SEC Filing | Concentrix Corporation

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cnxc-20230531

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, 2023


☐			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, 2023
Common Stock, $0.0001 par value						52,053,571

Concentrix Corporation

Form 10-Q
Index


		Page
PART I	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Consolidated Balance Sheets as of May 31, 2023 (unaudited) and November 30, 2022	2
	Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended May 31, 2023 and 2022	3
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Six Months Ended May 31, 2023 and 2022	4
	Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Six Months Ended May 31, 2023 and 2022	5
	Consolidated Statements of Cash Flows (unaudited) for the Three and Six Months Ended May 31, 2023 and 2022	7
	Notes to the Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46

PART II	OTHER INFORMATION	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2	Unregistered S ales of E quity S ecurities and U se of P roceeds	53
Item 6.	Exhibits	54

	Signatures	56

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONCENTRIX CORPORATION

CONSOLIDATED BALANCE SHEETS

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


	May 31, 2023		November 30, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	152,896	$	145,382
Accounts receivable, net	1,394,012		1,390,474
Other current assets	205,149		218,476
Total current assets	1,752,057		1,754,332
Property and equipment, net	394,464		403,829
Goodwill	2,903,594		2,904,402
Intangible assets, net	910,784		985,572
Deferred tax assets	44,892		48,541
Other assets	554,214		573,092
Total assets	$	6,560,005	$	6,669,768

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	148,679	$	161,190
Current portion of long-term debt	—		—
Accrued compensation and benefits	418,221		506,966
Other accrued liabilities	399,539		395,304
Income taxes payable	41,045		68,663
Total current liabilities	1,007,484		1,132,123
Long-term debt, net	2,130,960		2,224,288
Other long-term liabilities	490,120		511,995
Deferred tax liabilities	77,179		105,458
Total liabilities	3,705,743		3,973,864
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000 shares authorized and no shares issued and outstanding as of May 31, 2023 and November 30, 2022, respectively	—		—
Common stock, $0.0001 par value, 250,000 shares authorized; 52,619 and 52,367 shares issued as of May 31, 2023 and November 30, 2022, respectively, and 51,178 and 51,096 shares outstanding as of May 31, 2023 and November 30, 2022, respectively	5		5
Additional paid-in capital	2,459,234		2,428,313
Treasury stock, 1,441 and 1,271 shares as of May 31, 2023 and November 30, 2022, respectively	(214,172)		(190,779)
Retained earnings	912,204		774,114
Accumulated other comprehensive loss	(303,009)		(315,749)
Total stockholders’ equity	2,854,262		2,695,904
Total liabilities and stockholders’ equity	$	6,560,005	$	6,669,768

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, 2023		May 31, 2022		May 31, 2023		May 31, 2022
Revenue	$	1,614,706	$	1,568,101	$	3,251,110	$	3,104,153
Cost of revenue	1,034,481		1,009,185		2,089,724		2,007,103
Gross profit	580,225		558,916		1,161,386		1,097,050
Selling, general and administrative expenses	417,659		402,004		842,773		792,393
Operating income	162,566		156,912		318,613		304,657
Interest expense and finance charges, net	47,213		12,973		81,203		21,743
Other expense (income), net	9,383		(2,545)		13,097		(10,161)
Income before income taxes	105,970		146,484		224,313		293,075
Provision for income taxes	27,120		33,451		57,593		69,503
Net income before non-controlling interest	78,850		113,033		166,720		223,572
Less: Net income (loss) attributable to non-controlling interest	—		(109)		—		157
Net income attributable to Concentrix Corporation	$	78,850	$	113,142	$	166,720	$	223,415

Earnings per common share:
Basic	$	1.51	$	2.16	$	3.20	$	4.27
Diluted	$	1.51	$	2.14	$	3.18	$	4.23
Weighted-average common shares outstanding:
Basic	51,181		51,564		51,165		51,596
Diluted	51,392		51,990		51,457		51,995

