Q1 2026 Concentrix Corp Earnings Call

March 24, 2026

Speaker #1: Hello everyone, thank you for joining us and welcome to the Concentrix first quarter 2026 financial results conference call. After today's prepared remarks, we will host a question-and-answer session.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Concentrix Q1 2026 Financial Results Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star one again. I will now hand the call over to Elise Brassell, Corporate Communications. Please go ahead.

Speaker #1: If you'd like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, please press star 1 again. I will now end the call over to Elise Brissell, Corporate Communications.

Speaker #1: Please go ahead.

Speaker #2: Thank you, operator, and good morning, everybody. Welcome to the Concentrix first quarter 2026 earnings call. This call is a property of Concentrix and may not be recorded or rebroadcast without the written permission of Concentrix.

Elise Brassell: Thank you, operator, and good morning, everybody. Welcome to the Concentrix Q1 2026 Earnings Call. This call is the property of Concentrix and may not be recorded or rebroadcast without the written permission of Concentrix. This call contains forward-looking statements that address our expected future performance and that, by their nature, address matters that are uncertain. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements as a result of new information or future expectations, 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 in our other public filings with the SEC.

Speaker #2: This call contains forward-looking statements that address our expected future performance and that, by their nature, address matters that are uncertain. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements.

Speaker #2: 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.

Speaker #2: This includes the risk factors provided in our annual report on Form 10-K and in our 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 EBITDA margin, non-GAAP net income, non-GAAP EPS, and constant currency revenue growth.

Elise Brassell: 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 investor relations website under Financials. With me on the call today are Chris Caldwell, our President and Chief Executive Officer, and Andre Valentine, our Chief Financial Officer. Chris will provide a summary of our operating performance and growth strategy, and Andre will cover our financial results and business outlook. Then we'll open the call for your questions. Now I'll turn the call over to Chris.

Speaker #2: A reconciliation of these non-GAAP measures is available in the news release and on the company investor relations website under financials. With me on the call today are Chris Caldwell, our president and chief executive officer; and Andre Valentine, our chief financial officer.

Speaker #2: Chris will provide a summary of our operating performance and growth strategy, and Andre will cover our financial results and business outlook. Then we'll open the call for your questions.

Speaker #2: Now I'll turn the call over to Chris.

Speaker #3: Thank you, Elise. Hello everyone, and thank you for joining us for our first quarter 2026 earnings call. Today, I'd like to start by giving you an overview of how we're thinking about the quarter, and then I'll turn it over to Andre to talk more about the specifics of our results.

Chris Caldwell: Thank you, Elise. Hello, everyone, and thank you for joining us for our Q1 2026 Earnings Call. Today I'd like to start by giving you an overview of how we're thinking about the quarter, and then I'll turn it over to Andre to talk more about the specifics of our results. Overall, in the first quarter, we continue to win the right business, drive the right revenue mix, and execute on our strategy, allowing us to come within our guide for both revenue and profit. Our solutions are driving value both from automating work or when combined with a human to drive performance. Our overall wins with technology are up more than 61% year over year in the first quarter, highlighting the shift in our go-to-market offerings and client acceptance.

Speaker #3: Overall, in the first quarter, we continue to win the right business, drive the right revenue mix, and execute on our strategy, allowing us to come within our guide for both revenue and profit.

Speaker #3: Our solutions are driving value both from automating work or, when combined with a human, to drive performance. Our overall wins with technology are up more than 61% year over year in the first quarter, highlighting the shift in our go-to-market offerings and client acceptance.

Speaker #3: When we look at our bookings quarter on quarter, our signed annual contract value for solutions including AI more than doubled, and we're seeing sequential increases in expanding AI license consumption across our client base.

Chris Caldwell: When we look at our bookings quarter on quarter, our signed annual contract value for solutions including AI more than doubled, and we're seeing sequential increases in expanding AI license consumption across our client base. Our pipeline of opportunities continue to be solid and represent a continued progression and shift to a higher solution mix. Our proprietary IX suite of AI products, our third-party technology partners, and our deep domain expertise continue to be differentiators that open the door for us to win larger, more transformative deals with our clients. While this might initially compress some existing revenue and margin, when these programs reach scale and full production, the margin is accretive, and we generally see revenue growth across our portfolio of services into these clients.

Speaker #3: Our pipeline of opportunities continues to be solid and represents a continued progression and shift to a higher solution mix. Our proprietary IX suite of AI products, our third-party technology partners, and our deep domain expertise continue to be differentiators that open the door for us to win larger, more transformative deals with our clients.

Speaker #3: While this might initially compress some existing revenue and margin, when these programs reach scale and full production, the margin is accretive, and we generally see revenue growth across our portfolio of services into these clients.

Speaker #3: As an example, we closed close to 60 enterprise IX Suite deals in the quarter, including our largest IX HERO contract to date with two Fortune 50 companies.

Chris Caldwell: As an example, we closed close to 60 enterprise iX suite deals in the quarter, including our largest iX Hero contracts to date with two Fortune 50 companies. Both clients will use our proprietary AI technologies to modernize their ability to create more efficient, personalized, and effective interactions with their customers while allowing us to sell additional solutions into these accounts. Looking forward, we are continuing with our focus of securing complex work and high-value services in our client base, growing our share of wallet using our extended offerings, allowing clients to consolidate work with us, leveraging our own IP and third-party platforms to differentiate ourselves in the market, and driving internal efficiencies to fuel continued investment in areas of new growth. In summary, we delivered another quarter with revenue growth, and we are on track to meet our expectations for the year.

