AI Tech Letter
(THOSE AREN'T CHICKENS IN YOUR TRANSLATOR APP)
(IBEX)
I was flying back from Monterey last month when I found myself eavesdropping on a fascinating exchange at the customer service counter.
The passenger ahead of me—clearly not a native English speaker—was struggling to explain his situation to an agent who spoke only English.
Then, the agent tapped her screen, and suddenly, she was responding in his language with surprising accuracy.
Curious, I leaned in as she handed him a feedback form. "How was your experience with our new AI-powered translation service?" it read.
When my turn came, she confirmed the system was new. "It’s a game-changer," she said. "Three weeks ago, we'd have needed a translator or spent half an hour playing charades."
This experience came to mind as I dug into IBEX Limited (IBEX), a Washington D.C.-based company positioning itself at the intersection of old-school customer service and cutting-edge AI.
Their business process outsourcing services have earned them a reputation for high-quality omnichannel support across growing offshore markets, with a focus on using AI, automation, and data analytics to transform how brands engage with customers.
Remember when "customer service" meant being stuck on hold for an hour while a recorded voice assured you that your call was "very important"? IBEX is changing that narrative.
Their Wave iX solutions don't replace humans—they enhance them. One hospitality client now deploys English-speaking agents with AI-powered translation to handle multilingual interactions (goodbye language barriers and soul-crushing hold music).
The quality of these translations is what sets them apart in a world where most translation apps still turn phrases like "welcome gift" into "live chickens" (true story from my last international trip).
Their AI also handles routine inquiries ("What are your hours?") while humans tackle the complex ones ("Why does my new dishwasher sound like it's harboring raccoons?").
It's essentially digital triage at its finest—at least until that gets disrupted too, which in Silicon Valley terms means sometime next Tuesday.
Now, let's talk numbers. IBEX posted a record-breaking second quarter with revenues hitting $140.7 million, up 6.1% year-over-year.
Their "land-and-expand playbook" brought in five new major clients this quarter alone. Earnings per share came in at $0.59 (beating expectations by $0.08), with adjusted EBITDA climbing to $16.5 million and margins improving to 11.8%.
If you're new to investing, beating analyst expectations is like showing up to your in-laws' house with an expensive bottle of wine—it won't solve all your problems, but it certainly helps set a positive tone.
The sector breakdown tells another interesting story.
Offshore operations (now 53% of total revenue) grew by 14%, while HealthTech surged 31%—no surprise to anyone who's visited a doctor's office lately and watched them wrestle with patient management software.
Travel, logistics, and retail also saw healthy increases. A significant move this quarter was IBEX's buyback of 3.6 million shares from TRGI, freeing it from "controlled company" status and helping boost EPS by 36%.
But let's not pop the champagne just yet. For all its strong earnings, IBEX has some glaring weak spots.
Revenue growth is anemic at 1.66%—well below the sector median of 3.93%. The FinTech segment is particularly troubling, with revenue down 15%.
Cash flow remains negative (they burned through $3.2 million), and their net cash position dropped precipitously from $60.8 million to just $13.7 million thanks to that $70 million share buyback.
It's like bragging that you're only losing $100 at the poker table instead of $200—technically an improvement, but your wallet still gets lighter.
Management has also acknowledged that costs related to AI implementation and infrastructure are rising, potentially squeezing margins in the latter half of fiscal 2025.
Meanwhile, customers are taking longer to pay (Days Sales Outstanding extended from 75 to 79 days), which could further strain working capital.
So what's the bottom line? At its current valuation—9.97x forward P/E for 2025 and 8.61x for 2026—IBEX might represent a bargain for investors who believe in the long-term promise of AI-driven outsourcing.
I've been trading long enough to know that sometimes the market offers gifts for those willing to look past short-term turbulence.
For the stock to realize its potential upside, however, IBEX needs to demonstrate stronger revenue growth and better cash flow management.
If it succeeds, a move toward a 12x–14x P/E range would offer meaningful upside. If not, it could remain stuck in what I call "value trap purgatory."
As for me, I'm keeping IBEX on my watchlist—right next to “learn a second language” and “never fly standby again.” Some opportunities, like some flights, are worth waiting for.
