Concentrix Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2024, as filed with the Securities and Exchange Commission on January 28, 2025. References to “we,” “our,” “us,” or “the Company” or “Concentrix” refer to Concentrix Corporation and its subsidiaries. This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding our expected future financial condition and growth, cash flows, results of operations, effective tax rate, leverage, liquidity, business strategy, competitive position, demand and market acceptance for our services and products portfolio, seasonality of our business, international operations, the potential benefits associated with use of the Company’s technology and services, acquisition opportunities and the anticipated impact of acquisitions, capital allocation and dividends, growth opportunities, spending, capital expenditures and investments, debt repayment and obligations, competition and market forecasts, industry trends, our human capital resources and sustainability initiatives, and statements that include words such as believe, expect, may, will, provide, could, should, and other similar expressions. These forward-looking statements are inherently uncertain and involve substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Risks and uncertainties include, among other things: risks related to general economic conditions and their effects on our clients’ businesses, including consumer demand, interest rates, inflation, international tariffs, supply chains, and the effects of the conflicts in Ukraine and Gaza; cyberattacks on our or our clients’ networks and information technology systems; uncertainty around, and disruption from, new and emerging technologies, including the adoption and utilization of artificial intelligence (“AI”) and generative AI; the failure of our staff and contractors to adhere to our and our clients’ controls and processes; the inability to protect personal and proprietary information; the effects of communicable diseases or other public health crises, natural disasters, and adverse weather conditions; geopolitical, economic and climate- or weather-related risks in regions with a significant concentration of our operations; the ability to successfully execute our strategy; competitive conditions in our industry and consolidation of our competitors; variability in demand by our clients or the early termination of our client contracts; the level of business activity of our clients and the market acceptance and performance of their products and services; the demand for end-to-end solutions and technology; damage to our reputation through the actions or inactions of third parties; changes in law, regulations or regulatory guidance, or changes in their interpretation or enforcement; the operability of our communication services and information technology systems and networks; the loss of key personnel or the inability to attract and retain staff with the skills and expertise needed for our business; increases in the cost of labor; the inability to successfully identify, complete and integrate strategic acquisitions or investments or realize anticipated benefits within the expected timeframe, including with respect to our combination with Webhelp; higher than expected tax liabilities; currency exchange rate fluctuations; investigative or legal actions; and other risks that are described under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended November 30, 2024. We do not intend to update forward-looking statements, which speak only as of the date hereof, unless otherwise required by law. Concentrix, Webhelp, and all Concentrix company, product, and services word and design marks and slogans are trademarks or registered trademarks of Concentrix Corporation and its subsidiaries. Other names and marks are the property of their respective owners. All rights reserved. Overview and Basis of Presentation Concentrix is a global technology and services leader that powers our clients’ brand experiences and digital operations. We design, build, and run fully integrated, end-to-end solutions, including customer experience (“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. Our differentiated portfolio of solutions supports Fortune Global 500 as well as new economy clients across the globe in their efforts to deliver an optimized, consistent brand experience across all channels of communication, including voice, chat, email, generative AI-powered self-service, social media, asynchronous messaging, and custom applications. We strive to deliver exceptional services globally supported by our deep industry knowledge, technology and security practices, talented people, and digital and analytics expertise. 