IPO Launch: IBEX Limited Seeks $100 Million U.S. IPO

IPOStreet

IBEX Limited (IBEX) has filed to raise $100 million in an IPO of its common stock, according to an F-1 registration statement.

The business offers consumer lifecycle management services and related solutions for the enterprise.

IBEX continues to increase sales and net profit, also has strong free cash flow and is well placed in an increasing market.

Hamilton, Bermuda-based IBEX was established to build a broad range of customer service capabilities for companies of all sizes around the world.

Management is led by Mr. Robert Dechant who has been with the company since 2015 and previously worked as Chief Sales , Marketing and Customer Support Officer at Qualfon, a call center support firm.

Below is a brief overview video of IBEX 'customer lifecycle experience:

Source: ibex.connect

The company is concentrating its attention on the Technology, Travel & Hospitality, Communications & Media, Financial Services, Education, Automotive, Retail and Medical & Health Insurance sectors.

The company's primary offerings include:

  • Connect-Engage customers
  • Digital-Add customers
  • CX-Grow relationships

IBEX raised at least $96 million from investors including the International Resource Group (which is a selling shareholder).

The company primarily has two groups of clients, Fortune 500 companies with large client bases and smaller, 'New Economy' technology or other businesses.

The majority of the company's revenue growth in recent periods was due to growth in its segment New Economy, with the chart below showing the sales ramp in that category:

ibexclient
Source: Company registration statement

Reseller commissions expenses as a percentage of total sales dropped as revenues increased.

According to a ResearchAndMarkets 2018 market research report, by 2024 the global customer experience management market is expected to hit $21.3 billion.

This reflects a 22 per cent CAGR projection between 2018 and 2024.

An increasing demand for customized customer experiences as well as continued innovation and efficiencies on the part of vendors are the key drivers for this expected growth.

Organizations such as IBEX are now able to deliver customer service services to smaller consumers, targeting the 'long tail' of consumers at potentially higher revenue per customer.

Large players in the competitive industry or other industries include:

  • 24-7 Intouch
  • Alorica
  • Atento (ATTO)
  • Concentrix
  • SITEL
  • Startek (SRT)
  • SYKES Enterprises (SYKE)
  • TaskUs
  • Teleperformance (TLPF
  • TeleTech
  • TELUS International
  • Webhelp

We can summarize the latest financial performance of IBEX as follows:

  • Growing topline revenue
  • Increasing gross profit and gross margin
  • Growing operating profit and net income
  • Increased cash flow from operations

Below are relevant financial results derived from the firm 's registration statement:

ibexpl

Source: Company registration statement

IBEX had $15.5 million in cash, and $176.1 million in total liabilities as of March 31, 2020.

Free cash flow was $32.9 million over the twelve months ended March 31, 2020.

IBEX plans to raise $100 million in gross proceeds from an IPO of its common stock, with the selling shareholder retaining $25 million and the company retaining $75 million of that sum.

Assuming a successful IPO, the market value of the company at IPO will be about $389.8 million, excluding the impact of underwriter over-allocation options.

With the exception of the impact of underwriter options and private placement shares or limited stock, if any, the float ratio to outstanding shares would be about 27.18%.

The management says the net proceeds from the IPO will be used as follows:

We intend to use between $25.0 million and $40.0 million of the net proceeds that we receive from this offering for:

[i] $20.0 million to $40.0 million in capital expenditures to build out additional facilities to accommodate growth from new and existing clients, as well as expand our existing facilities to accommodate social distancing requirements related to the current COVID-19 situation; and

[ii] $5.0 million to $10.0 million to invest in upgraded support systems that improve our internal employee management as well as real time financial reporting.

We will also consider using part of the net proceeds from this offering for repayment of some of our financial indebtedness that carries a higher interest rate.

Citigroup, RBC Capital Markets, Baird, SunTrust Robinson Humphrey and Piper Sandler are listed bookrunners of the IPO.

Commentary

IBEX is seeking U.S. public investment capital to fund its expansion initiatives and upgrades to its existing facilities and systems.

The firm's financials show solid topline revenue growth and improving results in all other major metrics.

Reseller commissions spending as a percentage of total sales dropped as revenue increased, a positive signal.

The market opportunity for BPO services to New Economy and legacy firms is expected to grow at a very strong 22% CAGR in the coming years, so the firm has positive industry dynamics in its favor.

Citigroup is the lead left underwriter and the company-led IPOs have produced an average return of 9.7 percent since their IPO over the last 12 months. This is a mid-tier result for all major underwriters over the period.

As for the valuation, the IBEX IPO is priced higher compared to Atento, but Atento has shown negative growth while IBEX has accelerated growth in the latest period, so I find the IPO to be fairly valued.

Overall, I’m impressed with IBEX’ results and management’s focus on New Economy companies for the firms’ future growth prospects.

My opinion on the IPO is a BUY at $21.00 per share.

Expected IPO Pricing Date: August 6, 2020.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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