IBEX Limited

Q1 2021 Earnings Conference Call

11/22/2021

spk_0: thank you for standing by and welcome to i backed first quarter fiscal year twenty twenty two earnings conference call at the time all participants are any listen only mode after the speaker presentation that will be a question and answer session to ask a question during the session you will need to press star one on your telephone please give that today's conference may be it should you require any further assistance please press star zero i would i like to turn the call over to your house brinley johnson a blue shirt group
spk_1: that afternoon a bottle for joining a long before the barbican aren't our my you that matters fact that all at all car mean could find looking statements related to our operating performance and intercontinental without outlet which have been a management current belief and information please note that these by looking statements reflect opinions i've ever dated car and wiener take no obligation to revive with information as a result of new development which may occur fiber containment are subject to various with uncertainty of other factors i could cause actual results permit kelly for note expected and described des for my detailed description of our risk factors please review our final stack now that the securities and exchange commission on august tenth twenty twenty with that attorney never the bad decking the yeah
spk_2: thank you brinley good afternoon and thank you all for joining us today as we discuss our first quarter fiscal year twenty twenty two financial results we're excited to speak you today is carla nicer a business overview as a results first and foremost we hope you are all staying safe and healthy the pandemic reminds us each and every day to put our employees and their families first critical factor in our successes are people without employees their drive and commitment to put our customers first we would not have achieved success we are experiencing today many thanks to each of them for their continued commitment to our business as we shared with you last quarter we're in the midst of a very exciting the or it ibex a year marked by key strategic growth initiatives that includes formally launching our staff augmentation business we call ibex augment expansion of our ways vex technology and geographic expansion into honduras driven by our long term thinking as we invest for our future and continue to transform our business as expected the first quarter prove to be or slowest of what will otherwise be an impressive year for i ducks this was really driven by the tale of two cities or growth engine now sixty two percent of revenues and our legacy customer group largely comprised of telco customers which experienced significant one time reset last year in is now approaching the tail end of the decline and rough comparisons year over year the growth engine consisting of clients new from f y sixteen who are adopting our omni channel capabilities now make up sixty two percent of our business up from forty six percent in prior year and fifty two percent from que four f y twenty one in this continues to grow at an explosive right this is driven a remarkable change in the mix of our business including our top clients today our largest client represents a lebron percent of our revenues in f y sixteen or top three clients were approximately eighty percent and we continue to add to this engine or sales organization continues to really set the tone for the business with another strong quarter of revenue growth in the addition of nine new clients across key verticals as a reminder this comes on the heels of last year which we drove twenty three new clients a record for ibex said we are well on our way to delivering another exceptional year in new client revenue and wins as a previously discussed our growth model is to deploy designed to deploy a land and expand approach with our clients we deliver exceptional see x results with extremely proficient launches and then showcase the additional insights in partnership some missions that way backs in our business intelligence tools can offer this allows us to win new lines of business and service with these clients and expand our wallets share with them over time on average the revenues in year to of our client relationships are between two and a half to three and a half acts of your one revenues with continued strong growth in to three and beyond we've shared this in a table in i recently filed annual report which i encourage everyone to review now as an example one of our strategic clients we won in f white nineteen who quickly became a top ten client for us recently expanded with us in two additional locations in the philippines and jamaica effectively doubling the size of our business as part of the expansion into new state of the art facilities ibex was awarded to new lines of business plus additional market share ibex is consistently ranked in the first two positions for performance in the customers outsource bpl network this growth that we had one is expected to move our client into our top three clients later this year into one though this growth was offset by declines in our legacy three clients were one time events occurred in our to legacy telco customers one which emerged from bankruptcy and the other which had a major divestiture last year this decline which played out over the last three quarters will will be behind us beginning in the third quarter these clients now represent only twenty five percent of existing revenue exiting the quarter which going forward will be overshadowed by our new omni channel business as a result of are powerful growth engine scaling to such a substantial