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, 2023		May 31, 2022		May 31, 2023		May 31, 2022
Net income before non-controlling interest	$	78,850	$	113,033	$	166,720	$	223,572
Other comprehensive income (loss):
Unrealized gains (losses) of defined benefit plans, net of taxes of $(289) and $(180) for the three and six months ended May 31, 2023, respectively, and $0 and $0 for the three and six months ended May 31, 2022, respectively	1,051		(7)		499		766
Unrealized gains (losses) on cash flow hedges during the period, net of taxes of $1,752 and $(797) for the three and six months ended May 31, 2023, respectively, and $4,440 and $5,387 for the three and six months ended May 31, 2022, respectively	(5,261)		(12,944)		2,393		(15,704)
Reclassification of net losses on cash flow hedges to net income, net of taxes of $(1,014) and $(2,948) for the three and six months ended May 31, 2023, respectively, and $(1,078) and $(846) for the three and six months ended May 31, 2022, respectively	3,044		3,138		8,851		2,465
Total change in unrealized gains (losses) on cash flow hedges, net of taxes	(2,217)		(9,806)		11,244		(13,239)
Foreign currency translation, net of taxes of $0 for the three and six months ended May 31, 2023 and 2022, respectively	(16,246)		(54,995)		997		(68,834)
Other comprehensive income (loss)	(17,412)		(64,808)		12,740		(81,307)
Comprehensive income	61,438		48,225		179,460		142,265
Less: Comprehensive income (loss) attributable to non-controlling interest	—		(109)		—		157
Comprehensive income attributable to Concentrix Corporation	$	61,438	$	48,334	$	179,460	$	142,108

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, 2023
	Concentrix Corporation Stockholders’ Equity
	Common stock					Treasury stock
	Shares	Amount		Additional paid-in capital		Shares	Amount		Retained earnings		Accumulated other comprehensive income (loss)		Total stockholders’ equity
Balances, February 28, 2023	52,595	$	5	$	2,447,418	1,400	$	(208,996)	$	847,671	$	(285,597)	$	2,800,501
Other comprehensive loss	—	—		—		—	—		—		(17,412)		(17,412)
Share-based compensation activity	24	—		11,816		—	—		—		—		11,816
Repurchase of common stock for tax withholdings on equity awards	—	—		—		2	(236)		—		—		(236)
Repurchase of common stock	—	—		—		39	(4,940)		—		—		(4,940)
Dividends	—	—		—		—	—		(14,317)		—		(14,317)
Net income	—	—		—		—	—		78,850		—		78,850
Balances, May 31, 2023	52,619	$	5	$	2,459,234	1,441	$	(214,172)	$	912,204	$	(303,009)	$	2,854,262

Balances, November 30, 2022	52,367	$	5	$	2,428,313	1,271	$	(190,779)	$	774,114	$	(315,749)	$	2,695,904
Other comprehensive income	—	—		—		—	—		—		12,740		12,740
Share-based compensation activity	252	—		30,921		—	—		—		—		30,921
Repurchase of common stock for tax withholdings on equity awards	—	—		—		60	(8,452)		—		—		(8,452)
Repurchase of common stock	—	—		—		110	(14,941)		—		—		(14,941)
Dividends	—	—		—		—	—		(28,630)		—		(28,630)
Net income	—	—		—		—	—		166,720		—		166,720
Balances, May 31, 2023	52,619	$	5	$	2,459,234	1,441	$	(214,172)	$	912,204	$	(303,009)	$	2,854,262

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 income (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 CASH FLOWS
(currency in thousands)
(unaudited)


