Q4 2021 Ibex Ltd Earnings Call
[music].
Welcome to the IMAX fourth quarter and fiscal year 2021 earnings conference call. At this time, all participants are in listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question at that time. Please press Star then one you touched on the telephone.
On today's conference call is being recorded.
I would now like turn the conference with your host with Burnley Johnson with the Blue shirt group.
Good afternoon, and thank you for joining us today before I begin I want to remind you that the matters discussed on today's call may include forward looking statements related to our operator.
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 obligations 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 more detailed description of our risk factors. Please review our annual report on form 20-F filed with the Securities and Exchange Commission.
With that I'll turn it over to Bob decades CEO.
Thanks, Brent Lee and good afternoon, everyone.
Credibly proud and excited to share with you our fiscal 2021 results and outlook for the future.
With our 16th consecutive quarter of organic revenue growth I am pleased to announce that we achieved a record year of revenue EBITDA and new client wins in both quantity and in Europe bookings and.
And we did this in the face of a once in a century global pandemic.
COVID-19 forced companies to accelerate their digital transformation to thrive or survive.
As a result, they look aggressively to key partners to support their digital first businesses.
I am proud to say that IMAX is one on a big stage.
Digital first blue chip businesses.
Leading new economy companies as well as hyper growth iconic Fintech and health Tech.
We had a record number of new logo wins that more than doubled our previous high for in year revenue.
And once again, we had 100% retention within our top 20 clients, which accounts for more than 90% of our revenues.
Overall, we retained 99, 5% of our clients on a revenue basis comparing from FY 'twenty.
IDEXX is winning as a result of the many key attributes we have built over the last six years.
At the forefront.
Tech led solutions in our wave <unk> platform that drives innovation and performance.
Really important is the culture that we have built.
Our speed and flexibility are unique and best client branding and the strength of our leadership.
This as you have heard me say multiple times as BPL two point, though.
It is differentiated it is disruptive and it is very difficult to replicate.
Our results are the proof points.
As we walk through our results today.
You will see our transformation as a company is clearly working.
And while I'm extremely proud of our FY 'twenty one results.
Believe that the best is yet to come.
Before we dive into the most recent business results.
To take a moment to share my look back at what we've accomplished in my own personal scorecard that I hold myself accountable too.
I have now completed my six year at the helm of IMAX.
FY 2016, we started the transformation from a traditional labor arbitrage focused business to a digital focus business. The results of this initiative are nothing short of spectacular.
Revenue from clients one since 2016 are now approximately $230 million.
40% from prior year and at a five year CAGR of 84%.
This is made up of over 60 new clients.
Approximately 75% of this business is integrated Omnichannel and digital while the remaining 25% are with great brands that are investing heavily in and placing a priority on delivering great customer experiences.
As the momentum continues to build the result is great diversification across our client base and strategic protocols, but most importantly, with a differentiated customer value proposition leading the way.
Our top three clients represented nearly 70% of our business in FY 2015.
12 months ago at our IPO those three legacy clients were at 44%.
We exited Q4 of this year, where these clients are now down to 28% and trending lower.
Again, this is driven primarily by the explosive growth of our high margin digital first business choosing IMAX as it CX brand partner.
The demand for our digital first services led to an increase in over three.
3300, new seats.
34% increase to our nearshore and offshore locations.
Our highest margin regions.
And we established a strong backlog of an additional 3200 seats that will be launched in the first half of fiscal year 2022.
In addition to our new domestic location in Pittsburgh.
We just announced our entry into the Honduras market with initial plans to hire more than 400 people.
Our goal is to become the leader in Honduras, just as we did in Jamaica, and Nicaragua, while growing our Honduran workforce to over 2000 employees within the next two years.
In two and a half short years, we will have seen our nearshore and offshore capacity grow by 125%, while the domestic capacity has been reduced by 25%.
By December 77% of our seats will reside in our high margin nearshore and offshore locations.
This has helped position IMAX as the number one provider of BPL and CX services across Nicaragua, Jamaica provincial Philippines and Pakistan.
What matters. Most here is that our returns on this spend since I have joined have been stellar.
We track our returns on invested capital.
And new seat capacity to meet client demand in our nearshore and offshore centers typically have a payback of less than two years.
So while we have record revenues up nearly 10% and record EBITDA of nearly 20%.
Which we're extremely proud of there is something even more powerful forming underneath.
Let me review my perspective on some industry trends that are accelerating the need for our differentiated solutions.
Competition for wallet share has never been higher demand.
Demand for everyday products has increased exponentially and consumers are switching brands at unprecedented rates.
As consumers flocked to new shopping strategies brand loyalty has been tested like never before.
Beneficiaries of this shift our trusted brands that provide their customers with high quality customer obsessed support and innovative solutions.
As volumes of interactions increase we see a growing need for superior differentiating service and support.
Speed and precision.
Of artificial intelligence technologies and analytics. In addition to human insight has become the focal point for shaping the customer journey and provides the intelligence needed for the customer experience of the future.
The current shift is galvanizing companies to rethink the traditional customer delivery delivery platforms and organize their business around a broader multichannel approach.
The desire for convenience and simplicity.
With each consumer connection is driving the need for automation that will quickly solve customer inquiries.
And the need for expertly trained contact center personnel.
AI automation is the key to supporting both the non voice channel support and the interaction with frontline personnel.
Whether we are supporting a digitally transforming blue chip.
Our digital first company the option to support consumers when and how they desire is paramount to the success of the overall service strategy.
Companies are turning to IDEXX because of our acute focus on the customer experience.
Our ability to enhance our client brands and our ability to deploy technology and AI across the customer and agent lifecycle.
Now to our greatest asset.
People.
To help protect the health and safety, we continue to put our employees first in all the markets. We operate as it relates to COVID-19.
We invested close to $13 million in our people to keep them in our centers safe and COVID-19 free.
This is one of the many costs that had been added to our current P&L today.
In a COVID-19 environment.
So the attractive margins and cash flows we see today.
Only be up into the right in the future.
These investments and our people are paying off.
Our team has been performing amazingly.
We have passed all of our health audits.
And we have had no site shutdowns.
Today, we are proud to say that we have over 70% of our people vaccinated in the Philippines.
And over 95% in Pakistan.
As a comparison.
Kern vaccination percentage in the Philippines.
Teen percent.
Without question, we are the gold standard in these markets for our vigilance against this terrible virus.
This is the type of track record that truly delights our clients.
And builds loyalty with our employees.
Additionally, we recently conducted our eye voice employee satisfaction survey and I am proud to say that we have a best in class employee net promoter score of 71 and.
And our great employee base are providing an astounding 40 plus percent.
Of referrals for our new hires.
In addition through our ongoing investment in our ESG programs, we continue to support and enrich the lives of our employees and their families.
In the past year, we have provided essential services in areas, who have been most challenged with the ongoing spread of COVID-19, we are reshaping social dynamics in many countries we operate in.
We provide equal opportunities and an exciting career for women and many minorities in parts of the world where that simply does not exist.
Coming to work every day I am beyond excited to see the sheer talent.
Energy and customer first mindset that our culture breeds and our employees thrive upon.
Now, let me touch a minute on work at home.
Work at home capabilities have been a great vector of resiliency to enable us to offset the lost capacity and keep our pipeline agents.
<unk> candidate is strong in all markets.
However, despite our record margins some of our contact centers are currently at 50% capacity with Covid restrictions in place.
<unk>, how much earning potential is left in front of us with our existing footprint alone.
We have built the operational platform now that post COVID-19 has the ability to scale to approximately $650 million in revenue in todays footprint complemented with work at home.
