Q3 2026 Concentrix Corp Earnings Call

September 29, 2026

Speaker #1: Hello everyone, thank you for joining us, and welcome to the Concentrix Q3 2026 financial results conference call. After today's prepared remarks, we will host a Q&A session.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Concentrix Third Quarter 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.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Concentrix Q3 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 Brassel, Corporate Communications and Investor Relations. Elise, please go ahead.

Speaker #2: Thank you, operator, and welcome, everyone, to Concentrix’s Q3 2026 earnings call. This call is the property of Concentrix and may not be recorded or rebroadcast without the written permission of Concentrix.

Elise Brassell: Thank you, operator, and welcome everyone to Concentrix's Q3 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 our 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.

Elise Brassell: 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 our 10-K and in our other public filings with the SEC.

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 our 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 margins, 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 Financial. 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.

Elise Brassell: A reconciliation of these non-GAAP measures is available in the news release and on the company investor relations website under Financial. 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: 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 Q3 2026 earnings call. I'm proud to start this call by recognizing a milestone that speaks to how far Concentrix has come since it was released and concerns for the viability of the services industry started.

Chris Caldwell: Thank you, Elise. Hello, everyone, and thank you for joining us for our Q3 2026 earnings call. I'm proud to start this call by recognizing a milestone that speaks to how far Concentrix has come over the last few years since generative AI was released and concerns for the viability of the services industry started. Over the last three years, we've steadily expanded the services we offer and invested in deployments of AI technology to evolve our business. This quarter, we crossed the mark that 50% of our revenue now comes from businesses that we generated in the last three years. That is very different than our traditional business.

Speaker #3: Over the last three years, we've steadily expanded the services we offer and invested in deployments of AI technology to evolve our business. This quarter, we crossed the mark where 50% of our revenue now comes from businesses that we generated in the last three years.

Speaker #3: That is very different from our traditional business. These new revenue sources are comprised of $3 billion of revenue, which is coming from new and existing clients that have either gone through significant transformation or have AI influencing the revenue.

Chris Caldwell: These new revenue sources are comprised of USD 3 billion of revenue that is coming from new and existing clients that has either gone through heavy transformation or has AI influencing the revenue, USD 1.3 billion of net revenue resulting from the compression of our traditional services using our iX Suite AI platform, and finally, USD 700 million of revenue from new high-value services we brought to the market across growing segments like risk and compliance. Compared to our traditional business, this revenue is growing faster at an expected 30% year-over-year growth rate in fiscal 2026, is more profitable, and is stickier with a revenue retention rate four times higher. We laid this out in more detail in the Q3 investor summary presentation you can find on our website under investor relation events and presentations.

Speaker #3: $1.3 billion of net revenue resulting from the compression of our traditional services using our iX Suite AI platform, and finally $700 million of revenue from new high-value services we brought to the market across growing segments like risk and compliance.

Speaker #3: Compared to our traditional business, this revenue is growing faster at an expected 30% year-over-year growth rate in fiscal 2026, is more profitable, and is stickier, with a revenue retention rate four times higher.

Chris Caldwell: Compared to our traditional business, this revenue is growing faster at an expected 30% year-over-year growth rate in fiscal 2026, is more profitable, and is stickier with a revenue retention rate four times higher. We laid this out in more detail in the Q3 investor summary presentation you can find on our website under investor relation events and presentations.

Speaker #3: We've laid this out in more detail in the Q3 investor summary presentation, which you can find on our website under Investor Relations, Events and Presentations.

Speaker #3: We're planning more investor outreach in early 2027 to break down how we are looking at our business in more detail. But as an introduction, let me share a few other stats that make me confident and excited about the future.

Chris Caldwell: We're planning more investor outreach in the early part of 2027 to break down how we are looking at our business in more detail, but as an introduction, let me share a few other stats that make me confident and excited about the future. We expect our new business revenues to exceed USD 6 billion in 2027. As we have talked about, we are seeing the margin progression we've expected in our overall business with a 30 basis point improvement year on year in Q3. We are winning new clients and also evolving our existing clients to new services. As an example, all of our top five clients and more than 90% of our top 100 clients have expanded into new services and offerings with us since the start of fiscal 2023.

Speaker #3: We expect our new business revenues to exceed $6 billion in 2027. As we have discussed, we are seeing the margin progression we expected in our overall business, with a 30 basis point improvement year on year in Q3.

Chris Caldwell: We expect our new business revenues to exceed USD 6 billion in 2027. As we have talked about, we are seeing the margin progression we've expected in our overall business with a 30 basis point improvement year on year in Q3. We are winning new clients and also evolving our existing clients to new services. As an example, all of our top five clients and more than 90% of our top 100 clients have expanded into new services and offerings with us since the start of fiscal 2023.

Speaker #3: We are winning new clients and also evolving our existing clients to new services. As an example, all of our top five clients, and more than 90% of our top 100 clients, have expanded into new services and offerings with us since the start of fiscal 2023.

Speaker #3: Our average tenure with our clients remains strong, at more than 16 years with our top 25 clients, and 15 years for our top 50 clients, with a 98% retention rate across our entire client base.

Chris Caldwell: Our average tenure with our clients remains strong at more than 16 years with our top 25 clients and 15 years for our top 50 clients, with a 98% retention rate across our entire client base. Together, these stats show we are building on a solid foundation, and we are pushing the evolution of our business as quickly as possible. Turning to our third quarter, we can see these same themes reflected. We're continuing to prove that as clients scale AI, we create more opportunities to grow our business, expand profitably, and deepen client relationships. We are actively focused on disrupting our own traditional business to take advantage of our momentum. Our sales pipeline continues to be stable with net new logo sales involving AI growing 63% quarter over quarter.

