Concentrix Corporation

Thank you for standing by and welcome to Concentric's fiscal third quarter 2023 financial results conference call. At this time, all participants are in a listen to only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. I would now like to hand the call over to Vice President, Investor Relations, David Stein. Please go ahead.

Thank you, Lateef, and good evening. Welcome to the Concentrix Corporation third quarter fiscal 2023 earnings call. As a result of the combination earlier this week, we now operate as one Concentrix WebHelp. This call is the property of Concentrix WebHelp and may not be recorded or rebroadcast without written permission. 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 today'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 and subsequent SEC filings. Also during the call, we will discuss non-GAAP financial measures, including free cash flow, non-GAAP operating income, adjusted EBITDA, non-GAAP EPS, and adjusted constant currency revenue growth. A reconciliation of these non-GAAP measures is available in the news release and on the company investor relations website under financials. With me on the call 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. Hello everyone and thank you for joining us today for our third quarter earnings call. We are thrilled to have you with us as we discuss our performance in the third quarter and the exciting news that we have closed our transformative combination with WebHelp. We're pleased that we executed to deliver revenue and profit growth with strong cash flow in the third quarter. We experienced continued stable demand for high-value and technology-infused services, achieved solid new business signings, and our continued focus on business mix drove margin expansion. We entered the fourth quarter with a strong pipeline of opportunities that we believe will continue to drive our growth into 2024. Reported revenue in the third quarter was $1.63 billion. On an organic, constant currency basis, revenue grew 1.7%. Our third quarter non-GAAP operating income increased to $231 million and adjusted EBITDA increased to $269 million, both growing by over 4% compared with last year. Solid execution yielded 10 basis point improvements in both our non-GAAP OI and adjusted EBITDA margins over last year. Our non-GAAP EPS was $2.71 per share compared with $2.95 per share last year, largely reflecting the impact of expected higher interest rates. Given our continued organic growth, strong free cash flow generation, and the accretive web help combination, we are pleased to raise the quarterly dividend by 10%. This increased quarterly dividend translates to $1.21 per share on an annualized basis. We continue to grow in each of our strategic verticals, which more than offset continued volume softness with a few select large clients as we discussed last quarter. From a Catalyst perspective, we again experienced sequential quarterly revenue growth with our digital CX solutions. Our unique digital IT service capabilities with thousands of staff able to design, deploy, and integrate technology-infused solutions at scale differentiates us significantly from our traditional CX peers. From a sales perspective, we continue to focus on our sell as one approach with our combined catalyst and CX operations design, build, and run services. During the quarter, we saw steady demand across multiple geographies and verticals as clients continued to look for differentiated ways to service their customers while managing their cost structure. While clients are still signing smaller deals that ramp more slowly, we are pleased with the higher complexity work that we will be performing with these new wins. We also see a strong pipeline of opportunities as a combined Concentrix Web Help organization that we would not have been able to pursue prior to the combination. From an operating perspective, we are delivering exceptional service with record client attainment scores this quarter. Our focus remains on being the best partner for our clients' relationships and winning more opportunities within each account. The more technology-infused services we provide to our clients, the stickier our relationships become. Notably, we've accelerated our progress in the quarter deploying generative AI solutions both internally and with select clients. From an internal productivity perspective, our AI analytics-based recruiting platform now supports 8.6 million career site visits and processes 3.3 million applications already this year. It has already allowed our team to scale more cost-effectively, and we see additional benefits as we continue the rollout across our enterprise. Our AI-based workforce management solution optimizes concurrent scheduling and peak management for now over 115,000 of our staff where we see better utilization and user experience for the team. This again will have additional benefits as we scale up to the rest of our workforce. Our most widely used proprietary AI Smart Assist product improves productivity through automation for over 190 team members now to easily access the tools and provide visibility to the information required to perform their jobs every day easier. From the ability for AI to enhance our client services, we use an AI-based quality automation platform to drive insights from 100% of our customer interactions where deployed. Now, across tens of thousands of seats, the platform has reviewed 129 million interactions to