Concentrix Corp 10-Q

ITEM 1. FINANCIAL STATEMENTS CONCENTRIX CORPORATION CONSOLIDATED BALANCE SHEETS (currency and share amounts in thousands, except par value) February 29, 2024 November 30, 2023 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 234,794 $ 295,336 Accounts receivable, net 1,927,644 1,888,890 Other current assets 619,483 674,423 Total current assets 2,781,921 2,858,649 Property and equipment, net 730,242 748,691 Goodwill 5,030,656 5,078,668 Intangible assets, net 2,672,636 2,804,965 Deferred tax assets 76,088 72,333 Other assets 951,316 928,521 Total assets $ 12,242,859 $ 12,491,827 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 202,362 $ 243,565 Current portion of long-term debt 2,714 2,313 Accrued compensation and benefits 594,341 731,172 Other accrued liabilities 923,744 1,016,406 Income taxes payable 59,605 80,583 Total current liabilities 1,782,766 2,074,039 Long-term debt, net 5,034,109 4,939,712 Other long-term liabilities 938,435 920,536 Deferred tax liabilities 385,912 414,246 Total liabilities 8,141,222 8,348,533 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 February 29, 2024 and November 30, 2023, respectively — — Common stock, $ 0.0001 par value, 250,000 shares authorized; 67,981 and 67,883 shares issued as of February 29, 2024 and November 30, 2023, respectively, and 65,572 and 65,734 shares outstanding as of February 29, 2024 and November 30, 2023, respectively 7 7 Additional paid-in capital 3,605,694 3,582,521 Treasury stock, 2,409 and 2,149 shares as of February 29, 2024 and November 30, 2023, respectively ( 295,732 ) ( 271,968 ) Retained earnings 1,055,950 1,024,461 Accumulated other comprehensive loss ( 264,282 ) ( 191,727 ) Total stockholders’ equity 4,101,637 4,143,294 Total liabilities and stockholders’ equity $ 12,242,859 $ 12,491,827 The accompanying notes are an integral part of these consolidated financial statements. 2 CONCENTRIX CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (currency and share amounts in thousands, except per share amounts) (unaudited) Three Months Ended February 29, 2024 February 28, 2023 Revenue $ 2,402,748 $ 1,636,404 Cost of revenue 1,546,219 1,055,243 Gross profit 856,529 581,161 Selling, general and administrative expenses 708,090 425,114 Operating income 148,439 156,047 Interest expense and finance charges, net 82,439 33,990 Other expense (income), net ( 6,824 ) 3,714 Income before income taxes 72,824 118,343 Provision for income taxes 20,722 30,473 Net income $ 52,102 $ 87,870 Earnings per common share: Basic $ 0.76 $ 1.69 Diluted $ 0.76 $ 1.68 Weighted-average common shares outstanding: Basic 65,664 51,150 Diluted 65,790 51,476 The accompanying notes are an integral part of these consolidated financial statements. 3 CONCENTRIX CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (currency in thousands) (unaudited) Three Months Ended February 29, 2024 February 28, 2023 Net income before non-controlling interest $ 52,102 $ 87,870 Other comprehensive income (loss): Unrealized gains (losses) of defined benefit plans, net of taxes of $( 135 ) and $ 109 for the three months ended February 29, 2024 and February 28, 2023, respectively 1,304 ( 552 ) Unrealized gains (losses) on hedges during the period, net of taxes of $ 1,328 and $( 2,549 ) for the three months ended February 29, 2024 and February 28, 2023, respectively ( 4,020 ) 7,654 Reclassification of net (gains) losses on hedges to net income, net of taxes of $ 150 and $( 1,934 ) for the three months ended February 29, 2024 and February 28, 2023, respectively ( 427 ) 5,807 Total change in unrealized gains (losses) on hedges, net of taxes ( 4,447 ) 13,461 Foreign currency translation, net of taxes of $ 0 for the three months ended February 29, 2024 and February 28, 2023, respectively ( 69,412 ) 17,243 Other comprehensive income (loss) ( 72,555 ) 30,152 Comprehensive income (loss) $ ( 20,453 ) $ 118,022 The accompanying notes are an integral part of these consolidated financial statements. 4 CONCENTRIX CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (currency and share amounts in thousands) (unaudited) Three Months Ended February 29, 2024 and February 28, 2023 Common stock Treasury stock Shares Amount Additional paid-in capital Shares Amount Retained earnings Accumulated other comprehensive income (loss) Total stockholders’ equity Balances, November 30, 2022 52,367 $ 5 $ 2,428,313 1,271 $ ( 190,779 ) $ 774,114 $ ( 315,749 ) $ 2,695,904 Other comprehensive income — — — — — — 30,152 30,152 Share-based compensation activity 228 — 19,105 — — — — 19,105 Repurchase of common stock for tax withholdings on equity awards — — — 58 ( 8,216 ) — — ( 8,216 ) Repurchase of common stock — — — 71 ( 10,001 ) — — ( 10,001 ) Dividends — — — — — ( 14,313 ) — ( 14,313 ) Net income — — — — — 87,870 — 87,870 Balances, February 28, 2023 52,595 $ 5 $ 2,447,418 1,400 $ ( 208,996 ) $ 847,671 $ ( 285,597 ) $ 2,800,501 Balances, November 30, 2023 67,883 $ 7 $ 3,582,521 2,149 $ ( 271,968 ) $ 1,024,461 $ ( 191,727 ) $ 4,143,294 Other comprehensive loss — — — — — — ( 72,555 ) ( 72,555 ) Share-based compensation activity 98 — 23,173 — — — — 23,173 Repurchase of common stock for tax withholdings on equity awards — — — 23 ( 2,090 ) — — ( 2,090 ) Repurchase of common stock — — — 237 ( 21,674 ) — — ( 21,674 ) Dividends — — — — — ( 20,613 ) — ( 20,613 ) Net income — — — — — 52,102 — 52,102 Balances, February 29, 2024 67,981 $ 7 $ 3,605,694 2,409 $ ( 295,732 ) $ 1,055,950 $ ( 264,282 ) $ 4,101,637 The accompanying notes are an integral part of these consolidated financial statements. 