Concentrix Corporation

Good day, everyone, and welcome to Concentrix's third quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please note that this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Sarah Buda. Please go ahead.

Great. Thank you, Operator, and good evening. Welcome to the Concentrix Third Quarter 2025 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 our other public filings with the SEC. Also during the call, we will discuss non-GAAP financial measures, including adjusted 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's investor relations website under financials. With me on the call today are Chris Caldwell, our President and CEO, 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 up for your questions. And so now I'll turn the call over to Chris.

Thank you very much, Sarah. Hello, everyone, and thank you for joining us today for our third quarter 2025 earnings call. In Q3, we exceeded our revenue guidance once again with solid year-on-year growth across the board. We are gaining share and securing new wins by combining AI, CX, and IT services into a powerful, tightly integrated solution. Our adjacent offerings continue to scale and complement our traditional business, and we believe our IX suite is giving us clear, competitive differentiation in front of clients. Overall, I am pleased with our strong market position and our revenue momentum. Turning to profit, margins were below plan in the quarter, which Andre will provide more details in his comments. What is important to understand is that we have line of sight to modest sequential quarterly margin improvement over the next few quarters, even as we continue to lean into growth and believe we can drive further margin expansion from there. Now, let's dive into the details of our demand environment and how we see our business evolving. The positive revenue momentum we've seen this year is a direct reflection of our commitment to establish concentrics at the forefront of the change happening in our industry. We believe we are becoming a leader in solutions that combine practical AI, human intelligence, where applicable, at global scale. As a result, we are well positioned to be a trusted strategic partner clients rely on to support their business in these times of change. In fact, almost 40% of our new wins this year include our AI technology platforms as part of the solution. This percentage only increases as we include our partners' technology. As a reminder, our IX AI technology suite addresses clients' needs for both fully automation of tasks that can be handled completely autonomously and for partial automation using AI and agentics to supercharge human advisors to make them more effective and efficient. Within a year of commercially availability, our IX suite of AI solutions are ramping and on track to be accretive as we exit this year. This achievement in its own right sets us apart from many of our pure AI players and from traditional CX players in the space. Clients recognize that they need partners to help them convert AI promises into reality. A recent study from MIT showed that only 33% of AI projects built internally are succeeding on plan. Conversely, the same study showed that externally sourced AI projects with strategic partners succeeded about 67% of the time, more than double the success rate. Our rate of success with our deployments is even higher, with early data showing that the vast majority of our use cases result in a documented positive outcome for the client to improve revenue, better CSAT, or process efficiency. This is reflective of our ability to deliver pragmatic AI solutions that are aligned with what clients need and what they value most. The strategic role of partners that can combine AI with CX and IT services has support of our own blind study of 450 global enterprises that stated by an overwhelming majority, clients plan to increase their outsourcing spend as they deploy AI. We absolutely are focused on capturing as much of this growth as we can, and I am confident that we are in a strong position to make that happen. In summary, our strategy is paying off. Despite all the market speculation about the negative impacts of AI on our business, we have shown that AI is indeed a positive tailwind. We are growing our major accounts and securing new wins with our integrated offerings. With a strong competitive position, we are leaning into growth, delivering solutions that align with our clients' business needs, gaining share, and scaling our business. This gives us the foundation to support our progression towards a higher growth rate in coming years while generating strong cash flow. Lastly, I would like to thank our game changers across more than 70 countries for their commitment to client success and welcome our new team members from SAI Digital who joined us in September. I'm optimistic about our strategy as we capitalize on the opportunities we have in front of us today. Now, let me turn over to Andre for details of the quarter and our outlook.

