Welcome to the ibex first quarter full year 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentations, there'll be a question-and-answer session. To ask a question at that time, please star one one on your touch-tone telephone. As a reminder, today's call is being recorded. There is also an accompanying earnings deck presentation available in the ibex investor relations website at investors.ibex.co. I will now turn this over to Mr. Michael Darwal of ibex. Sir, you may begin.
Good afternoon and thank you for joining us today. Before we begin, I wanna remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals, and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments which may occur. Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our annual report on Form 20-F, filed with the U.S. Securities and Exchange Commission on October 4, 2022. With that, I'll turn it over to Bob Dechant, CEO.
Thank you, Mike. Good afternoon, everyone, and thank you all for joining us today as we share our first quarter fiscal 2023 results. I'm extremely proud of how well our business continues to perform in the face of the current market conditions. Our results were very strong across the board. We delivered the company's best first quarter on record, highlighted by revenue growth of 17.8% year-on-year to $127.9 million. This was led by 44.3% growth of our BPO 2.0 clients, comprised of those new clients won since FY 2016, which now repres ent 76% of our total revenues. Adjusted EBITDA increased an impressive 59% year-on-year to $18.2 million or 14.3%.
Adjusted net income increased to $6.4 million from $0.9 million, and free cash flow increased to $5.2 million from $1.6 million in prior year quarter. On a trailing twelve-month basis, revenue was $512.9 million, up 16% and well above our historical 10% growth rates, while adjusted EBITDA was $73.6 million. Our business has been built to successfully navigate choppy waters and perform well in all market conditions. This has been fueled by our powerful new logo engine that continues to win both elite blue chip clients and leading new economy clients across all our strategic verticals. Our ability to outperform our competition on key client KPIs leads to our rapid land and expand partnerships, resulting in sizable market share gains.
The result is a business that is enviable in both client and vertical diversification. Additionally, ibex is built well structurally from a digital mix standpoint, where today integrated omni-channel and digital-only support is 71% of our overall business and continues to grow. If you recall, when I joined ibex in May of 2015, 98% of our business was voice only. As a result, we are strategically positioned to capitalize on the secular trends of growth in digital-first customer interactions. In the quarter, we won three new clients, including a leading healthcare company and a top-tier high-growth new economy company who both have significant growth potential. Along with the wins we had in late Q4 FY 2022, we had 11 new client launches in the quarter.
As a result, we expect another great year of revenue build by new in the fiscal year, and our pipeline continues to expand non-linearly as our brand and reputation grows, and our added investments into our sales and marketing organization take hold. We continue to do a remarkable job in our strategic verticals of health tech and fintech with growth of 53% year-over-year. These two key verticals now represent over 30% of our business, up from approximately 23% in Q1 FY 2022, and will continue to grow with our recent wins and late-stage pipeline deals. Another key vector for our revenue growth is expansion within our embedded base clients, where we continue to land and expand, resulting in an increased share of wallet.
With the new clients won since FY 2016, our annual revenue retention rate has been greater than 140% over the last five years as we expand into new geographies and new services with these clients. Our client retention continues to be as strong as any BPO in the industry, and our NPS score has increased to an extremely high rating of 68. We are winning new clients across both large digitally transforming blue chip clients and pure play new economy digitally first brands. This highlights our ability to win against both traditional multi-billion dollar competitors as well as new economy only focused competitors. ibex's differentiated BPO 2.0 capabilities, our unparalleled company culture and our Wave iX technology stack are resonating well with clients and differentiate ibex. Recently, we were recognized across the globe with multiple highly sought-after awards.
In CALA, we were named Best Place to Work and Best Place to Work for Women for a third year in a row. In the Philippines, we were selected as one of the Philippines' best employers by the Philippine Daily Inquirer and Statista. While in Pakistan, we won the Best BPO and Gender Diversity and Inclusivity awards. Our technologies continue to be noticed as well. Wave iX won the Contact Center Technology Award, Product of the Year Award, and Customer Experience Innovation Award, honoring the company for embracing technology as a key tool for customer service excellence by CUSTOMER Magazine. Lastly, we are incredibly proud of Julie Casteel, one of my key leaders who was named Female Executive of the Year at the Globee 2022 Women World Awards. These awards distinguish ibex as innovators, thought leaders and market movers in the contact center and customer care industries.
