Concentrix(CNXC) - 2024 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for the three and nine months ended August 31, 2024 and 2023, along with detailed notes Consolidated Balance Sheets Total assets decreased from $12.49 billion to $12.21 billion as of August 31, 2024, driven by lower cash and intangibles, with total liabilities also decreasing Consolidated Balance Sheet Highlights (in millions/billions) | Account | August 31, 2024 (unaudited, $B) | November 30, 2023 ($B) | | :--- | :--- | :--- | | Total Assets | $12.21 | $12.49 | | Cash and cash equivalents ($M) | $246.2 | $295.3 | | Goodwill ($B) | $5.08 | $5.08 | | Intangible assets, net ($B) | $2.48 | $2.80 | | Total Liabilities ($B) | $8.04 | $8.35 | | Long-term debt, net ($B) | $4.91 | $4.94 | | Total Stockholders' Equity ($B) | $4.17 | $4.14 | Consolidated Statements of Operations Q3 2024 revenue increased to $2.39 billion from $1.63 billion YoY due to the Webhelp acquisition, but net income declined to $16.6 million from $77.6 million Statement of Operations Summary (in millions, except per share amounts) | Metric (in millions) | Three Months Ended Aug 31, 2024 | Three Months Ended Aug 31, 2023 | Nine Months Ended Aug 31, 2024 | Nine Months Ended Aug 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $2,387.4 | $1,632.8 | $7,170.9 | $4,883.9 | | Gross Profit | $864.2 | $593.7 | $2,578.3 | $1,755.1 | | Operating Income | $153.2 | $162.3 | $451.9 | $480.9 | | Net Income | $16.6 | $77.6 | $135.6 | $244.4 | | Diluted EPS | $0.25 | $1.49 | $2.00 | $4.67 | Consolidated Statements of Cash Flows Net cash from operating activities decreased to $383.1 million for the nine months ended August 31, 2024, with financing activities shifting from a $1.64 billion inflow to a $268.1 million outflow Cash Flow Summary (Nine Months Ended Aug 31, in millions/billions) | Cash Flow Activity (in millions/billions) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities ($M) | $383.1 | $448.7 | | Net cash used in investing activities ($M) | ($183.4) | ($115.7) | | Net cash provided by (used in) financing activities ($M/$B) | ($268.1) | $1.64B | | Net (decrease) increase in cash ($M/$B) | ($74.7) | $1.97B | Notes to the Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial statement line items, covering the Webhelp Combination, revenue, debt, and equity - The company completed its acquisition of Webhelp on September 25, 2023, for a total purchase price consideration of approximately $3.77 billion, net of cash acquired[18][19] - For the nine months ended August 31, 2024, revenue from the Retail, travel and ecommerce vertical grew 86.5% YoY, and Communications and media grew 48.8% YoY, primarily driven by the Webhelp Combination[92] - During the nine months ended August 31, 2024, the company repurchased 1.5 million shares for $101.6 million and paid dividends totaling $61.2 million[8][104] - As of August 31, 2024, the company was in compliance with all debt covenants related to its Senior Notes, Restated Credit Facility, and other borrowing arrangements[87] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management analyzes financial results, highlighting the Webhelp Combination's impact on revenue, margins, and expenses, and discusses liquidity, capital resources, debt, and non-GAAP measures Results of Operations Q3 2024 revenue increased 46.2% to $2.39 billion due to the Webhelp Combination, but operating income fell 5.6% to $153.2 million due to higher SG&A expenses and amortization - Q3 2024 revenue increased by 46.2% YoY, primarily due to the Webhelp Combination[128] - Q3 2024 SG&A expenses increased by 64.8% YoY, mainly due to incremental costs from the Webhelp Combination, a $77.0 million increase in amortization, and a $17.6 million increase in acquisition-related and integration expenses[137][138] - Interest expense for Q3 2024 increased by 63.9% YoY to $80.8 million, driven by interest on senior notes and the Sellers' Note issued for the Webhelp acquisition[142][143] - The effective tax rate for Q3 2024 was 37.0%, up from 27.3% in Q3 2023, primarily due to a change in the geographic mix of income[148][149] Certain Non-GAAP Financial Information The company provides non-GAAP metrics to assess base operating performance, with Q3 2024 Non-GAAP operating income at $331.0 million and Non-GAAP diluted EPS at $2.87 GAAP to Non-GAAP Reconciliation Highlights (Q3 Ended Aug 31, in millions, except per share) | Metric (in millions, except per share) | 2024 | 2023 | | :--- | :--- | :--- | | GAAP Operating Income | $153.2 | $162.3 | | Non-GAAP Operating Income | $331.0 | $231.0 | | GAAP Net Income | $16.6 | $77.6 | | Non-GAAP Net Income | $192.2 | $143.7 | | GAAP Diluted EPS | $0.25 | $1.49 | | Non-GAAP Diluted EPS | $2.87 | $2.76 | Liquidity and Capital Resources As of August 31, 2024, total liquidity was $1.47 billion, with cash used for debt repayment, $101.6 million in stock repurchases, and $61.2 million in dividends, while remaining debt compliant - Total liquidity as of August 31, 2024, was $1.47 billion, comprising undrawn credit facilities and cash and cash equivalents[188] - During the nine months ended August 31, 2024, the company voluntarily prepaid $350 million of the principal balance on its Term Loan[172] - The company repurchased $101.6 million of its common stock and paid $61.2 million in dividends during the first nine months of fiscal 2024[163][164] - On September 25, 2024, the company announced a quarterly cash dividend of $0.33275 per share, an increase from the previous rate[107][164] Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, primarily from foreign currency exchange rates and interest rates, and its use of derivative instruments for hedging - The company has significant foreign currency risk as approximately 50% of revenue is priced in U.S. dollars, while a substantial portion of costs are in local currencies like the Philippine peso and Indian rupee[193][194] - A hypothetical 10% adverse change in foreign currency exchange rates would result in a potential loss in fair value of approximately $103.8 million on hedging contracts, substantially mitigated by corresponding gains on underlying exposures[194] - The company is exposed to interest rate risk on its variable-rate debt, where a 100 basis point increase in interest rates would cause an estimated increase in annual interest expense of approximately $20.2 million[196] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of August 31, 2024, with ongoing integration of Webhelp's internal controls - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the reporting period[197] - The company is in the process of evaluating and integrating the operations, processes, and internal controls of the acquired Webhelp business[199] PART II—OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings not expected to materially affect its financial position, with no material developments this quarter - During the three months ended August 31, 2024, there were no new material legal proceedings or material developments in previously reported proceedings[201] Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for fiscal year ended November 30, 2023 - There have been no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2023[202] Unregistered Sales of Equity Securities and Use of Proceeds This section details Q3 2024 common stock repurchases, totaling 607,298 shares for approximately $39.3 million, with $188.5 million remaining under authorization Share Repurchases (Quarter Ended August 31, 2024) | Period | Total Shares Purchased (Program) | Average Price Paid per Share ($) | | :--- | :--- | :--- | | June 2024 | 215,452 | $60.42 | | July 2024 | 199,861 | $66.93 | | August 2024 | 191,985 | $67.23 | | Total | 607,298 | $64.72 (approx.) | - As of August 31, 2024, approximately $188.5 million remained available for share repurchases under the existing program[203] Other Information The company reports no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2024 - During the third quarter of 2024, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement[204] Exhibits This section lists exhibits filed with the Form 10-Q, including Webhelp acquisition agreements, corporate governance documents, and officer certifications - The report includes certifications from the CEO and CFO pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[206]