	Six Months Ended
	May 31, 2023		May 31, 2022
Cash flows from operating activities:
Net income before non-controlling interest	$	166,720	$	223,572
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	76,386		73,174
Amortization	78,686		79,525
Non-cash share-based compensation expense	27,734		27,590
Provision for doubtful accounts	4,830		4,422
Deferred income taxes	(29,714)		963
Unrealized foreign exchange loss	—		470
Unrealized loss on call options	12,429		—
Pension and other post-retirement benefit costs	5,627		5,628
Pension and other post-retirement plan contributions	(3,115)		(3,119)
Other	536		(107)
Changes in operating assets and liabilities:
Accounts receivable, net	(15,554)		(17,039)
Accounts payable	(3,874)		(17,777)
Other operating assets and liabilities	(83,363)		(164,818)
Net cash provided by operating activities	237,328		212,484
Cash flows from investing activities:
Purchases of property and equipment	(71,781)		(71,166)
Acquisition of business, net of cash and restricted cash acquired	—		(1,565,252)
Other investments	—		(1,000)
Net cash used in investing activities	(71,781)		(1,637,418)
Cash flows from financing activities:
Proceeds from the Prior Credit Facility - Term Loan	—		2,100,000
Repayments of the Prior Credit Facility - Term Loan	(25,000)		—
Repayments of the original credit facility - original term loan	—		(700,000)
Proceeds from the Securitization Facility	727,000		848,500
Repayments of the Securitization Facility	(794,500)		(742,500)
Cash paid for debt issuance costs	(20,683)		(8,863)
Proceeds from exercise of stock options	3,187		5,200
Repurchase of common stock for tax withholdings on equity awards	(8,452)		(2,912)
Repurchase of common stock	(14,941)		(57,850)
Dividends paid	(28,630)		(26,170)
Net cash provided by (used in) financing activities	(162,019)		1,415,405
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1,357		(9,382)
Net increase (decrease) in cash, cash equivalents and restricted cash	4,885		(18,911)
Cash, cash equivalents and restricted cash at beginning of year	157,463		183,010
Cash, cash equivalents and restricted cash at end of period	$	162,348	$	164,099

Supplemental disclosure of non-cash investing activities:
Accrued costs for property and equipment purchases	$	6,186	$	4,907

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” 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, retail, travel and e-commerce, communications and media, banking, financial services and insurance, and healthcare.

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, 2022 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, 2022. 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, 2022. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

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

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, 2022. Recently adopted accounting pronouncements are discussed below.

Concentration of credit risk

For the three and six months ended May 31, 2023 and 2022, no client accounted for more than 10% of the Company’s consolidated revenue.

As of May 31, 2023, no client comprised more than 10% of the Company’s total accounts receivable balance. As of November 30, 2022, one client comprised 12.4% 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 simplified the accounting for income taxes. The guidance was 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.

No other new accounting pronouncements recently adopted or issued had or are expected to have a material impact on the consolidated financial statements.

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 and restricted cash acquired, for the acquisition of PK was $1,573.3 million, which was funded by proceeds from the Company’s term loan under its senior credit facility and additional borrowings under its accounts receivable securitization facility. See Note 8—Borrowings for a further discussion of the Company’s term loan, senior credit facility and the accounts receivable securitization facility.

The 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 and restricted cash acquired (6)	37,310
Total purchase price consideration	$	1,573,320

(1) Represents the cash consideration paid for the outstanding shares of PK 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 certain 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 and restricted cash balance acquired at the acquisition.

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 deductible for income tax purposes.

The following table summarizes the final 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	$	30,798
Accounts receivable	85,367
Property and equipment	11,158
Operating lease right-of-use assets	12,288
Identifiable intangible assets	469,300
Goodwill	1,119,068
Other assets	26,449
Total assets acquired	1,754,428

Liabilities assumed and non-controlling interest:
Accounts payable and accrued liabilities	78,092
Operating lease liabilities	12,288
Deferred tax liabilities	51,418
Non-controlling interest	2,000
Total liabilities assumed and non-controlling interest	143,798

Total consideration transferred	$	1,610,630

The purchase price allocation includes $469,300 of acquired identifiable intangible assets, all of which have finite lives. The fair value of the identifiable intangible assets has been estimated by 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 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

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 December 1, 2020, 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 the Company believes 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 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 under the 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 prior period second fiscal quarter is as follows:


	Six Months Ended
	May 31, 2022
Revenue	$	3,137,114
Net income	219,789

ServiceSource Acquisition

Background

On July 20, 2022, the Company completed its acquisition of ServiceSource International, Inc. (“ServiceSource”), a global outsourced go-to-market services provider, delivering business-to-business (“B2B”) digital sales and customer success solutions that complemented Concentrix’ offerings in this area.

Purchase price consideration

The total purchase price consideration, net of cash acquired, for the acquisition of ServiceSource was $141.5 million, which was primarily funded by cash on the Company’s balance sheet, as well as borrowings under the Company’s Securitization Facility.