5 CONCENTRIX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (currency in thousands) (unaudited) Three Months Ended February 29, 2024 February 28, 2023 Cash flows from operating activities: Net income before non-controlling interest $ 52,102 $ 87,870 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 67,758 38,175 Amortization 116,302 39,260 Non-cash share-based compensation expense 21,566 16,601 Provision for doubtful accounts ( 180 ) 1,722 Deferred income taxes ( 22,131 ) ( 7,393 ) Amortization of debt issuance costs 5,625 419 Pension and other post-retirement benefit costs 3,579 2,934 Pension and other post-retirement plan contributions ( 859 ) ( 615 ) Change in acquisition contingent consideration ( 14,897 ) — Other ( 96 ) 433 Changes in operating assets and liabilities: Accounts receivable, net ( 44,894 ) 112 Accounts payable ( 36,516 ) ( 9,672 ) Other operating assets and liabilities ( 194,229 ) ( 65,953 ) Net cash provided by (used in) operating activities ( 46,870 ) 103,893 Cash flows from investing activities: Purchases of property and equipment ( 56,059 ) ( 39,597 ) Acquisition of business, net of cash and restricted cash acquired ( 4,503 ) — Net cash used in investing activities ( 60,562 ) ( 39,597 ) Cash flows from financing activities: Proceeds from the Amended Credit Facility - Term Loan — — Repayments of the Amended Credit Facility - Term Loan ( 100,000 ) ( 25,000 ) Proceeds from the Securitization Facility 628,000 417,500 Repayments of the Securitization Facility ( 430,500 ) ( 397,000 ) Other debt proceeds 400 — Other debt repayments ( 2,792 ) — Proceeds from exercise of stock options 1,607 2,504 Repurchase of common stock for tax withholdings on equity awards ( 2,090 ) ( 8,216 ) Repurchase of common stock ( 21,674 ) ( 10,001 ) Dividends paid ( 20,613 ) ( 14,313 ) Change in funds held for clients ( 37,894 ) — Net cash provided by (used in) financing activities 14,444 ( 34,526 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 5,544 ) 2,797 Net increase (decrease) in cash, cash equivalents and restricted cash ( 98,532 ) 32,567 Cash, cash equivalents and restricted cash at beginning of year 516,487 157,463 Cash, cash equivalents and restricted cash at end of period $ 417,955 $ 190,030 Supplemental disclosure of non-cash investing activities: Accrued costs for property and equipment purchases $ 20,181 $ 5,747 The accompanying notes are an integral part of these consolidated financial statements. 6 CONCENTRIX CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (currency and share amounts in thousands, except per share amounts) NOTE 1— BACKGROUND AND BASIS OF PRESENTATION: Background Concentrix Corporation (“Concentrix,” the “CX business” or the “Company”), is a leading global provider of Customer Experience (“CX”) solutions and technology that help iconic and disruptive brands drive deep understanding, full lifecycle engagement, and differentiated experiences for their end-customers around the world. The Company provides end-to-end capabilities, including CX process optimization, technology innovation and design engineering, front- and back-office automation, analytics, and business transformation services to clients in five primary industry verticals. The Company’s primary verticals are technology and consumer electronics, 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, 2023 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, 2023. 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, 2023. 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, 2023. Recently adopted accounting pronouncements are discussed below. Concentration of credit risk For the three months ended February 29, 2024 and February 28, 2023, no client accounted for more than 10% of the Company’s consolidated revenue. As of February 29, 2024 and November 30, 2023, no client comprised more than 10% of the Company’s total accounts receivable balance. 7 Recently adopted accounting pronouncements In November 2023, the Financial Accounting Standards Board (the “FASB”) issued accounting standards update (“ASU”) 2023-07, which enhances the disclosures required for reportable segments in annual and interim consolidated financial statements. ASU 2023-07 is effective for the Company for annual reporting periods beginning with the fiscal year ending November 30, 2025 and for interim reporting periods beginning in fiscal year 2026. Early adoption is permitted. The Company is currently evaluating the impact that this update will have on its disclosures in the consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, which requires enhanced income tax disclosures, including disaggregation of information in the rate reconciliation table and disaggregated information related to income taxes paid. The amendments in ASU 2023-09 are effective for the fiscal year ending November 30, 2026. The Company is currently evaluating the impact that this update will have on its disclosures in 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: Webhelp Combination Background On September 25, 2023, the Company completed its acquisition (the “Webhelp Combination”) of all of the issued and outstanding capital stock (the “Shares”) 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 the Webhelp business (“Webhelp”), from the holders thereof (the “Sellers”). The Webhelp Combination was completed pursuant to the terms and conditions of the Share Purchase and Contribution Agreement, dated as of June 12, 2023, as amended by the First Amendment to the Share Purchase and Contribution Agreement, dated as of July 14, 2023 (the “SPA”), by and among Concentrix, 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 Corporation (“Purchaser”), Webhelp Parent, the Sellers, and certain representatives of the Sellers. Webhelp is a leading provider of CX solutions, including sales, marketing, and payment services, with significant operations and client relationships in Europe, Latin America, and Africa. Since the closing of the Webhelp Combination, the Company has operated under the trade name “Concentrix + Webhelp” while it transitions Webhelp operations and branding to the Concentrix name. Preliminary purchase price consideration The total preliminary purchase price consideration, net of cash and restricted cash acquired, for the acquisition of Webhelp was $ 3,774.8 million, which was funded by proceeds from the Company’s August 2023 offering and sale of senior notes, term loan borrowings under the Company’s senior credit facility, the issuance of shares of the Company’s common stock, and cash on hand. See Note 8 — Borrowings for a further discussion of the Company’s senior notes, term loan, and senior credit facility. 