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Edited Transcript of IBEX.OQ earnings conference call or presentation 24-Sep-20 8:30pm GMT

·39 mins read

Q4 2020 Ibex Ltd Earnings Call Oct 8, 2020 (Thomson StreetEvents) -- Edited Transcript of Ibex Ltd earnings conference call or presentation Thursday, September 24, 2020 at 8:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Karl Gabel IBEX Limited - CFO * Robert T. Dechant IBEX Limited - CEO ================================================================================ Conference Call Participants ================================================================================ * Arvind Anil Ramnani Piper Sandler & Co., Research Division - MD & Senior Research Analyst * Ashwin Vassant Shirvaikar Citigroup Inc., Research Division - MD & Lead Analyst * Seth Robert Weber RBC Capital Markets, Research Division - Equity Analyst * Tobey O'Brien Sommer Truist Securities, Inc., Research Division - MD * Brinlea C. Johnson The Blueshirt Group, LLC - MD ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the IBEX Limited Announces Fourth Quarter and Full Year 2020 Financial Results Conference call. (Operator Instructions) Please be advised that today's conference may be recorded. (Operator Instructions) I would now like to hand the conference over to your speaker today, Brinlea Johnson of Blueshirt Group. Please go ahead, ma'am. -------------------------------------------------------------------------------- Brinlea C. Johnson, The Blueshirt Group, LLC - MD [2] -------------------------------------------------------------------------------- Good afternoon, and thank you for joining us today. Before we begin, I want to remind you that matters discussed today 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 final prospectus filed with the Securities and Exchange Commission on August 10, 2020. With that, I'll turn it over to Bob Dechant, CEO. -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [3] -------------------------------------------------------------------------------- Thank you, Brinlea. Good afternoon, and thank you for joining us on our first earnings call as a public company for IBEX Limited. Today, we will be reviewing our fourth quarter and fiscal year 2020 results for our year ending June 30. Before I get into the highlights and the financial results, I would like to take the opportunity to introduce you to ibex and describe our leadership position in the industry. ibex helps the world's leading brands connect to their customers. The business we built has grown to over 22,000 employees across 7 geographies and 30 highly branded contact centers. Over the past year, we handled over 138 million interactions from customer acquisitions to customer service contacts and customer surveys and analytics. And we do this for over 100 premier clients, many who are leaders of the new economy. Our great performance with these clients have enabled ibex to lead the industry in client retention. In fact, we haven't lost a major client in the last 5 years. ibex is a growth leader in a very large market. The TAM we are targeting is over $100 billion and includes digital marketing, contact center services and CX surveys and analytics. We built our brand as a tech-led, highly agile, employee-first business that values insights over transactions, customer experience over labor arbitrage and seeks to disrupt the traditional manner in which outsourcers operate. We are a leader in what is termed BPO 2.0, where new economy clients and digitally transforming companies are passionate about their brands, focused on customer lifetime value, and as a result, are seeking to enhance the customer experience across all channels. Their consumers are digitally native. We believe that our differentiated and broad suite of CLX services, our amazing employee culture and our highly branded global contact centers, along with our purpose-built Wave X technology stack, uniquely position us to lead in this market. The market shift to BPO 2.0 has been critical to our success, demonstrated by our exceptional organic revenue growth rates with both new economy brands and blue chip clients that are seeking to digitally transform their businesses. The result is approximately 30% of our overall business today is digital. This contrast to many of our competitors that still have very voice-centric labor arbitrage-driven businesses. While it has been a challenging year for everyone with the pandemic, the ibex performance and our resilience has been outstanding, and I am very proud of this team. Our results demonstrate the power and the talent of our ibex employees around the world and the traction and strength of our solutions. FY '20 was a record year for us in all of our key metrics: revenue, net income, adjusted EBITDA and new logo wins. Revenues grew 10% year-over-year to $405 million. Net income from continuing operations was $7.8 million versus a loss of $4.5 million in prior year, and adjusted EBITDA increased 49% year-over-year to $54.1 million. We also won 24 new logos throughout the year and have great visibility into the revenue growth they will deliver in FY '21. And great operational performance across all of our regions and centers enabled us to continue our industry-best client retention metrics. Now turning to our solutions. Strategically, we had a strong year with our Velocity offering, which targets the new economy vertical, where we had a record number of new logo wins. As an example, the fastest-growing restaurant management platform company needed an expert outsourced partner to help them scale their customer support, which was experiencing hyper growth. Targeting a nearshore solution, they look to ibex's vision and our success in the region as a clear differentiator. And ibex Nicaragua was selected to support direct interactions with restaurant owners, managers and staff. Originally, this was developed as a proof