Q4 2023 IBEX Limited Earnings Call
Yes.
[music].
Welcome to the IBEX fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you will need.
The press Star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again to note. There is an accompanying earnings deck presentation available on the IBEX Investor Relations website at investors Dot IBEX Dot C O I.
I will now turn this conference over to Michael Mr. Michael Dar wall Investor Relations of buybacks.
Good afternoon, and thank you for joining us today before we begin I want to remind you that matters discussed on today's call may include forward looking statements related to our operating performance financial goals and business outlook, which are based on management's current beliefs.
And assumptions. Please note that these forward looking statements reflect our opinion as of the date of this call and we undertake no obligation to revise this information as a result of new developments, which may occur.
Forward looking statements are subject to various risks uncertainties and other factors that could cause our actual results to differ materially from those expected and described today.
For more detailed description of our risk factors. Please review our annual report on Form 10-K filed with the U S Securities and Exchange Commission on September 13, 2023.
Additionally, I would like to remind everyone that we've moved to being a domestic filer and as such are now reporting on a U S GAAP basis, rather than from the previous I F RF standard.
We've been messaging and preparing for the conversion and are excited to be reporting accordingly, with that I will now turn the call over to Bob Deca CEO of IMAX.
Thank you Mike Good afternoon, everyone and thank you all for joining us today, as we share our fourth quarter and fiscal year 2023 results.
First before I dive into the results I am very excited to welcome our new CFO Taylor Greenwald to his first earnings call with IBEX tail.
Taylor brings a fantastic background and skill set to IMAX, having spent nearly 20 years in the industry.
While Taylor started just a few weeks ago.
Im already confident that perfectly complements our culture and our team.
FY2023 it was another record year for IMAX, where we achieved all time best across all key financial metrics, including.
Revenue.
EBITDA EBITDA margin net income EPS and free cash flow.
We accomplished this in the face of unprecedented challenges across the BPM market.
With significant macroeconomic pressure and massive competitor consolidation.
We continue to demonstrate our unique ability to successfully compete and win against our much larger competitors.
Our competitive advantage is built around an unparalleled agent first culture with tremendous employee engagement.
Our wave X technology stack.
And our deep analytics capabilities that we call wave ex insights.
Enable us to consistently outperform our competitors.
Additionally, our speed and flexibility create a significant advantage for IBEX.
The result is in an amazingly resilient business that has performed extremely well in all market conditions.
Let me take a moment to highlight the financial results, we delivered in FY2023.
One of the most turbulent years I've seen in my 25 plus years in this industry.
We delivered record revenues of $523 million up six 1% year over year, driven by new wins with Blue chip clients in our strategic verticals.
Adjusted EBITDA increased 49% year over year.
Adjusted EBITDA margin increased 370 basis points to 12, 7%.
Adjusted net income grew over 42%.
To $36 9 million for the year another record for the company and resulting in adjusted EPS of $1 96 versus $1 39 in prior year.
We delivered record free cash flow of $22 9 million versus $14 1 million in the prior year.
And ended the year with $57 4 million in cash and cash equivalents with virtually zero borrowings as we head into the fiscal 2024.
Q4 was a solid quarter for IDEXX tempered by prevailing market headwinds on revenue.
During the quarter, we continued the shift of business from onshore to offshore with our clients, resulting in revenue growth of 1%.
Our <unk> 2.0 clients grew at 7% for the quarter and now represent 79% of our overall revenue.
Up from 74% in Q4, FY 'twenty two.
Revenues in our highly profitable offshore and near shore region grew 10%.
Our onshore region contracted 18% versus prior year quarter as we successfully migrated clients from the U S to our low cost markets.
As a result, EBITDA grew a healthy 21% versus prior year quarter to $15 4 million with a margin of 12, 4% up 210 basis points.
As I previously highlighted.
We have structurally built our business for long term margin expansion as we continue to grow in these regions with our clients.
FY2023 was an amazing year for IBEX winning awards.
During the year, we won more than a dozen awards and recognitions, including 2023 America's greatest workplaces for diversity by Newsweek.
2023, Philippines best employers by the Philippine Daily Inquirer.
Best place to work in Nicaragua for the third consecutive year and best place to work for women in Central America, and Caribbean for the second consecutive year by Great places to work.
And 2023 contact Center Technology Award by customer magazine for our wave ex among many other awards. These.
These are a testimony to the great brand and reputation we have built in the industry.
I am so proud of what this team has accomplished in FY 'twenty, three and I am equally excited for what the future will bring to IMAX.
At the core buybacks is our powerful new logo engine, where we continue to win high profile deals against heavy competition.
Our ability to win new business across strategic verticals with both large digitally transforming blue chip clients.
And pure play new economy digital first brands is unique to IDEXX.
We are able to build winning solutions across both client sets.
While macroeconomic conditions began to lengthen sales cycles in the second half of FY2023.
<unk> posted another strong year of wins and generating revenue from these new clients.
Over the course of the year 10, new client relationships were established across the health Tech.
Retail and e-commerce, and the technology verticals and approximately $35 million of new logo revenue for the year.
These wins included multiple wins in our strategic health care vertical, including a leading health care payer.
And the top administrator for the dental industry, demonstrating our ability to win in high profile deals.
Importantly, we are beginning to see the pipeline velocity pick up speed since June .
We won six new logos during this timeframe, including key wins in health Tech and Fintech.
We also have significant deal flow in our current pipeline with several very high profile fortune, one hundreds where I believe we are well positioned to win.
Okay.
Our land and expand model is driven by our ability to get out of the gates fast with our clients and deliver great results for them early and often.
As an example.
For the leading healthcare payer that we launched in October we reached number one provider out of seven on a balanced scorecard by March <unk>.
Competing against mostly long tenured multibillion dollar competitors.
For the year, we won the rising Star Award during their annual partner Award ceremony.
Operator: Welcome to the Ibex fourth quarter in full year 2023 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
Based on our outstanding performance, we were awarded a more than three X head count growth from prior year on the current business.
And an important new line of business and new geography.
Again, our ability to drive operational excellence starts with our agents and their passion for working for IMAX and supporting our great client brands.
Operator: To note, there is an accompanying earnings deck presentation available on the Ibex Investor Relations website at investors.ibbex.co.
We are extremely proud of the environment, we have created especially for our incredible agents, who are the fabric of IMAX.
Michael Darwal: I will now turn this conference over to Michael, Mr. Michael Darwal, Investor Relations of Ibex. Good afternoon and thank you for joining us today. Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals, and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments, which may occur.
We were excited to be able to once again recognized our top performing agents and leaders globally as we reinstituted a regional VIP events post pandemic.
Michael Darwal: 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 10K filed with the U.S. Securities and Exchange Commission on September 13, 2023. Additionally, I would like to remind everyone that we have moved to being a domestic filer, and as such, are now reporting on a U.S, gap basis rather than from the previous IFRS standard. We have been messaging and preparing for the conversion and are excited to be reporting and courting.
These are the pinnacle of employee recognition and engagement and differentiates us from our peers.
The results speak for themselves.
As our employee net promoter score of 68 demonstrates this is especially true in the highly competitive market like the Philippines, where we scored a best in class 79 employee net promoter score.
Complementing our great employee engagement and culture is our wave <unk> technology stack and wave ex insights our deep analytics R V.
<unk> solutions enable our agents to achieve proficiency faster empower our management to more efficiently and effectively run operations and for us to provide our clients analysis and solutions to improve the customer experience.
