Concentrix(CNXC) - 2025 Q2 - Quarterly Results

Executive Summary Second Quarter Fiscal 2025 Highlights Concentrix exceeded its revenue guidance for Q2 FY2025 and subsequently raised its full-year growth outlook, generating $200.3 million in adjusted free cash flow and anticipating over $240 million in shareholder returns for fiscal 2025 - Exceeded revenue guidance for the quarter and raised full year growth outlook[5] - Generated $200.3 million in adjusted free cash flow for the quarter, on track to deliver $625 million to $650 million for the year[5][6] - Expects to return more than $240 million to shareholders in fiscal 2025 through share repurchases and dividends[5] - Saw ongoing momentum for the Company's iX Product Suite[5] CEO Commentary CEO Chris Caldwell highlighted Q2 revenue outperformance despite mid-quarter volatility, expressing optimism for accelerated client activity and improving margins in the second half, with AI investments on track to be accretive by year-end - Outperformed expectations on revenue growth in Q2 despite some mid-quarter volatility[7] - Anticipates an accelerated pace of activity with existing and new clients and improving margins in the second half of the year[7] - AI investments are on pace to be accretive to the business by year-end as planned[7] Second Quarter Fiscal 2025 Financial Results Key Financial Metrics (GAAP & Non-GAAP) Concentrix reported Q2 FY2025 revenue of $2,417.4 million, a 1.5% increase year-on-year, with GAAP operating income and net income declining, while non-GAAP diluted EPS slightly increased, and non-GAAP operating income and Adjusted EBITDA decreased due to temporary program pauses and strategic investments Three Months Ended May 31, 2025 vs. May 31, 2024 | Metric | May 31, 2025 ($M) | May 31, 2024 ($M) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :--------- | | Revenue | 2,417.4 | 2,380.7 | 1.5 % | | Operating income | 148.3 | 150.2 | (1.3)% | | Non-GAAP operating income (1) | 303.7 | 321.1 | (5.4)% | | Operating margin | 6.1 % | 6.3 % | -20 bps | | Non-GAAP operating margin (1) | 12.6 % | 13.5 % | -90 bps | | Net income | 42.1 | 66.8 | (37.0)% | | Non-GAAP net income (1) | 179.6 | 183.1 | (1.9)% | | Adjusted EBITDA (1) | 357.3 | 379.6 | (5.9)% | | Adjusted EBITDA margin (1) | 14.8 % | 15.9 % | -110 bps | | Diluted earnings per common share | 0.63 | 0.98 | (35.7)% | | Non-GAAP diluted earnings per common share (1) | 2.70 | 2.69 | 0.4 % | - Non-GAAP operating income decreased primarily due to temporary program pauses mid-quarter and investments ahead of expected accelerated growth in the second half of the year[6] Revenue by Segment In Q2 FY2025, the Technology and consumer electronics segment remained the largest revenue contributor with 1% growth, while Retail, travel and e-commerce, and Communications and media segments both grew by 3%, Healthcare remained flat, and 'Other' saw a slight decline Revenue by Segment (Three Months Ended May 31, 2025 vs. May 31, 2024) | Segment | May 31, 2025 ($K) | May 31, 2024 ($K) | % Change | | :-------------------------------- | :---------------- | :---------------- | :--------- | | Technology and consumer electronics | 662,719 | 658,268 | 1 % | | Retail, travel and e-commerce | 583,782 | 568,081 | 3 % | | Communications and media | 392,963 | 381,253 | 3 % | | Banking, financial services and insurance | 384,015 | 377,723 | 2 % | | Healthcare | 176,386 | 176,673 | — % | | Other | 217,506 | 218,718 | (1)% | | Total revenue | 2,417,371 | 2,380,716 | 2 % | Cash Flow and Shareholder Returns Concentrix generated $236.5 million in cash flow from operations and $200.3 million in adjusted free cash flow during Q2 FY2025, continuing its shareholder return program through quarterly dividends and share repurchases - Cash flow provided by operations was $236.5 million in the quarter[6] - Adjusted free cash flow was $200.3 million in the quarter[6] - Paid a $0.33275 per share quarterly dividend on May 6, 2025[12] - Repurchased approximately 920,000 common shares in Q2 at a cost of $45.0 million, averaging $49.09 per share[12] Business Outlook Third Quarter Fiscal 2025 Expectations For the third quarter of fiscal 2025, Concentrix forecasts reported revenue between $2.445 billion and $2.470 billion, with an implied constant currency revenue growth of 1.0% to 2.0%, and non-GAAP EPS projected in the range of $2.80 to $2.91 Third Quarter Fiscal 2025 Forecasts | Metric | Low ($M) | High ($M) | | :-------------------------------- | :--------- | :---------- | | Reported Revenue | 2,445 | 2,470 | | Constant Currency Revenue Growth | 1.0 % | 2.0 % | | Operating Income | 162.2 | 172.2 | | Non-GAAP Operating Income | 318 | 328 | | Non-GAAP EPS | 2.80 | 2.91 | | Effective Tax Rate | ~25.5% | ~25.5% | Full Year Fiscal 2025 Expectations Concentrix has raised its full-year