Speaker #3: Together, these stats show we are building on a solid foundation, and we are pushing the evolution of our business as quickly as possible. Turning to our Q3, we can see these same themes reflected.

Chris Caldwell: Turning to our Q3, we can see these same themes reflected. We're continuing to prove that as clients scale AI, we create more opportunities to grow our business, expand profitably, and deepen client relationships. We are actively focused on disrupting our own traditional business to take advantage of our momentum. Our sales pipeline continues to be stable with net new logo sales involving AI growing 63% quarter over quarter.

Speaker #3: We're continuing to prove that as clients scale AI, we create more opportunities to grow our business, expand profitably, and deepen client relationships. We are actively focused on disrupting our own traditional business to take advantage of our momentum.

Speaker #3: Our sales pipeline continues to be stable, with net new logo sales involving AI growing 63% quarter over quarter. Three of our four largest iX Suite wins this quarter came from clients who are already using the product and are now expanding their use cases because of the results we've helped them achieve.

Chris Caldwell: Three of our four largest iX Suite wins this quarter came from clients who are already using the product and are now expanding their use cases because of the results we've helped them achieve. We also brought 61 opportunities, including more than 30,000 advisors live on our iX Suite this quarter, contributing to our margin expansion we delivered in Q3 and the impact to our revenue growth in our traditional business. Our strategy, vision, and execution is getting recognized by the market. We're building an identity for Concentrix as a partner that bridges the gap between AI ambition and operational reality through our New Realities marketing campaign, and it's resonating with clients, partners, and the industry. We were recognized by research firms as a leading partner with multi-disciplines and in strategy and vision.

Speaker #3: We also brought 61 opportunities, including more than 30,000 advisors, live on our iX Suite this quarter. Contributing to our margin expansion, we delivered in Q3, and the impact to our revenue growth in our traditional business.

Speaker #3: Our strategy, vision, and execution are getting recognized by the market. We're building an identity for Concentrix as a partner that bridges the gap between AI ambition and operational reality through our New Realities marketing campaign, and it's resonating with clients, partners, and the industry.

Chris Caldwell: Our strategy, vision, and execution is getting recognized by the market. We're building an identity for Concentrix as a partner that bridges the gap between AI ambition and operational reality through our New Realities marketing campaign, and it's resonating with clients, partners, and the industry. We were recognized by research firms as a leading partner with multi-disciplines and in strategy and vision.

Speaker #3: We were recognized by research firms as a leading partner with multi-disciplines and in strategy and vision. As an example, this month, EverScrews recognized us as a leader in customer experience management, with growth in vision and capability across every geography.

Chris Caldwell: As an example, this month, Everest Group recognized us as a leader in customer experience management with growth in vision and capability across every geography. We earned Best of Category honors for Globee for human AI teaming and conversational AI. Together with our strategic partner, NICE, we received an International CX Excellence Award for our work with UK technology retailer, Currys. Our technology-powered consumer experience solution delivered double-digit improvements in customer satisfaction. Just as importantly, we exceeded our profitability guidance for the quarter and expect that momentum to continue into Q4. As a reminder, this marks our second consecutive quarter of record adjusted free cash flow while continuing to reduce leverage. While AI is expanding our growth opportunities, we are also navigating industry shifts like hyperscaler spend priorities, which will have a larger impact than previously expected on our revenue in Q4.

Speaker #3: We are invested category honors for Glovi for human AI teaming and conversational AI, and together with our strategic partner NICE, we received an international CX Excellence Award for our work with UK technology retailer Curries.

Speaker #3: Our technology-powered consumer experience solution delivered double-digit improvements in customer satisfaction. And, just as importantly, we exceeded our profitability guidance for the quarter and expect that momentum to continue into Q4.

Chris Caldwell: Just as importantly, we exceeded our profitability guidance for the quarter and expect that momentum to continue into Q4. As a reminder, this marks our second consecutive quarter of record adjusted free cash flow while continuing to reduce leverage. While AI is expanding our growth opportunities, we are also navigating industry shifts like hyperscaler spend priorities, which will have a larger impact than previously expected on our revenue in Q4.

Speaker #3: As a reminder, this marks our second consecutive quarter of record adjusted free cash flow while continuing to reduce leverage. While AI is expanding our growth opportunities, we're also navigating industry shifts like hyperscaler spend priorities, which will have a larger impact than previously expected on our revenue in the fourth quarter.

Speaker #3: In addition, shore mix created about a 3% headwind this quarter, as we talked about in our second quarter earnings call. As clients shift budgets and shores, we continue to use a combination of technology, right-shoring, and services to create a balance for growth and long-term profitability in our traditional business.

Chris Caldwell: In addition, shore mix created about a 3% headwind this quarter, as we talked about in our Q2 earnings call. As clients shift budgets and shores, we continue to use a combination of technology, right shoring, and services to create a balance for growth and long-term profitability in our traditional business. It is important to note that while the business is evolving, we are doing what we can to accelerate our rollout of AI. This causes temporary headwinds that result in growing stickier and higher margin revenue and relationships. While this evolution progresses, we are staying disciplined in how we allocate capital. This quarter, we strengthened our balance sheet by reducing net debt by approximately $211 million. By the end of our fiscal 2026 year, we expect to have completed $900 million of debt paydown in the last three years.

Speaker #3: It's important to note that while the business is evolving, we are doing what we can to accelerate our rollout of AI. This causes temporary headwinds that result in growing stickier and higher-margin revenue and relationships.

