What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-07 compared with 2022-07-08 · 117 added, 116 removed, 293 unchanged (44% of the section changed)

12 unchanged sentences

the inability to execute on our digital customer experience strategy;

the inability to successfully identify, complete or integrate strategic acquisitions or investments, including our acquisition and integration of ServiceSource International, Inc.;

the inability to successfully identify, complete or integrate strategic acquisitions or investments, including our integration of ServiceSource International, Inc.;

competitive conditions in our industry and consolidation of our competitors;

28 unchanged sentences

PK Acquisition

On December 27, 2021, we completed our acquisition of PK, a leading CX design engineering company with more than 5,000 staff in four countries.

On December 27, 2021, we completed our acquisition of PK, a leading CX design engineering company with more than 5,000 staff in four countries, for total consideration of $1,581.0 million, net of cash acquired.

PK creates pioneering experiences that accelerate digital outcomes for their clients’ customers, partners and staff.

1 unchanged sentence

The addition of the PK staff and technology to our team further strengthened our capabilities in CX design and development, artificial intelligence (“AI”), intelligent automation, and customer loyalty.

ServiceSource Pending Acquisition

In May 2022, we 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 Acquisition

On July 20, 2022, we completed our acquisition of ServiceSource International, Inc.

(“ServiceSource”) for total consideration of $142.8 million, net of cash acquired.

ServiceSource is a global outsourced go-to-market services provider, delivering B2B digital sales and customer success solutions that are expected to complement our 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.

On December 1, 2020, the previously announced separation (the “separation”) of Concentrix and our technology-infused CX solutions business from TD SYNNEX was completed through a tax-free distribution of all of the issued and outstanding shares of our common stock to TD SYNNEX stockholders (the distribution and, together with the separation, the “spin-off”).

5 unchanged sentences

We successfully transitioned a significant portion of our workforce to a remote working environment throughout the second quarter of 2020 and implemented a number of safety and social distancing measures in our sites to protect the health and safety of our staff.

During the six months ended May 31, 2022, almost all of our workforce was productive, but we experienced the continued effects of the COVID-19 pandemic, as variants caused new waves of COVID-19 cases around the globe.

During the three and nine months ended August 31, 2022, almost all of our workforce was productive, but we 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 our operational and financial performance, including our ability to execute our 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 our delivery and operations locations, our continued utilization of remote work environments in response to future health and safety restrictions, and the effect on our clients’ businesses and the demand for their products and services, all of which are uncertain and cannot be predicted.

5 unchanged sentences

We generate revenue through the provision of CX solutions and technology to our clients pursuant to client contracts.

Our client contracts typically consist of a master services agreement, supported in most cases by multiple statements of work, which contains the terms and conditions of each contracted solution.

Our client contracts typically consist of a master services agreement, supported in most cases by multiple statements of work, which contain the terms and conditions of each contracted solution.

Our client contracts can range from less than one year to over five years in term and are subject to early termination by our clients for any reason, typically with 30 to 90 days’ notice.

2 unchanged sentences

Remaining revenue from the sale of these solutions are typically recognized as the services are provided over the duration of the contract using contractual rates.

Our cost of revenue consists primarily of personnel costs related to the delivery of our solutions.

The costs of our revenue can be impacted by the mix of client contracts, where we deliver the CX solutions, additional lead time for programs to be fully scalable, and transition and initial set-up costs.

Our cost of revenue consists primarily of personnel costs related to the delivery of our solutions and technology.

The costs of our revenue can be impacted by the mix of client contracts, where we deliver the CX solutions and technology, additional lead time for programs to be fully scalable, and transition and initial set-up costs.

Our cost of revenue as a percentage of revenue has also fluctuated in the past, based primarily on our ability to achieve economies of scale, the management of our operating expenses, and the timing and costs incurred related to our acquisitions and investments.

In the second quarter of 2022 and 2021, approximately 78% and 84% of our consolidated revenue was generated from our non-U.S.

In the third quarter of 2022 and 2021, approximately 78% and 85% of our consolidated revenue was generated from our non-U.S.

operations, and approximately 67% and 61%, respectively, of our consolidated revenue was priced in U.S.

9 unchanged sentences

Economic and Industry Trends

The CX solutions industry in which we operate is competitive.

Clients’ performance measures are based on competitive pricing terms and quality of services.

Further, there can be competitive pressure in various labor markets, which could result in increased labor costs.

The CX solutions industry in which we operate is competitive, including on the basis of pricing, delivery capabilities and quality of services.

Further, there can be competitive pressure for labor in various markets, which could result in increased labor costs.

Accordingly, we could be subject to pricing and labor cost pressures and may experience a decrease in revenue and operating income.

5 unchanged sentences

Critical Accounting Policies and Estimates

During the three and six months ended May 31, 2022, there were no material changes to our critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021.

Results of Operations – Three and Six Months Ended May 31, 2022 and 2021

Three Months Ended Six Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

During the three and nine months ended August 31, 2022, there were no material changes to our critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021.

