Q2 2025 Concentrix Corp Earnings Call

Operator: Good day, and thank you for standing by.

Good day, and thank you for standing by walking through the Concentrix second quarter financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a quick.

Operator: Welcome to the Concentrix Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand. To withdraw your question, please press star 1 again.

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Operator: Please be advised that today's conference is being recorded.

Speaker Change: Please be advised that today's conference is being recorded I would now like to turn the conference over to Sara Buda, Vice President Investor Relations. Please go ahead.

Sara Buda: I would now like to turn the conference over to Sara Buda, Vice President in Vista Relations. Please go ahead. Great, thank you operator and good evening.

Sara Buda: Great. Thank you operator, and good evening welcome to the Concentrix second quarter 2025 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 future performance and that by their nature address matters that are uncertain.

Sara Buda: Welcome to the Concentrix second quarter 2025 earnings call. This call is the property of Concentrix and may not be recorded or rebroadcast without the written permission of Concentrix.

Sara Buda: call contains forward-looking statements that address our future performance and that by their nature address matters that are These uncertainties may cause our actual future results to be materially different from those expressed in our forward looking statements. We do not undertake to update or 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 filings with the SEC for additional information regarding uncertainties that could affect our future financial results. This includes the risk factors provided in our annual report on Form 10-K and other public filings with the SEC.

Speaker Change: These uncertainties may cause our actual future results to be materially different from 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 events or developments. Please refer to today's earnings release and our most recent filings with the SEC for additional information regarding uncertainties.

Speaker Change: <unk> that could affect our future financial results. This includes the risk factors provided in our annual report on Form 10-K, and other public filings with the SEC 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 EBITA margin non.

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 growth. A reconciliation of these non-GAAP measures is available in the news release and on the company's investor relations website.

Speaker Change: GAAP net income non-GAAP EPS in constant currency revenue growth.

Speaker Change: A reconciliation of these non-GAAP measures is available in the news release and on the company's 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 Caldwell: With me on the call today are Chris Caldwell, our president and CEO and Andre Valentine, our Chief Financial Officer.

Sara Buda: 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 up the call for your questions.

Chris Caldwell: 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 up the call for your questions and now I will turn the call over to Chris. Thank you very much Sarah Hello, everyone and thank you for joining us today for our second quarter 2025 earnings call. We are seeing momentum from the investments we have been making.

Christopher Caldwell: And now I'll turn the call over to Chris. Thank you very much, Sara.

Christopher Caldwell: Hello, everyone, and thank you for joining us today for our second quarter 2025 earnings call. We are seeing momentum from the investments we have been making, accelerating our growth rate and demonstrating the value of our differentiated offerings. Today, I'll give you a bit more detail on our progress, and then Andre will talk about our view of ongoing revenue, margin and cash flow growth in the second half of the year. Now, let's start with a quarter. We reported yet another solid revenue quarter above our guidance, which outpaced both in our core offerings and our adjacent solutions.

Chris Caldwell: Accelerating our growth rate and demonstrating the value of our differentiated offerings today I'll give you a bit more detail on our progress and then Andre will talk about our view of ongoing revenue margin and cash flow growth in the second half of the year.

Chris Caldwell: Let's start with the quarter, we reported yet another solid revenue quarter above our guidance, which outpaced both in our core offerings and are adjacent solutions, we saw growth in our pipeline across verticals and geographies with the desired mix of services and accretive margin profiles operational margins for the quarter.

Christopher Caldwell: We saw growth in our pipeline across verticals and geographies with the desired mix of services and accretive margin profiles. Operational margins for the quarter were lighter than anticipated, driven by two reasons. Our decision to hold labor in April while clients reacted to tariffs and temporarily paused projects, and two, preparing for accelerated growth in the second half we won in quarter. As anticipated, by the end of May, we exited the month with our margin trending more favorably and expect that by later in Q3, we will again see improvement year over year in our margin. The goodwill we have seen from clients because of our decisions has already produced benefits.

Chris Caldwell: There were lighter than anticipated driven by two reasons our decision to hold labor in April while clients reacted to tariffs and temporarily pause projects and to preparing for accelerated growth in the second half we won in quarter as anticipated by the end of May we exited the month with our margin trending more favorably and <unk>.

Chris Caldwell: That's very later in Q3, we will again see improvement year over year in our margin.

Chris Caldwell: The goodwill we are seeing from clients because of our decision has already produced benefits.

Christopher Caldwell: We also delivered over $200 million in adjusted pre-cash flow in the quarter. As you can see from our outlook, we are excited about our second half momentum across all metrics, as Andre will detail. We are outperforming due to a few primary factors. First, our strategy to deliver pragmatic, deployable AI solutions aligned with what clients want is working. This is being driven both by embracing third-party technology partners as well as our own IX suite of products. Clients are over the AI hype and want practical solutions. A Gartner study recently revealed that enterprises are adopting a digital-first but not digital-only approach.

Chris Caldwell: We also delivered over $200 million and adjusted free cash flow in the quarter as you can see from our outlook. We're excited about our second half momentum across all metrics as Andre will detail.

Chris Caldwell: We are outperforming due to a few primary factors first our strategy to deliver pragmatic deployable AI solution aligned with what clients want is working this is being driven both by embracing third party technology partners as well as our own <unk> suite of products clients are over.

Chris Caldwell: The AI hype and one practical solutions are Gardner study recently revealed that enterprises are adopting a digital first but not digital only approach and our own third party survey of 450 Global enterprises showed a similar sentiment revealing that 85% of these enterprises expect.

Christopher Caldwell: And our own third-party survey of 450 global enterprises showed a similar sentiment, revealing that 85% of these enterprises expect to increase their outsourcing budget over the next two to three years. The majority of that increase is expected to be net new investments in supporting their AI agenda. Further, even though the survey was completely blind and independent, Enterprise's selection of Concentrix as a partner to build and deploy their AI initiatives was significantly ahead of all other traditional companies, CX companies combined. and it was even higher than many IT services companies. This is clear third-party validation of our recognition as a technology solutions provider in the marketplace.

Chris Caldwell: To increase their outsourcing budget over the next two to three years.

Chris Caldwell: The majority of that increase is expected to be net new investments in supporting their AI agenda.

Chris Caldwell: Further even though the survey was completely blind and independent enterprises selection of Concentrix as a partner to build and deploy their AI initiatives with significantly ahead of all other traditional companies CX companies combined.

Chris Caldwell: And it was even higher than many it services companies.

Chris Caldwell: This is clear third party validation of our recognition as a technology solutions provider in the marketplace.

Christopher Caldwell: Over the past 18 months, we have made thoughtful investments in our technology and our teams to position ourselves for this exact aha moment. In Q2, we also launched ixHero, our agentic AI-powered application that gives humans superpowers to more accurately and efficiently complete tasks with more consistent outcomes. This complements our autonomous AI assistant product, ixHello, giving clients an array of AI solutions to meet their needs for both full automation and human augmentation. We are delighted with the early market traction we are gaining, and our pipeline of integrated product solutions deals is strong. We believe we are on track for our products to be accretive to the business as we exit the end of the year, and believe we can deliver accelerated levels of revenue growth for our products without increasing our spends this year.

Chris Caldwell: Over the past 18 months, we have made thoughtful investments in our technology and our teams to position ourselves for this exact moment.

Chris Caldwell: In Q2, we also launched <unk>, our <unk> AI powered application the gifts humans superpowers to more accurately and efficiently complete tasks with more consistent outcomes. This complements our autonomous AI assistant product IX Hello, giving clients an array of AI solutions to meet their needs for both.

Chris Caldwell: Full automation and human augmentation.

Chris Caldwell: We are delighted with the early market traction, we are gaining and our pipeline of integrated product solutions deals is strong. We believe we are on track for our products to be accretive to the business as we exit the end of the year and believe we can deliver accelerated levels of revenue growth for our products without increasing our spend this year.

Christopher Caldwell: Within our marketplace, we are also the winning on the side of partner consolidation. This is enabling us to grow and win new business that tends to have more complexity as we introduce new adjacent services that can be deployed securely and at scale.

Chris Caldwell: Within our marketplace. We are also winning on the side of partner consolidation. This is enabling us to grow and win new business that tends to have more complexity as we introduce new adjacent services that can be deployed securely and at scale.

Christopher Caldwell: In summary, we delivered another strong revenue and cash flow quarter and are on track to exceed our revenue forecast for the year. We are confident the strategy we implemented several years ago is working. The strategy centered around, one, bringing integrated technology-led solutions to market that align with clients' needs, and two, expanding the value we provide clients across a broader portfolio of business solutions to grow a share, and finally, three, keeping our underlying business healthy by automating or de-investing in commodity work. The market is evolving as we anticipated. Clients are centralizing spend with partners that have scale, breadth, and expertise to deliver real-world solutions that drive tangible results.

Chris Caldwell: In summary, we delivered.

Chris Caldwell: Another strong revenue and cash flow quarter and are on track to exceed our revenue forecast for the year. We are confident the strategy. We implemented several years ago is working the strategy centered around one bringing integrated technology led solutions to market that align with client needs and to expanding the value we provide clients across a.

Chris Caldwell: Broader portfolio business solutions to grow share and finally, three keeping our underlying business healthy by automating or the investing in commodity work.

Chris Caldwell: The market is involving evolving as we anticipated clients are centralizing spend with partners that have scale breadth and expertise to deliver real world solutions that drive tangible results, we are well positioned against our competitor set particularly for large scale programs that combine consulting it integration CX expertise.

Christopher Caldwell: We are well positioned against our competitor set, particularly for large-scale programs that combine consulting, IT integration, CX expertise, and AI. We have made and will continue to make the right investments in the business for ongoing profitability.

Chris Caldwell: We have made and will continue to make the right investments in the business for ongoing profitability.

Christopher Caldwell: I would like to thank our game changers for their passion this quarter and the clients for their trust.

Chris Caldwell: I would like to thank our game changers for their passion in this quarter and our clients for their trust and with that Andre I'll turn it over to you.

Andre Valentine: And with that, Andre, I'll turn it over to you. Well, thank you, Chris. In the second quarter, we exceeded our revenue guidance yet again, delivering revenue of approximately $2.4 billion, an increase of 1.5% year-on-year on both a cost-to-currency and as-reported basis. The growth in the quarter was broad-based across our client base and reflects continued strength in our core AI-led customer experience offerings and ongoing growth in our adjacent AI solutions. These adjacent services are growing at a rate that is faster than the company as a whole and we continue to believe that as these solutions increase in scale, there's an increasing opportunity for them to contribute to revenue growth.

Andre: Thank you Chris in the second quarter, we exceeded our revenue guidance, yet again delivering revenue of approximately $2 4 billion, an increase of one 5% year on year on both a constant currency and as reported basis.

Speaker Change: The growth in the quarter was broad based across our client base and reflects continued strength in our core AI led customer experience offerings and ongoing growth in our adjacent AI solutions.

Speaker Change: These adjacent services are growing at a rate that is faster than the company as a whole and we continue to believe that as these solutions increase in scale. There is an increasing opportunity for them to contribute to revenue growth.

Andre Valentine: Looking at our second quarter revenue growth by vertical on a constant currency basis, growth was well balanced across verticals. Revenue from retail, travel, and e-commerce clients grew 3% year-over-year, led by growth with travel clients. Media and Communications also grew 3% year-on-year this quarter. This is positive to see as this vertical has been flat to down in the past few years. Revenue from banking, financial services, and insurance clients grew 2%. And our tech vertical and our healthcare vertical were both relatively flat, reflecting offshore movement. Turning to profitability, our non-GAAP operating income was $304 million. This is below the guidance range we provided on our last call.

Speaker Change: Looking at our second quarter revenue growth by vertical on a constant currency basis growth was well balanced across verticals.

Speaker Change: Revenue from retail travel and e-commerce clients grew 3% year over year led by growth with travel clients meet.

Speaker Change: Media and communications also grew 3% year on year. This quarter. This is positive to see as this vertical has been flat to down in the past few years revenue from banking financial services and insurance clients grew 2% and our tech vertical in our healthcare vertical were both relatively flat reflecting offshore movement.

Speaker Change: Turning to profitability our non-GAAP operating income was $304 million. This is below the guidance range. We provided on our last call as Chris mentioned in April some clients pause programs as a sorted through the impact of tariffs on their business. During this time, we kept their program stable with the expectation that the programs would start to resume in may.

Andre Valentine: As Chris mentioned, in April, some clients paused programs as they sorted through the impact of tariffs on their business. During this time, we kept their programs stable with the expectation that the programs would start to resume in May, as they have. We also made elevated investments to support the acceleration of revenue growth in the second half of 2025. Margins improved in May, and we expect meaningful sequential margin improvement in both the third and fourth quarter of the year. Adjusted EBITDA in the quarter was $357 million, a margin of 14.8%. Non-GAAP WDPS was $2.70 per share within our guidance range and an increase of 1 cent year-on-year as we benefit from lower interest expense, a more favorable tax rate, and a lower share count as we continue to repurchase our shares.

Speaker Change: As they have we also made elevated investments to support the acceleration of revenue growth in the second half of 2025.

Speaker Change: Margins improved in May and we expect meaningful sequential margin improvement in both the third and fourth quarter of the year.

Speaker Change: Adjusted EBITDA in the quarter was $357 million a margin of 14, 8%.

Speaker Change: non-GAAP diluted EPS was $2 70 per share within our guidance range and an increase of <unk> year on year as the benefit from lower interest expense, a more favorable tax rate and a lower share count as we continue to repurchase our shares.

Andre Valentine: Gap net income was $42 million for the quarter, and Gap diluted EPS was $0.63 per share. Reconciliations for gap and non-gap measures are provided in today's earnings report. Adjusted free cash flow was $200 million in the quarter, an improvement of about $240 million sequentially from Q1. We returned approximately $67 million to shareholders in the quarter, which included repurchasing $45 million of our common shares, or approximately 920,000 shares, at an average price of approximately $49 per share. The remaining $22 million in shareholder return was in the form of our quarterly dividend. At the end of the second quarter, cash and cash equivalents were $343 million, and total debt was approximately $4.9 billion, bringing our net debt to $4.5 billion.

Speaker Change: GAAP net income was $42 million for the quarter and GAAP diluted EPS was <unk> 63 per share.

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

Speaker Change: Adjusted free cash flow was $200 million in the quarter, an improvement of about $240 million sequentially from Q1.

Speaker Change: We returned approximately $67 million to shareholders in the quarter, which included repurchasing $45 million of our common shares or approximately 920000 shares at an average price of approximately $49 per share.

Speaker Change: The remaining $22 million in shareholder return was in the form of our quarterly dividend.

Speaker Change: At the end of the second quarter cash and cash equivalents were $343 million and total debt was approximately $4 9 billion.

Speaker Change: Bringing our net debt $4 5 billion. We also reduced the amount of our off balance sheet factored accounts receivable with the balance standing at approximately $142 million at the end of the quarter.

Andre Valentine: We also reduced the amount of our off-balance sheet factored accounts receivable with the balance standing at approximately $142 million at the end of the quarter. As previously disclosed, we refinanced a portion of our debt maturities and extended our revolving credit facility on favorable terms in the quarter. Late in the quarter, we made a $150 million voluntary principal payment against our term loan that matures in December of 2026, bringing the balance on that term loan down to $600 million. At the end of the quarter, we had approximately $1.5 billion in liquidity, including our $1.1 billion revolver, which is undrawn.

Speaker Change: As previously disclosed we refinanced a portion of our debt maturities and extended our revolving credit facility at favorable terms in the quarter late in the quarter, we made a $150 million voluntary principal payment against our term loan that matures in December of 2026, bringing the balance on that term loan down to 600 million.

Speaker Change: At the end of the quarter, we had approximately $1 5 billion in liquidity, including our $1 $1 billion revolver, which is undrawn.

Andre Valentine: Overall, we delivered a strong revenue quarter above expectations with steady growth across verticals. We continue to complement our core CX growth with strong momentum from our adjacent solutions such as data annotation, analytics, B2B sales, and AI implementation IT solutions. Our pipeline is strong and the new business we are signing is accretive to margins as these programs scale.

Speaker Change: Overall, we delivered a strong quarter.

Speaker Change: Revenue quarter above expectations with steady growth across verticals, we continue to complement our core <unk> growth with strong momentum from our adjacent solutions such as data annotation analytics <unk> sales in AI implementation solutions, our pipeline is strong and the new business. We are signing is accretive to margins as these.

Speaker Change: Program scale.

Andre Valentine: Now I will turn to our outlet. For the third quarter, we expect the following. revenue of $2.445 billion to $2.470 billion. Based on current exchange rates, these expectations assume an approximate 140 base. Positive impact of foreign exchange rates compared with the prior year period. The guidance implies constant currency revenue growth for the quarter, ranging from 1 to 2 percent. We expect operating income of $162 million to $172 million, and non-GAAP operating income of $318 million to $328 million. This translates into expected non-GAAP EPS of $2.80 per share to $2.91 per share, assuming approximately $68 million in non-GAAP interest expense, 62.7 million diluted common shares outstanding, and approximately 5% of net income attributable to participating securities.

Speaker Change: Now I'll turn to our outlook.

Speaker Change: For the third quarter, we expect the following.

