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Earnings Transcript for CNXC - Q4 Fiscal Year 2023

Operator: Good day, and thank you for standing by. Welcome to the Concentrix Fiscal Fourth Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, David Stein. Please go ahead.
David Stein: Thank you, Lisa, and good evening. Welcome to the Concentrix Fourth Quarter Fiscal 2023 Earnings Call. This call is the property of Concentrix and may not be recorded or rebroadcast without the written permission of Concentrix. This call contains forward-looking statements that address our expected future performance and that, by their nature, address matters that are uncertain. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do undertake to update our forward-looking statements as a result of new information or future expectations, events or developments. Please refer to today's earnings release and our most recent filings with the SEC for additional information regarding uncertainties that could affect our future financial results. This includes the risk factors provided in our annual report on Form 10-K and in our other public filings with the SEC. Also during the call, we will discuss non-GAAP financial measures, including free cash flow, non-GAAP operating income, non-GAAP operating margin, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP EPS and constant currency revenue growth. A reconciliation of these non-GAAP measures is available in the news release and on the company Investor Relations website under Financials. With me on the call today are Chris Caldwell, our President and Chief Executive Officer, and Andre Valentine, our Chief Financial Officer. Chris will provide a summary of our operating performance and growth strategy, and Andre will cover our financial results and business outlook. Then we'll open the call for your questions. Now I'll turn the call over to Chris.
Chris Caldwell: Thank you very much, David. Hello, everyone, and thank you for joining us today for our fourth quarter and fiscal year 2023 earnings call. It was an incredibly exciting year in which we believe we made the right investments and focused on strengthening our fundamentals. We are excited about the opportunities that are in front of us now with a larger footprint, expanded marquee client base, and more geo-diversified business with the ability to deliver advanced technical solutions at scale. Our 2023 revenue increased 12.5% on an as-reported basis, including approximately 9% from Webhelp. We are excited about the cross-selling traction that already started in the fourth quarter that while small had clients from either side of the combination generating revenue that neither company would have been able to participate in prior to coming together. On a non-GAAP basis, our operating income increased 14.2%, and our adjusted EBITDA margin was up 30 basis points to 16.6%. We were very pleased with our free cash flow increasing 8% for the year. Throughout 2023, we also made great progress in evolving our solution offerings by developing multiple new intellectual property initiatives for both internal and external consumption, that will allow us to be more integrated into client environments while also reducing our operating costs. A few examples of these initiatives include our internally developed Connect CX product, allowing our game changers to be more productive by automating paths to built-in AI and is now deployed on more than 220,000 desktops, hitting our goal, we mentioned in Q3 of deploying to approximately 80% of our legacy operations. We continue to expand the deployment of Connect CX across our new footprint and intend to upgrade the platform to GenAI in the next two quarters. Our training CX suite has gone through a massive upgrade this year being rebuilt on GenAI and training over 100,000 game changers in 2023. It is creating more intuitive and interactive engagement and accelerating their speech proficiency, a tool that has gained interest from clients to use in-house based on our results. Our Smart Suite, which we just started to roll out is almost up to 35,000 desktops. Through real-time assisted self-coaching and faster access to personalized haulage management, the set of technologies has delivered double-digit improvement in key metrics like AHT and NPS, all built on GenAI. These internal tools are in addition to the external cloud and software partners we have used to deliver services to our clients. All these examples continue to demonstrate our focus on being a complete solutions company for our clients with a tech-first mindset, which we believe differentiates us greatly from our peer CX competitors and allows us to deliver higher value services. In 2023, our innovation and complete automation of transactions for partial processes hit an all-time high, which drives higher value to our clients and more efficiencies for us. Turning to the fourth quarter. Our team continued to deliver excellent service for our clients while making considerable progress with the initial integration of the Webhelp business, which I'll talk about in a bit. We met several financial and operating milestones in the fourth quarter, which Andre will review in more detail, but at a high level, revenue increased 36% as reported and grew over 3% on a pro forma constant currency basis in the quarter. We also delivered record