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


Cash consideration for ServiceSource stock (1)	$	150,392
Cash consideration for ServiceSource vested and unvested equity awards (2)	6,704
Cash consideration for repayment of ServiceSource debt, including accrued interest (3)	10,063
Total consideration transferred	167,159
Less: Cash and restricted cash acquired (4)	25,652
Total purchase price consideration	$	141,507

(1) Represents the cash consideration paid for the outstanding shares of ServiceSource common stock.

(2) Represents the cash consideration paid or to be paid for vested and unvested ServiceSource stock option awards, restricted stock units and performance stock units.

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

(4) Represents the ServiceSource cash and restricted cash balance acquired at the acquisition.

Preliminary purchase price allocation

The purchase price was allocated to the assets acquired and liabilities assumed 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, high-value service delivery capabilities and strategic benefits that are expected to be realized from the acquisition. None of the goodwill is deductible for income tax purposes.

The following table summarizes the preliminary estimates of fair values of the assets acquired and liabilities assumed as of the acquisition date:


	As of
	July 20, 2022
Assets acquired:
Cash and cash equivalents	$	24,355
Accounts receivable	40,097
Property and equipment	8,112
Operating lease right-of-use assets	29,487
Identifiable intangible assets	40,200
Goodwill	44,287
Net deferred tax assets	22,724
Other assets	19,649
Total assets acquired	228,911

Liabilities assumed:
Accounts payable and accrued liabilities	32,265
Operating lease liabilities	29,487
Total liabilities assumed	61,752

Total consideration transferred	$	167,159

As of May 31, 2023, 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 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. Measurement period adjustments to the preliminary purchase price allocation during the three and six months ended May 31, 2023 were not material.

The preliminary purchase price allocation includes $40,200 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 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 ServiceSource.

The preliminary amounts allocated to intangible assets are as follows:


	Gross Carrying Amount		Weighted-Average Useful Life
Customer relationships	$	31,370	15 years
Technology	5,640		5 years
Trade name	3,190		3 years
Total	$	40,200

Pending Combination with Webhelp

On March 29, 2023, Concentrix and OSYRIS S.à r.l., a private limited liability company (société à responsabilité limitée) incorporated under the laws of the Grand Duchy of Luxembourg and a direct wholly owned subsidiary of Concentrix (“Purchaser”), entered into a binding put option letter agreement (the “Put Option”) with certain stockholders (the “Beneficiaries”) of Marnix Lux SA, a public limited liability company (société anonyme) incorporated under the laws of the Grand Duchy of Luxembourg (“Webhelp Parent”) and the parent company of Webhelp SAS (“Webhelp”). Pursuant to the Put Option, Concentrix and Purchaser committed to acquire (the “Offer”) all of the issued and outstanding capital stock of Webhelp Parent (the “Shares”) from the holders of Webhelp Parent (the “Sellers”), subject to the terms and conditions of the Share Purchase and Contribution Agreement.

Certain required consultation processes with works councils representing certain Webhelp staff in France and the Netherlands were completed in late April 2023. On May 30, 2023, the Beneficiaries completed the collection of powers of attorney from 100% of the other Sellers to allow a representative to act on behalf of the Sellers in connection with the execution of the Share Purchase and Contribution Agreement and other related agreements and documents. On June 2, 2023, the Beneficiaries exercised the Put Option and on June 12, 2023, Concentrix, the Purchaser, the Beneficiaries and Webhelp Parent entered into the Share Purchase and Contribution Agreement.

Subject to the terms and conditions of the Share Purchase and Contribution Agreement, Purchaser will acquire (directly and further to a contribution by Concentrix) all of the Sellers’ Shares. The aggregate consideration for the acquisition of the Shares will consist of:

•€500,000 in cash, subject to adjustment as set forth in the Share Purchase and Contribution Agreement (the “Closing Cash Payment”);

•a note issued by Concentrix in execution of a delegation of payment by Purchaser to Concentrix of a portion of the consideration for the Acquired Shares (as defined below) (the “Sellers’ Note” and, together with the Closing Cash Payment, the “Cash Purchase Price”) in the aggregate principal amount of €700,000, with a term of two years and bearing interest at a rate of 2% per annum on the unpaid principal outstanding from time to time;

•14,861.885 shares (the “Closing Shares”) of common stock, par value $0.0001 per share, of Concentrix (the “Concentrix common stock”); and

•the contingent right granted by Purchaser in exchange for the Exchanged Shares (as defined below) to earn an additional 750 shares of Concentrix common stock (the “Earnout Shares”) if certain conditions set forth in the Share Purchase and Contribution Agreement occur, including the share price of Concentrix common stock reaching $170.00 per share within seven years from the closing of the Webhelp Combination (as defined below) (the “Closing Date”) (based on daily volume weighted average prices measured over a specified period).

