Welcome to the IBEX Third Quarter Full Year 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. To note, there is 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, Investor Relations of IBEX.

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 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 13, 2023. As a reminder, as of July 1, 2023, we became a domestic filer and as such, are reporting on a U.S. GAAP basis rather than from the previous IFRS standards. With that, I will now turn the call over to IBEX CEO, Bob Dechant.

Thank you, Mike. Good afternoon, everyone, and thank you all for joining us today as we share our third quarter fiscal 2024 results. For my remarks today, I will briefly review our results for the quarter, which included the strongest adjusted EBITDA margin and EPS quarter in our history. And then I will go into detail and share our strategy to be at the leading edge of the transformation from traditional live agents to a business that also offers AI virtual agents and automated interactions. Our third quarter fiscal 2024 was one of the strongest on record. The operational and strategic initiatives we have delivered upon over the last several quarters, resulted in adjusted EBITDA of $19.2 million delivering record 15.1% adjusted EBITDA margin and $0.70 adjusted EPS. Revenues for the quarter were slightly down to $126.8 million versus prior year, primarily due to the completion of a short-term project we serviced last year. These results are an output of the structural business we have built. We continue to grow our highest margin services and geographies. Our digital-first and integrated omnichannel business grew to 78% of our revenues from 73% prior year. And our higher margin offshore and nearshore regions grew to 76% of our revenue from 72% prior year. Our higher revenue, lower margin U.S. region contracted to 24% of revenue from 28% prior year. We expect these trends to continue as we land and expand with great new clients. I’m again excited to report we had 3 new client wins in the quarter, totaling 15 for the first three quarters of 2024 as compared to 8 in the same period in FY ‘23. Our pipeline is loaded with great blue-chip clients that continue to look to better alternatives to their long-tenured relationships with our multibillion-dollar competitors. I am…

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussion of our third quarter and fiscal year 2024 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 and non-GAAP measures are included in the tables attached to our earnings press release. Our third quarter results are among the strongest in our history. Our record adjusted EBITDA and EPS results were achieved despite the expected 3.6% decline in revenue from the prior year, which resulted in revenue of $126.8 million versus $131.6 million. On a year-over-year basis, revenue was impacted by the completion of project-related revenue received in the prior year, representing 2 points of the decline and a changing business environment for several of our FinTech and telecommunication costs. Revenue was also impacted by the shift from lower-margin onshore to higher margin offshore geographies. The strength of our 15 new client wins across all our key verticals, partially offset these headwinds. Revenue mix continued to grow in our higher margin digital and omni-channel services and offshore geographies. Digital and omni-channel delivery now represents 78% of our total revenue versus 73% in the third quarter a year ago, while our offshore and nearshore revenues now comprise 76% of total revenue versus 72% in the prior year quarter. Our lower margin onshore region decreased to 24% of total revenue versus 28% in the prior year quarter. We expect that these mix shift trends will continue to have a positive impact on our long-term margins. GAAP net income was $10.3 million, down from $11.3 million in the prior year quarter. The change…

Thank you. [Operator Instructions] Our first question comes from the line of David Koning from Baird. Your line is open.

Yes. Hey, guys. Congrats on great profitability.

Great. Thanks, Dave. Yes. We’re really proud of the milestone of punching north of 15%.

Yes. No, it’s great. And maybe if we just start though on sales activity, you called out in the Q – I know you called out on the call day, but call on the Q specifically that Q3 kind of marked unthawing of some sales decisions and how Q1 and Q2 were still a little tougher for sales. So things are clearly getting better. What’s kind of the timeline between like when those get better and then when that kind of goes into revenue? And then kind of also are these bigger than average or kind of normal size wins?

Yes, Dave, thanks for that question. And, yes, so we started seeing at the beginning of our fiscal year that pace velocity and size of deals starting to pick up, okay? So that would have been kind of around the July time frame. Now the prior two quarters, things were running a little bit slow. So we started getting those and they continue to accelerate into Q3 and some strength into now what I feel like is Q4. The – so we’re excited about that, not only the size and the velocity. Now what we also like is the quality of these new logos and potential new logos. They’re blue chips, leading brands that are out there that are really looking in my mind, looking to challengers to the incumbents, and that plays really well to us. And the challenge to me sits in two buckets. One is, can you go deliver as a strong, differentiated traditional BPO that leverages technology, etcetera. But the other piece in that decision-making is can you drive AI into your business to help them solve interactions. And candidly, and why I lead into the discussion on AI Dave on my remarks is most of what we’re seeing is the industry is talking about AI kind of internally. And we are out in front of how AI can impact the customer experience. And so we think those two things work really well for us. And that’s what the clients are looking. So the size of the opportunities, I think, are great. The brands are kind of what we’ve historically done, which are just the who’s who the – who everybody wants to do business with, and I love the ability for us to compete and to win.

Got it. Thanks for that. And then maybe just one follow-up. The EBITDA margin was really good, obviously. But what was particularly interesting, even with revenue down a little bit, the margin – the gross margin was super strong. It was one of the best, I think, we’ve ever seen. How are you able to do that? Like is it a mix like a geographic mix or what’s happening on the gross margin?

Dave, so let me take the first cut at this and then, Taylor, if you want to add some more color on to this. But look, we the business that we’ve built is one that is structurally solid that as we grow, we think we grow in our high-margin services and geographies. Now right now, we have a few headwinds, but those headwinds are kind of localized to our lower-margin U.S. region. And that region, I think I shared was down about 4% from prior year. But we are growing and landing and expanding with those clients into our Philippine region and our nearshore regions. And so that overall structure of our business, to me, is you put those together. And I think our ceiling continues to rise. And so you might have a quarter here that that bounces off or so but our overall ceiling continues to rise as all of those vectors connect and align. And that’s what happened in Q3. And as I look out over the next several quarters, I feel like gross margin should – we should be able to really have a solid performance around gross margin as a result of that structure. Now Taylor, you might want to give maybe a little bit more color into kind of some of those details, the regional gross margins, et cetera.

No, absolutely. And we’ve had an impressive track record of improving gross margins. If you look at like six of the past seven quarters, we’ve improved gross margins on a year-over-year basis. And really, it’s a combination, as Bob mentioned, we’re going into higher margin services and higher margin geographies, which has helped driving the improvement in our gross margins. And then recently, we’ve also had a couple regional specific initiatives where we thought we could drive improvement in gross margins and have seen good traction with those initiatives. So it’s really a combination of profit improvement initiatives as well as higher margin services.

Got it. Thanks, guys.

Thanks, David. Appreciate it.

Thank you. This concludes the question-and-answer session. I would now like to turn it back to Bob Dechant for closing remarks.

Operator, thank you. So real quickly, I’m very proud of the team and the results that we posted this quarter as said those milestones were quite an achievement from this team. I’m also very excited about the trajectory of our business and really the opportunities that AI presents us and where we believe we are going to be on the leading edge of this transformation. With that, thank you all for joining, and look forward to chatting with you next quarter. Thank you.

Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.