Concentrix Corporation (CNXC) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reflects strong financial performance with record cash flow and positive revenue growth. Guidance is optimistic, especially in high-growth areas like AI. Despite competitive pressures and some vague responses, the company maintains a strong strategic position with improved margins and debt reduction. With a market cap of $4.14 billion, the positive outlook and strategic initiatives suggest a stock price increase of 2% to 8% over the next two weeks.

Key Financial Performance

Revenue for Q4 2025 $2.55 billion, representing a 3.1% growth year-over-year on a constant currency basis. Growth was driven by increases in banking, financial services, insurance (11%), communications and media (7%), travel (7%), and automotive clients (7%). However, technology and consumer electronics and healthcare clients saw a 2% decrease due to share movement and underlying volume.

Non-GAAP Operating Income for Q4 2025 $323 million, with a margin of 12.7%. This was a sequential increase of 40 basis points compared to Q3 2025 but a decrease year-over-year due to overcapacity-related issues earlier in the year.

Adjusted EBITDA for Q4 2025 $379 million, with a margin of 14.8%. This reflects the company's efforts to manage costs and improve operational efficiency.

Non-GAAP Net Income for Q4 2025 $192 million, translating to a non-GAAP diluted EPS of $2.95 per share.

Adjusted Free Cash Flow for Q4 2025 $287 million, a quarterly record for the company, reflecting strong cash generation.

Full-Year Revenue for Fiscal 2025 $10.035 billion to $10.180 billion, representing a 2.1% growth year-over-year on a constant currency basis. Growth was driven by high-growth verticals and new service offerings, offset by a proactive reduction in non-complex work and resolutioning efforts.

Full-Year Non-GAAP Operating Income for Fiscal 2025 $1.254 billion, with a margin of 12.8%. This reflects investments in technology and operational efficiencies.

Adjusted Free Cash Flow for Fiscal 2025 $626 million, an increase of over $150 million (32%) year-over-year, driven by higher income and lower interest expenses.

Shareholder Returns for Fiscal 2025 $258 million returned to shareholders through dividends ($89 million) and share repurchases ($169 million).

Net Debt Reduction for Fiscal 2025 $184 million reduction in net debt, reflecting the company's focus on improving its financial position.

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Operating Highlights

AI platform iX Suite: Launched in 2025 with an investment of over $25 million, achieving $60 million in annualized revenue and breakeven profitability. Over 40% of new business includes this technology.

Revenue growth: Achieved 2% total growth in constant currency for 2025, with Q4 growth above 3%. High single-digit growth in newer adjacent offerings.

Client base expansion: 98% of top 50 clients now use more than one solution. Significant wins with major banks, electric car companies, and AI model makers.

Operational efficiencies: Reduced non-complex work from 7% to 5% of revenue. Invested $95 million in capabilities, facilities, and footprint, moving 4% of onshore business to offshore centers.

Cost savings: Reduced expenditures on non-billable resources and infrastructure by $100 million run rate by Q1 2026.

Strategic focus areas: Focused on high-value services, growing wallet share, leveraging IP investments, and driving efficiencies.

Go-to-market investments: Invested $25 million in retraining sales teams, upgrading enterprise sellers, and developing vertical offerings.

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Risk or Challenges

Margin Compression: The migration of 4% of onshore business to offshore centers resulted in margin compression due to additional and duplicate costs incurred during the transition.

Geopolitical Headwinds: The company faced significant geopolitical uncertainties in 2025, which could impact operations and client relationships.

Natural Disasters: Natural disasters posed challenges to operations and client support during the year.

AI Market Competition: The AI market is described as crowded and competitive, posing challenges for the adoption and differentiation of the company's AI platform.

Revenue Impact from Non-Complex Work Reduction: Proactive reduction of non-complex work is expected to impact revenue by approximately 1% in fiscal 2026.

Resolutioning Client Work: Optimizing client cost structures through resolutioning is expected to impact revenue by 2% in fiscal 2026.

Interest Expense: The company anticipates an interest expense of approximately $257 million in fiscal 2026, which could affect profitability.

Debt Levels: The company has a net debt of $4.311 billion, which could pose financial risks if not managed effectively.

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Guidance & Outlook

Revenue Expectations for 2026: Full year reported revenue is expected to be in the range of $10.035 billion to $10.180 billion, implying constant currency revenue growth of 1.5% to 3%. First quarter reported revenue is expected to be $2.475 billion to $2.50 billion, implying constant currency revenue growth of 1.5% to 2.5%.

Profitability Projections for 2026: Full year non-GAAP operating income is expected to be in the range of $1.24 billion to $1.29 billion. Full year non-GAAP EPS is expected to be $11.48 to $12.07 per share. Sequential quarterly increases in non-GAAP operating income are expected in the second half of 2026.

Cash Flow Expectations for 2026: Adjusted free cash flow is expected to increase to a range of $630 million to $650 million through higher income and lower interest expense. Adjusted free cash flow in the first quarter is expected to be slightly negative but improved compared to the prior year.

