IBEX Ltd 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS IBEX LIMITED Page Report of Independent Registered Public Accounting Firm ( Deloitte & Touche LLP , Tampa, Florida ; PCAOB ID Number 34 ) 64 Report of Independent Registered Public Accounting Firm ( BDO LLP , Reading, United Kingdom ; PCAOB ID Number 1295 ) 65 Consolidated B alance Sheets 66 Consolidated Statements of Comprehensive Income 67 Consolidated Statements of Stockholders’ Equity 68 Consolidated Statements of Cash Flows 69 Notes to the Consolidated Financial Statements 70 63 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of IBEX Limited Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of IBEX Limited and subsidiaries (the "Company") as of June 30, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we expres s no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Tampa, Florida September 13, 2023 We have served as the Company's auditor since 2021. 64 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Ibex Limited Hamilton, Bermuda Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of comprehensive income, stockholders’ equity, and cash flows for the year ended June 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”) of Ibex Limited (“the Company”). In our opinion, the consolidated financial statements of the Company present fairly, in all material respects, the results of its operations and its cash flows for the year ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ BDO LLP BDO LLP We have served as the Company’s auditor from 2017 through 2021. Reading, United Kingdom September 13, 2023 65 Table of Contents IBEX LIMITED AND SUBSIDIARIES Consolidated Balance Sheets (Amounts in thousands, except share amounts) June 30, 2023 June 30, 2022 Assets Current assets Cash and cash equivalents $ 57,429 $ 48,831 Accounts receivable, net of allowance of $ 120 and $ 1,290 86,364 75,418 Prepaid expenses 6,616 7,135 Due from related parties 43 13 Tax advances and receivables 5,965 6,390 Other current assets 2,190 4,564 Total current assets 158,607 142,351 Non-current assets Property and equipment, net 41,151 41,939 Operating lease assets 70,919 83,094 Goodwill 11,832 11,832 Deferred tax asset, net 4,585 9,276 Other non-current assets 6,230 5,688 Total non-current assets 134,717 151,829 Total assets $ 293,324 $ 294,180 Liabilities and stockholders' equity Current liabilities Accounts payable and accrued liabilities $ 18,705 $ 21,286 Accrued payroll and employee-related liabilities 29,360 33,453 Current deferred revenue 6,413 8,600 Current operating lease liabilities 13,036 13,808 Current maturities of long-term debt 413 15,079 Due to related parties 2,314 2,583 Income taxes payable 3,020 2,965 Total current liabilities 73,261 97,774 Non-current liabilities Non-current deferred revenue 1,383 3,993 Non-current operating lease liabilities 64,854 75,994 Long-term debt 600 661 Other non-current liabilities 3,262 2,299 Total non-current liabilities 70,099 82,947 Total liabilities 143,360 180,721 Commitments and contingencies (Note 9) Stockholders' equity Common stock: par value $ 0.0001 , 108,057,967 shares authorized, 18,280,419 and 18,246,391 shares outstanding as of June 30, 2023 and 2022, respectively 2 2 Additional paid-in capital 204,734 197,785 Treasury stock at cost: 245,447 and 227,888 shares as of June 30, 2023 and June 30, 2022, respectively ( 3,682 ) ( 3,406 ) Accumulated other comprehensive loss ( 6,312 ) ( 4,562 ) Accumulated deficit ( 44,778 ) ( 76,360 ) Total stockholders' equity 149,964 113,459 Total liabilities and stockholders' equity $ 293,324 $ 294,180 The accompanying notes are an integral part of these consolidated financial statements. 66 Table of Contents IBEX LIMITED AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Amounts in thousands except for per share amounts) Year Ended June 30, 2023 2022 2021 Revenue $ 523,118 $ 492,851 $ 443,388 Cost of services (exclusive of depreciation and amortization presented separately below) 374,992 373,973 335,249 Selling, general and administrative 88,663 80,153 76,976 Depreciation and amortization 18,985 18,100 14,118 Total operating expenses 482,640 472,226 426,343 Income from operations 40,478 20,625 17,045 Interest expense, net ( 152 ) ( 1,246 ) ( 1,892 ) Income before income taxes 40,326 19,379 15,153 Provision for income tax (expense) / benefit ( 8,744 ) 2,077 ( 2,064 ) Net income $ 31,582 $ 21,456 $ 13,089 Other comprehensive loss Foreign currency translation adjustments $ ( 2,234 ) $ ( 2,281 ) $ ( 650 ) Unrealized gain / (loss) on cash flow hedging instruments, net of tax 515 ( 323 ) 202 Actuarial (loss) / gain on defined benefit plan ( 31 ) 440 137 Total other comprehensive loss ( 1,750 ) ( 2,164 ) ( 311 ) Total comprehensive income $ 29,832 $ 19,292 $ 12,778 Net income per share Basic $ 1.74 $ 1.18 $ 0.74 Diluted $ 1.67 $ 1.15 $ 0.71 Weighted average common shares outstanding Basic 18,200 18,232 17,649 Diluted 18,893 18,724 18,359 The accompanying notes are an integral part of these consolidated financial statements. 67 Table of Contents IBEX LIMITED AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity (Amounts in thousands) Common shares Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income / (Loss) Accumulated Deficit Total Stockholders' Equity Preferred Stock Shares Amount Amount Balance, June 30, 2020 1,842 $ — — $ 127,710 $ ( 2,087 ) $ ( 106,905 ) $ 18,718 $ 12 Dividend distribution to Series A preferred shareholder, 1 share, $ 4,000 per share — — — — — ( 4,000 ) ( 4,000 ) — Preferred share conversion upon initial public offering on August 7, 2020 12,985 2 — 10 — — 12 ( 12 ) Shares issued through initial public offering on August 7, 2020 3,571 — — 61,912 — — 61,912 — Net income for the period ended June 30, 2021 — — — — — 13,089 13,089 — Foreign currency translation adjustment — — — — ( 650 ) — ( 650 ) — Changes in fair value of cash flow hedges — — — — 202 — 202 — Changes in defined benefit plan — — — — 137 — 137 — Issue of common shares related to option issuances 1 — — 28 — — 28 — Provision for common stock warrants — — — 791 — — 791 — Stock based compensation expense — — — 4,510 — — 4,510 — Balance, June 30, 2021 18,399 $ 2 — $ 194,961 $ ( 2,398 ) $ ( 97,816 ) $ 94,749 $ — Net income for the period ended June 30, 2022 — — — — — 21,456 21,456 — Foreign currency translation adjustment — — — — ( 2,281 ) — ( 2,281 ) — Changes in fair value of cash flow hedges — — — — ( 323 ) — ( 323 ) — Purchase of treasury shares ( 228 ) — ( 3,406 ) — — — ( 3,406 ) — Changes in defined benefit plan — — — — 440 — 440 — Issue of restricted common shares 73 — — — — — — — Provision for common stock warrants — — — 970 — — 970 — Issue of common shares related to option issuances 3 — — 35 — — 35 — Stock based compensation expense — — — 1,818 — — 1,818 — Balance, June 30, 2022 18,247 $ 2 ( 3,406 ) $ 197,785 $ ( 4,562 ) $ ( 76,360 ) $ 113,459 $ — Net income for the period ended June 30, 2023 — — — — — 31,582 31,582 — Foreign currency translation adjustment — — — — ( 2,234 ) — ( 2,234 ) — Changes in fair value of cash flow hedges — — — — 515 — 515 — Purchase of treasury shares ( 18 ) — ( 276 ) — — — ( 276 ) — Changes in defined benefit plan — — — — ( 31 ) — ( 31 ) — Forfeiture of restricted common shares ( 72 ) — — — — — — — Provision for common stock warrants — — — 1,090 — — 1,090 — Issue of common shares related to option issuances 123 — — 2,053 — — 2,053 — Stock based compensation expense — — — 3,806 — — 3,806 — Balance, June 30, 2023 18,280 $ 2 ( 3,682 ) $ 204,734 $ ( 6,312 ) $ ( 44,778 ) $ 149,964 $ — The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents IBEX LIMITED AND SUBSIDIARIES Consolidated Statements of Cash Flows (Amounts in thousands) June 30, 2023 June 30, 2022 June 30, 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 31,582 $ 21,456 $ 13,089 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,985 18,100 14,118 Noncash lease expense 14,456 14,066 11,958 Warrant contra revenue 1,090 970 791 Deferred income tax 4,529 ( 5,170 ) ( 1,914 ) Share-based compensation expense 4,606 1,851 5,361 Allowance of expected credit losses 295 — 291 Loss / (gain) on lease terminations 251 — ( 634 ) Gain on sale of subsidiaries ( 246 ) — — Change in assets and liabilities: (Increase) / decrease in accounts receivable ( 12,297 ) ( 9,705 ) ( 13,333 ) (Increase) / decrease in prepaid expenses and other current assets 1,467 3,551 ( 2,033 ) Increase / (decrease) in accounts payable and accrued liabilities ( 3,753 ) 2,307 ( 4,009 ) Increase / (decrease) in deferred revenue ( 4,797 ) 5,506 3,183 Decrease in operating lease liabilities ( 14,309 ) ( 12,926 ) ( 10,791 ) Net cash inflow from operating activities 41,859 40,006 16,077 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ( 18,952 ) ( 25,919 ) ( 20,823 ) Cash outflow from sale of subsidiaries, net of cash received ( 85 ) — — Net cash outflow from investing activities ( 19,037 ) ( 25,919 ) ( 20,823 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit 43,448 88,117 116,026 Repayments of line of credit ( 54,597 ) ( 99,227 ) ( 115,189 ) Proceeds from debt — — 1,714 Repayment of related party loan — — ( 1,614 ) Repayment of debt ( 3,795 ) ( 6,834 ) ( 11,080 ) Net proceeds from initial public offering — — 63,107 Listing costs related to the initial public offering — — ( 1,074 ) Proceeds from the exercise of options 2,053 35 28 Principal payments on finance leases ( 447 ) ( 818 ) ( 7,019 ) Purchase of treasury shares ( 276 ) ( 3,406 ) — Dividend distribution — — ( 4,000 ) Net cash (outflow) / inflow from financing activities ( 13,614 ) ( 22,133 ) 40,899 Effects of exchange rate difference on cash and cash equivalents ( 610 ) ( 965 ) ( 181 ) Net increase / (decrease) in cash and cash equivalents 8,598 ( 9,011 ) 35,972 Cash and cash equivalents at beginning of the year 48,831 57,842 21,870 Cash and cash equivalents at end of the year $ 57,429 $ 48,831 $ 57,842 Supplemental cash flow disclosures Cash paid for interest $ 152 $ 1,246 $ 1,892 Cash paid for income taxes $ 4,283 $ 2,160 $ 5,665 Supplemental non-cash disclosures Change in accounts payable related to fixed assets $ ( 621 ) $ 1,631 $ ( 849 ) The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents IBEX LIMITED AND SUBSIDIARIES Notes to the Consolidated Financial Statements (Amounts in thousands, except per share amounts) 1. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OVERVIEW IBEX Limited (“IBEX” and together with its subsidiaries, the “Company,” “ibex,” “we,” “us,” or “our”) was incorporated on February 28, 2017 in Hamilton, Bermuda. Our registered office in Bermuda is Crawford House, 50 Cedar Avenue, Hamilton HM 11, Bermuda. We are a “controlled company” within the meaning of the rules of Nasdaq, with The Resource Group International Limited (“TRGI”) being our controlling shareholder. TRG Pakistan Limited holds a controlling interest in TRGI. On August 7, 2020, the Company was admitted to trade on the Nasdaq Global Market under the ticker symbol “IBEX.” The Company is an end-to-end provider of technology-enabled customer lifecycle experience (“CLX”) solutions. Through the Company’s integrated CLX platform, a comprehensive portfolio of solutions is offered to optimize customer acquisition, engagement, expansion and experience for clients. The Company leverages sophisticated technology and proprietary analytics, in combination with its global footprint and business process outsourcing expertise, to protect and enhance clients’ brands. The Company manages nearly 176 million interactions each year with consumers on behalf of clients through an omni-channel approach, using voice, web, chat and email. Our services cover three main areas: • ibex Connect: Our Connect business lies at the core of our offerings and generates the majority of the company’s revenue. This business unit delivers differentiated customer service (assisting our clients’ customers with information about our clients and their products or services), technical support (providing specialized teams to provide information, assistance and technical guidance to our clients’ customers on a specific product or service), revenue generation (upselling and cross selling) and other value-added outsourced back office services (finance and accounting, marketing support, sales operations, and human resources administration) to our clients. We deploy these capabilities through a true omni-channel CX model, which integrates voice, email, chat, SMS, social media and other communication applications. • ibex Digital: Our ibex Digital suite of solutions works with consumer-facing businesses to help them build, grow and scale technology-driven customer acquisition solutions, while helping drive digital transformation. We offer digital marketing, e-commerce technology, and platform solutions for some of the largest and fastest growing brands, helping them build new customer acquisition channels, increase acquired customers, and often do both at a reduced cost. • ibex CX: Our CX business measures, monitors and manages our clients’ wholistic customer experiences. By offering a 360-degree CX approach, our clients can harness the power of data and customer feedback to differentiate themselves within today’s “customer expectation economy.” We enable our clients to improve retention of their customers, identify and manage service issues in real time, predict future behavior and outcomes, derive impact analysis scenarios and assign “action plans” throughout the enterprise. Operating segments An operating segment is defined as a component of a company for which separate financial information is available and which is regularly evaluated by the chief operating decision maker (“CODM”) for the purpose of making decisions regarding resource allocation and in performance assessment. The Company’s CODM is the chief executive officer (“CEO”). The Company’s CODM reviews consolidated financial results to make decisions, allocate resources and assess performance. Therefore, the Company has determined that it operates in a single operating and reportable segment. 70 Table of Contents SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation and principles of consolidation Historically, the Company qualified as a foreign private issuer and prepared its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Effective July 1, 2023, the Company no longer qualifies as a foreign private issuer as defined in Rule 405 of Regulation C under the Securities Act and Rule 3b-4 under the Exchange Act and therefore has become a domestic filer and must file this Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 and in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Company’s consolidated financial statements were prepared in accordance with U.S. GAAP retrospectively for the fiscal years ended June 30, 2023, 2022, and 2021 and include the financial results of all wholly-owned subsidiaries. When the Company does not have majority ownership in an entity but exerts significant influence over that entity, the Company accounts for the entity under the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation. Use of estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Significant items subject to such estimates and assumptions include useful lives for property and equipment; impairment of long-lived assets, operating lease assets and liabilities, goodwill, and other intangible assets; allowance for credit losses; valuation allowances for deferred tax assets and other receivables; fair value of share-based compensation, warrants, and derivatives, and legal provisions. The Company bases its estimates on historical experience and other assumptions it believes are reasonable, including the use of outside experts as necessary, and updates these estimates on an ongoing basis and as new events occur, more experience is acquired and/or more information is obtained. Actual results could differ materially from these estimates. Foreign currency matters These financial statements are presented in U.S. dollars, which is the functional and presentation currency of IBEX Limited. Certain of the Company’s subsidiaries have a functional currency other than the U.S. dollar. The assets and liabilities of these subsidiaries are translated into U.S. dollars at period-end exchange rates. Income and expense items are translated at the monthly average exchange rates during the period in which the items occur. Translation gains and losses are recorded in accumulated other comprehensive income (loss) ("AOCI"), a component of stockholders' equity, and included in net earnings only upon sale or liquidation of the underlying foreign subsidiary or affiliated company. Foreign currency transaction gains and losses are recognized in selling, general and administrative expense and are based on differences between foreign exchange rates on the transaction date and on the settlement date. Cash and cash equivalents Cash and cash equivalents includes highly liquid investments with initial maturities of three months or less and include money market funds. The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of those instruments. The majority of the Company’s cash and cash equivalents are deposited with financial institutions located in the U.S. and may at times exceed insured limits. Trade receivables Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the statements of cash flows. In accordance with Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) , the Company maintains an allowance for credit losses for expected lifetime credit losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Account balances 71 Table of Contents are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Concentration of credit risk The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and derivative instruments. Historically, the losses related to credit risk have been immaterial. The Company regularly monitors its credit risk to mitigate losses. The Company evaluates the creditworthiness of its clients prior to and throughout the life of the client relationship. The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative instruments as all of its counterparties are investment-grade financial institutions. Tax advances and receivables Tax advances and receivables consist primarily of refundable sales and use taxes and income tax prepayments. Other assets Other current assets and other non-current assets consist primarily of refundable security deposits, loans and advances receivable, and derivative assets. Property and equipment Property and equipment and assets leased under financing leases are carried at cost at acquisition date and are depreciated using the straight-line method over their estimated useful lives as follows: Property and equipment Useful economic life Leasehold improvements Lesser of life of the asset or expected lease term Furniture, fixture and office equipment 3 - 5 years Computer equipment and software 3 years Vehicles 3 - 5 years Property and equipment assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying value of the asset, an impairment charge is recognized to the extent its carrying value exceeds its estimated fair value. The Company did not identify any impairments for the years ended June 30, 2023, 2022 or 2021. Leases The Company determines whether an arrangement contains a lease at inception in accordance with the provisions of Accounting Standards Codification (“ASC”) 842, Leases. Operating leases are included in operating lease assets and current and non-current lease liabilities, and assets leased under finance leases are included in property and equipment and current and non-current debt in the consolidated balance sheets. Operating lease assets represent the Company’s right to use an underlying asset for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases with initial terms in excess of twelve months are recognized at the commencement date based on the present value of lease payments over the lease term. The operating lease asset is adjusted for lease incentives, prepaid lease payments and initial direct costs. Operating lease expense is recognized on a straight-line basis over the lease term in cost of services or selling, general and administrative expense, as applicable. The Company has lease agreements for office space with lease and non-lease components. The Company has elected to combine lease and non-lease components. 72 Table of Contents Certain of the Company’s lease agreements include rental payments that adjust periodically based on an index or rate, generally the applicable Consumer Price Index (“CPI”). The operating lease liability is measured using the prevailing index or rate at the measurement date (i.e., the commencement date). Incremental payments due to changes to the index- and rate-based lease payments are expensed as incurred. For purposes of calculating operating lease liabilities, the lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company’s capital investment, relationships with clients serviced at the site, and employee recruitment potential are some of the factors it considers when determining whether it will exercise its option to extend a lease. The Company determines the incremental borrowing rates based on information available at the lease commencement date. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Interest on finance leases is included in interest expense, net, in the consolidated statements of comprehensive income. We apply judgment in estimating the incremental borrowing rate including considering the term of the lease, the currency in which the lease is denominated, and the impact of collateral and our credit risk on the rate. The Company has elected the short-term lease recognition exemption for all asset classes. Leases with a term of twelve months or less are expensed as incurred in the consolidated statements of comprehensive income as cost of services or selling, general and administrative expense as applicable. The Company did not have any material short-term leases for the periods presented. For finance leases, the right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. The right of use asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term. The lease liability is initially measured in the same manner and date as for operating leases and is subsequently measured at amortized cost using the effective interest method. Goodwill Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is not amortized but is tested for impairment at the reporting unit level, on an annual basis or more frequently, if events occur or circumstances change indicating potential impairment. The Company annually tests goodwill for impairment on June 30. In evaluating goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. Qualitative factors that the Company considers include, but are not limited to, macroeconomic and industry conditions, overall financial performance and other relevant entity-specific events. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative goodwill impairment test to identify potential goodwill impairment and measures the amount of goodwill impairment it will recognize, if any. In the quantitative goodwill impairment test, the Company compares the estimated fair value of the reporting unit with its related carrying value. If the estimated fair value exceeds the carrying amount, no further analysis is needed. If, however, the reporting unit’s estimated fair value is less than its carrying amount, the Company records an impairment for the difference between the estimated fair value and the carrying value. The Company uses an internally developed discounted cash flow model that includes estimates of projected revenues, expenses and related cash flows based on assumed long-term growth rates and demand trends, expected future investments to grow new units, and estimated discount rates. The Company bases these assumptions on its historical data and experience, industry projections, and micro and macro general economic condition projections and expectations. No impairments were recorded during the fiscal years ended June 30, 2023, 2022 or 2021. 73 Table of Contents Other intangible assets The Company has indefinite-lived intangible assets consisting of trademarks. The Company evaluates indefinite-lived intangible assets for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Similar to goodwill, the Company may first use a qualitative analysis to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The qualitative analysis will include a review of changes in economic, market and industry conditions, business strategy, and financial performance, among others, to determine if there would be a significant decline to the fair value of an indefinite-lived intangible asset. If a quantitative analysis is completed, an indefinite-lived intangible asset is evaluated for possible impairment by comparing the fair value of the asset with its carrying value. An impairment charge is recorded if the asset’s carrying value exceeds its estimated fair value. No impairments were recorded during the fiscal years ended June 30, 2023, 2022 or 2021. Other intangible assets are included in other non-current assets on the consolidated balance sheets. Derivatives The Company accounts for financial derivative instruments under ASC 815, Derivatives and Hedging (“ASC 815”). The Company generally utilizes options with expirations of 12 months or less to reduce its foreign currency exposure due to exchange rate fluctuations on forecasted operating cash flows denominated in non-functional foreign currencies. The Company also entered into an interest rate swap to mitigate the effect of interest rate fluctuations. In using derivative financial instruments to hedge these exposures, the Company exposes itself to counterparty credit risk. The Company designates these derivatives as cash flow hedges. To qualify for hedge accounting treatment, a derivative must be highly effective in mitigating the designated risk of the hedged item. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedging activities. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective on a prospective and retrospective basis. When it is determined that a derivative has ceased to be a highly effective hedge or if a forecasted hedged item is no longer probable of occurring, or if the Company de-designates a derivative as a hedge, the Company discontinues hedge accounting and records all gains and losses in earnings. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is reported in AOCI until the hedged transaction affects earnings. At that time, this amount is reclassified from AOCI and recognized within cost of services or selling, general and administrative expenses, or interest expense, net, as applicable. Cash flows related to derivative contracts are classified within the operating section in the consolidated statements of cash flows. Commitments and Contingencies The Company is subject to claims and lawsuits filed in the ordinary course of business. Although management does not believe that any such proceedings other than those noted below will have material adverse effect on its consolidated financial position, results of operations, or cash flows, no assurances to that effect can be given based on the uncertainty of litigation and demands of third parties. The Company records a liability for pending litigation and claims where losses are both probable and can be reasonably estimated. Legal fees are expensed as incurred. Employee benefits (a) Defined contribution plans The Company sponsors a 401(k) plan in the U.S. under which the Company makes matching contributions for eligible employees up to 4 % of compensation. All Company matching contributions are immediately vested. The Company operates defined contribution plans in other countries as allowed or required by law. 74 Table of Contents For the years ending June 30, 2023, 2022, and 2021, the Company incurred plan expenses of $ 1.2 million, $ 1.0 million, and $ 0.8 million, respectively, which is recorded in selling, general and administrative expenses. (b) Defined benefit plan The Company records amounts relating to its defined benefit plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. Remeasurement changes are reflected in AOCI. Current service costs are recorded in the period to which they relate. Prior service cost, if any, resulting from an amendment to a plan is recognized and amortized over the remaining period of service of the covered employees. The Company reviews and adjusts its assumptions annually based on current rates and trends. The Company believes that the assumptions utilized in recording its obligation under the plan are reasonable based on its experience and market conditions. As of June 30, 2023 and 2022, defined benefit obligations of $ 1.2 million and $ 0.8 million, respectively, were included in other non-current liabilities in the consolidated balance sheets, and amounts recognized in the consolidated statements of comprehensive income for the years ended June 30, 2023, 2022, and 2021 were $ 0.4 million, $ 0.4 million, and $ 0.6 million, respectively. Share-based compensation plans The Company accounts for its share-based awards in accordance with provisions of ASC 718, Compensation - Stock Compensation . The Company calculates the fair value of option awards using the Black-Scholes model. For equity-classified awards, total compensation cost is based on the grant date fair value. For liability-classified awards, total compensation cost is based on the fair value of the award on the date the award is granted and is subsequently re-measured at each reporting date until settlement. The Company recognizes share-based compensation expense over the requisite vesting period using a graded vesting model. Awards to employees and directors may contain service, performance and/or market vesting conditions. For unvested awards with performance conditions, the Company assesses the probability of attaining the performance conditions at each reporting period. Awards that are deemed probable of attainment are recognized in expense over the requisite service period. The Company accounts for forfeitures as they occur. Warrant to purchase common shares The Company accounts for a warrant to purchase its common shares as an equity instrument in accordance with the provisions of Accounting Standard Update (“ASU”) No. 2019-08, Compensation – Stock Compensation (Topic 718) and ASC 606, Revenue from Contracts with Customers , which requires entities to measure and classify share-based payment awards granted to a customer by applying the guidance under Topic 718, as of January 1, 2019. On the grant date, the Company measured the warrant using a Black-Scholes option pricing model. There was no immediate vesting upon execution of the warrant. Contra-revenue and equity are recorded as revenue is recognized. The Company has elected a policy to estimate forfeitures for non-employee equity grants. At each reporting period, the Company assesses the likelihood of additional vesting in accordance with service or performance conditions included in the warrant terms. The Company revises its estimates for additional contra-revenue when it is probable that additional shares will vest. Income taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are also recognized for the estimated future effects of tax loss carry forwards. The effect of changes in tax rates on deferred taxes is recognized in the period in which the enactment dates change. 