fourth quarter non-GAAP operating income and adjusted EBITDA up 37% and 40%, respectively. These improvements are as a result of solid growth in Europe, Asia and Latin America with increased movement to offshore and nearshore operations as well as continued delivery efficiencies, some delivered from the tools that I highlighted earlier. I'm also pleased that we continue to grow in each of our key verticals as well as in our catalyst, B2B and specialized healthcare areas. We have invested in a new strategic and consultative set of seller capabilities that will allow us to deliver our [sell as one] (ph) initiative, which focuses on selling complete end-to-end transformational solutions in larger enterprise deals. With a sales pipeline that currently stands at over $0.25 billion of annual contract value, created all within Q4. Clients continue to appreciate both our advanced services and technologies and our extensive global reach. Our wins this quarter included a broad range of clients across verticals and delivery regions, providing a full spectrum of services. A few examples of those wins. An international money transfer company experiencing exponential growth saw a partner for high-risk compliance operations. We are now providing anti-money laundering and fraud prevention services for this client. The solution includes a European center of excellence with skilled experts and FinTech leadership. The second phase of this project will launch later this quarter, leveraging capabilities of the combined business, including advanced technology from catalyst and our Know Your Customer platform that came from Webhelp. Our premier health -- mental health clinic faced the challenge of establishing consistent practices for customer access. We are providing a comprehensive solution involving a modern curriculum, cloud contact center services, our AnyPaaS solution, CRM integration and Generative AI-driven functionality. Our solution is streamlining processes, increasing efficiency in scheduling and referrals and empowering the team to significantly enhance the overall customer experience in mental health. Another healthcare management company sought best-in-class capabilities and transformative solutions to navigate the complex system for assisting members with provider selection and insurance inquiries. Within 30 days, we started to integrate the technology stack, perform the CX assessment and quality assurance review. This is helping to revolutionize and evaluate overall member experiences for the client. Finally, an automotive manufacturer faced challenges managing multiple vendors. Our catalyst team leveraged our intelligence operational capabilities for compliance and best practices and developed strategic IT services that implemented dashboard reporting and robotic analysis solutions. The solution marked a significant step forward towards achieving higher efficiency and innovative automation within their business. Based on the reception from clients and our pipeline of opportunities that combine with capabilities of Concentrix Catalyst and our core CX operations, it is evident that our strategy is working. Our clients view the combination of deep domain expertise, digitally enabled global delivery and our ability to invest and secure adaptable, scalable technology as key differentiators. Our unique approach to intentionally infuse digital technologies and analytics continues to drive sales wins. Turning to our Webhelp transaction. This marks a significant milestone in the evolution of our company. It is the beginning of a new chapter, creating a global market leader with a world-class platform for value creation. We now offer one of the most robust, well-balanced global footprint in the industry. The combination of the two companies broaden our technology and AI solutions in multiple high-value verticals, strengthening our end-to-end value proposition and adding significant new consulting, technology and operating capabilities in Europe, Latin America and Africa. The integration of the two companies is progressing smoothly and is contributing as anticipated. Throughout the quarter, we achieved significant integration milestones. Examples include the start of successful migration of over 30,000 new staff to our HR systems and starting the sales management practice and establishing the global leadership structure. We are thrilled with the talented staff and the strength of our combined execution. As I mentioned, we are already converting a growing pipeline for wins that neither company could have won without the other, and we are on track to deliver the cost synergies we discussed when we announced the combination. Turning to fiscal 2024. In the first quarter, we expect to make progress towards achieving our synergy targets for the combination as integration activities move forward. We expect to continue to convert and ramp synergy pipeline wins as well. For the full year, we expect revenue growth, profit improvement, strong cash generation and debt reduction. We also see 2024 being the year that GenAI will start to positively influence our revenue and margins in the later part of the year and into early 2025. While the specific timing of these advancements with AI and client adoption are still not entirely clear, we are now confident in our ability to offer competitive solutions and see benefits from the