IBEX Ltd Stock

Hello, and welcome to ibex Fourth Quarter Full Year 2026 Earnings Conference Call. [Operator Instructions] To note, there is an accompanying presentation available on the ibex Investor Relations website at investors.ibex.co.

I would now like to hand the conference over to Mr. Greg Bradbury, Investor Relations for 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 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 10, 2026, and any other risk factors we include in the subsequent filings with the SEC.

With that, I will now turn the call over to ibex CEO, Bob Dechant.

Thanks, Greg. Good afternoon and thank you all for joining us today as we review our fourth quarter and fiscal year 2026 results. I am pleased to report that our fourth quarter marked another period of outperformance, continuing the momentum we have built throughout fiscal 2026, as we further expanded our differentiation while creating additional separation between ibex and the rest of the traditional BPO market.

We delivered record fourth quarter revenue, growing 12% to $164.3 million, bringing our full-year organic revenue growth to 15%, or $644.1 million. We also did this while generating full-year records for adjusted EBITDA, EPS, adjusted EPS, operating cash flow, and free cash flow. The quarter also marked our sixth straight quarter of double-digit revenue growth. These results demonstrate the strength of ibex and the separation we have from the competition. We have created a powerful flywheel that enables us to consistently outperform the market.

It starts with our differentiation and proven track record, which enables us to win trophy new logo clients across key verticals. We then operationally outperform our competition, allowing us to rapidly take significant market share. As a result, we have built a business with best-in-class client retention rates. The proof points of our flywheel are clear. In the fourth quarter, our new logo engine accelerated considerably. During the period, we added nine new trophy logos, bringing our annual total to 17 wins across multiple verticals and geographies. For the year, revenue from our top five, top 10, and top 25 clients grew 24%, 22%, and 15%, respectively.

This growth represents market share we are taking from our competitors. I am proud to report that ibex was named Partner of the Year by three different Fortune 500 companies, all of which are top 10 clients, highlighting that our clients clearly recognize the impact of our solutions on their business outcomes.

In fiscal year 2026, we recorded revenue and client retention rates north of 99%, indicating our ability to deliver not just for a select few clients, but across our client base. Additionally, our client Net Promoter Score remains world-class at 71. While our financial results already underscore this point, it is another strong validation that our clients remain incredibly supportive of the work we are doing. On the topic of growth, earlier this year we announced our target of growing the Health Tech vertical into a $100 million business by the end of the fiscal year. During the fourth quarter, the segment grew 42% to $29.4 million and grew 38% for the full year to $114 million, significantly surpassing the revenue goal we set for the business. What makes that performance especially compelling is that this growth has been built organically and will continue to be one of ibex's most important growth vectors in fiscal year 2027 and beyond.

While Health Tech represents a large and important vertical to us, it also serves as a strong showcase of our proven ability to build and scale new verticals organically across new geographies, further validating our ongoing investment and expansion into additional high-growth markets. One attribute of ibex that I am particularly proud of is our ability to improve as we grow. That applies to our business, our team, and our brand. I am pleased to report that our employee Net Promoter Score increased this year from an already impressive 77 to 82, with a 95% participation rate, putting us in unprecedented territory not only amongst traditional BPO peers, but across all industries. This is an important part of our competitive moat and a foundation for our ability to consistently outperform the competition.

Fiscal year 2026 also marked a transformational step forward in defining a new era of BPO, one powered by AI agents. Our strategic partnership with Sierra AI firmly establishes ibex as a leading provider of AI agents. We bring an integrated solution to market that enables us to deliver both effective AI agent call containment and high levels of customer satisfaction. Many studies, including one by MIT, have highlighted that AI agent solutions often fall short on ROI or deliver poor quality interactions. Our solution is designed to deliver both significant cost savings and high-quality AI-driven interactions. It combines a best-in-class AI agent engine with our best-in-class business insights to create customer journeys that deliver the end.

And we formalized the strategic partnership in late January and announced it publicly in May. In that short period of time, we have achieved tremendous traction across both new and existing clients, demonstrating that our AI strategy is translating into a transformational success for our clients and ibex. The following are four distinct and meaningful case studies that highlight the progress we are making at AI speed. In the first, ibex beat out a pure-play AI technology company, a SaaS technology company, and a traditional multi-billion dollar BPO peer to win and launch an AI agent partnership with Philippine Airlines, an existing ibex client.

We won the proof of concept in Q4 and reached full-scale deployment at the start of fiscal year 2027. During the proof-of-concept phase, ibex launched an AI agent solution in three languages, English, Tagalog, and Taglish, achieved resolution rates above 20% and delivered CSAT above 4.7 out of 5.0, on par with our traditional human agents while our competitors struggled. Importantly, and consistent with our thesis going in, this solution is not cannibalizing our revenues.

As we continue to be a critical partner, we are able to take share from our BPO competitors on the human agent side. This is a significant net win and a strong early proof point of how we intend to win in the evolving BPO 3.0 market. The second example is with BJ's Wholesale, a new trophy client win in which we led with our AI solution, not traditional BPO. We launched in June and achieved impressive results in weeks, not months.

We are attaining resolution rates above 40% and CSAT scores above 4.7 out of 5.0, exceeding the human agent scores delivered by the client's legacy BPO vendor. Based on the outstanding performance and the strength of the partnership we have forged, we now anticipate launching traditional human agents in the first half of fiscal year 2027. This adds another dimension to our powerful land and expand model. We believe BJ's is a great illustration of our ability to lead with AI, deliver meaningful client outcomes, and then win additional business, proving that our AI agent solutions are not merely an ancillary offering, but a leading solution that will drive future growth.

A third example comes from deploying Sierra AI on our digital customer acquisition business. In this case, we are leveraging AI agent solutions we built to take inbound call volume that were previously handled through traditional IVR and converting them into incremental sales opportunities for our human agents. This creates a virtuous cycle. We are easily able to scale to answer all the call volume generated through our own digital marketing efforts, efficiently convert them into additional revenue opportunities, and reinvest in new digital marketing campaigns to further expand this growing business.

The last and fourth example highlights the strength of our partnership. Not only are we winning new business by leading with the ibex Sierra solution, but we are also winning traditional CX business through the partnership. Earlier in the year, Sierra introduced us to a leading luxury activewear brand seeking the right partner to scale human agent support alongside its AI solution as the brand experiences hyper growth. Based on the strength of Sierra's partnership and the trust it had developed with the client, we signed and launched a proof of concept within 30 days. Following our outperformance versus the incumbent vendor, we signed a long-term agreement and are now executing an aggressive ramp.

This is a great example of how our traditional BPO can work and now move at the speed of AI, not BPO. Each of these four solutions are driving incremental growth for ibex. And we currently have double-digit client deployments with our AI agent solution spread across five verticals, creating additional vectors of growth. Importantly, we have now turned the perceived threat of AI for BPOs into an important growth opportunity for ibex. The result is a business that is strategically built for today and tomorrow. For many quarters, we have demonstrated our ability to outperform the traditional BPO market on the human agent side of the business.

Now we have created the ability to deliver best-in-class AI agents as well, which gives us confidence in our ability to continue to deliver on our growth trajectory, both near-term and long-term. To summarize, we will look back on fiscal 2026, not only as another banner year across the business, but also as the start of something greater. We began to define the new era of BPO, BPO 3.0, and we are confident in our ability to build on this momentum and solidify ibex's industry leadership position. I firmly believe our business today is stronger than ever, and that we are best positioned for the future. Lastly, I want to thank my team for their tireless efforts in making ibex the best in the industry.

With that, I will now turn the call over to Taylor to go into more detail on our fourth quarter and fiscal year 2026 financial results and guidance. Taylor?

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our fourth quarter and fiscal year 2026 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 to non-GAAP measures are included in the tables attached to our earnings press release. Turning to our results, we had a strong fourth quarter across many key operating metrics, including revenue, adjusted EBITDA, EPS, and free cash flow. This was our sixth consecutive quarter of double-digit revenue growth, resulting in top-line growth of 12% for the quarter. Our differentiating solutions and execution are clearly separating us from the traditional BPO pack.

Fourth quarter revenue was $164.3 million, up from $147.1 million in the prior year quarter. Revenue growth was driven by vertical growth in Health Tech of 42%, Technology of 27%, Travel, Transportation, and Logistics of 18%, Retail & E-commerce of 7%, with help from growth in our AI agent solutions. We continue to win and grow in all geographic markets during the quarter. Our onshore region grew 15% compared to the prior year quarter, driven by clients won and launched during fiscal year 2026, including several clients in our higher margin Health Tech vertical. Our highest margin offshore region grew 14% from the prior year quarter, and our nearshore locations grew 2%. Offshore revenue comprised 50% of total revenue, allowing us to maintain our strong gross margin of 28.6% for the quarter. Onshore revenue expanded to 28% of total revenue from 27% in the prior year quarter.

Our higher margin digital and omnichannel services also continue to strengthen, growing 12% versus the prior year quarter to 82% of total revenue. This continued mix shift reflects the growing contribution of our digital and AI-enabled solutions and reinforces the strategic and financial impact as deployments begin to scale. We have structurally built ibex so that our growth vectors are our highest margins regions, services, and vertical markets, and we expect that we will continue to be successful driving long-term margin growth.

Fourth quarter GAAP net income was $8.7 million compared to $9.6 million in the prior year quarter. The results were primarily driven by training expenses related to the many new client wins in the quarter and temporary impact of work transferring from nearshore to offshore delivery centers, as well as the impact of higher fuel prices on utility and transportation expenses, particularly in our offshore region. Our GAAP results also include $2 million of lease termination losses and severance expense associated with a shift of work from our nearshore to offshore regions, as well as impairment losses and asset disposal gains. Our tax rate was 10% versus 19% in the prior year quarter, primarily attributable to changes in revenue mix across our taxable jurisdictions and discrete tax items, including a favorable resolution of uncertain tax position during the current year.

Fully diluted GAAP EPS was $0.59, down from $0.66 in the prior year quarter. Moving to non-GAAP measures, adjusted EBITDA decreased slightly to $20.2 million, or 12.3% of revenue, from $20.5 million, or 13.9% of revenue, for the same period last year and driven primarily by the expenses related to new client wins, the temporary impact of work transferring from nearshore to offshore, as well as the impact of higher fuel prices. We expect adjusted EBITDA margins to return to expanding in the first quarter of fiscal year 2027.

In addition to our customary non-GAAP adjustments of stock-based compensation and foreign currency gains and losses, our non-GAAP results also exclude the $2 million of lease termination losses, severance expense, impairment losses, and asset disposal gains discussed above. Adjusted net income remained consistent at $12.7 million when compared to the prior quarter. Non-GAAP fully diluted adjusted earnings per share was $0.85 compared to $0.87 in the prior year quarter. As a company, we are pleased with the client diversification we have established over the last several years.

For the fourth quarter of fiscal year 2026, our largest client accounted for 9% of revenue, and our top five, top 10, and top 25 clients represented 33%, 53%, and 75%, respectively, of overall revenue, compared to 36%, 54%, and 79%, respectively, of overall revenue in the prior year quarter, representative of a well-diversified client portfolio which continues to diversify with new clients. Over the past decade, we have done a tremendous job of not only retaining our top 25 clients, but also winning and growing new strategic clients. Two great examples of this are two of our signature client wins from fiscal year '25 growing into top 25 clients, and one of our signature client wins from fiscal year '24 growing into a top 10 client.