24 We generate revenue from performing services that are generally tied to our clients’ products and services. Any shift in business or the size of the market for our clients’ products or services, or any failure of technology or failure of acceptance of our clients’ products or services in the market may impact our business. The staff turnover rate in our business is high, as is the risk of losing experienced team members. High staff turnover rates may increase costs and decrease operating efficiencies and productivity. Webhelp Combination On September 25, 2023, we completed our acquisition (the “Webhelp Combination”) of all of the issued and outstanding capital stock (the “Shares”) of Marnix Lux SA, (“Webhelp”), from the holders thereof (the “Sellers”). The purchase consideration for the acquisition of the Shares was valued at approximately $3,774.8 million, net of cash and restricted cash acquired. Revenue and Cost of Revenue We generate revenue through the provision of technology and services 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 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. Our technology and services are generally characterized by flat unit prices. Approximately 98% of our revenue is recognized as services are performed, based on staffing hours or the number of client customer transactions handled using contractual rates. 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 technology and services. The costs of our revenue can be impacted by the mix of client contracts, where we deliver the technology and services, 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. Through the first quarter of fiscal years 2025 and 2024, approximately 89% and 79%, respectively, of our consolidated revenue was generated from our non-U.S. operations, and approximately 55% and 50%, respectively, of our consolidated revenue was priced in U.S. dollars. We expect that a significant amount of our revenue will continue to be generated from our non-U.S. operations while being priced in U.S. dollars. As a result, we have certain client contracts that are priced in non-U.S. dollar currencies for which a substantial portion of the costs to deliver the services are in other currencies. Accordingly, our revenue may be earned in currencies that are different from the currencies in which we incur corresponding expenses. Fluctuations in the value of currencies, such as the Philippine peso, the Indian rupee, the euro, and the Canadian dollar, against the U.S. dollar or other currencies in which we bill our clients, and inflation in the local economies in which these delivery centers are located, can impact the operating and labor costs in these delivery centers, which can result in reduced profitability. As a result, our revenue growth, costs, and profitability have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates and inflation. Margins Our gross margins fluctuate and can be impacted by the mix of client contracts, services provided, shifts in the geography from which our technology and services are delivered, client volume trends, the amount of lead time that is required for programs to become fully scaled, and transition and set-up costs. Our operating margin fluctuates based on changes in gross margins as well as overall volume levels, as we are generally able to gain scale efficiencies in our selling, general and administrative costs as our volumes increase. Economic and Industry Trends The industry in which we operate is competitive, including on the basis of pricing terms, 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. Our business operates globally in 75 countries across six continents. We have significant concentrations in the Philippines, India, 25 Brazil, the United States, Egypt, Türkiye , Colombia, Malaysia, Morocco, China, the United Kingdom, and elsewhere throughout EMEA, Latin America, and Asia-Pacific. Accordingly, we would be impacted by economic strength or weakness in these geographies and by the strengthening or weakening of local currencies relative to the U.S. dollar. Seasonality Our revenue and margins fluctuate with the underlying trends in our clients’ businesses and trends in the level of consumer activity. As a result, our revenue and margins are typically higher in the fourth fiscal quarter of the year than in any other fiscal quarter. Critical Accounting Policies and Estimates During the three months ended February 28, 2025, 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, 2024. 26 Results of Operations – Three Months Ended February 28, 2025 and February 29, 2024 Three Months Ended February 28, 2025 February 29, 2024 ($ in thousands) Revenue $ 2,372,222 $ 2,402,748 Cost of revenue 1,516,323 1,546,219 Gross profit 855,899 856,529 Selling, general and administrative expenses 687,032 708,090 Operating income 168,867 148,439 Interest expense and finance charges, net 72,994 82,439 Other expense (income), net (4,919) (6,824) Income before income taxes 100,792 72,824 Provision for income taxes 30,535 20,722 Net income $ 70,257 $ 52,102 Revenue Three Months Ended % Change February 28, 2025 February 29, 2024 2025 to 2024 ($ in thousands) Industry vertical: Technology and consumer electronics $ 657,692 $ 665,102 (1.1) % Retail, travel and e-commerce 583,898 583,712 — % Communications and media 371,000 380,165 (2.4) % Banking, financial services and insurance 365,193 365,422 (0.1) % Healthcare 189,805 191,089 (0.7) % Other 204,634 217,258 (5.8) % Total $ 2,372,222 $ 2,402,748 (1.3) % We generate revenue by delivering our technology and services to our clients categorized in the above primary industry verticals. Our solutions focus on customer engagement, process optimization, and back-office automation. Our revenue