technology. While our clients are taking time on their AI adoption, we are seeing tangible benefits with our own use cases, and we'll continue to invest -- these investments to make us more efficient and offer a higher level of service to our clients ahead of returns for the next few quarters. We see immense potential in the emerging technologies that can intelligently act on customer intent to improve the customer experience and are building out new capabilities and services to take advantage of the market as it develops. Based on our conversations with clients and the proof of concept we're currently working on, we continue to believe that GenAI will enhance the customer experience with human involvement versus completely automating work. Our current GenAI pipeline includes over 140 client engagements. While the majority of these projects revolve around proof of concepts, a few projects have transitioned to the run or managed services phase. The use cases that are gaining traction relate mostly to our technology, allowing our game changers to be more productive and more personalized engagement specific to the end customers. A few relate to completely automated services replacing low-value work while we generate more managed services type of revenue for supporting the technology and the environment. In summary, we have made great strides executing our strategy in 2023, making investments in acquired and organic growth and a differentiated growth model that I believe will allow us to outperform in the market. We believe that 2024 will require continued investment to ensure we are ahead of the market for further GenAI deployments at scale. Finally, I want to acknowledge the collective strength of the team we've built and thank them all for their adaptability and commitment to execution in the evolving industry. Their dedication and hard work has positioned us as a formidable force in the market. I also want to thank our clients for their trust, our talented Board of Directors for their support and mentorship and our investors for the confidence in Concentrix. We look forward to an exciting year ahead and the continued success of our company. Now, I will turn the call over to Andre. Andre?
Andre Valentine: Thank you, Chris, and hello, everyone. I'll begin with a look at our financial results for the fourth quarter and then discuss our business outlook for fiscal year 2024. I'm pleased to report that our revenue and profitability metrics not only met but exceeded our Q4 guidance. Free cash flow also remained strong, allowing for substantial debt reduction in the fourth quarter. Fourth quarter revenue was $2.23 billion, which included $574 million added by the Webhelp business for the last two months of the quarter. We will not be separately reporting Webhelp performance going forward as we are now managing the business on an integrated basis. On a pro forma basis, as if the Webhelp combination was completed at the beginning of the fourth quarter, revenue for the quarter was $2.42 billion, resulting in pro forma constant currency growth of approximately 3.5%. As anticipated, the contribution from the legacy business came in at the low end of our prior full year guide and the Webhelp business contributed faster growth. Revenue increases with clients in our four strategic verticals more than offset some volume softness with a few clients. On a pro forma basis, revenue from retail, travel and e-commerce clients grew 12% in the quarter. Pro forma revenue from banking, financial services and insurance clients grew 6%. Healthcare client revenue grew 5% on a pro forma basis. Revenue from technology and consumer electronics clients grew by 1% on a pro forma basis as growth with several clients was offset by continued softer volumes with a large consumer electronics client. Continuing trends from earlier in the year, pro forma revenue from communications and media clients decreased by 3% and revenue from clients in our other vertical decreased 6%. While we grew on a pro forma basis with 14 of our 20 largest clients, softer volumes with a handful of consumer electronics, retail, e-commerce and communications clients remained a headwind. Turning to profitability. Non-GAAP operating income was $341 million in the fourth quarter, up $93 million compared with last year. Our non-GAAP operating margin was 15.3%, up 20 basis points from the fourth quarter last year. Adjusted EBITDA was $398 million, up $113 million compared with last year. Our adjusted EBITDA margin was 17.8%, up 40 basis points from last year. This margin progress reflects profit flow-through on revenue growth efficiency gains across our operations and early attainment of synergies from the Webhelp combination. On a pro forma basis, as if the Webhelp transaction had closed at the beginning of the prior year's fourth quarter, profitability metrics would have been as follows
Operator: Thank you. [Operator Instructions]. The first question that we have for today is from Joseph Vafi of Canaccord. Your line is open.
Joseph Vafi: Hey guys, good afternoon. Nice to see strong results here for the end of the year. Just wanted to maybe drill down a little bit on your guidance philosophy here for the coming fiscal year. And any assumptions you have on changes in the macro relative to where you are on that revenue guide? And then I'll have a quick follow-up.
