Q2 2025 IBEX Ltd Earnings Call
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Speaker Change: Welcome to the IMAX second quarter FY 2025 earnings 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.
Speaker Change: 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 to note there isn't an accompanying earnings deck presentation available on the IMAX Investor Relations website at investors that IBEX Darko I will now turn this conference over to Mr.
Speaker Change: Sure Michael Dar wall.
Mr. Darko: Head of Investor Relations for IMAX.
Speaker Change: Good afternoon, and thank you for joining us today before we begin I want to remind you that matters discussed on today's call may include forward looking statements related to our operating performance financial goals and business outlook, which are based on management's current beliefs and assumptions. Please note that.
Speaker Change: These forward looking statements reflect our opinion as of the date of this call and we undertake no obligation to revise this information as a result of new developments, which may occur.
Speaker Change: Forward looking statements are subject to various risks uncertainties and other factors that could cause our actual results to differ materially from those expected and described today for more detailed description of our risk factors. Please review our annual report on Form 10-K filed with the U S Securities and exchange premiere.
Bob decking: On September 12, 2024 with that I'll now turn the call over to IMAX CEO Bob decking.
Speaker Change: Thanks, Mike.
Speaker Change: Good afternoon, everyone and thank you all for joining us today as we share our second quarter fiscal year 2025 results.
Speaker Change: I'd like to start by once again thanking my team for a tremendous quarter.
Speaker Change: They continue to show why they are the best in the industry.
Speaker Change: The second quarter were strong across the board.
We achieved our highest growth in two years at six 1%.
Speaker Change: This enabled us to post the highest revenue for quarter in the history of IMAX.
Speaker Change: In addition, we had another great quarter on profitability.
Speaker Change: And now have improved adjusted EBITDA margin over the prior year and 10 out of the last 11 quarters.
Speaker Change: Our topline growth starts with the success of our powerful new logo engine.
Speaker Change: And our ability to highlight our differentiation, enabling us to win large enterprise deals with trophy brands.
Speaker Change: Our growth has been accelerated by our ability to take market share within our embedded base clients driven by our ability to outperform the competition.
Speaker Change: This is our proven land and expand playbook.
Speaker Change: Also important to our success is our high client retention.
Speaker Change: Our revenue retention rates are some of the highest in the industry highly.
Speaker Change: Highlighting our ability to be a strategic partner with our clients.
Speaker Change: We also had important wins with our wave IX translate and automate generative AI solutions that position us well into the future.
Speaker Change: These wins added to an extremely strong quarter.
Speaker Change: These growth factors continue to be our margin expansion drivers.
Speaker Change: We continue to grow aggressively in both our highest margin regions.
Speaker Change: <unk> by 14% year over year growth in our offshore region in Q2.
Speaker Change: And in our highest margin services highlighted by 8% year over year growth in Omnichannel revenue in Q2.
Speaker Change: These sectors have enabled us to expand adjusted EBITDA margin consistently.
Speaker Change: As a result, we remain confident in our ability to continue to drive topline growth.
Speaker Change: And expand margin.
Speaker Change: I am proud to report the following highlights for Q2 FY 'twenty five.
Speaker Change: We delivered record Q2 revenue of $140 7 million up six 1% from a year ago.
Speaker Change: We expanded adjusted EBITDA margin 100 basis points from prior year to 11, 8%.
Speaker Change: While delivering record Q2, adjusted net income of $9 6 million up 20% from a year ago.
Speaker Change: We achieved adjusted EPS of <unk> 59.
Speaker Change: 36% from a year ago.
Speaker Change: We closed five new logos in the quarter for a total of eight year to date.
Speaker Change: Several of these new wins include both traditional agent support.
Speaker Change: And innovative generative AI deployments, demonstrating the power of our differentiated solutions.
Speaker Change: We executed the strategic repurchase of approximately $3 6 million shares from TR Gi.
Speaker Change: Enabling us to eliminate our status as a controlled company within that NASDAQ definition.
Speaker Change: This will provide better independence for us as a company.
Speaker Change: And we bolstered our board of directors with the additions of JJ, Shuang, Patrick Mcginnis, and Karen Bad Embacle, who bring a strong industry and AI talents.
Speaker Change: Lastly, we had a great quarter.
Speaker Change: <unk> opportunities and launches with our wave IX AI solution stack, placing IBEX ahead of the market as we turned the quarter into our fiscal Q3.
Speaker Change: We are winning with both AI translate.
