IBEX Limited

Welcome to the IBEC third quarter full year 2023 earnings conference call. At this time, all participants are in a listening mode. After the speaker's presentation, there will be a Q&A session. To ask a question, please press star 11 on your telephone. You will hear an automated message advise that your hand is raised. Please remember that today's call is being recorded. I would now like to turn the conference over to Mr. Michael Dole, Investor Relations of IBEX. Sir, you may begin.

Good afternoon, and thank you for joining us today. Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals, and business outlook. which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments which may occur. Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our annual report on Form 20F filed with the US Securities and Exchange Commission on October the 4th, 2022. With that, I'll turn it over to Bob Deccan, CEO.

Thank you, Mike. Good afternoon, everyone. And thank you all for joining us today as we share our third quarter fiscal 2023 results. Nearly three years have passed since our IPO of August 2020, highlighted by a number of great moments for IBEX. Earlier this month, on Monday, May 1st, we proudly celebrated by ringing the closing bell at NASDAQ. As a public company, IBEX has built a track record of transformation and execution. Our journey from IPO to today continues to get stronger and better. Once again, I'm extremely proud of how well our business is performing. First, we delivered outstanding financial results, where we again stair-step profitability across our key metrics, including adjusted EBITDA margin, net income, EPS, and free cash flow. Second, we continued strong double-digit growth in our digital-first BPO 2.0 clients that resulted in robust growth in our more profitable offshore, nearshore, and rest of world regions. Next, we continue to make strategic moves to position our business for long-term enhanced results. Lastly, I am proud of the progress we continue to make on the ESG front. We set a new standard in adjusted EBITDA margin with an all-time high 18.5% for 24.4 million, up 390 basis points from a year-ago quarter. This is the second straight quarter margin has been above 18%, and we believe we are now at a new normal. Net income increased to $11.7 million from $6.6 million. Free cash flow increased to $13.4 million from $5.9 million, and EPS was 59 cents per share. Revenue grew to $131.6 million, up 8.4% when normalizing for the Q4 FY22 exit of a low margin legacy client. More importantly, revenue with our digital first BPO 2.0 clients grew at 12.3% and is now 78% of our overall business. and revenue in our higher margin regions grew at approximately 15%. In the quarter, we made aggressive decisions with our clients to accelerate the move of significant business from our U.S. region to the Philippines. While this collaborative move impacts our revenue, it will have an immediate and long-term positive impact on profitability. Not only are we gaining from the move into more profitable regions, but our clients are benefiting as well as we lower operating costs for them as a result of favorable labor costs. Additionally, these actions are enabling us to further rationalize our U.S. capacity. This will be completed by the end of our fourth quarter and will further strengthen our position for FY24. We remain excited about our pipeline and the opportunities with high profile clients. Since our last call, though, we are now seeing lengthening of sell cycles in our pipeline as a result of the macro environment pushing new client revenue out. Despite that, we continue to win great new logos in our key verticals. For the fiscal year, we are forecasting new revenues in the range of 30 to 35 million. Based on our historical success of land and expand in our new partnerships, we anticipate this new client cohort to generate between 60 and 70 million in FY24, which we expect will continue to grow into FY25. Our ability to win high profile deals continues to be a direct result of our differentiated BPO 2.0 capabilities, which include our WaveX technology stack, our powerful WaveX business analytics, IBEX's amazing company culture, and highly branded sites. This positions us to deliver outstanding results for our clients. As an example, this past fall, we launched with a top-tier healthcare payer as their first new BPO partner in several years. The incumbent providers are the largest of our competitors. Following a very successful launch, IBEX attained the number one partner ranking amongst eight competitors for the March quarter. The client recognized us for this achievement by stating, this is a remarkable milestone for IBEX since we only started operations in October, 2022. It's performance like this that enabled our strategic FinTech and health tech verticals to grow 18% year over year to 32% of total revenue. This exemplifies the power of our solution where we integrate technology, analytics, unparalleled culture, and an amazing management team. As said, the growth of our BPO 2.0 segment of our business is driving growth in our higher margin offshore, nearshore, and rest of world regions. These markets now represent 72% of our overall business, and grew approximately 15% from prior year quarter. We have thoughtfully restructured the makeup of our U.S. footprint into a smaller region with more profitable clients, enabling our margins to increase. As mentioned earlier, with the completion of our site rationalization in the current quarter, we expect continued margin expansion into FY24 for our US-based operations. Another vector for margin expansion is selling into the available