Q2 2026 Concentrix Corp Earnings Call

June 29, 2026

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to the Concentrix Q2 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, welcome to the Concentrix Q2 2026 Financial Results Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Elise Brassell, Corporate Communications and Investor Relations. Elise, please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Elise Prasell, Corporate Communications and Investor Relations.

Speaker #1: Elise, please go ahead.

Speaker #2: Thank you, operator, and welcome everyone to Concentrix's Q2 2026 earnings call. This call is the property of Concentrix and may not be recorded or rebroadcast without written permission from Concentrix.

Elise Brassell: Thank you, operator, welcome everyone to Concentrix's Q2 2026 earnings call. This call is the property of Concentrix and may not be recorded or rebroadcast without 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 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 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, Andre will cover our financial results and business outlook. We'll open the call for your questions. 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 on our Q2 2026 earnings call. Our Q2 marked an acceleration in many areas in the evolution of our business.

Chris Caldwell: Thank you, Elise. Hello, everyone, thank you for joining us on our Q2 2026 earnings call. Our Q2 marked an acceleration in many areas in the evolution of our business. A few key statistics we are very excited about. First, we saw a record level of contract signings for our iX suite of technology, up 400% year over year for the number of deals. We saw increases of 25% year on year in the number of deals where we sold technology with our services. We saw an increase of 80% year on year in the number of deals where we sold AI and technology with our services. We saw a record Q2 cash flow. We improved our efficiency by increasing our revenue per non-billable headcount by 14% year on year. We saw margin expansion sequentially of 10 basis points with a clear path to continued expansion.

Speaker #3: A few key statistics we are very excited about. First, we saw a record level of contract signings for our IX suite of technology, up 400% year over year for the number of deals.

Speaker #3: We saw increases of 25% year on year in the number of deals where we sold technology with our services. We saw an increase of 80% year on year in the number of deals where we sold AI and technology with our services.

Speaker #3: We saw record Q2 cash flow. We improved our efficiency by increasing our revenue per non-billable headcount by 14% year on year. We saw margin expansion sequentially of 10 basis points, with a clearer path to continued expansion.

Speaker #3: While it is still early days, the momentum we see in parts of the business we have been investing in is paying off, while we are being prudent about managing our cost structure to drive better returns.

Chris Caldwell: While early days, the momentum we see in the parts of the business we have been investing in are paying off while we are being prudent about managing our cost structure to drive better returns. Our key message today is we are continuing to effectively execute our strategy, we're making the right investments in the business for long-term shareholder value. Let's break down some of these areas further. First, on our iX suite of technology, we closed almost 100 deals in Q2 and are now focused on keeping up with demand for deployments. While we have improved our implementation speed by 12% through the quarter, we need to be faster to take advantage of the demand. We are on track to double our iX suite revenue by the end of this fiscal year, hoping to surpass $120 million in annual recurring revenue.

Speaker #3: Our key message today is that we are continuing to effectively execute our strategy, and we are making the right investments in the business for long-term shareholder value.

Speaker #3: Now, let's break down some of these areas further. First, on our IX suite of technology, we closed almost 100 deals in Q2 and are now focused on keeping up with demand for deployments.

Speaker #3: While we have improved our implementation speed by 12% through Q2, we need to be faster to take advantage of the demand. We are on track to double our IX suite revenue by the end of this fiscal year, hoping to surpass $120 million in annual recurring revenue.

Speaker #3: While growing, our IX suite is still a small percentage of our total revenue. What really excites us about this is that now we have clients using our solution for the year, and the economics are becoming clearer.

Chris Caldwell: While growing, our iX Suite is still a small percentage of our total revenue. What really excites us about this is now we have clients using our solution for the year, the economics are becoming clearer. We now have 11% of our revenues influenced by iX Suite deployments. While we can see some revenue decreases when we first deploy the platform from driving automation and productivity gains, these tend to be short-lived. We are seeing clients with iX Suite growing significantly faster than our consolidated average and delivering almost 350 basis points better margin, starting to buy additional licenses for clients' internal operations by the end of the first year of installation. Our subscription with clients already deployed grew 24% year on year for new licensed revenue. This is because our technology works in enterprise settings and drives real value.

Speaker #3: We now have 11% of our revenues influenced by IX suite deployments. While we can see some revenue decreases when we first deploy the platform, from driving automation and productivity gains, these tend to be short-lived.

Speaker #3: We are seeing clients with IX Suite growing significantly faster than our consolidated average, delivering almost 350 basis points better margin, and starting to buy additional licenses for clients' internal operations by the end of the first year of installation.

Speaker #3: Our subscription with clients already deployed grew 24% year on year for new license revenue. This is because our technology works in enterprise settings and drives real value.

Speaker #3: One other important point for investors to appreciate: of the top 75% of our clients, 97 have AI in production. 97% have AI in production.

Chris Caldwell: One other important point for investors to appreciate, of the top 75% of our clients, 97% have AI in production. The vast majority have multiple AI solutions deployed for multiple use cases for CX versus homogenous technology stack. The solutions we are putting in with our partners and our own technology are delivering real value because we have deep domain knowledge of the processes. The environments of clients are getting more complex with AI, not less, that provides additional opportunities for us to manage these environments and sell additional services. It also shows AI has not significantly cannibalized our revenue or opportunities when our client base has adopted it. Second, while Andre will talk through the strong cash flow results in more detail, it's important to appreciate that as we stated at the beginning of the year, we are focused on reducing our debt.

Speaker #3: The vast majority have multiple AI solutions deployed for multiple use cases for CX, versus a homogeneous technology stack. The solutions we are putting in with our partners and our own technology are delivering real value because we have deep domain knowledge of the processes.

Speaker #3: The environments of clients are getting more complex with AI, not less, and that provides additional opportunities for us to manage these environments and sell additional services.

Speaker #3: It also shows AI has not significantly cannibalized our revenue or opportunities when our client base has adopted it. Second, while Andre will talk through the strong cash flow results in more detail, it's important to appreciate that, as we stated at the beginning of the year, we are focused on reducing our debt.

Speaker #3: We believe it is the best way to deliver value to our shareholders, especially when the stock price is more volatile than we would all like.

Chris Caldwell: We believe it is the best way to deliver value to our shareholders when the stock price is more volatile than we would all like. Third, we saw a path this quarter to accelerate the use of AI internally within our own organization and align our cost structure to the profit potential of the various areas of our business. This drove a higher restructuring charge than we anticipated at the beginning of the quarter, on a cash basis, even after some reinvestment, we expect to cover the charge in 6 to 9 months. We are not completely done yet, expect that we will spend an additional $75 million in restructuring this year while still hitting our free cash flow guide, reducing our net leverage below 2.6 times and continuing to reduce our debt in 2027.

