Q4 2024 Concentrix Corp Earnings Call

January 15, 2025

Good day and thank you for standing by welcome to the Concentrix is fiscal fourth quarter FY 2024 financial results Conference call. At this time all participants are in a listen only mode. Please be advised that today's conference is being recorded after the speaker's presentation there'll be a question and answer session to ask a question.

Unknown Executive: Good day and thank you for standing by. Welcome to the Concentrix's fiscal fourth quarter FY 2024 financial results conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced.

Speaker Change: Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again I would not like to hand, the conference over to your speaker today, Sara Buda, Vice President Investor Relations.

Sara Buda: To withdraw your question, please press star 11 I would now like to hand the conference over to your speaker today, Sara Buda, Vice President, Investor Relations.

Speaker Change: Terrific. Thank you operator, and good evening welcome to the Concentrix fourth quarter and fiscal 2024 earnings call. This call is the property of Concentrix and may not be recorded or rebroadcast without our written permission of Concentrix. This call contains forward looking statements that address our expected future performance and that by their nature address matters that.

Unknown Executive: Terrific.

Sara Buda: Thank you, operator and good evening. Welcome to the Concentrix fourth quarter and fiscal 2024 earnings call.

Speaker Change: These uncertainties may cause our future results to be.

Speaker Change: Curiously different than those expressed in our forward looking statements. We do not undertake to update our forward looking statements as a result of new information or future expectations of events or developments. Please refer to today's earnings release and our most recent filings with the SEC for additional information regarding uncertainties that could affect our future financial results. This includes the risk factor.

Unknown Executive: please refer to today's earnings release and our most recent filing. for additional information regarding uncertainties that could affect our future financial This includes the risk factors provided in our annual report on Form 10-K and our other public...

Speaker Change: As provided in our annual report on Form 10-K, and our other public filings with the SEC.

Sara Buda: Also during the call we will discuss non-GAAP financial measures including adjusted free cash flow, non-GAAP operating income, non-GAAP operating margin, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP EPS, and constant currency revenue. A reconciliation of these non-GAAP measures is available in the news release and on the company's investor relations website under With me on the call today are Chris Caldwell, our President and CEO, and Andre Valentine, our Chief Financial Officer. Chris will provide a summary of our operating performance and growth strategy, and Andre will cover our financial results. Then we'll open the call up.

Speaker Change: Also during the call, we will discuss non-GAAP financial measures, including adjusted free cash flow non-GAAP operating income non-GAAP operating margin adjusted EBITDA adjusted EBITDA margin non-GAAP net income non-GAAP EPS in constant currency revenue growth.

Speaker Change: Reconciliation of these non-GAAP measures is available in the news release and on the company's Investor Relations website under financials with me on the call today are Chris Caldwell, our president and CEO and Andre Valentine, Our Chief Financial Officer, Chris will provide a summary of our operating performance and growth strategy and Andre.

Speaker Change: I will cover our financial results and business outlook, then we'll open the call up for your questions and now I will turn the call over to Greg.

Unknown Executive: And now I'll turn the call over.

Speaker Change: Okay.

Christopher Caldwell: Thank you, Sara. Hello, everyone, and thank you for joining us today for our fourth quarter and fiscal year 2024 earnings call. Before we get into the details of our results, I think it might be helpful to look at how our business has evolved over the past few years to show why we are confident that we will continue to grow profitably in 2025 and believe mid-single-digit growth is achievable in later years. As we have stated and provided many examples over the last two years since Gen AI started to be mainstream, we have executed with intent to focus our offerings on taking advantage of Gen AI and expanding into new areas while keeping our underlying business healthy by de-investing in commodity work.

Speaker Change: Thank you Sarah Hello, everyone and thank you for joining us today for our fourth quarter and fiscal year 2024 earnings call before we get into the details of our results I think it might be helpful to look at how our business has evolved over the past few years to show why we are confident that we will continue to grow profitably in 2025 and believe mid <unk>.

Speaker Change: Signal digit growth is achievable in later years.

Speaker Change: As we have stated and provided many examples over the last two years since Ginnie I started to be mainstream we've executed with intent to focus our offerings and taking advantage of AI and expanding into new areas, while keeping our underlying business is healthy by investing in commodity work as a result, we have more than 2000 clients.

Christopher Caldwell: As a result, we have more than 2,000 clients, including 155 of the Global Fortune 500, with extremely high client revenue retention rates of approximately 99% in fiscal 2024. We have built a defensible market leadership position as a provider of integrated technology-led business solutions that power our clients' success. This means we have the scale, technologies, and capabilities to broaden our market and address the evolving needs of our clients. Our top 25 clients, which are all leading global brands, have an average tenure of over 16 years with us. Our revenue with these top clients continues to grow faster than the rest of our business as we introduce auxiliary services and complementary solutions to expand our value and grow our share while automating and innovating work for them.

Speaker Change: Including 155 of the global Fortune 500, with extremely high client revenue retention rate of approximately 99% in fiscal 2024.

Speaker Change: We have built a defensible market leadership position as a provider of integrated technology led business solution. The power of our clients' success. This means we have the scale technologies and capabilities to broaden our market and address the evolving needs of our clients.

Our top 25 clients, which are all leading global brands have an average tenure of over 16 years with us our revenue with these top clients continues to grow faster than the rest of our business as we introduce ancillary services and complementary solutions to expand our value and grow our share while automating innovating worked for them.

Christopher Caldwell: In fact, nearly $1 billion of our revenue in 2024 is derived from new Concentrix solutions that didn't exist at scale in our business 24 months ago. Solutions such as data annotation, data modeling, analytics, B2B sales enablement, AI design and deployment, cybersecurity, financial crimes and compliance are now today And even now with our commercial available software products, combining our revenue from these offerings grew above mid-single digits in fiscal 2024. Additionally, we have our Catalyst IT Services offering, which represents roughly 8% of total revenue and is also growing well. As we have grown these ancillary services, and we have also proactively reduced the percentage of our business related to low complexity transactions from 13% three years ago to 7% today, as we expect to continue to reduce this percentage further in fiscal 2025.

Speaker Change: In fact, nearly $1 billion of our revenue in 2024 is derived from new Concentrix solution that didn't exist at scale in our business 24 months ago salute.

Speaker Change: Solutions, such as data annotation data modeling analytics BV sales enablement, AI design and deployment cyber security financial crime compliance are now today.

Speaker Change: And even now with our commercial available software products, combining our revenue from these offerings grew above mid single digits in fiscal 2024. Additionally, we have our catalyst services offering which represents roughly 8% of total revenue and then also growing well as.

Speaker Change: As we have grown these ancillary services and we have also proactively reduced the percentage of our business related to low complexity transaction from 13% three years ago to 7% today.

Speaker Change: We expect to continue to reduce this percentage further in fiscal 2025.

Christopher Caldwell: And finally, as AI emerged as a business imperative, we have consistently grown and evolved our business to take advantage of this opportunity and use it as a source of differentiation. In fact, with generative AI deployments across half of our clients, approximately 200,000 desktops in our own operations using GenAI, and with tens of thousands of digital workers that are autonomous, we are confident saying that we have one of the larger deployments of AI technology at scale in the world. We have found that as we deploy our technology, we grow revenue faster with these clients, and we are particularly encouraged that as we have completed the web help integration, we have a large pipeline of new clients in Europe who we will deploy our technology in fiscal 2025.

Speaker Change: And finally as AI emerged as a business imperative, we have consistently grown and evolved our business to take advantage of this opportunity and use that as a source of differentiation in fact with generative AI deployments across half of our clients approximately 200000 desktops in our own operations using gen III and with tens of thousands of digital workers.

Speaker Change: That our economists were competent thing that we have one of the larger deployments of AI technology at scale in the world. We have found that as we deploy our technology to grow revenue faster with these clients and we're particularly encouraged that as we have completed the web help integration we have a large pipeline of new clients in Europe, who we will deploy our ticket.

Speaker Change: In fiscal 2025.

Christopher Caldwell: While the market focus on the erroneous perception of AI as a headwind for our business, we have turned it into a tailwind, using generative AI to take advantage to create new opportunities while making our traditional business better. We have given numerous examples on our last few calls of how we lead our clients through their AI journey from designing and building their operations to deploying automation in reducing low value transactions to enhancing their internal productivity. In doing so, we reduce our client's total cost while increasing our revenue as they consolidate spend with fewer providers and unlock new sources of revenue for us.

Speaker Change: While the market focus on the erroneous perception of AI as a headwind for our business. We have turned it into a tailwind using generative AI to take advantage to create new opportunities, while making our traditional business better we have given numerous examples on our last few calls of how we lead our clients through the AI journey from designing and building our operation.

Speaker Change: To deploying automation and reducing low value transactions to enhancing their internal productivity in doing so we reduced our total cost while I'm pleased with increasing our revenue as they consolidate spend with fewer providers and unlock new sources of revenue for US. This has been the case throughout our history and continues.

To be the case today.

Speaker Change: Delighted with the progress we have made as we have adapted and innovated to address our clients' evolving needs. While we see a clear disconnect today between our underlying fundamentals and our public market valuation I am confident that as we execute our multi year growth strategy, our valuation will align with the strength of our business and the value of our distinguished and unique market.

Christopher Caldwell: While we see a clear disconnect today between our underlying fundamentals and our public market valuation, I am confident that as we execute our multi-year growth strategy, our valuation will align with the strength of our business and the value of our distinguished and unique market leadership position.

Speaker Change: Leadership position.

Christopher Caldwell: With this context as a backdrop, let me give you my view of our most important achievements of 2024 and our expectations for 2025. I'll then turn the call over to Andre, who can provide more details on our financials and outlook. 2024 was a remarkable year for Concentrix. We integrated Web Health with Velocity, aligning our sales, marketing, delivery, and operations team within the first year. We aligned our cultures around one company, one team, ensuring we delivered global scale consistently with local relevance and expertise for every client in every location around the globe. We are delighted to say the Web Health integration is now complete with ongoing net synergy benefits showing through in 2025 and beyond.

Speaker Change: With this context as a backdrop, let me give you my view of our most important achievements of 2024 and our expectation for 2025 I will then turn the call over to Andre who can provide more details on our financials and outlook.

Andre Valentine: 2024, it was a remarkable year for Concentrix, we integrated web help with velocity aligning our sales marketing and delivery and operations team within the first year, we align our cultures around one company one team ensuring we delivered global scale consistently with local relevance and expertise for every client in every location around the globe.

Andre Valentine: We are delighted to say the web help integration is now complete with ongoing net synergy benefits showing through in 2025 and beyond we secured a number of key transformative wins in 2020 for both with our own technology and technology for leading partners and our pipeline continues to be strong going into 2025.

Christopher Caldwell: We secured a number of key transformative wins in 2024, both with our own technology and technology from leading partners and our pipeline continues to be strong going into 2025. We've made prudent investments in our business that we believe will allow us to drive growth and margin expansion in the future. This included founding a new software products organization with strong leadership, enhancing AI tools and technology and expanding our relationship with partners. And we have our first commercial win with our Gen AI IX product suite. All in all, 2024 was a strong year for Concentrix. We delivered solid financial results, growing revenue well ahead of most peers in the broader BPO and ITO service sector, while generating strong free cash flow.

Andre Valentine: We've made prudent investments in our business that we believe will allow us to drive growth and margin expansion in the future.

Andre Valentine: <unk> found included founding a new software product organization with strong leadership, enhancing AI tools and technology and expanding our relationship with partners.

Andre Valentine: And we have our first commercial wins with our Gen AI IX product suite.

Andre Valentine: All in all 2024, it was a strong year for Concentrix, we delivered solid financial results growing revenue well ahead of most peers in the broader <unk> service sector, while generating strong free cash flow, we have evolved our business to take advantage of what clients want fewer providers that can do more and invested more of that take global scale and technology capabilities.

Christopher Caldwell: We've evolved our business to take advantage of what clients want, fewer providers that can do more, and invested more that take global scale technology capabilities to meet their needs. But what gets me most excited is the strong fundamental platform we put in place to drive sustainable growth into the future.

Andre Valentine: To meet their needs.

Andre Valentine: But what gets me most excited is the strong fundamental platform, we put in place to drive sustainable growth into the future for 2025, let me be very clear, we expect to grow our revenue our non-GAAP operating margin and our free cash flow, while paying down debt. We will continue to expand our journey offering both from leading <unk>.

Christopher Caldwell: For 2025, let me be very clear. We expect to grow our revenue, our non-GAAP operating margin, and our free cash flow while paying down debt. We will continue to expand our GenAI offering, both from leading companies like Salesforce, Microsoft and Google, and others on top of our own technology in order to offer our client base the best solution for their business. We'll expand our key relationships by demonstrating the power of Concentrix, combining our design-build-run capabilities and innovative AI-led solutions, domain expertise, and business process experts to fuel our client success. And we will continue to secure new transformational wins that demonstrate the value of our broad-based technology solutions while decreasing our low-complexity business.

Andre Valentine: Things like Salesforce, Microsoft and Google and others on top of our own technology in order to offer our client base. The best solution for their business, we will expand our key relationships by demonstrating the power of Concentrix, combining our design build run capabilities and innovative AI led solutions domain expertise and business process excellence to fuel.

Our client success, and we will continue to secure new transformation.

