SEC Filing | Concentrix Corporation

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cnxc-20220531

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, 2022


☐			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.)

39899 Balentine Drive, Newark, California									94560
(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, 2022
Common Stock, $0.0001 par value						52,044,544

Concentrix Corporation

Form 10-Q
Index


		Page
PART I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of May 31, 2022 (unaudited) and November 30, 2021	3
	Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended May 31, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Six Months Ended May 31, 2022 and 2021	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Six Months Ended May 31, 2022 and 2021	6
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended May 31, 2022 and 2021	8
	Notes to the Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44

PART II	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2	Unregis t ered S ales of E quity S ec ur ities and U se of P ro ceeds	46
Item 5.	Other Information	46
Item 6.	Exhibits	47

	Signatures	48

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONCENTRIX CORPORATION

CONSOLIDATED BALANCE SHEETS

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


	May 31, 2022		November 30, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	163,364	$	182,038
Accounts receivable, net	1,311,715		1,207,953
Other current assets	153,904		153,074
Total current assets	1,628,983		1,543,065
Property and equipment, net	401,716		407,144
Goodwill	2,925,679		1,813,502
Intangible assets, net	1,037,987		655,528
Deferred tax assets	53,104		48,413
Other assets	565,183		578,715
Total assets	$	6,612,652	$	5,046,367

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	110,931	$	129,359
Current portion of long-term debt	105,000		—
Accrued compensation and benefits	437,516		453,434
Other accrued liabilities	346,204		351,642
Income taxes payable	23,371		33,779
Total current liabilities	1,023,022		968,214
Long-term debt, net	2,197,876		802,017
Other long-term liabilities	501,579		546,410
Deferred tax liabilities	164,073		109,471
Total liabilities	3,886,550		2,426,112
Commitments and contingencies (Note 14)

Redeemable non-controlling interest	2,157		—

Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000 shares authorized and no shares issued and outstanding as of May 31, 2022 and November 30, 2021, respectively	—		—
Common stock, $0.0001 par value, 250,000 shares authorized; 52,058 and 51,927 shares issued as of May 31, 2022 and November 30, 2021, respectively, and 51,342 and 51,594 shares outstanding as of May 31, 2022 and November 30, 2021, respectively	5		5
Additional paid-in capital	2,404,281		2,355,767
Treasury stock, 716 and 333 shares as of May 31, 2022 and November 30, 2021, respectively	(118,248)		(57,486)
Retained earnings	589,740		392,495
Accumulated other comprehensive loss	(151,833)		(70,526)
Total stockholders’ equity	2,723,945		2,620,255
Total liabilities, redeemable non-controlling interest, and stockholders’ equity	$	6,612,652	$	5,046,367

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, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Revenue	$	1,568,101	$	1,369,878	$	3,104,153	$	2,723,156
Cost of revenue	1,009,185		887,149		2,007,103		1,754,377
Gross profit	558,916		482,729		1,097,050		968,779
Selling, general and administrative expenses	402,004		354,505		792,393		705,666
Operating income	156,912		128,224		304,657		263,113
Interest expense and finance charges, net	12,973		6,745		21,743		14,448
Other expense (income), net	(2,545)		(3,546)		(10,161)		257
Income before income taxes	146,484		125,025		293,075		248,408
Provision for income taxes	33,451		42,121		69,503		76,693
Net income before non-controlling interest	113,033		82,904		223,572		171,715
Less: Net income (loss) attributable to non-controlling interest	(109)		—		157		—
Net income attributable to Concentrix Corporation	$	113,142	$	82,904	$	223,415	$	171,715

Earnings per common share:
Basic	$	2.16	$	1.59	$	4.27	$	3.31
Diluted	$	2.14	$	1.57	$	4.23	$	3.26
Weighted-average common shares outstanding
Basic	51,564		51,275		51,596		51,215
Diluted	51,990		52,005		51,995		51,928