percentage of our business as well as a revenue diversification are quiet next has purposefully and stood structurally changed this is most evident in the repositioning king of our top three clients as of this quarter we now have a new number one client when measured by revenue over the last twelve months this client is one of the most dominant technology providers and marketplaces in the world this not only represents a meaningful strategic relationship but a key partner and partner partial owner in our business with warrants and an underlying common equity ownership as indicated above we also believe that we will soon have another high high growth on the channel client entering our top three later this year these relationships represent a paradigm of i decks to point out where we deliver differentiate a customer value propositions and a new level of service for our clients and in key strategic relationships like this offer dedicated team and place not only is a extent and of our customers brands but internally to support this relationship as well as a result these relationships with our clients have become mission critical extensions of their brands and creating a business it's truly essential as evidenced by our continued one hundred percent retention within our top twenty clients as i noted in our earnings release are spending this quarter outpaced our revenues as we on board new clients and invest in key long term growth initiatives we have added forty one hundreds new seats in the calendar year representing a twenty five percent increase while this was initially done to investigate head of the curve we ultimately have such a strong backlog in demand from our customers lucky to grow with us in hindsight it is largely been done just two servers that customer base and the new clients this includes are expansion into honduras a new market for ibex in one in which we are very excited about we have a strong really mover advantage and are entering the market with a beautiful state of the art see x delivery center which will serve as our anchor in the region we believe that we have the ability to become the leader in this market just as we have done in jamaica in nicaragua and the island of the hall we have always invested for our future and will not manage the business for given corridor we had a significant pipeline have committed business and we expect to return to growth this quarter turning to our balance sheet we have a strong cast position company is currently levered at approximately one point eight times he bit dark and us has significant room for increasing leverage when additional opportunities present themselves in closing while we are of course disappointed by the short term pause after sixteen quarters of impressive revenue growth in achieving record margins along the way we expect this track record to resume in our current quarter as such are guidance is reaffirmed and we are cook incredibly excited about what's ahead for i ibex i will now turned the poll over the current car over you thank you bob and good afternoon everyone thank you for joining the call today i'll start off with our first quarter twenty twenty two results and then turned to our fiscal year twenty twenty two died our technology like client continue to grow and oppressive ray and client continue to rely on either acts as a trusted partner
spk_3: are there are significant he isn't all fun
spk_2: our health pack and syntax for teaching radicals coupled with our digital first client wins continue to outpace are more mature health and education clients and provides a platform for utilization of are competitive and differentiating late x technology solutions in my discussion of financial results references to revenue and net income or on an eye for us basis while adjusted net income adjusted ebitda and adjusted earnings per share our a non gap basis reconciliation of our i for us and nine that measures are included in the tables attached to our earnings press release first quarter revenue was flat at one hundred and eight point six million impaired two hundred and eight point eight million in the prior year quarter for quarter revenue was impacted by significant decreases related to our legacy pop requirements which now represents only twenty five percent of our revenue as well as decreases related to our digital marketing by these decreases were offset biking feed growth and our clients one since the school year sixty this kelp or real by thirty four percent over the prior year quarter and now represents sixty two percent of our total revenue in addition we differ net training revenue of three point five young compared to one point two million in the prior year cooler indicating significant future revenue growth but impacting both revenue and margins in the court net income in the first quarter was three million compared to a net loss of three point four million prefer the same period last year on a non gap faces adjusted net income was point nine million versus five point five billion last year and adjusted fully deluded earnings per share with five cents versus thirty two cents in the prior year court adjusted ebitda for the first quarter of fiscal year twenty twenty kill was eleven point five million or ten point six percent of revenue compared to fifteen point eight million were fourteen point five percent of revenue in the prior year adjusted even a margin decreased primarily due to significant increases and payroll and other costs related the ramp a new business in the quarter lower digital marketing by and long term investments in our sales and marking the organization and cyber security technologies as we continue to scale up the business we're excited about the major improvement and our playing concentration on a trailing twelve month revenue basis we now have a new path fine with the leading technology provider and marketplace in the world my top three high concentration decreased by almost ten full percentage points in twenty eight point seven percent this quarter from thirty eight point one percent of overall revenue in a year ago quarter