Andre Valentine: Transformational wins that demonstrate the value of our broad based technology solutions, while decreasing our low complexity business as we look at two years ahead I'm excited about what we are in our journey to become a world's most trusted partner for business and technology solutions. The power World that works I would like to thank our dedicated game changers for their hard work.

Christopher Caldwell: As we look into the years ahead, I'm excited about what we are in our journey to become the world's most trusted partner for business and technology solutions, the power of world that works.

Christopher Caldwell: I'd like to thank our dedicated game changers for their hard work and commitment to excellence, and our clients for their trust and their business.

Henri: And commitment to excellence and our clients for their trust and their business now I will turn the call over to Henri.

Andre Valentine: Now I'll turn the call over to Andre. Well, thank you, Chris. And hello, everyone.

Henri: Well, thank you, Chris and Hello, everyone at 2024 hours a year of significant operational achievement for Concentrix. We integrated web help ahead of plan, culminating in the migration of our financial ERP system at the end of the year, we proactively and essentially invested in the prioritization and commercialization.

Andre Valentine: 2024 was a year of significant operational achievement for Concentrix. We integrated WebHealth ahead of plan, culminating in the migration of our financial ERP system at the end of the year. We proactively and intentionally invested in the productization and commercialization of our internally developed products while driving strong cash flow. We reduced our leverage through debt pay down while increasing our share repurchase program and increasing our dividend. And strategically, we continue to diversify and broaden our value to clients through a diversified set of service options. With a successful 2024 behind us, I'm confident in our position as we enter 2025.

Henri: Of our internally developed products.

Henri: Driving strong cash flow.

Henri: Reduced our leverage through debt pay down while increasing our share repurchase program and increasing our dividend and strategically we continue to diversify and broaden our value to clients through a diversified set of service offerings.

Henri: With a successful 2024 behind us I'm confident in our position as we enter 2025 with that let me delve into the details of our financial results for the fourth quarter and fiscal 2024, and then discuss our business outlook for fiscal 2025.

Andre Valentine: With that, let me delve into the details of our financial results for the fourth quarter and fiscal 2024, and then discuss our business outlook for fiscal 2025. In Q4, we delivered revenue of approximately $2.45 billion, growing 1.5% on a pro forma constant currency basis, which is at the high end of our September guidance. Looking at our fourth quarter revenue growth by a vertical on a pro forma constant currency basis, revenue from retail, travel and e-commerce clients grew almost 9% year-over-year, a continuation of the solid growth we've been seeing in this vertical. Revenue from banking, financial services and insurance clients grew 5%, relatively consistent with prior quarters this year.

Henri: In Q4, we delivered revenue of approximately $2 $45 billion.

Henri: Growing one 5% on a pro forma constant currency basis, which is at the high end of our September guidance range.

Henri: Looking at our fourth quarter revenue growth by vertical on a pro forma constant currency basis revenue from retail travel and E. Commerce clients grew almost 9% year over year, a continuation of the solid growth we've been seeing in this vertical.

Henri: Revenue from banking financial services and insurance clients grew 5% relatively consistent with prior quarters. This year, our recent wins and pipeline give us confidence. This vertical will continue to remain strong for us.

Andre Valentine: Our recent wins at Pipeline give us confidence this vertical will continue to remain strong for us. Revenue from communications and media clients decreased 1% on a pro forma basis, a slight improvement from prior quarters in the year. This decrease in revenue reflects ongoing decreases from a few North American communications clients, partially offset by increases with media clients. Our technology and consumer electronics clients also decreased 1% on a pro forma constant currency basis as did our revenue from clients in the healthcare field. Turing to Profitability, our non-GAP Operating income was $347 million in the top half of our guidance range that we provided on our last call.

Revenue from communications and media clients decreased 1% on a pro forma basis, a slight improvement from prior quarters in the year.

Henri: <unk> <unk>.

Decrease in revenue reflects ongoing decreases from a few north American communications clients, partially offset by increases with media clients.

Henri: Our technology and consumer electronics clients also decreased 1% on a pro forma constant currency basis.

Henri: <unk>.

Henri: Revenue from clients in the healthcare vertical.

Turning to profitability our non-GAAP.

Henri: Operating income was $347 million in the top half of our guidance range that we provided on our last call.

Andre Valentine: Non-Gap Operating Income Margin was 14.2%, a decrease from Q4 2023, primarily due to our increased technology spend, upfront investments in some transformational wins, and duplicate costs related to accelerated shore shift in Q4, all of which we discussed last quarter. Adjusted EBITDA in the quarter was $403 million, a margin of 16.5%. Non-GAAP net income was $219 million in the quarter, an increase of about $6 million compared to the fourth quarter of last year. and Non-Gap Diluted EPS is $3.26. Gap Net Income was $116 million for the quarter and Gap Diluted EPS was $1.72 per share.

Henri: non-GAAP operating income margin was 14, 2% a decrease from Q4 2023, primarily due to our increased technology spend upfront investments in some transformational wins and duplicate costs related to accelerated sure shift in Q4, all of which we discussed last quarter adjusted.

Henri: Adjusted EBITDA in the quarter was $403 million a margin of 16, 5%.

Henri: non-GAAP net income was $219 million in the quarter, an increase of about $6 million compared to the fourth quarter of last year and non-GAAP diluted EPS was $3 26.

GAAP net income was $116 million for the quarter and GAAP diluted EPS was $1 70 272 per share reconcile.

Andre Valentine: Reconciliations for Gap and Non-Gap measures are provided in today's earnings report. Looking at our results for the full year 2024, we grew 2.7% on a pro forma constant currency basis at the high end of the guidance rates we provided a year ago and above many peers. Non-GAAP-OI was $1.32 billion, up slightly over prior year on a pro forma Nine Gap operating margin was 13.7%. Adjusted free cash flow was $475 million. Our free cash flow included spending on integration costs to generate increased synergies in fiscal 2025. We returned approximately $220 million to shareholders. Specifically, we repurchased 136 million of our common shares, representing 2.2 million shares at an average price of approximately $61.74 per share.

Henri: Reconciliations for GAAP and non-GAAP measures are provided in today's earnings release.

Looking at our results for the full year 2024, we grew two 7% on a pro forma constant currency basis at the high end of the guidance range, we provided a year ago and above many peers.

Henri: non-GAAP <unk> was 132 billion up.

Henri: Up slightly over prior year on a pro forma basis non-GAAP operating margin was 13, 7%.

Henri: Adjusted free cash flow was $475 million, our free cash flow included spending on integration cost to generate increased synergies in fiscal 2025.

Henri: We returned approximately $220 million to shareholders, specifically, we repurchased $136 million of our common shares representing $2 two.

Henri: Million shares at an average price of.

Henri: Approximately $61 74 per share and we paid $84 million in dividends during the year, we reduced our net debt by approximately $209 million during the year.

Andre Valentine: And we paid $84 million in dividends during the year. We reduced our net debt by approximately $209 million during the year, and we further reduced our off-balance sheet obligation related to receivables factoring by $46 million during the year to approximately $162 million at year end. At the end of the fourth quarter, cash and cash equivalents were $241 million, and total debt was $4.736 billion, bringing our net debt to $4.495 billion at year-end.

Henri: <unk> reduced our off balance sheet obligation related related to receivables factoring by $46 million during the year to approximately $162 million at year end.

Henri: At the end of the fourth quarter cash and cash equivalents for $241 million and total debt was 4.7 hundred $3 6 billion.

Henri: Bringing our net debt to $4 $4 95 billion at year end.

Andre Valentine: Our liquidity remains strong at approximately $1.5 billion, including over $1 billion on our line of credit, which is undrawn.

Henri: Our liquidity remains strong at approximately $1 5 billion, including over $1 billion on our line of credit which is undrawn.

Henri: With this let me now talk about our outlook for 2025 in the first quarter.

Andre Valentine: With this, let me now talk about our outlook for 2025 in the first quarter. First, as Chris mentioned, we are on an exciting journey as we broaden our offerings to address the evolving needs of our clients. And while the macro continues to affect our business, as it has for all services companies, we expect to deliver growth in 2025 based on the following. Incremental revenue from business we won in 2024 that will ramp throughout the year. Share gains with our largest clients as they consolidate spend with us because of the capabilities and scale that we offer to meet their business needs.

Henri: First as Chris mentioned, we're on an exciting journey as we broaden our offerings to address the evolving needs of our clients.

Henri: While the macro continues to affect our business as it has for all services companies, we expect to deliver growth in 2025 based on the following.

Incremental revenue from business, we won in 2024 that will ramp throughout the year.

Henri: Share gains with our largest clients as they consolidate spend with us because of the capabilities and scale that we offer to meet their business needs and continued growth in outsourcing as clients seek partners that can help them embrace and adopt AI to re imagine their business, while ensuring customer experience excellence data security and.

Andre Valentine: and continued growth in outsourcing as clients seek partners that can help them embrace and adopt AI to reimagine their business while ensuring customer experience excellence, data security and business stability. As always, these drivers of growth will be balanced by the underlying effect of the macro on our clients' businesses, our proactive automation as we continue to intentionally migrate away from low complexity business, and continued movement to lower cost. Delivery Countries as we've seen over the past several years. Turning to margins, we expect non-GAAP operating income and adjusted EBITDA margins to uptick slightly as we balance synergy savings with investments to power our future growth.

Henri: Business stability.

Henri: As always these drivers of growth will be balanced by the underlying effect of the macro on our clients' businesses are proactive automation as we continue to intentionally migrate away from low complexity business and continued movement to lower cost <unk>.

Henri: Delivery countries as we've seen over the past several years.

Henri: Turning to margins, we expect non-GAAP operating income and adjusted EBITDA margins to uptick slightly as we balanced synergy savings with investments to power our future growth we.

Andre Valentine: We do expect our spending on software product development to decrease throughout the course of the year. And finally, we expect Adjusted Free Cash Flow to grow to between $625 and $650 million in 2025, driven by synergy savings, lower integration costs, and lower interest expense.

Henri: We do expect our spending on software product development to decrease throughout the course of the year.

Henri: And finally, we expect adjusted free cash flow to grow to between 625 and $650 million in 2025, driven by synergy savings and lower integration costs and lower interest expense.

Andre Valentine: With this context, our guidance for the full year is as follows. Full Year Reported Revenue of $9.47 billion to $9.61 billion. Our guidance implies constant currency revenue growth for the full year in a range of 0% to 1.5%. Based on current exchange rates, our expectation assumes an approximately 150 basis point negative impact of foreign exchange rates compared with 2024. Non-GAAP operating income is expected to be in a range of $1.3 billion to $1.34 billion. Non-GAAP EPS is expected to be in a range of $11.18 per share to $11.77 per share, assuming non-GAAP interest expense of $273 million, approximately 63.6 million diluted common shares outstanding, and approximately 5% of net income attributable to persistent insecurity.

Henri: With this context, our guidance for the full year is as follows.

Full year reported revenue of $94 7 billion to $9 six $1 billion.

Henri: Our guidance implies constant currency revenue growth for the full year in a range of zero to one 5% based on current exchange rates, our expectation assumes that approximately 150 basis point negative impact of foreign exchange rates compare with 2024.

Henri: non-GAAP operating income is expected to be in the range of one.

Henri: One.

Henri: One 3 billion to $1 $34 billion.

Henri: non-GAAP EPS is expected to be in a range of $11 18 per share to $11 77 per share assuming non-GAAP interest expense of $273 million.

Henri: Lastly, $63 6 million diluted common shares outstanding and approximately 5% of net income attributable to participating securities.

Andre Valentine: effective tax rate is expected to approximately 25.5 to 26.5 percent.

Henri: The effective tax rate is expected to approximate 25, 5% to 26, 5%.

Andre Valentine: And finally, as a signal of confidence in our long-term growth strategy, the board has refreshed our share repurchase authorization to $600 million. We expect our spending on fiscal year 2025 repurchases to modestly exceed the pace in fiscal 2024, taking advantage of what we believe is the extreme disconnect between the fundamentals of our business and our current valuation. We remain committed to maintaining investment-grade principles, repaying our debt to move closer to our target leverage ratio, and continuing to support our given...

Henri: Finally, as a signal of confidence in our long term growth strategy. The board has refreshed our share repurchase authorization to $600 million, we expect our spending in fiscal year 2025 repurchases to modest modestly exceed the pace in fiscal 2020 for taking advantage of what we believe is the extreme disconnect between.

Henri: The fundamentals of our business and our current valuation.

Henri: We remain committed to maintaining investment grade principles repaying our debt to move closer to our target leverage ratio and continuing to support our dividend.

Andre Valentine: For the first quarter, we expect reported revenue of $2.355 billion to $2.37 billion, implying a constant currency revenue growth rate of 0% to 0.75%. Non-GAAP operating income is expected to be in a range of $305 million to $315 million. Non-Gap EPS is expected to be between $2.49 per share to $2.64 per share. Assuming non-gap interest expense of $74 million, approximately 64.1 million diluted common shares outstanding, and approximately 5% of net income attributable to participating securities. effective tax rate in the first quarter. is expected to approximate 25.5 to 26.5 percent.

Henri: For the first quarter, we expect reported revenue of $2 355 billion.

Henri: The $2 $3 7 billion.

Henri: Implying of constant currency revenue growth rate of zero to 0.7.

