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IBEX announced Record Q4 and Fiscal Year 2023 Financial Results

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IBEX

IBEX Limited (“ibex”), a leading provider in global business process outsourcing and end-to-end customer engagement technology solutions, today announced financial results for its fourth quarter and fiscal year ended June 30, 2023.

Key Fiscal Year 2023 Highlights

  • Fiscal year 2023 revenue increased 6.1% over the prior year period to $523.1 million, with a continued migration from onshore to higher margin offshore and nearshore regions.
  • Revenue generated from BPO 2.0 clients grew at an accelerated rate and increased 18.5% for fiscal year 2023. These clients represented 77% of revenue for the fiscal year.
  • Ten new client relationships were established across the HealthTech, Retail & E-Commerce, Travel, Transportation & Logistics, and Technology verticals during fiscal year 2023.
  • Fiscal year 2023 GAAP net income and diluted earnings per share increased to $31.6 million and $1.67 from $21.5 million and $1.15 in the prior year, respectively. Net income margins in the full year were 6.0%, an increase of 168 bps for the year.
  • Fiscal year 2023 adjusted net income and adjusted earnings per share increased to $36.9 million and $1.96 from $26.0 million and $1.39 in the prior year.
  • Fiscal year 2023 adjusted EBITDA increased 48.8% to $66.6 million, over the prior year. Adjusted EBITDA margins in the full year were 12.7%, an increase of 360 bps for the year.
  • Capacity utilization increased to 77% at June 30, 2023 from approximately 69% at June 30, 2022, contributing to the significant margin improvement.
  • Net cash position improved to $56.4 million as of June 30, 2023 from $33.1 million as of June 30, 2022 due to strong free cash flow generated throughout the year (see Exhibit 4 for reconciliation).
  • Results in line with guidance on a US GAAP basis.

Key Fourth Quarter 2023 Highlights

  • Fourth quarter revenue increased 0.7% to $124.4 million over the prior year quarter.
  • Fourth quarter GAAP net income and diluted earnings per share declined to $4.5 million, and $0.24 compared to $6.4 million, and $0.35 in the prior year quarter, driven largely by the absence of a one-time deferred tax benefit in the prior year quarter. Net income margin was 3.6% compared to 5.2% in the prior year quarter.
  • Fourth quarter adjusted net income and adjusted earnings per share declined to $6.2 million and $0.33 compared to $8.3 million and $0.45 in the prior year quarter, driven largely by the absence of a one-time deferred tax benefit in prior year quarter.
  • Fourth quarter non-GAAP adjusted EBITDA increased 21.0% to $15.4 million, over the prior year quarter.
  • Adjusted EBITDA margins in the fourth quarter were 12.4%, +210 bps in the quarter.

“In the face of a challenging macro-environment, ibex delivered outstanding financial results in fiscal year 2023,” said Bob Dechant, CEO of ibex. “Our business grew at 6% annually, driven by new wins with blue chip clients in our strategic verticals, while adjusted EBITDA grew at an impressive 49%. We made meaningful progress on growth in our key HealthTech and Retail & E-Commerce verticals, as well as our geographic footprint and capacity utilization.” Dechant continued, “We finished the year with continued strong margin expansion and have our pipeline and sales funnel in a great position. Additionally, with our leadership position in developing AI based solutions, I am very optimistic about the long-term trajectory of ibex in fiscal year 2024 and beyond.”

Domestic filing status and US GAAP conversion
As of July 1, 2023, we became a domestic filer and are reporting our financial results in accordance with US GAAP, rather than IFRS. The two significant accounting impacts from this change are in lease and warrant accounting. Among the impacts, this results in a reduction in reported debt of $77.9 million as of June 30, 2023, a reduction in fourth quarter and fiscal year 2023 reported revenue of $0.02 million and $0.2 million, respectively, and a reduction in reported fourth quarter and fiscal year 2023 adjusted EBITDA of $5.3 million and $21.9 million, respectively, compared to what would have been reported under IFRS. When these impacts are factored into our previously provided guidance issued under IFRS, the results align with our previous guidance.

Fiscal Year 2023 Financial Performance
Revenue

  • Revenue increased 6.1% to $523.1 million compared to $492.9 million in the prior year as we successfully grew in our strategic verticals while replacing a large legacy technology client.
  • Revenue growth was primarily driven by strength in our HealthTech, Retail & E-Commerce, Travel and Transportation & Logistics verticals.
  • The Telecom vertical now represents 16.3% of our annual revenue, compared to 18.1% in the prior year, as we continue diversifying our client base.

Net Income and Earnings Per Share

  • Net income and diluted earnings per share increased to $31.6 million and $1.67, respectively, compared to $21.5 million and $1.15, respectively, in the prior year. The improvement was primarily driven by stronger operating results from higher capacity utilization and an increased mix of higher margin nearshore and offshore delivery.
  • Net income margin was 6.0%, compared to 4.4% in the prior year.
  • Non-GAAP adjusted net income and diluted adjusted earnings per share increased to $36.9 million and $1.96, respectively, compared to $26.0 million and $1.39, respectively, in the prior year (see Exhibit 1 for reconciliation).

Adjusted EBITDA

  • Adjusted EBITDA increased to $66.6 million, compared to $44.7 million in the prior year (see Exhibit 2 for reconciliation), driven by stronger operating results from higher capacity utilization and an increased mix of higher margin nearshore and offshore delivery.
  • Adjusted EBITDA margin was 12.7%, compared to 9.1% in the prior year (see Exhibit 2 for reconciliation).