Chris Caldwell: Sure, Joe, it's Chris. I'll pass to Andre if he's got a follow-up comments. The way we look at 2024 evolving is similar to 2023. We don't expect there to be a sort of seasonal peak in Q4. We expect retail and e-commerce continuing to be somewhat muted, primarily driven by the macroeconomic conditions. Similar with consumer electronics, we're seeing that as relatively muted. And so we see it as being that consistency through the course of the year. We do see us being able to deploy more of our Generative AI solutions internally through the course of the year that will add to some better productivity gains. But as we've called out, kind of investing that into, frankly, winning the business, doing more transformation, and building out more tools because we do think that this year, we'll start to see a bit more of an inflection point near the end of the year for client solutions. That will mute a bit of growth, but that's more of the back half of the year is the way we are looking at it.
Joseph Vafi: Got it. And then -- and maybe you could compare and contrast maybe the cadence of momentum between kind of core Concentrix and then Webhelp. I know they're kind of integrating so it may be harder to do at this point, but how -- is there a way to kind of give us a little more color into those two sides of the business? Thanks.
Chris Caldwell: Yeah. Joe, it's pretty integrated even now as we speak and we talked about [indiscernible] deals. What I'll tell you is that the Webhelp business has brought us more kind of nearshore and offshore capabilities for our Europe business. And so clearly, our goal over the next year is to drive more business into higher profit nearshore and offshore regions than sort of Continental Europe for some of the business that we're doing. The Webhelp business also brings us more e-commerce clients that are -- and travel clients within the market, and that's a global comment, clients in Latin America and Europe in those categories. And frankly, that has been a fairly successful high-growth area for us and so that's like to be. And then lastly, in some of the newer capabilities that we're bringing on board, like the AML and KYC activity that we called out as some of the wins that we've got -- we expect to see some good wins from that. But the general like-for-like core business is very, very, very similar. It really brings us the additional footprint and in additional market clients that we were after.
Andre Valentine: Yeah, I think it's fair, Joe, to say that when we acquired Webhelp, it was growing faster than Concentrix, I think in our guidance, that continues and it certainly helped by the fact that unlike the Concentrix business, Webhelp did not have much of a presence in North America where we do see some pressure given higher costs and clients' desire to drive costs down through automating transactions or looking for nearshore or offshore alternatives to onshore North American services.
Joseph Vafi: Got it. Great. Thanks guys for that color.
Andre Valentine: Thank you.
Operator: Thank you. One moment for our next question. And our next question will be coming from Vincent Colicchio of Barrington Research. Your line is open.
Vincent Colicchio: Yeah, Chris, congrats on a good quarter. I'm curious how significant are the revenue synergies that are baked into your guidance?
Chris Caldwell: Yeah. To be quite honest, Vince, they are quite conservative. We -- as we talked when we announced the deal, we did not count on revenue synergies, that was sort of additional extra. We were more focused on getting from cost synergy perspective as we looked at the numbers. What I would tell you is that normally, it takes six to eight months before we start to see real kind of material opportunities that come from bringing two businesses together. We were very happy and surprised that we got a few small deals done within the fourth quarter, but I wouldn't overread into that. I still think it's sort of that six to eight-month window before it becomes more material, and we haven't really looked at that within our guide for the year.
Vincent Colicchio: And then have you baked in -- do you have any concerns about client losses due to increased revenue concentration? I know there was not a lot of overlap between the two firms.
Chris Caldwell: Yeah, there wasn’t a lot of overlap between the two firms, which is what really interested us. We haven't had any feedback from clients that we're over-indexed with any of them. In fact, a few that we thought we were going to be touching that threshold, actually we've done well with in terms of finding new opportunities. So that hasn't been a concern at all so far, and we don't see anything in the horizon.
Vincent Colicchio: And the last one for me. You had referred to leveraging AI for productivity purposes as the main driver for you, and not seeing it as a labor substitute. Could you give us your latest thoughts on the latter?