Switching to our verticals, Health Tech grew 42% and increased to 17.9% of fourth quarter revenue versus 14% in the prior quarter. Technology grew 27% and increased to 8.4% compared to 7.4%. Travel, Transportation, and Logistics grew 18% and increased to 14.5% compared to 13.8%. And Retail & E-commerce grew 7% and comprised 24.2% of total revenue compared to 25.3% in the prior year quarter. These increases were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to the lower margin Telecommunications vertical decreased to 9.4% of revenue for the quarter versus 10.9% in the prior year quarter as we see lower volume from legacy carriers.

Revenues from the FinTech vertical were up 3% and represented 9.7% of revenue for the quarter versus 10.6% in the prior year quarter. Moving on to our full-year results, we achieved record full-year revenue, adjusted EBITDA, EPS, adjusted EPS, operating cash flow, and free cash flow for fiscal year 2026. Fiscal year 2026 revenue was $644.1 million, an increase of 15.4% from $558.3 million in the prior year. Revenue growth was driven by vertical growth in Health Tech of 38%, Technology of 26%, Travel, Transportation, and Logistics of 17%, and Retail & E-commerce of 14%, along with accelerating growth in our digital acquisition business and our AI agent solutions.

During fiscal year 2026, these AI-enabled offerings progressed from an emerging growth vector to becoming a more meaningful contributor to our results, supporting both new client wins and expansion within our embedded base. We grew in both our onshore and offshore regions throughout the year. Our onshore region grew 25% compared to prior year, driven by growth of several clients in our higher margin Health Tech vertical, in our high margin AI agent solutions, and digital acquisition business. Our highest margin offshore region comprised 51% of total revenue and grew 16% compared to prior year. Revenue from our nearshore locations grew 5% compared to the prior year.

Fiscal year 2026 net income increased to $46.3 million versus $36.9 million in the prior year. The increase was primarily driven by the continued revenue growth and operating leverage gained from SG&A expenses. Our effective tax rate was 14.7% versus 19.7% for fiscal year 2026, which was attributable to changes in revenue mix across our taxable jurisdictions and discrete items recognized in the current year. Excluding the discrete tax benefits from stock-based compensation and favorable resolution of uncertain tax positions, our effective tax rate would have been 18.2% for fiscal year 2026. We expect our normalized tax rate going forward to be in a 20% to 22% range, benefiting from higher net income and lower diluted shares outstanding. Our GAAP fully diluted earnings per share increased 32.8% to $3.13.

Reviewing our non-GAAP measures for the full year, adjusted EBITDA increased to a record of $82.4 million compared to $72 million for the prior year. Adjusted EBITDA margin was 12.8% for fiscal year 2026, consistent with 12.9% for the prior year. Adjusted net income increased 21% to $52.2 million compared to $43 million in the prior year. Non-GAAP fully diluted adjusted earnings per share increased 28% to $3.52 compared to $2.75. The increase in non-GAAP adjusted net income and non-GAAP fully diluted earnings per share was primarily driven by the top and bottom line operating performance discussed earlier and our lower tax rate and share count.

Moving to cash flow, net cash generated from operating activities was a record $59 million for fiscal year 2026 compared to $45.7 million for fiscal year 2025, which was driven by an increase in our revenues and profitability offset by a higher use of working capital. Our DSOs were 69 days for the quarter, down from 72 days at the end of last year. We expect our DSOs to remain stable in the low to mid-70s on a go-forward basis. Capital expenditures were $27.8 million or 4.3% of revenue for fiscal year 2026, versus $18.4 million or 3.3% of revenue in the prior year. This increase was primarily driven by expansions in our offshore regions and purchases of IT and telecommunications equipment to support the company's continued growth.

Free cash flow for fiscal year 2026 was a record inflow of $31.2 million compared to an inflow of $27.3 million in the prior year. This increase was primarily driven by the increase in net cash generated from operating activities offset by the planned increase in capital expenditures. We are proud to have achieved record cash flow levels while investing for high growth. During the quarter, we repurchased 143,000 shares for $4.3 million at an average price of $29.83, bringing our fiscal year share repurchases to 453,000 shares for $14.4 million at an average price of $31.70.

On May 11, 2026, the Board authorized a new share repurchase program for $20 million, and the total amount available for repurchase as of June 30, 2026, was $17.9 million. We ended the fourth quarter with $32.6 million of cash and debt of $1.7 million for a net cash position of $30.9 million, an improvement of $16.9 million compared to net cash of $14 million at the end of the third quarter, an improvement of $17.2 million compared to net cash of $13.7 million at the end of our last fiscal year.

I am also pleased to mention two additional items. First, we just renewed our revolving HSBC credit facilities through October 2029 with a total capacity of up to $76 million. Additionally, as it has now been over five years since our IPO, we have exited emerging growth status and are well prepared for the SOX certification process to attest to the effectiveness of our financial reporting and disclosure controls. Looking back, fiscal year 2026 was a banner year that included record performance across many key operating metrics, including revenue, adjusted EBITDA, EPS, and free cash flow. Our financial results were driven by consistent performance throughout the year, supported by our differentiated strategy and increased traction in our AI-enabled solution offerings.

Looking ahead, this momentum gives us confidence that our strategy will continue generating results that outpace our market as we head to fiscal year 2027. Forecasting the year ahead, our healthy balance sheet and cash flows are enabling us to continue to make smart investments to support increased capacity for anticipated growth, as well as to further extend our current AI leadership position. Reflective of our current position and forward momentum, we are providing initial first quarter and fiscal year 2027 revenue and adjusted EBITDA guidance.

For fiscal year 2027, revenue is expected to be in the range of $700 million to $715 million or 9% to 11% growth. Adjusted EBITDA is expected to be in the range of $90 million to $94 million or 9% to 14% growth. For the first quarter fiscal year 2027, revenue is expected to be in the range of $168 million to $170 million or 11% to 12% growth. Adjusted EBITDA is expected to be in the range of $22 million to $23 million or 13% to 18% growth. Capital expenditures for the year are expected to be in the range of $25 million to $30 million. Our business is well positioned for today and the years ahead, and we are excited about the momentum we have built as we head into fiscal year 2027 and beyond.

With that, Bob and I will now take questions. Operator, please open the line.

[Operator Instructions]

Our first question comes from the line of Jacob Haggarty with Baird.

Congrats on another great quarter here. Just a question real quick, could you -- like, your growth has accelerated pretty nicely since the AI fears have kicked in, ironically. Are you guys already seeing benefits from AI? Is that part of what's driving this growth, or can that be an accelerating factor in the years to come here?

Hey, Jacob, it's Bob, and thanks for the question and appreciate your being on the call. So here is my belief is our performance continues to stand out, and that is noticed by potential clients that are looking at us, et cetera. But when we do the announcement with Sierra, such a strong player in the AI world, it also helps them take notice, and it puts us, I think, into a different classification versus the rest of the pack. And really moves us into that position of being a BPO player that can be their partner for today in the human world, but also be their partner as they now evolve and the -- bring AI agents to market.

And so it further differentiates us. And I think that is what we are seeing is the acceleration of our business, our traditional business, our business to -- our ability to win new logos, but it also now creates what we are really excited about is another dimension for growth. Because if you think about our implementations, we go from a proof of concept to rapidly full deployment.

We go to 20% to 40% of their enterprise volume, as I highlighted in those case studies. Now, do you know how long that would take to hire to 20% to 40% on the human side between training and hiring? It takes a long time to build that type of scale. And now we are building that scale almost immediately with the scale of the AI agent solution. So we think pathway to revenue for that is really exciting. So we just think that, that adds a whole lot, another dimension of growth to our business. And like I said, in the face of the threat of AI, and we are out in front of it, so we actually truly believe we future-proofed this business.

Yes, no, that makes a lot of sense. And just a modeling question really quick on FQ4 tax rate. It was a bit lower. How do you think about that for the coming year? Like, should that go back to near 20% or does that stay structurally lower for a little bit?

Good question. Jacob, good to hear from you. You are right. So going forward, we would expect our tax rate to continue to be in that 20% to 22% range. The fourth quarter we benefited from some discrete tax items, including a favorable resolution from a tax matter with the tax authority. So I think for modeling purposes, 20% to 22% would be the right range.

Our next question comes from the line of David Paige with RBC.

Congrats on the good results. Looks like a broad-based growth across all four verticals. So I was just wondering if you could provide a little bit more color on each vertical out into 1Q and to 2027. Is growth going to be accelerating? Or where should we be focused on?

Sure, David, thank you for joining. Thank you for that question. And you -- I like how you touched on that because we are seeing growth in our key verticals, and that's something that we believe is important, how we have built ourselves, a diversified as a business from a client and a vertical standpoint. Let's start with the Health care, Health Tech vertical. We are doing an amazing job with the big payers and the pipeline is really strong in that space with those players. And we feel, like, that will continue to fuel a lot of growth for us as we win those throughout the course of this year. Our pipeline is really strong there. But we have also won in what I'll call more specialty areas of the health care ecosystem. Things like non-emergency medical transportation, where we are just winning deal after deal after deal.

And so we are really excited because we have the strength of those that have massive budgets for CX, and then we are winning in with the specialty companies that allow us to really, kind of, have a really strong one-two punch. When I think about the e-commerce world, we are doing very well in the e-commerce world. We are winning new logos. We are winning as e-commerce world is looking for disruptive markets, low price points. Our Pakistan market is on fire, growing rapidly as are several of our other low-cost markets.

But we are -- one area of growth there is we're just winning massive market share against our competitors by simply outperforming them, which is a really good position to be in because that's obviously then really sticky if you are outperforming, if you are growing with them. And then if you are bringing some of these innovative solutions, you become a more and more trusted partner. And so I think we're doing very well in that space. I'd say similarly in the Travel, Transportation, where we are winning.

Look, we highlighted what we did with Philippine Airlines. Well, we are deferring and containing a lot of calls that were going to humans with AI, but we are doing that. We are winning market share and we are growing with them. And so we are able to win new businesses just based on, kind of, what we are doing in as a business, our differentiated value proposition. As I look into '27, I feel really strong about the trajectory of the business. The 9 new logos, I don't think are a one-off that we did in the Q4. I really think that's a -- that is a combination of the brand that we've created, the differentiation that we continually highlight, and then our strong AI play, and in particular, AI agent play.

We're -- our competition in the BPO space, they are not leaning into this. And so we are well ahead of anybody in the pack. And as clients look at that, they want a provider that can deliver successful AI agents. And that's the solution that we built with Sierra, leveraging the strength of them and the strength of us. We put it together. And as you can see, we are delivering the end. That's resonating and that is driving growth. So I feel really strong about the trajectory of this business.

Congrats on the good results.

Great. Thank you. Yes, we are really proud of what we have done.

Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to CEO Bob Dechant for closing remarks.

Thanks, operator, and thanks all for participating today. As you can tell, we are really proud of the work that we've done here. And again, it's all driven by the best team in the industry. So I just want to thank them, a special call out to them. I appreciate all your efforts that you put out throughout the entire year. I couldn't be more proud of what you've done and what we've done as a company. Thank you all for joining us today. And we look forward to speaking with you shortly next quarter in November. Have a good night.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Welcome to the ibex Third Quarter FY 2026 Earnings Conference Call. [Operator Instructions]

Please be advised that today's conference is being recorded. [Operator Instructions] To note, there is an accompanying earnings presentation available on the ibex Investor Relations website at investors.ibex.co. I will now turn this conference over to Mr. Greg Bradbury, Investor Relations for 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 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 11, 2025, and any other risk factors we include in subsequent filings with the SEC.