On the Closing Date, (i) Purchaser will purchase certain of the Sellers’ Shares (the “Acquired Shares”) in exchange for the Cash Purchase Price, (ii) certain Sellers will contribute certain of their Shares (the “Contributed Shares”) to Concentrix in exchange for the Closing Shares, (iii) the Sellers will transfer and exchange certain of their Shares (the “Exchanged Shares”) to Purchaser in exchange for the contingent right to earn the Earnout Shares, (iv) Concentrix will execute and deliver the Sellers’ Note to the Sellers party thereto, and (v) Concentrix will transfer to Purchaser the Contributed Shares and the Exchanged Shares (collectively, and together with the other transactions contemplated by the Share Purchase and Contribution Agreement, the “Webhelp Combination”). As a result of the Webhelp Combination, Purchaser will hold all of the share capital and voting rights of Webhelp Parent on a fully

diluted basis, and Webhelp Parent will become a wholly owned subsidiary of Purchaser, which in turn is a wholly owned subsidiary of Concentrix.

The Webhelp Combination is expected to close by the end of the year, subject to the satisfaction of customary closing conditions, including approval by Concentrix stockholders and regulatory approvals.

Acquisition-related and integration expenses

In connection with the acquisitions of PK and ServiceSource and the pending combination with Webhelp, the Company incurred $7,433 and $12,976 of acquisition-related and integration expenses for the three and six months ended May 31, 2023, respectively, and $1,726 and $2,648 for the three and six months ended May 31, 2022. These expenses primarily include legal and professional services, cash-settled awards, severance and retention payments and costs associated with lease terminations to integrate the businesses. These acquisition-related and integration expenses were recorded within selling, general and administrative expenses in the consolidated statement of operations.

NOTE 4—SHARE-BASED COMPENSATION:

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

In January 2023, the Company granted 53 restricted stock awards and restricted stock units and 52 performance-based restricted stock units under the Concentrix Stock Incentive Plan, which included annual awards to the Company’s senior executive team. The restricted stock awards and restricted stock units had a weighted average grant date fair value of $138.79 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, 2025. The performance-based restricted stock units had a grant date weighted average fair value of $136.19 per share.

The Company recorded share-based compensation expense in the consolidated statements of operations for the six months ended May 31, 2023 and 2022 as follows:


	Three Months Ended				Six Months Ended
	May 31, 2023		May 31, 2022		May 31, 2023		May 31, 2022
Total share-based compensation	$	11,189	$	12,647	$	27,943	$	27,816
Tax benefit recorded in the provision for income taxes	(2,798)		(3,212)		(6,986)		(7,064)
Effect on net income	$	8,391	$	9,435	$	20,957	$	20,752

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, 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, 2023		November 30, 2022
Cash and cash equivalents	$	152,896	$	145,382
Restricted cash included in other current assets	9,452		12,081
Cash, cash equivalents and restricted cash	$	162,348	$	157,463

Restricted cash balances relate primarily to funds held for clients, restrictions placed on cash deposits by banks as collateral for the issuance of bank guarantees and the terms of a government grant, and letters of credit for leases.