Chris Caldwell: Yeah, for sure. So we've got a lot of POCs in place with clients, well over 140, and it's sort of growing on a weekly, monthly basis. And what we're finding is that clients are very hesitant, not to say that this won't change, but very hesitant to have fully automated GenAI solutions, I'll call it in the while, dealing with customers with no human intervention or no human checks. And there's a lot of reasons for that, which we can go through, but that's still the overwhelming sentiment. And so where people are looking at it to drive the best benefit is where it's hoping whether their staff, our staff, the enterprise staff, be more productive and being able to deliver a differentiated personal service to the customers that they're engaging with. That's where we see some of the big push. And every time we talk about sort of some things that are fully automated, we tend to get the clients are saying, no, that's not where we're at right at the moment. That's well down the pipe. And so we're not only building the tools internally for ourselves, because we're seeing the benefits, but that's where we're also seeing clients focus their efforts is kind of making themselves better and more productive than sort of complete automation work.
Vincent Colicchio: Okay, thank you.
Chris Caldwell: Thanks, Vin.
Operator: Thank you. One moment for the next question. And our next question will be coming from Divya Goyal of Scotiabank. Your line is open.
Divya Goyal: Good afternoon, everyone. It's a great quarter. I just wanted to build on to this AI question. So you talked about the proof of concepts that you're deploying with the clients and trying to assess the productivity gains. Have you been and what sort of internal AI deployment are you looking at or considering? And do you think that can broadly bring the productivity gains within your organization and help you with an improved operating margin?
Chris Caldwell: Yeah, we do. I mean, we see a lot more tools that we can build internally to drive better productivity across our enterprise. And what we're seeing is that where we can either get information, large quantities of information, like healthcare, like banking, wealth management, even very complicated tech support, even complex case management with travel and transportation, where we can take huge quantities of information and boil it down and put it into a personalized format and deliver it to a customer, there's big, big productivity gains that we're seeing within that base. Then if you look at how we can actually take the interactions and then analyze the interactions and provide feedback back to our game changers that the name we call our staff is that the productivity and uniqueness that we can deliver to each individual is something that frankly we couldn't do in the past without scaling up significant number more of QA and labor and coaches and everything else that goes along with it. So we see some really, really, really big benefits from that perspective. And in terms of complete automation, we talked about, we have a few that we put in place that are complete automated GenAI experiences. They're on very, very small LLMs. They're very controlled LLMs. And what we're seeing is our revenue model is, we're providing the managed services, we're providing the data ingestion, we're providing the management of those LLMs and the clients are very cautious about putting them on small transactional queues and really, really, really can fold in lockdowns and there's no hallucinations. Nothing goes wrong. At the small cues, there's not as much productivity that you get, but it's definitely something that we're continuing to push.
Divya Goyal: That’s helpful, Chris. Maybe I'll ask another question. And I know you spoke about it at the time when you announced the Webhelp acquisition. But now that the company has been acquired for almost a quarter, and you've been obviously integrating it, what are some of the key growth geographies that you see? And then I wanted to further kind of understand how the broader LatAm integration going and do you see significant upside coming from the LatAm integration in the shorter term given the growth being discussed across LatAm region in general?
Chris Caldwell: Yeah for sure. So just to kind of set the stage a little bit. The Concentrix business was growing faster in Asia and Europe than it was in North America. And we felt that we were underperforming in Latin America. And one of the things that we were really excited about was that it gave us faster growth market in Europe with this Webhelp combination. We are combined with a very, very, very strong team within Latin America, and then our Asia team continues to perform very, very well as Andre called out. So from a faster growth geography perspective, think nearshore Europe, think Africa is kind of higher growth avenues for us and more profitable growth than what we were able to achieve since we just didn't have that footprint. From a Latin American combination perspective, very, very, very strong execution team in Latin America now with the combination of the two businesses coming together. And we see the growth not only in new opportunities taking from North America into the Latin American market but also in some domestic Latin American markets that we've historically done very well in and together we think we'll do even better in. Think Brazil, think Colombia, think Peru, think a few other markets, Mexico, that we now have the ability to do both that local engagement business as well as the global business from the nearshore market within North America. So I'm quite excited from that perspective.
