IBEX Ltd Q2 FY2025 earnings call

• Second quarter was strong with highest growth in two years at 6.1% and highest revenue in IBEX history.
• Achieved improved adjusted EBITDA margin over prior year in ten out of eleven quarters.
• Record Q2 adjusted net income of $9.6 million, up 20% from a year ago; adjusted EPS of $0.59, up 36% from a year ago.
• Closed five new logos in the quarter, with several including traditional agent and generative AI deployments.
• Executed strategic repurchase of ~3.6 million shares from TRGI, eliminating controlled company status.
• Bolstered board of directors with additions of JJ Zhuang, Patrick McGinniss, and Karen Battambachal.
• Had great quarter with WaveIX AI solution stack wins, including AI translate and AI Automate Solutions.

Second quarter revenue was $140.7 million, up 6.1% from the prior year. Revenue growth was driven by vertical growth in health tech of 31%, travel transportation and logistics of 17%, and retail and e-commerce of 4%, partially offset by a decline in the FinTech vertical of 15%. Offshore revenues now comprised 53% of total revenue versus 49% in the prior year quarter. Digital and omnichannel delivery represented 80% of total revenue, an increase from 79% in the prior year quarter.

• Revenue expected to be in the range of $525 to $535 million, up from previous range of $515 to $525 million.
• Adjusted EBITDA expected to be in the range of $68 million to $69 million, up from previous range of $67 to $69 million.
• Capital expenditures expected to remain in the range of $15 to $20 million.

• Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from those expected; for detailed risk factors, review annual report on Form 10-K filed with SEC on September 12, 2024.

Q: Hey, guys. Congrats on another great quarter. Really good to see. And maybe to start, just on revenue, is it a combination? Is the backdrop getting better? You know, maybe a combination of a few kind of things. Is the backdrop getting better? Are you just winning against others? And how is Gen AI? I mean, you kinda talked a little bit about it. Is Gen AI actually a tailwind, headwind, a little of both? Like, you know, because all those three things seem to be driving revenue.

A: Yeah, David. So appreciate the question. And, you know, maybe it's a little bit of all of the above. But I think probably the biggest drivers for us are our continued winning new logos that then drive a lot of, you know, a lot of revenue growth with them in, you know, kind of in their year twos and things like that. So, you know, and that's been a staple of IBEX, so our ability to win and then land and expand and get those, you know, those new clients growing. So that's, you know, that's I think, probably one of the biggest drivers. Actually, it is the biggest driver. The second driver that's going on is, for us, is our ability to win market share. And I will say a lot of the embedded base clients are looking and moving some of their business into the lower labor cost markets. That, as you know, over the years has been the game. You know, a lot of that's been taking place that puts pressure on, you know, on top-line revenue. What we've been able to do is manage through that but take market share. And so I think we're, if you look at our competitors, where those events are putting serious headwinds into their business, for us, it isn't because we're winning market share. And as both Taylor and I said, we're winning market share because we're out-executing our competitors. And so those are, I think, the two biggest variables. And then the third one, just around the macro and, you know, kind of demand, I would kind of sit and say that, you know, the demand has stabilized. I'm not sure the demand's come back. Right? And so but the good news is it's stabilized, and that's, you know, allowing us to, I think, continue to build the momentum. And as you see now, the last several quarters, our top-line growth continues to build and grow.

Q: Yeah. Yep. No. That's great. And then, I guess, secondly, just on margins, I mean, you continue to put up really good margins. The way you're guiding the back half, though, it looks like margins might be down just a touch in the back half to get the, you know, the updated EBITDA guidance. I mean, you raised EBITDA, which is great. But Q2 is so good that it actually takes a little bit of margin, creates a margin headwind, it looks like, in the second half. Right? So just kinda wondering on that.

A: Yeah. Hey, Taylor. I'll throw that over to you. Taylor Greenwald: Yeah. No. Absolutely. So, David, if you look at our gross margins, on the gross margin level, we improved at 140 basis points in Q1, 210 basis points in Q2, and we expect that improvement year over year to continue into Q3 and Q4. So we're feeling very good about the profitability of our business. What we're doing, and it's intentional, is we are investing in SG&A, in sales resources, in technology, both in the infrastructure as we recently implemented our new financial system and HR system, and then also in AI capabilities, to grow the business. But if you look at the back half of the year in terms of our guidance, you know, we're still at around, what, 14% adjusted EBITDA margin. So we still feel very good about that, and it's the fact that our gross margins are seeing such improvement that we're able to invest in growth and continue.