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Concentrix Corp (CNXC) Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue beat: $2.483B vs S&P Global consensus $2.461B and above guidance; non-GAAP EPS missed: $2.78 vs $2.868 consensus; Adjusted EBITDA missed: $359.2M vs $382.2M consensus . S&P Global estimates marked with asterisks; Values retrieved from S&P Global.*
  • Management attributed margin shortfall to excess capacity tied to tariff‑impacted clients and accelerated client transformations; expects modest sequential margin improvement over the next few quarters .
  • Guidance mix: FY25 constant-currency revenue growth raised to 1.75–2.0%, but FY25 non-GAAP EPS lowered to $11.11–$11.23 and non-GAAP operating income to $1.25–$1.26B; Q4 non-GAAP EPS guided to $2.85–$2.96 .
  • Capital returns: Dividend raised to $0.36 and ~$240M 2025 return target reaffirmed; repurchased ~800K shares for $42.2M in Q3; repaid €700M seller’s note; net debt ~$4.5B .

What Went Well and What Went Wrong

What Went Well

  • Revenue outperformed guidance and consensus on strong BFSI and Communications & Media growth; constant currency growth +2.6% YoY driven by integrated solutions and IX AI suite traction .
  • AI commercialization advancing: ~40% of new wins include CNXC AI platforms; IX suite on track to be modestly accretive exiting Q4, with greater traction in Hero (agent‑assist) and growing pipeline .
  • Cash generation improved: Q3 operating cash flow $224.8M, adjusted free cash flow $178.8M; full‑year adjusted FCF outlook $585–$610M (up YoY) .

Quotes:

  • “Almost 40% of our new wins this year include our AI technology platforms as part of the solution.” — Chris Caldwell (CEO) .
  • “We are confident that we can deliver modest sequential quarter profitability improvement in the next few quarters.” — Andre Valentine (CFO) .
  • “We continue to be on our front foot with generative AI… scaling our adjacent services.” — Andre Valentine .

What Went Wrong

  • Margin shortfall vs plan: Non‑GAAP operating income $305.1M below the prior guidance range due to excess capacity at a handful of tariff‑impacted clients and accelerated in‑quarter transformations; Adjusted EBITDA margin fell to 14.5% (-180 bps YoY) .
  • FY25 profitability guide lowered: Non‑GAAP EPS cut to $11.11–$11.23 (from $11.53–$11.76) and non‑GAAP operating income cut to $1.25–$1.26B (from $1.30–$1.32B) on margin pressures .
  • Non‑GAAP EPS missed by ~$0.09 vs consensus; Adjusted EBITDA missed by ~$23M vs consensus, reflecting capacity/mix headwinds and $8M incremental GenAI cybersecurity investment; -$4M currency impact .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$2,372.2 $2,417.4 $2,483.3
Operating Income ($USD Millions)$168.9 $148.3 $147.0
Non-GAAP Operating Income ($USD Millions)$321.5 $303.7 $305.1
Operating Margin (%)7.1% 6.1% 5.9%
Non-GAAP Operating Margin (%)13.6% 12.6% 12.3%
Adjusted EBITDA ($USD Millions)$374.2 $357.3 $359.2
Adjusted EBITDA Margin (%)15.8% 14.8% 14.5%
Diluted EPS (GAAP) ($USD)$1.04 $0.63 $1.34
Diluted EPS (Non-GAAP) ($USD)$2.79 $2.70 $2.78
Cash from Operations ($USD Millions)$1.4 $236.5 $224.8
Adjusted Free Cash Flow ($USD Millions)$(39.8) $200.3 $178.8

Segment revenue (verticals)

VerticalQ3 2024 ($M)Q2 2025 ($M)Q3 2025 ($M)
Technology & Consumer Electronics$664.8 $662.7 $670.6
Retail, Travel & e‑Commerce$593.7 $583.8 $622.8
Communications & Media$380.5 $393.0 $411.2
Banking, Financial Services & Insurance$352.5 $384.0 $384.4
Healthcare$172.4 $176.4 $174.1
Other$223.5 $217.5 $220.1
Total Revenue$2,387.4 $2,417.4 $2,483.3

Performance vs Wall Street consensus (S&P Global) — Q3 2025

MetricQ3 2025 Consensus*Q3 2025 Actual
Revenue ($USD Millions)$2,460.9*$2,483.3
EPS (Primary) vs Non‑GAAP EPS ($USD)$2.868*$2.78 (Non‑GAAP diluted)
Adjusted EBITDA ($USD Millions)$382.2*$359.2

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q2 release)Current Guidance (Q3 release)Change
Reported RevenueFY 2025$9.720B–$9.815B $9.798B–$9.823B Raised (narrowed up)
Constant‑Currency Revenue GrowthFY 20251.0%–2.0% 1.75%–2.0% Raised
Non‑GAAP Operating IncomeFY 2025$1,300M–$1,320M $1,250M–$1,260M Lowered
Non‑GAAP EPSFY 2025$11.53–$11.76 $11.11–$11.23 Lowered
Effective Tax RateFY 2025~25% ~24% Lowered
Adjusted Free Cash FlowFY 2025$625M–$650M $585M–$610M Lowered
Shareholder ReturnsFY 2025~$240M ~$240M Maintained
Dividend per ShareNext payment$0.33275 (Aug 5) $0.36 (Nov 4) Raised
Reported RevenueQ4 2025N/A$2.525B–$2.550B New
Non‑GAAP Operating IncomeQ4 2025N/A$320M–$330M New
Non‑GAAP EPSQ4 2025N/A$2.85–$2.96 New
Non‑GAAP Interest Expense AssumptionQ4/FY 2025N/A~$67M Q4; ~$273M FY Disclosed
Diluted Shares AssumptionQ4/FY 2025N/A~62.4M Q4; ~63.1M FY Disclosed
Participating Securities AllocationQ4/FY 2025N/A~5.5% Q4; ~5% FY Disclosed