decreased by 1.3% for the three months ended February 28, 2025, compared to the three months ended February 29, 2024. Contributing to the decrease in revenue was the negative effect of changes in foreign currency exchange rates of $62.4 million, or 2.6%. The unfavorable foreign currency rate impact on revenue was primarily due to the weakening of the euro, the Brazilian real and several other currencies against the U.S. dollar. Partially offsetting this decrease in revenue due to foreign currency exchange rates were increases in our revenue due to underlying client volumes. For the three months ended February 28, 2025, revenue across all verticals decreased in comparison to the prior period, with the exception of retail, travel, and e-commerce which remained flat over the prior period. Revenue in our technology and consumer electronics vertical decreased 1.1%, which included a decrease as a result of foreign currency exchange rates partially offset by increases in underlying business, primarily from several social media and internet-related service clients. Revenue in our retail, travel and e-commerce vertical remained flat, which included increases in underlying business, primarily from several larger clients in this vertical, offset by a decrease as a result of foreign currency exchange rates. Revenue in our communication and media vertical decreased 2.4%, which included a decrease as a result of foreign currency exchange rates, partially offset by increases in underlying business primarily from several clients in the vertical. Revenue in our banking, financial services and insurance vertical decreased 0.1%, which included a decrease as a result of foreign currency exchange rates partially offset by increases in underlying business, primarily from several clients in the vertical. Revenue in our healthcare vertical decreased 0.7%, which included a decrease as a result of foreign currency exchange rates and decreases in underlying business, primarily from a larger client in the vertical. Revenue in our other vertical decreased 5.8%, which included a decrease as a result of foreign currency exchange rates and decreases in underlying business primarily related to an automotive client. 27 Cost of Revenue, Gross Profit and Gross Margin Percentage Three Months Ended % Change February 28, 2025 February 29, 2024 2025 to 2024 ($ in thousands) Cost of revenue $ 1,516,323 $ 1,546,219 (1.9)% Gross profit $ 855,899 $ 856,529 (0.1)% Gross margin % 36.1 % 35.6 % 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 decreased by 1.9% in the three months ended February 28, 2025, compared to the three months ended February 29, 2024. Contributing to the decrease in cost of revenue was a $79.3 million, or 5.1%, net reduction in our cost of revenue due to changes in foreign currency exchange rates. The foreign currency exchange rate impact on our cost of revenue was caused primarily by the weakening of the euro and Egyptian pound against the U.S. dollar. The decrease in cost of revenue as a result of foreign currency exchange rates was partially offset by increases in underlying business. Our gross profit decreased by 0.1% in the three months ended February 28, 2025, compared to the three months ended February 29, 2024, primarily due to decreases in gross profit associated with underlying business partially offset by a net favorable foreign currency impact of $16.9 million on gross profit. Our gross margin percentage for the three months ended February 28, 2025 increased to 36.1% from 35.6% in the prior fiscal year period due to the changes previously described. Selling, General and Administrative Expenses Three Months Ended % Change February 28, 2025 February 29, 2024 2025 to 2024 ($ in thousands) Selling, general and administrative expenses $ 687,032 $ 708,090 (3.0)% Percentage of revenue 29.0 % 29.5 % 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, amortization of intangible assets resulting from acquisitions, marketing expenses, and acquisition-related and integration expenses. Our selling, general and administrative expenses decreased by 3.0% in the three months ended February 28, 2025, compared to the three months ended February 29, 2024. Contributing to the decrease was a $22.2 million reduction in selling, general and administrative expenses due to changes in foreign currency exchange rates. As a percentage of revenue, selling, general and administrative expenses decreased from 29.5% in the first fiscal quarter of 2024 to 29.0% in the first fiscal quarter of 2025 primarily due to changes in foreign currency exchange rates. Operating Income Three Months Ended % Change February 28, 2025 February 29, 2024 2025 to 2024 ($ in thousands) Operating income $ 168,867 $ 148,439 13.8% Operating margin 7.1 % 6.2 % Our operating income increased during the three months ended February 28, 2025, compared to the three months ended February 29, 2024, primarily due to the decrease in selling, general and administrative expenses partially offset by a decrease in gross profit. Our operating margin in the first quarter of 2025 increased from the first quarter of 2024 due to the decrease in selling, general and administrative expenses as a percentage of revenue and the increase in gross margin percentage. 