of concept. But the results were so successful that the client chose to immediately expand and grow the program. Then with COVID impacting internal operations for them, the client was able to scale ibex Nicaragua, help meet the demands of a customer base that was pivoting to digital, contactless restaurant operations, helping these restaurants survive and thrive throughout the pandemic. We've also added complex back office digital solutions that include things like digital menu creation so as to help drive a digital transformation among the restaurant customers for our client. This is a great example of how we leverage all of our capabilities, digital and voice, to build a robust solution for our clients. Additionally, we made a big splash in the utilities vertical with our turnkey, digital marketing, e-commerce technology platform and contact center solution. We are extremely excited about the inroads we have made in the health care vertical as well. We launched this strategic vertical in the beginning of FY '20 and had immediate success, winning 2 clients, providing revenue cycle management solutions and custom technology-based solutions. We also had another great year winning digitally focused blue chip clients, including one of the largest technology and Internet-related services companies and a leading domain registration and web hosting company. We were extremely successful in our land-and-expand strategy, where we are able to leverage our trusted partner position to deploy many new CLX solutions for existing clients. To enable us to service this record growth, we successfully launched 4 new sites across our geographies in the Philippines and Nicaragua from late Q4 FY '19 to Q2 of FY '20. We also won Best Place to Work award, being only the second BPO to win this in all of the Caribbean and Latin America, adding to our numerous awards we have won over the last several years. Our brand and our commitment to those regions remain strong, and our growth will continue to drive expansion in the coming quarters. And our performance did not miss a beat in Q4 of our fiscal year despite the pandemic. Throughout the crisis, we have focused on 3 main areas: one, the health of our people; two, the resiliency for our clients; and three, the strength of our financials. We believe we have been best-in-class in all 3 categories. Because the health of our employees is most important to us, we immediately instituted strict protocols at each of our sites. Globally, we have passed 100% of our health audits since the pandemic started, and we continue to institute measures such as social distancing and enhanced cleaning and sanitation to safeguard our teams. As a result of our hard work, not one of our centers have been shut down. We were also able to rapidly deploy over 10,000 employees to work-at-home status, enabling us to keep over 98% of our people working and earning wages. Through our agile technology and fast decision-making, we are able to keep all of our client operations resilient while winning major market share gains against our slower, less resilient competitors. In fact, we successfully launched 4 new markets for existing clients taking away volumes from our competition. Q4 also brought exciting new clients to ibex. We won 6 new logos in the quarter, all of which have already been launched. The launch of these clients was not impacted by COVID but was accomplished successfully, utilizing our robust virtual hiring and training protocols. And the performance of these clients is great out of the gate, and these programs quickly continue to ramp based on our stellar performance. And our sales pipeline remains extremely strong. And I am confident to say that ibex has proven that we can win during the crisis and outside the crisis. By succeeding for our employees and our clients, our financial results were excellent with a record fourth quarter. In fact, revenues grew 14.7% to $100.9 million from prior year, and adjusted EBITDA expanded to $13.5 million, an 83% increase from prior year. In summary, the resume that my management team and I have built is amazing, and I remain very excited about the future market opportunities. Our results have defined ibex as a leader in more than revenue growth. We are also leaders in EBITDA margin, nearshore and Philippines expansion, new economy client wins, digitally driven solutions, purpose-built technology solutions, new logo wins and hands down the leader in employee engagement. On behalf of the executive team and our Board of Directors, I would personally like to thank our 22,000-plus global employees for their commitment to making ibex awesome, #ibexawesome. And to our new shareholders, we thank you for your confidence in us. We look forward to updating you on the progress in the months ahead. Karl Gabel, our CFO, will now walk you through our key financial highlights to the quarter and the year. He will then turn it back to me to conclude with our full year outlook and our strategic priorities. Karl? -------------------------------------------------------------------------------- Karl Gabel, IBEX Limited - CFO [4] -------------------------------------------------------------------------------- Thank you, Bob, and good afternoon. As this is our first earnings call, I'll start with a review of our full year 2020 financials, followed by our fourth quarter 2020, and then I will turn it back to Bob. My references to revenue are IFRS-based, while profitability measures reference both IFRS and non-GAAP measures. A full reconciliation of IFRS to non-GAAP financial measures is included in the tables attached to our earnings release available today on our Investor Relations website. We had a milestone year, and we are very proud of what we have achieved. Full year revenue increased 10% to $405.1 million compared to full year 2019. New economy revenue grew to 26.9% versus 22% for the same period last year. Non-voice revenue