Speaker #3: Both clients will use our proprietary AI technologies to modernize their ability to create more efficient, personalized, and effective interactions with their customers, while allowing us to sell additional solutions into these accounts.

Speaker #3: Looking forward, we are continuing with our focus of securing complex work and high-value services in our client base, growing our share of wallet using our extended offerings, allowing clients to consolidate work with us, leveraging our own IP and third-party platforms to differentiate ourselves in the market, and driving internal efficiencies to fuel continued investment in areas of new growth.

Speaker #3: In summary, we delivered another quarter with revenue growth, and we are on track to meet our expectations for the year. We are winning the right business and successfully executing, while making the right investments in the business for long-term revenue and margin growth.

Chris Caldwell: We are winning the right business and successfully executing while making the right investments in the business for long-term revenue and margin growth. I would like to thank our game changers for their tireless pursuit of excellence with our clients and their trust and partnership that we have with our clients. With that, Andre, I'll turn it over to you.

Speaker #3: I would like to thank our game changers for their tireless pursuit of excellence with our clients, and for the trust and partnership that we have with our clients.

Speaker #3: With that, Andre, I'll turn it over to you.

Andre Valentine: Well, thanks, Chris, and good morning. I'll review the details of Q1 and then discuss our outlook for Q2 and remainder of 2026. We delivered revenue of approximately $2.5 billion, an increase of 1.9% on a constant currency basis and over 5% on a reported basis. Looking at constant currency growth by vertical, revenue from banking and financial services clients grew 13% year over year. Revenue from retail, travel, and e-commerce clients grew 6%, largely driven by growth with travel and e-commerce clients. Media and communications revenues grew 3%, largely with clients outside the US and global entertainment and media companies. Our technology and consumer electronics vertical and our healthcare vertical both decreased about 6%, driven by lighter volumes than clients expected and onshore mix.

Speaker #4: Thanks, Chris, and good morning. I'll review the details of the first quarter and then discuss our outlook for the second quarter and remainder of 2026.

Speaker #4: We delivered revenue of approximately $2.5 billion, an increase of 1.9% on a constant currency basis and over 5% on a reported basis. Looking at constant currency growth by vertical, revenue from banking and financial services clients grew 13% year over year.

Speaker #4: Revenue from retail, travel, and e-commerce clients grew 6%, largely driven by growth with travel and e-commerce clients. Media and communications revenues grew 3%, largely with clients outside the US and global entertainment and media companies.

Speaker #4: Our technology and consumer electronics vertical and our healthcare vertical both decreased about 6%, driven by lighter volumes than clients expected and shore mix. Turning to profitability, our non-GAAP operating income was $295 million.

Andre Valentine: Turning to profitability, our non-GAAP operating income was $295 million, the midpoint of the guidance range we provided on our last call. Adjusted EBITDA in the quarter was $348 million, a margin of 13.9%. Non-GAAP diluted EPS was $2.61, in line with the guidance range we provided in January. GAAP results for Q1 reflect a $6 million loss on the sale of two small non-strategic businesses. One of these sales closed in the quarter, with the second expected to close later this year. The assets and liabilities of the pending sale are reflected in the balance sheet as assets held for sale. Total net proceeds from the two sales will be approximately $20 million.

Speaker #4: The midpoint of the guidance range we provided on our last call. Adjusted EBITDA in the quarter was $348 million, with a margin of 13.9%. Non-GAAP diluted EPS was $2.61, in line with the guidance range we provided in January.

Speaker #4: GAAP results for the first quarter reflect a $6 million loss on the sale of two small, non-strategic businesses. One of these sales closed in the quarter, with a second expected to close later this year.

Speaker #4: The assets and liabilities of the pending sale are reflected in the balance sheet as assets held for sale. Total net proceeds from the two sales will be approximately $20 million.

Speaker #4: Our GAAP results for the first quarter, and our expectations for GAAP results for the second quarter, also reflect restructuring charges related to cost actions that we are taking to align our cost structure and invest in higher growth and higher profit areas.

Andre Valentine: Our GAAP results for Q1 and our expectations for GAAP results for Q2 also reflect restructuring charges related to cost actions that we are taking to align our cost structure and invest in higher growth and higher profit areas. We expect the combination of the actions taken in Q1 and Q2 of 2026 to drive approximately $40 million in annualized savings over and above investments in growth. This will contribute to sequential profitability growth in H2 2026. Complete reconciliations of non-GAAP measures to the comparable GAAP measures are provided in today's earnings release. Adjusted free cash flow was -$145 million in the quarter. It reflects an increase in accounts receivable at the end of the quarter resulting from the timing of cash receipts.

Speaker #4: We expect the combination of the actions taken in the first and second quarters of 2026 to drive approximately $40 million in annualized savings, over and above investments in growth.

Speaker #4: This will contribute to sequential profitability growth in the second half of 2026. Complete reconciliations of non-GAAP measures to the comparable GAAP measures are provided in today's earnings release.

Speaker #4: Adjusted free cash flow was negative $145 million. This reflects an increase in accounts receivable at the end of the quarter resulting from the timing of cash receipts.

Speaker #4: The related receivables were all collected in the first week of March. As a reminder, free cash flow in our business is seasonal with negative free cash flow in the first quarter and robust free cash flow generation in each subsequent quarter.

