Concentrix Corporation (CNXC) Earnings Call Transcript & Summary

Good day, everyone, and thank you for standing by. Welcome to the Concentrix Fiscal First (sic) [ Second ] Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand it over to the Vice President of Investor Relations, Sara Buda. Please proceed.

Thank you, operator, and good evening, everyone. Welcome to the Concentrix Second Quarter Fiscal 2024 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 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 not 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 our other public filings with the SEC. Also, during the call, we will provide and discuss non-GAAP financial measures, including adjusted 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's Investor Relations website under Financials. With me on the call today are Chris Caldwell, our President and CEO; 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 to your questions. But now, I'll turn the call over to our CEO, Chris Caldwell.

Thank you very much, Sara. Hello, everyone, and thank you for joining us today for our second quarter 2024 earnings call. First, let me start off by thanking our clients and game changers for their contributions for being included in the Fortune 500 List for the first time this year. We started with an idea that the company wanted to deliver a better brand experience for their customers. We believe that by thinking about the customer experience holistically across both back office and front office work, while investing in technology for frictionless engagement, we expect to create a market opportunity for ourselves. Over 20 years, we have grown that idea to be a global player in over 70 countries, delivering solutions that continue to place the industry forward. I couldn't be prouder of the team or more thankful for the trust of our clients. Now turning to the second quarter performance. We increased revenue 47% as reported and grew 4% on a pro forma constant currency basis in the quarter, exceeding our prior guidance. We reported non-GAAP operating income of $321 million, an increase of 46% year-on-year and in line with our guidance. We delivered adjusted EBITDA of $380 million, an increase of 47% year-on-year. On a pro forma basis, we grew non-GAAP operating income 4% and adjusted EBITDA of 2% year-on-year. We generated more than $200 million in adjusted free cash flow this quarter, while returning more than $60 million of value to shareholders through dividends and share repurchases. We remain on track to generate $700 million of adjusted free cash flow for the full year after integration expenses and on track to complete $120 million of share repurchases for the fiscal year, of which we have done over $60 million through the end of Q2. Our positive momentum continued in the second quarter, giving us confidence to raise our revenue growth guidance for the full year. Our revenue guidance does not anticipate any changes in the macroeconomic environment, but it does reflect ongoing client demand for our solutions and the stability of our clients' volumes. We see the same momentum in Catalyst as its growth continues to be accretive, which we expect to continue for all of 2024. From a vertical perspective, we are seeing particular strength in retail, travel and e-commerce and banking and financial services that is expected to continue for the rest of 2024. As we mentioned in our first quarter call, we are increasing our investment in our technology while also investing to transition more business left from competitors. In the second quarter, we accelerated these investments while still expecting to increase our non-GAAP operating income by 40 basis points for the entire year on a pro forma basis. Specifically, we have increased our development spend to approximately 1% of revenue through the second quarter, an increase of approximately 50 basis points from the start of Q1. This increased investment relates to our development and technology platforms for both clients and installs as well as an increasing number of pilots that we have underway with clients using generative AI. We see this investment remaining at this level for a few quarters prior to falling more in line with historically what we have spent, while revenue from these investments start to become more meaningful. We also expect to incur approximately $20 million to $25 million of book term incremental expense as we take up a large multiyear programs, where we are taking share from competitors as clients consolidate capacity with us. These investments, again, are temporary and revenue follows in subsequent quarters. We see both of these as near-term and to investment that will be up for long-term growth and value creation. Now let's talk about some of our recent wins and the trends we're seeing in the business. As a reminder, our growth strategy is to drive incremental value to clients through a broader technology and services and global scale. Our strategy is working, and we're starting to see it reflected in our growth rate and our pipeline building