fiscal 2025 reported revenue outlook to $9.720 billion to $9.815 billion, expecting constant currency growth of 1.0% to 2.0%, and projects non-GAAP EPS of $11.53 to $11.76 and adjusted free cash flow of $625 million to $650 million Full Year Fiscal 2025 Forecasts | Metric | Low ($M) | High ($M) | | :-------------------------------- | :--------- | :---------- | | Reported Revenue | 9,720 | 9,815 | | Constant Currency Revenue Growth | 1.0 % | 2.0 % | | Operating Income | 675 | 695 | | Non-GAAP Operating Income | 1,300 | 1,320 | | Non-GAAP EPS | 11.53 | 11.76 | | Effective Tax Rate | ~25% | ~25% | - Expects to generate approximately $625 million to $650 million of adjusted free cash flow in fiscal year 2025[11] - Expects to return approximately $240 million to shareholders in fiscal 2025 through share repurchases and dividends[11] Shareholder Programs Quarterly Dividend Concentrix paid a quarterly dividend of $0.33275 per share on May 6, 2025, and its Board of Directors has declared the same dividend amount payable on August 5, 2025 - Paid a $0.33275 per share quarterly dividend on May 6, 2025[12] - Declared a quarterly dividend of $0.33275 per share payable on August 5, 2025[12] Share Repurchase Program In the second quarter, Concentrix repurchased approximately 920,000 common shares for $45.0 million under its existing program, with $537.3 million remaining authorized for future repurchases - Repurchased approximately 920,000 common shares in the second quarter at a cost of $45.0 million[12] - Average cost per share for repurchases was $49.09[12] - Remaining share repurchase authorization was $537.3 million as of May 31, 2025[12] Company Information & Disclosures About Concentrix Concentrix Corporation is a Fortune 500 global technology and services leader, providing human-centered, tech-powered, and intelligence-fueled end-to-end solutions to over 2,000 clients across 70+ markets, aiming to transform how companies connect, interact, and grow - Concentrix Corporation is a Fortune 500 global technology and services leader[17] - Provides human-centered, tech-powered, intelligence-fueled, fully integrated, end-to-end solutions[17] - Serves over 2,000 clients across 70+ markets, helping them solve business challenges and redefine success[17] Use of Non-GAAP Information Concentrix utilizes various non-GAAP financial measures, such as constant currency revenue growth, non-GAAP operating income/margin, Adjusted EBITDA/margin, non-GAAP net income, free cash flow, adjusted free cash flow, and non-GAAP diluted EPS, to provide investors with a clearer understanding of its core operating performance and to facilitate period-to-period comparisons by excluding certain non-recurring or non-cash items - Non-GAAP measures are used to better assess and understand base operating performance, especially for period-to-period comparisons and future planning[19] - Key non-GAAP measures include constant currency revenue growth, non-GAAP operating income/margin, Adjusted EBITDA/margin, non-GAAP net income, free cash flow, adjusted free cash flow, and non-GAAP diluted EPS[18][21] - Adjustments typically exclude acquisition-related and integration expenses, amortization of intangible assets, share-based compensation, certain debt costs, imputed interest, legal settlement costs, changes in acquisition contingent consideration, foreign currency gains/losses, and related tax effects[18][21] Safe Harbor Statement This news release contains forward-looking statements regarding Concentrix's future financial condition, growth, profitability, and strategic initiatives, which are inherently uncertain and subject to substantial risks and uncertainties that could cause actual results to differ materially from expectations, and the company does not undertake to update them - Includes forward-looking statements about future financial condition, growth, profitability, operations, cash flows, and strategic initiatives[20][22] - Statements are inherently uncertain and involve substantial risks and uncertainties, including general economic conditions, cyberattacks, new technologies (AI), regulatory changes, and acquisition integration[22] - The Company does not undertake a duty to update forward-looking statements[22] Consolidated Financial Statements Consolidated Balance Sheets As of May 31, 2025, Concentrix reported total assets of $12.396 billion, an increase from $11.991 billion at November 30, 2024, with total liabilities also increasing to $8.117 billion and total stockholders' equity growing to $4.279 billion Consolidated Balance Sheet (May 31, 2025 vs. November 30, 2024) | Metric | May 31, 2025 ($K) | November 30, 2024 ($K) | | :-------------------------- | :---------------- | :------------------- | | Cash and cash equivalents | 342,759 | 240,571 | | Accounts receivable, net | 