Speaker #3: Third, we saw a path this Q2 to accelerate the use of AI internally within our own organization and align our cost structure to the profit potential of the various areas of our business.

Speaker #3: This drove a higher restructuring charge than we anticipated at the beginning of Q2, but on a cash basis, even after some reinvestment, we expect to cover the charge in six to nine months.

Speaker #3: We are not completely done yet and expect that we will spend an additional $75 million in restructuring this year, while still hitting our free cash flow guide, reducing our net leverage below 2.6 times, and continuing to reduce our debt in 2027.

Speaker #3: Lastly, as we have called out, we have some very fast-moving parts of our business that are benefiting from the current environment of enterprises needing AI expertise that is practical, real, and well thought out.

Chris Caldwell: Lastly, as we have called out, we have some very fast-moving parts of our business that are benefiting from the current environment of enterprises needing AI expertise that are practical, real, and well thought out. We are focused on keeping up with the demand as quickly as possible by ensuring we continue to have the right resources available in the right markets with the right vertical expertise. We are doing this successfully by rebalancing our priorities of spend in real time. Now, turning to the marketplace. We are definitely seeing increased financial pressure on our clients as they try and cope with their own investment needs and their current operating environments. This has created demand for more of our automation solutions, also increased the urgency of moving work offshore and caused certain clients to prioritize spend across their client base, resulting in reduced spend overall.

Speaker #3: We are focused on keeping up with demand as quickly as possible by ensuring we continue to have the right resources available in the right markets with the right vertical expertise.

Speaker #3: We are doing this successfully by rebalancing our priorities of spend in real time. Now, turning to the marketplace, we are definitely seeing increased financial pressure on our clients as they try to cope with their own investment needs and their current operating environments.

Speaker #3: This has created demand for more of our automation solutions, but also increased the urgency of moving work offshore and caused certain clients to prioritize spend across their client base, resulting in reduced spend overall.

Speaker #3: Combined, this has resulted in approximately 2% additional headwinds going into our Q3 that we see for the rest of the year. While the market is competitive, we are being very prudent to ensure we have the right economic returns on our business.

Chris Caldwell: Combined, this has resulted in approximately 2% additional headwinds going into our Q3 that we see for the rest of the year. While the market is competitive, we are being very prudent to ensure we have the right economic returns on our business. We have a strong competitive offering to help clients reduce their total cost of delivery with right shoring and automation. This environment and the faster deployments of our technology do mute revenue, we see the path to a greater return as we demonstrated with higher margins this quarter and faster growth further out as more of our business mix changes. In fact, this is exactly where Concentrix excels. We're solving the AI ROI challenges with putting the right tools and services together for clients.

Speaker #3: We have a strong competitive offering to help clients reduce their total cost of delivery with right shoring and automation. This environment and the faster deployments of our technology do meet revenue, but we see the path to a greater return, as we demonstrated with higher margins this Q2 and faster growth further out as more of our business mix changes.

Speaker #3: In fact, this is exactly where Concentrix excels. We're solving the AI ROI challenges by putting the right tools and services together for clients. As AI gets more complex, clients increasingly are looking for partners who can deliver across the full ecosystem, which plays directly to our strengths.

Chris Caldwell: As AI gets more complex, clients increasingly are looking for partners who can deliver across the full ecosystem, which plays directly to our strengths. While others may excel in one or two areas, few can match our integrated model, it's helping us win more complex deals, it's demonstrating greater value to our clients. As an example, two of our largest cross-sell wins in the quarter added AI services for existing Fortune 500 clients. This dynamic is fundamental to our growth strategy and reinforces our confidence in the trajectory ahead. In the H2, we're staying focused on winning complex, high-value work with practical, technology-led solutions to solve real business problems and running more efficiently so we can invest in new areas of growth while improving our profit margins.

Speaker #3: While others may excel in one or two areas, few can match our integrated model, which is helping us win more complex deals and demonstrate greater value to our clients.

Speaker #3: As an example, two of our largest cross-sell wins in Q2 added AI services for existing Fortune 500 clients. This dynamic is fundamental to our growth strategy and reinforces our confidence in the trajectory ahead.

Speaker #3: In the back half of the year, we're staying focused on winning complex, high-value work with practical, technology-led solutions to solve real business problems and running more efficiently, so we can invest in new areas of growth while improving our profit margins.

Speaker #3: I would like to thank our game-changers for their passion this Q2, and our clients for their partnership. And with that, Andre, I'll turn it over to you.

Chris Caldwell: I would like to thank our Game-Changers for their passion this quarter and our clients for their partnership. With that, Andre, I'll turn it over to you.

Speaker #1: Well, thank you, Chris, and hello, everyone. We're very happy with how our investments are progressing. Our growth in Q2 came in slightly below our guidance at 0.6% in constant currency terms, and within our guidance at nearly 2% as reported.

Andre Valentine: Well, thank you, Chris, and hello, everyone. We are very happy with how our investments are progressing. Our growth in Q2 came in slightly below our guidance at 0.6% in constant currency terms and within our guidance at nearly 2% as reported. We believe this reflects an acceleration of offshoring and some clients' reallocation of spending away from certain customer segments, rather than anything that would mute our enthusiasm for the business areas that we have been investing in over the last 2 years that are helping to drive our business forward. We saw strong growth in areas that tend to be less impacted by shore movement, banking, financial services, and our AI solutions. While consumer electronics, media, and telecom saw the acceleration of offshoring have a more pronounced effect.

Speaker #1: We believe this reflects an acceleration of offshoring and some clients' reallocation of spending away from certain customer segments, rather than anything that would mute our enthusiasm for the business areas that we've been investing in over the last two years, which are helping to drive our business forward.

Speaker #1: We saw strong growth in areas that tend to be less impacted by shore movement—banking, financial services, and our AI solutions—while consumer electronics, media, and telecom saw the acceleration of offshoring have a more pronounced effect.

Speaker #1: As we mentioned in our last earnings call, the decrease in healthcare client revenue was driven by reduced participation in open enrollment at the start of the year.

