Concentrix (CNXC) 30 Mar 222022 Q1 Earnings call transcript

Hello. Thank you for standing by, and welcome to Concentrix' Fiscal First Quarter 2022 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, David Stein, Vice President of Investor Relations. Please go ahead.

good and Josh, you, morning. Thank Concentrix Welcome Call. Fiscal Earnings Quarter to the XXXX First This and of recorded property call the is Concentrix without permission or the may of Concentrix. rebroadcast be not expected forward-looking that their contains address are that matters and call This nature, address our that, future statements by uncertain. performance be forward-looking uncertainties statements. to future may those than actual our different These expressed cause results materially in our result update of undertake We to our or forward-looking developments. as events do information new a or future not statements release earnings SEC yesterday's Please our regarding most that the to refer our with filings and results. for uncertainties recent information additional future could affect financial This includes risk provided report in our the Form XX-K. on factors annual EPS the flow, adjusted constant as including we call, non-GAAP discuss currency free revenue during growth. non-GAAP financial adjusted cash income, measures, adjusted well Also operating as will and EBITDA A measures these on Concentrix available Investor news the website non-GAAP the in release under Financials. and Relations reconciliation of is Chris Officer; Financial President me today our and on Chief our Caldwell, Valentine, Executive are Chief Officer. Andre call the With and Chris summary of results performance will and operating will provide strategy, cover financial outlook. business and a and Andre our growth our call open for questions. the we'll Then your

I'll call over to Chris. Now, turn the

announce for Thank XXXX. to our acquisition. Catalyst business call and of our you We're integration Good PK, welcome well much, quarter strong latest earnings happy progress very everyone, first results of in our David. morning, another to as solid quarter fiscal as with the

with new acquisition. contributions to performance by and with seeking Our robust existing clients fueled was wins from responding strong PK CX our clients benefit our from capabilities differentiated opportunities,

operations the impacted from Philippines great earnings on quarter, Ray we recovering surge our that in COVID our discussed and made QX the in During we call. that Typhoon people and in the progress

Ukraine. displaced our have no time. or thank community during are our that do troubling in been members this staff war, with thoughts presence a and border with because I operations around staff Russia, especially of in While to Ukrainians would the large we the and them family helping Ukraine our world, have their we of Ukrainian that have either like

$X.XX XX% XX%. adjusted Our an -- by pro a to we revenue periods, of grew represents On both an basis constant reported forma currency in first of include increase currency quarter PK on billion year-over-year basis.

Our first up was from $X.XX compared to to increased XX%, $XXX million operating adjusted XX% share last been earnings immediately share income And increased expected. of accretive compared non-GAAP contributions $X.XX quarter million to per with have last year. XX% earnings and with per year. Non-GAAP $XXX share per PK EBITDA as

deployment consistent to we We capital paid terms strategy, in the in in $XX dividends capital repurchase our returning In did of quarter. million with first quarter. investors, not shares the

remain $XXX available warrant. remain market time today, our to program, modest authorization over share committed of million and conditions repurchase As on as we purchases

on have about before to as good our We're and operated we X Concentrix simplifying, to Having clients for the us digital our deliver service to unique optimizing have possible been PK into technology design CX integration harmonizing and schedule months, the leader. ahead to truly team. differently as our execution CX around even We're acquisition at of Turning the for partners wouldn't in solutions a client expertise The allows is combined the and of solutions mix acquisition. CX of already expectations. progress catalyst think wins to seen a Catalyst marketplace that strategic making Catalyst for that small us of from digital report strong solutions operations. demand I'm can more the able consulting art seeing solutions what Concentric positions the digital we're pleased scale and for to be. track This our

achieved seasonal saw quarter, volume demand across growth some broad lower Despite a our our clients, and volatility we verticals. again. we portfolio of section few growth across the with During a

economy in looking to pandemic the some annual in $X.X offshore now on structures quarter, revenue has that us positioning volume more basis manage $XXX subsided an the to increased to billion better. move or exceed million seeing over We're their revenue clients also New nearshore client for to XX% cost these clients. and

