial results and guidance.

Speaker 2

Taylor?

Speaker 3

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our Q1 fiscal year 2024 financial results, references to revenue, net income and net cash generated from operations or on a U. S. GAAP basis, while adjusted net income, adjusted earnings per share, adjusted EBITDA and free cash flow are on a non GAAP basis.

Speaker 3

Reconciliations of our U. S. GAAP to non GAAP measures are included in the tables attached to our earnings press release. We had a strong quarter, representing a solid start to our fiscal year in terms of profitability and free cash flow. As our clients continued migrating to lower cost offshore regions and we absorbed the impact of a changing business environment for several of our FinTech clients, Revenue declined 2.5 percent to $124,600,000 compared to $127,800,000 in the prior year quarter.

Speaker 3

Revenue mix continued to trend towards higher margin services and geographies. Digital and omni channel delivery now represent 77% of our total revenue versus 71% in the Q1 a year ago, while our offshore and near shore revenues now comprise 75% of total revenue versus 70% in the prior year quarter. Looking at revenue in total, the shift in geo mix and decline in the FinTech vertical were largely offset by growth in our strategic HealthTech and Retail Verticals. Net income increased to $7,400,000 versus $6,500,000 in prior year quarter. The increase in net income was primarily driven by stronger operating results And higher interest income versus interest expense in the prior year quarter, partially offset by higher tax expense.

Speaker 3

EPS increased to $0.39 compared to $0.35 in the prior year quarter. We expect our annual effective tax rate To be approximately 20% for the year on a normalized basis. On a non GAAP basis, adjusted net income increased to $7,600,000 compared to $6,800,000 in the prior year quarter. Non GAAP fully diluted adjusted earnings per share increased to $0.40 compared to $0.36 in the prior year quarter. Adjusted EBITDA increased to $13,700,000 or 11% of revenue Compared to $12,900,000 or 10.1 percent of revenue for the same period last year, the increase in adjusted EBITDA margin was Primarily driven by stronger operating results from an increased mix of higher margin offshore and nearshore delivery, higher capacity utilization and an increased mix of digital and omni channel delivery.

Speaker 3

Partially offsetting these operational benefits were higher SG and A expenses for investments Sales, marketing, IT, infrastructure and increased compliance expenses to support our growing business. For the Q1 of fiscal year 2024, our top 5 and top 10 client concentrations remained largely flat at 40% and 59% respectively of overall revenue. Our client base remains stable as just one new client entered our top 10 client list. We have worked hard to diversify our client base over the last several years and are proud of the progress we have made. Switching to our verticals, retail and e commerce increased to 23.4% of 1st quarter revenue versus 21.3% in the prior year quarter.

Speaker 3

Healthtech increased to 11.9 percent of 1st quarter revenue versus 10.2% in the prior year quarter And Travel, Transportation and Logistics increased to 13.5% of 1st quarter revenue versus 13% in the prior year quarter. Conversely, our exposure to telecommunications vertical decreased to 16.8% of quarterly revenue versus 17.3% in the prior year quarter. Additionally, FinTech decreased to 14.8% of revenue for the quarter versus 19.9% in the prior year quarter, impacted by the changing landscape for crypto and new economy investment platform points. Net cash generated from operations increased to $8,700,000 for the quarter compared to $5,600,000 in the prior year quarter, primarily due to stronger operating results. Our DSOs were 67 days, up 4 days sequentially.

Speaker 3

Several larger client payments were received shortly after the quarter ended and negatively impacted our DSOs at the end of the Q1. Despite this, we continue to be below industry average. Capital expenditures were $2,100,000 or 1.6 percent Revenue in the Q1 of fiscal year 2024 versus $3,600,000 or 2.8 percent of revenue in the prior year quarter, And we continue to utilize our available capacity following the build outs completed during the pandemic. Investment we did make in CapEx for the quarter was used predominantly Seek utilization of previously built out capacity. Free cash flow increased to $6,600,000 in the current quarter Compared to $2,000,000 in the prior year quarter, as we converted nearly half of adjusted EBITDA to free cash flow.