Andre Valentine: The related receivables were all collected in the first week of March. As a reminder, free cash flow in our business is seasonal, with negative free cash flow in Q1 and robust free cash flow generation in each subsequent quarter. This pattern is expected to recur in fiscal year 2026. We're confident repeating our previous guidance for between $630 and 650 million in adjusted free cash flow this year. We returned approximately $65 million to shareholders in the quarter, which included repurchasing $42 million of our common shares, or approximately 1.05 million shares, at an average price of approximately $40 per share. The remaining $23 million in shareholder return was in the form of our quarterly dividend.

Speaker #4: This pattern is expected to recur in fiscal year 2026. We're confident in repeating our previous guidance for between $630 and $650 million in adjusted free cash flow this year.

Speaker #4: We returned approximately $65 million to shareholders in the quarter, which included repurchasing $42 million of our common shares, or approximately 1.05 million shares, at an average price of approximately $40 per share.

Speaker #4: The remaining $23 million in shareholder return was in the form of our quarterly dividend. In February, we issued $600 million of three-year senior notes maturing March 1, 2029.

Andre Valentine: In February, we issued $600 million of three-year senior notes maturing 1 March 2029. The new notes carry an interest rate coupon of 6.50%. The proceeds from the new notes were used to retire $600 million of 6.65% senior notes that mature in August 2026. $200 million of the 6.65% senior notes maturing in August 2026 remain outstanding, and we expect to repay them with strong free cash flow in Q2 and Q3. At the end of Q1, cash and cash equivalents were $234 million, and total debt was approximately $4.75 billion, bringing our net debt to $4.51 billion.

Speaker #4: The new notes carry an interest rate coupon of 6.50%. The proceeds from the new notes were used to retire $600 million of 6.65% senior notes that mature in August 2026.

Speaker #4: $200 million of the 6.65% senior notes maturing in August 2026 remain outstanding and we expect to repay them with expected strong free cash flow in the second and third quarters.

Speaker #4: At the end of the first quarter, cash and cash equivalents were $234 million and total debt was approximately $4.75 billion. Bringing our net debt to $4.51 billion.

Speaker #4: Our off-balance sheet factored accounts receivable borrowings were approximately $129 million at the end of the quarter. At the end of the quarter, our liquidity was nearly $1.4 billion.

Andre Valentine: Our off-balance sheet factored accounts receivable borrowings were approximately $129 million at the end of the quarter. At the end of the quarter, our liquidity was nearly $1.4 billion, including our $1.1 billion revolving credit facility, which was undrawn. To summarize, in Q1, we delivered revenue and profitability in line with our guidance range. We also took proactive steps to manage upcoming debt maturities while continuing to invest in growth. Now I'll turn to our outlook. For Q2, we expect the following. Q2 revenue of $2.46 to $2.485 billion. Based on current exchange rates, we expect an approximate 75 basis points positive impact of foreign exchange rates compared with the prior period.

Speaker #4: Including our $1.1 billion revolving credit facility, which was undrawn. To summarize, in the first quarter we delivered revenue and profitability in line with our guidance range.

Speaker #4: We also took proactive steps to manage upcoming debt maturities while continuing to invest in growth. Now I'll turn to our outlook. For the second quarter, we expect the following.

Speaker #4: Second quarter revenue of $2.46 to $2.4585 billion. Based on current exchange rates, we expect an approximate 75 basis point positive impact of foreign exchange rates compared with the prior period.

Andre Valentine: The guidance implies constant currency revenue growth for the quarter ranging from 1% to 2%. As we've said, our goal is to be conservative in our revenue guidance, and we are being prudent with the current geopolitical situation. We expect Q2 non-GAAP operating income of $290 to 300 million. This implies a non-GAAP operating margin of 11.8% to 12.1%. Q2 non-GAAP earnings per share will be expected to be 2.57 to 2.69 per share, assuming approximately $67 million in interest expense, 60.9 million in diluted common shares outstanding, and approximately 4.9% of net income attributable to participating securities.

Speaker #4: The guidance implies constant currency revenue growth for the quarter ranging from 1% to 2%. As we've said, our goal is to be conservative in our revenue guidance, and we are being prudent with the current geopolitical situation.

Speaker #4: We expect second quarter non-GAAP operating income of $290 to $300 million. This implies a non-GAAP operating margin of 11.8% to 12.1%. Second quarter non-GAAP earnings per share will be expected to be $2.57 to $2.69 per share.

Speaker #4: Assuming approximately $67 million in interest expense, $60.9 million in diluted common shares outstanding, and approximately $4.9% of net income attributable to participating securities. The non-GAAP effective tax rate is expected to be approximately 25% for the second quarter.

Andre Valentine: The non-GAAP effective tax rate is expected to be approximately 25% for Q2. Our expectations for the full year non-GAAP metrics remain unchanged from our earnings call in January and can be found in today's release. As I mentioned earlier, we continue to expect to generate between $630 and $650 million in adjusted free cash flow this year. In addition to our strong free cash flow, we expect aggregate proceeds for approximately $40 million from asset sales, including the sale of the two businesses I mentioned earlier. The remaining proceeds will come from the sale of owned properties that are no longer being utilized. We are committed to reducing our net leverage to below 2.6 times adjusted EBITDA by the end of fiscal 2026. In summary, our overall demand environment remains solid.

Speaker #4: Our expectations for the full year non-GAAP metrics remain unchanged from our earnings call in January. It can be found in today's release. As I mentioned earlier, we continue to expect to generate between $630 and $650 million in adjusted free cash flow this year.

Speaker #4: In addition to our strong free cash flow, we expect aggregate proceeds for approximately $40 million from asset sales including the sale of the two businesses I mentioned earlier.