8 The preliminary purchase price consideration to acquire Webhelp consisted of the following: Cash consideration for Shares (1) $ 529,160 Cash consideration for repayment of Webhelp debt and shareholder loan (2) 1,915,197 Total cash consideration 2,444,357 Equity consideration (3) 1,084,894 Earnout shares contingent consideration (4) 32,919 Sellers’ note consideration (5) 711,830 Total consideration transferred 4,274,000 Less: Cash and restricted cash acquired (6) 499,211 Total purchase price consideration $ 3,774,789 (1) Represents the cash consideration paid, and to be paid, in the aggregate amount of € 500,000 , as adjusted in accordance with the SPA. (2) Represents the cash consideration paid to repay Webhelp’s outstanding senior loan debt and shareholder loan. (3) Represents the issuance of 14,862 shares of common stock, par value $ 0.0001 per share, of Concentrix Corporation (the “Concentrix common stock”). (4) Represents the contingent right for the Sellers to earn an additional 750 shares of Concentrix common stock (the “Earnout Shares”). The estimated fair value of this contingent consideration was determined using a Monte-Carlo simulation model. The inputs include the closing price of Concentrix common stock as of the Closing Date, Concentrix-specific historical equity volatility, and the risk-free rate. See further details below. (5) Represents a promissory note issued by Concentrix Corporation in the aggregate principal amount of € 700,000 to certain Sellers. See Note 8 — Borrowings for a further discussion of this promissory note. (6) Represents the Webhelp cash and restricted cash balance acquired at the Closing Date. The Company granted Sellers the contingent right to earn the Earnout Shares if certain conditions set forth in the SPA occur, including the share price of Concentrix common stock reaching $ 170.00 per share within seven years from the closing of the Webhelp Combination (the “Closing Date”) (based on daily volume weighted average prices measured over a specified period). Prior to the Closing Date, Concentrix and certain Sellers entered into stock restriction agreements (the “Stock Restriction Agreements”), pursuant to which such Sellers (the “Restricted Stock Participants”) agreed to contribute in kind to the Company, and the Company agreed to receive, certain of the Restricted Stock Participants’ Shares in exchange for the issuance of shares of Concentrix common stock with certain restrictions thereon (the “Restricted Shares”) in lieu of such Sellers’ right to a portion of the Earnout Shares. On the Closing Date, the Company issued approximately 80 Restricted Shares in exchange for certain of the Restricted Stock Participants’ Shares. The Restricted Shares are non-transferable and non-assignable and are not entitled to any dividends or distributions unless and until the restrictions lapse, as set forth in the Stock Restriction Agreements. The Restricted Shares will be automatically cancelled by the Company for no consideration in the event that the restrictions on the Restricted Shares do not lapse. The Restricted Stock Participants have waived any and all rights as a holder of Restricted Shares to vote on any matter submitted to the holders of Concentrix common stock. 9 Preliminary purchase price allocation The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations . 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, comprehensive service portfolio delivery capabilities, and strategic benefits that are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date: As of September 25, 2023 Assets acquired: Cash and cash equivalents $ 310,313 Accounts receivable 455,218 Other current assets (1) 454,465 Property and equipment 323,606 Identifiable intangible assets 1,984,000 Goodwill 2,098,531 Deferred tax assets 22,541 Other assets 410,085 6,058,759 Liabilities assumed: Accounts payable 67,558 Accrued compensation and benefits 246,450 Other accrued liabilities 576,549 Income taxes payable 72,227 Debt (current portion and long-term) 8,589 Deferred tax liabilities 411,788 Other long-term liabilities 401,598 Total liabilities assumed 1,784,759 Total consideration transferred $ 4,274,000 (1) Includes restricted cash acquired of $ 188,899 . As of February 29, 2024, the purchase price allocation is preliminary. The preliminary purchase price allocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period (not to exceed twelve months following the acquisition date). The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of identifiable intangible assets acquired, the fair value of certain tangible assets acquired and liabilities assumed, and deferred income taxes. The 10 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. As a result of further refining its estimates and assumptions since the date of the acquisition, the Company recorded measurement period adjustments to the initial purchase price allocation. Adjustments were primarily made to cash, goodwill, accrued compensation and benefits, accrued liabilities and deferred income taxes. These measurement period adjustments to the preliminary purchase price allocation during the three months ended February 29, 2024 were not material. The preliminary purchase price allocation includes $ 1,984,000 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 Webhelp Combination, 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 Webhelp. The preliminary amounts allocated to intangible assets are as follows: Gross Carrying Amount Weighted-Average Useful Life Amortization Method Customer relationships $ 1,882,000 15 years Accelerated Trade name 102,000 3 years Straight-line Total $ 1,984,000 Supplemental Pro Forma Information (unaudited) 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 combination with Webhelp had been completed on December 1, 2022, 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 combination with Webhelp had occurred on December 1, 2022 to give effect to certain events that the Company believes to be directly attributable to the acquisition. These pro forma adjustments primarily include: • A net increase in amortization expense that would have been recognized due to acquired identifiable intangible assets. • An increase in depreciation expense associated with the step up of fair values of property and equipment assets acquired. • A net increase to interest expense to reflect the additional borrowings of Concentrix incurred in connection with the combination as previously described and the repayment of Webhelp’s historical debt in conjunction with the combination. • The related income tax effects of the adjustments noted above. 11 The supplemental pro forma financial information for the prior period first fiscal quarter ended February 28, 2023 is as follows: Three Months Ended February 28, 2023 Revenue $ 2,362,015 Net income 17,482 Acquisition-related and integration expenses In connection with the Webhelp Combination and previous year acquisitions, the Company incurred $ 30,173 and $ 5,543 of acquisition-related and integration expenses for the three months ended February 29, 2024 and February 28, 2023, respectively. 