across both existing and new clients. Some examples of wins in the quarter include a major global retail e-commerce client, where we combine the power of our GenAI and translation tools with our CX expertise and global footprint to design and implement a new customer solution experience for them across their EMEA operations. This allowed our clients to move volume from competitors to us resulting in a 20% increase in our revenues and a mid-single-digit increase in our margin for this specific program while reducing the cost for the client by double digits. Our use of GenAI expertise was a win-win for us and our clients. We also won a new large global media client this quarter. We will support the launch of one of our new high-profile channels in EMEA and consolidate their customer experience operations in Japan and Korea. We will also design and build a generative AI knowledge management solution for their enterprise. They wanted a partner that can provide a complete solution delivered globally and consistently and securely, which we are able to do. Other wins in the quarter include a global travel client that have the Webhelp relationship in Europe. This quarter, we started to expand our revenue as a combined organization by leveraging our [ AI-backed ] footprint and our AI-based training tools to improve effectiveness and efficiency for our game changers. This resulted in [ Europe ] coming from competitors to us as well as the potential new revenue stream as they contemplate rolling out our AI solutions across their enterprise. Finally, we sold Catalyst services into a former Webhelp client in Europe to provide specialized digital engineering resources to build, enhance and maintain the client's digital infrastructure and CCaaS platform to support their primary channel for new business. This strengthened our existing relationships with the client. These wins underscore the breadth and complexity of solutions that we are delivering for our clients. They also reflect how our business continues to change. At our Investor Day 2 years ago, we talked about 13% of our business being commoditized low-complexity transactions. Last year, we updated investors that we were down to 10%, and net-net, we have reduced that to 7%, meaning 93% of our current commodity are leading to high complexity now in our business. These wins also demonstrate 2 important factors in our ability to gain market and wallet share. Clients are keeping a broader set and a great solution from fewer partners to our mobile technology and integrated consulting implementation and support offerings. And secondly, automation and generative AI is continuing to be an area of positive advantage for us. As we have said before, we believe generative AI presents a tremendous upside opportunity for Concentrix and our clients. We have an increasing number of products and solutions going into production compliance now. While the level of GenAI adoption readiness varies greatly by vertical end clients, there are a few common themes with these pilots in production. First, the vast majority of piloting process are looking at using AI to augment a unit adviser, to make the adviser more effective in representing our clients' brand and enhancing the brand experience for our customers. Second, many of these pilots are using generative AI to operate or replace existing knowledge platforms, chatbots, automation systems and IVR systems. This brings me to the upside opportunities we see as we combine our own AI tools we sold off to our partners to bring new value from our clients. Many of our technology platforms continue to gain traction in the market. We are building this momentum, and we'll be introducing a variety of new products over the coming quarters. This quarter, we filed a patent for GILE which stands for generative, intelligent, limitless engineering, a platform will be developed for automated coating and testing using GenAI that is helping us to build new platform faster. From our internal usage, we are seeing up 40% productivity boot to experience coders on a transactional past. We believe our investments in both generative AI pilots and technology products will help us expand the share of wallet and share market long-term and superior marketing. Finally, let me touch on the Webhelp integration. As you can see from these wins we've mentioned, we're starting to see revenue synergies sooner than we expected. This is a testament to the successful integration of our go-to-market and delivery organizations, which we initiated on day 1 and are largely behind us. The integration is on track, as is a realization of planned cost synergies. In summary, our growth strategy has worked. We are differentiating Concentrix in the market and delivering incremental value to clients to a broad set of technology and services at global scale and our recent wins offer evidence that AI is an upside opportunity for consensus. With that, I'd like to thank our game changers and our clients for the relationships over last quarter and pass the call over to Andre. Andre, over to you.