Speaker #4: The remaining proceeds will come from the sale of owned properties that are no longer being utilized. We are committed to reducing our net leverage to below 2.6 times adjusted EBITDA by the end of fiscal 2026.

Speaker #4: In summary, our overall demand environment remains solid. The margin headwinds we have seen in recent quarters are being managed and we are confident in our ability to drive year-over-year profitability growth in the second half of 2026.

Andre Valentine: The margin headwinds we have seen in recent quarters are being managed, and we are confident in our ability to drive year-over-year profitability growth in H2 2026. We're confident in the continued strong free cash flow generation of the business and our plan to reduce net leverage over the balance of the year. We are in a strong competitive position to drive long-term outperformance. Now, operator, please open the line for questions.

Speaker #4: We're confident in the continued strong free cash flow generation of the business and our plan to reduce net leverage over the balance of the year.

Speaker #4: And we are in a strong competitive position to drive long-term outperformance. Now, operator, please open the line for questions.

Speaker #1: Thank you. We will now begin the question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now begin the question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Speaker #1: To withdraw your question, please press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device.

Speaker #1: Please stand by while we compile the Q&A roster. Your first question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open.

Speaker #1: Please go ahead.

Ruplu Bhattacharya: Hi. Thank you for taking my questions. Chris, can you specify approximately how much revenue in Q1 was related to AI and the iX suite? How are you pricing these solutions? Can you give us an idea of how you're looking at investments related to AI in 2026?

Speaker #3: Hi. Thank you for taking my questions. Chris, can you specify approximately how much revenue in one Q was related to AI and the IX suite?

Speaker #3: And how are you pricing these solutions? And can you give us an idea of how you're looking at investments related to AI in 2026?

Speaker #4: So let me answer the questions in a bit of a backwards way. So, just in terms of how we're pricing these solutions, our IXflow solution, which is the fully autonomous solution that we have, basically is priced by consumption.

Chris Caldwell: Let me answer the questions in a bit of a backwards way. Just in terms of how we're pricing these solutions. Our iX Hello solution, which is the fully autonomous solution that we have, basically is priced by consumption. We put it in for very small or de minimis fees, and then based on how many contacts that are fully automated, we get paid for. As you can imagine, when we put it in, we see a negative margin for the first little while, and then, as it scales and grows, we see a positive margin similar to what you'd expect from a SaaS or software type of business.

Speaker #4: So we put it in for very small or de minimis fees. And then, based on how many contacts that are fully automated, we get paid for.

Speaker #4: And so as you can imagine, when we put it in, we see a negative margin for the first little while. And then as it scales and grows, we see a positive margin similar to what you'd expect from a SaaS or software type of business.

Speaker #4: On our HERO product, it is a subscription basis where we sell on a per-seat subscription of how many humans are actually using the product.

Chris Caldwell: On our HERO product, it is a subscription basis, where we sell on a per-seat subscription of how many humans are actually using the product, to drive the business. As we talked about at the end of last year, we ended Q4 at $60 million of ARR. We continue to add to that. We're not releasing numbers on a quarterly basis, but our expectation is to be at or above $100 million by the end of this fiscal year. If we reach that sooner, we will update you on that. So far, we're actually a little ahead of plan from where we expected based on what we've sold within Q1.

Speaker #4: To drive the business. And as we talked about, at at the end of last year, we added Q4 at $60 million of ARR. We continue to add to that.

Speaker #4: We're not releasing numbers on a quarterly basis, but our expectation is to be at or above $100 million by the end of this fiscal year, if we reach that sooner.

Speaker #4: We will update you on that. But so far, we're actually a little ahead of plan from where we expected based on what we've sold within the first quarter.

Speaker #4: And we have a very, very strong pipeline going into the second quarter that we've already started to see some good uptake with on our proprietary AI products.

Chris Caldwell: We have a very, very strong pipeline, going into Q2 that we've already started to see some good uptake with, on our proprietary AI products. In terms of the percentage of our business with AI within our business in Q1, Ruplu, the challenge that we have is that what we're seeing in the marketplace is that, as you think about AI solutions, we're seeing clients adopt more than one AI solution, and sometimes they're adopting more than one AI solution from us. Sometimes they're doing some things internally. The way we look at it is of the revenue we service, of the clients we service, how much of that has AI involved in it?

Speaker #4: In terms of the percentage of our business with AI within our business in Q1, Ruplu, the challenge that we have is that what we're seeing in the marketplace is that as you think about AI solutions, we're seeing clients adopt more than one AI solution.

Speaker #4: And sometimes they're adopting more than one AI solution from us. Sometimes they're doing some things internally. So the way we look at it is, of the revenue we service, of the clients we service, how much of that has AI involved in it?

Speaker #4: And the reality is it's the vast majority of our clients are using our AI, their own AI, some other pieces and bits and pieces of AI.

Chris Caldwell: The reality is that the vast majority of our clients are using our AI, their own AI, some other bits and pieces of AI. What we also look at is our success rate of AI implementations, because in the marketplace there's a lot of people who are talking about AI, but they're not getting the success rate. We're seeing very, very high success rates, very, very high success rates on our AI implementations driving real tangible value for clients. That's what we're very excited about as we're going into Q2.

Speaker #4: What we also look at is our success rate of AI implementations. Because in the marketplace, there's a lot of people who are talking about AI, but they're not getting the success rate.

Speaker #4: And we're seeing very, very high success rates very, very high success rates on our AI implementations driving real tangible value for clients. And so that's what we're very excited about as we're going into the second quarter.