Thank you, Chris, and hello, everyone. I'll review the details of the third quarter and then discuss our outlook for the fourth quarter. We're in a positive position for revenue growth as we enter the final months of 2025. As we focus on improving margins, we're capturing the growth opportunities in the current environment, and our cash flow continues to increase. Importantly, we're winning the right kind of revenue that reflects the value of our differentiated offerings. Now let me get into some details on the quarter. We delivered revenue of approximately $2.48 billion, an increase of 2.6% year-on-year on a constant currency basis, and 4% year-on-year as reported. We delivered revenue above our guidance range, as we have done for the past several quarters. Looking at growth by vertical, Our growth in the quarter was led by growth in banking, financial services, and insurance. Other verticals were solid as well, driven by continued demand for our integrated offerings and ongoing growth in our adjacent solutions. Specific constant currency revenue growth by a vertical was as follows. Revenue from banking and financial services and insurance clients grew 8% year on year. Media and communications clients grew 7% year on year. largely driven by clients outside of the U.S. and global entertainment slash media companies. Revenue from retail, travel, and e-commerce clients grew 3%, largely driven by travel, which continues to be a strong vertical for us, and our technology and consumer electronics vertical and our healthcare vertical were both essentially flat. Turning to profitability, our non-GAAP operating income was $305 million, which was below the guidance range we provided on our last call. This was largely due to two factors. First, excess capacity. For context, when we set our guides for the quarter, we expected a faster return to stability with a handful of clients impacted by tariffs in the second quarter and expected consolidation of additional client volume to occur more quickly to optimize the resources we were holding. We were doing the right thing for our clients long-term, but in-quarter volumes didn't materialize how the clients or we envisioned. This excess capacity accounted for the majority of the shortfall. A distant second factor for the margin variance was some in-quarter decisions to accelerate transformation opportunities to help clients realize technology benefits more quickly. We are confident that we can deliver modest sequential quarter profitability improvement in the next few quarters as we resolve the capacity issue as committed volume migrates to us or we remove the excess capacity proactively. On a year-on-year basis, our non-GAAP operating income was impacted by the factors I just mentioned, as well as $8 million in additional investments in cybersecurity for generative AI and a $4 million negative currency impact. Adjusted EBITDA on the quarter was $359 million, a margin of 14.5%. Non-GAAP deleted earnings per share was $2.78 per share, 2 cents below our guidance range, as a lower effective tax rate partially offset the non-GAAP operating income variance. GAAP net income was $88 million for the quarter and GAAP diluted earnings per share was $1.34 per share. Reconciliations of non-GAAP measures to the comparable GAAP measures are provided in today's earnings release. Adjusted free cash flow was $179 million in the quarter, an increase of about $44 million year on year. Year to date, our adjusted free cash flow increased $83 million. We returned approximately $64 million to shareholders in the quarter, which included repurchasing $42 million of common shares or approximately 800,000 shares at an average price of approximately $53 per share. The remaining $22 million in shareholder return was in the form of our quarterly dividend. I'm pleased to share that our board has authorized an increase to our quarterly dividend to $0.36 per share. At the end of the third quarter, cash and cash equivalents were $350 million, and total debt was $4.8 billion, bringing our net debt to $4.5 billion. We also reduced the amount of our off-balance sheet factored accounts receivable to approximately $127 million at the end of the quarter. To summarize, in Q3, we delivered strong revenue above expectations. We are lessening our exposure to low complexity transactions, and growing our higher complexity integrated solutions. We continue to be on our front foot with generative AI, using it to our advantage to secure highly strategic tech enabled CX programs while scaling our adjacent services. Now I'll turn to our outlook. For Q4 and the full year 2025, we expect the following. Q4 revenue of $2.525 to $2.550 billion. Based on current exchange rates, these expectations assume an approximate 160 basis point positive impact of foreign exchange rates in Q4 compared with the prior year period. This guidance implies constant currency revenue growth for the quarter ranging from 1.5% to 2.5%. As we've said, our goal is to be conservative in our revenue guidance. This leads to fiscal year 2025 revenue, of $9.798 billion to $9.823 billion based on current exchange rates, which assume an approximate 10 basis point positive impact of foreign exchange rates compared with the prior year. As such, we're increasing our guidance for the full year to 1.75% to 2% constant currency revenue growth. For Q4, we expect non-GAAP operating income of $320 to $330 million. This drives full-year non-GAAP operating income to $1.25 billion to $1.26 billion. This translates into expected non-GAAP earnings per share of $2.85 to $2.96 for Q4, assuming approximately $67 million in non-GAAP interest expense. 62.4 million diluted common shares outstanding, and approximately 5.5% of net income attributable to participating securities. For fiscal year 2025, we expect full year non-GAAP EPS of $11.11 per share to $11.23 per share. Assuming non-GAAP interest expense of $273 million, approximately 63.1 million diluted common shares outstanding, and approximately 5% of net income attributable to participating securities. The non-GAAP effective tax rate is expected to be approximately 25% for Q4 and 24% for the full year. And finally, we've modified our expectations for full year adjusted free cash flow to be between $585 to $610 million, an increase of between $110 to $135 million year on year. This implies a continuation of our year-over-year improvement in adjusted free cash flow in the fourth quarter. Regarding capital allocation priorities, we are on track to meet our commitment to return over $240 million to shareholders this year, a combination of over $150 million in spending to repurchase our shares, and approximately $90 million in dividends. And today, we repaid the 700 million euro seller's note related to the web help combination through our previously committed new term loan borrowings that we discussed in our last earnings call. Looking to next year, we will prioritize debt repayment while supporting our dividend and our share repurchase program. In summary, our overall demand environment remains positive as we enter the last part of 2025. We had some margin headwinds in the quarter but see a path to modest sequential quarter improvement moving forward. We continue to drive strong cash flow growth year on year, and as Chris mentioned, we are in a strong competitive position to drive long-term outperformance. With all of this, we are feeling positive about 2026 and look forward to providing detailed guidance for 2026 on our next call. Now, operator, please open the line for questions.

