Concentrix Reports Record Second Quarter 2021 Results with Strong New Business Signings

·19 min read

FREMONT, Calif., June 23, 2021 (GLOBE NEWSWIRE) -- Concentrix Corporation (NASDAQ: CNXC), a leading global provider of customer experience (CX) solutions and technology, today announced financial results for the fiscal second quarter ended May 31, 2021.

Three Months Ended

May 31, 2021

May 31, 2020

Change

Revenue ($M)

$

1,369.9

$

1,066.4

28.5

%

Operating income ($M)

$

128.2

$

23.6

443.2

%

Non-GAAP operating income ($M) (1)

$

172.1

$

67.5

155.0

%

Operating margin

9.4

%

2.2

%

720 bps

Non-GAAP operating margin (1)

12.6

%

6.3

%

630 bps

Net income ($M)

$

82.9

$

2.5

3,216.0

%

Non-GAAP net income ($M) (1)

$

124.9

$

35.3

253.8

%

Adjusted EBITDA ($M) (1)

$

208.3

$

97.7

113.2

%

Adjusted EBITDA margin (1)

15.2

%

9.2

%

600 bps

Diluted earnings per share (2)

$

1.57

$

0.05

3,040.0

%

Non-GAAP diluted earnings per share (1), (2)

$

2.37

$

0.68

248.5

%

(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 ended May 31, 2020, weighted average number of shares used for diluted EPS is based on the number of shares issued in connection with the spin-off of 51.6 million.

Second Quarter Fiscal 2021 Highlights:

  • Revenue was $1,369.9 million, up 28.5% from the prior year second quarter and 24.3% on a constant currency basis, compared with $1,066.4 million in the prior year second quarter.

  • Operating income was $128.2 million, or 9.4% of revenue, compared with $23.6 million, or 2.2% of revenue, in the prior year second quarter.

  • Non-GAAP operating income was $172.1 million, or 12.6% of revenue, compared with $67.5 million, or 6.3% of revenue, in the prior year second quarter.

  • Adjusted EBITDA was $208.3 million, or 15.2% of revenue, compared with $97.7 million, or 9.2% of revenue, in the prior year second quarter.

  • Cash flow from operations of $203.2 million in the quarter. Free cash flow for the quarter was $174.4 million and outstanding indebtedness was paid down to $959.2 million.

  • Diluted earnings per share (“EPS”) was $1.57 compared to $0.05 in the prior year second quarter.

  • Non-GAAP diluted EPS was $2.37 compared to $0.68 in the prior year second quarter.

"We continue to see our value proposition resonating with the market driving our performance to exceed pre-COVID levels," said Chris Caldwell, Concentrix President and CEO. "Reopening economies accelerated demand for our CX transformation services across existing and new clients. We are very pleased with significant new business wins with iconic and disruptive clients across the globe. Based upon our strong results year-to-date, we are confident in exceeding our stated goals of constant currency revenue growth above 10 percent for fiscal 2021 and margins above pre-COVID levels.”

Business Outlook
The following statements are based on Concentrix’ current expectations for the third quarter of fiscal 2021. Non-GAAP financial measures exclude the impact of acquisition-related and integration expenses, divestitures, spin-off related expenses, the amortization of intangibles, depreciation, share-based compensation and the related tax effects thereon. These statements are forward-looking and actual results may differ materially.

Third Quarter Fiscal 2021 Expectations:

  • Third-quarter revenue is expected to be in the range of $1.35 billion to $1.40 billion as reported.

  • Third-quarter operating income is expected to be in the range of $116.3 million to $130.3 million and non-GAAP operating income is expected to be in the range of $160.0 million to $174.0 million.

  • The effective tax rate is expected to approximate 27% to 28%.

Conference Call and Webcast
Concentrix will host a conference call for investors to review its second quarter fiscal 2021 results tomorrow morning, Thursday, June 24, 2021 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 over 105 global disruptor 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 through technology, design, data, process, and people. 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 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 using their comparable prior year’s currency conversion rate in comparison to prior year’s revenue. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.

  • 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 and share-based compensation.

  • 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 the income tax effect of assets held for sale.

  • 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 the 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 the income tax effect of assets held for sale.