Results of Operations – Three and Nine Months Ended August 31, 2022 and 2021

Three Months Ended Nine Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

($ in thousands) ($ in thousands)

9 unchanged sentences

Net income before non-controlling interest 107,124 109,754 330,696 281,469

Net income (loss) attributable to non-controlling interest (109) — 157 —

Net income attributable to non-controlling interest 434 — 591 —

Net income attributable to Concentrix Corporation $ 106,690 $ 109,754 $ 330,105 $ 281,469

Three Months Ended % Change Six Months Ended % Change

May 31, 2022 May 31, 2021 2022 to 2021

Three Months Ended % Change Nine Months Ended % Change

August 31, 2022 August 31, 2021 2022 to 2021

($ in thousands)

10 unchanged sentences

Our solutions focus on customer engagement, process optimization, and back-office automation.

Our revenue increased 14.5% in the three months ended May 31, 2022 compared to the three months ended May 31, 2021, which included revenue related to the acquired PK operations of $124.0 million, or an increase of 9.0%, and larger volumes across all verticals over the prior year period.

Our revenue increased 13.1% in the three months ended August 31, 2022 compared to the three months ended August 31, 2021, which included revenue from acquired operations of $142.5 million, or an increase of 10.2%, and larger volumes across all verticals over the prior year period.

These increases were partially offset by a decrease in revenue related to divested businesses of $5.3 million, or 0.4%, and an unfavorable translation effect of foreign currencies of $58.6 million, or 4.2%.

The unfavorable foreign currency translation effect on revenue was primarily due to the weakening of the euro, Japanese yen, British pound, and Australian dollar against the U.S.

Our revenue increased 14.0% in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, which included approximately five months of revenue related to the acquired PK operations of $207.2 million, or an increase of 7.6%, and larger volumes across all verticals over the prior year period.

Our revenue increased 13.7% in the nine months ended August 31, 2022 compared to the nine months ended August 31, 2021, which included revenue from acquired operations of $349.7 million, or an increase of 8.5%, and larger volumes across all verticals over the prior year period.

These increases were partially offset by a decrease in revenue related to divested businesses of $37.9 million, or 0.9%, and an unfavorable translation effect of foreign currencies of $120.9 million, or 2.9%.

The unfavorable foreign currency translation effect on revenue was primarily due to the weakening of the euro, Japanese yen, British pound and Australian dollar against the U.S.

For the three and six months ended May 31, 2022, revenue in our technology and consumer electronics vertical increased as a result of increases in volumes from several social media and internet-related service clients and increases in volumes from a broad-based group of hardware and software clients over the prior year periods.

For the three and six months ended May 31, 2022, revenue

in our communications and media vertical increased primarily due to contributions from the PK operations resulting in increased volumes over the prior year periods.

For the three and six months ended May 31, 2022, revenue in our retail, travel and ecommerce vertical increased primarily due to contributions from the PK operations and increased volumes across the majority of our retail and ecommerce and travel and tourism clients over the prior year periods.

For the three and six months ended May 31, 2022, revenue from clients in the banking, financial services and insurance vertical increased due to increased volumes from several banking and financial services clients offset by a decrease in volumes related to several of our insurance clients.

For the three and six months ended May 31, 2022, revenue in our healthcare vertical increased due to contributions from the PK operations and increased volumes across the majority of our health insurance clients.

For the three and six months ended May 31, 2022, revenue in our other vertical increased primarily reflecting contributions from the PK operations.

For the three and nine months ended August 31, 2022, revenue in our technology and consumer electronics vertical increased as a result of increases in volumes from several social media and internet-related service clients, increases in volumes from a broad-based group of hardware and software clients and increases due to contributions from acquired operations over the prior year periods.

For the three and nine months ended August 31, 2022, revenue in our communications and media vertical increased primarily due to

contributions from acquired operations.

For the three and nine months ended August 31, 2022, revenue in our retail, travel and ecommerce vertical increased primarily due to contributions from acquired operations and increased volumes across the majority of our retail and ecommerce and travel and tourism clients over the prior year periods.

For the three and nine months ended August 31, 2022, revenue from clients in the banking, financial services and insurance vertical increased due to increased volumes from several banking and financial services clients offset by a decrease in volumes related to several of our insurance clients.

For the three and nine months ended August 31, 2022, revenue in our healthcare vertical increased due to contributions from acquired operations and increased volumes across the majority of our health insurance clients over the prior year periods.

For the three and nine months ended August 31, 2022, revenue in our other vertical increased primarily due to contributions from acquired operations.

Cost of Revenue, Gross Profit and Gross Margin Percentage

Three Months Ended % Change Six Months Ended % Change

May 31, 2022 May 31, 2021 2022 to 2021 May 31, 2022 May 31, 2021 2022 to 2021

Three Months Ended % Change Nine Months Ended % Change

August 31, 2022 August 31, 2021 2022 to 2021 August 31, 2022 August 31, 2021 2022 to 2021

($ in thousands) ($ in thousands)

3 unchanged sentences

Cost of revenue consists primarily of personnel costs.

Gross margins can be impacted by resource location, client mix and pricing, additional lead time for programs to be fully scalable, and transition and initial set-up costs.

Our cost of revenue increased by 13.8% in t he three months ended May 31, 2022 compared to the three months ended May 31, 2021, primarily due to the increase in our revenue and personnel costs related to staff supporting the acquired PK operations.