This will position us for a very meaningful inflection of free cash flow.
In closing <unk> has become a partner of choice for some of the world's most well known brands across our strategic protocols, which continues to be an important driver in key strategic element of our accelerated growth.
Strong client partnerships industry, leading six models and innovative technology continued to generate a strong recurring cash flow with high earnings visibility.
We're extremely excited about the opportunities in front of us.
Now before I turn the call over to Carl for the financial update.
I'd like to introduce Dan <unk>, EVP of Investor Relations and corporate development.
This was a strategic hire by me and the board not just in the area of significantly improving our investor relations function.
But across corporate strategy and capital allocations.
Dan joins us from Columbia Threadneedle.
He was a portfolio manager ensured the responsibility for the firm's IMAX investment as one of our largest shareholders. Dan believes so strongly in our business and is investment that we were able to convince him to join US I had the opportunity to establish a close working relationship with.
Dan over the past 14 months.
Quickly come to respect as return oriented mindset and passion. We are excited for you all to meet him.
Dan would love for you to say a few words.
Thank you Bob its great to be here.
I have been passionate about a more concentrated form of investing throughout my career, but joining IBEX takes us to a whole different level and truly a reflection of this going all in with what I believe is a rare and exceptional opportunity.
This business has done nothing but impressed me since my early work and pre IPO meetings.
Thought I could use this brief time to walk you through what excited me about IMAX.
The following is my personal view and not a reflection of my former employer.
I tried to understand the business from every angle the way that our long term business owner would speaking of customers competitors and employees trying to understand how it delight its customers competes with other businesses why it's grown in the past what has to happen for it to thrive in the future who are the people running it.
How are they wired.
What I found was a strong franchise punching high above its weight I learned about expanding customer value propositions using technology at its core leaving the company to now partner with some of the fastest growing and most tech savvy companies on the planet and an incredibly fragmented industry.
I saw an unspoken obsession on operations.
Perhaps most importantly, I found a tight knit group of managers that have a real hop in their step every day.
It's not often you get the wait patiently to make a high conviction that like that after our business has already been stress tested and still have an attractive opportunity remaining.
<unk> the great opportunities are long gone by then.
Covid has offered me exactly that.
The business not only continues to remain incredibly resilient throughout the pandemic given the mission critical nature of its offerings. Its actually put up record results with 16 straight quarters of revenue growth and widened its mode. During this time.
As Bob and Carl will share with you the business is forced to be unusually capital an operationally intensive during this period due to COVID-19 requirement.
Without these costs I believe the profitability and cash flow profile would be significantly different than what it is today and this is on top of double digit growth and margins last year.
As an investor this type of under earning and potential inflection always excited me.
Now the best part.
The world is truly our oyster as far as how we allocate capital from here.
It's rare enough to find a high quality business with this type of growth profile, providing a sea of high return reinvestment opportunities to widen its MAU.
Yet at the same time offering and ability to sit back opportunistically with a growing and large net cash balance and a stock that's trading at such a wide discount to its intrinsic value.
This combination is truly hard to find and what convinced me to go all in.
With that Karl I'll turn it to you.
Thank you Dan.
And good afternoon, everyone. Thank you for joining the call today.
I'll start with a review of our full year 2021 financing results.
Followed by fourth quarter 2021.
And then our fiscal year 2022 guidance.
I am happy to report we.
Exceptional results ending a breakthrough year.
As Bob mentioned.
We had a record year of top line revenue adjusted EBITDA and.
<unk> continued our intensive edition of new client wins.
Combination of digital source, each ship pre eminent nuclear entity and strategic Fintech and health Tech planning words has more than doubled our in year bookings last.
Last year.
We remain very confident about the trajectory of the business and believe we will deliver strong results for our shareholders.
Since our shift to the digital first marketplace in fiscal year 2016.
Clients. We have won now makes up more than $230 million were 52% of our revenues.
And that's a five year compounded annual growth rate of 84%.
Our global operational excellence and client first focus has yielded a 40% annual revenue growth rate over fiscal year 2020 for these clients alone.
After 2008, new clients won in fiscal year 2021 'twenty two launched during the year contributing nearly $30 million in revenue in the year.
Average clients one in the current year typically contribute approximately two to three times in the subsequent year.
In my discussion of financial results references to revenue.
Isos basis, while adjusted net income adjusted EBITDA and same forma adjusted earnings per share.
Non-GAAP basis.
Reconciliations to non-GAAP measures are included in the tables attached <unk> earnings press release.
Full year revenue increased nine 5%.
$450.0 million compared to prior year.
On a non-GAAP basis, adjusted net income was 23.6 million versus $17 million last year.
Pro forma adjusted fully diluted earnings per share was $29.0, and his two year 2021 versus 90 in fiscal year 2020.
Full year 2021, adjusted EBITDA increased to $68.0 million or 14, 9% of revenue compared to $57.0 million or 13, 6% of revenue in the prior year.
This was primarily driven by continued growth in new economy, and blue chip digitally transforming bonds.
Expansion outside of the U S E T SEC margins inside of the U S and some increase in operating leverage.
For fiscal year, 2021, or top three legacy client concentration decreased to 34, 2% from 43, 7% of overall revenue last year exiting the year at 28, 2%.
In the fourth quarter by vertical.
Market retail and e-commerce increased to 19, 6% of annual revenue compared to 16, 8% in the prior year.
Additionally, Fintech and health Tech, where we made strategic investments in early fiscal year 'twenty increased significantly to 19, 3% combined in the fourth quarter, which is a sequential quarter increase from 14, 5% and an increase from nine eight.
<unk> in the fourth quarter of fiscal year 'twenty.
Conversely, telecommunications decreased to 29, 3% of annual revenue exiting the year at 24, 9% in the fourth quarter.
Total capital expenditures, including cash and noncash amounts were $35.0 million or five 1% of revenue for the full year 2021 versus $25.0 million or four 2% of revenue last year.
The increase in total capital expenditures is primarily attributable to an additional four new sites in Jamaica, Nicaragua, and the Philippines as well as expansions of existing sites for a total of over 3300 workstations added during the year.
Net cash generated from operations was $34.0 million.
Year, ending June 30 of 2021 compared to $58.0 million in this in fiscal year 2020, excluding changes in working capital cash from operations increased compared to the prior year.
Dsos, which are currently below the industry average.
56 days for the fourth quarter up seven days from the same period last year and five days sequentially.
As previously communicated the increase in DSO was related to one of our larger clients reverting back to standard payment terms.
Non-GAAP free cash flow decreased to $6.0 million from $51.0 million in the prior year.
Decrease in free cash flow was primarily driven by an increase in cash capital expenditures of $20.0 million.
Including new capacity with social distancing requirements. In addition to working capital changes previously mentioned.
Yes.
The company measure capacity utilization, including both agents working at home and on site against total workstations.
Capacity utilization remained strong at 77% in June 2021 versus 84% in June 2020, while launching new sites in the second half of the year.
On a normalized basis, excluding the bulk of the one fair value adjustment our tax rate was 13% in 2021 versus 18% in the quality yield there.
The reduction in the normalized rate was primarily the result of a U S employment tax credit, which began to benefit the company this year.
We expect our fiscal year 'twenty to normalized tax rates to continue to decrease.
We implement related tax planning strategies, which will allow us to begin fully utilizing our U S net operating losses from prior years.
We have a strong balance sheet and ended the fiscal year with $65.0 million in cash total borrowings of $33.0 million and lease liabilities was $84 million.
Sure the cash of $30.0 million total borrowings of $34.0 million.
Lease liabilities of $81.0 million as of the prior year.