Divya Goyal: That's great. If I may just ask…
Andre Valentine: Yeah, I was just going to add, Chris, some really strong technology capabilities, frankly, digital capabilities in that LatAm team that are very, very key to helping us grow that domestic market practice throughout Latin America. So just another great thing that we found in Latin America as we brought the two businesses together.
Divya Goyal: That's helpful, Andre. Just one last question here. On the pricing environment, so over the last few quarters, there has been this increased consolidation of this league. We have had some Concentrix consolidated. Do you see any significant scale benefits? And has that -- have you seen a significant change in the pricing environment given the broader macro and how things have trended?
Chris Caldwell: Yeah, that's a good question. I'd answer by saying that, right now the market is quite competitive and what we're seeing is on top of every client's mind is reducing costs and to them that is total cost of ownership. Some of them say simply a pricing exercise. And we are seeing competitors in some commodity work and some kind of higher volume, easier to move work being very, very, very aggressive from a pricing perspective. What we're not seeing that is in some of the higher work that we're doing where there's more technology, more integrated services to be done. But overall, it's a very, very competitive market right now is what we're seeing.
Divya Goyal: That's helpful. I'll pass the line. Thank you both.
Chris Caldwell: Thank you.
Operator: Thank you. Our next question will be coming from Ruplu Bhattacharya of Bank of America. Your line is open.
Ruplu Bhattacharya: For the first one, Chris, can I ask you about the general operating environment? Can you talk about deal sizes, the sales cycle, and you haven't, I didn't think you mentioned the new economy client growth. I mean, if you can talk about that and what really has changed in the last 90 days from an operational standpoint?
Chris Caldwell: So a couple things, Ruplu. Just in terms of timing of deals, the standard deals that we're doing, there's really been no change in timing. They tend to follow the same pattern that we've seen for the last number of quarters. Obviously, we're focusing on some of the big transformational deals that we talked about. We formed a new team around sort of big deals. We expect those to take a lot longer. Historically, they can take a fair bit longer, but they're stickier, longer term contracts, and frankly more profitable. And so certainly we're putting more effort into that. What we are seeing in the marketplace is that wins, as we've talked about for probably the last couple of quarters, tend to come in at the volume that we were expecting and stay closer to that volume versus growing. And that tends to be more driven by the macroeconomic conditions, right? People are moving to us because they're getting a change or differentiated level of service and their business is not as growing as fast as it was in a very robust economy. And so we're seeing those deals come in and probably growing a little slower than what you would have seen a year and a half to two years ago from that perspective. The only other kind of comment I'll make just in terms of new economy is we're seeing new economy win business, kind of fall in line with everything else, right, it's a little higher here and there. So some of the e-commerce that we talked about would fall into that category. Some of the travel would actually be in the new economy category. And so we're seeing that continue to grow a little faster. But FinTech and healthcare new economy companies and a few other companies like that, tend to be following a lot of the general macroeconomic conditions of their enterprise peers in the last quarter. That's probably a little different than what we saw a couple of quarters ago.
Ruplu Bhattacharya: Okay, all right, thanks for that. Let me ask a question to Andre. For fiscal ‘24, Andre, you're guiding low single-digits. So 1% to 3% year-on-year growth on a pro forma basis. If Webhelp is growing much faster than the base Concentrix business, is it reasonable for us to think that most of that growth is coming from Webhelp or do you expect the core Concentrix business to also grow year-on-year? And if you can also leave in commentary on the catalyst business, how is that doing year-on-year and when do you expect to get to corporate average growth for the capitalist business?
