Concentrix (CNXC) 28 Jun 222022 Q2 Earnings call transcript

Good day. And welcome to Concentrix Fiscal Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there’ll be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. to Relations. call like Stein, to now Investor VP, would turn over the David I

begin. may You

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

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

welcome earnings fiscal Good second David. morning, call our to for quarter XXXX. everyone. you, And Thank

we As from quarter strong clients stronger results and model results, fares are announced times our from our we quarter our in you expansion. we can services believe we revenue our how had have investors many to see that This and uncertain our second feel offer margin last demand. even around growth questions the during show business

succeeding to the Our business is despite that macroeconomic environment, growth can strategy is strong which the changes rapidly we that adjust that and our us -- ever growing. our changing underlying and confidence gives

increased business pipeline do signings, solutions to are a in XX.X%. exchange revenue We the a of cost see quarter foreign a the second to $X.XX slowdown more of increase, a Reported seeing the in than our or work we billion, signs revenue although as to to anticipated lower digital currency constant On up including continues which XX.X%, and placement headwind. business. positive higher locations not was drive basis,

market earnings compared Our with Adjusted to XX%. to with with per growing XX% labor to we $XXX for income to pricing second operating XX% increases. the increased have again, saw continues across verticals. year. price stable by last share any per growth at share, last The million most $XXX offset to quarter $X.XX non-GAAP being clients accepted EBITA increases improved Non-GAAP compared all our part share year. Once million $X.XX per increased

vast cost from majority happy while client their geography. offshore the better volume their structure, to Some delivering current base clients did decide our to of move manage is

businesses rest clients, dozen the of our solid across we driving engaged and offerings. As business the new of strong many across remains the a CX both pipeline logos, for our us signings Catalyst operations Solution over our Demand year. better digital and for two and gives outcomes part confidence won strong now expect transformation to

quarter believe investors also interest seen cycles. changes vibrant we’ve strong, There clients in base the succeed They about our substantial As have with lot last weather down of more strength couple clients. continue quarter. contributions we’ve understanding the is our increasing of over economy. in been economy and spoken client size months, year-over-year to of in the to XX% to new in questions will $XXX generally this We new to about and a grow make million economy these

new As over service. a end our verticals markets and of have set reminder, we across XXX we economy spread clients that

our them Day These help basis As grew challenges to are they globally, look Analyst as to potential. their of us and of revenue. clients, with the these deal in become clients year-over-year at complex these we the our large the which over of of majority be the of second many we and with January, enterprise not have help economy our we back revenue as XX% a represents to navigate. small time client In companies on as more XX% quarter, businesses they that scale new able stated clients

to strong range making seeing Turning full CX and progress Concentrix our good of motion to cross-sell Catalyst, capabilities. we’re sales

the interest our CX in combined close $XXX met have select of key Concentrix to of addition traditional previously. have pipeline address capabilities in QX, to able a clients been set what these had with million beyond to have pipeline. opportunities to participate the would more end we opportunities, growing and explore of we our At to Catalyst These solutions. explain needs are to additional fully gained a with opportunities Our of teams significant

needed areas help company of needed in their organization. -- software many a CX example, to help For

leverage our So they a to with partnered us capabilities. of variety

costs. support scalable Catalyst instrumental user in developed their holistic system, are able journey our Concentrix approach delivery before. CRM revenue building growing optimize total deepening Having while not transition function, and customer and to support have and all would lowering We been their them customer relationships a the their that our and ways to and a significant helping out to designing build value bots, driven have a new understanding combined adding teams customer experience, been we journey,

challenge at moment to operations Our simply demand and want hire is the technical single strategic keep end-to-end CX a selectively with development business clients to for as hiring. capabilities confirm have locations pursue source, footprint are partners our operator, on up. fewer deal continued strong expertise global cannot service we the staff domain our scale. advantage clients a deliver expanding deeper Increasingly, and our and in meet who broader to The integrator Solutions. We enough demand to global Catalyst in Catalyst taking of

sales This generation were we sales the in expand quarter, adds May. expertise ServiceSource announce acquisition also capabilities. pleased domain business-to-business our deep and of to ServiceSource and

active We with demand an have from significant our pipeline for clients capability. this