Speaker #3: Okay. Thanks for the details there, Chris. For my follow-up, Andre, can I ask you a question related to the cadence of margin improvement? If we look at the guidance, the implied operating margins go from 11.8% this quarter to about 12.5% in the for the full fiscal year.

Ruplu Bhattacharya: Okay. Thanks for the details there, Chris. For my follow-up, Andre, can I ask you a question related to the cadence of margin improvement? If we look at the guidance, the implied operating margins go from 11.8% this quarter to about 12.5% for the full fiscal year. You mentioned a couple of things like there's cost reduction actions you're taking. I think Chris mentioned like the pipeline indicates a better mix. And I think he also said that margins improve over time in contracts. Can you help us get comfortable with how we should think about this margin progression? Looks like the EPS guide for next quarter is slightly below the Street estimates.

Speaker #3: You mentioned a couple of things like there's cost reduction actions you're taking. I think Chris mentioned the pipeline indicates a better mix. And I think he also said that margins improve over time in contracts.

Speaker #3: Can you help us get comfortable with how we should think about this margin progression? Looks like the EPS guide for next quarter is slightly below the street estimates.

Speaker #3: So can you help us just think about how you're thinking about the ramp and what's giving you confidence that you can get to 12.5%—which would mean above 13% operating margin for the fourth quarter?

Ruplu Bhattacharya: Can you help us just think about how you're thinking about the ramp and what's giving you confidence that you can get to 12.5%, which would mean above 13% operating margin for Q4?

Andre Valentine: Sure. Happy to do that, Ruplu. The guidance is very much consistent with what we said entering the year, which was, you know, we thought that margins would be somewhat compressed in the H1, and then we would see sequential margin expansion in the H2 of the year that would get us to year-over-year margin increases in the H2 of the year. Driving that is certainly the result of the cost actions that we're taking in the H1. Other drivers are, if you look at the revenue guide, there's roughly, depending on where you are in the guide, $100 to 150 million of additional revenue coming online in the H2 of the year over the H1.

Speaker #5: Sure, happy to do that, Ruplu. And the guidance is very much consistent with what we said entering the year, which was we thought that margins would be somewhat compressed in the first half, and then we would see sequential margin expansion in the second half of the year that would get us to year-over-year margin increases in the second half of the year.

Speaker #5: Driving that is certainly the result of the cost actions that we're taking in the first half. Other drivers are, if you look at the revenue guide, there's roughly, depending on where you are in the guide, $100 to $150 million of additional revenue coming online in the second half of the year over the first half.

Speaker #5: That's going to flow through and absorb the capacity that we've added into the business, and will certainly drive revenue at fairly high flow-through as we go forward.

Andre Valentine: That's gonna flow through at, you know, absorb the capacity that we've added into the business, and will certainly drive revenue at fairly high flow through as we go forward. Then you have some of the transformational deals, as Chris alluded to, getting to kind of full scale and full production, and reaching the intended margins on those projects. That's really it. We have a great deal of confidence in our ability to drive the expansion in margin that begins, you know, first you see kind of stable to slightly expanding margin here in Q2, a bigger uptick in Q3 as we go sequentially, thanks to revenue coming online and the cost actions.

Speaker #5: Then you have some of the transformational deals, as Chris alluded to, getting to kind of full scale and full production. And reaching the intended margins on those projects.

Speaker #5: And then that's really it. And so, we have a great deal of confidence in our ability to drive the expansion in margin that begins first.

Speaker #5: You see kind of stable to slightly expanding margin here in Q2. A bigger uptick in Q3 as we go sequentially, thanks to revenue coming online and the cost actions.

Speaker #5: And then further step up in the fourth quarter. Which is kind of a traditional pattern of a step up in margin as we go from Q3 to Q4.

Andre Valentine: a further step up in Q4, which is kind of a traditional pattern of a step up in margin as you go from Q3 to Q4.

Speaker #3: If I can just ask a clarification on that, Andre, you had also mentioned in prior quarters that some customers, both in Europe as well as North America, were looking to move operations offshore.

Ruplu Bhattacharya: If I can just ask a clarification on that, Andre, you had also mentioned in prior quarters that some customers, both in Europe as well as North America, were looking to move operations offshore, and that was impacting revenues in the near term and you know, margins would have improved over time. Can you update us on how that is impacting results currently? Also, you had talked about supporting some customers whose volumes were not materializing, and you had laid out two or three options that you had. Can you give us an update on where that stands and are customer volumes coming back as you had expected, or are you taking some remedial actions? Thanks for all the details.

Speaker #3: And that was impacting revenues. In the near term and margins would have improved over time. Can you update us on how that is impacting results currently?

Speaker #3: Also, you had talked about supporting some customers whose volumes were not materializing. And you had laid out two or three options that you had.

Speaker #3: Can you give us an update on where that stands and are customer volumes coming back as you had expected? Or are you taking some remedial actions?

Speaker #3: Thanks for all the details.

Speaker #5: Sure, happy to do that. Well, yes, absolutely. The trend towards moving work offshore continues, as we talked about. I believe on the last call, we have, as we see it, roughly 15% of our revenue delivered out of North America and Western Europe that we think, over time, has the capacity to perhaps move offshore.