The increases were partially offset by foreign currency impacts of $34.5 million.

Gross margin can be impacted by resource location, client mix and pricing, additional lead time for programs to be fully scalable, and transition and initial set-up costs.

Our cost of revenue increased by 10.6% in t he three months ended August 31, 2022 compared to the three months ended August 31, 2021, primarily due to the increase in our revenue and personnel costs related to staff supporting acquired operations.

The increases were partially offset by foreign currency impacts of $56.8 million, or 6.2%.

The foreign currency impact on our cost of revenue was caused primarily by the weakening of the euro, Philippine peso, Japanese yen, and British pound against the U.S.

Our cost of revenue increased by 14.4% in t he six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to the increase in our revenue and personnel costs related to staff supporting the acquired PK operations during the six months ended May 31, 2022.

The increases were partially offset by foreign currency impacts of $57.2 million.

Our cost of revenue increased by 13.1% in t he nine months ended August 31, 2022 compared to the nine months ended August 31, 2021, primarily due to the increase in our revenue and personnel costs related to staff supporting acquired operations during the nine months ended August 31, 2022.

The increases were partially offset by foreign currency impacts of $113.9 million, or 4.3%.

The foreign currency impact on our cost of revenue was caused primarily by the weakening of the euro, Philippine peso, Japanese yen, and British pound against the U.S.

Our gross profit increased 15.8% in the three months ended May 31, 2022 compared to the three months ended May 31, 2021, primarily due to the increase in revenue and the contributions from the PK operations, partially offset by a net unfavorable foreign currency impact of $2.2 million on gross profit.

Our gross margin percentage for the three months ended May 31, 2022 increased to 35.6% from 35.2% in the prior year period due to the impact of the PK operations and changes in the mix of geographies where our services were delivered.

Our gross profit increased 13.2% in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to the increase in revenue and the contributions from approximately five months of the PK operations, partially offset by a net unfavorable foreign currency impact of $5.1 million on gross profit.

Our gross margin percentage for the six months ended May 31, 2022 decreased to 35.3% from 35.6% in the prior year period due to the impact of approximately five months of the PK operations and changes in the mix of geographies where our services were delivered.

Our gross profit increased 17.8% in the three months ended August 31, 2022 compared to the three months ended August 31, 2021, primarily due to the increase in revenue and the contributions from acquired operations, partially offset by a net unfavorable foreign currency impact of $1.8 million on gross profit.

Our gross margin percentage for the three months ended August 31, 2022 increased to 35.9% from 34.4% in the prior year period due to changes in the mix of geographies where our services were delivered.

Our gross profit increased 14.7% in the nine months ended August 31, 2022 compared to the nine months ended August 31, 2021, primarily due to the increase in revenue and the contributions from acquired operations, partially offset by a net unfavorable foreign currency impact of $7.0 million on gross profit.

Our gross margin percentage for the nine months ended August 31, 2022 increased to 35.5% from 35.2% in the prior year period due to changes in the mix of geographies where our services were delivered.

Selling, General and Administrative Expenses

Three Months Ended % Change Six Months Ended % Change

May 31, 2022 May 31, 2021 2022 to 2021 May 31, 2022 May 31, 2021 2022 to 2021

Three Months Ended % Change Nine Months Ended % Change

August 31, 2022 August 31, 2021 2022 to 2021 August 31, 2022 August 31, 2021 2022 to 2021

($ in thousands) ($ in thousands)

3 unchanged sentences

Our selling, general and administrative expenses consist primarily of support personnel costs such as salaries, commissions, bonuses, employee benefits and share-based compensation costs.

Selling, general and administrative expenses also include the cost of

our global delivery facilities, utility expenses, hardware and software costs related to our technology infrastructure, legal and professional fees, depreciation on our technology and facility equipment, share-based compensation expense, amortization of intangible assets resulting from acquisitions, marketing expenses and acquisition-related and integration expenses.

Our selling, general and administrative expenses increased 13.4% in the three months ended May 31, 2022 compared to the three months ended May 31, 2021, primarily due to incremental selling, general and administrative expenses associated with the PK operations, an increase in share-based compensation expense of $3.3 million, an increase in amortization expense of $6.9 million primarily associated with the intangible assets recognized in the PK acquisition and an increase in acquisition-related and integration expenses of $1.7 million.

Selling, general and administrative expenses also include the cost of our global delivery facilities, utility expenses, hardware and software costs related to our technology infrastructure, legal and professional fees, depreciation on our technology and facility equipment, amortization of intangible assets resulting from acquisitions, marketing expenses and acquisition-related and integration expenses.

Our selling, general and administrative expenses increased 24.0% in the three months ended August 31, 2022 compared to the three months ended August 31, 2021, primarily due to incremental selling, general and administrative expenses associated with the acquired operations, an increase in amortization expense of $7.5 million primarily associated with the intangible assets recognized in the acquisitions of PK and ServiceSource, and an increase in acquisition-related and integration expenses of $12.6 million.

These increases were partially offset by favorable currency impacts of $16.2 million.