Speaker Change: Revenue of 2.4, 45 billion to $2 $4 seven zero billion.

Speaker Change: Based on current exchange rates these expectations assume an approximate 140 basis point positive impact of foreign exchange rates compared with the prior year period the.

Speaker Change: The guidance implies constant currency revenue growth for the quarter, ranging from 1% to 2%.

Speaker Change: We expect operating income of $162 million to $172 million and non-GAAP operating income of $318 million to $328 million.

Speaker Change: This translates into expected non-GAAP EPS of $2 80 per share to $2 91 per share assuming approximately $68 million in non-GAAP interest expense.

Speaker Change: $2 7 million diluted common shares outstanding and approximately 5% of net income attributable to participating securities.

Andre Valentine: The effective tax rate is expected to be approximately 25.5% in the quarter.

Speaker Change: Effective tax rate is expected to be approximately 25, 5% in the quarter.

Andre Valentine: Our guidance for the full year 2025 is as follows. fiscal year reported revenue of $9.720 billion to $9.815 billion based on current exchange rates, which assumes a de minimis impact on exchange rates compared with the prior year period. Accordingly, we are increasing our guidance for constant currency revenue growth for the full year to 1 to 2 percent. We expect operating income of $675 million to $695 million, and non-GAAP operating income of $1,300 million to $1,320 million. This is within our initial profit guidance for the year and adjusts for the resulting Q2 and a currency headwind to profit as compared to our initial guidance.

Speaker Change: Our guidance for the full year 2025 is as follows fiscal.

Speaker Change: Fiscal year reported revenue of $9 720 billion to $9 $8 5 billion.

Speaker Change: Just on current exchange rates, which assumes a de minimis impact.

Speaker Change: Adrian compared with the prior year period.

Speaker Change: Accordingly, we are increasing our guidance for constant currency revenue growth for the full year to 1% to 2%.

Speaker Change: We expect operating income of $675 million to $695 million and non-GAAP operating income of <unk> hundred million to <unk> hundred $20 million. This is within our initial profit guidance for the year and adjust for the results in Q2, and a currency headwind to profit as compared to our <unk>.

Speaker Change: Initial guidance, we do expect our non-GAAP profit margin to increase sequentially in both the third and fourth quarters as revenue.

Andre Valentine: We do expect our non-gap profit margin to increase sequentially in both the third and fourth quarters as revenue follows the upfront investments we've made and as our technology suite moves to being accretive to the business in the fourth quarter. Our guidance for NIGAP EPS is $11.53 to $11.76 per share, assuming NIGAP interest expense of $273 million. approximately 63.1 million diluted common shares outstanding and approximately 5% of net income attributable to participating securities. The effective tax rate is expected to be approximately 25% for the full year.

Speaker Change: As the upfront investments, we've made and as our technology suite moves to being accretive to the business in the fourth quarter.

Speaker Change: Our guidance for non-GAAP EPS is $11 53 to.

Speaker Change: To $11 76 per share assuming non-GAAP interest expense of $273 million.

Speaker Change: Ultimately $63 1 million diluted common shares outstanding and approximately 5% of net income attributable to participating securities.

Speaker Change: The effective tax rate is expected to be approximately 25% for the full year.

Andre Valentine: And finally, we continue to expect adjusted free cash flow of $625 to $650 million. Included in this expectation is an improvement in day sales outstanding from current levels and the expected sequential improvement in profitability and lower integration costs.

Speaker Change: And finally, we continue to expect adjusted free cash flow of $625 million to $650 million.

Speaker Change: <unk> in this expectation is it an improvement in days sales outstanding from current levels and the expected sequential improvement in profitability and lower integration costs.

Andre Valentine: In regard to capital allocation priorities, as we said in January, we expect our spending on share repurchases to modestly exceed last year, taking advantage of the disconnect between the fundamentals of our business and our current valuation, while continuing to pay down debt. We remain committed to maintaining our investment grade principles, and of course, we will continue to support our dividend, which currently has a yield of approximately 2.4%.

Speaker Change: In regard to capital allocation priorities as we said in January.

Speaker Change: Our spending on share repurchases to modestly exceed last year, taking advantage of the disconnect between the fundamentals of our business and our current evaluation, while continuing to pay down debt, we remain committed to maintaining our investment grade principles and of course, we will continue to support our dividend, which currently has a yield of approximately two.

Speaker Change: Two 4%.

Andre Valentine: In summary, we are seeing a steady acceleration in our growth rate and are confident that our strategy to differentiate Concentrix from the market will continue to drive stronger growth in the second half of 2025 and beyond. We expect margin improvement in the second half and are committed to driving strong year-on-year pre-cash flow growth. We have made the right investments in the business that are allowing us to outperform and over the long term position us to generate mid-single digit growth we believe this business can deliver. And we are committed to having the right capital structure and continued capital return through a combination of share repurchases and dividends while reducing our leverage.

Speaker Change: In summary, we are seeing a steady acceleration of our growth rate and are confident that our strategy to differentiate concentrix and the market will continue to drive stronger growth in the second half of 2025 and beyond we expect margin improvement in the second half and are committed to driving strong year on year free cash flow growth.

Speaker Change: We have made the right investments in the business that are allowing us to outperform and over the long term position us to generate mid single digit growth. We believe this business can deliver and we are committed to having the right capital structure and continued capital return through a combination of share repurchases and dividends, while reducing our leverage with that operator.

Operator: With that, operator, please now open the line for questions. Thank you. As a reminder, if you would like to ask a question, please press star 1 on your.

Speaker Change: Please now open the line for questions.

Speaker Change: Thank you.

Speaker Change: Mind, you if you would like to ask a question. Please press star one on your telephone you hear an automated message advising you were had its rates. We also ask that you. Please wait for your name a company to be announced before proceeding with your question one moment for the first question.

Operator: You hear an automated message arising. Your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with the event. One moment for the first.

Joseph Vafi: And the first question will be coming from the line of Joseph Vafi of Conicord. Your line is open. Hey, everyone. Good afternoon. Great to see another solid quarter here relative to expectations. So congrats on that. Just maybe just a few quick ones from me. I know it did sound like some of the weaker verticals kind of from a broad base are doing a little bit better. And I know you're looking for a little bit of revenue acceleration here in the second half. Just want to drill down on that a little bit. You know, if revenue acceleration is, you know, more broad based here or is it more reliant on, you know, a couple of specific contracts and, you know, maybe other color there on where it might be coming from from a vertical basis.

Speaker Change: And the first question will be coming from the line of Joseph <unk>.

Speaker Change: <unk> of Canaccord Your line is open.

Speaker Change: Hey, everyone. Good afternoon, great to see another solid quarter here relative to expectations. So congrats on that.

Speaker Change: Maybe just a few quick ones for me.

Speaker Change: I know it sounded like some of the weaker verticals kind of from a broad base are doing a little bit better and I know you are looking for a little bit of.

Speaker Change: Revenue acceleration here in the second half.

Speaker Change: Wanted to drill down on that a little bit.

Speaker Change: If revenue acceleration is.

Speaker Change: More broad based here or is it more reliant on a couple of specific contracts.

Speaker Change: Maybe other color there on where it might be coming from from a vertical basis, and then I'll have a quick follow up.

Joseph Vafi: And then I'll have a quick follow up.

Christopher Caldwell: For sure, Joe.

Chris Caldwell: Sure Joe It's Chris So the momentum is broad based as we talked about from a pipeline perspective.

Christopher Caldwell: It's Chris. So the momentum is broad-based. As we talked about from a pipeline perspective, we're seeing very solid pipeline building, not only from a geography perspective in all of our geographies, but also in a vertical perspective. I think banking, as Andre alluded to, tech and media and comms, we're starting to see some good momentum. Healthcare, we're starting to get to the end of the offshoring mutation of our growth. And so we're really excited about what we're seeing. And frankly, as we kind of indicated in our comments, the type of deals that we're winning and the solutions that we're type of winning are the type that we've been after.

Chris Caldwell: We're seeing very solid pipeline building not only from a geography perspective in all of our geographies, but also on a vertical perspective I think.

Speaker Change: King.

Speaker Change: Andre alluded to tech and media and comps were starting to see some good momentum.

Speaker Change: Health care, we're starting to get to the end of the offshoring.

Speaker Change: Mutation of muting of our growth and so we're really excited about what we're seeing and frankly as you're kind of indicating a comment.

Speaker Change: The type of deals that we're winning and the solutions that were types of winning.

Speaker Change: Are the type that we've been after they're much more stickier they are more complex.

Joseph Vafi: They're much more stickier, they're more complex, and a big chunk of them use our technology. So we're pretty happy with that. That's great.

Speaker Change: Big chunk of them use our technology, so we're pretty happy with that.

Speaker Change: That's great and then kind of talking about your technology definitely of the congrats on getting that market research recognition for the technology.

Christopher Caldwell: And then kind of talking about your technology, definitely congrats on getting that market research recognition for the technology. You know, where are we in this journey now? You know, it's been, you know, I think Concentrix has done a great job here in, you know, turning AI into, you know, to a clear positive from an unknown, you know, over the last year, year and a half. I know you're rolling out some standalone, you know, software products. It sounds like it's helping you gain share, just maybe just kind of maybe just some more broad, you know, some more detailed commentary here on, you know, how AI is treating you right now in the market and what you may, you know, what we should expect here, you know, for the next year.

Speaker Change: Where are we in that journey now it's been I think concentrix, you've done a great job here.

Speaker Change: <unk>.

Speaker Change: Turning AI into.

Speaker Change: A clear positive from an unknown over the last year year, and a half I know youre rolling out some standalone.

Speaker Change: Software product.

Speaker Change: It sounds like it is helping you gain share there.

Speaker Change: I was just kind of maybe it's a more broad some more detailed commentary here on.

Speaker Change: How AI is treating you right now in the market and what you may what we should expect here.

Speaker Change: For them here.

Christopher Caldwell: Yeah, for sure, Joe. So I'll tackle the question in two parts. The first part is really our own technology. As we talked about sort of two years ago, not frankly, many clients were buying real AI. And so we developed a suite of products internally ourselves and started to see some very strong benefits. And then, you know, middle of last year, our clients started talking about wanting to deploy what we had, you know, basically been showing them internally working. And so that's where we started to commercialize the product and launch the first fully autonomous product late last year.

Speaker Change: Yes for sure Joe So I'll tackle the question in two parts. The first part is really our own technology as we talked about sort of two years ago.

Speaker Change: Frankly, many clients were buying real AI and so we developed a suite of products internally ourselves and starting to see some very strong benefits and then middle of last year. Our clients started talking about wanting to deploy what we have.

Speaker Change: Basically been showing them internally working and so thats, where we started to commercialize the product and launched the first.

Speaker Change: Fully autonomous product late last year, and then the I'll call it human augmentation product X.

Christopher Caldwell: And then the I'll call it human augmentation product, IX Hero, you know, at the beginning of Q2. And what we've been super happy with is not only are we getting clients to think about how to use it internally and are adopting it sort of a little ahead of where we expected them to adopt it, but also from the size of deployments, we're very happy that we're starting to see some scale. The one thing that we are seeing is the economic model slightly different than what we expected. We're seeing clients willing to give us more work because of our platform, which we're obviously costing into that and we're getting economic return from, but it's not necessarily always turning into discrete billing.

Speaker Change: Hero at the beginning of Q2 and what we've been Super happy with is not only are we getting clients to think about how to use it internally and are adopting it.

Speaker Change: Sort of a little ahead of where we expected them to adopt it but also from the size of deployment.

Speaker Change: Happy that we're starting to see some scale. The one thing that we are seeing is the economic model is slightly different than what we expected. We are seeing clients willing to give us more work because of our platform, which we are obviously costing into that and we're getting economic return from but it's not necessarily always turning into discrete billing. We are also.

Christopher Caldwell: We are also, you know, growing our discrete billing, though, when a client is deploying it across their enterprise, or wants to split how they're how they're buying products and services from us. And so we're super, super happy with how that is going. As we talked about, our expectation is that we'll be accretive by the end of Q4. And as I also mentioned, we expect to be able to accelerate growth on those products without investing more at this rate, because we built sort of and took the time to build it into a commercial product at the beginning of the year.

Speaker Change: Growing our discrete billing, though when a client is deploying it across their enterprise or was to split how they're how they're buying products and services from us and so we're super Super happy with how that is growing as we talked about our expectation is that will be accretive by the end of.

Speaker Change: Q4.

Speaker Change: I also mentioned, we expect to be able to accelerate growth on those products without investing more of this at this rate because we built sort of took the time to build it into a commercial product at the beginning of the year. So.

Christopher Caldwell: So as painful it was at the beginning of the year, we're starting to see the benefits of that investment and that time taken to build it that way. As we talked about a quarter or two ago, is now getting to a billion dollars and growing much faster than our core business. And so we're seeing all these positives from this AI, as we talked about two years ago, despite a lot of people not necessarily believing us at that time. And we're excited to see where the momentum can take us.

Speaker Change: Painful it was at the beginning of the year, we're starting to see the benefits of that investment and.

Speaker Change: At that time taken to build it that way the second part of the AI discussion is really about our third party technology partners and our adjacent services in the third technology partners are really coming to us because they've got this technology. They don't understand how to implement it in the last mile that drives value for clients many of them.

Phil: Phil POC or where they can't get growth out of it and they're coming to us to say, how do we actually implement this and use it and working with our clients to do that so we're seeing good growth in those implementation services were seeing good growth in the pipeline and we're also selling services around that from a delivery of services perspective, and then from an AR.

Jason: Jason services perspective.

Speaker Change: The growth in our data annotation, our analytics business, our implementations business, our consulting or managed services business.

Speaker Change: Even our <unk> business, where we're actually selling AI solutions on behalf of software vendors.

Speaker Change: As we've talked about a quarter or two ago is now getting to $1 billion and growing much faster than our core business and so we're seeing all of these positives from this AI as we talked about two years ago.

Speaker Change: Despite what a lot of people not necessarily believing us at that time, and we're excited to see where the momentum can take us.

Joseph Vafi: That's great. A lot of color there. Much appreciated.

Chris Caldwell: Sure that's great a lot of color there much appreciate Chris Congrats on all the progress.

Joseph Vafi: Chris, congrats on all the progress you and the whole Thank you very much, Joe. Thank you.

Chris Caldwell: The whole team.

Chris Caldwell: Thank you very much Joe.

Operator: One moment for the next question.

Chris Caldwell: Thank you one moment for the next question.

Chris Caldwell: Okay.

Robbie Bamberger: And the next question will be coming from the line of Robbie Bamberger. of Baird, your line is open. Yeah, thanks for taking my question. Can you maybe provide just a little bit more color on kind of what happened to margins in Q2 that caused you to be about 80 bps below last guide? And then, you know, how much of that was due to that pause from tariffs that you mentioned? And then also how much was due to impacts like FX or anything else that won off this quarter? For sure, Bobby, no problem. So let me walk you through the quarter because it might provide a little bit of color.

Speaker Change: And the next question will be coming from the line of Robbie Bamberger.

Speaker Change: Of Baird. Your line is open.

Robbie Bamberger: Thanks for taking my question can you maybe provide just a little bit more color on kind of what happened to margins in Q2 that caused you to be about 80 bps below last guide and then how much of that was due to that pause from tariffs that you mentioned.

Speaker Change: And then also how much was due to impacts like FX or anything else that.

Speaker Change: One off this quarter.

Speaker Change: But for sure Bob No problem. So let me walk you through the quarter, because it might provide a little better color.

Andre Valentine: You know, the first month of the quarter, March, was well in line with everything that we expected, going well, pipeline doing well. When the tariffs kicked in, I think some of our clients, it was a small subset of clients who are in the logistics industry and some who are manufacturing product, were quite surprised about how robust the tariffs were. And so really what they did was they paused and they said, look, we need a couple of weeks to kind of figure out what to do. We want to halt some of these projects to kind of figure out, like, are they going to be driving the returns that we expected?

Speaker Change: The first months of the.

Speaker Change: Quarter March was well in line with what we expected.

Speaker Change: Growing well pipeline doing well.

Speaker Change: When the tariffs kicked in I think some of our clients. So it was a small handset of a small subset of clients who are in the logistics industry and some who are manufacturing products, we're quite surprised about how robust the tariffs were and so really what they did was a pause and they said look we need a couple of weeks to kind of figure out what to do.

Speaker Change: Do we want to help some of these projects to kind of figure out what are they are there going to be driving the returns that we expected we need to reorganize our supply chain before we continue to ship et cetera, et cetera, et cetera, and with a few and again this is less than a handful of clients who are relatively larger clients with us we had a conversation where we said look.

Christopher Caldwell: Do we need to reorganize our supply chain before we continue to shift, etc., etc., etc. And with a few, and again, this is less than a handful of clients who are relatively larger clients with us, we had a conversation where we said, look, you know, we can downsize all this labor. We can put all these projects on isolation. But our expectation is that tariffs will get sorted out, that you'll be able to rebound pretty quickly. And that's going to delay you, you know, three or four months of support and cause you other problems. And so we worked out where we actually held the labor.

Speaker Change: We can downsize all this labor we can pull all of these projects in isolation, but our expectation is that tariffs will get sorted out that youll be able to rebound pretty quickly and thats going to delay you three or four months of support and causing other problems and so we worked out where we actually held the labor.