Speaker Change: And AI automated solutions.
Speaker Change: These marks significant milestones for <unk> as we continue to redefine the customer experience for many of our clients.
Speaker Change: As a reminder, our wave IX AI translate solution is a disruptive solution that displaces all World Third Party language translation service bureaus.
Speaker Change: As an example for one of our hospitality clients, we are able to have our English speaking agents provide multilingual support utilizing AI for real time translation.
Speaker Change: This eliminates the need to augment our trained customer service agents with additional language translation only agents, providing a game changing solution that significantly improves the customer experience and reduces unnecessary costs.
Speaker Change: This has already been positive we've seen by clients across the multitude of industry segments and is 100% accretive to revenue and profitability.
Speaker Change: Our wave IX offering also includes our AI automated solution.
Speaker Change: Where we leverage our deep analytics and AI to automate low complexity call types.
Speaker Change: This is an enterprise wide solution, meaning we are providing 100% of the automated support for our clients.
Speaker Change: And implementations, where IMAX is one of multiple <unk>, providing contact center services.
Speaker Change: Which is the high majority of our engagements we see this as both incremental to revenue and margin while further enhancing our trusted partner status with our clients.
Speaker Change: As a result, we are increasing our stickiness with our clients and expanding our competitive moat.
Speaker Change: And this positions us extremely well as we look out over the next several years.
Speaker Change: In summary, we are bullish on that trajectory as we move into the second half of FY 'twenty five.
Speaker Change: We believe our business is well positioned today for continued growth strong EPS and one where we lead the competition from an AI perspective.
Speaker Change: Our ability to win on the big stage with trophy clients against our much larger competitors is the staple of IDEXX I'm extremely proud of the business. We have built and I expect this to continue throughout FY 'twenty five and beyond.
Speaker Change: With that I will now turn the call over to Taylor to go into more details on our second quarter, FY 'twenty five financials and guidance Taylor.
Thank you Bob and good afternoon, everyone.
Speaker Change: Thank you for joining the call today.
Speaker Change: In my discussion of our second quarter fiscal year 2025 financial results references to revenue net income and net cash generated from operations were on a U S GAAP basis.
Speaker Change: Adjusted net income adjusted earnings per share adjusted EBITDA and free cash flow are on a non-GAAP basis reconciliations of our U S. GAAP to non-GAAP measures are included in the table attached to our earnings press release.
Speaker Change: Turning to our results our second quarter results are among the strongest in our history with record top line results and strong profitability.
Speaker Change: Second quarter revenue was $140 7 million, an increase of six 1% from $132 6 million in the prior year quarter.
Speaker Change: Revenue growth was driven by vertical growth in health Tech are 31% travel transportation and logistics of 17% and retail and E. Commerce of 4% and was partially offset by declines in fintech vertical of 15%.
Speaker Change: Our focused efforts to grow our higher margin offshore delivery locations are continuing to have a favorable impact on bottom line results.
Speaker Change: Offshore revenues now comprise 53% of total revenue versus 49% in the prior year quarter.
Speaker Change: Revenue mix in our higher margin digital and Omnichannel services also continues to be strong.
Digital and Omnichannel delivery represented 80% of our total revenue an increase from 79% in the prior year quarter.
Speaker Change: For context, digital and Omnichannel comprise roughly 65% at the time of our IPO in 2020.
Speaker Change: We expect that we will continue to be successful driving growth in these higher margin regions services as new client wins and growth in our embedded base continue to be focused in these areas.
Speaker Change: Second quarter net income increased to $9 3 million compared to $6 1 million in the prior year quarter. The increase was primarily driven by the meaningful growth of work and higher margin offshore regions of 14% year over year for the quarter.
Speaker Change: And the realization of the site and cost optimization efforts completed over the past year, partially offset by higher income tax and interest expense.
Speaker Change: Fully diluted EPS was <unk> 57 up from 33 cents in the prior year quarter.
Speaker Change: <unk> to the EPS growth was the impact from fewer diluted shares outstanding from share repurchases over the last year, including the repurchase of $3 6 million shares from <unk> in November.
Speaker Change: Weighted average diluted shares outstanding for the quarter were $16 5 million versus $18 4 million one year ago.
Speaker Change: In the third quarter, we expect this number to be approximately $14 3 million shares as we realize a bulk order impact from the $3 6 million <unk> share repurchase.
