IBEX Holdings Files For $75 Million U.S. IPO

Summary

• IBEX Holdings intends to raise $75 million from an IPO.
• The firm sells customer lifecycle software and services to enterprises.
• We don't know the final terms of the IPO; when we learn those details I'll provide a final opinion.

Quick Take

IBEX Holdings (IBEX) intends to sell common shares for gross proceeds of $75 million from a U.S. IPO, according to an F-1 registration statement.

The firm acts as an end-to-end customer acquisition & engagement solution, working to help brands meet, support, and keep customers. IBEX has designed a suite of digital and omnichannel, customer-centric solutions that manages interactions throughout all phases of the customer lifecycle.

I’ll provide a final opinion when we learn additional details about the IPO.

Company

Washington, DC-based IBEX was founded in 2002 to be an end-to-end provider of technology-enabled customer lifecycle experience [CLX] solutions. The company offers a portfolio of solutions to optimize customer acquisition, engagement, expansion and experience for clients.

Management is headed by Mohammed Khaishgi, who has been with the firm since 2017. Khaishgi previously founded and served as COO of The Resource Group from 2002 - 2017 and Senior Director of Align Technology from 2000 - 2002. Khaishgi also serves on the Afiniti.com Board of Directors.

IBEX primarily works with Fortune 500 brands in many different industries. These brands generally have large customer bases that depend on outsourced providers to maximize customer retention/improve customer expansion.

The principal shareholder of the company is The Resource Group International Limited, which is controlled by TRG Pakistan Limited, or TRGP, a publicly traded company in Pakistan. The shareholder owns 92.8% of company stock pre-IPO.

Technology

IBEX has developed technology-enabled solutions through their integrated CLX platform to optimize customer acquisition, engagement, expansion and experience. The company’s solutions help clients with the growth of their customer bases, retaining their customers, protecting and enhancing their brands, and maximizing customer lifetime value.

Below is a description of IBEX’s suite of products:

(Source: F-1 statement)

IBEX facts at a glance:

• Operating in 45 countries
• 55 million service & support interactions every year
• 1 million new lines of business for clients yearly
• 15,000 employees worldwide
• 15 million sales calls to company clients

IBEX has 25 service delivery locations in seven (7) countries:

• USA
• UK
• Philippines
• Senegal
• Pakistan
• Nicaragua
• Jamaica

The products that power the company’s solutions include:

• CLX Convert
• CLX Sense
• CLX Pulse
• CLX Signal
• CLX Target
• CLX Trust
• CLX Connect

The CLX Product Suite is a combination of tools & technologies. Products are designed to provide services across four phases of the customer lifecycle experience: Acquire, Engage, Expand, and Experience. Acquire includes digital marketing and conversion. Engage includes customer sales and support. Expand covers upsell, cross-sell and retention, and Experience includes customer feedback and experience.

The CLX platform is founded on the core competencies of the CLX Product Cloud, Data and Analytics, People and Processes, Global Delivery Locations, Network Infrastructure, and Strategy and Innovation. The CLX Product Cloud powers a ‘flexible and modular toolset of integrated products that can be configured, connected, and deployed based on diverse client needs and requirements, powers the system.’

As of September 30, 2017, IBEX’s integrated CLX platform consists of a global network of 26 delivery centers in seven countries with proprietary technology and data analytics capabilities. The global delivery network incorporates onshore, nearshore and offshore BPO capabilities.

Customer Acquisition

IBEX’s customer base includes Fortune 500 companies. The company has an average tenure of five years with top clients. IBEX also has delivery centers placed in labor markets with relatively low levels of resource competition.

IBEX’s direct sales and marketing teams are focused on driving awareness and adoption of the CLX platform, as well as accelerating customer acquisition and expanding the relationship with existing customers. The company looks to develop long-term relationships with large strategic clients that have needs across the entire CLX lifecycle. IBEX uses a “land and expand” strategy to nurture these relationships.

To best position the company, management has focused its efforts on key market verticals that include telecommunications, technology, cable and broadband, high-growth technology, health and health insurance, financial services and automotive.

The sales cycle for IBEX’s solutions is around 2 - 3 months for Customer Acquisition solutions, 12 - 18 months for Customer Engagement and Customer Expansion solutions, and 12 - 24 months for Customer Experience solution.

The company believes that clients are utilizing a “champion-challenger” model in their procurement of CLX services. Nimbler, more innovative providers compete effectively against larger vendors.

Market

According to a 2017 market research report by MarketsandMarkets, the customer experience management market is predicted to grow from an estimated $5.98 billion in 2017 to $16.91 billion by 2022, representing a strong CAGR of 23.1%.