Andre Valentine: Happy to do that. Well, yes, absolutely. The trend towards moving work offshore continues. As we talked about, I believe on the last call, we have, as we see it, roughly 15% of our revenue is delivered out of North America and Western Europe that we think over time as the capacity to perhaps move offshore. We provided our revenue guide entering the year for roughly a 2-point headwind from shore movement. We think we're still in line with that. As we think about what that means from a margin perspective, particularly the commentary that I made about utilizing capacity that we've built ahead of revenue, a big piece of that is that shift offshore filling up capacity that we've added over the last couple of quarters in advance of that revenue.

Speaker #5: We've provided our revenue guide entering the year. For roughly a two-point headwind from shore movement, we think we're still in line with that. And as we think about what that means from a margin perspective, particularly the commentary that I made about utilizing capacity that we've built ahead of revenue, a big piece of that is that shift offshore filling up capacity that we've added over the last couple of quarters.

Speaker #5: In advance of that revenue. So, that is how we would think about the impact of shore movement. Obviously, when those programs get offshore, margins are improved.

Andre Valentine: That is how we would think about the impact of offshore movement. Obviously, when those programs get offshore, margins are improved, you know, when the programs get to full run rate. Back to the commentary about volumes not materializing. As you recall, last year, H2, actually starting Q2, we saw impacts from tariffs, you know, delaying some programs. We said that would eventually we would work that through the system through either having the volumes materialized, or shedding or the excess capacity that we'd added in advance of those programs. That is pretty much playing out in line with our expectation.

Speaker #5: When they get to when the programs get to full run rate. Back to the commentary about volumes not materializing. As you recall, last year, the second half of the year, actually starting the second quarter, we saw impacts from tariffs delaying some programs.

Speaker #5: We said that eventually we would work that through the system, through either having the volumes materialize or shedding the excess capacity that we'd added in advance of those programs.

Speaker #5: That is pretty much playing out in line with our expectation. We saw improvement in that situation as we expected in Q1. And we think that's fully out of our system kind of as we exit Q2.

Andre Valentine: We saw improvement in that situation as we expected in Q1, and we think that's fully out of our system kind of as we exit Q2.

Speaker #3: Okay, thanks for the details. Appreciate it.

Ruplu Bhattacharya: Okay. Thanks for the details. Appreciate it.

Speaker #1: Your next question comes from the line of Luke Morrison with Canaccord Genuity. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Luke Morrison with Canaccord Genuity. Your line is open. Please go ahead.

Speaker #4: Great, thank you. Hey, guys, how are you? How are you? Starting with Andre. Hey, so you sold those two small, non-strategic businesses in the quarter for, I think you said, $20 million combined.

Luke Morrison: Great. Thank you. Hey, guys, how are you?

Chris Caldwell: Good. Luke, how are you?

Luke Morrison: Maybe we'll start with Andre. You sold those two small non-strategic businesses in the quarter for, I think you said $20 million combined. Obviously pretty small, but can you just talk about the philosophy behind those divestitures? You know, is this potentially the beginning of a more active portfolio pruning effort? Were those more opportunistic? You know, are there other parts of the portfolio that you'd consider non-core? Just any help there.

Speaker #4: Obviously, pretty small. But can you just talk about the philosophy behind those divestitures? Is this potentially the beginning of a more active portfolio pruning effort where those more opportunistic?

Speaker #4: Are there other parts of the portfolio that you'd consider non-forward? Just any help there.

Speaker #5: Yeah, happy to do that. Yeah. So, not really looking to shed anything else at this point in time. We're always kind of looking at the portfolio of what we have in the business.

Andre Valentine: Happy to do that. Yeah. Not really looking to shed, you know, anything else at this point in time. You know, we're always kind of looking at the portfolio of what we have in the business. These two businesses were quite small, not strategic, not growing, and not accretive to overall margins. It just made sense to exit those. We'll continue to look at the portfolio over time and see if there are other things that make sense, but I wouldn't expect. Certainly nothing imminent there and nothing really that we're working on.

Speaker #5: These two businesses were quite small, not strategic, not growing, not accretive to overall margins. And so, it just made sense to exit those.

Speaker #5: We'll continue to look at the portfolio over time and see if there are other things that make sense. But I wouldn't expect certainly nothing imminent there and nothing really that we're working on.

Speaker #4: Got it. Helpful. And then Andre, the two verticals you mentioned that were down 6% in the quarter. I wonder if that was related to the customers that you were referencing in your last question.

Luke Morrison: Got it. Helpful. Then Andre, you know, the two verticals you mentioned that were down 6% in the quarter, I wonder if that was related to the customers that you were referencing in your last question. Then maybe, you know, double-clicking there, you attributed that to lighter volumes than clients expected in short mix. Can you just help us disaggregate those two factors? Then whether or not you have line of sight to those verticals, you know, stabilizing in H2 of this year.

Speaker #4: And then, maybe double-clicking there, you attributed that to lighter volumes than clients expected in shore mix. Can you just help us disaggregate those two factors?

Speaker #4: And then whether or not you have line of sight to those verticals stabilizing in the back half of this year.

Speaker #5: Yeah. So I'll bifurcate the two because they're not exactly the same. So healthcare, we actually saw lighter volumes than expected largely related to changes in Medicare membership or for some of our clients as well as participation in the Affordable Care Act program.

Andre Valentine: Yeah. I'll bifurcate the two because they're not exactly the same. Healthcare, we actually saw lighter volumes than expected, largely related to changes in Medicare membership for some of our clients, as well as

Chris Caldwell: Participation in the Affordable Care Act program. That impacted our revenues in the healthcare vertical. We don't see that really returning to growth here for a couple of quarters. That is kind of where that vertical stands. With respect to tech and consumer electronics, the impact is a little bit around underlying volumes. Even as we consolidate a share within some of those clients, underlying volumes are down. A little bit of impact of automation there. That's about half of the revenue change there, and then offshore mix being the other half of that kind of 6% constant currency reduction. That vertical, you know, it's seen some volatility in the past eight quarters. Some quarters we grow a little bit, some we shrink.

