Concentrix Reports Fiscal 2023 Fourth Quarter and Full Year Results

FREMONT, Calif., Jan. 18, 2023 (GLOBE NEWSWIRE) — Concentrix Corporation (NASDAQ: CNXC), a leading global provider of customer experience (CX) solutions and technology, today announced financial results for the fiscal fourth quarter and fiscal year ended November 30, 2023.

  Three Months Ended       Fiscal Year Ended    
  November 30, 2023   November 30, 2020   Change   November 30, 2023   November 30, 2020   Change
Revenue ($M) $ 1,466.6     $ 1,300.9     12.7 %   $ 5,587.0     $ 4,719.5     18.4 %
Operating income ($M) $ 157.9     $ 120.2     31.4 %   $ 572.4     $ 308.8     85.4 %
Non-GAAP operating income ($M) (1) $ 203.4     $ 175.4     16.0 %   $ 733.7     $ 509.4     44.0 %
Operating margin   10.8 %     9.2 %   160 bps     10.2 %     6.5 %   370 bps
Non-GAAP operating margin (1)   13.9 %     13.5 %   40 bps     13.1 %     10.8 %   230 bps
Net income ($M) $ 124.1     $ 64.6     92.1 %   $ 405.6     $ 164.8     146.1 %
Non-GAAP net income ($M) (1) $ 158.0     $ 106.8     47.9 %   $ 534.6     $ 316.5     68.9 %
Adjusted EBITDA ($M) (1) $ 238.2     $ 211.2     12.8 %   $ 874.0     $ 638.5     36.9 %
Adjusted EBITDA margin (1)   16.2 %     16.2 %   0 bps     15.6 %     13.5 %   210 bps
Diluted earnings per common share (2) $ 2.35     $ 1.25     88.0 %   $ 7.70     $ 3.19     141.4 %
Non-GAAP diluted earnings per common share (1), (2) $ 2.99     $ 2.07     44.4 %   $ 10.15     $ 6.13     65.6 %

(1) See non-GAAP reconciliations included in the accompanying financial tables for the reconciliation of each non-GAAP measure to its most directly comparable GAAP measure.
(2) For the three months and fiscal year ended November 30, 2020, weighted average number of shares used for both diluted EPS is based on the number of shares issued in connection with the spin-off of 51.6 million.

Fourth Quarter Fiscal 2023 Highlights:

  • Revenue was $1,466.6 million, up 12.7% from the prior year fourth quarter, compared with $1,300.9 million in the prior year fourth quarter, and 14.0% on an adjusted constant currency basis.
  • Operating income was $157.9 million, or 10.8% of revenue, compared with $120.2 million, or 9.2% of revenue in the prior year fourth quarter.
  • Non-GAAP operating income was $203.4 million, or 13.9% of revenue, compared with $175.4 million, or 13.5% of revenue, in the prior year fourth quarter.
  • Adjusted EBITDA was $238.2 million, or 16.2% of revenue, compared with $211.2 million, or 16.2% of revenue, in the prior year fourth quarter.
  • Cash flow from operations was $182.1 million in the quarter. Free cash flow for the quarter was $145.8 million.
  • Diluted earnings per common share (“EPS”) was $2.35 compared to $1.25 in the prior year fourth quarter.
  • Non-GAAP diluted EPS was $2.99 compared to $2.07 in the prior year fourth quarter.

“We delivered adjusted constant currency revenue growth above 17 percent with margin expansion in 2023, our first year as an independent public company,” said Chris Caldwell, Concentrix President and CEO. “We are on track integrating the complementary PK acquisition. This further differentiates our unmatched CX capabilities and industry-leading execution. Our strong close to the year, including double-digit revenue growth, margin expansion, and strong new business signings in the fourth quarter, gives us confidence in our ability to grow above the market during 2023.”

