Welcome to the IBEX Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. To note, there is also an accompanying earnings deck presentation available on the IBEX Investor Relations website at investors.ibex.co. I will now turn this conference over to your host, Ms. Brinlea Johnson with The Blueshirt Group.

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 opinions 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 that 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 20-F filed with the U.S. Securities and Exchange Commission on October 14th, 2021. With that, I’ll turn it over to Bob Dechant, CEO.

Thank you, Brinlea. Good afternoon, everyone, and thank you all for joining Karl and me today as we share our fourth quarter and fiscal year 2022 results. FY ‘22 was a record year across multiple fronts, including revenue, EBITDA, net income, EPS, free cash flow and new client revenue. We accomplished this in the face of continued pressures related to COVID-19 and an increasingly volatile market. We have demonstrated that we can execute and deliver results during the most difficult times, and our momentum continues to build. In the last three consecutive quarters, we accelerated revenue growth to 15%, which is well above our historical 10% rate, and we achieved our revenue guidance for the fiscal year 2022. Our EBITDA margins continue to expand over the same period and we are proud to report we achieved 15.1% EBITDA margin in the quarter, a record for the fourth quarter on a year-over-year basis. At the core of IBEX is our powerful new logo engine and our ability to land and expand these partnerships. FY ‘22 was a banner year, as we won 23 great new clients. IBEX has a unique ability to win new business with both large, digitally transforming blue-chip clients, and pureplay, new economy, digitally-first brands. We continue to successfully compete against both multi-billion dollar companies, as well as new economy only focused providers. These attributes are enabling us to navigate well through the current market conditions as our clients continue to look to outsource more. IBEX is winning because our differentiators are impactful. There are many elements to our BPO 2.0 capabilities that will continue to resonate well in the market. Our Wave X Technology stack is a key enabler for IBEX to consistently outperform our competitors. Our agent-first culture is simply the best in the markets where…

Thank you, Bob, and good afternoon everyone. Thank you for joining the call today. We had a strong year with record results in top line revenue and net income growth and adjusted EBITDA. The demand for our solution continues to increase both organically, with our existing clients and through new logo wins. Our client diversification is a strange and continues to improve as we added new, high profile HealthTech, FinTech and retail e-commerce clients over the course of the year. I’ll start with a review of our fourth quarter, followed by fiscal year ‘22 financial results. In my discussion, references to revenue, net income, and net cash generated from operations, are in an IFRS basis, while adjusted net income, adjusted earnings per share, adjusted EBITDA and free cash flow are non-GAAP basis. Reconciliations of our IFRS and non-GAAP measures are included in the tables attached to our earnings press release. Fourth quarter revenue increased 13.6% to $123.7 million compared to $108.9 million in the prior year quarter. We continue to experience high growth in our cohort of clients won since fiscal year ‘16, particularly in HealthTech and FinTech, retail and e-commerce, and travel, transportation and logistics verticals. This cohort grew by 43% over the prior year quarter and now represent 74% of our total revenue versus 59% in the prior year quarter. The above revenue growth was partially offset by continued decreases related to our legacy free clients, which now represent only 15% of our total revenue. During the quarter the company strategically replaced one legacy client with a new fast growing HealthTech client. The transition suppressed revenue by $3.9 million and negatively impacted margins compared to last quarter, as we moved our agents to this new high growth launch. Net income increased to $4.9 million versus $4 million in…

Thank you. [Operator Instructions]. Our first question comes from Tobey Sommer with Truist. You may proceed.

Thanks. Well, you talked about your sales pipeline being quite good. I was wondering if could describe what the front of the top of the sales funnel looks like in terms of client behavior, certainly relative to news flow in capital markets. There’s the volatility being expressed and I am wondering if there is any change in the top of the funnel metrics in your sales process.

Sure Tobey, and thanks for that question and really kind of a very thoughtful considering where things are today. Look, I think the overall pipeline as I said is at an all-time high and really strong. But as you peel back the onion, and this is part of what we like in our position across multiple verticals with big blue chips, as well as some new economies. We are seeing a lot of fast deal flow, especially from the blue chips that are evaluating their current scenarios, their current captains, their current business that they have that are struggling keeping those things operating and needing outsourcing to fill the gap in a fairly fast basis. And typically, because they know the pressures that exist in the U.S. market, we’re seeing a lot of demand in what I’ll say in our near shore and Philippines market. As an example, the very, very large healthcare provider, originally we were pretty close and in discussions with the U.S., launch and then that pivoted late into that deal cycle for an extremely aggressive Philippine launch and I think that’s very representative. So we feel that the pipeline is very strong. It will come in a lot of different fronts, but we really like our position where we have our irons in the fire across multiple fronts and we think decisions are being made relatively faster as a result of that.

I appreciate that, thanks. Could you give us a little bit of color on the pace of what you expect for cash flow in fiscal ‘23 and I kind of ask that in the context of being pleasantly surprised at the cash from ops in the fourth quarter itself.