grew to 16.5% from 12.7% for the same period last year. Digital revenue grew to 29.5% versus 28.5% for the same period last year. Our full year net income from continuing operations increased to $7.8 million versus a loss of $4.5 million last year. On a non-GAAP basis, adjusted net income was $15.6 million versus $1.8 million for the same period last year, excluding any adjustments for IFRS 16. Pro forma adjusted fully diluted EPS was $0.84 in 2020 versus $0.10 in 2019. Full year 2020 adjusted EBITDA increased 49% from the prior year to $54.1 million or 13.4% of revenue compared to $36.3 million or 9.9% of revenue in the prior year. This was primarily driven by continued growth in new economy clients, growth in non-voice revenue, expansion in nearshore and offshore regions and margin improvement in our digital business. For fiscal year 2020, on a consolidated basis, our top 3 client concentration decreased to 43.7% from 50.6% of overall revenue last year. The clients outside of the top 3 increased by 25.3% and are primarily responsible for driving the revenue growth. By vertical market, telecommunications decreased to 35.9% of revenue versus 40.5% last year, whereas retail and e-commerce increased to 16.8% of revenue versus 7.9% last year. Net cash generated from operating activities increased significantly to $51.7 million for the year ended June 30, 2020, up from $2.2 million in fiscal year 2019. Non-GAAP free cash flow increased to $25.6 million from a $2.5 million usage in the prior year. The increase in free cash flow is primarily attributable to an increase in adjusted EBITDA, a decline in the DSOs to 48 days from 65 days in the prior year period, offset by higher capital expenditures in 2020. Net debt decreased to $84.1 million versus $109.4 million in the prior year. Capital expenditures were $16.9 million or 4.2% of revenue for the full year 2020 versus $9.7 million or 2.6% of revenue last year. The increase in capital expenditures is primarily attributable to the addition of 2 new sites in the Philippines, a new site in Nicaragua as well as expansions of existing sites in Nicaragua and Jamaica, adding a total of 1,957 workstations, 1,730 offshore, 843 nearshore and while reducing onshore by 616. The company measures capacity utilization, including both agents working at home and on site, against total workstations. Capacity utilization was strong at 84% at both June of 2020 and June of 2019. At June of 2020, on-site capacity utilization was 43% and work at home was 41%, whereas 84% was all on site at June of 2019. Our normalized tax rate was 22.9% in 2020 versus 26.5% in the prior year, excluding the impact of the cancellation of a legacy ESOP plan in 2019. We ended full year 2020 with a strong balance sheet and $21.9 million in cash, up from $8.9 million in the prior year. After the quarter closed, we also added $63.1 million in cash as a result of our recent IPO. Turning to fourth quarter, we had exceptional results, ending a milestone year by over-delivering against many of our targets. Our overall performance is a result of several factors, including: one, our ability to deliver for our embedded client base during unprecedented times; two, our speed in deploying secure technology that enables a high percentage of our workforce to continue to work from home; and three, the trust placed in ibex with our new logo clients. Revenue in the fourth quarter grew 14.7% to $100.9 million compared to the year ago quarter. The Q4 strong revenue growth was minimally impacted by the health crisis of COVID-19 as a result of our performance by the operational teams, as Bob discussed. Net loss from continuing operations in the fourth quarter of 2020 was $3.8 million compared to net loss of $4.6 million for the same period last year. On a non-GAAP basis, adjusted net income was $2.6 million versus a net loss of $1.4 million in the prior year quarter, excluding any adjustments for IFRS 16. Pro forma adjusted fully diluted EPS was $0.14 in Q4 '20 versus negative $0.07 in Q4 '19. Adjusted EBITDA in the fourth quarter of 2020 increased over 83% to $13.5 million, and the adjusted EBITDA margin increased by 500 basis points to 13.4%. This was primarily driven by continued growth in new economy clients, expansion in nearshore and offshore regions and margin improvement in our digital business. In addition, as the company deployed a work-at-home service offering, agent efficiency increased, resulting in margin improvement. Turning to client mix in the fourth quarter. On a consolidated basis, our top 3 client concentration decreased to 40% from 46.7% of overall revenue for the same period last year. The clients outside the top 3 increased by 29% and are primarily responsible for driving the overall revenue growth. By vertical market, telecommunications decreased to 32.7% of revenue from 37.9% in the prior year quarter, whereas retail and e-commerce increased to 20.9% of revenue from 11.4%. As it relates to COVID-19, the largest impact has been operational in nature, primarily related to the complexities of ensuring staff can continue to be productive whether at home or in the new socially distant office environment. Client demand for our services has remained robust despite COVID-19 as confirmed by our strong revenue growth. From a financial perspective, the impact of the pandemic manifested itself primarily in the form of cost to temporarily house over 1,600 of our employees in hotels close to our sites due to the public transportation disruptions in the Philippines. As a result, we have incurred onetime expenses of approximately $5.4 million in the fourth quarter and approximately $6.1 million in fiscal year 2020, net of client reimbursements. We expect to continue incurring costs related to ongoing public transportation disruptions in some of our offshore locations, at least through the end of the first quarter of 2021. As a result of the pandemic, the company