Concentrix

“Our investment in AI tools remain a key priority, and we're increasing our investment to accelerate deployment of the cutting-edge solutions. While this investment is impacting margins in the short term, we believe that this increased investment will allow us to demonstrate faster to the market why we see generative AI as a benefit. To be clear, much of this is our own intellectual property we have developed that is now deployed in hundreds of our clients.”

“Despite our focus on investing in technology, due to our size, scale, and the regular implementation of our technology-infused solutions, historically, our costs of developing, maintaining, and integrating new technologies were not material on a stand-alone basis. In fiscal year 2024, we increased our investment in technology to approximately 1% of revenue, including expenses related to the development of our new iX suite of technology, as well as pilot programs for clients related to the use of GenAI.”

“Flow-through from revenue growth and efficiency gains across our business more than offset investments to ramp new programs and accelerated investment in AI development and deployment.”

“We have an extensive R&T department that is innovating internally for our own workforce, as well as for customers around all forms of automation, including Generative AI.”

“At the same time, we are continuing to invest in our future by upskilling our people and expanding specialized AI talent to grow new capabilities. Looking ahead to Q4, we are pushing accelerated deployments of AI, but we remain confident in the growth opportunity of our new business revenues and the overall market opportunities.”

“In terms of how we're thinking about spending money on our iX Suite, as we've talked about, we're benefiting from some of the ability to lower our cost base with AI internally on our development. We brought down our expenditures on our iX Suite.”

“We expect that margin profile to continue to build up, and at some point, at critical mass, we expect iX Hero to have effectively SaaS-type margins, but that is a fair bit away.”

“We have an extensive R&T department that is innovating internally for our own workforce, as well as for customers around all forms of automation, including Generative AI.”

“Our selling, general and administrative expenses consist primarily of support personnel costs such as salaries, commissions, bonuses, employee benefits and share-based compensation costs.”

“We invest in information technology systems, infrastructure, automation and security to enhance workforce management and enhance productivity.”

“It's basically thousands of people we haven't needed to hire, while we've been able to grow the business based on the productivity, and we just see that increasing.”

“In fact, we built our own technology internally just for ourselves that's very similar to this, that we're finding productivity gains.”

“Additionally, lower wages and reduced temporary contract service costs contributed to the decrease in cost of revenue. These decreases were partially offset by higher restructuring expenses, primarily related to severance and other employee-related costs resulting from the Company's recent cost reduction initiatives.”

“The Company recorded severance costs of $31,429 and $91,650 for the three and nine months ended August 31, 2026, respectively, primarily related to the Company’s cost reduction initiatives. These actions affected approximately 30,000 employees.”

“Contributing to the increase over the prior year period was an increase of $5.7 million related to restructuring expenses, which was offset by a reduction of $6.2 million due to changes in foreign currency exchange rates.”

“This increase in margins demonstrates our focus on winning the right business, as well as our discipline and execution in aligning our business investments to areas that we have identified for profit-enhancing growth while reducing costs in other areas.”

“In terms of how we're thinking about spending money on our iX Suite, as we've talked about, we're benefiting from some of the ability to lower our cost base with AI internally on our development. We brought down our expenditures on our iX Suite.”

“We previously handled 95% of the airline's transactions through a voice channel with thousands of Game Changers. Today, using our technology, some generative AI, and some machine learning AI chatbots, more than 50% of transactions have been automated. With this implementation of technology, we reduced the number of Game Changers needed by close to 500, while the remaining Game Changers process the more complex transactions.”

“That's why in the first quarter of 2024, we automated significant portions of over 60 million transactions for our clients, yet was still able to grow our revenue.”

“We have been a leader in our industry in advancements such as conversational virtual assistants, multichannel and augmented CRM, predictive analytics, emotion analytics, cognitive learning, AI, and GenAI and enjoy a first mover advantage.”

“In September 2024, we introduced our iX suite of technology with the release of iX Hello, a GenAI-powered platform for creating virtual assistants.”

“That's not only the AI we do, we also do a lot of automation and AI that's built into solutions that doesn't get classified as Catalyst revenue, that goes through the rest of our client success business.”

