IBEX's Q4 2025 Earnings Call: Contradictions Emerge on AI Margins, Growth Sustainability, and Generative AI Impact

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $558.3M for FY2025, up 9.8% YOY; Q4 revenue $147.1M, up 18.2% YOY
• EPS: $2.36 diluted EPS for FY2025, up 28% YOY (Adjusted EPS $2.75, up 31% YOY)
• Gross Margin: 31.4% in Q4 (maintained; prior-year comparison not provided)

Guidance:

• Revenue for FY26 expected at $590–$610M.
• Adjusted EBITDA for FY26 expected at $75–$79M.
• Q1 FY26 revenue expected at $143–$146M.
• Q1 FY26 adjusted EBITDA expected at $17.5–$19M.
• FY26 capital expenditures expected at $20–$25M.
• Normalized tax rate expected at 20%–22%.
• DSOs expected to remain in the mid-70s days.

Business Commentary:

• Revenue Growth and Market Share Expansion:
• IBEX reported record fiscal year revenue of $558.3 million, up 10% from a year ago, with Q4 revenues increasing to a blistering 18% from the prior year.

• Growth was driven by operational excellence, market share wins, and the strategic expansion into higher margin offshore regions and digital acquisition business.

• AI Integration and Strategic Vision:

• The company deployed AI internally to enhance operational efficiency, and AI agent solutions like chatbots and voice bots were rolled out to handle less complex interactions.

• This strategic move positioned IBEX as an industry leader in AI-driven customer experience solutions, enabling it to support customers across their entire journey.

• Health of the Balance Sheet and Shareholder Returns:

• IBEX ended the fourth quarter with a net cash position of $13.7 million, showing a strong balance sheet, with zero net debt and robust free cash flow generation.

• The company completed share repurchases totaling 3.9 million shares during fiscal 2025, indicating confidence in its financial health and commitment to shareholder value.

• Retention and Growth in Key Verticals:

• Retail and e-commerce increased to 25.3% of fourth quarter revenue, health tech remained strong at 14%~, and travel, transportation, and logistics also showed growth.
• Success in these verticals was driven by a diversified client portfolio and the ability to retain and expand with existing clients, while continuously winning significant new clients.

Sentiment Analysis:

• Management highlighted record FY2025 revenue ($558.3M, up ~10%), record adjusted EPS ($2.75, up 31%), and Q4 revenue growth of 18%. They cited strongest-ever free cash flow in Q4 ($23M) and confidence in FY2026 with guidance for revenue of $590–$610M and adjusted EBITDA of $75–$79M. CEO emphasized market share gains, strong embedded client performance, and full-scale AI deployments moving beyond proofs of concept, stating the company is well positioned for FY2026 and beyond.

Q&A:

• Question from David Koenig (Baird): Q4 was up ~5% sequentially vs typically flat/down; was any of this one-time? Also, the 'other' vertical jumped significantly—was that a new client and is it sustainable?
  Response: Growth is sustainable (not one-time), driven by market-share gains with existing clients across geographies, strong digital acquisition performance, and continued new-logo momentum with no client losses.

• Question from David Koenig (Baird): How do you view Gen AI’s net impact on volumes and your business outlook?
  Response: AI moved from POC to full-scale deployments; IBEX’s end-to-end integration from AI agent to human agent is resonating with clients and creating a new growth vector, positioning the company ahead of peers.