Concentrix Corporation

Good day, and thank you for standing by. Welcome to the Concentric Fiscal Fourth Quarter 2023 Financial Results Conference Call. At this time, all participants are on 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, David Stein. Please go ahead.

Thank you, Lisa, and good evening. Welcome to the Concentrix fourth quarter fiscal 2023 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 expectations, 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 in our other public filings with the SEC. Also during the call, we will discuss non-GAAP financial measures including free cash flow, non-GAAP operating income, non-GAAP operating margin, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP EPS, and 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 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. Hello, everyone, and thank you for joining us today for our fourth quarter and fiscal year 2023 earnings call. It was an incredibly exciting year in which we believe we made the right investments and focused on strengthening our fundamentals. We are excited about the opportunities that are in front of us now with a larger footprint, expanded marquee client base, and more geo-diversified business with the ability to deliver advanced technical solutions at scale. Our 2023 revenue increased 12.5% on an as-reported basis, including approximately 9% from Webhub. We are excited about the cross-selling traction that already started in the fourth quarter that, while small, had clients from either side of the combination generating revenue that neither company would have been able to participate in prior to coming together. On a non-GAAP basis, our operating income increased 14.2%, and our adjusted EBITDA margin was up 30 basis points to 16.6%. We were very pleased with our free cash flow increasing 8% for the year. Throughout 2023, we also made great progress in evolving our solution offerings by developing multiple new intellectual property initiatives for both internal and external consumption that will allow us to be more integrated into client environments while also reducing our operating costs. A few examples of these initiatives include our internally developed ConnectCX product, allowing our game changers to be more productive by automating tasks with built-in AI, and is now deployed on more than 220,000 desktops, hitting our goal we mentioned in Q3 of deploying to approximately 80% of our legacy operations. We continue to expand the deployment of ConnectCX across our new footprint and intend to upgrade the platform to GenAI in the next two quarters. Our training CX suite has gone through a massive upgrade this year, being rebuilt on GenAI and training over 100,000 game changers in 2023. It's creating more intuitive and interactive engagement and accelerating their speech proficiency, a tool that has gained interest from clients to use in-house based on our results. Our smart suite, which we just started to roll out, is almost up to 35,000 desktops. Through real-time assistance, self-coaching, and faster access to personalized knowledge management, the set of technologies has delivered double-digit improvements in key metrics like AHT and NPS, all built on GenAI. These internal tools are in addition to the external cloud and software partners we have used to deliver services to our clients. All these examples continue to demonstrate our focus on being a complete solutions company for our clients with a tech-first mindset, which we believe differentiates us greatly from our peer CX competitors and allows us to deliver higher value services. In 2023, our innovation and complete automation of transactions or partial processes hit an all-time high, which drives higher value to our clients and more efficiencies for us. Turning to the fourth quarter, our team continued to deliver excellent service for our clients while making considerable progress with the initial integration of the Web Health business, which we'll all talk about in a bit. We met several financial and operating milestones in the fourth quarter, which Andre will view in more detail, but at a high level, revenue increased 36% as reported and grew over 3% on a pro forma constant currency basis in the quarter. We also delivered record fourth quarter non-GAAP operating income and adjusted EBITDA up 37% and 40%, respectively. These improvements are as a result of solid growth in Europe, Asia, and Latin America, with increased movement to offshore and nearshore operations, as well as continued delivery efficiencies, some delivered from the tools that I highlighted earlier. I'm also pleased that we continue to grow in each of our key verticals, as well as in our catalyst B2B and specialized health care areas. We have invested in a new strategic and consultative set of seller capabilities that will allow us to deliver our Sell as One initiative, which focuses on selling complete end-to-end transformational solutions in larger enterprise deals, with a sales pipeline that currently stands at over a quarter billion dollars of annual contract value created all within Q4. Clients continue to appreciate both our advanced services and technologies and our extensive global reach. Our wins this quarter included a broad range of clients across verticals and delivery regions, providing a full spectrum of services. A few examples of those wins. An international money transfer company experiencing exponential growth sought a partner for high-risk compliance operations. We are now providing anti-money laundering and fraud prevention services for this client. The solution includes a European Center of Excellence with skilled experts and fintech leadership. The second phase of this project will launch later this quarter, leveraging capabilities of the combined business, including advanced technology from Catalyst and our Know Your Customer platform that came from WebHelp. A premier mental