These items and scale efficiencies resulted in a decrease in selling, general and administrative expenses as a percentage of revenue from 25.9% in the second fiscal quarter of 2021 to 25.6% in the second fiscal quarter of 2022.

Our selling, general and administrative expenses increased 12.3% in the six months ended May 31, 2022 compared to the six months ended May 31, 2021, primarily due to incremental selling, general and administrative expenses associated with approximately five months of the PK operations during the first half of 2022, an increase in share-based compensation expense of $11.4 million, an increase in amortization expense of $10.3 million primarily associated with the intangible assets recognized in the acquisition of PK and an increase in acquisition-related and integration expenses of $2.6 million.

These items resulted in an increase in in selling, general and administrative expenses as a percentage of revenue from 23.6% in the third fiscal quarter of 2021 to 25.9% in the third fiscal quarter of 2022.

Our selling, general and administrative expenses increased 16.0% in the nine months ended August 31, 2022 compared to the nine months ended August 31, 2021, primarily due to incremental selling, general and administrative expenses associated with the acquired operations, an increase in share-based compensation expense of $11.8 million, an increase in amortization expense of $17.8 million primarily associated with the intangible assets recognized in the acquisitions of PK and ServiceSource, and an increase in acquisition-related and integration expenses of $15.2 million.

These increases were partially offset by favorable currency impacts of $32.4 million.

These items and scale efficiencies resulted in a decrease in selling, general and administrative expenses as a percentage of revenue from 25.9% in the six months ended May 31, 2021 to 25.5% in the six months ended May 31, 2022.

These items resulted in an increase in selling, general and administrative expenses as a percentage of revenue from 25.1% in the nine months ended August 31, 2021 to 25.7% in the nine months ended August 31, 2022.

Operating Income

Three Months Ended % Change Six Months Ended % Change

May 31, 2022 May 31, 2021 2022 to 2021 May 31, 2022 May 31, 2021 2022 to 2021

Three Months Ended % Change Nine Months Ended % Change

August 31, 2022 August 31, 2021 2022 to 2021 August 31, 2022 August 31, 2021 2022 to 2021

($ in thousands) ($ in thousands)

1 unchanged sentence

Operating margin 10.0 % 10.8 % 9.9 % 10.1 %

Our operating income increased during the three and six months ended May 31, 2022 compared to the three and six months ended May 31, 2021 due to the increase in gross profit partially offset by the increase in selling, general and administrative expenses.

Our operating margin increased during the three months ended May 31, 2022 compared to the three months ended May 31, 2021 due to the increase in gross margin percentage and the decrease in selling, general and administrative expenses as a percentage of revenue.

Our operating margin increased during the six months ended May 31, 2022 compared to the six months ended May 31, 2021 due to the decrease in selling, general and administrative expenses as a percentage of revenue more than offsetting the decrease in gross margin percentage.

Our operating income increased during the three and nine months ended August 31, 2022 compared to the three and nine months ended August 31, 2021 due to the increase in gross profit partially offset by the increase in selling, general and administrative expenses.

Our operating margin decreased during the three and nine months ended August 31, 2022 compared to the three and nine months ended August 31, 2021 due to the increase in gross margin percentage more than offset by the increase in selling, general and administrative expenses as a percentage of revenue.

Interest Expense and Finance Charges, Net

Three Months Ended % Change Six Months Ended % Change

May 31, 2022 May 31, 2021 2022 to 2021 May 31, 2022 May 31, 2021 2022 to 2021

Three Months Ended % Change Nine Months Ended % Change

August 31, 2022 August 31, 2021 2022 to 2021 August 31, 2022 August 31, 2021 2022 to 2021

($ in thousands) ($ in thousands)

2 unchanged sentences

Amounts recorded in interest expense and finance charges, net consist primarily of interest on our Prior Term Loan and our Term Loan under our Credit Facility and interest on our Securitization Facility borrowings.

The increase in interest expense for the three months and six months ended May 31, 2022 compared to the three and six months ended May 31, 2021, was due to the interest expense on the increase in borrowings incurred on the Term Loan as part of our Amended Credit Facility entered into in connection with the PK acquisition.

The increase in interest expense for the three and nine months ended August 31, 2022 compared to the three and nine months ended August 31, 2021, was due to the increase in borrowings and an increased interest rate on the Term Loan under our Credit Facility and increased borrowings and an increased interest rate under the Securitization Facility.

The increased borrowings primarily result from borrowings incurred for the acquisitions of PK and ServiceSource in fiscal year 2022.

Other Expense (Income), Net

Three Months Ended % Change Six Months Ended % Change

May 31, 2022 May 31, 2021 2022 to 2021 May 31, 2022 May 31, 2021 2022 to 2021

Three Months Ended % Change Nine Months Ended % Change

August 31, 2022 August 31, 2021 2022 to 2021 August 31, 2022 August 31, 2021 2022 to 2021

($ in thousands) ($ in thousands)

2 unchanged sentences

Amounts recorded as other expense (income), net include foreign currency transaction gains and losses other than cash flow hedges, investment gains and losses, non-service component of pension costs, and other non-operating gains and losses.

Other expense (income), net in the three months ended May 31, 2022 was income of $2.5 million in comparison to income of $3.5 million in the three months ended May 31, 2021.

