Vincent Colicchio • Barrington Research

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Chairman & CEO Michael Connors described the AI market as being in the 'second inning,' with client adoption focused on securing funding via cost optimization and then scaling. He stated that ISG is not turning away business due to labor shortages, having trained over 1,100 employees and leveraging its own AI agents. For the geographic outlook, he expects the Americas to continue leading growth, with Europe poised to return to year-over-year growth in the second half.

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CEO Michael P. Connors detailed ISG's AI talent strategy, which includes training 90% of its client-facing staff, making surgical hires for AI skills, and trimming less needed skills. He noted client AI adoption is growing, with ISG serving 200 clients in the space. Regarding regional performance, he clarified that while the percentage growth in the Americas may moderate from Q1's high level, he still expects strong double-digit growth to continue, independent of the expected second-half recovery in other regions.

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Michael P. Connors, Chairman and CEO, identified two strong drivers in the Americas pipeline: a pickup in cost optimization and an increasing client focus on AI-driven digital transformation. He projected APAC would see improvement in the second half of the year. Michael Sherrick, EVP and CFO, reported the Q4 consultant utilization rate was 72% and confirmed the company remains comfortable in the low to mid-70s range.

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CEO Michael P. Connors stated that he expects sales cycles in the U.S. to improve starting in Q4, aided by post-election clarity. He anticipates that demand in the Americas could grow beyond the high single-digit target in 2025, with Europe lagging by a few quarters. Regarding AI, Connors confirmed revenue will accelerate in 2025 but will likely be more significant in 2026 as clients are still moving at a measured pace, though AI is now a component in nearly all sourcing deals.

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CEO Gary Kramer attributed client growth to a combination of strong personnel, expanded product offerings in health and IT, a larger addressable market, and a focused sales process, confirming most new clients are new to the PEO model. He explained the Pacific Northwest slowdown is concentrated in Portland due to local economic headwinds. CFO Anthony Harris clarified that consistent wage inflation was offset by a decrease in average hours worked, resulting in a net 1.7% increase in average billing per WSE.

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Executive Gary Kramer humorously declined to reveal the company's 'playbook' for client acquisition. Regarding the staffing business, he clarified that its agricultural clients are largely domestic-focused and not heavily impacted by China tariffs, while logistics has seen some pull-forward activity. He described workers' compensation pricing as having 'moderated' and noted that a recent advisory rate increase recommendation in California suggests pricing may be near a bottom. He reminded that the staffing business is a very small part of the overall company.

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CEO Gary Kramer confirmed that the company is positioned to consistently grow its PEO recruiting business, as it is gaining good penetration with its installed client base and is used as a sales tactic for new business. He also noted that health care brokers are becoming a more productive referral channel, particularly during their busy season, as they realize BBSI can handle administration and free up their time to sell more.

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Chairman and CEO Ted Fernandez affirmed they have the necessary resources, noting that platform capabilities are also driving operating improvements and accelerating solution design. He stated that utilization weakness was concentrated in the technology groups, which is being addressed by the restructuring. Regarding AI Explorer, Fernandez shared recent, highly positive feedback from a leading AI enterprise software company, which called the platform 'excellent' and more 'complete and thoughtful' than anything they had seen.

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Ted Fernandez, Chairman and CEO, estimated a 50-50 split between GenAI consulting and implementation revenue for the quarter, expecting implementation to become a much larger multiple over time. He confirmed that cross-selling is occurring, with a common path being the enhancement of traditional digital transformation projects with a GenAI scan. For the Oracle segment, he noted that while overall activity is solid, the segment is expected to be down as it works to replace a large engagement that recently concluded.

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Chairman and CEO Ted Fernandez stated that Oracle activity remains strong, especially in EPM. He confirmed that the company has been actively increasing headcount in its Gen AI groups to meet demand, as noted by the CFO. Regarding the joint venture, Fernandez reported that it is beginning to sign licenses, the final agreements are being formalized, and it will offer clients flexible licensing or consulting engagement options, with licensing activity expected to grow.