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 February 2024, the Company granted 96 restricted stock units and 115 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 units had a weighted average grant date fair value of $ 89.28 per share and vest over a service period of three years . The performance-based restricted stock units will vest, if at all, upon the achievement of certain financial targets during the three-year period ending November 30, 2026. The performance-based restricted stock units had a grant date weighted average fair value of $ 85.71 per share. The Company recorded share-based compensation expense in the consolidated statements of operations for the three months ended February 29, 2024 and February 28, 2023 as follows: Three Months Ended February 29, 2024 February 28, 2023 Total share-based compensation $ 21,646 $ 16,754 Tax benefit recorded in the provision for income taxes ( 5,411 ) ( 4,188 ) Effect on net income $ 16,235 $ 12,566 Share-based compensation expense is included in selling, general and administrative expenses in the consolidated statements of operations. 12 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 February 29, 2024 November 30, 2023 Cash and cash equivalents $ 234,794 $ 295,336 Restricted cash included in other current assets 183,161 221,151 Cash, cash equivalents and restricted cash $ 417,955 $ 516,487 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. The Company had a corresponding current liability recorded in other accrued liabilities on the consolidated balance sheet related to funds held for clients of approximately $ 174,303 and $ 218,228 as of February 29, 2024 and November 30, 2023, respectively. Accounts receivable, net: Accounts receivable, net is comprised of the following as of February 29, 2024 and November 30, 2023: As of February 29, 2024 November 30, 2023 Billed accounts receivable $ 1,098,480 $ 1,082,469 Unbilled accounts receivable 840,339 818,954 Less: Allowance for doubtful accounts ( 11,175 ) ( 12,533 ) Accounts receivable, net $ 1,927,644 $ 1,888,890 Allowance for doubtful trade receivables: Presented below is a progression of the allowance for doubtful trade receivables: Three Months Ended February 29, 2024 February 28, 2023 Balance at beginning of period $ 12,533 $ 4,797 Net additions (reductions) ( 180 ) 1,722 Write-offs and reclassifications ( 1,178 ) ( 435 ) Balance at end of period $ 11,175 $ 6,084 13 Property and equipment, net: The following table summarizes the carrying amounts and related accumulated depreciation for property and equipment as of February 29, 2024 and November 30, 2023: As of February 29, 2024 November 30, 2023 Land $ 28,276 $ 28,039 Equipment, computers and software 777,778 762,961 Furniture and fixtures 157,760 157,425 Buildings, building improvements and leasehold improvements 567,571 566,384 Construction-in-progress 35,869 35,175 Total property and equipment, gross $ 1,567,254 $ 1,549,984 Less: Accumulated depreciation ( 837,012 ) ( 801,293 ) Property and equipment, net $ 730,242 $ 748,691 Shown below are the countries where 10% or more and other significant concentrations of the Company’s property and equipment, net are located as of February 29, 2024 and November 30, 2023: As of February 29, 2024 November 30, 2023 Property and equipment, net: United States $ 121,875 $ 123,335 Philippines 72,460 75,943 France 70,913 65,599 India 48,895 51,248 Others 416,099 432,566 Total $ 730,242 $ 748,691 Goodwill: The following table summarizes the changes in the Company’s goodwill for the three months ended February 29, 2024 and February 28, 2023: Three Months Ended February 29, 2024 February 28, 2023 Balance at beginning of period $ 5,078,668 $ 2,904,402 Acquisition measurement period adjustments 13,187 — Foreign exchange translation ( 61,199 ) 676 Balance at end of period $ 5,030,656 $ 2,905,078 14 Intangible assets, net: The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of February 29, 2024 and November 30, 2023: As of February 29, 2024 As of November 30, 2023 Gross amounts Accumulated amortization Net amounts Gross amounts Accumulated amortization Net amounts Customer relationships $ 3,652,193 $ ( 1,111,685 ) $ 2,540,508 $ 3,670,246 $ ( 1,011,201 ) $ 2,659,045 Technology 79,690 ( 39,642 ) 40,048 79,739 ( 36,174 ) 43,565 Trade names 117,948 ( 26,471 ) 91,477 118,823 ( 17,255 ) 101,568 Non-compete agreements 2,200 ( 1,597 ) 603 2,200 ( 1,413 ) 787 $ 3,852,031 $ ( 1,179,395 ) $ 2,672,636 $ 3,871,008 $ ( 1,066,043 ) $ 2,804,965 Estimated future amortization expense of the Company’s intangible assets is as follows: Fiscal years ending November 30, 2024 (remaining nine months) $ 344,518 2025 428,418 2026 381,018 2027 288,145 2028 244,272 Thereafter 986,265 Total $ 2,672,636 Accumulated other comprehensive income (loss): The components of accumulated other comprehensive income (loss) (“AOCI”), net of taxes, were as follows: Three Months Ended February 29, 2024 and February 28, 2023 Unrecognized gains (losses) on defined benefit plan, net of taxes Unrealized gains (losses) on hedges, net of taxes Foreign currency translation adjustments, net of taxes Total Balances at November 30, 2022 $ ( 8,471 ) $ ( 19,914 ) $ ( 287,364 ) $ ( 315,749 ) Other comprehensive income (loss) before reclassification ( 552 ) 7,654 17,243 24,345 Reclassification of losses from other comprehensive income (loss) — 5,807 — 5,807 Balances at February 28, 2023 $ ( 9,023 ) $ ( 6,453 ) $ ( 270,121 ) $ ( 285,597 ) Balances at November 30, 2023 $ ( 11,271 ) $ 4,489 $ ( 184,945 ) $ ( 191,727 ) Other comprehensive income (loss) before reclassification 1,304 ( 4,020 ) ( 69,412 ) ( 72,128 ) Reclassification of gains from other comprehensive income (loss) — ( 427 ) — ( 427 ) Balances at February 29, 2024 $ ( 9,967 ) $ 42 $ ( 254,357 ) $ ( 264,282 ) 15 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 February 2026. 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. Cross-currency interest rate swaps In connection with the closing of the Webhelp Combination, the Company entered into cross-currency swap arrangements with certain financial institutions for a total notional amount of $ 500,000 of the Company’s senior notes. In addition to aligning the currency of a portion of the Company’s interest payments to the Company’s euro-denominated cash flows, the arrangements, together with intercompany loans and additional intercompany cross-currency interest rate swap arrangements described below, effectively converted $ 250,000 aggregate principal amount of the Company’s 6.650 % Senior Notes due 2026 and $ 250,000 aggregate principal amount of the 16 Company’s 6.660 % Senior Notes due 2028 into synthetic fixed euro-based debt at weighted average interest rates of 5.12 % and 5.18 %, respectively. Concurrent with entering into the cross-currency interest rate swaps with certain financial institutions, Marnix SAS, a wholly owned subsidiary of Concentrix, entered into corresponding U.S. dollar denominated intercompany loan agreements with certain other subsidiaries of Concentrix with identical terms and notional amounts as the underlying $ 500,000 U.S. dollar denominated senior notes, with reciprocal cross currency interest rate swaps. The cross-currency interest rate swaps are designated as fair value hedges. 