Turning to the fourth quarter revenue of $117.0 million increased by seven 9% compared to the year ago quarter.
On a non-GAAP basis, adjusted net income increased to $13.0 million compared to $4.0 million in the prior year quarter.
Non-GAAP pro forma fully diluted adjusted earnings per share increased to 31.
Compared to 16 in the prior year quarter.
Adjusted EBITDA increased to $24.0 million or 14, 6% of revenue compared to $22.0 million or 13, 8% of revenue for the same period last year.
Turning now to fiscal year 'twenty two guidance.
Given our strong performance in fiscal year, 'twenty, one and the continuing strength of our sales pipeline and revenue backlog.
We expect fiscal year 2000, <unk> revenue growth to be in the range of 70% to 9% over fiscal year 'twenty one.
Revenue growth is expected to accelerate beginning in the second quarter.
Adjusted EBITDA is expected to be in the range of 69 million to $71 million.
And Capex is expected to be between 30 million and $35 million, we expect a return to normalized capex spending levels when social distancing restrictions subside.
In closing.
Our growth momentum continues to be strong and we are well positioned for profitable results.
Our base client business continues to have confidence in our ability to deliver consistent predictable results and our new prospective clients look to IDEXX to provide innovative solutions to enhance their brand.
We continue to execute on numerous fronts and see tangible results from our unique <unk> value proposition.
Hospital. This will remain a growth and transformational leader in the industry and look forward to exceptional results. This year.
With that Bob and I will now take questions. Operator, please open the lines.
Thank you.
Ladies and gentlemen, if you would like to ask a question.
One can get Touchtone telephone again back to platforms.
One.
One on the plane.
Okay.
Our first question comes from.
Toby Sommer with Securities. Your line is open.
Hey, good afternoon, everyone Jos.
Jasper Bibb on for Tobey. My first question was just on the capacity you've been adding a nearshore recently, what's been the experience ramping those sites and is there going to be kind of any associated margin drag in the first half of next year as you start bringing sites online.
Sure Jasper. So this is Bob thanks for joining us and great to hear your voice again.
So.
Well we've been growing.
<unk> yeah.
With what we would you know what we're doing what we did late last year.
This year in the first half of this coming year really in 19, 2020 one.
And we saw no margin degradation as we brought the capacity online.
So we feel really good about that that this business is you saw that we were going into Honduras within enabling clients at about 400 agents work.
Our business so.
So we feel very good about our trajectory to filling those sites, which is the key or getting them.
Full and the social distance world.
We feel very good about that around our business now.
When I think about the first half with the Delta barrier and things like that.
Theres always going to be risk on some of the hiring and clients.
Clients quite often sometimes want to travel down to Jamaica.
Program get started or training get started and with the various and some of the travel restrictions we've seen just a little deal slide.
So kind of the path to revenue is just shifting a little bit, but I think overall, we feel very good that what we've done in 19.2021.
Play out for us in 'twenty two.
Yeah.
Alright that makes sense and then could you just comment on kind of the big step down in large account concentration during the fourth quarter and what was driving that decline just seem like a fairly significant sequential growth.
Yes sure sure. So I guess first let me just start with the strengths.
Outside of those three legacy clients is just off the charts, both with what we have closed in the past that's growing and then big wins in the year that put substantial revenue.
Into into our business now.
I think we have what I'll describe as.
Two what I'll say, one time events that impacted us in let's say the second half of FY.
2021.
One of our largest clients emerged from bankruptcy with a new CEO.
That was focused on driving costs out of the business and kind of reinventing themselves and then the other one was once again one of our top clients. These both in the telco world.
That was doing a spin out divestiture of their video and streaming business through P firm.
And.
When those two events happened enterprise volumes basically went down fairly sizable much more than they thought much more than we had thought.
And so.
And interestingly to note is our market share with those clients as the revenue has gone down it has actually expanded.
So the good news is as I see it is that.
That curve has flattened out because there was kind of onetime events have taken place now it's just kind of the you know kind of what has been the historical trajectory of.
Yeah.
The telco clients.
And.
I guess more importantly.
As we've been able to hit these numbers too absolutely fantastic numbers for the year for Q3 Q4 in spite of that which I just look at and say that's really the strength of one.
What we've built here and feel proud about that.
Yeah got it last question for me just following up on your prepared remarks is there any way to better quantify how much these kind of remote working.
Costs have been weighing on your operating margins.
And what that kind of Delta is between where you are now and what kind of the earnings potential might be in a normalized environment.
Sure. So how I would think about this.
There are obviously operating costs that were incurred.
Centers are.
Half.
At 50%.
Usable capacity from prior.
Now we as a business are running at about 37%, 38%, 39% work at home. So we're able to complement.
Some of that loss capacity significantly.
With work at home.
But the Covid testing, the what I'll call the agent shrinkage.
From.
From Covid and now the delta various impacts impacts your numbers. So there is a lot on the on the cost side that are significantly higher than we thought.
Outlines several of those on the other side there are some advantages.
Two biggest.
Two biggest.
P&L gains I guess, one is our <unk>.
Not a lot of our people are traveling these days so that's down significantly and then our U S business. The work at home model in the U S business has really made a big impact into kind of the margins and I think we're gonna stay work at home for a long time in the U S. So I think that's going to be kind of a.
Go forward go forward gain I think when you put all of that when you put all of those factors in.
Jasper I think we have.
Clear upside as we look.
Into whenever kind of whenever we get out of this and I think it's.
And when that is I don't know none of the snow, but we think theres a lot of upside in this business.
As we do that upside in margin and clearly upside on revenue is what we are building two is where we have another $200 million of.
Once we get past or to a pre pandemic environment operating environment. We have a lot of revenue that's out there without with limited capex and so I think there'll be a great flow through there. So so that's kind of how I think about this.
Got it thanks for taking the questions.
Thank you. Our next question comes from Dave Koning of Baird. Your line is open.
Yeah, Hey, guys great job on the air.
Thanks, David.
Yeah, and I guess my first question.
Sounds like Youre going to bring on 3200 workstations in the first half of next year I think that adds something like 15% to the base.
Is the reason revenue growth only it's only going to be 7% to 9%, maybe theres a little conservatism in there, but also just the geo mix is the yield a little lower is.
Is that the right way to think about it.
Sure so.
So.
Capacity is coming online and it will we will be phasing in revenue of that.
So.
I think.
If you do the math.
The ability to to kind of.
Grow that.
I remember your capacity is about half that youre usable capacity is about half that in there.
Or could home complement.
In the U S. A work at home is 80% in these other markets, it's kind of in the thirties.
Call. It 30, 35, 40% work at home and so you put those.
Those two elements in there and that's kind of where we're getting into our our topline growth.
Just say good stay for one minute the business, we built and as you know we built this business and it has been performing consistently at a 10% revenue growth.
<unk>.
Now we are.
15% market right that you have.
All right at that 15% margin threshold and we've continually been improving.
So I think structurally this business is built for that and we'll continue that out over the next two or three years.
When we look though just with the delta area with potential impact in the supply chain and the supply chain, perhaps of people supply chain of computers things like that and then we're investing back now that now that will really accelerated we're investing back into the business, we're putting several million dollars in the sales and marketing side.
The business to continue to drive future growth and then we're putting I think we're putting up.
Several million dollars into investing in it systems, let's say run our business more efficiently and effectively.
All of those things together.
We kind of look and say hey, let's be.
Let's be cautiously.
Let's be cautious about our expectations for the year, hence the 7% to 9% in the EBITDA of 69 to 71 range.
I'll remind you Dave last year, we did the exact same thing.
And we started the year at 59 to 61 and the business kept building momentum and those big potential impacting we were able to.