With our track record of important new client wins, our client diversification remains among the industry best and continues to strengthen. Today, we have over 50 clients that generate over $1 million per annum, and we expect that number to increase to approximately 60 by fiscal year-end as our new logo engine continues to run full throttle. Moving on to profitability, adjusted EBITDA margin improved 370 basis points over the same prior year period to a very healthy 14.3%. This margin improvement resulted in 59.1% adjusted EBITDA growth over the prior year quarter to $18.2 million. We expect to realize meaningful margin improvement as we continue to grow and sell into our available capacity built out over the last two years. Before I conclude, let me spend a few minutes talking about the macroeconomic environment.
Inflation and wage pressures continue to add challenges to the business. Our team is focused on a daily basis meeting these challenges and delivering on results for both clients and shareholders. Our business was able to achieve 17.8% growth and strong margins while incurring downturns with our and trading clients and our strategic exit of a large low margin client. This is an example of the resiliency and sustainability we have built into this business. We see opportunities present themselves as clients continue to struggle with cost pressures and the difficulties operating their own U.S.-based contact centers. ibex is a great solution for them, especially with our already built capacity in all our regions. Additionally, our stellar operational performance positions us well to continue to gain share of wallet as clients look to eliminate bottom performing vendors.
I believe we are uniquely positioned to capitalize on these important trends. Looking forward to the remainder of FY 2023 and beyond, we are very confident in our business. Our momentum remains strong and we are passionate about the future of ibex. Lastly, I would like to thank my team for their continued dedication to our mission. I'll now turn the call over to Karl to go through the financial results and guidance. Karl?
Thank you, Bob, and good afternoon, everyone. Thank you for joining the call today. In my discussions of our first quarter fiscal year 2023 financial results, references to revenue, net income, and net cash generated from operations are on an IFRS basis, while adjusted net income, adjusted earnings per share, adjusted EBITDA, and free cash flow are on a non-GAAP basis. Reconciliations of our IFRS to non-GAAP measures are included in the tables attached to our earnings press release. We had a strong quarter, representing our best start to a fiscal year on record, highlighted by 17.8% top-line revenue growth to $127.9 million, compared to $108.6 million in the prior year quarter.
We continue to experience high growth in our BPO 2.0 clients, those that were won since fiscal year 2016, as this cohort grew by 44% over the prior year quarter and now represents 76% of our total revenue versus 62% in the prior year quarter. Net income increased to $4.3 million versus $3 million in the prior year quarter. The increase in net income was primarily driven by stronger operating results, including the absence of non-recurring costs in Q1 fiscal year 2023, partially offset by a negative impact from the fair value measurement of share warrants and increased depreciation. We expect our annual effective tax rate to be in the range of 12%-14% on a normalized basis, excluding the effect of the warrant fair value adjustment.
On a non-GAAP basis, adjusted net income increased to $6.4 million compared to $0.9 million in the prior year quarter. Non-GAAP fully diluted adjusted earnings per share increased to $0.34 compared to $0.05 in the prior year quarter. The increase in adjusted net income and adjusted fully diluted earnings per share was primarily driven by stronger operating results, partially offset by increased depreciation. Adjusted EBITDA increased to $18.2 million or 14.3% of revenue compared to $11.5 million or 10.6% of revenue for the same period last year. The increase in adjusted EBITDA margin was primarily driven by growth in our BPO 2.0 clients, along with continued growth in higher margin offshore regions, lower costs associated with ramping up new clients, as well as operating leverage as we continue to scale.
