IBEX — IBEX Limited · 2026-09-09 · Verdict: WATCH · Conviction 3

Price $36.90 (screen close, 2026-09-09) · Mkt cap $494M basic / $553M diluted · EV $539M diluted (net cash $14.0M) · EV/normalised after-tax operating profit 12.8x · FCF yield 6.5% LTM · Net cash $14.0M · ADV $4.0M Sources read: 10-K 2025-09-11 (Items 1, 1A, 7), 10-Q 2026-05-06 (Q3 FY26, quarter ended 31 March 2026), DEF 14A 2025-10-28, 8-Ks 2026-05-06 and 2026-05-13, Form 4 summary (12 of 76 filings, 12m), Q3 FY2026 call transcript.

Desk stats - Revenue trend. FY2025 (to 30 June 2025) $558.3M, +9.8% (10-K 2025, Item 7). Nine months to 31 March 2026 $479.8M, +16.7%; Q3 alone $164.4M, +16.8% (10-Q 2026-05-06). All organic, no acquisitions: HealthTech +53.7%, Technology +42.6%, Travel/Logistics +15.1%, Retail +8.3%, Telecom -23.1%. - Normalised after-tax operating profit. LTM to 31 March 2026 GAAP operating income $57.4M (FY25 $46.6M less 9M FY25 $34.3M plus 9M FY26 $45.1M). Adjustments: +$1.5M severance (FY25 $0.558M, all in Q4; 9M FY26 $0.973M, from migrating a client's volume nearshore to offshore); −$2.7M net foreign-currency gain sitting inside SG&A, which is not operating. No impairment add-back: $1.429M in FY25 and $1.532M in FY24 (10-K 2025, Item 7), with a fourth already flagged for Q4 FY26 (Q3 call, CFO), is a recurring cost of site rationalisation. Normalised operating income $56.3M against GAAP $57.4M; at 25% tax, $42.2M (the company's own LTM rate of 16-19% would give $46M). - EV / normalised after-tax profit. Cash $15.409M less debt $1.391M = net cash $14.0M (10-Q, Exhibit 4). On 13,389,116 shares outstanding, EV $480M = 11.4x; on the 14,994,000 diluted shares used for Q3 EPS, EV $539M = 12.8x; adding $59.6M of operating leases, 14.2x. - Leverage. Net cash. Including leases, net obligations of $45.6M are 0.55x LTM adjusted EBITDA of $82.6M. $67.1M undrawn at HSBC. - Is the growth sustainable? Organic, cash-backed at the operating line, guided up: FY26 guidance was raised three times, latest to revenue $638-642M and adjusted EBITDA $82-84M (8-K 2026-05-06). - What the screen got wrong. It reads FY2025 as current, showing 9.8% growth and $46.6M of EBIT when trailing figures are 16.7% and $57.4M. It prices 13.39M basic shares when 1,409,617 options and units were outstanding at 30 June 2025 (DEF 14A, Equity Compensation Plan Information) and the diluted count is 12% higher. It ignores $59.6M of lease liabilities across 32 delivery centres. Its artifact_flag of false is correct: no masking charge here.

1. What the business actually does

IBEX is an outsourced customer-experience provider: 36,000 people in 32 delivery centres handling service, technical support and sales for about 140 clients, plus a smaller digital customer-acquisition arm (10-K 2025, Item 1; 10-Q). About 97% of workstations are offshore (Philippines, Pakistan, India) or nearshore (Nicaragua, Honduras, Jamaica); 96% of revenue is from US clients. The model is land-and-expand. Bermuda-incorporated, June fiscal year.

2. Why it is mispriced — the edge case

There is none, and that caps this at WATCH. The stock is 12.1% below its 52-week high, up 23.5% in six months, positive twelve-month momentum, $4.0M daily volume. No spin, no index event, no restatement, no forced seller. The nearest overhang is TRGI, the legacy controlling holder, still at 12.9% after selling 3,562,341 shares back to the company for $70M in FY2025 (10-Q; DEF 14A ownership) — but nothing shows it selling now. What exists is a debate, not a dislocation: the market discounts BPO terminal value because of AI, and Item 1A concedes that "some of the recently brought to market third-party AI solutions have the potential of replacing some of our lower tier service offerings" (10-K 2025, Item 1A).

3. Unit economics and growth

Operating margin has gone 7.8% (FY24) to 8.3% (FY25) to 9.4% for nine months of FY26, 9.8% in Q3. The driver is mix: payroll fell from 54.0% to 52.1% of revenue as work moved offshore, and Q3 SG&A fell from 19.2% to 16.7% of revenue. Concentration improved — largest client 9% of Q3 revenue against 11% in FY25 — clients above $1M of annual revenue grew about 20% to 70, and retention was 99.9% of revenue for the year (Q3 call).