Avoid those and operate our business really sound really no shutdowns limited shrinkage and so we were able to attain fantastic numbers for the year. Our goal is to do that in 'twenty, two but it's each day, it keeps getting harder and harder with the Delta area.
Yeah got you Yeah, I mean, you had a great year relative to expectations for sure.
And then maybe another thing I mean, I thought that such an interesting data point that youre now going to have capacity for about $200 million of revenue yeah without extending the footprint.
It always seems to us like if all you have to do is add people and you've got all the capacity in place you can often get 25%, 30% incremental margins.
Is that about the right math and does that imply over the next few years.
This is the Formula you should have really nice margin trajectories, though.
Your thesis is spun on it really to states and that's how we're thinking of the business and so.
Again, when that happens who knows.
But.
But look even without this business has pointed up into the right. Both from a revenue and margin standpoint, and we're hopeful and as even Dan highlighted and you know kind of history's thesis of IDEXX.
He's he sees that.
Coming in really coming in from the outside and.
That's a really exciting potential.
Yeah, Thanks, and maybe just one quick last one DNA kind of ramp through the year and I know, that's just a function of capex growing in capacity coming on it was about $12.0 million in Q4, how does that ramp through 2022, I mean can we leave it around seven five to eight all year and how should we think about that.
Hey, Carl I'll pass that over to you.
Yes. Thanks.
<unk>.
Dave I can follow up with you on that point, but as we're as we're growing remember the DNA has two components one is with the.
The PP&E, but you also have the under <unk> you have the lease part of the differentiation that goes through there.
So that's something I can follow up with you I don't have an answer for you right now on this call.
Gotcha, Alright, thanks, guys, great great year.
Appreciate it thanks for joining.
Thank you again, ladies and gentlemen, I'd like to ask a question. Please press Star then.
Hello.
Our next question comes from Ashwin <unk> Citi. Your line is open.
Yeah.
Okay.
Thank you.
Bob.
Good question.
First question is a clarification I think.
When I think of the.
I think you mentioned.
The percentage of people that are working from home.
If if all of a sudden tomatoe everything returned to normal and they all could come back in.
The question is what would you have capacity.
Dan.
Right.
Because I think you put a couple of different numbers out there but.
I'm not necessarily triangulating to be additional capacity for $200 million.
Sure so.
So our capacity.
Today.
Let's let's look at.
What we believe is going to happen post.
When we returned to normalcy okay.
A pre pre pandemic environment when that occurs.
We're going to still keep significant.
Work at home in play so the light switch.
I won't go on and then everything.
Was fully back into centers.
<unk> been with our clients, we've talk with our clients in every one of our clients is committed to keeping some element of work at home with us as part of their portfolio. So so.
Today is Carl touched on it he said our current GAAP.
<unk> utilization is at 70 for the year is at 70, 777%.
So if all you did would just take.
<unk> moved everything from work at home and you'd be able to 77% utilization.
However, our clients in the U S. We're going to stay at least 50%, maybe even up to 75% work at home going forward.
Number.
And in the I'll call the emerging market regions near shore, Philippines. Our belief is it's probably going to be in that 15% range, maybe as much as 20%.
So when you look.
Cut that our U R utilization when we can use all of those centers is going to be at that point significantly lower it's going to be.
Because we have this work at home component. So you do that math, it's probably going to be and maybe the.
55% to 60% effective utilization of the in center seats, which gives an enormous.
Flow upside of being able to sell into seats to sell into.
And then don't forget.
Ashwin that we have.
Incremental 3000.3200 seats, that's that's coming onboard.
Kind of as we speak right now.
That then will each have a trajectory for revenue growth in those that youll see.
Full and certainly in the first and the first half of next year, if not by Q4 of this current year put all that in we think we have a couple of hundred million dollars that's sitting in.
In this in this footprint.
Right.
Got it so you're essentially saying that.
Even in a normal situation work from home is a permanent option that many correct miners want and then <unk> that's correct.
Got it.
Yeah Okay.
And it gives what why because it gives you the amazing.
Flex capacity.
You can just ramp up Pcs youre, not building brick and mortar time to time to ramp and it gives you a brazil built in resiliency for BCP et cetera, where 18 months ago, everybody got flat caught flatfooted because they had very very little work at home if any of their enterprise.
Alright, great.
And I also have a question about sort of the cadence of revenue through the course of 'twenty two and you kind of mentioned it continue onward is van you expect to see that pick up so I guess part of it is easier comps.
From a visibility perspective are there any any specific things youre seeing like particular client ramps and things like that that would affect that.
So we have.
Many of the new logos that we won.
Last year, and especially several that were won in the second half of the year late year and then in May of <unk>.
Started launching in Q1 are very very high volume ramps with clients that are just experiencing explosive growth.
So.
When I look at the business that I think we have structurally built ashwin it is a.
Q2 for US is always a big quarter because of all the retail work commerce work seasonality for the holiday season, Black Friday et cetera, but I believe that what we've done and what we did last year. If we didn't if we didn't have those two one events is that.
The second half of the year was as strong as our Q2 and this year, we would've been there.
<unk> not been for kind of the two events that I talked about structurally our business is built like that the pipeline that we have.
So I think youre going to see a little bit of a <unk>.
Little bit of an inflection point.
On our call it our.
Our.
What our historical quarterly flows worldwide.
What that might look like.
But.
If I can squeeze a third one in.
And I look at your solutions that connect to have extended plan next year.
Does any any of them, how higher or lower visibility.
Then than the others.
And even though I'm asking the question is because.
<unk> for Q4.
You provided in your.
Outlook.
Now obviously.
A couple of million dollars.
Delta between expectation and what you delivered.
So.
Hey.
And my understanding is that primarily came from the traditional outsourcing business.
Are you seeing if there are any.
Arent any a different visibility.
As you look across your solution.
Sure.
That's a fantastic question.
I would say.
In the connect part of the business and you're right some of the GAAP.
Large portion of that was attributed to these two kind of.
One off onetime events.
I think we have.
Great visibility to the revenue there.
Short of those two events, which again are we.
We're not we're not even perceived by the clients that we're dealing with at that time that these inflection points.
Would occur so we have I think repeatable.
Business vary.
Month over month quarter over quarter with the <unk>.
Good.
Track record of <unk>.
Where the revenues are going.
And it said.
Our revenue retention.
With our clients is off the charts right.
We continue to we don't lose clients here and as said our revenue retention is 99, 5% from last year.
It's unheard of in this industry, so I feel.
<unk>.
That engine there is very very predictable on revenue.
Our digital marketing business.
Is I'd say, a little less predictable.
Why because you have.
You know you have its marketing spend its AD campaigns digital marketing that's out there that.
It can be.
Can be spiky.
Can be spiky based on promotions that certain clients have.
For the quarter.
And so there is less predictability there that's about.
15% of our business, but it's a high margin business, our highest margin business. So when I think of those two businesses I feel good about our overall predictability because.
You have the largest part of your business is very predictable.
Got it thank.
Thank you Bob.
Yeah.
Thank you I'm showing no further questions at this time ill turn the call back over to Bob to chat whether Omar.
Valerie Thank you very much and again for everybody I appreciate everyone.
Staying on the call and your attendance on the call and we really appreciate your continued confidence in IMAX and we are looking forward to a fantastic FY 'twenty two so with that thank you so much and everybody have a good day.
Okay.
Thank you ladies and gentlemen that concludes today's conference. Thank you all participating you may now disconnect have a great day.
Hey.
[music].
[music].
[music].
Welcome to the other fourth quarter and fiscal year 2021 earnings conference call. At this time, all participants are in listen only mode.
