SEC Filing | Concentrix Corporation

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cnxc-20210531

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number: 001-39494

CONCENTRIX CORPORATION

(Exact name of Registrant as specified in its charter)


Delaware									27-1605762
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

44111 Nobel Drive, Fremont, California									94538
(Address of Principal Executive Offices)									(Zip Code)

(800) 747-0583

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

CNXC

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date.


Class						Outstanding as of June 30, 2021
Common Stock, $0.0001 par value						52,216,701

Concentrix Corporation

Form 10-Q
Index


		Page
PART I	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Consolidated Balance Sheets as of May 31, 2021 (unaudited) and November 30, 2020	2
	Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended May 31, 2021 and 2020	3
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Six Months Ended May 31, 2021 an d 2020	4
	Consolidated Statements of Stockholders ’ Equity (unaudited) for the Three and Six Months Ended May 31, 2 021 and 2020	5
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended May 31, 2021 and 2020	7
	Notes to the Consolidated Financial Statements (unaudited)	8
Item 2.	Management ’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41

PART II	OTHER INFORMATION	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 6.	Exhibits	43

	Signatures	44

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONCENTRIX CORPORATION

CONSOLIDATED BALANCE SHEETS

(currency and share amounts in thousands, except par value)


	May 31, 2021		November 30, 2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	131,249	$	152,656
Accounts receivable, net	1,089,387		1,081,481
Assets held for sale	83,010		—
Other current assets	173,226		189,239
Total current assets	1,476,872		1,423,376
Property and equipment, net	399,422		451,649
Goodwill	1,837,900		1,836,050
Intangible assets, net	736,877		798,959
Deferred tax assets	41,582		47,423
Other assets	609,587		620,099
Total assets	$	5,102,240	$	5,177,556

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	109,506	$	140,575
Current portion of long-term debt	—		33,750
Payable to former parent	—		22,825
Accrued compensation and benefits	363,948		419,715
Other accrued liabilities	356,665		371,072
Income taxes payable	29,141		20,725
Liabilities held for sale	30,353		—
Total current liabilities	889,613		1,008,662
Long-term debt, net	959,158		1,111,362
Other long-term liabilities	595,619		601,887
Deferred tax liabilities	128,082		153,560
Total liabilities	2,572,472		2,875,471
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000 shares authorized as of May 31, 2021; no shares issued and outstanding as of May 31, 2021	—		—
Common stock, $0.0001 par value, 250,000 shares authorized as of May 31, 2021; 51,296 shares issued and outstanding as of May 31, 2021	5		—
Additional paid-in capital	2,327,025		—
Treasury stock, 4 shares as of May 31, 2021	(527)
Retained earnings	171,715		—
Former parent company investment	—		2,305,899
Accumulated other comprehensive income (loss)	31,550		(3,814)
Total stockholders’ equity	2,529,768		2,302,085
Total liabilities and stockholders’ equity	$	5,102,240	$	5,177,556

(Amounts may not add due to rounding)

The accompanying notes are an integral part of these consolidated financial statements.

CONCENTRIX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(currency and share amounts in thousands, except per share amounts)

(unaudited)


	Three Months Ended				Six Months Ended
	May 31, 2021		May 31, 2020		May 31, 2021		May 31, 2020
Revenue	$	1,369,878	$	1,066,363	$	2,723,156	$	2,254,982
Cost of revenue	887,149		721,193		1,754,377		1,464,622
Gross profit	482,729		345,170		968,779		790,360
Selling, general and administrative expenses	354,505		321,590		705,666		678,569
Operating income	128,224		23,580		263,113		111,791
Interest expense and finance charges, net	6,745		12,928		14,448		30,513
Other expense (income), net	(3,546)		(1,641)		257		(4,876)
Income before income taxes	125,025		12,293		248,408		86,154
Provision for income taxes	42,121		9,823		76,693		31,367
Net income	$	82,904	$	2,470	$	171,715	$	54,787
Earnings per common share:
Basic	$	1.59	$	0.05	$	3.31	$	1.06
Diluted	$	1.57	$	0.05	$	3.26	$	1.06
Weighted-average common shares outstanding
Basic	51,275		51,602		51,215		51,602
Diluted	52,005		51,602		51,928		51,602

(Amounts may not add due to rounding)

The accompanying notes are an integral part of these consolidated financial statements.

