Executive Summary / Key Takeaways

• IBEX has successfully pivoted to become a digital-first, higher-margin CX provider, demonstrating a return to double-digit organic revenue growth in Q3 FY2025, its best growth in over two years, driven by strategic wins and market share gains.
• The company's differentiated Wave iX technology suite, particularly its AI Automate and AI Translate solutions, is gaining traction, positioning IBEX as a first mover in AI-enabled CX and expected to drive meaningful, high-margin revenue expansion starting in Q4 FY2025 and into FY2026.
• Growth is increasingly concentrated in higher-margin offshore and nearshore regions and digital/omnichannel services, contributing to gross margin expansion and improved operating profitability, despite investments in technology and expansion into new markets like India.
• IBEX maintains a strong balance sheet with solid free cash flow generation, enabling strategic investments in AI and infrastructure while also supporting significant share repurchases to return value to shareholders.
• Management has raised full-year FY2025 guidance for both revenue ($540M-$545M) and adjusted EBITDA ($68M-$70M), signaling confidence in continued momentum driven by strategic execution and the positive impact of AI deployments.

The Transformation of IBEX: From BPO to Digital-First CX Leader

IBEX Limited, incorporated in 2017 and listed on Nasdaq in 2020, has undergone a significant transformation from a traditional business process outsourcing (BPO) provider to a technology-enabled customer lifecycle experience (CLX) solutions leader. This strategic pivot, branded as BPO 2.0, has focused on delivering integrated digital-first services from higher-margin geographies, fundamentally reshaping the company's operational profile and financial trajectory.

At its core, IBEX's offering revolves around its Connect business, providing customer service, technical support, and revenue generation through an omni-channel model. Complementing this is the ibex Digital suite, focused on technology-driven customer acquisition. This integrated approach is underpinned by the company's proprietary Wave iX technology stack, which is increasingly incorporating cutting-edge Artificial Intelligence (AI) solutions.

The Wave iX platform is designed to optimize customer interactions and drive digital transformation for clients. Its AI capabilities, including AI Automate, AI Translate, and AI Authenticate, represent a critical technological differentiator. AI Translate, for instance, enables real-time language translation, allowing English-speaking agents to provide multilingual support. This is described as a disruptive solution that displaces traditional third-party language translation services, offering a game-changing improvement in customer experience and reducing costs. Management highlights that AI Translate is 100% accretive to revenue and profitability. Similarly, AI Automate leverages AI and deep analytics to handle high-volume, low-complexity interactions via chat and voice bots. While this may cannibalize some traditional agent volume, it is positioned as an enterprise-wide solution that is incremental to revenue and margin on an overall client level, enhancing IBEX's trusted partner status and competitive moat.

The strategic intent behind these AI investments is clear: to position IBEX as a first mover in AI-enabled CX, creating new revenue streams and driving future growth and margin expansion. With a robust pipeline of over 75 AI opportunities and 9 deployments expected in Q4 FY2025, the company anticipates an inflection point where these solutions move from pilots to full production, contributing meaningfully to financial results in FY2026.

Competing in the CX Landscape: Punching Above Its Weight

The customer experience and BPO market is highly competitive, featuring large global players like EXLService (EXLS), Concentrix (CNXC), Teleperformance (TLPFY), and Genpact (G). IBEX, while smaller in scale compared to some of these giants, has demonstrated a consistent ability to compete and win against them, particularly in securing new logo opportunities and gaining market share within existing client relationships.

IBEX's competitive advantage is rooted in its differentiated capabilities, including its agent-first culture (reflected in a high employee net promoter score of 77), its Wave iX technology stack, and its deep analytics expertise. These attributes enable IBEX to outperform competitors in service delivery, which is a key factor in winning market share. For example, the company's land-and-expand strategy is fueled by its ability to deliver superior performance, leading clients to consolidate more business with IBEX and expand into new geographies or lines of business, often displacing larger incumbent providers. Recent wins in the gaming industry and a large deal in the Australia/New Zealand/Singapore regions, where IBEX beat out multibillion-dollar competitors, underscore this capability.

While larger competitors like EXLS and Genpact may have more extensive AI analytics capabilities or broader service portfolios, and giants like Concentrix and Teleperformance benefit from immense global scale and efficiency, IBEX's strength lies in its focused, integrated CLX platform and its ability to quickly bring innovative solutions like AI Translate and AI Automate to market. Management feedback suggests IBEX is further along than many competitors in deploying these specific customer-facing AI solutions.

Financially, IBEX's TTM gross profit margin of 30.89% and EBITDA margin of 12.37% are competitive within the sector, though some larger, more diversified players like EXLS (38% gross, 25% EBITDA in 2024) or Genpact (35% gross, 20% EBITDA in 2024) may exhibit higher profitability metrics due to scale, service mix, or analytics focus. However, IBEX's recent trend of margin expansion, particularly in the latter half of FY2024 (14.8% adjusted EBITDA margin in H2 FY24), indicates improving operational efficiency and the positive impact of its strategic shift towards higher-margin work. The company's focus on growing its offshore and nearshore delivery footprint (97% of workstations as of March 31, 2025) is a direct response to client demand for cost reduction while also improving IBEX's own margin profile compared to lower-margin onshore work.