75 Table of Contents We recognize deferred tax assets to the extent that we determine that these assets are more likely than not to be realized. In making such a determination, we consider the available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. If we determine that we are able to realize our deferred tax assets in the future in excess of their net recorded amount, we will make an adjustment to the valuation allowance. We record uncertain tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that met the more likely than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to uncertain tax positions in income tax expense in the consolidated statement of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheets. Share repurchase plans The board of directors may authorize share repurchases of the Company’s common shares. Purchases made pursuant to these authorizations may be carried out through open market transactions, negotiated purchases or otherwise, at times and in such amounts as the Company deems appropriate. Shares repurchased under such authorizations are held in treasury for general corporate purposes, including issuances under various employee share-based award plans. When Company shares are repurchased, the amount of the consideration paid (including directly attributable costs, net of any tax effects) is recognized as a deduction of additional paid in capital. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are subsequently sold or reissued, the amount received is recognized as an increase in additional paid in capital, and any resulting surplus or deficit on the transaction is reclassified to accumulated deficit. See footnote 14 for more information on share repurchases. Equity method investment The Company uses the equity method to account for its investment in a company if the investment provides the Company with the ability to exercise significant influence over, but not control of, the operating and financial policies of the investee. The Company’s consolidated net income includes the Company’s proportionate share of the net income or loss of the investee. The Company’s judgment regarding the level of influence over its equity method investee includes considering key factors such as the Company’s ownership interest, representation on the board of directors and participation in policy-making decisions of the investee and material intercompany transactions. The Company has elected to classify distributions from its investee based on the cumulative earnings approach. See footnote 17 for more information. Emerging Growth Company The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Accordingly, the Company has the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies pursuant to Section 13(a) of the Exchange Act. The Company has elected to use the extended transition period until we are no longer an emerging growth company or until we choose to opt out of the extended transition period affirmatively and irrevocably. Recently Adopted Accounting Pronouncements In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting , which provided optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendment allows entities to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or 76 Table of Contents reassess a previous accounting determination. Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. The Company adopted the new guidance during the fourth quarter of fiscal year 2022 and the adoption had no effect on the financial statements or related disclosures during the year. 2. REVENUE FROM CONTRACTS WITH CUSTOMERS The Company recognizes revenues for services for which control has transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring the promised services. This process involves identifying the customer contract, determining the performance obligations in the contract, determining the transaction price, allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and (b) is separately identified in the contract. The Company considers a performance obligation satisfied as it provides services to a customer, meaning the customer has the ability to direct the use and obtain the benefit of the service. Revenues from contact center services, which consist of customer service, technical support and other value-added outsourced back-office services, are recognized as the services are performed on the basis of the number of billable minutes or hours, contractual rates, and other contractually agreed metrics, if applicable. Certain of our client contracts include bonus and penalty provisions. Revenues related to training that occurs upon commencement of a new client contract or statement of work are deferred and recognized on a straight-line basis over the estimated life of the client program, as it is not considered to have a standalone value to the customer. The related expenses are expensed as incurred. Revenues are recognized over time as performance obligations are satisfied and in the period in which the Company has a right to invoice, net of discounts, incentives, and/or penalties as per contractual terms. Bonuses and penalties accrue for the current billing period and do not depend on future performance. In some cases, we may estimate these bonuses or penalties using the “most likely amount” method based on actual data and historical experience. Revenues from digital services are recognized at a point in time upon the successful consumer activation or purchase of clients’ services. We utilize third parties in the satisfaction of this performance obligation; however, because we retain control over these third parties and are solely responsible for the risk and reward associated with this performance obligation, we have determined that we are the principal in these transactions and therefore recognize revenue on a gross basis. Revenues from CX software-as-a-service products are recognized over time based on the term of the subscription. Set-up fees to customize the customer experience solution for client’s specific needs are deferred and recognized on a straight-line basis over the term of the subscription. Revenues related to additional consulting services are recognized over the period as the related services are performed on a per hour basis. All of our contracts include the right to invoice for services on a monthly basis. None of our contracts include significant termination penalties, and generally may be terminated for convenience at any time with a short notice period (generally 30 to 120 days). The Company generally does not incur significant upfront costs to fulfill or obtain a contract that would qualify for capitalization under ASC 606. Disaggregation of Revenue The majority of the Company’s revenues are derived from contracts with customers who are located in the United States. However, the Company delivers most of its services from geographies outside of the United 77 Table of Contents States. Our global delivery model is built on regional customer experience delivery centers and includes a unique ability to support work-at-home capabilities in any region. The Company generates approximately 97 % of its revenue from clients based in the United States of America. June 30, 2023 June 30, 2022 June 30, 2021 Revenue United States $ 509,170 $ 476,092 $ 428,557 Others 13,948 16,759 14,831 Total $ 523,118 $ 492,851 $ 443,388 The following table presents the breakdown of the Company’s revenues by geographical location, based on where the services are provided, for the years ended: June 30, 2023 June 30, 2022 June 30, 2021 Revenue Onshore (United States) $ 145,401 $ 167,925 $ 168,475 Offshore (Philippines, Pakistan) 221,913 186,902 163,865 Nearshore (Jamaica, Nicaragua, Honduras) 155,804 138,024 111,048 Total $ 523,118 $ 492,851 $ 443,388 The following table presents the breakdown of the Company’s revenue by pattern of revenue recognition for the years ended: June 30, 2023 June 30, 2022 June 30, 2021 Pattern of Revenue recognition Services transferred over time $ 489,942 $ 455,206 $ 402,613 Services transferred at a point in time 33,176 37,645 40,775 $ 523,118 $ 492,851 $ 443,388 The movement in the deferred revenue is as follows: June 30, 2023 June 30, 2022 Opening balance $ 12,593 $ 7,087 Revenue recognized during the year ( 11,329 ) ( 5,592 ) Revenue deferred during the year 6,532 11,098 Closing balance $ 7,796 $ 12,593 78 Table of Contents 3. ACCOUNTS RECEIVABLE AND SIGNIFICANT CLIENTS Accounts receivable, net in the accompanying consolidated balance sheets consists of the following: June 30, 2023 June 30, 2022 Accounts receivable $ 86,484 $ 76,708 Less: Allowance for credit losses ( 120 ) ( 1,290 ) Accounts receivable, net $ 86,364 $ 75,418 The Company estimates its expected credit losses using the lifetime expected credit loss model. The allowance for credit losses is calculated quarterly based on the Company’s historical loss percentages (net of recoveries). In addition to the evaluation of historical losses, the Company considers current and future economic conditions and events such as changes in customer credit quality and liquidity. The Company will write-off accounts receivable against the allowance when it determines a balance is uncollectible, and wrote-off $ 1.4 million for the year ended June 30, 2023. Write-offs for the two fiscal years ended June 30, 2022 and 2021 were not material. Activity in the Company’s allowance for credit losses consists of the following: June 30, 2023 June 30, 2022 Balance, beginning of year $ 1,290 $ 2,301 Provision for credit losses 321 7 Reversal of provision for credit losses ( 26 ) ( 767 ) Uncollectible receivables written off ( 1,410 ) — Effect of foreign exchange ( 55 ) ( 251 ) Balance, end of year $ 120 $ 1,290 Significant Clients The Company has one client in excess of 10% of total revenue for the years ended June 30, 2023 and June 30, 2022, and three clients in excess of 10% of total revenue for the year ended June 30, 2021. The revenue from our top three clients as a percentage of total revenue is as follows: Year ended June 30, 2023 2022 2021 Client 1 13 % 12 % 12 % Client 2 7 % 8 % 12 % Client 3 7 % 7 % 11 % Amounts receivable from these clients is as follows: Year ended June 30, 2023 2022 Client 1 $ 5,968 $ 9,966 Client 2 $ 13,807 $ 5,725 Client 3 $ 6,405 $ 4,369 To limit the Company’s credit risk with its clients, management regularly monitors the aging of customer receivables, maintains allowances for credit losses and may require prepayment for services from certain clients. Based on currently available information, management does not believe significant credit risk exists as of June 30, 2023. 79 Table of Contents 4. PROPERTY AND EQUIPMENT, NET Property and equipment consists of the following: June 30, 2023 June 30, 2022 Leasehold improvements $ 37,356 $ 33,277 Furniture & fixtures 31,228 29,986 Computer equipment 73,824 67,448 Software 21,057 19,556 Vehicles 1,779 1,295 Assets under construction 435 1,356 Property and equipment, gross $ 165,679 $ 152,918 Less: Accumulated depreciation ( 124,528 ) ( 110,979 ) Property and equipment, net $ 41,151 $ 41,939 The following table presents the Company’s total property and equipment by geographic location: June 30, 2023 June 30, 2022 USA $ 10,751 $ 10,476 Philippines 9,117 11,474 Pakistan 3,923 2,995 Jamaica 13,374 11,318 Nicaragua 3,421 4,948 Honduras 565 709 Senegal — 19 Total $ 41,151 $ 41,939 Depreciation expense, which includes depreciation expense for finance lease assets, for the Company was $ 19.0 million, $ 18.1 million, and $ 14.1 million for the years ended June 30, 2023, 2022, and 2021, respectively. 