and clients. deal the are We tightness of in and will strong market clients an perspective, X the environment dozen geographies digital logos verticals, technology, labor with strong Europe. and across higher parts and this demand despite with and solid continue to we remain operating see particularly health satisfaction transformation levels in fintech, the with some travel and continued businesses U.S. in From over demand solutions solutions. levels with quarter cautiously high CX and average optimistic our primarily pipeline, sizes staff crypto, our won maintained performance new of care market, We

we to contact put are insights recently we quarter, During chain issues our and as through CX uses possible, a for few for leading opportunities as I sift Quality volatility which volumes, the ensure earlier To themes, which efficient into our slightly. Insight supply to have records mentioned continued muted of the quarter their improvement. capabilities, production clients, AI in for

new while that office. improving incredibly client customer across capabilities, CX Operations, in more recognition experience Hub experience. Vendor benefits to expect This CX some be without was clients engaging over X.X for meet report NEAT as Canada an delivering assesses also Evaluation the leader of out NelsonHall's are by this this We're And work-at-home ability In years. immediate collaborative roll their Concentrix capabilities. Transformation, CX achievement. it of our the improvement proud Experience social, our early future needing trends to and improves platform to our seeing positive a next the requirements Innovation identified enterprise and on very in we and We solution makes our to

second the to Turning quarter.

transforming in on everything focused We operations will continue our market continue CX strong, step to remains our for to for guidance and directionally goals. are feel QX customers. summary, be and the and confident to year, clients In a our The solid. our we're our

new and into with markets innovating relationships for acquisitions we expanding emerging deepening shareholders. to returns relentless solutions pursue superior to our selectively drive our while and strategic We are client

our to to for exceptional to for that, staff their our execution thank like I Finally, trust. will Andre. continued over With call commitment Andre? their the I and clients turn now would

transportation negative care Revenue grew year $XX large technology, negative by and our from divested impact financial services, $X.XX the first includes across and reported thank a financial a of begin during compared billion. revenue an first in the improvement with currency year fluctuations. revenue quarter currency technology travel, million Revenue look clients an e-commerce impact in everyone. businesses and verticals of last quarter. million improvement XX% profit at PK, in you, I'll million contribution of strong revenue grew On first retail, increased and in health all tourism foreign was full increased basis, travel Revenue from Well, $XX The constant and strong adjusted for in year. growth the with clients led The $XX quarter. last in the the and business XX% from and the from was for XX%. industries. our electronics approximately Chris, delivered our outlook the the Revenue results quarter vertical. consumer increases and hello, discuss and quarter with XXXX. by We then second a

digits revenues in vertical. services our accounted grew of of media grew in The from PK the strategic the banking, grew by said, each and verticals double contributed each in Our organically the our and for verticals acquisition to of and vertical insurance by Revenue quarter. quarter. XX%. increase communications health financial other of XX% and most care X clients That the

first Our revenue. of quarter the new generated of from growth Virtually was our XX% growth XX% new organic. of all economy clients and represented in economy revenue clients strong year-over-year

million to was Turning year. compared million operating first profitability. $XXX last quarter the with Non-GAAP $XXX income in

quarter operating million non-GAAP $XXX last compared margin the was first EBITDA year. last same quarter the Adjusted as in year. Our $XXX XX.X%, million with the was first

COVID quarter which of down year. XX with million PK. year. existing and XX.X% globally, non-GAAP wage PK Our availability; GAAP adjusted compared margin XXXX the typhoon; were new ramps; per included of results in surge last $XX Earnings investment cases of quarter and program last compensation share and staff $X.XX quarter integration contributions for amortization the quarter and offset clients; $X.XX acquisition $XX in by expense pricing, first related points first a income growth million reflects in compared revenue the from was was EBITDA basis Non-GAAP last first million Philippines new the of with share-based $XXX expense million of impacted the to and with year. intangibles, from Profitability flow-through $X the inflation. from of basis in the $XXX increased on net first million XX.X%, of

flow. cash to Turning

free break-even million, $XX also flow quarter. resulted quarter were and cash the in This capital cash totaled $XX expenditures flow First million. from in operations

and year-end As payments quarter cash quarter in weakest is XXth payrolls the flow some cash first typical of and flow the incentives a year. regions, typically therefore, month the of free reminder, reflects in

to cash Turning the outstanding of at and billion $X.XXX was billion. end just were of cash over the sheet. debt quarter, the balance Net debt and first the $X.X At the $XXX million, equivalents end quarter. was

$X.XX the second During declared our dividend the paid Board quarter, quarterly to and during of another we paid has quarter. $X.XX per of a quarterly per dividend share share, be

Regarding our stock repurchase program.