“Our investment in AI tools remain a key priority, and we're increasing our investment to accelerate deployment of the cutting-edge solutions. While this investment is impacting margins in the short term, we believe that this increased investment will allow us to demonstrate faster to the market why we see generative AI as a benefit. To be clear, much of this is our own intellectual property we have developed that is now deployed in hundreds of our clients.”

“Three of our four largest iX Suite wins this quarter came from clients who are already using the product and are now expanding their use cases because of the results we've helped them achieve. We also brought 61 opportunities, including more than 30,000 advisors live on our iX Suite this quarter, contributing to our margin expansion we delivered in Q3 and the impact to our revenue growth in our traditional business.”

“The second thing that we've talked about is our increase in AI automation sales that we've been doing. Not only did we have a very strong AI pipeline, sales pipeline in Q2, which we called out, we also had another one in Q3.”

“What we talked about in Q2 was the ability to deliver on these AI automations at pace. We've been really happy with how the team has reacted in Q3, and we've been able to deploy those automations much faster than what we originally expected, which I think is a really good thing. We're seeing that impact in Q4, and which will also impact into Q1.”

“We have talked about exiting 2026 with an ARR of just software licensing around $120 million. We are on pace to do that.”

“We expect that margin profile to continue to build up, and at some point, at critical mass, we expect iX Hero to have effectively SaaS-type margins, but that is a fair bit away.”

“That's not only the AI we do, we also do a lot of automation and AI that's built into solutions that doesn't get classified as Catalyst revenue, that goes through the rest of our client success business.”

“A few examples of wins in the quarter include a top European retailer signing a tech-led solution that includes our generative AI, agent automation technology, analytics, and ongoing services to take care of their customers.”

“By proactively introducing technological innovation to our clients, we deepen our relations and are often rewarded with opportunities to expand our engagements and secure additional sources of revenue.”

“We're doing that now in some places, like, again, that regional airline example and a large, retailer in Europe that we're doing it, that will, will definitely remove, some work, but they're giving us more work that historically they haven't outsourced to offset that because we're far more efficient at being able to deliver these solutions.”

“These new revenue sources are comprised of $3 billion of revenue that is coming from new and existing clients that has either gone through heavy transformation or has AI influencing the revenue, $1.3 billion of net revenue resulting from the compression of our traditional services using our iX Suite AI platform, and finally, $700 million of revenue from new high-value services we brought to the market across growing segments like risk and compliance.”

“Compared to our traditional business, this revenue is growing faster at an expected 30% year-over-year growth rate in fiscal 2026, is more profitable, and is stickier with a revenue retention rate 4x higher.”

“We're continuing to prove that as clients scale AI, we create more opportunities to grow our business, expand profitably, and deepen client relationships. We are actively focused on disrupting our own traditional business to take advantage of our momentum. Our sales pipeline continues to be stable with net new logo sales involving AI growing 63% quarter-over-quarter.”

“We're helping clients right now understand how to engage with it. We're helping clients understand how to support these channels. We do see agentic shopping becoming more and more prevalent in the marketplace, and see opportunities for us to grow with that, supporting our clients, supporting this infrastructure.”

“What we have also talked about is how it influences revenue that runs through this platform. That was the number that I called out of the $1.3 billion that is running through our platform, which, as we have talked about before, is growing faster than our traditional revenue because we are getting optimized work out of it, and it is at a higher profit margin out of it.”

“While we are aggressively disrupting our own traditional business, the underlying new business is stronger and healthier as evidenced by our margin expansion, strong free cash flow and growth of our new services.”

“However, the transition of lower complexity support to online and self-support options, driven by heavy automation and the increased use of new technologies, reduces volumes in the voice channel.”

“Some emerging technologies, including AI, GenAI, RPA, ML, VOC, IVR, and IoT, may cause an adverse shift in the way certain of our existing business operations are conducted, including by replacing or supplementing human contacts with automated or self-service options, or by decreasing the size of the available market.”