Speaker 3

This is the Highest level of free cash flow Ibex has generated in the Q1 of fiscal year. We ended the Q1 with $62,000,000 in cash, up from $57,400,000 as of June 2023, mostly driven by strong cash conversion of operating profits during the quarter. Net cash improved to $61,100,000 from $56,400,000 as of June 2023. Borrowing availability under our revolving credit facilities increased to $72,600,000 at September 2023 compared to $71,900,000 as of June 2022. During the quarter on September 18, we announced a share repurchase program authorizing us to repurchase up to $30,000,000 worth of shares.

Speaker 3

In the Q1, we repurchased 134,000 shares for $2,000,000 For fiscal year to date through November 8, We have repurchased over 400,000 shares. Looking forward to the remainder of 2024, we're confident in the resiliency of our business supported by the client diversification and strategic vertical expansions we've built over the preceding years. As a result of our strong start to the year, We remain confident in our execution, which is reinforced by our reiteration of prior guidance in our share repurchase program. We believe our recent client wins and strength of our pipeline will return us to growth later in the year and position us well as we head into fiscal year 2025. I joined Ibex as I was excited about the diversity of clients and vertical markets we serve, the strong balance sheet and positive cash flow, Strength of our management team and employees and our ability to win market share to grow our business.

Speaker 3

As I have now been here for almost 3 months, I can say that I have not been disappointed in any of the assumptions I made about Ibex prior to joining the team. I'm certainly excited about our future and where we're headed. With that, Bob, I'll now take questions. Operator, please open the line.

Operator

Thank you. One moment for our first question. Our first question comes from the line of Tobey Sommer of Truist. Your line is open.

Speaker 4

Thanks. I was wondering if you could describe what you're hearing from customers in your conversations with them about Calendar 2024 growth expectations in their businesses and the implications for Ibex next year?

Speaker 5

Yes. Thanks for that question, Toby, and appreciate you joining the call. Our clients Give us pretty good visibility to their business and their forecasts. 6 months out, they'll kind of give Directional views past that. If you look at the whole of them, They're still trying to figure that out.

Speaker 5

And you'll have some that are winning and they're pretty bullish on that and others that are kind of, Let's say a little bit more conservative. You put it all together, it's kind of looks like our top 25 clients that we've talked about. Okay. We talked about earlier that some up, some down, but for the most part, they're holding in really strong. And I think that's a tribute to Being very diversified business that we've built not only from clients, but from the verticals.

Speaker 5

And so, some winners, some losers, we put it all together and I think we're holding pretty strong. Appreciate that. And I was wondering maybe

Speaker 4

if you could describe the pace of deal flow, which in your first Your prepared remarks, I think you described as improving. And maybe add to that a little bit of perspective on the contours of the pipeline for new logos. Thanks.

Speaker 5

Sure. Yes. And that's an important part, as you know, of our business. And last quarter, I kind of shared that, hey, the pace is picking up And we have some really large deals that are in play and really delighted to announce that we're 2 for 2 On those very large deals and we won 4 other deals. And that's really the track record that my team and I have built here over the years.

Speaker 5

The first two quarters of the calendar year or our last two quarters of our fiscal year, Things started slowing and they started getting delayed and deals. And I see that things are back to the pace that they were And with very large blue chip deals and also what I think are some really new economy kind of disruptive brands. And so We're getting excited about where this business is picking up again and how that trajectory looks in the back, Not only the back half of the year, Joe, but really into 2025.

Speaker 4

And then I just wanted to ask A question about capital deployment and

Speaker 5

I'll get back in the queue.

Speaker 4

Should we expect a similar pace of acquisition or excuse me, of share repurchase Given the announced value that you said you execute over 6 months and maybe if you could Give us the parameters in thought process around how you're going to manage the balance sheet Sort of over time once that's come and gone and been executed on, like how low would you let cash go? Do Do you want cash to remain relatively stable even in with the share repurchase? Thanks.