is in the process of establishing a more permanent work-at-home services offering and has already terminated 2 U.S. leases that were up for renewal and moved workforces fully to remote in those areas. In summary, our fiscal year '20 revenue growth with new economy and blue chip clients, the development of highly digital and customizable CX solutions and our leadership and BPO 2.0 positions us for continued success in the future. I'll now turn the call back to Bob. -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [5] -------------------------------------------------------------------------------- Thank you, Karl. As I look ahead to FY '21, I'm very excited and optimistic about our market opportunities and our ability to outpace the industry. A fundamental shift has occurred in this industry, and ibex is at the forefront. Our position in the BPO 2.0 world continues to distance itself from yesterday's legacy competitors. As we did so amazingly well in Q4, we remain completely focused on the health of our people and the success of our clients going forward. We are focused on 4 main priorities for the year: one, accelerate winning deals with the new economy leaders and those blue chip clients that are digitally transforming themselves. We are positioned perfectly to continue to win in this market. Number two, continued expansion in our nearshore and Philippines markets. You may have seen our press release recently of being the first to market in Ocho Rios, Jamaica, just as we were the first in Bohol, Philippines a year ago. We have new sites ready to announce later this quarter, and we will continue to push aggressively for further site expansions. Number three, we're going to continue to invest in both technology and sales to further differentiate ibex and to further drive our growth. Our fourth priority, focused M&A around 2 key areas: one being technology that can further advance our Wave X competitive advantage; and two, around our key target verticals. Being mindful of the uncertainty around COVID-19 for our fiscal year 2021, we are conservatively guiding to growth of 6.5% to 7.5% on revenue, with revenues then being in the range of $431 million to $435 million and adjusted EBITDA of $59.5 million to $61 million, a year-over-year increase of between 10% and 13% when compared to prior year. We believe we are well positioned to deliver stellar results going forward with our leadership position in BPO 2.0 and the new digital economy, our reputation for excellence and our strong balance sheet. Thank you all for your time, and I look forward to keeping you posted on our progress. Thank you all. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Ashwin Shirvaikar with Citibank. -------------------------------------------------------------------------------- Ashwin Vassant Shirvaikar, Citigroup Inc., Research Division - MD & Lead Analyst [2] -------------------------------------------------------------------------------- Bob, Karl, congratulations on the quarter. My first question is if you could comment perhaps on the visibility and quarterly cadence for revenues and EBITDA margins for fiscal '21? And in particular, given 1Q is almost done, any color on expectations here would be great. -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [3] -------------------------------------------------------------------------------- Sure. That's a great question, Ashwin, and let me handle that. So I think we have great visibility in our overall business. Our clients are winning. We're winning with them. We're growing with them. We've won new clients. We've launched with them, and it's all repeatable business. And so none of this business that we have is what I'll call onetime or just happen to be a short-term project as it relates to the crisis. So from a overall standpoint, we feel very good about where the business is. The quarter, as you said, is -- we're almost well through it. And so we felt very strong about the trajectory, top line and EBITDA loss. -------------------------------------------------------------------------------- Ashwin Vassant Shirvaikar, Citigroup Inc., Research Division - MD & Lead Analyst [4] -------------------------------------------------------------------------------- And the quarterly cadence part of the question, perhaps if you could help us out so we get our models right? -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [5] -------------------------------------------------------------------------------- Sure. Karl, do you want to touch on the quarterly piece? -------------------------------------------------------------------------------- Karl Gabel, IBEX Limited - CFO [6] -------------------------------------------------------------------------------- Yes. Sure, Bob. Ashwin, nice to talk to you. I think the way Bob explained it is just the visibility we have, led by the retention of our clients going forward, is a key point that he hit on. So as far as the quarterly cadence, we give fiscal year guidance, right, overall. But if you look at our past results, you can see that typically, the second quarter is higher than the first quarter. You do have some seasonality, et cetera, that happens in the second quarter. But I think overall, when you look at it from a fiscal year perspective and the fiscal year number and just the fact of the client retention and our operations team, as Bob said, we feel pretty confident about the guidance. -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [7] -------------------------------------------------------------------------------- Yes. And one last piece, Ashwin, on this is our business, as I think everybody knows, we have a lot in the -- a lot of the winners and the leaders as it relates to the retail marketplace, and they have the products and services that people want around the holiday season. So they -- that stuff starts ramping in the summer. And so our -- we typically go