Sure, let me touch on the kind of the broad part and then Karl if you wanted to then add in, feel free to do that. But – and we’ve been saying this Tobey for a while that we aggressively – the business was there. We aggressively built out in a socially distance environment. So if we launched a 1,000 seats center, we were able to only use 500 seats with that. And with the growth that we had and have had, there was a lot of CapEx that we use. Now we said, when we will hit that inflection point at some point, we didn’t know when. And then really as we got to March and April, our markets all opened up and now you see the power of the business that we built from a free cash flow standpoint. Now as we think as into FY ‘23, we are looking at a fairly low CapEx spend for the year and a very good EBITDA year. And so when you put those together, we feel the outlook, not only in ‘23, but also the size of the capacity we have, we look at that into ‘24 and also spilling it ‘25. We think we are in a high cash kind of free cash flow generation here over the next quite some time and we’re really excited about that. Karl, you may want to add some color.

Sure, Bob. Just to add to that, I’d say that as Bob mentioned earlier, we hit our free cash flow inflection point in the back half specifically in Q4. And if you look at the drivers that are – while we don’t give free cash flow guidance, but the guidance we do given indicates continued improvement, higher adjusted EBITDA and margins, lower CapEx. And I think the other point I’ll just hit on that Bob can hit on is just the DSOs. We continue to focus in on DSOs with the company for working capital management, and that is part of the free cash flow equation.

Okay, thank you very much. I’ll get back in the queue.

Thank you. One moment for questions. Our next question comes from Ryan Potter with Citi. You may proceed.

Hey, thanks for taking my question. I wanted to start on your new economy client exposure. I was wondering if you first could remind us what your current exposure in that is there in terms of percent of revenue. Then also what trends you’ve been seeing recently in your new economy clients, particularly as funding levels have reduced for more startup tech companies.

Yes, so good question. And I’ll – if we look at our new economy clients as a whole, I think that number, Ryan, I’ll – maybe we’ll get back to you on that, the exact total number. But when I drill down on the respective verticals that sit inside that or sub-verticals, the one market that we have, that we’ve done a really good job with winning is in the crypto world. And so – but that is this much smaller. There’s other competitors of ours that have heavy exposure in the crypto world. And so ours was probably about 5% of total as the crypto world kind of went upside down. And so when I think of our current position with the new economy players, that’s really the one market that we’re seeing, I guess what I would say kind of sizable softness. But for us our exposure is only –has been only 5% in that. So we don’t feel that any of those areas are going to impact what I think is a – what is a strong growth engine, really driven by the diversification of our clients, our segments, our winning with blue chips, our winning with I think leading new economy folks. And so I feel very good. I feel like we’ve done an amazing job in building a very diversified business on all fronts.

Got it! And then I guess shifting gears to the talent and supply side, what are you seeing in terms of wage inflation and then attrition trends? Have they begun to stabilize? And then also could you give an update on where you are in terms of return to office footprint overall. Like how many of the 10,000 seat capacity that you guys opened up can be kind of backfilled by employees returning to office versus hiring new employees?

Yes, so let me touch the second part first, because that’s a really you know kind of important part of our business. So we obviously went aggressively with work-at-home during the pandemic, and that started to reel back in over let’s say the last four quarters, and today we’re about 20% work-at-home. We had a choice when these markets opened up, to say we’re going to push all those agents back into the centers, to allow us to kind of maximize utilization in those centers or keep them at, you know in a work-at-home environment. We chose to keep the lion’s share of our people in a work-at-home environment, because – and many of my competitors have highlighted this, that when they forced their folks to go home, go back into the center, attrition went – agent attrition went through the roof. So our attrition hasn’t really moved significantly over this timeframe, because we kept our people in the environments that worked. Now the beauty of that for us is now we have all this capacity. Rather than moving all the people in and then you know utilizing your – a lot of your capacity for, call it in that you know like-to-like in flat revenue. So I think that decision is a great decision for our people, for our agents, for attrition and then as a result you know your costs associated with that. Now on your first part of your question certainly wage inflation, wage pressures exist in all markets, and certainly the U.S. would be – you know I think would be you know the market that has the most pressure. We’ve done an amazing job in their selling to clients with high agent wage rates and so we are driving great results in the U.S. margins moving up, etc., you know kind of as a result of really that partnership with clients and the business we are attracting. In some of the other markets you know we see some wage pressures. Just to give you an idea, they would be – you know and so we’ve had to do some wage adjustments at an agent level, but nothing you know of major, so certainly less than 5% wage adjustments, probably more in the, you know in the 3% adjustments and the good news is, the dollar has been extremely strong in those markets. So we’ve insulated ourselves from an FX standpoint, but more importantly, we’ve insulated ourselves from a client standpoint, where we’ve negotiated call out increases in many of our contracts or we’ve negotiated successfully with clients outside of call-out provisions, kind of outside of those time lines, and we’ve been very successful in getting appropriate price increases that allow us to move the wages. So if you put all of that kind of in the mixer, I think the end result will be stronger margin coming out of this business as a result of all of those elements.

Great! Thanks again.

