SEC Filing | Concentrix Corporation

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cnxc-20210831

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 August 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 September 30, 2021
Common Stock, $0.0001 par value						52,319,658

Concentrix Corporation

Form 10-Q
Index


		Page
PART I	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Consolidated Balance Sheets as of August 31, 2021 (unaudited) and November 30, 2020	2
	Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended August 31, 2021 and 2020	3
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended August 31, 2021 and 2020	4
	Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Nine Months Ended August 31, 2021 and 2020	5
	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended August 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	39
Item 4.	Controls and Procedures	39

PART II	OTHER INFORMATION	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 6.	Exhibits	41

	Signatures	42

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONCENTRIX CORPORATION

CONSOLIDATED BALANCE SHEETS

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


	August 31, 2021		November 30, 2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	154,193	$	152,656
Accounts receivable, net	1,131,416		1,081,481
Other current assets	175,217		189,239
Total current assets	1,460,826		1,423,376
Property and equipment, net	397,841		451,649
Goodwill	1,822,642		1,836,050
Intangible assets, net	695,285		798,959
Deferred tax assets	43,007		47,423
Other assets	589,839		620,099
Total assets	$	5,009,440	$	5,177,556

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	78,618	$	140,575
Current portion of long-term debt	—		33,750
Payable to former parent	—		22,825
Accrued compensation and benefits	418,329		419,715
Other accrued liabilities	342,908		371,072
Income taxes payable	48,937		20,725
Total current liabilities	888,792		1,008,662
Long-term debt, net	865,837		1,111,362
Other long-term liabilities	579,746		601,887
Deferred tax liabilities	109,310		153,560
Total liabilities	2,443,685		2,875,471
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000 shares authorized as of August 31, 2021; no shares issued and outstanding as of August 31, 2021	—		—
Common stock, $0.0001 par value, 250,000 shares authorized as of August 31, 2021; 51,448 shares issued and outstanding as of August 31, 2021	5		—
Additional paid-in capital	2,338,108		—
Treasury stock, 93 shares as of August 31, 2021	(13,964)		—
Retained earnings	281,469		—
Former parent company investment	—		2,305,899
Accumulated other comprehensive loss	(39,863)		(3,814)
Total stockholders’ equity	2,565,755		2,302,085
Total liabilities and stockholders’ equity	$	5,009,440	$	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				Nine Months Ended
	August 31, 2021		August 31, 2020		August 31, 2021		August 31, 2020
Revenue	$	1,397,251	$	1,163,694	$	4,120,407	$	3,418,676
Cost of revenue	915,910		751,161		2,670,287		2,215,783
Gross profit	481,341		412,533		1,450,120		1,202,893
Selling, general and administrative expenses	329,962		335,770		1,035,628		1,014,339
Operating income	151,379		76,763		414,492		188,554
Interest expense and finance charges, net	4,868		9,002		19,316		39,515
Other expense (income), net	(5,858)		593		(5,601)		(4,283)
Income before income taxes	152,369		67,168		400,777		153,322
Provision for income taxes	42,615		21,771		119,308		53,138
Net income	$	109,754	$	45,397	$	281,469	$	100,184
Earnings per common share:
Basic	$	2.10	$	0.88	$	5.41	$	1.94
Diluted	$	2.08	$	0.88	$	5.35	$	1.94
Weighted-average common shares outstanding
Basic	51,432		51,602		51,288		51,602
Diluted	52,061		51,602		51,914		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				Nine Months Ended
	August 31, 2021		August 31, 2020		August 31, 2021		August 31, 2020
Net income	$	109,754	$	45,397	$	281,469	$	100,184
Other comprehensive income (loss):
Unrealized gains (losses) of defined benefit plans, net of taxes of $0 and $98 for the three and nine months ended August 31, 2021, respectively, and $3,114 for the three and nine months ended August 31, 2020, respectively	2		(8,881)		(446)		(8,879)
Unrealized gains (losses) on cash flow hedges during the period, net of taxes of $3,840 and $47 for the three and nine months ended August 31, 2021, respectively, and $(8,677) and $(8,934) for the three and nine months ended August 31, 2020, respectively	(11,219)		26,086		(620)		26,860
Reclassification of net gains on cash flow hedges to net income, net of taxes of $1,400 and $6,940 for the three and nine months ended August 31, 2021, respectively, and $1,976 and $4,774 for the three and nine months ended August 31, 2020, respectively	(4,091)		(5,942)		(20,617)		(14,354)
Total change in unrealized gains (losses) on cash flow hedges, net of taxes	(15,310)		20,144		(21,237)		12,506
Foreign currency translation gains (losses), net of taxes of $0 for the three and nine months ended August 31, 2021 and 2020, respectively	(56,105)		74,383		(14,366)		35,893
Other comprehensive income (loss)	(71,413)		85,646		(36,049)		39,520
Comprehensive income	$	38,341	$	131,043	$	245,420	$	139,704