spk_3: are intact and help that clerical infinitive route in response to our aggressive investments two years ago
spk_2: increasing significantly it twenty point five percent in the first quarter up from nine point nine percent in the first quarter of fiscal year twenty one the telecommunications vertical decrease the twenty one point five percent a rabbit revenue as compared to thirty three point five percent a year ago total capital ventures including cash and non pass amounts or nine point seven million for eight point nine percent of revenue and the first quarter of fiscal year twenty twenty two birthdays require two million or three percent of revenue last year we added close to nine hundred nice teeth and are high margin near shore and offshore locations during the quarter with approximately another twenty three hundred seats expected to come on mine in the second quarter net cash generate from operations was six point nine nine for the quarter up sixty percent compared to five point nine million in the first quarter of fiscal year twenty twenty one positively impacted by he created a nonrecurring costs asked taxes and working capital
spk_3: offset by lower adjusted ebitda
spk_2: he had those were sixty three days for the first quarter up ten days from the same period last year and seven days sequentially the sequential quarter increase was driven by signing up for elections while the year over year increase was also impacted by one of our market finds reverting to standard payment turks non gap free cash flow decrease the one point six million from two point seven billion in the prior year the decrease in free cash flow was primarily driven by increase in cash capital expenditures of five point three million as compared to three point two million from last year
spk_4: on a normalized basis
spk_2: after the weren't fair value justin we expect our annual pass rape have been thinking to decrease to the big single digits reflecting the ongoing benefits of our tax planning efforts in addition to the expected decrease in our overall noise tax rate we will also recognize a get hurt packs benefit of approximately four million this year or balance sheet remain strong and we ended a quarter with fifty four million in cash total borrowing with of twenty point three million and least liabilities that eighty six point six them prepared to accept it and seven point eight million total borrowings of twenty eight point five done and elite fly believe of eighty four million as
spk_3: have you won twenty one
spk_2: turning out to our fiscal year twenty twenty two that we are reaffirming or guiding her full year revenue room of seventy nine percent and even death of sixty nine to seventy one million with back commitment of thirty to thirty five done with continued wins from our strategic articles and digital press coins the significant investments were making to increase or capacity to me quite the man a new client revenue that will materialize beginning and kid to we are confident in our guidance or fiscal year twenty twenty go with that bob and i will now pick questions operator please of the noise operator before we open it up for questions there's one item i'd like to dress as you may be aware of the resource group international ltd trg is our largest shareholder with controlling interest in i ibex last week to or geez managing partners the hst he was accused of sexual assault and subsequently resigned as ceo chairman and director of another trg company affinity after discussions with affinities board it's very important to note that mr chesty stepped off the board of ibex in two thousand and seventeen he has not been involved in any strategy or any business discussions around the company since that time as well ibex his boyhood is composed of the vast majority of independent board members who are unaffiliated with p r g the affinity incident is in no way related to ibex i got she's committed to the strong values old are more than thirty one thousand employees worldwide a customers and our partners these recent developments do not in any way impact our promise to maintain those values we hold dear we want to read it a rate to our employees customers and partners that ibex maintains a robust worldwide whistle blower solution for any employee who seeks it it is overseen by our chief legal officer chief people officer and ultimately the audit committee of ibex which is composed of independent board members under nasdaq guidelines to dress all the sensitive matters of this nature more personally i want to see how proud we are of the work we have done here and i backs around diversity equity and inclusion over the many years when i joined the company we created an employee first culture which includes one of openness transparency well being and safety that remains at the forefront of ibex today i'm confident that we will continue to see our company thrived with that operator lucky if you may now open the line for questions
spk_0: thank you as a reminder to ask a question you will need to press star one on your touchdown telephone to withdraw your question press the pound key please stand by while we compound the q and a roster our first question comes from line dave counting a baird please go ahead
spk_5: yeah hey guys thank you
