IBEX Limited (NASDAQ:IBEX) Q1 2026 Earnings Call Transcript

IBEX Limited (NASDAQ:IBEX) Q1 2026 Earnings Call Transcript November 7, 2025

Operator: Welcome to the IBEX First Quarter FY 2026 Earnings Conference Call. [Operator Instructions] To note, there is an accompanying earnings presentation available on the ibex Investor Relations website at investors.ibex.co. I will now turn this conference over to Mr. Michael Darwal, Head of Investor Relations for ibex.

Michael Darwal: Good afternoon, and thank you for joining us today. Before we begin, I want to remind you that matters discussed on today’s call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based on management’s current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments, which may occur. Forward-looking statements are subject to various risks, uncertainties and other factors, which could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on September 11, 2025, and any other risk factors we include in subsequent filings with the SEC.

With that, I will now turn the call over to IBEX CEO, Bob Dechant.

Robert Dechant: Thanks, Mike. Good afternoon, and thank you all for joining us today as we share our first quarter fiscal year 2026 results. Before I speak to our first quarter results, I want to start by saying that our thoughts and prayers are with the people of Jamaica who are dealing with the devastation left behind by Hurricane Melissa. I would also like to say how proud I am of our ibex Jamaica team who has shown enormous courage and resilience through this tragedy and have worked tirelessly to care for our employees while getting us operational within 24 hours of the hurricane in our Portmore and Kingston sites and as of Monday this week in our Ocho Rios site. I would also like to highlight the great support we have received from our clients who have offered assistance alongside our ibex Cares initiatives to help those who are significantly impacted.

Lastly, the BPO community in Jamaica is a tight knit community, and our thoughts and prayers go out to our Jamaican BPO peers and their people. I am pleased to report that ibex carried the momentum we built throughout fiscal 2025 into 2026, delivering an outstanding first quarter with revenue growth of 16.5% and adjusted EPS growth of 74% as we continue to separate ourselves from the pack in the BPO market. Our sustained double-digit revenue growth highlights our competitive differentiation in the CX space. We continue to drive exceptional operational delivery for our existing clients, enabling us to win significant market share from our competition. I am equally proud of our new logo engine that continues to win trophy clients, positioning us well for continued growth and margin expansion.

And I’m excited on the progress we have made in our AI automate and translation deployments for our clients. Collectively, this continues to validate our position as a leader in the CX space. Q1 was a very strong quarter. Even more impressive is the performance we continue to stack quarter-over-quarter, leading to powerful momentum into the balance of FY ’26. Over the last 12 months, our results have shown explosive double-digit organic revenue growth, which is well above market growth, consistent margin expansion and significant growth in EPS and free cash flow. For the last 12 months, we delivered organic revenue growth of 13% fueled in large part by revenue growth approaching 20% in our high-margin offshore regions and digital-first services.

We delivered record adjusted EBITDA of nearly $76 million for the trailing 12 months, up more than 13% from the prior 12-month period, while making key investments for future growth and differentiation. We achieved record [Audio Gap] adjusted EPS of $3.17 on $31 million, up from $25 million in the prior 12 months while investing meaningful CapEx in support of our growth. These results are an output of our sizable and distinct competitive differentiation that we have built and the strength of this leadership team to consistently execute quarter-over-quarter. Paramount to this differentiation is our best-in-class blend of culture, engagement and branding. Our purpose-built Wave iX technology and integrated AI solution suite, connecting seamlessly AI to human agents.

And our deep analytics and business insights capabilities. The ibex’ leadership team is able to consistently execute against these points, outperforming the competition, setting ibex’ apart, trusted partner. This playbook was key to us delivering one of the most impressive starts to a fiscal year in our history and has us well positioned to perform throughout FY ’26. The ibex’ brand is stronger than it has ever been. Highlighting this is our most recent employee Net Promoter Score of 77, an all-time high and our client Net Promoter Score of 71, up impressively from 68. It is important to note that anything above 70 is considered world-class. These metrics play a critical part in our outstanding client revenue retention of over 98% and validate that our competitive moat is deep and wide.