Fiscal Year 2023 Highlights:

  • Revenue was $5,587.0 million, up 18.4% from the prior fiscal year, compared with $4,719.5 million in the prior fiscal year, and 17.3% on an adjusted constant currency basis.
  • Operating income was $572.4 million, or 10.2% of revenue, compared with $308.8 million, or 6.5% of revenue, in the prior fiscal year.
  • Non-GAAP operating income was $733.7 million, or 13.1% of revenue, compared with $509.4 million, or 10.8% of revenue, in the prior fiscal year.
  • Adjusted EBITDA was $874.0 million, or 15.6% of revenue, compared with $638.5 million, or 13.5% of revenue, in the prior fiscal year.
  • Cash flow from operations was $514.2 million in the fiscal year. Free cash flow for the fiscal year was $365.1 million.
  • Diluted earnings per common share (“EPS”) was $7.70 compared to $3.19 in the prior fiscal year.
  • Non-GAAP diluted EPS was $10.15 compared to $6.13 in the prior fiscal year.

Quarterly Dividend and Share Repurchase Program:

  • Concentrix paid a $0.25 per share quarterly dividend on November 2, 2023. The Company’s Board of Directors has declared a quarterly dividend of $0.25 per share payable on February 8, 2023, to shareholders of record at the close of business on January 28, 2023.
  • Concentrix repurchased 0.1 million shares in the fourth quarter at a cost of $25.1 million under its previously announced share repurchase program. At November 30, 2023, the Company’s remaining share repurchase authorization was $474.9 million.

First Quarter and Full Year Fiscal 2023 Outlook:
The following statements are based on Concentrix’ current expectations for the first quarter and full year fiscal 2023. Non-GAAP financial measures exclude the impact of acquisition-related and integration expenses, amortization of intangible assets, depreciation, share-based compensation and the related tax effects thereon. These statements are forward-looking and actual results may differ materially.

First quarter 2023:

  • Revenue is expected to be in the range of $1.510 billion to $1.540 billion, including an approximately $78 million contribution from PK for the months of January and February, as reported.
  • Non-GAAP operating income is expected to be in the range of $190 million to $205 million.
  • The effective tax rate is expected to approximate 25% to 26%.

Full year 2023:

  • Revenue is expected to be in the range of $6.450 billion to $6.600 billion, including an approximately $485 million 11-month contribution from PK, as reported.
  • Non-GAAP operating income is expected to be in the range of $890 million to $930 million.
  • The effective tax rate is expected to approximate 25% to 26%.

The Company believes that a quantitative reconciliation of the non-GAAP operating income outlook to the most directly comparable GAAP measure cannot be provided without unreasonable efforts due to the incomplete purchase price allocation for the PK acquisition and the related unavailability of the expected amortization of PK intangible assets. For the same reason, Concentrix is unable to address the probable significance of the unavailable information, which may have a material impact on the Company’s GAAP results.

Conference Call and Webcast
Concentrix will host a conference call for investors to review its fiscal 2023 fourth quarter results tomorrow morning, Wednesday, January 19, 2023 at 9:00 a.m. (ET)/6:00 a.m. (PT).

The live conference call will be webcast in listen-only mode in the Investor Relations section of the Concentrix website under “Events and Presentations” at https://ir.concentrix.com/events-and-presentations. A replay will also be available on the website following the conference call.

About Concentrix
Concentrix Corporation (Nasdaq: CNXC), is a leading global provider of customer experience (CX) solutions and technology, improving business performance for some of the world’s best brands including over 100 Fortune Global 500 clients and more than 125 new economy clients. Every day, from more than 40 countries and across 6 continents, our staff delivers next generation customer experience and helps companies better connect with their customers. We create better business outcomes and help differentiate our clients by reimagining everything CX through Strategy + Talent + Technology. Concentrix provides services to clients in our key industry verticals: technology & consumer electronics; retail, travel & ecommerce; banking, financial services & insurance; healthcare; communications & media; automotive; and energy & public sector. Visit www.concentrix.com to learn more.