After the Speakers' presentation there'll be a question and answer that question at that time. Please press Star then one you touched on.
I don't mind say topical is be able to afford it.
I would now like some of the Thompson.
It really doesn't with the blue shirt group.
Good afternoon, and thank you for joining us today before we begin I want to remind you that the 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 it could.
Cause actual results to differ materially from those expected and described today.
Detailed description of our risk factors. Please review our annual report on form 20-F filed with the Securities and Exchange Commission with that I'll turn it over to Bob decades, Yeah.
Thanks, Bradley and good afternoon, everyone I'm incredibly proud and excited to share with you our fiscal 2021 results and the outlook for the future.
With our 16th consecutive quarter of organic revenue growth I am pleased to announce that we achieved a record year of revenue EBITDA and new client wins in both quantity and in Europe bookings.
And we did this in the face of a once in a century global pandemic.
COVID-19 forced companies to accelerate their digital transformation to thrive or survive.
As a result, they look aggressively to keep partners to support their digital first businesses.
I am proud to say that IMAX is one on a big stage with digital first blue chip businesses, leading new economy companies as well as hyper growth iconic Fintech and health Tech.
We had a record number of new logo wins that more than doubled our previous high for in year revenue.
And once again, we had 100% retention within our top 20 clients, which accounts for more than 90% of our revenues.
Overall, we retained 99, 5% of our clients on a revenue basis comparing from FY 'twenty.
IDEXX is winning as a result of the many key attributes we have built over the last six years.
At the forefront.
Tech led solutions in our wave <unk> platform that drives innovation and performance.
Really important is the culture that we have built.
Our speed and flexibility are unique and best client branding and the strength of our leadership.
This as you have heard me say multiple times as PPO two point, though.
It is differentiated it is disruptive.
It's very difficult to replicate.
Our results are the proof points.
As we walk through our results today.
You will see our transformation as a company is clearly working.
And while I'm extremely proud of our FY 'twenty one results I believe that the best is yet to come.
Before we dive into the most recent business results I want to take a moment to share my look back at what we've accomplished in my own personal scorecard that I hold myself accountable too.
I have now completed my six year at the helm of buybacks.
<unk> thousand 2016, we started the transformation from a traditional labor arbitrage focused business to a digital focus business. The results of this initiative are nothing short of spectacular.
Revenue from clients one since 2016 are now approximately $230 million.
40% from prior year and at a five year CAGR of 84%.
This is made up of over 60 new clients.
Approximately 75% of this business is integrated Omnichannel and digital while the remaining 25% are with great brands that are investing heavily in and placing a priority on delivering great customer experiences.
As the momentum continues to build the result is great diversification across our client base and strategic protocols, but most importantly, with a differentiated customer value proposition leading the way.
Our top three clients represented nearly 70% of our business in FY 2015.
12 months ago at our IPO, those three legacy clients or at 44%.
We exited Q4 of this year, where these clients are now down to 28% and trending lower.
Again, this is driven primarily by the explosive growth of our high margin digital first business choosing IMAX as it CX brand partner.
The demand for our digital first services led to an increase in over three.
<unk> 3300, new seats.
34% increase to our nearshore and offshore locations.
<unk> are our highest margin regions.
And we established a strong backlog of an additional 3200 seats that will be launched in the first half of fiscal year 2022.
In addition to our new domestic location in Pittsburgh, We just announced our entry into the Honduras market with initial plans to hire more than 400 people.
Our goal is to become the leader in Honduras, just as we did in Jamaica, and Nicaragua, while growing our Honduran workforce to over 2000 employees within the next two years.
And two and a half short years, we will have seen our nearshore and offshore capacity grow by 125%, while the domestic capacity has been reduced by 25%.
By December 77% of our seats will reside in our high margin nearshore and offshore locations.
This has helped position IMAX as the number one provider of BPL and CX services across Nicaragua, Jamaica provincial Philippines and Pakistan.
What matters. Most here is that our returns on this spend since I have joined have been stellar.
We track our returns on invested capital.
And new seat capacity to meet client demand in our nearshore and offshore centers typically have a payback of less.
Less than two years.
So while we have record revenues up nearly 10% and record EBITDA of nearly 20%.
Which we're extremely proud of there is something even more powerful forming underneath.
Let me review my perspective on some industry trends that are accelerating the need for our differentiated solutions.
Competition for wallet share has never been higher.
Everyday products has increased exponentially and consumers are switching brands at unprecedented rates.
Consumers flocked to new shopping strategies brand loyalty has been tested like never before.
Beneficiaries of this shift our trusted brands that provide their customers with high quality customer obsessed support and innovative solutions.
As volumes of interactions increase we see a growing need for superior differentiating service and support.
Speed and precision.
Of artificial intelligence technologies and analytics. In addition to human insight has become the focal point for shaping the customer journey and provides the intelligence needed for the customer experience of the future.
The current shift is galvanizing companies to rethink the traditional customer delivery delivery platforms and organize their business around a broader multichannel approach.
The desire for convenience and simplicity.
With each consumer connection is driving the need for automation that will quickly solve customer inquiries.
And the need for expertly trained contact center personnel.
AI automation is the key to supporting both the non voice channel support and the interaction with frontline personnel.
Whether we are supporting a digitally transforming blue chip.
Our digital first company the option to support consumers when and how they desire is paramount to the success of the overall service strategy.
Companies are turning to IDEXX because of our acute focus on the customer experience.
Our ability to enhance our client brands and our ability to deploy technology and AI across the customer and agent lifecycle.
Now to our greatest asset.
People.
To help protect their health and safety, we continue to put our employees first in all the markets. We operate as it relates to COVID-19.
We invested close to $13 million in our people to keep them and our centers safe and COVID-19 free.
This is one of the many costs that had been added to our current P&L today.
In a COVID-19 environment.
So the attractive margins and cash flows we see today.
Only be up into the right in the future.
These investments and our people are paying off.
Our team has been performing amazingly.
We have passed all of our health audits.
And we have had no site shutdowns.
Today, we are proud to say that we have over 70% of our people vaccinated in the Philippines.
And over 95% in Pakistan.
As a comparison.
Current vaccination percentage in the Philippines is 14%.
Without question, we are the gold standard in these markets for our vigilance against this terrible virus.
This is the type of track record that truly delights our clients.
And build loyalty with our employees.
Additionally, we recently conducted our I 40 employee satisfaction survey and I'm proud to say that we have a best in class employee net promoter score of 71.
Our great employee base are providing an astounding 40 plus percent.
Of referrals for our new hires.
In addition through our ongoing investment in our ESG programs, we continue to support and enrich the lives of our employees and their families.
In the past year, we have provided essential services in areas, who have been most challenged with the ongoing spread of COVID-19, we are reshaping.
<unk> social dynamics in many countries we operate in.
We provide equal opportunities and an exciting career for women and many minorities in parts of the world where that simply does not exist coming.
Coming to work every day I am beyond excited to see the share talent.
Energy and customer first mindset that our culture breeds and our employees swipe apart.
Now, let me touch a minute on work at home.
Work at home capabilities have been a great vector of resiliency to enable us to offset the lost capacity.
Keep our pipeline agent candidate is strong in all markets.
However, despite our record margins.
Some of our contact centers are currently at 50% capacity with Covid restrictions in place showing how much earning potential is left in front of us with our existing footprint alone.
We have built the operational platform now that post COVID-19 has the ability to scale to approximately $650 million in revenue in todays footprint complemented with work at home.
This will position us for a very meaningful inflection of free cash flow.