scale technology client can new of whom help CX We also services. attractive brands, gain economy cross-sell and an we and other portfolio

transaction after the accretive months. in expect to be and synergies the the to year growth first We second in close XX profitability half both fiscal of and

about dividends In terms of paid at in stock we of repurchased price in capital average deployment, an our the per and share. $XXX of quarter, $XX million XX second million

that From that demand value for attainment to continue and second completing services, volume continue banking, compelling clients achieve we customer while in healthcare. environment, we is and In Solutions impacting CX our macro quarter, on experiencing an to chain primarily strong acquisition. and clients of travel complementary was We scores. our the technology, operating our as ServiceSource client our focus have some acquisitions, industries, particularly perspective, financially satisfaction, automotive particularly in mentioned current strong China. financial supply manufacture with e-commerce also and innovation insurance, of Reflecting are volatility, crypto out

We’re details to on our social The this Governance and and and responsibility, ahead our goals Environmental, provides well for team a investments making, meaningful having measurable impact more a schedule. the making our have with XXXX better also released our our commitment thank our with Concentrix can’t progress the to efforts few enough to Social in of communities. of close world happy earnings report I completion our the the were to updated our place staff and and quarter. report corporate

We update download goals. of copy. website you have Investor a Relations I visit section other now encourage the started to our to and

despite confident business, shift summary, keeps pipeline we everything customers. and continue some clients bar grow base than our to us balance faster currency strategic of their across the focused we’re market, programs that lower delivery, In of the year, strong verticals, broad our win will a foreign transforming the clients margins. across a to expanding with to our CX Turning impact on strength and cost while robust the and

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

and our that, will execution, Board to clients Directors our their like membership, that of our thank their mentorship. would for I -- it for I staff Andre. and trust with exceptional And commitment their support to with over and talented for turn Finally,

thank of entering point billion, hello, quarter we Revenue in I’ll second a improvement the euro, growth, the is for third the generation second the revenue reflecting yen FX strong the fluctuations. at This and Chris, British look year the Japanese second quarter. from a margin our up Well, financial XXXX. and the improvement reported XX.X% foreign a We the impact then you, X-point nearly The X currency dollar outlook the results begin negative for $X.XX and basis. our quarter and was weakening delivered with quarter reported in on impact discuss quarter, during than an as business includes in quarter. and expected pound, everyone. almost Australian cash full revenue more

quarter for Revenue in approximately these the the clients a in travel since our XX% U.S. percentage reminder, pro growing in led XX%. on by weakened second reported denominated acquired one-third basis, a second was as of retail, businesses on quarter. e-commerce dollar. currency constant of a since start all currencies second and across of approximately outlook from the increased early last than divested increased quarter. compared impact revenue for the the to our forma As impact have of had revenue year revenue way year basis, Revenue the dollar against our grew U.S. On And the Revenue verticals of XX% the prior growth other year. and the vertical. adjusted healthcare an and revenue our rest meaningful the currencies is in

services organically the our revenue the in acquisition Each almost XXXX. in other that XX%. constant grew grew the insurance of by industries of vertical December financial inclusion clients banking, of the X% growth quarter, in by and a from and quarter. strategic electronics digits double quarter. consumer grew second verticals X% and the our driven verticals Revenue media four in grew by currency of both communications from technology and on of all PK in Clients basis Our with

year-over-year XX% second consumer quarter revenue represented growth of from growth strong technology and by led travel generated clients and XX% services insurance new banking, economy all and the organic, retail, new economy Our our clients revenue. and financial e-commerce Virtually and of was clients verticals. electronics, and in

mentioned, lower cost this to deliver foreign Chris strong shifts in able geographies. exchange headwinds and we delivery As in were growth service to despite

profitability, non-GAAP the Turning last in to with was $XXX $XXX compared second quarter, operating million income year. million