With that, I will now turn the call over to ibex's CEO, Bob Dechant.

Thanks, Greg. Good afternoon, and thank you all for joining us today as we discuss our third quarter results for fiscal 2026. I'm excited to report that our third quarter represented yet another period of outperformance where we again extended the separation between ourselves and the rest of the traditional BPO market. We delivered record revenue growth of 17% to $164.4 million, while adjusted EPS grew by 11% to $0.91.

This was our fifth straight quarter of double digit revenue growth, seventh of our last 8 quarters of double digit growth in adjusted EBITDA and it was our eighth consecutive quarter of double digit GAAP and adjusted EPS growth, all done organically.

Put together, we have a proven track record of delivering strong results and are confident in our momentum we have going into FY '27 and beyond. Our strong results were again anchored by our 2 key pillars of growth, driving new wins with key logos and market share gains with existing clients, driven by our continued ability to outperform the competition operationally.

In fact, over the last 5 quarters, our growth within our top 10 clients, where we often compete against our multibillion-dollar competitors has averaged more than 25%. We also had 100% client retention for the quarter and revenue retention for the year of 99.9%. This is the flywheel we have created that continues to drive blistering growth for ibex.

In the quarter, we won another new logo and have since added 3 additional significant wins in the first few weeks of April for a total of 11 year-to-date. These will set us up well for FY '27.

Growth within our existing customers continues to be strong and broad-based, coming primarily across our strategic verticals. We continue to win big in our health tech vertical, where growth was nearly 54% and represented the high watermark for the quarter. This vertical has been a standout performer, growing rapidly since we launched it in 2021 and now will far exceed a $100 million business by the end of this fiscal year.

This success demonstrates our ability to build and scale new verticals from the ground up and validates our ongoing investment in India as a high-growth market for our business now and in the future.

The ibex brand today is stronger than it's ever been. Our employee and client Net Promoter Scores remain world-class and our focus on culture and operational excellence is reinforcing our position as a trusted partner and industry leader. And all this is before we factor in our landmark strategic partnership with Sierra ai that we formally announced earlier this week.

Through this partnership, ibex will integrate Sierra's market-leading AI technology with our best-in-class CX expertise, tech integration and deep analytics to design and deploy scalable end-to-end AI-powered CX solutions.

We believe we can stand up these solutions in weeks, not months or years. We are now uniquely positioned to provide a seamless solution that leverages the strengths of both leading AI and human-powered support. The volume and velocity of opportunities in just the first months since signing this partnership has been great, along with several decisive early wins. More to come on this in the near future.

We believe this collaboration will be transformative for our business and set ibex up well for the future. Within that context of AI's impact on our industry, I'd like to take some time to share our thoughts on the current state of the market and ibex's place in it.

Today, there is a pervasive view that with the advent of generative AI, a lot of traditional call center work will be replaced by AI. The belief is that the size of the call center industry and volume of interactions handled by human agents will shrink over time. And as a result, the BPO volumes will shrink as well.

This is the perceived threat that is front and center in our industry and for labor arbitrage only driven businesses, what I call BPO 1.0. I honestly believe this perceived threat is real and represents a big challenge for their businesses. However, for differentiated providers like ibex that are leaning into Agentic AI, this instead is an opportunity. Let me explain.

Clients today are looking for partners that are more than labor arbitrage, ones that bring culture, technology and business insights to create a great experience for their customers. I call this BPO 2.0.

They continue to rapidly move away from their legacy BPO 1.0 vendors, shifting from bigger to better in the decision-making process. This plays well for BPOs that are faster, more flexible and differentiated.

For ibex, our land and expand flywheel, where we win trophy new clients and then take significant market share from the competition has enabled us to post record results over many consecutive quarters and established ibex as the best BPO in the industry.

And we have done this as many of our clients are currently deploying Agentic AI. In fact, one of our larger clients began deploying an AI agent solution last summer. Within 6 months, their call volumes decreased by 20% due to the containments of the AI solution.

Yet over the same time, we have been able to continue to grow our overall business at 17%, while revenues with this client hold strong as we continue to take market share away from underperforming competitors.

And now that we have established our partnership with Sierra, we have the opportunity to deliver on that solution ourselves capitalizing on our deep understanding of the customer journeys and strong client partnerships. We believe these solutions will be accretive to our business as we add on the AI volumes on top of our BPO business and create another vector for highly profitable revenue growth.

In summary, I am confident that this industry is extremely viable if you are a strong differentiated BPO with the ability to deliver a great Agentic AI solution. And I am even more confident in ibex and our ability to lead this transformation in the BPO industry.

And now as I look forward, adding this powerful new arrow to our quiver uniquely enables us to provide a truly seamless customer experience from AI agent to human agent. This significantly widens and deepens our already compelling competitive moat and supercharges our already powerful business and defines our leadership position in BPO 3.0.

That is the importance of this announcement to our business. To this point, our AI agent solution is seeing early and fast wins.

We are winning opportunities versus other AI technology companies, SaaS companies and BPO competitors, beating them across the board in terms of deal wins, speed to deployment and successful containment and resolution.

As an example, in one of our early wins with a leading airline, we competed against all 3 competitor types and easily outperformed the various competitors in a bake-off having our deployment with Sierra in place and delivering results far exceeding the targeted benchmarks before our competitors could even go live. And we did this solution in 3 languages.

As a result, we have now been awarded all the business. We are also seeing exciting traditional BPO opportunities coming to us as a result of our Sierra partnership. As an example, we recently were introduced to a leading luxury activewear brand, looking for the right partner to help them scale human agent support to complement their great AI solution as their brand experiences hyper growth.

And within 30 days, we signed and launched this new client in April. Our ability to respond and execute with speed and experience and as I like to say, moving at the speed of AI is setting ibex apart.

Additionally, it is clear that AI is raising the bar for exceptional human agent customer support, which plays very well into our strengths. We are excited with the velocity of our AI pipeline.

In summary, we are confident in our ability to outperform the BPO industry. But more importantly, we will continue to define and lead the new era of BPO 3.0 as we aim to make ourselves even more valuable and essential to our existing and new clients.

I am proud of our team's execution quarter-over-quarter and remain more optimistic than ever about our future.

With that, I will now turn the call over to Taylor to go into more detail on our fiscal third quarter financial results and guidance. Taylor?

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussion of our third quarter fiscal year 2026 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 to non-GAAP measures are included in the tables attached to our earnings press release.

Turning to our results. Our third quarter results are once again among the strongest in our history with record revenue, adjusted EBITDA, EPS and adjusted EPS. As Bob mentioned, this was our fifth consecutive quarter of double digit revenue growth.

It was our seventh in our last 8 quarters of double digit adjusted EBITDA growth and it was our eighth consecutive quarter of double digit GAAP and adjusted EPS growth. Our differentiated solutions and execution are clearly separating us from the pack.

Third quarter revenue was $164.4 million, an increase of 16.8% from $140.7 million in the prior year quarter. Revenue growth was driven predominantly by broad-based growth in our high-margin HealthTech vertical of 53.7%, technology vertical of 42.6%, travel, transportation and logistics of 15.1% and retail and e-commerce of 8.3%, along with continued growth in our digital acquisition business, partially offset by an expected decline in telecommunications, one of our smallest verticals at 23.1%.

We continue to win and grow in all geographic markets during the quarter. Our onshore region grew 36.8% compared to the prior year quarter, driven by growth of our high-margin digital acquisition business and several clients in our higher-margin HealthTech vertical.

Our highest margin offshore revenues grew 13.9% and our nearshore locations grew 3.7%. Offshore revenue comprises 50% of total revenue, as onshore revenue expanded to 27.9% of total revenue from 23.8% in the prior year quarter, reflective of the growth in our digital acquisition services and onshore HealthTech delivery. Our higher-margin digital and omnichannel services continue to strengthen, growing 18% versus the prior year quarter to 82% of our total revenue.

We have structurally built ibex so that our growth vectors are our highest margin regions, services and vertical markets and we expect that we will continue to be successful driving growth in these higher-margin areas as new client wins and growth in our embedded base continue to be focused in these areas.

Third quarter net income increased to $13.3 million compared to $10.5 million in the prior year quarter. The increase was primarily driven by the continued revenue growth and operating leverage gained from SG&A expenses as they decreased from 19.2% to 16.7% of revenue, partially offset by $800,000 of severance expense.

The severance expense was incurred as one of our clients shifted their volumes from our nearshore to higher-margin offshore region. In the shift, we were able to pick up moderate market share. We expect an additional asset impairment charge related to this move in the fourth quarter as we adjust capacity.

Our tax rate was 16.6% versus 19.2% in the prior year quarter, primarily attributable to changes in revenue mix across our taxable jurisdictions and favorable discrete tax benefits in the current year quarter. We expect our effective tax rate before discrete items for the fourth quarter to be approximately 19%.

Fully diluted EPS was $0.89, up 22% from $0.73 in the prior year quarter. Contributing to the EPS growth was the impact from strong operating performance. Our weighted average diluted shares outstanding for the quarter were 15 million shares versus 14.4 million 1 year ago.

Moving to non-GAAP measures. Adjusted EBITDA increased to a record of $22 million or 13.4% of revenue from $19.4 million or 13.8% of revenue for the same period last year. The 40 basis point decline in adjusted EBITDA margin was primarily driven by the temporary impact of the work shifting from nearshore to offshore and a less positive impact from deferred training revenue, partially offset by lower SG&A expenses as a percent of revenue compared to the same quarter in the prior year.

It's worth noting that for the first 9 months of fiscal year 2026, our adjusted EBITDA margin is up 50 basis points to 13%. Adjusted net income increased to $13.6 million from $11.8 million in the prior year quarter.

Non-GAAP fully diluted adjusted earnings per share increased 11% to $0.91 from $0.82 in the prior year quarter. As a company, we are pleased with the client diversification we have established over the last several years.

For the third quarter of fiscal year 2026, our largest client accounted for 9% of revenue and our top 5, top 10 and top 25 clients, where we see many of our largest competitors grew 22%, 19.3% and 15.8%, demonstrating our ability to win market share.

The concentrations for these same cohorts represented 35%, 54% and 77% of overall revenue, respectively, as compared to 38%, 54% and 80% of the overall revenue in the prior year quarter, representative of a well-diversified client portfolio.

Over the past decade, we have done a tremendous job of not only retaining our top 25 clients, but also winning and growing new strategic clients. Two great examples of this are one of our signature client wins from fiscal year '25 growing into a top 20 client and one of our signature client wins for fiscal year '24 growing into a top 10 client.

Another signal of our ability to win and scale clients is the growth we continue to see in clients averaging more than $1 million per annum in revenue, the count of which has grown nearly 20% from the prior year quarter to 70 clients in the third quarter.

Switching to our verticals, HealthTech grew 54% and increased to 20.8% of the third quarter revenue versus 15.8% in the prior year quarter. Technology grew 43% and increased to 9.2% compared to 7.5% and our other vertical increased 27% to 14% of total revenue compared to 13% in the prior year quarter.