2,061,412 | 1,926,737 | | Total current assets | 3,170,669 | 2,842,424 | | Goodwill | 5,131,900 | 4,986,967 | | Intangible assets, net | 2,156,035 | 2,286,940 | | Total assets | 12,396,060 | 11,991,438 | | Total current liabilities | 1,973,365 | 1,995,813 | | Long-term debt, net | 4,862,425 | 4,733,056 | | Total liabilities | 8,117,360 | 7,951,714 | | Total stockholders' equity | 4,278,700 | 4,039,724 | Consolidated Statements of Operations For the three months ended May 31, 2025, total revenue was $2.417 billion, with net income of $42.1 million, a 37% decrease year-over-year, while for the six-month period, total revenue was $4.790 billion, with net income of $112.4 million, a 6% decrease compared to the prior year Consolidated Statements of Operations (Three Months Ended May 31, 2025 vs. May 31, 2024) | Metric | May 31, 2025 ($K) | May 31, 2024 ($K) | % Change | | :-------------------------------- | :---------------- | :---------------- | :--------- | | Total revenue | 2,417,371 | 2,380,716 | 2 % | | Gross profit | 848,148 | 857,569 | (1)% | | Operating income | 148,345 | 150,170 | (1)% | | Income before income taxes | 51,721 | 87,128 | (41)% | | Net income | 42,093 | 66,834 | (37)% | | Diluted EPS | 0.63 | 0.98 | - | Consolidated Statements of Operations (Six Months Ended May 31, 2025 vs. May 31, 2024) | Metric | May 31, 2025 ($K) | May 31, 2024 ($K) | % Change | | :-------------------------------- | :---------------- | :---------------- | :--------- | | Total revenue | 4,789,593 | 4,783,464 | — % | | Gross profit | 1,704,047 | 1,714,098 | (1)% | | Operating income | 317,212 | 298,609 | 6 % | | Income before income taxes | 152,513 | 159,952 | (5)% | | Net income | 112,350 | 118,936 | (6)% | | Diluted EPS | 1.68 | 1.74 | - | Reconciliation of GAAP to Non-GAAP Measures This section provides detailed reconciliations of GAAP financial measures to their non-GAAP counterparts, including operating income, Adjusted EBITDA, net income, diluted EPS, and free cash flow, by adjusting for various non-recurring and non-cash items to offer a clearer view of underlying business performance Operating Income and Adjusted EBITDA Reconciliation Operating Income Reconciliation (Three Months Ended May 31, 2025) | Metric | Amount ($K) | | :-------------------------------- | :---------- | | Operating income (GAAP) | 148,345 | | Acquisition-related and integration expenses | 16,808 | | Step-up depreciation | 2,536 | | Amortization of intangibles | 109,158 | | Share-based compensation | 26,862 | | Non-GAAP operating income | 303,709 | Adjusted EBITDA Reconciliation (Three Months Ended May 31, 2025) | Metric | Amount ($K) | | :-------------------------------- | :---------- | | Net income | 42,093 | | Interest expense and finance charges, net | 75,406 | | Provision for income taxes | 9,628 | | Other expense (income), net | 21,218 | | Acquisition-related and integration expenses | 16,808 | | Step-up depreciation | 2,536 | | Amortization of intangibles | 109,158 | | Share-based compensation | 26,862 | | Depreciation (exclusive of step-up depreciation) | 53,615 | | Adjusted EBITDA | 357,324 | Net Income and EPS Reconciliation Non-GAAP Net Income Reconciliation (Three Months Ended May 31, 2025) | Metric | Amount ($K) | | :-------------------------------- | :---------- | | Net income (GAAP) | 42,093 | | Acquisition-related and integration expenses | 16,808 | | Step-up depreciation | 2,536 | | Debt costs | 1,102 | | Imputed interest related to sellers' note | 4,503 | | Legal settlement costs | 2,000 | | Change in acquisition contingent consideration | 8,691 | | Foreign currency losses (gains), net | 10,789 | | Amortization of intangibles | 109,158 | | Share-based compensation | 26,862 | | Income taxes related to the above | (44,931) | | Non-GAAP net income | 179,611 | Non-GAAP Diluted EPS Reconciliation (Three Months Ended May 31, 2025) | Metric | Amount ($) | | :-------------------------------- | :--------- | | Diluted EPS (GAAP) | 0.63 | | Acquisition-related and integration expenses | 0.25 | | Step-up depreciation | 0.04 | | Debt costs | 0.02 | | Imputed interest related to sellers' note | 0.07 | | Legal settlement costs | 0.03 | | Change in acquisition contingent consideration | 0.13 | | Foreign currency losses (gains), net | 0.16 | | Amortization of intangibles | 1.64 | | Share-based compensation | 0.40 | | Income taxes related to the above | (0.67) | | Non-GAAP diluted EPS | 2.70 | Free Cash Flow Reconciliation Free Cash Flow Reconciliation (Three Months Ended May 31, 2025) | Metric | Amount ($K) | | :-------------------------------- | :---------- | | Net cash provided by operating activities | 236,536 | | Purchases of property and equipment | (55,792) | | Free cash flow | 180,744 | | Change in outstanding factoring balances | 19,542 | | Adjusted free cash flow | 200,286 |