date, delivering 20% to 30% improvements in audit efficiency and insights into customers' clients that see high value. Our proprietary learning bot utilizes AI to simulate real-world customer scenarios for over 60,000 team members during training, establishing better speed to proficiency, reducing new higher average processing time, and improving effectiveness by 5% to 10% in the ramp periods. And our cognitive AI bots developed for client-specific implementations will handle over 900 million customer interactions by the end of this year, delivering significant value for our clients and a higher margin service for us. we are actively investing in additional generative AI solutions to further enhance workforce productivity and improve the quality of interactions with customers. We are on track to deploy our AI tools across nearly 80% of our legacy operations business by year end and start wide deployment of the tool within our new clients from our combination with WebHelp shortly. Turning to AI with our clients, We are also collaborating with some of the world's largest companies to design, build, and run generative AI-infused solutions across the services value chain. Working with one of our large technology clients in a key project this quarter, we used generative AI to power 35% efficiency gains and deliver releases 30% faster than traditional methods in their software development lifecycle. During the quarter, we also delivered a proof of concept for generative AI knowledge management that builds 3D modeling and augmented reality solutions for a global retail client that couldn't cost-effectively be done before. Catalyst also launched its first deployment of our new generative AI-infused offering, AnyPass, that we have been developing for close to two years. For our first implementation, we seamlessly transitioned the entire CCaaS tech staff of a healthcare client in less than eight hours. enabling fully automated generative AI experiences for patients and advisors with our generative AI intelligence insights and reporting capabilities. Historically, this would have taken weeks to months to transition. This has resulted in substantial savings for our clients and a new revenue opportunity for our business. For another key client, we are now working exclusively to train and test a generative AI tool in advance of it becoming customer facing. Using a combination of automation and humans and our unique knowledge of the customer base and domain knowledge, we are building hundreds of thousands of different subject matter conversations to train the AI across multiple categories with a plan to increase the scope to a million conversations in the next six months. With all of these examples and with many more we have deployed and are working on, I hope it is evident that we see opportunity to grow revenue and be more efficient with AI and see this as a net benefit to our industry. Now, let's turn our attention to the web help combination that sets the stage for a new chapter in our business offering evolution. This combination is a historic milestone in our industry. As a combined organization, Concentrix WebHelp possesses distinct strategic advantages that we believe increases our differentiation and will drive our success as a transformative force in the industry. This combination brings new expertise such as know your customer and anti-money laundering and payment services for our financial clients. IT services at scale in EMEA, deeper domain expertise in a number of our core verticals, and helps create a robust footprint spanning 70 plus countries, enabling us to offer tailored solutions on a global scale. We also gain over a thousand new clients that we believe have the ability to spend on services and capabilities that Concentrix historically has offered. Our commitment to nurturing a supportive and inclusive workforce is further reinforced by the harmonious integration of our cultures, which are globally renowned for their excellence in workplace practices and commitment to ESG. We have a clear path to positive financial returns from the combination with WebHelp. We're well on track to achieve enhanced revenue growth, profitability, and non-gap EPS increase within the first year. We expect double-digit accretion in non-GAAP EPS in the second year, further underscoring the financial strength of the combination. In addition to these compelling benefits, our integration process is on schedule, and we are confident that we will achieve cost synergies of $120 million by the third year, including $75 million in the first year post-close with substantial progress made already. Since the announcement, we have been able to spend more time with the WebHelp team, which has given us great confidence that this transaction is the right investment. We expect the integration work to be completed within 12 months, and I would like to welcome all of our new game changers to the Concentrix WebHelp team. I would also like to welcome our two new board members, Olivier Duhas, WebHelp co-founder and CEO, who becomes vice chair of our board of directors, and Nicolas Guessa, a GBL partner and director. Finally, I would like to thank our exceptional staff for their commitment to execution, our clients for their trust, our talented board of directors for their support and mentorship, and our investors for your continued support. We look forward to an exciting and prosperous year ahead. And now I'll turn the call over to Andre. Andre?