These metrics are also viewed by prospective clients as best-in-class, giving them confidence in choosing ibex as their go-forward partner during the RFP process. We are very excited with the wins we have had in the last 2 quarters, where over this time frame, we have won seven high-profile new opportunities, facing off against our much larger multibillion-dollar competitors. At the core of ibex is our new logo engine that continues to win trophy new clients and our ability to land and expand with these clients. As compared to 2 years ago, our number of clients making up more than $1 million per annum in revenue is up nearly 24%. Clients representing $1 million to $10 million per annum are up over 21% during the same time frame. And the number of clients generating $10 million to $20 million per annum is up nearly 67%.

And the average revenue generated by clients with annual spend over $20 million during these periods is up approximately 14%. This powerful combination of winning blue-chip trophy clients and growing significant market share with them, parlayed with our outstanding client retention rates has us on an amazing trajectory of double-digit growth. Q4 of fiscal 2025 marked the shift from proof of concept for our AI solutions to full-scale deployments for several of our key clients. We continue to invest in bolstering our team supporting this critical vector for growth, most recently with the addition of Michael Ringman as CTO. We are in an exciting time in the industry with the intersection of AI and CX. Mike brings an enormous amount of experience in both areas and will help accelerate our leadership position.

I am confident that under Mike’s direction, our AI technology road map will help further separate ibex from the pack. Coming off a statement year in fiscal 2025, I am proud of our start to fiscal 2026, and I am confident that ibex is very well positioned for success this year and beyond. With that, I will now turn the call over to Taylor to go into more details on our first quarter results and FY ’26 guidance. Taylor?

Taylor Greenwald: Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our first quarter fiscal year 2026 financial results, references to revenue, net income and net cash generated from operations are on a U.S. GAAP basis, while adjusted net income, adjusted earnings per share, adjusted EBITDA and free cash flow are on a non-GAAP basis. Reconciliations of our U.S. GAAP to non-GAAP measures are included in the tables attached to our earnings press release. Turning to our results. Our first quarter results marked our strongest start to a fiscal year. We achieved record first quarter revenue, adjusted EBITDA, EPS, adjusted EPS and free cash flow. First quarter revenue was $151.2 million, an increase of 16.5% from $129.7 million in the prior year quarter.

Revenue growth was driven by vertical growth in retail and e-commerce of 25%, HealthTech of 19.5% and travel, transportation and logistics of 15.4% and was partially offset by an expected decline in telecommunications, our smallest vertical of 22.5%. Importantly, our fintech vertical reached an inflection point in the first quarter and grew 3.4%. And with recent wins, we are confident in the positive trajectory of fintech going forward. Our focused efforts to grow our higher-margin delivery locations and services continues to have a favorable impact on bottom line results. We are really excited that we’re winning in all markets and as a result, growing revenue in all geographies. Our highest margin offshore revenues grew 20% in the quarter.

Our nearshore locations grew 7% and our onshore region grew 21%, driven by growth of our high-margin digital acquisition services. Revenue mix in our higher-margin digital and omnichannel services continues to strengthen, growing 25% to 82% of our total revenue versus prior year quarter. We expect that we will continue to be successful driving growth in these higher-margin services and regions as we continue to land and expand new clients from our strong pipeline as well as win further share with our embedded base clients. First quarter net income increased to $12 million compared to $7.5 million in the prior year quarter. The increase was primarily driven by the meaningful growth of work in higher-margin offshore regions of 19.5% and operating leverage gained from SG&A expenses as they went from 20.2% to 17.5% of revenue.

Fully diluted EPS was $0.82, up from $0.43 in the prior year quarter. Contributing to the EPS growth was the impact from fewer diluted shares outstanding as a result of our ongoing share repurchase program and a lower tax rate. Diluted shares for the quarter were $14.6 million versus $17.5 million 1 year ago. Our tax rate was 11% versus 21% in the prior year due to a discrete tax benefit related to stock-based compensation. We expect our effective tax rate before discrete items to remain consistent at 20% to 22% for the remaining quarters. Moving to non-GAAP measures. Adjusted EBITDA increased 24.9% to $19.5 million or 12.9% of revenue from $15.6 million or 12.0% of revenue for the same period last year. The 90 basis point improvement in adjusted EBITDA margin was primarily driven by growth in our higher-margin offshore locations during recent years and stronger operating results.