CONCENTRIX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(currency in thousands)

(unaudited)


	Three Months Ended				Six Months Ended
	May 31, 2021		May 31, 2020		May 31, 2021		May 31, 2020
Net income	$	82,904	$	2,470	$	171,715	$	54,787
Other comprehensive income (loss):
Unrealized (loss) gain of defined benefit plans, net of taxes of $0 and $98 for the three and six months ended May 31, 2021, respectively, and $0 for the three and six months ended May 31, 2020, respectively	(72)		(16)		(448)		2
Unrealized gain on cash flow hedges during the period, net of taxes of $(6,048) and $(3,793) for the three and six months ended May 31, 2021, respectively, and $(844) and $(257) for the three and six months ended May 31, 2020, respectively	17,669		2,537		10,599		774
Reclassification of net gains on cash flow hedges to net income, net of taxes of $2,518 and $5,540 for the three and six months ended May 31, 2021, respectively, and $1,144 and $2,798 for the three and six months ended May 31, 2020, respectively	(7,355)		(3,440)		(16,526)		(8,412)
Total change in unrealized gain (loss) on cash flow hedges, net of taxes	10,314		(903)		(5,927)		(7,638)
Foreign currency translation gain (loss), net of taxes of $0 for the three and six months ended May 31, 2021 and 2020, respectively	35,433		(26,227)		41,739		(38,490)
Other comprehensive income (loss)	45,675		(27,146)		35,364		(46,126)
Comprehensive income (loss)	$	128,579	$	(24,676)	$	207,079	$	8,661

(Amounts may not add due to rounding)

The accompanying notes are an integral part of these consolidated financial statements.

CONCENTRIX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(currency in thousands)

(unaudited)


	Three and Six Months Ended May 31, 2021
	Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Former parent company investment		Accumulated other comprehensive income (loss)		Total
Balances, February 28, 2021	$	5	$	2,314,996	$	(409)	$	88,811	$	—	$	(14,125)	$	2,389,278
Other comprehensive income	—		—		—		—		—		45,675		45,675


Share-based compensation activity	—		12,029		—		—		—		—		12,029
Repurchase of common stock for tax withholdings on equity awards	—		—		(118)		—		—		—		(118)
Net income	—		—		—		82,904		—		—		82,904
Balances, May 31, 2021	$	5	$	2,327,025	$	(527)	$	171,715	$	—	$	31,550	$	2,529,768

Balances, November 30, 2020	$	—	$	—	$	—	$	—	$	2,305,899	$	(3,814)	$	2,302,085
Other comprehensive income	—		—		—		—		—		35,364		35,364
Reclassification of net former parent investment in Concentrix	—		2,305,899		—		—		(2,305,899)		—		—
Issuance of common stock at separation and spin-off	5		(5)		—		—		—		—		—
Share-based compensation activity	—		21,131		—		—		—		—		21,131
Repurchase of common stock for tax withholdings on equity awards	—		—		(527)		—		—		—		(527)
Net income	—		—		—		171,715		—		—		171,715
Balances, May 31, 2021	$	5	$	2,327,025	$	(527)	$	171,715	$	—	$	31,550	$	2,529,768

(Amounts may not add due to rounding)

The accompanying notes are an integral part of these consolidated financial statements.

CONCENTRIX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(currency in thousands)

(unaudited)


	Three and Six Months Ended May 31, 2020
	Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Former parent company investment		Accumulated other comprehensive loss		Total
Balances, February 29, 2020	$	—	$	—	$	—	$	—	$	1,578,184	$	(69,062)	$	1,509,122
Share-based compensation	—		—		—		—		3,796		—		3,796
Other comprehensive loss	—		—		—		—		—		(27,146)		(27,146)
Hypothetical current tax expense recorded for separate return basis presentation	—		—		—		—		4,298		—		4,298
Net income	—		—		—		—		2,470		—		2,470
Balances, May 31, 2020	$	—	$	—	$	—	$	—	$	1,588,748	$	(96,208)	$	1,492,540

Balances, November 30, 2019	$	—	$	—	$	—	$	—	$	1,519,923	$	(50,082)	$	1,469,841
Share-based compensation	—		—		—		—		7,987		—		7,987
Other comprehensive loss	—		—		—		—		—		(46,126)		(46,126)
Hypothetical current tax expense recorded for separate return basis presentation	—		—		—		—		6,051		—		6,051
Net income	—		—		—		—		54,787		—		54,787
Balances, May 31, 2020	$	—	$	—	$	—	$	—	$	1,588,748	$	(96,208)	$	1,492,540

(Amounts may not add due to rounding)

The accompanying notes are an integral part of these consolidated financial statements.

CONCENTRIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(currency in thousands)
(unaudited)


	Six Months Ended
	May 31, 2021		May 31, 2020
Cash flows from operating activities:
Net income	$	171,715	$	54,787
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	72,225		61,979
Amortization	69,199		73,357
Non-cash share-based compensation expense	15,690		7,987
Provision for doubtful accounts	(2,132)		6,118
Deferred income taxes	(4,764)		(11,210)
Hypothetical current tax expense recorded for separate return basis presentation	—		6,051
Unrealized foreign exchange gains	3,240		(3,678)
Other	142		1,544
Changes in operating assets and liabilities:
Accounts receivable, net	(10,896)		41,396
Payable to former parent	(22,825)		(2,650)
Accounts payable	(15,033)		1,264
Other operating assets and liabilities	(37,446)		60,256
Net cash provided by operating activities	239,115		297,201
Cash flows from investing activities:
Repayments of loan to non-Concentrix subsidiary of former parent as part of its centralized treasury operations	—		5,492
Purchases of property and equipment	(70,758)		(69,241)
Acquisitions of business, net of cash acquired and refunds	(3,015)		(2,635)
Net cash used in investing activities	(73,773)		(66,384)
Cash flows from financing activities:
Repayments of the Credit Facility - Term Loan	(200,000)		—
Proceeds from the Securitization Facility	768,500		—
Repayments of the Securitization Facility	(756,000)		—
Repayments of borrowings from former parent	—		(212,936)
Proceeds from exercise of stock options	5,441		—
Repurchase of common stock for tax withholdings on equity awards	(527)		—
Net cash used in financing activities	(182,586)		(212,936)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(6,626)		(3,178)
Net (decrease) increase in cash, cash equivalents and restricted cash	(23,870)		14,703
Cash, cash equivalents and restricted cash at beginning of year	156,351		83,514
Cash, cash equivalents and restricted cash at end of period	$	132,481	$	98,217

Supplemental disclosure of non-cash investing activities:
Accrued costs for property and equipment purchases	$	6,037	$	4,282

(Amounts may not add due to rounding)

The accompanying notes are an integral part of these consolidated financial statements.

CONCENTRIX CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(currency and share amounts in thousands, except per share amounts)

NOTE 1—BACKGROUND AND BASIS OF PRESENTATION:

Background

Concentrix Corporation (“Concentrix,” the “CX business” or the “Company”) is a leading global provider of technology-infused Customer Experience (“CX”) solutions that help iconic and disruptive brands drive deep understanding, full lifecycle engagement, and differentiated experiences for their end-customers around the world. The Company provides end-to-end capabilities, including CX process optimization, technology innovation, front- and back-office automation analytics and business transformation services to clients in five primary industry verticals.

On December 1, 2020, the separation of the CX business (the “separation”) from SYNNEX Corporation (“SYNNEX” or the “former parent”) was completed through a tax-free distribution of all of the issued and outstanding shares of the Company’s common stock to SYNNEX stockholders (the “distribution” and, together with the separation, the “spin-off”). SYNNEX stockholders received one share of the Company’s common stock for each share of SYNNEX common stock held as of the close of business on November 17, 2020. As a result of the spin-off, the Company became an independent public company and the Company’s common stock commenced trading on the Nasdaq Stock Market (“Nasdaq”) under the symbol “CNXC” on December 1, 2020.

In connection with the spin-off, on November 30, 2020, the Company entered into a separation and distribution agreement, an employee matters agreement, a tax matters agreement and a commercial agreement with SYNNEX to set forth the principal actions to be taken in connection with the spin-off and define the Company’s ongoing relationship with SYNNEX after the spin-off.