In closing IBEX has become a partner of choice for some of the world's most well known brands across our strategic protocols, which continues to be an important driver in key strategic element of our accelerated growth.
These strong client partnerships industry, leading six models and innovative technology continued to generate a strong recurring cash flow with high earnings visibility.
We are extremely excited about the opportunities in front of us.
Now before I turn the call over to Carl for the financial update.
To introduce Dan <unk>, EVP of Investor Relations and corporate development.
This was a strategic hire by me and the board not just in the area of significantly improving our investor relations function.
But across corporate strategy and capital allocations.
Dan joins us from Columbia, Threadneedle, where he was a portfolio manager and shared the responsibility for the firm's IBEX investment is one of our largest shareholders.
<unk> believes so strongly in our business and is investment that we were able to convince him to join us.
I had the opportunity to establish a close working relationship with Dan over the past 14 months.
Quickly come to respect as return oriented mindset and passion. We are excited for you all to meet him.
Dan.
Would love for you to say a few words.
Thank you Bob its great to be here.
Been passionate about a more concentrated form of investing throughout my career, but joining IBEX takes us to a whole different level and truly a reflection of this going all in with what I believe is a rare and exceptional opportunity.
This business has done nothing but impressed me since my early work and pre IPO meetings.
Thought I could use this brief time to walk you through what excited me about IMAX.
The following is my personal view and not a reflection of my former employer.
I try to understand the business from every angle the way that a long term business owner would speaking of customers competitors and employees trying to understand how it delights its customers' competes with other businesses why it's grown in the past what has to happen for it to thrive in the future who are the people running it.
How are they wired.
What I found was a strong franchise punching high above its weight.
I learned about expanding customer value propositions using technology at its core leaving the company to now partner with some of the fastest growing and most tech savvy companies on the planet.
And then incredibly fragmented industry.
I saw an unspoken obsession on operations.
Most importantly, I found the Tightknit group of managers that have a real hop in their step every day.
It's not often you get the wait patiently to make a high conviction that like that after our business has already been stress tested and still have an attractive opportunity remaining.
Typically the great opportunities are long gone by then.
But COVID-19 has offered me exactly that.
The business not only continues to remain incredibly resilient throughout the pandemic given the mission critical nature of its offerings. Its actually put up record results with 16 straight quarters of revenue growth and widened its mode. During this time.
As Bob and Carl will share with you the business is forced to be unusually capital an operationally intensive during this period due to COVID-19 requirement.
Without these costs I believe the profitability and cash flow profile would be significantly different than what it is today and this is on top of double digit growth and margins last year.
As an investor this type of under earning and potential inflection always excited me.
Now the best part.
The world is truly our oyster as far as how we allocate capital from here.
It's rare enough to find a high quality business with this type of growth profile, providing a sea of high return reinvestment opportunities to widen its mode yet.
Yet at the same time offering and ability to sit back opportunistically with a growing and large net cash balance and a stock that's trading at such a wide discount to its intrinsic value.
This combination is truly hard to find and what convinced me to go all in.
With that Karl I'll turn it to you.
Thank you Dan.
Good afternoon, everyone. Thank you for joining the call today.
All statements or the view of our full year 2021 financing results.
Followed by fourth quarter 2021.
And then our fiscal year 'twenty 'twenty two guidance.
I am happy to report, we had exceptional results ending a breakthrough year.
As Bob mentioned.
We had a record year of top line revenue.
The EBITDA.
<unk> continued our intensive addition, new client wins.
Combination of digital source, new chip preeminent new quantity and so.
He just Fintech health Tech, claiming words.
More than doubled our in Europe bookings either last year.
We remain very confident about the trajectory of the business and believe we will deliver strong results for our shareholders.
Since our shift to the digital first marketplace in fiscal year 2016.
Clients. We have won now makes up more than $230 million, whereas 52% of our revenues net income.
Five year compounded annual growth rate of 84%.
Our global operational excellence and client first focus has yielded a 40% annual revenue growth rate over fiscal year 2020 for these clients alone.
All of the 23, new clients won in fiscal year 2021 'twenty two launched during the year contributing nearly $30 million in revenue in the year and on average clients. One in the current year typically contribute approximately two to three times in the subsequent year.
In my discussion of financial results references to revenue.
Yes basis, while adjusted net income adjusted EBITDA and same formal adjusted earnings per share.
Non-GAAP basis.
Reconciliations to non-GAAP measures are included in the tables attached to your earnings press release.
Full year revenue increased nine 5%.
$450.0 million compared to prior year.
On a non-GAAP basis, adjusted net income was 23.6 million versus $17 million last year.
Pro forma adjusted fully diluted earnings per share was $29.0, and his full year 2021 versus <unk> <unk> in fiscal year 2020.
Full year 2021 adjusted EBITDA.
Increased to $68.0 million or 14, 9% of revenue compared to $57.0 million. We're at 13, 6% of revenue in the prior year.
This was primarily driven by continued growth in new autonomy and blue chip digitally transforming bonds.
Expansion outside of the U S E T SEC margins inside of Europe, and some increase in operating leverage.
For fiscal year, 2021, or top three legacy client concentration decreased to 34, 2% from 43, 7% of overall revenue last year exiting the year at 28, 2% in the fourth quarter by vertical.
Market retail and e-commerce increased to 19, 6% of annual revenue compared to 16, 8% in the prior year.
Additionally, Fintech and health Tech, where we made strategic investments in early fiscal year 'twenty increased significantly to 19, 3% combined in the fourth quarter, which is a sequential quarter increase from 14, 5% and an increase of nine eight.
In the fourth quarter of fiscal year 'twenty.
Conversely, telecommunications decreased to 29, 3% of annual revenue exiting the year at 24, 9% in the fourth quarter.
Total capital expenditures, including cash and noncash amounts were $35.0 million or five 1% of revenue for the full year 2021 versus $16 nine mold or four 2% of revenue last year.
The increase in total capital expenditures is primarily attributable to the addition of four new sites in Jamaica, Nicaragua, and the Philippines as well as expansions of existing sites for a total of over 3300 workstations added during the year.
Net cash generated from operations was $34.0 million.
Year, ending June 32021, compared to $58.0 million in fiscal year 2020.
Excluding changes in working capital cash from operations increased compared to the prior year.
Dsos, which are currently below the industry average was 56 days for the fourth quarter up seven days from the same period last year and five days sequentially.
As previously communicated.
The increase in DSO was related to one of our larger clients reverting back to standard payment terms.
Non-GAAP free cash flow decreased to $6.0 million from $51.0 million in the prior year.
Decrease in free cash flow was primarily driven by an increase in cash capital expenditures was $20.0 million, including new capacity with social distancing requirements.
Dishing to working capital changes previously mentioned.
Okay.
The company measures capacity utilization, including both agents working at home and won't fight against total workstations.
Capacity utilization remained strong at 77% in June 2021 versus 84% in June 2020, while launching new sites in the second half of the year.
On a normalized basis, excluding the fall of the week.
One fair value adjustment our tax rate was 13% in 2021 voice is 18% and the quality yield.
Watson in the normalized rate was primarily the result of a U S employment tax policy.
Which began to benefit the company this year.
We expect our fiscal year 'twenty, two normalized tax rate to continue to decrease as we implement related tax planning strategies, which will allow us to begin fully utilizing our U S. Net operating losses from prior years.
We have a strong balance sheet and ended the fiscal year with $65.0 million in cash total borrowings of $33.0 million and lease liabilities was 84 million compared to cash of $30.0 million total borrowings of $34.0 million and lease liabilities of <unk>.
$11.0 million as of the prior year.
Turning to the fourth quarter revenue of $117.0 million increased by seven 9% compared to the year ago quarter.