Two tensions sit underneath. The growth engine is one vertical: HealthTech went from 15.8% to 20.8% of revenue on 53.7% growth, and the CEO says much of it lands onshore, historically the low-margin geography — onshore rose to 27.9% of revenue from 23.8%, and adjusted EBITDA margin duly fell 40bp year over year to 13.4%. And cash conversion is thin while the company builds: nine-month free cash flow was $9.5M on $34.2M of operating cash flow, with capex of $24.6M guided up again to $25-30M against about $18.5M of LTM depreciation, so LTM free cash flow of $32.3M flatters what FY26 will print.

4. Balance sheet and capital allocation

The only real fixed obligation is $59.6M of leases. Capital allocation has been buybacks: $76.4M in FY25 (mostly the TRGI block near $19.65) and $10.1M in nine months of FY26, with a fresh $20M authorised 11 May 2026 (8-K 2026-05-13), or 4% of the cap. Weighted diluted shares have fallen from 18.255M (FY24) to 15.725M (FY25) to 14.780M (9M FY26). The offset is coming: the April 2022 performance units vest on the first fiscal year with revenue at or above $600M and adjusted EBITDA at or above $74M (DEF 14A), and FY26 guidance clears both; four named officers alone hold 414,000 of them. Insiders and directors own 3.4%. The Form 4 pack captured 12 of 76 filings with no open-market buys or sales, too small a sample to read either way.

5. Management: what they said vs what they did

Guidance was raised three times in FY26 and each raise was delivered. The May Sierra AI partnership is the strategic bet: IBEX contracts and bills the client, pays Sierra a negotiated cost per resolution, and the CEO claims "technology/software margins" against BPO gross margins "in the 30% range" (Q3 call). He also gave the honest version: "it will cannibalise some of our business as human volume gets displaced by AI." The disclosed proof point is one client whose call volumes fell 20% within six months of deploying an AI agent while IBEX held revenue with that client by taking share. One data point, and it is the whole thesis.

6. Valuation

At $36.90 against $42.2M of normalised after-tax operating profit, a 10% discount rate and a perpetuity, the reverse DCF says the price implies about 2% perpetual growth (2.8% treating leases as debt) — from a business that just grew revenue 16.7% and operating profit 31% over nine months. Base: FY27 revenue +10% to $705M at a 13.2% adjusted EBITDA margin, less $22M D&A and $7M stock compensation, gives $50M after tax; at 13x, $44. Bear: AI containment bites, FY27 revenue flat at $640M and margin to 11.5%, $34M after tax at 8x, $19 (-48%). Bull: Sierra scales, revenue $740M at a 14% margin, $57M after tax at 17x, $65. Weighting base 50%, bear 25%, bull 25% gives $43, about 17% above price.

7. Catalysts and timeline

The decisive one is days away and outside this bundle: FY2026 fourth-quarter and full-year results with the first FY2027 guidance, which last year arrived with the 10-K filed 11 September. It carries the Q4 impairment the CFO pre-announced and whatever the Sierra pipeline has converted.

8. Risks and pre-registered kill criteria

1. Adjusted EBITDA margin below 12.5% for two consecutive quarters (13.4% in Q3 FY26, 13.0% for nine months).
2. FY2027 revenue guidance below $680M, under about 6% growth on the FY26 guide.
3. HealthTech revenue growth below 15% year over year for two consecutive quarters.
4. Weighted diluted share count back above 15.75M, meaning the 2022 performance-unit vest plus the $20M buyback fail to hold dilution flat.

9. Verdict and one-paragraph summary

WATCH, conviction 3. IBEX is a good business the screen prices off stale data: on trailing numbers it is growing 17% organically, has taken operating margin from 7.8% to 9.8% in two years, holds net cash, retained 99.9% of revenue, and trades at about 12.8x normalised after-tax operating profit on diluted shares, a price implying roughly 2% perpetual growth forever. What stops it being an idea is that nothing is mispricing it: the stock sits 12% off its high after a 23.5% six-month run, no forced seller exists, and the discount is the market's honest, unresolved verdict on whether agentic AI shrinks the pool of human customer-service minutes faster than IBEX takes share of it, a question the company's own risk factor concedes and answers with a single client anecdote and a two-month-old Sierra partnership. Alongside that, free cash flow is thin while capex runs 1.6x depreciation, the FY26 guide is exactly the level that triggers a large 2022 performance-unit vest, and the year ended 30 June 2026 is not in these filings at all. The Q4 print and first FY2027 guide, due within days, decide it: a double-digit guide with margin held above 13% makes this a real idea near this price.

Research for discussion, not investment advice. Positions and sizing are the reader's decision.