Thank you so much. And as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again. One moment for our first question. And it comes from the line of Luke Morrison with Canaccord Genuity. Please proceed.

Hey, guys. Thanks for taking the question here. So maybe we can start with the margin guide down. So you obviously highlighted excess capacity from tariff-impacted clients as the main driver there. along with some drag from those accelerating transformation programs. Can you just unpack that in a little more detail? Were there any additional tariff-related headwinds from the new round that went into effect in August? There was this impact all carryover from last quarter's client pauses. And then on the excess capacity, how quickly do you expect that to normalize? Is this more of a one or two-quarter issue or something that can linger? And then finally on the transformation programs, can you just give us more color on what those were and whether they should be thought of as near-term margin headwinds or flip to revenue over time?

Yeah, for sure, Lucas, Chris. So if you remember what we talked about in Q3, we talked that we were under from a year-over-year profitability perspective when the tariffs were first announced with sort of excess capacity that we had. And our expectations were and what our clients were messaging us was that they thought that they would be normal or normalized in Q3. And we talked about sort of being a little under in the first month of the quarter, sort of on par the second month and over on the third month. And what happened was with some of the additional noise with tariffs within the third quarter, By the second month, we still weren't seeing that uptick coming through from the clients. The clients weren't seeing that uptick either. We were also seeing that they were taking a little longer to move volume that they committed to consolidating to us just from ability to move it from other providers to us. That's already started, but it delayed us from getting that kickstart. And we had multiple conversations sort of with them on a daily basis saying, okay, do you want us to remove capacity? Do you want us to keep capacity? And really the overall belief was to keep capacity because these are highly trained individuals and they're sort of in global roles and they're tightly integrated into the supply chain and that they needed to balance this out. So, from our perspective, we are seeing sort of the momentum we want. We do think it'll be multi-quarter normalization. And as Andre pointed out, if we don't sort of see, and we're measuring this on sort of a daily basis, if we don't see sort of the expectations come in and our clients don't see the expectations, then we'll start to rationalize the excess capacity through the quarter and into next quarter. There was a bit of additional noise before August on tariffs, frankly. The additional noise in August was only slightly uptick, but really clients are looking at this more holistically about sort of the new reality of where they're operating in. And so it didn't get worse by any stretch of the imagination. It didn't get as better as either the clients or we expected. And again, just to be very clear on this, this is a small group, a handful of clients, very defined clients that we're working through with this. And your second question, sorry, that talks to your second question, whether there would be a lingering impact. We don't believe so. From a transformation perspective, We had some clients who were in the process of looking at different AI technology partners. We were able to present and put in our technology into the solution right away. The clients were excited about it and so they wanted to kind of get it in in the quarter and we were able to achieve that. Similarly, what happens when we put that in and we're able to remove headcount, normally that would be a couple of quarter process and planning our guidance. what happened was we were able to put the technology in successfully, and we had some overcapacity, which we're already in the process of dealing with. So to your point, we don't see it as impacting our margins going forward. You wouldn't normally notice it if we had made the decision pre-quarter, and they would have been sort of in line or accretive to our existing underlying business margins. Hopefully a lot of color, but hopefully that explains where we're at.

Yeah, super, super helpful. Thank you. And then maybe just a follow-up, I'd love to get a little more color on how your IAC suite is ramping here. You know, what does pipeline and win rates look like here? What's the relative demand between Hello and Hero? And to what extent are those deployments being priced discreetly versus being bundled into broader deals?