Christopher Caldwell: We paused the projects that kept sort of the investment going from that perspective. And we started already in May starting to back in line. And as we talked about in my prepared script, we'll see those margins come back in line through the first part of Q3. By the end of Q3, we expect to be up again year on year on margins. The benefit we got from that, which is really important for investors to understand, is that the clients very much appreciated what we did. They didn't miss a beat in their supply chain. They've now started to ask us to take on more volume because some other partners pulled back and we were able to capture that.

Speaker Change: Pause the projects, but kept sort of the investment going from that perspective.

Speaker Change: We started already in may starting to see those margins coming back in line as we talked about in my prepared script, we'll see those margins come back in line through the first part of Q3 by the end of Q3, we expect to be up again year on year on margin. The benefit we got from that which is really important for investors to understand is that the clients.

Speaker Change: Very much appreciated what we did they didn't miss a beat in their supply chain. They are now starting to ask us to take on more volume because some other partners pulled back and we were able to capture that.

Andre Valentine: And that's allowed us to kind of accelerate some of the investments that we talked about going in. If you look at sort of the midpoint of our earnings guide, and Andre can chip in, but if you look at the midpoint of our earnings guide from a margin perspective, you can think of it as really the majority held labor, a small portion of it as being investments that we won in quarter because of the held labor that people were going to move volume to us for.

Speaker Change: That's allowed us to kind of accelerate from the investments that we talked about going in if you look at sort of the midpoint of our earnings guide and Andre can chip in but if you look at the midpoint of our earnings guide from a margin perspective, you can think of it as really the majority held labor.

Speaker Change: A small portion of it as being investments that we won in the quarter because of the held labor that people were going to move volume to us for and then FX Andre if you want to comment on FX FX is certainly a mixed bag for us Ravi as you think about the top line certainly it was more of a tailwind than we expected, but when you net things out.

Andre Valentine: And then FX, Andre, if you want to comment on FX. Yeah, FX, certainly a mixed bag for us, Robby. As you think about the top line, certainly it was more of a tailwind than we expected. But when you net things out, it was a bit of a tail, sorry, a headwind for us from a profitability perspective. And obviously we benefited from the strength of the euro and the pound, but at the same time, the weakening of the USD versus the unhedged portion of our exposure to the Philippines peso, Indian rupee had an impact. But overall, it was certainly smaller than the impacts that Chris has talked about.

Speaker Change: It was a bit of a tail sorry, a headwind for us from a profitability perspective.

Speaker Change: And obviously, we benefited from the strength of.

Speaker Change: The euro and the pound at the same time.

Speaker Change: The weakening of the USD versus.

Speaker Change: The unhedged portion of our exposure to the Philippines peso Indian rupee had an impact but.

Speaker Change: So but overall is.

Speaker Change: It was certainly smaller than.

Speaker Change: The impacts that Chris has talked about.

Andre Valentine: Yep, that's very helpful there. And then, you know, if we look in the back half, we can imply sort of mildly above 2% organic constant FX growth in H2 after about, you know, 1.5% in the first half. I guess, what gives you confidence in the mild acceleration there? And then, is it partly due to the April revenue volumes kind of being a little bit lower because of those clients essentially pausing spend due to the tariffs? And then, you know, Q3 guide implies mildly above that 1% sequential that we've seen sort of the past three years.

Speaker Change: Yes, that's very helpful. There and then.

Speaker Change: If we look in the back half, we can imply sort of mildly above 2% organic constant FX growth.

Speaker Change: <unk> two after about one 5% in the first half I guess, what gives you confidence in the mild acceleration there and then is it partly due to the April revenue volumes kind of being a little bit lower because of those clients essentially pausing spend due to the tariffs and then.

Speaker Change: Q3 guide implies mildly above that 1% sequential that we've seen sort of the past three years is that due to the tariff impact.

Robbie Bamberger: Is that due to the tariff impact? Yeah, I wouldn't read too much in the tariff impact. I'll let Andre kind of go through some of the other comments. But just to be very clear, we started seeing the volume coming back in our expectations by the end of May from the volume that was held off in April from the tariffs. And that's layered in. If you think about how we've guided for the last two quarters, we've been quite conservative in coming over our guide. And I think that's still our philosophy from a revenue perspective. And so if you extrapolate that out, you can see that we came over the guide even with this pause.

Speaker Change: Yes, I wouldn't read too much into the tariff impact.

Speaker Change:

Speaker Change: I'll, let Andre kind of go through some of the other comments, but just to be very clear, we started seeing the volume coming back in our expectations.

Speaker Change: By the end of May from the volume that was held off in April from the tariffs.

Speaker Change: And Thats layered in if you think about how we've guided for the last two quarters, we've been quite conservative them coming over our guide and I think that's still our philosophy from a revenue perspective, and so if you. If you extrapolate that out you can see that we came over the guide even with this pause we would've probably come in even more over the guide with this pause.

Robbie Bamberger: We would have probably come in even more over the guide with this pause and our expectations that we're going to continue to perform well and accelerate through the back half of the year. Yeah, I think our confidence, Robby, comes from the new business that we've signed so far this year that is ramping, as well as the extra share that we think we've picked up because of the actions we took in the second quarter to gain even more traction with some clients. So very confident in our guide. As Chris has said, we've tried to be very conservative, very much focused on coming in at the top end of the range for every period that we've given, which would imply a nice acceleration through the second quarter.

Speaker Change: And our expectations that we're going to continue to perform well and accelerate through the back half of the year, Yes, I think our confidence really comes from the new business that we've signed so far this year that is ramping as well as the extra share that we think we've ticked up because of the actions. We took in the second quarter to gain even even more traction with some clue.

Speaker Change: So very confident in our guide as Kristian said, we've tried to be very conservative very much focused on coming in at the top end of the range for every period that we've given which would imply a nice acceleration through the second half.

Robbie Bamberger: Awesome.

Robbie Bamberger: Thank you guys. Thank you.

Speaker Change: Awesome. Thank you guys.

Speaker Change: Thank you.

Speaker Change: Thank you and our next question.

Ruplu Bhattacharya: will be coming from the line of. Ruplu Bhattacharya. of Bank of America.

Speaker Change: We will be coming from the line of.

Speaker Change: <unk> China.

Speaker Change: Of Bank of America. Your line is open.

Ruplu Bhattacharya: Your line is open. Hi, thanks for taking my questions. Chris, how should we think about the revenue contribution from ix-hello and ix-hero AI offerings this year and beyond? And since it looks like operating margin guide for the full year is now lower by 40 bits to 13.4% at the midpoint, are you planning to moderate your spending on AI? Yeah, so a couple of things. First, from a comment perspective, as we mentioned, we're spending about $50 million incrementally, $100 million total on internal tools, but $50 million specifically to our IEX suite. And when you look at that, we've talked about in Q4, our expectation is that we are creative and we're on plan to do that from an economic value perspective.

Speaker Change: Hi, Thanks for taking my questions.

Speaker Change: Chris how should we think about the revenue contribution from <unk> Halo and <unk> hero AI offerings, this year and beyond and since it looks like operating margin guide for the full year is now lower by 40 bps to 13, 4% at the midpoint are you planning to moderate your spending on AI.

Speaker Change: Yes, so a couple of things.

Speaker Change: From a content perspective, as we mentioned.

Speaker Change: Adding about $50 million incrementally $100 million total on internal tools, but 50 million specifically to our <unk> suite.

Speaker Change: And when you look at that we've talked about in Q4, our expectation was that would be accretive and we're on plan to do that from an economic value perspective.

Christopher Caldwell: And we've also said that we can hold our spending as is and continue to accelerate revenue on that. And so, honestly, our expectation is that we'll continue going into the next year, not guiding for the next year, that we'll see continued margin expansion capabilities with it and also tying into growth by client bundling services and technology with us going into the new year. So, from our perspective, we're very happy where we're positioning. We're very happy with the comfortable of spend. We don't need to increase our spend to continue to see the benefit and are using generative AI tools internally ourselves to drive better value from our development team.

Speaker Change: And we've also said that we can hold our spending as is and continues to accelerate revenue on that and so honestly. Our expectation is that will continue going into the next year not guiding for next year that we'll see continued margin.

Speaker Change: Spansion capabilities with it and also tying into growth by clients bundling services and technology with us going into the new year.

Speaker Change: From our perspective, we're very happy where we are positioning we're very happy with the comfortable of spend we don't need to increase our spend to continue to see the benefit.

Speaker Change: <unk> are using sort of generative AI tools internally ourselves to drive better value from our development team. So that is all going very very very well we would not.

Christopher Caldwell: So, that is all going very, very, very well. We would not, Rupalu, be investing in these suite of products. to get a business that just covers our development costs. We see this as a very strategic initiative. We see this as a very differentiated initiative. Our clients are seeing it that way as well. We're getting some great recognition from a number of different analysts around our AI technology and what we're able to do with it. And so over the coming years, we continue to see it as a benefit by taking the strategy.

Speaker Change: The investing in this suite of products.

Speaker Change: To get a business that just covers our development costs. We see this as a very strategic initiative. We see this as a very differentiated initiatives. Our clients are seeing it that way as well, we're getting some great recognition from a number of different analysts around our AI technology, and what we're able to do with it and so over.

Speaker Change: In the coming years, we continue to see as a benefit by by taking a strategy.

Ruplu Bhattacharya: Okay, thanks for that.

Speaker Change: Okay. Thanks for that.

Andre Valentine: Andre, I'd like to follow up a little bit more on operating margins. I mean, like fiscal 2Q operating margins were 80 bps lower than the midpoint of your guidance, but revenue was higher than guidance. So when we look at the guide, it's 50 bps higher sequentially to 13.1%, but just on 40 million higher revenue sequentially at the midpoint. So I think that implies like a sequential incremental margin or something like 46%, which is just the change in operating income over the change in revenue. So I'd like to ask you, like, you know, what gives you the confidence that you're going to get that level of margin improvement on just 40 million higher revenue sequentially?

Speaker Change: I'd like to follow up a little bit more on operating margins.

Speaker Change: In late fiscal <unk> operating margins were 80 bps lower than the midpoint of your guidance, but revenue was higher than guidance.

Speaker Change: So when you look at the guide.

Speaker Change: <unk> bps higher sequentially to 13, 1%, but just on $40 million higher revenue sequentially at the midpoint. So I think that in plays like the sequential incremental margin on something like 46%, which is just the change in operating income over the change in revenue. So I'd like to ask you like what gives you the.

Speaker Change: Confidence that youre going to get that level of margin improvement on just $40 million higher revenue sequentially and you said margins are trending better now.

Andre Valentine: And you said margins are trending better now, what are the operating margins trending at currently in the quarter? Yes, so again, I'll start, Ruplu, by reminding you we're very focused on the higher end of our revenue guide, and so, therefore, the incremental revenue that we're trying to drive in Q3 is certainly higher than the $40 million at the midpoint. We should see, we've always talked about incremental revenue driving roughly 20% to 25% of flow through, so you can do the math and see what that would give us. We expect the impact from the tariff pause to start to mostly get weaned away completely as we go through this course, and most of that benefit, most of that hurt being one time, so that will drive improvement as we move into Q3, and then just other underlying improvements in our operations as we scale programs, and lastly, moving to a more positive position, getting towards accretion in the AI investment.

Speaker Change: The operating margin is trending at.

Speaker Change: Currently in the quarter.

Speaker Change: Yes, so again I'll start by reminding you that we're very focused on the higher end of our revenue guide and so therefore, the incremental revenue that we're trying to drive in Q3 is certainly higher than the $40 million at the midpoint.

Speaker Change: We should see.

Speaker Change: We've always talked about incremental revenue driving roughly 20% to 25% of flow through so you can do the math and see what that would give us.

Speaker Change: The impact from the tariff pause.

Speaker Change: <unk>.

Speaker Change: Two.

Speaker Change: Start to.

Speaker Change: Mostly you get leaned away completely as we go through this quarter. So most of that benefit.

Speaker Change: Most of that hurt being one time, so that will drive improvement as we move into Q3.

Speaker Change: And then just other underlying improvements in our operations as we scale programs and lastly, moving to a positive more positive position getting towards accretion in the AI investment all of those things are kind of baked into.

Andre Valentine: All those things are kind of baked into the stepping stones to the midpoint of our guide.

Speaker Change: The stepping stones to the midpoint of our guidance.

Christopher Caldwell: Okay. Chris, if I can ask you one more real quick. I mean, just looking at the general operating environment, can you talk about how sales cycles are trending? And you said that some customers are trying to move their services offshore. What was the impact to revenues and margins? And can you also talk about the catalyst business? How should we think about revenue growth there? So if you can just give us these details about the operating environment.

Speaker Change: Okay, Chris if I can ask you one more real quick I mean, just looking at the general operating environment can you talk about how sales cycles are trending and you said that.

Speaker Change: Some customers who are trying to move their services offshore what was the impact to revenues and margins and can you also talk about the catalyst business. How should we think about revenue growth. There. So if you can just give us these details about the operating environment. Thank you so much.

Christopher Caldwell: Thank you so much. Yeah, for sure. So I'll tell you, transformation deals that obviously we're winning and have in our pipeline tend to take longer, but they're not elongated and they're not shrinking. They tend to go through a lot more sign-offs just because of the type of investment that's required. But we're quite happy with what we're seeing in our pipeline. We're quite happy with our win rate within those. In the traditional operating environment, where we can drive savings for clients and show them what we can do with them, with our own technology, with third-party technologies, those continue to move at a reasonable pace.

Speaker Change: Sure. So I will tell you to transformation deals that obviously, we're winning and have in our pipeline tends to take longer but they're not elongated and we're not shrinking they tend to go through a lot more sign offs, just because of the type of investment that's required.

Speaker Change: But we're quite happy with what we're seeing in our pipeline, we're quite happy with our win rate within those in the.

Speaker Change: Additional operating environment, where we can drive savings for clients and show them, what we can do with them.

Speaker Change: With our own technology with third party technologies, those continuing to move at a reasonable pace, we're talking a quarter to two quarters to go from start to close of a deal and then again, probably two quarters before it gets to revenue and starts to contribute.

Christopher Caldwell: We're talking a quarter to two quarters to go from start to close of a deal. And then again, probably two quarters before it gets to revenue and starts to contribute to our organization, which historically has been the case for a long, long time. What clients are looking for is something different. They're looking for something unique. They're looking for something that works. They're looking for something that's pragmatic. And I think we fit very, very well in that space. And clients are also looking for a service provider that can bring them the technology, the integration, the managed services, and the delivery of what they need to do.

Speaker Change: Organization, which historically has been the case for a long long time.

Speaker Change: Clients are looking for is something different they're looking for something unique they're looking for something that works, but looking for someone who is pragmatic and I think we fit very very well in that space and clients are also looking for a service provider that can bring them the technology and the integration managed services and the delivery of what they need to do and Thats sort of a year.

Christopher Caldwell: And that's sort of a unique position that we see ourselves in and where we are winning very, very, very nicely. And so we're quite happy with the operating environment. Because we're succeeding in that space, obviously our catalyst business is a key part of that. Now, our catalyst revenue is going in line with our business. But it's enabling more growth within the business that we don't necessarily count under the catalyst label that sometimes fits in other parts of our P&L, for lack of a better term. But you should see this going forward more and more as an integrated offering as we execute.

Speaker Change: <unk> position that we see ourselves in and where we're winning very very very nicely and so we're quite happy with the operating environment.

Speaker Change: Because we are succeeding in that space, obviously, our catalyst business is a key part of that now our catalyst revenue is growing in line with our business.

Speaker Change: But it's enabling more growth within the business that we don't necessarily count under the catalyst label.

Speaker Change: Some other parts of our of our.

Speaker Change: Our.

Speaker Change: P&L for lack of a better a better term, but you should see this going forward more and more.

Speaker Change: The integrated offering.

Christopher Caldwell: And then in terms of pricing, from a transformational perspective, from a complexity perspective, that pricing is, as we talked about, accretive, it's healthy, I mean, it's always competitive. Things that are very commodity-based, which obviously we're walking away from that type of work, is very, very, very price sensitive right now. And that's why we just don't pursue it. If we can't automate it, we're de-investing in that space. From an onshore to offshore perspective, Rupalu, it's about a 2% headwind that we see from a growth perspective, 1.5% to 2%, depending on the quarter, of work moving from a high-cost country to a offshore country.

Speaker Change: As we execute and then in terms of pricing.

Speaker Change: From a transformational perspective from a complexity perspective that pricing is.

Speaker Change: As we've talked about accretive it's healthy it's always competitive.

Speaker Change: Things that are very commodity based which obviously, we're walking away from that type of work is very very very price sensitive right now and Thats why we just don't pursue it if we can't automate it we're investing in that space from an onshore to offshore perspective.

Speaker Change: It's about a 2% headwind that we see from a growth perspective.

Speaker Change: One 5% to 2% depending on the quarter.

Speaker Change: Work moving from a high cost country to offshore country, and we tend to have duplicate costs for both the quarter quarter and a half.