Speaker #5: And so that impacted our revenues in the healthcare vertical. We don't see that really returning to growth here for a couple of quarters. And so that is kind of where that vertical stands.

Speaker #5: With respect to tech and consumer electronics, the impact is a little bit around underlying volumes. Even as we consolidate share within some of those clients, underlying volumes are down—a little bit of impact of automation there.

Speaker #5: That's about half of the revenue change there, and then Shore Mix being the other half of that kind of 6% constant currency reduction. That vertical, you've seen some volatility.

Speaker #5: In the past eight quarters, some quarters we grow a little bit, some we shrink. We think that could go up or down as we go through the second half of 2026, based on what we see in the pipeline.

Chris Caldwell: We think that, you know, could go up or down as we go through H2 2026 based on what we see in the pipeline and opportunities to continue to gain share within the client base.

Speaker #5: And opportunities to continue to gain share within the client base.

Speaker #4: Excellent. Thank you.

Luke Morrison: Excellent. Thank you.

Speaker #1: Your next question comes from the line of David Koenig with Baird. Your line is open. Please go ahead.

Operator: Your next question comes from the line of David Koning with Baird. Your line is open. Please go ahead.

Speaker #6: Yeah. Hey, guys. Thank you. I guess my first question just longer-term margins. I know you've had some puts and takes. But if we think back to, I think, '22 to '24, you had 14% or so margins.

David Koning: Yeah. Hey, guys. Thank you. I guess my first question, just longer term margins. I know you've had some puts and takes, but you know, if we think back to, I think, 2022 to 2024, you had 14% or so margins. We're lower than that now, and I know, you know, there's some, yeah, some factors, but you know, things that should make it go up, the WebHelp synergies, scale, shift to AI, offshore, like all those should be positive tailwinds. Can those tailwinds drive margins back to at least where margins have been or hopefully higher, and how fast could they get there?

Speaker #6: We're lower than that now. And I know there's some, yeah, some factors. But things that should make it go up—the web help synergies, scale, shift to AI, offshore—all those should be positive tailwinds. Can those tailwinds drive margins back to at least where margins have been, or hopefully higher?

Speaker #6: And how fast could they get there?

Speaker #4: Yeah. David, it's Chris. You're right. I mean, when we look at the business, sans some of this AI implementations and transformational implementations, and look at sort of programs that are running at scale, running the way we'd expect, whatever else that kind of goes along with it, we're in that range.

Chris Caldwell: Yeah. David, it's Chris. You're right. I mean, when we look at the business sans kind of some of this AI implementation and transformational implementation and look at sort of programs that are running at scale, running the way we'd expect, and everything else that kind of goes along with it, we're in that range, and our expectation is we continue to build on that as we get some of the other programs up to scale as we put in the new AI. A lot of the WebHelp synergies we've invested in developing our AI and changing our go-to-market platform, which we talked about last year and this year.

Speaker #4: And our expectation is we continue to build on that as we get some of the other programs up to scale, as we put in the new AI.

Speaker #4: A lot of the web help synergies we've invested in developing our AI and changing our go-to-market platform, which we've talked about last year and this year.

Speaker #4: And as we talked about in the prepared remarks, in terms of the annual contract values effectively doubling as we went into Q1, as we talk about sort of our tax rates increasing, all of those are going to kind of give us the momentum and leverage.

Chris Caldwell: As we talked about in the prepared remarks in terms of the annual contract values, effectively doubling as we went into Q1, as we talk about sort of our task rates increasing, all of those are going to kind of give us some momentum and leverage. I don't wanna guide past 2026, but it's very clear to Andre and I that our expectations is we get this back to historical margins, and then we can progress past there. Timeline, I think as earlier question around where we see our margins at the end of Q4 this year, you can start to see kind of how we're incrementing up to get back to those historic margins.

Speaker #4: I don't want to guide past 2026, but it's very clear to Andre and I that our expectations as we get this back to historical margins and then we can progress past there.

Speaker #4: Timeline, I think, as earlier question around where we see our margins at the end of Q4 this year, you can start to see kind of how we're incrementing up to get back to those historic margins.

Speaker #6: Yeah, okay. That's helpful. I guess banking was very strong in the quarter, as was the retail segment. Maybe just refresh a little bit on those.

David Koning: Yeah. Okay. That's helpful on that. I guess banking was very strong in the quarter, as was the retail segment. Maybe just refresh a little bit on those. Is growth in those two sustainable, and is it some market factors happening right now or any one-off impacts that are happening? Maybe just kinda walk through those again.

Speaker #6: Is growth in those two sustainable? And is it some market factors happening right now, or are there any one-off impacts that are happening? Maybe just kind of walk through those again?

Speaker #4: Yeah, so banking—you saw last quarter was quite strong, and we expect there to be fairly strong strength through the course of the year.

Chris Caldwell: Yeah. Banking you saw last quarter was quite strong and we expect there to be fairly strong strength through the course of the year, sort of high single digit, low double digit growth base. What we like about it is that it's very widespread. We're doing very well in banking BFSI across both fintechs, you know, top kind of 200 global banks, sort of the traditional enterprise banks, and some new entrants who are trying to disrupt the market. Really we're seeing broad-based success in that. What's really driving a lot of the growth is actually this combination of the solutions of the banks now coming to us for more complex work. A very large transformational deal we won last year that we talked about is in the BFSI.

