Concentrix Corp Q1 FY2025 earnings call

• AI solutions: Gen AI solutions powered by own and partner technology deployed at scale. IX suite expected to be accretive to earnings by end of fiscal 2025. Introduced new features of IXLO with smarter, multimodal customer-facing assistance. • Broader offerings: Revenue for top twenty-five clients outpaced other business growth. Offer broad range of business solutions from strategy to digital operations. Differentiated engagement helps grow share of client spending. • Positive trends: Q1 results showed year-over-year revenue and profitability growth above guidance. Confidence in ongoing revenue, margin, and cash flow growth for remainder of the year.

In the first quarter, Concentrix Corporation delivered revenue of approximately $2.37 billion, growing 1.3% year over year on a constant currency basis. On a constant currency basis, revenue from retail, travel, and e-commerce clients grew 4% year over year led by travel clients. Revenue from banking, financial services, and insurance grew 3%. The tech vertical grew about 1%, led by consumer electronics. Healthcare was largely flat year on year due to short shift from a select few clients, media and communications was also flat on a constant currency basis. Non-GAAP operating income was $322 million, with a margin of 13.6%. Adjusted EBITDA in the quarter was $374 million, a margin of 15.8%. Non-GAAP net income was $188 million, and non-GAAP diluted EPS was $2.79.

• Q2 expected revenue: $2.37 to $2.39 billion. Operating income expected $155 million to $165 million, non-GAAP operating income $315 million to $325 million, non-GAAP EPS $2.69 to $2.80. • Full-year 2025: Revenue expected $9.49 billion to $9.635 billion. Constant currency revenue growth 0% to 1.5%. Operating income expected $669 million to $709 million, non-GAAP operating income $1,300 million to $1,340 million, non-GAAP EPS $11.18 to $11.77. Adjusted free cash flow expected $625 million to $650 million.

• Foreign exchange rates can impact revenue and guidance. • Uncertainties in AI deployment and commercialization of products may affect expected growth and margins.

Q: Joseph Vafi with Canaccord Genuity asked about vertical market commentary, especially consumer electronics and other weak verticals, and about the AI suite uses and revenue opportunity.

A: Chris Caldwell responded on consumer electronics taking share from competitors, stability in the sector, and on AI suite that IXLO products came from internal use cases and have traction with thousands of seats deployed.

Q: David Koning with Baird asked about macro environment impact on Gen AI and margins.

A: Chris Caldwell said Gen AI is pervasive in solutions and Andre Valentine talked about synergy savings with $95 million recognized in fiscal 2024 and $120 million projected for 2025.

Q: Ruplu Bhattacharya with Bank of America asked about AI-related spend, POCs of Gen AI, and guidance margin step down.

A: Chris Caldwell said AI spend less than incremental $50 million run rate, POCs still ongoing with Gen AI, and Andre Valentine explained guidance conservatism and ramp costs in Q2.

Q: Vincent Colicchio with Barrington Research asked about pipeline in Europe, Asia Pac, Catalyst, and consolidation trend.

A: Chris Caldwell said Europe and Asia Pac have healthy pipelines, Catalyst attach rate up in Q1, and benefit from consolidation more now than a year ago.

Q: Divya Goyal with Scotiabank asked about AI revenue and margin cannibalization, debt positioning, and macro booking trends.

A: Chris Caldwell said AI deployment won't mute growth with offsetting capabilities, Andre Valentine talked about refinancing seller's note, and Chris Caldwell discussed macro booking trends with strong bookings in Europe, Asia Pac, and North America focused on offshore delivery.