Yeah, for sure, Luke. So a couple things. As we talk about, when we look across the course of the year, and you have to remember we probably started at a smaller percentage when we first announced to where we are now. But literally 40% of our new wins have our technology, our platform integrated into the new wins. And it's a combination of both where it's discrete billing as well as where it's bundled in. The majority still at this point are where we're bundling it in and using it as a differentiated service. But we see that inflection point coming relatively quickly where there will be more discrete billing than from a bundled offering, even though, frankly, the clients see the value in it because they're giving us the business to do it. In terms of the two products, we're seeing far more traction with Hero than Hello. And I just want to kind of explain this a little bit. Hello is the fully autonomous product where we're putting in a product which basically removes human interaction. So think of a multimodal bot that can call out, can take calls coming in or chats or whatever the case may be. The commercial model for that product is evolving where it's much more gain share, where we're putting it in. And similarly, I think competitors are pure AI competitors are doing the same thing, where it's more of a, you know, we'll take this out, we'll take a percentage of the transactions that we're saving you, being fully autonomous. And we think that'll continue on with that revenue model. On the Hero product, we're seeing much stronger traction because clients see this product as being able to work immediately in their environment, drive significant benefits from a quality and automation perspective and proficiency perspective, meaning that they're able to sell more, be more efficient, take out more costs, drive CSAT, and we have so many demonstrable cases of that, it's very, very, very, very compelling. And what we're happy about is that clients are now starting to see, hey, I can deploy this across my entire infrastructure, including my internal capabilities as well as other partner capabilities. And that is as a SAS model, a typical SAS model where we're charging per seat, and we'll continue that model based on what we're seeing with it. And our pipeline just continues to build and get stronger. And as I mentioned at the beginning, While 40% of the new wins are that, you have to imagine that in the last quarter was a lot higher, and we're going to continue to drive that forward. And as we talked about in the prepared remarks, expect to be, you know, mildly, modestly, whichever modifier you want, accretive at the end of Q4.

Excellent. Thank you.

Thank you so much. Our next question comes from the line of Dave Conning with NPR. W. Baird. Please go ahead.

Yeah. Hey, guys. Thank you. And I guess my first question, just kind of the bridge to margins and how we get back. I think we were at 13.4% or around there was your previous guidance. Now we're maybe at 12.8% margin guidance, something in that ballpark. So we've come down 60 bits. Is it fair to say these sound pretty like one-off type things Is it fair to say that 13.4% or somewhere around there, what your old guidance would be the baseline from which to grow next year, and then as you weave some of the Gen AI projects on that should carry a higher margin, we could have a pretty outsized margin improvement next year as things normalize, or is some of the one-off stuff really gonna kind of recur for a little bit?

Yeah, Dave, so let me talk about the market environment. I'll let Andre do the bridge. These are one-off items, and as we talk about, they're pretty defined about where we're seeing them. And when we look at our business, clients outside of these impacted clients are providing and driving the margins that historically we see, and then also new wins that are coming in as they ramp and get to scale are providing the margins that we want to see and are driving. We do expect that the AI platforms will continue to help us as they become more creative. I don't know how accretive they will be in the 2026 timeframe. I just want to temper that a little bit. What we're focused on doing is driving back to where historically we were, as we talked about, and then we do see additional opportunity to grow our margins That's a combination, though, of not only our tech solutions, also the areas where we're winning new deals and the solutions and transformation deals that we're winning, and some of the new auxiliary services that we've talked about that are higher margin around AI enablement. Andre, I'll pass it to you for the bridge.

Yeah, you pretty much covered it. So, yes, David, I think it'll take a couple of quarters, as we've said, to kind of take care of these one-off items, which are with just a handful of clients. So I don't know that I would say that they go away completely and we're completely at run rate as we enter 2026. So there'll be a bit of a build there. From there, I think, though, I think the margin levers and the things that give us the confidence that we can get margins moving back in the right direction are most of the things that Chris has just alluded to. We should see some contribution as software revenue ramps. We'll see more contribution as we deploy more technology into our solutions. We're reducing the kind of low complexity commoditized work and replacing it with faster growth, higher margin work, including the work in some of the adjacent areas that we've talked about. You know, shore movement continues to be a driver for us of margin improvement. And then, you know, as we continue to move our growth rate up from where we'll exit this year, should be able to start seeing some leverage on our G&A. So all of those things have us confident that, you know, while we will, you know, work for a quarter or two here to get margins kind of back related to these one-time kind of one-off items on these handful of clients. Once we get there, we can keep margins moving in the right direction.