Henri: 75%.

Henri: non-GAAP operating income is expected to be in a range of $305 million to $315 million.

Henri: non-GAAP EPS is expected to be between $2 49 per share to $2.64 per share assuming a non-GAAP interest expense of $74 million approximately $64 1 million diluted common shares outstanding and approximately 5% of net income attributable to participating secure.

Henri: <unk>.

The effective tax rate in the first quarter is expected to approximate 25 five to 26, 5%.

Andre Valentine: As in prior years, we expect adjusted free cash flow in the first quarter to be negative, although improved as compared to last year's Q1, followed by consistent, strong cash flow generation over the remaining quarters of the year.

Henri: As in prior years, we expect adjusted free cash flow in the first quarter to be negative although improved as compared to last year's Q1, followed by consistent strong cash flow generation over the remaining quarters of the year or.

Andre Valentine: Our business outlook and cash flow expectations did not include any future acquisitions or impacts from future foreign currency fluctuations. We remain confident in the growth of the business and believe we are taking a conservative position in our guidance for 2025.

Henri: Our business outlook and cash flow expectations do not include any future acquisitions or impacts from future foreign currency fluctuations.

Henri: We remain confident in the growth of the business and believe we are taking a conservative position in our guidance for 2025.

Andre Valentine: As we look back on 2024, we're delighted with our market position. We have intentionally and strategically expanded our value to clients by broadening our portfolio of solutions across the spectrum of business and technology solutions. We've embraced the opportunity of generative AI and have established a clear market leadership position that is allowing us to win large transformational programs and drive new revenues. We believe we are making the right investments in the business to future-proof our offerings and position us for growth upside in the long term while growing margins in cash flow. We remain steadfast in our commitments to driving shareholder value through a combination of long-term revenue and margin expansion, having the right capital structure, and continued capital return through a combination of share repurchases and dividends.

Henri: As we look back on 2024, we're delighted with our market position.

Henri: Position, we are intentionally and strategically expanded our value to clients by broadening our portfolio of solutions across the spectrum of business and technology solutions, we've embraced the opportunity of generative AI and have established a clear market leadership position that is allowing us to win large transformational programs and dry.

Henri: <unk> new revenue streams.

Henri: We believe we believe we are making the right investments in the business to future proof, our offerings and position us for growth upside in the long term, while growing margins and cash flow, we remain steadfast in our commitment to driving shareholder value through a combination of long term revenue and margin expansion, having the right capital structure and continued cap.

Henri: Return through a combination of share repurchases and dividends. We're excited about the road ahead.

Andre Valentine: We're excited about the road ahead.

Unknown Executive: With that, Josh, please open the line for questions. 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.

Henri: With that Josh Please open the line for questions.

Henri: 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, one moment for questions.

Joseph: Our first question comes from Joseph <unk> with Canaccord Genuity you May proceed.

Joseph Vafi: Our first question comes from Joseph Vafi with Canicord Genuity. You may proceed. Hey guys, good afternoon. Nice to see progress in the business on a lot of fronts.

Joseph: Hey, guys. Good afternoon, nice to see progress in the business on a lot of fronts I thought maybe we'd just kind of drill down first on the revenue outlook appreciate.

Joseph Vafi: I thought maybe we'd just kind of drill down first on the revenue outlook. I appreciate your discussions on incremental revenue wins, share gains, and more volume switching to outsourcers. I just wanted to also get some input on – I know you mentioned that the less complex work was going to continue to decline.

Joseph: Your discussions on incremental revenue wins share gains and <unk>.

Joseph: More and.

Joseph: More volume switching to Outsourcers just wanted to also get some input on I know you mentioned that the less complex work was going to continue to decline and I was wondering if you could provide some commentary on.

Christopher Caldwell: I was wondering if you could provide some commentary on perhaps how many points of kind of revenue headwind that may comprise in 2025, and then also if there's any headwind coming from geographic delivery, mixed change from perhaps onsite or onshore to offshore, etc., and then I'll have a quick follow-up. Yeah, for sure, Joe. So a couple of things.

Joseph: Perhaps how many points.

Kind of a revenue headwind that may comprise in 2025, and then also if there is.

Joseph: Any headwind coming from.

Joseph: Geographic delivery mix change from perhaps.

Joseph: On site or onshore to offshore et cetera, and then I'll have a quick follow up.

Joe: Yes for sure Joe So from a couple of things.

Speaker Change: Let's start with the last one first in terms of your shift in revenue headwinds, we are seeing that from Europe into Africa and Eastern Europe.

Christopher Caldwell: Let's start with the last one first. In terms of geoshift and revenue headwinds, we are seeing that from Europe into Africa and Eastern Europe. We are continuing to see that from North America. We talked about that a little bit where we had some healthcare programs going offshore. Cost for delivery is certainly a big issue with clients, and so we expect that that kind of offshoring of work will continue, similar to what we've talked about as a point, a bit of headwind of growth in the last little while. In terms of the low value transaction going down, our expectation is that we will lower that by another 1% to 2% in the course of 2025.

Speaker Change: We are continuing to see that from North America, we talked about that a little bit where we had some health care programs going offshore.

Speaker Change: Cost for delivery is certainly a big issue with clients and so we expect that that kind of offshoring of work will continue.

Speaker Change: Similar to what we've talked about as a point point a bit of headwind the growth in the last little while in terms of the low value transaction going down our expectation that we will lower that by another 1% to 2% in the course of 2025.

Christopher Caldwell: So you'll get down to that sort of 5% range. There's always stuff that kind of falls into that. But we've done what we're really happy with, a very good job over the last year of not growing that, not going after any business that would add to that, and continue to automate and drive that down. So our expectation is, if you just think of 7% going down to 5% of our business, of that type of headwind as we look at 2025 and what we're looking at.

Speaker Change: So you'll get down to that sort of five percentage range, there's always stuff that kind of falls into that but.

Speaker Change: But we've done what we're really happy with a very good job over the last year not growing that not not going after the business that would add to that and continue to automate and drive that down so our expectation is if.

Speaker Change: If you just think of.

Speaker Change: 7% going down to 5% of our business of that type of headwind as we look at 2025 and what we're looking at.

Great. Thanks for that color, Chris and then.

Joseph Vafi: Great. Thanks for that call, Chris.

Joseph Vafi: And then maybe more of a detailed update. I know last quarter you indicated that, you know, there was a large transformational win, I believe, where you were going to finance some of the upfront costs there. Just kind of update on those types of transactions, you know, progress and when they may kind of reverse and start generating revenue and how they may contribute to the P&L in 2025. Thanks a lot. Yeah, for sure, Joe. So, well, the large transformational deal that we had upfront, some of the costs will start to generate revenue in 2025, but it's more in the sort of third and fourth quarter for it to be more meaningful.

Speaker Change: Maybe more of a detailed update I know last quarter you indicated that.

Speaker Change: There was a large transformational when I believe were.

Speaker Change: You were going to.

Speaker Change: You were going to finance some of the upfront costs, there just kind of update on on those types of transactions.

Speaker Change: Progress and when they may come.

Speaker Change: <unk>.

Speaker Change: Kind of reverse and start generating revenue and how they may contribute to the P&L in 2025, thanks a lot.

Joe: Sure Joe.

Speaker Change: The large transformational deal that we had the upfront some of the costs will start to generate revenue in 2025, but it's more in the <unk>.

Speaker Change: Third and fourth quarter for it to be more meaningful there's really not too much.

Christopher Caldwell: There's really not too much in Q1 outside of some costs that are running through, and Q2 we'll start to see some revenue, but then it's really on the back half of the year. We have not done any deals of that size in Q4 that you'll see through, but we have done a number of smaller transformational deals relative to the large one. And they'll start, you know, frankly, generating revenue within Q2 and Q3, but again, more back half of the year. The transformational deals tend to take a little longer just because we have to build out the platform for it to move across, move the work across and then start to drive it.

Speaker Change: Q1 outside of some costs that are running through in Q2, we'll start to see some revenue, but then it's really on the back half of the year.

Speaker Change: We have not done any deals of that size in Q4 that you won't you'll see through but we have done a number of smaller transformational deals.

Speaker Change: Relative to the large one and they'll start frankly generating revenue within Q2, and Q3, but again more back back half of the year. The transformational deals tend to take a little longer just because we have to build out the platform for its move across move of work across.

Speaker Change: And then start to drive it, but youre not seeing that sort of upfront capital requirement that.

Christopher Caldwell: But you're not seeing that sort of upfront capital requirement that we saw with the one very large transformational deal.

Speaker Change: We saw with the one very large transformational deal.

Speaker Change: Sure great. Thanks, very much Chris.

Joseph Vafi: Great. Thanks very much, Chris. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Dave Koning with Baird You May proceed.

David Koning: Our next question comes from Dave Koning with Baird. You may proceed. Yeah. Hey, guys. Thanks so much. Great Q4.

Dave Koning: Yeah, Hey, guys. Thanks, so much great Q4.

Dave Koning: And maybe first of all just when we look across CX or PPO or it.

David Koning: And maybe first of all, just, you know, when we look across CX or BPO or IT, in the last couple of years, businesses have just wanted to spend less, tighten the belt a little bit, we kind of get that. Are we getting to a point where, you know, consumers are starting to push back? You know, we have to go through a whole bunch of bots and then, you know, finally talk to somebody on the phone. And, you know, that takes extra time that, you know, really we're having as consumers to take longer while businesses are getting to lower their handle time.

Dave Koning: The last couple of years businesses, just wanted to spend a lot of tightened our belts a little bit we kind of get that.

Dave Koning: Are we getting to a point where consumers are starting to push back is.

Dave Koning: We have to go through a whole bunch of box and then finally talk to somebody on the phone and that takes extra time that really were having as consumers to take longer while businesses are getting to lower their handle time, but is there enough pushback that you are starting to see companies say, hey, we need to outsource more here not less because there's consumer pushback and we want to reinvest in.

David Koning: But is there enough pushback that you're starting to see companies say, hey, we need to outsource more here, not less, because there's consumer pushback and we want to reinvest in service again? Is that starting to shift back?

Dave Koning: Service again or is that starting to shift back.

Speaker Change: Yes, that's a very interesting question, we see it in certain industries, we see it in <unk>, we see it in some high value goods.

Christopher Caldwell: Yeah, that's a very interesting question. We see it in certain industries. We see it in BFSI. We see it in some high-value goods. We see it in a bit of auto, where we don't actually see that pushback from consumers as in telecom, for instance, or in consumer electronics, for instance, because there's no one really raising the bar high enough that people can do to compare to. Kind of maybe a sad state of affairs, but that's generally what we're seeing. And so where we see businesses really want to separate and differentiate their offering, they're outsourcing more, and they're outsourcing more of the tech, and they're kind of doing it in a combined manner that really drives a better customer experience.

Speaker Change: We see it in a bit of auto where we don't actually see that pushback from.

Speaker Change: From consumers as in Telecom for instance, or in <unk>.

Speaker Change: Some of our products for instance, because there's no one really raising the bar high enough that people can do the comparison.

Speaker Change: Kind of maybe a subset of affairs, but thats generally what we are what we're seeing and so where we see businesses really want a separate and differentiate their offering they're outsourcing more and they're outsourcing more of the tech and they're kind of doing it in a combined manner that really drives a better customer.

Speaker Change: Customer experience, we do think as you know.

David Koning: We do think, as consumer purchasing power hopefully rebounds in 2025, that companies will kind of try and differentiate a lot more. And I think generally what we're seeing is that probably there will be some human involved in that, and most likely that human will be in an outsourced relationship. Yeah, that's that's great to hear.

Speaker Change: Consumer consumer purchasing power I, hopefully rebounds in 2025 that companies will kind of trying to differentiate a lot more and I think generally what we're seeing is that probably there will be some human involved in that.

Speaker Change: And most likely that you will be in an outsourced relationship.

Speaker Change: Yes, that's great to hear and then maybe my follow up I know you kind of.

David Koning: And then maybe my follow up, I know, you kind of indicated that in the beginning of the call back to mid single digits at some point is, is there a time frame, you know, which you kind of expect to get back to that? And are there indications in the pipeline or, you know, anything in the demand environment that you're seeing that would say, hey, we're, maybe we're only three, four or five quarters from that, just a little context around that? Yeah, for sure. I mean, if you look at what we called out, and you just simply take the billion dollars of business that we talked about in the opening comments, growing sort of high single digit, and then you talk about the catalyst business, which is growing roughly in that range.

Speaker Change: Indicated that in the beginning of the call back to mid single digits at some point is there a timeframe.

Speaker Change: You kind of expect to get back to that.

Speaker Change: Are there indications in the pipeline or anything in the demand environment that youre seeing that would say, hey, where maybe we're only three or four or five quarters from that just a little context around that.

Speaker Change: Yeah for sure I mean, if you look at what we call them and you just simply take the $1 billion of business that we've talked about in the opening comments growing.

Speaker Change: Sort of high single digits.

Speaker Change: Single digit and then you talked about the catalyst business, which is growing roughly in that range and then we have a number of other capabilities within our business growing within that range you can see that at.