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, cash flows, leverage, liquidity, business strategy, growth, demand for the Company’s services, margin expansion 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; the level of outsourced business services; the level of business activity of the Company’s clients and the market acceptance and performance of their products and services; consolidation of the Company’s competitors; competitive conditions in the Company’s industry; currency exchange rate fluctuations; variability in demand by the Company’s clients or the early termination of the Company’s client contracts; competition in the customer experience solutions industry; political and economic stability in the countries in which the Company operates; the outbreak of communicable disease or other public health crises; cyberattacks on the Company’s networks and information technology systems; the inability to protect personal and proprietary information; increases in the cost of labor; the operability of the Company’s communication services and information technology systems and networks; changes in law, regulations or regulatory guidance; investigative or legal actions; the loss of key personnel; natural disasters, adverse weather conditions, terrorist attacks, work stoppages or other business disruptions; 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 2021 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)

May 31, 2021

November 30, 2020

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

131,249

$

152,656

Accounts receivable, net

1,089,387

1,081,481

Assets held for sale

83,010

Other current assets

173,226

189,239

Total current assets

1,476,872

1,423,376

Property and equipment, net

399,422

451,649

Goodwill

1,837,900

1,836,050

Intangible assets, net

736,877

798,959

Deferred tax assets

41,582

47,423

Other assets

609,587

620,099

Total assets

$

5,102,240

$

5,177,556

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

109,506

$

140,575

Current portion of long-term debt

33,750

Payable to former parent

22,825

Accrued compensation and benefits

363,948

419,715

Other accrued liabilities

356,665

371,072

Income taxes payable

29,141

20,725

Liabilities held for sale

30,353

Total current liabilities

889,613

1,008,662

Long-term debt, net

959,158

1,111,362

Other long-term liabilities

595,619

601,887

Deferred tax liabilities

128,082

153,560

Total liabilities

2,572,472

2,875,471

Stockholders' equity:

Preferred stock, $0.0001 par value, 10,000 shares authorized as of May 31, 2021; no shares issued and outstanding as of May 31, 2021

Common stock, $0.0001 par value, 250,000 shares authorized as of May 31, 2021; 51,296 shares issued and outstanding as of May 31, 2021

5

Additional paid-in capital

2,327,025

Treasury stock, 4 shares as of May 31, 2021

(527

)

Retained earnings

171,715

Former parent company investment

2,305,899

Accumulated other comprehensive income (loss)

31,550

(3,814

)

Total stockholders' equity

2,529,768

2,302,085

Total liabilities and stockholders' equity

$

5,102,240

$

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

Six Months Ended

May 31, 2021

May 31, 2020

% Change

May 31, 2021

May 31, 2020

% Change

Revenue

Technology and consumer electronics

$

417,277

$

327,997

27

%

$

830,095

$

651,910

27

%

Communications and media

254,860

210,684

21

%

503,650

474,248

6

%

Retail, travel and ecommerce

231,966

168,380

38

%

470,967

367,294

28

%

Banking, financial services and insurance

228,816

168,283

36

%

437,900

360,987

21

%

Healthcare

115,418

84,965

36

%

240,642

182,290

32

%

Other

121,541

106,053

15

%

239,902

218,254

10

%

Total revenue

1,369,878

1,066,363

28

%

2,723,156

2,254,982

21

%

Cost of revenue

887,149

721,193

23

%

1,754,377

1,464,622

20

%

Gross profit

482,729

345,170

40

%

968,779

790,360

23

%

Selling, general and administrative expenses

354,505

321,590

10

%

705,666

678,569

4

%

Operating income

128,224

23,580

444

%

263,113

111,791

135

%

Interest expense and finance charges, net

6,745

12,928

(48

)

%

14,448

30,513

(53

)

%

Other expense (income), net

(3,546

)

(1,641

)

116

%

257

(4,876

)

(105

)

%

Income before income taxes

125,025

12,293

917

%

248,408

86,154

188

%

Provision for income taxes

42,121

9,823

329

%

76,693

31,367

145

%

Net income

$

82,904

$

2,470

3,256

%

$

171,715

$

54,787

213

%

Earnings per common share:

Basic

$

1.59

$

0.05

$

3.31

$

1.06

Diluted

$

1.57

$

0.05

$

3.26

$

1.06

Weighted-average common shares outstanding

Basic

51,275

51,602

51,215

51,602

Diluted

52,005

51,602

51,928

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

Six Months Ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Revenue

$

1,369,878

$

1,066,363

$

2,723,156

$

2,254,982

Revenue growth, as reported under U.S. GAAP

28.5

%

(8.1

)

%

20.8

%

(3.4

)

%

Foreign exchange impact

(4.2

)

%

1.9

%

(3.1

)

%

1.3

%

Constant currency revenue growth

24.3

%

(6.2

)

%

17.7

%

(2.1

)

%


Three Months Ended

Six Months Ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Operating income

$

128,224

$

23,580

$

263,113

$

111,791

Acquisition-related and integration expenses

3,198

17,550

Spin-off related expenses

506

1,506

Amortization of intangibles

34,597

36,379

69,198

73,357

Share-based compensation

9,283

3,840

16,401

8,102

Non-GAAP operating income

$

172,104

$

67,503

$

348,712

$

212,306


Three Months Ended

Six Months Ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Net income

$

82,904

$

2,470

$

171,715

$

54,787

Interest expense and finance charges, net

6,745

12,928

14,448

30,513

Provision for income taxes

42,121

9,823

76,693

31,367

Other expense (income), net

(3,546

)