These increases were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to the lower-margin telecommunications vertical decreased to 8.6% of revenue for the quarter versus 13.1% in the prior year quarter as we see lower volume from legacy carriers.

Revenues from the fintech vertical were up 5% and represented 9.7% of revenue for the quarter versus 10.8% in the prior year quarter and revenues from retail and e-commerce grew 8.3%, represented 23.9% of revenue versus 25.8% in the prior year. Travel, transportation and logistics grew 15% and stayed relatively constant at 13.8% of revenue.

Moving to cash flow. Net cash generated from operating activities was a strong $11.9 million for the third quarter of fiscal year 2026 compared to $8.8 million for the prior year quarter. The increase was primarily driven by increased revenue and profitability.

Our DSOs were 71 days, down from 73 days at the end of the second quarter, which is consistent with our expectations. We expect our DSOs to remain stable in the low to mid-70s on a go-forward basis.

Capital expenditures were $5.3 million or 3.2% of revenue for the third quarter of fiscal year 2026, consistent with the prior year quarter. Free cash flow was an inflow of $6.6 million in the current quarter compared to an inflow of $3.6 million in the prior year quarter, driven by the increase in net cash generated from operating activities.

During the quarter, we repurchased approximately 140,000 shares for $4.5 million, bringing our fiscal year share repurchase to 310,000 shares for $10.1 million and leaving $3.2 million on our share repurchase authorization. We ended the third quarter with $15.4 million of cash and debt of $1.4 million for a net cash of $14 million, consistent with a net cash position of $13.7 million at the end of our last fiscal year.

Our strong financial results in fiscal year 2026 are being driven by our differentiated strategy and sustainable growth trends with our clients, giving us confidence in continued outperformance heading into fiscal year 2027.

Our third quarter revenue was again led by meaningful growth in our higher-margin services and vertical markets, particularly a robust growth in HealthTech. This combination of drivers led to a record quarterly adjusted EBITDA of $22 million.

As we head into the fourth quarter, our healthy balance sheet and cash flows are enabling us to make thoughtful investments to support increased capacity for anticipated growth as well as further extend our current AI leadership position.

Reflective of our outstanding performance thus far and our forward momentum, we are again raising our revenue and adjusted EBITDA guidance for the year. Revenue is now expected to be in the range of $638 million to $642 million, up from $620 million to $630 million.

Adjusted EBITDA is now expected to be in the range of $82 million to $84 million, up from $80 million to $82 million. Capital expenditures are now expected to be in the range of $25 million to $30 million, up from our previous range of $20 million to $25 million as a result of ongoing investment to meet increased demand in higher-margin regions.

Our business is well positioned for today and for the years ahead and we're excited about the future of ibex as we head into the fourth quarter of fiscal year 2026 and beyond.

With that, Bob and I will now take questions. Operator, please open the line.

[Operator Instructions] Our first question comes from Dave Koning with Baird.

Congrats on another good quarter.

Thanks, Dave. Yes, we're very proud of what we continue to do.

Yes, for sure. Well, I wanted to kick off just the new AI partnership. Two questions around that. One is model. And then secondly, around that, how do you decide whether to use some of your AI solutions for their AI solutions? And does this cannibalize some of your stuff? Or kind of how does that all work?

Sure, Dave. And I will -- let me repeat what I think I heard you say because you were a little bit garbled, at least from my end. The question was really around with the Sierra, how does that impact or versus the stuff that we've built ourselves. And I think it's very easy to describe that.

The elements that we've built in the Wave iX stack are in our internally focused business, things that can help our agents do their jobs better, things like training simulators for agents, things like agent assist, something at their side that they can use that's AI to help them resolve a complex issue quicker.

Those are the elements that we have built internally. As it relates to AI agents, our philosophy was there's no way we could compete against the best-in-class out there that are creating that engine.

So for us trying to build that, we would have fallen flat on our face in front of every CTO in the industry. And we, therefore, believe that we wanted to partner with the leading player in the industry.

Sierra is clearly that leader, cut above. And from their standpoint, when they looked at us, they said, "Look, what you guys are doing, how you've leaned in, you guys are a cut above." And so really aligned very, very well with the 2 companies' visions, philosophies and positions in the industry. And so to your point, it does not impact at all. In fact, this gives us now the best-in-class engine with the best-in-class BPO.

Yes. Okay. And I also asked about the economic model. How does that -- how does the [ rev ] share work on that?

Sure. So the contracts that we're going to be doing are going to be ibex contracts that we will be billing our clients on that. And then the -- our teams will be working building the implementations, et cetera.

And then we will then -- we have an arrangement with Sierra that those costs -- we've negotiated a cost structure for those resolutions and all. And with the combination of the 2, Dave, we believe it's very accretive to BPO margins.

And just directionally, our BPO margins are in the 30% gross margin range. These are technology/software margins, which, as you know, are significantly higher. And so we feel that this is a high-growth vector for us that will drive significant margin expansion for us when you put all that into the equation.

Now I think your last part of your question, Dave, if I got it right, was, hey, how do you see this cannibalizing your business? And look, we're leaning into that. We're leaning into that.

We've been -- our clients have been -- are moving in AI and we're growing our business at the highest of anybody in the industry, as you can see. And that's been many quarters.

And we've been able to do that because of the flywheel, winning new clients and then taking market share from those clients. This accelerates that because it validates us as a cut above, as a differentiated player.

As I mentioned on my remarks, they brought us opportunities that we've closed in AI speed, not BPO speed. And so we think that on whole, this is going to accelerate our overall growth business.

It will cannibalize some of our business that we have as human volume gets displaced by AI. But if we have that solution in place, I can guarantee you that the models say that it will be accretive for revenue.

And having the AI solution and the revenues associated to that, plus what we have on the BPO side, on the human side, add those 2 together, it will be a growth vector for us. And so one of the real advantages of being fast, nimble, leaned in and where all of this is opportunity for us.

Yes. Great. Maybe if I can just do one more. On health, 54% growth. How much of that was new clients? How much of that is just existing clients growing? And is there any lumpy revenue, like not unsustainable revenue in Q3 because it was so strong?

Yes. Great question, Dave. And so over the last 2 years, we've brought in 6 new logos on the health care space that are meaningful new logos, players that are leaders in their respective spaces.

It's a combination of that. And then we have a couple of the, in particular, the largest payer in the world and we've just been taking a whole lot of market share. So our 54% growth is an and. We're taking market share where clients have massive budgets north of $600 million. And then we are winning a lot of very competitive new logos that we're winning that's driving that growth.

And what's interesting is some of that is landing in the U.S. And I will just call out the beauty of that is -- and Dave, you've been with us forever. You know that our U.S. business has, over the years, been a low-margin business where the majority of our margins remain outside the U.S. Over the last couple of years with our play in health care, we have done a complete transformation of the U.S. market.

And so now you can see it's actually not at a trough. It's growing and growing well, but it's growing profitably because we've just taken what I would call legacy old telcos where nobody ever makes money on them and we've replaced them with leading health care companies, an amazing shift that we've done that is -- you can see that in the results on top line and bottom line results.

And Bob, just to follow up on Dave's question too. None of that revenue was onetime in nature, Dave. It's all sustainable and this is the new run rate for health care.

Yes, Dave, and to that point, what Taylor just said is if you look at how our business flows now, historically, if you go back 5 years ago, Q2 for us, our Q2, the December quarter was always a big increase and then our revenues came down, would come down hard as a result of the retail and some of the open enrollment, let's say, for health care in the early days of that.

Today, if you look the last couple of years, we've been very smooth from Q2 to Q3 and beyond. And that's how we've -- our business is structurally built that way. And so to Taylor's point, there's no real Q3 or Q2 kind of onetime bumps that -- or Q3 onetime bumps that are going to go down. It is sustainable and repeatable.

I would now like to turn the call back over to Bob Dechant for any closing remarks.

Thanks, Josh, and thank you all for listening today. I'd like to close by once again just thanking my entire organization who is the best in the industry. They continue to deliver and execute.

And we built this amazing flywheel here and we love the trajectory of our business in the future. And now with our Sierra announcement, we believe our business is extremely future-proofed and will be strong over the long haul. So thank you all. Look forward to talking next quarter.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Welcome to the IBEX Second Quarter FY 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] To note, there is an accompanying earnings presentation available on the IBEX Investor Relations website at investors.ibex.co. I will now turn this conference over to Greg Bradbury, Investor Relations for 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 11, 2025, and any other risk factors we include in subsequent filings with the SEC. With that, I will now turn the call over to IBEX's CEO, Bob Dechant.

Thanks, Greg. Good afternoon, and thank you all for joining us today as we review our fiscal second quarter 2026 results. I'd like to start by recognizing the entire IBEX organization for delivering another outstanding quarter yet again. Their continued consistent execution underpins our financial and operational success and is key in building IBEX into the category disruptor we are today. Looking to our results, I am pleased to report that the momentum we've built across the business accelerated in the second quarter, enabling us to deliver exceptional results with headline revenue growth of 17% and adjusted EPS growth of 46%. Quarter-over-quarter, we are continuing to further separate ourselves from the pack in the BPO market. In fact, this quarter marks our fourth consecutive period of double-digit organic revenue growth, well above competitive growth rates and underscores our clear differentiation.

And this continues to resonate well in the market. Our market-leading growth is a direct result of the differentiation we have built into our business and our ability to execute against it. At the top, our growth starts with our new logo engine, which consistently is able to win trophy clients versus our much bigger competitors. In Q2, we had significant wins in HealthTech and FinTech. HealthTech has been a standout performer, growing rapidly since we launched the vertical in 2021 and is on track to become $100 million by the end of the fiscal year. This success demonstrates our ability to build and scale new verticals from the ground up. Outside of the new wins, we are also driving growth within our existing customer base. Our approach is simple. Once we begin working with a customer, we build that relationship over time through a combination of exceptional operational delivery and differentiated service model built with innovative technology at its core.

As a result, we are able to become more than another vendor, we are a trusted partner. One example that typifies this dual approach is our recent expansion into India. We entered this strategic market in late March of 2025, and we now have 2 sites with nearly 1,000 agents up and running. Beyond traditional contact center services, we've expanded our capabilities into the region to include broader revenue cycle management and credentialing services to better support our health care clients. This expansion has been fueled by both organic growth with existing clients and new logo wins in the region. Expansion into India represents one of our highest growth vectors and will continue to be a key driver of growth as we reach critical mass. Our combined outperformance has allowed us to achieve several major milestones in calendar year 2025, including surpassing $600 million in revenue while growing 16% during that time.

And we were able to do it profitably, generating $80 million of EBITDA with 13% margins. This continues to validate that we have structurally built our company for performance where our growth vectors are also our margin expansion vectors. Today, the IBEX brand is stronger than it has ever been. Our employee and client Net Promoter Scores remain world-class, underscoring that the image we project to our customers is consistent with the culture we've built internally. Our market-leading growth, combined with our healthy balance sheet are enabling strategic investments in our growing AI capabilities as well as further expansion into strategic markets and in top-performing geographies. We believe we are further along than any of our competitors in our AI solutions, partnerships and deployments.