Christopher Caldwell: And then we have a number of other capabilities within our business growing within that range. You can see that at scale, right, that's a few billion dollars. At scale, we are growing, you know, above that single digit mark. So clearly, what do we need to do, we need to continue to be faster at automating some of the work that we can get done, because we've, when we do that, we tend to win more work, we need to continue to focus on bringing down our lower value work, so that, you know, we don't have that overhang within our within our business.

Speaker Change: Scale right. That's a few billion dollars upscale we are growing.

Speaker Change: Above that single digit Mark so clearly what do we need to do we need to continue to be faster at automating some of the work.

Speaker Change: We can get done because we when we do that we tend to win more work.

Speaker Change: We need to continue to focus on bringing down our lower value work.

So that.

Speaker Change: We don't have that overhang within our within our business and if you kind of do the math, we talk about other years, but it's not multiple years, our expectation is that.

David Koning: And if you kind of do the math, we talked about other years, but but it's not multiple years, our expectation is that, you know, getting out of 2025, and if we can continue to drive what we want to drive, then that's something that we should be able to achieve shortly thereafter. Gotcha. That's great. Well, thanks, guys. Thank you very much. Thank you.

Speaker Change: Getting out of 2025, and if we can continue to drive what we want to drive then that's something that we should be able to achieve shortly thereafter.

Speaker Change: Gotcha, that's great well thanks, guys.

Speaker Change: Thank you very much.

Thank you.

Speaker Change: Our next question comes from <unk> Bhattacharya with Bank of America You May proceed.

Ruplu Bhattacharya: Our next question comes from Ruplu Bhattacharya with Bank of America. You may proceed.

Aisling Grueninger: Hi, this is Aisling on. My first question is for Chris. Can you just talk about how your digital CX or Catalyst business is trending? What was the revenue growth year-over-year this quarter and how should we think about growth in fiscal 25 since you've talked about some potential large deals? Yeah, so our catalyst business is doing very, very well. We talked about it being roughly 8% of our business, and we talked about it growing well, which you consider mid to high single digit growth through the course of the year. There's some fluctuation in that as we continue to add more partner implementations in it.

Speaker Change: Hi, This is Ashley on for <unk>. My first question is for Chris can you just talk about how your digital CX or catalysts business is trending what was the revenue growth year over year this quarter and how should we think about growth in fiscal 'twenty five since you've talked about some potential large deals you're pursuing thanks.

Chris Caldwell: Yes, so our catalyst business is doing very very well, we've talked about it being roughly 8% of our business and we've talked about it growing well.

Speaker Change: You consider mid to high single digit growth through the course of the year.

Speaker Change: There is some fluctuation in that as we continue to add more partner implementations and our expectation is that that's what it's going to continue to grow it's one of the.

Christopher Caldwell: Our expectation is that that's what it's going to continue to grow. It's one of the higher, bigger growing areas as we implement more and more technology. And we're kind of quite happy with what we're finding with it. And it's adding a lot of value to our overall relationships within our client base.

Speaker Change: They are growing areas as we implement more and more technology and we're quite happy with what we're finding with it and it's adding a lot of value to our overall relationships within our.

Speaker Change: Client base.

Thanks, one for Andre can you just talk about the priorities for cash in fiscal 'twenty, five and how you're balancing reinvesting in the business versus M&A versus buybacks, just any color around that would help thanks.

Andre Valentine: Thanks.

Andre Valentine: One for Andre. Can you just talk about the priorities for cash in Fiscal 25 and how you balance reinvesting in the business versus M&A versus buybacks? Just any color around that would be great. Sure, happy to do it. So I feel really confident in the free cash flow generation in 2025 and that that will give us the opportunity to continue doing what we have been doing which is obviously First and foremost, investing in growing the business organically and then having the free cash flow left over to continue to pay down our debt and as well as return capital to shareholders.

Speaker Change: Sure happy to do it so I feel really confident in.

Speaker Change: In the free cash flow generation in 2025, and that that will give us the opportunity to continue doing what we have been doing which is obviously <unk>.

Speaker Change: And for most investing in growing the business organically and then having the free cash flow left over to continue to pay down our debt.

Speaker Change: And as well as return capital to shareholders. So we feel great about the confidence that our board has shown.

Andre Valentine: We feel great about the confidence that our board has shown in us in increasing the authorization for share repurchases up to $600 million. We've said that we'll continue, certainly during this period where we feel like there's this disconnect between our valuation and the underlying fundamentals. will be active in share buyback, and in my commentary I said we buy back slightly more, modestly more than what we purchased in fiscal year 24, so you can kind of figure out from that what the priorities will be. generate the strong free cash flow, share repurchases slightly more than the $136 million that we did this year.

Speaker Change: In us in.

Speaker Change: Increasing the authorization for share repurchases up to $600 million.

Speaker Change: He said that yes, we will continue certainly during this period, where we feel like there is this disconnect between our valuation and the internet.

Speaker Change: The fundamentals of the business will be active in share buyback.

Speaker Change: In my commentary I said buyback.

Speaker Change: Slightly more modestly more than what we repurchased in fiscal year 'twenty. Four so you can kind of figure out from that what the priorities will be.

Speaker Change: Generate the strong free cash flow.

Speaker Change: Share repurchases slightly more than the $136 million that we did this year, our dividend was $84 million this past year.

Andre Valentine: Our dividend was $84 million this past year. We've increased it in the past by 10% each year. We might look to do that again this year. And then with the remainder left to pay down debt to move closer to our target. Thank you.

Speaker Change: We've increased it in the past by by 10% each year, we might look to do that again this year.

Speaker Change: And then with the remainder.

Speaker Change: Two.

Speaker Change: Move closer to pay down debt to move closer to our targeted leverage ratio.

Speaker Change: Great. Thank you I'll pass it back.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: Our next question comes from <unk> <unk> with Scotiabank you May proceed.

Divya Goyal: Our next question comes from Divya Goyal with Scotiabank. You may proceed. Good afternoon, everyone. So I wanted to further talk about this demand environment that we're talking about here. Chris, could you help us understand the sustainability of these revenues? Obviously, the growth is bleak for fiscal 2025. How should the market get confident in terms of the company returning to, say, even the mid single digits from a revenue growth standpoint? And if you could potentially also help us understand how should how could or should we expect the markets to potentially grow on a go forward basis?

Speaker Change: Good afternoon, everyone.

Speaker Change: So I wanted to talk about the demand environment that we're talking about here.

Could you help us understand the sustainability of these revenues obviously the growth is bleak for fiscal 'twenty 25, how should the market get confident in terms of the company returning to say, even the mid single digits from a revenue growth standpoint.

Speaker Change: And if you could potentially also help us understand how should how could or should we expect the margins to potentially grow on a go forward basis. Thank you.

Christopher Caldwell: Thank you. Yeah, Divya, so a couple of things. As we talk about, we've got a lot of businesses growing within our portfolio that are at mid-single digits, if not higher, and some even higher. And as they get more and more scale of our business, that's what gives us the confidence to believe that we can get to mid-single digit. As Andre also talked about, if you think about this year ahead, not only are the wins that we've gotten within 2024 that will layer into our business over the course of the year, but we'll also drive down our transactional sort of low-value business from 7% to 6% to 5% through the course of the year.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: A couple of things as we talked about we've got a lot of businesses growing within our portfolio that are at mid single digits, if not higher.

Speaker Change: Some even higher and as they get more and more scale of our business. That's what gives us the confidence to believes that we can get to mid single digit.

Andre Valentine: Andre has also talked about if you think about this year ahead.

Andre Valentine: We are the wins that we've gotten within 2024 that layer into our business over the course of the year.

Andre Valentine: But it will also drive down our transactional.

Andre Valentine: Low value business from seven 6% to 5% through the course of the year. So there is some headwinds to that but ultimately we're quite confident that we can grow grow past that with all the different areas that we're making and.

Christopher Caldwell: So there's some headwinds to that. But ultimately, we're quite confident that we can grow past that with all the different areas that we're making. And the areas that are growing are things that are in demand around generative AI, whether it be the data annotation, whether it be our analytics business, our analytics business is doing very, very well, whether it be some of our gen AI prototyping and tooling and implementation. We've signed up with Salesforce and Microsoft and Google this year to do more and more partner work, just certainly expanding. And we're happy with that. So there's lots of momentum in the business.

Andre Valentine: Areas that are growing are things that are in demand around generative AI, whether it be the data annotation, whether it be our analytics business doing very very well, whether it be some of our gen AI.

Andre Valentine: First typing and pooling and implementation.

Andre Valentine: We signed up with <unk>.

Andre Valentine: Sales force is Microsoft and Google is here to do more and more partner work, so certainly expanding.

Andre Valentine: We're happy with that so theres lots of momentum in the business and I was wondering appointment we're also being somewhat prudent.

Christopher Caldwell: And as Andre pointed out, we're also being somewhat prudent. with our guidance for fiscal 25, because we will do the right thing by our clients, but we also want to make sure that we're messaging to investors, being prudent with what we want to get done. And if there's an opportunity to move stuff offshore that will drive a higher margin for us, we would probably do that, whether it creates a revenue headwind or not. I think in terms of the margin expansion process, through the course of 2024, we were pretty clear about where we were making additional investments, whether it be in our software platforms, whether it be in some of the new capabilities that we're building out with our partners.

Andre Valentine: With our guidance.

Andre Valentine: For fiscal 'twenty five.

Andre Valentine: Because.

Andre Valentine: We will do the right thing for our clients, but we also want to make sure that we are messaging to investors.

Being prudent with what we want to get done and if there is an opportunity to move some offshore that will drive a higher margin for us.

Andre Valentine: Probably do that whether it creates a revenue headwind or not I think in terms of the margin expansion process through the course of 2024, we were pretty clear about where we were making additional investments whether it be in our software platform whether it be in some of the new capabilities that we're building out with our partners and obviously.

Christopher Caldwell: And obviously, we have to hire, in some cases, a different skill set of individuals for some of the work that we've gotten into, whether it be our financial crimes and compliance, whether it be some of our BFFI work, etc. And I think all of those are higher margin businesses that we are growing and we're growing well. And so my expectation is that that will start getting layered in and we'll start to see that grow. And as Andre also pointed out in the prepared remarks, we do not expect to spend the same on our software development this year as we did last year.

Andre Valentine: The higher in some cases, a different skill set of individuals for some of the work that we've gotten into.

Andre Valentine: Whether it be our financial crime and compliance whether it would be some of our BSI work et cetera, and I think all of those are higher margin businesses.

Andre Valentine: We are growing and we're growing well and so my expectation is that that will start getting layered in and we will start to see that grow and as Andre also pointed out in.

Andre Valentine: In the prepared remarks, we do not expect to spend the same on our software development. This year as we did last year, we told investors that we needed to get everything into a.

Christopher Caldwell: We told investors that we needed to get everything into a multi-tenant, more commercially-ready state that we would be spending up until the end of the year. And then we would be looking at reducing that spend through the course of 2025, more in line with how we're driving revenue. So that's our plan. And also, one thing that we should call out is that we're very happy with the number of IEX product sales we got within the first couple of weeks. We've got a very strong pipeline with that. Now, clearly, that's very low dollar value to begin with, but frankly, it's software margins.

Andre Valentine: Multi tenant more commercially ready state.

Andre Valentine: We will be spending up until sort of the end of the year and then we would be looking at.

Andre Valentine: Kind of reducing that spend through the course of.

Andre Valentine: 2025 more in line with how we are driving revenue. So that's our that's our plan and also one thing that we should call out is that we're very happy with the number of IX.

Andre Valentine: Product sales, we got within the first couple of weeks, we've got a very strong pipeline with that absolutely are very low dollar value to begin with but frankly, a software margins and so as we layer in more and more of that into our business. We have the ability to grow our margins through that as well.

Divya Goyal: And so as we layer more and more of that into our business, we have the ability to grow our margins through that as well. That's helpful.

Speaker Change: That's helpful. Maybe I'll just ask one more question in the interest of the <unk>.

Divya Goyal: Maybe I'll just ask one more question in the interest of, you know, the concerns around the CX sector. Could you help us understand, like, with the increased prevalence of agentic AI, how will Concentrix managed services play out? Or what specific role would Concentrix have to play with the increasing prevalence of automation, AI and agentic AI? And that's all for me. Thank you. Yeah, for sure, Divya. I go back to our prepared remarks. Like, right now, what I think investors don't quite understand is that we have half our clients on JNI right now. We have literally tens of thousands of autonomous agentic agents doing what they need to do and continue to drive it.

Speaker Change: Turns around the CX sector could you help us understand like would the increased prevalence of <unk> AI, how will Concentrix managed services play out or what specific role with Concentrix have to play with the increasing prevalence of automation AI and <unk> AI.

Speaker Change: Is all for me thank you.

Speaker Change: Yes for sure.

Speaker Change: I go back to our prepared remarks, but right now I think investors don't quite understand is that we have half of our client fund VIII right now we have literally tens of thousands of autonomous agenda agent.

Speaker Change: Doing what they need to do and continue to drive it.

Christopher Caldwell: These things do require tuning, they do require data management, they do require analytics to make sure that they're doing the right things. There does need to be some regulatory compliance around them, depending on which country they're deployed on. There's just a lot of other management that goes around with it. And here we have grown our revenues while, in the last two years, driving this JNI deep into our client base and doing a lot of autonomous work. And what we're finding is that even the big software providers are coming to us to say, look, you understand the domain expertise around this.