“As these technologies evolve, some lower complexity services currently performed by our game-changers may be replaced by tools deployed by clients.”

“We previously handled 95% of the airline's transactions through a voice channel with thousands of Game Changers. Today, using our technology, some generative AI, and some machine learning AI chatbots, more than 50% of transactions have been automated. With this implementation of technology, we reduced the number of Game Changers needed by close to 500, while the remaining Game Changers process the more complex transactions.”

“And what we're seeing is that clients are clearly focused on the most cost-effective way, as they've always been. This is not new. Most effective way of automating work. AI is just another tool, or Generative AI is just another tool to make that happen.”

“And so we've talked for a while about, you know, as there's been more cost pressure on people, certainly we've looked to automate more, but also they've looked to move and switch shores.”

“That's why in the first quarter of 2024, we automated significant portions of over 60 million transactions for our clients, yet was still able to grow our revenue.”

“We're doing that now in some places, like, again, that regional airline example and a large, retailer in Europe that we're doing it, that will, will definitely remove, some work, but they're giving us more work that historically they haven't outsourced to offset that because we're far more efficient at being able to deliver these solutions.”

“We're continuing to prove that as clients scale AI, we create more opportunities to grow our business, expand profitably, and deepen client relationships. We are actively focused on disrupting our own traditional business to take advantage of our momentum. Our sales pipeline continues to be stable with net new logo sales involving AI growing 63% quarter-over-quarter.”

“Three of our four largest iX Suite wins this quarter came from clients who are already using the product and are now expanding their use cases because of the results we've helped them achieve. We also brought 61 opportunities, including more than 30,000 advisors live on our iX Suite this quarter, contributing to our margin expansion we delivered in Q3 and the impact to our revenue growth in our traditional business.”

“While AI is expanding our growth opportunities, we are also navigating industry shifts like hyperscaler spend priorities, which will have a larger impact than previously expected on our revenue in the fourth quarter.”

“In addition, shore mix created about a 3% headwind this quarter, as we talked about in our second quarter earnings call.”

“It is important to note that while the business is evolving, we are doing what we can to accelerate our rollout of AI. This causes temporary headwinds that result in growing stickier and higher margin revenue and relationships.”

“At the same time, we are continuing to invest in our future by upskilling our people and expanding specialized AI talent to grow new capabilities. Looking ahead to Q4, we are pushing accelerated deployments of AI, but we remain confident in the growth opportunity of our new business revenues and the overall market opportunities.”

“While not providing guidance for 2027, we currently expect the growth of our new business revenue to offset much, if not all, of our automation efforts in 2027 while driving stable to improved margins across our entire business.”

“On a constant currency basis, this represented a decrease of 0.5%, which is slightly below the lower end of the guidance we provided in June. Our revenue for the quarter reflects an acceleration of our deployment of AI for clients, as well as client decisions to reduce support for certain customer sets that we have supported.”

“The hyperscale customers we are talking about are two specific clients who, as we talked about in our Q2 call, are looking at stopping support for certain client sets.”

“What we talked about in Q2 was the ability to deliver on these AI automations at pace. We've been really happy with how the team has reacted in Q3, and we've been able to deploy those automations much faster than what we originally expected, which I think is a really good thing. We're seeing that impact in Q4, and which will also impact into Q1.”

“Our belief is that we need a couple more quarters to continue to drive automation in our traditional business.”

“We do see it abating over time, but maybe not for the reason that you indicated so much as we are really getting to the point where we only, as we exit this year, have 10%- 11% of revenue that we see as kind of in the pool of stuff that is likely over time to be movable offshore.”

“We are seeing clients who are moving the work, and the belief is that as we put an AI to it, they will continue to leave it where it resides versus pulling it back into a higher cost region.”

“Our belief is that as we continue to add more and more of the new revenues, as we continue to automate more and more of our traditional revenues, that we've got that margin stability, as we talked about in the prepared remarks, certainly in 2027.”

“While we are aggressively disrupting our own traditional business, the underlying new business is stronger and healthier as evidenced by our margin expansion, strong free cash flow and growth of our new services.”