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 February 29, 2024 November 30, 2023 Derivative instruments not designated as hedging instruments: Foreign exchange forward contracts (notional value) $ 1,478,401 $ 2,173,330 Other current assets 10,519 16,078 Other accrued liabilities 9,556 20,856 Derivative instruments designated as fair value hedges: Cross-currency interest rate swaps (notional value) $ 471,604 $ 471,604 Other long-term liabilities 12,988 17,219 Derivative instruments designated as cash flow hedges: Foreign exchange forward contracts (notional value) $ 1,013,034 $ 996,667 Other current assets and other assets 9,849 14,330 Other accrued liabilities and other long-term liabilities 4,244 2,724 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. 17 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 Locations of gain (loss) in statement of operations February 29, 2024 February 28, 2023 Derivative instruments designated as cash flow and fair value hedges: Gains (losses) recognized in OCI: Foreign exchange forward contracts $ ( 5,423 ) $ 10,203 Cross-currency interest rate swaps 75 — Total $ ( 5,348 ) $ 10,203 Gains (losses) reclassified from AOCI into income: Foreign exchange forward contracts Gain (loss) reclassified from AOCI into income Cost of revenue for services $ 454 $ ( 5,760 ) Gain (loss) reclassified from AOCI into income Selling, general and administrative expenses 123 ( 1,981 ) Total $ 577 $ ( 7,741 ) Derivative instruments not designated as hedging instruments: Gain recognized from foreign exchange forward contracts, net (1) Other expense (income), net $ 337 $ 6,225 (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 gains in AOCI that are expected to be reclassified into earnings in the normal course of business within the next twelve months are $ 5,168 . 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. 18 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 February 29, 2024 As of November 30, 2023 Fair value measurement category Fair value measurement category Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Assets measured at fair value: Cash equivalents $ 49,236 $ 49,236 $ — $ — $ 52,847 $ 52,847 $ — $ — Foreign government bond — — — — 1,853 1,853 — — Forward foreign currency exchange contracts 20,368 — 20,368 — 30,408 — 30,408 — Liabilities measured at fair value: Forward foreign currency exchange contracts 13,800 — 13,800 — 23,580 — 23,580 — Cross-currency interest rate swaps 12,988 — 12,988 — 17,219 — 17,219 — Acquisition contingent consideration 31,940 — 31,940 — 48,600 — 48,600 — Liabilities measured at other than fair value: Long term debt (senior notes) Fair value 2,149,981 — 2,149,981 — 2,146,554 — 2,146,554 — Carrying amount 2,132,774 — — — 2,131,870 — — — The Company’s cash equivalents consist primarily of highly liquid investments in money market funds and term deposits with maturity periods of three months or less. The carrying values of cash equivalents approximate fair value since they are near their maturity. Investment in foreign government bond classified as an available-for-sale debt security is recorded at fair value based on quoted market prices. The fair values of forward exchange contracts are measured based on the foreign currency spot and forward rates. Fair values of long-term foreign currency 19 exchange contracts are measured using valuations based upon quoted prices for similar assets and liabilities in active markets and are valued by reference to similar financial instruments, adjusted for terms specific to the contracts. The fair values of the cross-currency interest rate swaps are determined using a market approach that is based on observable inputs other than quoted market prices, including contract terms, interest rates, currency rates, and other market factors. The estimated fair value of the acquisition contingent consideration was determined using a Monte-Carlo simulation model. The inputs include the closing price of Concentrix common stock as of the reporting period end date, Concentrix-specific historical equity volatility, and the risk-free rate. The effect of nonperformance risk on the fair value of derivative instruments was not material as of February 29, 2024 and November 30, 2023. The carrying values of term deposits with maturities less than one year, accounts receivable and accounts payable approximate fair value due to their short maturities and interest rates that are variable in nature. The carrying values of the outstanding balance on the term loan under the Company’s senior credit facility and the outstanding balance on the Company’s accounts receivable securitization facility (the “Securitization Facility”) approximate their fair values since they bear interest rates that are similar to existing market rates. The fair values of the 2026 Notes, 2028 Notes, and 2033 Notes (as defined in Note 8) were based on quoted prices in active markets and are classified within Level 2 of the fair value hierarchy. The Company does not adjust the quoted market prices for such financial instruments. During the three months ended February 29, 2024 and February 28, 2023, there were no transfers between the fair value measurement category levels. NOTE 8—BORROWINGS: Borrowings consist of the following: As of February 29, 2024 November 30, 2023 Other loans $ 2,714 $ 2,313 Current portion of long-term debt $ 2,714 $ 2,313 6.650 % Senior Notes due 2026 $ 800,000 $ 800,000 6.600 % Senior Notes due 2028 800,000 800,000 6.850 % Senior Notes due 2033 550,000 550,000 Credit Facility - Term Loan component 1,850,000 1,950,000 Securitization Facility 326,000 128,500 Sellers’ Note 756,177 762,286 Other loans 2,509 5,301 Long-term debt, before unamortized debt discount and issuance costs 5,084,686 4,996,087 Less: unamortized debt discount and issuance costs ( 50,577 ) ( 56,375 ) Long-term debt, net $ 5,034,109 $ 4,939,712 Senior Notes On August 2, 2023, the Company issued and sold (i) $ 800,000 aggregate principal amount of 6.650 % Senior Notes due 2026 (the “2026 Notes”), (ii) $ 800,000 aggregate principal amount of 6.600 % Senior Notes due 2028 (the “2028 Notes”) and (iii) $ 550,000 aggregate principal amount of 6.850 % Senior Notes due 2033 (the “2033 Notes” and, together with the 2026 Notes and 2028 Notes, the “Senior Notes”). The Senior Notes were sold in a registered public offering pursuant to the Company’s Registration Statement on Form S-3, which became effective upon filing, and a Prospectus Supplement dated July 19, 2023, to a Prospectus dated July 17, 2023. 