The change in other expense (income), net was primarily due to less favorable foreign currency transaction changes compared to the prior year period.

Other expense (income), net in the six months ended May 31, 2022 was income of $10.2 million in comparison to expense of $0.3 million in the six months ended May 31, 2021.

Other expense (income), net in the three months ended August 31, 2022 was income of $12.1 million compared to income of $5.9 million in the three months ended August 31, 2021.

The change in other expense (income), net was primarily due to favorable foreign currency transaction changes compared to the prior year period.

Other expense (income), net in the nine months ended August 31, 2022 was income of $22.2 million in comparison to income of $5.6 million in the nine months ended August 31, 2021.

The change in other expense (income), net was primarily due to favorable foreign currency transaction changes compared to the prior year period.

Provision for Income Taxes

Three Months Ended % Change Six Months Ended % Change

May 31, 2022 May 31, 2021 2022 to 2021 May 31, 2022 May 31, 2021 2022 to 2021

Three Months Ended % Change Nine Months Ended % Change

August 31, 2022 August 31, 2021 2022 to 2021 August 31, 2022 August 31, 2021 2022 to 2021

($ in thousands) ($ in thousands)

2 unchanged sentences

Provision for income taxes consist of our current and deferred tax expense resulting from our income earned in domestic and international jurisdictions.

Our provision for income taxes decreased in the three and six months ended May 31, 2022 compared to the three and six months ended May 31, 2021, primarily due to the additional expense of $9.2 million in the second quarter of 2021 related to the change in our indefinite reinvestment assertion for Concentrix Insurance Solutions (“CIS”) due to the then-pending sale that closed in the third quarter of 2021, income tax benefits of $5.4 million and $7.3 million for the three and six months ended May 31, 2022, respectively, related to favorable changes in uncertain tax positions and favorable tax rulings, partially offset by the increase in expense as a result of the increase in income before taxes.

The effective tax rate for the three month and six months ended May 31, 2022 decreased compared to the prior year periods primarily due to the decrease in the provision for income taxes as previously described, despite the overall increase in income before taxes.

Our provision for income taxes decreased in the three and nine months ended August 31, 2022 compared to the three and nine months ended August 31, 2021, primarily due to an additional expense of $3.7 million and $13.0 million, respectively, during the three and nine months ended August 31, 2021 related to the divestiture of Concentrix Insurance Solutions (“CIS”).

The decrease in the three months ended August 31, 2022 was partially offset by higher income tax expense due to the change in mix of income earned in different tax jurisdictions between periods.

The decrease in the nine months ended August 31, 2022 was partially offset by an increase in income taxes as a result of an increase in income before taxes between periods.

The effective tax rate for the three months ended August 31, 2022 increased slightly compared to the prior year period primarily due to the change in mix of income earned in different tax jurisdictions between periods partially offset by the impact of the CIS divestiture as previously described.

The effective tax rate for the nine months ended August 31, 2022 decreased compared to the prior year period primarily due to the decrease in the provision for income taxes as previously described.

Certain Non-GAAP Financial Information

28 unchanged sentences

These non-GAAP financial measures also exclude share-based compensation expense.

Given the subjective assumptions and the variety of award types that companies can use when calculating share-based compensation expense, management believes this additional information allows investors to make additional comparisons between our operating results and those of our peers.

Given the subjective assumptions and the variety of award types that companies can use when calculating

share-based compensation expense, management believes this additional information allows investors to make additional comparisons between our operating results and those of our peers.

As these non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies.

These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

Three Months Ended Six Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

($ in thousands)

4 unchanged sentences

Revenue in adjusted constant currency $ 1,495,707 $ 1,391,916 $ 4,454,981 $ 4,082,496

Three Months Ended Six Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended Nine Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

($ in thousands, except per share amounts)

3 unchanged sentences

Share-based compensation 9,862 9,457 37,678 25,858

Gain on divestitures and related transaction costs — (13,197) — (13,197)

Non-GAAP operating income $ 221,472 $ 181,636 $ 636,118 $ 530,348

5 unchanged sentences

Acquisition-related and integration expenses 12,565 — 15,213 —

Gain on divestitures and related transaction costs — (13,197) — (13,197)

Amortization of intangibles 41,500 33,997 121,025 103,195

9 unchanged sentences

Share-based compensation 9,862 9,457 37,678 25,858

Gain on divestitures and related transaction costs — (13,197) — (13,197)

Income taxes related to the above (1)

(16,237) (8,315) (44,170) (20,742)

Income tax effect of assets held for sale (2)

— 9,247 — 9,247

Non-GAAP net income $ 154,380 $ 131,696 $ 459,851 $ 376,583

3 unchanged sentences

Share-based compensation 0.19 0.18 0.72 0.49

Gain on divestitures and related transaction costs — (0.25) — (0.25)

Income taxes related to the above (1)

(0.31) (0.16) (0.85) (0.40)

Income tax effect of assets held for sale (2)

— 0.18 — 0.18

Non-GAAP Diluted EPS $ 2.95 $ 2.49 $ 8.74 $ 7.15

(1) The tax effect of taxable and deductible non-GAAP adjustments was calculated using the tax deductible portion of the expenses and applying the entity specific, statutory tax rates applicable to each item during the respective periods.

