Concentrix Corporation

Good day and welcome to Consensrix Fiscal Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your touchtone telephone. If anyone should require assistance during the conference, please press star then 0 to reach an operator. As a reminder, this call is being recorded. I would now like to turn the call over to David Stein, VP Investor Relations. You may begin.

Thank you, Michelle, and good morning. Welcome to the Concentrix Second Quarter Fiscal 2022 Earnings Call. This call is the property of Concentrix and may not be recorded or rebroadcast without the permission of Concentrix. This call contains forward-looking statements that address our expected future performance and that by their nature address matters that are uncertain. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements as a result of new information or future events or developments. Please refer to yesterday's earnings release and our most recent filings with the SEC for additional information regarding uncertainties that could affect our future financial results. This includes the risk factors provided in our annual report on Form 10-K. Also during the call, we will discuss non-GAAP financial measures, including free cash flow, non-GAAP operating income, adjusted EBITDA, and adjusted EPS, as well as adjusted constant currency revenue growth. A reconciliation of these non-GAAP measures is available in the news release and on the Concentrix Investor Relations website under Financials. With me on the call today are Chris Caldwell, our President and Chief Executive Officer, and Andre Valentine, our Chief Financial Officer. Chris will provide a summary of our operating performance and growth strategy, and Andre will cover our financial results and business outlook. Then we'll open the call for your questions. Now I'll turn the call over to Chris.

Thank you, David. Good morning, everyone, and welcome to our second quarter earnings call for fiscal 2022. As you can see from our results we announced, our second quarter had strong revenue growth and even stronger margin expansion. This last quarter we have fielded many questions from investors around how our business model fares during uncertain times and we believe our results show the services we offer to our clients are in demand. Our growth strategy is succeeding despite the ever-changing macroeconomic environment which gives us the confidence that we can rapidly adjust to changes that are and that our underlying business is strong and growing. We are not seeing signs of a slowdown in our pipeline or new business signings, although the placement of work to lower cost locations and more drive to digital solutions continues to increase, which we see as a positive to the business. Reported revenue in the second quarter was $1.57 billion, up 14.5%, including a higher than anticipated foreign exchange headwind. On a constant currency basis, revenue increased 17.2%. Our second quarter non-GAAP operating income improved to $213 million, growing 24%. Adjusted EBITDA increased 20% to $250 million compared with last year. Non-GAAP earnings per share increased 24% to $2.93 per share compared with $2.37 per share last year. Once again, we saw growth across all our verticals. The market continues to have stable pricing, with price increases being accepted by clients for the most part to offset any labor increases. Some clients did decide to move volume offshore to better manage their cost structure, while the vast majority of our client base is happy delivering from their current geography. As part of driving better business outcomes for our clients, we won digital transformation and CX solution businesses across over two dozen new logos, many now engaged across both our operations and catalyst offerings. Demand remains strong and our solid pipeline gives us the confidence to expect strong signings for the rest of the year. As we've spoken with investors over the last couple of months, we've also seen a lot of interest in understanding more about our new economy clients. There have been questions about size and strength of these clients to weather changes in the economy. We believe our new economy client base is strong, vibrant, and will generally succeed in down cycles. They continue to make substantial contributions this quarter to grow, increasing 42% year over year to $363 million in the quarter. As a reminder, we have over 125 new economy clients spread across our set of verticals and end markets that we service. As we stated at the time of our analyst day back in January, The majority of these are not small companies and have large potential. In the second quarter, we grew revenue on a year-over-year basis with over 80% of these clients, which represents 90% of our new economy client revenue. These clients look to us to be able to help them as they scale globally, as their businesses become more complex, and as they deal with many of the challenges that we help our enterprise clients navigate. Turning to Concentrix Catalysts, We're making strong progress and seeing good sales motion to cross-sell our full range of CX capabilities. Our teams have met with a select set of our clients to explain the opportunities to more fully address key CX needs and have gained significant interest to explore these additional solutions. At the end of Q2, we had a pipeline of close to $100 million of opportunities with combined capabilities beyond what we would have been able to participate in previously. These opportunities are in addition to our growing traditional concentric catalyst pipeline. For example, a software company needed help in many areas of their CX organization, so they partnered with us to leverage a variety of our capabilities. We are helping them build out a scalable support function, transition to a new CRM system, designing and building user bots, growing their revenue, and understanding their customer journey, all while lowering their total delivery costs. Having developed a customer journey-driven approach to optimize a holistic customer experience, our combined concentrics and catalyst teams have been instrumental in deepening the relationships and adding significant value in ways that we would not have been able to support before. Our challenge in catalyst at the moment is hiring. We simply cannot hire enough technical staff to meet the strong demand and are expanding our development locations, taking advantage of our global footprint to keep up. The demand for our operations and catalyst business continue to confirm our clients want to deal with fewer partners who have deeper domain expertise and broader service capabilities on a global scale. Increasingly, as a single source integrator and operator, we selectively pursue strategic clients to deliver end-to-end CX solutions. This quarter, we were also pleased to announce the acquisition of ServiceSource in May. ServiceSource adds deep domain expertise in sales generation and expands our business-to-business sales capabilities. We have an active pipeline with significant demand from our clients for this capability. We also gain an attractive client portfolio of technology and new economy brands whom we can help scale and cross-sell other CX services. We expect the transaction to close in the second half of fiscal year and be accretive to both growth and profitability after synergies in the first 12 months. In terms of capital deployment, in the second quarter we paid $13 million in dividends and repurchased $58 million of our stock at an average price of about $158 per share. We also continue to focus on completing complementary and financially compelling acquisitions as we have mentioned with our service source acquisition. From an operating perspective, we continue to achieve strong customer satisfaction, innovation, and client value attainment scores. In our second quarter, demand for CX Solutions was particularly strong in travel, technology, banking financial services and insurance, automotive, and healthcare. Reflecting the current macro environment, some of our clients are experiencing volume volatility, particularly in e-commerce and crypto industries, while supply chain is primarily impacting clients that manufacture out of China. We are also happy to have released our updated environmental, social, and governance report with our earnings this quarter. The report provides more details on our efforts in corporate social responsibility, the investments we are making, and our progress in having a measurable and meaningful impact to our staff and our communities. I can't thank the Concentrix team enough for the commitment to making the world a better place. With a few of our 2025 goals close to completion well ahead of schedule, we have now started to update other goals. I encourage you to visit the Investor Relations section of our website and download a copy. Turning to the balance of the year, despite foreign currency impact and a shift of some programs to lower cost delivery, our broad-based strength across the business, strong win-win with clients, and a robust pipeline across our strategic verticals keeps us confident that we will continue to grow faster than the market while expanding our margins. In summary, we're focused on transforming everything CX for our clients and their customers. We are deepening our client relationships and relentlessly innovating with new solutions and expanding into emerging markets while we selectively pursue strategic acquisitions to drive superior returns for our shareholders. Finally, I would like to thank our exceptional staff for their commitment to execution, our clients for their trust, and our talented board of directors for their support and membership. And with that, mentorship. And with that, I will turn it over to Andre.