20 The Senior Notes were issued pursuant to, and are governed by, an indenture, dated as of August 2, 2023 (the “Base Indenture”), between Concentrix and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), as supplemented by a first supplemental indenture dated as of August 2, 2023 between Concentrix and the Trustee relating to the 2026 Notes, a second supplemental indenture dated as of August 2, 2023 between Concentrix and the Trustee relating to the 2028 Notes, and a third supplemental indenture dated as of August 2, 2023 between Concentrix and the Trustee relating to the 2033 Notes (such supplemental indentures, together with the Base Indenture, the “Indenture”). The Indenture contains customary covenants and restrictions, including covenants that limit Concentrix Corporation’s and certain of its subsidiaries’ ability to create or incur liens on shares of stock of certain subsidiaries or on principal properties, engage in sale/leaseback transactions or, with respect to Concentrix Corporation, consolidate or merge with, or sell or lease substantially all its assets to, another person. The Indenture also provides for customary events of default. Restated Credit Facility On April 21, 2023, the Company entered into an Amendment and Restatement Agreement (the “Amendment Agreement”) with the lenders party thereto, JPMorgan Chase Bank, N.A. and Bank of America, N.A., to amend and restate the Company’s senior secured credit facility (the “Prior Credit Facility” and as amended and restated, the “Restated Credit Facility”). The Restated Credit Facility provides for the extension of a senior unsecured revolving credit facility not to exceed an aggregate principal amount of $ 1,042,500 . The Restated Credit Facility also provides for a senior unsecured term loan facility in an aggregate principal amount not to exceed approximately $ 2,144,700 (the “Term Loan”), of which $ 1,850,000 was incurred upon the amendment and approximately $ 294,702 was drawn on a delayed draw basis on the Closing Date. Aggregate borrowing capacity under the Restated Credit Facility may be increased by up to an additional $ 500,000 by increasing the amount of the revolving credit facility or by incurring additional term loans, in each case subject to the satisfaction of certain conditions set forth in the Restated Credit Facility, including the receipt of additional commitments for such increase. As of November 30, 2023, the outstanding principal balance on the Term Loan was $ 1,950,000 due to principal payments made subsequent to the Closing Date. During the three months ended February 29, 2024, the Company voluntarily prepaid $ 100,000 of the principal balance on the Term Loan, without penalty, resulting in an outstanding balance at February 29, 2024 of $ 1,850,000 . The maturity date of the Restated Credit Facility is December 27, 2026, subject, in the case of the revolving credit facility, to two one-year extensions upon the Company’s prior notice to the lenders and the agreement of the lenders to extend such maturity date. Due to the voluntary prepayments previously described, no principal payment is required until the outstanding principal amount is due in full on the maturity date. Borrowings under the Restated 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 applicable margin, which ranges from 1.125 % to 2.000 %, based on the credit ratings of the Company’s senior unsecured non-credit enhanced long-term indebtedness for borrowed money plus a credit spread adjustment to the SOFR rate of 0.10 %. Borrowings under the Restated Credit Facility that are base rate loans bear interest at a per annum rate (but not less than 1.0 %) equal to (i) the greatest of (A) the Prime Rate (as defined in the Restated Credit Facility) in effect on such day, (B) the NYFRB Rate (as defined in the Restated Credit Facility) in effect on such day plus ½ of 1.0%, and (C) the adjusted one-month term SOFR rate plus 1.0 % per annum, plus (ii) an applicable margin, which ranges from 0.125 % to 1.000 %, based on the credit ratings of the Company’s senior unsecured non-credit enhanced long-term indebtedness for borrowed money. The Restated Credit Facility contains certain loan covenants that are customary for credit facilities of this type and that restrict the ability of Concentrix Corporation and its subsidiaries to take certain actions, including the creation of liens, mergers or consolidations, changes to the nature of their business, and, solely with respect to 21 subsidiaries of Concentrix Corporation, incurrence of indebtedness. In addition, the Restated Credit Facility contains financial covenants that require the Company to maintain at the end of each fiscal quarter, (i) a consolidated leverage ratio (as defined in the Restated Credit Facility) not to exceed 3.75 to 1.0 (or for certain periods following certain qualified acquisitions, including the Webhelp Combination, 4.25 to 1.0) and (ii) a consolidated interest coverage ratio (as defined in the Restated Credit Facility) equal to or greater than 3.00 to 1.0. The Restated Credit Facility also contains various customary events of default, including payment defaults, defaults under certain other indebtedness, and a change of control of Concentrix Corporation. None of Concentrix’ subsidiaries guarantees the obligations under the Restated Credit Facility. Prior to entering into the Amendment Agreement, obligations under the Company’s Prior Credit Facility were secured by substantially all of the assets of Concentrix Corporation and certain of its U.S. subsidiaries and were guaranteed by certain of its U.S. subsidiaries. Borrowings under the Prior Credit Facility bore 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 ranged from 1.25 % to 2.00 %, based on the Company’s consolidated leverage ratio. Borrowings under the Prior Credit Facility that were base rate loans bore 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 ranged from 0.25 % to 1.00 %, based on the Company’s consolidated leverage ratio. From August 31, 2022 through the date of the Amendment Agreement, the outstanding principal of the term loans under the Prior Credit Facility was payable in quarterly installments of $ 26,250 . At February 29, 2024 and November 30, 2023, no amounts were outstanding under the Company’s revolving credit facility. During the three months ended February 28, 2023, the Company voluntarily prepaid $ 25,000 of the principal balance on the term loans under the Prior Credit Facility, without penalty. Securitization Facility The Company has an amended Securitization Facility that provides for available borrowings of up to $ 500,000 with a termination date of July 5, 2024. 