Use of Non-GAAP Information
In addition to disclosing financial results that are determined in accordance with GAAP, we also disclose certain non-GAAP financial information, including:

  • Constant currency revenue growth, which is revenue growth adjusted for the translation effect of foreign currencies so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of our business performance. Constant currency revenue growth is calculated by translating the revenue of each fiscal year in the billing currency to U.S. dollars using the comparable prior year’s currency conversion rate in comparison to prior year’s revenue. Generally, when the U.S. dollar either strengthens or weakens against other currencies, revenue growth at constant currency rates or adjusting for currency will be higher or lower than revenue growth reported at actual exchange rates.
  • Adjusted constant current revenue growth, which is constant currency revenue growth excluding revenue for businesses acquired or divested since the beginning of the prior year period so that revenue growth can be viewed without the impact of acquisitions or divestitures, thereby facilitating period-to-period comparisons of our business performance.
  • Non-GAAP operating income, which is operating income, adjusted to exclude acquisition-related and integration expenses, including related restructuring costs, spin-off related expenses, amortization of intangible assets, share-based compensation and gain on divestitures and related transactions costs.
  • Non-GAAP operating margin, which is non-GAAP operating income, as defined above, divided by revenue.
  • Adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA, which is non-GAAP operating income, as defined above, plus depreciation.
  • Adjusted EBITDA margin, which is adjusted EBITDA, as defined above, divided by revenue.
  • Non-GAAP net income, which is net income excluding the tax effected impact of acquisition-related and integration expenses, including related restructuring costs, spin-off related expenses, amortization of intangible assets, share-based compensation and gain on divestitures and related transaction costs.
  • Free cash flow, which is cash flows from operating activities less capital expenditures. We believe that free cash flow is a meaningful measure of cash flows since capital expenditures are a necessary component of ongoing operations. However, free cash flow has limitations because it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments for business acquisitions.
  • Non-GAAP diluted earnings per common share (“EPS”), which is diluted EPS excluding per share, tax effected impact of acquisition-related and integration expenses, including related restructuring costs, spin-off related expenses, amortization of intangible assets, share-based compensation and gain on divestitures and related transaction costs.

We believe that providing this additional information is useful to the reader to better assess and understand our base operating performance, especially when comparing results with previous periods and for planning and forecasting in future periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results. Management also uses these non-GAAP measures to establish operational goals and, in some cases, for measuring performance for compensation purposes. These non-GAAP financial measures exclude amortization of intangible assets. Although intangible assets contribute to our revenue generation, the amortization of intangible assets does not directly relate to the services performed for our clients. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of our acquisition activity. Accordingly, we believe excluding the amortization of intangible assets, along with the other non-GAAP adjustments, which neither relate to the ordinary course of our business nor reflect our underlying business performance, enhances our and our investors’ ability to compare our past financial performance with its current performance and to analyze underlying business performance and trends. These non-GAAP financial measures also exclude share-based compensation expense. Given the subjective assumptions and the variety of award types that companies can use when calculating share-based compensation expense, management believes this additional information allows investors to make additional comparisons between our operating results and those of our peers. As these non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

Safe Harbor Statement
This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include, but are not limited to, statements regarding the Company’s expected future financial condition, results of operations, including revenue and operating income, effective tax rate, capital allocation, business strategy, innovation in the Company’s business, the value of the Company’s solutions, the integration of the PK business, the contributions of the PK business and statements that include words such as believe, expect, may, will, provide, could and should and other similar expressions. These forward-looking statements are inherently uncertain and involve substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Risks and uncertainties include, among other things: risks related to general economic conditions, including uncertainty related to the COVID-19 pandemic and its impact on the global economy, supply chains, inflation, the Company’s business and the business of the Company’s clients; other communicable diseases, natural disasters, adverse weather conditions or public health crises; cyberattacks on the Company’s or its clients’ networks and information technology systems; the inability to protect personal and proprietary information; the failure of the Company’s staff and contractors to adhere to the Company’s and its clients’ controls and processes; the inability to execute on the Company’s digital CX strategy; the inability to successfully identify, complete and integrate strategic acquisitions or investments, including the integration of PK; competitive conditions in the Company’s industry and consolidation of its competitors; geopolitical, economic and climate or weather related risks in regions with a significant concentration of the Company’s operations; higher than expected tax liabilities; the loss of key personnel; the demand for CX solutions and technology; variability in demand by the clients or the early termination of the Company’s client contracts; the level of business activity of the Company’s clients and the market acceptance and performance of their products and services; the operability of communication services and information technology systems and networks; changes in law, regulations or regulatory guidance; currency exchange rate fluctuations; damage to the Company’s reputation through the actions or inactions of third parties; increases in the cost of labor; investigative or legal actions; and other factors contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020 filed with the Securities and Exchange Commission and subsequent SEC filings. The Company does not undertake a duty to update forward-looking statements, which speak only as of the date on which they are made.