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, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Net income before non-controlling interest	$	113,033	$	82,904	$	223,572	$	171,715
Other comprehensive income (loss):
Unrealized gains (losses) of defined benefit plans, net of taxes of $0 and $0 for the three and six months ended May 31, 2022, respectively, and $0 and $98 for the three and six months ended May 31, 2021, respectively	(7)		(72)		766		(448)
Unrealized gains (losses) on cash flow hedges during the period, net of taxes of $4,440 and $5,387 for the three and six months ended May 31, 2022, respectively, and $(6,048) and $(3,793) for the three and six months ended May 31, 2021, respectively	(12,944)		17,669		(15,704)		10,599
Reclassification of net (gains) losses on cash flow hedges to net income, net of taxes of $(1,078) and $(846) for the three and six months ended May 31, 2022, respectively, and $2,518 and $5,540 for the three and six months ended May 31, 2021, respectively	3,138		(7,355)		2,465		(16,526)
Total change in unrealized gains (losses) on cash flow hedges, net of taxes	(9,806)		10,314		(13,239)		(5,927)
Foreign currency translation, net of taxes of $0 for the three and six months ended May 31, 2022 and 2021, respectively	(54,995)		35,433		(68,834)		41,739
Other comprehensive income (loss)	(64,808)		45,675		(81,307)		35,364
Comprehensive income	48,225		128,579		142,265		207,079
Less: Comprehensive income (loss) attributable to non-controlling interest	(109)		—		157		—
Comprehensive income attributable to Concentrix Corporation	$	48,334	$	128,579	$	142,108	$	207,079

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

CONCENTRIX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(currency and share amounts in thousands)

(unaudited)


	Three and Six Months Ended May 31, 2022
			Concentrix Corporation Stockholders’ Equity
			Common stock					Treasury stock
	Redeemable non-controlling interest		Shares	Amount		Additional paid-in capital		Shares	Amount		Retained earnings		Accumulated other comprehensive loss		Total stockholders’ equity
Balances, February 28, 2022	$	2,266	51,664	$	5	$	2,389,403	348	$	(60,040)	$	489,656	$	(87,025)	$	2,731,999
Other comprehensive loss	—		—	—		—		—	—		—		(64,808)		(64,808)
Net income attributable to non-controlling interest	(109)		—	—		—		—	—		—		—		—
Share-based compensation activity	—		(322)	—		14,878		—	—		—		—		14,878
Repurchase of common stock for tax withholdings on equity awards	—		—	—		—		1	(358)		—		—		(358)
Repurchase of common stock	—		—	—		—		367	(57,850)		—		—		(57,850)
Dividends	—		—	—		—		—	—		(13,058)		—		(13,058)
Net income	—		—	—		—		—	—		113,142		—		113,142
Balances, May 31, 2022	$	2,157	51,342	$	5	$	2,404,281	716	$	(118,248)	$	589,740	$	(151,833)	$	2,723,945

Balances, November 30, 2021	$	—	51,594	$	5	$	2,355,767	333	$	(57,486)	$	392,495	$	(70,526)	$	2,620,255
Other comprehensive loss	—		—	—		—		—	—		—		(81,307)		(81,307)
Equity awards issued as acquisition purchase consideration	—		—	—		15,725		—	—		—		—		15,725
Acquisition of non-controlling interest in subsidiary	2,000		—	—		—		—	—		—		—		—
Net income attributable to non-controlling interest	157		—	—		—		—	—		—		—		—
Share-based compensation activity	—		(252)	—		32,789		—	—		—		—		32,789
Repurchase of common stock for tax withholdings on equity awards	—		—	—		—		16	(2,912)		—		—		(2,912)
Repurchase of common stock	—		—	—		—		367	(57,850)		—		—		(57,850)
Dividends	—		—	—		—		—	—		(26,170)		—		(26,170)
Net income	—		—	—		—		—	—		223,415		—		223,415
Balances, May 31, 2022	$	2,157	51,342	$	5	$	2,404,281	716	$	(118,248)	$	589,740	$	(151,833)	$	2,723,945

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

CONCENTRIX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(currency and share amounts in thousands)

(unaudited)



	Concentrix Corporation Stockholders’ Equity
	Common stock					Treasury stock
	Shares	Amount		Additional paid-in capital		Shares	Amount		Retained earnings		Former parent company investment		Accumulated other comprehensive loss		Total stockholders’ equity
Balances, February 28, 2021	51,214	$	5	$	2,314,996	4	$	(409)	$	88,811	$	—	$	(14,125)	$	2,389,278
Other comprehensive loss	—	—		—		—	—		—		—		45,675		45,675
Share-based compensation activity	82	—		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	51,296	$	5	$	2,327,025	4	$	(527)	$	171,715	$	—	$	31,550	$	2,529,768

