Q3 2025 IBEX Ltd Earnings Call
Yeah.
Speaker Change: Welcome to the IMAX third 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'll be a question and answer session to ask a question. Please press star one one on your telephone.
Speaker Change: And wait for your name to be announced to withdraw your question. Please press star one again to note there is an accompanying.
Speaker Change: Earnings deck presentation available on the IMAX Investor Relations website at investors that IMAX Darko I will now turn this conference over to Mr. Michael Dar wall 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.
Speaker Change: Please note that these forward looking statements reflect our opinion as of the date of this call and we undertake no obligation to revise this information as a result of new developments, which may occur.
Speaker Change: Forward looking statements are subject to various risks uncertainties and other factors that could cause our actual results could differ materially from those expected and described today for a more detailed description of our risk factors. Please review our annual report on Form 10-K filed with the U S Securities and Exchange Commission.
Speaker Change: On September 12 2024.
Speaker Change: With that I will now turn the call over to IDEXX CEO Bob decade.
Bob Decade: Thanks, Mike Good afternoon, and thank you all for joining us today as we share our third quarter fiscal year 2025 results.
Bob Decade: I'd like to begin today by once again thanking my team for another outstanding quarter.
Bob Decade: Our track record of delivering great results continue to showcase why they are the best in the industry.
Bob Decade: In Q3, FY 'twenty five didn't disappoint.
Bob Decade: The momentum we have continues to build and I am excited to report that we have returned to double digit organic revenue growth at 11%.
Bob Decade: This marks our best growth in more than two years and resulted in our highest revenue quarter ever as a company.
Bob Decade: Additionally, we had another strong quarter on profitability.
Bob Decade: Where we delivered adjusted EBITDA of $19 4 million.
Bob Decade: At a margin of 13, 8% and expanded gross margin 50 basis points.
Bob Decade: I am also excited to announce that we achieved a major strategic milestone in the quarter.
Bob Decade: With our entry into the India market.
Bob Decade: For a leading healthcare client operating in this key location has been a strategic priority for the company.
Bob Decade: And further enhances our client delivery options.
Bob Decade: Our reputation as a growth leader in the industry is driven by our success of our powerful new logo sales engine with a large enterprise deals, where we can execute our land and expand strategy.
Bob Decade: Blue chip clients choose us for our differentiated capabilities and our ability to disrupt the status quo and outperform our competition.
Bob Decade: More recently clients are also choosing us for our ability to quickly bring innovative AI solutions to Mark <unk>.
Bob Decade: Enabling us to solve for today with our <unk> solutions.
Bob Decade: And tomorrow with our AI stack.
This is a powerful combination.
Bob Decade: In the quarter, we won four key new logo opportunities often against our much larger competitors, giving us a total of 12 for the year.
Bob Decade: As an example, we had a significant win with a top tier global E Commerce company, providing content moderation services that leverage a complex balance of both AI automation and human review.
Bob Decade: Additional services include the verification process for traders and sellers.
Bob Decade: User review moderation.
Bob Decade: Content policy enforcement and general consumer compliance and now we are expanding with them to provide global English customer support our land and expand strategy with our embedded base clients was at full throttle in Q3, we had strong growth within our top 25 clients and in <unk>.
Bob Decade: Particular, our top five clients.
Bob Decade: Again, this is driven by our ability to outperform our larger competitors across all of our theaters.
Bob Decade: As a result, we have developed a strong trust with our clients and this plays a huge role in their willingness to expand with us in many of our regions and even now in a brand new market for us like India in the quarter, we had great success with our market leading waiver.
Bob Decade: <unk> AI solutions, winning and launching several clients with our AI automate.
Bob Decade: <unk> AI translate offerings. These.
Bob Decade: These significant milestones increase our stickiness with our clients and widen our competitive moat.
Bob Decade: Importantly, our waves.
Bob Decade: AI pipeline is robust with over 75 opportunities in the pipeline today and 90 deployments expected in fiscal Q4.
Bob Decade: As we look to FY 'twenty six we are confident that these high margin services will provide meaningful revenue and margin for us.
Bob Decade: Both factors continue to be our margin expansion drivers.
Bob Decade: From a geographic standpoint.
Bob Decade: We grew our highest margin offshore region by 19% year over year.
This is our strongest growth there in two years.
Bob Decade: From a service standpoint, our higher margin integrated omni channel revenue grew by 16% year over year.
Bob Decade: Now represents 81% of our overall business let.
Bob Decade: Let me take a moment to recap what we accomplished in the quarter, we delivered record revenue of $147 million up 11% from a year ago. We delivered strong Q3, adjusted EBITDA margin of $19 4 million, while making key investments into India.