Speaker Change: Things do require tuning the new required data management, they do require analytics to make sure that they're doing the right things.

Speaker Change: And there does need to be some regulate regulatory.

Speaker Change: Clients, Robyn, depending on which countries. They are deployed on there's just a lot of other management that goes around with it and here we have grown our revenues while in last two years driving this journey deep into our client base and doing a lot of autonomous work and what we're finding is that even the big software providers are coming to us to say look you up.

Speaker Change: Extend the domain expertise around this you understand how the systems are built you have tightened with all the technology you understand the data and the domain expertise around what we're trying to achieve you understand the client relationship so help us trying to figure out how to.

Christopher Caldwell: You understand how the systems are built. You have tie-ins to all the technology. You understand the data and the domain expertise around what we're trying to achieve. You understand the client relationship. So help us try to figure out how to get our products in there, sell our products in there, and then maintain the products as they go. And so that provides new revenue streams for us that two years ago we didn't have. I think the other thing that we called out in the prepared remarks and sort of our businesses that weren't at scale two years ago and now are at scale is even revenue generation.

Speaker Change: That our product and their solar products in there and then maintain our products.

Speaker Change: They go and so that provides new revenue streams for us that two years ago, we didn't have.

Speaker Change: I think the other thing that we called out in the prepared remarks, and some of our businesses.

Speaker Change: Where does that scale three years ago and now are at scale is even the revenue generation a lot of people are thinking generative AI is simply for reducing cost and taking out cost.

Christopher Caldwell: A lot of people are thinking generative AI is simply for reducing costs and taking out costs. We found that clients are actually open to trying to figure out how to use JNI for driving revenues and figuring out how to improve the experience and actually delivering better outcomes for the client. And again, that requires consulting analytics and data modeling and data annotation and managed services around that and security and compliance, et cetera, et cetera, et cetera. And I just don't think that people appreciate despite the best commercials on TV and as you walk through the airport about how well done this stuff is, it isn't.

Speaker Change: We found that clients are actually open to try and figure out how to use gen AI for driving revenues and figuring out how to improve the experience and actually delivering better outcomes for.

Speaker Change: For the clients and again that requires consulting analytics and data modeling and data annotation and managed services around that and secure and compliant et cetera, et cetera et cetera.

Speaker Change: And I, just don't think that.

Speaker Change: People. Appreciate this is despite the best commercials on TV and as you walk through the airport about how one and done this stuff is it isn't.

Divya Goyal: And it requires professional services companies to be able to support that. Very helpful, thank you.

Speaker Change: And it requires professional services companies to be able to to support them.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone.

Unknown Executive: Thank you, and as a reminder, to ask a question, please press star 1 1 on your telephone.

Speaker Change: And im not showing any further questions. This concludes the conference. Thank you for your participation you may now disconnect.

Unknown Executive: And I'm not showing any further questions.

Unknown Executive: This concludes the conference. Thank you for your participation. You may now disconnect.

Speaker Change: Okay.

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Unknown Executive: Good day and thank you for standing by.

Speaker Change: Good day and thank you for standing by welcome to the Concentrix is fiscal fourth quarter FY 2024 financial results Conference call. At this time all participants are in a listen only mode. Please be advised that today's conference is being recorded after the speaker's presentation there'll be a question and answer session to ask a question. Please press star.

Unknown Executive: Welcome to the Concentrix's fiscal fourth quarter FY 2024 financial results conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced.

Sara Buda: One one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again I would not like to hand, the conference over to your speaker today, Sara Buda, Vice President Investor Relations.

Sara Buda: To withdraw your question, please press star 11 I would now like to hand the conference over to your speaker today, Sara Buda, Vice President, Investor Relations. Terrific. Thank you, operator and good evening. Welcome to the Concentrix fourth quarter and fiscal 2024 earnings call.

Sara Buda: Terrific. Thank you operator, and good evening welcome to the Concentrix fourth quarter and fiscal 2024 earnings call. This call is the property of Concentrix and may not be recorded or rebroadcast without our written permission of Concentrix. This call contains forward looking statements that address our expected future performance and that by their nature address matters.

Unknown Executive: This call is the property of Concentrix and may not be recorded or rebroadcast without the written permission. This call contains forward-looking statements that address our expected future performance and that, by their nature, address matters that are uncertain. These uncertainties may cause our future results do not undertake to update our forward-looking statements as a result of new information or future expectations, events, or developments. please refer to today's earnings release and our most recent filing. for additional information regarding uncertainties that could affect our future financial This includes the risk factors provided in our annual report on Form 10-K and our other public...

Or is that or uncertain. These uncertainties may cause our future results to be materially different than those expressed in our forward looking statements. We do not undertake to update our forward looking statements as a result of new information or future expectations of events or developments. Please refer to today's earnings release and our most recent filings with the SEC for additional information regarding <unk>.

Sara Buda: Certainties that could affect our future financial results. This includes the risk factors provided in our annual report on Form 10-K, and our other public filings with the SEC.

Sara Buda: Also during the call, we will discuss non-GAAP financial measures, including adjusted free cash flow, non-GAAP operating income, non-GAAP operating margin, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP EPS, and constant currency revenue. A reconciliation of these non-GAAP measures is available in the news release and on the company's investor relations website under With me on the call today are Chris Caldwell, our President and CEO, and Andre Valentine, our Chief Financial Officer. Chris will provide a summary of our operating performance and growth strategy, and Andre will cover our financial results. Then we'll open the call up.

Sara Buda: Also during the call, we will discuss non-GAAP financial measures, including adjusted free cash flow non-GAAP operating income non-GAAP operating margin adjusted EBITDA adjusted EBITDA margin non-GAAP net income non-GAAP EPS in constant currency revenue growth. A reconciliation of these non-GAAP measures is available in the news release and on the company.

Sara Buda: <unk> Investor Relations website under financials.

Sara Buda: With me on the call today are Chris Caldwell, our president and CEO and Andre Valentine, Our Chief Financial Officer, Chris will provide a summary of our operating performance and growth strategy and Andre will cover our financial results and business outlook. Then we'll open the call up for your questions and now I will turn the call over to questions.

Unknown Executive: And now I'll turn the call over.

Christopher Caldwell: Thank you, Sara. Hello, everyone, and thank you for joining us today for our fourth quarter and fiscal year 2024 earnings call. Before we get into the details of our results, I think it might be helpful to look at how our business has evolved over the past few years to show why we are confident that we will continue to grow profitably in 2025 and believe mid-single-digit growth is achievable in later years. As we have stated and provided many examples over the last two years since GenAI started to be mainstream, we have executed with intent to focus our offerings on taking advantage of GenAI and expanding into new areas while keeping our underlying business healthy by de-investing in commodity work.

Speaker Change: And believe mid single digit growth is achievable in later years.

Speaker Change: As we have stated and provided many examples over the last two years since <unk> started to be mainstream we've executed with intend to focus our offerings and taking advantage of AI and expanding into new areas, while keeping our underlying business is healthy by investing in commodity work.

Christopher Caldwell: As a result, we have more than 2,000 clients, including 155 of the Global Fortune 500, with extremely high client revenue retention rates of approximately 99% in fiscal 2024. We have built a defensible market leadership position as a provider of integrated technology-led business solutions that power our clients' success. This means we have the scale, technologies, and capabilities to broaden our market and address the evolving needs of our clients. Our top 25 clients, which are all leading global brands, have an average tenure of over 16 years with us. Our revenue with these top clients continues to grow faster than the rest of our business, as we introduce auxiliary services and complementary solutions to expand our value and grow our share while automating and innovating work for them.

Speaker Change: As a result, we have more than 2000 clients, including 155 of the global Fortune 500 with extremely high client revenue retention rate of approximately 99% in fiscal 2024.

Speaker Change: Our top 25 clients, which are all leading global brands have an average tenure of over 16 years with us our revenue with these top clients continues to grow faster than the rest of our business as we introduce ancillary services and complementary solutions to expand our value and grow our share while automating and innovating worked for them.

Christopher Caldwell: In fact, nearly $1 billion of our revenue in 2024 is derived from new Concentrix solutions that didn't exist at scale in our business 24 months ago. Solutions such as data annotation, data modeling, analytics, B2B sales enablement, AI design and deployment, cybersecurity, financial crimes and compliance are now today. And even now with our commercial available software products, combining our revenue from these offerings grew above mid single digits in fiscal 2024. Additionally, we have our Catalyst IT Services offering, which represents roughly 8% of total revenue and is also growing well. As we have grown these ancillary services, and we have also proactively reduced the percentage of our business related to low complexity transactions from 13% three years ago to 7% today, as we expect to continue to reduce this percentage further in fiscal 2025.

Speaker Change: In fact, nearly $1 billion of our revenue in 2024 is derived from new Concentrix solution that didn't exist at scale in our business 24 months ago solutions.

Speaker Change: Solutions, such as data annotation data modeling analytics, BV sales enablement, AI design and deployment cyber security financial crime and compliance are now today.

Speaker Change: As we expect to continue to reduce this percentage further in fiscal 2025.

Christopher Caldwell: And finally, as AI emerged as a business imperative, we have consistently grown and evolved our business to take advantage of this opportunity and use it as a source of differentiation. In fact, with generative AI deployments across half of our clients, approximately 200,000 desktops in our own operations using GenAI, and with tens of thousands of digital workers that are autonomous, we are confident saying that we have one of the larger deployments of AI technology at scale in the world. We have found that as we deploy our technology, we grow revenue faster with these clients, and we are particularly encouraged that as we have completed the web health integration, we have a large pipeline of new clients in Europe who we will deploy our technology in fiscal 2025.

Speaker Change: And finally as AI emerged as a business imperative, we have consistently grown and evolved our business to take advantage of this opportunity and use that as a source of differentiation in fact with generative AI deployment across half of our client approximately 200000 desktops in our own operations using gen III and with tens of thousands of digital workers.

That our economists were competent thing that we have one of the larger deployment of AI technology at scale in the world. We have found that as we deploy our technology and grow revenue faster with these clients and we're particularly encouraged that as we have completed the web app integration, we have a large pipeline of new clients in Europe, who we will deploy our technology.

Speaker Change: In fiscal 2025.

Christopher Caldwell: While the market focus on the erroneous perception of AI as a headwind for our business, we have turned it into a tailwind, using generative AI to take advantage to create new opportunities while making our traditional business better. We have given numerous examples on our last few calls of how we lead our clients through their AI journey from designing and building their operations to deploying automation in reducing low-value transactions to enhancing their internal productivity. In doing so, we reduce our clients' total costs while increasing our revenue as they consolidate spend with fewer providers and unlock new sources of revenue for us.

Speaker Change: While the market focus on the erroneous perception of AI as a headwind for our business. We have turned it into a tailwind using generative AI to take advantage to create new opportunities, while making our traditional business better we have given numerous examples on our last few calls of how we lead our clients through their AI journey from designing and building our operation.

Speaker Change: To deploying automation and reducing low value transactions to enhancing their internal productivity in doing so we reduced our total cost while I'm pleased to increasing our revenue as they consolidate spend with fewer providers and unlock new sources of revenue for US. This has been the case throughout our history and continues.

Christopher Caldwell: This has been the case throughout our history and continues to be the case today. I am delighted with the progress we have made as we have adapted and innovated to address our clients' evolving needs. While we see a clear disconnect today between our underlying fundamentals and our public market valuation, I am confident that as we execute our multi-year growth strategy, our valuation will align with the strength of our business and the value of our distinguished and unique market leadership position.

Speaker Change: To be the case today.

Speaker Change: Delighted with the progress we have made is we've adapted and innovated to address our clients' evolving needs. While we see a clear disconnect today between our underlying fundamentals and our public market valuation I am confident that as we execute our multi year growth strategy, our valuation will align with the strength of our business and the value of our distinguished and unique market.

Speaker Change: Leadership position.

Christopher Caldwell: 2024 was a remarkable year for Concentrix. We integrated Webhelp with Velocity, aligning our sales, marketing, delivery, and operations team within the first year. We aligned our cultures around one company, one team, ensuring we delivered global scale consistently with local relevance and expertise for every client in every location around the globe. We are delighted to say the Webhelp integration is now complete with ongoing net synergy benefits showing through in 2025 and beyond. We secured a number of key transformative wins in 2024, both with our own technology and technologies from leading partners and our pipeline continues to be strong going into 2025.

Speaker Change: 2024, it was a remarkable year for Concentrix, we integrated web help with velocity aligning our sales marketing and delivery and operations team within the first year, we align our culture around one company one team ensuring we delivered global scale consistently with local relevance and expertise for every client in every location around the globe.

Speaker Change: We are delighted to say the web help integration is now complete with ongoing net synergy benefits showing through in 2025 and beyond we secured a number of key transformative wins in 2020 for both with our own technology and technologies from leading partners and our pipeline continues to be strong going into 2025.

Christopher Caldwell: We have made prudent investments in our business that we believe will allow us to drive growth and margin expansion in the future. This included founding a new software products organization with strong leadership, enhancing AI tools and technology and expanding our relationship with partners. And we have our first commercial wins with our Gen AI IX product suite. All in all, 2024 was a strong year for Concentrix. We delivered solid financial results, growing revenue well ahead of most peers in the broader BPO and ITO service sector, while generating strong free cash flow. We've evolved our business to take advantage of what clients want, fewer providers that can do more, and invested more that take global scale technology capabilities to meet their needs.