These are the key elements of <unk> to point out. These are the reasons, we have a long track record of winning great new clients and growing market share with them by outperforming the competitor's.
Bob Deck: With that, I will now turn the call over to Bob Deck and CEO of ibex. Thank you, Mike. Good afternoon, everyone, and thank you all for joining us today as we share our fourth quarter and fiscal year 2023 results.
In recent months the intersection of generative AI and CX has dominated the headlines.
Bob Deck: First, before I dive into the results, I'm very excited to welcome our new CFO, Taylor Greenwald, to his first earnings call with ibex. Taylor brings a fantastic background in skill set to ibex, having spent nearly 20 years in the industry. While Taylor started just a few weeks ago, I am already confident that he perfectly compliments our culture and our team.
We see this as great opportunity for leveraging our tech led capabilities, we are using speed to move quickly into building solutions leveraging these capabilities. In fact, we are currently leveraging AI in our customer survey offering using the technology to provide.
Deep insights into surveys, we do for our automotive clients across voice email and text.
Our AI strategy is built on a three pronged approach to continue to differentiate IMAX.
Bob Deck: FY 23 was another record year for ibex, where we achieved all-time bests across all key financial metrics, including revenue, EBITDA, EBITDA margin, net income, EPS, and free cash flow. We accomplished this in the face of unprecedented challenges across the BPO market, with significant macroeconomic pressure and massive competitor consolidation. We continue to demonstrate a unique ability to successfully compete and win against our much larger competitors. Our competitive advantage is built around an unparalleled agent-first culture with tremendous employee engagement.
First we have already developed and deployed generative AI solutions to assist our agents and quickly providing solutions to customers, resulting in a productivity boost.
We're already seeing operational gains here.
Second last quarter, we began deploying generative AI solutions to accelerate the deep analytics of wave <unk> insights.
These tools move the needle.
Allowing us to go from a small sample of calls monitored to enabling the analysis of 100% of all interactions in both real time and post interaction.
Resulting in a quality boost for our clients.
Bob Deck: Our Wevex technology stack and our deep analytics capabilities that we call Wevex Insights enable us to consistently outperform our competitors. Additionally, our speed and flexibility create a significant advantage for Ibex. The result is an amazingly resilient business that has performed extremely well in all market conditions.
This technology can operate at large scale in a very cost effective manner, enabling us to quickly evaluate the agents entire performance and develop customized training and continued improvement plans.
For our clients, we can quickly provide valuable insights into their customer preferences activity.
And behavior.
Bob Deck: Let me take a moment to highlight the financial results we delivered in FY23. One of the most turbulent years I've seen in my 25-plus years in this industry. We delivered record revenues of 523 million, up 6.1% year over year, driven by new winds with blue chip clients in our strategic verticals. Adjusted EBITDA increased 49% year over year, adjusted EBITDA margin increased 370 basis points to 12.7%. Adjusted net income grew over 42% to 36.9 million for the year, another record for the company and resulting in adjusted EPS of $1.96 versus $1.39 in prior year.
In prong number three we are developing customer facing solutions for our clients that help the continued digital transformation of their customer experiences.
This is the most exciting part of our strategy.
With the recent addition of our Genesis relationship and additional AI focused partnerships IMAX is very well positioned to expand our customer facing AI powered solutions.
In Q4, we launched IBEX Tech team.
Team that is working with clients to built solutions.
Such as human like voice and chat box.
Giving our clients a volume boost.
Without the need to hire more agents.
As an example.
We're a leading provider of media and digital Entertainment technologies IBEX delivered an AI based call deflection solution.
Bob Deck: We delivered record free cash flow of 22.9 million versus 14.1 million in the prior year, and ended the year with 57.4 million in cash and cash equivalents with virtually zero borrowings as we head into the fiscal 2024. Q4 was the solid quarter for Ibex, tempered by prevailing market headwinds on revenue. During the quarter, we continued the shift of business from onshore to offshore with our clients, resulting in revenue growth of 1%.
Integrated with Genesis, which which allows callers to seamlessly select an AI bot to complete their support request while being on hold.
This solution became impactful during their peak season.
While we realize that these types of solutions may reduce the total number of contact volumes our clients have.
This fits into our strategy of accelerating digital first support for our clients.
We are confident that this will help IBEX become a more trusted partner.
Bob Deck: Our BPO 2.0 clients grew at 7% for the quarter and now represent 79% of our overall revenue, up from 74% in Q4 FY22. Revenues in our highly profitable offshore and nearshore region grew 10% while our onshore region contracted 18% versus prior year quarter as we successfully migrated clients from the U.S, to our low-cost markets. As a result, EBITDA grew a healthy 21% versus prior year quarter to 15.4 million with a margin of 12.4% of 210 basis points. As I have previously highlighted, we have structurally built our business for long-term margin expansion as we continue to grow in these regions with our clients.
Provide a new vector of revenue growth with higher margins and position us to win more market share with our clients versus our bigger labor arbitrage focused competition.
As I previously highlighted we have built <unk> into a very strong and structurally solid business. This is enabling us to invest into our business for the long term to develop IBEX into an even stronger company as we continue to grow.
In Q4, we made a decision to upgrade our legacy ERP and HCM systems into an integrated workday solution.
We believe that this investment will strengthen our capabilities to run this business, even more efficiently and at even larger scale.
We are excited about the speed that the project is moving and.
And expect this to be completed by this time next year.
Bob Deck: Florence. FY23 was an amazing year for Ibex winning awards. During the year, we won more than a dozen awards and recognitions, including 2023 America's greatest workplaces for diversity by Newsweek. 2023 Philippines Best Employers by the Philippine Daily Inquirer. Best place to work in Nicaragua for the third consecutive year and best place to work for women in Central America and Caribbean for the second consecutive year by great places to work. And 2023 Contact Center Technology Award by Customer Magazine for our WaveX among many other awards. These are a testimony to the great brand and reputation we have built in the industry.
From a capital allocation standpoint, our strong financial position and balance sheet is enabling us to evaluate M&A opportunities as a way to both enhance our solutions and our competitive moat as.
As well as accelerate our growth.
I am excited to have Taylor as our CFO as I believe his experience will help our strategy here.
In summary, we have built IBEX into a business that has above market revenue growth and strong margin expansion and one that competes well against our larger competitors.
Our ability to win with high profile brands is a staple of IBEX. We expect this to continue into FY 'twenty four and beyond.
While market conditions will put some pressure on the first half of FY 'twenty four I am confident in the long term trajectory of buybacks and believe that we are well positioned to take <unk> to the next level as a public company.
Bob Deck: I'm so proud of what this team has accomplished in FY23 and I am equally excited for what the future will bring to Ibex. At the core of Ibex is our powerful new logo engine where we continue to win high-profile deals against heavy competition. Our ability to win new business across strategic verticals with both large digitally transforming blue chip clients and pure play new economy digital first brands is unique to Ibex. We are able to build winning solutions across both client sets.
With that I will now turn the call over to Taylor to go into more detail on our 23 financials and guidance for FY 'twenty for Taylor.
Thank you Bob and good afternoon, everyone I am very excited to join the IMAX team and look forward to what we can accomplish as an organization the.
The combination of business performance and execution over the last several years.
<unk> has positioned itself as a leader in the digital first BPL two point of space is impressive.
I was attracted to IMAX by their diversified client base vertical expansion in geographic footprint.