5. LEASES The Company has operating lease obligations primarily for our delivery centers and finance lease obligations primarily for vehicles and other equipment. Leases typically have initial terms of two to thirteen years , and may include renewal options if the Company is reasonably certain to exercise such options. The components of lease cost are as follows: June 30, 2023 June 30, 2022 June 30, 2021 Operating lease cost: Operating lease cost $ 21,614 $ 21,442 $ 18,961 Variable lease cost 4,127 4,207 3,806 Total operating lease cost 25,741 25,649 22,767 Finance lease cost: Amortization of right of use assets 446 375 2,541 Interest on lease liabilities 143 93 104 Total finance lease cost $ 589 $ 468 $ 2,645 80 Table of Contents The following table presents supplemental balance sheet information related to leases: June 30, 2023 June 30, 2022 Operating lease assets $ 70,919 $ 83,094 Operating lease liabilities, current 13,036 13,808 Operating lease liabilities, non-current 64,854 75,994 Total operating lease liabilities $ 77,890 $ 89,802 Finance lease assets, net 929 641 Finance lease liabilities, current 361 391 Finance lease liabilities, non-current 600 322 Total finance lease liabilities $ 961 $ 713 The following table presents supplemental cash flow information related to leases: June 30, 2023 June 30, 2022 June 30, 2021 Cash paid for amounts included in the measurement of lease liabilities $ 14,309 $ 12,926 $ 10,791 Operating cash flows paid for interest portion of finance leases $ 143 $ 93 104 Financing cash flows paid for principal portion of finance leases $ 447 $ 818 $ 7,019 The following table presents supplemental noncash information related to leases: June 30, 2023 June 30, 2022 Right-of-use assets obtained in exchange for lease obligations Operating leases 11,281 24,319 Finance leases 881 452 June 30, 2023 June 30, 2022 Weighted average remaining lease term (in years) Operating leases 5.7 5.8 Finance leases 2.6 3.0 Weighted average discount rate Operating leases 9.2 % 9.0 % Finance leases 13.4 % 12.2 % 81 Table of Contents The following table presents the maturities of our lease liabilities as of June 30, 2023: Year Ending June 30 Operating Leases Finance Leases 2024 $ 19,162 $ 496 2025 17,398 432 2026 15,966 220 2027 15,712 33 2028 12,785 — Thereafter 19,587 — Total undiscounted lease payments 100,610 1,181 Less: liability accretion ( 22,720 ) ( 220 ) Total lease liabilities 77,890 $ 961 6. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The carrying amount of goodwill at both June 30, 2023 and 2022 was $ 11.8 million. During the years ended June 30, 2023 and 2022, the Company performed a qualitative assessment and determined that the estimated fair value of the reporting unit exceeded the carrying value, therefore, no impairment charges were recognized. Other Intangible Assets The carrying amount of indefinite-lived intangible assets (trademarks) at both June 30, 2023 and 2022 was $ 0.7 million and is included in other non-current assets in the consolidated balance sheets. During the years ended June 30, 2023 and 2022, the Company performed a qualitative assessment and determined that no impairment was necessary. 7. DERIVATIVES Cash flow hedges Interest rate swap In March 2020, the Company entered into a $ 15 million notional floating to fixed interest-rate swap to hedge the interest rate risk on the first $ 15 million of the balance outstanding under our three-year $ 35.0 million revolving credit facility (as amended, the “PNC Credit Facility”) with PNC Bank, N.A. (“PNC”). At the time the hedge was executed, all critical terms matched between the hedge and the hedged item. Hedge effectiveness was assessed prospectively at inception, and on an ongoing basis by confirming that the critical terms continue to match. For the year ended June 30, 2023 there was no hedge ineffectiveness. For the year ended June 30, 2022, due to a decline in the line of credit balance, the Company recorded $ 0.05 million of hedge ineffectiveness, which is included in interest expense, net. For the year ended June 30, 2021 there was no hedge ineffectiveness. The hedge expired by its terms in March 2023 and was not replaced. The Company has elected the optional expedients under ASC 848, which allows companies to continue applying hedge accounting, without de-designation, when one or more critical terms of the hedging relationship change, or is expected to change, due to reference rate reform. Effective June 1, 2022, the hedged debt index was changed from LIBOR to SOFR and the hedge documentation was updated to reflect this change on the effective date. The swap was not amended and the Company continued to apply hedge accounting. 82 Table of Contents The fair value of the interest rate swap is recorded in other current assets in the consolidated balance sheets as of June 30, 2023 and 2022: Maturity Date USD Notional Floating rate receivable Fixed rate payable Fair value (liability) / asset Interest rate swap March 26, 2023 $ 15,000 1M USD-SOFR 1.43 % Fair value as of June 30, 2022 $ 170 Fair value as of June 30, 2023 $ — Foreign exchange contracts During the two years ended June 30, 2023 and 2022, the Company entered into foreign currency exchange contracts, consisting of offsetting foreign exchange option contracts (“collars”), to mitigate foreign exchange fluctuations on the Philippine Peso (“PHP”) within a certain range and on a certain percentage of its PHP operating costs. The collars were designated as cash flow hedges upon inception, in accordance with ASC 815, in order to match the financial results of the hedges with the forecasted transactions. These contracts cover periods commensurate with the expected exposure, generally three to twelve months . We execute our contracts with our primary banking partner, PNC. The Company has not experienced and does not anticipate experiencing any issues related to derivative counterparty defaults. The following table shows the notional amount and fair value of our foreign exchange cash flow hedging instruments as of June 30, 2023 and 2022: Settlement date Hedged currency Foreign currency rate Notional amount Fair Value Foreign currency option contracts - liabilities July 6, 2023 through June 21, 2024 PHP 52.50 - 57.90 $ 27,303 Fair value as of June 30, 2022 981 Fair value as of June 30, 2023 100 The fair value of the collars are included in accounts payable and accrued liabilities in the consolidated balance sheets. Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in AOCI. Amounts previously recognized in AOCI are reclassified to expense in the periods in which the hedged expenses occur. During the years ended June 30, 2023 and 2022, the Company reclassified a loss of $ 1.2 million and $ 0.3 million, respectively, related to its collars in cost of services. The table below summarizes the aggregate unrealized net gain or loss in AOCI for the three years ended June 30: June 30, 2023 June 30, 2022 June 30, 2021 Aggregate unrealized net loss at beginning of period $ 857 $ 316 $ 518 Add: Net loss / (gain) from change in fair value of cash flow hedges 524 860 ( 202 ) Less: Net loss reclassified to earnings from effective hedges ( 1,201 ) ( 319 ) — Aggregate unrealized net loss at end of period $ 180 $ 857 $ 316 83 Table of Contents 8. DEBT Debt consists of the following: June 30, 2023 June 30, 2022 Debt Revolving credit facility $ 52 $ 11,202 Demand loans — 1,626 Notes payable — 1,851 Loans — 348 Finance leases 961 713 Total debt $ 1,013 $ 15,740 Less: Current maturities of long-term debt and finance leases ( 413 ) ( 15,079 ) Total long-term debt, net $ 600 $ 661 Revolving credit facilities PNC Credit Facility In November 2013, the Company’s subsidiary, Ibex Global Solutions, Inc. (formerly known as TRG Customer Solutions, Inc.), entered into the three-year $ 35.0 million revolving credit facility with PNC (as amended, the “PNC Credit Facility”). Between June 2015 and March 2021, the PNC Credit Facility was amended multiple times for increases to the maximum revolving advance amount and extensions of the maturity date. In March 2021, the PNC Credit Facility was amended to join its wholly owned subsidiaries, Digital Globe Services, LLC, TelSatOnline, LLC and 7 Degrees, LLC as borrowers. In September 2021, the PNC Credit Facility was amended to join its wholly owned subsidiary, iSky, LLC as a borrower. In June 2022, the PNC Credit Facility was amended to increase the maximum revolving advance amount to $ 80 million, with the ability to request increases, up to a maximum revolving advance amount of $ 95 million (contingent upon lender approval), change the reference rate used from LIBOR to Term SOFR and extend the maturity date to May 2026. Borrowings under the PNC Credit Facility bear interest at SOFR plus a margin of 1.75 % and/or negative 0.5 % of the PNC Commercial Lending Rate for domestic loans. The PNC Credit Facility also requires a commitment fee of 0.25 % per annum of undrawn commitments to be paid quarterly in arrears. The PNC Credit Facility is guaranteed by IBEX Global Limited and secured by substantially all the assets of Ibex Global Solutions, Inc. and its wholly owned subsidiaries mentioned above. The line of credit balance as of June 30, 2023 and 2022 is $ 0.1 million and $ 11.2 million, respectively. As of June 30, 2023, the Company had $ 71.9 million of borrowing available based on eligible collateral. The PNC Credit Facility contains certain financial, operating, and other covenants, including, among other things, covenants restricting additional borrowings, pay dividends and make certain investments. The Company was in compliance with all debt covenants as of June 30, 2023. Notes payable During fiscal year 2022, the Company has financed $ 1.0 million related to the purchase of various property and equipment at interest rates ranging from 5.4 % to 9.76 % per annum. As of June 30, 2023 and 2022, the balance of the notes were zero and $ 0.2 million, respectively. In fiscal year 2022, the Company financed its insurance policies at interest rates ranging from 4.6 % to 5 % per annum. As of June 30, 2023 and 2022, the balance of the notes were zero and $ 1.7 million, respectively. Demand Loans In January 2018, the Company’s subsidiary IBEX Global Jamaica Limited entered into a $ 1.4 million non-revolving demand loan with First Global Bank Limited. As of June 30, 2023 and 2022 the balance of the loan was zero and $ 0.2 million, respectively. 