from Q4 to even a stronger Q1 and then a real, very strong Q2. And I think that's pretty much how our business will operate. -------------------------------------------------------------------------------- Ashwin Vassant Shirvaikar, Citigroup Inc., Research Division - MD & Lead Analyst [8] -------------------------------------------------------------------------------- Got it. Got it. And then if I can squeeze in a question on work at home, obviously, that -- given the environment seems to be an attractive offering, what sort of initial feedback are you getting from your clients on that? And when we think of the margins of that, should those look more perhaps like the nearshore rather than onshore? I would imagine it would be higher margins and better capital return. -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [9] -------------------------------------------------------------------------------- So that's a great question, Ashwin. And let me -- I think when we think -- and this is the way we believe our business operates as it relates to work at home. There is the U.S. work-at-home business, which has a set of dynamics in their -- then would -- in the -- what I'll call emerging markets. And there's a set of dynamics that work in those markets. The nature of work at home in the U.S. right now with high unemployment, a call center job being considered essential has made this a desirable job. And so it's enabled us to hire. It's enabled us to retain our people. And I think operationally, we're getting more throughput out of our people in the U.S. because attrition is less -- all those areas have made attrition less and absenteeism less. So it helps move the needle up in our U.S. business. It does not move it up quite to where, what I'll call the nearshore or offshore margins are, but it certainly is a very good trend. When I think about the other markets, the emerging markets, it's a little bit different dynamic. Culturally, people love to work in centers. And broadband bandwidth, broadband reliability, power reliability, things like that in the home are nowhere near what we're accustomed to in the U.S. And so there are some trade-offs on that side of the house. But as -- the exciting thing for us is in the U.S., we're able, as Karl said, we took 600 seats offline in the U.S. without -- while keeping operations up and running. So we think that, that will have our ability to be -- take facilities, reduce the costs that we have for facilities, not just, call it, in our Q4, but as we look out over the course of the year plus. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Our next question comes from Seth Weber with RBC Capital Markets. -------------------------------------------------------------------------------- Seth Robert Weber, RBC Capital Markets, Research Division - Equity Analyst [11] -------------------------------------------------------------------------------- Congrats on getting the first one under your belt here. I wanted to ask about -- the new logos actually came in better than what we were expecting for the year. Can you just talk to the sort of the pace of the sales cycle? And Bob, I think you mentioned that the pipeline was quite strong. Can you just talk to the pipeline, maybe relative to pre-COVID? And do you feel like COVID has kind of triggered more conversations for customers looking to use a company -- use an ibex versus pre-COVID? Just any additional color there? -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [12] -------------------------------------------------------------------------------- Sure. So great question, and there's 2 key pieces on that. And so let me touch -- first, start with the first part of your question on the -- just the flow of the pipeline and the wins. We had an amazing year of 24 new logo wins. What we found is deal flow is fast. And I'll contrast that with many, many years ago, all that you heard on calls like this were extended sales cycles, et cetera. And these were kind of the guys that would do RFPs once every 3 years, and they wouldn't be looking for -- not really looking to move. And what we found, whether it's new economy, kind of new companies in that bucket or even what I call the blue chips, those that are digitally transforming, they're looking for change. They're looking for difference. They're looking for, call it, something disruptive. And we fit very well in that. And so -- and the pace that they're looking for those solutions rivals their new economy, the pure new economy folks. So we've seen just a fast pace on what I'll call kind of both cylinders, if you will, in that. And then part B, the second part, set of your question is the pipeline is really strong. And we have found -- and I want to clarify, the pipeline is not strong with people that are just looking to react to COVID or overreact or because a one vendor -- one partner of theirs might have been inoperable, and let's get a quick fix. That's not what we're dealing with. There were a few of those, and those were on the side and I don't view those as strategic. These are strategic deals that we're winning. And I think clients, with what's going on, it's been a catalyst for people to say, "We need to make decisions." We need to build in BCP and inherent resiliency in their enterprise of whether it's in captives, insourced or outsourced. And I think with that, that has maybe added even a little bit more catalyst in fast decision-making. And we've been winning these deals virtually, virtual site tours. We show the things that just resonate well with ibex, which is our employee engagement, our beautiful branded sites. These show the things that we've done, amazing things they show and they transmit through Zoom calls. They really do, and we've just been winning well more than our fair share in this space. -------------------------------------------------------------------------------- Seth Robert Weber, RBC Capital