IBEX Q2 2025 Earnings Report

IBEX EPS Results

• Actual EPS: $0.51
• Consensus EPS: $0.49
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

IBEX Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $134.63 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

IBEX Announcement Details

• Quarter: Q2 2025
• Date: 2/6/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 4:30PM ET

IBEX (NASDAQ:IBEX) provides end-to-end technology-enabled customer lifecycle experience solutions in the United States and internationally. The company products and services portfolio includes ibex Connect, that offers customer service, technical support, revenue generation, and other revenue generation outsourced back-office services through the CX model, which integrates voice, email, chat, SMS, social media, and other communication applications; ibex Digital, a customer acquisition solution that comprises digital marketing, e-commerce technology, and platform solutions; and ibex CX, a customer experience solution, which provides a suite of proprietary software tools to measure, monitor, and manage its clients' customer experience. It operates customer engagement and customer acquisition delivery centers. The company serves banking and financial services, delivery and logistics, health tech and wellness, high tech, retail and e-commerce, streaming and entertainment, travel and hospitality, and utility industries. The company was formerly known as IBEX Holdings Limited and changed its name to IBEX Limited in September 2019. IBEX Limited was incorporated in 2017 and is headquartered in Washington, District of Columbia. The company is a subsidiary of The Resource Group International Limited.

IBEX Q2 2025 Earnings Call Transcript

Key Takeaways

• Ivex delivered record Q2 revenue of $140.7 million, up 6.1% year-over-year, while expanding adjusted EBITDA margin 100 bps to 11.8% and raising adjusted EPS 36% to $0.59.
• Growth was powered by a proven “land and expand” playbook that combines a powerful new-logo engine—which added five new logos this quarter—and best-in-class client retention rates.
• Generative AI under the Wave IX platform, including AI Translate and AI Automate, secured key enterprise wins, driving incremental revenue and margin accretion.
• Ivex repurchased ~3.6 million shares from TRGI, removing its controlled-company status on Nasdaq, and bolstered its board with three new directors skilled in AI and industry leadership.
• The company raised its fiscal 2025 guidance to $525 million–$535 million in revenue and $68 million–$69 million in adjusted EBITDA, underscoring confidence in continued top-line growth and margin expansion.

Presentation

[Operator]

Welcome to the Ivex Second Quarter FY twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. To note, there isn't an accompanying earnings deck presentation available on the Ivex Investor Relations website at investors.ibex.co.

[Operator]

I will now turn this conference over to Mr. Michael Darwold, Head of Investor Relations for Ibex.

[Michael Darwal, Executive VP of Investor Relations & Deputy CFO at IBEX]

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 that 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 K filed with the U.

[Michael Darwal, Executive VP of Investor Relations & Deputy CFO at IBEX]

S. Securities and Exchange Commission on 09/12/2024. With that, I will now turn the call over to Ivek's CEO, Bob Deken.

[Robert Dechant, CEO at IBEX]

Thanks, Mike. Good afternoon, everyone, and thank you all for joining us today as we share our second quarter fiscal year twenty twenty five results. I'd like to start by once again thanking my team for a tremendous quarter. They continue to show why they are the best in the industry. The second quarter was strong across the board.

[Robert Dechant, CEO at IBEX]

We achieved our highest growth in two years at 6.1%. This enabled us to post the highest revenue for a quarter in the history of Ivex. In addition, we had another great quarter on profitability and now have improved adjusted EBITDA margin over the prior year in 10 out of the last 11 quarters. Our top line growth starts with the success of our powerful new logo engine and our ability to highlight our differentiation enabling us to win large enterprise deals with trophy brands. Our growth is then accelerated by our ability to take market share within our embedded based clients, driven by our ability to outperform the competition.

[Robert Dechant, CEO at IBEX]

This is our proven land and expand playbook. Also important to our success is our high client retention, where our revenue retention rates are some of the highest in the industry, highlighting our ability to be a strategic partner with our clients. We also had important wins with our WAVE IX translate and automate generative AI solutions that position us well into the future. These wins added to an extremely strong quarter. More on this later.