Speaker Change: We've made prudent investments in our business that we believe will allow us to drive growth and margin expansion in the future.

Speaker Change: <unk> found included filing a new software product organization with strong leadership, enhancing AI tools and technology and expanding our relationship with partners.

Speaker Change: And we have our first commercial wins with our Gen AI IX product suite.

Speaker Change: All in all 2024, it was a strong year for Concentrix, we delivered solid financial results growing revenue well ahead of most peers in the broader <unk> service sector, while generating strong free cash flow, we have evolved our business to take advantage of what clients want fewer providers that can do more and invested more of that take global scale and quality capabilities.

Speaker Change: To meet their needs, but what gets me. Most excited is the strong fundamental platform, we put in place to drive sustainable growth into the future for 2025, let me be very clear, we expect to grow our revenue our non-GAAP operating margin and our free cash flow, while paying down debt, we will continue to expand our journey.

Christopher Caldwell: But what gets me most excited is the strong, fundamental platform we put in place to drive sustainable growth into the future. For 2025, let me be very clear, we expect to grow our revenue, our non-GAAP operating margin, and our free cash flow while paying down debt. We will continue to expand our GenAI offering, both from leading companies like Salesforce, Microsoft and Google, and others on top of our own technology in order to offer our client base the best solution for their business. We'll expand our key relationships by demonstrating the power of Concentrix, combining our design-build-run capabilities and innovative AI-led solutions, domain expertise, and business process excellence to fuel our client success.

Speaker Change: Offering both from leading companies like Salesforce, Microsoft and Google and others on top of our own technology in order to offer our client base. The best solution for their business, we will expand our key relationships by demonstrating the power of Concentrix, combining our design build run capabilities and innovative AI led solutions domain expertise and.

Speaker Change: Business process excellence to fuel our client success, and we will continue to secure new transformation customer mark transformational wins that demonstrate the value of our broad based technology solutions, while decreasing our low complexity business as we look at to the years ahead I'm excited about what we are in our journey to become the world's most trusted partner.

Christopher Caldwell: And we will continue to secure new transformational wins that demonstrate the value of our broad-based technology solutions while decreasing our low-complexity business.

Christopher Caldwell: As we look to the years ahead, I'm excited about what we are in our journey to become the world's most trusted partner for business and technology solutions, the power of world that works.

Andre Valentine: For business and technology solutions, the power World that works I would like to thank our dedicated game changers for their hard work and commitment to excellence and our clients for their trust and their business now I'll turn the call over to Andre.

Christopher Caldwell: I'd like to thank our dedicated game changers for their hard work and commitment to excellence, and our clients for their trust and their business.

Andre Valentine: Now, I'll turn the call over to Andre. Well, thank you, Chris. And hello, everyone.

Andre Valentine: Well, thank you, Chris and Hello, everyone at 2024 hours a year of significant operational achievement for Concentrix. We integrated web help ahead of plan, culminating in the migration of our financial ERP system at the end of the year, we proactively and intentionally invested and the prioritization and commercialization.

Andre Valentine: Of our internally developed products.

Andre Valentine: Driving strong cash flow.

Andre Valentine: Reduced our leverage through debt pay down while increasing our share repurchase program and increasing our dividend and strategically we continue to diversify and broaden our value to clients through a diversified set of service offerings.

Andre Valentine: With a successful 2024 behind us I'm confident in our position as we enter 2025 with that let me delve into the details of our financial results for the fourth quarter and fiscal 2024, and then discuss our business outlook for fiscal 2025.

Andre Valentine: With that, let me delve into the details of our financial results for the fourth quarter and fiscal 2024, and then discuss our business outlook for fiscal 2025. In Q4, we delivered revenue of approximately $2.45 billion, growing 1.5% on a pro forma constant currency basis, which is at the high end of our September guidance. Looking at our fourth quarter revenue growth by a vertical, on a pro forma, constant currency basis, revenue from retail, travel, and e-commerce clients grew almost 9% year-over-year, a continuation of the solid growth we've been seeing in this vertical. Revenue from banking, financial services, and insurance clients grew 5%, relatively consistent with prior quarters this year.

Andre Valentine: In Q4, we delivered revenue of approximately $2 $4 5 billion.

Andre Valentine: Growing one 5% on a pro forma constant currency basis, which is at the high end of our September guidance range.

Andre Valentine: Looking at our fourth quarter revenue growth by vertical on a pro forma constant currency basis revenue from retail travel and E. Commerce clients grew almost 9% year over year, a continuation of the solid growth we've been seeing in this vertical.

Revenue from banking financial services and insurance clients grew 5% relatively consistent with prior quarters. This year, our recent wins and pipeline give us confidence. This vertical will continue to remain strong for us.

Andre Valentine: Our recent wins at Pipeline give us confidence this vertical will continue to remain strong for us. Revenue from communications and media clients decreased 1% on a pro forma basis, a slight improvement from prior quarters in the year. This decrease in revenue reflects ongoing decreases from a few North American communications clients partially offset by increases with media clients. Our technology and consumer electronics clients also decreased 1% on a pro-forma, constant currency basis, as did revenue from clients in the healthcare Turing to Profitability, our non-GAAP Operating income was $347 million in the top half of our guidance range that we provided on our last call.

Andre Valentine: Revenue from communications and media clients decreased 1% on a pro forma basis, a slight improvement from prior quarters in the year.

Andre Valentine: This.

Andre Valentine: Decrease in revenue reflects ongoing decreases from a few north American communications clients, partially offset by increases with media clients.

Andre Valentine: Our technology and consumer electronics clients also decreased 1% on a pro forma constant currency basis acid.

Andre Valentine: Revenue from clients in the healthcare vertical.

Andre Valentine: Turning to profitability our non-GAAP.

Andre Valentine: Operating income was $347 million in the top half of our guidance range that we provided on our last call.

Andre Valentine: Non-Gap Operating Income Margin was 14.2%, a decrease from Q4 2023, primarily due to our increased technology spend, upfront investments in some transformational wins, and duplicate costs related to accelerated shore shift in Q4, all of which we discussed last quarter. Adjusted EBITDA in the quarter was $403 million, a margin of 16.5%. Non-Gap Net Income was $219 million in the quarter, an increase of about $6 million compared to the fourth quarter of last year. and Non-Gap Diluted EPS was $3.26. Gap Net Income was $116 million for the quarter, and Gap Diluted EPS was $1.72 per share.

non-GAAP operating income margin was 14, 2% a decrease from Q4 2023, primarily due to our increased technology spend upfront investments in some transformational wins and duplicate costs related to accelerated sure shift in Q4, all of which we discussed last quarter adjusted.

Andre Valentine: Adjusted EBITDA in the quarter was $403 million a margin of 16, 5%.

Andre Valentine: non-GAAP net income was $219 million in the quarter, an increase of about $6 million compared to the fourth quarter of last year and non-GAAP diluted EPS was $3 26.

Andre Valentine: GAAP net income was $116 million for the quarter and GAAP diluted EPS was $1 70 272 per share references.

Andre Valentine: Reconciliations for Gap and Non-Gap measures are provided in today's earnings report. Looking at our results for the full year 2024, we grew 2.7% on a pro forma constant currency basis at the high end of the guidance rates we provided a year ago and above many peers. NongapOI was $1.32 billion, up slightly over prior year on a pro forma Nine Gap operating margin was 13.7%. Adjusted free cash flow was $475 million. Our free cash flow included spending on integration costs to generate increased synergies in fiscal 2025. We returned approximately $220 million to Shareware. Specifically, we purchased 136 million of our common shares, representing 2.2 million shares at an average price of approximately $61.74 per share.

Andre Valentine: Reconciliations for GAAP and non-GAAP measures are provided in today's earnings release.

Andre Valentine: Looking at our results for the full year 2024, we grew two 7% on a pro forma constant currency basis at the high end of the guidance range, we provided a year ago and above many peers.

Andre Valentine: non-GAAP <unk> was $132 billion up.

Andre Valentine: Up slightly over prior year on a pro forma basis non-GAAP operating margin was 13, 7%.

Andre Valentine: Adjusted free cash flow was $475 million, our free cash flow included spending on integration cost to generate increased synergies in fiscal 2025.

Andre Valentine: We returned approximately $220 million to shareholders, specifically, we repurchased $136 million of our common shares representing two two.

Andre Valentine: Million shares at an average price of.

Andre Valentine: Approximately $61 74 per share and we paid $84 million in dividends during the year, we reduced our net debt by approximately $209 million during the year.

Andre Valentine: Further reduced our off balance sheet obligation related related to receivables factoring by $46 million during the year to approximately $162 million at year end.

Andre Valentine: At the end of the fourth quarter cash and cash equivalents for $241 million and total debt was 4.7 hundred $3 6 billion.

Andre Valentine: Bringing our net debt to $4 $4 95 billion at year end.

Andre Valentine: Our liquidity remains strong at approximately $1.5 billion, including over $1 billion on our line of credit, which is undrawn.

Andre Valentine: Our liquidity remains strong at approximately $1 $5 billion.

Andre Valentine: Including over $1 billion on our line of credit which is undrawn.

Andre Valentine: With this, let me now talk about our outlook for 2025 in the first quarter. First, as Chris mentioned, we are on an exciting journey as we broaden our offerings to address the evolving needs of our clients. And while the macro continues to affect our business as it has for all services companies, we expect to deliver growth in 2025 based on the following. Incremental revenue from business we won in 2024 that will ramp throughout the year. Share gains with our largest clients as they consolidate spend with us because of the capabilities and scale that we offer to meet their business needs.

Andre Valentine: With this let me now talk about our outlook for 2025 in the first quarter.

Andre Valentine: First as Chris mentioned, we're on an exciting journey as we broaden our offerings to address the evolving needs of our clients.

Andre Valentine: And while the macro continues to affect our business as it has for all services companies, we expect to deliver growth in 2025 based on the following.

Andre Valentine: Incremental revenue from business, we won in 2024 that will ramp throughout the year.

Andre Valentine: Share gains with our largest clients as they consolidate spend with us because of the capabilities and scale that we offer to meet their business needs and continued growth in outsourcing as clients seek partners that can help them embrace and adopt AI to re imagine their business, while ensuring customer experience excellence data security.

Andre Valentine: and continued growth in outsourcing as clients seek partners that can help them embrace and adopt AI to reimagine their business while ensuring customer experience excellence, data security and business stability. As always, these drivers of growth will be balanced by the underlying effect of the macro on our clients' businesses, our proactive automation as we continue to intentionally migrate away from low-complexity business, and continued movement to lower-cost Delivery Countries, as we've seen over the past several years. Turning to margins, we expect non-GAAP operating income and adjusted EBITDA margins to uptick slightly as we balance synergy savings with investments to power our future growth.

Andre Valentine: And business stability.

Andre Valentine: As always these drivers of growth will be balanced by the underlying effect of the macro on our clients' businesses are proactive automation as we continue to intentionally migrate away from low complexity business and continued movement to lower cost.

Andre Valentine: Delivery countries as we've seen over the past several years.

Turning to margins, we expect non-GAAP operating income and adjusted EBITDA margins to uptick slightly as we balanced synergy savings with investments to power our future growth we.

Andre Valentine: We do expect our spending on software product development to decrease throughout the course of the year.

Andre Valentine: And finally, we expect adjusted free cash flow to grow to between $625 million and $650 million in 2025, driven by synergy savings, lower integration costs, and lower interest expense.

Andre Valentine: And finally, we expect adjusted free cash flow to grow to between 625 and $650 million in 2025, driven by synergy savings and lower integration costs and lower interest expense.

Andre Valentine: With this context, our guidance for the full year is as follows. full year reported revenue of $9.47 billion to $9.61 billion. Our guidance implies constant currency revenue growth for the full year in a range of 0% to 1.5%. Based on current exchange rates, our expectation assumes an approximately 150 basis point negative impact of foreign exchange rates compared with 2024. Non-GAAP operating income is expected to be in a range of $1.3 billion to $1.34 billion. Non-GAAP EPS is expected to be in a range of $11.18 per share to $11.77 per share, assuming non-GAAP interest expense of $273 million, approximately 63.6 million diluted common shares outstanding, and approximately 5% of net income attributable to persistent and secure investment.

Andre Valentine: With this context, our guidance for the full year is as follows.

Andre Valentine: Full year reported revenue of $94 7 billion to $9 six $1 billion.

Andre Valentine: Our guidance implies constant currency revenue growth for the full year in a range of zero to one 5% based on current exchange rates, our expectation assumes that approximately 150 basis point negative impact of foreign exchange rates compare with 2024.

Andre Valentine: non-GAAP operating income is expected to be in the range of one.

Andre Valentine: One.

Andre Valentine: One 3 billion to <unk>, three 4 billion.

Andre Valentine: non-GAAP EPS is expected to be in a range of $11 18 per share to $11 77 per share assuming non-GAAP interest expense of $273 million.

Andre Valentine: Ultimately $63 6 million diluted common shares outstanding and approximately 5% of net income attributable to participating securities.

Andre Valentine: effective tax rate is expected to approximately 25.5 to 26.5 percent.