Markets, Research Division - Equity Analyst [13] -------------------------------------------------------------------------------- Super. That's great color. And then I was intrigued by your comments on the newer verticals, the utilities and health care. Can you just talk a little bit to what your -- what your kind of strategy is there? And are you hiring specialized people to go after those markets? Or do you feel like you're -- you have what you need in-house at this point? And just sort of talk about how you're going after these markets and what you think they could represent over the next couple of years to ibex? -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [14] -------------------------------------------------------------------------------- Sure. That's a great question. And I think I'll answer it from 2 -- there's 2 ways to think about this. Operationally, the team that I have here, they've been doing this on a large scale with some of the large players in this industry, and they've been squarely set in delivering operationally in fintech, in health care, in utility. So operationally, we haven't had to build anything because I have just great operators here that are able to go there. From a go-to-market standpoint, we brought in some of the, what I'll call, really talented folks around the space that have that domain knowledge. So for instance, I brought in one of the individual heads of my financial services. He was in a financial services company, and he ran all of outsourcing for them globally, had the decisions of that outsourcing as well as the captives. He's at the forefront of our financial services and just has a reputation and an understanding and a Rolodex, if you will, great relationships with his peers. And so that gets us out in front of that. The same thing with health care and the same thing with utilities. So we've had instant credibility from a go-to-market standpoint. And then when you look at our solution set, which is tech-led, which is digital driven, most of these companies are looking at trying to figure out how they do that transformation. Our attributes just stack up really well. The deals we've won, we've beaten the who's who of this industry, those that have massive businesses. And so when I think of this, the goal that I've set for each of the, call it, the vertical heads, these guys should be able to create fairly sizable businesses in this. And our goal -- look, we're $400 million. I tend to think that we can be very relevant. Very relevant should be in 10% of our overall business, just as a directional of how we think about this over, call it, 2, 3 years. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from Tobey Sommer with Truist. -------------------------------------------------------------------------------- Tobey O'Brien Sommer, Truist Securities, Inc., Research Division - MD [16] -------------------------------------------------------------------------------- I was wondering if you could speak to cash flow and CapEx expectations for the year, given the EBITDA guidance that you've laid out, absent acquisitions or sort of deployment of capital, what that could look like? -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [17] -------------------------------------------------------------------------------- Sure. Karl, why don't you handle that question? -------------------------------------------------------------------------------- Karl Gabel, IBEX Limited - CFO [18] -------------------------------------------------------------------------------- Sure. Sure. Thanks, Tobey. Thanks for the question. So I mean, if you look at just the cash flow for fiscal year '20 and I thought about the net free cash flow, about $25 million, $26 million, I think it was about $25.6 million, up from a use of about $2.5 million. So what was driving that is -- on our model would be the improvement in the results, also working capital. And the reduction in the DSOs is the primary driver of the improvement in working capital that the company went to 48 days as the DSO for fiscal year '20. And then you have the -- you offset that on CapEx, right? So those would be the primary drivers. And as you look at CapEx -- and Bob, like, talked about this a little bit too as we look at how -- fiscal year '21. But typically, on the maintenance side, you're looking in that 2% to 3% range, right? And anything on top of that would be your growth CapEx. So if you looked at our fiscal year '20, for example, that was about $17 million. I think that would break down probably pretty close to 60% of that was in the growth CapEx. One thing about fiscal year '21 is with social distancing, we are looking at having increased CapEx in our fiscal year '21 actually pulling it forward from fiscal year '22. So you have some more CapEx in fiscal year '21, but that could -- should unwind itself depending upon what you have from new sales and things of that nature. It could unwind itself in fiscal year '22. So I don't know, Tobey, does that answer your question? -------------------------------------------------------------------------------- Tobey O'Brien Sommer, Truist Securities, Inc., Research Division - MD [19] -------------------------------------------------------------------------------- That gets to it. But if I could just ask a follow-up before I get to my next one. What is that -- what's your expectation for DSO at this point? Clearly, fiscal '20 had some significant improvement. Can you hold that? Or could there be some variability here this year? -------------------------------------------------------------------------------- Karl Gabel, IBEX Limited - CFO [20] -------------------------------------------------------------------------------- The company is focused on DSO, and we did benefit from some collections this year to lower it to the 48 days, which may normalize in fiscal year '21. So if you look at, I think, where we came into this