Accounts receivable, net:

Accounts receivable, net is comprised of the following as of May 31, 2023 and November 30, 2022:


	As of
	May 31, 2023		November 30, 2022
Billed accounts receivable	$	763,595	$	782,049
Unbilled accounts receivable	639,191		613,222
Less: Allowance for doubtful accounts	(8,774)		(4,797)
Accounts receivable, net	$	1,394,012	$	1,390,474

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, 2023		May 31, 2022		May 31, 2023		May 31, 2022
Balance at beginning of period	$	6,084	$	6,904	$	4,797	$	5,421
Net additions (reductions)	3,108		2,474		4,830		4,422
Write-offs and reclassifications	(418)		(2,384)		(853)		(2,849)
Balance at end of period	$	8,774	$	6,994	$	8,774	$	6,994

Property and equipment, net:

The following table summarizes the carrying amounts and related accumulated depreciation for property and equipment as of May 31, 2023 and November 30, 2022:


	As of
	May 31, 2023		November 30, 2022
Land	$	27,154	$	27,336
Equipment, computers and software	574,271		542,209
Furniture and fixtures	89,881		89,167
Buildings, building improvements and leasehold improvements	389,024		362,218
Construction-in-progress	7,893		14,975
Total property and equipment, gross	$	1,088,223	$	1,035,905
Less: Accumulated depreciation	(693,759)		(632,076)
Property and equipment, net	$	394,464	$	403,829

Shown below are the countries where 10% or more of the Company’s property and equipment, net are located as of May 31, 2023 and November 30, 2022:


	As of
	May 31, 2023		November 30, 2022
Property and equipment, net:
United States	$	118,940	$	123,184
Philippines	74,239		76,361
India	43,043		42,698
Others	158,242		161,586
Total	$	394,464	$	403,829

Goodwill:

The following table summarizes the changes in the Company’s goodwill for the six months ended May 31, 2023 and 2022:


	Six Months Ended
	May 31, 2023		May 31, 2022
Balance at beginning of period	$	2,904,402	$	1,813,502
Acquisitions	—		1,126,111
Acquisition measurement period adjustment	(1,215)		—
Foreign exchange translation	407		(13,934)
Balance at end of period	$	2,903,594	$	2,925,679

Intangible assets, net:

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of May 31, 2023 and November 30, 2022:


	As of May 31, 2023						As of November 30, 2022
	Gross amounts		Accumulated amortization		Net amounts		Gross amounts		Accumulated amortization		Net amounts
Customer relationships	$	1,741,007	$	(886,973)	$	854,034	$	1,731,610	$	(811,727)	$	919,883
Technology	79,682		(28,981)		50,701		79,728		(21,820)		57,908
Trade names	14,479		(9,583)		4,896		14,552		(8,291)		6,261
Non-compete agreements	2,200		(1,047)		1,153		2,200		(680)		1,520
	$	1,837,368	$	(926,584)	$	910,784	$	1,828,090	$	(842,518)	$	985,572

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


Fiscal years ending November 30,
2023 (remaining six months)	$	78,680
2024	146,296
2025	134,188
2026	117,661
2027	87,387
Thereafter	346,572
Total	$	910,784

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, 2023 and 2022
	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
Balances at February 28, 2022	$	(21,972)	$	(4,836)	$	(60,217)	$	(87,025)
Other comprehensive income (loss) before reclassification	(7)		(12,944)		(54,995)		(67,946)
Reclassification of gains from other comprehensive income (loss)	—		3,138		—		3,138
Balances at May 31, 2022	$	(21,979)	$	(14,642)	$	(115,212)	$	(151,833)

Balances at February 28, 2023	$	(9,023)	$	(6,453)	$	(270,121)	$	(285,597)
Other comprehensive income (loss) before reclassification	1,051		(5,261)		(16,246)		(20,456)
Reclassification of gains from other comprehensive income (loss)	—		3,044		—		3,044
Balances at May 31, 2023	$	(7,972)	$	(8,670)	$	(286,367)	$	(303,009)


	Six Months Ended May 31, 2023 and 2022
	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
Balances at November 30, 2021	$	(22,745)	$	(1,403)	$	(46,378)	$	(70,526)
Other comprehensive income (loss) before reclassification	766		(15,704)		(68,834)		(83,772)
Reclassification of gains from other comprehensive income (loss)	—		2,465		—		2,465
Balances at May 31, 2022	$	(21,979)	$	(14,642)	$	(115,212)	$	(151,833)

Balances at November 30, 2022	$	(8,471)	$	(19,914)	$	(287,364)	$	(315,749)
Other comprehensive income (loss) before reclassification	499		2,393		997		3,889
Reclassification of gains from other comprehensive income (loss)	—		8,851		—		8,851
Balances at May 31, 2023	$	(7,972)	$	(8,670)	$	(286,367)	$	(303,009)

Refer to Note 6—Derivative Instruments 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 benefit plans is recorded in “Other expense (income), net” in the consolidated statement of operations.