spk_6: he they've yeah and i am first of all i'm in a just thinking through this korean margin was a little lower than normal but you also that as i would say the benefit of samir top clients becoming a little smaller than normal in and maybe is or correlation there were some of those larger clients generating higher margin or
spk_5: is it something else is it may be wage inflation or maybe just talk to a little more margins
spk_2: sure did dave great question thanks for that i'm lenny money for it this way if you take our business with are non legacy three so that legacy telcos if you look at the clients outside of that were growing and those are higher margin clients now we board boarded new clients and were growing significantly with that that client base so much so that this quarter we had significant kyrie about fifty percent more hiring of new agents this quarter then we did year ago and we had great growth from que want to cute to last last year so it's really driven not by volumes going down outside of those wrote those note that the to legacies it's driven by growth that has accelerated training ah in the quarter that word the honestly optimistic that we will now hit you know yeah he hit his stride and que tu as a result of all that hiring so it's really front loading you know the cost associated with that and then the cost associated with the build up to the centers to accommodate that massive growth
spk_5: gotcha yeah that's that's how for that makes sense and then i guess what we think of the cadence you talked about growth resuming and que to i assume you mean year over year growth if that's the case that would require eight nine percent sequential growth in queue to and then the rest the are a little more sequential growth in it may be is is that right is that how to think about it and and a what we're at
spk_6: think you can a hit on a novel what had a driving that sequential if to the year
spk_2: sure so i'm dave your you know you understand our business flow and model model very well we're excited with this growth that we will be resuming our business you know towards that double digit growth the army you know the impact of our our downturn of our choco businesses are is flattening off and then in the second half of the year of will have really favorable comparisons so i think you've had to do exactly this quarter you know that those comparisons will still be down significantly because of you know what what occurred in the back half as last year this year layered on in the second half we won't have that he won't will have favorable comparisons and we just have strength out of our our our strength out of our growth clients and new business that we've won but worded that are really just taking home and to to look this stuff on this year so we're really excited about this business and and yeah and the flow of that you know the flow of quarterly revenues and and profitability
spk_6: gotcha get a says
spk_2: preceded it
spk_0: thank you i next question comes from tovey summer the truest securities your line helping
spk_7: thank you on that sort of a broad question of thought in it has to do with visibility in sort of forward trends and liberals was how would you characterize your visibility lol at this juncture in if you could sort of think about it under or over the period of time you've been public and comparable press today vs sort of appeared it's ounces going public
spk_2: sir toby great question of i think we have very very good visibility with our clients the lion's share about or clients out over minimally three to four corners a lot of that is because we have type partnerships and they're very open to say here's what we see their our business going and making sure that we are aligned in and strategically planning our network of geography is and capacity you know to service them are i will say the one area the business that we'd didn't have this ability to was one of our clients telco clients the drug testing the business of course we're not going to have his visibility to that the structural changes you know that that occurred to their up and then the others are point he reads rica march from bankruptcy and i'll just address they are very very important client to us we have not last market share but working as a partner with them we actually you know worked significantly at taking their call volumes down there you know kind of collective hours required down significantly to help them drive you know kind of to profitability so i shall we have great visibility on in this business i think we have one last element is our new logo business that way continue continually bring on we have fantastic visibility i believed of that in year but really out in the or two and the your three we've done the analysis of this business of the last three four five years and end up and and and we can predict where those revenues will be and we're excited you know good extremely excited about that and i a just we will say that are nine new logos for the quarter were material new logos we set a record last year not only and numbered but in your revenue bye bye more than one hundred percent of prior yourself a revenues of the year about new loggers last year was one hundred percent more than we've ever had we are on pace to be that this year and actual really excited about that and and then he just part you know use that as your visibility down you know in in the subsequent your two and three of those relationships were excited were that potential texas
spk_8: thank you