(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 Nine Months Ended August 31, 2021
	Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Former parent company investment		Accumulated other comprehensive income (loss)		Total
Balances, May 31, 2021	$	5	$	2,327,025	$	(527)	$	171,715	$	—	$	31,550	$	2,529,768
Other comprehensive loss	—		—		—		—		—		(71,413)		(71,413)


Share-based compensation activity	—		11,083		—		—		—		—		11,083
Repurchase of common stock for tax withholdings on equity awards	—		—		(13,437)		—		—		—		(13,437)
Net income	—		—		—		109,754		—		—		109,754
Balances, August 31, 2021	$	5	$	2,338,108	$	(13,964)	$	281,469	$	—	$	(39,863)	$	2,565,755

Balances, November 30, 2020	$	—	$	—	$	—	$	—	$	2,305,899	$	(3,814)	$	2,302,085
Other comprehensive loss	—		—		—		—		—		(36,049)		(36,049)
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	—		32,214		—		—		—		—		32,214
Repurchase of common stock for tax withholdings on equity awards	—		—		(13,964)		—		—		—		(13,964)
Net income	—		—		—		281,469		—		—		281,469
Balances, August 31, 2021	$	5	$	2,338,108	$	(13,964)	$	281,469	$	—	$	(39,863)	$	2,565,755

(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 Nine Months Ended August 31, 2020
	Common stock		Additional paid-in capital		Treasury stock		Retained earnings		Former parent company investment		Accumulated other comprehensive (loss) income		Total
Balances, May 31, 2020	$	—	$	—	$	—	$	—	$	1,588,748	$	(96,208)	$	1,492,540
Share-based compensation	—		—		—		—		3,834		—		3,834
Transfers from former parent	—		—		—		—		(2,986)		—		(2,986)
Other comprehensive income	—		—		—		—		—		85,646		85,646
Hypothetical current tax expense recorded for separate return basis presentation	—		—		—		—		3,536		—		3,536
Net income	—		—		—		—		45,397		—		45,397
Balances, August 31, 2020	$	—	$	—	$	—	$	—	$	1,638,529	$	(10,562)	$	1,627,967

Balances, November 30, 2019	$	—	$	—	$	—	$	—	$	1,519,923	$	(50,082)	$	1,469,841
Share-based compensation	—		—		—		—		11,821		—		11,821
Transfers from former parent	—		—		—		—		(2,986)		—		(2,986)
Other comprehensive income	—		—		—		—		—		39,520		39,520
Hypothetical current tax expense recorded for separate return basis presentation	—		—		—		—		9,587		—		9,587
Net income	—		—		—		—		100,184		—		100,184
Balances, August 31, 2020	$	—	$	—	$	—	$	—	$	1,638,529	$	(10,562)	$	1,627,967

(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)


	Nine Months Ended
	August 31, 2021		August 31, 2020
Cash flows from operating activities:
Net income	$	281,469	$	100,184
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	105,371		93,488
Amortization	103,194		110,190
Non-cash share-based compensation expense	25,344		11,821
Provision for doubtful accounts	(763)		5,477
Deferred income taxes	(21,270)		(25,721)
Hypothetical current tax expense recorded for separate return basis presentation	—		9,587
Unrealized foreign exchange (gain) loss	(446)		12,666
Gain on divestitures and related transaction costs	(13,197)		—
Other	66		(1,136)
Changes in operating assets and liabilities:
Accounts receivable, net	(58,584)		(11,592)
Payable to former parent	(22,825)		1,118
Accounts payable	(42,290)		7,414
Other operating assets and liabilities	(23,944)		75,081
Net cash provided by operating activities	332,125		388,577
Cash flows from investing activities:
Repayments of loan to non-Concentrix subsidiary of former parent as part of its centralized treasury operations	—		(5,749)
Purchases of property and equipment	(112,869)		(106,249)
Acquisitions of business, net of cash acquired and refunds	(3,279)		(4,941)
Proceeds from divestitures, net of cash sold	73,708		—
Net cash used in investing activities	(42,440)		(116,939)
Cash flows from financing activities:
Repayments of the Credit Facility - Term Loan	(200,000)		—
Proceeds from the Securitization Facility	1,042,000		—
Repayments of the Securitization Facility	(1,123,000)		—
Repayments of borrowings from former parent	—		(260,178)
Proceeds from exercise of stock options	6,870		—
Repurchase of common stock for tax withholdings on equity awards	(13,964)		—
Net cash used in financing activities	(288,094)		(260,178)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,348)		2,121
Net (decrease) increase in cash, cash equivalents and restricted cash	(757)		13,581
Cash, cash equivalents and restricted cash at beginning of year	156,351		83,514
Cash, cash equivalents and restricted cash at end of period	$	155,594	$	97,095