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 credit spread adjustment to the SOFR rate of 0.10 %), plus a spread of 0.80 %. Amounts drawn under the Securitization Facility have been classified as long-term debt within the consolidated balance sheet based on the Company’s ability and intent to refinance on a long-term basis as of February 29, 2024 and November 30, 2023. Under the Securitization Facility, Concentrix Corporation and certain of its subsidiaries (the “Originators”) sell or otherwise transfer all of their accounts receivable to a special purpose bankruptcy-remote subsidiary of the Company (the “Borrower”) that grants a security interest in the receivables to the lenders in exchange for available borrowings of up to $ 500,000 . The amount received under the Securitization Facility is recorded as debt on the Company’s consolidated balance sheets. Borrowing availability under the Securitization Facility may be limited by the Company’s accounts receivable balances, changes in the credit ratings of the 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 Restated Credit Facility and customary events of default, including payment defaults, defaults under certain other indebtedness, a change in control of Concentrix Corporation, and certain events negatively affecting the overall credit quality of the transferred accounts receivable. 22 The Borrower’s sole business consists of the purchase or acceptance through capital contributions of the receivables and related security from the Originators and the subsequent retransfer of or granting of a security interest in such receivables and related security to the administrative agent under the Securitization Facility for the benefit of the lenders. The Borrower is a separate legal entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of the Borrower’s assets prior to any assets or value in the Borrower becoming available to the Borrower’s equity holders, and the assets of the Borrower are not available to pay creditors of the Company and its subsidiaries. Sellers’ Note On September 25, 2023, as part of the consideration for the Webhelp Combination, Concentrix Corporation issued the Sellers’ Note in the aggregate principal amount of € 700,000 to certain Sellers. The stated rate of interest associated with the Sellers’ Note is two percent ( 2.00 %) per annum, which is below the Company’s expected borrowing rate. As a result, the Company discounted the Sellers’ Note by € 31,500 using an approximate 4.36 % imputed annual interest rate. This discounting resulted in an initial value of € 668,500 or $ 711,830 . The discounted value is being amortized into interest expense over the two-year term. All stated principal and accrued interest will be due and payable on September 25, 2025. Covenant compliance As of February 29, 2024 and November 30, 2023, Concentrix was in compliance with all covenants for the above arrangements. 23 NOTE 9— EARNINGS PER SHARE: Basic and diluted earnings per common share ( “ EPS ” ) are computed using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating security. Three Months Ended February 29, 2024 February 28, 2023 Basic earnings per common share: Net income $ 52,102 $ 87,870 Less: net income allocated to participating securities (1) ( 2,002 ) ( 1,556 ) Net income attributable to common stockholders $ 50,100 $ 86,314 Weighted-average number of common shares - basic 65,664 51,150 Basic earnings per common share $ 0.76 $ 1.69 Diluted earnings per common share: Net income $ 52,102 $ 87,870 Less: net income allocated to participating securities (1) ( 1,998 ) ( 1,546 ) Net income attributable to common stockholders $ 50,104 $ 86,324 Weighted-average number of common shares - basic 65,664 51,150 Effect of dilutive securities: Stock options and restricted stock units 126 326 Weighted-average number of common shares - diluted 65,790 51,476 Diluted earnings per common share $ 0.76 $ 1.68 (1) Restricted stock awards granted to employees by the Company are considered participating securities. Effective in the fourth quarter of fiscal year 2023, restricted stock units granted are also considered participating securities. NOTE 10— REVENUE: Disaggregated revenue In the following table, the Company’s revenue is disaggregated by primary industry verticals: Three Months Ended February 29, 2024 February 28, 2023 Industry vertical: Technology and consumer electronics $ 665,102 $ 516,608 Retail, travel and ecommerce 583,712 305,504 Communications and media 380,165 256,987 Banking, financial services and insurance 365,422 259,653 Healthcare 191,089 177,824 Other 217,258 119,828 Total $ 2,402,748 $ 1,636,404 24 NOTE 11— PENSION AND EMPLOYEE BENEFITS PLANS: The Company has a 401(k) plan in the United States under which eligible employees may contribute up to the maximum amount as provided by law. Employees become eligible to participate in the 401(k) plan on the first day of the month after their employment date. The Company may make discretionary contributions under the plan. Employees in most of the Company’s non-U.S. legal entities are covered by government mandated defined contribution plans. During the three months ended February 29, 2024 and February 28, 2023, the Company contributed $ 26,116 and $ 22,654 , respectively, to defined contribution plans. Defined Benefit Plans For eligible employees in the United States, the Company maintains a frozen defined benefit pension plan (“the cash balance plan”), which includes both a qualified and non-qualified portion. The pension benefit formula for the cash balance plan is determined by a combination of compensation, age-based credits, and annual guaranteed interest credits. The qualified portion of the cash balance plan has been funded through contributions made to