Andre Valentine: Sure. So the Concentrix business is growing on a year-over-year basis at each point of our guide. However, across our guidance, I would say Webhelp is growing faster at each of those points, both at the low end, midpoint, and high end of the range. As for catalyst, catalyst has reached a level of stability where it is growing really in line with the rest of the business and actually poised to grow maybe a little bit faster than the rest of the business in 2024. So we feel good about that. Again, we're not seeing the large transformational deals that we've talked about. We've talked about this for a few quarters. We're not seeing large transformational deals there, but a number of opportunities to do smaller projects and drive good results for clients and growth for the business.
Ruplu Bhattacharya: Okay, thanks for the clarification there, Andre. Chris, if I can come back to you, I mean, I think in the prepared remarks, you said 2024 will be the year that GenAI will positively influence revenues, and maybe in the latter part of the year and into 2025. I mean, so I guess my question to you would be, is that correct? And if it is, then what's giving you confidence that the revenue impact will actually be positive from Generative AI? Because you kind of have to balance some volume going away because of AI, but then you could get higher level work. So can you just give us your thought process on how you're thinking about this revenue impact in 2024 and 2025?
Chris Caldwell: Yeah, for sure, Ruplu, it's a great question. I think there's two things that we look at. First, when we've now been at this sort of a year and a quarter, give or take with clients looking at POCs and actually getting them in. And frankly, we've been spending a lot of this in our own dime and kind of co-developing with clients, et cetera, et cetera. Haven’t meaningfully put anything into from a revenue perspective. And so it's been not a drag, but it's just been an investment that we've been making. And we start to see near the end of 2024, where there's enough momentum that we think these things will start to go into more production that where it's chargeable, then we’ll start to see more chargeable, then we'll start to see some benefits of that. And in the POCs, we are seeing where we're driving revenue. And we're starting to develop all these new levels of service for Generative AI, whether it be from different types of content tagging and content management, whether it be from how we implement the LLMs, whether it be from how we manage the LLMs, whether it be from kind of the annotation of the data, whether it be from the analytics and supporting the application layer that integrates into it and then running it, because you have to continue to tune these elements. We're starting to see all this new opportunities for revenue that's coming out that will offset some of the decline that you'll get from people being more productive with the technology being put in place. And so we now have enough kind of test cases and data that we can start to extrapolate and start to see, okay, we see how this works. Now, why we talk about the fact that visibility is a little light is that we still have clients who generally are looking at this and POCs are okay but there's still a lot of hesitation for adoption full scale where you're going to see sort of probably a bigger inflection point. We do think that'll come. I think it's a matter of time, but we'll start to see I think early signs within sort of the back half of 2024 to early 2025.
Ruplu Bhattacharya: Okay, thanks for the details there. I'm going to try and squeeze one more in if I can. So, you're doing the Webhelp integration and you said that the focus is going to be on debt reduction for the next two years. How should we think about your propensity for future M&A in these two years or at least in 2024? You do -- I mean do you think that that's something you're going to consider? And if so, what are the metrics? What size? What are you looking for? And if you can just give any thoughts on inorganic growth in the near term.
Chris Caldwell: Andre, can you take that?
Andre Valentine: Sorry, yes. Yeah, so obviously, Ruplu, the real focus is on paying down debt. And so I don't think we would say never as related to smaller or tuck-in type M&A. Obviously, we want to keep investing in the business, but anything that we do will be consistent with the investment grade principles that we've outlined and our desire to get that net leverage close to 2 times within the two year period of post transaction close. So what would we look to acquire? I think it would be again, tuck in nature, could be domain expertise, technological expertise in a certain area, but again would be relatively small and not something of scale such as what we've done with Webhelp. Chris, anything you want to add there?
Chris Caldwell: No, I agree. As we've talked about, it's really about domain expertise, it's about technology, and it's about furthering our differentiated value proposition. And so we're focused on kind of making sure that we keep to our investment grade principles and enhancing the business if we have the opportunities from an M&A perspective in those areas.
Ruplu Bhattacharya: Okay, thank you for all the details. Appreciate it.
Chris Caldwell: Sure, Ruplu. Thank you.
Operator: Thank you. And there are no more questions in the queue. So this does conclude today's conference call. Thank you all for joining. You may now disconnect.