Concentrix (NASDAQ:CNXC) said its investments in artificial intelligence are reshaping its customer-experience business, with management emphasizing higher-margin technology and services revenue even as near-term sales growth faces pressure from accelerated offshoring and selected client spending changes.
Speaking at a Canaccord event, Chief Executive Officer Chris Caldwell described Concentrix as a global customer-experience provider operating in about 75 countries with revenue of just under $10 billion. He said the company’s work extends beyond call centers and includes designing customer-experience systems, implementing the technology behind them, and providing the associated services.
AI bookings rise as company prioritizes margin expansion
While Caldwell characterized recent revenue growth as “relatively anemic,” he said Concentrix is making progress in deploying its Intelligent Experience, or IX, offerings. AI solution contract bookings increased 400% year over year in the company’s second quarter, according to Caldwell.
The IX suite includes fully autonomous tools that can handle customer interactions such as calls and chats, as well as AI tools designed to augment employees and improve productivity. Caldwell said the company is seeing its strongest momentum in the human-augmentation category, where customers can see operational savings and process improvements from technology deployments.
Concentrix expects IX annual recurring revenue to reach about $120 million by the end of the year, up from nearly nothing a little more than a year ago, Caldwell said. The suite currently influences roughly $1.4 billion to $1.5 billion of company revenue.
Management said AI deployments can initially reduce revenue as automation takes effect. Caldwell said revenue commonly declines during the first one or two months of a deployment, bottoms around months six or seven, and then begins growing. After a year, clients using the platform have generally grown faster than Concentrix’s corporate average and faster than before the technology was implemented, he said.
Caldwell also said that after a year of deployment, non-GAAP operating income has increased by about 350 basis points for affected clients. He attributed that improvement to greater operating efficiency, improved pricing and additional volume, as well as software revenue generated through SaaS-style charges.
Offshoring pressure accelerates
Management said accelerated offshoring has become a larger revenue headwind than initially anticipated. The company entered the year expecting a 200-basis-point headwind but now expects about 300 basis points, Caldwell said.
About 15% of Concentrix’s business can potentially be delivered from a lower-cost location than where it is currently performed, he said. The company expects that figure to decline to around 11% by year-end as work transitions offshore.
Caldwell said the trend is being driven by clients seeking cost savings after not receiving as much value as expected from certain AI investments. Though offshoring reduces revenue dollars, he said gross-margin dollars remain comparable and the transition becomes more accretive after implementation, which typically takes three to four quarters.
He expects offshoring to remain a recurring industry headwind, though at a more normal annual level of roughly 150 to 200 basis points after the current acceleration. Some work is likely to remain onshore because of brand, customer-service or “white glove” requirements, he said.
Separately, Caldwell said some large clients have pulled back support for certain small-business customer segments, particularly in higher-cost European and Asia-Pacific markets, while directing more investment toward enterprise customers. He characterized that development as narrow and specific to a limited customer set rather than a broader trend across Concentrix’s client base.
Deployment capacity and human interaction remain important
Caldwell said deployment capacity is currently constraining the pace at which Concentrix can roll out IX technology. The company is seeking technical talent and forward-deployed engineers, while also working to shorten implementation cycles through more self-service capabilities and improved onboarding tools.
He said autonomous AI has expanded the types of tasks that can be automated, including collections in some countries and application-related processes. However, management believes human interactions will remain important in higher-stakes customer moments, such as healthcare questions or resolving a problem with a brand.
Caldwell also said increased automation does not necessarily reduce customer-contact volumes. Faster, easier access to service can lead consumers to contact brands more frequently, he said, while clients seek to use those interactions to improve sales, loyalty, customer service and overall delivery costs.
Cash flow targeted for debt reduction
Chief Financial Officer Andre Valentine said Concentrix expects margin improvement to continue through the second half of the year, supported by IX adoption, offshoring, and restructuring actions that use AI in back-office and general-and-administrative functions.
Valentine said the company expects free cash flow of $630 million to $650 million this year. Management plans to use the majority of that cash flow, after dividends, to reduce debt. The company is targeting leverage below 2.6 times this year and around 2.2 times by the end of fiscal 2027.
Share repurchases remain paused while debt is reduced, although Valentine said buybacks could return if management continues to view the shares as undervalued. He added that Concentrix would also consider accretive acquisitions that fit its long-term strategy.
About Concentrix (NASDAQ:CNXC)
Concentrix Inc (NASDAQ: CNXC) is a global business services company specializing in customer engagement solutions and technology?driven business process outsourcing. The firm’s offerings encompass customer care delivered across voice and digital channels, back?office processing, analytics and consulting, and automated workflow management. By integrating proprietary platforms, strategic partnerships and advanced automation, Concentrix helps clients enhance customer experiences and streamline operations.
Its capabilities extend to digital marketing and technology implementation, leveraging artificial intelligence, machine learning and data analytics to optimize customer journeys.