Andre Valentine: <unk> tax rate is expected to approximate 25, 5% to 26, 5%.

Andre Valentine: And finally as a signal of confidence in our long term growth strategy. The board has refreshed our share repurchase authorization to $600 million, we expect our spending in fiscal year 2025 repurchases to modest modestly exceed the pace in fiscal 2020 for taking advantage of what we believe is the extreme disconnect between.

Andre Valentine: The fundamentals of our business and our current valuation.

Andre Valentine: We remain committed to maintaining investment grade principles repaying our debt to move closer to our target leverage ratio and continuing to support our dividend.

Andre Valentine: For the first quarter, we expect reported revenue of $2.355 billion to $2.37 billion, implying a constant currency revenue growth rate of 0% to 0.75%. Non-GAAP operating income is expected to be in a range of $305 million to $315 million. Non-GAAP EPS is expected to be between $2.49 per share to $2.64 per share. Assuming non-GAAP interest expense of $74 million, approximately $64.1 million diluted common share is outstanding, and approximately 5% of net income attributable to participating securities. effective tax rate in the first quarter. is expected to approximate 25.5 to 26.5 percent.

Andre Valentine: For the first quarter, we expect reported revenue of $2 355 billion.

The $2 $3 7 billion.

Implying our constant currency revenue growth rate of zero to 0.7.

Andre Valentine: 75%.

Andre Valentine: non-GAAP operating income is expected to be in a range of $305 million to $315 million.

Andre Valentine: non-GAAP EPS is expected to be between $2 49 per share to $2 64 per share assuming a non-GAAP interest expense of $74 million approximately $64 1 million diluted common shares outstanding and approximately 5% of net income attributable to participating secure.

Andre Valentine: <unk>.

Andre Valentine: The effective tax rate in the first quarter is expected to approximate $25 five to 26, 5%.

As in prior years, we expect adjusted free cash flow in the first quarter to be negative although improved as compared to last year's Q1, followed by consistent strong cash flow generation over the remaining quarters of the year or.

Andre Valentine: Our business outlook and cash flow expectations do not include any future acquisitions or impacts from future foreign currency fluctuations.

Andre Valentine: We remain confident in the growth of the business and believe we are taking a conservative position in our guidance for 2025.

Andre Valentine: As we look back on 2024, we're delighted with our market position.

Andre Valentine: Position, we are intentionally and strategically expanded our value to clients by broadening our portfolio of solutions across the spectrum of business and technology solutions, we've embraced the opportunity of generative AI and have established a clear market leadership position that is allowing us to win large transformational programs and dry.

Andre Valentine: <unk> new revenue streams.

Andre Valentine: We believe we believe we are making the right investments in the business to future proof, our offerings and position us for growth upside in the long term, while growing margins and cash flow, we remain steadfast in our commitment to driving shareholder value through a combination of long term revenue and margin expansion, having the right capital structure and continued cap.

Return through a combination of share repurchases and dividends. We're excited about the road ahead.

Andre Valentine: We're excited about the road ahead.

Unknown Executive: With that, Josh, please open the line for questions. 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.

Andre Valentine: With that Josh Please open the line for questions.

Andre Valentine: 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, one moment for questions.

Joseph Vafi: Our first question comes from Joseph Vafi with Canaccord Genuity. You may proceed. Hey guys, good afternoon. Nice to see progress in the business on a lot of fronts.

Speaker Change: Our first question comes from Joseph <unk> with Canaccord Genuity you May proceed.

Speaker Change: Hey, guys. Good afternoon, nice to see progress in the business on a lot of fronts I thought maybe we'd just kind of drill down first on the revenue outlook appreciate.

Joseph Vafi: I thought maybe we'd just kind of drill down first on the revenue outlook. I appreciate your discussions on incremental revenue wins, share gains, and more volume switching to outsourcers. Just wanted to also get some input on – I know you mentioned that the less complex work was going to continue to decline.

Speaker Change: Your discussions on incremental revenue wins share gains and <unk>.

Speaker Change: More and.

Speaker Change: More volume switching to Outsourcers just wanted to also get some input on I know you mentioned that the less complex work was going to continue to decline and I was wondering if you could provide some commentary on.

Speaker Change: Perhaps how many points.

Speaker Change: Kind of a revenue headwind that may comprise in 2025, and then also if there is.

Speaker Change: Any headwind coming from.

Speaker Change: Geographic delivery mix change from perhaps.

Speaker Change: On site or onshore to offshore et cetera, and then I'll have a quick follow up.

Speaker Change: Yes for sure Joe So a couple of things.

Speaker Change: Let's start with the last one first in terms of viewership and revenue headwinds, we are seeing that from Europe into Africa and eastern Europe.

Speaker Change: We are continuing to see that from North America, we talked about that a little bit where we had some health care programs going offshore.

Speaker Change: Cost for delivery is certainly a big issue with clients and so we expect that that kind of offshoring of work will continue.

Speaker Change: Similar to what we've talked about is a point where in a bit of headwind the growth in the last little while in terms of the low value transaction going down our expectation that we will lower that by another 1% to 2% in the course of 2025.

Christopher Caldwell: So you'll get down to that sort of 5 percentage range. There's always stuff that kind of falls into that, but we've done what we're really happy with, a very good job over the last year of not growing that, not going after any business that would add to that, and continue to automate and drive that down. So our expectation is, if you just think of 7% going down to 5% of our business, of that type of headwind as we look at 2025 and what we're looking at. Great.

Speaker Change: So you'll get down to that sort of five percentage range theres always something kind of falls into that but.

Speaker Change: But we've done what we're really happy with a very good job over the last year not growing that not not going after the business that would add to that and continuing to automate and drive that down so our expectation is if.

Speaker Change: If you just think of.

Speaker Change: 7% going down to 5% of our business of that type of headwind as we look at 2025 and what we're looking at.

Joseph Vafi: Thanks for that call, Chris. And then maybe more of a detailed update.

Speaker Change: Great. Thanks for that color, Chris and then.

Speaker Change: Maybe more of a detailed update I know last quarter you indicated that.

Joseph Vafi: I know last quarter you indicated that, you know, there was a large transformational win, I believe, where you were going to finance some of the upfront costs there. Just kind of update on those types of transactions, you know, progress and when they may kind of reverse and start generating revenue and how they may contribute to the P&L in 2025. Thanks a lot. Yeah, for sure, Joe. So, well, the large transformational deal that we had upfront from the cost will start to generate revenue in 2025, but it's more in the sort of third and fourth quarter for it to be more meaningful.

Speaker Change: There was a large transformational when I believe were.

Speaker Change: You were going to.

Speaker Change: You are going to finance some of the upfront costs, there just kind of update on on those types of transactions.

Speaker Change: Progress and when they may kind of.

Speaker Change: Kind of reverse and start generating revenue and how they may contribute to the P&L in 2025, thanks a lot.

Speaker Change: Sure Joe.

Speaker Change: The large transformational deal that we had the upfront some of the costs will start to generate revenue in 2025, but it's more in the.

Speaker Change: Third and fourth quarter for it to be more meaningful there's really not too much.

Christopher Caldwell: There's really not too much in Q1 outside of some costs that are running through and Q2 we'll start to see some revenue, but then it's really on the back half of the year. We have not done any deals of that size in Q4 that you'll see through, but we have done a number of smaller transformational deals relative to the large one. And they'll start, you know, frankly, generating revenue within Q2 and Q3, but again, more back half of the year. The transformational deals tend to take a little longer just because we have to build out the platform for it to move across, move the work across and then start to drive it.

Speaker Change: In Q1 outside of some costs that are running through in Q2, you'll start to see some revenue, but then it's really on the back half of the year.

Speaker Change: Have not done any deals of that size in Q4 that youll see through but we have done a number of smaller transformational deals.

Speaker Change: And then start to drive it, but youre not seeing that sort of upfront capital requirement that.

Christopher Caldwell: But you're not seeing that sort of upfront capital requirement that we saw with the one very large transformational deal.

Speaker Change: That we saw with the one very large transformational deal.

Joseph Vafi: Great. Thanks very much, Chris. Thank you.

Speaker Change: Sure Great.

Chris Caldwell: Thanks, very much Chris.

Speaker Change: Thank you.

David Koning: Our next question comes from Dave Koning with Baird. You may proceed. Yeah. Hey, guys. Thanks so much. Great Q4.

Speaker Change: Our next question comes from Dave Koning with Baird You May proceed.

Dave Koning: Yeah, Hey, guys. Thanks, so much great Q4.

Dave Koning: And maybe first of all just when we look across CX or PPO or it.

Dave Koning: The last couple of years businesses, just wanted to spend the last tightened the belt a little bit we kind of get that are we getting to a point where consumers are starting to push back is.

Dave Koning: And service again or is that starting to shift back.

Christopher Caldwell: Yeah, that's a very interesting question. We see it in certain industries, we see it in BFSI, we see it in some high value goods. We see it in a bit of auto, where we don't actually see that pushback from consumers as in telecom, for instance, or in consumer electronics, for instance, because there's no one really raising the bar high enough that people can do to compare to. Kind of maybe a sad state of affairs, but that's generally what we're what we're seeing. And so where we see businesses really want to separate and differentiate their offering, they're outsourcing more, and they're outsourcing more the tech, and they're kind of doing it in a combined manner that really drives a better customer customer experience.

Dave Koning: Yes.

Dave Koning: Very interesting question, we see it in certain industries, we see it in <unk>, we see it in some high value goods we.

Dave Koning: We see it in a bit of auto where we don't actually see that pushed back from.

Dave Koning: From consumers as in Telecom for instance, or in consumer electronics for instance, because there is no one really raising the bar high enough that people can do the comparison.

Dave Koning: And kind of maybe assess it of affairs, but thats generally what we are what we're seeing and so where we see businesses really want a separate and differentiate their offering they're outsourcing more and they're outsourcing more of the tech and they're kind of doing it in a combined manner that really drive a better customer.

David Koning: We do think as, you know, consumer, you know, consumer purchasing power, hopefully rebound in 2025, that companies will kind of try and differentiate a lot more. And I think, generally, what we're seeing is that probably there will be some human involved in that. And most likely that human will be in an outsourced relationship.

Dave Koning: Customer experience, we do think as you know.

Dave Koning: Consumer consumer purchasing power hopefully rebounds in 2025 that companies would kind of try and differentiate a lot more and I think generally what we're seeing is that probably there will be some human involved in that.

Most likely that you will be in an outsource relationship.

David Koning: Yeah, that's that's great to hear.

Speaker Change: Yes, that's great to hear and then maybe my follow up I know you kind of.

Speaker Change: Indicated that in the beginning of the call back to mid single digits. At some point is is there a timeframe at which you kind of expect to get back to that.

Speaker Change: Yeah for sure I mean, if you look at what we call them and you just simply take the $1 billion of business and we've talked about in the opening comments growing.

Speaker Change: Sort of high single digits.

Christopher Caldwell: And then we have a number of other capabilities within our business growing within that range. You can see that at scale, right, that's a few billion dollars, at scale, we are growing, you know, above that single digit mark. So clearly, what do we need to do, we need to continue to be faster at automating some of the work that we can get done, because when we do that, we tend to win more work. We need to continue to focus on bringing down our lower value work, so that, you know, we don't have that overhang within our business.

Speaker Change: Above that single digit Mark so clearly what do we need to do we need to continue to be faster at automating. Some of the work that we can get done because when we do that we tend to win more work.

Speaker Change: We need to continue to focus on bringing down our lower value work so that.

Speaker Change: We don't have that overhang within our within our business and if you kind of do the math, we talk about higher years, but it's not multiple years, our expectation is that.

David Koning: And if you kind of do the math, we talked about other years, but it's not multiple years, our expectation is that, you know, getting out of 2025, and if we can continue to drive what we want to drive, then that's something that we should be able to achieve shortly thereafter. Gotcha. That's great.

Speaker Change: Getting out of 2025, and if we can continue to drive what we want to drive than that.

Speaker Change: Thats something that we should be able to achieve shortly thereafter.

Speaker Change: Gotcha, that's great well thanks, guys.

Unknown Executive: Well, thanks, guys. Thank you very much. Thank you.

Speaker Change: Thank you very much.

Speaker Change: Thank you.

Ruplu Bhattacharya: Our next question comes from Ruplu Bhattacharya with Bank of America. You may proceed.

Speaker Change: Our next question comes from <unk> <unk> with Bank of America You May proceed.

Aisling Grueninger: Hi, this is Aisling on. My first question is for Chris. Can you just talk about how your digital CX or catalyst business is trending? What was the revenue growth year-over-year this quarter and how should we think about growth in fiscal 25 since you've talked about some potential large deals Yeah, so our catalyst business is doing very, very well. We talked about it being roughly 8% of our business, and we talked about it growing well, which you consider mid to high single digit growth through the course of the year. There's some fluctuation in that as we continue to add more partner implementations of it.

Speaker Change: Hi, This is Ashley on for <unk>. My first question is for Chris can you just talk about how your digital CX or catalyst business is trending what was the revenue growth year over year this quarter and how should we think about growth in fiscal 'twenty five since you've talked about some potential large deals you're pursuing thanks.

Speaker Change: Yes, so our catalyst business is doing very very well, we've talked about it being roughly 8% of our business and we've talked about it growing well, which you consider mid to high single digit growth through the course of the year.