28 Interest Expense and Finance Charges, Net Three Months Ended % Change February 28, 2025 February 29, 2024 2025 to 2024 ($ in thousands) Interest expense and finance charges, net $ 72,994 $ 82,439 (11.5)% Percentage of revenue 3.1 % 3.4 % Amounts recorded in interest expense and finance charges, net consist primarily of interest expense on our senior notes issued in August 2023, interest expense on term loan borrowings under our senior credit facility, interest expense on borrowings under our accounts receivable securitization facility (the “Securitization Facility”), and interest expense on the promissory note issued by us to certain Sellers in connection with the Webhelp Combination (the “Sellers’ Note”). The decrease in interest expense and finance charges, net for the three months ended February 28, 2025, compared to the three months ended February 29, 2024, was primarily due to a decrease in interest expense on our term loan borrowings under our senior credit facility of $11.7 million. The decrease is a result of the decrease in outstanding borrowings and a decrease in the effective interest rate on the borrowings. The decrease was partially offset by an increase in interest expense on our Securitization Facility of $2.2 million primarily due to the increase in outstanding borrowings in comparison to the prior year period. Other Expense (Income), Net Three Months Ended % Change February 28, 2025 February 29, 2024 2025 to 2024 ($ in thousands) Other expense (income), net $ (4,919) $ (6,824) (27.9)% Percentage of revenue (0.2) % (0.3) % Amounts recorded as other expense (income), net primarily include foreign currency transaction gains and losses other than cash flow hedges, investment gains and losses, the non-service component of pension costs, other non-operating gains and losses, and changes in acquisition contingent consideration related to the Webhelp Combination. Other expense (income), net in the three months ended February 28, 2025 was income of $4.9 million, compared to income of $6.8 million in the three months ended February 29, 2024. The change in other expense (income), net over the prior fiscal year period was primarily due to a decrease in income of $12.9 million related to the change in acquisition contingent consideration associated with the Webhelp Combination partially offset by net foreign currency gains of $10.8 million. Provision for Income Taxes Three Months Ended % Change February 28, 2025 February 29, 2024 2025 to 2024 ($ in thousands) Provision for income taxes $ 30,535 $ 20,722 47.4% Percentage of income before income taxes 30.3 % 28.5 % Our provision for income taxes consists of our current and deferred tax expense resulting from our income earned in domestic and international jurisdictions. Our provision for income taxes increased in the three months ended February 28, 2025, compared to the three months ended February 29, 2024, primarily due to an increase in income before taxes and income tax expense of $4.3 million related to certain tax law changes, primarily in France. The effective tax rate for the three months ended February 28, 2025 increased compared to the three months ended February 29, 2024, primarily due to the tax law changes and a change in the mix of income earned in different tax jurisdictions between periods. 29 Certain Non-GAAP Financial Information In addition to disclosing financial results that are determined in accordance with GAAP, we also disclose certain non-GAAP financial information, including: • Non-GAAP operating income, which is operating income, adjusted to exclude acquisition-related and integration expenses, including related restructuring costs, step-up depreciation, amortization of intangible assets and share-based compensation. • Non-GAAP operating margin, which is non-GAAP operating income, as defined above, divided by revenue. • Adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA, which is non-GAAP operating income, as defined above, plus depreciation (exclusive of step-up depreciation). • Adjusted EBITDA margin, which is adjusted EBITDA, as defined above, divided by revenue. • Non-GAAP net income, which is net income excluding the tax effected impact of acquisition-related and integration expenses, including related restructuring costs, step-up depreciation, amortization of intangible assets, share-based compensation, imputed interest related to the Sellers’ Note, change in acquisition contingent consideration and foreign currency losses (gains), net. Non-GAAP net income also excludes the income tax effect of certain tax law changes. • Free cash flow, which is cash flows from operating activities less capital expenditures, and adjusted free cash flow, which is free cash flow excluding the effect of changes in the outstanding factoring balance. We believe that free cash flow is a meaningful measure of cash flows since capital expenditures are a necessary component of ongoing operations. We believe that adjusted free cash flow is a meaningful measure of cash flows because it removes the effect of factoring which changes the timing of the receipt of cash for certain receivables. However, free cash flow and adjusted cash flow have limitations because they