IBEX(IBEX) - 2024 Q1 - Quarterly Report

FORM 10-Q General Information This section details the Form 10-Q filing, including reporting period, filer status, and outstanding shares - IBEX LIMITED filed a Quarterly Report on Form 10-Q for the period ended September 30, 2023[2] - The registrant is an Accelerated Filer and an Emerging Growth Company[4][5] - As of October 31, 2023, the number of common shares outstanding was 17,938,752[6] CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This section warns that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ - This Form 10-Q contains forward-looking statements based on current expectations, assumptions, and projections, which are not guarantees of performance and involve known and unknown risks and uncertainties[10] - Important factors that could cause actual results to differ materially include general economic uncertainty, geopolitical conditions, ability to attract and retain clients, profitability, managing international operations, and the impact of cyberattacks[10][12] PART I. FINANCIAL INFORMATION This part presents the company's unaudited consolidated financial statements and management's analysis for the period Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the period ended September 30, 2023, prepared in accordance with U.S. GAAP, along with detailed notes explaining significant accounting policies and specific financial line items Consolidated Balance Sheets (unaudited) This table presents the company's financial position, including assets, liabilities, and equity, as of September 30, 2023 | Metric | September 30, 2023 ($000s) | June 30, 2023 ($000s) | | :-------------------------- | :-------------------------- | :------------------- | | Total assets | 295,480 | 293,324 | | Total liabilities | 139,441 | 143,360 | | Total stockholders' equity | 156,039 | 149,964 | - Cash and cash equivalents increased to $62.0 million as of September 30, 2023, from $57.4 million as of June 30, 2023[16] Consolidated Statements of Comprehensive Income (unaudited) This table details the company's revenues, expenses, and net income for the three months ended September 30, 2023 | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Revenue | 124,609 | 127,805 | | Income from operations | 8,331 | 7,670 | | Net income | 7,425 | 6,523 | | Basic EPS | 0.41 | 0.36 | | Diluted EPS | 0.39 | 0.35 | - Net income increased by 13.8% year-over-year, and diluted EPS increased by 11.4% year-over-year[18] Consolidated Statements of Stockholders' Equity (unaudited) This table outlines changes in the company's equity, including capital, treasury stock, and accumulated deficit | Metric | September 30, 2023 ($000s) | June 30, 2023 ($000s) | | :-------------------------- | :-------------------------- | :------------------- | | Additional paid-in capital | 206,323 | 204,734 | | Treasury stock | (5,726) | (3,682) | | Accumulated deficit | (37,353) | (44,778) | | Total Stockholders' Equity | 156,039 | 149,964 | - The company repurchased 134,524 shares of common stock for $2.0 million during the three months ended September 30, 2023[21] Consolidated Statements of Cash Flows (unaudited) This table summarizes cash flows from operating, investing, and financing activities for the quarter | Cash Flow Activity | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash inflow from operating activities | 8,684 | 5,562 | | Net cash outflow from investing activities | (2,052) | (3,558) | | Net cash outflow from financing activities | (1,967) | (7,666) | | Net increase / (decrease) in cash and cash equivalents | 4,600 | (5,980) | | Cash and cash equivalents, ending | 62,029 | 42,851 | - Net cash inflow from operating activities increased by $3.1 million year-over-year[24] Notes to the Consolidated Financial Statements (unaudited) This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements 1. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note describes the company's business, U.S. GAAP transition, and significant accounting policies - IBEX Limited is an end-to-end provider of technology-enabled customer lifecycle experience (CLX) solutions, operating in a single operating and reportable segment[26][27] - Effective July 1, 2023, the Company transitioned from IFRS to U.S. GAAP and became a domestic filer[28] - The Company qualifies as an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards[42][43] 2. REVENUE FROM CONTRACTS WITH CUSTOMERS This note details revenue recognition policies and disaggregates revenue by client and delivery location - Revenue from contact center services is recognized as services are performed, digital services at a point in time upon consumer activation/purchase, and CX software-as-a-service over the subscription term[46][47][48] Client Location | Client Location | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :---------------- | :------------------------------------------ | :------------------------------------------ | | United States | 121,184 | 123,913 | | Other countries | 3,425 | 3,892 | | Total | 124,609 | 127,805 | Service Delivery Location | Service Delivery Location | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Onshore (United States) | 31,536 | 38,177 | | Offshore (Philippines, Pakistan) | 57,359 | 51,156 | | Nearshore (Jamaica, Nicaragua, Honduras) | 35,714 | 38,472 | | Total | 124,609 | 127,805 | 3. ACCOUNTS RECEIVABLE AND SIGNIFICANT CLIENTS This note provides information on accounts receivable, credit losses, and client concentration Accounts Receivable and Allowance for Credit Losses | Metric | September 30, 2023 ($000s) | June 30, 2023 ($000s) | | :-------------------------- | :-------------------------- | :------------------- | | Accounts receivable, net | 90,114 | 86,364 | | Allowance for credit losses | (131) | (120) | - One client contributed 12% of total revenue for the three months ended September 30, 2023, down from 14% in the prior year[55] 4. LEASES This note presents details on the company's operating and finance lease costs and liabilities Lease Costs | Lease Cost Type | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Total operating lease cost | 5,667 | 6,339 | | Total finance lease cost | 143 | 99 | Lease Liabilities | Lease Liability | September 30, 2023 ($000s) | June 30, 2023 ($000s) | | :-------------------------- | :-------------------------- | :------------------- | | Total operating lease liabilities | 74,072 | 77,890 | | Total finance lease liabilities | 977 | 961 | - The weighted average remaining lease term for operating leases was 5.5 years as of September 30, 2023[60] 5. DERIVATIVES This note explains the company's use of foreign currency hedges and their fair values - The Company uses foreign currency exchange contracts (collars) to mitigate foreign exchange fluctuations on the Philippine Peso (PHP) operating costs, designated as cash flow hedges[62] Fair Value of Foreign Currency Option Contracts | Metric | September 30, 2023 ($000s) | June 30, 2023 ($000s) | | :-------------------------- | :-------------------------- | :------------------- | | Fair value of foreign currency option contracts - liabilities | 316 | 100 | - Aggregate unrealized net loss in Accumulated Other Comprehensive Income (AOCI) from cash flow hedges was $374 thousand as of September 30, 2023[65] 6. DEBT This note provides information on the company's total debt and available borrowing capacity Debt Breakdown | Metric | September 30, 2023 ($000s) | June 30, 2023 ($000s) | | :-------------------------- | :-------------------------- | :------------------- | | Total debt | 977 | 1,013 | | Current maturities of long-term debt | (396) | (413) | | Total long-term debt, net | 581 | 600 | - As of September 30, 2023, the Company had $72.6 million of borrowing available under the PNC Credit Facility and was in compliance with all debt covenants[66][67] 7. CONTINGENCIES AND COMMITMENTS This note discusses the company's exposure to claims, lawsuits, and indemnification agreements - The Company is subject to claims and lawsuits in the ordinary course of business but does not believe any will have a material adverse effect on its financial position[68] - The Company enters into indemnification agreements with clients and vendors, but historically has not experienced significant losses from these obligations[69] 8. WARRANT This note details a warrant issued to Amazon, including its terms, vesting, and related contra revenue - A 10-year warrant was issued to Amazon to acquire approximately 1.67 million common shares at $9.42 per share, with vesting tied to Amazon's service purchases[70][71] - As of September 30, 2023, 1,004,410 warrant shares were vested, and the warrant has not been exercised[72] - The Company recorded contra revenue of approximately $0.3 million for the three months ended September 30, 2023 and 2022, respectively[72] 9. SHARE BASED COMPENSATION This note outlines the company's share-based compensation expense and unrecognized compensation Share-Based Compensation Expense | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Total share-based compensation expense | 848 | 1,122 | - As of September 30, 2023, there was $7.3 million of total unrecognized compensation expense related to non-vested share-based awards, expected to be recognized over a weighted-average period of 3.5 years[74] 10. FAIR VALUE This note describes the fair value hierarchy for derivatives and phantom stock awards - Derivative instruments (cash flow hedges) and phantom stock awards are classified as Level 2 in the fair value hierarchy, using observable market inputs[79][80] Fair Value of Liabilities | Liabilities ($000s) | September 30, 2023 (Level 2) | June 30, 2023 (Level 2) | | :-------------------------- | :-------------------------- | :------------------- | | Cash flow hedge - foreign currency collars, net | 316 | 100 | | Phantom stock options | 724 | 1,173 | | Total liabilities | 1,040 | 1,273 | 11. INCOME TAXES This note presents the company's income tax provision, effective tax rate, and impact of tax holidays Income Tax Provision and Effective Tax Rate | Metric | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Provision for income taxes ($000s) | 1,388 | 1,047 | | Effective tax rate | 15.7% | 13.8% | - Tax holidays in Nicaragua, Pakistan, Honduras, Jamaica, and the Philippines reduced income tax expense by $1.4 million ($0.07 per diluted share) for the three months ended September 30, 2023[86] 12. STOCKHOLDERS' EQUITY This note provides details on accumulated other comprehensive income and the share repurchase program Accumulated Other Comprehensive Income (AOCI) | AOCI Component ($000s) | September 30, 2023 | September 30, 2022 | | :-------------------------- | :-------------------------- | :------------------- | | Foreign Currency Translation Adjustment | (6,961) | (5,703) | | Derivative Valuation | (318) | (900) | | Defined Benefit Plan | 72 | 103 | | Total AOCI | (7,207) | (6,500) | - The Board authorized a $30 million share repurchase program on September 18, 2023. During the three months ended September 30, 2023, 134,524 shares were repurchased for $2.0 million[89] 13. WEIGHTED AVERAGE SHARE COUNTS This note presents basic and diluted weighted average share counts for earnings per share calculations Weighted Average Shares | Shares (000s) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Basic | 18,287 | 18,141 | | Diluted | 18,898 | 18,641 | 14. RELATED PARTY TRANSACTIONS This note discloses revenue and accounts payable related to transactions with related parties - The Company recognized $0.01 million in revenue from related parties for the three months ended September 30, 2023 and 2022[91] - Accounts payable to related parties decreased significantly to $0.1 million as of September 30, 2023, from $2.3 million as of June 30, 2023[91] 15. INVESTMENT IN JOINT VENTURE This note describes the company's equity method investment in Lake Ball, LLC, and its share of profit - The Company holds a 47.5% ownership interest in Lake Ball, LLC, accounted for under the equity method[92] Share of Profit from Joint Venture | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Share of profit | 270 | 152 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook, discussing key trends, operational results, and liquidity, including a detailed analysis of revenue, expenses, and non-GAAP financial measures Overview This section describes IBEX's business, service offerings, and operational scale - IBEX delivers innovative business process outsourcing (BPO), smart digital marketing, online acquisition technology, and end-to-end customer engagement solutions[96] - The company operates 31 global CX delivery centers with approximately 30,000 employees, managing nearly 176 million customer interactions annually[96] Business Highlights This section summarizes recent achievements, including strong financial performance and new client acquisitions - The Company delivered strong financial performance, particularly growth in digital-first solutions with HealthTech and Retail & E-commerce clients[97] - Achieved profit and margin expansion, strong free cash flows, and new client wins despite macroeconomic trends[97] Recent Financial Highlights This section presents key financial metrics for the quarter, including revenues, net income, and diluted EPS Key Financial Metrics | Metric | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Revenues ($M) | 124.6 | 127.8 | -2.5% | | Net income ($M) | 7.4 | 6.5 | +13.8% | | Fully diluted earnings per share | 0.39 | 0.35 | +12.3% | - Revenue decline was due to external factors impacting the FinTech vertical, partially offset by increases in Retail & E-commerce and HealthTech verticals[98] Trends and Factors Affecting our Performance This section discusses internal and external factors influencing the company's financial and operational performance Macroeconomic Trends This section analyzes how macroeconomic conditions impact revenue and operational shifts - Macroeconomic factors, including inflation and rising interest rates, led to a modest decline in revenue and a shift of work from onshore to offshore sites[100] Artificial Intelligence ("AI") This section highlights the company's strategic initiatives in leveraging generative AI for productivity and customer insights - The company is aggressively developing its 'Next wave of Wave X' by leveraging generative AI to increase agent productivity, provide deeper customer insights, and integrate AI into the customer journey[102] Client's Underlying