[Robert Dechant, CEO at IBEX]

These growth vectors continue to be our margin expansion drivers. We continue to grow aggressively in both our highest margin regions, exemplified by 14% year over year growth in our offshore region in Q2 and in our highest margin services, highlighted by 8% year over year growth in omni channel revenue in Q2. These vectors have enabled us to expand adjusted EBITDA margin consistently. As a result, we remain confident in our ability to continue to drive top line growth and expand margin. I'm proud to report the following highlights for Q2 FY 2025.

[Robert Dechant, CEO at IBEX]

We delivered record Q2 revenue of $140,700,000 up 6.1% from a year ago. We expanded adjusted EBITDA margin 100 basis points from prior year to 11.8% while delivering record Q2 adjusted net income of $9,600,000 up 20% from a year ago. We achieved adjusted EPS of $0.59 up 36% from a year ago. We closed five new logos in the quarter for a total of eight year to date. Several of these new wins include both traditional agent support and innovative generative AI deployments demonstrating the power of our differentiated solutions.

[Robert Dechant, CEO at IBEX]

We executed the strategic repurchase of approximately 3,600,000.0 shares from TRGI, enabling us to eliminate our status as a controlled company within the NASDAQ definition. This will provide better independence for us as

[Robert Dechant, CEO at IBEX]

a company. And

[Robert Dechant, CEO at IBEX]

we bolstered our Board of Directors with the additions of JJ Zhuang, Patrick McGinnis and Karen Battenbockel, who bring a strong industry and AI talents. Lastly, we had a great quarter winning opportunities and launches with our Wave IX AI solution stack, placing Ivex ahead of the market as we turned the quarter into our fiscal Q3. We are winning with both AI translate and AI automate solutions. These mark significant milestones for Ivex as we continue to redefine the customer experience for many of our clients. As a reminder, our Wave IX AI Translate solution is a disruptive solution that displaces old world third party language translation service bureaus.

[Robert Dechant, CEO at IBEX]

As an example, for one of our hospitality clients, we are able to have our English speaking agents provide multilingual support utilizing AI for real time translation. This eliminates the need to augment our trained customer service agents with additional language translation only agents, providing a game changing solution that significantly improves the customer experience and reduces unnecessary costs. This has already been positively seen by clients across the multitude of industry segments and is 100% accretive to revenue and profitability. Our Wave IX offering also includes our AI Automate solution, where we leverage our deep analytics and AI to automate low complexity call types. This is an enterprise wide solution, meaning we are providing 100% of the automated support for our clients.

[Robert Dechant, CEO at IBEX]

So in implementations where IBEX is one of multiple BPOs providing contact center services, which is the high majority of our engagements, we see this as both incremental to revenue and margin, while further enhancing our trusted partner status with our clients. As a result, we are increasing our stickiness with our clients and expanding our competitive mode. And this positions us extremely well as we look out over the next several years. In summary, we are bullish on the trajectory as we move into the second half of FY twenty twenty five. We believe our business is well positioned today for continued growth, strong EPS and one where we lead the competition from an AI perspective.

[Robert Dechant, CEO at IBEX]

Our ability to win on the big stage with trophy clients against our much larger competitors is the staple of IBEX. I'm extremely proud of the business we have built and I expect this to continue throughout FY twenty twenty five and beyond. With that, I will now turn the call over to Taylor to go into more details on our second quarter FY twenty twenty five financials and guidance. Taylor?

[Taylor Greenwald, Chief Financial Officer at IBEX]

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussion of our second quarter fiscal year twenty twenty five financial results, references to revenue, net income and net cash generated from operations are 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.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Reconciliations of our U. S. GAAP to non GAAP measures are included in the table attached to our earnings press release. Turning to our results, our second quarter results are among the strongest in our history with record top line results and strong profitability. Second quarter revenue was $140,700,000 an increase of 6.1% from $132,600,000 in the prior year quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Revenue growth was driven by vertical growth in HealthTech of 31%, Travel, Transportation and Logistics of 17% and Retail and e commerce of 4% and was partially offset by a decline in the FinTech vertical of 15%. Our focused efforts to grow our higher margin offshore delivery locations are continuing to have a favorable impact on bottom line results. Offshore revenues now comprised 53% of total revenue versus 49% in the prior year quarter. Revenue mix in our higher margin digital and omni channel services also continues to be strong. Digital and omni channel delivery represented 80% of our total revenue, an increase from 79% in the prior year quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