do not represent the residual cash flow available for discretionary expenditures. For example, free cash flow and adjusted free cash flow do not incorporate payments for business acquisitions. • Non-GAAP diluted earnings per common share (“EPS”), which is diluted EPS excluding the per share, tax effected impact of acquisition-related and integration expenses, including related restructuring costs, step-up depreciation, amortization of intangible assets, share-based compensation, imputed interest related to the Sellers’ Note, change in acquisition contingent consideration and foreign currency losses (gains), net. Non-GAAP EPS also excludes the per share income tax effect of certain tax law changes. Non-GAAP EPS excludes net income attributable to participating securities, and the per share, tax-effected impact of adjustments to net income described above that are attributable to common shareholders. We believe that providing this additional information is useful to the reader to better assess and understand our base operating performance, especially when comparing results with previous periods and for planning and forecasting in future periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results. Management also uses these non-GAAP measures to establish operational goals and, in some cases, for measuring performance for compensation purposes. These non-GAAP financial measures exclude amortization of intangible assets. Our acquisition activities have resulted in the recognition of intangible assets, which consist primarily of customer relationships, technology, and trade names. Finite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in our statements of operations. Although intangible assets contribute to our revenue generation, the amortization of intangible assets does not directly relate to the services performed for our clients. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of our acquisition activity. Accordingly, we believe excluding the amortization of intangible assets, along with the other non-GAAP adjustments, which neither relate to the ordinary course of our business nor reflect our underlying business performance, enhances our and our investors’ ability to compare our past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within our GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired, or the estimated useful life of an intangible asset is revised. 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. 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 30 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 February 28, 2025 February 29, 2024 ($ in thousands, except per share amounts) Operating income $ 168,867 $ 148,439 Acquisition-related and integration expenses (1) 18,024 30,173 Step-up depreciation 2,376 2,501 Amortization of intangibles 105,619 116,302 Share-based compensation 26,600 21,646 Non-GAAP operating income $ 321,486 $ 319,061 Net income $ 70,257 $ 52,102 Interest expense and finance charges, net 72,994 82,439 Provision for income taxes 30,535 20,722 Other expense (income), net (4,919) (6,824) Acquisition-related and integration expenses (1) 18,024 30,173 Step-up depreciation 2,376 2,501 Amortization of intangibles 105,619 116,302 Share-based compensation 26,600 21,646 Depreciation (exclusive of step-up depreciation) 52,721 65,257 Adjusted EBITDA $ 374,207 $ 384,318 Operating margin 7.1 % 6.2 % Non-GAAP operating margin 13.6 % 13.3 % Adjusted EBITDA margin 15.8 % 16.0 % Net income $ 70,257 $ 52,102 Acquisition-related and integration expenses (1) 18,024 30,173 Step-up depreciation 2,376 2,501 Imputed interest related to Sellers' Note included in interest expense and finance charges, net 4,186 4,178 Change in acquisition contingent consideration included in other expense (income), net (2,024) (14,897) Foreign currency losses (gains), net (2) (4,179) 6,610 Amortization of intangibles 105,619 116,302 Share-based compensation 26,600 21,646 Income taxes related to the above (3) (36,992) (42,960) Income tax effect of change in tax law 4,269 — Non-GAAP net income $ 188,136 $ 175,655 31 Three Months Ended February 28, 2025 February 29, 2024 ($ in thousands, except per share amounts) Diluted earnings per common share (“EPS”) $ 1.04 $ 0.76 Acquisition-related and integration expenses (1) 0.27 0.44 Step-up depreciation 0.04 0.04 Imputed interest related to Sellers' Note included in interest expense and finance charges, net 0.06 0.06 Change in acquisition contingent consideration included in other expense (income), net (0.03) (0.22) Foreign currency losses (gains), net (2) (0.06) 0.10 Amortization of intangibles 1.57 1.70 Share-based compensation 0.40 0.32 Income taxes related to the above (3) (0.56) (0.63) Income tax effect of change in tax law 0.06 — Non-GAAP Diluted EPS $ 2.79 $ 2.57 (1) For the three months ended February 28, 2025 and February 29, 2024, acquisition-related and integration expenses, including restructuring costs, primarily included integration costs associated with the Company’s combination with Webhelp. These costs primarily include severance and employee-related costs, costs associated with facilities consolidation, including lease terminations to integrate the businesses, and information technology system consolidation costs. (2) Foreign currency losses (gains), net are included in other expense (income), net and primarily consist of gains and losses recognized on the revaluation and settlement of foreign currency transactions and realized and unrealized gains and losses on derivative contracts that do not qualify for hedge accounting. (3) 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. 