Speaker 5

Taylor, why don't you?

Speaker 3

Yes. No, absolutely. So, Tobey, we don't provide a forecast or guidance for our share repurchase. But what I can say is we Certainly believe the valuations that our shares are trading right now are compelling. And as you saw, Once we announced the share repurchase program, we've repurchased over 400,000 shares for $6,700,000 and we have Authorization up to $30,000,000 So we have over an additional $20,000,000 availability to continue to repurchase program.

Speaker 3

But fortunately, if you look at our balance sheet, as you indicated, we have no debt. We have a very nice cash balance. We have positive cash flow. And so we balance all our capital allocation strategies. And at this point, we're We don't have a debt repay, aren't considering a dividend.

Speaker 3

So it's really our capital is going to be balanced between share repurchase, Expanding capacity in targeted geographies. And then we're also, as Bob mentioned, open to Targeted opportunistic M and A opportunities if they come along. So I would say that We are comfortable with our balance sheet obviously where it is now, but we'd also be comfortable deploying some of the capital on these items, assuming we get the proper returns. So we're Continue down that path, but feel we're in very good shape from a balance sheet perspective.

Speaker 4

If I could sneak in a follow-up there. With respect to targeted acquisitions, could you describe in the broadest parameters Like what kind of thing would fit? Is it geographic? Is it an industry? Is it some Customer relationships, what would you want to extract from an acquisition like that?

Speaker 3

Exactly. I think we'd be interested potentially in geographic Expansion in geographies where we aren't currently located to get a beachhead and then we can grow organically from there. I think also we have strategic verticals and if we saw an opportunity that was focused on one of our Strategic verticals, I think that would interest us as well.

Speaker 5

Yes, Tobey, if I could just add, we are For better part of my first 7, 8 years here, we were heads down operating this business. And now that we've really transformed this business and we have this really well structured balance sheet And business model, we've now really created a corp dev team that has a lot of pipeline that we are evaluating in that. And Going back a year, we're kind of just starting that process and now we've been careful about it. But there's a lot of opportunities that We're having the good news is I think we have a team that is pretty sharp and savvy and looking at the right things and then we'll make If that comes across, we'll make that decision.

Speaker 4

Appreciate your responses. Thank you.

Speaker 5

Operator, are there any more questions?

Operator

Our next question comes from the line of Dave Koning of Baird. Your line is open.

Speaker 6

Yes. Hey guys, nice job. Can you hear me?

Speaker 5

Sure can, Dave.

Speaker 6

Yes. All right. Good, good. So I guess my first question, You're doing a nice job. This year is a little tougher growth wise, but would you be growing better?

Speaker 6

Maybe how much Headwind is the shift offshore and how much is it in a normal year? Like is this year a 5% Headwind from the shift offshore, but in a normal year might only be a couple of percent, like how much of the headwind to revenue is this? I know that's good for margin, but just kind of talk through that.

Speaker 5

Sure. And I guess the way to think about this, Dave, and I think we talked about In the numbers is the percentage of business that we now have in the nearshore And offshore regions. And that increased 5% for our business. And so and if you look at what's happened in the Which is where that is extensively coming from, that's down sizably. You can see the correlation of the U.

Speaker 5

S. Down to the move into other regions. And so, I think that's the math that's there. What I like is, I think we've gotten a lot of that transformation or the move Kind of behind us as we move kind of into the second half of this year. And so I think The way I look at it is hopefully that will be key in us resuming kind of getting into resuming out what has been our Really strong growth track record of the better part of 8 years.

Speaker 5

And so I think once those things kind of level Normalize, I think that will be a key driver for us and especially because that pipeline is picking up.