(2) In the second quarter of fiscal year 2021, we announced a definitive agreement to sell our CIS business and, therefore, as of May 31, 2021, we were no longer indefinitely reinvested with respect to our investment in this subsidiary.

This amount represents the income tax impact of the change in this reinvestment assertion for the three and six months ended May 31, 2021.

Liquidity and Capital Resources

Our primary uses of cash are working capital, capital expenditures to expand our delivery footprint and enhance our technology solutions, debt repayments and acquisitions, including our recent acquisition of PK and our pending acquisition of ServiceSource.

Our financing needs for these uses of cash have been a combination of operating cash flows and third-party debt arrangements.

8 unchanged sentences

The repurchase program has no termination date and may be suspended or discontinued at any time.

During the three and six months ended May 31, 2022, we purchased 366,704 shares of our common stock under the program for approximately $57.9 million in the aggregate.

At May 31, 2022, approximately $417.1 million remained available for share repurchases under the existing authorization from the Company’s board of directors.

During June 2022, we repurchased 92,306 aggregate shares of our common stock for an aggregate purchase price of $13.8 million.

During the three and nine months ended August 31, 2022, we purchased 359,355 and 726,059 shares, respectively, of our common stock under the program for approximately $49.0 and $106.8 million, respectively, in the aggregate.

At August 31, 2022, approximately $368.1 million remained available for share repurchases under the existing authorization from the Company’s board of directors.

During September 2022, we repurchased 105,840 shares of our common stock for an aggregate purchase price of $12.9 million.

During fiscal years 2022 and 2021, the Company has paid the following dividends per share approved by the Company’s board of directors:

3 unchanged sentences

March 29, 2022 April 29, 2022 $0.25 May 10, 2022

On June 27, 2022, we announced a cash dividend of $0.25 per share to stockholders of record as of July 29, 2022, payable on August 9, 2022.

June 27, 2022 July 29, 2022 $0.25 August 9, 2022

On September 28, 2022, we announced a cash dividend of $0.275 per share to stockholders of record as of October 28, 2022, payable on November 8, 2022.

The board of directors expects that future cash dividends will be paid on a quarterly basis.

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Credit Facility

On December 27, 2021, in connection with the closing of the acquisition of PK, we entered into an amendment of our senior secured credit facility (the “Credit Facility”) to (i) refinance the then-outstanding term loan (the “Prior Term Loan”) with a new term loan, which was fully advanced, in the aggregate outstanding principal amount of $2,100 million (the “Term Loan”), (ii) increase the commitments under our revolving credit facility (the “Revolver”) to $1,000 million, (iii) extend the maturity of the Credit Facility from November 30, 2025 to December 27, 2026, (iv) replace LIBOR with SOFR as the primary reference rate used to calculate interest on the loans under the Credit Facility, and (v) modify the commitment fee on the unused portion of the Revolver and the margins in excess of the reference rates at which the loans under the Credit Facility bear interest.

The proceeds from the Term Loan and additional borrowings under the Securitization Facility were used to repay the outstanding principal amount of the Prior Term

Loan and to finance the acquisition of PK, including the repayment of certain indebtedness of PK and the payment of fees and expenses in connection with the acquisition.

Borrowings under the Credit Facility bear interest, in the case of SOFR rate loans, at a per annum rate equal to the applicable SOFR rate (but not less than 0.0%), plus an adjustment of between 0.10% and 0.25% depending on the interest period of each SOFR loan, plus an applicable margin, which ranges from 1.25% to 2.00%, based on our consolidated leverage ratio.

Borrowings under the Credit Facility that are not SOFR rate loans bear interest at a per annum rate equal to (i) the greatest of (a) the Federal Funds Rate in effect on such day plus ½ of 1.00%, (b) the rate of interest last publicly announced by Bank of America as its “prime rate” and (c) the term SOFR rate plus 1.00%, plus (ii) an applicable margin, which ranges from 0.25% to 1.00%, based on our consolidated leverage ratio.

margins in excess of the reference rates at which the loans under the Credit Facility bear interest.

The proceeds from the Term Loan and additional borrowings under the Securitization Facility were used to repay the outstanding principal amount of the Prior Term Loan and to finance the acquisition of PK, including the repayment of certain indebtedness of PK and the payment of fees and expenses in connection with the acquisition.

Borrowings under the Credit Facility bear interest, in the case of term or daily SOFR loans, at a per annum rate equal to the applicable SOFR rate (but not less than 0.0%), plus an adjustment of between 0.10% and 0.25% depending on the interest period of each SOFR loan, plus an applicable margin, which ranges from 1.25% to 2.00%, based on our consolidated leverage ratio.

Borrowings under the Credit Facility that are base rate loans bear interest at a per annum rate equal to (i) the greatest of (a) the Federal Funds Rate in effect on such day plus ½ of 1.00%, (b) the rate of interest last publicly announced by Bank of America as its “prime rate” and (c) the term SOFR rate plus 1.00%, plus (ii) an applicable margin, which ranges from 0.25% to 1.00%, based on our consolidated leverage ratio.