Balances, November 30, 2020	—	$	—	$	—	—	$	—	$	—	$	2,305,899	$	(3,814)	$	2,302,085
Other comprehensive loss	—	—		—		—	—		—		—		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	51,135	5		(5)		—	—		—		—		—		—
Share-based compensation activity	161	—		21,131		—	—		—		—		—		21,131
Repurchase of common stock for tax withholdings on equity awards	—	—		—		4	(527)		—		—		—		(527)
Net income	—	—		—		—	—		171,715		—		—		171,715
Balances, May 31, 2021	51,296	$	5	$	2,327,025	4	$	(527)	$	171,715	$	—	$	31,550	$	2,529,768

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, 2022		May 31, 2021
Cash flows from operating activities:
Net income before non-controlling interest	$	223,572	$	171,715
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	73,174		72,225
Amortization	79,525		69,199
Non-cash share-based compensation expense	27,590		15,690
Provision for doubtful accounts	4,422		(2,132)
Deferred income taxes	963		(4,764)
Unrealized foreign exchange loss	470		3,240
Other	(107)		142
Changes in operating assets and liabilities:
Accounts receivable, net	(17,039)		(10,896)
Payable to former parent	—		(22,825)
Accounts payable	(17,777)		(15,033)
Other operating assets and liabilities	(162,309)		(37,446)
Net cash provided by operating activities	212,484		239,115
Cash flows from investing activities:
Purchases of property and equipment	(71,166)		(70,758)
Acquisitions of business, net of cash acquired	(1,565,252)		(3,015)
Other investments	(1,000)		—
Net cash used in investing activities	(1,637,418)		(73,773)
Cash flows from financing activities:
Proceeds from the Credit Facility - Term Loan	2,100,000		(200,000)
Repayments of the Credit Facility - Prior Term Loan	(700,000)		—
Proceeds from the Securitization Facility	848,500		768,500
Repayments of the Securitization Facility	(742,500)		(756,000)
Cash paid for debt issuance costs	(8,863)		—
Proceeds from exercise of stock options	5,200		5,441
Repurchase of common stock for tax withholdings on equity awards	(2,912)		(527)
Repurchase of common stock	(57,850)		—
Dividends paid	(26,170)		—
Net cash provided by (used in) financing activities	1,415,405		(182,586)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(9,382)		(6,626)
Net decrease in cash, cash equivalents and restricted cash	(18,911)		(23,870)
Cash, cash equivalents and restricted cash at beginning of year	183,010		156,351
Cash, cash equivalents and restricted cash at end of period	$	164,099	$	132,481

Supplemental disclosure of non-cash investing activities:
Accrued costs for property and equipment purchases	$	4,907	$	6,037

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 Customer Experience (“CX”) solutions and technology 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 and design engineering, front- and back-office automation, analytics and business transformation services to clients in five primary industry verticals. The Company’s primary verticals are technology and consumer electronics, communications and media, retail, travel and e-commerce, banking, financial services and insurance, and healthcare.

On December 1, 2020, the separation of the CX business (the “separation”) from SYNNEX Corporation, now known as TD SYNNEX Corporation (“TD 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 TD SYNNEX stockholders (the “distribution” and, together with the separation, the “spin-off”). TD SYNNEX stockholders received one share of the Company’s common stock for each share of TD 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.

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, 2021 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, 2021. 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, 2021. All intercompany balances and transactions have been eliminated in consolidation.

Risks and uncertainties related to the COVID-19 pandemic

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 the Company’s sites to protect the health and safety of the team. During the three and six months ended May 31, 2022, almost all of the Company’s workforce was productive, but the Company experienced the continued effects of the COVID-19 pandemic, as variants caused new waves of COVID-19 cases around the globe.