Earnings Call Themes & Trends

TopicQ1 2025 (prior)Q2 2025 (prior)Q3 2025 (current)Trend
AI/Technology initiativesExceeded profit guidance; momentum for iX Hello AI; positioning for margin expansion and FCF growth AI investments on pace to be accretive by year‑end; raised FY growth outlook ~40% of new wins include CNXC AI; IX Hero traction; accretive exiting Q4 Strengthening adoption, nearer-term accretion
Margins/capacityGAAP operating margin 7.1% Non‑GAAP OI below PY on mid‑quarter volatility; OPM 6.1% Non‑GAAP OI $305M below prior guide; excess capacity at tariff‑impacted clients; sequential improvement expected Near‑term pressured; path to improve
Tariffs/macroN/AMid‑quarter volatility noted Tariff noise delayed client volume consolidation; multi‑quarter normalization expected Macro friction lingering but manageable
Segment demandStable Tech & Healthcare; mixed elsewhere Broad-based; Retail/Travel, Comms up sequentially BFSI +8% CC, Comms +7% CC; Retail/Travel +3% CC; Tech/Healthcare flat Diversified growth led by BFSI/Comms
Capital allocation/debtBuybacks; dividend $0.33275 Reiterated ~$240M returns Dividend to $0.36; ~800K shares repurchased; €700M seller’s note repaid; debt paydown priority in 2026 Ongoing returns; deleveraging focus
Regulatory/complianceN/AN/ABFSI adoption slower due to compliance/regulatory; pipeline strong Adoption pacing
Consolidation dynamicN/AN/AClients favor fewer, deeper partners; consolidation trend to continue 24–36 months Tailwind to share gains
Factoring programN/AAdjusted FCF up; factoring balances impact Off‑balance sheet factored AR reduced to ~$127M Lower reliance

Management Commentary

  • Strategic positioning: “We’re gaining share… by combining AI, CX, and IT services into a powerful, tightly integrated solution… IX suite is giving us clear, competitive differentiation.” — Chris Caldwell .
  • AI partner effectiveness: “Almost 40% of our new wins… include our AI technology platforms.” — Chris Caldwell .
  • Margin outlook: “We can deliver modest sequential quarter profitability improvement… as committed volume migrates to us or we remove excess capacity.” — Andre Valentine .
  • Capital returns: “Board has authorized an increase to our quarterly dividend to $0.36 per share… on track to return over $240M to shareholders this year.” — Andre Valentine .

Q&A Highlights

  • Margin drivers and trajectory: Excess capacity at a handful of tariff‑impacted clients was the primary driver; transformation acceleration was secondary. Multi‑quarter normalization expected; will rationalize capacity if volumes lag; path to sequential improvement remains intact .
  • IX suite ramp and pricing: Stronger traction in Hero (agent‑assist, per‑seat SaaS); Hello (fully autonomous) tends toward gain‑share pricing. Bundled pricing dominates today with shift toward more discrete pricing anticipated .
  • Segment sustainability: Sequential step‑ups in Retail/Travel and Communications & Media were broad‑based and priced for long‑term accretive margins; adoption of IX tech is strong in Travel, e‑Commerce, Consumer Electronics; BFSI wins pacing behind due to compliance .
  • Consolidation and pipeline: Clients prefer fewer partners with deeper capabilities; consolidation trend likely to persist for 24–36 months; pipeline broad‑based across EMEA, Americas, APAC .
  • Free cash flow and dividend: FY25 adjusted FCF trimmed due to margin pressures, but growth still expected in 2026 as integration spend wanes and cash interest declines; dividend increase reflects confidence in FCF durability; 2026 focus on debt repayment .

Estimates Context

  • Q3 2025 vs S&P Global consensus: Revenue beat ($2.483B vs $2.461B*), EPS miss ($2.78 non‑GAAP vs $2.868* primary), Adjusted EBITDA miss ($359.2M vs $382.2M*). The miss was driven by excess capacity at tariff‑affected clients and accelerated transformations, partially offset by lower tax rate; revenue strength came from BFSI and Communications & Media demand and integrated solutions . Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term setup: Revenue momentum and a beat vs consensus are positives, but EPS/EBITDA misses and lowered FY25 profitability guidance temper the print; watch execution on capacity rationalization and margin recapture over the next 1–2 quarters .
  • AI commercialization is real: IX Hero adoption and ~40% of new wins including CNXC AI platforms support a medium‑term mix shift to higher‑margin, tech‑enabled revenue; accretive exit to Q4 targeted .
  • Guidance mix matters: FY25 revenue growth raised (1.75–2.0% CC) while non‑GAAP EPS cut ($11.11–$11.23); expect estimate revisions to lower EPS/EBITDA while modestly lifting revenue .
  • Cash flow and capital returns: Strong FCF trajectory with FY25 adjusted FCF $585–$610M; dividend increased and ~$240M returns on track; 2026 capital allocation skews to deleveraging after seller’s note repayment .
  • Segment leadership: BFSI and Comms drive growth; Retail/Travel healthy; Tech/Healthcare flat—monitor BFSI compliance timing and tariff dynamics for volume normalization .
  • Risk watchlist: Tariff-related client behavior, currency impacts, and capacity discipline are key drivers of margin recovery; management indicates multi‑quarter normalization and proactive adjustments if volumes lag .
  • Strategic expansion: Acquisition of SAI Digital enhances digital commerce and AI capabilities in APAC, strengthening CNXC’s tech stack and regional delivery footprint .

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