spk_2: good as your question about wallet share a lot like to ask them to wenzel spectrum how do you feel that your sort of customer market share or wallets share is trending a in the legacy customers that are will sort of of in importance of and the larger most of your are emerging customers how's how's ibex out performing from that perspective so those are some of the most key metrics that i will get toby so just of you know that kudos to your question i will say with our important three clients and have been with us for over fifteen years on our our market share as held search on that and so our downturn in there is nothing unique to ibex it's very enterprise volumes as a result of the you know the to one types and gone down on significantly so we've held market share of the i'll serve on that maybe have grown market share you know a percentage point or two but nothing you know nothing nothing materials now on the on the new clients that we've brought and you don't we we measure those and we are performing so well that we are taking naps it's market share i highlighted you know club with the one client that you know that we used in essence dub you don't effectively doubled our size of business this is a classic client that we have gone and to were day prior prior had multibillion dollar service providers and we've gone in and we've taking the lion's share the marketshare so we have the largest market share more than fifty per said in that enterprise with our client that is now number one we are neat we have as much market share in the markets that week services anybody in that market so i feel most proud of our ability to go in and steal that business based on ah based on performance and and so with that if you have to have like client i look can you say you have a shock to the actors of growth with our client one ids market you're a number two is as if they're the white clients with art which are growth clients you're going to grow with the way and behind their backs so it's mostly have a double you know you kind of and double accelerator behind you and work will really excited bad as how that plays out over the next twelve twenty four to thirty six months
spk_0: thank you
spk_9: thank you once again to ask a question please press star one on your touchdown telephone again at star one on your touchdown telephone to ask a question
spk_0: and next question comes on a line
spk_3: of dan carlin of rbc capital markets your question please thanks and good evening i am i had a question around obviously the revenue performances core i feel like
spk_10: ah i'm gonna come off a last quarter that the method jane from you guys was in a one cues gonna be at the low end up not below the seventy nine percent guide some epic you he deftly thought it was gonna be we quarter but as a lot weaker than i expected
spk_2: and based on the consensus number that sound like a was with anyone else expect it's my question is how much of this was a surprise to you from the three you know three am clients and then then the digital volumes are relative to what your expectations were oh so damn that's it that's a good question and when you say will were disappointed out with that the ended the day with where the top line growth was on you know we're hoping to drive a few percentage points of growth now underlying job that was tom of significant ramping that we've done which is build revenue that goes to clients that as we were modeling we kind of looked at it from how we run the business and there are some inherent growth in there that then you know in the county world's got pushed him deferred different revenue that will get an overtime so he have somewhere between you know those those two numbers i think we you know we felt we be and you know maybe we're percent it's point or two down from you know down from where we thought we would be as we run the business but i will say the the position we're at right now the numbers seats we built out the number of new you know new new age it's that we've hired be one continue to hire to to that are hitting he helped full speed for the you know for the quarter
spk_3: we feel really good with a really good about you know our ability to get this business right back on track him like a said you know hit our hit our full year numbers and if you look at flight growth in the quarter one you can kind of you know is david i live and you can kind of look and you know model where i think we will go and two to three and
spk_2: for yeah oh let me up a different way when we go on the for we are curve if fun if we look at your let's just call him that the their clients it at what to say have some have dragged on your growth absolute dollars as we jump off into december's quarter march and june have a star i got either gonna be near a absolute dollar flat level and then all this new incremental business that wine and you've been building is he
spk_11: for are gonna go over that or are they still declining materially and you're telling at that this new business with all of new businesses gonna be so large that the absolute dollars are still gonna grow or that and therefore you're still don't get growth at an accelerated rate throughout the year
spk_2: machine sure so like up the yet fair question and end end up the into to we have seen that decline flight now so i'm very encouraged by that and as we've talked with them about where this is looking out now two three quarters out we can feel like we've you know that it took about three quarters for all of those things to play out we've leveled and we we look out and overall that isn't saying you're kind of flat to may be very very minor decline over the next three four quarters sword george by that now discordant because the decline started in our cute three last year those comparisons will be down fairly sizable a