Speaker Change: There is some fluctuation in that as we continue to add more partner.

Mutations in <unk>, our expectation is that's what it is going to continue to grow it's one of the.

Speaker Change: Client base.

Andre Valentine: Thanks.

Andre Valentine: One for Andre. Can you just talk about the priorities for cash in Fiscal 25 and how you balance reinvesting in the business versus M&A versus buybacks? Just any color around that would help. Sure, happy to do it. So I feel really confident in the free cash flow generation in 2025, and that that will give us the opportunity to continue doing what we have been doing, which is obviously First and foremost, investing in growing the business organically, and then having the free cash flow left over to continue to pay down our debt, and as well as return capital to shareholders.

Speaker Change: Thanks, one for Andre can you just talk about the priorities for cash in fiscal 'twenty, five and how you're balancing reinvesting in the business versus M&A versus buybacks, just any color around that would help thanks.

Sure happy to do it so I feel really confident in.

Speaker Change: In the free cash flow generation in 2025.

Speaker Change: That will give us the opportunity to continue doing what we have been doing which is obviously.

Speaker Change: First and foremost most investing in growing the business organically and then having the free cash flow left over to.

Speaker Change: We continue to pay down our debt.

Speaker Change: And as well as return capital to shareholders. So we feel great about the confidence that our board has shown in.

Andre Valentine: So we feel great about the confidence that our board has shown in us in increasing the authorization for share repurchases up to $600 million. We've said that we'll continue, certainly during this period where we feel like there's disconnect between our valuation and the underlying fundamentals. will be active in share buyback, you know, in my commentary I said we buy back, you know, slightly more, modestly more than what we purchased in fiscal year 24, so you can kind of figure out from that what the priorities will be. generate the strong free cash flow, share repurchases slightly more than the $136 million that we did this year.

Speaker Change: In us in.

Speaker Change: Increasing the authorization for share repurchases up to $600 million.

Speaker Change: He said that we will continue certainly during this period, where we feel like there is this disconnect between our valuation and the underlying fundamentals of the business will be active in share buyback.

Speaker Change: In my commentary I said buyback.

Speaker Change: Slightly more modestly more than what we repurchased in fiscal year 'twenty. Four so you can kind of figure out from that what the priorities will be.

Speaker Change: Generate the strong free cash flow.

Speaker Change: Share repurchases slightly more than the $136 million that we did this year, our dividend was $84 million this past year.

We've increased it in the past by by 10% each year, we might look to do that again this year.

Speaker Change: And then with the remainder.

Speaker Change: Left to.

Speaker Change: Move closer to pay down debt to move closer to our targeted leverage ratio.

Unknown Executive: Thank you all.

Speaker Change: Great. Thank you I'll pass it back.

Speaker Change: Thanks.

Divya Goyal: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from <unk> <unk> with Scotiabank you May proceed.

Speaker Change: Good afternoon, everyone.

Speaker Change: So I wanted to talk about the demand environment that we're talking about here.

Divya Goyal: Chris, could you help us understand the sustainability of these revenues? Obviously, the growth is bleak for fiscal 2025. How should the market get confident in terms of the company returning to, say, even the mid single digits from a revenue growth standpoint? And if you could potentially also help us understand how should how could or should we expect the margins to potentially grow on a go forward basis? Thank you. Yeah, Divya, so a couple of things. As we talk about, we've got a lot of businesses growing within our portfolio that are at mid-single digits, if not higher, and some even higher.

Could you help us understand the sustainability of these revenues obviously the growth is bleak for fiscal 'twenty 25, how should the market get confident in terms of the companies are turning to say, even the mid single digits from a revenue growth standpoint.

And if you could potentially also help us understand how should how could or should we expect the margins to potentially grow on a go forward basis. Thank you.

Yes.

Speaker Change: A couple of things as we talked about we've got a lot of businesses growing within our portfolio that are at mid single digits, if not higher.

Christopher Caldwell: And as they get more and more scale of our business, that's what gives us the confidence to believe that we can get to mid-single digit. And as Andre also talked about, if you think about this year ahead, not only are the wins that we've gotten within 2024 that will layer into our business over the course of the year, but we'll also drive down our transactional sort of low-value business from, you know, 7% to 6% to 5% through the course of the year. So there's some headwinds to that. But ultimately, we're quite confident that we can grow past that with all the different areas that we're making.

Some even higher and as they get more and more scale of our business. That's what gives us the confidence to believe that we can get to mid single digit.

Andres also talked about if you think about this year ahead.

Speaker Change: We are the wins that we've gotten within 2024 that layer into our business over the course of the year.

Speaker Change: But also drive down our transactional sort of low value business from seven 6% to 5% through the course of the year. So there is some headwinds to that but ultimately we are quite confident that we can grow grow past that with all the different areas that we're making and.

Christopher Caldwell: And, you know, the areas that are growing are things that are in demand around generative AI, whether it be the data annotation, whether it be our analytics business, our analytics business is doing very, very well, whether it be some of our gen AI prototyping and tooling and implementation. We've signed up with Salesforce and Microsoft and Google this year to do more and more partner work, just certainly expanding. And we're happy with that. So there's lots of momentum in the business. And as Andre pointed out, we're also being somewhat prudent. with our guidance for fiscal 25.

Speaker Change: The areas that are growing are things that are in demand around generative AI, whether it be the data annotation, whether it be our analytics business and whats doing very very well whether it be some of our gen AI.

Speaker Change: Prototyping and tooling and implementation.

Speaker Change: We signed up with <unk>.

Speaker Change: Those forces of Microsoft and Google is here to do more and more partner work, So certainly expanding.

Speaker Change: We're happy with that so theres lots of momentum in the business and as Andrea pointed out we are also being somewhat prudent.

With our guidance for.

Christopher Caldwell: Because, you know, we will do the right thing where I find, but we also want to make sure that we're messaging to investors, you know, being prudent with what we want to get done. And if there's an opportunity to move stuff offshore that will drive a higher margin for us, we would probably do that, whether it creates a revenue headwind or not. I think in terms of the margin expansion process, through the course of 2024, we were pretty clear about where we were making additional investments, whether it be in our software platforms, whether it be in some of the new capabilities that we're building out with our partners.

Speaker Change: For fiscal 'twenty five.

Because.

Speaker Change: We will do the right thing for our clients, but we also want to make sure that we are messaging to investors.

Speaker Change: Being prudent with what we want to get done and if theres an opportunity to move some offshore that will drive a higher margin for us.

Speaker Change: Probably do that whether it.

Speaker Change: It's a revenue headwind or not I think in terms of the margin expansion process through the course of 2024, we were pretty clear about where we were making additional investments whether it be in our software platform whether it be in some of the new capabilities that we're building out with our partners and obviously, we have to hire in some cases are different.

Christopher Caldwell: And obviously, we have to hire, in some cases, a different skillset of individuals for some of the work that we've gotten into, whether it be our financial crimes and compliance, whether it be some of our DSSI work, etc. And I think all of those are higher margin businesses that we're growing and we're growing well. And so my expectation is that that will start getting layered in and we'll start to see that grow. And as Andre also pointed out in the prepared remarks, we do not expect to spend the same on our software development this year as we did last year.

Speaker Change: Skill set of individuals for some of the work that we've gotten into.

Speaker Change: Whether it be our financial crime and compliance whether it be some of our BSI work et cetera, and I think all of those are higher margin businesses.

Speaker Change: We are growing and we're growing well.

So my expectation is that that will start getting layered in and we will start to see that grow and as Andre also pointed out in the prepared remarks, we do not expect to spend the same on our software development. This year as we did last year, we told investors that we needed to get everything into a.

Christopher Caldwell: We told investors that we needed to get everything into a multi-tenant, more commercially-ready date that we would be spending up until the end of the year. And then we would be looking at reducing that spend through the course of 2025, more in line with how we're driving revenue. So that's our plan. And also, one thing that we should call out is that we're very happy with the number of IEX product sales we got within the first couple of weeks. We've got a very strong pipeline with that. Now, clearly, that's very low dollar value to begin with, but frankly, it's software margins.

Speaker Change: Multi tenant.

Speaker Change: More commercially ready state.

Speaker Change: We'll be spending up until sort of the end of the year and then we would be looking at.

Speaker Change: Kind of reducing that spend through the course of <unk>.

Speaker Change: 25 more in line with how we are driving revenue. So that's our that's our plan and also one thing that we should call out is that we're very happy with the number of IX.

Speaker Change: <unk> sales, we got within the first couple of weeks, we've got a very strong pipeline with that clearly that's very low dollar value to begin with but frankly in software margins.

Divya Goyal: And so as we layer more and more of that into our business, we have the ability to grow our margins through that as well. That's helpful.

Speaker Change: As we layer in more and more of that into our business, we have the ability to grow our margins through that as well.

Divya Goyal: Maybe I'll just ask one more question in the interest of, you know, the concerns around the CX sector. Could you help us understand, like, with the increased prevalence of agentic AI, how will Concentrix managed services play out? Or what specific role would Concentrix have to play with the increasing prevalence of automation, AI and agentic AI? That's all for me. Thank you. Yeah, for sure, Divya. I go back to our prepared remarks. Like right now, what I think investors don't quite understand is that we have half our clients on JAI right now. We have literally tens of thousands of autonomous agentic agents doing what they need to do and continue to drive it.

Speaker Change: That's helpful. Maybe I'll just ask one more question in the interest of the concerns around the CX sector could you help us understand like with the increased prevalence of Agentic AI, how will concentric managed services play out or what specific role with concentrix have to play with the increasing.

Speaker Change: Evidence of automation AI and <unk> AI.

Speaker Change: That's all for me thank you.

Speaker Change: Yes for sure.

Speaker Change: I go back to our prepared remarks, but right now I think investors don't quite understand is that we have half of our client fund VIII right. Now we have literally tens of thousands of autonomous agenda agents doing what they need to do and continue to drive. It. These things do require tuning the new required data management. They do require analytics to make sure that they are.

Christopher Caldwell: These things do require tuning. They do require data management. They do require analytics to make sure that they're doing the right thing. There does need to be some regulatory compliance around them, depending on which countries they're deployed on. There's just a lot of other management that goes around with it. And here we have grown our revenues while, in the last two years, driving this JAI deep into our client base and doing a lot of autonomous work. And what we're finding is that even the big software providers are coming to us to say, look, you understand the domain expertise around this.

They're doing the right things there does need to be some regulated regulatory compliance Robyn depending on which countries. They are deployed on there's just a lot of other management that goes around with it and here we have grown our revenues while in last two years driving this journey deep into our client base.

Speaker Change: And doing a lot of autonomous work and what we're finding is that even the big software providers are coming to us to say look you understand the domain expertise around this you understand how the systems are belt you have tightened with all the technology you understand the data and the domain expertise around what we're trying to achieve you understand the client relationship so help us.

Christopher Caldwell: You understand how the systems are built. You have tie-ins to all the technology. You understand the data and the domain expertise around what we're trying to achieve. You understand the client relationship. So, help us try to figure out how to get our products in there, sell our products in there, and then maintain the products as they go. And so, that provides new revenue streams for us that, you know, two years ago we didn't have. I think the other thing that we called out in the prepared remarks in sort of our businesses that weren't at scale two years ago and now are at scale is even revenue generation.

Speaker Change: Trying to figure out how to get our products into our seller products in there and then maintain our products.

Speaker Change: They go and so that provides new revenue streams for us.

Speaker Change: Two years ago, we didn't have.

Speaker Change: And I think the other thing that we called out in the prepared remarks, and some of our businesses.

Speaker Change: Where does that scale two years ago and now are at scale is even the revenue generation a lot of people are thinking generative AI is simply for reducing cost and taking out cost.

Christopher Caldwell: A lot of people are thinking generative AI is simply for reducing costs and taking out costs. We found that clients are actually open to trying to figure out how to use JAI for driving revenues and figuring out how to improve the experience and actually delivering better outcomes for the client. And again, that requires consulting analytics and data modeling and data annotation and managed services around that and security and compliance, etc., etc., etc. And I just don't think that, you know, people appreciate this isn't, despite the best commercials on TV and as you walk through the airport about how well done this stuff is, it isn't.

Speaker Change: From the clients are actually open to try and figure out how you Jimmy I for driving revenues and figuring out how to improve the experience and actually delivering better outcomes for.

Speaker Change: For their clients and again that requires consulting analytics and data modeling and data annotation and managed services around security and compliance et cetera, et cetera et cetera.

Speaker Change: Don't think that.

Speaker Change: People. Appreciate this is despite the best commercials on TV and as you walk through the airport about how one and done this stuff is it isn't.

Divya Goyal: And it requires professional services companies to be able to support that. Very helpful. Thank you.

Speaker Change: And it requires professional services companies to be able to to support them.

Speaker Change: Very helpful. Thank you.

Unknown Executive: And as a reminder, to ask a question, please press star 11 on your telephone.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone.

Unknown Executive: And I'm not showing any further questions.

Speaker Change: And I'm not showing any further questions. This concludes the conference. Thank you for your participation you may now disconnect.

Unknown Executive: This concludes the conference. Thank you for your participation.

Unknown Executive: You may now disconnect.

Q4 2024 Concentrix Corp Earnings Call

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