Christopher Caldwell: And we tend to duplicate costs for about a quarter, quarter and a half, to possibly sometimes two quarters, depending on the complexity of the program, before we see margins go up, even though revenue kind of drops right out of the gate as we move the stuff off offshore. But that will continue to become less and less of a burden as you go through, because as we've mentioned for the last year or two, the primary new winds are coming in nearshore and offshore, they're not coming on onshore for the most part. So that tends to fade down.

Speaker Change: To possibly sometimes two quarters, depending on the complexity of the program before we see margins go up even though revenue kind of drops right out the gate as we move the stuff offshore, but that will continue to become less and less of a burden as you go through because as we've mentioned for the last year or two.

Speaker Change: Primary new wins are coming in nearshore and offshore.

Speaker Change: Not coming on onshore for the most part.

Speaker Change: That tends to sit down and then the last thing that we've talked about is that from a complexity of work.

Christopher Caldwell: And then the last thing that we've talked about is that from a complexity of work product perspective, we have about 7%, it's actually a little less now, but 7% of our revenue is commoditized. And our expectation is to get to 5% by the end of the year, so it's about a 2% headwind. And we're on pace to do that. So if you would like to think about us halfway through the year being halfway through that move, you've got that headwind, which we don't expect to repeat next year, which gives us further cause for why we see acceleration in our business as we go in, and again, not guiding for next year, but going into next year.

Speaker Change: Perspective, we have about 7% as I said, a little less now, but 7% of our revenue is.

Speaker Change: Commoditized.

Speaker Change: And.

Speaker Change: We are our expectation will be up to 5% by the end of the year. So it's about a 2% headwind and we're on pace to do that so if you would like to think about us halfway through the year being halfway through that move you have.

Speaker Change: Got that headwind, which we don't expect to repeat next year, which gives us further cause for why we see acceleration in our business as we go in and again not guiding for next year, but going into next year, sorry, I know that was a very long winded answer, but hopefully that covered all your points.

Christopher Caldwell: Sorry, Rupalu, I know that was a long winded answer, but hopefully that covered all your points.

Ruplu Bhattacharya: Yeah, no, thank you for all the details. Appreciate it.

Speaker Change: Yes, no. Thank you for all the details appreciate it.

Operator: Thank you.

Operator: One moment for the next question. And our next question will be coming from the line.

Speaker Change: Thank you one moment for the next question.

Speaker Change: And our next question will be coming from the line.

Vincent Colicchio: of Vincent Colicchio of Barrington Research, your line is open. Yeah, Chris, it's nice to see additional consolidation benefits for the company. Can you give us some color on how these came about, why you are benefiting from this trend? And if we have legs here into the second half of the additional consolidation. Yeah, so let me start with the last part of your question first. Yes, we have legs into the next part of the back half of the year, and frankly beyond, because we do see this trend of clients as a whole wanting fewer partners, and they want partners with broader services so that they can obviously boil it down to fewer partners.

Speaker Change: Vincent.

Speaker Change: Steel Barrington Research your line is open.

Speaker Change: Okay.

Speaker Change: Yes, Chris.

Speaker Change: Nice to see.

Speaker Change: <unk> consolidation.

Speaker Change: Benefits for the company.

Speaker Change: Can you give us some color on how these came about why are you benefiting from this trend and.

Speaker Change: If we have legs here into the second half.

Speaker Change: Additional consolidation.

Speaker Change: Yes, So let me start with the last part of your question first yes, we have legs into the next part of the back half of the year.

Speaker Change: And frankly beyond because we do see this trend of clients as a whole wanting fewer partners and they want partners with broader services. So that they can obviously boil it down to fewer partners.

Christopher Caldwell: Really, around consolidation comes to three things. The first thing is being top of the stack rank, operational excellence. And we perform and are always focused on trying to be number one for our clients, and where we are number one for our clients, we tend to win from a consolidation perspective. The second thing that's super important to clients is technology to help them automate and improve their delivery. And with our own IX suite of products, as well as with third-party products, we tend to do very well from that perspective as well. And then the third thing that's important from a consolidation perspective is scale.

Speaker Change: Really around consolidation comes to three things. The first thing is being top of the stack rank.

Speaker Change: Operational excellence and we perform and are always focused on trying to be number one for our clients and where we are number one for our clients. We tend to win from a consolidation perspective. The second thing that's super important to clients is technology to help them automate and improve their delivery and with our own <unk> suite of products as well as with third party.

Speaker Change: We tend to do very well from that perspective, as well and then the third thing Thats important from a consolidation perspective as scale scale not only on a footprint perspective.

Christopher Caldwell: Scale not only on a footprint perspective, but also on a capabilities perspective. And so if you think about a client dealing with three or four partners, one partner for analytics, one partner for some tech, one partner for CX, one partner for back office, and yet they can come to Concentrix and we can say, look, we can do all this for you. We can help you with your platforms. We can run it. We're very flexible from a commercial perspective. That really resonates with these clients, and that's where we tend to do very, very well. And across those three pillars, we continue to see lots of ability to execute going into the back half of the year and into 2026.

Speaker Change: But also on a capabilities perspective, and so if you think about a client dealing with three or four partners partner for analytics, one partner for some tactical and partner for our CX one partner for back office and yet they can come to Concentrix and we can say look we can do all of this for you. We can help you with your platforms. We can run it we're very flexible from a commercial perspective.

Speaker Change: That really resonates with these with these clients and Thats, where we tend to do very very well and across those three pillars. We continue to see lots of ability to execute going into the back half of the year and into 2026.

Vincent Colicchio: Thanks for that color.

Speaker Change: Thanks for that color and could you give us some color on managed services does that continue to grow and sort of what level are you at in terms of the managed services.

Christopher Caldwell: And could you give us some color on managed services? Does that continue to grow and sort of what level are you at in terms of managed services as a percent of the business? Yeah, so we do see managed services growing and we really see, actually, AI is one of the big areas that we see managed services continue to grow much faster than historically what we've done in managed services, because with AI, it's not, you know, plugging it and it's done, it requires a lot of maintenance to continue to drive the efficiency that AI can do.

Speaker Change: Center of the business.

Speaker Change: Yes, so we do see managed services growing and we really see actually AI is one of the big areas that we see managed services continuing to grow much faster than historically, what we've done in managed services because with AI it's not.

Speaker Change: Plug in and has done it requires a lot of maintenance too to continue to drive the efficiency.

Christopher Caldwell: So we see that growing. Right now, the managed services business in our overall business is not massive, it's a portion of our Catalyst business. And if you think of our Catalyst business as being 8% of revenue, it's smaller, but it is one of the areas that is growing faster than our overall business. And we see that continue to grow based on the demands of what AI drives for managed services.

Speaker Change: I can do so we see that growing right now the managed services business and our overall business is not massive it's a portion of our catalyst business and if you think of our catalyst businesses being 8% of revenue is smaller but it is one of the areas is growing faster than our overall business and.

Speaker Change: We see that continuing to grow based on the demands of what.

Speaker Change: Drives for managed services.

Vincent Colicchio: Thanks, Chris.

Chris Caldwell: Thanks, Chris.

Speaker Change: Yes.

Operator: Thank you.

Speaker Change: Thank you.

Operator: As a reminder, if you would like to ask a question, please press star 1-1 on your phone. One moment, my friends.

Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone one moment for the next question.

Davao Goyal: And the next question will be coming from the line of Davao Goyal of Scotiabank. Your line is open. Good afternoon, everyone. So thanks a lot for all the color that you provided here on profitability. Andre and Chris, I wanted to get a little bit more color in terms of the elasticity of your headcount as the revenue potentially continues to grow from an automation standpoint and an offshoring standpoint. And obviously what happened this quarter where you ended up holding on to a lot of labor and stuff, despite slight weakness. So help us understand, how do you potentially see it trending with increasing automation and AI?

Speaker Change: And the next question will be coming from the line.

Davao Guido: Davao Guido.

Speaker Change: <unk> Bank your line is open.

Davao Guido: Good afternoon, everyone.

Speaker Change: Thanks, a lot for all the color that you provided do you have in profitability.

Speaker Change: Andre and Chris I wanted to get a little bit more color in terms of the elasticity of your head count.

Speaker Change: As the revenue potentially continues to grow from an automation standpoint, and an offshoring standpoint, and obviously what happened this quarter, where you ended up.

Davao Guido: Holding onto a lot of labor and stuff despite slight weakness so help us understand how do you potentially see it trending with increasing automation and AI.

Christopher Caldwell: getting more prominent across the revenue. The first thing that you should appreciate, and I think you know, because you know the industry well, is that we can lower our costs pretty quickly from a headcount perspective if we need to. And we took a conscious decision in April to keep it based on not only the client relationships and where we saw as a competitive advantage, but if we had not seen that, we could have exited the labor very, very, very, very quickly and kind of had a different result. But net, net, net, economically, we think it was better with what we did.

Speaker Change: Yeah, I think more prominent across the revenue.

David: For sure David I appreciate that.

Speaker Change: First thing that you should appreciate and I think you know because you know the industry well that we can lower our costs pretty quickly from a head count perspective, if we need to and we took a conscious decision in April to keep it based on not on the client relationships and where we thought as a competitive advantage, but if we had not seen that we could have exited the labor very very.

Speaker Change: Very very quickly.

Speaker Change: And kind of.

Speaker Change: <unk> had.

Speaker Change: <unk> had a different result, but net net net economically we think it was better with what we did from an elasticity perspective of labor.

Christopher Caldwell: From an elasticity perspective of labor, I'm hesitant to give too much detail because I see people coming out with these things saying like, you know, 40% of our work is done by AI, 90% of our work is done by AI, but they're not decreasing their headcount, which is a little dubious. What we find is that our efficiencies, depending on the role and job that it's done, is anywhere from about 5% to 40%. And I know that's quite a large range, but it depends where, you know, we're putting it in. It depends the task that we're doing it in, and it depends on the skill set of the individual.

Speaker Change: Other than to give too much details because I see people coming out with these thing thing.

Speaker Change: 40% of our work is done by a 90% of our work is done by air, but theyre not decreasing their head count which is a little dubious what we find is that our efficiencies depending on the role and job that has done is anywhere from about 5% to 40% and I know that's quite a large range, but it depends where.

Speaker Change: Sure.

Speaker Change: We're putting it in it depends the tasks that we're doing it in and it depends on the skill set of the individual we are seeing some of that elasticity now.

Christopher Caldwell: We are seeing some of that elasticity now. We are using some of that for competitive advantage on getting volume from others because we can be more competitive in the space while still maintaining and growing our margins. We also see that as where we are helping our clients be more cost efficient, and therefore they're buying our technology to do that. But long term, we do see our ability to continue to grow our revenue without growing our headcount. And if you look at our headcount numbers for the most part, through the course of the year, they haven't really materially changed, yet we've grown our revenue.

Speaker Change: We are using some of that for competitive advantage on getting volume from others, because we can be more competitive in the space, while still maintaining and growing our margins. We also see that as where we are helping our clients be more cost efficient and therefore, they are buying our technology to do that but long term, we do see our ability to continue to grow our <unk>.

Speaker Change: Revenue without growing our head count and if you look at our head count numbers for the most part through the course of the year, they havent really materially.

Speaker Change: Change that we've grown our revenue.

Christopher Caldwell: That's very helpful. But as of now, given the potential increase in automation and AI, you don't see a decline in headcount. Like, I'm just wondering from a global employment loss standpoint, right, like That's where my head's at and I'm thinking about how can we best preempt that situation. Yeah, so Divya, our goal is, frankly, to keep our headcount flat as we grow revenue and maybe possibly decline headcount depending on our growth of revenue. And clearly, we're going to take advantage of as much automation as we can. I think from our perspective, what we look at is kind of our margin profile of our business, is the complexity of the work that we're dealing with.

Speaker Change: That's very helpful, but as of now given the potential increase in automation and AI.

Speaker Change: Don't see a decline in head count like I'm, just wondering from global employment law standpoint.

Speaker Change: That's where my head's at.

Speaker Change: How can we best Pms that situation.

Speaker Change: Yeah. So Olivia our goal is frankly to keep our head count flat as we grow revenue and maybe possibly decline in head count depending on our growth of revenue and clearly we're going to take advantage of as much automation as we can.

Speaker Change: I think from our perspective, we look as kind of our margin profile of our business is accretive to the complexity of the work that we're dealing with.

Christopher Caldwell: There is some automation, more will come, and as that comes in, we will take the appropriate action. But right now, we do not see a massive decrease. And in fact, if you look at some of the analyst studies, like I think Gardner's come out with it, and McKinsey just came out with a report recently, and there was an FT column on it. They all expected employment in outsourcing will actually increase over the next three years. So it's an interesting phenomenon and goes in the face of some of what the pure tech companies are saying because they might not necessarily understand the dynamics of how to deliver services around their tech.

Speaker Change: There is some automation more will come in as that comes in we will take the appropriate action, but right now we do not see a.

Speaker Change: A massive decrease and in fact, if you look at some of the analyst studies like I think Gartner has come out with it and Mckinsey just came out with a report recently and there was a FTE column order. They all expect of employment and outsourcing will actually increase over the next three years. So.

Speaker Change: Interesting phenomenon and goes in the face of some of the.

Speaker Change: What the pure tech companies are saying, because they might not necessarily understand the dynamics of how to deliver services around the attack.

Davao Goyal: That's very helpful.

Davao Goyal: I'll just ask one last question here. You briefly spoke about the shift in pricing dynamics out there. Could you talk to us a little bit more about how exactly are you seeing your pricing strategy evolve, again, with increasing automation, increasing AI, increasing offshoring? Are you seeing a shift from time and material to more outcomes-based pricing? And plus, with your IXLO-like solutions, right? Talk to us a little bit about your pricing strategy and how are you broadly competing with the increasing consolidation in mind as well. And that'll be all for me. Thank you. No problem, Divya.

Speaker Change: That's very helpful. I'll just ask one last question here.

Speaker Change: Briefly spoke about the shift in pricing dynamics out there could you talk to us a little bit more about.

Speaker Change: How exactly are you seeing Friday pricing strategy it was.

Speaker Change: With increasing automation increasingly increasing off shoring are you seeing a shift from time and material do more.

Speaker Change: Outcomes based pricing and plus with your IX Hello, like solutions like talk to us a little bit about your pricing strategy and how you broadly competing with the increasing consolidation in mind as well and that'll be all for me. Thank you.

Speaker Change: No problem. So first off we're not seeing when you look at the size of our business. We have we're not seeing a material change we are seeing more interest in outcomes based pricing, we're seeing more interest in sort of the transformational deals that we're doing that will lower cost, but it still tends to come to a transactional unit timings bye.

Christopher Caldwell: So first off, we're not seeing, when you look at the size of the business we have, we're not seeing a material change. We are seeing more interest in outcomes-based pricing. We're seeing more interest in sort of the transformational deals that we're doing that will lower cost, but it still tends to come to a transactional unit times by a revenue unit, and there you get the revenue. And we do expect that will continue to slowly change, but we've had that for the last 10 years, and it hasn't necessarily moved that much. So it might be another 10 years.

Speaker Change: Revenue unit and there you get the revenue.

Speaker Change: We do expect that we'll continue to slowly changed but we've said that for the last 10 years and it hasn't moved that much. So it might be another 10 years, we're still we're still discussing it for the most part I think from our perspective, what we're focused on is growing net new streams of revenue.

Christopher Caldwell: We're still discussing it for the most part. I think from our perspective, what we are focused on is growing net new streams of revenue, such as our IX product suite. And so while I mentioned we do have some of it bundled into our services, we also have discrete revenue, and that's very much like software SaaS revenue, and our goal is certainly very much to grow that as a discrete revenue line. We also have maintenance and managed services contracts that I think Vince brought up, where we actually are billing for a set fee for the whole year, and we manage the equipment and services that we're doing.

Speaker Change: Our IX product suite and so while I mentioned, we do have some of it bundled into our services. We also have discrete revenue and that's very much like software SaaS revenue and our goal is certainly very much to grow that as a discrete revenue line. We also have maintenance managed services contracts set I think Vince brought up where we are.

Speaker Change: Actually our billing for a set fee for the whole year and we manage.

Speaker Change: The equipment and services that we're doing and so that's a bit of a different revenue flow, but all of these different revenue flows are well under half of our revenue and just to set expectations. The margin profile is great. We definitely want to grow it but we don't see it getting over half of our revenue for well for the foreseeable future by any stretch of imagination.

Christopher Caldwell: And so that's a bit of a different revenue flow. But all these different revenue flows are well under half of our revenue, and just to set expectations, the margin profile is great. We definitely want to grow it, but we don't see it getting over half our revenue for the foreseeable future, by any stretch of the imagination.

Speaker Change:

Davao Goyal: That's helpful. Thank you.

Speaker Change: That's helpful. Thank you.

Speaker Change: Okay.

Operator: There are no more questions in the queue and at this time this does conclude the conference call for today. You may all disconnect and have a great evening.

Speaker Change: Thank you there are no more.

Speaker Change: Questions in the queue.

Speaker Change: And at this time. This does conclude the conference call for today, you may all disconnect and have a great evening.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: [music].

Operator: Good day and thank you for standing by.

Speaker Change: Good day and thank you for standing by welcome to the Concentrix second quarter financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you'll need to press star one on your telephone you will then hear an automated message.