Thank you, Chris, and hello, everyone. I'll begin with a look at our financial results and then discuss our outlook for the rest of the year. The second quarter marked another solid quarter for the company. We exceeded our targets for revenue delivered profits within our guidance range and drove strong free cash flow. We delivered second quarter revenue of $2.4 billion on a pro forma constant currency basis. As if the Webhelp combination was completed at the beginning of 2023, we grew revenue by 4%. For the first half of the year, our constant currency pro forma growth was 3.4%, so our overall revenue trends remain positive. As you can see from our guidance, we expect this stability to continue in the second half of the year. Looking at our revenue growth by vertical. On a pro forma basis, revenue from retail, travel and e-commerce clients grew 10% year-over-year. Revenue from banking, financial services and insurance clients grew 6% and our other vertical grew 3%. Our technology and consumer electronics clients grew over 3% on a pro forma basis. While this vertical is still lagging some other sectors due to the macro environment, we were happy to see some positive momentum from consumer electronics clients as we gained share with key clients. We continue to see strength in enterprise tech. Revenue from our telco and media clients decreased 3% on a pro forma basis, primarily due to lower volumes from a few North American communications clients, as discussed in prior quarters. Turning to profitability. Our non-GAAP operating income was $321 million in the quarter, an increase of $101 million compared with the second quarter of 2023. Our non-GAAP operating margin was 13.5%, down about 20 basis points from last year due to the inclusion of Webhelp, which historically operated at slightly lower non-GAAP OI margin. Adjusted EBITDA was $380 million, up $121 million year-over-year, and our adjusted EBITDA margin was 15.9%, roughly flat year-on-year. On a pro forma basis, our second quarter profitability metrics continued their solid improvement. Non-GAAP operating income increased $12 million with a 30 basis point margin improvement compared with last year. Adjusted EBITDA was up $8 million, and our adjusted EBITDA margin was flat when compared with the last year. Non-GAAP net income was $183 million in the quarter, an increase of approximately $46 million compared to the second quarter of last year. Non-GAAP EPS was $2.69 per share, an increase of $0.06 per share year-on-year. GAAP net income was $67 million for the quarter. GAAP results for the second quarter of 2024 included $116 million in the amortization of intangibles, $31 million in expenses related to the Webhelp combination and integration, $22 million in share-based compensation expense, $2.5 million in step-up depreciation, a $7 million reduction in acquisition contingent consideration, $14 million in net foreign currency gains and $4 million in imputed interest related to the seller's note issued in connection with the combination. Our adjusted free cash flow for the quarter was strong at $202 million, and we remain on track for our full year adjusted free cash flow outlook of $700 million, net of integration expenses. As we stated in our last call, the adjusted free cash flow metric is calculated as free cash flow, excluding the impact of the factoring program we assumed and have continued to operate since the Webhelp combination. During the second quarter, the amount of factored accounts receivable decreased by $24 million, with the outstanding factored balance standing at about $162 million at the end of the quarter. In the second quarter, we made payments related to earnouts of past Webhelp acquisitions of approximately $28 million, of which, approximately $5 million resulted in a reduction of adjusted free cash flow. Turning to the balance sheet. At the end of the second quarter, cash and cash equivalents were $207 million and total debt was $4.9 billion. Net debt was $4.7 billion at the end of the second quarter, and we repaid $150 million of the principal amount of our term loan in the quarter. We reduced our net debt to 2.97x pro forma adjusted EBITDA at quarter end, a sequential decrease from 3.04x in the prior quarter. We expect to continue to reduce our net debt and net leverage through the end of 2024. We remain committed to our plan of reducing net leverage to close to 2x adjusted EBITDA within 2 years of the close of the Webhelp combination while supporting our dividend and buying back stock. During the second quarter, we repurchased approximately 660,000 shares of our stock for approximately $40 million at an average price of approximately $61 per share, and we paid $20 million through our quarterly dividend. As a reminder, on our first quarter earnings call in March, we committed to $100 million in share repurchases over the remaining 3 quarters of 2024. So we have about $60 million more to go on that commitment. At quarter end, the remaining authorization