As a reminder, our Wave iX AI solution has 2 dimensions: one where we leverage business insights organization and partnerships with best-in-class Agentic AI technology companies to create successful AI solutions for our clients. These solutions allow us to create a seamless end-to-end customer journey from AI agent to human agent. The second dimension of Wave iX is where we deploy AI internally across the agent life cycle. These purpose-built AI technologies enable us to drive operations more efficiently and effectively and dramatically improve agent hiring, training and onboarding, what we call speed to green. As a result, IBEX is increasingly being recognized as an industry leader in AI-powered CX.

Said another way, the transformation of our contact center operations to AI-powered is enabling us to extend our separation on both operational and financial performance. We are now moving beyond our leadership position in BPO 2.0 and are defining the market for BPO 3.0. To accomplish this, we are continuing to invest in bolstering our team and strategic partnerships to support this critical vector for growth. To that end, we recently promoted our President of IBEX Digital and Deputy CFO, Mike Darwal, to the role of Chief AI and Digital Officer. As you might have surmised, Mike's worn many hats over a decade plus here that he's been with IBEX, and he's proven himself to be an invaluable member of our leadership team.

Mike has been the Chief Engineer of the success of our soaring digital business. As the CX industry and IBEX continues its transformation from AI-supported to AI first, we will continue to invest in the talent and the resources to maintain and extend our leadership. Looking ahead, IBEX is well positioned for success in the second half of the fiscal year and beyond. We have built a structurally sound company with a market-leading growth profile, expanding margins and strong cash flow generation. We also have one of the finest and growing rosters of trophy clients in the industry, each with significant outsourcing spend and expansion potential. Additionally, we continue to set ourselves apart from the traditional BPO CX provider, both in terms of our financial performance as well as our leadership in the AI evolution of the space.

Now before I turn the call over to Taylor, I want to welcome Jack Jones as our new Chairman. Jack has been an invaluable Board member for nearly 9 years. Prior, he was one of the biggest buyers of BPO services during his 26-plus years at JPMorgan Chase and was a key executive for 5-plus years at Expert Global Solutions, a leading CX company. We are all excited to have him step into the Chairman role. With that, Taylor will now go into more detail on our fiscal second quarter financial results and guidance. Taylor?

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our second quarter fiscal year 2026 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 to non-GAAP measures are included in the tables attached to our earnings press release. Turning to our results. Our second quarter results are once again among the strongest in our history with record revenue and EPS. Second quarter revenue was $164.2 million, an increase of 16.7% from $140.7 million in the prior year quarter, marking our fourth consecutive quarter of double-digit top line growth.

Revenue growth was driven predominantly by growth in our high-margin HealthTech vertical of 35.1%, travel, transportation and logistics of 20.2% and retail and e-commerce of 17.2% as well as strong performance by our digital acquisition services, partially offset by an expected decline in telecommunications, one of our smallest verticals of 23.1%. We continue to win and grow in all geographic markets and our focused efforts to grow our higher-margin offshore delivery locations are continuing to have a favorable impact on bottom line results. Our highest margin offshore revenues grew 16.2% compared to the prior year quarter. Our nearshore locations grew 8.5% and our onshore region grew 27.5%, driven by growth in our high-margin digital acquisition services.

Offshore revenues comprised 52.3% of total revenue and onshore revenues expanded to 24% of total revenue from 22% in the prior year quarter, reflective of the growth in our digital acquisition services. Our higher-margin digital and omnichannel services continues to strengthen, growing 19% versus the prior year quarter to 82% of our total revenue. We have structurally built IBEX so our growth vectors are our highest margin regions in services, and we expect that we will continue to be successful in driving growth in these higher-margin regions in services as new client wins and growth in our embedded base continue to be focused in these areas. Second quarter net income increased to $12.2 million compared to $9.3 million in the prior year quarter. The increase was primarily driven by the continued growth of work in our higher-margin offshore regions and operating leverage gained from SG&A expenses as they decreased from 18.3% to 16.8% of revenue.

Our tax rate was 19.1% versus 20.2% in the prior year quarter, primarily attributable to changes in revenue mix across our taxable jurisdictions and favorable discrete tax benefits in the current year quarter. We expect our effective tax rate before discrete items to remain consistent at 20% to 22% for the remaining quarters before any discrete items, including discrete tax benefits related to stock-based compensation. Fully diluted EPS was $0.83, up 45% from $0.57 in the prior year quarter. Contributing to the EPS growth was the impact from strong operating performance and fewer diluted shares outstanding as a result of our ongoing share repurchase program. Our weighted average diluted shares outstanding for the quarter were 14.7 million versus 16.5 million 1 year ago.

Moving to non-GAAP measures. Adjusted EBITDA increased to a record of $20.7 million or 12.6% of revenue from $16.5 million or 11.8% of revenue for the same period last year. The 80 basis point improvement in adjusted EBITDA margin was primarily driven by growth in our higher-margin offshore locations during recent years, growth in key high-margin verticals from existing and new clients launched throughout fiscal year 2025 and fiscal year 2026 to date and a reduction in SG&A expenses as a percentage of revenue. Adjusted net income increased to $12.8 million from $9.6 million in the prior year quarter. Non-GAAP fully diluted earnings per share increased 46% to $0.87 from $0.59 in the prior year quarter. As a company, we're pleased with the client diversification we have established over the last several years.

For the second quarter of fiscal year 2026, our largest client accounted for 10% of revenue, and our top 5, top 10 and top 25 client concentrations represented 39%, 57% and 79% of overall revenue, respectively, as compared to 39%, 54% and 79% of overall revenue in the prior year quarter, representative of a well-diversified client portfolio. Over the past decade, we have done a tremendous job retaining our top 25 clients and are excited to see one of our signature wins from fiscal year '25 already move in the top 20 and one of our signature client wins from fiscal year '24 move into the top 10. Switching to our verticals. HealthTech increased to 17.4% of second quarter revenue versus 15.1% in the prior year quarter. Travel, transportation and logistics increased to 14.1% versus 13.7% in the prior year quarter.

Retail and e-commerce remained consistent at 28.6%, and our other vertical increased to 13.7% compared to 10.6% in the prior year quarter. These increases were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to the telecommunications vertical decreased to 8.7% of revenue for the quarter versus 13.1% in the prior year quarter as we see lower volumes from legacy carriers, marking the first time since pre-IPO, this vertical comprises less than 10% of revenue. Revenues from the FinTech vertical were relatively flat and represented 9.3% of revenue for the quarter versus 11% in the prior year with expectation of growth in the ensuing quarters.

Moving to cash flow. Net cash generated from operating activities was a second quarter record of $6.6 million for the second quarter of fiscal year 2026 compared to $1.1 million for the prior year quarter. The increase was driven by increased revenues and profitability as well as lower use of working capital. Our DSOs were 73 days, up from 71 days at the end of the first quarter, which is consistent with our expectations. We expect our DSOs to remain stable in the mid-70s on a go-forward basis. Capital expenditures were $11.7 million or 7.1% of revenue for the second quarter of fiscal year 2026 versus $4.3 million or 3.1% of revenue in the prior year quarter. This planned increase was primarily driven by expansion in our offshore regions to meet our strong demand. Following our typical seasonal pattern, free cash flow was an outflow of $5.1 million in the current quarter compared to an outflow of $3.2 million in the prior year quarter due to the increase in capital expenditures.

During the quarter, we repurchased approximately 78,000 shares for $2.9 million, bringing our fiscal year share repurchase to $170,000 or $5.6 million and leaving $7.8 million on our share repurchase authorization. We ended the second quarter with $15.5 million of cash and debt of $1.4 million for a net cash position of $14 million, consistent with a net cash position of $13.7 million at the end of our last fiscal year. In the second quarter, we continued to build on the momentum we have generated over the past 12 months. Our strong quarterly revenue performance was again led by meaningful growth in our higher-margin geographies, services and vertical markets, particularly in HealthTech.

This combination of drivers led to a record quarterly adjusted EBITDA of $20.7 million. As we look ahead to the second half of the fiscal year, our robust balance sheet is enabling us to make opportunistic investments to further extend our current AI leadership position. Additionally, with the clear returns we've already seen, we are proactively investing in increased sales resources as well as capacity in our top-performing geographies, positioning us for further success in the years ahead. Considering our outperformance in fiscal year 2026 thus far, we are confident in further raising our revenue and adjusted EBITDA guidance for the year.

Revenue is now expected to be in the range of $620 million to $630 million versus a previous range of $605 million to $620 million. Adjusted EBITDA is now expected to be in the range of $80 million to $82 million versus a previous range of $78 million to $81 million. We now expect capital expenditures to be at the upper end of our previous $20 million to $25 million range. Our business is well positioned for today and the years ahead, and we're excited about the future of IBEX as we head into the third quarter of fiscal year 2026 and beyond. With that, Bob and I will now take questions. Operator, please open the line.

[Operator Instructions] Our first question comes from David Koning with Baird.

Great job again. And I guess to kick it off, a lot of market turbulence around AI and who's going to win and who's going to lose and new products coming out. It sounds like you're doing very well. Just you talked a little bit already about it on the call, but maybe give a little more color on the demand you're seeing. Is your industry and your company a benefit of AI? Is it a headwind? Maybe just talk through that a little more.

Yes, Dave, and thanks for the question and your opening comments. I couldn't be more prouder of the team that just continues to deliver quarter-over-quarter. Look, I think we have established ourselves in the AI leadership position in this industry. And there's a lot of good things that comes out of that. it helps our new logo engine going in and winning traditional just BPO deals because this is a company that can take the journey of where those clients, those trophy clients want to go. So it helps us significantly in that. Number two, it helps us in the operational execution of the day-to-day business that we have to outperform, to distance -- to continue to distance ourselves from the pack in terms of performance, which then pays off in market share growth.

As an example, and I think this is on the slide, our top 10 clients, we grew 20%. Where did that come from? It came from market share because of our outperformance. Then the third dimension is where we now are creating those AI agentic solutions, AI agents. But the value proposition that we have is very, very unique because we're leveraging the power of our business insights organization and what we do on the human side, and we kind of create that what I'll call seamless journey end-to-end. And it's almost think of it as like an integrated supply chain in the world of years ago and all of a sudden, you get more velocity through that supply chain and you engineer cost out but you create it as an integrated supply chain. That's what we're doing and the vision that we're sharing that's different, I believe, than anybody in the industry right now, and that's resonating well.

Yes. Great. I guess, secondly, just the mix of business is changing, it sounds like very favorably, higher margins, better growth away from telecom towards health care. Does that change the kind of sequential pattern of revenue through each year? Or does that -- usually Q3 and Q4 are down a couple -- a few percent sequentially, whatever it is. Is there any like changes either to that or any other mix shift impacts to the business?

So that's a really good question, Dave. And I would say, as most of us kind of have gotten to understand, the world of retail is very, very heavy in the December quarter, right, as you get from Black Friday, Cyber Monday all the way through the holidays, Christmas and all. And so we've been a leader in that vertical for a long time. And so you would see a huge spike in Q2 as kind of you highlight. And then that would start tapering off in Q3 and Q4. I think the mix has changed. And if you look at what we did last year, you could see that Q2 to Q3 sequential did not go down like it has historically. So it does change some of that. And so we feel pretty good about, I think, maybe a little bit more consistent flow over the 4 quarters and less massive -- just a massive spike for Q2.

Yes. Okay. And maybe -- that's helpful. And then maybe just one quick last question. The gross margins went down year-over-year, but the operating expense percent of revenue got way more favorable. Is that a little mix of maybe the offshore shift? Or what's driving that?