Fourth Quarter Financial Performance
Revenue

  • Revenue increased 0.7% to $124.4 million, compared to $123.5 million in the prior year quarter. Revenue growth was driven by 10% growth in our higher margin near and offshore regions, offset by lower onshore revenue, and was moderated by prevailing macroeconomic market conditions. Revenues in our higher margin offshore and nearshore regions represented 73.9% of revenue mix for the quarter versus 67.8% in the prior year quarter.
  • Revenue related to our BPO 2.0 clients grew 7.0% compared to the prior year quarter and now represents 78.8% of our quarterly revenue.

Net Income and Earnings Per Share

  • Net income decreased to $4.5 million compared to $6.4 million in the prior year quarter. Diluted earnings per share decreased to $0.24 compared to $0.35 in the prior year quarter. The decrease was primarily the result of higher taxes due to the absence of a one-time tax benefit in the prior year quarter.
  • Net income margin decreased to 3.6% compared to 5.2% in the prior year quarter.
  • Non-GAAP adjusted net income was $6.2 million, compared to $8.3 million in the prior year quarter. Non-GAAP adjusted diluted earnings per share decreased to $0.33, compared to $0.45 in the prior year quarter (see Exhibit 1 for reconciliation). The decline was largely the result of a one-time tax benefit in the prior year quarter.

Adjusted EBITDA

  • Adjusted EBITDA increased to $15.4 million, compared to $12.8 million in the prior year quarter (see Exhibit 2 for reconciliation), driven by stronger operating results from higher capacity utilization and an increased mix of higher margin nearshore and offshore delivery.
  • Adjusted EBITDA margin increased to 12.4%, compared to 10.3% in the prior year quarter (see Exhibit 2 for reconciliation).

Fiscal 2023 Year End Cash Flow and Balance Sheet

  • Cash flow from operations increased to $41.9 million, compared to $40.0 million in the prior year. The increase was primarily driven by improvements in operating results, offset by higher working capital requirements.
  • Capital expenditures were $19.0 million compared to $25.9 million in the prior year.
  • Full year free cash flow increased to $22.9 million, compared to $14.1 million in the prior year (see Exhibit 3 for reconciliation).
  • Cash and cash equivalents improved to $57.4 million and availability on our revolving credit facilities was $71.9 million as of June 30, 2023, compared to cash and cash equivalents of $48.8 million and availability on our revolving credit facilities of $50.5 million as of June 30, 2022.
  • Total debt was $1.0 million as of June 30, 2023, compared to total debt of $15.7 million last year.
  • Net cash position improved to $56.4 million as of June 30, 2023 from $33.1 million as of June 30, 2022 (see Exhibit 4 for reconciliation).

Fiscal Year and First Quarter Fiscal 2024 Business Outlook
“Looking ahead to fiscal year 2024, while the sales pipeline remains healthy, we expect the macroeconomic environment and trend toward lower cost, higher margin regions will continue to impact revenue growth. The impact of the operational improvements we’ve made to our business and margin structure will carry forward, which enables us to further invest in our infrastructure for the future, as we focus on revenue growth and continued EBITDA margin expansion,” said Taylor Greenwald, CFO of ibex. “We view ibex as a business that will resume to historical growth rates with continued margin expansion over the longer term.”

  • For fiscal year 2024 revenue is expected to be in the range of $525 to $535 million, representing low single-digit growth. Adjusted EBITDA margin should increase to approximately 13%.
  • For the first quarter fiscal 2024 revenue is expected to be in the range of $122 to $125 million, reflective of the macroeconomic impacts. Adjusted EBITDA margin should increase to approximately 11% versus 10% in the prior year quarter on a US GAAP basis.
  • Fiscal year 2024 capital expenditures are expected to be in the range of $15 to $20 million.

Conference Call and Webcast Information
IBEX Limited will host a conference call and live webcast to discuss its fourth quarter of fiscal year 2023 financial results at 4:30 p.m. eastern time today, September 13, 2023. The conference e-call may be accessed by registering at here. We will also post to this section of our website the earning slides, which will accompany our conference call and live webcast, and encourage you to review the information that we make available on our website.

Live and archived webcasts can be accessed at: https://investors.ibex.co/.

Financial Information
This announcement does not contain sufficient information to constitute an interim financial report as defined in Financial Accounting Standards ASC 270, “Interim Financial Reporting.” The financial information in this press release has not been audited.

Non-GAAP Financial Measures
We present non-GAAP financial measures because we believe that they and other similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. We also use these measures internally to establish forecasts, budgets and operational goals to manage and monitor our business, as well as evaluate our underlying historical performance, as we believe that these non-GAAP financial measures provide a more accurate depiction of the performance of the business by encompassing only relevant and manageable events, enabling us to evaluate and plan more effectively for the future. The non-GAAP financial measures may not be comparable to other similarly titled measures of other companies, have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP as issued by the Financial Accounting Standards Board (“FASB”). Non-GAAP financial measures and ratios are not measurements of our performance, financial condition or liquidity under GAAP as issued by the FASB and should not be considered as alternatives to operating profit or net income or as alternatives to cash flow from operating, investing or financing activities for the period, or any other performance measures, derived in accordance with GAAP as issued by the FASB or any other generally accepted accounting principles.

ibex is not providing a quantitative reconciliation of forward-looking non-GAAP adjusted EBITDA margin to the most directly comparable GAAP measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items without unreasonable effort. These items include, but are not limited to, non-recurring expenses, fair value adjustments, and share-based compensation expense. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period.

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