Chris Caldwell: It is important to note that while the business is evolving, we are doing what we can to accelerate our rollout of AI. This causes temporary headwinds that result in growing stickier and higher margin revenue and relationships. While this evolution progresses, we are staying disciplined in how we allocate capital. This quarter, we strengthened our balance sheet by reducing net debt by approximately $211 million. By the end of our fiscal 2026 year, we expect to have completed $900 million of debt paydown in the last three years.

Speaker #3: While this evolution progresses, we're staying disciplined in how we allocate capital. This quarter, we strengthened our balance sheet by reducing net debt by approximately $211 million, and by the end of our fiscal 2026 year, we expect to have completed $900 million in debt paydown over the last three years.

Speaker #3: This puts us on track to reduce our net leverage to approximately 2.6 times at year-end, with further significant debt and leverage reduction planned in 2027 to approximately 2.2 times.

Chris Caldwell: This puts us on track to reduce our net leverage to approximately 2.6 times at year-end, with further significant debt and leverage reduction planned in 2027 to approximately 2.2 times. At the same time, we are continuing to invest in our future by upskilling our people and expanding specialized AI talent to grow new capabilities. Looking ahead to Q4, we are pushing accelerated deployments of AI, but we remain confident in the growth opportunity of our new business revenues and the overall market opportunities. We are focused on being the partner of choice to help transform operating models with the right mix of automation, technology, global talent, and deep domain expertise. We are seeing a healthy, stable pipeline of complex, high-value opportunities where clients are looking for practical solutions that deliver measurable business outcomes.

Speaker #3: At the same time, we're continuing to invest in our future by upskilling our people and expanding specialized AI talent to grow new capabilities. Looking ahead to Q4, we are pushing accelerated deployments of AI, but we remain confident in the growth opportunity of our new business revenues and the overall market opportunities.

Chris Caldwell: Looking ahead to Q4, we are pushing accelerated deployments of AI, but we remain confident in the growth opportunity of our new business revenues and the overall market opportunities. We are focused on being the partner of choice to help transform operating models with the right mix of automation, technology, global talent, and deep domain expertise. We are seeing a healthy, stable pipeline of complex, high-value opportunities where clients are looking for practical solutions that deliver measurable business outcomes.

Speaker #3: We are focused on being the partner of choice to help transform operating models with the right mix of automation, technology, global talent, and deep domain expertise.

Speaker #3: We're seeing a healthy, stable pipeline of complex, high-value opportunities where clients are looking for practical solutions that deliver measurable business outcomes. While not providing guidance for 2027, we currently expect the growth of our new business revenue to offset much, if not all, of our automation efforts in 2027, while driving stable to improved margins across our entire business.

Chris Caldwell: While not providing guidance for 2027, we currently expect the growth of our new business revenue to offset much, if not all, of our automation efforts in 2027 while driving stable to improved margins across our entire business. We expect the overall business to benefit from consolidation in the industry, with growth momentum to be more in the back half of the year. We expect our free cash generation to be above our 2026 levels. Before I hand it over to Andre, I want to thank our game changers around the world for their commitment to our clients and to each other. Their expertise and innovation make our success possible. I would also like to thank our clients for their trust they place in us as they navigate an increasingly complex business environment.

Speaker #3: We expect the overall business to benefit from consolidation in the industry, with growth momentum expected to be stronger in the back half of the year.

Speaker #3: We expect our free cash generation to be above our 2026 levels. Before I hand it over to Andre, I want to thank our game-changers around the world for their commitment to our clients and to each other.

Chris Caldwell: Before I hand it over to Andre, I want to thank our game changers around the world for their commitment to our clients and to each other. Their expertise and innovation make our success possible. I would also like to thank our clients for their trust they place in us as they navigate an increasingly complex business environment.

Speaker #3: Their expertise in innovation makes our success possible, and I'd also like to thank our clients for the trust they place in us as they navigate an increasingly complex business environment.

Speaker #3: With that, Andre, we'll take you through more details on our quarterly performance and outlook for the rest of the year. Andre.

Chris Caldwell: With that, Andre will take you through more details on our quarterly performance and outlook for the rest of the year. Andre.

Speaker #2: Well, thank you, Chris, and hello, everyone. I'll begin with a review of our financial results for the third quarter, then discuss our outlook for the fourth quarter and full year 2026.

Andre Valentine: Well, thank you, Chris, and hello, everyone. I will begin with a review of our financial results for the Q3 and then discuss our outlook for the Q4 and full year 2026. In the Q3, we delivered revenue of approximately $2.45 billion. On a constant currency basis, this represented a decrease of 0.5%, which is slightly below the lower end of the guidance we provided in June. Our revenue for the quarter reflects an acceleration of our deployment of AI for clients, as well as client decisions to reduce support for certain customer sets that we have supported. Turning to profitability, our non-GAAP operating income was $309 million, above the high end of the guidance range we provided in June. Adjusted EBITDA in the quarter was $363 million.

Speaker #2: In the third quarter, we delivered revenue of approximately $2.45 billion. On a constant currency basis, this represented a decrease of 0.5%, which is slightly below the lower end of the guidance we provided in June.

Speaker #2: Our revenue for the quarter reflects an acceleration in our deployment of AI for clients, as well as client decisions to reduce support for certain customer sets that we have supported.

Andre Valentine: Our revenue for the quarter reflects an acceleration of our deployment of AI for clients, as well as client decisions to reduce support for certain customer sets that we have supported. Turning to profitability, our non-GAAP operating income was $309 million, above the high end of the guidance range we provided in June. Adjusted EBITDA in the quarter was $363 million.