For context, digital nomichannel comprised roughly 65% at the time of our IPO in 2020. We expect that we will continue to be successful driving growth in these higher margin regions services as new client wins and growth in our embedded base continue to be focused in these areas. Second quarter net income increased to $9,300,000 compared to $6,100,000 in the prior year quarter. The increase was primarily driven by the meaningful growth of work and higher margin offshore regions of 14% year over year for the quarter and the realization of the site and cost optimization efforts completed over the past year, partially offset by higher income tax and interest expense. Fully diluted EPS was $0.57 up from $0.33 in the prior year quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Contributing to the EPS growth was the impact from fewer diluted shares outstanding from share repurchases over the last year, including the repurchase of 3,600,000.0 shares from TRGI in November. Our weighted average diluted shares outstanding for the quarter were 16,500,000.0 versus 18,400,000.0 1 year ago. In the third quarter, we expect this number to be approximately 14,300,000 shares as we realize a full quarter impact from the $3,600,000 TRGI share repurchase. Moving to non GAAP measures, adjusted EBITDA increased to $16,500,000 or 11.8% of revenue from $14,300,000 or 10.8 percent of revenue for the same period last year. The 100 basis point improvement in adjusted EBITDA margin was primarily driven by growth in our higher margin offshore locations during recent years, growth in key verticals from existing and new clients launched throughout fiscal twenty twenty four and fiscal twenty twenty five to date, and stronger operating results due to site optimization efforts.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Adjusted net income increased to $9,600,000 from $8,000,000 in the prior year quarter. Non GAAP fully diluted adjusted earnings per share increased to $0.59 from $0.44 in the prior year quarter. The increases were driven by the higher EBITDA and fewer diluted shares outstanding offset by higher income tax and interest expense. We expect our tax rate to track toward 21% to 22% for the year. As a company, we are pleased with the client diversification we have established over the last several years.

[Taylor Greenwald, Chief Financial Officer at IBEX]

For the second quarter of fiscal year twenty twenty five, our largest client accounted for 12% of revenue and our top five, ten and twenty five client concentrations declined compared to the prior year to 39%, fifty four % and seventy nine % from 41%, fifty nine % and eighty two % respectively of overall revenue, representative of a well diversified client portfolio which continues to become more diversified. Over the past decade, we have done a tremendous job attending our top 25 clients and are excited to see one of our signature client wins from fiscal year twenty twenty four already move into our top 20. Switching to our verticals, HealthTech increased to 15.1% of second quarter revenue versus 12.2% in the prior year quarter. Travel, transportation logistics increased to 13.7% versus 12.5% in the prior year quarter. And retail and e commerce remained relatively consistent at 28.5% versus 29% in the prior year quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

These increases were driven by continued demand in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to FinTech vertical decreased to 11% of revenue for the quarter versus 13.7% in the prior year quarter, impacted by the changing landscape for some client payment support models and geographic shifts from onshore to offshore delivery. Net cash generated from operating activities was $1,100,000 for the second quarter of fiscal year twenty twenty five compared to an outflow of $1,600,000 for the prior year quarter. The increase was driven by increased revenues and stronger operating results, partially offset by longer DSOs for our receivables. Our DSOs were seventy nine days, up from seventy five days at the end of the first quarter as we experienced our typical seasonal increase in DSOs and also some delay in payments related to having our clients remit payments into a new bank account.

[Taylor Greenwald, Chief Financial Officer at IBEX]

We expect our DSOs to remain stable in the mid-70s on a go forward basis. Capital expenditures were $4,300,000 or 3.1% of revenue for the second quarter versus $2,900,000 or 2.2% of revenue in the prior year quarter. This increase was primarily driven by expansions in our offshore nearshore regions to support growth in these higher margin geographies. Free cash flow was an outflow of $3,200,000 in the current quarter compared to an outflow of $4,500,000 in the prior year quarter. The improvement was driven by increased net cash provided by operating activities, partially offset by higher capital expenditures during the current quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