Bob Deck: While macro economic conditions began to lengthen cell cycles in the second half of FY23, Ibex posted another strong year of wins and generating revenue from these new clients. Over the course of the year 10 new client relationships were established across the health tech, retail and e-commerce and the technology verticals and approximately 35 million of new logo revenue for the year. These wins included multiple wins in our strategic health care vertical including a leading health care payer and a top administrator for the dental industry demonstrating our ability to win in high profile deals.
Importantly, the strong balance sheet gives me great confidence that we can continue to drive future revenue growth strong EBITDA margin and cash flow generation.
As Mike mentioned on July one 2023, IMAX became a domestic filer and we're now reporting our financial results in accordance with U S GAAP rather than <unk>.
In my discussions of our fourth quarter and full year fiscal 2023 financial results references to revenue net income and net cash generated from operations are now reported on a U S GAAP versus <unk> basis.
Reconciliations of our U S GAAP to non-GAAP measures of adjusted net income adjusted earnings per share adjusted EBITDA and free cash flow are also included in the tables attached to our earnings press release.
Bob Deck: Importantly, we are beginning to see the pipeline velocity pick up speed since June. We won six new logos during this time frame including key wins and health tech and thin tech. We also have significant deal flow in our current pipeline with several very high profile Fortune 100s where I believe we are well positioned to win. Our land and expand model is driven by our ability to get out of the gates fast with our clients and deliver great results for them early and often.
The two significant accounting impacts from the change to U S. GAAP are in leased and warrant accounting among other items. This results in a June 32023 reduction in reported debt of $78 million.
A $5 3 million and $21 9 million reduction in reported fourth quarter and fiscal year 2023 adjusted EBITDA.
With these impacts are factored into the previously provided guidance issued under Ifr S.
Our results aligned with our previously provided guidance.
Okay.
Turning to our results fourth quarter revenue increased approximately 1% to $124 4 million compared to $123 5 million in the prior year quarter.
Bob Deck: As an example, for the leading health care payer that we launched in October, we reached number one provider out of seven on a balance scorecard by March. Competing against mostly long tenured multi-billion dollar competitors. For the year, we won the Rising Star Award during their annual partner awards ceremony. Based on our outstanding performance, we were awarded a more than three X headcount growth from prior year on the current business and an important new line of business and new geography.
Revenue growth was driven by our higher margin regions offset by lower onshore revenue as we successfully grew our strategic verticals, while replacing a large legacy technology client.
<unk> <unk> from lower margin onshore revenue locations to higher margin nearshore and offshore has significant impact on both top and bottom line results.
Onshore revenues declined, 18% and nearshore and offshore revenues benefiting particularly from growth in health Tech and retail increased 10% versus the prior year quarter.
Bob Deck: Again, our ability to drive operational excellence starts with our agents and their passion for working for Ibex and supporting our great client brands. We are extremely proud of the environment we have created, especially for our incredible agents who are the fabric of Ibex. We were excited to be able to once again recognize our top performing agents in leaders globally as we re-instituted our regional VIP events post-pandemic. These are the pinnacle of employee recognition and engagement and differentiates us from our peers.
We continued to experience solid growth in our BPM to point out clients as this cohort grew by 7% over the prior year quarter and now represents 79% of our total revenue compared to 74% in the prior year quarter.
During the quarter, we continued to experience the macroeconomic headwinds, which contributed to longer new client sales cycle and impacted near term revenue growth.
However, as we head into the new fiscal year, we're beginning to see encouraging signs of our pipeline accelerating.
Fourth quarter net income declined to $4 5 million versus $6 4 million in the prior year quarter. The decline was primarily due to higher taxes, including the absence of a one time deferred tax benefit of $1 8 million in the prior year quarter.
Bob Deck: The results speak for themselves as our employee net promoter score of 68 demonstrates. This is especially true in the highly competitive market like the Philippines where we scored a best-in-class 79 employee net promoter score. Complementing our great employee engagement and culture is our WaveX technology stack and WaveX insights are deep analytics arm. These solutions enable our agents to achieve proficiency faster, empower our management to more efficiently and effectively run operations and for us to provide our clients analysis and solutions to improve the customer experience.
Offset in part by stronger operating results and lower interest expense.
Yeah.
Moving to non-GAAP measures adjusted EBITDA increased to $15 4 million or 12, 4% of revenue compared to $12 8 million or 10, 3% of revenue for the same period last year.
The 210 basis point improvement in adjusted EBITDA margin was primarily driven by growth and profitability of our BPL 2.0 clients and higher margin regions client price increases and improved site capacity utilization, which increased from 69% to 77%.
Adjusted net income declined to $6 2 million compared to $8 3 million in the prior year quarter non-GAAP fully diluted earnings per share decreased <unk> 33, compared to <unk> 45 in the prior year quarter.
Bob Deck: These are the key elements of BPO 2.0. These are the reasons we have a long track record of winning great new clients and growing market share with them by outperforming the competitors.
The declines in adjusted net income and fully diluted adjusted earnings per share were primarily driven by higher income tax expense from the absence of a prior year deferred tax benefit mentioned earlier and was partially offset by our stronger operating performance.
Bob Deck: In recent months, the intersection of generative AI and CX has dominated the headlines. We see this as great opportunity for leveraging our tech led capabilities. We are using speed to move quickly into building solutions leveraging these capabilities. In fact, we are currently leveraging AI in our customer survey offering using the technology to provide deep insights into surveys. We do for our automotive clients across voice, email and text.
As a company we are pleased with the client diversification we've established over the last several years for the fourth quarter of fiscal year 2023, our largest client accounted for less than 12% of revenue.
Top five and top 10 client concentrations were approximately 37% and 55% of total revenue respectively.
And our top 25 client concentration was 80%.
Bob Deck: Our AI strategy is built on a three-prong approach to continue to differentiate ibex. First, we have already developed and deployed generative AI solutions to assist our agents in quickly providing solutions to customers, resulting in a productivity boost. We are already seeing operational gains here. Second, last quarter we began deploying generative AI solutions to accelerate the deep analytics of wave x inside. These tools move the needle, allowing us to go from a small sample of calls monitored to enabling the analysis of 100% of all interactions in both real time and post interaction, resulting in a quality boost for our clients.
In addition, we ended the fiscal year with 57 clients billing at over $1 million per annum versus <unk> 49 in the prior year and 29 clients billing at over $5 million per annum up from 23 exec.
Exemplifying the success of our land and expand approach, we will continue to maintain our focus on client diversification.
Switching to our industry verticals retail and e-commerce increased 22% of fourth quarter revenue versus 19% in the prior year quarter, driven by continued growth in multiple offshore geographies.
<unk> increased to 14% of fourth quarter revenue versus 9% in the prior year quarter in large part due to the organic growth we've experienced based on the onshore and offshore wind.
Clearly the top healthcare payer Bob previously mentioned.
Our exposure to the telecommunications vertical continues to decrease accounting for 15% of quarterly revenue versus 17% in the prior year quarter.
Technology decreased 9% from 11% of quarterly revenue, mainly due to the exit of our lower margin legacy client in the fourth quarter of fiscal year 2022.
Bob Deck: We are enabling us to quickly evaluate the agent's entire performance and develop customized training and continued improvement plans. For our clients, we can quickly provide valuable insights into their customer preferences, activity and behavior. In Prong number three, we are developing customer facing solutions for our clients that help the continued digital transformation of their customer experiences. This is the most exciting part of our strategy with the recent addition of our Genesis relationship and additional AI-focused partnerships. Ibex is very well positioned to expand our customer facing AI-powered solutions.