health clinic faced the challenge of establishing consistent practices for customer access. We are providing a comprehensive solution involving a modern curriculum, cloud contact center services, our AnyPath solution, CRM integration, and generative AI-driven functionality. Our solution is streamlining processes, increasing efficiency in scheduling and referrals, and empowering the team to significantly enhance the overall customer experience in mental health. Another healthcare management company sought best-in-class capabilities and transformative solutions to navigate the complex system for assisting members with provider selection and insurance inquiries. Within 30 days, we started to integrate the technology stack, perform the CX assessment, and quality assurance review. This is helping to revolutionize and evaluate overall member experiences for the client. Finally, an automotive manufacturer faced challenges managing multiple vendors. Our Catalyst team leveraged our intelligence operational capabilities for compliance and best practices and developed strategic IT services that implemented dashboard reporting and robotic analysis solutions. The solution marked a significant step forward towards achieving higher efficiency and innovative automation within their business. Based on the reception from clients and our pipeline of opportunities that combine the capabilities of Concentrix Catalyst and our core CX operations, it is evident that our strategy is working. Our clients view the combination of deep domain expertise, digitally enabled global delivery, and our ability to invest in secure, adaptable, scalable technology as key differentiators. Our unique approach to intentionally infuse digital technologies and analytics continues to drive sales wins. Turning our Turning to our web health transaction, This marks a significant milestone in the evolution of our company. It is the beginning of a new chapter creating a global market leader with a world-class platform for value creation. We now offer one of the most robust, well-balanced global footprints in the industry. The combination of the two companies broadened our technology and AI solutions in multiple high-value verticals, strengthening our end-to-end value proposition and adding significant new consulting, technology, and operating capabilities in Europe, Latin America, and Africa. The integration of the two companies is progressing smoothly and is contributing as anticipated. Throughout the quarter, we achieved significant integration milestones. Examples include the start of successful migration of over 30,000 new staff to our HR system and starting the sales management practice and establishing the global leadership structure. We are thrilled with the talented staff and the strength of our combined execution. As I mentioned, we are already converting a growing pipeline for wind that neither company could have won without the other, and we are on track to deliver the cost synergies we discussed when we announced the combination. Turning to fiscal 2024, in the first quarter, we expect to make progress towards achieving our synergy targets for the combination as integration activities move forward. We expect to continue to convert and ramp synergy pipeline wins as well. For the full year, we expect revenue growth, profit improvement, strong cash generation, and debt reduction. We also see 2024 being the year that GenAI will start to positively influence our revenue and margins in the later part of the year and into early 2025. While the specific timing of these advancements with AI and client adoption are still not entirely clear, We are now confident in our ability to offer competitive solutions and see benefits from the technology. While our clients are taking time on their AI adoption, we're seeing tangible benefits with our own use cases and will continue to invest in these investments to make us more efficient and offer a higher level of service to our clients ahead of returns for the next few quarters. We see immense potential in the emerging technologies that can intelligently act on customer intent to improve the customer experience and are building out new capabilities and services to take advantage of the market as it develops. Based on our conversations with clients and the proof of concepts we are currently working on, we continue to believe that GenAI will enhance the customer experience with human involvement versus completely automating work. Our current GenAI pipeline includes over 140 client engagements. While the majority of these projects revolve around a group of concepts, a few projects have transitioned to the run or manage services phase. The use cases that are gaining traction relate mostly to our technology, allowing our game changers to be more productive and more personalized engagement specific to the end customers. A few relate to completely automated services replacing low-value work while we generate more managed services type of revenue for supporting the technology and the environment. In summary, we have made great strides executing our strategy in 2023, making investments in acquired and organic growth and a differentiated growth model that I believe will allow us to outperform in the market. We believe that 2024 will require continued investment to ensure we are ahead of the market for further GenAI deployments at scale. Finally, I want to acknowledge the collective strength of the team we've built and thank them all for their adaptability and commitment to execution in the evolving industry. Their dedication and hard work has positioned us as a formidable force in the market. I also want to thank our clients for their trust, our talented board of directors for their support and mentorship, and our investors for the confidence and concentric. We look forward to an exciting year ahead and the continued success of our company. Now, I will turn the call over to Andre.