Bob Decade: We achieved record adjusted EPS of <unk> 82.
Bob Decade: Up 18% from a year ago.
Bob Decade: We generated $3 6 million of free cash flow and completed the repayment of the seller financing note two tier Gi associated with the strategic repurchase of approximately $3 6 billion shares from them in Q2.
Bob Decade: We closed four new logos in the quarter. These wins cut across the health Tech Fintech and retail and e-commerce verticals we.
Bob Decade: We had an impactful quarter with key wins and launches in our leading wave IX AI solution stack.
Bob Decade: Lastly, we made our first entry into India, a strategic market that will provide us additional growth opportunities in the future again, I couldnt be more proud of this team and their performance.
Bob Decade: Before I close I would like to take a moment to address the current tariff impacts in our business.
Bob Decade: We view the direct impact of the U S trade tariffs to not have any impact on our business as our services fall outside of the scope of the trade measures indirectly to date, we have seen no impact to our client volumes.
Bob Decade: And we currently believe that the impact to future volumes to be limited to a small subset of our clients as.
Bob Decade: As we maintain an incredibly well diversified client and industry vertical base in closing we remain confident in the trajectory of our business. Therefore, I'm excited to announce that we are raising full year guidance on both revenue and EBITDA.
Bob Decade: And are launching a new $15 million share repurchase program.
Bob Decade: We have built a very strong business that continues to execute quarter over quarter.
Bob Decade: And we are well positioned to do so in the future.
Bob Decade: With that I will now turn the call over to Taylor to go into more details on our third quarter FY 'twenty five financials and guidance over to you Taylor.
Taylor: Thank you Bob and good afternoon, everyone.
Bob Decade: Thank you for joining the call today.
Speaker Change: Hey, my discussions of our third quarter fiscal year 2025 financial results references to revenue net income and net cash generated from operations around the U S. GAAP basis, while adjusted net income adjusted earnings per share adjusted EBITDA and free cash flow are on a non-GAAP basis.
Speaker Change: Reconciliations of our U S. GAAP to non-GAAP measures are included in the tables attached to our earnings press release.
Speaker Change: Turning to our results our third quarter results are once again, among the strongest in our history with record top line results strong profitability and record adjusted EPS.
Speaker Change: Third quarter revenue was $140 7 million, an increase of 11% from $126 8 million in the prior year quarter.
Speaker Change: Revenue growth was driven by vertical growth in health Tech are 20% travel transportation and logistics of 19% and retail and E. Commerce are 15% along with growth in our digital acquisition business.
These increases were partially offset by decline in the Fintech vertical is 12%.
Speaker Change: It is worth noting this quarter also saw a slight sequential growth over our second quarter, which is typically our highest revenue fiscal quarter for the first time in nine years.
Speaker Change: Market share gains enabled this result.
Speaker Change: Focused efforts to grow our higher margin offshore delivery locations are continuing to have a favorable impact on bottom line results offshore.
Speaker Change: Offshore revenues now comprise 51% of total revenue versus 48% in the prior year quarter contributing to our 50 basis point gross margin improvement to 31, 8% revenue mix in our higher margin digital and Omnichannel services also continues to be strong.
Speaker Change: Digital and Omnichannel delivery represented 81% of our total revenue an increase from 78% in the prior year quarter and grew 16% versus the same quarter a year ago.
Speaker Change: For context, digital and Omnichannel comprised roughly 55% 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 in services as new client wins and growth in our embedded base continue to be focused in these areas and as we grow in our new market India.
Speaker Change: Third quarter net income increased slightly to $10 5 million compared to $10 3 million in the prior year quarter.
Speaker Change: Increase was primarily driven by the meaningful growth of work and higher margin offshore regions of 19% year over year for the quarter and the realization of site and cost optimization efforts completed over the past year.
Speaker Change: Firstly offset by higher selling general and administrative expenses related to investments in our teams technology expansion in India and the workday implementation.
Speaker Change: Net income was also impacted by increases in interest expense.
Speaker Change: And income tax expense due to the absence of the favorable discrete item accorded in the prior year.
Fully diluted EPS was <unk> 73 up from 57, the prior year quarter.
Speaker Change: Germany to the EPS growth was the impact from fewer diluted shares outstanding from share repurchase over the last year, including the repurchase of $3 6 million shares from TR Gi in November.
Speaker Change: Our weighted average diluted shares outstanding for the quarter were $14 4 million versus $18 8 million one year ago.
Speaker Change: The board has recently authorized an additional $15 million share repurchase plan over the next year.
