FPA Queens Road Small Cap Value Fund on Concentrix Corporation
Thesis
Concentrix is one of the world's largest customer-experience outsourcing providers and has evolved beyond call centers into technology-enabled business-process outsourcing. The WebHelp acquisition increased scale but left the company with roughly three turns of debt just as growth and margins weakened. The market is concerned that AI will disrupt its core services, a risk the fund explicitly shares. At the same time, demand for the iX Suite suggests Concentrix may be able to integrate AI into its own offering and defend its role with customers. The valuation is extremely low, but uncertainty keeps the position below 50 basis points.
“The company trades at very low valuation multiples, but we share the market's concern and currently hold less than 50 bps of CNXC.”
Key risks
- AI could structurally disrupt core customer-experience services
- Growth and margins have already declined
- Leverage from the WebHelp acquisition limits flexibility