Copyright 2023 Concentrix Corporation. All rights reserved. Concentrix, the Concentrix logo, and all other Concentrix company, product and services names and slogans are trademarks or registered trademarks of Concentrix Corporation and its subsidiaries. Concentrix and the Concentrix logo Reg. U.S. Pat. & Tm. Off. and applicable non-U.S. jurisdictions. Other names and marks are the property of their respective owners.

CONCENTRIX CORPORATION
CONSOLIDATED BALANCE SHEETS
(currency and share amounts in thousands, except par value)
(Amounts may not add due to rounding)

  November 30, 2023   November 30, 2020
  (unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 182,038     $ 152,656  
Accounts receivable, net   1,207,953       1,081,481  
Other current assets   153,074       189,239  
Total current assets   1,543,065       1,423,376  
Property and equipment, net   407,144       451,649  
Goodwill   1,813,502       1,836,050  
Intangible assets, net   655,528       798,959  
Deferred tax assets   48,413       47,423  
Other assets   578,715       620,099  
Total assets $ 5,046,367     $ 5,177,556  
       
LIABILITIES AND EQUITY      
Current liabilities:      
Accounts payable $ 129,359     $ 140,575  
Current portion of long-term debt         33,750  
Payable to former parent         22,825  
Accrued compensation and benefits   453,434       419,715  
Other accrued liabilities   351,642       371,072  
Income taxes payable   33,779       20,725  
Total current liabilities   968,214       1,008,662  
Long-term debt, net   802,017       1,111,362  
Other long-term liabilities   546,410       601,887  
Deferred tax liabilities   109,471       153,560  
Total liabilities   2,426,112       2,875,471  
Stockholders’ equity:      
Preferred stock, $0.0001 par value, 10,000 shares authorized as of November 30, 2023; no shares issued and outstanding as of November 30, 2023          
Common stock, $0.0001 par value, 250,000 shares authorized as of November 30, 2023; 51,927 shares issued and 51,594 shares outstanding as of November 30, 2023   5        
Additional paid-in capital   2,355,767        
Treasury stock, 333 shares as of November 30, 2023   (57,486 )      
Retained earnings   392,495        
Former parent company investment         2,305,899  
Accumulated other comprehensive loss   (70,526 )     (3,814 )
Total stockholders’ equity   2,620,255       2,302,085  
Total liabilities and stockholders’ equity $ 5,046,367     $ 5,177,556  
               

CONCENTRIX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(currency and share amounts in thousands, except per share amounts)
(Amounts may not add due to rounding)
(unaudited)