We ended the second quarter with $20,200,000 of cash and debt of $33,900,000 for a net debt of $13,700,000 compared to $62,300,000 of cash and debt of $1,500,000 for a net cash of $60,800,000 at the end of our first quarter. The decrease in our net cash position during the quarter was primarily driven by the share repurchase of 3,600,000.0 shares from TRGI for $70,000,000 We funded the share repurchase with $45,000,000 of cash on hand and a $25,000,000 convertible promissory note from TRGI. After the second quarter ended, this note was paid in full with proceeds from our new revolving lines of credit with HSBC. To summarize our second quarter of fiscal year twenty twenty five, we achieved strong top and bottom line second quarter results. We accelerate our top line momentum with over 6% revenue growth, driven by new client wins over the last year and continued expansion of our embedded client base made possible by strong service delivery.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Additionally, our profitability continues to improve, where for 10 of the last eleven quarters we have delivered year over year adjusted EBITDA margin expansion enabling strategic investments in AI capabilities and sales resources. These results are still continued confidence in the execution of our strategy throughout 2025 enabling us to raise our fiscal year guidance and continue to return value to shareholders. Revenue is now expected to be in the range of $525,000,000 to $535,000,000 versus the previous range of $515,000,000 to $525,000,000 Adjusted EBITDA is now expected to be in the range of $68,000,000 to $69,000,000 versus the previous range of $67,000,000 to $69,000,000 and capital expenditures are expected to remain in the range of $15,000,000 to $20,000,000 Our business is well positioned for today and for the years ahead and we're excited about the future of buybacks as we head into the third quarter of fiscal year twenty twenty five and beyond. With that, Bob and I will now take questions. Operator, please open the line.

[Operator]

Thank you. Our first question comes from David Koning with Baird. You may proceed.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Yes. Hey guys, congrats on another great quarter. Really good to see.

[Robert Dechant, CEO at IBEX]

Thanks, David. Yes, we're really pleased with the results we posted.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Yes. And maybe to start, just on revenue, is it a combination is the backdrop getting better? Maybe a combination of a few kind of things. Is the backdrop getting better? Are you just winning against others?

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

And how is Gen AI? I mean, you kind of talked a little bit about Gen AI actually a tailwind, headwind, a little of both, like because all those three things seem to be driving revenue?

[Robert Dechant, CEO at IBEX]

Yes,

[Robert Dechant, CEO at IBEX]

David. So appreciate the question. And maybe it's a little bit of all of the above, but I think probably the biggest drivers for us are continued winning new logos that then drive a lot of revenue growth with them in kind of in their year 2s and things like that. So, and that's been a staple of IBEX of our ability to win and then land and expand and get those new clients growing. So that's I think probably one of the biggest drivers.

[Robert Dechant, CEO at IBEX]

Actually, it is the biggest driver. The second driver that's going on is for us is our ability to win market share. And I will say a lot of the embedded based clients are looking and moving some of their business into the lower labor cost markets that as you know over the years has been the game. A lot of that's been taking place that puts pressure on top line revenue. But what we've been able to do is manage through that, but take market share.

[Robert Dechant, CEO at IBEX]

And so I think we're if you like look at our competitors, where those events are putting serious headwinds into their business. For us, it isn't because we're winning market share and as both Taylor and I said, we're winning market share because we're out executing our competitors. And so those are, I think, the two biggest variables. And then the third one just around the macro and kind of demand, I would kind of sit and say that the demand has stabilized. I'm not sure the demand has come back, right?

[Robert Dechant, CEO at IBEX]

And so, but the good news is it's stabilized and that's allowing us to, I think, continue to build the momentum. And as you've seen over the last several quarters, our top line growth continues to build and grow.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Yes, that's great. And then I guess secondly, just on margins, I mean, you continue to put up really good margins. The way you're guiding the back half though, it looks like margins might be down just a touch in the back half, to get the updated EBITDA guidance. I mean, you raised EBITDA guidance, which is great. But Q2 was so good that it actually takes a little bit of margin, creates a little margin headwind it looks like in the second half, right?

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

So just kind of wondering on that.

[Robert Dechant, CEO at IBEX]

Hey, Taylor, I'll throw that over to you if you want to look at that.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Yes, absolutely. So David, if you look at our gross margins, on the gross margin level, we improved at 140 basis points in Q1, '2 '10 basis points in Q2, and we expect that improvement year over year to continue into Q3 and Q4. So we're feeling very good about the profitability of our business. Now what we're doing and it's intentional is we are investing in SG and A, in sales resources and technology both in the infrastructures. We recently implemented our new financial system and HR system and then also in AI capabilities to grow the business.