$XXX we authorization. As on of have today, remaining our million

repurchase and cash was net remains As AR our credit of we for acquisition, on quarters free adjusted and for approximately approximately a EBITDA, gross the we our and PK of modest lines was on leverage be with stock At undrawn quarter, X.Xx at debt forma of strong expect of basis activity cash, end over leverage PK. with the billion approximately X.Xx time. securitization. pro the dividend time $X.X Liquidity X trailing capacity some our the reduction priorities said, near-term to flow first

flexibility financial Our as provides current forward. move liquidity we significant

Now I'll full and XXXX. discuss quarter our the for year second business outlook

with a XX% year. expect X-point growth. impact For and net This to X-point in related billion basis, constant revenue revenue billion. rates be benefit businesses pro includes range $X.XX $X.XX the forma X% divested foreign exchange a currency last quarter, a to of second we of to equates our acquired in and XXXX On adjusted compared the the to guidance negative to

Our quarter income operating profitability second range million. the in of non-GAAP the to include million $XXX expectations $XXX for

million expense be XX% and of expect a million, average to count XX effective rate approximately approximately of the in to interest We XX% second tax approximately an quarter share shares. weighted $XX.X

the outlook year. to Moving for our entire

we guidance our shared call. the confirming are last on earnings We

equates past rates X-point expect constant of guidance net in expectations for to currency our in we On year. pro a basis, growth. benefit XXXX We X% of the the foreign is exchange XXXX divested a related to negative range Also billion. revenue have X-point $X.XX acquired XX% impact businesses be XXXX, and to a forma to adjusted in revenue $X.X to billion continue to with included compared our a

$XXX of range full to Our a million include expectations income year non-GAAP operating $XXX profitability million. in

full year million a share expect in million count to We be XX% of approximately average $XX XX tax an range million shares. of approximately of $XX XX% rate to with a and interest expense effective to weighted

Our any the the or In fluctuations. remainder business outlook does with not from closing, year. impacts strong future costs. very and are pleased of transaction or for Also currency impacts integration confident the guidance results not quarter we very in are included our our for future in include the first acquisition-related outlook

a global our the we're and growing on in As grow a well-positioned organically to faster plan leader fragmented than executing market, market.

spot the With strong cash questions. balance progression sheet, Josh, consolidator open in we're deliver flow. line margin I a proven sustainable a that, please free growth, great now, with strong a for believe and As to

first of Our from comes Bank Instructions] Bhattacharya [Operator question Ruplu America. with

half terms rates ramp first the for about the are fiscal can prepared sourcing new you geographies cycle us and days projects? or second but as of macro question in Chris, to moving ago, on how customers to any XX And of trending think and strength? how in political logo had some based the shaping 'XX is versus on second expected talked your more what's the to different And times win maybe the details this sales your you the different locations? about happening have remarks, environment, different some of is in compared you I half give up of touched times part the trending, the are

For sure, Ruplu.

The and sort balanced first we putting people pre-COVID where be in nearshore/offshore thing, than the of of bit talked to work are are about work, to a doing a seeing to is, terms little sort I more Andre are alluded where of tends of I more people which geography onshore. think

of height sort to with in of a the COVID, of COVID, faster we During see did of periods. see growth prior than at sort onshore it levels. we And going little pre-COVID kind back

how driven really to fixed the their of quarter. height sort deals we're certainly of from COVID by executing that's ability that business progress driven continuing the through. are along That's how chain with shaping we the within coming as benefit by returning time clients longer that and a we're the and sort perspective. driven basis, our kind the bit view called see on normal into of mean clients happy a expected think economics business sort That's QX Everything models, a plan, a what they're in little I shaping sort longer. getting that's probably taking to So to little of I thing is That's issues seeing 'XX to cost the scale QX, period. those by and of next From how of volume continue expected. generally, of we our out quarters fiscal perspective, of through. X working only year's up of during very sort sort and muting QX From the the supply than we see of and that's dragged a else up cycle how the labor.