  Three Months Ended       Fiscal Year Ended    
  November 30, 2023   November 30, 2020   % Change   November 30, 2023   November 30, 2020   % Change
Revenue                      
Technology and consumer electronics $ 481,004     $ 410,542     17 %   $ 1,759,203     $ 1,422,817     24 %
Communications and media   245,172       239,268     2 %     1,005,283       954,234     5 %
Retail, travel and ecommerce   272,921       237,912     15 %     985,550       796,324     24 %
Banking, financial services and insurance   213,403       185,522     15 %     862,033       712,469     21 %
Healthcare   135,464       118,558     14 %     489,855       392,686     25 %
Other   118,644       109,056     9 %     485,091       441,004     10 %
Total revenue   1,466,608       1,300,858     13 %     5,587,015       4,719,534     18 %
Cost of revenue   947,240       842,226     12 %     3,617,527       3,058,009     18 %
Gross profit   519,368       458,632     13 %     1,969,488       1,661,525     19 %
Selling, general and administrative expenses   361,463       338,425     7 %     1,397,091       1,352,764     3 %
Operating income   157,905       120,207     31 %     572,397       308,761     85 %
Interest expense and finance charges, net   3,730       8,798     (58 )%     23,046       48,313     (52 )%
Other expense (income), net   (744 )     (3,164 )   (76 )%     (6,345 )     (7,447 )   (15 )%
Income before income taxes   154,919       114,573     35 %     555,696       267,895     107 %
Provision for income taxes   30,811       49,946     (38 )%     150,119       103,084     46 %
Net income $ 124,108     $ 64,627     92 %   $ 405,577     $ 164,811     146 %
Earnings per common share:                      
Basic $ 2.37     $ 1.25         $ 7.78     $ 3.19      
Diluted $ 2.35     $ 1.25         $ 7.70     $ 3.19      
Weighted-average common shares outstanding                      
Basic   51,555       51,602           51,355       51,602      
Diluted   52,016       51,602           51,914       51,602      
                                       

        

CONCENTRIX CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(currency and share amounts in thousands, except per share amounts)
(Amounts may not add due to rounding)
(unaudited)

  Three Months Ended   Fiscal Year Ended
  November 30, 2023   November 30, 2020   November 30, 2023   November 30, 2020
Revenue $ 1,466,608     $ 1,300,858     $ 5,587,015     $ 4,719,534  
Revenue growth, as reported under U.S. GAAP   12.7 %     7.3 %     18.4 %     0.2 %
Foreign exchange impact   %     (1.0 )%     (2.0 )%     0.5 %
Constant currency revenue growth   12.7 %     6.3 %     16.4 %     0.7 %
Effect of excluding revenue of acquired and divested businesses   1.3 %     %     0.9 %     %
Adjusted constant currency revenue growth   14.0 %     6.3 %     17.3 %     0.7 %
                               
  Three Months Ended   Fiscal Year Ended
  November 30, 2023   November 30, 2020   November 30, 2023   November 30, 2020
Operating income $ 157,905   $ 120,207   $ 572,397     $ 308,761
Acquisition-related and integration expenses   825     6,552     825       27,982
Spin-off related expenses       7,694           9,483
Amortization of intangibles   33,744     37,093     136,939       147,283
Share-based compensation   10,904     3,883     36,762       15,914
Gain on divestitures and related transaction costs           (13,197 )    
Non-GAAP operating income $ 203,378   $ 175,429   $ 733,726     $ 509,423
                         
  Three Months Ended   Fiscal Year Ended
  November 30, 2023   November 30, 2020   November 30, 2023   November 30, 2020
Net income $ 124,108     $ 64,627     $ 405,577     $ 164,811  
Interest expense and finance charges, net   3,730       8,798       23,046       48,313  
Provision for income taxes   30,811       49,946       150,119       103,084  
Other expense (income), net   (744 )     (3,164 )     (6,345 )     (7,447 )
Acquisition-related and integration expenses   825       6,552       825       27,982  
Spin-off related expenses         7,694             9,483  
Gain on divestitures and related transaction costs               (13,197 )      
Amortization of intangibles   33,744       37,093       136,939       147,283  
Share-based compensation   10,904       3,883       36,762       15,914  
Depreciation (excluding accelerated depreciation included in acquisition-related and integration expenses above)   34,865       35,795       140,236       129,126  
Adjusted EBITDA $ 238,243     $ 211,224     $ 873,962     $ 638,549  
                               