Speaker Change: Moving to non-GAAP measures adjusted EBITDA increased to $19 4 million or 13, 8% of revenue from $19 2 million or 15 115, 1% of revenue for the same period last year.
Speaker Change: Gross margin performance was offset primarily by increases in selling general and administrative expenses related to the aforementioned investments in our expansion in India.
Speaker Change: And there are people in technology, leading to a 130 basis point decline in adjusted EBITDA margin. During the three months ended March 31, 2025 compared to the same quarter in the prior year adjusted net income decreased to $11 8 million from $12 6 million in the prior year quarter non.
Speaker Change: non-GAAP fully diluted earnings per share increased to 82 cents from 70 in the prior year quarter, which was driven by the impact of higher revenue improved operating performance and fewer diluted shares outstanding.
Speaker Change: By higher income tax and interest expense.
Speaker Change: We expect our tax rate to track towards 20% to 21% for the year.
Speaker Change: As a company we're pleased with the client diversification, we've established over the last several years for the third quarter of fiscal year 2025, our largest client accounted for 11% of revenue and our top five top 10, and top 25 client concentration duration remained consistent with the prior year at 38%, 54% and 80%.
Speaker Change: <unk> of overall revenue.
Speaker Change: Representative of a well diversified client portfolio over.
Speaker Change: Over the past decade, we've done a tremendous job retaining our top 25 clients and are excited to see one of our signature client wins from fiscal year 'twenty for now move into the top 15.
Speaker Change: Switching to our verticals.
Speaker Change: Health deck increased to 15, 8% of third quarter revenue versus 14, 6% in the prior year quarter travel transportation and logistics increased 14% versus 13, 1% in the prior year quarter and retail E Commerce increased to 25, 7%.
Speaker Change: 24, 9% in the prior year quarter.
Speaker Change: These increases were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals.
Speaker Change: Conversely, our exposure to the Fintech vertical decreased to 10, 8% of revenue for the quarter versus 13, 7% in the prior year quarter as.
Speaker Change: As we believe after this quarter, we will have largely lap the impact of some client payment support model changes and geographic shifts from onshore to offshore delivery of the last year net cash generated from operating activities was $8 8 million for the third quarter of fiscal 2025% compared to $11 4 million for the prior year quarter.
Speaker Change: Our Dsos were 77 days down from 79 days at the end of the second quarter.
Speaker Change: We expect our Dsos remained stable in the mid 70% on a go forward basis improve.
Speaker Change: Improvement our days sales outstanding during the current year quarter was offset by increased investments in organizational teams and technology and expansion into the Indian market as compared to the prior year quarter.
Speaker Change: Capital expenditures were $5 3 million or three 7% of revenue for the third quarter of fiscal year 2025 versus $1 7 million or one 3% of revenue for the prior year quarter.
Speaker Change: This planned increase was primarily driven by expansion to meet demand.
Speaker Change: In our offshore and near shore regions supporting growth in these higher margin geographies as a result of our operating cash flow and increased capital expenditures in the quarter free cash flow was an inflow of $3 6 million in the current quarter compared to $9 7 million in the prior year quarter.
Speaker Change: We ended the third quarter with 13 million of cash and debt of $20 6 million net.
Speaker Change: Net debt of $7 6 million.
Speaker Change: Improvement of $6 1 million compared to net debt of $13 7 million at the end of our second quarter.
Speaker Change: During the quarter, we used our available cash and HSBC revolving facilities.
Speaker Change: Higher than 25 million convertible note, we had with TR Gi.
Speaker Change: To summarize our third quarter fiscal 2025, we achieved outstanding top and strong bottom line third quarter results, we delivered a multi high topline performance with 11% revenue growth over 7% fiscal year to date with 19% growth in our highest margin offshore regions our adjusted.
Speaker Change: EPS of <unk> <unk> was up 18% over the prior year quarter and was a record for our business continued.
Speaker Change: Continued expansion of our embedded client base and new client wins over the last year drove these excellent results.
The upward trend in our results over the last few quarters, not only enable strategic investments in our growing AI capabilities and sales resources, but also our in quarter entry into the Indian market.
Speaker Change: Importantly, these results is still continued confidence in the execution of our strategy, enabling us to again raised our fiscal year guidance.
Speaker Change: The newly authorized share repurchase program and continued to return value to shareholders.
Speaker Change: In terms of guidance for fiscal year 2025 Rep.
Speaker Change: Revenue is now expected to be in the range of $540 to $545 million versus a previous range of $525 million to $535 million and adjusted EBITDA is expected to be in the range of $68 million to $70 million versus a previous range of $68 million to $69 million.
Speaker Change: Capital expenditures are expected to remain in the range of 15 to 20.