Speaker #2: Turning to profitability, our non-GAAP operating income was $309 million, above the high end of the guidance range we provided in June. Adjusted EBITDA for the quarter was $363 million.

Speaker #2: Our non-GAAP operating income margin was 12.6%, and our adjusted EBITDA margin was 14.8%, with both measures up 30 basis points from the third quarter last year.

Andre Valentine: Our non-GAAP operating income margin was 12.6%, and our adjusted EBITDA margin was 14.8%, with both measures up 30 basis points from the Q3 last year. This increase in margins demonstrates our focus on winning the right business, as well as our discipline and execution in aligning our business investments to areas that we have identified for profit-enhancing growth while reducing costs in other areas. This is consistent with our commentary throughout 2026 that we would see year-over-year margin expansion in the H2 of the year. Non-GAAP diluted EPS was $2.92 per share, above the guidance range we provided in March and June, and up $0.14 from the Q3 of 2025. Our GAAP results for the Q3 reflect a $1.05 billion non-cash goodwill impairment charge triggered by the trading range of our stock during the quarter.

Speaker #2: This increase in margins demonstrates our focus on winning the right business, as well as our discipline and execution in aligning our business investments to areas that we have identified for profit-enhancing growth, while reducing costs in other areas.

Speaker #2: This is consistent with our commentary throughout 2026 that we would see year-over-year margin expansion in the second half of the year. Non-GAAP diluted EPS was $2.92 per share.

Andre Valentine: This is consistent with our commentary throughout 2026 that we would see year-over-year margin expansion in the H2 of the year. Non-GAAP diluted EPS was $2.92 per share, above the guidance range we provided in March and June, and up $0.14 from the Q3 of 2025. Our GAAP results for the Q3 reflect a $1.05 billion non-cash goodwill impairment charge triggered by the trading range of our stock during the quarter.

Speaker #2: Above the guidance range we provided in March and June, and up $0.14 from the third quarter of 2025. Our GAAP results for the third quarter reflect a $1.05 billion non-cash goodwill impairment charge, triggered by the trading range of our stock during the quarter.

Speaker #2: Complete reconciliations of non-GAAP measures to the comparable GAAP measures are provided in today's earnings release. Adjusted free cash flow was $218 million in the third quarter, the highest level we've achieved in the third quarter of any year since our spin-off in 2020.

Andre Valentine: Complete reconciliations of non-GAAP measures to comparable GAAP measures are provided in today's earnings release. Adjusted free cash flow was $218 million in the Q3, the highest level we have achieved in the Q3 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 reducing net leverage at the end of the year, we did not repurchase any shares in the quarter. In the quarter, we reduced total debt by $211 million. Our debt reduction in the quarter included the repayment of $200 million in senior notes that matured in August. At the end of the Q3, cash and cash equivalents were approximately $256 million. Total debt was approximately $4.375 billion, and net debt was approximately $4.119 billion.

Speaker #2: We returned approximately $23 million to shareholders in the quarter through our quarterly dividend. Consistent with our commitment to reducing net leverage at the end of the year, we did not repurchase any shares in the quarter.

Andre Valentine: Consistent with our commitment to reducing net leverage at the end of the year, we did not repurchase any shares in the quarter. In the quarter, we reduced total debt by $211 million. Our debt reduction in the quarter included the repayment of $200 million in senior notes that matured in August. At the end of the Q3, cash and cash equivalents were approximately $256 million. Total debt was approximately $4.375 billion, and net debt was approximately $4.119 billion.

Speaker #2: In the quarter, we reduced total debt by $211 million. Our debt reduction in the quarter included the repayment of $200 million in senior notes that matured in August.

Speaker #2: At the end of the third quarter, cash and cash equivalents were approximately $256 million. Total debt was approximately $4.375 billion, and net debt was approximately $4.119 billion.

Speaker #2: 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 is $375 million in term loan borrowings that mature in December 2026.

Andre Valentine: 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 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 gross 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 the Q4 and full year 2026, we expect the following. Q4 revenue of $2.41 billion to $2.46 billion. Based on current exchange rates, these expectations assume an approximate 65 basis point negative impact of foreign exchange rates in Q4 compared with the prior year period.

Speaker #2: 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 gross debt this year and reduce net debt to approximately $3.8 billion by the end of the year.

Andre Valentine: In total, we expect to repay over $550 million in gross 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 the Q4 and full year 2026, we expect the following. Q4 revenue of $2.41 billion to $2.46 billion. Based on current exchange rates, these expectations assume an approximate 65 basis point negative impact of foreign exchange rates in Q4 compared with the prior year period.

Speaker #2: Now I'll turn to our outlook. For the fourth quarter and full year 2026, we expect the following: fourth quarter revenue of $2.41 to $2.46 billion.

Speaker #2: Based on current exchange rates, these expectations assume an approximate 65-basis-point negative impact from foreign exchange rates in Q4 compared with the prior year period.

Speaker #2: The guidance implies a constant currency revenue decrease in the fourth quarter, ranging from 3% to 5%. This leads to fiscal year 2026 revenue of $9.827 billion to $9.877 billion, based on current exchange rates, which assume an approximate 80 basis point positive impact of foreign exchange rates compared with the prior year.

