Name: AgileThought, Inc. Q1 2023 Earnings Call
Start: 2023-05-12T08:01:04.000Z

Executive Summary

Q1 2023 revenue was $41.8M, down 5.4% YoY and 2.8% QoQ; gross margin improved to 34.2% (+290 bps YoY, +260 bps QoQ) as management continued exiting non-core revenues and noted market volatility mid-March impacted results .
The company cut FY 2023 revenue outlook from at least $201.6M to at least $185.0M, while raising the gross margin range to 34.5–35.5%; it introduced FY 2023 Adjusted Operating Income of at least $13.7M .
Liquidity constraints and financing defaults created going-concern risk: cash was $3.2M as of March 31 and $1.8M available cash as of April 30, with ongoing efforts to obtain funding and restructure debt .
Wall Street (S&P Global) consensus was unavailable; publicly reported consensus pointed to a miss versus estimates (EPS −$0.09 vs −$0.07; revenue $41.84M vs ~$43.0M), consistent with the company citing macro volatility and portfolio pruning .

What Went Well and What Went Wrong

Gross margin expanded to 34.2% (+290 bps YoY, +260 bps QoQ) driven by exit from non-core revenues and small non-strategic accounts; CEO: “We continued our exit from non-core revenues...which helped us perform better than expected on gross margin” .
Operational focus and deal governance supported margin trajectory; CFO: “...helped us grow our gross margin and is expected to help us improve our SGA in the coming quarters” .
Strategic initiatives launched: new Applied AI and Gaming guilds and appointment of Eric Purdum as CRO to accelerate go-to-market and growth .

Revenue missed the company’s prior Q1 guidance (at least $43.2M) and declined 5.4% YoY to $41.8M, impacted by market volatility since mid-March and the intentional exit of non-core business .
Significant GAAP losses on restructuring/impairment and financing costs: Loss from operations −$35.6M, Net loss −$38.1M, including impairment charges ($19.1M) and loss on debt extinguishment ($10.2M) .
Liquidity and debt concerns escalated; defaults under financing arrangements and limited available cash ($1.8M as of April 30) raised substantial doubt about going concern, forcing management to pursue funding and restructurings .

Metric	Q3 2022	Q4 2022	Q1 2023
Revenue ($USD Millions)	$43.395	$43.061	$41.844
Gross Margin (%)	34.3%	31.6%	34.2%
Adjusted Operating Income ($USD Millions)	$1.699	$5.066	$(1.186)
Adjusted Diluted EPS ($USD)	$(0.01)	$0.03	$(0.09)

Segment breakdown by geography:

Revenue by Geography ($USD Millions)	Q3 2022	Q4 2022	Q1 2023
United States	$27.410	$26.528	$26.113
Latin America	$15.985	$16.533	$15.731
Total	$43.395	$43.061	$41.844

KPIs and balance sheet/cash metrics:

KPI	Q3 2022	Q4 2022	Q1 2023
Number of large active clients (≥$1M)	29	33 (year-end)	33
Top 10 client revenue concentration (%)	61.7%	61.4% (year-end)	62.4%
Employees (Total)	2,576	2,504	2,255
Cash, cash equivalents, restricted cash ($USD Millions)	$10.361	$8.691	$3.174
Total Debt ($USD Millions)	$77.422	$76.056	$84.523

Q1 2023 vs estimates (S&P Global unavailable; public consensus shown):

Metric	Actual Q1 2023	Consensus Q1 2023	Result
Revenue ($USD Millions)	$41.844	~$43.0	Miss
Adjusted Diluted EPS ($USD)	$(0.09)	$(0.07)	Miss

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2023	≥ $201.6M	≥ $185.0M	Lowered
Gross Margin	FY 2023	33.5%–34.5%	34.5%–35.5%	Raised
Adjusted Operating Income	FY 2023	N/A	≥ $13.7M	New metric
Revenue	Q1 2023	≥ $43.2M	Actual $41.844M	Below guidance
Liquidity disclosure	As of Apr 30, 2023	N/A	Available cash $1.8M; going-concern risk disclosed	New disclosure

Topic	Previous Mentions (Q3 2022, Q4 2022)	Current Period (Q1 2023)	Trend
AI/technology initiatives	Expansion efforts and new market unit (TMT/US West); demand for digital transformation	Launched Applied AI and Gaming guilds; appointed CRO to drive growth	Increasing focus on AI and GTM
Macro/volatility and non-core exit	Exiting non-core business; strong demand despite macro uncertainty	Revenue shortfall attributed to market volatility since mid-March and continued non-core exit	Macro headwind; portfolio pruning
Regional trends (LATAM vs US)	Opened new LATAM offices; LATAM delivery attractive to clients amid geopolitical risks	US revenue down YoY; LATAM up slightly YoY; employee base reduced in US and LATAM	LATAM relatively resilient; US softer
Financing/credit facilities	Amendments and waivers to first/second lien facilities; maturity changes	Default status, limited liquidity, pursuit of funding and potential restructuring/M&A	Elevated financing risk
Margin and SG&A trajectory	CFO targeted faster path to ~40% gross margin; SG&A mid-high-20% with room to improve	Gross margin improved QoQ; management expects SG&A improvement in coming quarters	Margin improving; SG&A discipline ongoing

CEO (Manuel Senderos): “While the revenues in the quarter were below our guidance, impacted by the recent market volatility, we took strides in building our pipeline... we launched two new guilds: Applied AI and Gaming and appointed Eric Purdum as our new CRO.”
CFO (Amit Singh): “Our continued exit from non-core revenues... helped us grow our gross margin and is expected to help us improve our SGA in the coming quarters... improvements in gross margin and SGA are expected to help us achieve better Adjusted Operating Income for the full year than we previously expected.”
CFO (prior call context on targets): aiming closer to ~40% gross margin and SG&A trending toward ~20% over time .

Participants included William Blair, Alliance Global Partners, Cantor Fitzgerald, Needham & Co., and Canaccord Genuity .
Management addressed drivers of the revenue shortfall (macro volatility; continued exit of non-core revenues) and reiterated focus on margin improvement and SG&A discipline .
Liquidity and capital strategy were highlighted, including efforts to obtain funding, restructure debt, and evaluate strategic alternatives given going-concern risk .

S&P Global consensus data was unavailable for AGIL; therefore, comparisons to S&P consensus could not be made (S&P Global mapping unavailable).
Publicly reported consensus from Zacks/Nasdaq indicated Q1 2023 Adjusted EPS of −$0.07 vs actual −$0.09 and revenue ~$43.0M vs actual $41.84M, implying a miss on both metrics .

Revenue miss and FY guidance cut signal near-term growth headwinds from macro volatility and deliberate portfolio pruning; watch for 2H inflection as pipeline matures .
Margin trajectory is a relative positive: sustained gross margin gains and SG&A discipline aim to support FY Adjusted Operating Income despite lower revenue guidance .
Liquidity and debt risks are the central stock narrative: defaults, limited cash, and going-concern disclosure elevate financing/event risk; track funding, debt restructuring, and any strategic alternatives closely .
Strategic GTM upgrades (new CRO; Applied AI and Gaming guilds) may support demand generation and mix shift toward higher-margin offerings over time .
Client concentration remains high (top 10 at 62.4%); execution with large accounts is critical for stabilizing US revenue and driving incremental LATAM growth .
Balance sheet caution: debt increased QoQ and cash declined materially; aggressive working capital management and covenant compliance will be key in the near term .
Trading lens: stock likely reacts most to funding/margin updates and any credible path to de-risk the capital structure; operational wins (AI-driven deals, large logos) could reframe the trajectory if liquidity is addressed .