Do you want me take that, Bob? Yes, sure, Tim. Yes. No. So you're right. We're doing a very good job in terms of growing our SG&A expenses less than revenue, and you're seeing SG&A come down as a percent of revenue. And if you look at our gross margins, we're very -- we feel very good about the trajectory of our gross margins in the long term because if you look at the growth vectors, as Bob was mentioning, they're the high-margin vectors, right? It's the vertical markets, it's the offshore geos, it's the services, high-margin services. and then you throw AI in, it's the high-margin geos and services, which are driving our business forward. But we do have a couple of headwinds currently, and they're not bad -- necessarily bad headwinds to have.

One is on our deferred training revenue. I think we touched on this in the first quarter and also saw it in the second quarter that the year-over-year impact on deferred training as we're growing, we have more training and we expensed most of the training costs in period, but the revenue associated with training gets spread over the cost of the program. So that's a bit of a headwind for us right now during this high-growth phase. And then in addition, we're less than a year into India right now, and we're still investing in India, and we are up to where we expect those margins to be. So those are 2 headwinds that we feel right now. But as I said, they're not necessarily bad headwinds to have. It's just representative of the growth.

And I'm not showing any further questions. I'd now like to turn the call back over to Bob Dechant for any closing remarks.

Great. Thanks, Josh. And thank you all for joining us today. And as I've said, I couldn't be more proud of what IBEX has accomplished and what this team continually does quarter-over-quarter. We are a differentiated company. We are best-in-class in culture, engagement, our tech stack, and we are leading the clubhouse in AI. And so put all those together, the -- we really like where the future is for this business, and we look forward to reporting in the next 90 days. Thank you all. Have a good night.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Welcome to the IBEX First Quarter FY 2026 Earnings Conference Call. [Operator Instructions] To note, there is an accompanying earnings presentation available on the ibex Investor Relations website at investors.ibex.co. I will now turn this conference over to Mr. Michael Darwal, Head of Investor Relations for 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, which 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 11, 2025, and any other risk factors we include in subsequent filings with the SEC. With that, I will now turn the call over to IBEX CEO, Bob Dechant.

Thanks, Mike. Good afternoon, and thank you all for joining us today as we share our first quarter fiscal year 2026 results. Before I speak to our first quarter results, I want to start by saying that our thoughts and prayers are with the people of Jamaica who are dealing with the devastation left behind by Hurricane Melissa.

I would also like to say how proud I am of our ibex Jamaica team who has shown enormous courage and resilience through this tragedy and have worked tirelessly to care for our employees while getting us operational within 24 hours of the hurricane in our Portmore and Kingston sites and as of Monday this week in our Ocho Rios site. I would also like to highlight the great support we have received from our clients who have offered assistance alongside our ibex Cares initiatives to help those who are significantly impacted.

Lastly, the BPO community in Jamaica is a tight knit community, and our thoughts and prayers go out to our Jamaican BPO peers and their people. I am pleased to report that ibex carried the momentum we built throughout fiscal 2025 into 2026, delivering an outstanding first quarter with revenue growth of 16.5% and adjusted EPS growth of 74% as we continue to separate ourselves from the pack in the BPO market. Our sustained double-digit revenue growth highlights our competitive differentiation in the CX space.

We continue to drive exceptional operational delivery for our existing clients, enabling us to win significant market share from our competition. I am equally proud of our new logo engine that continues to win trophy clients, positioning us well for continued growth and margin expansion. And I'm excited on the progress we have made in our AI automate and translation deployments for our clients. Collectively, this continues to validate our position as a leader in the CX space.

Q1 was a very strong quarter. Even more impressive is the performance we continue to stack quarter-over-quarter, leading to powerful momentum into the balance of FY '26. Over the last 12 months, our results have shown explosive double-digit organic revenue growth, which is well above market growth, consistent margin expansion and significant growth in EPS and free cash flow. For the last 12 months, we delivered organic revenue growth of 13% fueled in large part by revenue growth approaching 20% in our high-margin offshore regions and digital-first services.

We delivered record adjusted EBITDA of nearly $76 million for the trailing 12 months, up more than 13% from the prior 12-month period, while making key investments for future growth and differentiation. We achieved record [Audio Gap] adjusted EPS of $3.17 on $31 million, up from $25 million in the prior 12 months while investing meaningful CapEx in support of our growth.

These results are an output of our sizable and distinct competitive differentiation that we have built and the strength of this leadership team to consistently execute quarter-over-quarter. Paramount to this differentiation is our best-in-class blend of culture, engagement and branding. Our purpose-built Wave iX technology and integrated AI solution suite, connecting seamlessly AI to human agents. And our deep analytics and business insights capabilities.

The ibex’ leadership team is able to consistently execute against these points, outperforming the competition, setting ibex’ apart, trusted partner. This playbook was key to us delivering one of the most impressive starts to a fiscal year in our history and has us well positioned to perform throughout FY '26.

The ibex’ brand is stronger than it has ever been. Highlighting this is our most recent employee Net Promoter Score of 77, an all-time high and our client Net Promoter Score of 71, up impressively from 68. It is important to note that anything above 70 is considered world-class. These metrics play a critical part in our outstanding client revenue retention of over 98% and validate that our competitive moat is deep and wide. These metrics are also viewed by prospective clients as best-in-class, giving them confidence in choosing ibex as their go-forward partner during the RFP process.

We are very excited with the wins we have had in the last 2 quarters, where over this time frame, we have won seven high-profile new opportunities, facing off against our much larger multibillion-dollar competitors. At the core of ibex is our new logo engine that continues to win trophy new clients and our ability to land and expand with these clients. As compared to 2 years ago, our number of clients making up more than $1 million per annum in revenue is up nearly 24%.

Clients representing $1 million to $10 million per annum are up over 21% during the same time frame. And the number of clients generating $10 million to $20 million per annum is up nearly 67%. And the average revenue generated by clients with annual spend over $20 million during these periods is up approximately 14%. This powerful combination of winning blue-chip trophy clients and growing significant market share with them, parlayed with our outstanding client retention rates has us on an amazing trajectory of double-digit growth.

Q4 of fiscal 2025 marked the shift from proof of concept for our AI solutions to full-scale deployments for several of our key clients. We continue to invest in bolstering our team supporting this critical vector for growth, most recently with the addition of Michael Ringman as CTO. We are in an exciting time in the industry with the intersection of AI and CX. Mike brings an enormous amount of experience in both areas and will help accelerate our leadership position.

I am confident that under Mike's direction, our AI technology road map will help further separate ibex from the pack. Coming off a statement year in fiscal 2025, I am proud of our start to fiscal 2026, and I am confident that ibex is very well positioned for success this year and beyond.

With that, I will now turn the call over to Taylor to go into more details on our first quarter results and FY '26 guidance. Taylor?

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our first quarter fiscal year 2026 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 to non-GAAP measures are included in the tables attached to our earnings press release.

Turning to our results. Our first quarter results marked our strongest start to a fiscal year. We achieved record first quarter revenue, adjusted EBITDA, EPS, adjusted EPS and free cash flow. First quarter revenue was $151.2 million, an increase of 16.5% from $129.7 million in the prior year quarter. Revenue growth was driven by vertical growth in retail and e-commerce of 25%, HealthTech of 19.5% and travel, transportation and logistics of 15.4% and was partially offset by an expected decline in telecommunications, our smallest vertical of 22.5%.

Importantly, our fintech vertical reached an inflection point in the first quarter and grew 3.4%. And with recent wins, we are confident in the positive trajectory of fintech going forward. Our focused efforts to grow our higher-margin delivery locations and services continues to have a favorable impact on bottom line results. We are really excited that we're winning in all markets and as a result, growing revenue in all geographies.

Our highest margin offshore revenues grew 20% in the quarter. Our nearshore locations grew 7% and our onshore region grew 21%, driven by growth of our high-margin digital acquisition services. Revenue mix in our higher-margin digital and omnichannel services continues to strengthen, growing 25% to 82% of our total revenue versus prior year quarter. We expect that we will continue to be successful driving growth in these higher-margin services and regions as we continue to land and expand new clients from our strong pipeline as well as win further share with our embedded base clients.

First quarter net income increased to $12 million compared to $7.5 million in the prior year quarter. The increase was primarily driven by the meaningful growth of work in higher-margin offshore regions of 19.5% and operating leverage gained from SG&A expenses as they went from 20.2% to 17.5% of revenue. Fully diluted EPS was $0.82, up from $0.43 in the prior year quarter. Contributing to the EPS growth was the impact from fewer diluted shares outstanding as a result of our ongoing share repurchase program and a lower tax rate.

Diluted shares for the quarter were $14.6 million versus $17.5 million 1 year ago. Our tax rate was 11% versus 21% in the prior year due to a discrete tax benefit related to stock-based compensation. We expect our effective tax rate before discrete items to remain consistent at 20% to 22% for the remaining quarters. Moving to non-GAAP measures. Adjusted EBITDA increased 24.9% to $19.5 million or 12.9% of revenue from $15.6 million or 12.0% of revenue for the same period last year. The 90 basis point improvement in adjusted EBITDA margin was primarily driven by growth in our higher-margin offshore locations during recent years and stronger operating results.

Adjusted net income increased to $13.1 million from $9 million in the prior year quarter. Non-GAAP fully diluted adjusted earnings per share increased 74.1% to $0.90 from $0.52 in the prior year quarter. As a company, we are pleased with the client diversification we have established over the last several years. For the first quarter of fiscal year 2026, our largest client accounted for 10% of revenue and our top 5, top 10 and top 25 client concentrations represented 37%, 55% and 79% of overall revenue, respectively, as compared to 36%, 51% and 77% of overall revenue in the prior year, representative of a well-diversified client portfolio.

Switching to our verticals. Retail & E-commerce increased to 26.3% versus 24.5% in the prior year quarter. HealthTech increased to 14.5% of first quarter revenue versus 14.1% in the prior year quarter, and travel, transportation and logistics remained relatively flat at 14.1% in the quarter. These results were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals.

Conversely, our exposure to the telecommunications vertical decreased to 10.2% of revenue for the quarter versus 15.4% in the prior year quarter as we see lower volume from legacy carriers. Revenues from the fintech vertical represented 11% versus 12.4% of the prior year quarter, though, as I mentioned earlier, grew 3.4% year-over-year and 6.8% sequentially, marking a return to growth and the lapping of prior impacts we had noted at fiscal year-end.

Moving to cash flow. Net cash generated from operating activities increased to $15.7 million for the first quarter of fiscal 2026 compared to $7.8 million for the prior year quarter. The increase in net cash inflow from operating activities was primarily due to higher revenues, which drove increased profitability as well as a lower use of working capital. We have seen a notable improvement in our days sales outstanding with DSOs for the quarter at 71 days, down from 75 days a year ago and 72 days as of June 30.

We expect our DSOs to remain relatively stable on a go-forward basis. Capital expenditures were $7.6 million or 5.1% of revenue for the first quarter of fiscal year 2026 versus $3.6 million or 2.8% of revenue in the prior year quarter. This increase was primarily driven by expansion in our offshore regions to support growth in these higher-margin geographies. Free cash flow was a first quarter record of $8 million compared to $4.1 million in the prior year quarter. The increase was driven by increased revenues during the current quarter and the aforementioned shorter DSOs.