Travel and transportation decreased slightly slightly to 12% from 13% of quarterly revenue, primarily due to macroeconomic pressure experienced by one of our larger clients as discussed in prior quarters.
Lastly, fintech decreased to 17% from 21% of quarterly revenue due.
Due in large part to continued headwinds in the crypto currency and new economy investing markets.
Moving to our fiscal year 2023 results revenue increased 6% to $523 1 million compared to $492 9 million in the prior year as we successfully grew in our strategic verticals, while replacing a large legacy technology clients.
Revenue growth was driven by our higher margin regions offset by lower onshore revenue.
Bob Deck: In Q4, we launched Ibex Tech, a team that is working with clients to build solutions such as human-like voice and chatbots, giving our clients a volume boost without the need to hire more agents. As an example, for a leading provider of media and digital entertainment technologies, Ibex delivered an AI-based call-defelection solution, integrated with Genesis, which allows callers to seamlessly select an AI bot to complete their support request while being on hold.
And the lapping of the low margin onshore legacy client that we exited in the fourth quarter of fiscal year 2022.
Similar to the fourth quarter, the shift from lower margin onshore revenue locations to higher margin nearshore and offshore throughout the year had a meaningful impact on revenue as onshore revenues declined 13% and nearshore and offshore revenues, particularly in the Philippines in Pakistan increased 16%.
The prior year.
We continue to experience high growth in our BPI to point our clients as we grew this segment, 19% over the prior year accounting for 77% of our total revenue versus 69% in the prior year.
The macroeconomic headwinds, which I mentioned earlier contributed to longer new client sales cycle and impacted near term revenue growth and had a more prominent impact in the second half of the fiscal year.
Bob Deck: This solution became impactful during their peak season. While we realize that these types of solutions may reduce the total number of contact volumes our clients have, this fits into our strategy of accelerating digital first support for our clients. We are confident that this will help Ibex become a more trusted partner, provide a new vector of revenue growth with higher margins and position us to win more market share with our clients versus our bigger labor arbitrage focused competition.
2023, net income increased to $31 6 million versus $21 5 million in the prior year. The increase in net income was primarily due to stronger operating results and lower interest expense offset by higher income tax expense the.
The increase in income tax expense was mostly driven by a significant one time deferred tax benefit of $4 1 million recorded in the prior year.
Moving to non-GAAP measures for the full year adjusted EBITDA increased to $66 6 million or 12, 7% of revenue compared to $44 7 million or nine 1% of revenue for the prior year.
Bob Deck: As I previously highlighted, we have built Ibex into a very strong and structurally solid business. This is enabling us to invest into our business for the long term to develop Ibex into an even stronger company as we continue to grow. In Q4, we made a decision to upgrade our legacy ERP and HCM systems into an integrated workday solution. We believe that this investment will strengthen our capabilities to run this business even more efficiently and at even larger scale.
The 370 basis point increase in adjusted EBITDA margin was primarily driven by growth in profitability in our <unk> clients and higher margin regions client price increases and higher work from site capacity utilization.
Adjusted net income increased 42% to $36 9 million compared to $26 million in the prior year non-GAAP fully diluted adjusted earnings per share increased 41% to $1 96 compared to $1 39 in the prior year the increase in adjusted net income and non-GAAP fully diluted adjusted earnings.
Bob Deck: We are excited about the speed that the project is moving and expect this to be completed by this time next year. From a capital allocation standpoint, our strong financial position and balance sheet is enabling us to evaluate M&A opportunities as a way to both enhance our solutions and our competitive mode as well as accelerate our growth. As our CFO, as I believe his experience will help our strategy here.
Earnings per share was primarily driven by our stronger operating performance and partially offset by higher income tax expense due to the absence of a prior year deferred tax benefit.
Net cash generated from operations was $41 9 million for the fiscal year compared to $40 million in the prior year. The increase was primarily driven by improvements in operating results offset by higher working capital requirements driven by higher accounts receivable.
Our Dsos were 63 days up eight days year over year, we continue to trend below industry average.
Bob Deck: In summary, we have built Ibex into a business that has above market revenue growth and strong margin expansion and one that competes well against our larger competitors. Our ability to win with high profile brands is the staple of Ibex. We expect this to continue into FY24 and beyond.
Capital expenditures were $19 million or three 6% of revenue in the fiscal year versus $25 9 million or five 3% of revenue last year.
Our continued utilization of available capacity build out in prior years and made available with the removal of social distancing requirements is yielding lower capital expenditure requirements.
Bob Deck: While market conditions will put some pressure on the first half of FY24, I'm confident in the long term trajectory of Ibex and believe that we are well positioned to take Ibex to the next level as a public company.
Free cash flow increased to $22 9 million in the fiscal year compared to $14 1 million in the prior year.
Driven largely by improved operating results and lower capital expenditures.
Taylor Greenwald: With that, I will now turn the call over to Taylor to go into more detail on our 23 financials and guidance for FY24 Taylor. Thank you Bob and good afternoon everyone.
We ended the fiscal year with $57 4 million in cash up from $48 8 million as of June 32022.
Total debt was $1 million down from total debt of $15 7 million as of June 32022, and borrowing availability under our revolving credit facilities increased to $71 9 million as of June 32023, compared to 55 billion as of June 32022.
Taylor Greenwald: I am very excited to join the Ibex team and look forward to what we can accomplish as an organization. The combination of business performance and execution over the last several years is Ibex has positioned itself as a leader and the digital first BPO 2.0 space is impressive. I was attracted to Ibex by their diversified client base, vertical expansion and geographic footprint. Importantly, the strong balance sheet gives me great confidence that we can continue to drive future revenue growth, strong EBITDA margins and cashflow generation.
Importantly, representing a strong balance sheet, our net cash position at fiscal year end improved to $56 4 million from $33 1 million as of June 32022.
As we look forward, our strong balance sheet positive cash flow growth of our digital first BPI to pointed out business. We're excited about the long term direction of buybacks were a $500 million best in class digital first service provider and a market over $100 billion and we expect to win market share over time.
Taylor Greenwald: As Mike mentioned on July 1, 2023, Ibex became a domestic biler and we are now reporting our financial results in accordance with US gap rather than IFRS. In my discussions of our fourth quarter and four year fiscal 2023 financial results, references to revenue, net income and net cash generated from operations are now reported on a US gap versus IFRS basis. Reconciliation of our US gap to non-gap measures of adjusted net income, adjusted earnings per share, adjusted EBITDA and free cashflow are also included in the tables attached to our earnings press release.
As we enter fiscal year 2024, we are still experiencing macroeconomic headwinds and a continuation of revenue shifting to higher margin near and offshore locations.
These factors will impact revenue growth as we currently expect fiscal year 2020 for revenue to be in the range of $525 million to $535 million.
We expect our adjusted EBITDA margin to approach, 13%, even as we build out our infrastructure, including a new ERP and HCM solution to position ourselves for greater growth in the years ahead.
Taylor Greenwald: The two significant accounting impacts from the change to US gap are in lease and warrant accounting. Among other items, this results in a June 30, 2023 reduction and reported debt of 78 million. And a 5.3 million and 21.9 million reduction in reported fourth quarter and fiscal year 2023 adjusted EBITDA. With these impacts are factors into the previously provided guidance issued under IFRS, our results align with our previously provided guidance. Turning to our results, fourth quarter revenue increased approximately 1% to 124.4 million compared to 123.5 million in the prior year quarter.