Operator: Welcome to the Concentrix Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand. To restore your question, please press star 1 again.

Speaker Change: Advising your hand is raised to withdraw your question. Please press star one again.

Operator: Please be advised that today's conference is being recorded.

Speaker Change: Please be advised that today's conference is being recorded I would now like to turn the conference over to Sara Buda, Vice President Investor Relations. Please go ahead.

Sara Buda: I would now like to turn the conference over to Sara Buda, Vice President in VISTA Relations. Please go ahead. Great, thank you operator and good evening. Welcome to the Concentrix second quarter 2025 earnings call.

Sara Buda: Great. Thank you operator, and good evening welcome to the Concentrix second quarter 2025 earnings call.

Sara Buda: This call is the property of Concentrix and may not be recorded or rebroadcast without the written permission of Concentrix.

Speaker Change: 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 future performance and that by their nature address matters that are uncertain. These.

Sara Buda: call contains forward-looking statements that address our future performance and that by their nature address matters that are These uncertainties may cause our actual future results to be materially different from those expressed in our forward looking statements. We do not undertake to update or 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 filings with the SEC for additional information regarding uncertainties that could affect our future financial results. This includes the risk factors provided in our annual report on Form 10-K and other public filings with the SEC.

Speaker Change: These uncertainties may cause our actual future results to be materially different from those expressed in our forward looking statements.

Speaker Change: We 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 filings with the SEC for additional information regarding uncertainties that could affect our future financial results. This includes the risk factors provided in our annual report on Form 10-K and other.

Speaker Change: Public filings with the SEC 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.

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 growth. A reconciliation of these non-GAAP measures is available in the news release and on the company's investor relations website.

Speaker Change: A reconciliation of these non-GAAP measures is available in the news release and on the company's 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 up the call for your questions.

Speaker Change: 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 up the call for your questions and now I will turn the call over to Chris. Thank you very much Sarah Hello, everyone and thank you for joining us today.

Christopher Caldwell: And now I'll turn the call over to Chris. Thank you very much, Sara. Hello, everyone. And thank you for joining us today for our second quarter 2025 earnings call. We are seeing momentum from the investments we have been making, accelerating our growth rate and demonstrating the value of our differentiated offerings. Today, I'll give you a bit more detail on our progress, and then Andre will talk about our view of ongoing revenue, margin and cash flow growth in the second half of the year. Now, let's start with a quarter. We reported yet another solid revenue quarter above our guidance, which outpaced both in our core offerings and our adjacent solutions.

Speaker Change: For our second quarter 2025 earnings call. We are seeing momentum from the investments, we have been making accelerating our growth rate and demonstrating the value of our differentiated offerings today I'll give you a bit more detail on our progress and then Andre will talk about our view of ongoing revenue margin and cash flow growth in the second half of the year.

Andre Valentine: Now, let's start with the quarter, we reported yet another solid revenue quarter above our guidance, which outpaced both in our core offerings and our adjacent solutions, we saw growth in our pipeline across verticals and geographies with a desired mix of services and accretive margin profiles operational.

Christopher Caldwell: We saw growth in our pipeline across verticals and geographies with the desired mix of services and accretive margin profiles. Operational margins for the quarter were lighter than anticipated, driven by two reasons. Our decision to hold labour in April while clients reacted to tariffs and temporarily paused projects, and two, preparing for accelerated growth in the second half we won in quarter. As anticipated, by the end of May, we exited the month with our margin trending more favourably and expect that by later in Q3, we will again see improvement year over year in our margin. The goodwill we have seen from clients because of our decisions has already produced benefits.

Speaker Change: Margins for the quarter were lighter than anticipated driven by two reasons our decision to hold labor in April while clients reacted to tariffs and temporarily pause projects and to preparing for accelerated growth in the second half we won in quarter as anticipated by the end of May we exited the month with our margin trending more.

Speaker Change: Favorably and expect that by later in Q3, we will again see improvement year over year in our margin.

Speaker Change: The goodwill we have seen from clients because of our decision has already produced benefits.

Christopher Caldwell: We also delivered over $200 million in adjusted pre-cash flow in the quarter. As you can see from our outlook, we are excited about our second half momentum across all metrics, as Andre will detail. We are outperforming due to a few primary factors. First, our strategy to deliver pragmatic, deployable AI solutions aligned with what clients want is working. This is being driven both by embracing third-party technology partners as well as our own IX suite of products. Clients are over the AI hype and want practical solutions. A Gartner study recently revealed that enterprises are adopting a digital-first but not digital-only approach.

Speaker Change: We also delivered over $200 million and adjusted free cash flow in the quarter as you can see from our outlook. We're excited about our second half momentum across all metrics as Andre will detail.

Andre: We are outperforming due to a few primary factors first our strategy to deliver pragmatic deployable AI solution aligned with what clients want is working.

Andre: This is being driven both by embracing third party technology partners as well as our own <unk> suite of products clients are over the AI hype and one practical solutions are Gardner study recently revealed that enterprises are adopting a digital first but not digital only approach and our own third Party survey.

Christopher Caldwell: And our own third-party survey of 450 global enterprises showed a similar sentiment, revealing that 85% of these enterprises expect to increase their outsourcing budget over the next two to three years. The majority of that increase is expected to be net new investments in supporting their AI agenda. Further, even though the survey was completely blind and independent, Enterprise's selection of Concentrix as a partner to build and deploy their AI initiatives was significantly ahead of all other traditional companies, CX companies combined. and it was even higher than many IT services companies. This is clear third-party validation of our recognition as a technology solutions provider in the marketplace.

Andre: Of 450 Global enterprises showed a similar sentiment revealing that 85% of these enterprises expect to increase their outsourcing budget over the next two to three years.

Andre: The majority of that increase is expected to be net new investments in supporting their AI agenda.

Andre: Further even though the survey was completely blind and independent enterprises selection of Concentrix as a partner to build and deploy their AI initiatives with significantly ahead of all other traditional companies CX companies combined.

Andre: And it was even higher than many it services companies.

Andre: This is clear third party validation of our recognition as a technology solutions provider in the marketplace.

Christopher Caldwell: Over the past 18 months, we have made thoughtful investments in our technology and our teams to position ourselves for this exact aha moment.

Andre: Over the past 18 months, we have made thoughtful investments in our technology and our teams to position ourselves for this exact aha moment.

Christopher Caldwell: In Q2, we also launched IX Hero, our agentic AI-powered application that gives humans superpowers to more accurately and efficiently complete tasks with more consistent outcomes. This complements our autonomous AI assistant product, IX Hello, giving clients an array of AI solutions to meet their needs for both full automation and human augmentation. We are delighted with the early market traction we are gaining, and our pipeline of integrated product solution deals is strong. We believe we are on track for our products to be accretive to the business as we exit the end of the year, and believe we can deliver accelerated levels of revenue growth for our products without increasing our spends this year.

Andre: In Q2, we also launched IX zero or a gentex AI powered application the gifts humans superpowers to more accurately and efficiently complete tasks with more consistent outcomes. This complements our autonomous AI assistant product IX Hello, giving clients an array of AI solutions to meet their needs for both.

Andre: <unk> automation and human augmentation.

Andre: We are delighted with the early market traction, we are gaining and our pipeline of integrated product solutions deals is strong. We believe we are on track for our products to be accretive to the business as we exit the end of the year and believe we can deliver accelerated levels of revenue growth for our products without increasing our spend this year.

Christopher Caldwell: Within our marketplace, we are also the winning on the side of partner consolidation. This is enabling us to grow and win new business that tends to have more complexity as we introduce new adjacent services that can be deployed securely and at scale. In summary, we delivered another strong revenue and cash flow quarter and are on track to exceed our revenue forecast for the year. We are confident the strategy we implemented several years ago is working. This strategy centered around, one, bringing integrated technology-led solutions to market that align with clients' needs, and two, expanding the value we provide clients across a broader portfolio of business solutions to grow share, and finally, three, keeping our underlying business healthy by automating or de-investing in commodity work.

Speaker Change: Within our marketplace. We are also winning on the side of partner consolidation. This is enabling us to grow and win new business that tends to have more complexity as we introduce new adjacent services that can be deployed securely and at scale.

Speaker Change: In summary, we delivered.

Speaker Change: Another strong revenue and cash flow quarter and are on track to exceed our revenue forecast for the year. We are confident the strategy. We implemented several years ago is working this strategy centered around one bringing integrated technology led solutions to market that align with clients needs and to expanding the value we provide clients across our.

Speaker Change: Broader portfolio of business solutions to grow share and finally, three keeping our underlying business healthy by automating or the investing in commodity work.

Christopher Caldwell: The market is evolving as we anticipated. Clients are centralizing spend with partners that have scale, breadth, and expertise to deliver real-world solutions that drive tangible results. We are well-positioned against our competitor set, particularly for large-scale programs that combine consulting, IT integration, CX expertise, and AI. We have made and will continue to make the right investments in the business for ongoing profitability. I would like to thank our game changers for their passion this quarter and the clients for their trust.

Speaker Change: The market is involving evolving as we anticipated clients are centralizing spend with partners that have scale breadth and expertise to deliver real world solutions that drive tangible results, we are well positioned against our competitor set particularly for large scale programs that combine consulting it integration CX expertise.

Speaker Change: We have made and will continue to make the right investments in the business for ongoing profitability.

Speaker Change: I would like to thank our game changers for their passion this quarter and our clients for their trust and with that Andre I'll turn it over to you.

Andre Valentine: And with that, Andre, I'll turn it over to you. Well, thank you, Chris. In the second quarter, we exceeded our revenue guidance yet again, delivering revenue of approximately $2.4 billion, an increase of 1.5% year-on-year on both a constant currency and as reported basis. The growth in the quarter was broad-based across our client base and reflects continued strength in our core AI-led customer experience offerings and ongoing growth in our adjacent AI solutions. These adjacent services are growing at a rate that is faster than the company as a whole and we continue to believe that as these solutions increase in scale, there's an increasing opportunity for them to contribute to revenue growth.

Andre Valentine: Thank you Chris in the second quarter, we exceeded our revenue guidance, yet again delivering revenue of approximately $2 4 billion, an increase of one 5% year on year on both a constant currency and as reported basis.

Andre: The growth in the quarter was broad based across our client base and reflects continued strength in our core AI led customer experience offerings and ongoing growth in our adjacent AI solutions.

Andre: These adjacent services are growing at a rate that is faster than the company as a whole and we continue to believe that as these solutions increase in scale. There is an increasing opportunity for them to contribute to revenue growth.

Andre Valentine: Looking at our second quarter revenue growth by vertical on a constant currency basis, growth was well balanced across verticals. Revenue from retail, travel, and e-commerce clients grew 3% year-over-year, led by growth with travel clients. Media and Communications also grew 3% year-on-year this quarter. This is positive to see as this vertical has been flat to down in the past few years. Revenue from banking, financial services, and insurance clients grew 2%. And our tech vertical and our healthcare vertical were both relatively flat, reflecting offshore movement. Turning to profitability, our non-GAAP operating income was $304 million. This is below the guidance range we provided on our last call.

Andre: Looking at our second quarter revenue growth by vertical on a constant currency basis growth was well balanced across verticals.

Speaker Change: Revenue from retail travel and E Commerce clients grew 3% year over year led by growth with travel clients media and.

Speaker Change: <unk> also grew 3% year on year. This quarter. This is positive to see as this vertical has been flat to down in the past few years revenue from banking financial services and insurance clients grew 2% and our tech vertical in our healthcare vertical were both relatively flat reflecting offshore movement.

Speaker Change: Turning to profitability our non-GAAP operating income was $304 million. This is below the guidance range. We provided on our last call as Chris mentioned in April some clients pause programs as a sorted through the impact of tariffs on their business. During this time, we kept their program stable with the expectation that the program should start to resume in may.

Andre Valentine: As Chris mentioned, in April, some clients paused programs as they sorted through the impact of tariffs on their business. During this time, we kept their programs stable with the expectation that the programs would start to resume in May, as they have. We also made elevated investments to support the acceleration of revenue growth in the second half of 2025. Margins improved in May, and we expect meaningful sequential margin improvement in both the third and fourth quarter of the year. suggested EBITDA in the quarter was $357 million, a margin of 14.8%. Non-GAAP WDPS was $2.70 per share within our guidance range and an increase of 1 cent year-on-year as we benefit from lower interest expense, a more favorable tax rate, and a lower share count as we continue to repurchase our shares.

Speaker Change: As they have we also made elevated investments to support the acceleration of revenue growth in the second half of 2025.

Speaker Change: Margins improved in May and we expect meaningful sequential margin improvement in both the third and fourth quarter of the year.

Speaker Change: Adjusted EBITDA in the quarter was $357 million a margin of 14, 8% non.

Speaker Change: non-GAAP diluted EPS was $2 70 per share within our guidance range and an increase of one <unk> at year on year as the benefit from lower interest expense, a more favorable tax rate and a lower share count as we continued to repurchase our shares.

Andre Valentine: Gap net income was $42 million for the quarter, and Gap diluted EPS was $0.63 per share. Reconciliations for Gap and non-Gap measures are provided in today's earnings report. Adjusted free cash flow was $200 million in the quarter, an improvement of about $240 million sequentially from Q1. We returned approximately $67 million to shareholders in the quarter, which included repurchasing $45 million of our common shares, or approximately 920,000 shares, at an average price of approximately $49 per share. The remaining $22 million in shareholder return was in the form of our quarterly dividend At the end of the second quarter, cash and cash equivalents were $343 million, and total debt was approximately $4.9 billion, bringing our net debt to $4.5 billion.

Andre Valentine: GAAP net income was $42 million for the quarter and GAAP diluted EPS was <unk> 63 per share.

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

Speaker Change: Adjusted free cash flow was $200 million in the quarter, an improvement of about $240 million sequentially from Q1.

Speaker Change: We returned approximately $67 million to shareholders in the quarter, which included repurchasing $45 million of our common shares or approximately 920000 shares at an average price of approximately $49 per share.

Speaker Change: The remaining $22 million each.

Speaker Change: Shareholder return was in the form of our quarterly dividend.

Speaker Change: At the end of the second quarter cash and cash equivalents were $343 million and total debt was approximately $4 9 billion.

Speaker Change: Bringing our net debt $4 5 billion.

Andre Valentine: We also reduced the amount of our off-balance sheet factored accounts receivable with the balance standing at approximately $142 million at the end of the quarter. As previously disclosed, we refinanced a portion of our debt maturities and extended our revolving credit facility on favorable terms in the quarter. Late in the quarter, we made a $150 million voluntary principal payment against our term loan that matures in December of 2026, bringing the balance on that term loan down to $600 million. At the end of the quarter, we had approximately $1.5 billion in liquidity, including our $1.1 billion revolver, which is undrawn.

Speaker Change: We also reduced the amount of our off balance sheet factored accounts receivable with the balance standing at approximately $142 million at the end of the quarter.

Speaker Change: As previously disclosed we refinanced a portion of our debt maturities and extended our revolving credit facility and have favorable terms in the quarter.

Speaker Change: Late in the quarter, we made a $150 million voluntary principal payment against our term loan that matures in December of 2026, bringing the balance on that term loan down to $600 million at the end of the quarter, we had approximately $1 5 billion in liquidity, including our $1 $1 billion revolver, which is undrawn.

Andre Valentine: Overall, we delivered a strong revenue quarter above expectations with steady growth across verticals. We continue to complement our core CX growth with strong momentum from our adjacent solutions such as data annotation, analytics, B2B sales, and AI implementation IT solutions. Our pipeline is strong and the new business we are signing is accretive to margins as these programs scale.

Speaker Change: Overall, we delivered a strong quarter.

Speaker Change: Revenue quarter above expectations with steady growth across verticals, we continue to complement our core CX growth with strong momentum from our adjacent solutions such as data annotation analytics VW sales in AI implementation solutions, our pipeline is strong and the new business. We are signing is accretive to margins as these.

Speaker Change: Program scale.

Andre Valentine: Now, I will turn to our outlet. For the third quarter, we expect the following. Revenue of $2.445 billion to $2.470 billion. Based on current exchange rates, these expectations assume an approximate 140 base positive impact of foreign exchange rates compared with the prior year period. The guidance implies constant currency revenue growth for the quarter, ranging from 1 to 2 percent. We expect operating income of $162 million to $172 million, and non-GAAP operating income of $318 million to $328 million. This translates into expected non-GAAP EPS of $2.80 per share to $2.91 per share, assuming approximately $68 million in non-GAAP interest expense, 62.7 million diluted common shares outstanding, and approximately 5% of net income attributable to participating securities.

Speaker Change: Now I'll turn to our outlook for.

Speaker Change: For the third quarter, we expect the following revs.

Speaker Change: Revenue of $2 445 billion to $2 $4 seven zero billion.

Speaker Change: Based on current exchange rates these expectations assume an approximate 140 basis point positive impact of foreign exchange rates compared with the prior year period.

Speaker Change: The guidance implies constant currency revenue growth for the quarter, ranging from 1% to 2%.

Speaker Change: We expect operating income of $162 million to $172 million and non-GAAP operating income of $318 million to $328 million.

Speaker Change: This translates into expected non-GAAP EPS of $2 80 per share to $2 91 per share assuming approximately $68 million in non-GAAP interest expense $62 7 million diluted common shares outstanding and approximately 5% of net income attributable to participating securities.