[Taylor Greenwald, Chief Financial Officer at IBEX]

But if you look at the back half of the year in terms of our guidance, we're still at around what 14% adjusted EBITDA margin. So we're still feel very good about that. And it's the fact that our gross margins are seeing such improvement that we're able to invest in growth and continue this trend.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Got you. Well, great job guys. Thank you.

[Robert Dechant, CEO at IBEX]

Great, David. Thanks. Good catching up.

[Operator]

Thank you. And I'm not showing any further questions. I'd now like to turn the call back over to Bob Deckin for any closing remarks.

[Robert Dechant, CEO at IBEX]

Josh, thank you and thank you all for attending. We're really proud of what we continue to do as a team, what we do operationally, what we do financially and then from a strategic standpoint with our AI strategy, put all those elements together. I love the trajectory of our business. And thank you all and we'll talk to you next quarter. Good

[Robert Dechant, CEO at IBEX]

night.

[Operator]

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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[Operator]

Welcome to the Ivex Second Quarter FY twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. To note, there isn't an accompanying earnings deck presentation available on the Ivex Investor Relations website at investors.ibex.co.

[Operator]

I will now turn this conference over to Mr. Michael Darwold, Head of Investor Relations for Ibex.

[Michael Darwal, Executive VP of Investor Relations & Deputy CFO at IBEX]

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 that 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 K filed with the U.

[Michael Darwal, Executive VP of Investor Relations & Deputy CFO at IBEX]

S. Securities and Exchange Commission on 09/12/2024. With that, I will now turn the call over to Ivek's CEO, Bob Deken.

[Robert Dechant, CEO at IBEX]

Thanks, Mike. Good afternoon, everyone, and thank you all for joining us today as we share our second quarter fiscal year twenty twenty five results. I'd like to start by once again thanking my team for a tremendous quarter. They continue to show why they are the best in the industry. The second quarter was strong across the board.

[Robert Dechant, CEO at IBEX]

We achieved our highest growth in two years at 6.1%. This enabled us to post the highest revenue for a quarter in the history of Ivex. In addition, we had another great quarter on profitability and now have improved adjusted EBITDA margin over the prior year in 10 out of the last 11 quarters. Our top line growth starts with the success of our powerful new logo engine and our ability to highlight our differentiation enabling us to win large enterprise deals with trophy brands. Our growth is then accelerated by our ability to take market share within our embedded based clients, driven by our ability to outperform the competition.

[Robert Dechant, CEO at IBEX]

This is our proven land and expand playbook. Also important to our success is our high client retention, where our revenue retention rates are some of the highest in the industry, highlighting our ability to be a strategic partner with our clients. We also had important wins with our WAVE IX translate and automate generative AI solutions that position us well into the future. These wins added to an extremely strong quarter. More on this later.

[Robert Dechant, CEO at IBEX]

These growth vectors continue to be our margin expansion drivers. We continue to grow aggressively in both our highest margin regions, exemplified by 14% year over year growth in our offshore region in Q2 and in our highest margin services, highlighted by 8% year over year growth in omni channel revenue in Q2. These vectors have enabled us to expand adjusted EBITDA margin consistently. As a result, we remain confident in our ability to continue to drive top line growth and expand margin. I'm proud to report the following highlights for Q2 FY 2025.

[Robert Dechant, CEO at IBEX]

We delivered record Q2 revenue of $140,700,000 dollars up 6.1% from a year ago. We expanded adjusted EBITDA margin 100 basis points from prior year to 11.8% while delivering record Q2 adjusted net income of $9,600,000 up 20% from a year ago. We achieved adjusted EPS of $0.59 up 36% from a year ago. We closed five new logos in the quarter for a total of eight year to date. Several of these new wins include both traditional agent support and innovative generative AI deployments demonstrating the power of our differentiated solutions.

[Robert Dechant, CEO at IBEX]

We executed the strategic repurchase of approximately 3,600,000.0 shares from TRGI, enabling us to eliminate our status as a controlled company within the NASDAQ definition. This will provide better independence for us as a company. And we bolstered our Board of Directors with the additions of JJ Zhuang, Patrick McGinnis and Karen Battenbockel, who bring a strong industry and AI talents. Lastly, we had a great quarter, winning opportunities and launches with our Wave IX AI solution stack, placing Ivex ahead of the market as we turned the quarter into our fiscal Q3. We are winning with both AI translate and AI automate solutions.