Gotcha. Thank you for that. And then maybe my follow-up, you had really good sequential movement in your retail travel, e-com business, and then your communications and media. Those two segments had big sequential step-ups. Anything to that, anything one-off, or is that sustainable? And are those maybe some lower margin businesses and maybe created a little bit of a mixed pressure?

You're right. So we have seen nice sequential step-ups in those. Those are not one-off things. It's pretty broad-based across the verticals you've mentioned. I talked a little bit, commented a little bit on the drivers of the growth in media and comms, again, mostly clients outside of the U.S., as well as some media slash entertainment, global media entertainment companies. In retail, travel, e-commerce, that has been a pretty broad base as well, spread between travel and e-commerce clients. And then from a margin profile perspective, something we really want to emphasize, the work that we're winning we're winning at the right long-term margins. And so while we maybe see some constructs where there's a bit more upfront investment on our part to get to that run rate, the deals as they are priced, kind of when they get to full scale, are at the right margins and should be accretive as we go forward.

And the only other comment I'll make is that when we look at the adoption of some of our IX technology platforms, we're doing well in travel with them. We're doing well in e-commerce with them. We're doing well in consumer electronics with them because they tend to be faster at adopting sort of this new technology or making good inroads in BFSI with it. And that's actually driving some wins. Those deployments are a little behind just because of the regulatory and compliance that you have to go through with any wins within that space.

Gotcha.

Well, thanks, guys. Sure. One moment for our next question. It comes from Vincent Colicchio with Barrington Research. Please proceed.

Yeah, Chris, curious if the consolidation situation remains robust and if we're still in the early innings there.

Yeah, Vince, we do think that consolidation will continue to impact our industry, and we see it as sort of a positive, to be quite honest. And we continue to see it being primarily driven by clients who are looking for fewer partners and deeper relationships with those partners and sort of a more robust offering for those partners. And so I think we're still in early innings, especially with sort of now as clients are procuring services, across multiple different disciplines together and do expect that to continue for the next, frankly, 24, 36 months in probably a heightened fashion.

And then the overall sales pipeline, is that, I assume it's at a healthy level, is that broad-based or is it the three segments that were strong this quarter will continue to be strong and some of the others will lag?

No, we're really happy with our pipeline. There's a couple of things that we've been doing through the course of the year that are starting to pay off. We've really brought in a lot of sort of deep domain expertise within a number of our verticals. of talent both from a technical sales and sort of consultation background that's really driving some nice pipeline both from a transformation perspective and an integrated offering perspective and so that we're seeing the benefits of and that's pretty broad based across our strategic protocols we're also seeing good momentum in all of our major regions like EMEA and the Americas and then Asia Pacific. We're seeing some very, very nice momentum from that perspective. And as Andre pointed out, not only the margin profile of these new deals as well as our pipeline is where we want to see it, but the length of the contracts, the stickiness of the deals, and frankly, the complexity of these deals are really where we are driving as a business.

Good to hear. Thanks.

Thank you so much. Our last question comes from Rupru Bhattacharya with the Bank of America. Please proceed.

Hi. Thanks for taking my questions. Chris, I want to ask a question on risk management. So obviously volumes were lower from some clients this quarter, but the company decided to invest in some transformational items for other customers. I'm just trying to understand, can you talk about the decision criteria for doing such investments? Like what ROI are you expecting from those customers? And just when you, like in terms of making such investments, obviously it hurts margins in the near term, but can you talk about what long-term benefit you expect to get? And I have a couple of follow-ups. Thank you.