Andre Valentine: As we mentioned on our last earnings call, the decrease in healthcare client revenue was driven by reduced participation in Open Enrollment at the start of the year. Turning to profitability, our non-GAAP operating income was $292 million, within the guidance range we provided on our last call. Our non-GAAP operating income margin was 11.9%. Adjusted EBITDA in the quarter is $347 million, a margin of 14.1%. Our non-GAAP operating income and adjusted EBITDA margins were up 10 basis points and 20 basis points, respectively, from Q1 of 2026. This improvement demonstrates our focus, discipline, and execution on aligning our business investments to areas in which we have identified growth and margin potential above the consolidated business while reducing costs in other areas.

Speaker #1: Turning to profitability, our non-GAAP operating income was $292 million, within the guidance range we provided on our last call. Our non-GAAP operating income margin was 11.9%.

Speaker #1: Adjusted EBITDA for Q2 is $347 million, with a margin of 14.1%. Our non-GAAP operating income and adjusted EBITDA margins were up 10 basis points and 20 basis points, respectively, from Q1 of 2026.

Speaker #1: This improvement demonstrates our focus, discipline, and execution in aligning our business investments to areas where we have identified growth and margin potential above the consolidated business, while reducing costs in other areas.

Speaker #1: Later, I will discuss our expectations for the second half of 2026, and you will see that we expect the improvement in margins to accelerate sequentially through the second half of the year.

Andre Valentine: Later, I will discuss our expectations for H2 of 2026, and you will see that we expect the improvement in margins to accelerate sequentially through H2 of the year. Non-GAAP diluted earnings per share was $2.63 in the quarter, in line with the guidance range we provided in March, and up $0.02 from Q1 of 2026. Our GAAP results for Q2 and our expectations for Q3 reflect restructuring charges related to accelerating movement of work offshore and aligning our cost structure for investment in higher growth and higher profit areas while accelerating the automation of other parts of our business. Complete reconciliations of non-GAAP measures to the comparable GAAP measures are provided in today's earnings release.

Speaker #1: Non-GAAP diluted earnings per share was $2.63 in Q1, in line with the guidance range we provided in March and up 2 cents from Q1 of 2026.

Speaker #1: Our GAAP results for Q2 and our expectations for Q3 reflect restructuring charges related to accelerating the movement of work offshore and aligning our cost structure for investment in higher-growth and higher-profit areas, while accelerating the automation of other parts of our business.

Speaker #1: Complete reconciliations of non-GAAP measures to the comparable GAAP measures are provided in today's earnings release. Adjusted free cash flow was $242 million in Q2, the highest level we've achieved in the second quarter of any year since our spin-off in 2020.

Andre Valentine: Adjusted free cash flow was $242 million in Q2, the highest level we have achieved in Q2 of any year since our spinoff in 2020. We returned approximately $23 million to shareholders in the quarter through our quarterly dividend. Consistent with our commitment to being below 2.6x net leverage at the end of the year, we did not repurchase any shares in the quarter. In the quarter, we reduced total net debt by $228 million to approximately $4.32 billion. At the end of Q2, cash and cash equivalents were $263 million, and total debt was approximately $4.585 billion. At the end of the quarter, our liquidity was nearly $1.5 billion, including our $1.1 billion undrawn revolving credit facility. Included in our outstanding debt at the end of the quarter was $200 million of senior unsecured notes due in August of 2026.

Speaker #1: We returned approximately $23 million to shareholders in Q1 through our Q1 dividend. Consistent with our commitment to being below 2.6 times net leverage at the end of the year, we did not repurchase any shares in Q1.

Speaker #1: In Q1, we reduced total net debt by $228 million to approximately $4.32 billion. At the end of Q2, cash and cash equivalents were $263 million, and total debt was approximately $4.585 billion.

Speaker #1: At the end of Q1, our liquidity was nearly $1.5 billion, including our $1.1 billion undrawn revolving credit facility. Included in our outstanding debt at the end of Q1 was $200 million of senior unsecured notes due in August of 2026.

Speaker #1: We intend to repay the notes using our Q3 free cash flow and existing sources of liquidity. Also included in our outstanding debt at the end of Q1 is $375 million in term loan borrowings that mature in December 2026.

Andre Valentine: We intend to repay the notes using our Q3 free cash flow and existing sources of liquidity. Also included in our outstanding debt at the end of the quarter is $375 million in term loan borrowings that mature in December 2026. We expect to repay these borrowings using free cash flow generated over the balance of the year and existing sources of liquidity. In total, we expect to repay over $550 million in debt this year and reduce net debt to approximately $3.8 billion by the end of the year. Now, I will turn to our outlook. For Q3, we expect the following: revenue of $2.465 to $2.490 billion. Based on current exchange rates, we expect an approximate -75 basis point impact of foreign exchange rates compared with the prior year period.

Speaker #1: We expect to repay these borrowings using free cash flow generated over the balance of the year and existing sources of liquidity. In total, we expect to repay over $550 million in debt this year and reduce net debt to approximately $3.8 billion by the end of the year.

Speaker #1: Now I will turn to our outlook. For Q3, we expect the following: revenue of $2.465 to $2.490 billion. Based on current exchange rates, we expect an approximate 75 basis point negative impact from foreign exchange rates compared with the prior year period.

Speaker #1: The guidance implies constant currency revenue growth for Q1, ranging from 0% to 1%. Q3 non-GAAP operating income is expected to be between $295 million and $305 million. This implies a non-GAAP operating income margin of 12.0% to 12.2%.

Andre Valentine: The guidance implies constant currency revenue growth for the quarter ranging from 0% to 1%. Q3 non-GAAP operating income of $295 to $305 million. This implies a non-GAAP operating income margin of 12.0% to 12.2%. Q3 non-GAAP EPS of $2.65 to $2.77 per share, assuming approximately $65 million in interest expense, 60.9 million diluted common shares outstanding at approximately 4.8% of net income attributable to participating securities. The non-GAAP effective tax rate is expected to be approximately 25% for Q3. For the full year 2026, we expect the following: revenue of $9.925 to $10.025 billion. Based on current exchange rates, we expect an approximate +75 basis point impact of foreign exchange rates compared with the prior year. The guidance implies constant currency revenue growth for the year ranging from 0.25% to 1.25%. This represents a decrease from our previous revenue growth expectation for the year.

Speaker #1: Q3 non-GAAP EPS of $2.65 to $2.77 per share, assuming approximately $65 million in interest expense, 60.9 million diluted common shares outstanding, and approximately 4.8% of net income attributable to participating securities.

Speaker #1: The non-GAAP effective tax rate is expected to be approximately 25% for Q3. For the full year 2026, we expect the following: revenue of $9.925 to $10.025 billion. Based on current exchange rates, we expect an approximate 75 basis point positive impact from foreign exchange rates compared with the prior year.