The extent of the continued impact of the COVID-19 pandemic on the Company’s operational and financial performance, including its ability to execute business strategies and initiatives in the expected time frame, will depend on future developments, including the duration, spread and severity of the pandemic, the evolution of the

virus and the effects of mutations in its genetic code, country and state restrictions regarding virus containment, the availability and effectiveness of vaccines and treatment options, accessibility to the Company’s delivery and operations locations, its continued utilization of remote work environments in response to future health and safety restrictions, and the effect on the Company’s clients’ businesses and the demand for their products and services, all of which are uncertain and cannot be predicted. 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, 2021. Accounting pronouncements adopted during the six months ended May 31, 2022 are discussed below.

Concentration of credit risk

For the three and six months ended May 31, 2022, no client accounted for more than 10% of the Company’s consolidated revenue. For the three and six months ended May 31, 2021, one client accounted for 11.2% and 11.5%, respectively, of the Company’s consolidated revenue.

As of May 31, 2022 and November 30, 2021, one client comprised 10.4% and 15.3%, respectively, of the Company’s total accounts receivable balance.

Recently adopted accounting pronouncements

In December 2019, the Financial Accounting Standards Board (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. This standard became effective for the Company in fiscal year 2022 and did not have a material impact on the consolidated financial statements.

Recently issued accounting pronouncements

In March 2020, the FASB issued optional guidance to ease the potential burden for a limited time 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 this guidance.

NOTE 3—ACQUISITIONS:

PK Acquisition

Background

On December 27, 2021, the Company completed its acquisition of PK, a leading CX design engineering company with more than 5,000 staff in four countries. PK creates pioneering experiences that accelerate digital outcomes for their clients’ customers, partners and staff. The acquisition of PK expanded the Company’s scale in the digital IT services market and supported the Company’s growth strategy of investing in digital transformation to

deliver exceptional customer experiences. The addition of the PK staff and technology to the Company’s team further strengthened its capabilities in CX design and development, artificial intelligence (“AI”), intelligent automation, and customer loyalty.

Purchase price consideration

The total purchase price consideration, net of cash acquired, was $1,581.0 million, which was funded by proceeds from the Company’s new term loan (the “Term Loan”) under its amended senior secured credit facility (the “Credit Facility”) and additional borrowings under its accounts receivable securitization facility (the “Securitization Facility”). See Note 8—Borrowings for a further discussion of the Term Loan, the Credit Facility and the Securitization Facility.

The preliminary purchase price consideration to acquire PK consisted of the following:


Cash consideration for PK stock (1)	$	1,177,342
Cash consideration for PK vested equity awards (2)	246,229
Cash consideration for repayment of PK debt, including accrued interest (3)	148,492
Cash consideration for transaction expenses of PK (4)	22,842
Total cash consideration	1,594,905
Non-cash equity consideration for conversion of PK equity awards (5)	15,725
Total consideration transferred	1,610,630
Less: Cash acquired (6)	29,653
Total purchase price consideration	$	1,580,977

(1) Represents the cash consideration paid for the outstanding shares of PK’s common stock, which includes the final settlement of the merger consideration adjustment paid pursuant to the merger agreement.

(2) Represents the cash consideration paid for vested PK stock option awards and restricted stock awards.

(3) Represents the cash consideration paid to retire PK’s outstanding third-party debt, including accrued interest.

(4) Represents the cash consideration paid for expenses incurred by PK in connection with the merger and paid by Concentrix pursuant to the merger agreement. These expenses primarily related to third-party consulting services.

(5) Represents the issuance of vested Concentrix stock options that were issued in conversion of certain vested PK stock options that were assumed by Concentrix pursuant to the merger agreement.

(6) Represents the PK cash balance acquired at acquisition.

Preliminary purchase price allocation

The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations. The purchase price was allocated to the assets acquired, liabilities assumed and non-controlling interest based on management’s estimate of the respective fair values at the date of acquisition. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were the

assembled workforce, comprehensive service portfolio delivery capabilities and strategic benefits that are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes.