Our non-GAAP Adjusted was year. last $XXX year. basis XX.X%, XX.X% with the points compared XXX operating in up last from million second quarter million, of EBITDA in margin of the was $XXX quarter second

and from expense ramps XX.X% Our last million Earnings last quarter $XX by existing $X.XX income year. adjusted growth basis, PK, reflects and quarter Profitably and contributions EBITDA with pricing, of amortization year. of program last in net million new Non-GAAP to improvements XX.X%, million million, of related share in for from expense was PK. non-GAAP new quarter clients, second compared year. second points per up compared $X.XX basis $X intangibles, the share-based XXXX $XXX revenue compensation and inflation. in of of of the included a quarter second the $XX investment productivity with with on acquisition GAAP the margin partially from integration were offset of second the wage results million $XXX flow-through in and increased was XX

second tax the rate in Our our was and rate XX%. GAAP tax XX% non-GAAP quarter was

were due primarily geographic expectations, Our in quarter our of second the tax mix below income. the rates to

expenditures cash cash were second capital to the quarter. This and cash million. flow free Turning quarter from million resulted in in totaled flow, operations of $XX $XXX flow $XXX million

for the to year approximately initial be revenue. bit our expectation of expect capital of expenditures X% below a We full

net non-GAAP free full expect flow We income. to of for the year cash XX% approximate

end Moving the quarter. debt quarter of million of to and equivalents end the $XXX were at second the debt was $X.X cash the balance cash outstanding $X.X and sheet, at billion. second was Net net billion the

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

$XX our XXX,XXX for We million. approximately of shares stock also repurchase

As million the $XXX of of on had we the authorization. second end remaining our quarter,

to our dividend a leverage times debt our this be EPS. forma undervalued to accretive modestly gross continued we trailing the was reduction quarter, pro valuation plan, addition will At and shares share that on In end repurchase approximately is warranted, modest believe the are basis. and at was that and adjusted net of second times EBITDA approximately quarters X-point leverage four X.X that

continue X EBITDA of beyond any by believe times leverage we year, ServiceSource. that the net We to the reduce under our end pro adjusted can additional forma barring to M&A

future. which securitization, credit, the significant $X.X on billion, remains on hand at strong cash flexibility $X Our approximately line financial liquidity the undrawn additional for capacity AR including of our and provides of billion

full outlook XXXX. Now, I’ll business our quarter the third discuss and year for

For $X.XXX a pro start for billion compared of range foreign forma a in $X.XXX and of sequential This growth with third negative acquired the we on equates the businesses XXXX a to quarter, impact to revenue on billion. revenue and X% point This since X% X-point third of expect headwind quarter a currency exchange roughly prior divestitures to an constant year includes to the be the adjusted quarter. basis, of impact basis. rates X

OI profitability non-GAAP of in this include the Our income $XXX the year-over-year. to million. to equates expectations million $XXX third At for in operating range XXX-basis-point non-GAAP midpoint, increase the margin quarter

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

now in strong basis, upon our while range for to also foreign Turning of expectations have as with start year-to-date, tightened now and a of transactions we X-point revenue This an additional to negative be a currency $X.XXX reported foreign based XXXX. billion our growth negative year, the X%, to revenue revenue impact adjusting forma the the our XXXX is outlook for Included pro year equates about of on on for to entire exchange $X.XXX performance expect in an that we XXXX. of acquired compared those to X% occurred impact at if exchange businesses fiscal constant rates divested XX% adjusted billion.

this $XXX million operating $XXX the in profitability income in margin range a Our equates increase expectations OI million. full non-GAAP year At include non-GAAP to of midpoint, to XXX-basis-point year-over-year.

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

business not costs. acquisition-only other or Our or acquisition impacts does ServiceSource and outlook future include integration any anticipated of transaction the

performance. months. in quarter are revenue we fluctuations. included in As XX we a currency closes, foreign ServiceSource EBITDA transaction contributions strong once first had the and the expect million $XX In from another reminder, $XXX future million with synergies of guidance of the closing, Also in in not impacts

of our in future unchanged. presented January remains Day for back business Investor Our the vision during our

targets the growth flow to questions. strong faster the in in with laid be the free to Michelle, for out leading use near double-digit through year, margin With please balance than consolidator a to space. against including executing meaningful open achieve strong our and market sheet line growth we XXXX, expansion, long-term generation We’re ability the strategy that, cash our earlier

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

Your line is open.