Speaker #1: The guidance implies constant currency revenue growth for the year ranging from 0.25% to 1.25%. This represents a decrease from our previous revenue growth expectation for the year.

Speaker #1: The primary driver of the reduction is the continued acceleration of mix shift to offshore locations, which now represents a nearly 300 basis point headwind. Our previous expectations for the year assumed a 200 basis point headwind from shore movement.

Andre Valentine: Primary driver of the reduction is the continued acceleration of mix shift to offshore locations, which now represents a nearly 300 basis point headwind. Our previous expectations for the year assumed a 200 basis point headwind from shore movement. We also see some clients' reallocation of spending away from certain customer segments as they manage their enterprise spend. Non-GAAP operating income of $1,200 to $1,230 million. This implies a non-GAAP operating margin of 12.1% to 12.3%. At the midpoint of our guidance for H2 2026, we expect our non-GAAP operating margin to be 12.5%, a slight increase over H2 fiscal 2025. This is consistent with our expectation that we expressed early in the year that margins in H2 fiscal 2026 would improve sequentially to the point where they were up year over year for H2 fiscal 2025.

Speaker #1: We also see some clients reallocating spending away from certain customer segments as they manage their enterprise spend. Non-GAAP operating income is projected to be between $1,200 and $1,230 million.

Speaker #1: This implies a non-GAAP operating margin of 12.1% to 12.3%. At the midpoint of our guidance for the second half of 2026, we expect our non-GAAP operating margin to be 12.5%, a slight increase over the second half of 2025.

Speaker #1: This is consistent with our expectation that we expressed earlier in the year—that margins in the second half of 2026 would improve sequentially to the point where they were up year over year for the second half of 2025.

Speaker #1: We expect non-GAAP earnings per share of $10.83 to $11.18 per share, assuming non-GAAP interest expense of approximately $265 million, 61.1 million diluted common shares outstanding, and approximately 4.8% of net income attributable to participating securities.

Andre Valentine: We expect non-GAAP earnings per share of $10.83

Andre Valentine: We expect non-GAAP earnings per share of $10.83 to $11.18 per share, assuming non-GAAP interest expense of approximately $265 million, 61.1 million diluted common shares outstanding, and approximately 4.8% of net income attributable to participating securities. The non-GAAP effective tax rate is expected to be approximately 24.5% for the full year. We continue to expect to generate between $630 and $650 million in adjusted free cash flow this year, with the Q4 being our highest cash flow quarter, as in previous years.

Andre Valentine: To $11.18 per share, assuming non-GAAP interest expense of approximately $265 million, 61.1 million diluted common shares outstanding, and approximately 4.8% of net income attributable to participating securities. The non-GAAP effective tax rate is expected to be approximately 24.5% for the full year. We continue to expect to generate between $630 and $650 million in adjusted free cash flow this year, with the Q4 being our highest cash flow quarter, as in previous years. With this cash generation, we expect to reduce our outstanding debt balance by over $550 million this year. We're committed to reducing our net leverage to below 2.6x adjusted EBITDA by the end of fiscal 2026. Looking at cash flow beyond 2026, with our continued evolution of our cost structure and growth in our AI-enabled businesses, we expect adjusted free cash flow in fiscal 2027 to exceed the amount we generate in 2026.

Speaker #1: The non-GAAP effective tax rate is expected to be approximately 24.5% for the full year. We continue to expect to generate between $630 million and $650 million in adjusted free cash flow this year, with Q4 being our highest cash flow quarter, as in previous years.

Speaker #1: With this cash generation, we expect to reduce our outstanding debt balance by over $550 million this year. We're committed to reducing our net leverage to below 2.6 times adjusted EBITDA by the end of 2026.

Andre Valentine: With this cash generation, we expect to reduce our outstanding debt balance by over $550 million this year. We're committed to reducing our net leverage to below 2.6x adjusted EBITDA by the end of fiscal 2026. Looking at cash flow beyond 2026, with our continued evolution of our cost structure and growth in our AI-enabled businesses, we expect adjusted free cash flow in fiscal 2027 to exceed the amount we generate in 2026.

Speaker #1: Looking at cash flow beyond 2026, with our continued evolution of our cost structure and growth in our AI-enabled businesses, we expect adjusted free cash flow in 2027 to exceed the amount we generate in 2026.

Speaker #1: This would allow us to reduce our outstanding debt by over $550 million once again in 2027, and bring our net debt to below $3.3 billion.

Chris Caldwell: This would allow us to reduce our outstanding debt by over $550 million once again in fiscal 2027, and bring our net debt to below $3.3 billion, roughly 2.2x adjusted EBITDA by the end of fiscal 2027. In summary, our demand environment is stable. We're confident in our ability to drive margin expansion in the H2 of 2026. We're confident in the continued strong free cash flow generation of the business and in our plan to repay debt and reduce leverage in 2026 and beyond. We're in a strong competitive position to drive long-term outperformance. Now, operator, please open the line for questions.

Andre Valentine: This would allow us to reduce our outstanding debt by over $550 million once again in fiscal 2027, and bring our net debt to below $3.3 billion, roughly 2.2x adjusted EBITDA by the end of fiscal 2027. In summary, our demand environment is stable. We're confident in our ability to drive margin expansion in the H2 of 2026. We're confident in the continued strong free cash flow generation of the business and in our plan to repay debt and reduce leverage in 2026 and beyond. We're in a strong competitive position to drive long-term outperformance. Now, operator, please open the line for questions.

Speaker #1: Roughly 2.2 times adjusted EBITDA by the end of 2027. In summary, our demand environment is stable. We're confident in our ability to drive margin expansion in the second half of 2026.

Speaker #1: We're confident in the continued strong free cash flow generation of the business and in our plan to repay debt and reduce leverage in 2026 and beyond.

Speaker #1: And we're in a strong competitive position to drive long-term outperformance. Now, operator, please open the line for questions.

Speaker #2: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. 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 Luke Morrison with Canaccord Genuity. Luke, your line is open. Please go ahead.

Speaker #2: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #2: 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 Luke Morrison with Canaccord Genuity.

Speaker #2: Luke, your line is open. Please go ahead.

Speaker #3: Hey, guys. Thanks for taking the question here. So the 2% headwinds for the year you framed as a mix of accelerated offshoring and client reallocation or reduced spend. Maybe just to start, can you help us split those?