For the first quarter of fiscal year 2023, our top five client concentration decreased to 39% from 42% of overall revenue compared to the same quarter last year. Our top ten clients now account for 58% of total revenue, down from 61% in the prior year quarter. We have worked hard to diversify our client base and are proud of the progress we continue to make. Switching to our verticals, retail and e-commerce increased to 21.4% of first quarter revenue versus 17.8% in the prior year quarter. Fintech and health tech increased to 30.1% of first quarter revenue versus 23.2% in the prior year quarter. Travel, transportation, and logistics increased to 13% of first quarter revenue versus 11.8% in the prior year quarter.
Conversely, our exposure to the telecommunications vertical decreased to 17.3% of quarterly revenue versus 21.5% in the prior year quarter. Net cash generated from operations was $8.8 million for the quarter compared to $6.9 million in the prior year quarter, primarily due to stronger operating results, partially offset by an increased use of working capital. Net cash generated from operations excluding working capital was $16 million for the quarter compared to $7.8 million in the prior year quarter. Our DSOs were 59 days, down 4 days year-over-year and up four days sequentially. We continue to be well below industry average.
Capital expenditures were $3.6 million or 2.8% of revenue in the first quarter of fiscal year 2023 versus $5.3 million or 4.9% of revenue in the prior year quarter as we continued to utilize our available capacity as a result of the removal of social distancing requirements. Non-GAAP free cash flow increased to $5.2 million in the current quarter compared to $1.6 million in the prior year quarter. We ended the first quarter with $42.9 million in cash, down from $48.8 million as of June 2022, mostly driven by a net pay down on a revolving line of credit during the quarter.
Total debt was $88.9 million, including total borrowings of $7.7 million and lease liabilities of $81.3 million, down from total debt of $104.7 million as of June 2022.
Borrowing availability under our evolving credit facilities increased to $56.7 million at September 2022 compared to $50.5 million as of June 2022. In closing, our business has great momentum. We continue to grow at a record pace and aggressively expand our current base of business across multiple lines of business and geographies. However, we acknowledge the challenging macroeconomic environment with wage and inflationary cost pressures, post-pandemic industry impacts, and market uncertainty, but remain optimistic about ibex's outlook based on the strengths of our existing partnerships, new client engine, operational performance, and strategic footprint. We have a high degree of confidence in the growth of our business, and as a result, we are reaffirming our previous guidance for fiscal year 2023. We look forward to continued success. With that, Bob and I will now take questions. Operator, please open the line.
Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star one one on your touchtone telephone. Again, to ask a question, please press star one one. One moment, please. Our first question comes from the line of Tobey Sommer of Truist. Your line is open.
Hello. Can you hear me?
Yeah, Toby. Hey, it's Bob. How are you doing?
Oh, great. Hey. Doing real well, thanks. I was wondering if you could describe the conditions or what's driving your new logo launches in the quarter, 'cause you described a couple of things where you're on your front foot in terms of what you're able to offer and then some market phenomenon where customers are looking to replace underperforming vendors. How would you characterize those drivers in your recent launches?
Sure. Really good question. You know, how I look at this is there is a flurry of deals that are just driven by the challenges that clients, whether they're our existing clients or, you know, target clients, you know. They typically, you know, those that have captives are typically in the, what I'll call more the blue chip, you know, the blue chip bucket. Whereas the new economy clients tend to. They've outsourced from day one or they may have had a small little captive that then they started to outsource. These macro economic factors are really putting pressure, I believe, in their internal operations. The effects have been move to work at home through COVID, then try to get their agents back into the centers.
Agents don't wanna do that. Attrition jumps up. The cost of replacing those agents is increasing because of wage inflation and pressures, et cetera. You almost have this virtuous cycle going on there that then leads them to, you know, to say, "Hey, look, I have to react. I have to move fast. I need to look for alternatives to stay resilient." That's where outsourcing really fits well in, you know, into the space. We started seeing this effect, Toby, happen almost a year ago, where we had several clients that were looking at, you know, at that and then launching in nearshore or our offshore markets, you know, as a way to deal with that.