Additionally, as we continued to benefit from past side expenses during Covid, our capital expenditures should remain in a $15 million to $20 million range for the year.
For the quarter, we expect revenues to be in a range of $122 million to $125 million and EBITDA margins to be roughly 11%.
Our visit is well positioned for today and the years ahead, and we are very excited about the future of IMAX into fiscal year 2024 and beyond.
With that Bob and I will now take questions. Operator, please open the line.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Taylor Greenwald: Revenue Growth was driven by our higher margin regions, offset by lower onshore revenue, as we successfully grew our strategic verticals while replacing a large legacy technology client. The shift from lower margin onshore revenue locations to higher margin near-shore and offshore has significant impact on both top and bottom line results. Onshore revenues declined 18% and near-shore and offshore revenues benefiting particularly from growth in health tech and retail, increased 10% versus the prior year quarter.
One moment for questions.
Our first question comes from Brian <unk> with Citi. You May proceed.
Hey, Thanks for taking my question I guess, maybe starting on visibility.
Taylor Greenwald: We continue to experience solid growth in our BPO 2.0 clients as this cohort grew by 7% over the prior year quarter and now represents 79% of our total revenue compared to 74% in the prior year quarter. During the quarter, we continue to experience some macroeconomic headwinds which contributed to longer new client sales cycles and impacted near-term revenue growth.
The confidence or visibility do you have into the full year outlook here and is there any different than how much visibility you have into initial outlook to start the year and beyond.
I guess what needs to happen to hit the low end and upper end of the ranges and are there any additional assumptions are including regarding the macro or any buffer as you may have embedded in the outlook.
Sure Ryan and thanks for that question and hopefully I can hit all parts and feel free if I, if I missed a couple too.
Taylor Greenwald: However, as we add into the new fiscal year, we're beginning to see encouraging signs of our pipeline accelerating. Fourth quarter net income declined to 4.5 million versus 6.4 million in the prior year quarter. The decline was primarily due to higher taxes including the absence of a one-time deferred tax benefit of 1.8 million in the prior year quarter, offset and part by stronger operating results and lower interest expense. Moving to non-gap measures, adjusted EBITDA increased to 15.4 million or 12.4% of revenue compared to 12.8 million or 10.3% of revenue for the same period last year.
To remind me but look.
Yeah.
A year ago, we did not anticipate in the back half of the year that the pipeline was going to slow down to where it did over the last two quarters.
And I don't think anybody in this space had visibility to that reality is that that did occur.
Now.
With the economic challenges, we did a really good job working with our clients, helping them get to low cost labor markets moving a lot of U S work.
Taylor Greenwald: The 210 basis point improvement that adjusted EBITDA was primarily driven by growth and profitability of our BPO 2.0 clients in higher margin regions, client price increases and improved site capacity utilization which increased from 69% to 77%. Adjusted that income to clients at 6.2 million compared to 8.3 million in the prior year quarter, non-gap fully diluted earnings per share decreased to 33 cents compared to 45 cents in the prior year quarter. The declines in adjusted net income and fully diluted adjusted earnings per share were primarily driven by higher income tax expense from the absence of a prior year deferred tax benefit mentioned earlier and was partially offset by our stronger operating performance.
Into places like the Philippines at lower price points and much higher margin for us. So we think that's a great.
<unk> had all the great visibility of that a year ago at the beginning of the year, but I think those are great moves of strengthening our partnerships and providing great solutions for our clients and actually winning market share.
Now as I look at this year.
Here's how I kind of view.
The delay of the pipeline over the last couple of quarters is putting some top line pressure onto our business.
But very candidly that pipeline is heating up.
And with very what I'll call large material fortune.
Taylor Greenwald: As a company, we are pleased with the client diversification we have established over the last several years. For the fourth quarter of fiscal year 2023, our largest client accounted for less than 12% of revenue. Our top five and top 10 client concentrations were approximately 37 and 55% of total revenue respectively and our top 25 client concentration was 80%. In addition, we ended the fiscal year with 57 clients building it over 1 million per annum versus 49 in the prior year and 29 clients building it over 5 million per annum up from 23.
100 type deals.
We won six since June .
Really like that pace, and we're winning on the big stage, and so and I feel very good about.
What is.
What is there over the next quarter.
A quarter or two and our ability to win and be beat what I'll call. The big guys head on.
So when I think about the two ranges that we gave.
I believe our ability to hit the high end or above that is going to be dependent on our success on this pipeline.
Why.
Taylor Greenwald: Exemplifying the success of our land and expand approach. We will continue to maintain our focus on client diversification. Wishing to our industry verticals retail and e-commerce increased to 22% of fourth quarter revenue versus 19% in the prior year quarter driven by continued growth and multiple offshore geographies. [inaudible] Ibex, Ibex, Ibex, Ibex, Ibex, Ibex, Ibex, Ibex, Ibex, Ibex, Ibex, Ibex, Ibex, Moving to our fiscal year 2023 results, revenue increased 6% to 523.1 million compared to 492.9 million in the prior year as we successfully grew in our strategic verticals while replacing the large legacy technology points.
We feel we are delivering very well for our incumbents are our installed base.
And so we continue to strengthen that installed base, we continue to.
Land and expand more types of work with those.
That we feel have great visibility and.
And so I think the big variability then comes into the pipeline.
I really like our position I like our we're we've kind of resumed to our very very strong win rates that we've had for five plus years and.
So hopefully that answers the Lions your question, if theres something I might have missed.
Please feel free to follow up.
No I think that covered all.
I guess kind of shifting.
Hi, and thanks for providing some of the examples you gave on how you're kind of leveraging AI in your business, but.
Just on <unk>.
<unk>, one and <unk> three could you maybe provide some numbers around how much agent productivity has improved where you have deployed <unk> solutions and then also in situations, where your views types to help reduce the need for more agents with end client does that change how you price your relationship with a client at all and does it impact <unk>.
And you have that client.
Sure Great yet really really solid question and so let's talk about.
The first kind of the first prong of AI.
We call kind of the agent assist.
Gives those agents the productivity boost in that now.
We're early on in that because what has to happen is you have to train.
Taylor Greenwald: Revenue growth was driven by our higher margin regions, offset by lower onshore revenue in the lapping of the low margin onshore legacy clients that we exited in the fourth quarter of fiscal year 2022. Similar to the fourth quarter, the shift from lower margin onshore revenue locations to higher margin near shore and offshore throughout the year had a meaningful impact on revenue as onshore revenues to climb 13% and near shore and offshore revenues.
The generative AI to be effective for your agents and to be really customized you don't just throw it kind of give them access to.
Unfiltered answers.
So we're early on on that but we're really excited about the potential gains and let me give you an idea of how that can really work your new agents that may not be able to get immediate access from the knowledge that they have inherently from being an agent for a long time.
Taylor Greenwald: Particularly in the Philippines and Pakistan increased 16% versus the prior year. We continue to experience higher growth in our BPO 2.0 clients as we grew this segment 19% over the prior year accounting for 77% of our total revenue versus 69% in the prior year. The macroeconomic headwinds which I mentioned earlier contributed to longer new point sales cycles and impacted near term revenue growth and had a more prominent impact in the second half of the fiscal year.