Andre Valentine: The effective tax rate is expected to be approximately 25.5% in the quarter.

Speaker Change: The effective tax rate is expected to be approximately 25, 5% in the quarter.

Andre Valentine: Our guidance for the full year 2025 is as follows. fiscal year reported revenue of $9.720 billion to $9.815 billion based on current exchange rates, which assumes a de minimis impact on exchange rates compared with the prior year period. Accordingly, we are increasing our guidance for constant currency revenue growth for the full year to 1 to 2 percent. We expect operating income of $675 million to $695 million, and non-GAAP operating income of $1,300 million to $1,320 million. This is within our initial profit guidance for the year and adjusts for the results in Q2 and a currency headwind to profit as compared to our initial guidance.

Speaker Change: Our guidance for the full year 2025 is as follows.

Speaker Change: <unk> year reported revenue of $9 720 billion to $9 $8 5 billion based.

Speaker Change: Based on current exchange rates, which assumes a de minimus impact from foreign exchange rate compared with the prior year period.

Speaker Change: Accordingly, we are increasing our guidance for constant currency revenue growth for the full year to 1% to 2%.

Speaker Change: We expect operating income of $675 million to $695 million and non-GAAP operating income of <unk> hundred million to <unk> hundred $20 million. This.

Speaker Change: This is within our initial profit guidance for the year and adjust for the results in Q2, and a currency headwind to profit as compared to our initial guidance.

Andre Valentine: We do expect our non-gap profit margin to increase sequentially in both the third and fourth quarters as revenue follows the upfront investments we've made and as our technology suite moves to being accretive to the business in the fourth quarter. Our guidance for NIGAP EPS is $11.53 to $11.76 per share, assuming NIGAP interest expense of $273 million. approximately 63.1 million diluted common shares outstanding and approximately 5% of net income contributable to participating securities. The effective tax rate is expected to be approximately 25% for the full year. And finally, we continue to expect adjusted free cash flow of $625 to $650 million.

Speaker Change: We do expect our non-GAAP profit margin to.

Speaker Change: To increase sequentially in both the third and fourth quarters as revenue follows the upfront investments, we've made and as our technology suite moves to being accretive to the business in the fourth quarter.

Speaker Change: Our guidance for non-GAAP EPS is $11 53 to.

Speaker Change: To $11 76 per share assuming non-GAAP interest expense of $273 million.

Speaker Change: Approximately $63 1 million diluted common shares outstanding and approximately 5% of net income attributable to participating securities.

Speaker Change: The effective tax rate is expected to be approximately 25% for the full year.

Speaker Change: And finally, we continue to expect adjusted free cash flow of $625 million to $658 million included in this expectation is it an improvement in days sales outstanding from current levels and the expected sequential improvement in profitability and lower integration costs.

Andre Valentine: included in this expectation, is an improvement in day sales outstanding from current levels and the expected sequential improvement in profitability and lower integration costs. In regard to capital allocation priorities, as we said in January, we expect our spending on share repurchases to modestly exceed last year, taking advantage of the disconnect between the fundamentals of our business and our current valuation, while continuing to pay down debt. We remain committed to maintaining our investment grade principles, and of course, we will continue to support our dividend, which currently has a yield of approximately 2.4%.

Speaker Change: In regard to capital allocation priorities as we said in January.

Speaker Change: Our spending on share repurchases to modestly exceed last year, taking advantage of the disconnect between the fundamentals of our business and our current evaluation, while continuing to pay down debt, we remain committed to maintaining our investment grade principles and of course, we will continue to support our dividend, which currently has a yield of approximately two.

Speaker Change: Two 4%.

Andre Valentine: In summary, we are seeing a steady acceleration in our growth rate and are confident that our strategy to differentiate Concentrix from the market will continue to drive stronger growth in the second half of 2025 and beyond. We expect margin improvement in the second half and are committed to driving strong year-on-year pre-cash flow growth. We have made the right investments in the business that are allowing us to outperform and over the long term position us to generate mid-single digit growth we believe this business can deliver. And we are committed to having the right capital structure and continued capital return through a combination of share repurchases and dividends while reducing our leverage.

Speaker Change: In summary, we are seeing a steady acceleration of our growth rate and are confident that our strategy to differentiate concentrix and the market will continue to drive stronger growth in the second half of 2025 and beyond we expect margin improvement in the second half and are committed to driving strong year on year free cash flow growth.

Speaker Change: We have made the right investments in the business that are allowing us to outperform and over the long term position us to generate mid single digit growth. We believe this business can deliver and we are committed to having the right capital structure and continued capital return through a combination of share repurchases and dividends, while reducing our leverage with that operator.

Operator: With that, operator, please now open the line for questions. Thank you. As a reminder, if you would like to ask a question, please press star 1 on your. You hear an automated message arising. Your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your order. One moment for the first.

Speaker Change: Please now open the line for questions.

Speaker Change: Thank you.

Speaker Change: Minder, if he would like to ask a question. Please press star one on your telephone you hear an automated message advising your hand is raised we also ask that you. Please wait for your name a company to be announced before proceeding with your question one moment for the first question.

Joseph Vafi: And the first question will be coming from the line of Joseph Vafi of Conicor, your line is open. Hey, everyone. Good afternoon. Great to see another solid quarter here relative to expectations. So congrats on that.

Speaker Change: And the first question will be coming from the line of Joseph <unk>.

Rafi: Rafi of Canaccord Your line is open.

Speaker Change: Hey, everyone. Good afternoon, great to see another solid quarter here relative to exit expectation so congrats on that.

Joseph Vafi: Just maybe just a few quick ones for me. And I know it did sound like some of the weaker verticals kind of from a broad base are doing a little bit better. And I know you're looking for a little bit of revenue acceleration here in the second half. Just want to drill down on that a little bit. You know, if revenue acceleration is, you know, more broad based here or is it more reliant on, you know, a couple of specific contracts and, you know, maybe other color there on where it might be coming from from a vertical basis.

Speaker Change: Hey.

Speaker Change: Few quick ones for me.

Speaker Change: I know it did sound like some of the weaker verticals kind of from a broad base are doing a little bit better and I know you are looking for a little bit of revenue.

Speaker Change: Revenue acceleration here in the second half just wanted to drill down on that a little bit.

Speaker Change: If revenue acceleration is.

Speaker Change: More broad base here or or is it more reliant on a couple of specific contracts.

Speaker Change: Maybe other color there on where it might be coming from from a vertical basis, and then I'll have a quick follow up.

Christopher Caldwell: And then I'll have a quick follow up. For sure, Joe. It's Chris. So the momentum is broad-based. As we talked about from a pipeline perspective, we're seeing very solid pipeline building, not only from a geography perspective in all of our geographies, but also in a vertical perspective. I think banking, as Andre alluded to, tech and media and comms, we're starting to see some good momentum. Healthcare, we're starting to get to the end of the offshoring mutation of our growth. And so we're really excited about what we're seeing. And frankly, as we kind of indicated in our comment, the types of deals that we're winning and the solutions that we're type of winning are the type that we've been after.

Speaker Change: Oh sure Joe It's Chris So the momentum is broad based as we talked about from a pipeline perspective.

Speaker Change: We're seeing very solid pipeline building not only from a geography perspective in all of our geographies, but also on a vertical perspective I think bank.

Speaker Change: Banking.

Speaker Change: As Andre alluded to tech and media and comps were starting to see some good momentum healthcare.

Speaker Change: Our health care, we're starting to get to the end of the offshoring.

Speaker Change: Mutation of muting of our growth and so we're really excited about what we're seeing and frankly as we kind of indicated in our comments.

Speaker Change: The types of deals that we're winning and the solutions that we're type of winning.

Speaker Change: Are the type that we've been after they're much more stickier than more complex.

Christopher Caldwell: They're much more stickier, they're more complex, and a big chunk of them use our technology. So we're pretty happy with that.

Speaker Change: A big chunk of them use our technology, so we're pretty happy with that.

Joseph Vafi: That's great, and then kind of talking about your technology, just definitely congrats on getting that market research recognition for the technology. You know, where are we in this journey now? You know, it's been, you know, I think Concentrix has done a great job here in, you know, I know you're rolling out some standalone, you know, software products. It sounds like it's helping you gain share, just maybe just kind of, maybe just more broad, you know, some more detailed commentary here on, you know, how AI is treating you right now in the market and what you may, you know, what we should expect here, you know, for the next year.

Speaker Change: That's great and then kind of talking about your technology definitely of the congrats on getting that market research recognition for the technology.

Speaker Change: Where are we in that journey now it's been I think concentrix, you've done a great job here.

Speaker Change: Ken.

Speaker Change: Turning AI into.

Speaker Change: A clear positive from an unknown over the last year year, and a half I know youre rolling out some standalone.

Speaker Change: Software product.

Speaker Change: It sounds like it is helping you gain share just maybe just kind of maybe its just more broad some more.

Speaker Change: Detailed commentary here on.

Speaker Change: How AI is treating you right now in the market and what you may have.

Speaker Change: What we should expect here.

Speaker Change: For them here.

Christopher Caldwell: Yeah, for sure, Joe. So I'll tackle the question in two parts. The first part is really our own technology. As we talked about sort of two years ago, not, frankly, many clients were buying real AI. And so we developed a suite of products internally ourselves and started to see some very strong benefits. And then, you know, middle of last year, our clients started talking about wanting to deploy what we had, you know, basically been showing them internally working. And so that's where we started to commercialize the product and launch the first fully autonomous product late last year.

Speaker Change: Yes for sure Joe So I'll tackle the question in two parts. The first part is really our own technology as we talked about sort of two years ago.

Speaker Change: Frankly, many clients were buying real AI and so we developed a suite of products internally ourselves starting to see some very strong benefits and then middle of last year. Our clients started talking about wanting to deploy what we had.

Speaker Change: <unk> basically been showing them internally working and so that's where we started to commercialize the product and launched the first.

Speaker Change: Fully autonomous product late last year, and then the I'll call it human augmentation product.

Christopher Caldwell: And then the, I'll call it human augmentation product, IX Hero, you know, at the beginning of Q2. And what we've been super happy with is not only are we getting clients to think about how to use it internally and are adopting it sort of a little ahead of where we expected them to adopt it, but also from the size of deployments, we're very happy that we're starting to see some scale. The one thing that we are seeing is the economic model slightly different than what we expected. We're seeing clients willing to give us more work because of our platform, which we're obviously costing into that and we're getting economic return from, but it's not necessarily always turning into discrete billing.

Speaker Change: Hero at the beginning of Q2 and what we've been Super happy with is not only are we getting clients to think about how to use it internally and are adopting it.

Speaker Change: Sort of a little ahead of where we expected them to adopt it but also from the size of deployments. We're very happy that we're starting to see some scale. The one thing that we are seeing is the economic model is slightly different than what we expected. We are seeing clients willing to give us more work because of our platform, which we are obviously costing into that and we're getting.

Speaker Change: Returning from but it's not necessarily always turning into discrete billing we are also.

Christopher Caldwell: We are also, you know, growing our discrete billing, though, when a client is deploying it across their enterprise, or wants to split how they're buying products and services from us. And so we're super, super happy with how that is going. As we talked about, our expectation is that we'll be accretive by the end of Q4. And as I also mentioned, we expect to be able to accelerate growth on those products without investing more at this rate, because we built sort of and took the time to build it into a commercial product at the beginning of the year.

Speaker Change: Growing our discrete billing, though when a client is deploying it across their enterprise.

Speaker Change: Or was to split how they're how they are buying products and services from us and so we're super Super happy with how that is going as we talked about our expectation is that will be accretive by the end of.

Speaker Change: Q4.

Speaker Change: I also mentioned, we expect to be able to accelerate growth on those products without investing more of this at this rate because we build sort of took the time to build it into a commercial product at the beginning of the year so as.

Christopher Caldwell: So as painful as it was at the beginning of the year, we're starting to see the benefits of that investment and that time taken to build it that way. The second part of the AI discussion is really about our third party technology partners, and our adjacent services. And the third technology partners are really coming to us because they've got this technology, they don't understand how to implement it in the last mile that drives value for clients. Many of them have had failed POCs, or where they can't get growth out of it. And they're coming to us to say, how do we actually implement this and use it and working with the clients to do that.

Speaker Change: As painful it was at the beginning of the year, we're starting to see the benefits of that investment.

Speaker Change: That time taken to build it that way the second part of the AI discussion is really about our third party technology partners and our adjacent services in the third technology partners are really coming to us because they've got this technology. They don't understand how to implement it in the last mile that drives value for clients many of them had.

Speaker Change: That failed Poc's are where they can't get growth out of it and they are coming to us to say, how do we actually implement this and use it and working with our clients to do that so we're seeing good growth in those implementation services were seeing good growth in the pipeline and we're also selling services around that from a delivery of services perspective, and then from an.

Christopher Caldwell: So we're seeing good growth in those implementation services, we're seeing good growth in the pipeline. And we're also selling it, you know, services around that, from a delivery of services perspective. And then from an adjacent services perspective, you know, the growth in our data annotation, our analytics business, our implementations business, our consulting, our managed services business, and even our B2B business, where we're actually selling AI solutions on behalf of software vendors, as we talked about a quarter or two ago, is now getting to a billion dollars and growing much faster than our core business. And so we're seeing all these positive from this AI, as we talked about two years ago, despite a lot of people not necessarily believing us at that time.

Speaker Change: <unk> services perspective.

Speaker Change: The growth in our data annotation, our analytics business, our implementations business, our consulting or managed services business and even our <unk> business, where we're actually selling AI solutions on behalf of software vendors.

Speaker Change: As we talked about a quarter or two ago is now getting to $1 billion and growing much faster than our core business and so we're seeing all of these positives from this AI as we talked about two years ago. Despite.

Speaker Change: Despite a lot of people not necessarily believing us at that time, and we're excited to see where the momentum can take us.

Joseph Vafi: And we're excited to see where the momentum can take us. That's great. A lot of color there. Much appreciated, Chris. Congrats on all the progress you and the whole. Thank you very much, Joe. Thank you.

Speaker Change: That's great a lot of color there much appreciate Chris Congrats on all the progress.

Speaker Change: Our whole team.

Chris Caldwell: Thank you very much Joe.

Operator: One moment for the next question.

Chris Caldwell: Thank you one moment for the next question.

Chris Caldwell: Okay.

Robbie Bamberger: And the next question will be coming from the line of Robbie Bamberger. of Baird, your line is open. Yeah, thanks for taking my question. Can you maybe provide just a little bit more color on kind of what happened to margins in Q2 that caused you to be about 80 bps below last guide? And then, you know, how much of that was due to that pause from tariffs that you mentioned? And then also how much was due to impacts like FX or anything else that won off this quarter? So let me walk you through the quarter because it might provide a little bit of color.

Chris Caldwell: And the next question will be coming from the line.

Robbie Bamberger: Robbie Bamberger.

Speaker Change: Of Baird. Your line is open.

Speaker Change: Yes. Thanks for taking my question can you maybe provide just a little bit more color on kind of what happened to margins in Q2 that caused you to be about 80 bps below last guide and then how much of that was due to that pause from tariffs that you mentioned.

Speaker Change: And then also how much was due to impacts like FX or anything else that.

Speaker Change: One off this quarter.

Bob Fisher: Fisher, Bob No problem. So let me walk you through the quarter, because it might provide a little better color.

Andre Valentine: The first month of the quarter, March, was well in line with everything that we expected, going well, pipeline doing well. When the tariffs kicked in, I think some of our clients, it was a small subset of clients who are in the logistics industry and some who are manufacturing products, were quite surprised about how robust the tariffs were. So really what they did was they paused and they said, look, we need a couple of weeks to figure out what to do. We want to halt some of these projects to figure out, are they going to be driving the returns that we expected?

Speaker Change: The first months of the.

Speaker Change: Quarter March was well in line with what we expected.

Speaker Change: Growing well pipeline doing well.

Speaker Change: When the tariffs kicked in I think some of our clients. So it was a small handset of a small subset of clients who are in the logistics industry and some who are manufacturing products, we're quite surprised about how robust the tariffs were and so really what they did was a pause and they said look we need a couple of weeks to kind of figure out what to do.

Speaker Change: Do we want to hold some of these projects to kind of figure out are they are they going to be driving the returns that we expected we need to reorganize our supply chain before we continue to ship et cetera, et cetera, et cetera, and with a few and again this is less than a handful of clients who are relatively larger clients with us we had a conversation where we said look.

Andre Valentine: Do we need to reorganize our supply chain before we continue to shift, etc., etc., etc.? And with a few, and again, this is less than a handful of clients who are relatively larger clients with us, we had a conversation where we said, look, we can downsize all this labor or we can put all these projects on isolation. But our expectation is that tariffs will get sorted out, that you'll be able to rebound pretty quickly. And that's going to delay you three or four months of support and cause you other problems. And so we worked out where we actually held the labor.

Speaker Change: We can downsize all of this labor we can pull all of these projects in isolation, but our expectation is that tariffs will get sorted out that youll be able to rebound pretty quickly and thats going to delay you three or four months of support and caused your other problems and so we worked out where we actually held the labor we.