Andre Valentine: The guidance implies a constant currency revenue decrease in the Q4 ranging from 3% to 5%. This leads to fiscal year 2026 revenue of $9.827 billion to $9.877 billion based on current exchange rates, which we assume an approximate 80 basis point positive impact of foreign exchange rates compared with the prior year. As such, we expect revenue for the full year to decrease by 0.8% to 0.3% on a constant currency basis. For the Q4, we expect non-GAAP operating income of $310 million to $320 million. This drives full-year non-GAAP operating income of $1,206 million to $1,216 million. The midpoint of our profitability expectations for the Q4 implies a non-GAAP operating income margin of approximately 12.9%, up 20 basis points from the Q4 last year.

Speaker #2: As such, we expect revenue for the full year to decrease by 0.8% to 0.3% on a constant currency basis. For the fourth quarter, we expect non-GAAP operating income of $310 million to $320 million.

Andre Valentine: As such, we expect revenue for the full year to decrease by 0.8% to 0.3% on a constant currency basis. For the Q4, we expect non-GAAP operating income of $310 million to $320 million. This drives full-year non-GAAP operating income of $1,206 million to $1,216 million. The midpoint of our profitability expectations for the Q4 implies a non-GAAP operating income margin of approximately 12.9%, up 20 basis points from the Q4 last year.

Speaker #2: This drives full-year non-GAAP operating income of $1,206 to $1,216 million. The midpoint of our profitability expectations for the fourth quarter implies a non-GAAP operating income margin of approximately 12.9%, up 20 basis points from the fourth quarter last year.

Speaker #2: This is consistent with our expectation all year that we would generate year-over-year margin expansion in the second half of the fiscal year. This guidance translates into an expected non-GAAP earnings per share of $2.86 to $2.98 for Q4, assuming approximately $63.5 million in interest expense, 61.2 million diluted common shares outstanding, and approximately 4.9% of net income attributable to participating securities.

Andre Valentine: This is consistent with our expectation all year that we would generate year-over-year margin expansion in the H2 of the fiscal year. This guidance translates into an expected non-GAAP earnings per share of $2.86 to $2.98 for Q4, assuming approximately $63.5 million in interest expense, 61.2 million diluted common shares outstanding, and approximately 4.9% of net income attributable to participating securities. For fiscal year 2026, we expect non-GAAP EPS of $10.97 to $11.09, assuming non-GAAP interest expense for the year of $265 million, approximately 61.1 million 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 24% for both Q4 and for the full year. We continue to expect to generate between $630 million and $650 million in adjusted free cash flow this year.

Speaker #2: For fiscal year 2026, we expect non-GAAP EPS of $10.97 to $11.09, assuming non-GAAP interest expense for the year of $265 million, approximately 61.1 million diluted common shares outstanding, and approximately 4.9% of net income attributable to participating securities.

Andre Valentine: For fiscal year 2026, we expect non-GAAP EPS of $10.97 to $11.09, assuming non-GAAP interest expense for the year of $265 million, approximately 61.1 million 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 24% for both Q4 and for the full year. We continue to expect to generate between $630 million and $650 million in adjusted free cash flow this year.

Speaker #2: The non-GAAP effective tax rate is expected to be approximately 24% for both Q4 and for the full year. We continue to expect to generate between $630 million and $650 million in adjusted free cash flow this year.

Speaker #2: With this cash generation, we expect to reduce our outstanding debt balance by over $550 million in the year. This expectation includes the funding of our acquisition of Castle Hill to further strengthen our risk and compliance offering in the fourth quarter.

Andre Valentine: With this cash generation, we expect to reduce our outstanding debt balance by over $550 million in the year. This expectation includes the funding of our acquisition of CastleHill to further strengthen our risk and compliance offering in the Q4. We are committed to reducing our net leverage to approximately 2.6x adjusted EBITDA by the end of fiscal 2026. Looking at cash flow beyond 2026, we expect adjusted free cash flow in fiscal 2027 to exceed the amount we generate in 2026. Our confidence in our cash generation in 2027 reflects an expectation of reduced restructuring costs, lower cash interest expense, and that our newer growing sources of revenue require less capital expenditures than our traditional business.

Speaker #2: We are committed to reducing our net leverage to approximately 2.6 times adjusted EBITDA by the end of fiscal 2026. Looking at cash flow beyond 2026, we expect adjusted free cash flow in fiscal 2027 to exceed the amount we generate in 2026.

Andre Valentine: We are committed to reducing our net leverage to approximately 2.6x adjusted EBITDA by the end of fiscal 2026. Looking at cash flow beyond 2026, we expect adjusted free cash flow in fiscal 2027 to exceed the amount we generate in 2026. Our confidence in our cash generation in 2027 reflects an expectation of reduced restructuring costs, lower cash interest expense, and that our newer growing sources of revenue require less capital expenditures than our traditional business.

Speaker #2: Our confidence in our cash generation in 2027 reflects an expectation of reduced restructuring costs, lower cash interest expense, and that our newer, growing sources of revenue require less capital expenditures than our traditional business.

Speaker #2: Our 2027 cash flow expectation would allow us to reduce our gross outstanding debt by over $550 million once again in fiscal 2027 and bring our net debt to below $3.3 billion, or roughly 2.2 times adjusted EBITDA by the end of fiscal 2027.

Andre Valentine: Our 2027 cash flow expectation would allow us to reduce our gross outstanding debt by over $550 million, once again, in fiscal 2027, and bring our net debt to below $3.3 billion, or roughly 2.2x adjusted EBITDA by the end of fiscal 2027. Our confidence in the continued strong cash flow generation of the business is reflected in our increased dividend to $0.37 per share, payable in November. In summary, our overall demand environment remains stable. We are confident in our ability to drive margin expansion of the business. We are confident in the continued strong free cash flow generation of the business, and our plan to pay down debt and reduce leverage in 2026 and beyond. We are in a strong competitive position to drive long-term outperformance. Now, operator, please open the line for questions.