A commitment fee is payable on the unused portion of the Revolver that ranges from 22.5 to 30 basis points, based on our consolidated leverage ratio.

Beginning August 31, 2022, the outstanding principal of the Term Loan is payable in quarterly installments of $26.25 million, with the unpaid balance due in full on the maturity date.

During the three months ended August 31, 2022, we paid $125.0 million of the principal balance on the Term Loan, including $98.75 million of voluntary prepayments, without penalty.

We may request, subject to obtaining commitments from any participating lenders and certain other conditions, incremental commitments to increase the amount of the Revolver or the Term Loan available under the Credit Facility in an aggregate principal amount of up to $450 million, plus an additional amount, so long as after giving effect to the incurrence of such additional amount, our pro forma first lien leverage ratio (as defined in the Credit Facility) would not exceed 3.00 to 1.00.

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The Credit Facility also contains various customary events of default, including payment defaults, defaults under certain other indebtedness, and a change of control of Concentrix.

Prior to being amended in December 2021, we initially entered into our senior secured credit facility on October 16, 2020, and it initially provided for the extension of revolving loans of up to $600 million and term loan borrowings of up to $900 million.

Prior to it being amended in December 2021, we initially entered into our senior secured credit facility on October 16, 2020, to provide for the extension of revolving loans of up to $600 million and term loan borrowings of up to $900 million.

On November 30, 2020, in connection with the spin-off, we incurred the full $900 million of term loan borrowings under the Credit Facility and $250 million of borrowings under the Securitization Facility (as defined below).

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During the fiscal year ended November 30, 2021, we paid $200.0 million of the principal balance on the Prior Term Loan, including $166.25 million of voluntary prepayments, without penalty.

We had no outstanding borrowings on the Revolver as of May 31, 2022 or November 30, 2021.

We had no outstanding borrowings on the Revolver as of August 31, 2022 or November 30, 2021.

Securitization Facility

On October 30, 2020, we entered into a $350 million accounts receivable securitization facility (the “Securitization Facility”) pursuant to certain agreements, including a receivables financing agreement and a receivables purchase agreement.

The Securitization Facility has a termination date of October 28, 2022.

On July 6, 2022, we entered into an amendment to our accounts receivable securitization facility (the “Securitization Facility”) to (i) increase the commitment of the lenders to provide available borrowings of up to $500 million, (ii) extend the termination date of the Securitization Facility from October 28, 2022 to July 5, 2024, and (iii) replace LIBOR with SOFR as one of the reference rates used to calculate interest on borrowings under the Securitization Facility.

In addition, the interest rate margins were amended, such that borrowings under the Securitization Facility that are funded through the issuance of commercial paper bear interest at the

applicable commercial paper rate plus a spread of 0.70% and, otherwise, at a per annum rate equal to the applicable SOFR rate (which includes a SOFR related adjustment of 0.10%), plus a spread of 0.80%.

Under the Securitization Facility, Concentrix and certain of its U.S.

based subsidiaries (the “Originators”) sell or otherwise transfer all of their accounts receivable to a special purpose bankruptcy-remote subsidiary of Concentrix that grants a security interest in the receivables to the lenders in exchange for available borrowings of up to $500 million.

certain characteristics of the accounts receivable being transferred (including factors tracking performance of the accounts receivable over time).

Borrowings under the Securitization Facility bear interest with respect to loans that are funded through the issuance of commercial paper at the applicable commercial paper rate plus a spread of 1.05% and, otherwise, at a per annum rate equal to the applicable LIBOR rate plus a spread of 1.15%.

We are also obligated to pay a monthly undrawn fee that ranges from 30 to 37.5 basis points based on the portion of the Securitization Facility that is undrawn.

Borrowing availability under the Securitization Facility may be limited by our accounts receivable balances, changes in the credit ratings of our clients comprising the receivables, client concentration levels in the receivables, and certain characteristics of the accounts receivable being transferred (including factors tracking performance of the accounts receivable over time).

The Securitization Facility contains various affirmative and negative covenants, including a consolidated leverage ratio covenant that is consistent with the Credit Facility and customary events of default, including payment defaults, defaults under certain other indebtedness, a change in control of Concentrix, and certain events negatively affecting the overall credit quality of the transferred accounts receivable.

As of May 31, 2022, we were in compliance with the debt covenants related to our debt arrangements.

Cash Flows – Six Months Ended May 31, 2022 and 2021

The following summarizes our cash flows for the six months ended May 31, 2022 and 2021, as reported in our consolidated statement of cash flows in the accompanying consolidated financial statements.

Six Months Ended

May 31, 2022 May 31, 2021

Prior to it being amended in July 2022, we initially entered into our accounts receivable securitization facility on October 30, 2020, to provide available borrowings of up to $350 million pursuant to certain agreements, including a Receivables Financing Agreement and a Receivables Purchase Agreement.

On November 30, 2020, in connection with the spin-off, we incurred $250 million of borrowings under the Securitization Facility.

Substantially all of the proceeds from such borrowings were transferred to TD SYNNEX on November 30, 2020 to eliminate debt owed by Concentrix to TD SYNNEX and in exchange for the contribution of certain Concentrix trademarks from TD SYNNEX to Concentrix.