on our share repurchase plan was approximately $227 million. Our liquidity remains strong at approximately $1.5 billion, including our over $1 billion line of credit, which is undrawn. We remain committed to investment-grade principles, and we are steadfast in our capital allocation priorities. We expect to continue to drive organic growth, realize integration synergies related to the Webhelp combination and repay debt, while continuing a disciplined program of returning capital to our shareholders through our dividend and disciplined share repurchases. Now I'll turn my attention to the business outlook for the third quarter and full year 2024. For the third quarter, we expect revenue of $2.35 billion to $2.4 billion based on current exchange rates. This reflects approximately 1.5% to 3.5% pro forma constant currency growth, net of an approximately 205 basis point exchange rate headwind. Pro forma revenue for the third quarter of 2023 would have been $2.367 billion, assuming the Webhelp combination occurred at the beginning of fiscal 2023. We expect non-GAAP operating income to be in the range of $330 million to $350 million in the third quarter. At the midpoint of our guidance, this equates to a non-GAAP operating income margin of approximately 14.3%. Importantly, this is an increase of 20 basis points over the prior year quarter on both a reported and pro forma basis. On a pro forma basis, non-GAAP operating income was $334 million in the third quarter of 2023. We expect non-GAAP EPS of $2.76 per share to $3.04 per share for the third quarter. This assumes interest expense of $75 million to $76 million, excluding $4 million of imputed interest on the seller's note. It assumes a non-GAAP effective tax rate in the range of 25% to 26%. We anticipate a weighted average diluted share for the third quarter. We estimate that about 4% of net income will be attributable to participating in securities at about 96% of total net income will be attributable to common shares for the third quarter. Turning now to the full year 2024 guidance. Based on our strong start and continued confidence in our strategy and execution, we are increasing our full year 2024 revenue guidance while reiterating our free cash flow guidance. Specifically, our guidance for the full year is as follows: we expect 2024 revenue to be in a range of $9.58 billion to $9.675 billion, reflecting approximately 2.5% to 3.5% pro forma constant currency growth. This is net of an approximately 150 basis point exchange rate headwind. This is an increase to our prior guidance of 1% to 3% year-on-year growth on a pro forma constant currency basis. We continue to expect first year net synergies of $75 million. The current run rate is approximately $80 million on an annualized basis. We do anticipate that some of these synergy savings will be offset by continued ramp-up costs and accelerated investment in technology. As a result of the investments Chris referred to earlier, we are reducing our non-GAAP operating income expectation for the year. We now anticipate non-GAAP operating income in the range of $1.35 billion to $1.40 billion for the year, which represents a 14.3% margin at the midpoint. Importantly, this is an increase of 10 basis points over the prior year and 40 basis points over the prior year on a pro forma basis. We expect non-GAAP EPS of $11.40 per share to $12.07 per share. This assumes full year interest expense of $300 million to $304 million, excluding $16 million of imputed interest on the seller's note. We expect an effective tax rate of approximately 25% to 25.5% and a weighted average diluted share count of approximately 65.1 million shares for the full year. In terms of cash flow, we are reiterating our outlook for $700 million in free cash flow in 2024 even after funding integration costs. This assumes no change in the amount of factored accounts receivable from the beginning of the year. Our strong free cash flow will position us to further reduce our net leverage to approximately 2.6x adjusted EBITDA by year-end while repurchasing approximately $120 million of shares, as we have committed. Our business outlook and cash flow expectations do not include any future acquisitions or impacts from future foreign currency fluctuations. In conclusion, we are pleased with our performance in the second quarter and our outlook for the year. We are exceeding our revenue growth expectations with solid execution across key verticals. We're optimistic about our second half and are seeing solid demand for our unique technology and services offerings. We're increasing our competitive position with a broader set of technology and service offerings. With this backdrop, we are increasing our revenue guidance for the year, and we are reiterating our expectations for free cash flow. We will continue to return value to shareholders with our ongoing share repurchase program and dividend while reducing leverage. With that, Carmen, please open the line for questions.