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Ted Fernandez, Chairman and CEO, responded that the negative year-over-year impact from eProcurement weakness will annualize after Q1 2025, noting the GSBT segment would have grown nearly 5% without it. For Oracle and SAP, he directed attention to CFO Robert Ramirez's guidance, which projects year-over-year growth for all three segments in Q4, with total company revenue expected to be up 3% to 5%.

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CEO Robert Frist confirmed that price escalators are now standard in nearly all new and renewed contracts and are being well-received. For NurseGrid, he detailed multiple monetization efforts, including NurseGrid Learn generating over $50,000 per month, a strategic partnership for student debt consolidation, and a new jobs function. He also highlighted NurseGrid's integration with the hStream platform's identity service to add more value for its growing user base.

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Robert Frist, CEO and Chairman, responded that the company is managing pricing effectively through value-based bundling, as seen with the Competency suite. He also highlighted the successful implementation of 3-5% annual price escalators in all new contracts over the past 18 months. Regarding M&A, Frist noted that while deal flow has increased, valuations remain high. He confirmed HealthStream has been outbid on recent deals and will maintain its disciplined, conservative approach, leveraging its strong, debt-free balance sheet to find opportunities with the right strategic and economic fit.

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CEO Robert Frist estimated that by the end of Q2 of next year, ShiftWizard will not only have feature parity with the legacy ANSOS application but will be superior in terms of scalability and functionality. He also noted that the ShiftWizard revenue run rate is already higher than that of ANSOS, indicating the crossover has begun.

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Chief Sales Officer Nate Swan clarified that the sales pipeline is strong, having grown 15% quarter-over-quarter, and the primary challenge is conversion, not pipeline generation. He explained that the sales force headcount decline is a mix of voluntary and involuntary turnover due to heightened performance management. To improve conversion, Swan stated the focus is on earlier manager involvement to better qualify buyers and establishing a 'social contract' to ensure buyer commitment, preventing reps from wasting time on deals unlikely to close.

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CFO Chris Finn affirmed that visibility is strong, particularly for the subscription business, and described the forecast as a balanced, non-recessionary view. CEO George Colony and CSO Nate Swan confirmed that client churn remains concentrated in smaller clients. They noted the primary reason for non-retention is a mismatch between the product and the client's persona or needs, an issue they are now addressing with more vigilance during the sales process. George Colony also highlighted single-seat contracts as an area for improvement.

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Chief Sales Officer Nate Swan responded that while progress in reaching senior executives is good, he would always like it to be faster, and noted the team is responding well to the new sales methodology. CFO Chris Finn clarified the client count decline was due to both the strategy of shedding smaller clients and a restatement of numbers following the divestiture of FeedbackNow, which CEO George Colony added accounted for 250 clients. Nate Swan identified 'budget' as the most common pushback for seat expansion, which he views as a signal to better demonstrate value and ROI.

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CEO Joyce Mullen outlined a two-pronged talent strategy: actively pursuing M&A and new hires for key AI, data, and cloud skills, complemented by an intensive internal development program to upskill existing employees. She also confirmed that the profitability and pricing initiatives started two years ago are well underway, having addressed low-hanging fruit and now being expanded to other regions.

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CEO Joyce Mullen explained that the company has a playbook for a significant downturn that includes accelerating cost actions like increased offshoring and automation, highlighting a new internal AI initiative to improve SG&A leverage. Regarding services, she stated that Insight expects spending to begin improving in the second half of the year, following the recovery in product sales, albeit with a slight lag.

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President & CEO Chris Caldwell attributed the success in vendor consolidation to three factors: top-tier operational performance, advanced technology offerings, and the scale to provide a broad, integrated portfolio of services. He confirmed this trend has continued momentum. Regarding managed services, Caldwell noted that it is a smaller but fast-growing part of the Catalyst business, with demand being significantly boosted by the ongoing maintenance requirements of AI solutions.