fiscal year, we were in the mid-60s, I think, around -- in our fiscal year '19, around -- Q4 around 65 days. So I think the way we look at it is this year, the company continues to focus on DSO. It's very important for the company, but we did benefit some from collections this year, and it may normalize back in fiscal year '21. -------------------------------------------------------------------------------- Tobey O'Brien Sommer, Truist Securities, Inc., Research Division - MD [21] -------------------------------------------------------------------------------- And if I could ask a question about the new logos in the fourth quarter. How do those compare with the new logos added throughout the year in terms of opportunity and ultimate size? Because when we sort of traffic in the language of logos, it's difficult to know the relative importance. So I understand you're just ramping the clients, but you must have a sense of the opportunity and how it compares to opportunity of logos added in prior quarters? -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [22] -------------------------------------------------------------------------------- Sure. That's -- Tobey, it's Bob. Great question. And I'm really excited about the logos. There's -- several of those 6 are fairly sizable that are ramping fast. And they typically start as a Phase 1 and candidly, Phase 2 has started well ahead of whatever we have -- what the original plan was based on us delivering and doing well. So very excited that they are not what I'll call nonmaterial new logos, if that's a word. I think they're important, and they will drive revenue for us. And what we're excited about is that by closing them in Q4 and getting them launched kind of right on that corner from June to July and on, we're going to be able to get a full year of revenue out of those with a ramp -- kind of a ramp in that Q1, but then you start moving up as we move into Q2, Q3, Q4. So we're excited about the impact and have great visibility to the impact that revenue will have for us in this fiscal year. -------------------------------------------------------------------------------- Tobey O'Brien Sommer, Truist Securities, Inc., Research Division - MD [23] -------------------------------------------------------------------------------- Last question for me. With the experience you've gained over the last 6 months, could you describe which of your geographies were and are easiest, not only to ramp and onboard agents in a remote fashion, but also sustain them and manage them and make them feel a little like they're part of the organization? And to the extent you give us kind of like, here are some easy ones and here's some more difficult ones, could you give us the why? -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [24] -------------------------------------------------------------------------------- Sure. And great -- I appreciate that question and kind of the thoughts because that does matter. Our business is premised on great employee engagement, and we've actually been able to continue that through COVID. And so the things that we have done as a company to keep that engagement are just off the charts. And all I say is, you can go look at that at ibex on places like Facebook and such to see what we're doing there because it's -- honestly, it's the best in the industry. Now from an ability to kind of run this business remote, hiring, recruiting and then training, we do this and are doing this well across -- candidly all theaters. Our Nicaragua business is our least work at home, mostly brick-and-mortar there, and we've been able to keep the centers healthy and the people in the centers a lot. We do have probably about 25% of the work at home there. But we're able to hire in all these markets. Some of the markets like Bohol, COVID is really not even relevant there or it's not that big. It's -- so the impact into that island or the island of Davao similarly, so some of these markets that we operate were out of what I'd call the hot zones. And that just makes it easy to hire, makes it easy to get trained, can get them into the centers and then move them out into a work-at-home environment as they kind of get through their initial phase of being a new agent to ibex. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Our next question comes from Arvind Ramnani with Piper Sandler. -------------------------------------------------------------------------------- Arvind Anil Ramnani, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [26] -------------------------------------------------------------------------------- Congrats on a good quarter. So I just had a one kind of overall question. Since going public, I just wanted to see, has that changed your conversations either with existing clients or with prospective clients? Or in other words, like typically, when you go public, you just have like a free branding event, higher profile type of thing. And that sometimes leads to kind of increased customer conversations. I just wanted to see the velocity of conversations or pipeline or interest levels have increased. -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [27] -------------------------------------------------------------------------------- Great question, Arvind, and thanks for your thoughts. And I'll say, being a public company gives us a whole lot of credibility. And when -- credibility around the results that we've had and posted and where this business has come over the last several years and being able to amplify that on a stage like NASDAQ is great for us as a company, and it's great for us just in a presence in the market, awareness in the market. And so with that, we believe that it's -- has helped be a catalyst in our kind of, what I'll say, deal flow and companies that now have heard of us or aware of us now as it's a pretty small industry. So that gets the ibex name out significantly more. And