Basis of presentation

The accompanying interim unaudited consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The amounts as of November 30, 2020 have been derived from the Company’s annual audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial position of the Company and its results of operations and cash flows as of and for the periods presented. These interim consolidated financial statements should be read in conjunction with the annual audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.

Prior to the spin-off on December 1, 2020

Prior to the spin-off, the CX business was held entirely within certain wholly-owned subsidiaries of SYNNEX dedicated to the CX business. As the separate legal entities that made up the CX business were not historically held by a single legal entity, the financial statements of the Company were prepared in connection with the expected separation and were derived from the SYNNEX consolidated financial statements and accounting records as if the Company had been operated on a stand-alone basis during the periods presented. Accordingly, for periods prior to December 1, 2020, the Company’s financial statements are presented on a combined basis, and for the periods subsequent to December 1, 2020, they are presented on a consolidated basis (all periods hereinafter are referred to as “consolidated financial statements”). All direct revenue and expenses attributable to the CX business, including

certain allocations of former parent costs and expenses, were separately maintained in a separate ledger in the legal entities that made up the CX business. As the separate legal entities that made up the CX business were not historically held by a single legal entity, former parent company investment was shown in lieu of stockholders’ equity in the prior periods. All significant intercompany balances and transactions between the legal entities that comprised the CX business were eliminated.

Management of the Company and the former parent considered allocations of former parent costs to be a reasonable reflection of the utilization of services by, or the benefits provided to, the Company. The allocations may not, however, have reflected the expense the Company would have incurred as a stand-alone company for those periods presented. Actual costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and other strategic decisions.

Prior to the spin-off, certain Concentrix legal entities in the United States jointly and severally guaranteed certain of SYNNEX’ borrowing arrangements and substantially all of the assets of these Concentrix legal entities secured SYNNEX’ obligations under the borrowing arrangements. Historically, Concentrix received or provided funding for acquisitions or ongoing operations as part of SYNNEX’ centralized treasury program. Accordingly, only cash amounts specifically recorded in the separate Concentrix ledger were reflected in the balance sheets. The Company reflected transfers of the cash from the former parent’s cash management system as loans or other accounts payable to the former parent or a reduction of accounts or loans receivable in the balance sheets based on the purpose for which the cash was provided by the former parent. Similarly, cash transfers to the former parent were reflected as reductions of loans or other accounts payable to the former parent or as loans receivable from the former parent. The cash payments and receipts were recorded in the statements of cash flows as operating or financing activities based on the nature of the transactions for which the funds were transferred between the Company and the former parent.

Prior to the spin-off, operations of Concentrix were included in the consolidated U.S. federal, and certain state and local income tax returns filed by SYNNEX, where applicable. Concentrix also filed certain separate state, local and foreign tax returns. Income tax expense and other income tax related information contained in the financial statements prior to the spin-off were presented on a separate return basis, which required the Company to estimate tax expense as if the Company filed a separate return apart from SYNNEX. The income taxes of Concentrix as presented in the financial statements for these periods may not be indicative of the income taxes that Concentrix has incurred or will incur following the spin-off.

Reclassifications

Certain amounts in the consolidated financial statements related to the prior period have been reclassified to conform to the current period’s presentation.

Risks and uncertainties related to the COVID-19 pandemic

In December 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”), which was declared a pandemic by the World Health Organization in March 2020. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and labor force participation, and created significant volatility and disruption of financial markets. The Company successfully transitioned a significant portion of its workforce to a remote working environment throughout the second quarter of 2020 and implemented a number of safety and social distancing measures in our sites to protect the health and safety of employees. During the six months ended May 31, 2021, almost all of the Company’s workforce was productive.

The Company is unable to predict how long the pandemic conditions will persist in regions in which the Company operates, if or when countries or localities may experience an increase in COVID-19 cases, what additional measures may be introduced by governments or the Company’s clients in response to the pandemic generally or to an increase in COVID-19 cases in a particular country or locality, and the effect of any such additional measures on the Company’s business. As a result, many of the estimates and assumptions used in

preparation of these consolidated financial statements required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve with respect to the pandemic and the global recovery from the pandemic, the Company’s estimates may materially change in future periods.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

For a discussion of the Company’s significant accounting policies, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020. Accounting pronouncements adopted during the six months ended May 31, 2021 are discussed below.