capacity we have in our higher margin regions. Work-from-site capacity utilization grew from approximately 50% into the 60s in the last two quarters, resulting in sizable margin gains. We believe we will continue to improve utilization based on our strong pipeline, which will result in further margin improvements. With all this momentum, we like the trajectory of IBEX. Our people are the very fabric of IBEX. They make our brand what it is. I am so proud of the approximately 35,000 employees who bring it each day to deliver great customer experiences for our clients. We recently completed our iVoice Net Promoter Score Survey of our employees globally. And we are delighted by both the participation rate and the NPS results, where we scored an impressive 85% and 68% respectively. In a highly competitive market like the Philippines, we scored a best in class 79 employee net promoter score. As you can see from these results, our brand is strong in all our regions, highlighting the impacts of our agent first culture and unparalleled employee engagement. We were thrilled to resume our regional VIP recognition events after a two year hiatus due to the pandemic. The events and experiences our agents and management teams take away from these VIP events enable us to continue to expand our brand and loyalty with our people across the globe. This, in turn, helps drive great customer experiences for our clients. Now, our industry is moving extremely fast. As we have discussed, there is a continued shift to digital first something IBEX has embraced with our growth of our BPO 2.0 client base. Recently, industry consolidation has accelerated with the announced mega mergers and leading most headlines is the exciting intersection of AI and CX. I believe IBEX is well positioned to take advantage of these opportunities presented. In the digital-first world, we have transformed IBEX from a company that did mostly voice-only support when I joined in 2015 to a company that is now over 73% digital. This is core to who we are and the clients we serve. I believe we are uniquely positioned to capitalize on this continued trend to digital-first and analytics. leveraging our Wavex tech stack and the power of our business analytics offering, where today we have over 90 deployments in our client engagements. Second, our industry has had a 25 year trend of mergers and acquisitions with continued consolidation across the space. Despite that trend, The industry is still extremely fragmented, and clients continue to come to companies like IBEX looking for differentiation, wanting better, desiring culture, speed, flexibility, and leaned-in leadership. That has enabled us to build a reputation as a partner that comes in as a challenger and outperforms. Our focus is on increasing value for our clients with advanced analytics, technology, and digital first solutions. McKinsey recently highlighted that only 37% of organizations are using advanced analytics to create value. We see this as an opportunity for IBEX. Lastly, Generative AI technologies present great opportunities for IBEX. IBEX is tech-led. We have approximately 400 developers of purpose-built technologies focused on CX solutions for over 20 years. That team has developed a deep experience deploying AI-based solutions. A prime example of this is in our WaveX business analytics offerings. where we have been deploying speech-to-text capabilities, then leveraging AI and machine learning-based models to deliver operational data to implement improvements and provide meaningful insights back to our clients. Generative AI enables us to automate this process and provide deeper insights faster and at a lower cost. Two quarters ago, our Waybex tech team began development of generative AI solutions to assist our agents in delivering great experiences. We are excited about the early results and the game-changing potential that the technology has. More than ever, though, our clients' boards and CEOs are asking their organizations about generative AI. With the competencies we have built We believe we are well positioned to work with our clients to help them better understand how to assess opportunities in their business, as well as to eventually have IBEX build out and implement solutions for them across the customer lifecycle. This is an exciting time for IBEX. Now, moving on to the outlook for the remainder of the fiscal year. We have a high degree of confidence about the trajectory of our business. Our business continues to progress extremely well on profitability and balanced top-line growth. We are confident that we have reached a new level of profitability in our business going forward. As a result, we are raising guidance for adjusted EBITDA for the full year to $88 to $90 million from $82 to $84 million. If you recall, adjusted EBITDA for FY22 was 66.8 million. Recognizing the impacts to revenue of the current macro environment and our strategic decision to accelerate the movement of key clients from onshore to offshore higher margin regions, we are reducing guidance for revenue for the full year to 523 to 527 million from 545 to 555 million. The resulting midpoints will have IBEX at approximately 17% adjusted EBITDA for the year, which would be in an improvement from 13.5% in FY22. We expect CapEx of approximately 19 million. Before I close, I want to thank our CFO, Carl Gable, for his dedication to IBEX over the last 19 years, eight of which I've had the privilege to be part of. Carl will be retiring June 30th, the end of our fiscal year. He will be missed, but thanks in no small part to his efforts, the company is in an amazing position going forward. Carl, now over to you.