Quite often they struggle with.
Adding to the knowledge base the right article they might have to escalate to a tier two supervisor to get to that.
Having generative AI on their fingertips to where they can find that answer that use that tool to get to there that's a really powerful productivity gains.
The early numbers that we have are our kind of impactful for a very small subset of kind of the new.
Taylor Greenwald: 2023 net income increased to 31.6 million versus 21.5 million in the prior year. The increase in net income was primarily due to stronger operating results and lower interest expense offset by higher income tax expense. The increase in income tax expense was mostly driven by a significant one time deferred tax benefit of 4.1 million recorded in the prior year. Moving to non-gap measures for the full year, adjusted EBITDA increased to 66.6 million or 12.7% of revenue compared to 44.7 million or 9.1% of revenue for the prior year.
Geared around those new agents, so I hate to quote a number because it's still pretty early on and.
But hopefully walking you through that you can see the.
Kind of the potential impact that that could.
Could have and really help that agents pathway.
Up to proficiency.
In our more customer facing solutions.
We are building.
Here's where we really see that working is in peak season. When the typical model is hire a whole lot of agents, we have to do a whole lot of build outs.
Taylor Greenwald: The 370 basis point increase in adjusted EBITDA margin was primarily driven by growth and profitability in our BPO 2.0 clients in higher margin regions. Client price increases and higher work from site capacity utilization. Adjusted net income increased 42% to 36.9 million compared to 26 million in the prior year. Non-gap fully deluded adjusted earnings per share increased 41% to $1.96 compared to $1.39 in the prior year. The increase in adjusted net income and non-gap fully diluted adjusted earnings per share was primarily driven by our stronger operating performance and partially offset by higher income tax expense due to the absence of a prior year deferred tax benefits.
And you have to keep those agents for a very short amount of time.
By leveraging AI solutions that allow us not to have too.
Do that incur all the build out cost the training costs and then our clients paying paying for that.
We think that we can provide a very elegant solution that.
Does not have the need for.
As many agents and the ramp is still going to have need for some but it doesn't stress test that ramp so it's probably easier for us easier on the build outs.
But it also changes the dynamics because now we kind of look at that as a technology margin and not a <unk> margin.
And so we think those things will provide another revenue source for us.
Taylor Greenwald: Our DSOs were 63 days up 8 days year-over-year. We continue to trend below industry average. Capital expenditures were 19 million or 3.6% of revenue in the fiscal year versus 25.9 million or 5.3% of revenue last year. Our continued utilization of available capacity build out in prior years and made available with the removal of social distancing requirements is yielding lower capital expenditure requirements. Precash low increased to 22.9 million in the fiscal year compared to 14.1 million in the prior year driven largely by improved operating results and lower capital expenditures.
A much higher revenue much higher margin.
Out of that out of that revenue.
But I want to be clear.
I don't think this if we do this right I don't think this cannibalize our business.
And the reason why is if you do these things I think you've become a stronger partner and they're going to vote their market share to the providers that dose that and so I'm very optimistic about that this is not a cannibalization of topline, but it really strengthens allows you to reason to win more market share of work.
Due and then layer on new business in the form of <unk>.
Taylor Greenwald: We ended the fiscal year with 57.4 million in cash up from 48.8 million as of June 30, 2022. Total debt was 1 million down from total debt of 15.7 million as of June 30, 2022 and borrowing availability under our revolving credit facilities increased to 71.9 million as of June 30, 2023 compared to 50.5 million as of June 30, 2022. Importantly, representing our strong balance sheet, our net cash position at fiscal year end improved to 56.4 million from 33.1 million as of June 30, 2022.
True, 100% digital machine AI, driven thats very very higher margin. That's why we're really excited and I'm, telling you I think speed.
Matters in this and I love.
Our position as a tech led company positions us well, but our speed and flexibility position us faster and I think we're beating everybody to the market here, just because thats, who we are and.
In this <unk> world.
Yes, great I guess, just one last clarification question.
With the move to GAAP reporting here will you be providing restated historical GAAP results on a quarterly basis or will this language without provided after you report future quarters.
Taylor Greenwald: As we look forward, our strong balance sheet, positive cash flow, growth of our digital first BPO 2.0 business. We are excited about the long-term direction of iBix. We are a 500 million best in class digital first service provider in a market over 100 billion and we expect to win market share over time. As we enter fiscal year 2024, we are still experiencing macro economic headwinds and a continuation of revenue shifting to higher margin near and offshore locations.
So Ryan.
Introduce you to tailor and great Jeff Taylor on board.
Great.
For you guys to connect so over to you Taylor yeah. Thanks for the question Ryan and so at this point, obviously, we issued the 10-K and we have our GAAP results for 'twenty, one 'twenty, two and 'twenty three full year results, we havent provided them yet on a quarterly basis other than the fourth quarter.
It's a good question and that's something we'll think about as we go forward in the next next quarter.
Taylor Greenwald: These factors will impact revenue growth as we currently expect fiscal year 2024 revenue to be in the range of 525 to 535 million. We expect our adjusted EBITDA margin to approach 13% even as we build out our infrastructure, including a new ERP and HGM solution to position ourselves for greater growth in the years ahead. Additionally, as we continue to benefit from past side expansions during COVID, our capital expenditures should remain in a 15 million to 20 million range for the year. For the quarter, we expect revenues to be in a range of 122 to 125 million and EBITDA margin to be roughly 11%.
Okay.
Got it thanks, Ken.
Taylor Greenwald: Our business is well positioned for today in the years ahead and we are very excited about the future of iBix in the fiscal year 2024 and beyond.
Great. Thanks, Brian .
Thank you and as a reminder to ask a question. Please press star one on your telephone.
One moment for questions.
Our next question comes from Matthew Roswell with RBC you May proceed.
Yes. Thank you good afternoon.
A quick question on the FY 'twenty for margin guidance, it looks like you're calling for about call. It 30 basis points of increase could you kind of bridge that.
In terms of I would expect the shift to offshore should have more of a benefit but I think the ERP implementation cost of pulling it down so could you just kind of.
Operator: With that, Bob and I will now take questions. Operator, please open the line. Thank you. As a reminder to ask a question, please press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again. One moment for questions.
Just to to that 30% 30 basis point increase in margin. Thank you.
Yeah, Matthew let me start out and then I'll.
Bring Taylor in on this who's obviously drinking by the fire hose.
He's got his arms around this real real fast, but so.
I think your instincts are exactly right we have a good.
What I'll call.
The tailwind on the business on the continued move.
Ryan Potter: Our first question comes from Ryan Potter with city, you may proceed. Hey, thanks to my question. I guess maybe starting on visibility. What level of confidence and visibility do you have into the four-year outlook here? Is that different than how much visibility you would have into initial outlook to start the year? Beyond that, I guess what needs to happen to hit the low end and upper end of the ranges? Are there any additional assumptions you're including regarding the macro or any buffers you may have embedded in that look?
Of.
Business to the offshore in the growth in those markets.
No.
Great for our business.
From a margin standpoint.
Now.
What we have chosen is to invest in on the ERP and.
In HCM solution. So you have workday. So there is a yes.
That's.
That's a fairly sizable investment we also have the investments that we're putting into think of it as the IBEX tack right. This the initiatives that we have going on around AI. That's another big theme on.