On a non-GAAP basis, adjusted net income increased to $13.0 million compared to $4.0 million in the prior year quarter.
Non-GAAP pro forma fully diluted adjusted earnings per share increased to 31.
Compared to <unk> 16 in the prior year quarter.
Adjusted EBITDA increased to $24.0 million or 14, 6% of revenue compared to $22.0 million or 13, 8% of revenue for the same period last year.
Turning now to fiscal year 2000 <unk> guidance.
Given our strong performance in fiscal year, 'twenty, one and the continuing strength of our sales pipeline and revenue backlog.
We expect fiscal year 2000, <unk> revenue growth to be in the range of 70% to 90% over fiscal year 'twenty one.
Revenue growth is expected to accelerate beginning in the second quarter.
Adjusted EBITDA is expected to be in the range of 69 million to $71 million.
And Capex is expected to be between 30 million and $35 million, we expect to return to normalized capex spending levels, when social distancing restrictions subside.
In closing.
Our growth momentum continues to be strong and we are well positioned for profitable results.
Our base client business continues to have confidence in our ability to deliver consistent predictable results and our new prospective clients look to IDEXX to provide innovative solutions to enhance their brand.
We continue to execute on numerous fronts empty tangible results from our unique <unk> value proposition.
Comparable this will remain a growth and change formation a leader in the industry and look forward to exceptional results. This year.
With that Bob and I will now take questions. Operator, please open the line.
Thank you.
Ladies and gentlemen, if you would like to ask a question.
One can get Touchtone telephone again.
But I didn't want.
One on the plane.
Yeah.
Okay.
Our first question comes from.
Toby Sommer with Securities. Your line is open.
Hey, good afternoon, everyone Jos.
Jasper Bibb on for Tobey, but my first question was just on the capacity you've been adding a nearshore recently, what's been the experience ramping those sites and is there going to be kind of any associated margin drag in the first half of next year as you start bringing sites online.
Sure Jasper. So this is Bob thanks for joining us and great to hear your voice again.
So.
We've been growing.
A portion at least with what we would you know what.
We're doing what we did late last year.
This year in the <unk>.
First half of this coming year really in 19, 2020 one.
We saw no margin degradation as we brought the capacity online.
So we feel really good about that that this business is you saw that we were going into hung doors within enabling clients at about 400 agents work.
Our business. So we feel very good about our trajectory to filling those sites, which is the key or getting them.
Full and the social distance world.
We feel very good about that around our business now.
When I think about.
The first half with the Delta variant and things like that.
There is always going to be risk on some of the hiring and clients.
Clients quite often sometimes want to travel down to Jamaica.
Program gets started or training get started and with the various and some of the travel restrictions we've seen just a little deal slide.
So kind of the path to revenue is just shifting a little bit, but I think overall, we feel very good that what we've done in 19.2021.
Play out for us in 'twenty two.
Alright that makes sense and then could you just comment on kind of the big step down in large account concentration during the fourth quarter and what was driving that decline just seem like a fairly significant.
That again sequential growth.
Yes sure sure. So I guess first let me just start with the strength outside.
Outside of those three legacy clients is just off the charts, both with what we've closed in the past that's growing and then big wins in the year that put substantial revenue.
Into into our business now.
I think we have what I'll describe as.
Two what I'll say, one time events that impacted us.
Let's see the second half of FY.
FY 'twenty one.
One of our largest clients emerged from bankruptcy with a new CEO.
That was focused on driving cost out of the business and kind of reinventing themselves and then the other one was once again one of our top clients. These both in the telco world.
That was doing a spin out divestiture of their video and streaming business through <unk>.
And.
When those two events happened enterprise volumes basically went down fairly sizable much more than they thought much more than we had thought and.
So.
And interestingly to note is our market share with those clients as the revenue has gone down it has actually expanded.
So the good news is as I see it as well.
That curve has flattened out because there was kind of one time events have taken place now it's just kind of the.
Kind of what has been the historical trajectory.
Telco clients.
And.
I guess more importantly.
As we've been able to hit these numbers too absolutely fantastic numbers for the year for Q3 Q4 in spite of that which I just look at and say that's really the strength of what.
What we've built here and feel proud about that.
Yeah got it last question for me just following up on your prepared remarks is there any way to better quantify how much these kind of remote working.
Costs have been weighing on your operating margin.
And what that kind of Delta is between where you are now and what kind of the earnings potential might be in a normalized environment.
Sure. So how I would think about this.
There are obviously operating costs that were incurred.
Centers are.
Perhaps.
At 50%.
Usable capacity from prior.
Now we as a business are running at about 37%, 38%, 39% work at home. So we're able to complement.
Some of that loss capacity significant of that with with work at home.
But the Covid testing.
What I'll call the agent shrinkage.
From.
From Covid, then now the delta various impacts impacts your numbers. So there is a lot on the on the cost side that are significantly higher than we thought.
Outlines several of those on the other side there are some advantages.
Two biggest.
Two biggest.
P&L gains I guess, one is our PLE.
Not a lot of our people are traveling these days so that's down significantly and then our U S business. The work at home model in the U S business has really made a big impact into kind of the margins and I think we're gonna stay work at home for a long time in the U S. So I think that's going to be kind of a.
Go forward go forward gain I think when you put all of that when you put all of those factors in.
Jasper I think we have.
Clear upside as we look.
Into whenever.
Whenever we get out of this and I think it's.
And when that is I don't know.
The snow, but we think theres a lot of upside.
This business.
As we do that upside in margin and clearly upside on revenue is what we are building two was really another $200 million of.
Once we get past or to a pre pandemic environment operating environment. We have a lot of revenue that's out there without with limited capex and so I think there'll be a great flow through there. So so that's kind of how I think about this.
Got it thanks for taking the questions.
Yes.
Thank you. Our next question comes from Dave Koning of Baird. Your line is open.
Yeah, Hey, guys great job on the air.
Thanks, David.
Yeah.
I guess my first question.
It sounds like Youre going to bring on 3200 workstations in the first half of next year I think that adds something like 15% to the base.
Is the reason revenue growth only it's only going to be 7% to 9%, maybe theres a little conservatism in there, but also just the geo mix as the yield a little lower.
Is that the right way to think about it.
Sure so.
So.
That capacity is coming online and it will we will be phasing in revenue of that.
And so.
I think.
If you do the math.
The ability to kind of.
Grow that.
Remember your capacity is about half that youre usable capacity is about half that in there.
Where could home complement.
In the U S. A work at home is 80% in these other markets, it's kind of in the thirties.
Call. It 30, 35, 40% work at home and so you put those.
Those two elements in there and that's kind of where we're getting into our our topline growth and I'll just say this stay for one minute the business, we've built and as you know we built this business and it has been performing consistently at a 10% revenue growth.
And now we're at 15.
15% Mark right.
Right.
All right at that 15% margin threshold and we've continually been improving and so I think structurally this business is built for that and we'll continue that out over the next two or three years.
When we look though just with the Delta Varian with potential impact in the supply chain and the supply chain, perhaps of people supply chain of computers things like that and then we're investing back now that now that we really accelerated we're investing back into the business, we're putting several million dollars in the sales and marketing side of it.
The business to continue to drive future growth and then we're putting I think we're putting up.
Several million dollars into investing in systems to let's say run our business more efficient and effectively put all of those things together.
We kind of look and say hey, let's be.
Let's be cautiously.
Let's be cautious about our expectations for the year, hence the 7% to 9% and the EBITDA 69 to 71 range.
I'll remind you Dave last year, we did the exact same thing.