XX think pre-COVID to XX months. I deals about talked that. we Like were

deals a were couple much not seeing fastest but We're a them stretch were they COVID, sort of than more months. bit, little COVID. what in During of the

solutions we're So levels, back they'll to that And with at that people for at that new and cycle we're looked work where looking strategy. the that looking suspect seeing. at the pre-COVID that's they're the we how of of we sort We happy going of are turn which and sort good times for of type trend frankly is looking our go-to-market place us. how don't pretty to through are

comments logo Got wins. new it. mean, And this I you any typically about quarter? talk

But we're of new and terms just winning, look quality called out Actually, with we're span. pretty to tend at and many of super we're the what of our those our how that. we Yes. happy in that logo the with type is wins. happy logos wins We

We at frankly, and diversity also of nice geos well portfolios, had those a spread as spread nice at look of the revenue we a sort the diversification. look and logos, the across around as we

which pipeline, to So a our was is strong. really pipeline happy as a just our very nice very mix. very, be mentioned, of some frankly, nice And it across And geos, we across also of the to some verticals continues mix, we're the see.

Okay.

can I if ask question, second my For Andre.

breakeven the in seasonal quarter, So of talked that. free of some and cash flow you was aspects the about

you can year? you talk this through think So year. CapEx about for well finally, for capital we your how costs talk about flow OpEx how cash And part allocation should you can you you COVID trending that, see as priorities if requirements And see the about about how rest as can as And your the the of year? talk trending? of this

Sure.

there. So let's towards start with end -- the

CapEx, So we for X% this see revenue year. roughly of

it where of off in far too not was QX. So

we we Omicron called COVID that the saw the when quarters. perspective, of variant certainly, the first we So acute would guided from that the I that relatively particularly -- impacts say, a significant out we pace or quarter. see first the QX half so throughout for being was at in From as

QX we're So And guiding progression the that COVID we we coming the of that costs full out -- in COVID driving somewhat we'll about progress margin see margin balance to quarters other contributing our at see on OpEx. we through that the we guide with year. the of the of perspective, to on this see to the the down impact as situation will both the some questions as being Again, terms drive also improving. your improvement. quarters Thinking move P&L some to, think see that line -- margin But well. an the that factor the a grow progression from see we gross we margin throughout continue as OpEx year, leverage as and

priorities was questions. allocation, one think, of capital So I for another your

balance post priorities grow a we our our the we said dividend, to and continuing focus said given the support acquisition, in As a I the investing That business on we're space. to proven also consolidator the of said, debt near in -- PK our the deleveraging on sheet at time as have organically, transaction. the term, then this remain

look we the capabilities with adding trend that balance being flow adding that sets things mix, priorities for will free QX and think look sort a will for and far that that grow; add for a platform did add can geo, of our cash clients to the expertise robust the historical move want looking you a that transaction; -- clients to to from see domain with pattern like so we quarters. PK continue the that we From much out And we our in free the about like we et whether the at think be think cash of we value will as believe of more if cetera. look into it I a perspective, we'll free I vertical, flow, to

actually breakeven It X negative So this QX was the last in was year. years.

albeit of QX. cash little amount throughout see a of QX flow in So we improvement, and bit QX is move significant What trends consistent past as pretty with a you and free then breakeven. should relatively

more Okay. for If can in just one Chris. I squeeze

on the more overall, of PK, new more? opportunities outsourcing the seeing opportunities? Catalyst you side Do the are seeing business? see So and environment, And new that of look customers on vertical response been? this when segment you how And you the at are customer outsourcing then Chris, has just acquisition you

Yes.

times a last the question, remarks the for we've kind the first on calls. earnings So of this mentioned couple in of few

total that services is they're and some complete it. are drivers and you tend kind of in looking need that. sort to order and we're for more, of clients around to type wrapper outsourcing end-to-end seeing arrangement, accomplish And X outsource a that of One technology of outsourcing more a to -- just seeing solution for We set of more.