Capital Allocation Priorities: Spending on share repurchases in 2026 is expected to be similar to 2025. The company is committed to maintaining investment-grade principles, repaying debt to move closer to the target leverage ratio, and supporting its dividend.

Operational Investments and Cost Management: The company plans to drive efficiencies through automation and simplification of the business while making investments in technology, SMEs, and vertical offerings. Duplicate costs are expected for a period as client programs are resolutioned, but these are expected to be removed in the second half of 2026.

AI and Technology Integration: The company will continue investing in its AI platform and expects to grow its own AI platform revenue. Investments in go-to-market spending, including technology and SMEs, will support long-term growth.

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Shareholder Return Plan

Dividend Payments: In fiscal year 2025, Concentrix paid approximately $89 million in dividends to shareholders.

Share Repurchases: Concentrix repurchased $169 million of its common shares, representing nearly 3.6 million shares at an average price of approximately $47 per share in fiscal year 2025.

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Key Q&A

Q:What metrics does the company focus on for AI-related software and chatbots, and what are the details of their spending plans for 2026?

A:The company focuses on metrics such as achieving accretive results and revenue goals, exiting the year with $60 million in run rate revenue on a total spend of over $50 million. For 2026, CapEx is expected to be 2%-2.5% of revenue, and OpEx will focus on variable spending to drive new opportunities. Incremental spending of $25 million in 2025 will be matched in 2026, with investments aligned to client needs and transformational contracts.

Q:How does the company determine whether to support a customer facing a slowdown and lower call volumes?

A:The company evaluates clients based on their historical buying behavior, focus on long-term value, and potential for consuming multiple services. They prioritize long-term relationships, with top clients averaging 18 years of service. Call volumes are not a factor in investment decisions, as the focus is on the type of services required.

Q:What is the company's view on market growth, Webhelp synergies, and future acquisitions?

A:The traditional CX market is flat, while other services grow at mid-single digits, with some areas achieving high single-digit growth. Webhelp exceeded synergy goals and contributed to new growth. The company will pursue opportunistic acquisitions that support clients and align with financial goals, while focusing on reducing debt.

Q:What is the outlook for margins and revenue growth in fiscal 2026?

A:Margins are expected to improve in the second half of fiscal 2026 due to resolving overcapacity issues, automation, and cost simplification. Revenue growth is guided conservatively at slightly less than 3% constant currency growth, with confidence in sequential quarterly increases.

Q:What are the lingering effects of growth headwinds, such as low-complexity work and onshore-to-offshore transitions?

A:Low-complexity work headwinds are expected to decrease to 1% in 2026 and diminish further by 2027. Onshore-to-offshore transitions involve about 15% of revenue, but many clients require onshore services due to compliance and sovereignty concerns. Most new work is optimized for its location from the start.

Q:What areas are driving high single-digit growth in adjacent services?

A:Specialized services such as data annotation, analytics, financial crimes and compliance, anti-money laundering, IT services, revenue generation, and digital assets are driving high single-digit growth, accounting for nearly 20% of revenue.

Q:What is the status of consolidation efforts and pricing in the traditional CX business?

A:Consolidation efforts are ongoing, with clients seeking partners with global scale and security. Pricing in the traditional CX business is highly competitive for commodity work, but the company focuses on quality revenue that is margin accretive and complex, providing value to clients.

Q:Is the company facing challenges in accessing talent for higher-end solutions?

A:The company has not faced significant challenges due to its global footprint, which provides access to a robust talent pool. They have strategically invested in talent acquisition to support higher-end solutions.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the specific rate of market growth and provided vague language about being 'opportunistic' in acquisitions without detailing specific plans. Additionally, while discussing pricing in the traditional CX business, the response lacked clarity on how competitive pressures are being managed beyond general statements about focusing on quality revenue.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

CNXC Transcript

Concentrix Corporation (CNXC) Q4 2025 Earnings Call Transcript

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Concentrix Corporation (CNXC) Q3 2025 Earnings Call Transcript

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The earnings call summary and Q&A reveal mixed signals: slightly lower EPS and free cash flow guidance, but positive AI product traction and shareholder returns. The market cap suggests a moderate reaction. The margin decline raises concerns, yet optimistic AI growth and strategic investments offer potential upside. The dividend increase supports a neutral outlook, balancing negative financials and positive strategic developments.

Concentrix Corporation (CNXC) Q2 2025 Earnings Call Transcript

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The earnings call reveals positive elements such as broad-based revenue acceleration, successful AI product adoption, and strategic shareholder returns. Although there were short-term margin shortfalls due to tariffs, management expects improvement by Q3. The company's strategic AI investments and managed services growth are favorable. The market cap suggests moderate sensitivity to these factors, leading to a positive stock price prediction.

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CNXC Slides

Concentrix Q4 2025 slides: modest growth continues, AI strategy takes center stage

2026-01-13

CNXC Report

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