During the quarter, we repurchased 92,000 shares for $2.7 million. We have $10.6 million remaining on our current share repurchase program. We ended the first quarter with cash and net cash balances of $22.7 million and $21.1 million, respectively, an increase from $15.3 million and $13.7 million as of June 30, 2025.

To summarize our first quarter of fiscal 2026, we achieved outstanding revenue growth and profitability and once again, allowing us to build on our existing momentum entering the fiscal year. Our revenue growth drove increased operating leverage and positioned us to post record first quarter adjusted EBITDA margin of 12.9%, adjusted EPS of $0.90 and free cash flow of $8 million. Our continued strong financial results and healthy balance sheet are enabling strategic investments in our growing AI capabilities and sales resources as well as further expansion in strategic markets and in our top-performing geographies.

Importantly, with our outstanding start to the fiscal year, we have the confidence in our business to raise our revenue and adjusted EBITDA guidance for fiscal year 2026. For fiscal year 2026, revenue is expected to be in the range of $605 million to $620 million, up from $590 million to $610 million. Adjusted EBITDA is expected to be in the range of $78 million to $81 million, up from $75 million to $79 million, and capital expenditures are expected to be in the range of $20 million to $25 million.

Our business is well positioned for today and the years ahead, and we are excited about the future ibex as we head into the second quarter of fiscal year 2026 and beyond.

With that, Bob and I will now take questions. Operator, please open the line.

[Operator Instructions] Our first question comes from David Koning with Baird.

Great job again, and you're doing exactly what you said, winning share with some of the new offerings. So congrats on all that.

Thanks, Dave. Yes, we're really proud of the quarter, proud of the role we're on.

Yes. Yes. Great. Well, maybe first off, what have you seen -- we've had this Gen AI kind of swirling around for really a few years now. And is it becoming a catalyst both for the industry and for you guys or more for you than the industry? Or maybe talk a little bit -- maybe also just add in how much of revenue is it now? And maybe where is it going in a few years?

Sure. So let me kind of break those up into two parts, Dave, if that's okay. When I look at through the ibex lens, the whole AI, the excitement and also the risks that people have talked about this relative to this industry. I think for ibex, it's been all positive. And let me explain on that a little bit. We have leaned in harder, faster, I believe, than anybody in the industry on AI. And that's -- I would say, there's two dimensions to that.

One where we are deploying AI internally to help us execute better, to provide tools and capabilities for our agents to deliver better for our teams to run the business more effectively, efficiently and drive better performance on our client KPIs. We're further along than anybody. And that's why I think one of the reasons we continue to outperform and then take significant market share. So that is a boom for ibex because of what we are doing above and beyond anybody else.

On the other side, the second dimension I look is the -- more around using AI for customer experiences, right, where you automate experiences, AI for language translation, et cetera. Again, I think that we have leaned further into that than anybody else. We're not afraid of what that might do to our business. I feel like much of the market is very cautious and hesitant about leaning in. We're leaning in and our clients are seeing that we have a unique end-to-end model that really goes from AI all the way through to a human agent to provide an integrated and seamless solution for them.

To me, I think that puts us in a really ideal position. And when clients are making decisions, they look at that and they say, this is the type of partner that we want because not only can they execute today on the BPO side, but they're looking forward and they're future-proofed basically in their model.

They can -- we can grow and evolve with them as AI gets deployed more. So it's a real competitive advantage for us, Dave. And I believe that, that's something that is when you look at what our results are, when you look at the growth rates that we're doing, the margin expansion, et cetera, I think that's an output of that.

Now to your question about how much of that is? We're still real early in the game. So it's not moving the needle on a whole lot of revenue and margin expansion yet, but we're positioned well. And we expect probably by the end of fourth quarter of this year and into FY '27, you'll start seeing that being another vector of growth and margin expansion that will move the needle for us.

Yes. Got you. And maybe just a follow-up. Gross margins were a little down in Q1, and I think you're holding full year margin about intact. You're raising revenue, raising EBITDA, but margin about intact. Is that -- is some of this a function of just all the investment going into AI? And I know your benefits from offshoring and AI ultimately is better margin, but maybe right now, it's a little lower as you invest?

Yes, Taylor, I'll throw that over to you.

Yes. No, absolutely. So you're right. Our margins are -- for the year, we're projecting our EBITDA margin to be about 13%. So that's up a bit from the prior year. And what you're seeing and what we're seeing is we're getting a lot of operating leverage out of our SG&A costs because we're able to hold our SG&A costs relatively flat while our revenue is growing at a much faster pace.

So seeing good leverage on the SG&A line. Gross margins are down a bit, particularly in Q1 and a bit in Q2, and you saw it in Q1. And really, a couple of impacts there. One, where as you know, we're ramping in India, so still making investments and aren't at the long-term margins we anticipate that we'll get to in India. And then probably more impactful in Q1 and Q2, it's a good problem to have.

We have more wins, which mean more training revenue. And as you know, we defer the train revenue, but experience the costs upfront. So we are seeing a little bit of headwind on the gross margin line on that as well. But long term, we feel very good about gross margin, as Bob said, the vectors of growth in terms of the offshore geographies and then once we start getting a more meaningful impact from AI should certainly have a positive long-term trend on gross margins.

I would now like to turn the call back over to Bob Dechant for any closing remarks.

Josh, thanks. And everybody, I appreciate you listening. I'm really proud of this team, proud of the consistent performance quarter-over-quarter that we continue to deliver as we separate ourselves from this industry, from our competitors. I'm also proud of what they've been doing in responding to emergencies and issues like we incurred in Jamaica with Hurricane Melissa.

And even in markets like the Philippines, there's been a whole lot going on there with typhoons as well as earthquakes, and that team has -- my team has delivered and kept us amazingly resilient for that. I want to thank them all for that because they are the best in the industry. And with that, thank you all for listening, and we look forward to talking to you next quarter. Good night.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Welcome to the IBEX Fourth Quarter, Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. To note, there is an accompanying earnings presentation available on the IBEX Investor Relations website at investors.ibex.co. I will now turn this conference over to Mr. Michael Darwal, Head of Investor Relations for 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 11, 2025, and any other risk factors we include in subsequent filings with the SEC.

With that, I will now turn the call over to IBEX'S CEO, Bob Dechant.

Thanks, Mike. Good afternoon, and thank you all for joining us today as we share our fourth quarter and fiscal year 2025 results. Before we get into the details of our results, I think it might be helpful to step back and look at how our business has evolved over the past decade and why we are confident in our continued ability to outperform the market.

In FY '16, when I joined as CEO, we undertook a strategic journey of transforming IBEX into a differentiated customer experience company. This strategy was built on 3 key pillars: one, the blend of our culture, engagement and branding; two, our purpose-built technology, we call Wave X and three, our deep analytics and business insights capabilities. We call this BPO 2.0.

Today, we believe we are best-in-class in each area. And the result of this is a differentiated company that is and can continue to outperform the competition. These capabilities, those 3 key pillars have enabled us to consistently win trophy new logo clients who are looking to a partner who can disrupt the status quo. Equally important, these attributes do in fact, empower us to outperform our competitors and consequently, win new market share.

The thesis is if you have an extremely engaged employee, powered with great technology and analytics, you will outperform your competition, delight and retain your clients, and our financial results continue to validate our differentiation. In FY '24, as the market began to look at the intersection of AI and CX as a threat, we set our new vision to BPO 3.0 with the goal to extend our capabilities and become an industry leader in delivering AI solutions to our clients, and as a result, create an even stronger company. I am proud to report that FY '25 saw IBEX make great strides in this strategic next step. We've been able to deploy AI internally to enable our operational teams to execute more effectively and efficiently for our clients, while at the same time, we have jumped ahead of our competitors in deploying AI agent solutions like chatbots and voice bots to solve less complex interactions.

What we have found is that having a seamless integrated solution from AI agent to human agent uniquely positions us to support customers along the entire customer journey. This gives us a competitive advantage. Importantly, this strategy and our ability to execute against it helped IBEX deliver on the most impressive results in our history as a company in FY '25 and has us well positioned to perform in FY '26 and beyond.

FY '25 was a transcendent year for IBEX, where we significantly outperformed the BPO market and achieved all-time bests across a number of key financial metrics. In FY '25, we delivered record fiscal year revenue of $558.3 million, up 10% from a year ago. We finished the year with Q4 revenues increasing to a blistering 18% from prior year. We delivered record adjusted EBITDA of $72 million for the fiscal year, up more than 10% from a year ago, while making key investments into new markets like India, geographic expansions into our highly profitable offshore regions and into our Wave iX tech stack.

We achieved record adjusted EPS of $2.75 up 31% from a year ago on record adjusted net income of $43 million, up 12% from a year ago. And we posted our strongest free cash flow quarter ever of $23 million in Q4 and a record $27 million for the year. The IBEX brand is stronger than it has ever been. Our growth has been driven by operational excellence with our embedded base clients, enabling us to win significant market share from our competition while our differentiated value proposition resulted in continued new logo wins with trophy clients throughout the year.

Importantly, this past quarter marked the shift from proof of concept for our AI solutions to full-scale deployments setting the table for future growth. Fiscal 2025 was a milestone year across many fronts, including our successful entry into India. When we IPO-ed the company in August of 2020, we were early in our strategy and a work-in-progress company. We believed in ourselves and our strategy and what an amazing journey this has been. Today, we have built IBEX into a structurally strong company that is outperforming the market and is well positioned for the future.

Let me highlight the current state of IBEX. We are a growth leader. Revenue grew 10% in FY '25 when many of the largest players were low single digit or negative. We have a strong margin profile that continues to expand, driven by double-digit revenue growth in our highest-margin services and geographies. We have built one of the finest rosters of trophy clients in the industry each with significant outsourcing spend. Our balance sheet is very healthy with 0 net debt and strong free cash flow generation. More than 80% of our business is higher valued digital-first and integrated omnichannel support.

We have a powerful new logo engine that continues to win high-profile clients and an operational team that outperforms. And we believe we are the early leader in bringing compelling AI CX solutions to market for our clients. All of this gives me, our leadership and our Board great confidence as we look ahead to the next 3 to 5 years. With these results in mind, I'd like to thank my team and the whole IBEX family for a tremendous quarter and fiscal year.

Fiscal 2025 was a statement year, one for the record books and highlights the strength of IBEX and this team. Last year, at this time, I said we believed we've reached an inflection point for IBEX with a return to growth. The momentum we amassed throughout the fiscal year showed exactly that delivering record results. We are now well positioned for another strong year in FY '26 and beyond.

With that, I will now turn the call over to Taylor to go into more details on our fourth quarter and full year FY '25 financials as well as FY '26 guidance. Taylor?

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our fourth quarter and fiscal year 2025 financial results, references to revenue, net income and net cash generated from operations are all 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 to non-GAAP measures are included in the tables attached to our earnings press release.

Our fourth quarter results are once again among the strongest in our history, with record results across the board for revenue, adjusted EBITDA, EPS, adjusted EPS and free cash flow. Fourth quarter revenue was $147.1 million, an increase of 18.2% from $124.5 million in the prior year quarter. This was our highest growth quarter in approximately 3 years. Revenue growth was driven by vertical growth in Retail & E-commerce of 25%, HealthTech up 19%; Travel, Transportation and Logistics up 10% and outstanding growth in our digital acquisition business.