Business Performance This section explains how client business performance and macroeconomic conditions affect demand for services - Demand for customer interaction services is influenced by client business performance; demand was constrained in Q1 2024 due to macroeconomic conditions[103] Capacity Utilization This section discusses capacity utilization's impact on operating margins and new delivery capacity investments - Operating margins are impacted by capacity utilization; the company is investing in additional capacity in nearshore and offshore regions due to shifting demand[104][105] Labor Costs This section addresses managing wage pressures through productivity, retention, and shifts to lower-cost locations - Increasing wage pressure in all geographies is being offset by higher agent quality, increased productivity, improved retention, contractual cost of living adjustments (COLA), and a shift to lower-cost delivery locations[106] Delivery Location This section emphasizes the profitability benefits of offshore and nearshore delivery locations - Offshore and nearshore geographies generate greater profit margins; approximately 94% of workstations are in these regions as of September 30, 2023[107] Provider Performance This section attributes revenue growth to strong performance, market share gains, and new client acquisitions - Revenues have generally increased due to performance-based market share gains with existing clients and new client wins[108] Sales Cycles and New Client Wins This section notes lengthened sales cycles but anticipates increased activity in the upcoming fiscal year - Sales cycles have lengthened in the current slowing economic environment, but activity is expected to pick up throughout fiscal year 2024[109] Client Concentration This section discloses the percentage of consolidated revenues from the largest and top three clients - The largest client accounted for 12% of consolidated revenues, and the top three clients accounted for 30% during the three months ended September 30, 2023[110] Seasonality This section cautions that business performance is subject to seasonal fluctuations, making quarter comparisons unreliable - Business performance is subject to seasonal fluctuations, meaning individual quarters should not be directly compared or used to predict annual results[110] Pricing This section discusses pricing strategies, including negotiated increases and leveraging offshore shifts for margin improvement - The company successfully negotiated price increases or COLA with many clients due to global labor market tightening and wage inflation[111] - A shift in service delivery from onshore to offshore locations results in lower client prices but tends to increase percentage operating margins[112] Results of Operations This section provides a detailed analysis of revenue and operating expenses, explaining financial performance drivers Revenue This section analyzes changes in total revenue and contributions from FinTech, Retail & E-commerce, and HealthTech verticals Revenue by Vertical | Vertical | Three Months Ended September 30, 2023 ($M) | Three Months Ended September 30, 2022 ($M) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Total Revenue | 124.6 | 127.8 | -2.5% | | FinTech (decrease) | -7.0 | - | -27.5% | | Retail and E-commerce (increase) | +1.9 | - | +7.0% | | HealthTech (increase) | +1.8 | - | +13.8% | Vertical as % of Total Revenue | Vertical as % of Total Revenue | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Retail and E-commerce | 23.4% | 21.3% | | HealthTech | 11.9% | 10.2% | | FinTech | 14.8% | 19.9% | Operating Expenses This section details the components of operating expenses, including cost of services, SG&A, and D&A Cost of services This section breaks down the cost of services, including payroll, facilities, and telecom expenses | Expense Category | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Cost of services | 88,196 | 96,153 | -8.3% | | Payroll and related costs | 66,800 | 73,600 | -9.2% | | Facilities expenses | 4,300 | 4,800 | -10.4% | | Telecom, printing, local transportation | 3,600 | 4,600 | -21.7% | - Payroll costs as a percentage of revenue decreased to 53.6% from 57.6% due to an increasing percentage of revenue from lower labor cost nearshore and offshore regions[117] Selling, general and administrative expense ("SG&A") This section explains the increase in SG&A expenses due to higher payroll, IT, legal, and travel costs | Expense Category | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | SG&A | 23,040 | 19,305 | +19.3% | - Increase in SG&A was primarily due to higher payroll and related costs ($1.6 million), IT expenses ($0.6 million), legal and professional fees ($1.2 million), and travel expenses ($0.5 million)[120] Depreciation and amortization expense ("D&A") This section presents