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Customer experience (CX) company Concentrix (CNXC) is launching higher after reporting 1Q25 results that featured healthy EPS growth of 9% to $2.79, easily surpassing analysts' estimates, while reaffirming its guidance for FY25. Since early last September, shares have plunged by nearly 40%, illustrating the decisively bearish sentiment and low expectations that have hung over the stock. CNXC's results were far from pristine -- revenue declined by 1.3%, marking its first yr/yr drop in over five years -- but they do qualify as better-than-feared coming off a disappointing Q4 earnings report that included a weak initial FY25 outlook.

We believe that the stock's skyrocket move higher is more tied to CNXC's rising AI-based opportunities, rather than the company's Q1 results and FY25 guidance. In particular, the company's iX Hello Suite is catching investors' attention as an emerging growth catalyst.

• iX Hello Suite is CNXC's GenAI-driven customer experience product that's designed to enhance customer interactions, improve operational efficiency, and drive automation across the enterprise. While iHello is still early in its monetization phase, it's gaining traction among enterprise clients with thousands of seats deployed. By the end of FY25, CNXC expects iHello to be earnings accretive and to contribute materially thereafter.
• The company is also experiencing solid growth from its top 25 clients with revenue growth from this group outpacing the overall business. This outperformance is driven by successful client consolidation efforts and the cross-selling of services.
• From a bottom-line perspective, CNXC's debt repayment strategy and ongoing share repurchases are providing a boost to EPS. In Q1, interest expense decreased by 11% to $73.0 mln, while the company repurchased approximately 550,000 common shares during the quarter. 
• CNXC did take a cautious approach with its FY25 guidance, merely reaffirming its EPS outlook of $11.18-$11.77 and revenue of $9.490-$9.635 bln, with constant currency growth projected at 0% to 1.5%. The company stated that since it's still at an early point in the year, it's not revising its outlook and will continue to take a conservative approach.

CNXC delivered better-than-expected Q1 results as it benefited from client consolidation and expanding AI-driven products. The company's GenAI opportunities are accelerating with its iX Hello suite gaining enterprise adoption, creating excitement around its longer-term growth potential.