[Robert Dechant, CEO at IBEX]

These mark significant milestones for Ivex as we continue to redefine the customer experience for many of our clients. As a reminder, our Wave IX AI Translate solution is a disruptive solution that displaces old world third party language translation service bureaus. As an example, for one of our hospitality clients, we are able to have our English speaking agents provide multilingual support utilizing AI for real time translation. This eliminates the need to augment our trained customer service agents with additional language translation only agents, providing a game changing solution that significantly improves the customer experience and reduces unnecessary costs. This has already been positively seen by clients across the multitude of industry segments and is 100% accretive to revenue and profitability.

[Robert Dechant, CEO at IBEX]

Our Wave IX offering also includes our AI Automate solution, where we leverage our deep analytics and AI to automate low complexity call types. This is an enterprise wide solution, meaning we are providing 100 of the automated support for our clients. So in implementations where IBEX is one of multiple BPOs providing contact center services, which is the high majority of our engagements, we see this as both incremental to revenue and margin, while further enhancing our trusted partner status with our clients. As a result, we are increasing our stickiness with our clients and expanding our competitive mode. And this positions us extremely well as we look out over the next several years.

[Robert Dechant, CEO at IBEX]

In summary, we are bullish on the trajectory as we move into the second half of FY twenty twenty five. We believe our business is well positioned today for continued growth, strong EPS and one where we lead the competition from an AI perspective. Our ability to win on the big stage with trophy clients against our much larger competitors is the staple of IBEX. I'm extremely proud of the business we have built and I expect this to continue throughout FY twenty twenty five and beyond. With that, I will now turn the call over to Taylor to go into more details on our second quarter FY twenty twenty five financials and guidance.

[Robert Dechant, CEO at IBEX]

Taylor?

[Taylor Greenwald, Chief Financial Officer at IBEX]

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. And my discussion of our second quarter fiscal year twenty twenty five financial results references to revenue, net income and net cash generated from operations are 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.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Reconciliations of our U. S. GAAP to non GAAP measures are included in the table attached to our earnings press release. Turning to our results, our second quarter results are among the strongest in our history with record top line results and strong profitability. Second quarter revenue was $140,700,000 an increase of 6.1% from $132,600,000 in the prior year quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Revenue growth was driven by vertical growth in HealthTech of 31%, Travel, Transportation and Logistics of 17% and Retail and e commerce of 4% and was partially offset by decline in the FinTech vertical of 15%. Our focused efforts to grow our higher margin offshore delivery locations are continuing to have a favorable impact on bottom line results. Offshore revenues now comprised 53% of total revenue versus 49% in the prior year quarter. Revenue mix in our higher margin digital and omni channel services also continues to be strong. Digital and omni channel delivery represented 80% of our total revenue, an increase from 79% in the prior year quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

For context, digital nomichannel comprised roughly 65% at the time of our IPO in 2020. We expect that we will continue to be successful driving growth in these higher margin regions services as new client wins and growth in our embedded base continue to be focused in these areas. Second quarter net income increased to $9,300,000 compared to $6,100,000 in the prior year quarter. The increase was primarily driven by the meaningful growth of work and higher margin offshore regions of 14% year over year for the quarter and the realization of the site and cost optimization efforts completed over the past year, partially offset by higher income tax and interest expense. Fully diluted EPS was $0.57 up from $0.33 in the prior year quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Contributing to the EPS growth was the impact from fewer diluted shares outstanding from share repurchases over the last year, including the repurchase of 3,600,000.0 shares from TRGI in November. Our weighted average diluted shares outstanding for the quarter were 16,500,000.0 versus 18,400,000.0 1 year ago. In the third quarter, we expect this number to be approximately 14,300,000.0 shares as we realize a full quarter impact from the $3,600,000 TRGI share repurchase. Moving to non GAAP measures, adjusted EBITDA increased to $16,500,000 or 11.8% of revenue from $14,300,000 or 10.8% of revenue for the same period last year. The 100 basis point improvement in adjusted EBITDA margin was primarily driven by growth in our higher margin offshore locations during recent years, growth in key verticals from existing and new clients launched throughout fiscal twenty twenty four and fiscal twenty twenty five to date, and stronger operating results due to site optimization efforts.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Adjusted net income increased to $9,600,000 from $8,000,000 in the prior year quarter. Non GAAP fully diluted adjusted earnings per share increased to $0.59 from $0.44 in the prior year quarter. The increases were driven by the higher EBITDA and fewer diluted shares outstanding offset by higher income tax and interest expense. We expect our tax rate to track toward 21% to 22% for the year. As a company, we are pleased with the client diversification we have established over the last several years.