Adjusted net income increased to $13.1 million from $9 million in the prior year quarter. Non-GAAP fully diluted adjusted earnings per share increased 74.1% to $0.90 from $0.52 in the prior year quarter. As a company, we are pleased with the client diversification we have established over the last several years. For the first quarter of fiscal year 2026, our largest client accounted for 10% of revenue and our top 5, top 10 and top 25 client concentrations represented 37%, 55% and 79% of overall revenue, respectively, as compared to 36%, 51% and 77% of overall revenue in the prior year, representative of a well-diversified client portfolio. Switching to our verticals. Retail & E-commerce increased to 26.3% versus 24.5% in the prior year quarter.

HealthTech increased to 14.5% of first quarter revenue versus 14.1% in the prior year quarter, and travel, transportation and logistics remained relatively flat at 14.1% in the quarter. These results were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to the telecommunications vertical decreased to 10.2% of revenue for the quarter versus 15.4% in the prior year quarter as we see lower volume from legacy carriers. Revenues from the fintech vertical represented 11% versus 12.4% of the prior year quarter, though, as I mentioned earlier, grew 3.4% year-over-year and 6.8% sequentially, marking a return to growth and the lapping of prior impacts we had noted at fiscal year-end.

Moving to cash flow. Net cash generated from operating activities increased to $15.7 million for the first quarter of fiscal 2026 compared to $7.8 million for the prior year quarter. The increase in net cash inflow from operating activities was primarily due to higher revenues, which drove increased profitability as well as a lower use of working capital. We have seen a notable improvement in our days sales outstanding with DSOs for the quarter at 71 days, down from 75 days a year ago and 72 days as of June 30. We expect our DSOs to remain relatively stable on a go-forward basis. Capital expenditures were $7.6 million or 5.1% of revenue for the first quarter of fiscal year 2026 versus $3.6 million or 2.8% of revenue in the prior year quarter.

This increase was primarily driven by expansion in our offshore regions to support growth in these higher-margin geographies. Free cash flow was a first quarter record of $8 million compared to $4.1 million in the prior year quarter. The increase was driven by increased revenues during the current quarter and the aforementioned shorter DSOs. During the quarter, we repurchased 92,000 shares for $2.7 million. We have $10.6 million remaining on our current share repurchase program. We ended the first quarter with cash and net cash balances of $22.7 million and $21.1 million, respectively, an increase from $15.3 million and $13.7 million as of June 30, 2025. To summarize our first quarter of fiscal 2026, we achieved outstanding revenue growth and profitability and once again, allowing us to build on our existing momentum entering the fiscal year.

Our revenue growth drove increased operating leverage and positioned us to post record first quarter adjusted EBITDA margin of 12.9%, adjusted EPS of $0.90 and free cash flow of $8 million. Our continued strong financial results and healthy balance sheet are enabling strategic investments in our growing AI capabilities and sales resources as well as further expansion in strategic markets and in our top-performing geographies. Importantly, with our outstanding start to the fiscal year, we have the confidence in our business to raise our revenue and adjusted EBITDA guidance for fiscal year 2026. For fiscal year 2026, revenue is expected to be in the range of $605 million to $620 million, up from $590 million to $610 million. Adjusted EBITDA is expected to be in the range of $78 million to $81 million, up from $75 million to $79 million, and capital expenditures are expected to be in the range of $20 million to $25 million.

Our business is well positioned for today and the years ahead, and we are excited about the future ibex as we head into the second quarter of fiscal year 2026 and beyond. With that, Bob and I will now take questions. Operator, please open the line.

Q&A Session

Operator: [Operator Instructions] Our first question comes from David Koning with Baird.

David Koning: Great job again, and you’re doing exactly what you said, winning share with some of the new offerings. So congrats on all that.

Robert Dechant: Thanks, Dave. Yes, we’re really proud of the quarter, proud of the role we’re on.

David Koning: Yes. Yes. Great. Well, maybe first off, what have you seen — we’ve had this Gen AI kind of swirling around for really a few years now. And is it becoming a catalyst both for the industry and for you guys or more for you than the industry? Or maybe talk a little bit — maybe also just add in how much of revenue is it now? And maybe where is it going in a few years?