the company's depreciation and amortization expense and its percentage of revenue | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | D&A expense | 5,042 | 4,677 | +7.8% | | D&A as % of revenue | 4.0% | 3.7% | +0.3 pp | Income from operations This section analyzes the increase in income from operations and operating margin, driven by utilization and delivery mix | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Income from operations | 8,331 | 7,670 | +8.6% | | Operating margin | 6.7% | 6.0% | +0.7 pp | - The increase was primarily driven by margin expansion from higher capacity utilization and shifts to more profitable nearshore and offshore locations[122] Interest income This section highlights the significant increase in interest income due to higher returns on invested funds | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Interest income | 586 | 48 | +1120.8% | - Interest income significantly increased due to higher income on invested funds[123] Interest expense This section presents the company's interest expense for the reported periods | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Interest expense | (104) | (148) | Provision for Income Taxes This section explains the increase in income tax expense, primarily due to higher pre-tax income | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Income tax expense | 1,388 | 1,047 | +32.6% | - Income tax expense increased primarily due to higher pre-tax income in the current year[125] Non-GAAP Financial Measures This section provides reconciliations and discussions of non-GAAP financial measures used to assess performance Adjusted net income and adjusted earnings per share This section presents adjusted net income and adjusted earnings per share, with year-over-year changes Adjusted Net Income and EPS | Metric | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Net income ($000s) | 7,425 | 6,523 | +13.8% | | Adjusted net income ($000s) | 7,574 | 6,798 | +11.4% | | Diluted earnings per share | 0.39 | 0.35 | +12.3% | | Adjusted earnings per share | 0.40 | 0.36 | +11.1% | EBITDA, adjusted EBITDA, and adjusted EBITDA margin This section provides EBITDA, adjusted EBITDA, and adjusted EBITDA margin, highlighting profitability improvements EBITDA and Adjusted EBITDA | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | EBITDA | 13,959 | 12,395 | +12.6% | | Adjusted EBITDA | 13,711 | 12,906 | +6.2% | | Adjusted EBITDA margin | 11.0% | 10.1% | +0.9 pp | - Adjusted EBITDA margin improved due to stronger operating results from higher capacity utilization and an increased mix of higher margin nearshore and offshore delivery[138] Free cash flow This section details the company's free cash flow, showing a significant increase from operating activities Free Cash Flow | Metric | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | YoY Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Net cash provided by operating activities | 8,684 | 5,562 | +56.1% | | Capital expenditures | 2,052 | 3,558 | -42.3% | | Free cash flow | 6,632 | 2,004 | +230.9% | Net cash This section presents the company's net cash position, calculated as cash and equivalents less total debt Net Cash Position | Metric | September 30, 2023 ($000s) | June 30, 2023 ($000s) | | :-------------------------- | :-------------------------- | :------------------- | | Cash and cash equivalents | 62,029 | 57,429 | | Total debt | 977 | 1,013 | | Net cash | 61,052 | 56,416 | Liquidity and Capital Resources This section discusses liquidity sources, including cash, operating cash flows, credit facilities, and share repurchases - Principal sources of liquidity as of September 30, 2023, were $62.0 million in cash and cash equivalents, cash flows from operations, and $72.6 million unused availability under existing credit facilities[144] - The Company repurchased 134,524 common shares for $2.0 million under a $30 million share repurchase program during the three months ended September 30, 2023[149] Cash Flow Activities | Cash Flow Activity | Three Months Ended September 30, 2023 ($000s) | Three Months Ended September 30, 2022 ($000s) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash inflow from Operating activities | 8,684 | 5,562 | | Net cash outflow from Investing activities | (2,052) | (3,558) | | Net cash outflow from Financing activities | (1,967) | (7,666) | Critical Accounting Policies and Estimates This section confirms no material changes to critical accounting policies and estimates, noting capitalized cloud computing costs - There have been no material changes to the Company's significant accounting policies or critical accounting estimates as reported in the Annual Report[159] - The Company capitalized $0.4 million in qualifying implementation costs for cloud computing software (ERP and HCM systems) during the three months ended