Speaker 3

And Bob, I'd just add in terms of the migration, it certainly has contributed. We've had very nice gross margin improvement Over the past year, it's gone from about 25% in the Q1 of 23% to 29% this quarter. And the shift to offshore has certainly helped us improve that gross margin as well as operating improvements we've made in the U. S.

Speaker 6

Got you. Thanks for that. And then maybe just as a follow-up question. You've had a lot of years where you've grown very well right around 10% or so. In a normal year like that, how much of the growth is from existing and how much is from new?

Speaker 6

And then in a year like this, how does that change? And then do you think you'll get back to normal by next year, maybe even late this year?

Speaker 5

Yes. We're hoping that we can get And again, the market is a little bit tough, Dave, right? So and also can we get to double digit in the back half of the year, In Q4 or into 2025, I'm not quite sure we're there yet, but can we get into upper single digits? That's what we're hopeful for. If things keep progressing on the pipeline, We feel good about just how that trajectory adds up.

Speaker 5

And if you look at, Dave, I kind of look and say, and we've shared these numbers in past, our new logo revenue has ranged in the $30,000,000 to $50,000,000 in your revenue over the last, let's say, kind of 3, 4 years ish. And so as we kind of move from a $400,000,000 to $500,000,000 company. You can just kind of do that math, dollars 30,000,000 $40,000,000 $50,000,000 off of $400,000,000 $500,000,000 so that As in, in your about 10% growth, but more importantly, as you know, those clients do Have historically done 2.5 times in year 2. So that usually you put those two things together and that Has given strong growth for us. And we think we're in a good position to have our business structurally Look like that down the road.

Speaker 6

Got you. That's helpful. And great job on margins and cash flow too.

Speaker 5

Yes. We're excited about What we've done here structurally as a company, it's really we're proud of that.

Speaker 6

Yes, great to see. Thanks guys.

Speaker 7

Thank you.

Operator

Thank you. One moment please. One moment for our next question. Our next question comes from the line of Matthew Roswell of RBC. Your line is open.

Speaker 7

Yes, congratulations on a nice quarter. I have three questions, sorry about that, all revolving around the large wins. And I guess the 3 of them are first. You mentioned that they were very competitive. So can you talk about pricing and competition for those wins for the large wins and then in general?

Speaker 7

2nd part of the question is the analytics piece, is that do you think that will become table stakes Winning new deals relatively soon. And the final question for Taylor, you had mentioned the ramp towards the back half of the year. How should we think About sort of the seasonality to revenues, are they large enough to kind of move the needle? Thank you.

Speaker 5

Great. So let me take the Matt, thank you. And thanks for those questions and joining. Let me take the first two and then Taylor will bounce over to you, if that makes sense. But so the deals that I talked about, especially the large deals, very, very competitive.

Speaker 5

And again, I would just sit and say, think of the Big multi $1,000,000,000 players, the $10,000,000,000 multiplayers toe to toe in those. And I so I like to call those on Broadway deals. And What both of them one common thing that we had in both of those and one was a nearshore deal and one was Provincial Philippine deal was the decision and your position around And your ability to deliver generative AI solutions, in this one case, as I highlighted, a smart audit IVR That then has chatbots and voicebots in the front end of the experience and being able to deliver those. That was key. And if we braided out light on that versus the other folks, there's no way we would have won that.

Speaker 5

And if I go back a year ago, that would never have been in anybody's decision making process. So it's front and center and the other deal and we're implementing that immediately. The other deal was very similar, but it's kind of like Phase 2 for them. And so what I love is In that area of the business, we're going head up against the multi $1,000,000,000 players and we're beating them because We have the BPO 2.0 capabilities, the culture, the analytics, the branding, all of that, The Wavex Technologies and now AI, and we're not taking a back seat. And that's what I love about what we've done.

Speaker 5

And therefore, the pricing is it's not front center. You have to be competitive. We think that with and again, think of this, these experiences now become automated experiences. They are lower cost than human experiences, but it's a just an extension the way I look at this, it's just an extension Of the transactions that we do with human folks, but now we get paid and you don't but we're using technology to do that And you monetize that. And we think that that is the vision I have is that is higher margin.