Speaker #4: Sort of high single-digit, low double-digit growth-based, and what we like about it is that it's very widespread. We're doing very well in banking, VFSI.

Speaker #4: Across both fintechs, top kind of 200 global banks—sort of the traditional enterprise banks—and some new entrants who are trying to disrupt the market.

Speaker #4: And so really, we're seeing broad-based success in that. What's really driving a lot of the growth is actually this combination of the solutions of the banks now coming to us for more complex work.

Speaker #4: So, the very large transformational deal we won last year that we talked about is in the VFSI. That's starting to come through to fruition this year.

Speaker #4: And driving the performance and profitability as we expected. And we're seeing more of that coming through where, traditionally, we haven't been able to sell some of our tech solutions into the banking and VFSI sector.

Chris Caldwell: That's starting to come through to fruition this year and driving the performance and profitability as we expected. We're seeing more of that coming through where traditionally we haven't been able to sell some of our tech solutions into the banking and BFSI sector, and now we are. We see that kind of sustained growth. In the travel, transportation, e-commerce sector, it's really both e-commerce and travel that are doing well. In the e-commerce side, we see that quite sustainable. We are winning net new clients as well as consolidating share in that. Again, it's a mix of the new solutions we're bringing to the table as well as people looking at our footprint and seeing benefit in how we can deliver consistently around the world.

Speaker #4: And now we are. So we see that kind of sustained growth. In the travel, transportation, e-commerce sector, it's really both e-commerce and travel that are doing well.

Speaker #4: On the e-commerce side, we see that quite sustainable. We're winning net new clients as well as consolidating share in that. And again, it's a mix of the new solutions we're bringing to the table, as well as people looking at our footprint and seeing benefit in how we can deliver consistently around the world.

Speaker #4: And then, on the travel side, we've got a strong travel portfolio, both in short-term stays portfolio, to longer stay portfolio, to airlines, to consolidators, to e-commerce platforms that deal with travel.

Chris Caldwell: On the travel side, we've got a strong travel portfolio both in, you know, short-term stays, longer stay portfolios, airlines, consolidators, e-commerce platforms that deal with travel. We're seeing broad-based support and what we like is what's going into those accounts is again kind of complete solution sets that's allowing us to get spend that historically hasn't been outsourced, technology spend which historically hasn't come to us, and then consolidation as well. We see that as sustainable as well. Don't ask me if jet fuel goes up to, you know, $200 a barrel, but at this point, we're very confident in what we can see with the pipeline in those verticals.

Speaker #4: And again, we're seeing broad-based support. And what we like is, what's going into those accounts is, again, these kind of complete solution sets. That's allowing us to get spend that historically hasn't been outsourced.

Speaker #4: Technology spend, which historically hasn't come to us, and then consolidation as well. So we see that as sustainable as well. Don't ask me if jet fuel goes up to $200 a barrel.

Speaker #4: But at this point, we're very confident in what we can see with the pipeline in those verticals.

Speaker #6: Yeah. Sounds great. Thanks, guys.

Speaker #1: Your next question comes from the line of Vincent Calicio with Farrington Research. Your line is open. Please go ahead.

David Koning: Yeah. Sounds great. Thanks, guys.

Operator: Your next question comes from the line of Vincent Colicchio with Barrington Research. Your line is open. Please go ahead.

Speaker #4: Chris, did you see any change or any signs of sentiment change or client behavior once the geopolitical issues started recently here?

Vincent Colicchio: Chris, did you see any change or any signs of, you know, sentiment change in our client behavior once the geopolitical issues started recently here?

Speaker #3: Yeah, so Vince, we've talked to a significant number of our clients. Some are being impacted, but very de minimisly so far. Things have been fairly robust.

Chris Caldwell: Yeah. So Vincent, we've talked to a significant amount of our clients. Some are being impacted, but very de minimis, so far. Things have been fairly robust. Our exposure to this is about 1% of revenue, give or take, which is sort of our Middle East operations. So far, we haven't seen sort of an impact at this point in time. I think people are just being very cautious right now, but so far it's fairly steady.

Speaker #3: Our exposure to this is about 1% of revenue, give or take, which is sort of our Middle Eastern operations. And so far, we haven't seen sort of an impact at this point in time.

Speaker #3: I think people are just being very, very cautious right now. But so far, it's fairly steady.

Speaker #4: And Andre, to what extent did excess capacity negatively impact margin this quarter?

Vincent Colicchio: Andre, to what extent did excess capacity negatively impact margin this quarter?

Speaker #2: Yeah, in the 20 to 40 basis point range. And so, as we think about opportunities to improve profitability as we get into the second half of the year, we think that—and here, I'm just really talking about the physical capacity.

Andre Valentine: Yeah. You know, it's in the 20 to 40 basis points range. That as we think about opportunities to improve profitability as we get into the H2 of the year, we think that here I'm just really talking about the physical capacity mostly. As we grow into the physical capacity, we think we see a 20 to 40 basis points improvement H2.

Speaker #2: Mostly, as we grow into the physical capacity, we think we see a 20- to 40-basis-point improvement. Second half.

Speaker #4: Thanks, guys.

Speaker #2: Sure.

Vincent Colicchio: Thanks, guys.

Andre Valentine: Sure.

Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Q1 2026 Concentrix Corp Earnings Call

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