Ryan Potter: Sure, Ryan. Thanks for that question and hopefully I can hit all parts and feel free if I missed a couple to remind me. But look, a year ago, we did not anticipate in the back half of the year that the pipeline was going to slow down to where it did over the last two quarters. And I don't think anybody in the space had visibility to that. Reality is it, you know, that did occur.
What kind of investments into our business.
And then candidly the last pieces of the sales and marketing engine and we continue to see our ability to win when on a big stage and so we are.
Investing into that because we we like our chances to win and our close rates in those percentages. So we keep feeding the beast if you will there.
So when you kind of do the the pluses and minuses.
We kind of look at that is roughly a 30 basis point improvement and we're going to manage that carefully right. As we go forward, we want to make sure we continue on margin progression.
Ryan Potter: Now, you know, with the economic challenges, we did a really good job working with our clients of helping them get to low-cost labor markets, moving a lot of US work into places like the Philippines at lower price points and much higher margin for us. So we think that's a great, you know, and you might not have had all the great visibility of that a year ago at the beginning of the year, but I think those are great moves of strengthening our partnerships and providing great solutions for our clients and actually winning market share.
So if we think we're again.
We'll pull back to make sure that we see the margin progression.
Okay, So I guess youre not trading the ERP.
Instead of a one time expense flowing through.
We are.
Okay. Thank you very much.
Yes, Thanks, Matt.
Thank you one moment for questions.
Ryan Potter: Now, as I look at this year, here's how I kind of view, you know, the delay of the pipeline over the last couple of quarters is putting some top line pressure onto our business. But very candidly, that pipeline is heating up. And with very what I call large material fortune, you know, 100 type deals, we won six in June. I really like that pace and we're winning on the big stage. And so, and I feel very good about what is, you know, what is there over the next quarter or two in our ability to win and beat what I'll call the big guys head on.
Our next question comes from Robert Bamberger with Baird You May proceed.
Yes, thanks for taking my question.
Maybe could you talk about the sequential revenue growth pattern throughout the year should we assume sort of that Q1 sequential step up and then stephane.
Step up in Q2, followed by declines in Q3, and Q4 kind of like typical sequential growth cadence.
Yes, Robbie thanks for joining the call and your questions and so sequentially.
We expect.
<unk>.
Fairly sizable.
The increase as we move into Q2.
We as we get.
A quarter, where now we can.
We can talk about where Q2 is is trending but historically, we have a lot of.
E Commerce business that drives that our Q2 the December quarter sequential growth.
Ryan Potter: So when I think about the two ranges that we gave, I believe our ability to hit the high end or above that is going to be dependent on our success on this pipeline. Why we feel we are delivering very well for our incumbents, you know, our, our install date, and so we continue to strengthen that install base, we continue to land and expand more types of work with those, you know, that we feel have great visibility.
Now.
This last year, and historically Q3, Q4, soften and it's kind of driven a little bit by the.
At the end of the retail.
Peak for.
The holiday season et cetera.
What I feel this year, we're going to be a little.
Flatter in other words kind of have.
Ryan Potter: And so I think the big variability then comes into the pipeline. And I really like our position, I like our, you know, we've kind of resumed to our very, very strong win rate that we've had for five plus years. And, you know, so hopefully that answers the lines of your question if there's something I might have missed. You know, please feel free to follow up. No, I think that I covered all.
A strong back half of the year I think driven by this pipeline work that we have.
These deals.
Typically would've been two quarters ago would've been.
Would have been decisions made and ramp starting.
And the pipeline and decisions delayed for those two quarters. So what we're finding is those decisions are being made this summer and.
Ryan Potter: I guess it's kind of shifting to AI and thanks for providing some of the examples you gave on how you're kind of leveraging AI in your business. But just on, I think it's 0.1 and 0.3, could you maybe provide some numbers around how much agent productivity has improved where you have deployed gen AI solutions. Then also in situations where you've used tax to help reduce the need for more agents with any client.
Into September October and we think that by the time you get those you get those ramped you'll be bringing sizable revenue gains from those in the January February months that should smooth that curve.
And it makes it look a little bit.
Stronger in the back half of the year than our historical have been.
Ryan Potter: Does that change how you price your relationship with client at all and does it impact toll spend that you have that client? Sure. Great. Yeah, really, really solid question. And so let's talk about the first, you know, kind of the first prong of AI and, you know, that we call kind of the agent assist gives those agents the productivity boost in that. Now, we're early on and that because what has to happen is you have to train the gender of AI to be effective for your agents and to be really customized.
Okay, Yeah that makes sense and then maybe just talking about the move from <unk> to GAAP can you maybe just specifically talk about anything happening on the revenue side. There I don't I don't imagine anything on revenues, but just exactly what is happening on the margin side moving from <unk> to GAAP and how we should think about that maybe historically and then going going forward.
Third.
Yes, no I think you're right on the revenue side it was not material.
I think in the fourth quarter, it was virtually nil and for the full year of 'twenty three we maybe had a $200000 headwind on revenue so not material on the adjusted EBITDA side is where you see the real impact and that's because of the change in lease accounting previously most of the lease expense was showing up as depreciation and interest expense.
Ryan Potter: You don't just throw it and, you know, kind of give them access to, you know, you know, unfiltered answers. So we're early on on that, but we're really excited about the potential gains and let me give you an idea of how that can really work your new agents that may not be able to get immediate access, you know, from the knowledge that they have inherently from being an agent for a long time.
Ryan Potter: Quite often they struggle with getting to the knowledge base, the right article, they might have to escalate to a tier two supervisor to get to that. Having gendered of AI on their fingertips to where they can find that answer that use that tool, you know, to get to their that's a really powerful productivity gains. The early numbers that we have are, you know, are kind of impactful for a very small subset of, you know, kind of the new, you know, geared around those new agents.
And now it's showing up as rent expense and so the the results you've seen in 'twenty, three and you've got to see him restate. It for the full year 'twenty, two and 'twenty one the K will continue continue going forward on an adjusted net.
Net income.
It's not that material.
The GAAP net income was material because on the warrants before we are.
Accounting for that on a mark to market basis, and so there is a lot of volatility if you remember and we pulled it out of adjusted earnings now we're accounting for that.
Warrant on an equity basis, which means that also the GAAP net income will be smoother going forward.
Yes that makes sense and then just on free cash flow conversion anything with the new accounting changes that would impact that going forward should we expect somewhere around 100% or anything impacting that.
Ryan Potter: So, you know, I hate to quote a number because it's still pretty early on. And, but, but, you know, hopefully walking you through that, you can see the, you know, kind of the potential impact that that could, you know, that that could have and really help that agents pathway to proficiency. In our more customer facing solutions that we're building, here's where we really see that working is in peak season when the typical model is higher a whole lot of agents, we have to do a whole lot of buildouts, and you have to keep those agents for a very short amount of time.
Nothing material impacting the free cash flow.
Perfect well, thank you guys.
Thank you great. Thanks for your questions Robert.
Thank you I'd now like to turn the call back over to Bob <unk> for any closing remarks, yes.
Yes, Thanks, Josh and thanks, everybody for joining the call.
Ryan Potter: By leveraging AI solutions that allow us not to have to, you know, do that, incur all the buildout costs, the training costs, and then our clients paying, you know, paying for that, we think that we can provide a very elegant solution that, you know, doesn't have the need for as many agents in the ramp, you're still going to have need for some, but it doesn't stress test that ramp. So it's probably easier for us, easier on the buildouts, but it also changes the dynamics because now we kind of look at that as a technology margin and not a BPO margin.