spk_10: that being said sequential quarter we don't have it you know we don't have that incremental headwind for the business so you know i feel like that's why you'll see this business in this quarter rebounding and rebounding you know very very strongly to comparisons and future ricky for that olympics and yeah and you follow yet
spk_2: yeah yeah yeah the me up at one of the pollen ended up in that yourself are you saying that you're you're you're getting get live in not your of year in december no no no no no no no no not at all no i feel a strong growth for this year none and i think we're resuming to to a growth court absolute okay level like what young and you're of year okay right and and if you're just peace those two to puzzles together year over year in our legacy will be down even though it has it's flattened we have significant growth yeah significant growth in the outside you know it in really our new from sixteen
spk_3: that new from sixteen last quarter you know we weren't forty five to forty percent growth range of that does it's that's where it was last year or last quarter this corner and we see that there's not accelerating war
spk_12: but that know that covert sounds fantastic so okay thank you have yeah yeah
spk_0: like extent thank you are next question comes from
spk_2: george i'm sorry george malice of mk cage management your question please
spk_13: and you add good afternoon gentlemen i'm fairly new to this story and i just have a modeling question i'm trying to understand your gap backs guidance for fiscal twenty two
spk_14: and that thirty to thirty five is that just get cash cap bags with does that include the leases
spk_15: i'm in there
spk_2: he george that's what joining the call and interested the ibex narrative some coral cable what do you take that call and can walk towards through what are your your kind of to cut cutbacks no thanks sir bob thank thank you request george yet at the dirtier thirty five million is our our cash cap facts and that's made up of both year the growth cat decks that bob's and and talking about and us army is cut backs and car why don't you just touch on the approximately where a maintenance kept axes as as you know on an annual basis
spk_3: sure sure and the maintenance cat acts of you look at the industry
spk_16: he typically runs around e o two percent but if you will get it over three year period sometimes you might run a little bit higher than two percent and sometimes you might run about lower than two percent arm said i would time to give a gauge on ah he had to split between the maintenance cap acts and yet and grow up
spk_2: peppers george what's interesting is we've built out a lot of seats that we are still today operating in as most of them in a socially distance environment and so as we hopefully at some point resume to a up a a a normal environment that capacities built out will now have significant capacity to sell into as we go from you know just think about it at thousand seats centers that have five hundred seats use of bulk to then using of thousand seats in that center and i shared numbers last quarter but you know when we look at this we have somewhere between one hundred and forty and one hundred new you know upwards of that two hundred and seventy five million oath of new revenues we can sell into these footprints as we get past that which we're excited about because that was certainly a utopia
spk_13: turn this business into are we believe that a really strong free cash flow business rape by let me just ask that question slightly differently your cap axes actually grade and and thirty or thirty five because you actually getting equipment also on the lease basis
spk_3: he died right
spk_2: again
spk_3: some george again this is i'm on our balance sheet and an odyssey on i oppressed sixteen at right of these assets and you have wider use leases arm
spk_2: that the assets get capitalized we have broken that applied on this quarter sake actually see the right of these assets that relate to when you're opening up as centers and things like that under fire for a sixteen what we're talking about any thirty to thirty five million is more or less ya it's it's related to the property and equipment that line item
spk_13: other that each year the that is your question because i didn't write this is the of the company doesn't own facilities yeah we read facilities so when we're recognizing yeah said liability for the facilities know the wonder why did you ask the right of use have set alight guy
spk_3: okay
spk_17: mike might make regulate the a bead added so if we look at ebita should we subtract something from ah some l a bad for he said he noted the get to a real ebita you know to compare it to the way it was done before
spk_10: when capitalized easy
spk_2: yet it in and i approached sixteen in your depreciation
spk_3: and gear
spk_7: amortization it'll include the amortization that's done through for that also for the right of miss assets
spk_13: hum so that will be quite of your depreciation am as a should any enough arm hope up there was in the axle prospectus if you go back to yourself there's actually a pro forma in there that actually no shows at that time yeah like the metrics would be before and after
spk_0: yeah applying yeah the i have for us sixteen accounting
spk_2: and if you have any questions we can certainly talk like after the cousin i'll do that thank you thank you this now enzyme q in a session i will now turn back to management for closing remarks would like to thank you very much
spk_0: in summary i want to see how proud we are to work we've done here
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only. Earnings Call, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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