84 Table of Contents In November 2018, the Company’s subsidiary IBEX Global Jamaica Limited entered into a $ 1.2 million non-revolving demand loan with First Global Bank Limited. As of June 30, 2023 and 2022, the balance of the loan was zero and $ 0.4 million, respectively. In October 2019, the Company’s subsidiary, IBEX Global Jamaica Limited, entered into a $ 0.8 million non- revolving demand loan with First Global Bank Limited. As of June 30, 2023 and 2022, the balance of the loan was zero and $ 0.1 million, respectively. In March 2020, the Company’s subsidiary, IBEX Global Jamaica Limited, entered into a $ 0.6 million non-revolving demand loan and a $ 2.0 million non-revolving demand loan with First Global Bank Limited. As of June 30, 2023 and 2022, the balance of the $ 0.6 million non-revolving demand loan was zero and $ 0.2 million, respectively. As of June 30, 2023 and 2022, the balance of the $ 2 million non-revolving demand loan was zero and $ 0.7 million, respectively. Loans In May 2020, the Company’s subsidiary, IBEX Global Solutions (Pvt) Limited entered into a loan agreement with JS Bank Limited for a loan of $ 1.0 million (PKR 165 million) under a government initiated wage and salary loan fund. The loan bears 3 % interest per annum with a two year term. Repayment of the loan commenced in January 2021, and was paid in full in December 2022. As of June 30, 2023 and 2022, the balance of the loan was zero and $ 0.2 million, respectively. In May 2020, the Company’s subsidiary, Virtual World (Pvt) Limited entered into a loan agreement with JS Bank Limited for a loan of $ 0.8 million (PKR 120 million) under a government initiated wage and salary loan fund. The loan bears 3 % interest per annum with a two year term. Repayment of the loan commenced in January 2021, was paid in full in December 2022. As of June 30, 2023 and 2022, the balance of the loan was zero and $ 0.1 million, respectively. Total interest expense of $ 0.2 million, $ 1.2 million, and $ 1.9 million has been recognized in the consolidated statements of comprehensive income for the years ended June 30, 2023, 2022, and 2021, respectively. 9. CONTINGENCIES AND COMMITMENTS The Company is subject to claims and lawsuits filed in the ordinary course of business. Although management does not believe that any such proceedings other than those noted below will have material adverse effect on its consolidated financial position, results of operations, or cash flows, no assurances to that effect can be given based on the uncertainty of litigation and demands of third parties. The Company records a liability for pending litigation and claims where losses are both probable and can be reasonably estimated. Legal proceedings In March 2022, a class action lawsuit was filed against the Company in the United States District Court for the District of Columbia alleging plaintiffs’ personal information was exposed as a result of the August 2020 ransomware incident. In July 2022, the parties reached a preliminary settlement. In March 2023, the Court granted final approval of the settlement, with a deadline for class members to submit claims to the Settlement Administrator ending March 20, 2023. As of June 30, 2023, there have been no objections or opt-outs received and the period to submit same has expired. The settlement was fully covered and paid by available insurance. Indemnification In addition, in the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify clients, vendors and other business partners with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, cybersecurity breach, services to be provided by us or from intellectual property infringement claims made by third parties. Historically, we have not experienced significant losses on these types of indemnification obligations. Purchase obligations 85 Table of Contents As of June 30, 2023, the Company is party to non-cancelable purchase obligations that mainly relate to long term telecommunications contracts and enterprise cloud solutions for the continuing operation of our business. The Company has commitments to pay $ 6.3 million in the next twelve months and $ 9.5 million thereafter related to these contracts. 10. WARRANT On November 13, 2017, and as subsequently amended, the Company issued to Amazon.com NV Investment Holdings LLC, a subsidiary of Amazon.com, Inc. (“Amazon”), a 10-year warrant to acquire approximately 1,674,017 common shares, representing 10.0 % of our equity on a fully diluted basis. The warrant is exercisable at a price per share of $ 9.42 . The warrant provides for net share settlement, that if elected by the holder, will reduce the number of shares issued upon exercise to reflect the net settlement of the exercise price. The warrant is classified as an equity instrument in accordance with ASU No. 2019-08, which was adopted retroactively on July 1, 2020. The Company determined the grant date fair value of the warrant using the Black-Scholes option pricing model. The warrant shares vest on the satisfaction of specified milestones tied to Amazon’s purchase of services from the Company during a seven-and-a-half-year period ending on June 30, 2024. The vesting is partially accelerated in the event of a reorganization transaction (as defined in the warrant). Amazon is entitled to customary shelf and piggy-back registration rights with respect to the shares issued upon exercise of the warrant. Amazon may not transfer the warrant except to a wholly-owned subsidiary of Amazon. As of June 30, 2023 and 2022, 1,004,410 and 669,607 warrants were vested, respectively. To date, no warrants have been exercised, expired or been cancelled. The Company recorded contra revenue of approximately $ 1.1 million, $ 1.0 million, and $ 0.8 million during the years ended June 30, 2023, 2022, and 2021, respectively. 11. SHARE BASED COMPENSATION Share-based compensation expense The following tables summarize the components of share-based compensation expense recognized in the Company’s consolidated statements of comprehensive income, both by line item and by plan: Year ended June 30, 2023 2022 2021 Cost of services $ 298 $ 105 $ — Selling, general and administrative 4,308 1,746 5,361 Total stock compensation expense $ 4,606 $ 1,851 $ 5,361 Year ended June 30, 2023 2022 2021 Phantom Stock Plans $ 800 $ 33 $ 851 2018 Restricted Stock Award Plan $ ( 7 ) $ 6 $ 885 2020 Long term Incentive Plan $ 3,813 $ 1,812 $ 3,625 Total stock compensation expense $ 4,606 $ 1,851 $ 5,361 Phantom Stock Plans In 2018, the Company adopted phantom stock plans (“Phantom Stock Plans”) in certain of its operating countries, which provide for grants of “phantom stock options” to certain executive officers and employees in those countries. Each phantom stock option provides the participant with a contractual right to receive an amount equal to the difference between the fair market value of a vested common share of the Company at the time of exercise and the exercise price of the option per share. 86 Table of Contents The maximum number of phantom stock options available for issuance under the Phantom Stock Plans is 600,000 . The Phantom Stock Plans shall continue until the earlier of June 30, 2025 or termination by the Company’s board of directors pursuant to the terms of the plans. The following table summarizes the phantom stock option activity for the year ended June 30, 2023: Share options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate intrinsic value (thousands) Outstanding as of June 30, 2022 187,673 $ 18.91 7.23 Granted 97,500 25.48 9.67 Exercised ( 63,089 ) 17.18 6.86 $ 558 Forfeited / expired ( 10,734 ) 24.36 8.94 Outstanding as of June 30, 2023 211,350 $ 22.18 8.38 $ 188 Vested and exercisable as of June 30, 2023 93,621 $ 19.43 7.34 $ 169 The weighted average fair value of the phantom stock options for the years ended June 30, 2023, 2022, and 2021 is $ 8.33 , $ 5.59 , and $ 13.84 respectively. The total pre-tax intrinsic value of the options exercised during the years ended June 30, 2023, 2022, and 2021 was $ 8.85 , $ 9.52 , and $ 14.76 , respectively. The liability for outstanding phantom stock options as of June 30, 2023 and 2022 was $ 1.2 million a nd $ 1.0 million and is included in other liabilities and non-current liabilities in the consolidated balance sheets, as applicable. As of June 30, 2023, the unrecognized compensation expense associated with the phantom stock plan is $ 0.6 million and it will be recognized ov er 47 months fro m the end of June 30, 2023. Phantom stock option awards vest based on service conditions. The Company has elected to use the Black-Scholes valuation to calculate the fair value of Phantom stock options. The Black-Scholes valuation model requires the use of certain estimates and assumptions that affect the fair value of options in the consolidated statement of profit or loss. These include the price per share, expected term, expected volatility, expected dividends and the risk-free interest rate. June 30, 2023 June 30, 2022 June 30, 2021 Expected term 1.40 - 6.12 years 1.40 - 5.66 years 1.65 - 5.66 years Volatility 33.41 % - 36.33 % 32.6 % - 37.2 % 32.23 % - 44.29 % Expected dividend yield 0.00 % 0.00 % 0.00 % Risk-free interest rate 4.05 % - 4.87 % 3.01 % to 3.03 % 0.25 % - 1.04 % The assumptions used in the Black-Scholes model are estimated as follows: • Expected dividend yield: Zero percent , as we do not anticipate paying dividends on our common shares. • Expected volatility: Based on the historical stock price volatility of comparable publicly-traded companies in our peer group. • Risk-free interest rate: Based on the U.S. Treasury yield curve in effect at the time of grant. • Expected term: Estimated based on the simplified method as we do not have adequate historical data. 2018 Restricted Share Plan On December 21, 2018, our board of directors and shareholders approved and adopted the Company’s 2018 Restricted Share Plan (the “2018 RSA Plan”). As of May 20, 2020, the Company will not issue further shares under this 2018 RSA plan and the remaining shares of 707,535 were transferred to the 2020 Long Term Incentive Plan. 87 Table of Contents Executive Leadership Team awards Performance-based restricted stock awards (“RSA”) were granted to executive leadership team employees and vested based on certain performance criteria, which have all been met, in addition to service conditions. A summary of the unvested RSAs is as follows: Shares Weighted Average Grant Date Fair Value Unvested