Concentration of credit risk

For the three and six months ended May 31, 2021, one client accounted for 11.2% and 11.5% of the Company’s consolidated revenue, respectively. For the three and six months ended May 31, 2020, one client accounted for 10.8% and 10.3% of the Company’s consolidated revenue, respectively.

As of May 31, 2021 and November 30, 2020, one client comprised 14.0% and 16.2%, respectively, of the Company’s total accounts receivable balance.

Recently adopted accounting pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued a new credit loss standard that replaces the current incurred loss impairment model with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This standard became effective for the Company's fiscal year beginning December 1, 2020. The adoption did not have a material impact on the consolidated financial statements.

Recently issued accounting pronouncements

In March 2020, the FASB issued optional guidance for a limited time to ease the potential burden in accounting for or recognizing the effects of reference rate reform, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”) on financial reporting. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The Company is currently evaluating the impact of the new guidance.

In December 2019, the FASB issued new guidance that simplifies the accounting for income taxes. The guidance is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those reporting periods. Certain amendments should be applied prospectively, while other amendments should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance.

In August 2018, the FASB issued new guidance to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amendment requires the Company to disclose the weighted-average interest crediting rates used in cash balance pension plans. It also requires the Company to disclose the reasons for significant changes in the benefit obligation or plan assets including significant gains and losses affecting the benefit obligation for the period. This standard is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. The adoption is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 3—ASSETS HELD FOR SALE:

In May 2021, the Company entered into a definitive agreement to sell its insurance third-party administration operations and software platform, Concentrix Insurance Solutions (“CIS”), to a third party. The Company completed the sale of CIS during July 2021.

As of May 31, 2021, the assets and liabilities of the CIS business qualified as assets and liabilities held for sale due to the planned divestiture. The following is a summary of the major categories of assets and liabilities that were reclassified to held for sale:


	As of
	May 31, 2021
Accounts receivable, net	$	6,657
Other current assets	4,066
Property and equipment, net	37,454
Goodwill	14,690
Intangible assets, net	3,447
Other assets	16,696
Total assets held for sale	$	83,010

Accounts payable	$	838
Accrued compensation and benefits	5,008
Other accrued liabilities	3,043
Deferred tax liabilities	13,733
Other long-term liabilities	7,731
Total liabilities held for sale	$	30,353

The Company determined that the sale of CIS did not qualify as discontinued operations. The CIS results of operations are included within the Company’s statements of operations for the full three and six months ended May 31, 2021.

NOTE 4—SHARE-BASED COMPENSATION:

In November 2020, in connection with the spin-off, SYNNEX, as sole stockholder of Concentrix, approved the Concentrix Corporation 2020 Stock Incentive Plan (the “Concentrix Stock Incentive Plan”) and the Concentrix Corporation 2020 Employee Stock Purchase Plan (the “Concentrix ESPP”), each to be effective upon completion of the spin-off. 4,000 shares of Concentrix common stock were reserved for issuance under the Concentrix Stock Incentive Plan, and 1,000 shares of Concentrix common stock were authorized for issuance under the Concentrix ESPP.

Prior to the spin-off, certain of the Company’s employees participated in a long-term incentive plan sponsored by SYNNEX. In connection with the completion of the spin-off and pursuant to the employee matters agreement with SYNNEX, each outstanding SYNNEX share-based award as of the distribution date was converted into either (a) SYNNEX and Concentrix share-based awards, each with the same number of shares as the original SYNNEX award, or (b) a share-based award of only SYNNEX common stock or only Concentrix common stock, with an adjustment to the number of shares to preserve the value of the award. As a result of the conversion of awards, on December 1, 2020, 827 restricted stock awards and restricted stock units and 684 stock options were issued under the Concentrix Stock Incentive Plan. Following the conversion, it was determined that the share-based awards were modified in accordance with the applicable accounting guidance. As a result, the fair values of the share-based

awards immediately before and after the modification were assessed in order to determine if the modification resulted in any incremental compensation cost related to the awards. Based on the analysis performed, including consideration of the anti-dilution feature contained in the SYNNEX stock incentive plan, it was determined that the conversion resulted in an immaterial amount of incremental compensation cost for the outstanding awards.