Thank you. One moment for question. Our next question comes from Robbie Bamberger with Baird. You may proceed.

Yeah, thanks for taking my question. So you’re expecting about 15% growth in Q1 and then it seems like about 10% in Q2 through Q4. Is that deceleration just because of top comps and should we expect sort of the normal seasonality that we’ve seen, typically where it’s about the highest revenue in Q2 and then maybe mild deceleration, sequential deceleration after that?

Yeah Robbie, that’s a good – you know it’s a good question. Look, there’s a lot of turbulence in this market, volatility, right. And so our goal is to continue, so just think about you know the last three quarters on – if you put all that together, we were at about a 15% growth and we were seeing roughly that for this quarter one. Our goal is to push towards that with. But just with a lot of turbulence in this market, we’ve just kind of taken a – well, I guess what I would say is a bit of a conservative approach on this, let’s see rather than leading with your chin, which you know we’ve seen that happen. So I think your math plays out right, but I think it’s driven by us, just kind of sitting and saying with that volatility let’s make sure we’re you know kind of just thinking through this conservatively.

Yeah. That makes sense and then maybe on the largest healthcare clients that you talked about, it seems like it’s expected to grow into one your biggest clients in the next few years. Are there other higher value added services? It seems like you were providing them and can you maybe expand a little bit on those and if you could provide those to other healthcare companies for other companies outside of this company as well?

Sure. And so you know Robbie, while I – let me just maybe add a one, one other asterisk. So this new client we announced that we won this quarter, the prior move and the HealthTech client hat we pivoted to, that client will be a top five client in this fiscal year. So we are really excited about the traction we have in the healthcare. One landed in FY ‘22, in the second half of FY ‘22 and will be a Top 5 client this year. Now add on that, now this healthcare provider and this is one of those that we’ve been in, working with for several years and we finally were able to break through with this provider as they finally said and this is a really important point, because we are winning against many multi-billion dollar players. The client finally said, we’re ready to move to something that looks radically different and IBEX fit – they fit the bill. Now, our whole solution in healthcare, expands, revenue cycle, management, member services, things like that. So you know a wide range of appointment schedules. So there is a wide range of solutions that we are providing in this space. With this client, we believe – and you know our largest client that we have and the diversification that we have with our current largest client, we believe that there’s many lines of business, many services that we’re going to use that as a model to try to drive to. And so I feel very, very good about our footprint, our technology and our ability to kind of very disruptively service this client versus some of their legacy incumbents. That recipe has worked in a big way multiple times and I expect it to do the same here.

Great! Thanks you very much.

Yeah, thanks Robbie.

Thank you. And our last question comes from Arvind Ramnani with Piper Sandler. You may proceed.

Hi! Thanks for taking my question. Most of them have been answered, but just a question on, how much of your revenue is exposed to kind of transactional volume. You know for instance, if you have Lyft, I think as an example you used before, I’m sure there’s a certain amount of revenue you get from kind of resolving certain issues on Lyft. So if you can just kind of outline, how of revenue is exposed to transaction. What I’m really trying to get to over here is like you know, if you get into a tough macro and some of your volumes are impacted because of transactions, but your contracts are intact, how much of downside would that really kind of suggest?

Yeah, very thoughtful question Arvind and thank you for that. Look, between a lot that we do in the retail world, and then you know let’s say in the ride sharing world or you know some of these other areas in today’s world, there’s – you know those are consumers, and those are consumers that are reaching out for service and support, whether it’s a –where’s my stuff or whatever and so that’s transactional. Now, let me give you a couple of examples. You know so I highlighted in my remarks. If you heard those about – in the – with the fortune 10 clients that is big in membership, transactional and their volumes were a little bit under pressure. Well, we were outperforming, we were out – as a result we were then able to take market share, into the market share to where we displaced, fully displaced to multibillion providers to grow our business with an overall enterprise that’s shrinking. I could go down my top 10 client list and articulate that same thing playing out multiple times with very, very large e-commerce providers. And so in this space right now, even where there are challenges, be based on our ability to outperform the health of our relationships and just the way we move fast flexible, the fact that we actually went aggressively in build outs when my competitors didn’t, we’re grabbing market share by the drills out of these folks. So on an overall macro, sure, you get concerned about that, but the DNA of these clients are, we’re going to take out our bottom performers and give that business to our top performers and I’ll take that value proposition all day long, because that’s how we’re winning huge market share inside those clients. Arvind, I don’t know if there’s a follow on to that at all or – but you know so certainly we keep focused on it, but we really like our position on being able to keep our top line growing by grabbing market share even if the enterprise is shrinking. That’s probably the most important element.

Thank you. And I’m not showing any further questions at this time. I would now like to turn the call back over to Bob Dechant for any further remarks.

Right Josh! Thanks very much and thank you all for joining us again. We’re excited to be out in front of you all. We just love the position that we’re in, this business that we’ve built, and I think FY ‘23 you’re going to see this momentum continue to go extremely strong. Thank you all for your continued interest and commitment into IBEX. Thanks! See you all.

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.