as of June 30, 2022 35,292 $ 0.61 Granted — — Vested ( 28,902 ) 0.61 Forfeitures / cancellations / expirations ( 106 ) 0.61 Unvested as of June 30, 2023 6,284 $ 0.61 2020 Long Term Incentive Plan On May 20, 2020, our board of directors and shareholders approved and adopted the Company’s 2020 Long Term Incentive Plan, with an amendment and restatement effective January 14, 2022 (the “2020 LTIP”). The number of common shares that we may issue with respect to awards granted under the 2020 LTIP will not exceed an aggregate of 1,987,326 shares. The 2020 LTIP provides for grants of stock options and stock awards. Stock options The Company granted stock options to new and existing employees and members of the board of directors over the last three fiscal years. These awards are subject to service-based, and in some cases, performance- and market-based vesting conditions and generally vest in monthly, quarterly, or annual installments over two to four years . The term of the option awards is ten years . The following table summarizes the stock option activity for the year ended June 30, 2023: Share options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate intrinsic value (thousands) Outstanding as of June 30, 2022 921,972 $ 16.62 7.34 Granted 236,200 26.22 9.67 Exercised ( 122,946 ) 16.79 7.28 $ 1,002 Forfeited / expired ( 93,627 ) 18.44 7.26 Outstanding as of June 30, 2023 941,599 18.78 7.89 $ 3,501 Vested and exercisable as of June 30, 2023 558,758 $ 16.36 7.16 $ 2,721 The weighted-average grant-date fair value of options granted during the years ended June 30, 2023, 2022, and 2021 was $ 18.78 , $ 16.42 , and $ 16.70 , respectively. The total pre-tax intrinsic value of the options exercised during the year ended June 30, 2023, 2022, and 2021 was $ 8.15 , $ 4.08 , and $ 3.65 , respectively. 88 Table of Contents We use the Black-Scholes model to determine the fair value of stock options with either solely service conditions or a combination of service and performance conditions. The grant date fair value of the stock options was estimated using the following assumptions: June 30, 2023 June 30, 2022 June 30, 2021 Expected term 6.12 years 6.08 - 7.00 years 5.30 - 10.00 years Volatility 32.89 % - 33.39 % 31.30 % - 31.54 % 29.40 % - 47.70 % Expected dividend yield 0.00 % 0.00 % 0.00 % Risk-free interest rate 3.75 % to 4.11 % 1.28 % to 2.00 % 0.57 % to 1.20 % The assumptions used in the Black-Scholes model are estimated as follows: • Expected dividend yield: Zero percent , as we do not anticipate paying dividends on our common shares. • Expected volatility: Based on the historical stock price volatility of comparable publicly-traded companies in our peer group. • Risk-free interest rate: Based on the U.S. Treasury yield curve in effect at the time of grant. • Expected term: Estimated based on the simplified method as we do not have adequate historical data. Restricted stock awards/units (RSU) The Company granted restricted stock awards in fiscal year 2022 (“RSU”) which vest based on service conditions over four years . The Company also granted restricted stock awards in fiscal year 2021 to the Chief Executive Officer and members of the board of directors which either vest immediately or over two years . Performance-based restricted stock units (PRSU) The Company granted restricted stock units that were subject to service and performance conditions in fiscal years 2022 and 2021. Performance triggers were based on revenue or EBITDA targets. If such targets are met, awards begin vesting on a three-year schedule, or, in some cases, vest immediately. If targets are not met, no shares will vest. The Company calculated the fair value of the RSU and PRSU awards based on the closing price of the Company’s stock on the date of grant and records compensation expense over the vesting period using a graded vesting model. The weighted average grant-date fair value of these awards during the years ended June 30, 2023, 2022, and 2021 w as $ 16.28 , $ 16.68 , and $ 19.23 , res pectively. The weighted average grant-date fair value of awards vested during the years ended June 30, 2023, 2022, and 2021 was $ 17.12 , $ 19.23 and $ 19.23 , respectively. A summary of the unvested RSU and PRSU activity for the year ended June 30, 2023 is as follows: Shares Weighted Average Grant Date Fair Value Unvested as of June 30, 2022 635,738 $ 16.68 Granted — $ — Vested ( 30,557 ) $ 17.12 Forfeitures / cancellations / expirations ( 60,000 ) $ 20.11 Unvested as of June 30, 2023 545,181 $ 16.28 As of June 30, 2023, there was app roximately $ 8.2 million of total unrecognized compensation expense which will be recognized over the remaining weighted average vesting period of 3.77 years using a graded vesting model. 89 Table of Contents 12. FAIR VALUE The fair value hierarchy prioritized the input to valuation techniques used to measure fair value. The hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The levels of the fair value hierarchy are as follows: Level 1: Quoted prices for identical instruments traded in active markets. Level 2: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3: Unobservable inputs that cannot be supported by market activity and that are significant to the fair value of the asset, liability, or equity such as the use of certain pricing models, discounted cash flow models and similar techniques that use significant unobservable inputs. The carrying value of our cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, accrued payroll and employee-related liabilities, approximate fair value because of their short-term nature. The Company measures its debt at carrying value including accrued interest, which approximates fair value because of its short-term nature. Derivatives designated as cash flow hedges The values of our derivative instruments are derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such the derivatives are classified as Level 2 in the fair value hierarchy. Phantom stock awards The Company uses the Black-Scholes option pricing model to value our phantom stock awards. All inputs to the model are derived from active market information for identical or similar instruments, including stock price, volatility, and interest rates. The inputs to the valuation pricing models are observable in the market, and as such the phantom stock awards are classified as Level 2 in the fair value hierarchy. The following is a summary of the Company’s fair value measurements on a recurring basis as of June 30, 2023 and 2022: Fair Value Measurements Using As of June 30, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Cash flow hedge - interest rate swap $ — $ — $ — Total assets $ — $ — $ — Liabilities Cash flow hedge - foreign currency collars, net $ — $ 100 $ — Phantom stock options — 1,173 — Total liabilities $ — $ 1,273 $ — 90 Table of Contents Fair Value Measurements Using As of June 30, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Cash flow hedge - interest rate swap $ — $ 170 $ — Total assets $ — $ 170 $ — Liabilities Cash flow hedge - foreign currency collars, net $ — $ 981 $ — Phantom stock options — 932 — Total liabilities $ — $ 1,913 $ — These balances are included in other current assets and other current and non-current liabilities, as applicable, in the consolidated balance sheets. There were no transfers between the different hierarchy levels in the years ended June 30, 2023 and 2022 . 13. INCOME TAXES Income before income taxes includes the following components: 2023 2022 2021 United States 21,938 1,996 3,910 Foreign 18,388 17,383 11,243 Total $ 40,326 $ 19,379 $ 15,153 The major components of the provision for income tax expense (benefit) are as follows: June 30, 2023 June 30, 2022 June 30, 2021 Current tax expense: Federal $ 385 $ — $ 1,350 State 487 647 1,051 Foreign 3,467 2,575 1,555 Total current expense $ 4,339 $ 3,222 $ 3,956 Deferred tax: Federal 4,019 ( 3,759 ) ( 1,036 ) State 843 ( 1,025 ) ( 717 ) Foreign ( 457 ) ( 515 ) ( 139 ) Total deferred expense (benefit) $ 4,405 $ ( 5,299 ) $ ( 1,892 ) Provision for income tax expense (benefit) $ 8,744 $ ( 2,077 ) $ 2,064 The Company’s income tax provision includes the results of the Company’s U.S. operations and its various foreign operations including subsidiaries based in the United Kingdom, European Union, Canada, Jamaica, Nicaragua, Pakistan, Senegal, Honduras, and the Philippines. The Company’s Bermuda-based companies are not subject to income tax as there is no corporate income tax in Bermuda. 91 Table of Contents Differences between U.S. federal statutory income tax rates and our effective tax rates for the years ended June 30, 2023, 2022, and 2021 are as follows: June 30, 2023 June 30, 2022 June 30, 2021 U.S. federal statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal deduction 1.4 % 3.0 % 7.5 % Foreign rate differential ( 5.7 ) % ( 8.6 ) % ( 13.5 ) % Non-deductible expenses / exempt income 1.2 % 1.5 % 1.7 % Employment and other tax credits ( 2.9 ) % ( 7.7 ) % ( 6.4 ) % Prior year provision / other items 3.1 % 0.4 % 1.8 % Unrecognized losses utilized during the year — % ( 0.7 ) % — % Change in valuation allowance 3.6 % ( 19.6 ) % 1.5 % Effective tax rate percentage 21.7 % ( 10.7 ) % 13.6 % We have been granted “Tax Holidays” as an incentive to attract foreign investment by the governments of Nicaragua, Pakistan, and certain qualifying locations in the Philippines. Generally, a Tax Holiday is an agreement between us and a foreign government under which we receive certain tax benefits in that country. In Pakistan, we have been granted approval for an indefinite exemption from income taxes on all exported IT services. In Nicaragua, we have been granted approval of exemption from income taxes until 2025, which can be extended for another 10 years upon application. The Tax Holidays for our qualifying Philippines facilities expire at staggered dates through 2031. Our Tax Holidays could be eliminated if there are future changes in our operations or the governmental authorities approve legislation to modify the Tax Holidays in the various taxing jurisdictions. The aggregate reduction in income tax expense due to the above Tax Holidays was $ 3.4 million, $ 2.7 million, and $ 0.8 million and for the years ended June 30, 2023, 2022, and 2021, respectively. The aggregate reduction in income tax expense per diluted share was $ 0.18 , $ 0.15 , and $ 0.04 for the years ended June 30, 2023, 2022, and 2021, respectively. 