(1,641

)

257

(4,876

)

Acquisition-related and integration expenses

3,198

17,550

Spin-off related expenses

506

1,506

Amortization of intangibles

34,597

36,379

69,198

73,357

Share-based compensation

9,283

3,840

16,401

8,102

Depreciation (excluding accelerated depreciation included in acquisition-related and integration expenses above)

36,226

30,161

72,225

61,822

Adjusted EBITDA

$

208,330

$

97,664

$

420,937

$

274,128


Three Months Ended

Six Months Ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Operating margin

9.4

%

2.2

%

9.7

%

5.0

%

Non-GAAP operating margin

12.6

%

6.3

%

12.8

%

9.4

%

Adjusted EBITDA margin

15.2

%

9.2

%

15.5

%

12.2

%


Three Months Ended

Six Months Ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Net income

$

82,904

$

2,470

$

171,715

$

54,787

Acquisition-related and integration expenses

3,198

17,550

Spin-off related expenses

506

1,506

Amortization of intangibles

34,597

36,379

69,198

73,357

Share-based compensation

9,283

3,840

16,401

8,102

Income taxes related to the above (1)

(11,107

)

(11,125

)

(21,674

)

(24,594

)

Income tax effect of assets held for sale (2)

9,247

9,247

Non-GAAP net income

$

124,924

$

35,268

$

244,887

$

130,708


Three Months Ended

Six Months Ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Net income

$

82,904

$

2,470

$

171,715

$

54,787

Less: net income allocated to participating securities

(1,254

)

(2,314

)

Net income attributable to common stockholders

81,650

2,470

169,401

54,787

Acquisition-related, integration, and spin-off related expenses allocated to common stockholders

3,198

17,550

Spin-off related expenses allocated to common stockholders

506

1,506

Amortization of intangibles allocated to common stockholders

34,074

36,379

68,266

73,357

Share-based compensation allocated to common stockholders

9,143

3,840

16,180

8,102

Income taxes related to the above allocated to common stockholders (1)

(10,939

)

(11,125

)

(21,382

)

(24,594

)

Income tax effect of assets held for sale allocated to common stockholders (2)

9,107

9,122

Non-GAAP net income attributable to common stockholders

$

123,035

$

35,268

$

241,587

$

130,708


Three Months Ended

Six Months Ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Diluted earnings per common share (“EPS”) (3)

$

1.57

$

0.05

$

3.26

$

1.06

Acquisition-related and integration expenses

0.06

0.34

Spin-off related expenses

0.01

0.03

Amortization of intangibles

0.66

0.70

1.31

1.42

Share-based compensation

0.18

0.07

0.31

0.16

Income taxes related to the above (1)

(0.22

)

(0.21

)

(0.41

)

(0.48

)

Income tax effect of assets held for sale (2)

0.18

0.18

Non-GAAP diluted EPS

$

2.37

$

0.68

$

4.65

$

2.53

Weighted-average number of common shares - diluted (4)

52,005

51,602

51,928

51,602


Three Months Ended

Six Months Ended

May 31, 2021

May 31, 2020

May 31, 2021

May 31, 2020

Net cash provided by operating activities

$

203,231

$

242,315

$

239,115

$

297,201

Purchases of property and equipment

(28,808

)

(25,353

)

(70,758

)

(69,241

)

Free cash flow

$

174,423

$

216,962

$

168,357

$

227,960


Forecast

Three Months Ended August 31, 2021

Low

High

Operating income

$

116,300

$

130,300

Amortization of intangibles

34,000

34,000

Share-based compensation

9,700

9,700

Non-GAAP operating income (5)

$

160,000

$

174,000

(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) In the second quarter of fiscal year 2021, we announced a definitive agreement to sell our Concentrix Insurance Solutions (“CIS”) business and, therefore, we are no longer indefinitely reinvested with respect to our investment in this subsidiary. This amount represents the income tax impact of the change in this reinvestment assertion.

(3) Diluted earnings per 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 1.5% and 1.3% of net income, respectively, for the three and six months ended May 31, 2021 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.

(4) Weighted-average number of shares used for diluted EPS for the second quarter ended May 31, 2020 is based on the number of shares issued in connection with the spin-off of 51.6 million.

(5) Adjustments related to acquisition-related and integration expenses and adjustments related to the sale of CIS for the three months ending August 31, 2021 cannot be quantified due to the forward-looking nature of the adjustments and their inherent variability.

CONTACT: Investor Contact: David Stein Investor Relations Concentrix Corporation david.stein@concentrix.com


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