[Operator Instructions] And it comes from the line of Joseph Vafi with Canaccord Genuity.

Guys, good afternoon. Great to see the fine-tune up on the guide, and welcome, Sara, to the team. I thought maybe we would just start with kind of parsing out kind of -- it looks like you're taking the bull by the horns a little bit on the macro or on the AI front, that is, and it's turning a little bit more into an opportunity than maybe people have thought previously. And then if we could compare and contrast that to what you're seeing on the macro and how both of those kind of have kind of funneled into the new guidance for the year? And then I have a quick follow-up.

Joe, it's Chris. So first of all, you're absolutely right. We are busy, in your terms, taking the bull by the horns from a generative AI perspective. We're seeing very good traction in pilots and getting some things into production into our client base. And we're also seeing the ability where we think that there's misses in the market from a technology solutions perspective on platforms than we have on one of these base fields out for ourselves already. But now we need to work on getting into commercial standards and from a multi-tenant perspective and EW's perspective, in large-scale rollouts. And so we don't want to miss that opportunity and are taking advantage and leading into it. I think, secondly, we also are seeing good traction in taking share as well as winning net new clients with even the AI products that we have right now, as we talked about in a couple of our wins. So we see that as being very, very positive, and we built that into sort of our guide of seeing our revenue increase. We'll also see some costs associated with winning pilots and building out the infrastructure that we want that we think will put us in a very, very nice position for further growth. In terms of the macro, we're not seeing really any change. We're not seeing it improving. We're not seeing it declining. We're seeing -- and that's sort of the global comment. We're seeing things fairly stable and steady. And clearly, any kind of positive changes coming for that, we expect to benefit from it based on the share that we have within our client base.

Great. That's great color. And then maybe one for Andre. I know that as we exit this year, some of the Webhelp merger-related costs are going to abate and then more cost synergies are going to kick in, combined with continued debt paydown, maybe offset a little bit more now at this point by investment in the business. And I know you're not providing guidance for next year, but it would be great to get an updated framework on. I think you've reiterated your $700 million in free cash flow guidance this year, but to kind of provide a little bit of framework for next year would also be helpful.

Happy to do that, Joe, and good to talk to you. Yes, so there certainly are reasons for us to be optimistic that the $700 million in free cash flow that we generate this year can go up in 2025. And I want to stop close to -- stop short of guiding for 2025. But the 2 major drivers there will be synergies. We expect in year 1 post close of the combination recognize $75 million in net synergies. We're already above that run rate as we look at the synergies that we are realizing right now in the business. We expect that will go up to at least $105 million in net synergies in the second year post close of the combination. And then you're right, the integration expenses will drop pretty meaningfully from 2024 to 2025. I would see a drop in the range, it could approach $50 million or more, frankly, of cash integration expenses dropping off. So both of those things would give us some confidence that we could see cash flow go up. Obviously, we're also going to be paying down debt. So some opportunity with that. And perhaps, if we get there, some interest rate reductions to see interest costs also come down from a cash basis and be a bit of a help to us in 2025.

Great. Nice to see the guidance.

One moment for our next question.

Operator, do we have the next question? Okay. I think the question was going to be from Ruplu.

And congrats on inclusion in the Fortune 500 List. Andre, can you help me understand all of the moving pieces to the guidance. It looks like fiscal 2Q revenues beat the midpoint of guidance by $32 million and EPS beat by $0.07. But you're guiding fiscal 3Q down sequentially and lower than Street estimates. And if I look at fiscal year revenue guidance increase, that looks like it's about $23 million at the midpoint, and then operating margin is down 50 bps to 14.3% and EPS is $0.36 lower. So given all of these different data points, I mean, my questions to you would be on the revenue side. Was there any pull-in of revenue from 2Q to 3Q? Why would there be a sequential decline in 3Q? And is there -- does that imply a somewhat steeper ramp between 3Q and 4Q to get to the full year?

So Ruplu, as we've kind of commented about our revenue guide throughout this year, we want to be prudent in how we guide revenue. And so we think that we have done that with what we've provided here. So having grown at 4% here in Q2, you're right, we are guiding to growth of 1.5% to 3.5% over the balance of the year, roughly, certainly, that's what we're guiding to in Q3. Again, we're just -- there, we're being prudent. We are not seeing anything in our clients' volumes. We are not seeing anything in our pipeline that suggests that revenue should decline. And so from a revenue perspective, just being prudent with the guide and, frankly, quite confident and focused on coming in as we did this most recent quarter in the -- at least in the upper half of what we've guided to, which would put you very, very close to a continuation of the growth rate that we saw here in the first half.