Luke Morrison: Hey, guys. Thanks for taking the question here. The 2% headwind for the year, you framed as a mix of accelerated offshoring and client reallocation or reduced spend. Maybe just to start, can you help us split those? How much is offshoring? When we think about that offshoring shift, do you still characterize that as largely gross profit neutral over the medium term? How much is just genuine reduction in client volumes and budgets there?

Luke Morison: Hey, guys. Thanks for taking the question here. The 2% headwind for the year, you framed as a mix of accelerated offshoring and client reallocation or reduced spend. Maybe just to start, can you help us split those? How much is offshoring? When we think about that offshoring shift, do you still characterize that as largely gross profit neutral over the medium term? How much is just genuine reduction in client volumes and budgets there?

Speaker #3: How much is offshoring when we think about that offshoring shift? Do you still characterize that as largely gross profit neutral over the medium term?

Speaker #3: And then, how much is just genuine reduction in client volumes and budgets here?

Speaker #4: Hey, Luke, it's Chris. Thanks for the question. So, to answer the first part, we originally planned for about 2% headwind offshoring at the beginning of the year.

Chris Caldwell: Hey, Luke. It's Chris. Thanks for the question. To answer the first part, we originally planned for about 2% headwind offshoring at the beginning of the year. We are now seeing that closer to 3% going into Q3. That tick-up started happening mid Q2, frankly, where we had some clients who were needing to move faster to see some cost savings. We expected that there was work to eventually head offshore, but normally we were expecting that probably in the early part of the new year. Just with the pressures, they are pushing faster, which we are accommodating. On our clients who are thinking about reprioritizing their spend and have started to reprioritize their spend, that is about 1%.

Speaker #4: We're now seeing that closer to 3% going into the third quarter. And that pickup started happening sort of mid-Q2, frankly, where we had some clients who were needing to move faster to see some cost savings.

Speaker #4: We expected that there was work to eventually head offshore, but normally we were expecting that probably in the early part of the new year.

Speaker #4: But just with the pressures there, pushing faster, which we are accommodating. On the clients who are thinking about reprioritizing their spend and have started to reprioritize their spend, that is about 1%.

Speaker #4: And what we're seeing is that clients are looking at high-cost markets and certain segments of customer bases, and deciding that they're no longer going to support these customer bases at all.

Chris Caldwell: What we are seeing is where clients are looking at high-cost markets and certain segmentation of customer bases and deciding that they are no longer going to support these customer bases at all. It is not that the volume is being automated, it is not going away, they are simply just not going to support. That is about a 1% headwind. Again, those decisions were made within Q2 when we are working with clients as they look to rationalize and figure out their spend over the next little while. In terms of the offshoring comment in regards to profit and revenue, it does help profit once we get past the duplicate costs. That normally takes about 2 quarters or so to 3 quarters. Revenue, depending on which country it ends up in, does decline. From a profit percentage perspective, it is more helpful to us.

Speaker #4: It's not that the volume is being automated; it's not going away. They're simply just not going to support it, and that is about a 1% headwind.

Speaker #4: And again, those decisions were made within the second quarter, when we're working with clients as they look to kind of rationalize and figure out their spend over the next little while.

Speaker #4: In terms of the offshoring comment in regards to profit and revenue, it does help profit once we get past the duplicate costs. That normally takes about two to three quarters.

Speaker #4: And revenue, depending on which country it ends up in, does decline. But from a profit percentage perspective, it is more helpful to us.

Speaker #3: Got it, that's helpful. And maybe just real quick on that— as we look out into next year and think about those two different vectors of drag, how should we be thinking about that playing out?

Luke Morrison: Got it. That is helpful. Maybe just real quick on that, as we look out into next year and think about those two different vectors of drag, how should we be thinking about that playing out? Do you see this being a durable headwind, or is this more near-term, and maybe we will see that. We were originally guiding to an inflection later in the year this year. Is that just getting pushed out, or how should we think about that playing out next year?

Luke Morison: Got it. That is helpful. Maybe just real quick on that, as we look out into next year and think about those two different vectors of drag, how should we be thinking about that playing out? Do you see this being a durable headwind, or is this more near-term, and maybe we will see that. We were originally guiding to an inflection later in the year this year. Is that just getting pushed out, or how should we think about that playing out next year?

Speaker #3: Do you see this being a durable headwind, or is this more near-term and maybe we'll see that? We were originally guiding to an inflection later in the year, this year.

Speaker #3: Is that just getting pushed out, or how should we think about that playing out next year?

Speaker #4: Yeah, Luke, the way we look at it this way, over the past probably 20 years, when clients have looked at unsupporting segments of customers, they think this is a great idea from a cost savings perspective, until they start to see our profile or they start to see client churn increase, and then they start to come back and figure out how do they need to invest to kind of continue to support those customers and grow the revenue.

Chris Caldwell: Yeah, Luke, the way we look at it this way, over the past probably 20 years, when clients have looked at unsupporting segments of customers, they think this is a great idea from a cost savings perspective until they start to see ARPU fall, or they start to see client churn increase, and then they start to come back and figure out how do they need to invest to continue to support those customers and grow the revenue. I do not want to say it is temporary as in a quarter or 2. These are big changes they are making their strategy, but I do not think that is a de facto way they are going to operate their business. We have already seen clients start to wonder if that was the best thing to do, even in these early days.

Speaker #4: So I don't want to say it's temporary as in a quarter or two. I mean, these are big changes that are impacting their strategy.

Speaker #4: But I don't think that is, de facto, the way they're going to operate their business. We've already seen clients kind of start to wonder if that was the best thing to do, even in these early days.

Speaker #4: In terms of the offshoring mix, look, we had expected—and we've talked about this before—that at the beginning of the year, we would have about 15% of our business that we believe can go offshore.

Chris Caldwell: In terms of the offshoring mix, look, we had expected, and we've talked about this before, We, at the beginning of the year, have about 15% of our business that we believe can go offshore. We expected it to go down to around 13%, give or take, with all the pluses and minuses by the end of the year. We now expect it to be probably around 11%-ish, when we exit the year. That is a finite amount of funnel, and we don't even think all of that will go. It's just that is what is possible to go based on what we're seeing in the business right now. Our expectations is that this acceleration is primarily driven by budgets and will probably be more moderate in 2027.

Speaker #4: We expected it to go down to around 13%, give or take, with all the pluses and minuses by the end of the year. We now expect it to be probably around 11% or so.

Speaker #4: When we exit the year, that is a finite amount of funnel, and we don't even think all of that will go. It's just, that is what is possible to go based on what we're seeing in the business right now.