[Taylor Greenwald, Chief Financial Officer at IBEX]

For the second quarter of fiscal year twenty twenty five, our largest client accounted for 12% of revenue and our top five, ten and twenty five client concentrations declined compared to the prior year to 39%, fifty four % and seventy nine % from 41%, fifty nine % and eighty two % respectively of overall revenue, representative of a well diversified client portfolio which continues to become more diversified. Over the past decade, we have done a tremendous job attending our top 25 clients and are excited to see one of our signature client wins from fiscal year twenty twenty four already move into our top 20. Switching to our verticals, HealthTech increased to 15.1% of second quarter revenue versus 12.2% in the prior year quarter. Travel, transportation logistics increased to 13.7% versus 12.5% in the prior year quarter. And retail and e commerce remained relatively consistent at 28.5% versus 29% in the prior year quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

These increases were driven by continued demand in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to FinTech vertical decreased to 11% of revenue for the quarter versus 13.7% in the prior year quarter, impacted by the changing landscape for some client payment support models and geographic shifts from onshore to offshore delivery. Net cash generated from operating activities was $1,100,000 for the second quarter of fiscal year twenty twenty five compared to an outflow of $1,600,000 for the prior year quarter. The increase was driven by increased revenues and stronger operating results, partially offset by longer DSOs for our receivables. Our DSOs were 79, up from seventy five days at the end of the first quarter as we experienced our typical seasonal increase in DSOs and also some delay in payments related to having our clients remit payments into a new bank account.

[Taylor Greenwald, Chief Financial Officer at IBEX]

We expect our DSOs to remain stable in the mid-70s on a go forward basis. Capital expenditures were $4,300,000 or 3.1% of revenue for the second quarter versus $2,900,000 or 2.2% of revenue in the prior year quarter. This increase was primarily driven by expansions in our offshore nearshore regions to support growth in these higher margin geographies. Free cash flow was an outflow of $3,200,000 in the current quarter compared to an outflow of $4,500,000 in the prior year quarter. The improvement was driven by increased net cash provided by operating activities, partially offset by higher capital expenditures during the current quarter.

[Taylor Greenwald, Chief Financial Officer at IBEX]

We ended the second quarter with $20,200,000 of cash and debt of $33,900,000 for a net debt of $13,700,000 compared to $62,300,000 of cash and debt of $1,500,000 for a net cash of $60,800,000 at the end of our first quarter. The decrease in our net cash position during the quarter was primarily driven by the share repurchase of 3,600,000.0 shares from TRGI for $70,000,000 We funded the share repurchase with $45,000,000 of cash on hand and a $25,000,000 convertible promissory note from TRGI. After the second quarter ended, this note was paid in full with proceeds from our new revolving lines of credit with HSBC. To summarize our second quarter of fiscal year twenty twenty five, we achieved strong top and bottom line second quarter results. We accelerate our top line momentum with over 6% revenue growth, driven by new client wins over the last year and continued expansion of our embedded client base made possible by strong service delivery.

[Taylor Greenwald, Chief Financial Officer at IBEX]

Additionally, our profitability continues to improve, where for 10 of the last eleven quarters we have delivered year over year adjusted EBITDA margin expansion enabling strategic investments in AI capabilities and sales resources. These results instill continued confidence in the execution of our strategy throughout 2025 enabling us to raise our fiscal year guidance and continue to return value to shareholders. Revenue is now expected to be in the range of $525,000,000 to $535,000,000 versus the previous range of $515,000,000 to $525,000,000 Adjusted EBITDA is now expected to be in the range of $68,000,000 to $69,000,000 versus the previous range of $67,000,000 to $69,000,000 and capital expenditures are expected to remain in the range of $15,000,000 to $20,000,000 Our business is well positioned for today and for the years ahead and we're excited about the future buybacks as we head into the third quarter of fiscal year twenty twenty five and beyond. With that, Bob and I will now take questions. Operator, please open the line.

