Concentrix(CNXC) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2020, the company generated revenue of $45.8 million, a decrease of $7.6 million or 14.2% year-over-year, primarily due to churn and proactively rationalized accounts [27][28] - Non-GAAP gross profit margins were 30.8% of revenue, down approximately 50 basis points year-over-year but up approximately 60 basis points sequentially from Q2 [31] - Adjusted EBITDA was negative $200,000, down approximately $1.3 million year-over-year but slightly improved sequentially from Q2 [32] - Cash flow from operations was positive at $5.9 million, significantly up from $500,000 in the same period last year, leading to positive free cash flow of $3.4 million in Q3 compared to negative free cash flow of $2.6 million a year ago [34] Business Line Data and Key Metrics Changes - The company secured its fourth new client logo win of the year in the health and fitness software sector, indicating successful expansion into new markets [13][14] - The company extended and expanded its partnership with Qlik, enhancing customer growth and retention initiatives [15][16] - The company managed approximately $1.5 billion of annual revenue for a client through a global renewals management program, demonstrating its ability to grow with existing clients [17][19] Market Data and Key Metrics Changes - The company reported that more than 70% of the year-over-year revenue contraction was tied to churn or proactively rationalized accounts, indicating challenges in client retention [27] - Despite challenges, the company experienced trailing 12-month revenue growth of nearly 5% across its other nine largest clients, excluding the impact of a large client facing market challenges [28] Company Strategy and Development Direction - The company is focused on a virtual-first operating model, which has allowed it to adapt quickly to market changes and maintain operational efficiency [8][10] - The management emphasized the importance of customer-centric initiatives and go-to-market transformation as key priorities for the industry [9][10] - The company is committed to investing in areas that align with its strategic priorities and long-term growth objectives, including enhancing its marketing initiatives and client partnerships [50][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's alignment with long-term market opportunities and the potential for growth despite the ongoing challenges posed by COVID-19 [8][20] - The management acknowledged that while the pandemic has caused delays and challenges, they are optimistic about the company's ability to drive growth and deliver value to clients [38][80] - The management highlighted the importance of maintaining a strong focus on cash flow and operational efficiency to navigate the current economic environment [52][70] Other Important Information - The company announced a leadership transition, with Chad Lyne taking over as CFO from Rich Walker, who will remain involved as a Board member [21][24] - The company reported a record low Days Sales Outstanding (DSOs) of 66 days, down from 76 days in Q2, indicating improved cash collection processes [33] Q&A Session Summary Question: What drove the impressive renewal rate of 87%? - Management noted that the churn has improved significantly year-over-year, with most churn tied to one large client adapting to market challenges [42][43] Question: Where have cuts been made in G&A expenses? - Management clarified that cuts were made to reallocate spend to higher return areas, particularly in the virtual-first operating model [46][48] Question: Was there any government stimulus that contributed to cash flow? - Management confirmed that they did not participate in significant government stimulus programs, but did receive a small grant in Singapore to maintain employment [53] Question: What is the current state of the pipeline going into 2021? - Management indicated that the pipeline is healthier than in previous years, with a focus on closing larger opportunities despite COVID-related delays [72][80] Question: What is the status of the Salesforce Org Health initiative? - Management reported that they are in the early stages of building alliances and partnerships, with hopes for significant revenue contributions in the future [81][82]