As of August 31, 2022, we were in compliance with the debt covenants related to our debt arrangements.

Cash Flows – Nine Months Ended August 31, 2022 and 2021

The following summarizes our cash flows for the nine months ended August 31, 2022 and 2021, as reported in our consolidated statement of cash flows in the accompanying consolidated financial statements.

Nine Months Ended

August 31, 2022 August 31, 2021

($ in thousands)

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Operating Activities

Net cash provided by operating activities was $212.5 million for the six months ended May 31, 2022 in comparison to $239.1 million for the six months ended May 31, 2021.

The decrease in net cash provided by operating activities over the prior year period was primarily due to changes in working capital over the prior year period partially offset by the increase in net income.

Net cash provided by operating activities was $365.0 million for the nine months ended August 31, 2022 compared to $332.1 million for the nine months ended August 31, 2021.

The increase in net cash provided by operating activities over the prior year period was primarily due to the increase in net income partially offset by changes in working capital over the prior year period.

Investing Activities

Net cash used in investing activities for the six months ended May 31, 2022 was $1,637.4 million in comparison to $73.8 million for the six months ended May 31, 2021.

The increase in net cash used in investing activities over the prior year period primarily related to the cash paid in connection with our acquisition of PK of $1,565.3 million.

Net cash used in investing activities for the nine months ended August 31, 2022 was $1,803.7 million compared to $42.4 million for the nine months ended August 31, 2021.

The increase in net cash used in investing activities over the prior year period primarily related to the aggregate cash paid in connection with our acquisitions of PK and ServiceSource of $1,705.4 million.

Financing Activities

Net cash provided by financing activities for the six months ended May 31, 2022 was $1,415.4 million, consisting primarily of net proceeds of $1,400.0 million from the refinancing of the Prior Term Loan with the Term Loan under the Credit Facility and net proceeds of $106.0 million from borrowings under the Securitization Facility, offset by share repurchases of $57.9 million, cash paid for debt issuance costs of $8.9 million and dividends of $26.2 million.

Net cash used in financing activities for the six months ended May 31, 2021 was $182.6 million, consisting primarily of the payment of $200.0 million of the principal balance of the Prior Term Loan under the Credit Facility (prior to giving effect to the

December 2021 amendment), partially offset by net borrowings of $12.5 million under the Securitization Facility and proceeds from the exercise of stock options and employee stock purchase plan of $5.4 million.

Net cash provided by financing activities for the nine months ended August 31, 2022 was $1,456.0 million, consisting primarily of net proceeds of $1,400.0 million from the refinancing of the Prior Term Loan with the Term Loan under the Credit Facility, payments of $125.0 million made on the Term Loan during the three months ended August 31, 2022 and net proceeds of $335.0 million from borrowings under the Securitization Facility.

The increases were offset primarily by share repurchases of $106.8 million, cash paid for debt issuance costs of $9.3 million and dividends of $39.1 million.

Net cash used in financing activities for the nine months ended August 31, 2021 was $288.1 million, consisting primarily of principal payments of $200.0 million on the Prior Term Loan under the Credit Facility (prior to giving effect to the December 2021 amendment) and net payments of $81.0 million under the Securitization Facility.

We believe our current cash balances and credit availability are enough to support our operating activities for at least the next twelve months.

Free Cash Flow (a non-GAAP measure)

Six Months Ended

May 31, 2022 May 31, 2021

Nine Months Ended

August 31, 2022 August 31, 2021

($ in thousands)

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Free cash flow (a non-GAAP measure) $ 267,765 $ 219,256

Our free cash flow was $141.3 million for the six months ended May 31, 2022 compared to $168.4 million for the six months ended May 31, 2021.

The decrease in free cash flow for the six months ended May 31, 2022 was due to the decrease in cash provided by operating activities and a slight increase in capital expenditures.

Our free cash flow was $267.8 million for the nine months ended August 31, 2022 compared to $219.3 million for the nine months ended August 31, 2021.

The increase in free cash flow for the nine months ended August 31, 2022 was due to the increase in cash provided by operating activities and a decrease in capital expenditures.

Capital Resources

As of May 31, 2022, we had total liquidity of approximately $1,302.4 million, which includes undrawn Revolver capacity of $1,000.0 million on the Credit Facility, undrawn capacity of $139.0 million on the Securitization Facility and cash and cash equivalents.

Our cash and cash equivalents totaled $163.4 million and $182.0 million as of May 31, 2022 and November 30, 2021, respectively.

As of August 31, 2022, we had total liquidity of approximately $1,216.7 million, which includes undrawn Revolver capacity of $1,000.0 million on the Credit Facility, undrawn capacity of $40.6 million on the Securitization Facility and cash and cash equivalents.

Our cash and cash equivalents totaled $176.1 million and $182.0 million as of August 31, 2022 and November 30, 2021, respectively.

Of our total cash and cash equivalents, 98% and 87% were held by our non-U.S.

legal entities as of May 31, 2022 and November 30, 2021, respectively.

legal entities as of August 31, 2022 and November 30, 2021, respectively.

The cash and cash equivalents held by our non-U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis