Welcome to the IBEX First Quarter and Fiscal Year 2023 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] As a reminder, today’s call is being recorded. 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 Mr. Michael Darwal with IBEX. Sir you may begin.

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 that could cause our actual result 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 US Securities and Exchange Commission on October 4, 2022. With that, I'll turn it over to Bob Dechant, CEO.

Thank you, Mike. Good afternoon, everyone, and thank you all for joining us today as we share our first quarter fiscal 2023 results. I am extremely proud of how well our business continues to perform in the face of the current market conditions. Our results were very strong across the board. We delivered the company's best first quarter on record highlighted by revenue growth of 17.8% year-on-year to $127.9 million. This was led by 44.3% growth of our BPO 2.0 clients comprised of those new clients won since FY 2016, which now represent 76% of our total revenues. Adjusted EBITDA increased an impressive 59% year-on-year to $18.2 million or 14.3%. Adjusted net income increased to $6.4 million from $0.9 million and free cash flow increased to $5.2 million from $1.6 million in prior year quarter. On a trailing 12-month basis, revenue was $512.9 million, up 16% and well-above our historical 10% growth rates, while adjusted EBITDA was $73.6 million. Our business has been built to successfully navigate choppy waters and perform well in all market conditions. This has been fueled by our powerful new logo engine that continues to win both elite blue-chip clients and leading new economy clients across all our strategic verticals. Our ability to outperform our competition on key client KPIs, leads to our rapid land and expand partnerships, resulting in sizable market share gains. The result is a business that is enviable in both client and vertical diversification. Additionally, IBEX is built well structurally from a digital mix standpoint where today integrated omni-channel and digital-only support is 71% of our overall business and continues to grow. If you recall, when I joined IBEX in May of 2015, 98% of our business was voice-only. As a result, we are strategically positioned to capitalize on the secular trends…

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions, of our first quarter fiscal year 2023 financial results, references to revenue, net income and net cash generated from operations are on an IFRS basis, while adjusted net income, adjusted earnings per share, adjusted EBITDA, and free cash flow are on a non-GAAP basis. Reconciliations of our IFRS to non-GAAP measures are included in the tables attached to our earnings press release. We had a strong quarter, representing our best start to a fiscal year on record highlighted by 17.8% top line revenue growth to $127.9 million, compared to $108.6 million in the prior year quarter. We continue to experience high growth in our BPO 2.0 clients, those that were won since fiscal year 2016, as this cohort grew by 44% over the prior year quarter and now represents 76% of our total revenue versus 62% in the prior year quarter. Net income increased to $4.3 million versus $3 million in the prior year quarter. The increase in net income was primarily driven by stronger operating results, including the absence of non-recurring costs in Q1 fiscal year 2023 partially offset by a negative impact from the fair value measurement of share warrants, and increased depreciation. We expect our annual effective tax rate to be in the range of 12% to 14% on a normalized basis, excluding the effect of the warrant fair value adjustment. On a non-GAAP basis, adjusted net income increased to $6.4 million, compared to $0.9 million in the prior year quarter. Non-GAAP fully diluted adjusted earnings per share increased to $0.34, compared to $0.05 in the prior year quarter. The increase in adjusted net income, and adjusted fully diluted earnings per share was primarily driven by stronger operating results, partially…

Thank you. [Operator Instructions] Our first question comes from the line of Tobey Sommer of Truist. Your line is open.

Hello. Can you hear me?

Yes, Tobey. Hey, it's Bob. How are you doing?

Great. Hey, doing really well. Thanks. I was wondering if you could describe the conditions or what's driving your new logo launches in the quarter because you described a couple of things where you're on your front foot in terms of what you're able to offer and then some market phenomenon where customers are looking to replace underperforming vendors. How would you characterize those drivers in your recent launches?

Sure. So really good question. And how I look at this is there is a flurry of deals that are just driven by the challenges that clients, whether they're our existing clients or target clients. And those – and they typically those that have captives are typically in the what I'll call more of the blue-chip bucket, whereas the new economy clients tend to they've outsourced from day one or they may have had a small little captive that then they started to outsource. And these macroeconomic factors are really putting pressure I believe in their internal operations. And the effects have been moved to work-at-home through COVID then try to get their agents back into the centers. Agents don't want to do that. Attrition jumps up. The cost of replacing those agents is increasing because of wage inflation and pressures, et cetera. So you almost have this virtuous cycle going on there. That then leads them to say, hey, look, I have to react. I have to move fast. I need to look for alternatives to stay resilient. And that's where outsourcing really fits well into the space. And so we started seeing this effect, Tobey happen almost a year ago where we had several clients that we're looking at that and then launching in nearshore or offshore markets as a way to deal with that. And I believe that that's a trend that's going to continue here as we continue to have some of the real hurdles and turbulence in the US market. And so to me that's a big driver that then gets complemented with and I look at it those clients of ours that may not have this – may not have their enterprise rapidly growing but may have their enterprise shrinking. As they deal with that, they're looking to consolidate volume to their best providers rather than have everybody kind of have their volumes decline by 20%, they're going to keep their top performers running full and take that out of the bottom performers. And that's playing really well to IBEX, because we're really strong operationally. And I evidence that with our Net Promoter as from our clients and also from our client retention numbers, which have just been outstanding. And so that plays very well to the IBEX growth trajectory.

Thanks very much for that context. You've been able to grow into some of the capacity that you added over the last couple of years and that's helping margins. How do we think about – how should we think about that on a go-forward basis as the growth increases and the pruning of lower margin customers is less of a headwind? Is there – how long can there sort of tailwind of not needing to invest a ton in CapEx last before you need to sort of revive that?

Yes, yes. And so our analysis has that we have about approximately $150 million worth of capacity – available capacity in the markets that were really exploding and that being nearshore, offshore and places like that. And so if you look at our growth trajectory, we feel that that pushes us well beyond FY 2023 and somewhere into past FY 2024 and into FY 2025 that we're able to mostly grow without a whole lot of CapEx. Now I do think over that time frame, we are going to want to grow into some new geographies, that we're not in today. And that will require a little CapEx, as you go down that path, but we're in a really good position over the next call it, two years plus for operating this business. Low CapEx, we believe you will see margin, appreciation as you fill those centers because we have those costs. Much of those costs are fixed under -- kind of under our belt already. And so the end result of that is, I think we'll -- we're positioned well for a healthy EBITDA expansion low CapEx, which then results in very strong free cash flow.

Last question for me and I'll get back in the queue. What do you see as things that the company needs to focus on building out, over the next year or two to position you to be 2x 3x the size assuming your aspirations go that direction?

Sure. Yes, that's – yes, they are. And our aspirations are, we are on an organic track to $1 billion. If you just look at our trajectory and my team and I really have that in our -- on our radar. Now to accomplish that, I think we need to continue to do what we do really well today, which is opening up in new markets, become a dominant player in those markets and then just build win new logos and fill those centers rapidly. I believe that kind of the recipe for success of that of continued growth in provincial Philippines, into our nearshore -- additional nearshore markets. And then another market that I look and say is an area that we probably want to move into, would be a market like India, where a lot of our clients are -- look into and look for growth. And so I view that as the organic side of what we do well today, and sticking to what we know how to execute extremely well. On top of that though, Tobey, I look at how do we expand the services that we do that can be complementary? And that's an area that I think where you look at higher margin, higher value services. And those are the areas that we're certainly spending a lot of time thinking about, how and where do we go, are we able to organically expand into that put some effort like we did into healthcare and Fintech, or is that something that we need a tuck-in acquisition, to build those capabilities? And those are the things that, my team and I are really looking and hope to really have a very firm strategy to accomplish that to aggressively drive and keep moving top line and bottom line up.

Thank you.

[Operator Instructions] I'm showing no further questions [Technical Difficulty] the call back over to Bob Dechant remarks.

Yes, operator and Valerie, thank you for turning it over to me. And thank you, all for being on the call today. We're really excited about our results. And I just want to thank my management team for continued delivering on this business and look forward to getting together with you all in a quarter from now and in that time hopefully, you all have a healthy and happy Thanksgiving and holiday season. So thank you all, and your confidence in IBEX.

Ladies and gentlemen this concludes the conference. Thank you all for [Technical Difficulty].