Thank you’re morning. you taking revenue Chris, my down on taking a constant like by for basis. questions. Good XXXX Hi. X% fiscal currency guide looks

looks than So that’s like it’s your FX topline. more it impacting

lower are cost customers some moving said you geographies. think to I

besides And the a on they also between revenue? if guide. wanted the at anywhere that the is still of revenues, XQ And your any customers revenue impact full revenue you demand? sequential weakness midpoint and that to fiscal are that, Just in and seeing and get on are your clarify, to year implies guide, I X% to look growth XQ XQ your of what

was look, year, last think, to wanted in pre-COVID, just go because to growth. about sequential on X% that, growth Concentrix XXXX, if -- back did sequential would get I and you X% if it I So, your we confidence

to can sequential growth X% you the the in fourth X%, have quarter? just confidence So, that

Ruplu, a unpack there. to Yeah. lot

questions try all let the and So part. in me tackle

the the fiscal one The to first X% regards in change year. for guide

in correct, back by that set they about delivering work is the expect the with them them give for and client moved the continue fast move next and wanting the get are had who a because that. on the in and There on it months. to a originally lot them where offshore be to put move of savings And primarily that. for able clients them $XX But of as -- order of clients You clients is of as and are move had second the sooner come bases want of faster, or kind to we’ve sort cost clients over with offshore, on to to they’re move kind we we won our some That’s pretty some based actually take. now, who course had they them of rest very impact happy the COVID that we’re to moved driven cost quarter sort to them that onshore during or million were of we year from had happy on-shore and savings. get XX

happy pretty from So what that we’re with we’re perspective, seeing.

a prepared in terms pipeline confidence of competence, think, the of you hope remarks, pipeline. In felt I I through lot the

and Catalyst QX, X% can $XXX pipeline range guidance good to our our deals that that’s in new the increase synergies net I get to Our confidence into to seeing we that of have opportunities sort alone midpoint to see guide. cross of QX with just that that come our pipeline win, want of we that continues the our our of a business to and pipeline million of grow, we’re at think we’re reflective winning at from

is Yeah. Ruplu, thing. that detail from divested I a would about a third last quarter just the through FX. kind and that of also had X% combination and this businesses we a I that remind midway impact of year point X

in basis confidence was we So it guide. well and to strong pipeline, with on that’s for us that adjusted from as an gives strong as contributions was the closer saw the think the signings Catalyst, in X% I what so QX,

margins. there. the a for Thanks on operating going XQ margin the like is for Looks is for at you up guide similar XX.X% XX.X%. details Okay. guide Andre, to midpoint and the the question fiscal Maybe, I’m XXXX ask

So the around XX.X%, to margin this means increase. sequential is that mathematically up be significant XQ fiscal a has which

the XQ So from margin, you giving what’s sequential confidence same question see of to you the that that XQ? can improvement margin kind

Yeah.

So, of QX. actually from us. XX-basis-point we such That’s from in Chris where This we pronounced to dissimilar. margin some XXX-basis-point is has a the for that midpoint of mix shore at you’re the the so a regarding the improvement is see last impact improvement alluded difference so QX saw to right, roughly OI non-GAAP not not year, positive revenues

nearshore we allows again, that and margin. moving obviously, margins that well. we’ll margin think the to FX Also, to just where geographies higher, contributions environment higher some offshore as that and us and drive from from PK So, in are current benefits see improvements continued

deliver of increase, a we think have little it’s can confident things it. year, not more those business in us is it we’ve to bit of and got we a all that we last juice than saw So what margin that so different the drive fairly level

there. services? the Europe to for impact the Majorelle Cytel can invoice in in. a How couple sneak landscape intention acquire competitive does details got customer this Okay. Thanks you questions, [ph]. based announced if Chris, its and more I’ve for recently them I

been the delivering. into So them doesn’t with been European our us. footprint. much offering really too don’t sort We’ve happy of We differentiated we’ve impact in run that it really

been And we’ve to believe us so like some that we clearly that, whenever see opportunities grow. talking is consolidation there’s about more consolidation more will as and we what industry provide

to able trends can rates, attrition, move to an taking about Are pass to attrition rates? In customers -- the Okay. based you you pricing. I those cost increases attrition and are in on ask pricing last hold? Chris, and labor on maybe Is had on have more pricing Maybe that for you seen the one, tending? outcomes you uptick talked that how