Christopher Caldwell: We paused the projects that kept sort of the investment going from that perspective. And we started already in May starting to see those margins coming back in line. And as we talked about in my prepared script, we'll see those margins come back in line through the first part of Q3. By the end of Q3, we expect to be up again year on year on margins. The benefit we got from that, which is really important for investors to understand, is that the clients very much appreciated what we did. They didn't miss a beat in their supply chain.

Speaker Change: Positive projects that kept sort of the investment going from that perspective.

Speaker Change: We started already in may starting to see those margins coming back in line as we talked about in my prepared script, we will see those margins come back in line through the first part of Q3 by the end of Q3, we expect to be up again year on year on margin. The benefit we got from that which is really important for investors to understand is that the clients.

Speaker Change: Very much appreciated what we did they didn't miss a beat in their supply chain. They have now started to ask us to take on more volume because some other partners pulled back and we were able to capture that.

Christopher Caldwell: They've now started to ask us to take on more volume because some other partners pulled back and we were able to capture that. And that's allowed us to kind of accelerate some of the investments that we talked about going in. If you look at sort of the midpoint of our earnings guide, and Andre can chip in, but if you look at the midpoint of our earnings guide from a margin perspective, you can think of it as really the majority held labor, a small portion of it as being investments that we won in the quarter because of the held labor that people were going to move volume to us for.

Speaker Change: That's allowed us to kind of accelerate some of the investments that we talked about going in if you look at sort of the midpoint of our earnings guide and Andre can chip in but if you look at the midpoint of our earnings guide from a margin perspective, you can think of it as really the majority held labor.

Speaker Change: A small portion of it as being investments that we won in the quarter because of the health labor that people were going to move volume to us for and then FX Andre if you want to comment on FX FX is certainly a mixed bag for us Ravi as you think about the top line certainly it was more of a tailwind than we expected, but when you net things out.

Andre Valentine: And then FX, Andre, if you wanted to comment on FX. Yeah, FX, certainly a mixed bag for us, Robbie. As you think about the top line, certainly it was more of a tailwind than we expected. But when you net things out, it was a bit of a tail, sorry, a headwind for us from a profitability perspective. And obviously, we benefited from the strength of the euro and the pound, but at the same time, the weakening of the USD versus the unhedged portion of our exposure to the Philippines peso, Indian rupee had an impact. But overall, it was certainly smaller than the impacts that Chris has talked about.

Speaker Change: It was a bit of a tail sorry, a headwind for us from a profitability perspective.

Speaker Change: Obviously, we benefited from the strength of.

Speaker Change: The euro and the pound at the same time.

Speaker Change: The weakening of the USD versus.

Speaker Change: The unhedged portion of our exposure to the Philippines peso Indian rupee had an impact but.

Speaker Change: So but overall is.

Speaker Change: It was certainly smaller than.

Speaker Change: The impacts of Christmas talked about.

Robbie Bamberger: Yeah, that's very helpful there. And then, you know, if we look in the back half, we can imply sort of mildly above 2% organic constant FX growth in H2 after about, you know, 1.5% in the first half. I guess what gives you confidence in the mild acceleration there? And then is it partly due to the April revenue volumes kind of being a little bit lower because of those clients essentially pausing spend due to the tariffs? And then, you know, Q3 guide implies mildly above that 1% sequential that we've seen sort of the past three years?

Speaker Change: Yes, that's very helpful. There and then.

Speaker Change: If we look in the back half, we can imply sort of mildly above 2% organic constant FX growth in H two after about one 5% in the first half I guess, what gives you confidence in the mild acceleration there and then is it partly due to the April revenue volumes kind of being a little bit lower because of those clients Sn.

Speaker Change: <unk> pausing spend due to the tariffs and then.

Speaker Change: Q3 guide implies mildly above that 1% sequential that we've seen sort of the past three years is that due to the tariff impact.

Christopher Caldwell: Is that due to the tariff impact? Yeah, I wouldn't read too much in the tariff impact. I'll let Andre kind of go through some of the other comments. But just to be very clear, we started seeing the volume coming back in our expectations by the end of May from the volume that was held off in April from the tariffs. And that's layered in. If you think about how we've guided for the last two quarters, we've been quite conservative in coming over our guide. And I think that's still our philosophy from a revenue perspective. And so if you extrapolate that out, you can see that we came over the guide even with this pause, we would have probably come in even more over the guide with this pause and our expectations that we're going to continue to perform well and accelerate to the back half of the year.

Speaker Change: Yes, I wouldn't read too much into the tariff impact.

Speaker Change: I'll, let Andre kind of go through some of the other comments, but just to be very clear, we started seeing the volume coming back in our expectations.

Speaker Change: By the end of May from the volume that was held off in <unk>.

Speaker Change: <unk> from the tariffs and that's layered in if you think about how we've guided for the last two quarters, we've been quite conservative them coming over our guide and I think that's still our philosophy from a revenue perspective, and so if you. If you extrapolate that out you can see that we can.

Speaker Change: And over the guide even with this pause we would've probably come in even more over the guide with this pause in our expectations that we're going to continue to perform well and accelerate through the back half of the year, Yes, I think our confidence really comes from the new business that we've signed so far this year that is ramping as well as the extra share that we think we've ticked up.

Andre Valentine: Yeah, I think our confidence, Robbie, comes from the new business that we've signed so far this year that is ramping, as well as the extra share that we think we've picked up because of the actions we took in the second quarter to gain even more traction with some clients. So very confident in our guide. As Chris has said, we've tried to be very conservative, very much focused on coming in at the top end of the range for every period that we've given, which would imply a nice acceleration through the second quarter. Awesome. Thank you, guys.

Speaker Change: Because of the actions we took in the second quarter to the gain.

Speaker Change: And then even more traction with some clients so very confident.

Speaker Change: In our guide as Kristian said, we've tried to be very conservative very much focused on coming in at the top end of the range for every period that we've given which would imply a nice acceleration through the second half.

Speaker Change: Awesome. Thank you guys.

Operator: Thank you.

Speaker Change: Thank you.

Ruplu Bhattacharya: And our next question.

Speaker Change: Thank you and our next question.

Ruplu Bhattacharya: will be coming from the line of. Ruplu Bhattacharya. of Bank of America. Your line is open. Hi, thanks for taking my questions. Chris, how should we think about the revenue contribution from ix-hello and ix-hero AI offerings this year and beyond? And since it looks like operating margin guide for the full year is now lower by 40 bits to 13.4% at the midpoint, are you planning to moderate your spending on AI? Yeah, so a couple of things. First, from a comment perspective, as we mentioned, we're spending about $50 million incrementally, $100 million total on internal tools, but $50 million specifically to our IEX suite.

Speaker Change: We will be coming from the line of Rob.

Rob: Hello Marcelo.

Speaker Change: Of Bank of America. Your line is open.

Speaker Change: Hi, Thanks for taking my questions.

Speaker Change: Chris how should we think about the revenue contribution from <unk>, Hello, and IX hero AI offerings, this year and beyond and since it looks like operating margin guide for the full year is now lower by 40 bps to 13, 4% at the midpoint are you planning to moderate your spending on AI.

Speaker Change: Yes, so a couple of things.

Speaker Change: From a content perspective, as we mentioned.

Speaker Change: About $50 million incrementally $100 million total on internal tools, but 50 million specifically to our IX suite.

Christopher Caldwell: And when you look at that, we've talked about in Q4, our expectation is that we are creative and we're on plan to do that from an economic value perspective. And we've also said that we can hold our spending as is and continue to accelerate revenue on that. And so, honestly, our expectation is that we'll continue going into the next year, not guiding for the next year, that we'll see continued margin expansion capabilities with it and also tying into growth by client bundling services and technology with us going into the new year. So, from our perspective, we're very happy where we're positioning.

Speaker Change: And when you look at that we've talked about in Q4, our expectation was that would be accretive and we're on plan to do that from an economic value perspective.

Speaker Change: And we've also said that we can hold our spending as is and continues to accelerate revenue on that and so honestly. Our expectation is that will continue going into the next year not guiding for next year that we'll see continued margin.

Speaker Change: Spansion capabilities with it and also tying into growth by clients bundling services and technology with us going into the new year.

Speaker Change: From our perspective, we're very happy where we are positioning we're very happy with the comfortable of spend we don't need to increase our spend to continue to see the benefit.

Christopher Caldwell: We're very happy with the comfortable of spend. We don't need to increase our spend to continue to see the benefit and are using sort of generative AI tools internally ourselves to drive better value from our development team. So, that is all going very, very, very well. We would not, Rupalu, be investing in these suite of products. to get a business that just covers our development costs. We see this as a very strategic initiative. We see this as a very differentiated initiative. Our clients are seeing it that way as well. We're getting some great recognition from a number of different analysts around our AI technology and what we're able to do with it.

Christopher Caldwell: Are using sort of generative AI tools internally ourselves to drive better value from our development team. So that is all going very very very well we would not.

Christopher Caldwell: The investing in this suite of products.

Christopher Caldwell: <unk> got a business that just covers our development costs, we see this as a very strategic initiative. We see this as a very differentiated initiatives. Our clients are seeing it that way as well, we're getting some great recognition from a number of different analysts around our AI technology, and what we're able to do with it and so over.

Andre Valentine: And so over the coming years, we continue to see it as a benefit by taking the strategy. Okay, thanks for that.

Christopher Caldwell: In the coming years, we continue to see as a benefit by by taking a strategy.

Andre Valentine: Okay. Thanks for that.

Andre Valentine: Andre, I'd like to follow up a little bit more on operating margins. I mean, like fiscal 2Q operating margins were 80 bits lower than the midpoint of your guidance, but revenue was higher than guidance. So when we look at the guide, it's 50 bits higher sequentially to 13.1%, but just on 40 million higher revenue sequentially at the midpoint. So I think that implies like a sequential incremental margin or something like 46%, which is just the change in operating income over the change in revenue. So I'd like to ask you, what gives you the confidence that you're going to get that level of margin improvement on just 40 million higher revenue sequentially?

Speaker Change: I'd like to follow up a little bit more on operating margins.

Andre Valentine: In late fiscal <unk> operating margins were 80 bps lower than the midpoint of your guidance, but revenue was higher than guidance.

Andre Valentine: So when we look at the guide.

Andre Valentine: EBIT higher sequentially to 13, 1%, but just on $40 million higher revenue sequentially at the midpoint. So I think that in plays like the sequential incremental margin was something like 46%, which is just the change in operating income over the change in revenue.

Andre Valentine: So I would like to ask you like what gives you the confidence that youre going to get that level of margin improvement on just $40 million higher revenue sequentially.

Andre Valentine: And you said margins are trending better now. What are the operating margins trending at currently in the quarter? So, again, I'll start, Ruplu, by reminding you we're very focused on the higher end of our revenue guide, and so, therefore, the incremental revenue that we're trying to drive in Q3 is certainly higher than the $40 million at the midpoint. We should see, we've always talked about incremental revenue driving roughly 20 to 25% of flow through, so you can do the math and see what that would give us. We expect the impact from the tariff pause to start to mostly get weaned away completely as we go through this course, and most of that benefit, most of that hurt being one time, so that will drive improvement as we move into Q3, and then just other underlying improvements in our operations as we scale programs, and lastly, moving to a more positive position, getting towards accretion in the AI investment.

Andre Valentine: And you said margins are trending better now.

Andre Valentine: The operating margins trending at.

Andre Valentine: Currently in the quarter.

Andre Valentine: Yes, so again I'll start by reminding you that we're very focused on the higher end of our revenue guide and so therefore, the incremental revenue that we're trying to drive in Q3 is certainly higher than the $40 million at the midpoint.

Andre Valentine: We should see.

Andre Valentine: We've always talked about incremental revenue driving roughly 20% to 25% of flow through so you can do the math and see what that would give us.

Andre Valentine: The impact from the tariff pause.

Andre Valentine: Two.

Andre Valentine: To.

Andre Valentine: Start to.

Andre Valentine: Mostly you get lead away completely as we go through this quarter. So most of that benefit.

Andre Valentine: Most of that hurt being one time, so that will drive improvement as we move into Q3.

Andre Valentine: And then just other underlying improvements in our operations as we scale programs and lastly, moving to a positive more positive position getting towards accretion.

Andre Valentine: In the AI investment all of those things are kind of baked into.

Andre Valentine: All those things are kind of baked into the stepping stones to the midpoint of our guide. Okay.

Andre Valentine: The stepping stones to the midpoint of our guidance.

Andre Valentine: Chris, if I can ask you one more real quick. I mean, just looking at the general operating environment, can you talk about how sales cycles are trending? And you said that some customers are trying to move their services offshore. What was the impact to revenues and margins? And can you also talk about the catalyst business? How should we think about revenue growth there? So if you can just give us these details about the operating environment. Thank you so much. Yeah, for sure. So I'll tell you, transformation deals that obviously we're winning and have in our pipeline tend to take longer, but they're not elongated and they're not shrinking.

Speaker Change: Okay, Chris if I can ask you one more real quick I mean, just looking at the general operating environment can you talk about how sales cycles are trending and you said that.

Andre Valentine: Some customers who are trying to move their services offshore what was the impact to revenues and margins and can you also talk about the catalyst business. How should we think about revenue growth. There. So if you can just give us these details about the operating environment. Thank you so much.

Andre Valentine: For sure. So I will tell you to transformation deals that obviously, we are winning and have in our pipeline tend to take longer but they're not elongated and we're not shrinking they tend to go through a lot more sign offs, just because of the type of investment that's required.

Christopher Caldwell: They tend to go through a lot more sign-offs just because of the type of investment that's required. But we're quite happy with what we're seeing in our pipeline. We're quite happy with our win rate within those. In the traditional operating environment, where we can drive savings for clients and show them what we can do with them, with our own technology, with third-party technologies, those continue to move at a reasonable pace. We're talking a quarter to two quarters to go from start to close of a deal. And then again, probably two quarters before it gets to revenue and starts to contribute to our organization, which historically has been the case for a long, long time.

Christopher Caldwell: But we're quite happy with what we're seeing in our pipeline, we're quite happy with our win rate within those in the traditional operating environment, where we can drive savings for clients and show them. What we can do with them with our own technology with third party technologies those continuing to move at a reasonable pace, we're talking a quarter to two quarters to.

Christopher Caldwell: So from start to close of a deal and then again, probably two quarters before it gets to revenue and starts to contribute to our organization, which historically has been the case for a long long time, where clients are looking for is something different. They are looking for something unique we're looking for something that works, they're looking for someone who is pragmatic and I think we fit.

Christopher Caldwell: What clients are looking for is something different. They're looking for something unique. They're looking for something that works. They're looking for something that's pragmatic. And I think we fit very, very well in that space. And clients are also looking for a service provider that can bring them the technology, the integration, the managed services and the delivery of what they need to do. And that's sort of a unique position that we see ourselves in and where we are winning very, very, very nicely. And so we're quite happy with the operating environment. Because we're succeeding in that space, obviously our catalyst business is a key part of that.

Christopher Caldwell: Very very well in that space and clients are also looking for a.

Christopher Caldwell: Service provider that can bring them the technology and the integration managed services and the delivery of what they need to do and Thats sort of a unique position that we see ourselves in and where we're winning very very very nicely and so we're quite happy with the operating environment.

Christopher Caldwell: Because we are succeeding in that space, obviously, our catalyst business is a key part of that now our catalyst revenue is growing in line with our business.

Christopher Caldwell: Now, our catalyst revenue is going in line with our business, but it's enabling more growth within the business that we don't necessarily count under the catalyst label that sometimes fits in other parts of our P&L, for lack of a better term. But you should see this going forward more and more as an integrated offering as we execute. And then in terms of pricing, from a transformational perspective, from a complexity perspective, that pricing is, as we talked about, accretive, it's healthy. I mean, it's always competitive. Things that are very commodity based, which obviously we're walking away from that type of work, is very, very, very price sensitive right now.

Christopher Caldwell: But it's enabling more growth within the business that we don't necessarily count under the catalyst label.

Speaker Change: Some other parts of our of our.

Christopher Caldwell: Our.

Christopher Caldwell: P&L for lack of a better a better term, but you should see this going forward more as more.

Christopher Caldwell: Integrated offering.

Christopher Caldwell: As we execute.

Christopher Caldwell: And then in terms of pricing from.

Christopher Caldwell: From a transformational perspective from a complexity perspective that pricing is.

Christopher Caldwell: As we've talked about accretive it's healthy it's always competitive things that are very commodity based which obviously, we're walking away from that type of work is very very very price sensitive right now and Thats why we just don't pursue it if we can't automate it we're investing in that space from an onshore to offshore.

Christopher Caldwell: And that's why we just don't pursue it. If we can't automate it, we're de-investing in that space. From an onshore to offshore perspective, Rupalu, it's about a 2% headwind that we see from a growth perspective, 1.5% to 2%, depending on the quarter, of work moving from a high cost country to an offshore country. And we tend to duplicate costs for about a quarter, quarter and a half, to possibly sometimes two quarters, depending on the complexity of the program, before we see margins go up, even though revenue kind of drops right out the gate as we move the stuff off offshore.

Christopher Caldwell: <unk>.

Christopher Caldwell: It's about a 2% headwind that we see from a growth perspective, one 5% to 2% depending on the quarter.