is think is look might and organizations taught historically, they outsourcing things some COVID, realize second that it's where a it’s allowed at to outsource them little is to what I focus. to probably And spend of thing during better. kind go the time and the way their that

And of trends up COVID little think sped this I it those bit. sort will think continue. a I

actually in deals. I've the They made terms with you reception had that's But been business, sort to In that want of gotten. super, come of that's months to some then points, of wouldn't we've it. as concepts, Catalyst Catalyst small have to are But deals these smaller comment, the discussion we proof is X happy where really over-magnify reception, I And that kind through. don't grow. where fantastic. start have super we've has these ago. Catalyst been conversations And some able of and new been I a starts

and that's capabilities, we're really so our for clients very they're And at encouraging. are discussion, And and meeting well adding looking really, where client progressing us on expectations. our then strategic big new those

gone So exceedingly forward. that happy with strong investments continued as to and see what value from returns we the go on Catalyst expect we've

just about said will on throughout through what of ahead year. feel the Catalyst that it QX. expectations, track like we would we this XX% year and was And Yes. as or more. And is reminder, Ruplu, a by it it grow It's be

how together. just that's So good really feel come about

on Congrats execution. the Okay. strong

[Operator question Barrington Vincent Our comes Instructions] Colicchio next Research. from with

this growth in year? any for change your Chris, expectation market

a faster are that. pointed little grow We're of that. that sort No. as saying We we'll think at than Andre it's to we still -- out, continue exceed And to continue market to X% even the analysts X%. see, seeing

to advantage to and it seems those take holding to as at So that it steady, continues still grow of we want be rates.

differentiator? the that prepared next in AI tool important you years. a mentioned new pushing your And an remarks X.X Is for had

of compliance showed actually to we it, clients a and Because sort clients. And them from experience. lot you to us them, sample of It it to the had the with in-house as of more relevant it also discussions and significantly is. as that well how strong some to not come a chat quality the XX% just demoed now We've in of after to drives standpoint normally, calls looking they but for the just XX%, as the We're customer standpoint out more interactions. calls. statistically able only sample implement There's benefits improving kind well. type meaningful, from XX% insights to some a it XX% figure into

differentiator, see it. So lot and benefits from do a we we a think it's of

benefiting your you consolidation in CX are vendor traditional And business? from

are. We

to see frame, good benefits see there We still the continue more but pace. was time a during we lot a steady Obviously, from COVID consolidation. the

for think of and that over as ecosystems of is about continue our taking we chunk from our comes XX% sort of partners to a from I portfolio clients. And take our with them. of existing services sort we of other client we work out of say growth can what our deliver

your from I And well traditional Is as of companies you're the vendors, for especially that on assume capabilities. in larger looking but PK terms new side, the acquisition with benefiting correct?

Yes.

think we -- first I have we're say, days, honestly our wins weren't expecting belt, the as combined within under wins quarter. early some but which absolutely, -- we I

So that strong, again, why thesis early is right do. wins, this but very we the indicators good to for pieces small did our very

or bigger These in team one broad-based I from conversations segment really the the think the together. that capabilities able build the just actually the at very, we're both vertical. coming CX design integrate services and the everything on to able mapping, are it the is And very actually is of us new one to being unique provided the important with sort our scale, that deliver sort journey having And experience. now our space. unique with Catalyst in capabilities can very of focused, thinking, technology are these being is of economy, This by clients, what's not acquisition and way. traditional more longer-term acceptance

frankly, happy together that's come with how just very so us. And for

further questions Chris now call this I'm to to would at back time. turn showing over And you. like I not Thank remarks. for further any Caldwell the any

in for Concentrix. much joining Great. always Thank much We your today. appreciate interest very very you

commitment combined to and we Our confident you Thank has market believe faster continue to than stay us and to the unique differentiated. a margins of beyond. with expand our really profit have good innovation day. XXXX capabilities grow much, in our will We and mix CX very

Thank concludes conference for call. Thank This you. participating. today's you

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