to back remarks, and value increase, pricing at things, about clients took prepared to for couple where I of that, in because clients primarily quickly not offshore. fact obviously at our them the a if increasing they’re the are the to, the -- go move then able alternative part, through as deliver look and business last able is we which a afford them pricing quarter to we look to for So they were most accepting going offering relatively we and talked in offshore, them that some

well necessarily better pre-COVID So to perspective, and we I performing be and we’re downtick or well an best-in-class we material pre-COVID perspective. covered executing think, we’re than seen from and continue From we any levels. still -- that generally think, attrition uptick haven’t

So our support muting Catalyst focused business. I’m have more supply global our and did the our globally are pretty we on lot Catalyst in better comfortable as believe From we we Catalyst we able with where that that hiring, of we’re seeing up position And a out pipeline comment. a segment. will in the work that’s the that work to open centers we a more of that, the be to fact and the have call development on perspective, labor we -- is growth be I

Thank for Okay. it. the Appreciate all you details.

you. Thank

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

is line open. Your

sounds the previously you’re curious plan. I track to catalysts healthy. pipeline Also communicated was Chris, on with Catalyst commentary are your XX% your for as fairly hiring you on that in Yeah. the -- just if look comparing if challenges cited line am grow that? curious

Yeah.

plan. of ahead little a is execution Catalyst our So

albeit we opportunities healthier expected closed in we this QX, anything close, very combined very, small didn’t we the pipeline is on point. we which honestly, to than expect As our at much some very, mentioned, deals, and

of pipeline to of actually be in We expected type this couple quarters level a that out business. with

it to million. we You was over slightly $XXX remember Catalyst got bought when

of being of short I with about time, valuable. of pipeline clients see to think very our they where perspective, that as the very, you and very the proposition within sort the sort building us if speaks think, XX% that delivering a a revenue From growth value we’re goal. a is muting expect we the little I us do has on that although development for as we and is hiring revenue to growth in quarter, and a to a speed reasonable will I that up revenue bring very it our business. say that muted the XX% in centers for bit of So think is dealing target long-term second that

or less Chris chain this has impact Andre prior the on And supply than had quarter of volume an quarter?

the in It’s pretty much actually line to same.

and see within But consistent that clients. We manufacturers period China sort QX our out it’s getting what consistent has manufacture and number of up better. challenges saw a continue or our nature who our in a impacted with any volume to is clients of with high volume opened in necessarily product It time. the having we hasn’t so of

terms continue post-pandemic. quarter in outsource could you what an use too last about market? hopefully, Does not of I expansion picture Chris, it’s the mentality question, willing that clients talked If in big And word, are optimistic. to that

would does operations pipeline, have in million the the they have outsourced, approximately majority opportunities been $XXX it not done within combined think that in-house. would of tell historically I of Vincent. you $XXX that been those are opportunities million vast -- Catalyst I’ll

we’re very, a it and technical sort kind And operations this us. -- strength that can of we’re expertise domain build applications. is our into, about and pretty that I bespoke talk now is run with it, to and And very eating exciting within market things that, got to then operationalize very haven’t new bench of operate, say which historically, We’ve deep to. we so been Catalyst able we able

across that, the is private that industries hearing multiples you’re relative and what fairly seeing? are market in generally to And rich seen still your markets, public in we’ve other industry downdraft

public do a multiples line their in of private of fall kind months peers. to number Historically, with take

I tell to are starting those multiples down. are to on will transacting to not meaningful starting they come starting you, down, way, less We But market. things in the come but a private see private are

to So waiting be it come would of public of be are would multiples. company people accretive to line multiples what indicative sort that to for in

Okay. Thanks for my answering questions.

you. Thank Perfect.

like further to Caldwell Chris to There I’d remarks. closing the questions. are for turn no back call over

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

pleased We’re the and dynamic encourage our execution marketplace. next the very ESG report our I’d look digital Thank also to to strong with download to you in in you our everybody. ability to extremely quarter. CX lead in continue forward talking all confident and quarter much you are to

concludes This program. the

disconnect. now have may You great a day. Everyone