Speaker #2: Our confidence in the continued strong cash flow generation of the business is reflected in our increased dividend to $37 per share, payable in November.

Speaker #2: In summary, our overall demand environment remains stable. We're confident in our ability to drive margin expansion in the business. We're confident in the continued strong free cash flow generation of the business and in our plan to pay down debt and reduce net leverage in 2026 and beyond.

Andre Valentine: We are confident in our ability to drive margin expansion of the business. We are confident in the continued strong free cash flow generation of the business, and our plan to pay down debt and reduce leverage in 2026 and beyond. We are in a strong competitive position to drive long-term outperformance. Now, operator, please open the line for questions.

Speaker #2: And we're in a strong competitive position to drive long-term outperformance. Now, operator, please open the line for questions.

Speaker #1: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. 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 Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

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

Speaker #1: 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 Rupalu Bhattacharya with Bank of America.

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

Speaker #3: Alert on your comment that growth in 2027 is going to be more back-half weighted. What is driving that? What specifically are the cycles? You had talked about some hyperscale customers who might be reducing some support to their end customers.

Ruplu Bhattacharya: Andre, on your comment that growth in 2027 is going to be more back half-weighted. What is driving that? What specifically are you seeing in the sales cycle? You had talked about some hyperscale customers who might be reducing some support to their end customers, and you have also talked about offshore moves that could be impacting revenues. So help us kind of understand what is driving that back-end loaded nature of revenues in the next year. I have a follow-up. Thank you.

Speaker #3: And you've also talked about offshore moves that could be impacting revenues. So help us understand what's driving that back-end loaded nature of revenues in the next year.

Speaker #3: And I have a follow-up. Thank you.

Speaker #4: No problem. Hi, Rupalu. It's Chris. So thank you for the question. So two things. Just in terms of what we're seeing right now, just to put some perspective and size what we're looking at, so hyperscale customers we're talking about are two specific clients who as we talked about in our Q2 call, are looking at stopping support for a certain client sets.

Chris Caldwell: No problem. Hi, Ruplu, it is Chris. So thank you for the question. So two things, just in terms of what we are seeing right now, just to put some perspective and size what we are looking at. The hyperscale customers we are talking about are two specific clients who, as we talked about in our Q2 call, are looking at stopping support for certain client sets. Originally, that was going to impact us in Q3 and flow through until sort of Q2 of next year. Right now, the decision is really to have that completely finished by the end of Q4. So you are seeing an oversized impact in Q4, and then clearly some impact in Q1 and Q2 from that. That again, is only two clients. It is very defined, and those clients are actually going with us in other areas of the business and other services.

Speaker #4: Originally, that was going to impact us in Q3 and flow through until sort of Q2 of next year. Right now, the decision is really to have that completely finished by the end of Q4.

Chris Caldwell: Originally, that was going to impact us in Q3 and flow through until sort of Q2 of next year. Right now, the decision is really to have that completely finished by the end of Q4. So you are seeing an oversized impact in Q4, and then clearly some impact in Q1 and Q2 from that. That again, is only two clients. It is very defined, and those clients are actually going with us in other areas of the business and other services.

Speaker #4: And so you're seeing an oversized impact in Q4, and then clearly some impact in Q1 and Q2 from that. That, again, is only two clients.

Speaker #4: It's very defined. And those clients are actually growing with us in other areas of the business, in other services. And so it's, again, a very, very confined part.

Chris Caldwell: It is again, very confined parts. The second thing that we have talked about is our increase in AI automation sales that we have been doing. Not only did we have a very strong AI pipeline, sales pipeline in Q2, which we called out, we also had another one in Q3. What we talked about in Q2 was the ability to deliver on these AI automations at pace. We have been really happy with how the team has reacted in Q3, and we have been able to deploy those automations much faster than what we originally expected, which I think is a really good thing. We are seeing that impact in Q4, which will also impact into Q1. When we talk about back-end growth opportunity in 2027, we are getting through these two clients who are looking at removing support for their base.

Speaker #4: The second thing that we've talked about is our increase in AI automation sales that we've been doing. Not only did we have a very strong AI sales pipeline in Q2, which we called out,

Speaker #4: We also had another one in Q3. And what we talked about in Q2 was the ability to deliver on these AI automations at pace.

Speaker #4: We've been really happy with how the team has reacted in Q3, and we've been able to deploy those automations much faster than we originally expected, which I think is a really good thing.

Chris Caldwell: We have been really happy with how the team has reacted in Q3, and we have been able to deploy those automations much faster than what we originally expected, which I think is a really good thing. We are seeing that impact in Q4, which will also impact into Q1. When we talk about back-end growth opportunity in 2027, we are getting through these two clients who are looking at removing support for their base.

Speaker #4: And so we're seeing that impact in kind of Q4, which will also impact into Q1. And so really, when we talk about back-end growth opportunity in 2027, we're getting through these two clients who are looking at removing support for their base.

Speaker #4: We're catching up on the automation deployments that we're doing, and we're also looking at what we're going to be consolidating within the marketplace as we look at Q3 and Q4—really Q2, Q3, and Q4 in 2027.

Chris Caldwell: We are catching up on the automation deployments that we are doing, and we are also looking at what we are going to be consolidating within the marketplace as we look at Q3 and Q4, really Q2, Q3, Q4 in 2027. That just gives you some of the color around what we are seeing from a growth profile perspective.

Speaker #4: So, that just gives you some of the color around what we're seeing from a growth profile perspective.