On January 20, 2021, the Company granted 431 restricted stock awards and restricted stock units and 26 stock options under the Concentrix Stock Incentive Plan, representing annual employee stock awards for fiscal year 2020 and pro-rated non-employee director stock awards for the 2020-2021 service year. The employee grants were delayed from October 2020 to January 2021 due to the previously pending spin-off.

The Company recognizes share-based compensation expense for all share-based awards made to employees, including employee stock options, restricted stock awards, restricted stock units, performance-based restricted stock units and employee stock purchases, based on estimated fair values.

The Company recorded share-based compensation expense in the consolidated statements of operations for the three and six months ended May 31, 2021 and 2020 as follows:


	Three Months Ended				Six Months Ended
	May 31, 2021		May 31, 2020		May 31, 2021		May 31, 2020
Total share-based compensation	$	9,283	$	3,840	$	16,401	$	8,102
Tax benefit recorded in the provision for income taxes	(2,320)		(960)		(4,100)		(2,026)
Effect on net income	$	6,963	$	2,880	$	12,301	$	6,077

Share-based compensation expense is included in selling, general and administrative expenses in the consolidated statements of operations.

NOTE 5—BALANCE SHEET COMPONENTS:

Cash, cash equivalents and restricted cash:

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:


	As of
	May 31, 2021		November 30, 2020
Cash and cash equivalents	$	131,249	$	152,656
Restricted cash included in other current assets	1,232		3,695
Cash, cash equivalents and restricted cash	$	132,481	$	156,351

Restricted cash balances relate primarily to restrictions placed by banks on cash collateral for the issuance of bank guarantees and the terms of a government grant.

Accounts receivable, net:

Accounts receivable, net is comprised of the following:


	As of
	May 31, 2021		November 30, 2020
Billed accounts receivable	$	645,785	$	644,789
Unbilled accounts receivable	449,115		445,655
Less: Allowance for doubtful accounts	(5,513)		(8,963)
Accounts receivable, net	$	1,089,387	$	1,081,481

Allowance for doubtful trade receivables:

Presented below is a progression of the allowance for doubtful trade receivables:


	Three Months Ended				Six Months Ended
	May 31,				May 31,
	2021		2020		2021		2020
Balance at beginning of period	$	6,239	$	6,953	$	8,963	$	6,055
Net additions (reductions)	422		4,617		(2,132)		6,118
Write-offs and reclassifications	(1,148)		(697)		(1,318)		(1,300)
Balance at end of period	$	5,513	$	10,873	$	5,513	$	10,873

Property and equipment, net:

The following tables summarize the carrying amounts and related accumulated depreciation for property and equipment as of May 31, 2021 and November 30, 2020:


	As of
	May 31, 2021		November 30, 2020
Land	$	27,879	$	29,000
Equipment, computers and software	454,334		476,243
Furniture and fixtures	92,809		90,944
Buildings, building improvements and leasehold improvements	358,748		336,194
Construction-in-progress	2,748		10,115
Total property and equipment, gross	$	936,518	$	942,496
Less: Accumulated depreciation	(537,096)		(490,847)
Property and equipment, net	$	399,422	$	451,649

Shown below are countries where 10% or more of the Company’s property and equipment, net are located:


	As of
	May 31, 2021		November 30, 2020
Property and equipment, net:
United States	$	98,817	$	149,903
Philippines	86,322		87,686
India	45,659		46,642
Others	168,624		167,418
Total	$	399,422	$	451,649

Goodwill:

The following table summarizes the changes in the Company’s goodwill for the period ended May 31, 2021:


Balance as of November 30, 2020	$	1,836,050
Acquisition	3,502
Assets held for sale	(14,690)
Foreign exchange translation	13,038
Balance as of May 31, 2021	$	1,837,900

Intangible assets, net:

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of May 31, 2021 and November 30, 2020:


	As of May 31, 2021						As of November 30, 2020
	Gross amounts		Accumulated amortization		Net amounts		Gross amounts		Accumulated amortization		Net amounts
Customer relationships	$	1,379,090	$	(645,488)	$	733,602	$	1,389,341	$	(595,024)	$	794,317
Technology	11,031		(8,386)		2,645		14,830		(11,045)		3,785
Trade names	7,014		(6,384)		630		6,846		(5,989)		857
	$	1,397,135	$	(660,258)	$	736,877	$	1,411,017	$	(612,058)	$	798,959

Estimated future amortization expense of the Company’s intangible assets is as follows:


Fiscal years ending November 30,
2021 (remaining 6 months)	$	65,905
2022	118,412
2023	103,868
2024	85,947
2025	75,793
Thereafter	286,952
Total	$	736,877

Accumulated other comprehensive income (loss):

The components of accumulated other comprehensive income (loss) (“AOCI”), net of taxes, were as follows:


	Three Months Ended May 31, 2021 and 2020
	Unrecognized gains (losses) on defined benefit plan, net of taxes		Unrealized gains (losses) on cash flow hedges, net of taxes		Foreign currency translation adjustments, net of taxes		Total
Balance, February 29, 2020	$	(29,922)	$	10,788	$	(49,928)	$	(69,062)
Other comprehensive income (loss) before reclassification	(16)		2,537		(26,227)		(23,706)
Reclassification of gains from other comprehensive income (loss)	—		(3,440)		—		(3,440)
Balances at May 31, 2020	$	(29,938)	$	9,885	$	(76,155)	$	(96,208)

Balance, February 28, 2021	$	(38,960)	$	12,998	$	11,837	$	(14,125)
Other comprehensive income (loss) before reclassification	(72)		17,669		35,433		53,030
Reclassification of gains from other comprehensive income (loss)	—		(7,355)		—		(7,355)
Balances at May 31, 2021	$	(39,032)	$	23,312	$	47,270	$	31,550


	Six Months Ended May 31, 2021 and 2020
	Unrecognized gains (losses) on defined benefit plan, net of taxes		Unrealized gains (losses) on cash flow hedges, net of taxes		Foreign currency translation adjustments, net of taxes		Total
Balance, November 30, 2019	$	(29,940)	$	17,523	$	(37,665)	$	(50,082)
Other comprehensive income (loss) before reclassification	2		774		(38,490)		(37,714)
Reclassification of gains from other comprehensive income (loss)	—		(8,412)		—		(8,412)
Balances at May 31, 2020	$	(29,938)	$	9,885	$	(76,155)	$	(96,208)

Balance, November 30, 2020	$	(38,584)	$	29,239	$	5,531	$	(3,814)
Other comprehensive income (loss) before reclassification	(448)		10,599		41,739		51,890
Reclassification of gains from other comprehensive income (loss)	—		(16,526)		—		(16,526)
Balances at May 31, 2021	$	(39,032)	$	23,312	$	47,270	$	31,550

Refer to Note 6 for the location of gains and losses on cash flow hedges reclassified from other comprehensive income (loss) to the consolidated statements of operations. Reclassifications of amortization of actuarial (gains) losses of defined benefits plans is recorded in “Other expense (income), net” in the consolidated statement of operations.

Restructuring:

The following table presents the activity related to liabilities for restructuring charges of previous acquisitions for the three and six months ended May 31, 2021 and 2020:


	Three Months Ended May 31, 2021 and 2020
Restructuring costs	Severance and benefits		Facility and exit costs		Total
Accrued balance as of February 29, 2020	$	1,753	$	1,121	$	2,874
Additional (release of) accrual during the period	(757)		11,849		11,092
Cash payments	(470)		(2,422)		(2,892)
Accrued balance as of May 31, 2020	$	526	$	10,548	$	11,074

Accrued balance as of February 28, 2021	$	—	$	15,806	$	15,806
Release of accrual during the period	—		(410)		(410)
Cash payments	—		(1,202)		(1,202)
Accrued balance as of May 31, 2021	$	—	$	14,194	$	14,194


	Six Months Ended May 31, 2021 and 2020
Restructuring costs	Severance and benefits		Facility and exit costs		Total
Accrued balance as of November 30, 2019	$	2,828	$	14,164	$	16,992
Additional (release of) accrual during the period	(321)		115		(206)
Cash payments	(1,981)		(3,731)		(5,712)
Accrued balance as of May 31, 2020	$	526	$	10,548	$	11,074