  Three Months Ended   Fiscal Year Ended
  November 30, 2023   November 30, 2020   November 30, 2023   November 30, 2020
Operating margin 10.8 %   9.2 %   10.2 %   6.5 %
Non-GAAP operating margin 13.9 %   13.5 %   13.1 %   10.8 %
Adjusted EBITDA margin 16.2 %   16.2 %   15.6 %   13.5 %
  Three Months Ended   Fiscal Year Ended
  November 30, 2023   November 30, 2020   November 30, 2023   November 30, 2020
Net income $ 124,108     $ 64,627     $ 405,577     $ 164,811  
Acquisition-related and integration expenses   825       6,552       825       27,982  
Spin-off related expenses         7,694             9,483  
Amortization of intangibles   33,744       37,093       136,939       147,283  
Share-based compensation   10,904       3,883       36,762       15,914  
Gain on divestitures and related transaction costs               (13,197 )      
Income taxes related to the above (1)   (11,549 )     (13,037 )     (32,291 )     (49,010 )
Non-GAAP net income $ 158,032     $ 106,812     $ 534,615     $ 316,463  
                               
  Three Months Ended   Fiscal Year Ended
  November 30, 2023   November 30, 2020   November 30, 2023   November 30, 2020
Net income $ 124,108     $ 64,627     $ 405,577     $ 164,811  
Less: net income allocated to participating securities   (1,790 )           (5,724 )      
Net income attributable to common stockholders   122,318       64,627       399,853       164,811  
Acquisition-related and integration expenses allocated to common stockholders   813       6,552       813       27,982  
Spin-off related expenses allocated to common stockholders         7,694             9,483  
Amortization of intangibles allocated to common stockholders   33,257       37,093       135,006       147,283  
Share-based compensation allocated to common stockholders   10,747       3,883       36,243       15,914  
Gain on divestitures and related transaction costs allocated to common stockholders               (13,011 )      
Income taxes related to the above allocated to common stockholders (1)   (11,382 )     (13,037 )     (31,835 )     (49,010 )
Non-GAAP net income attributable to common stockholders $ 155,753     $ 106,812     $ 527,069     $ 316,463  
                               
  Three Months Ended   Fiscal Year Ended
  November 30, 2023   November 30, 2020   November 30, 2023   November 30, 2020
Diluted earnings per common share (“EPS”) (2) $ 2.35     $ 1.25     $ 7.70     $ 3.19  
Acquisition-related and integration expenses   0.02       0.13       0.02       0.54  
Spin-off related expenses         0.15             0.18  
Amortization of intangibles   0.64       0.72       2.60       2.85  
Share-based compensation   0.21       0.08       0.70       0.31  
Gain on divestitures and related transaction costs               (0.25 )      
Income taxes related to the above (1)   (0.23 )     (0.26 )     (0.62 )     (0.94 )
Non-GAAP diluted EPS $ 2.99     $ 2.07     $ 10.15     $ 6.13  
               
Weighted-average number of common shares – diluted (3)   52,016       51,602       51,914       51,602  
                               
  Three Months Ended   Fiscal Year Ended
  November 30, 2023   November 30, 2020   November 30, 2023   November 30, 2020
Net cash provided by operating activities $ 182,053     $ 119,037     $ 514,178     $ 507,614  
Purchases of property and equipment   (36,210 )     (65,083 )     (149,079 )     (171,332 )
Free cash flow $ 145,843     $ 53,954     $ 365,099     $ 336,282  
                               

(1) The tax effect of taxable and deductible non-GAAP adjustments was calculated using the tax-deductible portion of the expenses and applying the entity-specific, statutory tax rates applicable to each item during the respective periods presented.

(2) Diluted earnings per common share (“EPS”) is calculated using the two-class method post spin-off. Unvested restricted stock awards granted to employees are considered participating securities. For the purposes of calculating diluted EPS, net income attributable to participating securities was approximately 1.4% of net income for both the three months and fiscal year ended November 30, 2023 and was excluded from total net income to calculate net income attributable to common stockholders. In addition, the non-GAAP adjustments allocated to common stockholders were calculated based on the percentage of net income attributable to common stockholders.

(3) Weighted-average number of shares used for diluted EPS for the three months and fiscal year ended November 30, 2020 is based on the number of shares issued in connection with the spin-off of 51.6 million.