Speaker 5

So when you put all of that together, That's why we're bullish on this. And I know the market looks at AI as around BPO as a risk. But that solution is clearly an extension of what we do and that's why we're excited about that. And that's why pricing It's competitive. You don't have you're not winning on low pricing.

Speaker 5

Let me put it that way. You just we hold our own. On the end, it was part 2, and I apologize for that long winded answer, Rob. That was something that we're talking about. On the analytics side, that's State of the States.

Speaker 5

But the question is, how good are you? So you have to have analytics. But where we think we're differentiating that sentence is using AI for analytics, Where you can, A, not be so reliant on humans, so you can scale it more cost effectively, But instead of surveying a low percentage of calls, you can survey 100% of the calls and then use those analytics, those AI analytics To find better insights, actually, we think that, yes, it's people's space, but within that, Those that can build it as a strong competitive advantage. And I think we're in a great position on that. And Taylor, it will be you on part 3.

Speaker 3

Yes. So I think part 3 related to the progression of the year And how we see some of the new wins rolling out. So if we look at revenue from Q1 to Q2, We are going to have a similar seasonal range as we did last year, maybe just not quite as strong, but I think It will be very similar to last year. And so revenue from a Q2 perspective will be down slightly on a year over year basis. But with the wins, the 4 wins that Bob mentioned we won in Q1 and then we have few additional so far in Q2, We're going to see revenue ramping so that Q3 will probably be an inflection point on a year over year basis in terms of revenue growth.

Speaker 3

And then we see these contributing nicely to Q4 and we will return to growth in Q4. From a profitability standpoint, profitability often follows revenue. So, on a year over year basis, the profitability will be down slightly, as Rev will be down slightly in Q2. But, we also auditioned, with all these deals That we've won and ramping. We as you know, we expense our training costs as they're incurred and we defer the training revenue.

Speaker 3

So it has a negative drag on margins initially. So we'll see some of that impact in Q2. But as these deals ramp and revenue grows And some of the training costs behind us, you'll see nice progression in margins in Q3 and Q4. And We always see a nice trend between Q2 and Q3 anyway, just because of some of the seasonal training that just falls off

Operator

Our next question comes from the line of Ryan Potter of Citi. Your line is open.

Speaker 8

Hey, thanks for taking my question. It's hard to see the 2 deals that you mentioned in 2Q and with some of it coming from Your Gen AI capabilities, but could you give an update on where you stand with your planned investments and rollouts of Into Gen AI and various capabilities around that. And I guess what has client adoption been so far Gen AI, are we still in very early stages? Are most clients starting to ask for some Gen AI embedded into their current services? And Tagging on that cadence question, how do you expect some GenAI to kind of help you through the peak volume season in 2Q?

Speaker 5

Sure. Great. Really good question, Ryan, and appreciate that. So Gen AI, it's early, yes, Very, very early. And so we have pretty much over the last Quarter and I believe I had this in my remarks that we now have 15 opportunities sitting in that pipeline.

Speaker 5

Some of those are embedded based clients, others are Kind of like this new win that we had that they're asking us to deliver around that. But there's not one There's not one only solution, Mike. It's not like everything is voice bots or everything is chat bots as it relates to AI. Our clients are looking at us to kind of multiple facets Around how to deploy AI to improve either take cost out or improve the experience and improve the number of interactions that you can do. And so we're early on those and there's different types.

Speaker 5

And so as it relates Kind of the impact it's having here's what I do know. GenAI is not really taking any volumes out of any of our clients' Business. But it has the potential to complement. It has the potential to The actual human interactions are very complex and take the lower cost ones off. And if we can do that and we can use technology and create a high margin business on that, It creates, I think a powerful business model for IDEXX.