[Operator]

Thank you. Our first question comes from David Koning with Baird. You may proceed.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Yes. Hey guys, congrats on another great quarter. Really good to see.

[Robert Dechant, CEO at IBEX]

Thanks, David. Yes, we're really pleased with the results we posted.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Yes. And maybe to start, just on revenue, is it a combination is the backdrop getting better? Maybe a combination of a few kind of things. Is the backdrop getting better? Are you just winning against others?

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

And how is Gen AI? I mean, you kind of talked a little bit about Gen AI actually a tailwind, headwind, a little of both, like because all those three things seem to be driving revenue.

[Robert Dechant, CEO at IBEX]

Yes, David. So appreciate the question. And maybe it's a little bit of all of the above, but I think probably the biggest drivers for us are continued winning new logos that then drive a lot of revenue growth with them in kind of in their year 2s and things like that. So, and that's been a staple of IBEX of our ability to win and then land and expand and get those new clients growing. So that's I think probably one of the biggest drivers.

[Robert Dechant, CEO at IBEX]

Actually, it is the biggest driver. The second driver that's going on is for us is our ability to win market share. And I will say a lot of the embedded based clients are looking and moving some of their business into the lower labor cost markets. That as you know over the years has been the game, a lot of that's been taking place that puts pressure on top line revenue. But what we've been able to do is manage through that, but take market share.

[Robert Dechant, CEO at IBEX]

And so I think we're, if you like, look at our competitors, where those events are putting serious headwinds into their business. For us, it isn't because we're winning market share and as both Taylor and I said, we're winning market share because we're out executing our competitors. And so those are, I think, the two biggest variables. And then the third one just around the macro and kind of demand, I would kind of sit and say that the demand has stabilized. I'm not sure the demand has come back, right?

[Robert Dechant, CEO at IBEX]

And so, but the good news is it's stabilized and that's allowing us to, I think, continue to build the momentum. And as you've seen over the last several quarters, our top line growth continues to build and grow.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Yes, that's great. And then I guess secondly, just on margins, I mean you continue to put up really good margins. The way you're guiding the back half though, it looks like margins might be down just a touch in the back half to get to the updated EBITDA guidance. I mean, you raised EBITDA guidance, which is great. But Q2 was so good that it actually takes a little bit of margin, creates a little margin headwind, it looks like in the second half, right?

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

So just kind of wondering on that.

[Robert Dechant, CEO at IBEX]

Hey, Taylor, I'll throw that over to you if you want to look

[Taylor Greenwald, Chief Financial Officer at IBEX]

at that. Yes, absolutely. So David, if you look at our gross margins, on the gross margin level, we improved at 140 basis points in Q1, '2 '10 basis points in Q2, and we expect that improvement year over year to continue into Q3 and Q4. So we're feeling very good about the profitability of our business. Now what we're doing and it's intentional is we are investing in SG and A, in sales resources and technology, both in the infrastructures.

[Taylor Greenwald, Chief Financial Officer at IBEX]

We recently implemented our new financial system and HR system and then also in AI capabilities to grow the business. But if you look at the back half of the year in terms of our guidance, we're still at around what 14% adjusted EBITDA margin. So we're still feel very good about that and it's the fact that our gross margins are seeing such improvement that we're able to invest in growth and continue this trend.

[David Koning, Senior Research Analyst at Robert W. Baird & Co]

Got you. Well, great job guys. Thank you.

[Robert Dechant, CEO at IBEX]

Great, David. Thanks. Good catching up.

[Operator]

Thank you. And I'm not showing any further questions. I'd now like to turn the call back over to Bob Deckin for any closing remarks.

[Robert Dechant, CEO at IBEX]

Josh, thank you and thank you all for attending. We're really proud of what we continue to do as a team, what we do operationally, what we do financially and then from a strategic standpoint with our AI strategy, put all those elements together. I love the trajectory of our business. And thank you all and we'll talk to you next quarter. Good night.

[Operator]

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Participants

Executives

• Michael Darwal, Executive VP of Investor Relations & Deputy CFO
• Robert Dechant, CEO
• Taylor Greenwald, Chief Financial Officer

Analysts

• David Koning, Senior Research Analyst at Robert W. Baird & Co