September 30, 2023[160] Recent Accounting Pronouncements This section refers to Note 1 for information on recently adopted accounting pronouncements - Refer to Note 1, 'Overview and Summary of Significant Accounting Policies,' for additional information regarding recently adopted accounting pronouncements[161] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses the company's exposure to financial and market risks, primarily foreign currency exchange risk and interest rate risk, and the strategies employed to mitigate them Foreign currency exchange risk This section identifies primary foreign currency exposures and hedging strategies to mitigate fluctuations - The Company's primary foreign currency exposures are in Philippine Peso (PHP), Jamaican Dollar, and Pakistani Rupee, due to a substantial portion of costs being denominated in local currencies[163] - A 10% appreciation/depreciation in PHP would impact expenses by approximately $2.8 million / $2.3 million, respectively[165] - The Company hedges a portion of its Philippine operating costs to mitigate foreign exchange fluctuations[164] Interest rate risk This section describes interest rate risk exposure related to cash and credit facilities, noting no material impact - The Company's exposure to interest rate risk relates primarily to cash and bank balances and credit facilities[167] - As of September 30, 2023, the total principal balance outstanding under the PNC Credit Facility was $0.00 million, indicating no material impact from a hypothetical 10% change in SOFR[167] ITEM 4. CONTROLS AND PROCEDURES This section reports on the evaluation of disclosure controls and procedures, identifying a material weakness in internal control over financial reporting related to complex non-routine transactions, and the ongoing remediation efforts Evaluation of Disclosure Controls and Procedures This section reports on the ineffectiveness of disclosure controls due to a material weakness in internal control - Management concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to a material weakness in internal control over financial reporting related to complex non-routine transactions[169][170] - The material weakness has not been remediated as of September 30, 2023, as the remediation plan is ongoing[171] Changes in Internal Control Over Financial Reporting This section states no material changes occurred in internal controls, apart from ongoing remediation for the material weakness - Except for the ongoing remediation plan for the material weakness, there have been no material changes in internal controls over financial reporting during the quarter ended September 30, 2023[172] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings This section refers to Note 7 for legal proceedings, indicating no anticipated material adverse effects - Information regarding legal proceedings can be found under Note 7, 'Contingencies and Commitments,' in the unaudited consolidated financial statements[175] Item 1A. Risk Factors This section refers to the Form 10-K for risk factors, confirming no material changes in this report - The Company is subject to various risks, as discussed under 'Risk Factors' in the Annual Report on Form 10-K, with no material changes noted in this Form 10-Q[176] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's share repurchase program, including shares bought back and remaining authorization - The Board authorized a share repurchase program on September 18, 2023, allowing the Company to repurchase up to $30 million of its shares over six months[177] Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining Under the Program ($000s) | | :-------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------- | | September 1 - September 30, 2023 | 134,524 | $15.15 | 27,962 | Item 3. Defaults Upon Senior Securities This section confirms no defaults on senior securities during the reporting period - There were no defaults upon senior securities[183] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable to the Company[184] Item 5. Other Information This section reports no director or officer adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No Company director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended September 30, 2023[185] Item 6. Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including legal and financial documents - The exhibit index includes documents such as the Memorandum of Association, Amended and Restated By-laws, Executive Employment Agreement, CEO and CFO Certifications, and Inline XBRL documents[188] Signatures This section contains the official certifications and signatures of the Chief Executive Officer and Chief Financial Officer - The report was signed by Robert Dechant, Chief Executive Officer, and Taylor Greenwald, Chief Financial Officer, on November 9, 2023[190]