Speaker #4: And so, our expectation is that this acceleration is primarily driven by budgets, and will probably be more moderate in 2027. But for what we're seeing right now, and what we know is moving, we see it accelerating by that 1%.

Chris Caldwell: From what we're seeing right now and what we know is moving, we see it accelerating by that 1%.

Speaker #3: Understood. Very helpful. Thank you.

Luke Morrison: Understood. Very helpful. Thank you.

Luke Morison: Understood. Very helpful. Thank you.

Speaker #4: Thank you.

Chris Caldwell: Thank you.

Speaker #2: Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Speaker #5: Hi, thanks for taking my questions. My first question is on margins. So, Andre, the full-year guide at the midpoint implies about a 12.2% operating margin, whereas the prior guide was about 12.5%.

Ruplu Bhattacharya: Hi, thanks for taking my questions. My first question is on margins. Andre, the full-year guide at the midpoint implies about 12.2% operating margin, versus the prior guide was about 12.5%. That 30 basis points of reduction, can you help us quantify where that is, what is impacting that? You're still expecting in the H2 for margins to be up year-on-year. What is giving confidence in that? I will follow up.

Speaker #5: So that 30 bips of reduction, can you help us quantify where that is what is impacting that? And then you're still expecting in the second half for margins to be up year on year.

Speaker #5: What is giving confidence in that? And then I will follow up.

Speaker #3: Sure. I had to do it. And thank you, Ruplu, for your question. Yes. So, the driver of the reduction in the margin guide is driven largely by the pull-down in the revenue.

Andre Valentine: Sure. Happy to do it, and thank you, Ruplu, for your question. Yes. The driver of the reduction in the margin guide is driven largely by the pull down in the revenue. Some of the duplicate costs that come with some of the movement offshore. Our confidence in driving the improvement in margin into Q3, where the midpoint of our guide is 12.1% and implied margin close to 13% in the Q4, all comes from the restructuring actions that we're taking, as well as through some of the duplicate costs related to the shore movement, getting some of the revenue to the higher margin offshore delivery.

Speaker #3: And some of the duplicate costs that come with some of the movement offshore. Our confidence in driving the improvement in margin into Q3, where the midpoint of our guide is 12.1% and the implied margin is close to 13% in the fourth quarter, all comes from the restructuring actions that we're taking.

Speaker #3: As well as getting through some of the duplicate costs related to the shore movement, and getting some of the revenue to the higher-margin offshore delivery.

Speaker #3: And again, then also some of our technology solutions, getting to more scale and working through the deployment on the IX Suite solutions that we sold in Q2, getting to those where they're generating revenue in Q3 and even more so in Q4.

Andre Valentine: Also some of our technology solutions getting to more scale, working through the deployment on the iX suite solutions that we sold in Q2, getting those to where they're generating revenue in Q3 and even more so in Q4.

Speaker #5: Okay, thanks for that. Let me ask a question on revenues. How much is revenue over billable headcount versus non-billable headcount? I think you said that revenue per non-billable headcount grew 14%.

Ruplu Bhattacharya: Okay. Thanks for that. Let me ask a question on revenues. How much is revenue over billable headcount versus non-billable headcount? I think you said that revenue per non-billable headcount grew 14%. Can you help us quantify that a little bit better, Chris?

Speaker #5: Can you help us quantify that a little bit better, Chris?

Speaker #4: Yeah, for sure, Ruplu. So, what we have been doing is driving more automation and using AI internally. In Q2, we were able to deploy some of our own AI tools internally.

Chris Caldwell: Yeah, for sure, Ruplu. What we have been doing is driving more automation and using AI internally. In Q2, we were able to deploy some of our own AI tools internally. That allowed us to reduce our non-billable headcount, even with net new adds in some of the technology areas that our revenue per non-billable headcount grew 14%. Clearly, our headcount, with billable people tends to be more linear, just because of what we're doing and how we're driving it. That clearly will start to differentiate more as we put more fully autonomous solutions into, and more tech solutions into our client base. That's grown a little bit, but just because of our footprint of where people are and what the bill rates are, as labor rates, probably not as applicable as our own internal efficiencies on the non-billable headcount.

Speaker #4: That allowed us to reduce our non-billable headcount, even with net new adds in some of the technology areas. Our revenue per non-billable headcount grew 14%.

Speaker #4: Clearly, our headcount with billable people tends to be more linear just because of what we're doing and how we're driving it. That clearly will start to differentiate more as we put more fully autonomous solutions and more tech solutions into our client base.

Speaker #4: That's grown a little bit. But just because of our footprint—where people are and what the bill rates are, as labor rates—it's probably not as applicable as our own internal efficiencies on the non-billable headcount.

Speaker #5: Got it. Let me sneak in one more question, if I can. In terms of your full-year guide, I think you said that there could be another 11% of the business that may want to move offshore.

Ruplu Bhattacharya: Got it. Let me sneak in one more question if I can. In terms of your full year guide, I think you said that there could be another 11% of the business that could want to move offshore. What have you factored in in terms of conservatism into the guidance? Do you think some of that can accelerate and, again, move into this year, in terms of trying to move offshore? In terms of being conservative when it comes to lower volumes, which end markets have you been more conservative in factoring into the guide? Has this impacted your decision to spend on AI-related tools, and how should we think about that spend going forward? Thanks for taking my questions.

Speaker #5: What have you factored in, in terms of conservatism, into the guidance? I mean, do you think some of that can accelerate—and, again, move into this year, too—in terms of trying to move offshore?

Speaker #5: And in terms of being conservative when it comes to lower volumes, which end markets have you been more conservative in factoring into the guide?

Speaker #5: And has this impacted your decision to spend on AI-related tools? And how should we think about that spend going forward? Thanks for taking my questions.

Speaker #3: Hey, Ruplu.

Chris Caldwell: Hey, Ruplu. That was a longer question for a sneak in, but we'll try and get it through it all. First, a couple things. When we look at our guide and our conservatism, we have been believing that offshoring will accelerate a tiny bit more than what the 3% is, but we've kind of factored that in. We don't expect there to be other clients who sort of look at moving away from supporting customer bases. These are clients who are kind of very specific to certain markets that we saw them take action. We have no other clients who are indicating that. We're being as conservative as we believe. In terms of the other revenue that could be outsourced, sorry, offshored, at the next level, our expectation is that will continue to go down by 1.5% to 2.5%, probably the next year or so.