Speaker Change: Our business is well positioned for today and the years ahead, and we're excited about the future buybacks as we complete fiscal year 2025, and look to fiscal year 2026 and beyond.
Speaker Change: Bob and I will now take questions.
Speaker Change: Operator, please open the line.
Speaker Change: Thank you.
Speaker Change: 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.
Speaker Change: One moment for questions.
Speaker Change: Our first question comes from Jacob aggregate with Baird You May proceed.
Jacob: Hey, guys congrats on the great results.
Jacob: Getting into India, that's exciting so I just had a question for you guys.
Jacob: When your sequential against normal sequential trends pretty meaningfully this quarter and I was just kind of curious if that's something that we should expect going forward it looks like.
Jacob: Based on the guidance kind of at the top end Youre still looking at.
Jacob: Being below normal sequential trends, so how should we kind of model like Q4 sequential trends that you expect them to be similar to this quarter or do you expect a step down and then kind of going into 2026 is just going to become a trend of being able to exceed the historical trends.
Speaker Change: Yes, Thanks, and Great question, Jacob and appreciate your being on the call at all so.
We're really proud of that.
Speaker Change: Our Q3.
Speaker Change: <unk> did not contract from R. R.
Speaker Change: <unk> at all.
Speaker Change: Typical seasonal strongest quarter of Q2.
Speaker Change: How that happened.
Speaker Change: There are multiple dimensions to that first of all over the years, we've done a pretty good job of building our business.
Speaker Change: Beyond just heavy heavy retail.
Speaker Change: So when you bring in health care.
Speaker Change: Care opportunities things like that a lot of.
Speaker Change: The.
Speaker Change: A lot of those volumes are not quite there they extend into Q3 pretty pretty well.
As let's say client customers send members may change plans and such so we think we've structurally changed it now that being said.
Speaker Change: We have a strong amount of.
Speaker Change: Q2.
Speaker Change: Call. It peak holiday volume that we will always have.
Speaker Change: One of the key things. We did this year was we were able to take significant market share away from our competitors in Q3 driven by performance.
Speaker Change: And so as.
Speaker Change: Those volumes were contracted across the enterprise for our retail customers.
Speaker Change: They took the volume.
Speaker Change: Out of our competitors and kept us.
Speaker Change: Much stronger based off of performance.
Speaker Change: Our goal is to keep that up year over year.
Speaker Change: And.
Speaker Change: So there.
Speaker Change: Those are two vectors that drove that the third is our strength of our new logo or new logo team and what I've looked at the data I think we're about $5 million of <unk>.
Speaker Change: <unk> logo revenue in the quarter that did not exist a year ago, and we expect that to continue so.
Speaker Change: Look we would love it to be flat year over year, I don't think that's necessarily the perfect expectation, but I feel pretty confident that the sequential decline from Q2 to Q3 will be muted will be.
Speaker Change: Slow down will be a lot less than it has historically been.
Now as it relates to Q4.
Speaker Change: Look we typically decline just a little bit from Q3 to Q4.
Speaker Change: From an absolute dollar standpoint, we'll see where thats going I mean that trend probably is.
Taylor: We'll probably continue Taylor I'll throw it over to you Taylor maybe you have.
Taylor: A little more comment on Q3 to Q4.
Taylor: No Bob I think you are correct I think we will see the trend of a small decline from Q3 to Q4 and our full year guidance would suggest that.
Taylor: So if you look at the year over year growth rate Q4 last year was the year, where really start inflicting towards growth. So the comps are going to get a little tougher for us, but we still feel like we have great momentum and are very pleased with the direction of the business.
Speaker Change: Yes, I appreciate it.
Speaker Change: Just to kind of follow up on that so when we've talked about kind of the AI with you guys in the past it's been about it coming on at a stronger margin. So I was kind of wanted to touch on the year over year margin decline this quarter.
Speaker Change: Like really just pretty much 100% coming from your expansion in India is there a little piece of maybe new volume that was signed that that's kind of bringing that down a little bit or what's kind of the dynamic there sure. Let me let me let me start with that so when we think of our overall business we ask.
Speaker Change: Group gross margin 50 basis points year over year.
Speaker Change: No.
Speaker Change: That is driven by the growth of our high margin.
Services and regions, we expect that to continue now we've made some pretty big investments in the quarter in particular, India.
Speaker Change: That those costs hit the quarter.
Speaker Change: But they jumpstart Q4, another vector of growth. So that's how we looked at that so I think structurally our business is not under headwinds on margin decline.
Speaker Change: We're making aggressive investments for growth, which is growth in kind of a real strategic footprint for us. So.
We feel very good about that trajectory of our business now one.