Speaker #3: Okay, thanks for that. As a follow-up, can I ask you for your thoughts on Meta's new news offering, as well as agentic AI in general?

Ruplu Bhattacharya: Okay, thanks for that. As a follow-up, can I ask you for your thoughts on Meta's new Muse offering, as well as agentic AI in general? How are you thinking about your own spend on the iX Suite, and what revenue and margin targets do you have for that? Thank you.

Speaker #3: And how are you thinking about your own spend on the IX suite? And what revenue and margin targets do you have for that? Thank you.

Chris Caldwell: For sure. Clearly, Meta announced a Muse product. OpenAI announced a product they called Dots. We are seeing more and more companies looking at this type of technology. In fact, we built our own technology internally just for ourselves that is very similar to this, that we are finding productivity gains. We are helping clients right now understand how to engage with it. We are helping clients understand how to support these channels. We do see agentic shopping becoming more and more prevalent in the marketplace, and see opportunities for us to grow with that, supporting our clients, supporting this infrastructure. We just see it as part of the evolution of the business. In terms of how we are thinking about spending money on our iX Suite, as we have talked about, we are benefiting from some of the ability to lower our cost base with AI internally on our development.

Speaker #4: For sure. So, clearly, Meta announced a Muse product, and OpenAI announced a product they called DOTS. We're seeing more and more companies looking at this type of technology.

Speaker #4: And in fact, we built our own technology internally just for ourselves that's very, very similar to this, and we're finding productivity gains. We're hoping clients right now understand how to engage with it.

Speaker #4: We're hoping clients understand how to support these channels, and we do see agentic shopping becoming more and more prevalent in the marketplace. We see opportunities for us to grow with that—supporting our clients and supporting this infrastructure.

Chris Caldwell: We do see agentic shopping becoming more and more prevalent in the marketplace, and see opportunities for us to grow with that, supporting our clients, supporting this infrastructure. We just see it as part of the evolution of the business. In terms of how we are thinking about spending money on our iX Suite, as we have talked about, we are benefiting from some of the ability to lower our cost base with AI internally on our development.

Speaker #4: And so we just see it as part of the evolution of the business. In terms of how we're thinking about spending money on our IX suite, as we've talked about, we're benefiting from some of the ability to lower our cost base with AI internally on our development.

Speaker #4: And so we brought down our expenditures on our IX suite, we're seeing the growth that we've talked about. We've talked about exiting 2026 with an ARR of just software licensing around $120 million.

Chris Caldwell: We brought down our expenditures on our iX suite. We are seeing the growth that we have talked about. We have talked about exiting 2026 with an ARR of just software licensing around $120 million. We are on pace to do that. What we have also talked about is how it influences revenue that runs through this platform. That was the number that I called out as a $1.3 billion that is running through our platform. Which, as we have talked about before, is growing faster than our traditional revenue because we are getting optimized work out of it, and it is at a higher profit margin out of it. We expect that margin profile to continue to build up. At some point, at critical mass, we expect iX Hero to have effectively SaaS-type margins. That is a fair bit away.

Speaker #4: We're on pace to do that. And then, what we've also talked about is how it influences revenue that runs through this platform. That was the number I called out as $1.3 billion that's running through our platform, which, as we've talked about before, is growing faster than our traditional revenue because we're getting optimized work out of it.

Chris Caldwell: That was the number that I called out as a $1.3 billion that is running through our platform. Which, as we have talked about before, is growing faster than our traditional revenue because we are getting optimized work out of it, and it is at a higher profit margin out of it. We expect that margin profile to continue to build up. At some point, at critical mass, we expect iX Hero to have effectively SaaS-type margins. That is a fair bit away.

Speaker #4: And it's at a higher profit margin out of it. So we expect that margin profile to continue to build up, and at some point, at critical mass, we expect IX Hero to have effectively SaaS-type margins, but that's a fair bit away.

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

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

Speaker #5: Yeah, Chris, congrats on the milestone that you reached. Is there a way to think about what level you need to reach before you can consistently achieve solid growth, say, in the mid-single digits?

Vincent Colicchio: Yeah, Chris, congrats on the milestone that you reached. Is there a way to think about what level you need to reach before you can consistently achieve solid growth, say, in the mid-single digits?

Speaker #4: Yeah, that's a great question. So, Vince, we expected to reach this 50% milestone really at the end of Q4, maybe middle of Q1. And so we've moved it forward a quarter and a half, which is fantastic from a momentum perspective.

Chris Caldwell: Yeah, that is a great question. So Vince, we expected to reach this 50% milestone really at the end of Q4, maybe middle of Q1. We have moved it forward a quarter and a half, which is fantastic from a momentum perspective. Our belief is that we need a couple more quarters to continue to drive automation in our traditional business. We believe that there is some consolidation that happens. If you, again, not guiding for 2027, if you read between the lines on 2027, we expect that momentum is not really going to happen until the back half of the year. So that is probably more a 2028 comment. Again, we are moving a couple quarters faster than we expected right now, so hopefully we can contain that momentum.

Speaker #4: Our belief is that we need a couple more quarters to continue to kind of drive automation in our traditional business. We believe that there's some consolidation that happens.

Chris Caldwell: We believe that there is some consolidation that happens. If you, again, not guiding for 2027, if you read between the lines on 2027, we expect that momentum is not really going to happen until the back half of the year. So that is probably more a 2028 comment. Again, we are moving a couple quarters faster than we expected right now, so hopefully we can contain that momentum.

Speaker #4: But if you, and again, not guiding for 2027, if you kind of read between the lines on 2027, we expect that momentum is not really going to happen until the back half of the year.