The main factors driving market growth for the mobile segment are the rise in smartphone adoption and prompt response about particular products or services of the smartphone. The main factors driving market growth for the travel & hospitality segment (projected to grow at the highest CAGR) are travel companies continuously adopting new business models to address the diversified demands of potential consumers.

The Asia Pacific market is predicted to grow at the highest CAGR during the forecast period as the use of mobile devices in this region increases. China, India, Russia, Australia, and Japan are all projected to grow at a high rate in the market.

Competition

Major competitive vendors that are developing products for the customer experience management market include:

• Adobe Systems (ADBE)
• Oracle (ORCL)
• IBM (IBM)
• Nokia (NOK)
• Tech Mahindra (OTC:TCHQY)
• Avaya (AVYA)
• OpenText (OTEX)
• Nice Systems (NICE)
• Verint (VRNT)
• MartizCX
• Medallia
• Qualtrics
• InMoment

According to the F-1 statement, IBEX faces competition from a variety of companies which operate in distinct segments of the customer lifecycle journey, including:

Call center and diversified BPO providers, including Teleperformance S.A., Convergys Corporation, SITEL Corporation, SYKES Enterprises, Incorporated, TeleTech Holdings, Inc., Sutherland Global Services, Inc., Alorica Inc., 24/7 Customer, Inc., VXI Global Solutions and Accenture PLC;

Customer acquisition companies, including Red Ventures, LLC, Clear Link Technologies, LLC and Qology Direct, LLC;

Insurance marketing agencies, including eHealth, Inc., SelectQuote Senior Insurance Services, Inc. and GoHealth, LLC; and

Vendors of customer experience management tools including Medallia, Inc., Vital Insights Inc., Maritz Holdings Inc., Qualtrics, LLC and J.D. Power and Associates, Inc.

Management believes that the investments the company has made has placed them in a strong competitive position with substantial first-mover advantages. The company’s leadership position is founded on the following key competitive strengths:

Provider of end-to-end customer lifecycle experience solutions Demonstrated ability to combine technology and service Proven expertise in mature industries Growing expertise in serving clients in emerging and high-growth industries Global delivery capabilities

Financials

IBEX’s recent financial results can be summarized as follows:

• Slowly growing topline revenue
• Uneven operating profit dollars
• Uneven operating margin percentage
• Increasing cash flow from operations
• Swing from comprehensive operating income to loss

Below are the company’s operational results for the past two years (Audited GAAP for full years ):

(Source: F-1 statement)

Revenue ($)

• Three months ended Sept 30, 2017: $89.5 million, 2.3% increase vs. prior
• FYE 2017: $334.5 million, 3.4% increase vs. prior
• FYE 2016: $323.6 million

Operating Profit ($)

• Three months ended Sept 30, 2017: $5.0 million
• FYE 2017: ($2.3 million) operating loss
• FYE 2016: $8.6 million

Operating Margin (%)

• Three months ended Sept 30, 2017: 5.6%
• FYE 2017: Negative
• FYE 2016: 2.7%

Cash Flow from Operations ($)

• Three months ended Sept 30, 2017: $6.5 million
• FYE 2017: $6.6 million
• FYE 2016: $3 million

As of September 30, 2017, the company had $11.7 million in cash and $131.7 million in total liabilities.

IPO Details

IBEX intends to raise $75 million in gross proceeds from an IPO of its common shares.

Management says it will use the net proceeds from the IPO as follows:

The principal purposes of this offering are to increase our capitalization and financial flexibility, enhance our visibility in the marketplace, create a public market for our common shares and fund growth initiatives. We intend to use approximately $36.9 million of the net proceeds that we receive from this offering to: [i] redeem 1,538,462 non-convertible redeemable senior preferred shares of our subsidiary Etelequote Limited for an aggregate redemption price of approximately $20.0 million, [ii] repay approximately $6.8 million of principal and accrued unpaid interest on the outstanding 15.0% convertible loan notes of Etelequote Limited held by TRGI, [iii] repay approximately $9.1 million principal amount of senior secured notes of our subsidiary e-TeleQuote Insurance, Inc. and [iv] the repayment of approximately $1.0 million of principal and accrued unpaid interest on the outstanding 15.0% promissory note of Etelequote Limited held by TRGI.

Management’s presentation of the company roadshow is not currently available.

Listed bookrunners of the IPO are Baird, Piper Jaffray, William Blair, SunTrust, and Robinson Humphrey.

Expected IPO Pricing Date: Not on calendar.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.