Our focused efforts to grow our higher-margin offshore delivery locations are continuing to have a favorable impact on bottom line results. Offshore revenue grew 17% from the prior year and comprised 49% of total revenue, allowing us to maintain our strong gross margin of 31.4%. Revenue mix in our higher-margin digital and omnichannel services also continues to be strong. Digital and omnichannel delivery represented 82% of our total revenue, an increase from 77% in the prior year quarter and grew 25% versus the same quarter a year ago. For context, digital and omnichannel comprised roughly 65% at the time of our IPO in 2020 and was basically negligible when we started this journey in 2016. We expect that we'll continue to be successful driving growth in these higher-margin regions and services as new client wins and growth in our embedded base continue to be focused in these areas.

Fourth quarter net income remained relatively consistent at $9.6 million compared to $9.8 million in the prior year quarter, results were primarily driven by the meaningful growth of work in higher-margin offshore regions of 17% year-over-year for the quarter, offset by higher selling, general and administrative expenses related to investments in our teams, technology and the Workday implementation as well as our expansion into India. We also incurred severance and impairment expenses of $2 million related to long-term assets, no longer carrying value for us and the closure of a very small business loan.

Net interest expense was $400,000 in the quarter versus $400,000 of net interest income in the prior year and our tax rate was 19% versus 26% in the prior year. Fully diluted EPS was $0.66, up from $0.56 in the prior year quarter. Positively impacting EPS growth were fewer diluted shares outstanding due to our share repurchases totaling 3.9 million shares during fiscal 2025, which includes the repurchase of 58,000 shares in the fourth quarter for $1.7 million. Our weighted average diluted shares outstanding for the quarter were $14.5 million versus $17.6 million 1 year ago.

Moving to non-GAAP measures. Adjusted EBITDA increased to $20.5 million or 13.9% of revenue from $17.9 million or a record of 14.4% of revenue for the same period last year. Adjusted net income increased to $12.6 million from $10.2 million in the prior year quarter. Non-GAAP fully diluted adjusted earnings per share increased to $0.87 from $0.58 in the prior year quarter, which was driven by the impact of higher revenue, strong operating performance, a lower tax rate and fewer diluted shares outstanding, offset by higher net interest expense.

As a BPO company, we are pleased with the client diversification we have established over the last several years. For the fourth quarter of fiscal year 2025, our largest client now accounts for less than 10% of revenue due to the strong growth in the rest of the business. And our top 5, top 10 and top 25 client concentrations remain consistent with the prior year at 36%, 54% and 79%, respectively, of overall revenue, representative of a well-diversified client portfolio. Over the past decade, we have done a tremendous job retaining our top 25 clients and are excited to see one of our signature client wins from fiscal year '24 now move into the top 15.

Switching to our verticals. Retail & E-commerce increased to 25.3% of fourth quarter revenue versus 24% in the prior year quarter, and HealthTech and Travel, Transportation and Logistics remained strong at 14% and 13.8% versus 13.9% and 14.8%, respectively, in the prior year quarter. These changes were driven by continued growth in multiple offshore geographies and our continued ability to win significant new clients in these verticals. Conversely, our exposure to the Fintech vertical decreased to 10.6% of revenue for the quarter versus 13.7% in the prior year quarter. We expect the Fintech vertical to stabilize as we move forward based on the strength of our pipeline in this vertical.

Moving on to our fiscal year 2025 results. Revenue increased 9.8% and to $558.3 million compared to $508.6 million in the prior year. Revenue growth was driven by vertical growth in HealthTech of 23%, Travel, Transportation and Logistics of 14% and Retail & E-commerce of 13%, along with outstanding growth in the digital acquisition business. We grew in both our onshore and offshore regions throughout the year. Onshore revenue, which comprised 24% of total revenue during the fiscal year, increased 13% and offshore revenue, which comprised 51% of our total revenue, increased 15% versus the prior year.

Our nearshore region, which comprised 25% of our total revenue, declined slightly at 3% versus the prior year as some of this business shifted to our offshore locations. Fiscal 2025 net income increased to $36.9 million versus $33.7 million in the prior year. The increase was driven by revenue growth and gross margin expansion, particularly in our higher-margin offshore regions offset by increases in selling, general and administrative and net interest expense. Our effective tax rate was 19.7% versus 17.9% for fiscal year 2024 which was attributable to changes in revenue mix across our taxable jurisdictions and discrete items recorded in the prior year. We expect our normalized tax rate going forward to be in a 20% to 22% range benefiting from higher net income and lower diluted shares outstanding, our GAAP diluted earnings per share increased 28% to $2.36.

Reviewing non-GAAP measures for the full year, adjusted EBITDA increased to $72 million or 12.9% of revenue compared to $65.2 million or 12.8% of revenue for the prior year. Adjusted EBITDA margin increased slightly as growth in our higher-margin offshore locations and in our digital acquisition business as well as our site optimization efforts over the past year was largely offset by increased SG&A expense. Adjusted net income increased 12.1% to $43 million compared to $38.4 million in the prior year. Non-GAAP fully diluted adjusted earnings per share increased 31% to $2.75 compared to $2.10. The increase in adjusted net income and non-GAAP fully diluted adjusted earnings per share was primarily driven by the top and bottom line operating performance discussed earlier and our lower share count. This was offset slightly by increased net interest expense compared to the prior year.

Net cash generated from operating activities was a record of $45.7 million for fiscal 2025 compared to $35.9 million for fiscal 2024. The increase was primarily driven by an increase in revenue and a lower use of working capital. Our DSO ended the year at 72 days for the quarter, consistent with the DSO at the end of last year. We expect our DSO to remain stable in the mid-70s on a go-forward basis. Capital expenditures were $18 million or 3.3% of revenue for fiscal year 2025 versus $9 million or 1.7% of revenue in the prior year. This increase was primarily driven by expansions to meet the strong demand in our highest margin regions.

Free cash flow for fiscal 2025 was a record of $27.3 million, up from $27 million in the prior year. Our record operating cash flow was offset by the increase in capital expenditures of $9.5 million as discussed above. We ended the fourth quarter with $15 million of cash and debt of $1.6 million for a net cash position of $13.7 million, an improvement of $21.2 million compared to net debt of $7.6 million at the end of our third quarter. When compared to our net cash position of $61.2 million as of June 30, 2024. This reflects the impact of $77.2 million in share repurchases during fiscal 2025 including our $70 million TRGI share repurchase.

To summarize our 2025 fiscal year, we achieved outstanding top and strong bottom line results during the year allowing us to enter fiscal 2026 with great momentum. We delivered a multiyear high top line performance with 10% revenue growth for the year and 18% for the fourth quarter. Our adjusted EPS of $2.75 for fiscal year 2025 was up 31% over the prior year and was a record for our business. The fourth quarter was also our strongest quarter ever in generating free cash flow of $23 million.

Our continuing strong financial results and healthy balance sheet are enabling strategic investments in our growing AI capabilities and sales resources as well as further expansion into strategic markets and in our top-performing geographies. Importantly, with the backdrop of a fluid market environment, we maintain continued confidence in the business to provide the following guidance of growth in the first quarter and fiscal 2026.

For fiscal 2026, revenue is expected to be in the range of $590 million to $610 million. Adjusted EBITDA is expected to be in the range of $75 million to $79 million. For first quarter of fiscal year 2026, revenue is expected to be in the range of $143 million to $146 million. First quarter adjusted EBITDA is expected to be in the range of $17.5 million to $19 million. Capital expenditures are expected to remain in the range of $20 million to $25 million for the year. Our business is well positioned for today in the years ahead, and we are excited about the momentum we've built as we head into fiscal year 2026.

With that, Bob and I will now take questions. Operator, please open the line.

[Operator Instructions] Our first question comes from David Koning with Baird.

Yes. Guys, great job again.

Thanks, Dave. Yes. We're really pleased with the quarter, the year and the trajectory. So thank you.

Yes. Everything looks really good. And I guess maybe to kick it off, the quarter itself, when we've looked at Q4s in the past, I think, every quarter since we've covered the stock, it's been a flat to down sequential quarter. This quarter, you were up 5% sequentially. And I guess, a, is there anything in there that was a little bit onetime in nature? And b, there's a vertical called kind of other that doesn't fit the other the other verticals that you often talk about. And that one was up a lot, I think, over 100% year-over-year, about $8 million sequentially. Was there something in there that maybe a new client that's coming on? And is that sustainable?

Yes. So great question, Dave, and good call out on our Q4, which historically does not jump up like we like it has this year. Here's the cascading down of the growth. And I would -- to your question, is any of this a onetime? And the answer to that is no, this is all kind of sustainable annuity-type business. But what we did exceptional in this quarter is win market share in our embedded base, driven by our great performance. The team on the operational side just continues to outperform the industry and our client services and biz dev team has done an amazing job of leveraging that to win market share, which is growing into new markets. We talked about India.

Those are growth vectors and margin -- or market share expansion vectors. And we did that across many, many clients -- of our existing clients. And I'll give you an example of that. Our second largest client, [ Big E-commerce ] company, we grew in every market with them, massively in Pakistan massively in Philippines. And now we even got the go ahead in Central America. It's kind of the one market we didn't have for them. And so we feel really good kind of Q1. And so that was, I think, the first big element is winning market share.

Number 2 was our digital acquisition business, the digital marketing business that we've referred to. Under Mike Darwal's leadership, that part of our business accelerated enormously, with focus and execution and just really leveraging kind of those capabilities, our data marketing type capabilities, et cetera, to drive a lot of customer acquisition for our clients. And we see that continuing into this -- in the first half of this year, kind of the power of that. And then the last element, just to touch on was our new logo team just continues to kind of do well and has consistently done well over the years. And you put those together with no client loss and you have the makings of just a powerful growth business?

Yes. That's all good. And then maybe just a follow-up. We talk with you and then a lot of your competitors, and there's been obviously this fear about GenAI and the impact. But when we do our survey, the majority of you and your peers tend to say, yes, there are some volumes we might lose over time, but net, it's probably going to be a positive, and it's just following the normal cadence of automation over time that you've seen for decades, really a little different type, but right? And maybe some commentary just GenAI, how you feel about it positive, negative, et cetera.

Sure, so -- and your comments are pretty well grounded in what we've seen. And again, what's exciting is this Q4, Dave, we went from proof of concept to some full-scale production implementations with our clients. So we've learned a lot as you do that. And what we have seen is there's a lot of opportunity for automation. But you know what's more important is actually the entire customer journey and owning that journey. And so as we've jumped out into the -- and we believe clearly we have a leadership position in this. And as we've jumped out into the leadership position of bringing those solutions to bear, but having that whole embracing the connection from AI agent to human agent and having that end-to-end value proposition, what we've seen as our clients see that as enormously valuable, enormously rich, and I think that's helped drive -- help us create another vector of growth for us. And so I think what you're hearing is right, I think we're further along than anybody. And I think we've also have more data around that end-to-end journey that anybody in this industry has, and we're able to leverage that to our advantage.

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

Thanks, Daniel. And I'll be brief. I couldn't be more proud of what IBEX has done and of what my management team just continues to deliver quarter-over-quarter, year-over-year, and we are well positioned for FY '26. So look forward to chatting in the next quarter, but we're really proud of everything that we've done in this space and how we've created ourselves into a truly differentiated company. Thank you all. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.