And then on operating margins, the 50 basis points lower, 14.3% versus 14.8% for the full year, I think you talked about some investments you're making. Can you elaborate more on what are the investments that you're making? And when do you expect to see revenue benefit from those investments?

Yes. So Chris said in his script alluding to 2 major areas where we're investing. So we are investing heavily in technology and our platforms, embedding GenAI into them, both for internal use, for client pilots and for the development of some commercial products. We don't think that -- and that is certainly weighing on our margins, but we think that's a good investment for the long term. And as you see in many of the wins that Chris talked about, that technology is at the forefront of what's driving our competitive advantage and driving those wins across the finish line for us. So -- and we also don't think that level of heightened investment is a forever thing. We think it is temporary here through the balance of the year and could even begin to taper as we exit the year. The other major area that we're investing in is transitioning new business to us. That can come in many, many different flavors. It can become a transitioning work from a competitor where we incur upfront technology cost. It could be upfront training cost. It could be all of those types of things. And so -- but we're happy to do that because, again, we do that in advance. The revenue shows up a few quarters out, and the margins on those deals are quite attractive to us. So that's how you think about it. You're right. At the midpoint of our guide, we've come down a bit. It's because of these investments. We think it's the right thing to do to grow the business and drive value for the long term.

Okay. And maybe I'll try and sneak one more in. Sorry if I missed this. Did you talk about the growth rate for the new economy clients and for the Catalyst business in fiscal 2Q? And how are sales cycles trending for different size of deals?

Yes. So Catalyst continues to -- we're very, very proud of how Catalyst is doing. It's growing quite nicely, grew sequentially from Q1 to Q2 and is meaningfully accretive to the overall growth rate for the business in Q2, and we see that continuing over the back half of the year. New economy clients continue to represent about 25% of revenue, Ruplu. And as I commented at your technology conference earlier this month, they are growing faster than the rest of the business faster than the enterprise clients, although not nearly as fast as they were, call it, 2 years ago. They have become very focused on ROI, on right-shoring the work, on embedding technology to become more efficient. And all the things, frankly, that the enterprise clients are interested into.

Next question comes from Divya Goyal with Scotiabank.

So I had a question on Webhelp. Andre, I think you mentioned that there are certain earn-out payments that you have to make related to the Webhelp acquisitions that were made prior to you guys acquiring Webhelp. If you could provide some more color on that? And is that going to be an additional -- is that an additional impact on your guidance as well for the year on the bottom line?

No. So the -- so yes, the payments that we made, and they were about $28 million in Q2, relate to past acquisitions by Webhelp. So these were things that were committed to prior to us becoming involved with Webhelp and then closing on the transaction in 2023. There are no -- they do not impact our bottom line as they were effectively have been accrued for some period of time. So no impact there. They do obviously used cash, although most of that payment does not impact our free cash flow. As I alluded to maybe $5 million impact on free cash flow. We don't expect any further earnouts in 2024 related to those acquisitions. I don't believe there are any in 2025, and then a fairly similar amount of earnouts would be expected in 2026. These were all kind of part and parcel with the financial model that we put together as we looked at the transaction and closed the transaction. They're playing out exactly as we expect them to.

That's perfect. And just another question related to Webhelp. So you did talk about some of the -- I think Chris mentioned some of the cross-sell synergies of Catalyst into Webhelp. If either you or Chris can provide a little bit more color into how exactly is that trending? And what is the broader traction that you are seeing core Catalyst into some of these new Webhelp clients that you've recently acquired?