Client concentration remains a factor, with the largest client accounting for 11% of revenue in Q3 FY25, but overall top client concentrations have remained stable or slightly declined, indicating increasing diversification over time. The strategic repurchase of shares from TRGI also reduced the largest shareholder's stake, eliminating controlled company status and potentially enhancing independence, although TRGI retains consent rights on certain actions until its ownership drops below 10%.

Financial Momentum and Strategic Investments

IBEX's financial performance in fiscal year 2025 demonstrates building momentum. After a slight revenue decline in FY2024 primarily due to the planned shift from onshore to offshore and macroeconomic headwinds in the first half, the company returned to growth. Q3 FY2025 revenue reached a record $140.7 million, an 11% increase year-over-year, marking a return to double-digit organic growth. This growth was broad-based across key verticals like HealthTech, Travel, Retail, and the digital acquisition business, offsetting a decline in FinTech.

Profitability has also shown strength. Q3 FY2025 net income was $10.5 million, a slight increase year-over-year, resulting in diluted EPS of $0.73, up from $0.57, benefiting from improved operating performance and fewer diluted shares outstanding due to share repurchases. The operating margin expanded to 9.5% in Q3 FY2025, up from 8.9% in the prior year quarter, driven by growth in higher-margin offshore regions and site optimization efforts. Gross margin improved by 50 basis points in Q3 FY2025, with offshore revenues now comprising 51% of the total. Adjusted EBITDA in Q3 FY2025 was $19.4 million (13.8% margin), slightly down in margin percentage year-over-year due to investments in SG&A, but the 9-month adjusted EBITDA margin improved to 12.5% from 12.3%, reflecting overall operational improvements.

The company maintains a solid liquidity position. As of March 31, 2025, cash and cash equivalents stood at $13.0 million, supplemented by $46.1 million in available borrowing capacity under the new HSBC (HSBC) Credit Facilities. Total debt was $20.6 million. The significant decrease in cash from June 30, 2024 ($62.7M) to March 31, 2025, primarily reflects the $45 million cash portion of the TRGI share repurchase and other buybacks. The $25 million TRGI convertible note was repaid in January 2025, utilizing available cash and the HSBC facility.

Free cash flow generation remains a key strength. FY2024 saw record free cash flow of $27 million, enabling the company to repurchase over 1.3 million shares (8% of outstanding shares) for $21.7 million. While Q3 FY2025 free cash flow was $3.6 million, impacted by increased capital expenditures for expansions in offshore/nearshore regions and IT equipment, the company's overall cash flow profile supports continued investment in growth initiatives, including AI capabilities and potential M&A, alongside shareholder returns through a new $15 million share repurchase program authorized in May 2025. DSOs were 77 days at the end of Q3 FY2025, expected to remain stable in the mid-seventies.

Outlook and Risks

Management's outlook for fiscal year 2025 is positive, reflected in the raised guidance. Revenue is now expected to be in the range of $540 million to $545 million, and adjusted EBITDA is projected to be between $68 million and $70 million. Capital expenditures are anticipated to be in the range of $15 million to $20 million, supporting continued expansion in higher-margin geographies and technology investments.

This guidance is underpinned by the expectation of continued momentum from new client wins, further expansion within the embedded base driven by performance, and the increasing contribution from higher-margin services and delivery locations. The anticipated shift of AI solutions from pilots to full production in Q4 FY2025 is a key factor in the positive outlook for future revenue and margin expansion, particularly heading into FY2026. Management expects the effective tax rate to track towards 20-21% for FY2025.

Despite the positive trajectory, IBEX faces several risks. Macroeconomic uncertainty, including inflation and potential recession, could impact client demand and pricing power. The ongoing trend of clients shifting work to lower-cost offshore sites, while a driver of IBEX's margin expansion, requires careful management of onshore capacity. Wage pressure in delivery geographies remains a challenge, requiring continued efforts to offset costs through productivity gains and contractual adjustments. The consent rights held by TRGI, the largest shareholder, could potentially influence strategic decisions, including M&A or financing activities. The transition out of controlled company status under Nasdaq rules requires adjustments to board and committee composition, although the company is currently in compliance with phase-in requirements.

Conclusion

IBEX has successfully navigated a strategic transformation, emerging as a more agile, digital-first, and higher-margin customer experience provider. The company's ability to win new enterprise clients and expand within its existing base by outperforming competitors, coupled with a strategic shift towards higher-margin offshore delivery and digital/omnichannel services, is driving a return to meaningful revenue growth and profitability expansion. The increasing adoption of its AI-powered Wave iX solutions represents a significant opportunity for future revenue streams and competitive differentiation. While macroeconomic uncertainties and competitive pressures from larger players persist, IBEX's demonstrated operational execution, strategic investments in technology and geographic expansion, and solid financial health, including strong free cash flow, position it favorably. The raised FY2025 guidance signals confidence in the continuation of these positive trends, suggesting that IBEX is well-positioned to capitalize on the evolving demands of the CX market, particularly as AI integration becomes increasingly critical.