The following table summarizes the preliminary estimates of fair values of the assets acquired, liabilities assumed and non-controlling interest as of the acquisition date:


	As of
	December 27, 2021
Assets acquired:
Cash and cash equivalents	$	29,653
Accounts receivable	86,955
Property and equipment	11,198
Operating lease right-of-use assets	12,288
Identifiable intangible assets	469,300
Goodwill	1,126,111
Other assets	11,954
Total assets acquired	$	1,747,459

Liabilities assumed and non-controlling interest:
Accounts payable and accrued liabilities	68,438
Operating lease liabilities	12,288
Deferred tax liabilities	54,103
Non-controlling interest	2,000
Total liabilities assumed and non-controlling interest	$	136,829

Total consideration transferred	$	1,610,630

As of May 31, 2022, the purchase price allocation is preliminary. The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (not to exceed twelve months following the acquisition date). The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of identifiable intangible assets acquired, the fair value of certain tangible assets acquired and liabilities assumed, and deferred income taxes. The Company expects to continue to obtain information for the purpose of determining the fair value of the assets acquired and liabilities assumed on the acquisition date throughout the remainder of the measurement period. The Company made immaterial measurement period adjustments during the second quarter of fiscal year 2022.

The preliminary purchase price allocation includes $469.3 million of acquired identifiable intangible assets, all of which have finite lives. The preliminary fair value of the identifiable intangible assets has been estimated using the income approach through a discounted cash flow analysis of certain cash flow projections. The cash flow projections are based on forecasts used by the Company to price the PK acquisition, and the discount rates applied were benchmarked by referencing the implied rate of return of the Company’s pricing model and the weighted average cost of capital. The intangible assets are being amortized over their estimated useful lives on either a straight-line basis or an accelerated method that reflects the economic benefit of the asset. The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future forecasted cash flows of the Company following the acquisition of PK.

The preliminary amounts allocated to intangible assets are as follows:


	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	398,600	15 years
Technology	63,500		5 years
Trade name	5,000		3 years
Non-compete agreements	2,200		3 years
Total	$	469,300

Impact on results of operations

The results of the PK operations have been included in the consolidated financial statements since December 27, 2021. The following table provides the results of operations for PK included in the consolidated statement of operations from the acquisition date through May 31, 2022:


	Three Months Ended		Six Months Ended
	May 31, 2022		May 31, 2022
Revenue	$	123,963	$	207,159
Income before income taxes	2,773		2,980

In connection with the acquisition of PK, the Company incurred a total of $1.7 million and $2.6 million of acquisition-related and integration expenses for the three and six months ended May 31, 2022, respectively. These expenses primarily include legal and professional services, and severance and retention payments to integrate the business. These acquisition-related and integration expenses were recorded within selling, general and administrative expenses in the consolidated statement of operations.

Supplemental Pro Forma Information

The supplemental pro forma financial information presented below is for illustrative purposes only, does not include the pro forma adjustments that would be required under Regulation S-X for pro forma financial information, is not necessarily indicative of the financial position or results of operations that would have been realized if the PK acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that we believe are reasonable under the circumstances.

The supplemental pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the PK acquisition had occurred on December 1, 2020 to give effect to certain events that the Company believes to be directly attributable to the PK acquisition. These pro forma adjustments primarily include:

•An increase in amortization expense that would have been recognized due to acquired identifiable intangible assets.

•An adjustment to interest expense to reflect the additional borrowings of Concentrix on the amended credit facility and the repayment of PK’s historical debt in conjunction with the acquisition.

•The related income tax effects of the adjustments noted above.

The supplemental pro forma financial information for the periods presented is as follows:


	Three Months Ended				Six Months Ended
	May 31,				May 31,
	2022		2021		2022		2021
Revenue	$	1,568,101	$	1,479,640	$	3,137,114	$	2,928,392
Net income	113,438		81,618		219,789		165,853

ServiceSource Pending Acquisition

In May 2022, the Company announced a definitive agreement to acquire ServiceSource International, Inc. (“ServiceSource”), a global market leader in B2B digital sales, for $1.50 per share in an all-cash transaction valued at approximately $131 million, inclusive of ServiceSource’s net cash. ServiceSource is a global outsourced go-to-market services provider, delivering B2B digital sales and customer success solutions that are expected to complement the Company’s existing offerings in this area. The transaction is expected to close in the second half of fiscal year 2022, subject to customary closing conditions, including approval by ServiceSource’s stockholders and regulatory requirements. ServiceSource has established a special meeting date of July 20, 2022 for its stockholders to consider approval of the transaction.

NOTE 4—SHARE-BASED COMPENSATION:

In November 2020, in connection with the spin-off, TD 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. In December 2021, 523 additional shares of Concentrix common stock were reserved for issuance under the Concentrix Stock Incentive Plan resulting from an automatic annual increase pursuant to the terms of the plan.