32 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, acquisitions, and acquisition-related and integration expenses, including in connection with the Webhelp Combination. Our financing needs for these uses of cash have been a combination of operating cash flows and third-party debt arrangements. Our working capital needs are primarily to finance accounts receivable. When our revenue is increasing, our net investment in working capital typically increases. Conversely, when revenue is decreasing, our net investment in working capital typically decreases. To increase our market share and better serve our clients, we may further expand our operations through investments or acquisitions. We expect that such expansion would require an initial investment in working capital, personnel, facilities, and operations. These investments or acquisitions would likely be funded primarily by our existing cash and cash equivalents, available liquidity, including capacity on our debt arrangements, or the issuance of securities. We funded the Webhelp Combination through (i) proceeds from our August 2023 offering and sale of senior notes, (ii) term loan borrowings under our senior credit facility, and (iii) cash on hand. In September 2021, considering our strong free cash flow, low leverage, and adequate liquidity to support capital return to stockholders while maintaining flexibility to pursue acquisitions, our board of directors authorized a share repurchase program. Under the share repurchase program, the board of directors authorized the repurchase of up to $500 million of our common stock from time to time as market and business conditions warrant, including through open market purchases or Rule 10b5-1 trading plans. In January 2025, our board of directors extended our share repurchase program by authorizing an increase of the amount remaining for share repurchases under the existing share repurchase authorization to $600 million. The share repurchase program has no termination date and may be suspended or discontinued at any time. During the three months ended February 28, 2025 and February 29, 2024, we repurchased 539,802 and 237,105 shares, respectively, of our common stock under the share repurchase program for approximately $25.8 million and $21.7 million, respectively, in the aggregate. At February 28, 2025, approximately $582.3 million remained available for share repurchases under the existing authorization from our board of directors. During March 2025, we repurchased 315,684 shares of our common stock under the share repurchase program for an aggregate purchase price of $14.5 million. During fiscal years 2025 and 2024, we paid the following dividends per share approved by our board of directors: Announcement Date Record Date Per Share Dividend Amount Payment Date January 24, 2024 February 5, 2024 $0.3025 February 15, 2024 March 26, 2024 April 26, 2024 $0.3025 May 7, 2024 June 26, 2024 July 26, 2024 $0.3025 August 6, 2024 September 25, 2024 October 25, 2024 $0.33275 November 5, 2024 January 15, 2025 January 31, 2025 $0.33275 February 11, 2025 On March 26, 2025, we announced a cash dividend of $0.33275 per share to stockholders of record as of the close of business on April 25, 2025, payable on May 6, 2025. We expect that future cash dividends will be paid on a quarterly basis. However, any decision to pay future cash dividends will be subject to our board of directors’ approval, and will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our debt agreements, industry practice, legal requirements, regulatory constraints, and other factors that our board of directors deems relevant. Our ability to pay dividends will depend on our ongoing 33 ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will continue to pay a dividend in the future. Debt Arrangements Senior Notes On August 2, 2023, we issued and sold (i) $800 million aggregate principal amount of 6.650% Senior Notes due 2026 (the “2026 Notes”), (ii) $800 million aggregate principal amount of 6.600% Senior Notes due 2028 (the “2028 Notes”) and (iii) $550 million 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 our 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. 