I believe that that's a trend that's gonna continue here as we continue to have some of the real hurdles and turbulence in the U.S. market. To me, that's a big driver that then gets complemented with. I look at it, those clients of ours that may not have this may not have their enterprise rapidly growing, but may have their enterprise shrinking, as they deal with that, they're looking to consolidate volume to their best providers. Rather than have everybody kinda have their volumes decline by 20%, they're gonna keep their top performers running full and take that out of the bottom performers. That's playing really well to ibex, because we're really strong operationally.
I evidence that with our net promoter score from our clients and also from our client retention numbers, which have just been outstanding. That plays very well to the ibex growth trajectory.
Thank you very much for that context. You've been able to grow into some of the capacity that you added over the last couple years, and that's helping margins. How should we think about that growth on a go-forward basis as the growth increases and the pruning of lower margin customers is less of a headwind? You know, how long can the sort of tailwind of not needing to invest a ton in CapEx last before you need to sort of revive that? Thanks.
Our analysis has that we have about approximately $150 million worth of capacity, available capacity in the markets that we're really expanding in, you know, that being nearshore, offshore and places like that. If you look at our growth trajectory, you know, we feel that that pushes us well beyond FY 2023 and somewhere into, you know, past FY 2024 and into FY 2025, that we're able to, you know, mostly grow without a whole lot of CapEx. Now, I do think over that timeframe, we are going to want to grow into some new geographies that we're not in today, and that will require a little CapEx as you go down that path.
We're in a really, you know, really good position over the next, you know, call it two years plus for operating this business. You know, low CapEx. We believe you will see margin appreciation as you fill those centers 'cause we have those costs. Much of those costs are fixed, under, you know, kinda under our belt already. You know, the end result of that is I think we're positioned well for, you know, for a healthy EBITDA expansion, low CapEx, which then results in, you know, very strong free cash flow.
Last question from me, and I'll get back in the queue. What do you see as things that the company needs to focus on building out over the next year or two to position you to be, you know, 2x-3x the size, assuming your aspirations go that direction?
Sure. Yeah, they are. Our aspirations are, you know, we are on a, you know, on an organic track to $1 billion. You know, if you just look at our trajectory and, you know, my team and I really have that, you know, that in our, you know, on our radar. Now, to accomplish that, I think we need to continue to do what we do really well today, which is opening up in new markets, become a dominant player in those markets, and then just build, you know, win new logos and fill those centers rapidly. I believe that, you know, kind of the recipe for success of that, of continued growth in provincial Philippines into our nearshore, you know, additional nearshore markets.
Then, you know, another market that, you know, I look and say is an area that we probably want to move into would be a market like India, where, you know, a lot of our clients are, you know, look into and, you know, look for growth. I view that as the organic side of what we do well today and sticking to what we know how to, you know, execute extremely well. On top of that, though, Toby, I look at, you know, hey, how do we expand the services that we do that can be complementary? That's an area that, you know, I think where you look at higher margin, higher value services, and those are the areas that we're, you know, certainly spending a lot of time thinking about how and where do we go?
Are we able to organically expand into that, put some effort like we did into healthcare and fintech, or is that something that we need a tuck-in acquisition to build those capabilities? Those are the things that, you know, my team and I are really looking and, you know, hope to really have a very, you know, firm strategy to accomplish that, you know, to aggressively drive and keep moving top line and bottom line up.
Thank you.
Thank you. Again, ladies and gentlemen, if you'd like to ask a question, press star one one on touchtone phone. Again, to ask a question, press star one one. One moment please. For the questions and comments, Bob Dechant, with his final remark.
Yeah, Operator and Valerie, thank you for turning it over to me. Thank you all for being on the call today. We're really excited about our results, and I just wanna thank my management team for continued delivering on this business. Look forward to getting together with you all in a quarter from now. In that time, hope you all have a healthy and happy Thanksgiving and holiday season. Thank you all for your confidence in ibex.
Ladies and gentlemen, this concludes our.