In January 2022, the Company granted 137 restricted stock awards and restricted stock units and 129 performance-based restricted stock units under the Concentrix Stock Incentive Plan, which included annual awards to the Company’s senior executive team and retention and new hire awards to staff who joined the Company as part of the PK acquisition. The restricted stock awards and restricted stock units awards had a weighted average grant date fair value of $181.09 per share and vest over a service period of four years. 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, 2024. The performance-based restricted stock units had a grant date weighted average fair value of $178.58 per share.

The Company recorded share-based compensation expense in the consolidated statements of operations for the three and six months ended May 31, 2022 and 2021 as follows:


	Three Months Ended				Six Months Ended
	May 31, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Total share-based compensation	$	12,647	$	9,283	$	27,816	$	16,401
Tax benefit recorded in the provision for income taxes	(3,212)		(2,320)		(7,064)		(4,100)
Effect on net income	$	9,435	$	6,963	$	20,752	$	12,301

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, 2022		November 30, 2021
Cash and cash equivalents	$	163,364	$	182,038
Restricted cash included in other current assets	735		972
Cash, cash equivalents and restricted cash	$	164,099	$	183,010

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

Accounts receivable, net:

Accounts receivable, net is comprised of the following as of May 31, 2022 and November 30, 2021:


	As of
	May 31, 2022		November 30, 2021
Billed accounts receivable	$	772,084	$	714,032
Unbilled accounts receivable	546,625		499,342
Less: Allowance for doubtful accounts	(6,994)		(5,421)
Accounts receivable, net	$	1,311,715	$	1,207,953

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,
	2022		2021		2022		2021
Balance at beginning of period	$	6,904	$	6,239	$	5,421	$	8,963
Net additions (reductions)	2,474		422		4,422		(2,132)
Write-offs and reclassifications	(2,384)		(1,148)		(2,849)		(1,318)
Balance at end of period	$	6,994	$	5,513	$	6,994	$	5,513

Property and equipment, net:

The following tables summarize the carrying amounts and related accumulated depreciation for property and equipment as of May 31, 2022 and November 30, 2021:


	As of
	May 31, 2022		November 30, 2021
Land	$	27,529	$	27,677
Equipment, computers and software	516,033		488,270
Furniture and fixtures	90,122		90,442
Buildings, building improvements and leasehold improvements	369,519		364,166
Construction-in-progress	12,751		10,741
Total property and equipment, gross	$	1,015,954	$	981,296
Less: Accumulated depreciation	(614,238)		(574,152)
Property and equipment, net	$	401,716	$	407,144

Shown below are the countries where 10% or more of the Company’s property and equipment, net are located as of May 31, 2022 and November 30, 2021:


	As of
	May 31, 2022		November 30, 2021
Property and equipment, net:
United States	$	111,923	$	101,333
Philippines	79,406		87,548
India	44,454		46,167
Others	165,933		172,096
Total	$	401,716	$	407,144

Goodwill:

The following table summarizes the changes in the Company’s goodwill for the six months ended May 31, 2022:


Balance as of November 30, 2021	$	1,813,502
Acquisition	1,126,111
Foreign exchange translation	(13,934)
Balance as of May 31, 2022	$	2,925,679

Intangible assets, net:

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of May 31, 2022 and November 30, 2021:


	As of May 31, 2022						As of November 30, 2021
	Gross amounts		Accumulated amortization		Net amounts		Gross amounts		Accumulated amortization		Net amounts
Customer relationships	$	1,727,681	$	(755,432)	$	972,249	$	1,347,961	$	(694,701)	$	653,260
Technology	74,282		(14,802)		59,480		10,835		(8,900)		1,935
Trade names	11,667		(7,295)		4,372		6,724		(6,391)		333
Non-compete agreements	2,200		(314)		1,886		—		—		—
	$	1,815,830	$	(777,843)	$	1,037,987	$	1,365,520	$	(709,992)	$	655,528

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


Fiscal years ending November 30,
2022 (remaining six months)	$	82,532
2023	153,699
2024	139,964
2025	128,441
2026	112,922
Thereafter	420,429
Total	$	1,037,987

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, 2022 and 2021
	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 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)