Supplemental disclosure of non-cash investing activities:
Accrued costs for property and equipment purchases	$	1,846	$	12,659

(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 year 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 periods 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 nine months ended August 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 nine months ended August 31, 2021 are discussed below.

Concentration of credit risk

For the three and nine months ended August 31, 2021, one client accounted for 11.9% and 11.7% of the Company’s consolidated revenue, respectively. For the three and nine months ended August 31, 2020, one client accounted for 11.8% and 10.8% of the Company’s consolidated revenue, respectively.

As of August 31, 2021 and November 30, 2020, one client comprised 14.9% 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 guidance 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—DIVESTITURES:

In July 2021, the Company completed the sales of its insurance third-party administration operations and software platform, Concentrix Insurance Solutions (“CIS”), and another non-CX solutions business in separate transactions for total cash consideration of approximately $73,708, both subject to customary post-closing adjustments. The divestitures generated a pre-tax gain of approximately $13,197, net of related transaction costs. The gain on divestitures and related transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.

The Company determined that the sales of the businesses did not qualify as discontinued operations. The results of the sold businesses’ operations are included within the Company’s statements of operations for fiscal year 2021 through the sales dates in July 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.

On July 1, 2021, the Company granted 109 performance-based restricted stock units under the Concentrix Stock Incentive Plan. The performance-based restricted stock units will vest, if at all, upon the achievement of certain annual financial targets during the three-year period ending November 30, 2023.

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 nine months ended August 31, 2021 and 2020 as follows:


	Three Months Ended				Nine Months Ended
	August 31, 2021		August 31, 2020		August 31, 2021		August 31, 2020
Total share-based compensation	$	9,457	$	3,929	$	25,858	$	12,031
Tax benefit recorded in the provision for income taxes	(2,364)		(982)		(6,464)		(3,008)
Effect on net income	$	7,093	$	2,947	$	19,394	$	9,023

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
	August 31, 2021		November 30, 2020
Cash and cash equivalents	$	154,193	$	152,656
Restricted cash included in other current assets	1,401		3,695
Cash, cash equivalents and restricted cash	$	155,594	$	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
	August 31, 2021		November 30, 2020
Billed accounts receivable	$	657,873	$	644,789
Unbilled accounts receivable	479,494		445,655
Less: Allowance for doubtful accounts	(5,951)		(8,963)
Accounts receivable, net	$	1,131,416	$	1,081,481

Allowance for doubtful trade receivables:

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


	Three Months Ended				Nine Months Ended
	August 31,				August 31,
	2021		2020		2021		2020
Balance at beginning of period	$	5,513	$	10,873	$	8,963	$	6,055
Net additions (reductions)	1,369		(641)		(763)		5,477
Write-offs and reclassifications	(931)		(2,435)		(2,249)		(3,735)
Balance at end of period	$	5,951	$	7,797	$	5,951	$	7,797

Property and equipment, net:

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


	As of
	August 31, 2021		November 30, 2020
Land	$	27,759	$	29,000
Equipment, computers and software	469,329		476,243
Furniture and fixtures	90,850		90,944
Buildings, building improvements and leasehold improvements	354,738		336,194
Construction-in-progress	7,577		10,115
Total property and equipment, gross	$	950,253	$	942,496
Less: Accumulated depreciation	(552,412)		(490,847)
Property and equipment, net	$	397,841	$	451,649

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


	As of
	August 31, 2021		November 30, 2020
Property and equipment, net:
United States	$	99,528	$	149,903
Philippines	82,184		87,686
India	46,718		46,642
Others	169,411		167,418
Total	$	397,841	$	451,649

Goodwill:

The following table summarizes the changes in the Company’s goodwill for the nine months ended August 31, 2021:


Balance as of November 30, 2020	$	1,836,050
Acquisition	3,502
Divestitures	(14,690)
Foreign exchange translation	(2,220)
Balance as of August 31, 2021	$	1,822,642

Intangible assets, net:

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


	As of August 31, 2021						As of November 30, 2020
	Gross amounts		Accumulated amortization		Net amounts		Gross amounts		Accumulated amortization		Net amounts
Customer relationships	$	1,362,259	$	(669,651)	$	692,608	$	1,389,341	$	(595,024)	$	794,317
Technology	10,892		(8,683)		2,209		14,830		(11,045)		3,785
Trade names	6,817		(6,349)		468		6,846		(5,989)		857
	$	1,379,968	$	(684,683)	$	695,285	$	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 three months)	$	33,824
2022	115,664
2023	101,531
2024	85,020
2025	74,978
Thereafter	284,268
Total	$	695,285

Accumulated other comprehensive income (loss):

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


	Three Months Ended August 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 gain (losses), net of taxes		Total
Balance, May 31, 2020	$	(29,938)	$	9,885	$	(76,155)	$	(96,208)
Other comprehensive income (loss) before reclassification	(8,881)		26,086		74,383		91,588
Reclassification of gains from other comprehensive income (loss)	—		(5,942)		—		(5,942)
Balances at August 31, 2020	$	(38,819)	$	30,029	$	(1,772)	$	(10,562)

Balance, May 31, 2021	$	(39,032)	$	23,312	$	47,270	$	31,550
Other comprehensive income (loss) before reclassification	2		(11,219)		(56,105)		(67,322)
Reclassification of gains from other comprehensive income (loss)	—		(4,091)		—		(4,091)
Balances at August 31, 2021	$	(39,030)	$	8,002	$	(8,835)	$	(39,863)


	Nine Months Ended August 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 gains (losses), net of taxes		Total
Balance, November 30, 2019	$	(29,940)	$	17,523	$	(37,665)	$	(50,082)
Other comprehensive income (loss) before reclassification	(8,879)		26,860		35,893		53,874
Reclassification of gains from other comprehensive income (loss)	—		(14,354)		—		(14,354)
Balances at August 31, 2020	$	(38,819)	$	30,029	$	(1,772)	$	(10,562)

Balance, November 30, 2020	$	(38,584)	$	29,239	$	5,531	$	(3,814)
Other comprehensive income (loss) before reclassification	(446)		(620)		(14,366)		(15,432)
Reclassification of gains from other comprehensive income (loss)	—		(20,617)		—		(20,617)
Balances at August 31, 2021	$	(39,030)	$	8,002	$	(8,835)	$	(39,863)

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 nine months ended August 31, 2021 and 2020:


	Three Months Ended August 31, 2021 and 2020
Restructuring costs	Severance and benefits		Facility and exit costs		Total
Accrued balance as of May 31, 2020	$	526	$	10,548	$	11,074
Additional (release of) accrual during the period	(214)		336		122
Cash payments	(219)		(2,362)		(2,581)
Accrued balance as of August 31, 2020	$	93	$	8,522	$	8,615

Accrued balance as of May 31, 2021	$	—	$	14,194	$	14,194
Additional accrual during the period	—		62		62
Cash payments	—		(990)		(990)
Accrued balance as of August 31, 2021	$	—	$	13,266	$	13,266


	Nine Months Ended August 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	(535)		451		(84)
Cash payments	(2,200)		(6,093)		(8,293)
Accrued balance as of August 31, 2020	$	93	$	8,522	$	8,615

Accrued balance as of November 30, 2020	$	—	$	17,810	$	17,810
Release of accrual during the period	—		(348)		(348)
Cash payments	—		(4,196)		(4,196)
Accrued balance as of August 31, 2021	$	—	$	13,266	$	13,266

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 August 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	August 31, 2021		November 30, 2020
Derivative instruments not designated as hedging instruments:
Foreign exchange forward contracts (notional value)	$	1,232,201	$	1,153,352
Other current assets	11,392		15,666
Other accrued liabilities	8,673		6,215
Derivative instruments designated as cash flow hedges:
Foreign exchange forward contracts (notional value)	$	870,844	$	814,731
Other current assets and other assets	18,033		38,212
Other accrued liabilities and other long-term liabilities	7,292		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	Three Months Ended				Nine Months Ended
		August 31, 2021		August 31, 2020		August 31, 2021		August 31, 2020
Derivative instruments designated as cash flow hedges
(Losses) gains recognized in OCI:
Foreign exchange forward contracts		$	(15,059)	$	34,764	$	(666)	$	35,795

Gains reclassified from AOCI into income:
Foreign exchange forward contracts
Gain reclassified from AOCI into income	Cost of revenue for services	$	3,839	$	5,567	$	19,801	$	13,322
Gain reclassified from AOCI into income	Selling, general and administrative expenses	1,652		2,351