Christopher Caldwell: <unk> moving from a high cost country to offshore country, and we tend to have duplicate costs for both the quarter quarter and a half.

Christopher Caldwell: To possibly sometimes two quarters, depending on the complexity of the program before we see margins go up even though revenue drops right out of the day as we move the stuff offshore, but that will continue to become less and less of a burden as you go through because as we've mentioned for the last year or two.

Christopher Caldwell: But that will continue to become less and less of a burden as you go through, because as we've mentioned for the last year or two, the primary new winds are coming in nearshore and offshore, they're not coming on onshore for the most part. So that tends to fade down. And then the last thing that we've talked about is that from a complexity of work product perspective, we have about 7%, it's actually a little less now, but 7% of our revenue is commoditized. And we are, our expectation is to get to 5% by the end of the year.

Christopher Caldwell: Primary new wins are coming in near shore and offshore theyre not coming on onshore for the most part.

Christopher Caldwell: So that tends to fade down and then the last thing that we've talked about is that from a complexity of work.

Christopher Caldwell: Product perspective, we have about 7% as I said, a little less now, but 7% of our revenue is.

Christopher Caldwell: There is commoditized.

Christopher Caldwell: And.

Christopher Caldwell: We are our expectation would be up to 5% by the end of the year. So it's about a 2% headwind and we're on pace to do that so if you would like to think about us halfway through the year being halfway through that move you've got that headwind, which we don't expect to repeat next year, which gives us further cause for why we see acceleration in our business as we go in and again not guiding for next.

Ruplu Bhattacharya: So it's about a 2% headwind. And we're on pace to do that. So if you would like to think about us halfway through the year being halfway through that move, you've got that headwind, which we don't expect to repeat next year, which gives us further cause for why we see acceleration in our business as we go in and again, not guiding for next year, but going into next year. Sorry, Rupalu, I know that was a very long winded answer, but hopefully that covered all your points. Yeah, no, thank you for all the details. Appreciate it.

Ruplu Bhattacharya: Year, but going into next year, sorry, I know that was a very long winded answer, but hopefully that covered all your points. Yes, no. Thank you for all the details appreciate it.

Operator: Thank you. One moment for the next question.

Ruplu Bhattacharya: Thank you one moment for the next question.

Operator: And our next question will be coming from the line. of Vincent Colicchio of Barrington Research. Your line is open. Yeah, Chris, it's nice to see additional consolidation benefits for the company. Can you give us some color on how these came about? Why you are benefiting from this trend? And if we have legs here into the second half of the additional consolidation. Yeah, so let me start with the last part of your question first. Yes, we have legs into the next part of the back half of the year, and frankly beyond, because we do see this trend of clients as a whole wanting fewer partners, and they want partners with broader services, so that they can obviously boil it down to fewer partners.

Operator: And our next question will be coming from the line.

Operator: Vincent.

Speaker Change: Nick Steel Barrington Research your line is open.

Operator: Yes, Chris.

Operator: Nice to see additional consolidation.

Operator: Benefits for the company.

Operator: Can you give us some color on how these came about why.

Operator: Benefiting from this trend and if we have legs here into the second half of the additional consolidation.

Operator: Yes, So let me start with the last part of your question first yes, we have legs into the next part of the back half of the year.

Operator: And frankly beyond because we do see this trend of clients as a whole wanting fewer partners and they want partners with broader services. So that they can obviously boil it down to fewer partners.

Vincent Colicchio: Really, around consolidation comes to three things. The first thing is being top of the stack rank, operational excellence. And we perform and are always focused on trying to be number one for our clients, and where we are number one for our clients, we tend to win from a consolidation perspective. The second thing that's super important to clients is technology to help them automate and improve their delivery. And with our own IX suite of products, as well as with third-party products, we tend to do very well from that perspective as well. And then the third thing that's important from a consolidation perspective is scale.

Operator: Really around consolidation comes to three things. The first thing is being top of the stack rank operational.

Vincent Colicchio: Operational excellence and we perform and are always focused on trying to be number one for our clients and where we are number one for our clients. We tend to win from a consolidation perspective. The second thing that's super important to clients is technology to help them automate and improve their delivery and with our own <unk> suite of products as well as with third party.

Vincent Colicchio: We tend to do very well from that perspective, as well and then the third thing Thats important from a consolidation perspective as scale scale not only on a footprint perspective, but also on a capabilities perspective, and so if you think about clients dealing with three or four partners partner for analytics, one partner for some tech one partner for our CX one.

Christopher Caldwell: Scale not only on a footprint perspective, but also on a capabilities perspective. And so if you think about a client dealing with 3 or 4 partners, one partner for analytics, one partner for some tech, one partner for CX, one partner for back office, and yet they can come to Concentrix, and we can say, look, we can do all this for you. We can help you with your platforms. We can run it. We are very flexible from a commercial perspective. That really resonates with these clients, and that's where we tend to do very, very well. And across those three pillars, we continue to see lots of ability to execute going into the back half of the year and into 2026.

Christopher Caldwell: For back office.

Christopher Caldwell: And yet they can come to Concentrix and we can say look we can do all of this for you. We can help you with your platforms. We can run it we're very flexible from a commercial perspective.

Christopher Caldwell: That really resonates with these with these clients and Thats, where we tend to do very very well in across those three pillars. We continue to see lots of ability to execute going into the back half of the year and into 2026.

Vincent Colicchio: Thanks for that color.

Speaker Change: Thanks for that color and could you give us some color on managed services does that continue to grow and sort of what level are you at in terms of managed services.

Christopher Caldwell: And could you give us some color on managed services? Does that continue to grow and sort of what level are you at in terms of managed services as a percent of the business? Yeah, so we do see managed services growing and we really see, actually, AI is one of the big areas that we see managed services continue to grow much faster than historically what we've done in managed services, because with AI, it's not, you know, plugging it and it's done, it requires a lot of maintenance to continue to drive the efficiency that AI can do.

Christopher Caldwell: Center of the business.

Christopher Caldwell: Yes, so we do see managed services growing and we really see actually AI is one of the big areas that we see managed services continuing to grow much faster than historically, what we've done in managed services because with AI it's not.

Christopher Caldwell: Plug in and has done it requires a lot of maintenance too to continue to drive the efficiency.

Christopher Caldwell: So we see that growing. Right now, the managed services business in our overall business is not massive, it's a portion of our Catalyst business. And if you think of our Catalyst business as being 8% of revenue, it's smaller, but it is one of the areas that is growing faster than our overall business. And we see that continue to grow based on the demands of what AI drives for managed services. Thanks, Chris. Thank you. As a reminder, if you would like to ask a question, please press star 1-1 on your phone. One moment, please.

Christopher Caldwell: Okay I can do so we see that growing right now the managed services business and our overall business is not massive it's a portion of our catalyst business and if you think of our catalyst businesses being 8% of revenue is smaller but it is one of the areas is growing faster than our overall business and we.

Christopher Caldwell: We see that continuing to grow based on the demands of what.

Christopher Caldwell: Drives for managed services.

Christopher Caldwell: Thanks, Chris.

Christopher Caldwell: Yes.

Christopher Caldwell: Thank you.

Christopher Caldwell: As a reminder, if you would like to ask a question. Please press star one on your telephone one moment for the next question.

Operator: And the next question will be coming from the line of Davao Goyal of Scotiabank. Your line is open. Good afternoon, everyone. So thanks a lot for all the color that you provided here on profitability. Andre and Chris, I wanted to get a little bit more color in terms of the elasticity of your headcount as the revenue potentially continues to grow from an automation standpoint and an offshoring standpoint. And obviously what happened this quarter where you ended up holding on to a lot of labor and stuff despite slight weakness. So help us understand, how do you potentially see it trending with increasing automation and AI?

Christopher Caldwell: And the next question will be coming from the line.

Davao Guido: Davao Guido.

Operator: <unk> Bank your line is open.

Speaker Change: Good afternoon, everyone.

Operator: Thanks, a lot for all the color that you provided do you have in profitability.

Operator: Andre and Chris I wanted to get a little bit more color in terms of the elasticity of your head count.

Operator: As the revenue potentially continues to grow from an automation standpoint, and an offshoring standpoint, and obviously what happened this quarter, where you ended up.

Operator: Quoting onto a lot of labor and stuff, despite slight weakness, but help us understand how do you potentially see it trending with increasing automation and AI.

Davao Goyal: getting more prominent across the revenue. The first thing that you should appreciate, and I think you know because you know the industry well, is that we can lower our costs pretty quickly from a headcount perspective if we need to. And we took a conscious decision in April to keep it based on not only the client relationships and where we saw as a competitive advantage, but if we had not seen that, we could have exited the labor very, very, very, very quickly and kind of had a different result. But net, net, net, economically, we think it was better with what we did.

Operator: Getting more prominent across the revenue.

Operator: For sure and I appreciate that.

Davao Goyal: First thing that you should appreciate and I think you know because you know the industry well that we can lower our costs pretty quickly from a head count perspective, if we need to and we took a conscious decision in April to keep it based on not on the client relationships and where we thought as a competitive advantage, but if we had not seen that we could have exited the labor very very.

Davao Goyal: We're very quickly and kind of.

Davao Goyal: <unk> had.

Davao Goyal: <unk> had a different result, but net net net economically we think it was better with what we did.

Christopher Caldwell: From an elasticity perspective of labor, I'm hesitant to give too much details because I see people coming out with these things saying like, you know, 40% of our work is done by AI, 90% of our work is done by AI, but they're not decreasing their headcount, which is a little dubious. What we find is that our efficiencies, depending on the role and job that it's done, is anywhere from about 5% to 40%. And I know that's quite a large range, but it depends where, you know, we're putting it in, it depends the task that we're doing it in, and it depends on the skill set of the individual.

Davao Goyal: Elasticity perspective of labor.

Davao Goyal: Hesitant to give too much details because I see people coming out with these thing thing.

Christopher Caldwell: 40% of our work is done by a 90% of our work is done by air, but theyre not decreasing their head count which is a little dubious what we find is that our efficiencies depending on the role and job that has done is anywhere from about 5% to 40% and I know that's quite a large range, but it depends where.

Christopher Caldwell: Sure.

Christopher Caldwell: We're putting it in it depends the tasks that we're doing it in and it depends on the skill set of the individual we are seeing some of that elasticity now.

Christopher Caldwell: We are seeing some of that elasticity now. We are using some of that for competitive advantage on getting volume from others because we can be more competitive in the space while still maintaining and growing our margins. We also see that as where we are helping our clients be more cost efficient, and therefore they're buying our technology to do that. But long term, we do see our ability to continue to grow our revenue without growing our headcount. And if you look at our headcount numbers for the most part, through the course of the year, they haven't really materially changed, yet we've grown our revenue.

Christopher Caldwell: We are using some of that for competitive advantage on getting volume from others, because we can be more competitive in the space, while still maintaining and growing our margins. We also see that as where we are helping our clients be more cost efficient and therefore, they are buying our technology to do that but long term, we do see our ability to continue to grow our <unk>.

Christopher Caldwell: Revenue without growing our head count and if you look at our head count numbers for the most part through the course of the year, they havent really materially.

Christopher Caldwell: <unk> grown our revenue.

Christopher Caldwell: That's very helpful. But as of now, given the potential increase in automation and AI, you don't see a decline in headcount. Like, I'm just wondering from a global employment loss standpoint, right, like That's where my head's at and I'm thinking about how can we best preempt that situation. Yeah, so Divya, our goal is, frankly, to keep our headcount flat as we grow revenue and maybe possibly decline headcount depending on our growth of revenue. And clearly, we're going to take advantage of as much automation as we can. I think from our perspective, what we look at is kind of our margin profile of our business, the complexity of the work that we're dealing with.

Christopher Caldwell: That's very helpful, but as of now given the potential increase in automation and AI.

Christopher Caldwell: Don't see a decline in head count like I'm, just wondering from global <unk>.

Christopher Caldwell: Women law standpoint, I like.

Christopher Caldwell: That's where my head's at.

Christopher Caldwell: How can we best Pms that situation.

Christopher Caldwell: Yes. So our goal is frankly to keep our head count flat as we grow revenue and maybe possibly decline in head count depending on our growth of revenue and clearly we're going to take advantage of as much automation as we can.

Christopher Caldwell: I think from our perspective, what we look is kind of our margin profile of our business is accretive to the complexity of the work that we're dealing with.

Christopher Caldwell: There is some automation. More will come. And as that comes in, we will take the appropriate action. But right now, we do not see a massive decrease. And in fact, if you look at some of the analyst studies, like I think Gartner has come out with it, and McKinsey just came out with a report recently, and there was an FT column on it. They all expect that employment and outsourcing will actually increase over the next three years. So it's an interesting phenomenon and goes in the face of some of what the pure tech companies are saying, because they might not necessarily understand the dynamics of how to deliver services around their tech.

Speaker Change: There is some automation more will come in as that comes in we will take the appropriate action, but right now we do not see a.

Christopher Caldwell: A massive decrease and in fact, if you look at some of the analyst studies like I think Gartner has come out with it and Mckinsey just came out with a report recently and there was a FTE column order. They all expected employment and outsourcing will actually increase over the next three years. So it's interesting phenomenon and goes in the face of some of the.

Christopher Caldwell: What the pure tech companies are saying, because they might not necessarily understand the dynamics of how to deliver services around the tech.

Davao Goyal: That's very helpful.

Christopher Caldwell: I'll just ask one last question here. You briefly spoke about the shift in pricing dynamics out there. Could you talk to us a little bit more about how exactly are you seeing your pricing strategy evolve? Again, with increasing automation, increasing AI, increasing offshoring, are you seeing a shift from time and material to more outcomes based pricing? And plus with your IXLO-like solutions, talk to us a little bit about your pricing strategy and how are you broadly competing with the increasing consolidation in mind as well? And that'll be all for me. Thank you. No problem, Divya.

Christopher Caldwell: It's very helpful. I'll just ask one last question here is.

Christopher Caldwell: You briefly spoke about the shift in pricing dynamics out there could you talk to us a little bit more about.

Christopher Caldwell: How exactly are you seeing Friday pricing strategy.

Christopher Caldwell: With increasing automation increasingly increasing off shoring are you seeing a shift from time and material do more.

Christopher Caldwell: Outcomes based pricing in place with your IX Hello, like solutions talk to us a little bit about your pricing strategy and how you broadly competing with the increasing consolidation in mind as well and that'll be all from me. Thank you.

Christopher Caldwell: So first off, we're not seeing, when you look at the size of a business we have, we're not seeing a material change. We are seeing more interest in outcomes-based pricing. We're seeing more interest in sort of the transformational deals that we're doing that will lower costs, but it still tends to come to a transactional unit times by a revenue unit, and there you get the revenue. And we do expect that will continue to slowly change, but we've said that for the last 10 years, and it hasn't necessarily moved that much, so it might be another 10 years, we're still discussing it for the most part.

Speaker Change: No problem. So first off we're not seeing when you look at the size of our business. We have we're not seeing a material change we are seeing more interest in outcomes based pricing, we're seeing more interest in sort of a transformational deals that we're doing that will lower cost, but it still tends to come to a transactional unit timings bye.

Christopher Caldwell: Revenue unit and there you get the revenue.

Christopher Caldwell: We do expect that we'll continue to slowly changed but we've said that the last 10 years and it hasn't moved that much. So it might be another 10 years, we're still we're still discussing it for the most part I think from our perspective, what we are focused on is growing net new streams of revenue.

Christopher Caldwell: I think from our perspective, what we are focused on is growing net new streams of revenue, such as our IX product suite. And so while I mentioned we do have some of it bundled into our services, we also have discrete revenue, and that's very much like software SaaS revenue, and our goal is certainly very much to grow that as a discrete revenue line. We also have managed services contracts that I think Vince brought up, where we actually are billing for a set fee for the whole year, and we manage the equipment and services that we're doing, and so that's a bit of a different revenue flow.

Christopher Caldwell: Our IX product suite and so while I mentioned, we do have some of it bundled into our services. We also have discrete revenue and that's very much like software SaaS revenue and our goal is certainly very much to grow that as a discrete revenue line. We also have maintenance managed services contracts set I think Vince brought up where we are.

Christopher Caldwell: Actually our billing for a set fee for the whole year and we manage.

Christopher Caldwell: The equipment and services that we're doing and so that's a bit of a different revenue flow, but all of these different revenue flows are well under half of our revenue and just to set expectations. The margin profile is great. We definitely want to grow it but we don't see it getting over half of our revenue for well for the foreseeable future by any stretch of imagination.

Christopher Caldwell: But all these different revenue flows are well under half of our revenue, and just to set expectations, the margin profile is great, we definitely want to grow it, but we don't see it getting over half our revenue for the foreseeable future by any stretch of the imagination. That's helpful. Thank you.

Christopher Caldwell:

Christopher Caldwell: That's helpful. Thank you.

Christopher Caldwell: Okay.

Davao Goyal: There are no more questions in the queue. And at this time, this does conclude the conference call for today. You may all disconnect and have a great evening.

Christopher Caldwell: Thank you there are no more.

Christopher Caldwell: Questions in the queue.

Speaker Change: And at this time. This does conclude the conference call for today, you may all disconnect and have a great evening.