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 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 consolidated balance sheets at their fair values. 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 2025. 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 foreign currency 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 currencies of the Company’s legal entities that own the assets or liabilities. 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.

In connection with the pending combination with Webhelp, the Company entered into short-term foreign exchange forward call option contracts to offset the foreign exchange risk associated with the cash payment required in euros upon closing of the Webhelp Combination. These derivatives are not designated as hedging instruments and are adjusted to fair value through earnings and included in other expense (income), net in the consolidated statement of operations.

Fair Values of Derivative Instruments in the Consolidated Balance Sheets

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


	Value as of
Balance Sheet Line Item	May 31, 2023		November 30, 2022
Derivative instruments not designated as hedging instruments:
Foreign exchange forward contracts (notional value)	$	1,561,286	$	1,465,853
Other current assets	9,668		22,839
Other accrued liabilities	16,708		14,934
Foreign exchange call options contracts (notional value)	$	2,012,475	$	—
Other current assets	2,199		—
Derivative instruments designated as cash flow hedges:
Foreign exchange forward contracts (notional value)	$	1,033,059	$	963,844
Other current assets and other assets	7,145		6,389
Other accrued liabilities and other long-term liabilities	18,701		32,935

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, the Japanese yen and the Australian dollar, 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 exchange 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:


		Three Months Ended				Six Months Ended
	Locations of gain (loss) in statement of operations	May 31, 2023		May 31, 2022		May 31, 2023		May 31, 2022
Derivative instruments designated as cash flow hedges
Gains (losses) recognized in OCI:
Foreign exchange forward contracts		$	(7,013)	$	(17,384)	$	3,190	$	(21,091)

Losses reclassified from AOCI into income:
Foreign exchange forward contracts
Loss reclassified from AOCI into income	Cost of revenue for services	$	(2,962)	$	(3,426)	$	(8,722)	$	(3,011)
Loss reclassified from AOCI into income	Selling, general and administrative expenses	(1,096)		(790)		(3,077)		(300)
Total		$	(4,058)	$	(4,216)	$	(11,799)	$	(3,311)

Derivative instruments not designated as hedging instruments:
Loss recognized from foreign exchange forward contracts, net(1)	Other expense (income), net	$	(11,060)	$	(16,148)	$	(4,835)	$	(17,160)
Loss recognized from foreign exchange call options contracts, net	Other expense (income), net	(12,429)		—		(12,429)		—
Total		$	(23,489)	$	(16,148)	$	(17,264)	$	(17,160)

(1) The gains and losses largely offset the currency gains and losses that resulted from changes in the assets and liabilities denominated in nonfunctional currencies.

There were no material gain or loss amounts excluded from the assessment of effectiveness. Existing net losses in AOCI that are expected to be reclassified into earnings in the normal course of business within the next twelve months are $10,556.

Offsetting of Derivatives

In the consolidated balance sheets, the Company does not offset derivative assets against liabilities in master netting arrangements.

Credit exposure for derivative financial instruments is limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the Company’s obligations to the counterparties. The Company manages the potential risk of credit losses through careful evaluation of counterparty credit standing and selection of counterparties from a limited group of financial institutions with high credit standing.

NOTE 7—FAIR VALUE MEASUREMENTS:

The Company’s fair value measurements are classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following table summarizes the valuation of the Company’s investments and financial instruments that are measured at fair value on a recurring basis:


	As of May 31, 2023								As of November 30, 2022
			Fair value measurement category								Fair value measurement category
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	99,094	$	99,094	$	—	$	—	$	89,932	$	89,932	$	—	$	—
Foreign government bond	—		—		—		—		1,529		1,529		—		—
Forward foreign currency exchange contracts	16,813		—		16,813		—		29,228		—		29,228		—
Foreign currency call options contracts	2,199		—		2,199		—		—		—		—		—
Liabilities:
Forward foreign currency exchange contracts	$	35,409	$	—	$	35,409	$	—	$	47,869	$	—	$	47,869	$	—