Robert Dechant: Sure. So let me kind of break those up into two parts, Dave, if that’s okay. When I look at through the ibex lens, the whole AI, the excitement and also the risks that people have talked about this relative to this industry. I think for ibex, it’s been all positive. And let me explain on that a little bit. We have leaned in harder, faster, I believe, than anybody in the industry on AI. And that’s — I would say, there’s two dimensions to that. One where we are deploying AI internally to help us execute better, to provide tools and capabilities for our agents to deliver better for our teams to run the business more effectively, efficiently and drive better performance on our client KPIs. We’re further along than anybody.

And that’s why I think one of the reasons we continue to outperform and then take significant market share. So that is a boom for ibex because of what we are doing above and beyond anybody else. On the other side, the second dimension I look is the — more around using AI for customer experiences, right, where you automate experiences, AI for language translation, et cetera. Again, I think that we have leaned further into that than anybody else. We’re not afraid of what that might do to our business. I feel like much of the market is very cautious and hesitant about leaning in. We’re leaning in and our clients are seeing that we have a unique end-to-end model that really goes from AI all the way through to a human agent to provide an integrated and seamless solution for them.

To me, I think that puts us in a really ideal position. And when clients are making decisions, they look at that and they say, this is the type of partner that we want because not only can they execute today on the BPO side, but they’re looking forward and they’re future-proofed basically in their model. They can — we can grow and evolve with them as AI gets deployed more. So it’s a real competitive advantage for us, Dave. And I believe that, that’s something that is when you look at what our results are, when you look at the growth rates that we’re doing, the margin expansion, et cetera, I think that’s an output of that. Now to your question about how much of that is? We’re still real early in the game. So it’s not moving the needle on a whole lot of revenue and margin expansion yet, but we’re positioned well.

And we expect probably by the end of fourth quarter of this year and into FY ’27, you’ll start seeing that being another vector of growth and margin expansion that will move the needle for us.

David Koning: Yes. Got you. And maybe just a follow-up. Gross margins were a little down in Q1, and I think you’re holding full year margin about intact. You’re raising revenue, raising EBITDA, but margin about intact. Is that — is some of this a function of just all the investment going into AI? And I know your benefits from offshoring and AI ultimately is better margin, but maybe right now, it’s a little lower as you invest?

Robert Dechant: Yes, Taylor, I’ll throw that over to you.

Taylor Greenwald: Yes. No, absolutely. So you’re right. Our margins are — for the year, we’re projecting our EBITDA margin to be about 13%. So that’s up a bit from the prior year. And what you’re seeing and what we’re seeing is we’re getting a lot of operating leverage out of our SG&A costs because we’re able to hold our SG&A costs relatively flat while our revenue is growing at a much faster pace. So seeing good leverage on the SG&A line. Gross margins are down a bit, particularly in Q1 and a bit in Q2, and you saw it in Q1. And really, a couple of impacts there. One, where as you know, we’re ramping in India, so still making investments and aren’t at the long-term margins we anticipate that we’ll get to in India. And then probably more impactful in Q1 and Q2, it’s a good problem to have.

We have more wins, which mean more training revenue. And as you know, we defer the train revenue, but experience the costs upfront. So we are seeing a little bit of headwind on the gross margin line on that as well. But long term, we feel very good about gross margin, as Bob said, the vectors of growth in terms of the offshore geographies and then once we start getting a more meaningful impact from AI should certainly have a positive long-term trend on gross margins.

Operator: I would now like to turn the call back over to Bob Dechant for any closing remarks.

Robert Dechant: Josh, thanks. And everybody, I appreciate you listening. I’m really proud of this team, proud of the consistent performance quarter-over-quarter that we continue to deliver as we separate ourselves from this industry, from our competitors. I’m also proud of what they’ve been doing in responding to emergencies and issues like we incurred in Jamaica with Hurricane Melissa. And even in markets like the Philippines, there’s been a whole lot going on there with typhoons as well as earthquakes, and that team has — my team has delivered and kept us amazingly resilient for that. I want to thank them all for that because they are the best in the industry. And with that, thank you all for listening, and we look forward to talking to you next quarter. Good night.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.