our win rates have been absolutely exceptional, started -- and have been great for several years. But in Q4, kind of as we proceed through Q1, I just feel really strong that, that is nothing but a catalyst for us. Operationally, our teams are heads down focusing on executing. So from that standpoint, being public hasn't really changed one thing, which is the way we want it to be. But certainly, from a external and go-to-market standpoint, I think it's just been -- it's a great position for us to be. -------------------------------------------------------------------------------- Arvind Anil Ramnani, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [28] -------------------------------------------------------------------------------- Yes. Yes. That's really helpful. And just one more question on the operational side. I know in March when COVID hit, you did a phenomenal job about getting operations and kind of being there for your clients. And we just kind of look out over the next 6 months, and there's still like some level of uncertainty. I mean no one knows if this -- if we're going to see like a full-blown second wave or maybe this whole thing goes away. I mean we don't know how it will play out. But are you taking any sort of preemptive measures in place just in case we kind of run into like another like ugly situation from a crisis perspective? -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [29] -------------------------------------------------------------------------------- Great point. And the answer is yes, and I'll give you a couple of kind of examples of -- absolutely. And so the idea -- and think of in the emerging markets for us, where bandwidth and power are challenging, reliable power are challenging in the home. So we've worked with the telcos in the theaters that we operate and have structured deals. And by the way, these are kind of myself and my team connecting with the CEOs of the leading telcos in the markets we're operating to ensure that we get bandwidth into the home and also power, power supplies and things like that. And then in our recruiting profiles, which is basically all being done virtually now, that now has become a key element of the recruiting is to understand the people that we're talking, what's the ability for them to be a work-at-home agent if they have to and understanding that. And so kind of being very thoughtful and looking forward should something like that happen. -------------------------------------------------------------------------------- Arvind Anil Ramnani, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [30] -------------------------------------------------------------------------------- Yes. Yes. And last question for me. I mean, I know during this kind of COVID crisis, you were really able to be there for your clients. And some of your competitors, they just -- they can't -- they couldn't really kind of get it done. And I think one of the things you and I have talked about is like when the dust settles, they know who the reliant, basically, vendors or partners are. And when they look to award the next cycle of work, you guys will be sort of really well positioned just because you did a good job during the crisis. Are you -- are some of those conversations starting to take shape that should sort of help some upside to revenue growth in the next like 12 to 18 months? -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [31] -------------------------------------------------------------------------------- Yes. So nothing like a crisis to -- and as you work shoulder to shoulder, to drive a bond and deeper relationships. And that's exactly what has occurred. And those relationships and what we've done has actually helped us elevate to the highest levels of our clients. And I've had numerous meetings with the CEOs of our clients, which historically, a BPO -- a CEO of a BPO is not having that discussion. And -- but because of just the nature of this, it's helped elevate us up into a much higher level. And I'll go back to, again, in the world of our solution set and BPO 2.0 and our tech-led, we're solving big problems now. And we talked a little bit about kind of what we've done with our restaurant company. And that's at the highest level where we're trying to help their restaurants and who are their customers digitally transform themselves. And so -- and those are strategic discussions, and we're having that across so many of our clients. And I just think that those are a lot different than just "how many seats can you get me" type discussions. And I think it positions us really well, not only for growth, but also just from the world of stickiness and being a real trusted partner and really adding value to their business. I think we're in a great position as a result. -------------------------------------------------------------------------------- Arvind Anil Ramnani, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [32] -------------------------------------------------------------------------------- Yes. Sounds like you guys are in a really good start and looking forward to a number of additional earnings calls now. -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [33] -------------------------------------------------------------------------------- Yes. As we are, Arvind, and we're very happy with where we are in this industry right now. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- Robert T. Dechant, IBEX Limited - CEO [35] -------------------------------------------------------------------------------- Well, listen, thanks for joining ibex and Karl and I for the last hour. We appreciate your interest in ibex, your participation on the call. And we will be -- you'll be hearing from us in the near term and look forward to all connecting in the next quarter. So thank you very much. Everybody, take care and stay healthy. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.