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. In connection with the closing of the Webhelp Combination, we entered into cross-currency swap arrangements with certain financial institutions for a total notional amount of $500 million of the Senior Notes. In addition to aligning the currency of a portion of our interest payments to our euro-denominated cash flows, the arrangements effectively converted $250 million aggregate principal amount of the 2026 Notes and $250 million aggregate principal amount of the 2028 Notes 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, an indirect wholly owned subsidiary of Concentrix Corporation, 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 million U.S. dollar denominated senior notes, with reciprocal cross-currency interest rate swaps. Restated Credit Facility On April 21, 2023, we 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 our prior credit agreement dated as of October 16, 2020 (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 $1,042.5 million. The Restated Credit Facility also provides for a senior unsecured term loan facility in an aggregate principal amount not to exceed approximately $2,144.7 million (the “Term Loan”), of which $1,850 million was incurred upon the amendment and approximately $294.7 million was drawn on a delayed draw basis (the “Delayed Draw Term Loans”) on the closing date of the Webhelp Combination. Aggregate borrowing capacity under the Restated Credit Facility may be increased by up to an additional $500 million 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 both February 28, 2025 and November 30, 2024, the outstanding principal balance on the Term Loan was $1,500 million. During the three months ended February 29, 2024, we voluntarily prepaid $100 million of the principal balance on the Term Loan without penalty. 34 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 our prior notice to the lenders and the agreement of the lenders to extend such maturity date. Due to voluntary prepayments, no principal payment on the term loans is due until the remaining 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 our 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 our 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 our ability to take certain actions, including the creation of liens, mergers or consolidations, changes to the nature of our business, and, solely with respect to our subsidiaries, incurrence of indebtedness. In addition, the Restated Credit Facility contains financial covenants that require us 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, 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 our subsidiaries guarantees the obligations under the Restated Credit Facility. At February 28, 2025 and November 30, 2024, no amounts were outstanding under our revolving credit facility. Securitization Facility On January 14, 2025, we entered into an amendment to the Securitization Facility to (i) increase in the commitment of the lenders to provide available borrowings from up to $600 million to up to $700 million and (ii) extend the termination date of the Securitization Facility from April 24, 2026 to January 14, 2027. For borrowings that are funded by certain lenders through the issuance of commercial paper, the amendment also reduced the spread to the applicable commercial paper rate from 0.80% to 0.75%. On April 25, 2024, we entered into an amendment to the Securitization Facility to (i) increase the commitment of the lenders to provide available borrowings from up to $500 million to up to $600 million, (ii) extend the termination date of the Securitization Facility from July 5, 2024 to April 24, 2026, and (iii) amend the interest rate margins, such that borrowings under the Securitization Facility that are funded by certain lenders through such lenders’ issuance of commercial paper bear interest at the applicable commercial paper rate plus a spread of 0.80% and, otherwise, at a bank rate that includes a per annum rate equal to the applicable SOFR rate (subject to a SOFR related adjustment of 0.10%), plus a spread of 0.90%. Under the Securitization Facility, Concentrix Corporation and certain of its U.S. based subsidiaries sell or otherwise transfer all of their accounts receivable to a special purpose bankruptcy-remote subsidiary of Concentrix Corporation that grants a security interest in the receivables to the lenders in exchange for available borrowings of up to $700 million. 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 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. 35 Sellers’ Note On September 25, 2023, as part of the consideration for the Webhelp Combination, we issued the Sellers’ Note in the aggregate principal amount of €700 million to certain Sellers. Pursuant to the Sellers’ Note, the unpaid principal amount outstanding accrues interest at a rate of two percent (2%) per annum, and all principal and accrued interest will be due and payable on September 25, 2025. The stated rate of interest is below our expected borrowing rate. As a result, we discounted the Sellers’ Note by €31,500. The discounted value is being amortized into interest expense over the two-year term. Amounts outstanding under the Sellers’ Note have been classified as long-term debt within the consolidated balance sheet based on our ability and intent to refinance on a long-term basis as of February 28, 2025 and November 30, 2024. As of February 28, 2025 and November 30, 2024, we were in compliance with the debt covenants related to our debt arrangements. Cash Flows – Three Months Ended February 28, 2025 and February 29, 2024 The following summarizes our cash flows for the three months ended February 28, 2025 and February 29, 2024, as reported in our consolidated statement of cash flows in the accompanying consolidated financial statements. Three Months