Concentrix Corporation

Good day and thank you for standing by. Welcome to Deconcentric's fiscal third quarter 2022 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Stein, Vice President of Investor Relations. Please go ahead.

Thank you, Elizabeth, and good morning. Welcome to the Concentrix Third Quarter Fiscal 2022 Earnings Call. This call is the property of Concentrix and may not be recorded or rebroadcast without the written 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 very much, David. Good morning, everyone, and welcome to our third quarter earnings call for fiscal 2022. First, Several of our regions have dealt with extreme weather over the last few weeks, and I would like to send our thoughts out to our teams who continue to focus on keeping our staff safe and delivering for our clients. They continue to do an outstanding job. Now, before digging into our operational results, I wanted to discuss the economy and changing dynamics with some of our clients as they work to address persistent challenges in the current macro environment. In times like these, our clients need to drive revenue generation, do more with less through automation, and retain customers by ensuring the best possible experience. We believe our disruptive and differentiated customer experiences offering uniquely positions us to address these needs holistically. Our pipeline for new business continues to be strong, and clients who are seeing weakness in their business, we're helping to look at consolidating work with us. Historically, we have done well in both good and more challenging economic times by helping our clients meet their goals. I remain optimistic that we can achieve our long-term financial objectives. Our culture values being flexible, tenacious, and thinking of the success of our clients in all of our actions. Now, turning to our third quarter results, we executed well in the quarter, continuing to deliver solid revenue growth and profit improvements in line with our guide. Reported revenue in the third quarter was $1.58 billion, up 13.1%, including a higher-than-anticipated foreign exchange headwind. On a constant currency basis, revenue increased by 17.3%, and organic constant currency was 7.5%. Our third quarter non-GAAP operating income improved to $221 million, growing 22%, and adjusted EBITDA increased 20% to $258 million compared with last year. Our non-GAAP earnings per share increased 19%, to $2.95 per share compared with $2.49 per share last year. We saw growth across all our strategic verticals in the third quarter despite challenges in the macro environment. Continued supply chain issues and softer growth in volumes compared to earlier in the year weighed somewhat on our revenue from certain clients in a few of our verticals. Our new economy clients made a very positive impact in the quarter. Revenue from new economy clients grew 27% year over year to nearly $370 million in the quarter. We continue to benefit from the breadth of our new economy clients, both in terms of verticals and geography. I'm particularly excited that we are closing sizable deals and seeing significant opportunities for growth across our entire business portfolio over the medium and long term. Since our last earning call, we signed the largest deal that Catalyst has ever signed in its history. A Fortune 100 company launched a rigorous, multi-stage, nearly year-long process where Catalyst won over several leading peers. As a key strategic partner, we will enable their digital-first strategy, co-creating the future of their entire digital experience. The significant competitive win underscores the importance of the transformation in digital services that we can now offer through Catalyst and will drive revenue for the next few years starting in Q1 of 2023. Additionally, we have signed a meaningful new outsourcing agreement with a client in our BFSI vertical that again is a Fortune 100 company. This significant transformation project with a top-tier insurance company to drive a better customer experience will leverage our multi-shore footprint, our scale, commitment automation, CX technology, and analytics capabilities. This project is expected to generate hundreds of millions of dollars in revenue over the next five years. After an extensive and highly competitive process, Concentrix was selected as a client's primary transformation partner. This new win is an example of a client turning to us to transform their customer experience while making more of their cost structure variable. As these two large recent wins demonstrate, our unique end-to-end value proposition provides mission-critical services that sets us apart in the CX digital marketplace and keep our business model resilient. During the quarter, we also signed over two dozen new logos. Examples of our wins include a range of new clients in technology, banking financial services, retail, and healthcare. The trend towards vendor consolidation also continues to enable client share growth in our scale accounts. During the quarter, we also welcomed ServiceSource, world-class B2B sales capabilities that hit the ground running and integrating quickly with our brand organizational structure and go-to-market completed within days of the close. We have very strong cultural alignment with the new B2B team and we are confident that we will exceed our year one and aggregate cost synergy target while driving meaningful revenue synergies. We have identified the actions needed to achieve more than 20 million in first year synergies that we set as an expectation when we announced the transaction And we've started to develop the pipeline of joint opportunities that we believe will exceed our first year sales synergy target. Our strategy to invest in capabilities that allow us to design, build, and run the future of CX is making headway. At the end of the third quarter, we had a pipeline of more than 160 million of single source integrator and operator opportunities combining capabilities of concentric catalyst, operations, our B2B team that we would not have been able to participate in without these investments. From an operating perspective, we continue to deliver exceptional service with record client value attainment scores and staffing metrics that continue to be better than pre-pandemic levels. We remain focused on being the best partner for our clients and adding value to these increased strategic relationships. In terms of hiring new technical talent, staffing to meet catalyst demands remains a challenge. We're working to take advantage of our global footprint to expand our development capability, including new talent pools in Poland and Costa Rica. Our employee and customer satisfaction scores continue to be positive. Clients rate us highly for innovating the customer journey with technology. This innovation also extends to our internal operations. During the quarter, we launched and developed additional internally developed technology platforms, ConnectCX, QualityCX, recruit CX to further unlock margin expansion. The more technology-infused services we provide to our clients, the stickier our relationships become. While we continue to experience elevated wage inflation, particularly in North America and parts of Europe, we continue to make some good progress on pricing linked to wages and increased automation to drive down our costs. This is evidenced by our healthy margin progression in the third quarter. In terms of work at home, We saw some shifts of our staff back to our sites in the third quarter and feel that we manage these transitions with the best interests of both our staff and clients in mind. At the end of the quarter, about 50% of our staff works from home now. Our continued strong cash generation allowed us to continue our balanced approach to capital allocation. In the quarter, we demonstrated this balance through our accretive acquisition of ServiceSource, where we're returning cash to investors through dividends and stock repurchases. In the third quarter, we paid $13 million in dividends and repurchased approximately $50 million of our stock at an average price of about $136 per share. Consistent with our commitment to disciplined capital deployment and continued prospects for strong free cash flow, we are pleased to raise the quarterly dividend by 10%. This increased quarterly dividend translates to $1.10 per share on an annualized basis. As you can see from our guide, we believe we will close our fiscal year 2022 by achieving the guidance that we laid out at the beginning of the year. And with our new wins, we believe we will continue to grow faster than the market. In summary, we're focused on transforming everything CX for our clients and our customers. We're deepening our client relationship 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'd 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 mentorship. With that, I'll turn it over to Andre. Andre?