Call center operators in the eye of the storm
Investors have certainly woken up to the threat posed by advances in artificial intelligence to legacy software-based companies. The pounding taken by industry leaders has dominated the headlines - Salesforce’s stock is down by almost 25% this year - but the impact is being felt in all corners of the economy.
One less noticed example of this is customer service call centers. They were early adopters of AI, as anyone who’s dealt with chatbots will know, but given advances in technology the pace of change will only accelerate. To keep up, long-established players like Concentrix have emerged as their clients’ “transform partner” and are rolling out new agentic operating frameworks and the like. As always is the case in the early stages of a tech disruption it’s almost impossible to predict who will be the winners and who will be the losers. For CNXC, this, along with the hangover of a big 2024 acquisition that generated a substantial goodwill writedown, is likely why shareholders have not rewarded management for its efforts: the company’s share price has declined from $45 to $33 over the past 12 months, and has fallen from a peak of over $200 in 2022. And this despite an aggressive stock buyback program and a relatively high level of dividend payments.
The firm’s creditors have reupped for the ride, last year agreeing to a debt restructuring that locks them in through 2028 and beyond. Their risks are great. CNXC’s Risk Score, as generated by AIR Platforms's AI-based credit intelligence platform, is now at the CCC+ equivalent level, having fallen from B+ at the time of the refi. CNXC’s free cash flow is relatively strong, but almost of half of it was returned to shareholders last year, eating into the reserves that it could need to face the challenges ahead.
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