Yes, for sure, Divya. It's Chris. So first on, we expected, obviously, revenue synergies, but we didn't necessarily account for them in the first year. They tend to take a while to gain traction and go, and we're kind of well ahead of where we expected to be at this point in time, both, by the way, taking Concentrix clients across to sort of the Webhelp footprint and vice versa, as we talked about on the prepared remarks. From a technology perspective, where we're gaining share, basically, across our whole client base, forget about whether it's Webhelp client originally or Concentrix client originally in integrating our technical services. And that majority come from our Catalyst group. Some of that comes from our existing client success organization already. But ultimately, if that value proposition of putting everything together that clients are most interested in that has really helped us accelerate our growth rate and start to build a stronger pipeline that we're seeing right now.

That's helpful. And is it fair to assume that your Catalyst business would be, to your point, consulting related? So would it be a higher-margin business? Or what is the big difference between what you're doing with Catalyst versus your standard business from a margin standpoint?

Yes. Good questions. So in our Catalyst business, we have our Consulting business, we have our Analytics business, we have our Digital Engineering business, our CCaaS business, our Cloud Migration business. And so there's a lot within our Catalyst business. And the margin profile, some is, as you can imagine, higher than our core business. Some is actually lower than our core business because we're doing a lot of these pilots, and we're doing a lot of the build-out of these tools within our Catalyst business, which is not necessarily accretive to our overall margin. But what we see, long term, as we talked about when we started investing in that business, is the ability to increase our margins, much like we do in our core business, to being more accretive than our core business as we go forward. But that's a longer-term comment.

[Operator Instructions] All right. And it comes from the line of Vincent Colicchio with Barrington Research.

Yes, Chris, I like to sort of think a little bit more about your market share gains. Are they coming at the expense of medium-sized and smaller players as well as some of your larger competitors?

Actually, they're coming from both. We've won the business from sort of smaller players, who weren't able to deliver [ on their footprint ] and didn't necessarily have the investment security that they needed. And we've won some good sites. One of the deals that we talked about is from a larger competitor, primarily because we could bring everything together and have the technology solution versus just sort of the operations part of it. And so we see that continuing based on how clients are thinking about their businesses [ over time versus ] right now.

So if we isolate your larger competitors, do you think you have a more complete portfolio today of what folks are looking for? Or am I over generalizing?

No, absolutely. We think we have a very, very complete portfolio across both the consulting and both the design, the build and the run aspects of delivery of services and solutions to clients. The clients are looking for someone who can bring this expertise and, by the way, do it materially to their enterprise and kind of reimagine what they're delivering from the customer experience perspective. And that's really where we're gaining the share because the conversations are very different than probably what we had 2 or 3 years ago.

And as -- with an early -- we're seeing the Webhelp revenue synergies a bit earlier than expected. How are you feeling about seeing a meaningful contribution from revenue synergies in '25?

I don't want to guide for '25, but I think, directionally, from my comments and from Andre's comments, you can see that we're pretty bullish in [indiscernible]. And as we expected, doing the transaction, that's what we want, and we're executing along that plan.

Okay. And then as the AI automation evolves here, I know we're still very early days, are you seeing any change in the competitive landscape in your technology business?

I think in the transformational deals that we're working on and seeing, we called out in Q1 and Q2, we have a different set of competitors. They're much larger, much bigger global sort of integration, development capabilities technology companies. And we think we compete very, very well with that because we have the domain expertise around what our clients are looking for because we run their businesses as it stands right now. So that's definitely changed from a competitive standpoint. We've also seen sort of smaller VC-backed companies talking about AI to kind of -- are talking about new bells and whistles. But again, they don't really necessarily understand what the clients are after and what the intimate knowledge of the domain expertise is. And so therefore, we have a very good competitive advantage against them as we're building out the technology that's very suited for the client base because we know it. We know the domain expertise. So we are migrating to different competitors, but we think we're very, very well positioned for sort of the new competitive landscape.

Thank you. And with that, ladies and gentlemen, I will conclude the Q&A session and conference for today. Thank you all for participating, and you may now disconnect.