Moving to non-GAAP measures adjusted EBITDA increased to $16 5 million or 11, 8% revenue from $14 3 million or 10, 8% of revenue for the same period last year.
Speaker Change: <unk> basis point improvement in adjusted EBITDA margin was primarily driven by growth in our higher margin offshore locations. During recent years growth in key verticals from existing and new clients throughout fiscal 2024, and fiscal 2025 to date and stronger operating results due to site optimization efforts.
Speaker Change: Adjusted net income increased to $9 6 million from <unk> 8 million in the prior year quarter.
Speaker Change: non-GAAP fully diluted adjusted earnings per share increased to 59 days from 44 in the prior year quarter the.
Speaker Change: The increases were driven by the higher EBITDA and fewer diluted shares outstanding.
Speaker Change: Led by higher income tax and interest expense.
Speaker Change: We expect our tax rate to track towards 21% to 22% for the year.
Speaker Change: As a company we are pleased with the client diversification, we have established over the last several years.
The second quarter of fiscal year 2025, our largest client accounted for 12% revenue.
Speaker Change: Top 510, and 25 client concentration has declined compared to the prior year to 39%, 54% and 79% from 41%, 59% and 82% respectively of overall revenue representative of a well diversified client portfolio, which continues to become more diversified.
Speaker Change: Over the past decade, we have done a tremendous job retaining our top 25 clients and are excited to see one of our signature client wins from fiscal year 'twenty four already move into our top 20.
Speaker Change: Switching to our verticals health Tech increase of 15, 1% of second quarter revenue versus 12, 2% in the prior year quarter travel transportation and logistics increased to 13, 7% versus 12, 5% in the prior year quarter and retail E. Commerce remained relatively consistent at 28 five.
Speaker Change: Sent versus 29% in the prior year quarter.
Speaker Change: These increases were driven by continued demand in multiple offshore geographies and our continued ability to win significant new clients in these verticals.
Speaker Change: Conversely, our exposure to fintech vertical decreased to 11% of revenue for the quarter versus 13, 7% in the prior year quarter impacted by the changing landscape for some client payment support models and geographic shift from onshore to offshore delivery.
Speaker Change: Net cash generated from operating activities was $1 1 million for the second quarter of fiscal year 2025, compared to an outflow of $1 6 million for the prior year quarter. The increase was driven by increased revenues and stronger operating results, partially offset by longer dsos for our receivables.
Speaker Change: Our Dsos were 79 days up from 75 days at the end of first quarter as we experienced our typical seasonal increase in DSO and also some delay in payments related to having our clients remit payments into a new bank again.
Speaker Change: Our dsos to remain stable in the mid Seventy's on a go forward basis.
Capital expenditures were $4 3 million or three 1% of revenue for the second quarter versus $2 9 million or two 2% of revenue in the prior year quarter. This increase was primarily driven by expansions in our offshore nearshore regions to support growth in these higher margin geographies.
Speaker Change: Free cash flow was an outflow of $3 2 million in the current quarter compared to an outflow of $4 5 million in the prior quarter. The improvement was driven by increased net cash provided by operating activities, partially offset by higher capital expenditures during the current quarter.
Speaker Change: We ended the second quarter with $22 million of cash and debt of $33 9 million for a net debt of $13 7 million compared to $62 3 million of cash and debt of $1 5 million for a net cash of $60 8 million at the end of our first quarter.
Speaker Change: The decrease in our net cash position during the quarter was primarily driven by the share repurchases of $3 6 million shares from TR Gi for $70 million.
Speaker Change: We funded the share repurchase with $45 million of cash on hand, and a 25 million convertible promissory note from <unk>.
Speaker Change: After the second quarter ended this note was paid in full with proceeds from our new revolving lines of credit with HSBC.
Speaker Change: To summarize our second quarter of fiscal year 2025, we achieved strong top and bottom line second quarter results, we accelerated our top line momentum with over 6% revenue growth driven by new client wins over the last year and continued expansion of our embedded client base made possible by strong service delivery.
Speaker Change: Additionally, our profitability continues to improve we're for 10 of the last 11 quarters, we've delivered year over year, adjusted EBITDA margin expansion, enabling strategic investments in AI capabilities and sales resources.
These results is still continued confidence in the execution of our strategy throughout 2025, enabling us to raise our fiscal year guidance and continue to return value to shareholders.
Speaker Change: Revenue is now expected to be in the range of $525 to $535 million versus a previous range of $515 million to $525 million.