Ended February 28, 2025 February 29, 2024 ($ in thousands) Net cash provided by (used in) operating activities $ 1,408 $ (46,870) Net cash used in investing activities (51,281) (60,562) Net cash provided by financing activities 102,300 14,444 Effect of exchange rate changes on cash, cash equivalents and restricted cash (6,582) (5,544) Net increase (decrease) in cash, cash equivalents and restricted cash $ 45,845 $ (98,532) Cash, cash equivalents and restricted cash at beginning of year 429,604 516,487 Cash, cash equivalents and restricted cash at the end of the period $ 475,449 $ 417,955 Operating Activities Net cash provided by operating activities was $1.4 million for the three months ended February 28, 2025, compared to net cash used in operating activities of $46.9 million for the three months ended February 29, 2024. The change over the prior year period was primarily due to favorable changes in working capital and an increase in net income. Investing Activities Net cash used in investing activities for the three months ended February 28, 2025 was $51.3 million, compared to $60.6 million for the three months ended February 29, 2024. The decrease in net cash used in investing activities over the prior year period primarily related to a decrease in capital expenditures. Financing Activities Net cash provided by financing activities for the three months ended February 28, 2025 was $102.3 million, consisting of net borrowings under our Securitization Facility of $181 million partially offset by share repurchases of $25.8 million, dividends paid of $22.4 million, a deferred acquisition consideration payment of $3.5 million, and a change in funds held for clients of $20.5 million. Net cash provided by financing activities for the three months ended February 29, 2024 was $14.4 million, consisting primarily of net borrowings of $197.5 million under our Securitization Facility partially offset by principal payments of $100.0 million made on term loan borrowings under our senior credit facility, share repurchases of $21.7 million, a change in funds held for clients of $37.9 million, and dividends of $20.6 million. 36 Free Cash Flow and Adjusted Free Cash Flow (non-GAAP measures) Three Months Ended February 28, 2025 February 29, 2024 ($ in thousands) Net cash provided by (used in) operating activities $ 1,408 $ (46,870) Purchases of property and equipment (50,618) (56,059) Free cash flow (a non-GAAP measure) $ (49,210) $ (102,929) Change in outstanding factoring balances 9,394 21,624 Adjusted free cash flow (a non-GAAP measure) $ (39,816) $ (81,305) Our free cash flow was a use of cash of $49.2 million for the three months ended February 28, 2025 compared to a use of cash of $102.9 million for the three months ended February 29, 2024. The increase in free cash flow for the three months ended February 28, 2025 compared to the prior fiscal year period was due to the increase in cash provided by operating activities and a decrease in capital expenditures. Our adjusted free cash flow was a use of cash of $39.8 million for the three months ended February 28, 2025 compared to a use of cash of $81.3 million for the three months ended February 29, 2024. The increase in adjusted free cash flow for the three months ended February 28, 2025 compared to the prior year period was due to an increase in free cash flow partially offset by a decrease in the change in outstanding factoring balances. Capital Resources As of February 28, 2025, we had total liquidity of $1,498.5 million, which includes undrawn capacity on our revolving credit facility of $1,042.5 million, undrawn capacity of $148.0 million under our Securitization Facility, and cash and cash equivalents. Our cash and cash equivalents totaled $308.0 million and $240.6 million as of February 28, 2025 and November 30, 2024, respectively. Of our total cash and cash equivalents, 98% were held by our non-U.S. legal entities as of both February 28, 2025 and November 30, 2024. The cash and cash equivalents held by our non-U.S. legal entities are no longer subject to U.S. federal tax on repatriation into the United States; repatriation of some non-U.S. balances is restricted by local laws. Historically, we have fully utilized and reinvested all non-U.S. cash to fund our international operations and expansions; however, we have recorded deferred tax liabilities related to non-U.S. withholding taxes on the earnings of certain previously acquired non-U.S. entities that are likely to be repatriated in the future. If in the future our intentions change, and we repatriate the cash back to the United States, we will report in our consolidated financial statements the impact of the state and withholding taxes depending upon the planned timing and manner of such repatriation. We believe that our available cash and cash equivalents balances, the cash flows expected to be generated from operations, and our sources of liquidity will be sufficient to satisfy our current and planned working capital and investment needs for the next twelve months. We also believe that our longer-term working capital, planned capital expenditures, and other general corporate funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financing activities.