Speaker Change: You kind of touched on AI now, we believe AI will come in and be even a higher margin service than any of the other services, we have in our stack and any of the other geographies we have in our stack today.
Speaker Change: Now what's really exciting is.
Speaker Change: As we move from Q3 to Q4.
Speaker Change: I think we are now moving from our business, our AI solutions being what I'll call prototypes and pilots.
Speaker Change: To now being full deployments.
Speaker Change: That will have.
Speaker Change: Very very important impact into our clients' business and.
Speaker Change: And then we will as a result, we will start driving as I said meaningful revenue and margin expansion for us.
Speaker Change: Look at the move from Q3 to Q4 as that inflection point from going you don't.
Speaker Change: Exciting pilots.
To really powerful.
Speaker Change: Appointment.
Speaker Change: Full production deployments and so we're really excited about that and think that positions us very well into FY 'twenty six.
Speaker Change: Yes, no that sounds good.
Speaker Change: I, just I guess, just kind of touching on and this is my last question, sorry, just kind of touching on the <unk>.
Speaker Change: AI dynamics there when you are saying that it's going to provide a meaningful revenue uplift.
Speaker Change: Is that something that you guys are going to start realizing kind of right away right at the start of the implementation of these projects or does that take.
Speaker Change: A quarter or two to develop and then is that something that you're implementing within your base as well, where we might even see existing contracts get a revenue uplift.
Speaker Change: Sure so.
Speaker Change: Really really good question.
Speaker Change: We've been winning these deals over the last several quarters and I would say kind of to your to your question. It's a couple of quarters worth of as your windows work with clients to.
Speaker Change: To begin piloting the solution before you go full production and so we've been deploying these but mostly in exciting pilots that now we're going into production. So those will go into production and should start generating revenue in March.
Speaker Change: Revenue in high margin, let's say, starting this quarter, our Q4, and obviously then move stronger into FY 'twenty six.
Speaker Change: The wins that we continue to have we'll have that probably two quarter effect of where we pilot them and then we move into kind of full full scale.
Speaker Change: Production so.
Speaker Change: We feel like.
Speaker Change: With the 75 opportunities that we have in the pipeline.
Speaker Change: We're going to continue to win win at a good rate and start layering those in as pilot study evolve into production and you can just see you.
Speaker Change: You can see a.
Speaker Change: A cascading effect into into the growth of that I think quarter over quarter. So we're pretty I think we're pretty excited about that and let me just.
Speaker Change: There is two key all first we have that we have really made commercial.
Speaker Change: One is our.
Speaker Change: AI automates.
Speaker Change: And that's where we are automating customer interactions and we.
Speaker Change: We see.
Speaker Change: Low complexity calls.
Speaker Change: As ideal for that and we're working with our clients to identify those and bring those in.
Speaker Change: That will that will.
Speaker Change: Go into.
Speaker Change: Eliminating some of human volume.
Speaker Change: But the math that we've done with our size when we win those opportunities we win them on an enterprise basis.
Speaker Change: We may have 20% of the outsourced work or 30% of the outsourced work.
Speaker Change: We may lose some of that revenue to the.
Speaker Change: From the human calls that then goes to AI, but we're winning AI at an enterprise level.
Speaker Change: The math, we believe that's accretive revenue to US now the second solution. We have is AI translate and AI translate for US is where we go after.
Speaker Change: The language translation services bureaus.
Speaker Change: Where.
Speaker Change: It's 100% accretive to us Thats every deployment there is accretive fully accretive revenue to us.
Speaker Change: So when you put those two together we believe that AI.
Speaker Change: As a growth vector.
Speaker Change: Into our overall business.
Speaker Change: Even as it may be offset a little bit with.
Speaker Change: With.
Speaker Change: With cannibalizing, a little bit of our agent volume, but because we win so much of that on an enterprise level. We believe it's all accretive.
Speaker Change: No that all makes sense. Thank you.
Speaker Change: Great. Thanks.
Speaker Change: And for the questions.
Bob Decade: Thank you I would now like to turn the call back over to Bob <unk> for any closing remarks.
Josh: Josh Thank you and thank you all for attending the call today.
Josh: As you can tell we're very proud of the results that we've delivered this quarter, but I think more importantly, these results that we've delivered over quarter after quarter. After quarter you can see the momentum in the business. We're very excited what we've built we believe that we have created just a fantastic business in this.
Josh: I believe that we have created just a fantastic business in this space and we're out performing the industry.
Josh: look forward to that. So thank you all and we look forward to talking to you all after the full year results in September . Thank you.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation. You may not disconnect.
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Thank you for watching!
Speaker Change: [music].