Lastly, I just want to really highlight my team and the work that they did over this last year. It was nothing short of exceptional they are the best in the industry and we're looking forward to delivering equally strong FY 'twenty four thank you all.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Ryan Potter: And so we think those things will provide another revenue source for us and a much higher revenue, much higher margin, you know, out of that revenue. But I want to be clear, I don't think this, if we do this right, I don't think this cannibalizes our business. And the reason why is if you do these things, I think you become a stronger partner and they're going to vote their market share to the provider that does that.
Ryan Potter: And so I'm very optimistic about, you know, that this is not a cannibalization of top line, but it really strength and allows you to reason to win more market share of what work you do. And then layer on new business, you know, in the form of, you know, true 100% digital machine AI driven, that's very, very higher margin. That's why we're really excited. And I'm telling you, I think speed really matters in this.
Yes.
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Ryan Potter: And I love, you know, our position as a tech led company positions as well, but our speed and flexibility position is faster. And I think we're beating everybody to the market here just because that's who we are in, you know, in this tech led world. Yeah, that's great. I guess this one last clarification question. I know with them is a gap reporting here. Will you be providing reinstated historical gap results on a quarterly basis, or will this language about provided as you report future quarters?
Yeah.
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Taylor Greenwald: So Ryan, I'll introduce you to Taylor and it's great to have Taylor on board and, you know, and great for, you know, you guys to connect. So over to Taylor. Yeah, no, thanks for the question, Ryan. And so at this point, obviously we've issued the 10K and we have our gap results for 21, 22, and 23, four year results. We haven't provided them yet on a quarterly basis other than the fourth quarter. That's a good question. There's something we'll think about as we go forward in the next quarter. Got it. Thanks again. Great. Thanks, Ryan. Thank you.
Okay.
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Operator: And as a reminder to ask a question, please press star 1-1 on your telephone. One moment for questions.
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Matthew Roswell: Our next question comes from Matthew Roswell with RBC. You may proceed. Yes, thank you. Good afternoon. Just a quick question on the FY24 margin guidance. Looks like you're calling for about 30 basis points of increase. Could you kind of bridge that? I would, in terms of, I would expect the shift offshore should have more of a benefit, but I think the ERP implementation costs are pulling it down. So did you just kind of, you know, bridges to that 30% that 30 basis point increase in margin? Thank you.
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Bob Deck: Matthew, let me start out and then I'll bring Taylor in on this who's obviously drinking by the fire hose, but he's got his arms around this real fast. So I think your instincts are exactly right. We have a good what I'll call tailwind on the business on the continued move of business to the offshore and the growth in those markets. That's great for our business from a margin standpoint. Now, what we have chosen is to invest in on the ERP and HCM solutions.
Okay.
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Bob Deck: So you have work day. So there's a fairly sizable investment. We also have the investments that we're putting in to think of it as the Ibex Tech, this initiative that we have going on around AI. That's another big theme on investments into our business. And then candidly, the last piece is the sales and marketing engine. And we continue to see our ability to win on a big stage. And so we're investing into that because we like our chances to win and our close rates and those percentages.
Okay.
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Bob Deck: So we keep feeding the beast if you will there. So when you do the pluses and minuses, we kind of look at that as roughly a 30 basis point of proof. And we're going to manage that carefully as we go forward. We want to make sure we continue on margin progression. So if we think we're gaining a bit ahead of us, we'll pull back to make sure that we see the margin progression we're going to see. OK, so I guess you're not treating the ERP implementation as a one-time expense. You're following it through. We are. OK, thanks very much. Yeah, thanks about. Thank you. One moment for questions.
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Robert Bamberger: All right, question comes from Robert Bamberger with Beard. He may proceed. Yeah, thanks for taking my question.
Bob Deck: Um, maybe could you talk about the sequential revenue growth pattern throughout the year? Should we assume sort of that Q1 sequential step up? And then step of in Q2 followed by declines in Q3 and Q4, kind of like typical sequential growth cadence? Oh, yeah, Robbie. Thanks for joining the call and your questions. And so sequentially, we expect a fairly sizable increase as we move into Q2. And you know, as we, as we get, you know, a quarter now, you know, we can, we can talk about where Q2 is, you know, is trending.
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Okay.
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Bob Deck: But historically, we'd have a lot of eCommerce business that drives that our Q2, the December quarter, you know, sequential growth. Now, this last year and historically Q3, Q4 soften, and it's kind of driven a little bit by the, you know, the end of the retail, you know, pink for, you know, the holiday season, et cetera. What I feel this year, we're going to be a little flatter, you know, in other words, you know, kind of have a, you know, a strong back half of the year.
Yes.
Okay.
Thanks.
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Yes.
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Okay.
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Bob Deck: I think driven by this pipeline work that we have these deals. Davis. Typically would have been two quarters ago, you know, would have been, would have been decisions made and ramps starting. And the pipeline and decisions delayed for those two quarters. So what we're finding is those decisions are being made this summer and, you know, into September, October. And we think that by the time you get those, you get those ramps, you'll be bringing sizable revenue, you know, gains from those in the January, February, month that should smooth that curve and make it look a little bit, you know, stronger in the back half of the year than our historicals have been. Yep, that makes sense.
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Okay.
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Okay.
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Bob Deck: And then maybe just talking about the move from IFRS to Gap, can you maybe just specifically talk about anything happening on the revenue side there? I don't, I don't imagine anything on revenues, but just exactly what's happening on the margin side, moving from IFRS to Gap and how we should think about that maybe historically and then going forward. Yeah, no, I think you're right on the revenue side, it was not material, you know, I think in the fourth quarter, it was, you know, virtually nailed for the whole year of 23, you maybe had a $200,000 headwind on revenue.
So.
Dan.
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Bob Deck: So not material. On the adjusted EBITDA side is where you see the real impact and that's because of the change in lease accounting. Previously, most of the lease expense was so enough as depreciation and intersex expense. And now it's showing up as rent expense. And so the results you've seen in 23 and you've also see every state for the whole year in 22 and 21 in the K will continue, continue going forward.
Yes.
Okay.
Okay.
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Yes.
Okay.
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Yes.
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Bob Deck: On an adjusted, you know, net income, it's not, you know, that material, the Gap net income was material because on the warrants before we were accounting for that on a marked market basis. And so there's a lot of volatility if you remember and we pulled that out of the just variance. Now we're accounting for the warrants on an equity basis which smooths that out. So the Gap net income will be smoother going forward. Yep, that makes sense.
Okay.
Okay.
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Yes.
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Yes.
Sure.
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Bob Deck: And then just on a free cash flow conversion, anything with the new accounting changes that would impact that going forward. Should we expect somewhere around 100% or anything impacting that? Nothing material impacting the free cash flow. Perfect. Well, thank you guys. Thank you. Great. Thanks for your questions, Robbie. Thank you.
So.
Dan.
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Bob Deck: I'd now like to turn the call back over to Bob Decken for any closing remarks. Yeah, thanks, Joss. And thanks everybody for joining the call.
Okay.
Operator: Lastly, I just want to really highlight my team and the work that they did over this last year. It was nothing short of exceptional. They're the best in the industry and we're looking forward to delivering equally strong FY 24. Thank you all. Thank you.
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Sure.
Okay.
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Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Okay.
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Okay.
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Yes.
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Phil.
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Sure.
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