Speaker #4: That was a longer question to sneak in, but we'll try and get through it all. First, a couple of things. When we look at our guide and our conservatism, we have been believing that the offshoring will accelerate a tiny bit more than what the 3% is.

Speaker #4: But we've kind of factored that in. We don't expect there to be other clients who would look at moving away from supporting customer bases.

Speaker #4: These are clients who are kind of very specific to certain markets. We saw them take action. We have no other clients who are indicating that.

Speaker #4: So, we're being as conservative as we believe. In terms of the other revenue that could be outsourced—sorry, offshored—at the next level, our expectation is that will continue to go down by 1.5% to 2.5% probably over the next year or so.

Speaker #4: I don't want to guide past that. But really, we're getting to lower and lower places where clients have either made a public pledge that work will be done in-market, and/or it is work that is regulated to be done in-market that can't move unless there's some legal change that needs to go along with that.

Chris Caldwell: I don't want to guide past that. Really, we're getting to lower and lower places that clients have either made a public pledge that work will be done in market and/or it is work that is regulated to be done in market that can't move, unless there's some legal change that needs to go along with that. As frustrating as it is that has seen that speed up, ultimately, it was going to happen over probably a longer period of time. In terms of investing in AI tools, look, we are starting to see some really strong headway with our iX suite that is offsetting some of the headwinds of just sort of the general marketplace. We are investing in four deployed engineers. We're investing in subject matter expertise.

Speaker #4: And so as frustrating as this has seemed, that speed up ultimately was going to happen over probably a longer period of time. In terms of investing in AI tools, look, we are starting to see some really strong headway—sorry, headways—with our IX suite.

Speaker #4: That is offsetting some of the headwinds of just sort of the general marketplace. And so, we are investing in forward-deployed engineers. We're investing in subject matter expertise.

Speaker #4: We're investing in expertise around some of our partner technology as well, to make sure that we can keep up with that demand. And we see those as being the right investments.

Chris Caldwell: We're investing in expertise around some of our partner technology as well to make sure that we can keep up with that demand. We see those as being the right investments. As we called out in the prepared remarks, now that we've had our own proprietary tech out there for a year, we see what's happened. We see that, yes, some revenue decreases to begin with, but at the end of the year, it's growing significantly faster than without the technology. We're seeing almost 350 basis points of margin improvement on those clients, and we're seeing them buy the technology for their internal deployments as well. All of that absolutely encourages us to make sure that we're investing.

Speaker #4: As we called out in the prepared remarks, now that we've had our own proprietary tech out there for a year, we see what's happened.

Speaker #4: We see that, yes, some revenue decreases to begin with, but at the end of the year, it's growing significantly faster than with the technology.

Speaker #4: We're seeing almost 350 basis points of margin improvement on those clients, and we're seeing them buy the technology for their internal deployments as well.

Speaker #4: And so all of that absolutely encourages us to make sure that we're investing. Just to be very clear, though, what we said last year was that we will be profitable by the end of 2025 on our AI investments.

Chris Caldwell: Just to be very clear, though, what we said last year was that we will be profitable by the end of 2025 on our AI investments, and that is the case. Now, as we get more leverage on those investments, we continue to drive them to be more accretive to our overall business.

Speaker #4: And that is the case. Now, as we get more leverage on those investments, we continue to drive them to be more accretive to our overall business.

Speaker #5: Thanks for all the details. I appreciate it.

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

Speaker #1: Your next question comes from the line of Dave Koenig with Baird. Dave.

Operator: Your next question comes from the line of David Koning with Baird. Dave-

Speaker #6: Hey, guys. Thank you.

David Koning: Hey, guys. Thank you.

Speaker #1: Your line is open. Please go ahead.

Operator: Your line is open. Please go ahead.

Speaker #6: Okay, great. Thank you. First of all, when we look at margins in the back half, I know they're up slightly, but that's off a pretty easy comp with all the tariffs in the second half—the tariff impacts in the back half of last year.

David Koning: Oh, great. Thank you. I guess, first of all, when we look at margins in H2, I know they're up slightly, but that's off a pretty easy comp with all the tariffs in H2, the tariff impacts in H2 of last year. Yeah, clearly there's some headwinds still in some of the investment you're making. Does this now leave a really easy comp for next year? If you're selling more iX, the offshore shift hurts these next couple quarters, but helps next year. Is this going to be a big outsized margin impact into next year?

Speaker #6: So yeah, clearly there are still some headwinds in some of the investments you're making. But does this now leave a really easy comp for next year?

Speaker #6: Like, if you're selling more IX, the offshore shift hurts this these next couple of quarters, but helps next year. Is this going to be a big, outsized margin impact into next year?

Chris Caldwell: Dave, I don't want to guide to next year. What I will tell you is that what we're going through, we're seeing really strong momentum, not only in our partner technology, but our own technology. We're seeing that drive a higher margin profile business. Also, as we get through our duplicate costs of moving stuff onshore to offshore, there's margin appreciation there. We do believe that we start to get more operational leverage as we build up all sorts of this tech installation and deployment talent. We do think we get more and more leverage of that as we put on more revenue to that area. All of that would lead to believe that there's still margin expansion capabilities. The magnitude of that, I think we'll talk about at the end of this fiscal year.

Speaker #4: Yeah, Dave, I don't want to guide to next year. What I will tell you is that what we're going through, we're seeing really strong momentum not only in our partner technology, but our own technology.

Speaker #4: We're seeing that drive a higher margin profile business. Also, as we get through our duplicate costs of moving stuff onshore to offshore, there's margin appreciation there.

Speaker #4: And we do believe that we start to get more operational leverage as we build up all sorts of this tech installation and deployment talent. We do think we get more and more leverage from that as we put more revenue into that area.

Speaker #4: So all of that would lead us to believe that there's still margin expansion capabilities. The magnitude of that, I think we'll talk about at the end of this fiscal year.

Speaker #3: Yeah, probably, Dave, the thing we're most confident in is our ability to increase our free cash flow again next year. That's why you heard me be specific in my commentary about that.

Andre Valentine: Probably, Dave, the thing we're probably the most confident in is our ability to increase our free cash flow again next year. That's why you heard me be specific in my commentary about that and in our plans to use that to continue to pay down debt.

Speaker #3: And in our plans to use that to continue to pay down debt.

Speaker #6: Yeah, I gotcha. And then, just as a follow-up, I mean, it sounds like a little over a 1% revenue headwind—or, I guess, a 1% impact relative to the old guidance—and about a 1% impact from more offshore shift, give or take.