92 Table of Contents Significant components of deferred tax assets and liabilities included in the consolidated balance sheets are as follows: June 30, 2023 June 30, 2022 Deferred tax assets Provision for doubtful accounts $ 99 $ 74 Provision for employee benefits and other expenses 755 1,147 Tax credit carryforwards 2,427 2,454 Section 174 research and development capitalization 589 — Net operating losses 2,394 8,748 Property and equipment, net 534 264 Intangible assets 3 — Lease liability (right of use assets) 6,546 7,392 Net unrealized loss on hedging 56 218 Total deferred tax assets $ 13,403 $ 20,297 Valuation allowance ( 1,463 ) ( 2,942 ) Total deferred tax assets, net of valuation allowance $ 11,940 $ 17,355 Deferred tax liabilities Property and equipment, net ( 732 ) ( 507 ) Right of use assets ( 5,440 ) ( 6,374 ) Intangible assets ( 1,184 ) ( 1,199 ) Total deferred tax liabilities $ ( 7,356 ) $ ( 8,080 ) Net deferred tax assets and liabilities $ 4,584 $ 9,275 The Company had U.S. gross federal net operating loss carry forwards of zero and $ 18.9 million, as of June 30, 2023 and 2022, respectively, and gross state net operating loss carry forwards of approximately $ 15.1 million and $ 32.2 million, as of June 30, 2023 and 2022, respectively, which may be available to offset state income tax liabilities in the future. The state net operating losses will expire based on each state income tax laws. The Company’s Canadian subsidiary has net operating loss carry forward of $ 2.1 million and $ 2.2 million as of June 30, 2023 and 2022, respectively, which will begin to expire in 2028. The Company’s UK and European subsidiaries have net operating loss carry forward of $ 3.4 million and $ 6.5 million, as of June 30, 2023 and 2022, respectively, which can be carried forward indefinitely. These amounts are estimated amounts for the year ended June 30, 2023, and based on the income tax returns filed for the year ended June 30, 2022. The Company assesses the available positive and negative evidence whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, valuation allowances of $ 1.5 million and $ 2.9 million have been recorded as of June 30, 2023 and 2022, respectively, to recognize only the portion of the Company’s deferred tax assets that are expected to be realized in certain foreign taxing jurisdictions. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present. We do not provide for deferred taxes on the excess of the financial reporting basis over the tax basis in our investments in foreign subsidiaries that are essentially permanent in duration or not subject to taxation in the U.S. or in the local country. The Company is subject to income tax in several jurisdictions and significant judgment is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Company recognizes tax 93 Table of Contents liabilities based on estimates of whether additional taxes and interest will be due. There are no material uncertain tax treatments that would require adjustment to income tax expense. Under accounting standards for uncertainty in income taxes (ASC 740-10), a company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. There were no unrecognized tax benefits in the years ended June 30, 2023, 2022, and 2021 that, if recognized, would affect the Company’s effective tax rate. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense/(benefit). We have not recorded any interest expense or penalties in income tax expense for the years ended June 30, 2023, 2022 and 2021. We do not have any interest or penalties accrued as of June 30, 2023 and 2022. We file numerous consolidated and separate income tax returns in the U.S. federal and various state jurisdictions as well as in various foreign jurisdictions. Our U.S. federal returns and most state returns for tax years 2019 and forward are subject to examination. Tax return filings in the United Kingdom for the year ended June 2019 and onward are still open for examination. Tax return filings in Canada for the year ended June 2020 and onward are still open for examination. Tax return filings in Luxembourg for the year ended June 2018 and onward are still open for examination as well as Cyprus tax returns for their tax years ending June 2017. 14. STOCKHOLDERS’ EQUITY AOCI The following table presents changes by component: Foreign Currency Translation Adjustment Derivative Valuation Defined Benefit Plan Total Balance as of June 30, 2020 ( 1,095 ) ( 518 ) ( 474 ) ( 2,087 ) Foreign currency translation ( 477 ) — — ( 477 ) Actuarial gain / (losses) on defined benefit plan — — ( 26 ) ( 26 ) Unrealized gains / (losses) on cash flow hedges — 202 — 202 Reclassifications to earnings ( 173 ) — 163 ( 10 ) Balance as of June 30, 2021 ( 1,745 ) ( 316 ) ( 337 ) ( 2,398 ) Foreign currency translation ( 2,281 ) — — ( 2,281 ) Actuarial gain / (losses) on defined benefit plan — — 287 287 Unrealized gains / (losses) on cash flow hedges — ( 905 ) — ( 905 ) Reclassifications to earnings — 364 153 517 Tax provision — 218 — 218 Balance as of June 30, 2022 ( 4,026 ) ( 639 ) 103 ( 4,562 ) Foreign currency translation ( 2,234 ) — ( 2,234 ) Actuarial gain / (losses) on defined benefit plan — — ( 120 ) ( 120 ) Unrealized gains / (losses) on cash flow hedges — ( 479 ) — ( 479 ) Reclassifications to earnings — 1,156 89 1,245 Tax provision — ( 162 ) — ( 162 ) Balance as of June 30, 2023 ( 6,260 ) ( 124 ) 72 ( 6,312 ) 94 Table of Contents The following table presents the reclassifications from AOCI to the consolidated statements of comprehensive income: For the year ended June 30, Description of AOCI components 2023 2022 2021 Statement of Other Comprehensive Income Classification Foreign currency translation gain 173 — — Selling, general and administrative expense Gains / (losses) on foreign currency hedges ( 1,201 ) ( 319 ) — Cost of services Gains / (losses) on interest rate swap 45 ( 45 ) — Interest expense, net Tax provision 162 ( 218 ) — Provision for income taxes Total derivative valuation ( 994 ) ( 582 ) — Amortization related to defined benefit plan ( 89 ) ( 153 ) ( 163 ) Cost of services Share buyback In December 2021, the Company’s board of directors authorized the repurchase of up to $ 20 million of its common shares. The Company’s proposed repurchases may be made from time to time through open market transactions at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legal permissible means, depending on the market conditions and in accordance with applicable rules and regulations. The actual timing, number, and dollar amount of repurchase transactions will be determined by management at its discretion and will depend on a number of factors including, but not limited to, the market price of the Company’s common shares, general market and economic conditions, and compliance with Rule 10b-18 and/or Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The repurchase program does not obligate the Company to acquire any particular amount of common shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. For the years ended June 30, 2023 and 2022, the Company repurchased 17,558 and 227,889 shares, respectively, of its common shares totaling $ 0.3 million, and $ 3.4 million, respectively. The repurchase program expired December 9, 2022. Dividend distribution Prior to our initial public offering in fiscal year 2021, our board of directors approved a one-time dividend of $ 4.0 million reflecting a portion of the cash generation from the business during fiscal year 2020. The dividend was paid on July 24, 2020 to TRGI, the holder of our Series A preferred share, which was entitled to a dividend preference that expired upon conversion of the Series A preferred share to common shares upon the completion of our IPO. 95 Table of Contents 15. WEIGHTED AVERAGE SHARE COUNTS The following table sets forth the components of the computation from basic to diluted earnings per share for net income for the years ended June 30: 2023 2022 2021 Shares used in basic earnings per share calculation 18,200 18,232 17,649 Effect of dilutive securities: Employee share-based compensation 199 227 489 Warrant 495 265 220 Total effects of dilutive securities 694 492 709 Shares used in dilutive earnings per share calculation 18,893 18,724 18,359 Shares considered anti-dilutive using the treasury method 367 18 3 16. RELATED PARTY TRANSACTIONS The Company has agreements with multiple companies under the control of our controlling shareholder, TRGI, and with companies which have common Directors, in the normal course of business. These transactions were executed on mutually agreed terms and include contact center services, back office support services and an office lease. During the fiscal years ended June 30, 2023, 2022, and 2021, the Company recognized revenue of $ 0.1 million, $ 0.1 million, and $ 1.2 million, respectively, and incurred expenses of $ 0.0 million , $ 0.0 million and $ 0.5 million, respectively. As of June 30, 2023 and 2022, the Company had accounts receivable of $ 0.0 million and $ 0.0 million , respectively, and accounts payable of $ 2.3 million and $ 2.6 million, respectively, with these related parties. Subsequent to June 30, 2023, the Company paid $ 2.2 million due to related parties. 17. INVESTMENT IN JOINT VENTURE The Company has an investment in Lake Ball, LLC to procure and sell commercial leads for its customers. The Company’s ownership interest is 47.5 % and is accounted for under the equity method. The Company’s investment of $ 0.4 million and $ 0.4 million at June 30, 2023 and 2022, respectively, is included in other non-current assets in the consolidated balance sheets, while net earnings from the joint venture is included in selling, general, and administrative expense in the consolidated statements of comprehensive income. The table below presents our investment in the joint venture : June 30, 2023 2022 Opening balance $ 382 $ 258 Dividends received ( 725 ) ( 1,027 ) Share of profit 715 1,151 Ending balance $ 372 $ 382 Revenue and comprehensive income of the joint venture is as follows: For the year ended June 30, 2023 2022 2021 Revenue $ 7,802 $ 6,455 $ 4,342 Comprehensive income $ 1,537 $ 1,792 $ 1,215 96 Table of Contents 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected quarterly financial data is presented below for each quarter in fiscal year 2023 to reflect the Company’s material retrospective change due to its conversion from IFRS to U.S. GAAP. Fiscal year 2023 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Revenue $ 127,805 $ 139,325 $ 131,557 $ 124,431 Cost of services 96,153 99,790 91,693 87,356 Income from operations 7,670 11,451 13,051 8,306 Net income 6,523 9,270 11,279 4,510 Net income per share: Basic $ 0.36 $ 0.51 $ 0.62 $ 0.25 Diluted $ 0.35 $ 0.49 $ 0.60 $ 0.24 97 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Change In Registrant’s Certifying Accountant None. Disagreements With Registrant’s Certifying Accountant None.