Speaker 5

And so that's kind of how we're thinking around this. As it relates to, is any of this really changing the ability to maybe not Rant so much during peak season. My team and I have actually been out in front with quite a few clients where we You don't have kind of building call deflection solutions for them, where they don't have You don't hire that many folks and we do that. Now, I think those will take hold probably for next year. I think they got a lot of interest on those for this peak season, and probably didn't have the time to get there.

Speaker 5

And my belief is as we turn the corner here next year around, you're going to see Maybe some of those solutions being implemented and some pretty good technology scale solutions that will be delivered.

Speaker 8

Got it. That's helpful. And I guess on the excess seat capacity You guys have kind of called out. Can you comment on how much of that seat capacity is kind of left to sell into? And are there certain Geos where you have more capacity than others.

Speaker 8

And I guess in terms of CapEx, CapEx has been relatively low as you've done selling into It's already built, but can you comment on eventual additional build outs you might need and how CapEx might trend going forward? And then how you Side on the organic versus inorganic growth?

Speaker 5

Sure. Tim, let me take the first part and then maybe you can kind of Around the CapEx, let me talk a little bit about the utilization around the geographies and such. And we and I think you can see these in the growth rates of our regions that you'll see. But our offshore regions have been growing Pretty aggressively. So we've been filling a lot of capacity in those regions.

Speaker 5

And then our near shore regions have been filling not quite as fast You know, a fast rate. So if I look at it right now, we have plenty capacity in the nearshore. That's why I'm excited about the one win that we have, Large client in Jamaica, because I don't think a big chunk out of that and that's should have strong margin flow through to margins. We will with the growth that we've been doing in the Philippines, we'll probably continue to look at some new markets, some new provincial plays in a market like that. And so I think we can get into some balanced CapEx going forward.

Speaker 5

I think we've Very conservative, Taylor. I love your thoughts on that.

Speaker 3

Yes. No, I think you're spot on. I think if there's one geography that we Probably would lean into a little bit more than others where utilization is right now, it's probably the Philippines. If you look at our capital expenditures in the first Quarter, they were just a little over $2,000,000 which is around it's on the low side of our capital expenditures. We Provide guidance of $15,000,000 to $20,000,000 for the year, which would imply that we would accelerate some of those capital expenditure investments And capacity expansions later in the year is when I would expect that to happen.

Speaker 8

Got it. Thanks again.

Operator

Thank you. Thank you. I'm showing no questions at this time. I'd like to turn the call back over to Bob Deckett, CEO, for any closing remarks.

Speaker 5

Yes. Thanks, Valerie. Thank you all for listening to our earnings call. In closing, I just have to say this, we're really proud of what we've built here And I have full confidence in where this business is going and our ability to deliver in the future. So thank you all for listening and we'll Look forward to the next quarter.

Operator

Thank you. Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect.

Operator

Have a great day.

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Key Takeaways

  • Ibex delivered $124.6 M in Q1 revenue, achieving the high end of guidance with 6% YoY adjusted EBITDA growth to $13.7 M and record 11% margin, while adjusted EPS rose to $0.40 from $0.36.
  • Free cash flow more than tripled to $6.6 M, representing nearly 50% conversion of adjusted EBITDA, and the company remains debt-free with a net cash position of $61.1 M.
  • Ibex won four new clients in Q1 across healthcare and financial services and secured two blue-chip Fortune 100 deals in Q2—one in automotive transportation and one in retail—expected to scale in H2 FY 2024.
  • Higher-margin services continue to drive mix improvement with digital and omnichannel now 77% of revenue and offshore/nearshore delivery at 75%, up from 71% and 70% a year ago, respectively.
  • The company’s three-axis generative AI strategy—enhancing frontline agents, powering deep analytics, and automating digital contacts—helped win an AI-powered smart IVR deal and underpins 15+ AI opportunities in its pipeline.
AI Generated. May Contain Errors.
Earnings Conference Call
IBEX Q1 2024
00:00 / 00:00