Speaker #4: So that's probably more a 2028 comment. But again, we're moving a couple of quarters faster than we expected right now, so hopefully we can maintain that momentum.

Speaker #5: And as a follow-up, are you able to articulate how large a headwind you'll see from offshoring in fiscal '27?

Vincent Colicchio: And as a follow-up, are you able to articulate how large a headwind you will see from offshoring in fiscal 2027?

Speaker #4: Yeah.

Andre Valentine: Yeah. We are not really guiding yet to fiscal 2027, Vince, but we will provide some color on it. We have talked about this year seeing that accelerate to being about a 3-point headwind on growth for us. We see it in that same sort of range, and we do not see it being higher, but possibly a touch lower. But included in what we are seeing right now is our revenue expectations for next year. I probably think it is right in that same range.

Speaker #3: Yeah. We're not really guiding yet to fiscal '27, Vince, but we'll provide some color around it. So, we have talked about this year seeing that accelerate to being about a three-point headwind on growth for us.

Speaker #3: We see it in that same sort of range. We don't see it being higher, possibly a touch lower. But included in what we're seeing right now are our revenue expectations for next year.

Speaker #3: I'd probably think it's right in that same range.

Speaker #5: Thank you.

Vincent Colicchio: Thank you.

Speaker #1: Your next question comes from the line of Jacob Haggerty with Robert W. Baird & Co., Inc. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Joseph Haggerty with Robert W. Baird & Co. Inc. Your line is open. Please go ahead.

Speaker #5: So, just thinking about the revenue headwind from offshoring—does that start to abate as you get more and more AI revenues? Do people bring some of that work back onshore because it's AI-assisted and they're getting cost benefits there?

Joseph Haggerty: So just thinking about the revenue headwind from offshoring, does that start to abate as you get more and more AI revenues? Do people bring some of that work back on shore because it is AI-assisted and they are getting cost benefits there? Or how do you see that evolving over time?

Jacob Haggerty: So just thinking about the revenue headwind from offshoring, does that start to abate as you get more and more AI revenues? Do people bring some of that work back on shore because it is AI-assisted and they are getting cost benefits there? Or how do you see that evolving over time?

Speaker #5: How do you kind of see that evolving over time?

Speaker #3: Jacob, I'm really glad you asked that question, because it was actually kind of the second part of the answer to Vince's question that I didn't give.

Andre Valentine: Jacob, I am really glad you asked that question because it was actually the second part of the answer to Vince's question that I did not give. We do see it abating over time, but maybe not for the reason that you indicated so much as we are really getting to the point where we only, as we exit this year, have 10%, 11% of revenue that we see as in the pool of stuff that is likely over time to be movable offshore. So we do see it abating over time more because there is just not that much of it left to move, as opposed to anything else. Chris, any impact from the AI playing any role there or not?

Speaker #3: We do see it abating over time, but maybe not for the reason that you indicated so much as we're really getting to the point where, as we exit this year, we only have 10–11% of revenue that we see as kind of in the pool of stuff that is likely, over time, to be movable offshore.

Speaker #3: So we do see it abating over time, more because there's just not that much of it left to move, as opposed to anything else.

Speaker #3: Chris, any impact from the AI playing any role there or not?

Speaker #4: Yeah, Jacob, we're not really seeing that. We're seeing clients who are moving the work, and the belief is that as we put AI to it, they'll continue to leave it where it resides, versus pulling it back into a higher-cost region.

Chris Caldwell: Yeah, Jacob, we are not really seeing that. We are seeing clients who are moving the work, and the belief is that as we put an AI to it, they will continue to leave it where it resides versus pulling it back into a higher cost region.

Speaker #3: No, that totally makes sense. And then could you just talk maybe about your confidence in margin stability, especially as we go into FY 2027 and maybe even beyond?

Joseph Haggerty: No, that totally makes sense. Then can you just talk maybe about your confidence in margin stability, especially as we go into F2027 and maybe even beyond?

Jacob Haggerty: No, that totally makes sense. Then can you just talk maybe about your confidence in margin stability, especially as we go into F2027 and maybe even beyond?

Speaker #4: So, on the newer revenue that we talked about, that we just crossed the 50% mark on, the margins are actually very stable.

Chris Caldwell: On the newer revenue that we talked about, that we are just crossing the 50% mark on, the margins are actually very stable. It is competitive, but because we are bringing unique offerings to it is at an elevated level. Where we look at margin pressure, for lack of a better term, is more the traditional business that might be commoditized. We will only go to a certain price point. We are not going to chase price in that type of the business. Our belief is that as we continue to add more and more of the new revenues, as we continue to automate more and more of our traditional revenues, that we have got that margin stability, as we talked about in the prepared remarks, certainly into 2027.

Speaker #4: And it's competitive, but because we're bringing unique offerings to it, it's at an elevated level. Where we kind of look at margin pressure, for lack of a better term, is more the traditional business that might be commoditized.

Speaker #4: And we'll only go to a certain price point. We're not going to chase price and that type of business. And so our belief is that as we continue to add more and more of the new revenues, as we continue to automate more and more of our traditional revenues, that we've got that margin stability, as we talked about in the prepared remarks, certainly in 2027.

Speaker #3: Awesome. Thank you, guys.

Joseph Haggerty: Awesome. Thank you guys.

Jacob Haggerty: Awesome. Thank you guys.

Speaker #1: Just a reminder, if you would like to ask a question, please press star 1. There are no further questions at this time. This concludes today's call.

Operator: Just a reminder, if you would like to ask a question, please press star one. There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.