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CEO Christopher Caldwell confirmed that the European pipeline is strong, alongside Asia Pac and the Americas, with a notable increase in transformational deals. He stated that the Catalyst services attach rate was up meaningfully in Q1. He also affirmed that Concentrix is benefiting from vendor consolidation more now than a year ago and believes the trend is still in its 'early innings.'

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CFO Andre Valentine stated that while the TCE vertical's growth is muted by low underlying volumes, Concentrix is gaining market share. CEO Christopher Caldwell affirmed that the client consolidation trend has legs, driven by clients' focus on cost and integrated solutions. He clarified that while there is no new specific automation percentage target, the pace of automation has significantly accelerated at clients' requests.

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CEO Patrick Zammit explained that the strength in APJ was broad-based, with notable contributions from consumer business in Japan and B2B business in India. He expressed confidence in continued solid growth and profit generation, citing the company's low market share in the region and a strategic focus on higher-margin segments.

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CEO Patrick Zammit attributed the weakness in peripherals to two main factors: continued challenges in the printing market and a strategic decision to exit a large, unprofitable peripherals contract in North America. He stated that the company is now actively seeking new, more profitable business in the SMB segment to rebuild the category.

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CEO Patrick Goepel explained the Canada tax product was driven by demand from new enterprise partners like Strata and Venture for their North American footprints. He noted they are already seeing inquiries and adoption from existing clients. On the competitive front, Goepel stated there is 'no change' in the environment, with strong new engagements, though enterprise sales cycles have elongated slightly.

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CEO Pat Goepel reported that Q4 bookings growth was 28%, driven by the core payroll business. Regarding the new audit firm partnership, he stated they are already pursuing deals together but that significant revenue is more likely a 2026 event, though some could materialize in late 2025. He did not comment on the exclusivity of the agreement.

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CEO Patrick Goepel stated that the current bookings mix is approximately 70% from new clients and 30% from existing clients. He noted a long-term strategic goal to 'flip that' ratio by driving more cross-sell and upsell revenue, leveraging the company's significantly expanded product portfolio, which increased its potential revenue per employee per month from ~$40 to ~$165.

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Rohit Kapoor, Chairman and Chief Executive Officer, described the AI competitive landscape as diverse, including start-ups, hyperscalers, and large technology firms. He asserted that EXL's key advantage is its deep understanding of client operations, workflows, and data. On pricing, he acknowledged that the macro environment makes it competitive, but EXL's focus on delivering value and business outcomes, backed by long-term relationships, helps manage pricing pressures.

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CEO Rohit Kapoor described the new deal wins as well-spread across business lines and similar in quality to past quarters, including some large Global 1000 logos expected to ramp up. CFO Maurizio Nicolelli stated that the M&A pipeline has opportunities but EXL remains selective. He reiterated a balanced capital allocation strategy between strategic M&A, like the recent ITI acquisition, and share repurchases, noting the company has spent $185 million on buybacks this year at an attractive price.

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CEO Keshav Murugesh estimated that AI-related models currently contribute close to 5% of revenue and expects this to increase, though he did not provide a specific fiscal 2026 target. He stated that access to skilled AI labor is not a limiting factor, citing a strategy of hiring in key markets and acquiring talent through M&A like Kipi. Executive David Mackey addressed attrition, explaining the spike was not concerning, focused at the entry-level, and that the rate tends to be volatile quarter-to-quarter.

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CEO Keshav Murugesh explained that Q1 headcount grew to support Q4 deal wins, but utilization will improve as a major healthcare client ramps down in Q2. Executive David Mackey added that due to the technology-enabled nature of the ramp-down, revenue will decrease more than headcount, but aggressive hiring will be needed to support new deal ramps. On the deal pipeline, Murugesh stated that focusing on large, transformational deals is the "new way of business for WNS for the long term," created by senior-level engagement. Mackey emphasized that the pipeline of deals over $10M in ACV is a new, additional layer of opportunity for the company.

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