David Koning: Yeah, gotcha. Just as a follow-up, it sounds like a little over 1% revenue headwind, or I guess 1% impact relative to the old guidance, and about 1% impact for more offshore shift, give or take. Does that imply that volumes actually are unchanged from what you were expecting before?

Speaker #6: I mean, does that imply that volumes are actually unchanged from what you were expecting before?

Speaker #4: Yeah. The volumes have been pretty consistent. I mean, what we plan to automate is being automated at sort of the levels that we expect to be automated. Clients' automations are kind of going the way they expected.

Chris Caldwell: Yeah, Dave, the volumes have been pretty consistent. What we plan to automate is being automated at the levels that we expect to be automated. Clients' automations are kind of going the way they expected. Some not as successfully as they are hoping for and providing more opportunities for services for us in getting that working. That's pretty much on plan. It's very clean when we look at the movement of work about what's going offshore, and it's also very clean when we see clients saying, Look, we're not going to support this set of customers in this market anymore because our costs are too much for our revenue model in that market. That is just very clean and discreet.

Speaker #4: Some, not as successfully as they are hoping for. And providing more opportunities for services for us and getting that working. But that's pretty much on plan.

Speaker #4: It's very clear when we look at the movement of work about what's going offshore. And it's also very clear when we see clients saying, "Look, we're not going to support this set of customers in this market anymore because our costs are too much for our revenue model in that market." That is just very, very clear and discrete.

Speaker #6: Gotcha. Thank you.

David Koning: Gotcha. Thank you.

Speaker #1: Your next question comes from the line of Vincent Colicchio with Barrington Research. Vincent, your line is open. Please go ahead.

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

Speaker #7: Yeah, Chris—yeah, Chris, congrats on the strong traction in the IX suite. I'm curious: what percentage of the IX suite bookings are replacing legacy revenue versus generating incremental spend?

Vincent Colicchio: Yeah, Chris. Congrats on the strong traction in the iX suite. I'm curious, what percentage of the iX suite bookings are replacing with legacy revenue versus generating incremental spend?

Speaker #4: That's interesting. So Vince, the way I would look at it is, if you think of the IX suite revenue, this is all incremental revenue to us because we've never had a product like this or a technology product like this.

Chris Caldwell: That's interesting. Vince, the way I would look at it is if you think of the iX suite revenue, this is all incremental revenue to us because we've never had a product like this or technology product like this. The size of it, at the end of this fiscal, we were just talking about it passing $120 million of annual recurring revenue. The reality is that what we're seeing is the influence from the rest of the businesses is more interesting to us because it's driving higher growth across that set of customers. 11% of our revenue now is influenced by iX suite. Consider that growing much faster than the rest of the revenue that we have. As we deploy every new deal, we expect to see that increase over 6, 8, 9 months as we get to full-year maturity.

Speaker #4: And the size of it, at the end of this fiscal, we just talked about it kind of passing $120 million of annualized recurring revenue.

Speaker #4: The reality is that what we're seeing is the influence in the rest of the business is more interesting to us because it's driving higher growth across that set of customers.

Speaker #4: And so, 11% of our revenue now is influenced by IX suite. Consider that growing much faster than the rest of the revenue that we have as we deploy every new deal.

Speaker #4: We expect to see that kind of increase over six, eight, nine months as we get to full-year maturity. And I think it will influence more and more.

Chris Caldwell: I think it'll influence more and more. Where that is winning us new revenue is, one, driving more consolidation from other competitors. We're also seeing where clients are giving us more work to do from their own captives or from their own facilities as well because we've got the technology. All of that kind of encourages us that as we sell more, we'll see more of the benefits come through faster.

Speaker #4: Where that is winning us new revenue is, one, driving more consolidation from other competitors. We're also seeing cases where clients are giving us more work to do from their own captives or from their own facilities as well, because we've got the technology.

Speaker #4: So all of that kind of encourages us that as we sell more, we'll see more of the benefits come through faster.

Speaker #7: Thanks for that color. As a follow-up, are you seeing a slowing in consolidation, which has been a benefit in recent quarters?

Vincent Colicchio: Thanks for that color. As a follow-up, are you seeing a slowing in consolidation which has been a benefit in recent quarters?

Chris Caldwell: We didn't see much consolidation in Q2, or frankly, we don't expect to see much consolidation in Q3. We expect to see more near the end of the year. Primarily in some consumer electronics, we expect to see some. We expect to see some in probably social media and telecom, which are traditional markets that tend to consolidate near the end of the year after they get through some of the holiday seasons. That's where we expect to pick up some additional share.

Speaker #4: We didn't see much consolidation in Q2, or frankly, we don't expect to see much consolidation in Q3. We expect to see more near the end of the year.

Speaker #4: And primarily in some consumer electronics, we expect to see some. We expect to see some in probably social media and telecom, which are traditional markets that tend to consolidate near the end of the year.

Speaker #4: After they get through some of the holiday season, and so that's where we expect to pick up some additional share.

Speaker #7: And then, just a small clarification for Andre. What's the size of the total restructuring program now, and over what time does it play out, Andre?

Vincent Colicchio: Just a small clarification for Andre. What's the size of the total restructuring program now, and over what time does it play out, Andre?

Speaker #3: Yeah. The total spend this year, as shown in the tables, will be a total of $175 million. So, we expect $45 million in spending in Q3.

Andre Valentine: Yeah. The total spend this year, this is in the tables, will be a total of $175 million. We expect $45 million in spending in Q3, and then an additional $30 million in Q4. We should be done all up and all in. Again, when we talk about the $630 to $650 million of free cash flow, I just want to reiterate, that is after those restructuring expenses. That's an all-up, all-in number. That is really as we expect those expenses to come down significantly next year, that is one of the reasons why we expect to see our free cash flow go up as we look out to fiscal year 2027, to the point where we were confident enough about it to bring it up on this call.

Speaker #3: And then an additional 30 in Q4. And then we should be done—all up and all in. And again, when we talk about the $630 to $650 million in free cash flow, I just want to reiterate that is after those restructuring expenses.

Speaker #3: So it's an all that's an all up, all in number. And that is really as we expect those expenses to come down significantly next year, that is one of the reasons.

Speaker #3: Why do we expect to see free cash flow go up as we look out to fiscal year 2027, to the point where we were confident enough about it to bring it up on this call?

Speaker #7: All right. Thanks, guys.

Vincent Colicchio: All right. Thanks, guys.

Operator: We have now reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Q2 2026 Concentrix Corp Earnings Call

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