And we started the year at 59 to 61 and the business kept building momentum and those big potential impacting we were able to.
Avoid dose and operate our business really sound really no shutdowns limited shrinkage and so we were able to obtain fantastic numbers for the year. Our goal is to do that in 'twenty, two but it's each day, it keeps getting harder and harder with the Delta area.
Yeah got you Yeah, I mean, you had a great year relative to expectations for sure.
And maybe another thing I mean, I thought that such an interesting data point that youre now going to have capacity for about $200 million of revenue, yes without extending the footprint.
It always seems to us like if all you have to do is add people and you've got all the capacity in place you can often get 25%, 30% incremental margins.
Is that about the right math and does that imply over the next few years.
This is the Formula you should have really nice margin trajectory still.
Your thesis is spun on it really the states and that's how we're thinking of the business and so again when that happens who knows.
But.
But look even without this business has pointed up into the right. Both from a revenue and margin standpoint, and we're hopeful and as even Dan highlighted in his speech thesis of buybacks.
He's he sees that.
Coming in.
Coming in from the outside.
And.
That's a really exciting potential.
Yep, Thanks, and maybe just one quick last one DNA kind of ramp through the year and I know thats, just a function of capex growing in capacity coming on it was about $12.0 million in Q4, how does that ramp through 2022, I mean can we leave it around seven 5% to eight all year, how should we think about that.
Hey, Karl Brexit over to you.
Yeah. Thanks.
Dave I can follow up with you on that point, but as we're as we're growing remember the DNA has two components one is with the <unk>.
The PP&E, but you also have the under <unk> you have the lease part of the differentiation that goes through there.
So that's something that I can follow up with you I don't have an answer for you right now on this call.
Gotcha, Alright, thanks, guys, great great year.
Appreciate it thanks, Dave for joining.
Thank you again, ladies and gentlemen, I'd like to ask a question. Please press Star then one.
Sure.
Our next question comes from Ashwin <unk> Citi. Your line is open.
Okay.
Okay.
Thank you.
Bob.
Good question.
First question the clarification I think.
When I think of the.
I think you mentioned.
The percentage of people that are working from home.
If if all of a sudden tomatoe everything returned to normal and Dale could come back in.
The question is what would your capacity be.
Dan.
Right.
Yes.
Because I think you put a couple of different numbers out there but.
I'm not necessarily triangulating to be additional capacity for $200 million.
Sure so.
So our capacity.
Today.
Let's look at.
What we believe is going to happen post.
When we return to normalcy okay.
A pre pre pandemic environment when that occurs we are going to still keep significant.
Work at home in play so the light switch.
We'll go on and then everything goes.
Fully back into centers.
We've been with our clients, we've talk with our clients in every one of our clients is committed to keeping some element of work at home with us as part of their portfolio. So so.
Today is Carl touched on it he said our current.
<unk> utilization is at 70 for the year is at 70, 777%.
So if all you did would just take and.
<unk> moved everything from work at home and you'd be at 77% utilization.
However, our clients in the U S. We're going to stay at least 50%, maybe even up to 75% worked at home going forward.
Number.
And in the what I'll call the emerging market regions near shore, Philippines. Our belief is it's probably going to be in that 15% range, maybe as much as 20%. So when you look.
That our U R utilization when we can use all of those centers is going to be at that point significantly lower it's going to be because.
Because we have this work at home component. So you do that math, it's probably going to be and maybe the 50.
55% to 60% effective utilization of the <unk>.
In center seats, which gives an enormous.
Flow upside of.
Being able to sell into seats to sell into.
And then don't forget.
Ashwin that we have given there will be incremental 3000.3200 seats, that's coming onboard.
Kind of as we speak right now.
That then will each have a trajectory for revenue growth in those that youll see.
Full and certainly in the first and the first half of next year, if not by Q4 of this current year put all that in we think we have a couple of hundred million dollars thats sitting in.
In this in this footprint.
Right.
Got it so youre essentially saying that.
Even in a normal situation work from home is a permanent option that many correct tumors lawn and then that's the news that's correct got.
Got it got it that's come.
Okay.
And it gives what why because it gives you the amazing.
Flex capacity.
Can just ramp up Tcs youre not building brick and mortar time to time to ramp and it gives you reserve built in resiliency for BCP et cetera.
18 months ago, everybody got flat caught flatfooted, because they had very very little work at home if any of their enterprise.
Alright, great.
I also have a question about sort of the cadence of revenue through the colors. So.
Of 22, and you kind of mentioned it.
Two Q on which is when you expect to see that pick up so.
Part of it is easier comps.
But from a visibility perspective.
Any any specific things youre seeing like particular client and.
Things like that.
That would affect that also.
Yeah.
So we have.
Many of the new logos that we won.
Last year, and especially several that were won.
In the second half of the year late year, and then in that than me.
It may have started.
Started launching in Q1 are very very high volume ramps with clients that are just experiencing explosive growth.
So.
When I look at the business that I think we have structurally built cash would it is a.
Q2 for US is always a big quarter because of all the retail work commerce work seasonality for the holiday season, Black Friday et cetera, but I believe that what we've done and what we did last year. If we didn't if we didn't have those two events is that.
The second half of the year wasn't as strong as our Q2 and this year. We would have been there had it not been for kind of the two events that I have talked about structurally our business is built like that the pipeline that we have.
So I think youre going to see a little bit of a.
Little bit of an inflection point.
On our call it our.
<unk>.
Whatever historical quarterly flows word what.
What that might look like.
Got it if.
If I can squeeze a third one in.
Can I look at Europe solutions Amex connect have extended Lubbock.
Right.
Does any any of them how higher or lower.
The team that has been than the others.
And the reason I'm asking the question is because.
Sure.
So Matt in the fourth Q.
<unk> provided outlook.
Outlook.
Obviously, there was a couple of million dollar.
Desktop between expectation and what you delivered.
So.
Hey.
And my understanding is it primarily came from the traditional outsourcing business.
Are you seeing if they are ready.
Okay.
The ability.
As you look across your solution.
Sure.
That's a fantastic question.
I would say.
In the connect part of the business and you're right some of the GAAP.
Large portion of that was attributed to these two kind of.
One off one time events.
I think we are.
Great visibility to the revenue there.
Short of those two events, which again are we.
We're not we're not even perceived by the clients that we're dealing with at that time that these inflection points.
Would occur so we have I think repeatable.
This is very.
Month over month quarter over quarter.
Good.
Track record.
<unk>, where the revenues are going.
And it said.
Our revenue retention.
With our clients is off the charts right.
We continue to we don't lose clients here and as said our revenue retention is 99, 5% from last year.
That's unheard of in this industry, so I feel that.
That engine there is very very predictable on revenue.
Our digital marketing business.
So I'd say a little less predictable.
Why because you have.
You have its marketing spend its AD campaigns digital marketing thats out there that.
Can be.
Can be spiky.
Can be spiky based on promotions that certain clients have.
For the quarter.
And so there is less predictability there that's about.
15% of our <unk>.
Business, but it's a high margin business, our highest margin business. So when I think of those two businesses I feel good about our overall predictability because.
You have the largest part of your business is very predictable.
Got it thank.
Thank you Bob.
Yes.
Thank you I'm showing no further questions. At this time is turn the call back over to Bob to chat.
Sure.
Valerie Thank you very much.
Again for everybody I appreciate everyone.
Staying on the call and your attendance on the call and we really appreciate your continued confidence in IMAX and we are looking forward to a fantastic FY 'twenty two so with that thank you so much and everybody have a good day.
Okay.
Thank you ladies and gentlemen that concludes today's conference. Thank you all participating you may now disconnect.
Okay.