Release Date: September 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IBEX Ltd (IBEX, Financial) achieved record EPS of $2.10, up from $1.96 last year.
- The company delivered record free cash flow of $27 million, an increase from $22.9 million in the prior year.
- IBEX Ltd (IBEX) won 18 new client relationships in FY24, up from 10 in the prior year.
- The company successfully grew its more profitable digital-first services, which now represent 77% of revenue.
- IBEX Ltd (IBEX) ended the year with $61.2 million in net cash and repurchased $1.3 million shares, reducing shares outstanding by 8%.
Negative Points
- Revenue decreased by 2.8% year-over-year to $509 million.
- The company faced macroeconomic headwinds, impacting near-term revenue growth.
- Onshore revenue, which is lower margin, decreased to 23% of total revenue from 26% in the prior year quarter.
- Net cash derived from operating activities decreased to $35.9 million from $41.9 million in the prior year.
- DSOs increased to 72 days, up from 63 days at the end of last year, indicating slower collection of receivables.
Q & A Highlights
Q: How do you view the macro environment, market share, and generative AI in relation to your forecast?
A: The macro environment showed some positive volume trends in the second half of the year. Our digital-first clients continue to grow, offsetting declines in legacy clients. We expect telco elements to stabilize and see growth in FY25. Our market share is strong, evidenced by significant wins, including a major gaming client. Generative AI presents a new revenue stream, with a large pipeline of opportunities. Overall, we are optimistic about FY25.
Q: Can you discuss the sustainability of margin improvements and the continuation of share buybacks?
A: We expect margin improvements to continue, driven by growth in profitable geographies and services, including AI. Economies of scale and operating leverage will also contribute. Wage pressures and ongoing investments in infrastructure and technology are considerations. Our goal is to reach a 15% EBITDA margin in the coming years. Regarding share buybacks, we have $27 million remaining under our current program and plan to continue repurchases while evaluating M&A opportunities.
Q: What were the key drivers behind the strong Q4 results?
A: Q4 revenue increased slightly to $124.5 million, driven by higher-margin regions and strategic verticals. Offshore and nearshore revenues grew to 77% of total revenue. Net income increased to $9.8 million, and adjusted EBITDA grew to $17.9 million. Key drivers included site and cost optimization efforts, growth in higher-margin offshore locations, and lower income tax expenses.
Q: How did the new client wins impact your business in FY24?
A: We won 18 new client relationships, primarily in retail, e-commerce, healthcare, and gaming. These wins nearly doubled from the prior year and contributed to our revenue growth. Notable wins included a major gaming client and a significant AI opportunity with a mobile carrier. These wins demonstrate our ability to compete and win against larger competitors.
Q: What are your expectations for FY25 in terms of revenue and adjusted EBITDA?
A: For FY25, we expect revenue to be in the range of $510 million to $525 million and adjusted EBITDA to be between $67 million and $69 million. For Q1 FY25, revenue is expected to be $124 million to $126 million, with adjusted EBITDA between $14.5 million and $15.5 million. We anticipate continued growth in higher-margin services and geographies.
Q: How is the company positioned in terms of AI initiatives and their impact on future growth?
A: We have launched a suite of AI services, including AI automate, AI translate, and AI authenticate. These services position us as a first mover in developing chat and voice bots to automate contacts. We have a pipeline of over 40 AI opportunities and are receiving positive feedback from clients. AI initiatives are expected to create new revenue streams and growth opportunities.
Q: What were the key financial metrics achieved in FY24?
A: We achieved record EPS of $2.10, up from $1.96 last year, and record free cash flow of $27 million. Net income increased to $33.7 million, and adjusted EBITDA was $65.2 million. We ended the year with $61.2 million in net cash and repurchased $1.3 million shares, reducing shares outstanding by 8%.
Q: How did the company's strategic transformation impact its performance?
A: Our strategic transformation to a digital-first company, branded as BPO 2.0, has been successful. Since our IPO in 2020, we have grown revenue by over 25%, expanded adjusted EBITDA by 65%, and improved margins by 310 basis points. We have also retired nearly all debt and built a strong client roster. Our focus on AI services is expected to further strengthen our business.
Q: What are the company's plans for capital allocation in FY25?
A: We plan to continue share repurchases, with $27 million remaining under our current program. We will also selectively evaluate M&A opportunities to enhance our solutions and competitive position. Additionally, we will invest in market growth in offshore and nearshore regions, utilizing expanded capacity built during the COVID-19 pandemic.
Q: How did the company's client diversification evolve in FY24?
A: Our largest client accounted for 12% of revenue, with top 5, top 10, and top 25 client concentrations declining slightly. We ended the year with 55 clients billing over $1 million per annum and 27 clients billing over $5 million per annum. This diversification exemplifies our ability to service large clients across various verticals and geographies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