a trust fund. The Company maintains funded or unfunded defined benefit pension or retirement plans for certain eligible employees in the Philippines, Malaysia, India, and France. Benefits under these plans are primarily based on years of service and compensation during the years immediately preceding retirement or termination of participation in the plans. Net benefit costs related to defined benefit plans were $ 3,579 and $ 2,934 , during the three months ended February 29, 2024 and February 28, 2023, respectively. On an aggregate basis, the plans were underfunded by $ 82,491 and $ 81,813 at February 29, 2024 and November 30, 2023, respectively. NOTE 12— INCOME TAXES: Income taxes consist of current and deferred tax expense resulting from income earned in domestic and international jurisdictions. The effective tax rates for the three months ended February 29, 2024 and February 28, 2023 were impacted by the geographic mix of worldwide income and certain discrete items. The liability for unrecognized tax benefits was $ 88,948 and $ 87,939 at February 29, 2024 and November 30, 2023, respectively, and is included in other long-term liabilities in the consolidated balance sheets. As of February 29, 2024 and November 30, 2023, the total amount of unrecognized tax benefits that would affect income tax expense if recognized in the consolidated financial statements was $ 59,724 and $ 52,779 , respectively. This amount includes net interest and penalties of $ 9,258 and $ 8,617 for the respective periods. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits could decrease between approximately $ 46,865 and $ 47,383 in the next twelve months; however, actual developments in this area could differ from those currently expected. 25 NOTE 13— LEASES: The Company leases certain of its facilities and equipment under operating lease agreements, which expire in various periods through 2037. The Company’s finance leases are not material. The following table presents the various components of operating lease costs: Three Months Ended February 29, 2024 February 28, 2023 Operating lease cost $ 68,920 $ 51,760 Short-term lease cost 20,486 4,719 Variable lease cost 10,756 12,331 Sublease income ( 492 ) ( 1,363 ) Total operating lease cost $ 99,670 $ 67,447 The following table presents a maturity analysis of expected undiscounted cash flows for operating leases on an annual basis for the next five fiscal years and thereafter as of February 29, 2024: Fiscal Years Ending November 30, 2024 (remaining nine months) $ 219,100 2025 253,922 2026 188,929 2027 130,847 2028 92,334 Thereafter 153,969 Total payments 1,039,101 Less: imputed interest* 156,627 Total present value of lease payments $ 882,474 *Imputed interest represents the difference between undiscounted cash flows and discounted cash flows. The following amounts were recorded in the consolidated balance sheets related to the Company’s operating leases: As of February 29, 2024 November 30, 2023 Operating lease ROU assets Other assets, net $ 839,337 $ 813,590 Current operating lease liabilities Other accrued liabilities 233,019 229,010 Non-current operating lease liabilities Other long-term liabilities 649,455 623,290 The following table presents supplemental cash flow information related to the Company’s operating leases. Cash payments related to variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below: Three Months Ended February 29, 2024 February 28, 2023 Cash paid for amounts included in the measurement of lease liabilities $ 75,842 $ 53,825 Non-cash ROU assets obtained in exchange for lease liabilities 87,511 41,394 26 The weighted-average remaining lease term and discount rate as of February 29, 2024 and November 30, 2023 were as follows: As of February 29, 2024 November 30, 2023 Weighted-average remaining lease term (years) 4.77 4.88 Weighted-average discount rate 6.52 % 6.41 % NOTE 14— COMMITMENTS AND CONTINGENCIES: From time to time, the Company receives notices from third parties, including customers and suppliers, seeking indemnification, payment of money, or other actions in connection with claims made against them. Also, from time to time, the Company has been involved in various bankruptcy preference actions where the Company was a supplier to the companies now in bankruptcy. In addition, the Company is subject to various other claims, both asserted and unasserted, that arise in the ordinary course of business. The Company evaluates these claims and records the related liabilities. It is possible that the liabilities ultimately incurred by the Company could differ from the amounts recorded. The Company does not believe that the above commitments and contingencies will have a material adverse effect on the Company’s results of operations, financial position, or cash flows. NOTE 15—STOCKHOLDERS’ EQUITY: Share repurchase program In September 2021, the Company’s board of directors authorized the Company to purchase up to $ 500,000 of the Company’s outstanding shares of common stock from time to time as market and business conditions warrant, including through open market purchases or Rule 10b5-1 trading plans. The repurchase program has no termination date and may be suspended or discontinued at any time. During the three months ended February 29, 2024 and February 28, 2023, the Company repurchased 237 and 71 shares, respectively, of its common stock for an aggregate purchase price of $ 21,674 and $ 10,001 , respectively. The share repurchases were made on the open market and the shares repurchased by the Company are held in treasury for general corporate purposes. At February 29, 2024, approximately $ 268,452 remained available for share repurchases under the existing authorization from the Company’s board of directors. During March 2023, the Company repurchased 184 shares of its common stock for an aggregate purchase price of $ 11,964 . Dividends During fiscal years 2024 and 2023, the Company has paid the following dividends per share approved by the Company’s board of directors: Announcement Date Record Date Per Share Dividend Amount Payment Date January 19, 2023 January 30, 2023 $ 0.275 February 10, 2023 March 29, 2023 April 28, 2023 $ 0.275 May 9, 2023 June 28, 2023 July 28, 2023 $ 0.275 August 8, 2023 September 27, 2023 October 27, 2023 $ 0.3025 November 7, 2023 January 24, 2024 February 5, 2024 $ 0.3025 February 15, 2024 On March 26, 2024, the Company announced a cash dividend of $ 0.3025 per share to stockholders of record as of April 26, 2024, payable on May 7, 2024. 27