Accrued balance as of November 30, 2020	$	—	$	17,810	$	17,810
Release of accrual during the period	—		(410)		(410)
Cash payments	—		(3,206)		(3,206)
Accrued balance as of May 31, 2021	$	—	$	14,194	$	14,194

NOTE 6—DERIVATIVE INSTRUMENTS:

In the ordinary course of business, the Company is exposed to foreign currency risk and credit risk. The Company enters into transactions, and owns monetary assets and liabilities, that are denominated in currencies other than the legal entity’s functional currency. The Company may enter into forward contracts, option contracts, or other derivative instruments to offset a portion of the risk on expected future cash flows, earnings, net investments in certain non-U.S. legal entities and certain existing assets and liabilities. However, the Company may choose not to hedge certain exposures for a variety of reasons including, but not limited to, accounting considerations and the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign currency exchange or interest rates. Generally, the Company does not use derivative instruments to cover equity risk and credit risk. The Company’s hedging program is not used for trading or speculative purposes.

All derivatives are recognized on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded in the consolidated statements of operations, or as a component of AOCI in the consolidated balance sheets, as discussed below.

Cash Flow Hedges

To protect gross margins from fluctuations in foreign currency exchange rates, certain of the Company’s legal entities with functional currencies that are not U.S. dollars may hedge a portion of forecasted revenue or costs not denominated in the entities’ functional currencies. These instruments mature at various dates through May 2023. Gains and losses on cash flow hedges are recorded in AOCI until the hedged item is recognized in earnings. Deferred gains and losses associated with cash flow hedges of foreign currency revenue are recognized as a component of “Revenue” in the same period as the related revenue is recognized, and deferred gains and losses related to cash flow hedges of costs are recognized as a component of “Cost of revenue” or “Selling, general and administrative expenses” in the same period as the related costs are recognized. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in AOCI associated with such derivative instruments are reclassified into earnings in the period of de-designation. Any subsequent changes in fair value of such derivative instruments are recorded in earnings unless they are re-designated as hedges of other transactions.

Non-Designated Derivatives

The Company uses short-term forward contracts to offset the foreign exchange risk of assets and liabilities denominated in currencies other than the functional currency of the respective entities. These contracts, which are not designated as hedging instruments, mature or settle within twelve months. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.

Fair Values of Derivative Instruments in the Consolidated Balance Sheets

The fair values of the Company’s derivative instruments are disclosed in Note 7 and summarized in the table below:


	As of
Balance Sheet Line Item	May 31, 2021		November 30, 2020
Derivative instruments not designated as hedging instruments:
Foreign exchange forward contracts (notional value)	$	1,125,886	$	1,153,352
Other current assets	13,988		15,666
Other accrued liabilities	4,362		6,215
Derivative instruments designated as cash flow hedges:
Foreign exchange forward contracts (notional value)	$	819,820	$	814,731
Other current assets and other assets	31,321		38,212
Other accrued liabilities and other long-term liabilities	30		309

Volume of activity

The notional amounts of foreign exchange forward contracts represent the gross amounts of foreign currency, including, principally, the Philippine Peso, the Indian Rupee, the Euro, the British Pound, the Canadian Dollar and the Japanese Yen, that will be bought or sold at maturity. The notional amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss. The Company’s exposure to credit loss and market risk will vary over time as currency rates change.

The Effect of Derivative Instruments on AOCI and the Consolidated Statements of Operations

The following table shows the gains and losses, before taxes, of the Company’s derivative instruments designated as cash flow hedges and not designated as hedging instruments in other comprehensive income (“OCI”), and the consolidated statements of operations for the periods presented:


	Locations of gain (loss) in income	For the three months ended				For the six months ended
		May 31, 2021		May 31, 2020		May 31, 2021		May 31, 2020
Derivative instruments designated as cash flow hedges
Gains recognized in OCI:
Foreign exchange forward contracts		$	23,718	$	3,381	$	14,393	$	1,031

Gains reclassified from AOCI into income:
Foreign exchange forwa