Speaker Change: Adjusted EBITDA is now expected to be in the range of 68% to $69 million versus a previous range of $67 million to $69 million.
Speaker Change: And capital expenditures are expected to remain in the range of $15 million to $20 million.
Speaker Change: Our business is well positioned for today and for the years ahead, and we're excited about the future buybacks as we head into the third quarter of fiscal year 2025 and beyond.
Speaker Change: With that Bob and I will now take questions. Operator, please open the line.
Speaker Change: Thank you.
Speaker Change: A reminder to ask a question. 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, one moment for questions.
Speaker Change: Our first question comes from David Koning with Baird You May proceed.
David Koning: Yeah, Hey, guys. Congrats on another great quarter really good to see.
David Koning: Thanks, David Yeah, we're really really pleased with the results we posted.
David Koning: Yeah, Yeah, and maybe to start just on revenue.
Is it a combination is the backdrop getting better.
Maybe a combination of a few kind of things that the backdrop getting better.
David Koning: Are you just winning against others and how is Gen AI and you kind of talked a little bit about it and they actually at the tailwind headwind a little of both like.
David Koning: Because all of those three things seem to be driving revenue.
David Koning: Yes, David.
I appreciate the question and maybe it's a little bit of all of the above but I think.
David Koning: Probably the biggest drivers for US are our continued winning new logos that then drive a lot of a lot of revenue growth with them.
David Koning: And kind of your twos and things like that so.
David Koning: And thats been a staple of buybacks of our ability to win and then land and expand and get those those new clients growing so that's.
David Koning: Think probably one of the one of the biggest drivers actually it is the biggest driver.
David Koning: The second driver Thats going on.
David Koning: As for US is our ability to win market share.
David Koning: I will say a lot of the embedded base clients are looking at.
David Koning: And moving some of their business into the lower lower.
David Koning: Labor cost markets that as you know over the years has been in the game.
David Koning: That's been taking place that puts pressure on on.
David Koning: On top line revenue, but what we've been able to do is manage through that but take market share.
David Koning: So I think we're if you look at our competitors.
David Koning: Those events are putting serious headwinds into their business for us it isn't because we're winning market share and as spoke Taylor and I said, we're winning market share because.
David Koning: We're out executing our competitors.
David Koning: And so those are I think.
David Koning: The two biggest variables.
David Koning: And then the third one just around the macro and kind of demand I would kind of sit and say that.
David Koning: Debt.
David Koning: The demand has stabilized I'm not sure the demands come back right and so but the good news is it's stabilized and that's allowing us to I think continue to build the momentum and as you've seen over the last several quarters, our topline growth continues to.
David Koning: To build in.
David Koning: And growth.
David Koning: Yes, yes, that's great.
David Koning: And then I guess secondly, just on margins I mean, you continue to put up really good margin the way youre guiding the back half, though it looks like margins might be down just a touch in the back half to get to the updated EBITDA guidance I mean, you're right. EBITDA go ahead switches, which is great. But Q2 is so good that it actually takes a little bit of margin.
David Koning: Create a margin headwind it looks like in the second half so just kind of wondering on that.
Taylor: Hey, Taylor I'll throw that over to you if you want to yes, yes.
Taylor: Yeah, no absolutely so David if you look at our gross margins on the gross margin level, we improved at 140 basis point in Q1.
Taylor: 210 basis points in Q2, and we expect that improvement year over year to continue into Q3 and Q4. So we're feeling very good about the profitability of our business now what we're doing and that's intentional as we are investing in SG&A and sales resources and technology both on the infrastructure.
Taylor: We recently implemented our new financial system, and HR system, and then also in AI capabilities to grow the business.
Taylor: But if you look at the back half of the year in terms of our guidance, we're still at around 14%.
EBITDA margins. So we still feel very good about that and it's the fact that our gross margins are seeing such improvement that we're able to invest in growth and continue this trend.
Taylor: Gotcha.
Speaker Change: Job guys. Thank you.
Speaker Change: Great David Thanks, good catching up.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Yes.
Speaker Change: And I'm not showing any further questions I'd now like to turn the call back over to Bob <unk> for any closing remarks.
Bob decking: Josh Thank you and thank you all for attending.
Bob decking: We're really proud of what we continue to do as a team what we do operationally what we do financially and then from a strategic standpoint, with our AI strategy put all those elements together I love the trajectory of our business and thank you all and we'll talk to you next quarter.
Bob decking: Good night.
Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
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