Yeah, for sure, Ripley. That's a great question. A couple of things. When we look at our business as a whole, one thing that we're very focused on is driving more share gains within a client and and long, long-term relationships. If you look at our top 25 that is over a 17-year tenure, it kind of goes to we believe in these long-term relationships through thick and thin because they benefit us. And we've also talked about when we look at our top sort of 25 accounts, they're growing very well, frankly, a little higher than the rest of the client base. And these are very sort of sophisticated buyers. They're very complex buyers. They're very large buyers. And so when we look at making those investments You can think that the clients that we do that with are clients who we've been with a long time, have multiple different offerings in, really their key go-to-market partner, and we see a lot more opportunity grow within that business. And as painful as it is to kind of deal with some of these things in period, we're really looking at longer term. where those clients want to reciprocate our investments around either more volume, more opportunities, and consolidating out smaller partners, etc., etc., etc. So that's how we look at it. We don't do it on clients who want to RP their business every quarter or are not sort of like-minded from a long-term partnership perspective. From the transformation clients, frankly, the way we look at it is that if we do the right thing with the client, that they will reward us with more business over the longer term. And the clients that we kind of sped up some transformation in quarter, honestly, they were focused on saying, hey, we need to do this. Can we do this right away? And if we can, it would be a big benefit. And we could have said, well, we can start it next quarter, whatever the case may be. That also allows the competitor to come in and say, hey, we can do it sooner. And so from our perspective, we want to keep these clients focused on us. We want them on our technology and our platforms. And so we're willing to take the pain to get them across to our platforms from a relationship perspective. And time has shown us, over 20 years in this industry, time has shown us when we do the right thing with our clients, we get rewarded over the longer term. And we're seeing that even with sort of the conversations about how to deal with this excess capacity right now. They are collaborative, they are engaged, and they're all focused about trying to make sure that we're both doing the right things for each other.

Okay, thanks for the details there. Can I ask a similar question on the IX suite of software that you're investing in? So you're investing $50 million incremental on the software versus the $50 million base level of CapEx that you typically have or investments that you typically have. Do you still expect to get to break even in fiscal 4Q And what level of investment should we expect going forward? And what's the criteria for you to either increase or decrease that spend? And I have a follow-up final for Andre.

Yeah, so a couple things. We absolutely expect to be on track, as we talked about in our prepared remarks, to be break-even, modestly accretive at the end of Q4 as we exit on our IX suite of products. You are correct. You know, roughly it's about $50 million incremental spend. It has popped up a little bit. It's gone down a little bit. But the reality is that it's in that ballpark. And so when you think of it from an accretive nature perspective, that's where we're at. We do expect that we're going to need to continue to increase investments. But I want to be very clear about this. It's in line with our revenue growth on the products that we're doing. As we install our IX Hello products, We absorb the cost for that as we put it in and so more and more projects there will be a cost to it and then we get the revenue from the run rate perspective of the software. On the Hello product, we get sort of the license revenue kind of right out of the gate as we sign those deals. So it's a bit of a difference between the products. But the criteria is it becomes a scalable business. We're going to invest as we continue to drive scale in that business. But as you've seen us in the past, we want to make an economic return on those investments, and so we'll do so as we go.

Okay, thank you. And maybe the last question I have for Andrej, Andre, it looks like, you know, you're taking down free cash flow guidance a little bit. How should we think about free cash flow going forward? And it looks like you also raised the dividend, so what was the rationale for doing that now, and how should we think about capital returns going forward? Thank you for all the details.

Sure, happy to do that. So as we think about free cash flow beyond 2025, we're still very optimistic that we can drive some increase to free cash flow in 2026. drivers there. We're coming to the very end of integration activities. A lot of those spending is cash, so that should be a help to us as we go out to next year. Secondly, our cash interest should drop next year as we continue to pay down debt, maybe get some help from interest rates as well. So those things have us positive. We also think we'll continue to grow the top line and make progress with the margin, and that will help. The drop in our guidance for Q4 is being driven by the margin pressures that we've seen and the drop in our profitability expectations for the full year. Capital allocation priorities as we go forward will remain balanced. So again, we're going to generate more free cash flow next year. And with that, we are going to prioritize repayment of debt while supporting our dividend and continuing our share repurchase program. I don't know that we'll see share repurchase dollars go up dramatically next year. I think we'll probably prioritize more taking some of the increase in cash flow and putting it towards our debt. And then lastly, the dividend. Look, we have investors who are very appreciative of the dividend. They are appreciative of our cadence of annual increases. We're confident in our ability to generate strong free cash flow, not only this year where we've driven a pretty sizable increase, but drive an increase in the next year as well. All of that is part of the decision to increase the dividend.

Okay. Thanks for all the details. Appreciate it.

Sure.

Thank you. And this concludes our Q&A session and conference for today. Thank you for participating. You may now disconnect.